Document:

<PAGE>   1
                                                                   Exhibit 10.19
                         COMMON STOCK PURCHASE AGREEMENT

         THIS COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is made as of
April 6, 2000, among Screaming Media.com Inc., a Delaware corporation (the
"Company") and Spyglass Inc., a Delaware corporation (the "Purchaser").

         The Company desires to sell, and the Purchaser desires to purchase, at
an aggregate purchase price of $5,000,000 (the "Purchase Price"), the number of
shares of the Company's common stock, par value $.01 per share (the "Common
Stock") equal to the Purchase Price divided by an amount equal to the final
offering price per share (the "Purchase Price Per Share") of the Common Stock in
the initial public offering (the "Initial Public Offering") of Common Stock
pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "Securities Act"). References to "Shares" in this
Agreement shall mean the shares of Common Stock purchased by Purchaser in
connection with this Agreement and shall also include any equity stock issued by
the Company with respect to Shares by way of a stock split, stock dividend,
other recapitalization or similar transaction. Subject to the transfer
restrictions set forth in Section 4(b) of this Agreement, such Shares shall
continue to be Shares in the hands of any holder other than the Purchaser.

         The Company and the Purchaser have therefore agreed as follows:

         1.   Purchase and Sale of the Shares; Closing.

                  (a) Purchase and Sale of the Shares. Subject to the terms and
conditions hereof, the Purchaser shall purchase from the Company, and the
Company shall sell to the Purchaser, the Shares for the Purchase Price.

                  (b) Closing. The closing of the purchase and sale of the
Shares hereunder (the "Closing") shall take place at the office of Skadden,
Arps, Slate, Meagher & Flom LLP at Four Times Square New York, New York at 10:00
a.m. on the third (fourth, if the pricing occurs after 4:30 P.M. (Eastern time))
business day after the date the final offering price per share of Common Stock
is determined in connection with the Initial Public Offering, or at such other
place and time upon which the Company and the Purchaser shall agree. The date of
Closing is referred to as the "Closing Date". At the Closing, the Company shall
deliver to the Purchaser a certificate representing the Shares and the Purchaser
shall deliver the Purchase Price to the Company by wire transfer of same-day
funds.
<PAGE>   2
         2.   The Purchaser's Representations and Acknowledgments.

         The Purchaser represents and warrants to the Company that:

                  (a) The Purchaser has been duly organized and is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation.

                  (b) The execution of this Agreement by the Purchaser has been
duly authorized by all necessary corporate action. This Agreement, when executed
and delivered by the Purchaser, shall constitute a valid and binding obligation
of the Purchaser enforceable in accordance with its terms, subject to laws of
general application relating to bankruptcy, insolvency and the relief of
debtors, and rules of law governing specific performance, injunctive relief or
other equitable remedies.

                  (c) Neither the execution and the delivery of this Agreement
nor the consummation of the transactions contemplated hereby will (i) violate
any statute, regulation, rule, injunction, judgment, order, ruling, or other
restriction of any government, governmental agency, or court to which the
Purchaser is subject or any provision of the charter or bylaws of the Purchaser
or (ii) conflict with, result in a breach of, constitute a default under, any
agreement, contract, lease, license, instrument, requirement to give notice, or
other arrangement to which the Purchaser is a party or by which it is bound (or
result in the imposition of any security interest upon any of it assets).

                  (d) The Purchaser is acquiring the Shares for investment for
its own account, not as a nominee or agent, and not with a view to, or for
resale in connection with, any distribution thereof, and the Purchaser has no
present intention of selling, granting any participation in, or otherwise
distributing the same in violation of applicable law. The Purchaser understands
that the Shares to be purchased have not been and will not have been registered
under the Securities Act by reason of a specific exemption from the registration
provisions of the Securities Act which depends upon, among other things, the
bona fide nature of the investment intent and the accuracy of such Purchaser's
representations as expressed herein.

                  (e) The Purchaser is an accredited investor within the
definition of Regulation D of the Securities Act. The Purchaser has such
knowledge and experience in financial and business matters that such Purchaser
is capable of evaluating the merits and risks of the purchase of the Shares
pursuant to this Agreement and of protecting the Purchaser's interests in
connection therewith. The Purchaser is able to bear the
                                        2

<PAGE>   3
economic risk of its respective investment in the Shares for an indefinite
period of time because the Shares have not been registered under the Securities
Act and, therefore, cannot be sold unless subsequently registered under the
Securities Act or an exemption from such registration is available.

                  (f) The Purchaser understands that the Shares are
characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
the Shares may be resold without registration under the Securities Act only in
certain limited circumstances. The Purchaser acknowledges that the Shares must
be held indefinitely unless subsequently registered under the Securities Act or
an exemption from such registration is available. The Purchaser is aware of the
provisions of Rule 144 promulgated under the Securities Act, which permit
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things, the
availability of certain current public information about the Company, the resale
occurring not less than one (1) year after a party has purchased and paid for
the security to be sold, the sale being effected through a "broker's
transaction" or in transactions directly with a "market maker" (as provided by
Rule 144(f)) and the number of shares being sold during any three (3) month
period not exceeding specified limitations.

                  (g) The Purchaser has had the opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of the
Shares and has had access to such other information concerning the Company that
it deemed necessary in order to evaluate the purchase of the Shares. The
Purchaser has also reviewed, or has had an opportunity to review, the following
documents: (A) the Company's Certificate of Incorporation and Bylaws and (B) the
Company's financial statements (the "S-1 Financial Statements") for the period
as of and ending on December 31, 1999, filed with the Securities and Exchange
Commission with the Company's Registration Statement on Form S-1 (the "Form
S-1") on February 16, 2000. Except as expressly set forth herein, the Company
does not make any representations or warranties regarding the Shares, the
Purchaser's investment in the Company or otherwise as to the financial
condition, assets, liabilities, business or prospects of any of the Company and
all of such representations and warranties are hereby disclaimed.

                  (h) The Purchaser has consulted with legal counsel regarding
its rights and obligations under this Agreement and fully understands the terms
and conditions contained herein.

                                        3
<PAGE>   4
         3. Company's Representations and Acknowledgments. In connection with
the Shares, the Company represents and warrants to the Purchaser that:

                  (a) The Company has been duly organized and is validly
         existing as a corporation in good standing under the laws of the
         jurisdiction of its incorporation.

                  (b) The execution of this Agreement by the Company has been
         duly authorized by all necessary corporate action. This Agreement, when
         executed and delivered by the Company, shall constitute a valid and
         binding obligation of the Company enforceable in accordance with its
         terms, subject to laws of general application relating to bankruptcy,
         insolvency and the relief of debtors, and rules of law governing
         specific performance, injunctive relief or other equitable remedies.

                  (c) Neither the execution and the delivery of this Agreement
         nor the consummation of the transactions contemplated hereby will (i)
         violate any statute, regulation, rule, injunction, judgment, order,
         ruling, or other restriction of any government, governmental agency, or
         court to which the Company is subject or any provision of the charter
         or bylaws of the Company or (ii) conflict with, result in a breach of,
         or constitute a default under, any agreement, contract, lease, license,
         instrument, requirement to give notice, or other arrangement to which
         the Company is a party or by which it is bound (or result in the
         imposition of any security interest upon any of it assets).

                  (d) The issuance of the Shares and the certificate
         representing such Shares by the Company have been authorized by all
         necessary corporate action and, when issued and delivered by the
         Company pursuant to this Agreement against payment of the consideration
         set forth herein, will be validly issued, fully paid and
         non-assessable.

                  (e) The Company recognizes that the Purchaser has relied on
         the S-1 Financial Statements. The S-1 Financial Statements have been
         prepared from, and are in accordance with, the books and records of the
         Company, have been prepared in accordance with generally accepted
         accounting principles (subject, in the case of unaudited statements, to
         normal and recurring year-end audit adjustments and footnote
         disclosure), consistently applied, and present fairly in all material
         respects the financial position of the Company and the results of its
         operations and cash flows at such dates and for such periods.

                                        4

<PAGE>   5
                  (f) Since December 31, 1999, there has not been any changes in
         the assets, liabilities, financial condition or operating results of
         the Company from that reflected in the S-1 Financial Statements, except
         changes in the ordinary course of business which have not been, in the
         aggregate, materially adverse to the business, assets, liabilities,
         results of operations, or condition (financial or otherwise) of the
         Company (a "Material Adverse Effect").

                  (g) Except as the Company has expressly disclosed to the
         Purchaser in writing, the Company does not have any material claims,
         liabilities, obligations of indebtedness of any nature whatsoever
         (whether known, unknown, accrued, absolute, contingent or otherwise and
         whether due or to become due) except as set forth in the S-1 Financial
         Statements.

                  (h) Except as set forth in the Form S-1, there is no action,
         suit, proceeding at law or in equity, or any arbitration or any
         administrative or other proceeding by or before (or to the knowledge of
         the Company any investigation by) any governmental or other
         instrumentality or agency, pending, or, to the knowledge of the
         Company, threatened, against or affecting the Company, or any of its
         properties or rights which, if adversely determined, would be
         reasonably likely to have a Material Adverse Effect. Except as the
         Company has expressly disclosed to the Purchaser in writing or except
         for any such conflict, violation, breach or default that would not have
         a Material Adverse Effect, the Company is not in conflict with or in
         violation or breach of, or default under, and to the knowledge of the
         Company, there exists no event that, with the giving of notice, the
         passage of time or both, would constitute a conflict, violation, breach
         or default with, of or under (x) any applicable law, statute, rule or
         regulation or (y) any provision of the Company's organizational
         documents. The Company has made available to the Purchaser true and
         complete copies of its organizational documents, as amended to date.

                  (i) Except as set forth in the Form S-1 or as otherwise
         provided in the Distribution Agreement or Services Agreement, both of
         which will be entered into between the Company and the Purchaser prior
         to Closing, (i) the Company has good and valid title to all material
         trademark registrations and applications, domain name applications and
         registrations, patents, patent applications, patentable inventions,
         know-how, trade secrets, computer programs, software, databases,
         slogans, common law trademarks, service marks and copyrights
         (collectively, "Intellectual Property") owned by the Company, or with
         respect

                                        5
<PAGE>   6
         to Intellectual Property used pursuant to license, sufficient rights to
         use the Intellectual Property in the manner in which it is currently
         used; (ii) the registrations and applications relating to Intellectual
         Property owned by the Company have not lapsed, expired or been
         abandoned; (iii) there are no pending or, to the knowledge of the
         Company, threatened proceedings or litigations or other adverse claims
         affecting or relating to the Intellectual Property the Company owns or
         to the knowledge of the Company the Intellectual Property owned jointly
         with, licensed to or licensed from, third parties, which proceedings,
         litigations or adverse claims would be reasonably likely to have,
         individually or in the aggregate, a Material Adverse Effect; and (iv)
         to the knowledge of the Company, neither the Intellectual Property
         owned by the Company or the Intellectual Property owned jointly with,
         licensed to or licensed from, third parties, nor the conduct of the
         business of the Company as currently conducted conflicts with or
         infringes in any way with the proprietary right of any third party,
         except where such conflict or infringement would not have, individually
         or in the aggregate, a Material Adverse Effect.

         4.   Legends; Transfer Restrictions.

                  (a) Legend. The Purchaser understands that the Shares, and any
securities issued in respect of or exchange for the Shares, may bear one or all
of the following legends:

         (i)      "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
                  REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN
                  ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
                  CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.  NO SUCH
                  SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE
                  REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
                  COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH
                  REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF
                  1933."

         (ii)     Any legend required by the Blue Sky laws of any state to the
                  extent such laws are applicable to the shares represented by
                  the certificate so legended.

                                        6
<PAGE>   7
                  (b) Securities Law Restrictions. No holder of Shares may sell,
transfer or dispose of any Shares unless (i) there is then an effective
registration statement under the Securities Act covering such proposed
disposition and such disposition is made in accordance with such registration
statement, or (ii) such holder of Shares shall have notified the Company of the
proposed disposition with a detailed statement of the circumstances surrounding
the proposed disposition and, if reasonably requested by the Company, such
Purchaser shall have furnished the Company with an opinion (reasonably
acceptable in form and substance to the Company) of counsel experienced in
securities laws matters that neither registration nor qualification under the
Securities Act and applicable state securities laws is required in connection
with such transfer.

                  (c) Void Transfers. Any transfer or attempted transfer of any
Shares in violation of any provision of this Agreement shall be void, and the
Company shall not record such transfer on its books or treat any purported
transferee of such Shares as the owner of such Shares for any purpose.

         5.   Conditions to Closing.

                  (a) Conditions to the obligations of the Purchaser. The
obligations of the Purchaser to purchase the Shares at the Closing is, at the
option of the Purchaser, subject to the fulfillment on or prior to the Closing
Date of or the waiver of the following conditions:

         (i)      The Company's representations and acknowledgments made in
                  section 3 of this Agreement shall have been true and correct
                  when made, and shall be true and correct in all material
                  respects as of the Closing Date.

         (ii)     All covenants, agreements, and conditions contained in this
                  Agreement to be performed by the Company on or prior to the
                  Closing shall have been fully performed or complied with in
                  all respects.

                  (b) Conditions to the obligations of the Company. The
obligations of the Company to sell the Shares to the Purchaser at the Closing
is, at the option of the Company, subject to the fulfillment on or prior to the
Closing Date of or the waiver of the following conditions:

         (i)      The Purchaser's representations and acknowledgments made in
                  section 2 of this Agreement shall have been true and correct
                  when made, and shall be true and correct in all material
                  respects as of the Closing Date.

                                        7
<PAGE>   8
         (ii)     All covenants, agreements, and conditions contained in this
                  Agreement to be performed by the Purchaser on or prior to the
                  Closing shall have been fully performed or complied with in
                  all respects.

                  (c) Conditions to each party's obligations. The respective
obligations of each party to effect the purchase and sale of the Shares at the
Closing is subject to the fulfillment on or prior to the Closing Date of or the
waiver of the following conditions:

         (i)      No temporary restraining order, preliminary or permanent
                  injunction or other order issued by any court of competent
                  jurisdiction or other legal restraint or prohibition
                  preventing the purchase and sale of the Shares or any other
                  transaction contemplated by this Agreement shall be in effect.

         (ii)     The Company and the Purchaser shall have entered into both a
                  Distribution Agreement and a Services Agreement (the
                  "Ancillary Agreements"), each on terms and conditions that are
                  satisfactory to each party.

         6. Holdback Agreement. The Purchaser agrees by purchase of the shares
of Common Stock hereunder, not to offer, sell, make any short sale of, loan,
grant any option for the purchase of, effect any public sale or distribution of
or otherwise dispose of any shares of Common Stock, during the 180 days after
the Initial Public Offering, other than with the prior written consent of the
Company and the managing underwriter in the Company's Initial Public Offering.

         7. Survival. Sections 2, 3, 4, 6, 7 , 8, 9, 14 and 16 shall survive and
continue in full force in accordance with their terms.

