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                                                                   EXHIBIT 10.10

                      GUARANTORS GENERAL SECURITY AGREEMENT

         This Guarantors General Security Agreement (the "Agreement") is dated
as of February 6, 2004 by and among Houba, Inc., an Indiana corporation with its
principal place of business at 16235 State Road 17, Culver, Indiana, 46511
("Houba"), Axiom Pharmaceutical Corporation, a Delaware corporation with its
principal place of business at 695 North Perryville Road, Rockford, Illinois,
61107 ("Axiom" and, together with Houba, the "Guarantors"), and Galen Partners
III, L.P., a Delaware limited partnership with its principal place of business
at 610 Fifth Avenue, Fifth Floor, New York, New York, 10020, acting in its
capacity as agent for the Purchasers, as defined below (the "Agent"), for the
benefit of the Purchasers.

                             PRELIMINARY STATEMENTS

         A.       Halsey Drug Co., Inc. (the "Company") has entered into a
Debenture and Share Purchase Agreement of even date herewith (as the same may be
amended, modified, supplemented or restated from time to time, the "Purchase
Agreement;" terms which are capitalized in this Agreement and not otherwise
defined shall have the meanings ascribed to them in the Purchase Agreement) with
the Purchasers listed on Exhibit B thereto (the "Purchasers").

         B.       Each of the Guarantors has executed and delivered to Agent,
for the benefit of the Purchasers, a Continuing Unconditional Secured Guaranty
of even date herewith (each a "Guaranty") of the Company's obligations under the
Purchase Agreement (collectively, the "Obligations").

         C.       The Purchasers have required, as a condition precedent to the
effectiveness of the Purchase Agreement, that each Guarantor (a) grant to the
Agent, for the ratable benefit of the Purchasers, a security interest in and to
the Collateral (as defined in Section 2.1 below) and (b) execute and deliver
this Agreement in order to secure the payment and performance by such Guarantor
of the Guaranty.

                                    AGREEMENT

         In consideration of the premises and in order to induce the Purchasers
to enter into and perform the Purchase Agreement, each Guarantor hereby agrees
as follows:

                                   ARTICLE 1

                          CREATION OF SECURITY INTEREST

1.1      SECURITY INTEREST

         Each Guarantor hereby pledges, assigns and grants to the Agent a
continuing perfected lien and security interest having priority over any and all
other security interests (except as otherwise

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provided in the Subordination Agreement) in all of such Guarantor's right, title
and interest in and to the Collateral (as defined in Section 2.1 below) in order
to secure the payment and performance of all Obligations owing by such
Guarantor.

1.2      GUARANTORS REMAIN LIABLE

         Anything herein to the contrary notwithstanding, (a) the Guarantors
shall remain liable under the contracts and agreements included in the
Collateral to the extent set forth therein to perform all of their duties and
obligations thereunder to the same extent as if this Agreement had not been
executed, (b) the exercise by the Agent of any of the rights hereunder shall not
release the Guarantors from any of their duties or obligations under the
contracts and agreements included in the Collateral and (c) neither the Agent
nor any Purchaser shall have any obligation or liability under the contracts and
agreements included in the Collateral by reason of this Agreement, the Purchase
Agreement or any other Transaction Document (as defined in the Subordination
Agreement), nor shall the Agent or any Purchaser be obligated to perform any of
the obligations or duties of the Guarantors thereunder or to take any action to
collect or enforce any claim for payment assigned hereunder.

                                   ARTICLE 2

                                   COLLATERAL

2.1      COLLATERAL

         For purposes of this Agreement, the term "Collateral" shall mean, with
respect to each Guarantor, all of the kinds and types of property described in
clauses (a) through (f) of this Section 2.1, whether now owned or hereafter at
any time arising, acquired or created by such Guarantor and wherever located,
and includes all replacements, additions, accessions, substitutions, repairs,
proceeds and products relating thereto or therefrom, and all documents, ledger
sheets and files of such Guarantor relating thereto and all Proceeds (as defined
in Section 2.2 below) of Collateral:

