<PAGE>   1




                                                                   EXHIBIT 10.41

                               SECURITY AGREEMENT


     THIS AGREEMENT made and entered into this 19th day of December, 1996, by
and between Caraco Pharmaceutical Laboratories, Ltd., the address of which is
1150 Elijah McCoy Drive, Detroit, Michigan 48202 ("Debtor"), and Rosemary
Joliat Living Trust u/a/d 4/12/88, the address of which 1411 North Woodward,
Suite 300, Birmingham, Michigan 48009 ("Secured Party").

                            R  E  C  I  T  A  L  S:

     In consideration of the mutual covenants and agreements of the parties
hereinafter set forth and good and valuable consideration paid and/or extended
by Secured Party to Debtor, the receipt and sufficiency of which is hereby
acknowledged by Debtor, the parties hereto agree as follows:

     1.   CREATION OF SECURITY INTEREST.  To secure the payment of the sums or
performance of the obligations referred to as the "Indebtedness" in Paragraph 2
of this Agreement, Debtor does hereby create in favor of Secured Party, its
successors and assigns, a continuing security interest and lien in all of
Debtor's right, title and interest in and to the following, wherever located,
(from time to time referred to as the "Collateral") which as used herein shall
have those definitions set forth below:

          A.   ACCOUNTS.  All present and future Accounts, Documents, Chattel
               Paper, Instruments, Contracts Rights, General Intangibles (as
               defined below) and chooses in action, including, any right to any
               refund of taxes heretofore or hereafter paid to any governmental
               authority including, without limitation, all new drug
               applications to, and approvals of such applications from, the
               United States Food and Drug Administration and other regulatory
               agencies;

          B.    EQUIPMENT.  All present or future Equipment and fixtures,
               including all machinery, computer equipment, furniture and
               furnishings owned by Debtor, and including all accessions,
               accessories, tools and dies, parts attached thereto or used or
               intended to be used in connection therewith and all books,
               records, instruments and documents relating thereto or useful in
               maintaining or realizing upon the Equipmnent, and all
               substitutions of, improvements to and replacements of as well as
               all additions to all of the foregoing, whether now owned or
               hereafter acquired by Debtor;


                                      1



<PAGE>   2


          C.   INVENTORY.  All Inventory and Goods, now or hereafter acquired
               including, but not limited to, raw materials, scrap,
               work-in-process, finished Goods, tangible property,
               stock-in-trade, wares and merchandise used in, held for sale or
               sold in the ordinary course of business, including Goods for
               sale, lease or other disposition which give rise to any Accounts,
               and including all Goods which have been returned to, repossessed
               or stopped in transit by the party granting a security interest
               to Secured Party therein, and all accessions, parts attached
               thereto or used or intended to be used in connection therewith,
               and all books, records, instruments and documents relating
               thereto or useful in maintaining or realizing upon the Inventory;

          D.   PROCEEDS.  Proceeds, and proceeds of hazard insurance and
               eminent domain or condemnation awards of all of the foregoing
               described assets and/or properties or interests therein,
               including all products of, and accessions to, such assets or
               properties or interests therein.  In addition thereto, any and
               all deposits or other sums at any time credited by or due from
               Secured Party to Debtor and any and all Instruments, Documents,
               policies and certificates of insurance, securities, Goods,
               Accounts Receivable, choses in action, chattel paper, cash,
               property and the proceeds thereof (whether or not the same are
               Collateral or Proceeds thereof hereunder) owned by Debtor or in
               which Debtor has an interest, which are now or at any time
               hereafter in possession or control of Secured Party or in transit
               by mail or carrier to or from Secured Party or in possession of
               any third party acting on Secured Party's behalf, without regard
               to whether Secured Party received the same in pledge, for
               safekeeping, as agent or otherwise, or whether Secured Party has
               conditionally released the same;

          E.   ACCOUNTS, CHATTEL PAPER, CONTRACTS, CONTRACT RIGHTS, DOCUMENTS,
               GENERAL INTANGIBLES, GOODS, INSTRUMENTS AND INVENTORY.  The
               foregoing terms shall have meanings ascribed to them in the
               Uniform Commercial Code as adopted by the State of Michigan, as
               supplemented by the definitions set forth above;

whether now owned or hereafter acquired by Debtor, and all books, records,
instruments and documents relating thereto or useful in maintaining or
realizing upon the Collateral.  Enumeratoin of specific items within general
types of Collateral is for the purpose of convenient reference and illustration
and shall not limit the scope of the security interest created under this
Security Agreement.