         8. Notices. Any notice provided for in this Agreement must be in
writing and must be either personally delivered, mailed by first class mail
(postage prepaid and return receipt requested) or sent by reputable overnight
courier service (charges prepaid) to the recipient at the address below
indicated:

         To the Company:

                  Screaming Media.com Inc.
                  601 West 26th Street, 13th Floor
                  New York, NY 10001
                  Telecopy:  212-691-1483
                  Attention:  Chief Executive Officer

                                        8
<PAGE>   9
         With a copy to:

                  Skadden, Arps, Slate, Meagher & Flom LLP
                  4 Times Square
                  New York, NY 10036
                  Telecopy: 212-735-2000
                  Attention: David J. Goldschmidt, Esq.

         To the Purchaser:

                  Spyglass, Inc.
                  1240 E. Diehl Road
                  Naperville, IL 60563
                  Telecopy:  630-245-6651
                  Attention: Chief Executive Officer

         With a copy to:

                  Baker & McKenzie
                  One Prudential Plaza
                  130 East Randolph Drive
                  Chicago, IL 60601
                  Attention: James L. Stetson, Esq.

or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement shall be deemed to have been given when personally
delivered, five days after deposit in the U.S. mail, or the business day next
following deposit with such an overnight courier service in such a manner, with
instructions for next-day delivery.

         9.   General Provisions.

                  (a) Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.

                                        9
<PAGE>   10
                  (b) Complete Agreement. This Agreement embodies the complete
agreement and understanding among the parties and supersedes and preempts any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way,
including, without limitation, any summary of terms or similar agreement.

                  (c) No Strict Construction. The language used in this
Agreement shall be deemed to be the language chosen by the parties hereto to
express their mutual intent, and no rule of strict construction shall be applied
against any party.

                  (d) Counterparts. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.

                  (e) Successors and Assigns. Except as otherwise provided
herein, this Agreement shall bind and inure to the benefit of and be enforceable
by the Purchaser, the Company, and their respective successors and assigns
(including subsequent holders of Shares); provided that, except as provided in
Section 13, the rights and obligations of the Purchaser under this Agreement
shall not be assignable without the prior written consent of the Company.

                  (f) Choice of Law. All issues and questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by, and construed in accordance with, the laws of the State of New
York, without giving effect to any choice of law or conflict of law rules or
provisions (whether of the State of New York or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than the State
of New York. In furtherance of the foregoing, the internal law of the State of
New York shall control the interpretation and construction of this Agreement,
even though under that jurisdiction's choice of law or conflict of law analysis,
the substantive law of some other jurisdiction would ordinarily apply.

         10. Remedies. Each of the parties to this Agreement shall be entitled
to enforce its rights under this Agreement specifically, to recover damages and
costs (including reasonable attorney's fees) caused by such breach of any
provision of this Agreement and to exercise all other rights existing in its
favor. The parties hereto agree and acknowledge that money damages would not be
an adequate remedy for any breach of the provisions of this Agreement and that
any party may in its sole discretion apply to any court of law or equity of
competent jurisdiction (without posting any bond or

                                       10

<PAGE>   11
deposit) for specific performance and/or other injunctive relief in order to
enforce or prevent any violations of the provisions of this Agreement.

         11. Amendment and Waiver. The provisions of this Agreement may be
amended and waived only with the prior written consent of the Company and the
Purchaser.

         12. Expenses. The Company and the Purchaser shall bear its own expenses
and legal fees incurred on their behalf with respect to this Agreement and the
Ancillary Agreements and the transactions contemplated hereby and thereby.

         13. Assignment. The provisions of this Agreement shall be assignable by
the Company to its successors or assigns. The provisions of this Agreement shall
be assignable by the Purchaser to any affiliate of the Purchaser, provided that
the Purchaser has provided written notice to the Company of such assignment.

         14. Registration Rights. (a) If the Company at any time or times after
the date hereof determines to prepare and file a ("Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act") (except a
registration statement in connection with the acquisition of any entity or
business or any employee benefit plan, including any stock option plan, or on
Form S-4 or Form S-8 under the Securities Act or any successor forms thereto) in
connection with the proposed offer of sale of Common Stock, which registration
statement does not consist exclusively of securities to be sold for the account
of the Company, the Company shall notify the Purchaser of such event and,
subject to paragraph (c) of this Section, shall permit the Purchaser to include
in such Registration Statement the number of Shares that the Purchaser shall
notify the Company it desires to register.

         (b) The Purchaser shall promptly provide the Company with such
information as may be required to permit a public offering of the Shares to be
sold by the Purchaser. The Company shall supply prospectuses and other documents
as the Purchaser may reasonably request in order to facilitate the public sale
or other disposition of such Shares. All expenses incurred by the Company
incurred in connection with the registration, qualification or compliance
pursuant to this Section, including, without limitation, all registration,
qualification and filing fees, printing expenses, escrow fees, stock transfer
taxes, fees and disbursements of counsel for the Company, and blue sky fees and
expenses, shall be borne by the Company; provided, however, that the Purchaser
shall bear the fees of its own counsel and any transfer taxes and underwriting
discounts or commissions applicable to the Shares sold by it. The Company shall
do any and all other acts and things which may be reasonably necessary

                                       11
<PAGE>   12
or desirable to enable the Purchaser to consummate the public sale or other
disposition of the Shares, but shall not be required to qualify as a foreign
corporation to qualify the Shares for sale under the securities laws of any
state. All decisions as to whether and when to proceed with any Registration
Statement shall be made solely by the Company. The Company shall not be
obligated to keep any Registration Statement effective for a total of more than
180 days.

         (c) Notwithstanding paragraph (a) of this Section, if the offering that
is subject of such Registration Statement is underwritten, in whole or in part,
and the managing underwriter advises the Company that the inclusion of
Purchaser's Shares proposed to be included in such Registration Statement would
interfere with the successful marketing (including pricing) of the securities
proposed to be registered by the Company, then the number of Purchaser's Shares
to be included in the underwritten offering may be reduced or excluded
altogether on the same basis as other holders of piggyback or other similar
registration rights with respect to Common Stock (other than as provided in the
following sentence), as determined by the Company in its sole discretion. If the
number of Shares to be included in an underwritten offering is reduced in the
circumstances described in the preceding sentence, the Purchaser shall not have
the right to have any of its Shares included in the Registration Statement until
the rights of (i) the holders of Common Stock issued on conversion of the
Company's Series B Preferred Stock and (ii) any other holder of Common Stock who
has been granted comparable registration rights in accordance with the investor
rights agreement between the Company and the holders of the Series B Preferred
Stock, to have their shares included in such Registration Statement have been
satisfied.

         (d) (i) The Company shall indemnify and hold harmless the Purchaser,
its officers and directors, and each other person, if any, who controls the
Purchaser within the meaning of the Securities Act against any losses, claims,
damages or liabilities, joint or several, to which the Purchaser or any such
director or officer or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Registration Statement
under which Shares to be sold by the Purchaser were registered under the
Securities Act, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading
or, with respect to any prospectus, necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; and the
Company will reimburse the Purchaser and each such director,

                                       12
<PAGE>   13
officer and controlling person for any legal or any other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, liability, action or proceeding; provided that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such Registration Statement, any such preliminary
prospectus, final prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by the Purchaser
for use in the preparation thereof. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the Purchaser
or any such director, officer or controlling person.

         (ii) The Purchaser agrees to indemnify and hold harmless the Company,
each director of the Company, each officer of the Company and each other person,
if any, who controls the Company within the meaning of the Securities Act, with
respect to any statement or alleged statement in or omission or alleged omission
from such Registration Statement, any preliminary prospectus, final prospectus
or any amendment or supplement thereto, if such statement or alleged statement
or omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company by the Purchaser for use in the
preparation of such Registration Statement, preliminary prospectus, final
prospectus, amendment or supplement. Such indemnity shall remain in full force
and effect, regardless of any investigation made by or on behalf of the Company
or any such director, officer or controlling person.

         (iii) Promptly after receipt by an indemnified party of notice of the
commence ment of any action or proceeding involving a claim referred to in the
preceding clauses of this paragraph (d), such indemnified party will, if a claim
in respect thereof is to be made against an indemnifying party, give written
notice to the latter of the commencement of such action, provided that the
failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under this Section, except to
the extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action is brought against an indemnified party,
unless in such indemnified party's reasonable judgement a conflict of interest
between such indemnified and indemnifying parties may exist in respect of such
claim, the indemnifying party shall be entitled to participate in and to assume
the defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable for any settlement made by

                                       13
<PAGE>   14
the indemnified party without its consent (which consent will not be
unreasonably withheld) or for any legal or other expenses subsequently incurred
by the indemnified party in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without the
consent of the indemnified party, consent to entry of any judgement or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability in respect to such claim or litigation.

         15. Termination. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned:

                      (a)    at any time, by mutual written consent of the
                             Company and the Purchaser; or

                      (b)    at any time from and including the date which is
180 days from the date first above written if the Closing has not occurred as of
such time, at the option of the Purchaser, upon written notice to the Company.

         16. Publicity. Neither party shall make any publicity, news release or
other public announcement relating to this Agreement or the existence of an
arrangement between the parties without the prior written approval of the other
party, except as otherwise required by law; provided, however, that both parties
shall have the right to: (i) list the other party as a customer or supplier in
its marketing or press materials; and (ii) describe the relationship of the
parties to the extent required in documents required to be filed with the
Securities and Exchange Commission or other regulatory body

                                       14
<PAGE>   15
         IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.

                                            SCREAMING MEDIA.COM INC.

                                            By: /s/ Kevin Clark
                                              ---------------------------
                                            Its:    Kevin Clark, CEO
                                                -------------------------

                                            SPYGLASS, INC.

                                            By:  /s/ Douglas P. Colbeth
                                                ---------------------------
                                            Its:     Douglas P. Colbeth, CEO
                                                ---------------------------<PAGE>   1
                                                                   EXHIBIT 10.57
                                 LOAN AGREEMENT

     This LOAN AGREEMENT, dated as of March 29, 2000 (the "Loan Agreement"), is
made and entered into by and between Halsey Drug Co., Inc., a New York
corporation ("Borrower"), and Watson Pharmaceuticals, Inc., a Nevada
corporation ("Lender"). Capitalized terms used herein shall have the meanings
given them in Section 12.1 below.

                                    RECITALS

     WHEREAS, concurrently herewith, the Lender and the Borrower are entering
into, among other agreements, that certain Product Purchase Agreement (the
"Purchase Agreement"), pursuant to which Lender will purchase from Borrower its
[___________________] product (the "Product") and related assets; those certain
Supply Agreements (the "Supply Agreements"), pursuant to which Borrower will
supply Lender with the finished Product and the active pharmaceutical
ingredient for the Product, respectively; and that Right of First Negotiation
Agreement (the "Negotiation Agreement"), pursuant to which Lender have a right
to negotiate supply agreements with Borrower for other pharmaceutical compounds
or finished goods with respect to which Borrower has or may acquire
manufacturing rights;

     WHEREAS, in order to develop its business and perform its obligations
under the Product Agreements, Borrower will require additional access to
credit;

     WHEREAS, it is therefore a condition to the execution of the Purchase
Agreement and the Supply Agreements that Lender loan to Borrower the principal
amount of Seventeen Million Five Hundred Thousand Dollars ($17,500,000) on the
terms and conditions set forth herein;

     WHEREAS, pursuant to that certain Debenture and Warrant Purchase
Agreement, dated as of March 10, 1998 (the "1998 Debenture Agreement"),
executed by Borrower in favor of the Purchasers named therein, Borrower issued
its 5% Convertible Senior Secured Debentures Due March 15, 2003 (such
debentures, the "Galen Debentures");

     WHEREAS, pursuant to that certain Debenture and Warrant Purchase
Agreement, dated May 26, 1999 (the "1999 Debenture Agreement"), executed by
Borrower in favor of the Purchasers named therein, Borrower issued its 5%
Convertible Senior Secured Debentures Due March 15, 2003 (such debentures, the
"Oracle Debentures," and collectively with the Galen Debentures, the "Existing
Debentures"). The holders of the Galen Debentures and the Oracle Debentures as
of a given date are sometimes referred to herein as the "Existing Holders."

     WHEREAS, to induce Lender to make the Loan, (i) Borrower will grant to
Lender a first priority perfected security interest in its assets; (ii) the
Borrower's subsidiaries will execute guaranties in favor of Lender,
guaranteeing the Borrower's obligations hereunder, and security agreements in
support of such guaranties, naming Lender a secured party; and (iii) Houba,
Inc., a wholly-owned subsidiary of the Borrower, shall execute a mortgage on
certain real property in Culver, Indiana in favor of Lender; and

     WHEREAS, as further inducement for the Lender to make the Loan, Lender,
the holders of the Galen Debentures, the holders of the Oracle Debentures,
Borrower and certain of the Guarantors will enter into that certain
Subordination Agreement, dated as of even date herewith and substantially in
the form attached hereto as Exhibit A (the "Subordination Agreement"), pursuant
to which the

<PAGE>   2

parties thereto shall agree that Lender shall be entitled to satisfaction in
full of Borrower's obligations under this Loan Agreement prior to the
satisfaction of Borrower's obligations under the Existing Debentures (exclusive
of interest payment obligations, subject to the terms of the Subordination
Agreement);

     NOW, THEREFORE, in consideration of the foregoing recitals and the
covenants herein contained, the parties hereto agree as follows.

                                   AGREEMENT

1.   AMOUNT AND TERMS OF LOAN.

     1.1  Term Loan. Subject to the terms herein, Lender agrees to loan to
Borrower the principal amount of Seventeen Million Five Hundred Thousand
Dollars ($17,500,000) (the "Loan"). Only one such Loan shall be made hereunder,
notwithstanding any prepayment of the Loan by Borrower, and sums repaid
hereunder may not be re-borrowed.

     1.2  Promissory Note. Borrower's obligation to pay the principal of, and
interest on, the Loan shall be evidenced by a secured promissory note in the
form attached hereto as Exhibit B (the "Note"), duly executed and delivered by
Borrower.

2.   SECURITY FOR THE LOAN; GUARANTIES.

     2.1  Collateral. All of the obligations of Borrower under this Loan
Agreement shall be secured by (a) a first priority lien on all the personal
property and assets of Borrower, now existing or hereinafter acquired, granted
to the Lender pursuant to a security agreement substantially in the form
attached hereto as Exhibit C (the "Watson Security Agreement"), which, except
for Permitted Liens, shall be a first priority lien and senior in priority to
the liens in favor of the Existing Holders, (b) collateral assignments
substantially in the form attached hereto as Exhibit D (the "Watson Collateral
Assignments"), executed by the Borrower in favor of the Lender; and (c) a stock
pledge agreement substantially in the form attached hereto as Exhibit E (the
"Watson Stock Pledge Agreement"), executed by Borrower in favor of Lender,
pledging all of the capital stock of the Guarantors to the Lender in support of
the Obligations.

     2.2  Guaranties. All of the Obligations of Borrower shall be guaranteed
pursuant to a guaranty substantially in the form attached hereto as Exhibit F
(the "Watson Guaranty"), executed by the Guarantors in favor of the Lender.