         (a)      all of such Guarantor's accounts, whether now existing or
existing in the future, including without limitation (i) all accounts receivable
(whether or not specifically listed on schedules furnished to the Agent),
including, without limitation, all accounts created by or arising from all of
such Guarantor's sales of goods or rendition of services made under any of such
Guarantor's trade names, or through any of its divisions, (ii) all unpaid
seller's rights (including rescission, replevin, reclamation and stoppage in
transit) relating to the foregoing or arising therefrom, (iii) all rights to any
goods represented by any of the foregoing, including returned or repossessed
goods, (iv) all reserves and credit balances held by such Guarantor with respect
to any such accounts receivable or account debtors, (v) all
health-care-insurance receivables, (vi) all deposit accounts, (vii) all
letter-of-credit rights, (viii) all instruments (including, without limitation,
promissory notes) and (ix) all guarantees or collateral for any of the foregoing
(all of the foregoing property and similar property being hereinafter referred
to as "Accounts");

         (b)      all of such Guarantor's inventory, including without
limitation (i) all raw materials, work in process, parts, components,
assemblies, supplies and materials used or consumed in such Guarantor's
businesses, wherever located and whether in the possession of such Guarantor or
any

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other Person; (ii) all goods, wares and merchandise, finished or unfinished,
held for sale or lease or leased or furnished or to be furnished under contracts
of service, wherever located and whether in the possession of such Guarantor or
any other person or entity; and (iii) all goods returned to or repossessed by
such Guarantor (all of the foregoing property being hereinafter referred to as
"Inventory");

         (c)      all of the equipment owned or leased by such Guarantor,
including, without limitation, machinery, equipment, office equipment and
supplies, computers and related equipment, furniture, furnishings, tools,
tooling, jigs, dies, fixtures, manufacturing implements, fork lifts, trucks,
trailers, motor vehicles, and other equipment (all of the foregoing property
being hereinafter referred to as "Equipment");

         (d)      all of such Guarantor's general intangibles (including,
without limitation, payment intangibles), instruments, securities (including
without limitation United States of America Treasury Bills), credits, claims,
demands, documents, letters of credit and letter of credit proceeds, chattel
paper, documents of title, certificates of title, certificates of deposit,
warehouse receipts, bills of lading, leases which are permitted to be assigned
or pledged, deposit accounts, money, tax refund claims, and contract rights
which are permitted to be assigned or pledged (all of the foregoing property
being hereinafter referred to as "Intangibles");

         (e)      all of each Guarantor's intellectual property, including,
without limitation, New Drug Applications, Investigatory New Drug Applications,
Abbreviated New Drug Applications, Alternative New Drug Applications,
registrations and quotas as issued by the DEA or the Attorney General of the
United States pursuant to the CSA, certifications, permits and approvals of
federal and state governmental agencies, patents, patent applications,
trademarks, trademark applications, service marks, service mark applications,
trade names, domain names, technical knowledge and processes, formal or informal
licensing arrangements which are permitted to be assigned or pledged,
blueprints, technical specifications, computer software, programs, databases,
copyrights, copyright applications and all confidential and proprietary
information, including, without limitation, know-how, trade secrets,
manufacturing and production processes and techniques, inventions, research and
development information, databases and data, including, without limitation,
technical data, financial and marketing and business data, pricing and cost
information and business and marketing plans, and all embodiments thereof, and
rights thereto, including, without limitation, all of such Guarantor's rights to
use the patents, trademarks, copyrights, service marks, or other property of the
aforesaid nature of other Persons now or hereafter licensed to such Guarantor,
together with the goodwill of the business symbolized by or connected with such
Guarantor's trademarks, copyrights, service marks, licenses and the other rights
included in this Section 2.1(e) (all of the foregoing property being hereinafter
referred to as "Intellectual Property"); and

         (f)      all interest, dividends, distributions, cash, instruments and
other property from time to time received, receivable or otherwise distributed
in respect of or in exchange for any or all of the then existing Collateral.

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2.2      PROCEEDS

         For purposes of this Agreement, the term "Proceeds" shall include (a)
whatever is now or hereafter received by such Guarantor upon the sale, exchange,
collection or other disposition of any item of Collateral, whether such proceeds
constitute Inventory, Accounts, Intangibles, royalties, payment under insurance
(whether or not the Agent is the loss payee thereof), or any indemnities,
warranties or guaranties, payable by reason of loss or damage to or otherwise
with respect to any or the foregoing Collateral, and (b) any such items which
are now or hereafter acquired by such Guarantor with any proceeds of Collateral
hereunder.