                                      2

<PAGE>   3



     2. INDEBTEDNESS.  Debtor shall pay to Secured Party when due all amounts
evidenced by tha Promissory Note in the principal amount of Sixty Five Thousand
and no/100 ($65,000) Dollars, with interest as therein provided, executed and
delivered by Debtor to Secured Party on even date herewith (the "Note"), as the
same may be modified, renewed, extended, amended or replaced from time to time,
and shall pay all amounts and perform all obligations required under or
pursuant to this Agreement and all other documents and/or agreements delivered
to Secured Party in connection with the Note (the "Loan Documents"), such
obligations of payment and performance being hereinafter collectively referred
to as the "Indebtedness".

     3. ACCELERATION CLAUSE.  Upon default in the payment or performance of any
portion of the Indebtedness of Debtor, as provided in the Note and the Loan
Documents, or upon the occurrence of any other default hereunder, all or any
portion of the Indebtedness of Debtor, whether due or not, shall at Secured
Party's option become immediately due and payable without notice or demand.

     4. USE OF COLLATERAL.  The Equipment and Inventory shall be used
exclusively in connection with the conduct of Debtor's present business, unless
Secured Party gives its written consent to another use.  Secured Party shall
have the right to inspect the Collateral at any time, to inspect Debtor's books
and records with respect thereto and to make inquiry of account and contract
debtors in connection therewith.

     5. REMOVAL.  The Equipment and Inventory shall be kept at Debtor's business
premises, and shall not be removed therefrom without the written consent of
Secured Party.  Removal of any of the Collateral by Debtor, or its agents,
servants or employees, shall be deemed a willful taking, an unlawful conversion
and a default under this Agreement.  Use of the Collateral and sale of the
Inventory in the regular and ordinary course of Debtor's business shall not
constitute a prohibited removal of the Collateral for the purpose of this
Agreement.

     6. REPAIRS AND TAXES.  Debtor shall at its own expense, from time to time,
replace and repair all parts of the Collateral as may be broken, worn, damaged
or otherwise in need of repair, and shall keep the Collateral in every respect
in good working order and repair.  Debtor shall pay all taxes charged against,
assessed or imposed upon any of the Collateral.

     7. INSURANCE.  Debtor shall keep the Collateral insured against loss and
damage by casualty, theft and such other perils.

     8. DEBTOR'S WARRANTIES AND REPRESENTATIONS.  Debtor warrants and represents
that:

        A.   The Collateral is or will be owned by Debtor and except with
             respect to (i) the collateral securing the loan between Debtor and
             the Economic Development Corporation of the City of Detroit
             entered into in August 1990, and (ii) the  collateral referenced
             in that certain Security Agreement between Debtor and Jay F.
             Joliat,


                                      3
<PAGE>   4


             as Trustee of the Jay F. Joliat Qualified Terminable Interest
             Marital Trust, u/a/d 4/8/82, that certain Security Agreement
             between Debtor and David A. Hagelstein, as Trustee of the
             TTEE David Hagelstein Trust, u/a/d 10/27/93, and that certain
             Security Agreememt between Debtor and John R. Morris, the
             Collateral is not subject to any security interests, liens or
             encumbrances, except as created by this Agreement, and Debtor will
             defend the Collateral against the claims and demands of all
             persons;

       B.    Debtor will execute, and will pay all costs of filing of, any
             financing, continuation or termination statement with respect to
             the security interest created by this Agreement;

    9. DEFAULT.  The following shall constitute defaults (each a "Default")
under this Agreement:

       A.    The occurrence of any misrepresentation, omission or misstatement
             in connection with or noncompliance or nonperformance of any of
             Debtor's obligations, agreements, representations or warranties
             under this Agreement (including the occurrence of any other
             default identified under this Agreement or the Loan Documents)
             which is not cured within 15 days after notice thereof;

       B.    Any default in the payment of any portion of the Indebtedness when
             due in accordance with the terms of the Note, this Agreement or
             the Loan Documents;

       C.    Debtor's voluntarily application for the appointment of a
             custodian, trustee or receiver to take custody or dispose of any
             substantial portion of its assets; or the appointment by a court
             of competent jurisdiction of a custodian, trustee or receiver to
             take custody or dispose of any substantial portion of the assets
             of Debtor pursuant to any involuntary proceeding and either (i)
             Debtor shall indicate approval of, consent to, or acquiescence to
             such appointment, or (ii) such custodian, trustee, or receiver
             shall not be discharged within thirty (30) days; or Debtor shall
             voluntarily seek protection from creditors under any applicable
             state or federal bankruptcy, liquidation or dissolution,
             insolvency, or debt reorganization laws; or any of Debtor's
             creditors shall institute any proceeding against Borrower under
             any applicable state or federal bankruptcy, liquidation or
             dissolution, insolvency, or debt reorganization laws, and the same
             shall not be dismissed or discharged within thirty (30) days.