     2.3  Guarantor Security Documents. All of the obligations of the
Guarantors under the Guaranties shall be secured by (a) a lien on all of the
personal property and assets of the respective Guarantors, now existing or
hereinafter acquired, granted to the Lender pursuant to a security agreement
substantially in the form attached hereto as Exhibit G (the "Watson Guarantors
Security Agreement"), which, except for Permitted Liens, shall be first liens
and senior in priority to the Guarantors' liens in favor of the Existing
Holders; (b) collateral assignments substantially in the form attached hereto
as Exhibit H (the "Watson Guarantors Collateral Assignments"), executed by the
Guarantors in favor of the Lender; and (c) a first mortgage covering Houba's
Culver, Indiana real property (the "Watson Mortgage").

<PAGE>   3

The Watson Security Agreement, the Watson Collateral Assignment, the Watson
Stock Pledge Agreement, the Watson Guaranty, the Watson Guarantors Security
Agreement, the Watson Guarantor Collateral Assignments and the Watson Mortgage
are sometimes referred to collectively herein as the "Watson Security
Documents." The Loan Agreement, the Note, the Watson Security Documents and the
Subordination Agreement are sometimes referred to collectively herein as the
"Loan Documents."

3.   CLOSING. The closing of this Loan Agreement (the "Closing") will take
place at the offices of Stradling Yocca Carlson & Rauth at 660 Newport Center
Drive, Suite 1600, Newport Beach, California 92660, simultaneously with the
execution of this Loan Agreement, or such other place, time and date as shall
be mutually agreed to by Lender and Borrower. Such time and date is herein
called the "Closing Date."

4.   CONDITIONS PRECEDENT. The obligation of Lender to make the Loan is subject
to the satisfaction of the following conditions.

     4.1  Execution of Note. Borrower shall have executed and delivered to
Lender the Note.

     4.2  Execution of Subordination Agreement. Borrower shall have executed
and delivered to Lender, and shall have caused the other parties thereto
(except Lender) to have executed and delivered, the Subordination Agreement.

     4.3  Execution of Related Agreements. Borrower shall have executed and
delivered to Lender the Purchase Agreement, the Supply Agreements and the
Negotiation Agreement.

     4.4  Amended Brooklyn Facility Lease. Borrower shall have executed and
delivered, and shall have caused the lessor under the Brooklyn Facility Lease
to have executed and delivered, an amendment to the Brooklyn Facility Lease in
form and substance reasonably acceptable to the Lender.

     4.5  No Default; Representations and Warranties. At the time of making the
Loan and also after giving effect thereto: (a) there shall have occurred no
Event of Default (as defined in Section 8.1 below), and (b) all representations
and warranties contained in the Loan Documents shall be true and correct in all
material respects.

     4.6  Corporate Documents; Proceedings. All corporate and legal proceedings
and all instruments and agreements in connection with the transactions
contemplated in the Loan Documents shall be satisfactory in form and substance
to Lender, and Lender shall have received all information and copies of all
documents and papers, including records of corporate proceedings and
governmental approvals, if any, which Lender reasonably may have requested in
connection therewith, such documents and papers to be certified where
appropriate by proper corporate or governmental authorities.

     4.7  Watson Security Documents. Borrower shall have duly authorized,
executed and delivered, and/or shall have caused the Agent, the holders of the
Oracle Debentures and the Guarantors, as applicable, to have duly authorized,
executed and delivered, the Watson Security Documents, together with:

<PAGE>   4

          (a)  copies of duly authorized, executed and proper UCC-1 Financing
Statements, in a form suitable for filing under the UCC of each jurisdiction as
may be necessary or, in the reasonable opinion of Lender, desirable to perfect
the security interests purported to be created by the Watson Security Documents
(the "Financing Statements"), such Financing Statements to be filed, or to be
caused to be filed, as soon as practicable, but in no event later than ten
Business Days, following the Closing;

          (b)  certified copies of UCC-11 Requests for Information or
equivalent reports, listing all other effective financing statements that name
Borrower as debtor and that are filed in the jurisdictions referred to in
clause (a) above, together with copies of such other financing statements (none
of which shall cover the Collateral except those issued in connection with the
Existing Debentures or to the extent evidencing Permitted Liens);

          (c)  copies of such other duly authorized, executed and proper
recordings and filings, including filings in the U.S. Patent and Trademark
Office, as may be necessary or, in the opinion of Lender, desirable to perfect
the security interests purported to be created by the Watson Security
Documents;

          (d)  copies of such duly authorized, executed and proper recordings
and filings as may be necessary or, in the opinion of Lender, desirable to
evidence the Watson Mortgage in the applicable state, county and local
recorders office;

          (e)  [intentionally omitted]; and

          (f)  evidence that all other actions necessary or, in the opinion of
Lender, desirable to perfect and protect the security interests purported to be
created by the Watson Security Documents have been or will be taken.

     4.8  Consents. Borrower shall have obtained all necessary consents or
waivers, if any, from all parties to any other material agreements to which
Borrower is a party or by which it is bound immediately prior to the Closing in
order that the transactions contemplated hereby may be consummated and the
business of Borrower may be conducted by Borrower after the Closing without
adversely affecting Borrower, including, without limitation, (a) the consent of
the Agent and the holders of the Oracle Debentures to the execution of the Loan
Documents and the transactions contemplated thereby; and (b) the consents of
the holders of the Existing Debentures required pursuant to Section 6.2 with
respect to non-cash interest payments.

     4.9  Other Deliveries.  Borrower shall have delivered to Lender:

          (a)  a copy of the Certificate of Incorporation of Borrower and each
Guarantor and all amendments thereto, certified by the Secretary of State for
the jurisdiction of incorporation of each;

          (b)  a copy of the By-Laws of Borrower and each Guarantor as amended
to date, certified as being true and complete by a principal officer of
Borrower;

          (c)  a Certificate of Good Standing and Tax Status from the state of
incorporation of Borrower and each Guarantor and from every state in which any
of them is qualified to do business; and

<PAGE>   5

          (d)  true and complete copies of the mortgages and all material
transaction documents (including, without limitation, the disclosure schedules
thereto) pertaining to the issuance of the Galen Debentures and the Oracle
Debentures, certified as such by a principal officer of Borrower.

     4.10 Due Diligence Investigation. No fact shall have been discovered which
in Lender's sole determination would make the consummation of the transactions
contemplated by this Loan Agreement not in Lender's best interests.

     4.11 Opinion of Counsel. Lender shall have received the opinion of St.
John & Wayne, L.L.C., counsel to Borrower, dated the Closing Date,
substantially in the form of Exhibit I attached hereto.

5.   REPRESENTATIONS AND WARRANTIES OF BORROWER. The Borrower represents and
warrants as follows:

     5.1  Organization and Existence, etc. Except as set forth in Section 5.1
of the Schedule of Exceptions attached hereto (the "Schedule of Exceptions"),
or in the Borrower's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998, as amended, or the Borrower's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1999 (collectively, the "Selected
Reports"), (a) the Borrower is a corporation duly organized and validly
existing and in good standing under the laws of its jurisdiction of
incorporation, and has all requisite corporate power and authority to carry on
its business as now conducted and proposed to be conducted; (b) the Borrower
has all requisite corporate power and authority to enter into this Loan
Agreement and to carry out and perform its obligations under the terms and
conditions of this Loan Agreement. Except as set forth in Section 5.1 of the
Schedule of Exceptions, the Borrower does not own or lease any property or
engage in any activity in any jurisdiction which might require qualification to
do business as a foreign corporation in such jurisdiction and where the failure
to so qualify would have a material adverse effect on the financial condition
of the Borrower and its Subsidiaries, taken as a whole, or subject the Borrower
to a material liability. To the extent the Borrower has not qualified to do
business in such jurisdictions, it will prepare and file such necessary
applications or documents to be filed with the appropriate authorities in such
jurisdictions to obtain such qualifications within 60 days. The Borrower has
furnished the Lender with true, correct and complete copies of its Certificate
of Incorporation, By-Laws and all amendments thereto to date.

     5.2  Subsidiaries and Affiliates. Section 5.2 of the Schedule of
Exceptions sets forth the name, jurisdiction of incorporation and authorized
and outstanding capitalization of each entity in which the Borrower owns
securities having a majority of the voting power in the election of directors
or persons serving equivalent functions (each, a "Subsidiary"). Except as set
forth in Section 5.2 of the Schedule of Exceptions, the Borrower has, and upon
the Closing will have, no Subsidiaries and does not, and upon the Closing will
not, own of record or beneficially any capital stock or equity interest or
investment in any corporation, association or business entity. Except as set
forth in Section 5.2 of the Schedule of Exceptions or in the Selected Reports,
each Subsidiary is a corporation duly organized and validly existing and in
good standing under the laws of its jurisdiction of incorporation and has all
requisite corporate power and authority to carry on its business as now
conducted and proposed to be conducted. Except as set forth in Section 5.2 of
the Schedule of Exceptions, no Subsidiary owns or leases any property or
engages in any activity in any jurisdiction which might require such Subsidiary
to qualify to do business as a foreign corporation in such jurisdiction and
where the failure to so qualify would have a material adverse effect on the
financial

<PAGE>   6

condition of the Borrower and its Subsidiaries, taken as a whole, or subject
such Subsidiary to a material liability. To the extent any Subsidiary has not
qualified to do business in such jurisdictions, it will prepare and file such
necessary applications or documents to be filed with the appropriate
authorities in such jurisdictions to obtain such qualifications within 60 days.
None of Cenci Power Products, Inc., a Delaware corporation, H.R. Cenci
Laboratories, Inc., a California corporation, Blue Cross Products, Inc., a New
York corporation, and Indiana Fine Chemicals, Inc., a Delaware corporation,
each wholly-owned Subsidiaries of Borrower (the "Immaterial Subsidiaries"),
have any material assets or conduct any material business operation.

     5.3  Capitalization.

          (a)  As of the date hereof, the Borrower's authorized capital stock
consists of 80,000,000 shares of Common Stock, par value $.01 per share, of
which 14,439,622 shares are outstanding and 47,888,808 of which are reserved
for issuance for the purposes set forth in Section 5.3 of the Schedule of
Exceptions, 31,889,792 of which have been reserved for issuance upon conversion
of the Existing Debentures and 10,258,716 of which have been reserved for
issuance upon exercise of the Warrants. As of the date hereof, the Borrower
holds 439,603 shares of Common Stock in its treasury which shares may be
reissued.

          (b)  All the issued and outstanding shares of capital stock of the
Borrower shall, as of the Closing, (i) have been duly authorized and validly
issued, (ii) be fully paid and nonassessable and (iii) have been offered,
issued, sold and delivered by the Borrower in compliance with applicable
federal and state securities laws. Other than as set forth in Section 5.3 of
the Schedule of Exceptions or the Selected Reports, there are no outstanding
preemptive, conversion or other rights, options, warrants, calls, agreements or
commitments granted or issued by or binding upon the Borrower, for the purchase
or acquisition of any shares of its capital stock or securities convertible
into or exercisable or exchangeable for capital stock.

     5.4  Authorization. All corporate action on the part of the Borrower and
the directors and stockholders of the Borrower necessary for the authorization,
execution, delivery and performance by the Borrower of this Loan Agreement and
the transactions contemplated herein has been taken or will have been taken
prior to the Closing.

     5.5  Binding Obligations; No Material Adverse Contracts, etc. The Loan
Agreement is a valid and binding obligation of the Borrower enforceable in
accordance with its terms. Except as set forth in Section 5.5 of the Schedule
of Exceptions, the execution, delivery and performance by the Borrower of this
Loan Agreement and compliance herewith will not result in any violation of and
will not conflict with, or result in a breach of any of the terms of, or
constitute a default under, any provision of state or federal law to which the
Borrower is subject, the Certificate of Incorporation, as amended, or the
By-Laws, as amended, of the Borrower, or any mortgage, indenture, agreement,
instrument, judgment, decree, order, rule or regulation or other restriction to
which the Borrower is a party or by which it is bound, or except for liens on
the assets of the Borrower created in favor of the Lender, result in the
creation of any mortgage, pledge, lien, encumbrance or charge upon any of the
properties or assets of the Borrower pursuant to any such term.

     5.6  Compliance with Instruments, etc. Except as set forth in Section 5.6
of the Schedule of Exceptions or the Selected Reports, neither the Borrower nor
any Subsidiary is (a) in default past any grace, notice or cure period under
any indenture, agreement or instrument to which it is a party or by which it is
bound, (b) in violation of its Certificate of Incorporation, By-Laws or of any

<PAGE>   7

applicable law, (c) in default with respect to any order, writ, injunction or
decree of any court, administrative agency or arbitrator, or (d) in default
under any order, license, regulation or demand of any government agency, which
default or violation would materially and adversely affect the business,
properties or condition (financial or otherwise) of the Borrower and its
Subsidiaries taken as a whole.

     5.7  Litigation. Except as set forth in Section 5.7 of the Schedule of
Exceptions or the Selected Reports, there is no action, suit or proceeding
pending, or, to the knowledge of the Borrower, threatened, against the Borrower
or any Subsidiary before any court, administrative agency or arbitrator or any
action, suit or proceeding pending, or, to the knowledge of the Borrower,
threatened, which challenges the validity of any action taken or to be taken
pursuant to or in connection with this Loan Agreement.

     5.8  Financial Information; SEC Documents.

          (a)  Borrower has furnished to Lender the consolidated financial
statements of Borrower and its Subsidiaries, including consolidated balance
sheets as of December 31, 1998 and 1997 and consolidated statements of
operations, changes in cash flows and stockholders' equity, covering the three
years ended December 31, 1998, all of which statements have been certified by
Grant Thornton LLP, certified public accountants, and all of which statements
are included or incorporated by reference in Borrower's Annual Report on Form
10-K for the year ended December 31, 1998 filed with the Commission under the
Exchange Act. Such financial statements fairly present the condition of
Borrower and its Subsidiaries as of the dates thereof and the results of the
operations of Borrower and its Subsidiaries for such periods.

          (b)  Borrower has also furnished to Lender the unaudited consolidated
balance sheets of Borrower and its Subsidiaries as of December 31, 1999, and
the related unaudited consolidated statements of operations, consolidated
statements of cash flow and consolidated statements of stockholders' equity for
the three months and twelve months ended December 31, 1999 and December 31,
1998. Such financial statements fairly present, in conformity with United
States generally accepted accounting principles ("GAAP") applied on a basis
consistent with the financial statements referred to in paragraph (a) of this
section, the consolidated financial position of Borrower and its Subsidiaries
as of such date and their consolidated results of operations for such periods
(subject to normal year-end adjustments). Since December 31, 1999, Borrower has
not had net losses (as calculated in conformity with GAAP applied on a basis
consistent with the financial statements referred to in paragraph (a) of this
section) of more than $5,000,000.

          (c)  None of the documents filed by the Borrower with the Commission
since June 30, 1998 contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements contained therein not false or misleading in light of the
circumstances in which they were made. There is no fact known to the Borrower
which the Borrower has not disclosed to the Lender prior to or as of the date
of this Loan Agreement which materially and adversely affects, or in the future
is likely to materially and adversely affect, the business, properties,
condition (financial or otherwise) or business prospects of the Borrower and
its Subsidiaries, taken as a whole.