                                   ARTICLE 3

                         REPRESENTATIONS AND WARRANTIES

         Each Guarantor severally represents and warrants as follows:

3.1      ORGANIZATION AND EXISTENCE

         Such Guarantor is a corporation duly organized, validly existing and in
good standing under the laws of its state of incorporation and is qualified to
do business in such other jurisdictions as the nature or conduct of its
operations or the ownership of its properties require such qualification. Such
Guarantor does not own or lease any property or engage in any activity in any
jurisdiction that might require qualification to do business as a foreign
corporation in such jurisdiction and where the failure to so qualify could
reasonably be expected to have a Material Adverse Effect or subject such
Guarantor to a material liability.

3.2      AUTHORIZATION

         (a)      Such Guarantor has all requisite corporate power and authority
(i) to execute and deliver, and to perform and observe its obligations under,
the Transaction Documents (as defined in the Subordination Agreement) to which
it is a party, and (ii) to consummate the transactions contemplated hereby and
thereby, including, without limitation, the grant of any security interest,
mortgage, payment trust, guaranty or other security arrangement by such
Guarantor in, on or in respect of the Collateral.

         (b)      All corporate action on the part of such Guarantor and its
directors and stockholders necessary for the authorization, execution, delivery
and performance by such Guarantor of this Agreement, the Guaranty by such
Guarantor in favor of Agent, and, in the case of Houba, the Mortgage, and the
transactions contemplated therein or in any other Transaction Document (as
defined in the Subordination Agreement) to which it is a party, has been taken.

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3.3      PLACES OF BUSINESS

         Such Guarantor has no places of business, or warehouses in which it
leases space, other than those set forth on Section 3.3 of Schedule A, a copy of
which is attached hereto and made a part hereof ("Schedule A").

3.4      LOCATION OF COLLATERAL

         Except for the movement of Collateral from time to time from one place
of business or warehouse listed on Section 3.3 of Schedule A to another place of
business or warehouse listed on Section 3.3 of Schedule A, the Collateral is
located at such Guarantor's chief executive offices or other places of business
or warehouses listed on Section 3.3 of Schedule A, and not at any other
location.

3.5      RESTRICTIONS ON COLLATERAL DISPOSITION

         None of the Collateral is subject to contractual obligations that may
restrict or inhibit the Agent's rights or ability to sell or dispose of the
Collateral or any part thereof after the occurrence of an Event of Default,
except (a) the rights of Watson under the Watson Term Loan and the documents
executed in connection therewith, including, without limitation, the Watson
Security Agreement dated as of March 29, 2000 (the "Watson Security Agreement"),
and (b) the rights of the Existing Debentureholders.

3.6      STATUS OF ACCOUNTS

         Each Account is based on an actual and bona fide rendition of services
or sale of goods or products to customers, made by such Guarantor in the
ordinary course of its business. The Accounts created are such Guarantor's
exclusive property and are not and shall not be subject to any lien, consignment
arrangement, encumbrance, security interest or financing statement whatsoever,
except (a) the lien in favor of Watson under the Watson Term Loan and the
documents executed in connection therewith, including, without limitation, the
Watson Security Agreement, and (b) the liens in favor of the Existing
Debentureholders. To the best knowledge of such Guarantor, such Guarantor's
customers have accepted the goods, products and services and owe and are
obligated to pay the full amounts stated in the invoices according to their
terms, without any dispute, offset, defense or counterclaim.

3.7      COPYRIGHTS, TRADEMARKS AND PATENTS

         (a)      Such Guarantor owns outright all of the Intellectual Property
Rights listed on Section 4.12 of the Schedule of Exceptions attached to the
Purchase Agreement free and clear of all liens and encumbrances except for the
Permitted Liens and pays no royalty to anyone under or with respect to any of
them.

         (b)      Such Guarantor has not licensed to anyone the use of any of
such Intellectual Property Rights and has no knowledge of the infringing use by
the Company or any Guarantor of any

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Intellectual Property Rights of third parties.

         (c)      Such Guarantor 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 Company and the Guarantors or with respect to any
license under which the Company or a Guarantor is licensor or licensee; or (ii)
that the Intellectual Property Rights infringe upon the rights of any third
party.

