DEBENTUREHOLDERS AGREEMENT



     THIS DEBENTUREHOLDERS AGREEMENT (this "Debentureholders Agreement") is

entered into as of December 20, 2002 by and among HALSEY DRUG CO., INC., a

corporation organized and existing under the laws of the State of New York

("Halsey" or the "Company"), and each of the holders of the Company's 5%

Convertible Senior Secured Debentures due March 31, 2006 listed on the signature

page hereto.



     WHEREAS, Halsey is a party to a certain Debenture and Warrant Purchase

Agreement dated as of March 10, 1998, as amended (the "1998 Purchase

Agreement"), with the persons listed on the signature pages thereto and pursuant

to which the Company issued certain 5% Convertible Senior Secured Debentures due

March 31, 2006 (the "1998 Debentures"); and



     WHEREAS, Halsey entered into a certain Debenture and Warrant Purchase

Agreement dated as of May 26, 1999, as amended (the "1999 Purchase Agreement"),

with the persons listed on the signature pages thereto and pursuant to which the

Company issued certain 5% Convertible Senior Secured Debentures due March 31,

2006 (the "1999 Debentures" and together with the 1998 Debentures, the "Existing

Debentures"); and



     WHEREAS, the Company has concurrently herewith entered into a certain

Debenture Purchase Agreement dated as of December 20, 2002 (the "2002 Purchase

Agreement"; capitalized terms used herein but not otherwise defined herein shall

have the meanings ascribed thereto in the 2002 Purchase Agreement) with Care

Capital, LLC, Essex Woodlands Health Ventures Fund V and those other persons

listed on the signature pages thereto and pursuant to which the Company proposes

to issue certain 5% Convertible Senior Secured Debentures due March 31, 2006

(the "2002 Debentures" and together with the Existing Debentures, the

"Debentures"); and



     WHEREAS, it is a condition to the completion of the transactions

contemplated pursuant to the 2002 Purchase Agreement that the Company shall have

executed this Debentureholders Agreement providing that the approval of the

holders of the Debentures shall be required as a condition to the Company's

completion of certain material transactions; and



     WHEREAS, the Company and the holders of the Debentures desire to enter into

this Agreement to provide for the approval rights of the holders of the

Debentures as hereinafter provided.



     NOW, THEREFORE, in consideration of the mutual covenants contained herein

and other good and valuable consideration, the receipt and sufficiency of which

are hereby acknowledged, the parties hereby agree as follows:



     1. Debentureholder Approval for Material Transactions.



     (a) Consent of Holders of 2002 Debentures. The Company hereby covenants and

agrees, that so long as any of the 2002 Debentures remain outstanding, it will

not, directly or indirectly, without the prior written consent of the holders of

at least sixty-six and two-thirds percent (66 2/3%) in the aggregate principal

amount of the 2002 Debentures then outstanding, take, or permit to be taken, any

of the following actions or complete, or permit to be taken, any of the

following transactions:



     (i) Any modification of the rights of the holders of the 2002 Debentures;



     (ii) Any issuance of securities, or the incurrence of indebtedness, by the

Company or any Guarantor which rank senior or equal in right of payment to the

2002 Debentures;



     (iii) Any declaration or payment of any dividends or distributions on, or

redemptions of, any securities ranking junior in priority to the 2002

Debentures, other than dividends or distributions payable in the Company's

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