     5.9  Permits; Governmental and Other Approvals.

<PAGE>   8

          (a)  Other than as set forth in Section 5.9 of the Schedule of
Exceptions or the Selected Reports, each of the Borrower and its Subsidiaries
possesses such franchises, licenses, permits and other authority as are
necessary for the conduct of its business as now being conducted and proposed
to be conducted (except where the failure to possess such franchises, licenses,
permits or other authority would not materially and adversely affect the
business, properties or condition (financial or otherwise) of the Borrower and
its Subsidiaries taken as a whole) and the Borrower and its Subsidiaries are
not in default under any of such franchises, licenses, permits or other
authority. Other than as set forth in Section 5.9 of the Schedule of Exceptions
or the Selected Reports, no approval, consent, authorization or other order of,
and no designation, filing, registration, qualification or recording with, any
governmental authority or any other person or entity is required in connection
with the Borrower's valid execution, delivery and performance of this Loan
Agreement or the consummation of any other transaction contemplated on the part
of the Borrower hereby.

          (b)  Without limiting the generality of the representations and
warranties made in Section 5.9, the Borrower represents and warrants that (i)
it and its Subsidiaries are in compliance in all material respects with all
applicable provisions of the Federal Food, Drug, and Cosmetic Act (the "FDC
Act"), (ii) its products and those of its Subsidiaries are not adulterated or
misbranded and are in lawful distribution, and (iii) it and its Subsidiaries
are in compliance with the following specific requirements: the Borrower and
its Subsidiaries have registered all facilities with the United States Food and
Drug Administration (the "FDA"); the Borrower and its Subsidiaries have listed
all drug products with the FDA; each drug product marketed by the Borrower or
any Subsidiary is the subject of an application approved by the FDA; all
marketed drug products comply with any conditions of approval and the terms of
the application submitted to the FDA; all drug products are manufactured in
compliance with the FDA's good manufacturing practice regulations; all products
are labeled and promoted in accordance with the terms of the marketing
application and the provisions of the FDC Act; all adverse events that were
required to be reported to the FDA have been reported to the FDA in a timely
manner; each of the Borrower and its Subsidiaries is in compliance in all
material respects with the terms of the consent agreement entered into by the
Borrower with the United States Attorney for the Eastern District of New York
on behalf of the FDA on June 29, 1993, as amended to date; to the Borrower's
knowledge, neither the Borrower nor any Subsidiary is employing or utilizing
the services of any individual who has been debarred under the FDC Act; all
stability studies required to be performed for products distributed by the
Borrower or a Subsidiary have been completed or are ongoing in accordance with
the applicable FDA requirements; any products exported by the Borrower or a
Subsidiary have been exported in compliance with the FDC Act; and each of the
Borrower and its Subsidiaries is in compliance in all material respects with
the provisions of the Federal Food, Drug, and Cosmetic Act, to the extent
applicable.

          (c)  Without limiting the generality of the representations and
warranties made in Section 5.9(a), the Borrower also represents and warrants
that it and its Subsidiaries are in compliance in all material respects with
all applicable provisions of the Controlled Substances Act (the "CSA") and that
the Borrower and its Subsidiaries are in compliance with the following specific
requirements: the Borrower and its Subsidiaries are registered with the Drug
Enforcement Administration (the "DEA") at each facility where controlled
substances are exported, imported, manufactured or distributed; all controlled
substances are stored and handled pursuant to DEA security requirements; all
records and inventories of receipt and distributions of controlled substances
are maintained in the manner and form as required by DEA regulations; all
reports, including, but not limited to, ARCOS, manufacturing quotas, production
quotas, and disposals, have been submitted to DEA in a timely manner; all
adverse events, including thefts or significant losses of controlled
substances, have been reported to DEA in a timely manner; to the Borrower's
knowledge, neither the

<PAGE>   9

Borrower nor any Subsidiary is employing any individual, with access to
controlled substances, who has previously been convicted of a felony involving
controlled substances; and any imports or exports of controlled substances have
been conducted in compliance with the CSA and DEA regulations.

     5.10 Sales Representatives, Customers and Key Employees. Other than as set
forth in Section 5.10 of the Schedule of Exceptions or the Selected Reports, to
the knowledge of the Borrower, no independent sales representatives, customers
or key employees or group of key employees of the Borrower or its Subsidiaries
has any intention to terminate his, her or its relationship with the Borrower
or such Subsidiary on or after the Closing or in the case of employees, leave,
as of the Closing, the employ of the Borrower on and after the Closing. Other
than as set forth in Section 5.10 of the Schedule of Exceptions or the Selected
Reports or as contemplated by this Agreement, all personnel are employed on an
"at will" basis and may be terminated upon notice of not more than 30 days.

     5.11 Copyrights, Trademarks and Patents.

          (a)  Section 5.11 of the Schedule of Exceptions sets forth a list of
all of the Borrower's and any Subsidiary's patents, patent applications,
trademarks, copyrights, trademark registrations and applications therefor,
patent, trademark or trade name licenses, contracts with employees or others
relating in whole or in part to disclosure, assignment or patenting of any
inventions, discoveries, improvements, processes, formulae or other know-how,
and all patent, trademark or trade names or copyright licenses which are in
force (referred to collectively as "Intellectual Property Rights"). The
Intellectual Property Rights are, to the best of the Borrower's knowledge and
belief, fully valid and are in full force and effect.

          (b)  The Borrower or a Subsidiary owns outright all of the
Intellectual Property Rights listed on Section 5.11 of the Schedule of
Exceptions attached hereto and, except as set forth in Section 8.3(l), such
Intellectual Property is free and clear of all liens and encumbrances and
neither Borrower nor its Subsidiaries pay any royalty to anyone under or with
respect to any of them.

          (c)  Neither the Borrower nor any Subsidiary has licensed anyone to
use any of such Intellectual Property Rights and has no knowledge of the
infringing use by the Borrower or any Subsidiary of any intellectual property
rights.

          (d)  The Borrower has no knowledge, nor has it received any notice
(i) of any conflict with the asserted rights of others with respect to any
Intellectual Property Rights used in, or useful to, the operation of the
business conducted by the Borrower and its Subsidiaries or with respect to any
license under which the Borrower or a Subsidiary is licensor or licensee; or
(ii) that the Intellectual Property Rights infringe upon the rights of any
third party.

     5.12 Inventory. All inventory of the Borrower consists of a quality and
quantity usable and salable in the ordinary course of business, except for
obsolete items and items of below-standard quality, all of which have been or
will be written off or written down to net realizable value on the unaudited
consolidated balance sheet of the Borrower and its Subsidiaries as of December
31, 1999. The quantities of each type of inventory (whether raw materials,
work-in-process, or finished goods) are not excessive, but are reasonable and
warranted in the present circumstances of the Borrower.

<PAGE>   10

     5.13 No Discrimination.  Neither the Borrower nor any Subsidiary in any
manner or form discriminates, fosters discrimination or permits discrimination
against any person belonging to any minority race or believing in any minority
creed or religion.

     5.14 Environmental Matters.

          (a)  Each of the Borrower and its Subsidiaries has obtained all
environmental, health and safety permits necessary or required for the
operation of its business (except where the failure to possess such franchises,
licenses, permits or other authority would not materially and adversely affect
the business, properties or condition (financial or otherwise) of the Borrower
and its Subsidiaries taken as a whole), and all such permits are in full force
and effect and each of the Borrower and its Subsidiaries is in compliance in
all material respects with all terms and conditions of such permits.

          (b)  Except as set forth in Section 5.14 of the Schedule of
Exceptions or the Selected Reports, there is no proceeding pending or, to the
best knowledge of the Borrower, threatened, which may result in the denial,
rescission, termination, modification or suspension of any environmental or
heath or safety permits necessary for the operation of the business of the
Borrower and its Subsidiaries.

          (c)  Except as set forth in Section 5.14 of the Schedule of
Exceptions or the Selected Reports, during the occupancy by the Borrower or any
Subsidiary of any real property leased by the Borrower or such Subsidiary, and
to the best knowledge of the Borrower, no other person or entity, has caused or
permitted materials to be generated, released, stored, treated, recycled,
disposed of on, under or at such parcels, which materials, if known to be
present, would require clean up, removal or other remedial or responsive action
under any Environmental Law. To the best knowledge of the Borrower, there are
no underground storage tanks and no polychlorinated biphenyls ("PCB's"), PCB
contaminated oil or asbestos on any property leased by the Borrower or any
Subsidiary.

          (d)  Except as set forth in Section 5.14 of the Schedule of
Exceptions or the Selected Reports, neither the Borrower nor any Subsidiary is
subject to any judgment, decree, order or citation related to or arising out of
Environmental Laws, or has received notice that it has been named or listed as
a potentially responsible party by any person or governmental body or agency in
any matter arising under Environmental Laws.

          (e)  To the best of knowledge of the Borrower, each of the Borrower
and its Subsidiaries has disposed of all waste in full compliance with all
Environmental Laws.

     5.15 Taxes. Except as set forth in Section 5.15 of the Schedule of
Exceptions or the Selected Reports, the Borrower and each of its Subsidiaries
have filed all necessary income, franchise and other material tax returns,
domestic and foreign and have paid all taxes shown as due thereunder, and the
Borrower has no knowledge of any tax deficiency which might be assessed against
the Borrower or any of the Subsidiaries which, if so assessed, would have a
material adverse effect on the business, properties, assets, net worth,
condition (financial or other), or results of operations of the Borrower and
its Subsidiaries taken as a whole.

     5.16 Employee Benefit Plans and Similar Arrangements.

<PAGE>   11

          (a)  Section 5.16 of the Schedule of Exceptions lists all employee
benefit plans and collective bargaining, labor and employment agreements or
other similar arrangements in effect to which the Borrower, its Subsidiaries,
and any of its ERISA Affiliates are a party or by which the Borrower, its
Subsidiaries, and any of its ERISA Affiliates are bound, legally or otherwise,
including, without limitation, any profit-sharing, deferred compensation,
bonus, stock option, stock purchase, pension, retainer, consulting, retirement,
severance, welfare or incentive plan, agreement or arrangement; any plan,
agreement or arrangement providing for fringe benefits or perquisites to
employees, officers, directors or agents, including but not limited to benefits
relating to employer-supplied automobiles, clubs, medical, dental,
hospitalization, life insurance and other types of insurance, retiree medical,
retiree life insurance and any other type of benefits for retired and
terminated employees; any employment agreement; or any other "employee benefit
plan" (within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended through the date of this Agreement ("ERISA"))
(herein referred to individually as "Plan" and collectively as "Plans"). For
purposes of this Agreement, "ERISA Affiliate" means (i) any corporation which
at any time on or before the Closing Date is or was a member of the same
controlled group of corporations (within the meaning of Section 414(b) of the
Code as the Borrower, its Subsidiaries, or any ERISA Affiliate; (ii) any
partnership, trade or business (whether or not incorporated) which at any time
on or before the Closing Date is or was under common control (within meaning of
Section 414(c) of the Code) with the Borrower, its Subsidiaries, or any ERISA
Affiliate; and (iii) any entity which at any time on or before the Closing Date
is or was a member of the same affiliated service group (within the meaning of
Section 414(m) of the Code) as the Borrower, its Subsidiaries or any ERISA
Affiliate, or any corporation described in clause (i) or any partnership, trade
or business described in clause (ii) of this paragraph.

          (b)  True and complete copies of the following documents with respect
to any Plan of the Borrower, its Subsidiaries, and each ERISA Affiliate, as
applicable, have been delivered to the Lender: (i) the most recent Plan
document and trust agreement (including any amendments thereto and prior plan
documents, if amended with the last two years), (ii) the last two Form 5500
filings and schedules thereto, (iii) the most recent IRS determination letter,
(iv) all summary plan descriptions, (v) a written description of each material
non-written Plan, (vi) each written communication to employees intended to
describe a Plan or any benefit provided by such Plan, (vii) the most recent
actuarial report, and (viii) all correspondence with the IRS, the Department of
Labor and the Pension Benefit Guaranty Corporation concerning any controversy.
Each report described in clause (vii) accurately reflects the funding status of
the Plan to which it relates and subsequent to the date of such report there
has been no adverse change in the funding status or financial condition of such
Plan.

          (c)  Each Plan is and has been maintained in compliance in all
material respects with applicable law, including but not limited to ERISA, and
the Code and with any applicable collective bargaining agreements or other
contractual obligations.

          (d)  Except as shown on Section 5.16 of the Schedule of Exceptions,
with respect to any Plan that is subject to Section 412 of the Code ("412
Plan"), there has been no failure to make any contribution or pay any amount
due as required by Section 412 of the Code, Section 302 of ERISA or the terms
of any such Plan, and no funding waiver has been requested or received from the
IRS. The assets of the Borrower, its Subsidiaries, or and ERISA Affiliates are
not now, nor will they after the passage of time be, subject to any lien
imposed under Code Section 412(n) by reason of a failure of the Borrower, any
Subsidiary, or any ERISA Affiliate to make timely installments or other
payments required under Code Section 412.

<PAGE>   12

          (e)  Except as shown on Section 5.16 of the Schedule of Exceptions or
in the Selected Reports, no Plan subject to Title IV of ERISA has any "Unfunded
Pension Liability." For purpose of this Agreement, Unfunded Pension Liability
means, as of any determination date, the amount, if any, by which the present
value of all benefit liabilities (as that term is defined in Section
4001(a)(16) of ERISA) of a plan subject to Title IV of ERISA exceeds the fair
market value of all assets of such plan, all determined using the actuarial
assumptions that would be used by the PBGC in the event of a termination of the
plan on such determination date.

          (f)  Except as shown on Section 5.16 of the Schedule of Exceptions,
to the best knowledge of the Borrower, its Subsidiaries, and ERISA Affiliates,
there are no pending or threatened claims, actions or lawsuits, other than
routine claims for benefits in the ordinary course, asserted or instituted
against (i) any Plan or its assets, (ii) any ERISA Affiliate with respect to
any 412 Plan, or (iii) any fiduciary with respect to any Plan for which the
Borrower, its Subsidiaries, or any ERISA Affiliate may be directly or
indirectly liable, through indemnification obligations or otherwise.

          (g)  Neither the Borrower, any Subsidiary, nor any ERISA Affiliate
has incurred and or reasonably expects to incur (i) any withdrawal liabilities
as defined in Section 4201 of ERISA ("Withdrawal Liability") and no event has
occurred which, with the giving of notice under Section 4219 of ERISA, would
result in Withdrawal Liabilities, or any liability under Section 4063, 4064, or
4243, or (ii) any outstanding liability under Title IV of ERISA with respect to
any 412 Plan.

          (h)  (h) Except as shown on Section 5.16 of the Schedule of
Exceptions, within the last five years, neither the Borrower, any Subsidiary,
nor any ERISA Affiliate has transferred any assets or liabilities of a 412 Plan
subject to Title IV of ERISA which had, at the date of such transfer, an
Unfunded Pension Liability or has engaged in a transaction which may reasonably
be subject to Section 4212(c) or Section 4069 of ERISA.