         (d)      Such Guarantor has made or performed all filings, recordings
and other acts and has paid all required fees and taxes to maintain and protect
its interest in each and every item of Intellectual Property in full force and
effect throughout the world, and to protect and maintain its interest therein
including, without limitation, recordations of any of its interests in patents
and trademarks with the U.S. Patent and Trademark Office and in corresponding
national and international patent offices, and recordation of any of its
interests in any copyrights with the U.S. Copyright Office and in corresponding
national and international copyright offices. Such Guarantor has used proper
statutory notice in connection with its use of each patent, trademark and
copyright.

3.8      INVENTORY

         All Inventory of such Guarantor 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 consolidated balance sheet of
the Guarantors and its Subsidiaries as of September 30, 2003. 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 such Guarantor.

3.9      OWNERSHIP

         Such Guarantor is the legal and beneficial owner of its Collateral free
and clear of any lien, claim, option or right of others, except for the security
interest created under this Agreement, the Watson Security Agreement and the
security agreements executed by the Company or the Guarantors in connection with
the Existing Debentures. No effective financing statement or other instrument
similar in effect covering all or any part of such Collateral or listing such
Guarantor or any trade name of such Guarantor is on file in any recording
office, except such as may have been filed relating to the Watson Term Loan and
the Existing Debentures. The Agent has, for the benefit of the Purchasers, a
valid and perfected security interest in the Collateral which security interest
has priority over any and all other security interests (except as otherwise
provided in the Subordination Agreement) in such Collateral.

                                    ARTICLE 4

                                    COVENANTS

         Each Guarantor agrees (which agreements shall be several as to each
Guarantor except as otherwise provided) as follows:

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4.1      DEFEND AGAINST CLAIMS

         Such Guarantor will defend the Collateral against all claims and
demands of all Persons at any time claiming the same or any interest therein
unless both the Agent and such Guarantor determine that the claim or demand is
not material and that, consequently, such defense would not be consistent with
good business judgment. Such Guarantor will not permit any lien notices with
respect to the Collateral or any portion thereof to exist or be on file in any
public office except for those in favor of the Agent and those permitted under
the terms of the Purchase Agreement.

4.2      CHANGE IN COLLATERAL LOCATION

         Such Guarantor will not (a) change its corporate name, (b) change the
location of its chief executive office or establish any place of business other
than those specified in Section 3.3 of Schedule A, or (c) move or permit
movement of the Collateral from the locations specified therein except from one
such location to another such location, unless in each case such Guarantor shall
have given the Agent at least thirty (30) days prior written notice thereof, and
shall have, in advance, executed and caused to be filed or delivered to the
Agent any financing statements or other documents required by the Agent to
perfect the security interest of the Agent in the Collateral in accordance with
Section 4.3 of this Agreement, all in form and substance satisfactory to the
Agent.

4.3      ADDITIONAL FINANCING STATEMENTS

         Promptly upon the reasonable request of the Agent, such Guarantor will
execute and deliver or use its best efforts to procure any document, give any
notices, execute and file any financing statements, mortgages or other
documents, all in form and substance satisfactory to the Agent, mark any chattel
paper, deliver any chattel paper or instruments to the Agent and take any other
actions that are necessary or, in the opinion of the Agent, desirable to perfect
or continue the perfection and the first priority of the Agent's security
interest in the Collateral, to protect the Collateral against the rights,
claims, or interests of third persons, or to effect the purposes of this
Agreement. Such Guarantor will pay the costs incurred in connection with any of
the foregoing.

4.4      ADDITIONAL LIENS; TRANSFERS

         Without the prior written consent of the Agent, such Guarantor will
not, in any way, hypothecate or create or permit to exist any lien, security
interest, charge or encumbrance on or other interest in the Collateral, other
than those permitted under the terms of the Purchase Agreement and the liens in
favor of Watson pursuant to the Watson Term Loan and documents relative thereto
and the Existing Debentureholders, and such Guarantor will not sell, transfer,
assign, pledge, collaterally assign, exchange or otherwise dispose of the
Collateral, other than the sale of Inventory in the ordinary course of business
and the sale of obsolete or worn out Equipment. Notwithstanding the foregoing,
if the proceeds of any such sale consist of notes, instruments, documents of
title, letters of credit or chattel paper, such proceeds shall be promptly
delivered to the Agent to be held as Collateral hereunder. If the Collateral, or
any part thereof, is sold, transferred, assigned, exchanged, or otherwise
disposed of in violation of these provisions, the security interest of the Agent
shall continue in such Collateral or part thereof notwithstanding such sale,
transfer, assignment, exchange

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or other disposition, and such Guarantor will hold the proceeds thereof for the
benefit of the Agent, and promptly transfer such proceeds to the Agent in kind.