                                      4
<PAGE>   5




         D.    The liquidation, dissolution, or other discontinuance of Debtor's
corporate existence.

     10. REMEDIES.   In the event of the occurrence of any default, Secured
Party may exercise its rights under law, including by way of enforcement under
the Uniform Commercial Code in effect in the State of Michigan at the date of
this Agreement.  Secured Party may enter Debtor's premises without legal process
and remove the Collateral or require the Debtor to assemble the Collateral and
make it available to Secured Party at a place within the State of Michigan
designated by Secured Party.  If it so elects, Secured Party may and is hereby
empowered, without legal process, to enter any premises where the Collateral may
be kept and take exclusive possession of it on those premises with or without a
custodian.  Secured Party may thereafter sell the Collateral at one or more
public or private sales, on or away from Debtor's business premises.  Unless the
Collateral is perishable, threatens to decline speedily in value or is of a type
customarily sold on a recognized market, Secured Party shall give Debtor
reasonable notice of the time and place of any public sale thereof, or of the
time after which any private sale or any other intended disposition thereof is
to be made.  The requirement of reasonable notice shall be met if notice is
mailed to Debtor, postage prepaid, by first class certified mail, return receipt
requested, at least five (5) days prior to the date of the proposed sale or
disposition.  At any such sale, Secured Party may in its absolute discretion
sell and dispose of all the right, title, and interest of Debtor in and to any
of the Collateral. Any such sale may be for cash or for credit, and Secured
Party may be the purchaser.  Out of the monies arising from the sale and/or
collection of the Collateral, Secured Party shall retain any and all sums then
owing to Secured Party, including all additional advances and debts, and all
costs, fees, charges and expenses in connection therewith, with interest,
including reasonably attorneys fees, disbursements as herein defined, premiums
on bonds, custodian's fees, fees of public officers, auctioneer's fees, plus
advertising and labor, disbursements for use and occupancy of premises and any
and all other disbursements made by Secured Party in connection with the taking,
maintaining, storage and disposing of the Collateral, tendering the excess (if
any) to Debtor or its successors or assigns.  If for any reason the Collateral
shall fail to satisfy all of the foregoing items, Debtor shall pay to Secured
Party the resulting deficiency upon demand.

     11. SEVERABILITY.   If any provision of this Agreement shall for any reason
be held to be invalid or unenforceable, that invalidity or unenforceability
shall not affect any other provision hereof, and this Agreement shall be
construed as if the invalid or unenforceable provision had never been contained
herein.

     12. NOTICES. All notices to the parties under this Agreement shall be
sufficient if mailed by certified mail, return receipt requested with sufficient
prepaid postage, to the parties at their addresses appearing at the beginning of
this Agreement, or at such other address as they shall designate in writing as
provided by this paragraph. Notice so directed and posted shall be effective
upon receipt or upon first attempted delivery or upon posting if proof of
posting is obtained (without regard to who receives or signs for such notice and
without regard to whether or not such notice is actually delivered).


                                      5

<PAGE>   6


     13. GOVERNING LAW.  This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Michigan.

     14. CAPTIONS.  Captions to paragraphs contained in this Agreement, are for
convenience only and are entirely without substantive effect.

     15. SUCCESSORS.  This Agreement shall be binding upon, and the benefits
hereof shall inure to, the parties hereto and their respective successors and
assigns.

     THIS AGREEMENT was executed as of the date and year first above written.

                                    DEBTOR:

                                    CARACO PHARMACEUTICAL LABORATORIES, LTD.
                                    a Michigan corporation


                                    By:/s/William R. Hurd
                                       -----------------------
                                       William R. Hurd
                                       Its: President


                                    SECURED PARTY:

                                    ROSEMARY JOLIAT LIVING TRUST, U/A/D 4/12/88


                                    By: /s/Jay F. Joliat P.O.A. DTD 7/1/89
                                       -------------------------------------
                                        Rosemary Joliat, as Trustee



                                      6