          (i)  Neither the Borrower, any Subsidiary, nor any ERISA Affiliate
has engaged, directly or indirectly, in a non-exempt prohibited transaction (as
defined in Section 4975 of the Code or Section 406 of ERISA) in connection with
any Plan.

          (j)  Except as shown on Section 5.16 of the Schedule of Exceptions,
neither the Borrower, any Subsidiary, nor any ERISA Affiliate has any unfunded
liability with respect to any non-tax qualified deferred compensation plan.

          (k)  The Lender will not have (i)  an obligation to make
contribution(s) to any multiemployer plan (as defined in Section 3(37) of
ERISA), or (ii) any Withdrawal Liability (whether imposed and not yet paid or
calculated assuming a complete or partial withdrawal of the Borrower, any
Subsidiary, or any ERISA Affiliate as of such date not yet imposed) which it
would not have had it not entered into the transactions described in this
Agreement.

          (l)  Except as shown on Section 5.16 of the Schedule of Exceptions,
during the last two years there have been no amendments to any Plan, no written
interpretation or announcement (whether or not written) by the Borrower, any
Subsidiary, or any ERISA Affiliate relating to any Plan, there have been and
are no negotiations, demands, or proposals which are pending that concern any
Plan, nor has any Plan been established, which resulted in or could result in a
material increase in (i) the accrued or promised benefits of any employees of
the Borrower, or any

<PAGE>   13

Subsidiary, or any ERISA Affiliate and (ii) any material increase in the level
of expense incurred in respect thereof.

          (m)  There has been no "Reportable Event" with respect to any 412
Plan subject to Title IV of ERISA within the last five years.

          (n)  Neither the Borrower, any Subsidiary, nor any ERISA Affiliate
sponsors, maintains or has obligations, direct, contingent or otherwise, with
respect to any Plan that is subject to the laws of any country other than the
United States.

          (o)  No ERISA Affiliate maintains an employee stock ownership plan or
other plan holding securities of the Borrower, any Subsidiary, or any ERISA
Affiliate.

          (p)  Each Plan that provides welfare benefits has been operated in
compliance with all requirements of Sections 601 through 608 of ERISA and
either (i) Section 162(i)(2) and (k) of the Code and regulations thereunder
(prior to 1989) or (ii) Section 4980B of the Code and regulations thereunder
after 1988, relating to the continuation of coverage under certain
circumstances in which coverage would otherwise cease. Neither the Borrower,
any Subsidiary, nor any ERISA Affiliate has contributed to a nonconforming
group health plan (as defined under Code Section 5000(c) and no ERISA Affiliate
has incurred a tax under Section 5000(a) of the Code which could become a
liability of the Borrower, any Subsidiary, or any ERISA Affiliate. Except as
shown on Section 5.16 of the Schedule of Exceptions or in the Selected Reports,
the Borrower, any Subsidiary, or any ERISA Affiliate does not and has not
maintained, sponsored or provided post-retirement medical benefits,
post-retirement death benefits or other post-retirement welfare benefits to its
current employees or former employees except as required by Section 4980B of
the Code and at the sole expense of the participant or the beneficiary of the
participant. The Borrower has complied in all respects with all requirements of
the Health Insurance Portability and Accountability Act of 1996 with respect to
each Plan that provides welfare benefits.

          (q)  Except as shown on Section 5.16 of the Schedule of Exceptions,
the Borrower, its Subsidiaries, and its ERISA Affiliates has funded or will
fund each Plan in accordance with the terms of such Plan through the Closing
Date, including the payment of applicable premiums on any insurance contract
funding a Plan, for coverage provided through the Closing Date.

          (r)  No Plan has been amended since the date of its most recent IRS
determination letter which would materially increase its cost and no Plan has
been amended in a manner that would require security to be provided in
accordance with Section 401(a)(29) of the Code.

          (s)  Each Plan that is intended to be a tax qualified Plan under
Section 401(a) of the Code ("Tax Qualified Plan") has been determined by the
IRS to qualify under Section 401 of the Code, and the trusts created thereunder
have been determined to be exempt from tax under the provisions of Section 501
of the Code, and to the best knowledge of the Borrower, its Subsidiaries, and
its ERISA Affiliates nothing has occurred, including the adoption of or failure
to adopt any Plan amendment, which would adversely affect its qualification or
tax-exempt status.

          (t)  Except as disclosed on Section 5.16 of the Schedule of
Exceptions, no employee or former employee of the Borrower, any Subsidiary, or
any ERISA Affiliate will become entitled to any bonus, retirement, severance,
job security or similar benefit, or any enhancement to any such benefit
(including acceleration of vesting or exercise of an incentive award) as a
result of

<PAGE>   14

the transactions contemplated under this Agreement and no agreement (whether
oral or written) of the employer, with respect to a current or former employee,
provides for the payment of any amounts which would fail to be deductible for
federal income tax purposes by reason of Section 280G of the Code.

     5.17 Disclosure. The information heretofore provided and to be provided
pursuant to this Loan Agreement, including the Schedules of Exceptions and the
Exhibits hereto, and each of the agreements, documents, certificates and
writings previously delivered to the Lender or its representatives, do not and
will not contain any untrue statement of a material fact and do not and will
not omit to state a material fact required to be stated herein or therein or
necessary in order to make the statements and writings contained herein and
therein not false or misleading in the light of the circumstances under which
they were made. To the knowledge of the Borrower, there is no fact which
materially adversely affects the business, prospects or condition (financial or
otherwise) of the Borrower which has not been set forth herein.

6.   PAYMENT OF EXISTING DEBENTURES; CHANGE OF CONTROL.

     6.1  No Optional Prepayment of Existing Debentures. Borrower may not, at
any time prior to the repayment of the Loan and the satisfaction in full of the
Obligations, prepay any Existing Debenture in whole or in part without the
prior written consent of Lender.

     6.2  Interest Payments on Existing Debentures. Notwithstanding the
foregoing Section 6.1, so long as no Event of Default shall have occurred and
be continuing under this Loan Agreement, the Borrower may pay to the Existing
Holders regularly scheduled payments in respect of the Existing Debentures;
provided, however, that the value of the aggregate amount of payments which may
be made to and accepted by the Existing Holders shall not exceed Six Hundred
Twenty Five Thousand Dollars ($625,000.00) on any Interest Payment Date (as
such term is defined in the Existing Debentures); and provided, further,
however, that the holders of the Existing Debentures listed on Schedule I
attached hereto shall have agreed that, on each Interest Payment Date while any
Obligations are outstanding, such holders shall receive such payments in the
capital stock and/or like debenture instruments of Borrower and not in cash or
cash equivalents.

     6.3  Change of Control. Upon the occurrence of a Change of Control,
Borrower hereby agrees that it shall satisfy the Obligations prior to
consummating any Change of Control Offer with any holder of the Existing
Debentures, and shall deliver a copy of any communication with any holder of an
Existing Debenture in connection with a Change of Control Offer to Lender
concurrently with the delivery thereof to such holder.

7.   AFFIRMATIVE COVENANTS. The Borrower hereby covenants and agrees, so long
as any Obligations remain outstanding, as follows:

     7.1  Maintenance of Corporate Existence, Properties and Leases; Taxes;
Insurance.

          (a)  The Borrower shall, and shall cause the Guarantors to, maintain
in full force and effect its corporate existence, rights and franchises and all
material terms of licenses and other rights to use licenses, trademarks, trade
names, service marks, copyrights, patents or processes owned or possessed by it
and necessary to the conduct of its business.

<PAGE>   15

          (b)  The Borrower shall, and shall cause the Guarantors to, keep each
of its properties necessary to the conduct of its business in good repair,
working order and condition, reasonable wear and tear excepted, and from time
to time make all needful and proper repairs, renewals, replacements, additions
and improvements thereto; and the Borrower shall, and shall cause the
Guarantors to, at all times comply with each material provision of all leases
to which it is a party or under which it occupies property.

          (c)  The Borrower shall, and shall cause the Guarantors to, promptly
pay and discharge, or cause to be paid and discharged when due and payable, all
lawful taxes, assessments and governmental charges or levies imposed upon the
income, profits, assets, property or business of the Borrower and the
Guarantors, and all claims or indebtedness (including, without limitation,
claims or demands of workmen, materialmen, vendors, suppliers, mechanics,
carriers, warehousemen and landlords) which, if unpaid might become a lien upon
the assets or property of the Borrower or a Guarantor; provided, however, that
any such tax, assessment, charge or levy need not be paid if the validity
thereof shall be contested timely and in good faith by appropriate proceedings,
if the Borrower or Guarantor shall have set aside on its books adequate
reserves with respect thereto, and the failure to pay shall not be prejudicial
in any material respect to the Lender; and provided, further, that the Borrower
or Guarantor will pay or cause to be paid any such tax, assessment, charge or
levy forthwith upon the commencement of proceedings to foreclose any lien which
may have attached as security therefor. The Borrower shall, and shall cause the
Guarantors to, pay or cause to be paid all other indebtedness incident to the
operations of the Borrower or the Guarantors.

          (d)  The Borrower shall, and shall cause the Guarantors to, keep
their respective assets which are of an insurable character insured by
financially sound and reputable insurers against loss or damage by theft, fire,
explosion and other risks customarily insured against by companies in the lines
of business of the Borrower and the Guarantors, in amounts sufficient to
prevent the Borrower or the Guarantors from becoming a co-insurer of the
property insured; and the Borrower shall, and shall cause the Guarantors to,
maintain, with financially sound and reputable insurers, insurance against
other hazards and risks and liability to persons and property to the extent and
in the manner customary for companies in similar businesses similarly situated
or as may be required by law, including, without limitation, general liability,
fire and business interruption insurance, and product liability insurance as
may be required pursuant to any license agreement to which the Borrower or
Guarantors are a party or by which any of them are bound.

     7.2  Basic Financial Information. The Borrower shall furnish the following
reports to the Lender so long as the Obligations are outstanding:

          (a)  within thirty (30) days after the end of each of the twelve (12)
monthly accounting periods in each fiscal year (or when furnished to the
Borrower's Board of Directors, if earlier), unaudited consolidated statements
of income and retained earnings and cash flows of the Borrower and its
Subsidiaries for each monthly period and for the period from the beginning of
such fiscal year to the end of such monthly period, together with consolidated
balance sheets of the Borrower and its Subsidiaries as at the end of each
monthly period, setting forth in each case comparisons to budget and to
corresponding periods in the preceding fiscal year, which statements will be
prepared in accordance with GAAP, consistently applied;

          (b)  within ninety (90) days after the end of each fiscal year,
consolidated statements of income and retained earnings and cash flows of the
Borrower and its Subsidiaries for the period from the beginning of each fiscal
year to the end of such fiscal year, and consolidated

<PAGE>   16

balance sheets as at the end of such fiscal year, setting forth in each case in
comparative form corresponding figures for the preceding fiscal year, which
statements will be prepared in accordance with GAAP, consistently applied
(except as approved by the accounting firm examining such statements and
disclosed by the Borrower), and will be accompanied by:

               (i)   an unqualified report of the Borrower's independent
                     certified public accounting firm; for purposes of this
                     Section, a report on the consolidated financial statements
                     of the Borrower and its Subsidiaries disclosing a "going
                     concern" paragraph shall not be considered "unqualified";

               (ii)  a report from such accounting firm, addressed to the
                     Lender, stating that in making the audit necessary to
                     express their opinion on such financial statements, nothing
                     has come to their attention which would lead them to
                     believe that the Borrower is not in compliance with all the
                     financial covenants contained in, or an event of default
                     has occurred with respect to, any material agreements to
                     which the Borrower or its Subsidiaries is a party or by
                     which it is bound, including, without limitation, this Loan
                     Agreement (an "Event of Noncompliance") or, if such
                     accountants have reason to believe that any Event of
                     Noncompliance has occurred, a letter specifying the nature
                     thereof; and

               (iii) the management letter of such accounting firm;

          (c)  within forty-five (45) days after the end of each quarterly
accounting period in each fiscal year, a certificate of the Chief Financial
Officer of the Borrower stating that the Borrower is in compliance with the
terms of this Loan Agreement and any other material contract or commitment to
which the Borrower or any of its Subsidiaries is a party or by which any of
them is bound, or, if the Borrower or any of its Subsidiaries is not in
compliance, specifying the nature and period of noncompliance, and what actions
the Borrower or such Subsidiary has taken and/or proposes to take with respect
thereto. Notwithstanding the foregoing, the certificate delivered at the end of
each fiscal year of the Borrower shall be signed by both the Chief Executive
Officer and the Chief Financial Officer of the Borrower and shall be delivered
within ninety (90) days after the end of the fiscal year;

          (d)  promptly upon receipt thereof, any additional reports or other
detailed information concerning significant aspects of the operations and
condition, financial or otherwise, of the Borrower and its Subsidiaries, given
to the Borrower by its independent accountants;

          (e)  at least thirty (30) days prior to the end of each fiscal year,
a detailed annual operating budget and business plan for the Borrower and its
Subsidiaries for the succeeding twelve-month period. Such budgets shall be
prepared on a monthly basis, displaying consolidated statements of anticipated
income and retained earnings, consolidated statements of anticipated cash flow
and projected consolidated balance sheets, setting forth in each case the
assumptions (which assumptions and projections shall represent and be based
upon the good faith judgment in respect thereof of the chief executive officer
of the Borrower) behind the projections contained in such financial statements,
and which budgets shall have been approved by the Board of Directors of the
Borrower prior to the beginning of each twelve-month period for which such
budget shall have been

<PAGE>   17

prepared and, promptly upon preparation thereof, any other budgets that the
Borrower may prepare and any revisions of such annual or other budgets;

          (f)  within ten (10) days after transmission or receipt thereof,
copies of all financial statements, proxy statements and reports which the
Borrower sends to its stockholders or directors, and copies of all registration
statements and all regular, special or periodic reports which it or any of its
officers or directors files with the Commission, the American Stock Exchange
(the "AMEX") or with any other securities exchange on which any of the
securities of the Borrower are then listed or proposed to be listed, copies of
all press releases and other statements made generally available by the
Borrower to the public concerning material developments in the business of the
Borrower and its Subsidiaries and copies of material communications sent to or
received from stockholders, directors or committees of the Board of Directors
of the Borrower or any of its Subsidiaries and copies of all material
communications sent to and received from the Existing Holders or any other
lender to the Borrower; and

          (g)  with reasonable promptness such other information and financial
data concerning the Borrower as any person entitled to receive materials under
this Section 7.2 may reasonably request.

     7.3  Notice of Adverse Change. The Borrower shall promptly give
notice to the Lender (but in any event within seven (7) days) after becoming
aware of the existence of any condition or event which constitutes, or the
occurrence of, any of the following:

          (a)  any Event of Noncompliance;

          (b)  any other Event of Default;

          (c)  the institution or threatening of institution of an action, suit
or proceeding against the Borrower or any Subsidiary before any court,
administrative agency or arbitrator, including, without limitation, any action
of a foreign government or instrumentality, which, if adversely decided, could
materially adversely affect the business, prospects, properties, financial
condition or results of operations of the Borrower and its Subsidiaries, taken
as a whole whether or not arising in the ordinary course of business;

          (d)  any information relating to the Borrower or any Subsidiary which
could reasonably be expected to materially and adversely affect the assets,
property, business or condition (financial or otherwise) of the Borrower or its
ability to perform the terms of this Agreement; or

          (e)  any failure by the Borrower or its Subsidiaries to comply with
the provisions of Section 7.4(b) below.