4.5      CONTRACTUAL OBLIGATIONS

         Such Guarantor will not enter into any contractual obligations which
may restrict or inhibit the Agent's rights or ability to sell or otherwise
dispose of the Collateral or any part thereof after the occurrence or during the
continuance of an Event of Default.

4.6      AGENT'S RIGHT TO PROTECT COLLATERAL

         Upon the occurrence or continuance of an Event of Default, the Agent
shall have the right at any time to make any payments and do any other acts the
Agent may deem necessary to protect the security interests of the Purchasers in
the Collateral, including, without limitation, the rights to pay, purchase,
contest or compromise any encumbrance, charge or lien which, in the reasonable
judgment of the Agent, appears to be prior to or superior to the security
interests granted hereunder, and appear in and defend any action or proceeding
purporting to affect its security interests in, or the value of, the Collateral.
The Guarantors hereby jointly and severally agree to reimburse the Agent for all
payments made and expenses incurred under this Agreement including reasonable
fees, expenses and disbursements of attorneys and paralegals acting for the
Agent, including any of the foregoing payments under, or acts taken to protect
its security interests in, the Collateral, which amounts shall be secured under
this Agreement, and agree they shall be bound by any payment made or act taken
by the Agent hereunder absent the Agent's gross negligence or willful
misconduct. The Agent shall have no obligation to make any of the foregoing
payments or perform any of the foregoing acts.

4.7      FURTHER OBLIGATIONS WITH RESPECT TO ACCOUNTS

         In furtherance of the continuing assignment and security interest in
the Accounts of such Guarantor granted pursuant to this Agreement, upon the
creation of Accounts, upon the Agent's request, such Guarantor will execute and
deliver to the Agent in such form and manner as the Agent may require, solely
for its convenience in maintaining records of Collateral, such confirmatory
schedules of Accounts, and other appropriate reports designating, identifying
and describing the Accounts as the Agent may reasonably require. In addition,
upon the Agent's request, such Guarantor shall provide the Agent with copies of
agreements with, or purchase orders from, the customers of such Guarantor and
copies of invoices to customers, proof of shipment or delivery and such other
documentation and information relating to such Accounts and other Collateral as
the Agent may reasonably require. Furthermore, upon the Agent's request, such
Guarantor shall deliver to the Agent any documents or certificates of title
issued with respect to any property included in the Collateral, and any
promissory notes, letters of credit or instruments related to or otherwise in
connection with any property included in the Collateral, which in any such case
came into the possession of such Guarantor, or shall cause the issuer thereof to
deliver any of the same directly to the Agent, in each case with any necessary
endorsements in favor of the Agent. Failure to provide the Agent with any of the
foregoing shall in no way affect, diminish, modify or otherwise limit the
security interests granted herein. Each Guarantor hereby authorizes the Agent to
regard such

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Guarantor's printed name or rubber stamp signature on assignment schedules or
invoices as the equivalent of a manual signature by such Guarantor's authorized
officers or agents.

4.8      INSURANCE

         Such Guarantor agrees to maintain public liability insurance, third
party property damage insurance and replacement value insurance on the
Collateral under such policies of insurance, with such insurance companies, in
such amounts and covering such risks as are at all times satisfactory to the
Agent in its commercially reasonable judgment. All policies covering the
Collateral are to name the Agent as an additional insured and the loss payee in
case of loss, and are to contain such other provisions as the Agent may
reasonably require to fully protect the Agent's interest in the Collateral and
to any payments to be made under such policies. Guarantor will provide notice to
Agent prior to any change in coverage.

4.9      TAXES

         Such Guarantor agrees to pay, when due, all taxes lawfully levied or
assessed against such Guarantor or any of the Collateral before any penalty or
interest accrues thereon; provided, however, that, unless such taxes have become
a federal tax or ERISA lien on any of the assets of such Guarantor, no such tax
need be paid if the same is being contested, in good faith, by appropriate
proceedings promptly instituted and diligently conducted and if an adequate
reserve or other appropriate provision shall have been made therefor as required
in order to be in conformity with GAAP.

4.10     COMPLIANCE WITH LAWS

         Such Guarantor agrees to comply in all material respects with all Legal
Requirements applicable to the Collateral or any part thereof, or to the
operation of its business or its assets generally, unless such Guarantor
contests in good faith, by appropriate legal, administrative or other
proceedings promptly instituted and diligently conducted, any such Legal
Requirements in a reasonable manner and in good faith. Such Guarantor agrees to
maintain in full force and effect, its respective licenses and permits granted
by any governmental authority as may be necessary or advisable for such
Guarantor to conduct its business in all material respects.

4.11     MAINTENANCE OF PROPERTY

         Such Guarantor agrees to keep all property useful and necessary to its
business in good working order and condition (ordinary wear and tear excepted)
and not to commit or suffer any waste with respect to any of its properties.

4.12     ENVIRONMENTAL AND OTHER MATTERS

         Such Guarantor will conduct its business so as to comply in all
respects with all environmental, land use, occupational, safety or health Legal
Requirements in all jurisdictions in which it is or may at any time be doing
business, except to the extent that such Guarantor is contesting, in good faith
by appropriate legal, administrative or other proceedings, promptly

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instituted and diligently conducted, any such Legal Requirement; provided,
further, that such Guarantor shall comply with the order of any court or other
governmental authority relating to such Legal Requirements unless such Guarantor
shall currently be prosecuting an appeal, proceedings for review or
administrative proceedings and shall have secured a stay of enforcement or
execution or other arrangement postponing enforcement or execution pending such
appeal, proceedings for review or administrative proceedings.

4.13     INTELLECTUAL PROPERTY

         With respect to each item of its Intellectual Property, each of the
Guarantors agrees to take, at its expense, all necessary steps, including,
without limitation, in the U.S. Patent and Trademark Office, the U.S. Copyright
Office and any other governmental authority, to (a) maintain the validity and
enforceability of such Intellectual Property and maintain such Intellectual
Property in full force and effect, and (b) pursue the registration and
maintenance of each patent, trademark, or copyright registration or application,
now or hereafter included in such Intellectual Property of the Guarantors,
including, without limitation, the payment of required fees and taxes, the
filing of responses to office actions issued by the U.S. Patent and Trademark
Office, the U.S. Copyright Office or other governmental authorities, the filing
of applications for renewal or extension, the filing of affidavits under
Sections 8 and 15 of the U.S. Trademark Act, the filing of divisional,
continuation, continuation-in-part, reissue and renewal applications or
extensions, the payment of maintenance fees and the participation in
interference, reexamination, opposition, cancellation, infringement and
misappropriation proceedings. Neither Guarantor shall, without the prior written
consent of the Agent, discontinue use of or otherwise abandon any Intellectual
Property, or abandon any right to file an application for any patent, trademark
or copyright, unless such Guarantor shall have previously determined that such
use or the pursuit or maintenance of such Intellectual Property is no longer
desirable in the conduct of such Guarantor's business and that the loss thereof
would not be reasonably likely to have a Material Adverse Effect, in which case,
such Guarantor will give prompt notice of any such abandonment to the Agent.

4.14     FURTHER ASSURANCES

         Such Guarantor shall take all such further actions and execute all such
further documents and instruments (including, but not limited to, collateral
assignments of Intellectual Property and Intangibles or any portion thereof) as
the Agent may at any time reasonably determine in its sole discretion to be
necessary or desirable to further carry out and consummate the transactions
contemplated by the Purchase Agreement and the documentation relating thereto,
including this Agreement, and to perfect or protect the liens (and the priority
status thereof) of the Agent in the Collateral.