Any notice given under this Section 7.3 shall specify the nature and period of
existence of the condition, event, information, development or circumstance,
the anticipated effect thereof and what actions the Borrower has taken and/or
proposes to take with respect thereto; or

     7.4  Compliance With Agreements; Compliance With Laws. The Borrower shall
comply and cause its Subsidiaries:

<PAGE>   18

          (a)  to comply with the terms and conditions of all material
agreements, commitments or instruments to which the Borrower or any of its
Subsidiaries is a party or by which it or they may be bound; and

          (b)  to comply in all material respects with any material laws,
ordinances, rules and regulations of any foreign, federal, state or local
government or any agency thereof, or any writ, order or decree, and conform to
all valid requirements of governmental authorities relating to the conduct of
their respective businesses, properties or assets, including, but not limited
to, (i) that certain Agreed Order, approved and adopted by the Indiana
Department of Environmental Management on December 27, 1999, with respect to
Houba's Culver, Indiana real property, and (ii) the requirements of the FDA
Act, the Federal Food, Drug, and Cosmetic Act, the CSA, ERISA, Environmental
Laws, the Occupational Safety and Health Act, the Foreign Corrupt Practices Act
and the rules and regulations of each of the agencies administering such acts.

     7.5  Protection of Licenses, etc. The Borrower shall, and shall cause its
Subsidiaries to, maintain, defend and protect to the best of their ability
licenses and sublicenses (and to the extent the Borrower or a Subsidiary is a
licensee or sublicensee under any license or sublicense, as permitted by the
license or sublicense agreement), trademarks, trade names, service marks,
patents and applications therefor and other proprietary information owned or
used by it or them and shall keep duplicate copies of any licenses, trademarks,
service marks or patents owned or used by it, if any, at a secure place
selected by the Borrower.

     7.6  Accounts and Records; Inspections.

          (a)  The Borrower shall keep true records and books of account in
which full, true and correct entries will be made of all dealings or
transactions in relation to the business and affairs of the Borrower and its
Subsidiaries in accordance with GAAP applied on a consistent basis.

          (b)  Subject to Section 12.12, the Borrower shall permit the Lender
or its officers, employees or representatives during regular business hours of
the Borrower, upon reasonable notice and as often as the Lender may reasonably
request, to visit and inspect the offices and properties of the Borrower and
its Subsidiaries and (i) to make extracts or copies of the books, accounts and
records of the Borrower or its Subsidiaries, and (ii) to discuss the affairs,
finances and accounts of the Borrower and its Subsidiaries, with the Borrower's
(or Subsidiary's) directors and officers, its independent public accountants,
consultants and attorneys.

          (c)  Nothing contained in this Section 7.6 shall be construed to
limit any rights which the Lender may have or acquire with respect to the books
and records of the Borrower and its Subsidiaries, to inspect its properties or
to discuss its affairs, finances and accounts.

     7.7  Independent Accountants. The Borrower will retain a firm of
independent certified public accountants reasonably acceptable to the Lender
(an "Approved Accounting Firm") to audit the Borrower's financial statements at
the end of each fiscal year. In the event the services of the Approved
Accounting Firm or any firm of independent public accountants hereafter
employed by the Borrower are terminated, the Borrower will promptly thereafter
request the firm of independent public accountants whose services are
terminated to deliver to the Lender a letter of such firm setting forth its
understanding as to the reasons for the termination of their services and
whether there were, during the two most recent fiscal years or such shorter
period during which said firm had been retained by the Borrower any
disagreements between them and the Borrower on any matter of

<PAGE>   19

accounting principles or practices, financial statement disclosure, or auditing
scope or procedure. In its notice, the Borrower shall state whether the change
of accountants was recommended or approved by the Board of Directors or any
committee thereof. In the event of such termination, the Borrower will promptly
thereafter engage another Approved Accounting Firm.

     7.8  Board Meetings; Observer Rights.. The Borrower agrees to hold
meetings of its Board of Directors at least four (4) times a year, at no more
than three-month intervals. The Lender shall have the right, at all times so
long as the Obligations are outstanding, to designate one person to attend all
meetings of the Board of Directors or committees thereof as an observer; and
Borrower shall deliver to Lender all written materials provided to the members
of its Board of Directors or committees thereof, concurrently with the delivery
of such materials to such members, provided, however, that the Borrower may
exclude Lender from any bona fide discussions, and shall not be obligated to
provide materials (i) regarding the relationship between Lender and Borrower
under this Loan Agreement and the various agreements between Borrower and
Lender contemplated hereby and (ii) which are communications between Borrower
and its attorneys of a type which would be considered subject to
attorney-client privilege.

     7.9  Maintenance of Office. The Borrower will maintain its principal
office at the address of the Borrower set forth in Section 12.7 of this Loan
Agreement where notices, presentments and demands in respect of any of the Loan
Documents may be made upon the Borrower, until such time as the Borrower shall
notify the Lender in writing, at least thirty (30) days prior thereto, of any
change of location of such office.

     7.10 Use of Proceeds. The Borrower shall use all the Loan proceeds only as
provided in Section 7.10 to the Schedule of Exceptions.

     7.11 Payment of Note; Prepayment. The Borrower shall pay the principal of
and interest on the Loan in the time, the manner and the form provided in the
Note. The Borrower may, upon at least three Business Days' prior written notice
to Lender, prepay the Note, in whole or in part, along with accrued, unpaid
interest to the date of such prepayment on the amount repaid.

     7.12 Reporting Requirements. The Borrower shall comply with its reporting
and filing obligations pursuant to Section 13 or 15(d) of the Exchange Act. The
Borrower shall provide copies of such reports, including, without limitation,
reports on Form 10-K, 10-Q, 8-K and Schedule 14A promulgated under the Exchange
Act, or substantially the same information required to be contained in any
successor form, to the Lender promptly upon filing with the Commission.

     7.13 Further Assurances. From time to time the Borrower shall execute and
deliver to the Lender and the Lender shall execute and deliver to the Borrower
such other instruments, certificates, agreements and documents and take such
other action and do all other things as may be reasonably requested by the
other party in order to implement or effectuate the terms and provisions of
this Loan Agreement and any of the Loan Documents.

     7.14 Default Notices. Borrower shall deliver to Lender copies of any
Default Notice it receives in connection with the Existing Debentures.

     7.15 Immaterial Subsidiaries. So long as any Obligations are outstanding,
Borrower shall not permit any of the Immaterial Subsidiaries to commence any
business operations of a type or

<PAGE>   20

scope not currently conducted by them, nor permit any Immaterial Subsidiary to
acquire any rights or property not currently owned by it.

8.   NEGATIVE COVENANTS. The Borrower hereby covenants and agrees, so long as
any Obligations are outstanding, it will not (and not allow any of its
Subsidiaries to), directly or indirectly, without the prior written consent of
the Lender, as follows:

     8.1  Payment of Dividends; Stock Purchase. Declare or pay any cash
dividends on, or make any distribution to the holders of, any shares of capital
stock of the Borrower, other than dividends or distributions payable in such
capital stock, or purchase, redeem or otherwise acquire or retire for value any
shares of capital stock of the Borrower or warrants or rights to acquire such
capital stock.

     8.2  Stay, Extension and Usury Laws. At any time insist upon, plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law wherever enacted, now or at any time hereinafter in
force, which may affect the covenants or the performance of the Loan Documents,
the Borrower hereby expressly waiving all benefit or advantage of any such law,
or by resort to any such law, hinder, delay or impede the execution of any
power herein granted to the Lender but will suffer and permit the execution of
every such power as though no such law had been enacted.

     8.3  Liens. Except as otherwise provided in this Loan Agreement, create,
incur, assume or permit to exist any mortgage, pledge, lien, security interest
or encumbrance on any part of its properties or assets, or on any interest it
may have therein, now owned or hereafter acquired, nor acquire or agree to
acquire property or assets under any conditional sale agreement or title
retention contract, except that the foregoing restrictions shall not apply to:

          (a)  liens for taxes, assessments and other governmental charges, if
payment thereof shall not at the time be required to be made, and provided such
reserve as shall be required by GAAP consistently applied shall have been made
therefor;

          (b)  liens of workmen, materialmen, vendors, suppliers, mechanics,
carriers, warehouseman and landlords or other like liens, incurred in the
ordinary course of business for sums not then due or being contested in good
faith, if an adverse decision in which contest would not materially affect the
business of the Borrower;

          (c)  liens securing indebtedness of the Borrower or any Subsidiaries
which is in an aggregate principal amount not exceeding $500,000, and which
liens are subordinate to liens on the same assets held by the Lender;

          (d)  statutory liens of landlords, statutory liens of banks and
rights of set-off, and other liens imposed by law, in each case incurred in the
ordinary course of business (i) for amounts not yet overdue or (ii) for amounts
that are overdue and that are being contested in good faith by appropriate
proceedings, so long as such reserves or other appropriate provisions, if any,
as shall be required by GAAP shall have been made for any such contested
amounts;

          (e)  liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases,

<PAGE>   21

government contracts, trade contracts, performance and return-of-money bonds
and other similar obligations (exclusive of obligations for the payment of
borrowed money);

          (f)  any attachment or judgment lien not constituting an Event of
Default;

          (g)  easements, rights-of-way, restrictions, encroachments, and other
minor defects or irregularities in title, in each case which do not and will
not interfere in any material respect with the ordinary conduct of the business
of the Borrower or any of its Subsidiaries;

          (h) any (i) interest or title of a lessor or sublessor under any
lease, (ii) restriction or encumbrance that the interest or title of such
lessor or sublessor may be subject to, or (iii) subordination of the interest
of the lessee or sublessee under such lease to any restriction or encumbrance
referred to in the preceding clause (ii), so long as the holder of such
restriction or encumbrance agrees to recognize the rights of such lessee or
sublessee under such lease;

          (i)  liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;

          (j)  any zoning or similar law or right reserved to or vested in any
governmental office or agency to control or regulate the use of any real
property;

          (k)  liens securing obligations (other than obligations representing
debt for borrowed money) under operating, reciprocal easement or similar
agreements entered into in the ordinary course of business of the Borrower and
its Subsidiaries;

          (l)  the liens securing the Borrower's and the Guarantor's
obligations under the Existing Debentures, which liens are subordinate to liens
on the same assets held by the Lender;

          (m)  the liens listed in Section 8.3 of the Schedule of Exceptions
("Permitted Liens"); and

          (n)  the replacement, extension or renewal of any lien permitted by
this Section 8.3 upon or in the same property theretofore subject or the
replacement, extension or renewal (without increase in the amount or change in
any direct or contingent obligor) of the indebtedness secured thereby.

     8.4  Indebtedness. Create, incur, assume, suffer, permit to exist, or
guarantee, directly or indirectly, any indebtedness, excluding, however, from
the operation of the covenant:

          (a)  any indebtedness or the incurring, creating or assumption of any
indebtedness secured by liens permitted by the provisions of Section 8.3(c)
above;

          (b)  the endorsement of instruments for the purpose of deposit or
collection in the ordinary course of business;

          (c)  indebtedness which may, from time to time be incurred or
guaranteed by the Borrower which in the aggregate principal amount does not
exceed $500,000 and is subordinate to the indebtedness under this Agreement;

<PAGE>   22

          (d)  indebtedness existing on the date hereof and described in
Section 8.4 of the Schedule of Exceptions;

          (e)  indebtedness relating to contingent obligations of the Borrower
and its Subsidiaries under guaranties in the ordinary course of business of the
obligations of suppliers, customers, and licensees of the Borrower and its
Subsidiaries;

          (f)  indebtedness relating to loans from the Borrower to its
Subsidiaries;

          (g)  indebtedness relating to capital leases in an amount not to
exceed $500,000;

          (h)  indebtedness under the Existing Debentures;

          (i)  accounts or notes payable arising out of the purchase of
merchandise or services in the ordinary course of business; or

          (j)  indebtedness (if any) expressly permitted by, and in accordance
with, the terms and conditions of this Loan Agreement.

For purposes hereof, the term "indebtedness" shall mean and include (A) all
items which would be included on the liability side of a balance sheet of the
Borrower (or a Subsidiary) as of the date on which indebtedness is to be
determined, excluding capital stock, surplus, capital and earned surplus
reserves, which, in effect, were appropriations of surplus or offsets to asset
values (other than reserves in respect of obligations, the amount,
applicability or validity of which is, at such date, being contested by such
corporation), deferred credits of amounts representing capitalization of
leases; (B) the full amount of all indebtedness of others guaranteed or
endorsed (otherwise than for the purpose of collection) by the Borrower (or
Subsidiary) for which the Borrower (or Subsidiary) is obligated, contingently
or otherwise, to purchase or otherwise acquire, or for the payment or purchase
of which the Borrower (or Subsidiary) has agreed, contingently or otherwise, to
advance or supply funds, or with respect to which the Borrower (or Subsidiary)
is contingently liable, including, without limitation, indebtedness for
borrowed money and indebtedness guaranteed or supported indirectly by the
Borrower (or Subsidiary) through an agreement, contingent or otherwise (1) to
purchase the indebtedness, or (2) to purchase, sell, transport or lease (as
lessee or lessor) property, or to purchase or sell services at prices or in
amounts designed to enable the debtor to make payment of the indebtedness or to
assure the owner of the indebtedness against loss, or (3) to supply funds to or
in any other manner invest in the debtor; and (C) indebtedness secured by any
mortgage, pledge, security interest or lien whether or not the indebtedness
secured thereby shall have been assumed; provided, however, that such term
shall not mean and include any indebtedness (x) in respect to which monies
sufficient to pay and discharge the same in full shall have been deposited with
a depositary, agency or trustee in trust for the payment thereof, or (y) as to
which the Borrower (or Subsidiary) is in good faith contesting, provided that
an adequate reserve therefor has been set up on the books of the Borrower (or
Subsidiary).

     8.5  Merger, Consolidation, etc. Merge or consolidate with any person
(except that the Borrower may merge with any wholly-owned Subsidiary so long as
the Borrower is the surviving corporation in such merger), or sell, transfer,
lease or otherwise dispose of 10% or more of its consolidated assets (as shown
on the most recent financial statements of the Borrower or the Subsidiary, as
the case may be) in any single transaction or series of related transactions
(other than the sale of inventory in the ordinary course of business), or
liquidate, dissolve, recapitalize or

<PAGE>   23

reorganize in any form of transaction, or acquire all or substantially all of
the capital stock or assets of another business or entity.

     8.6  Amendment of Charter Documents. Make any amendment to the Certificate
of Incorporation as heretofore amended, or By-Laws, as heretofore amended, of
the Borrower or the Certificate of Incorporation or By-Laws of either
Guarantor, which amendment would interfere in any material respect with the
payment by Borrower, or guaranty by the Guarantors, of the Obligations or the
performance by Borrower or the Guarantors of their respective obligations under
the Loan Documents or the Product Agreements.

     8.7  Loans and Advances. Except for loans and advances outstanding as of
the Closing Date and set forth in Section 8.7 of the Schedule of Exceptions,
directly or indirectly, make any advance or loan to, or guarantee any
obligation of, any person, firm or entity, except for (i) loans to employees of
the Borrower not in excess of $25,000 to any one employee or $100,000 in the
aggregate where such loan(s) are necessary under exigent circumstances of such
employee(s) as determined by the Board of Directors, or (ii) intercompany loans
or advances and those provided for in this Loan Agreement.

     8.8  Intercompany Transfers; Transactions With Affiliates; Diversion of
Corporate Opportunities.

          (a)  Make any intercompany transfers of monies or other assets in any
single transaction or series of transactions, except as otherwise permitted in
this Loan Agreement.

          (b)  Engage in any transaction with any of the officers, directors,
employees or affiliates of the Borrower or of its Subsidiaries, except on terms
no less favorable to the Borrower or the Subsidiary as could be obtained at
Arm's Length (as hereinafter defined).

          (c)  Divert (or permit anyone to divert) any business or opportunity
of the Borrower or Subsidiary to any other corporate or business entity.

     8.9  Personal Expenses. Except as set forth in Section 8.9 of the Schedule
of Exceptions, permit any person to charge to the Borrower (or any of its
Subsidiaries) any expense not directly related to the business of the Borrower
(or Subsidiary), including, without limitation, expenses for country and health
club membership fees and expenses, and personal travel and entertainment
expenses, or reimburse such person for any such expense.

     8.10 Other Business. Enter into or engage, directly or indirectly, in any
business other than the business currently conducted or proposed to be
conducted by the Borrower or any Subsidiary.

     8.11 Investments. Make any investments in, or purchase any stock, option,
warrant, or other security or evidence of indebtedness of, any person or entity
(exclusive of any Subsidiary), other than obligations of the United States
Government or certificates of deposit or other instruments maturing within one
year from the date of purchase from financial institutions with capital in
excess of $100 million.

     8.12 Employee Benefit Plans and Compensation. Except as contemplated by
this Loan Agreement:

<PAGE>   24

          (a)  enter into any agreement to provide for or otherwise establish
any written or unwritten employee benefit plan, program or other arrangement of
any kind, covering current or former employees of the Borrower or its
Subsidiaries except for (i) any such plan, program or arrangement expressly
permitted under an agreement listed in Section 8.12 of the Schedule of
Exceptions, and (ii) any such plan, program or arrangement which a company
similar to the Borrower in size and financial condition, and which is engaged
in a business substantially similar to the business of the Borrower and its
Subsidiaries, would establish or implement for the benefit of its employees in
the ordinary course of business; provided, however, that no such plan, program
or arrangement may be established or implemented if such action would have a
material affect on the terms of employment of the employees of the Borrower or
its Subsidiaries, or

          (b)  provide for or agree to any material increase in any benefit
provided to current or former employees of the Borrower or its Subsidiaries
over that which is provided to such individuals pursuant to a plan or
arrangement disclosed in Section 5.16 of the Schedule of Exceptions as of the
Closing Date. For purpose of this Section, a "material increase" shall not
include any cost of living increase or similar regular increase agreed to
pursuant to the Collective Bargaining Agreement between the Borrower and the
Drug, Chemical, Cosmetic, Plastics and Affiliated Industries Warehouse
Employees Local 815, International Brotherhood of Teamsters.

          (c)  provide for or agree to any increase in the annual compensation
of any of the employees of the Borrower or its Subsidiaries, except for (i)
annual salary increases not to exceed a ten percent (10%) increase over such
employee's annual salary compensation on the date hereof, and (ii) normal and
customary annual bonuses to employees not to exceed an aggregate Three Hundred
Fifty Thousand Dollars ($350,000) in any fiscal year.

     8.13 Capital Expenditures. Other than for a capital expenditure contained
in any budget approved by the Board of Directors, or capital expenditures not
contained in any such budget, but which do not exceed $250,000 in the aggregate
during any fiscal year of the Borrower, make or commit to make any capital
expenditures.

     8.14 Arm's Length Transactions. Enter into any transaction, contract or
commitment or take any action other than at Arm's Length. For purposes hereof
the term "Arm's Length" means a transaction or negotiation in which each party
is completely independent of the other, seeks to obtain terms which are most
favorable to it and has no economic or other interest in making concessions to
the other party.

9.   EVENTS OF DEFAULT

     9.1  Events of Default. The occurrence of any of the following events (an
"Event of Default") shall be deemed an event of default hereunder.

          (a)  if the Borrower shall default in the payment of (i) any part of
the principal of the Loan, when the same shall become due and payable, whether
at maturity or at a date fixed for prepayment or by acceleration or otherwise;
or (ii) the interest on the Loan; when the same shall become due and payable or
within two (2) Business Days thereafter;

          (b)  if the Borrower shall default in the performance of any of the
covenants contained herein and such default shall have continued without cure
for fifteen (15) days after written

<PAGE>   25

notice thereof (a "Default Notice") is given to the Borrower with respect to
such covenant by the Lender;

          (c)  if the Borrower shall default in the performance of any other
material agreement or covenant contained in the Loan Documents and such default
shall not have been remedied to the satisfaction of the Lender within
thirty-five (35) days after a Default Notice shall have been given to the
Borrower;

          (d)  if any representation or warranty made in this Loan Agreement or
in or any certificate delivered pursuant hereto shall prove to have been
incorrect in any material respect when made;

          (e)  if any default shall occur under any indenture, mortgage,
agreement, instrument or commitment evidencing or under which there is at the
time outstanding any indebtedness of the Borrower or a Subsidiary, in excess of
$100,000, or which results in such indebtedness, in an aggregate amount (with
other defaulted indebtedness) in excess of $250,000 becoming due and payable
prior to its due date and if such indenture or instrument so requires, the
holder or holders thereof (or a trustee on their behalf) shall have declared
such indebtedness due and payable;

          (f)  if any of the Borrower or its Subsidiaries shall default in the
observance or performance of any material term or provision of:

               (i)  any of the Product Agreements; or

               (ii) an agreement to which it is a party or by which it is bound
                    which default will have a material adverse effect on the
                    Borrower and its Subsidiaries, taken as a whole;

and such default is not waived or cured within the applicable grace period;

          (g)  if a final judgment which, either alone or together with other
outstanding final judgments against the Borrower and its Subsidiaries, exceeds
an aggregate of $250,000 shall be rendered against the Borrower or any
Subsidiary and such judgment shall have continued undischarged or unstayed for
thirty-five (35) days after entry thereof;

          (h)  if the Borrower or any Subsidiary shall make an assignment for
the benefit of creditors, or shall admit in writing its inability to pay its
debts; or if the Borrower or any Subsidiary shall suffer a receiver or trustee
for it or substantially all of its assets to be appointed, and, if appointed
without its consent, not to be discharged or stayed within ninety (90) days; or
if the Borrower or any Subsidiary shall suffer proceedings under any law
relating to bankruptcy, insolvency or the reorganization or relief of debtors
to be instituted by or against it, and, if contested by it, not to be dismissed
or stayed within ninety (90) days; or if the Borrower or any Subsidiary shall
suffer any writ of attachment or execution or any similar process to be issued
or levied against it or any significant part of its property which is not
released, stayed, bonded or vacated within ninety (90) days after its issue or
levy; or if the Borrower or any Subsidiary takes corporate action in
furtherance of any of the aforesaid purposes or conditions; or

<PAGE>   26

          (i)  if any Event of Default shall occur and be continuing under the
terms of the Existing Debentures, and the Majority Holders (as defined in the
Existing Debentures) shall have declared such indebtedness due and payable.

     9.2  Remedies.

          (a)  Upon the occurrence of an Event of Default, Lender may, at any
time, unless all defaults shall theretofore have been remedied, at its option,
by written notice or notices to Borrower (i) declare the Loan to be due and
payable, whereupon the same shall forthwith mature and become due and payable,
together with interest accrued thereon, without presentment, demand, protest or
notice, all of which are hereby waived; and (ii) declare any other amounts
payable to Lender under the Loan Documents or as contemplated hereby due and
payable.

          (b)  Upon the occurrence of any of the Events of Default described in
Section 9.1(h) above, then, automatically and whether or not notice is given,
(i) the Loan shall become immediately due and payable, together with interest
accrued thereon, without presentment, demand, protest or notice, all of which
are hereby waived; and (ii) any other amounts payable to Lender under the Loan
Documents or as contemplated hereby shall become immediately due and payable.

          (c)  Notwithstanding anything contained in Section 9.2(a), in the
event that at any time after the principal of the Loan shall so become due and
payable and prior to the date of maturity stated in the Note, and all arrears
of principal of and interest on the Loan (with interest at the rate specified
in the Note on any overdue principal and, to the extent legally enforceable, on
any interest overdue) shall be paid by or for the account of Borrower, then
Lender, by written notice or notices to Borrower, may (but shall not be
obligated to) waive such Event of Default and its consequences and rescind or
annul such declaration, but no such waiver shall extend to or affect any
subsequent Event of Default or impair any right resulting therefrom.

          9.3  Enforcement. In case any one or more Events of Default shall
occur and be continuing, Lender may proceed to protect and enforce its rights
by an action at law, suit in equity or other appropriate proceeding, whether
for the specific performance of any agreement contained herein or in the Note
or for an injunction against a violation of any of the terms hereof or thereof,
or in aid of the exercise of any power granted hereby or thereby or by law. In
case of a default in the payment of any principal of or interest on the Loan,
Borrower will pay to Lender such further amount as shall be sufficient to cover
the cost and the expenses of collection, including, without limitation,
reasonable attorneys' fees, expenses and disbursements. No course of dealing
and no delay on the part of Lender in exercising any rights shall operate as a
waiver thereof or otherwise prejudice Lender's rights. No right conferred
hereby or by the Note upon Lender shall be exclusive of any other right
referred to herein or therein or now available at law in equity, by statute or
otherwise.

10.  AMENDMENT AND WAIVER. This Agreement may not be amended, discharged or
terminated (or any provision hereof waived) without the written consent of the
Borrower and Lender.

11.  INDEMNITY, ETC. The Borrower shall:

          (a)  pay, and hold the Lender harmless from and against, any and all
present and future stamp, excise and other similar taxes with respect to the
foregoing matters and hold the Lender

<PAGE>   27

harmless from and against any and all liabilities with respect to or resulting
from any delay or omission (other than to the extent attributable to the
Lender) to pay such taxes; and

     (b)  indemnify the Lender, each of its Affiliates and their respective
officers, directors, employees, representatives, attorneys and agents (each an
"Indemnitee") from, and hold each of them harmless against, any and all losses,
liabilities, claims, damages, expenses, obligations, penalties, actions,
judgments, suits, costs or disbursements of any kind or nature whatsoever
(including, without limitation, the reasonable fees and disbursements of
counsel for such Indemnitee) that may at any time (including, without
limitation, at any time following the payment of the Obligations) be imposed
on, asserted against or incurred by any Indemnitee as a result of, or arising
out of, or in any way related to or by reason of, or in connection with the
preparation for a defense of, any investigation, litigation or proceeding
arising out of, related to or in connection with (i) the execution, delivery or
performance of any Loan Document (including, without limitation, any actual or
proposed use by the Borrower or its Subsidiaries of the proceeds of the Loan),
(ii) any violation by the Borrower or its Subsidiaries of any applicable
Environmental Law, (iii) any Environmental Claim arising out of the management,
use, control, ownership or operation of property or assets by the Borrower or
its Subsidiaries, including, without limitation, all on-site and off-site
activities involving Materials of Environmental Concern, (iv) the breach of any
environmental representation or warranty set forth in Section 5.14, (v) the
grant to the Lender of any Lien in any property or assets of the Borrower or
its Subsidiaries or any stock or other equity interest in the Guarantors, and
(vi) the exercise by the Lender of its rights and remedies (including, without
limitation, foreclosure) under any agreements creating any such Lien (but
excluding, as to any Indemnitee, any such losses, liabilities, claims, damages,
expenses, obligations, penalties, actions, judgments, suits, costs or
disbursements incurred solely by reason of the gross negligence or willful
misconduct of such Indemnitee as finally determined by a court of competent
jurisdiction). The Borrower's obligations under this Section shall survive the
termination of this Loan Agreement and the payment of the Obligations.

12.  MISCELLANEOUS

     12.1 Definitions.

     "1998 Debenture Agreement" is defined in the Recitals.

     "1999 Debenture Agreement" is defined in the Recitals.

     "412 Plan" is defined in Section 5.16(d).

     "Affiliate" shall mean any entity which controls, is controlled by or is
under common control with another entity. An entity is deemed to be in control
of another entity (controlled entity) if the former owns directly or indirectly
at least the lesser of (a) fifty percent (50%), or (b) the maximum percentage
allowed by law in the country of the controlled entity, of the outstanding
voting equity of the controlled entity.

     "Agent" shall mean Galen Partners III, L.P., in its capacity as agent for
the holders of the Galen Debentures.

     "AMEX" is defined in Section 7.2(f).

<PAGE>   28

     "Approved Accounting Firm" is defined in Section 7.7.

     "Arm's Length" is defined in Section 8.14.

     "Borrower" is defined in the Introduction.

     "Brooklyn Facility Lease" shall mean that certain real property lease,
dated October 1994, by and between the Borrower and Atlantic Properties
Company.

     "Business Day" shall mean any day other than a Saturday, Sunday or day
which banks are generally closed in the State of California.

     "Change of Control" shall mean the occurrence of any of the following: (i)
the consummation of any transaction the result of which is that any Person or
group (as such term is used in Section 13(d)(3) of the Exchange Act), other
than Galen, Oracle or any affiliate thereof or any group comprised of any of
the foregoing, owns, directly or indirectly, thirty percent (30%) of the Common
Equity of the Borrower, (ii) the Borrower consolidates with, or merges with or
into, another Person (other than a direct or indirect wholly-owned Subsidiary)
or sells, assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of the Borrower's assets or the assets of the Borrower and
its Subsidiaries taken as a whole to any person, or any person consolidates
with, or merges with or into, the Borrower, in any such event pursuant to a
transaction in which the outstanding Voting Stock of the Borrower, as the case
may be, is converted into or changed for cash, securities or other property,
other than any such transaction where the outstanding Voting Stock of the
Borrower, as the case may be, is converted into or exchanged for Voting Stock
of the surviving or transferee corporation and the beneficial owners of the
Voting Stock of the Borrower immediately prior to such transaction own,
directly or indirectly, not less than a majority of the Voting Stock of the
surviving or transferee corporation immediately after such transaction, (iii)
the Borrower, either individually or in conjunction with one or more
Subsidiaries sells, assigns, conveys, transfers, leases or otherwise disposes
of, or the Subsidiaries sell, assign, convey, transfer, lease or otherwise
dispose of, all or substantially all of the properties and assets of the
Borrower and its Subsidiaries, taken as a whole (either in one transaction or a
series of related transactions), including capital stock of the Subsidiaries,
to any person (other than the Borrower or a wholly owned Subsidiary of the
Borrower), or (iv) during any two (2) year period commencing subsequent to the
date of this Loan Agreement, individuals who at the beginning of such period
constituted the Board of Directors of the Borrower (together with any new
directors whose election by such Board of Directors or whose nomination for
election by the stockholders of the Borrower was approved by a vote of
two-thirds of the directors then still in office) who were either directors at
the beginning of such period or whose election or nomination for election was
previously so approved cease for any reason to constitute a majority of the
Board of Directors then in office; provided, however, that a Person shall not
be deemed to have ceased being a director for such purpose if such Person shall
have resigned or died or if the involuntary removal of such Person was made at
the direction of Persons holding a majority in principal amount of the
outstanding Existing Debentures.

     "Change of Control Offer" shall mean the offer required to be made to the
Existing Holders in accordance with the terms of the Existing Debentures in
connection with a Change in Control transaction.

     "Closing" is defined in Section 3.

<PAGE>   29

     "Closing Date" is defined in Section 3.

     "Code" shall mean the Internal Revenue Code of 1986, as amended.

     "Commission" shall mean the United States Securities and Exchange
Commission, and any successor agency.

     "Common Equity" means all capital stock of the Borrower that is generally
entitled to vote on the election of directors.

     "Confidential Information" shall mean, with respect to a party, all
information of any kind whatsoever (including without limitation, data,
compilations, formulae, models, patent disclosures, procedures, processes,
projections, protocols, results of experimentation and testing, specifications,
strategies and techniques), and all tangible and intangible embodiments thereof
of any kind whatsoever (including without limitation, apparatus, compositions,
documents, drawings, machinery, patent applications, records and reports),
which is disclosed by such party to the other party and is marked, identified
as or otherwise acknowledged to be confidential at the time of disclosure to
the other party. Notwithstanding the foregoing, Confidential Information of a
party shall not include information which the other party can establish by
written documentation (a) to have been publicly known prior to disclosure of
such information by the disclosing party to the other party, (b) to have become
publicly known, without fault on the part of the other party, subsequent to
disclosure of such information by the disclosing party to the other party, (c)
to have been received by the other party at any time from a source, other than
the disclosing party, rightfully having possession of and the right to disclose
such information, (d) to have been otherwise known by the other party prior to
disclosure of such information by the disclosing party to the other party, or
(e) to have been independently developed by employees or agents of the other
party without use of such information disclosed by the disclosing party to the
other party.

     "Congers Facility Lease" shall mean that certain real property lease,
dated March 17, 1999, by and between the Borrower and Par Pharmaceutical, Inc.

     "CSA" is defined in Section 5.9(c).

     "DEA" is defined in Section 5.9(c).

     "Default Notice" is defined in Section 9.1(b).

     "Environmental Claim" shall mean, with respect to any Person, any notice,
claim, demand or similar communication (written or oral) by any other Person
alleging potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries, fines or penalties arising out of, based on or resulting
from (i) the presence, or release into the environment, of any Material of
Environmental Concern at any location, whether or not owned by such Person or
(ii) circumstances forming the basis of any violation, or alleged violation, of
any Environmental Law.

     "Environmental Law" shall mean all federal, state, local and foreign laws
and regulations relating to pollution or protection of human health, safety or
the environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata), including without limitation,
laws and regulations relating to emissions, discharges, releases or threatened

<PAGE>   30

releases of Materials of Environmental Concern, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern.

     "ERISA" is defined in Section 5.16(a).

     "ERISA Affiliate" is defined in Section 5.16(a).

     "Event of Default" is defined in Section 9.1.

     "Event of Noncompliance" is defined in Section 7.2(ii).

     "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.

     "Existing Debentures" is defined in the Recitals.

     "Existing Holders" is defined in the Recitals.

     "FDA" is defined in Section 5.9(b).

     "FDC Act" is defined in Section 5.9(b).

     "Federal Food, Drug, and Cosmetic Act" shall mean the Federal Food, Drug,
and Cosmetic Act, 21 USC Sections 301 et seq.

     "Financing Statements" is defined in Section 4.7(a).

     "GAAP" is defined in Section 5.8(b).

     "Galen Debentures" is defined in the Recitals.

     "Guarantors" shall mean Halsey Pharmaceutical, Inc., a Delaware
corporation, and Houba, Inc., an Indiana corporation, both wholly-owned
Subsidiaries of the Borrower.

     "Houba" shall mean Houba, Inc., an Indiana corporation and a wholly-owned
Subsidiary of the Borrower.

     "Immaterial Subsidiaries" is defined in Section 5.2.

     "Indemnitee" is defined in Section 11(b).

     "Intellectual Property Rights" is defined in Section 5.11(a).

     "IRS" shall mean the United States Internal Revenue Service, and any
successor corporation.

     "Lender" is defined in the Introduction.

     "Loan" is defined in Section 1.1.

     "Loan Agreement" is defined in the Introduction.

<PAGE>   31

     "Loan Documents" is defined in Section 2.3.

     "Materials of Environmental Concern" shall mean and include chemicals,
pollutants, contaminants, wastes, toxic substances, petroleum and petroleum
products, asbestos and radioactive materials.

     "Negotiation Agreement" is defined in the Recitals.

     "Note" is defined in Section 1.2.

     "Obligations" shall mean all obligations, liabilities and indebtedness of
every kind, nature and description of the Borrower and the Guarantors from time
to time owing to the Lender or any Indemnitee under or in connection with the
Loan Documents, whether direct or indirect, primary or secondary, joint or
several, absolute or contingent, due or to become due, now existing or
hereafter arising and however acquired and shall include, without limitation,
all principal and interest on the Loan and, to the extent chargeable under any
Loan Document, all charges, expenses, fees and reasonable attorney's fees.

     "Oracle Debentures" is defined in the Recitals.

     "PCB" is defined in Section 5.14(c).

     "Permitted Liens" is defined in Section 8.3.

     "Person" shall mean any individual, partnership, limited liability
company, joint venture, firm, corporation, association, trust or other
enterprise or any government or political subdivision or any agency, department
or instrumentality thereof.

     "Plan" and "Plans" are defined in Section 5.16(a).

     "Product" is defined in the Recitals.

     "Product Agreements" shall mean the Purchase Agreement, the Supply
Agreements and the Negotiation Agreement, and any supply agreements entered
into after the date hereof pursuant to the terms as contemplated in the
Negotiation Agreement, collectively. "Product Agreement" shall mean any of the
Product Agreements.

     "Purchase Agreement" is defined in the Recitals.

     "Reportable Event" is defined in Section 5.16(m).

     "Schedule of Exceptions" is defined in Section 5.1.

     "Selected Reports" is defined in Section 5.1.

     "Subsidiary" is defined in Section 5.2.

     "Subordination Agreement" is defined in the Recitals.

     "Supply Agreements" is defined in the Recitals.

<PAGE>   32

     "Tax Qualified Plan" is defined in Section 5.16(s).

     "Unfunded Pension Liability" is defined in Section 5.16(e).

     "Voting Agreement" mean securities of any class of capital stock of the
Borrower entitling the holders thereof to vote in the election of members of
the Board of Directors of the Borrower.

     "Watson Collateral Assignments" is defined in Section 2.1.

     "Watson Guaranty" is defined in Section 2.2.

     "Watson Guarantors Collateral Assignment" is defined in Section 2.3.

     "Watson Guarantors Security Agreement" is defined in Section 2.3.

     "Watson Mortgage" is defined in Section 2.3.

     "Watson Security Agreement" is defined in Section 2.1.

     "Watson Security Documents" is defined in Section 2.3.

     "Watson Stock Pledge Agreement" is defined in Section 2.1.

     "Withdrawal Liability" is defined in Section 5.16(g).

     12.2 Right of Setoff. In addition to any rights now or hereafter granted
under applicable law or otherwise, and not by way of limitation of any such
rights, upon the occurrence and during the continuance of any Event of Default,
the Lender is hereby authorized at any time or from time to time, without
presentment, demand, protest or other notice of any kind to the Borrower or any
Guarantor or to any other Person, any such notice being hereby expressly
waived, to set off and to appropriate and apply any and all indebtedness at any
time held or owing by the Lender to or for the credit or the account of the
Borrower or its Subsidiaries, or any payment due Borrower from Lender under the
Product Agreements, against and on account of the Obligations or under any of
the other Loan Documents and all other claims of any nature or description
arising out of or connected with this Loan Agreement or any other Loan
Document, irrespective of whether or not such Lender shall have made any demand
hereunder and although said Obligations, liabilities or claims, or any of them,
shall be contingent or unmatured.

     12.3 Governing Law. This Agreement and the rights of the parties hereunder
shall be governed in all respects by the laws of the State of California
wherein the terms of this Loan Agreement were negotiated.

     12.4 Survival. Except as specifically provided herein, the
representations, warranties, covenants and agreements made herein shall survive
(a) any investigation made by Lender, and (b) the Closing.

     12.5 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon and enforceable by and against, the successors, assigns, heirs, executors
and administrators of the parties hereto.

<PAGE>   33

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

     12.7 Notices. All notices, demands or other communications given hereunder
shall be in writing and shall be sufficiently given if delivered either
personally, by fax (receipt confirmed by recipient or followed by copy sent via
the other means set forth herein) or by a nationally recognized courier service
marked for next Business Day delivery or sent in a sealed envelope by first
class mail, postage prepaid and either registered or certified, addressed as
follows.

<TABLE>
<CAPTION>
     If to Borrower:                         If to Lender:
     ---------------                         -------------
     <S>                                     <C>
     Halsey Drug Co., Inc.                   Chief Financial Officer
     695 No. Perryville Road                 Watson Pharmaceuticals, Inc.
     Rockford,  Illinois  61107              311 Bonnie Circle
     Fax no. (815) 399-9710                  Corona, California  92880
     Attn:    Mr. Michael Reicher            Fax no. (909) 279-8094
              Chief Executive Officer        cc:      Mr. Robert Funsten
                                                      General Counsel
</TABLE>

or to such other address with respect to any party hereto as such party may
from time to time notify (as provided above) the other party hereto. Any such
notice, demand or communication shall be deemed to have been given (i) on the
date of delivery, if delivered personally, (ii) on the date of facsimile
transmission, receipt confirmed, (iii) one Business Day after delivery to a
nationally recognized overnight courier service, if marked for next day
delivery or (iv) five Business Days after the date of mailing, if mailed.
Copies of any notice, demand or communication given to (x) Borrower shall be
delivered to St. John & Wayne, L.L.C., Two Penn Plaza East, Newark, New Jersey,
07105-2249, fax no. (973) 491-3555, Attn.: John P. Reilly, or such other
address as may be directed and (y) Lender shall be delivered to Stradling Yocca
Carlson & Rauth, A Professional Corporation, 660 Newport Center Drive, Newport
Beach, California, 92660, fax no. (949) 725-4100, Attn: Lawrence B. Cohn, or
such other address as may be directed.

     12.8 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to Lender upon any breach or default of Borrower under
this Loan Agreement shall impair any such right, power or remedy of Lender nor
shall it be construed to be a waiver of any such breach or default, or an
acquiescence, therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of
Lender of any breach or default under this Loan Agreement, or any waiver on the
part of Lender of any provisions or conditions of this Loan Agreement must be
made in writing and shall be effective only to the extent specifically set
forth in such writing. All remedies, either under this Loan Agreement or by law
or otherwise afforded to Lender shall be cumulative and not alternative.

     12.9 Rights; Severability. Unless otherwise expressly provided herein,
Lender's rights hereunder are several rights, not rights jointly held with any
other person. In case any provision of

<PAGE>   34

this Loan Agreement shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.

     12.10 Expenses. Borrower shall bear its own expenses and legal fees
incurred on its behalf with respect to the negotiation, execution and
consummation of the Loan Documents and the Product Agreements, and Borrower
will reimburse Lender for all of the reasonable expenses incurred by Lender
with respect to the negotiation, execution and consummation of the transactions
contemplated by the Loan Documents and the Product Agreements, and due
diligence conducted in connection therewith, including the reasonable fees and
disbursements of Lender's counsel; provided, however, that the amount of such
reimbursement shall not exceed $50,000. Such reimbursement shall be paid on the
Closing Date.

     12.11 Litigation. The parties each hereby waive trial by jury in any
action or proceeding of any kind or nature in any court in which an action may
be commenced arising out of this Loan Agreement or by reason of any other cause
or dispute whatsoever between them. The parties hereto agree that the state and
federal Courts which sit in the State of California and the County of Orange
shall have exclusive jurisdiction to hear and determine any claims or disputes
between Borrower and Lender, pertaining directly or indirectly to this Loan
Agreement or to any matter arising therefrom. The parties each expressly submit
and consent in advance to such jurisdiction in any action or proceeding
commenced in such courts provided that such consent shall not be deemed to be a
waiver of personal service of the summons and complaint, or other process or
papers issued therein. The choice of forum set forth in this Section 11.9 shall
not be deemed to preclude the enforcement of any judgment obtained in such
forum or the taking of any action under this Loan Agreement to enforce same in
any appropriate jurisdiction. The parties each waive any objection based upon
forum non conveniens and any objection to venue of any action instituted
hereunder.

     12.12 Confidentiality. Lender and Borrower shall:

           (a) not disclose any Confidential Information of the other to third
parties except to: (i) government authorities; or (ii) such party's Affiliates,
consultants or actual or potential contract manufacturers, licensees,
distributors, purchasers, joint ventures, clinical investigators or other
persons having bona fide business relations with such party, in each case
pursuant to a non-disclosure commitment; and

           (b) take such precautions as it normally takes with its own
confidential and proprietary information to prevent disclosure to third parties
of any Confidential Information (except as contemplated above);

provided, however, that no party shall be obligated to maintain confidentiality
under this Section 12.12 with respect to any information that (A) at the time
of disclosure is or thereafter becomes available to the general public other
than by breach of this Section 12.12 by such party; (B) is obtained by such
party from a third-party source who is not breaching a commitment of
confidentiality to the other party to this Loan Agreement by disclosing such
information to such first party; or (C) is required to be disclosed pursuant to
law to protect such party's interest or in connection with any litigation,
investigation or regulatory proceeding, or as otherwise required by law.

<PAGE>   35

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

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

     IN WITNESS WHEREOF, Borrower and Lender have caused this Loan Agreement to
be duly executed by their duly authorized officers all as of the day and year
first above written.

"BORROWER"                              "LENDER"

HALSEY DRUG CO., INC.                   WATSON PHARMACEUTICALS, INC.

/s/ Michael Reicher                     /s/ Robert C. Funsten
By:                                     By:
Its: Chief Executive Officer            Its: Senior Vice President

<PAGE>   36

                                   SCHEDULE I

       HOLDERS OF EXISTING DEBENTURES RECEIVING IN-KIND INTEREST PAYMENTS

ORACLE STRATEGIC PARTNERS, L.P.         GALEN PARTNERS III, L.P.

GALEN EMPLOYEE FUND III, L.P.           GALEN PARTNERS INTERNATIONAL, III, L.P.

MICHAEL REICHER                         PETER CLEMENS

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00007-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00007-of-00352.parquet"}]]