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                                    ARTICLE 5

                                    REMEDIES

5.1      OBTAINING COLLATERAL UPON DEFAULT

         If any Event of Default shall have occurred and be continuing, then and
in every such case, subject to any mandatory requirements of applicable law then
in effect, the Agent, in addition to any rights now or hereafter existing under
applicable law and subject to the Subordination Agreement, shall have all rights
as a secured creditor under the Uniform Commercial Code in all relevant
jurisdictions and may:

         (a)      personally, or by agents or attorneys, immediately retake
possession of the Collateral or any part thereof, from any Guarantor or any
other Person who then has possession of any part thereof, with or without notice
or process of law, and for that purpose may enter upon such Guarantor's premises
where any of the Collateral is located and remove the same and use in connection
with such removal any and all services, supplies, aids and other facilities of
such Guarantor;

         (b)      instruct the obligor or obligors on any agreement, instrument
or other obligation (including, without limitation, the Accounts) constituting
the Collateral to make any payment required by the terms of such instrument or
agreement directly to the Agent;

         (c)      withdraw all monies, securities and instruments held pursuant
to any pledge arrangement for application to the Obligations;

         (d)      sell, assign or otherwise liquidate, or direct any Guarantor
to sell, assign or otherwise liquidate, any or all of the Collateral or any part
thereof, and take possession of the proceeds of any such sale or liquidation;

         (e)      take possession of the Collateral or any part thereof, by
directing any Guarantor in writing to deliver the same to the Agent at any place
or places designated by the Agent, in which event such Guarantor shall at its
own expense:

                  (1)      forthwith cause the same to be moved to the place or
         places so designated by the Agent and there delivered to the Agent,

                  (2)      store and keep any Collateral so delivered to the
         Agent at such place or places pending further action by the Agent as
         provided in Section 5.2, and

                  (3)      while the Collateral shall be so stored and kept,
         provide such guards and maintenance services as shall be necessary to
         protect the same and to preserve and maintain the Collateral in good
         condition;

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         it being understood that any Guarantor's obligation to so deliver the
         Collateral is of the essence of this Agreement and that, accordingly,
         upon application to a court of equity having jurisdiction, the Agent
         shall be entitled to a decree requiring specific performance by such
         Guarantor of said obligation.

5.2      DISPOSITION OF COLLATERAL

         Subject to the Subordination Agreement, any Collateral repossessed by
the Agent under or pursuant to Section 5.1 and any other Collateral whether or
not so repossessed by the Agent may be sold, assigned, leased or otherwise
disposed of under one or more contracts or as an entirety, and without the
necessity of gathering at the place of sale the property to be sold, and in
general in such manner, at such time or times, at such place or places and on
such terms as the Agent may, in compliance with any mandatory requirements of
applicable law, determine to be commercially reasonable. Any of the Collateral
may be sold, leased or otherwise disposed of, in the condition in which the same
existed when taken by the Agent or after any overhaul or repair which the Agent
shall determine to be commercially reasonable. Any such disposition which shall
be a private sale or other private proceedings permitted by such requirements
shall be made upon not less than ten (10) days' written notice to such Guarantor
specifying the time at which such disposition is to be made and the intended
sale price or other consideration therefor, and shall be subject, for the ten
(10) days after the giving of such notice, to the right of such Guarantor or any
nominee of such Guarantor to acquire the Collateral involved at a price or for
such other consideration at least equal to the intended sale price or other
consideration so specified. Any such disposition which shall be a public sale
permitted by such requirements shall be made upon not less than ten (10) days'
written notice to such Guarantor specifying the time and place of such sale and,
in the absence of applicable requirements of law, shall be by public auction
(which may, at the option of the Agent, be subject to reserve), after
publication at least once in The New York Times not less than ten (10) days
prior to the date of sale. If The New York Times is not then being published,
publication may be made in lieu thereof in any newspaper then being circulated
in the City of New York, New York, as the Agent may elect. All requirements of
reasonable notice under this Section 5.2 shall be met if such notice is mailed,
postage prepaid at least ten (10) days before the time of such sale or
disposition, to the Guarantor at its address set forth herein or such other
address as the Guarantor may have, in writing, provided to the Agent. The Agent
may, if it deems it reasonable, postpone or adjourn any sale of any Collateral
from time to time by an announcement at the time and place of the sale to be so
postponed or adjourned without being required to give a new notice of sale. The
proceeds realized from the sale of any Collateral shall be applied as follows:
first, to the reasonable costs, expenses and attorneys' fees and expenses
incurred by Agent for collection and for acquisition, completion, protection,
removal, storage, sale and delivery of the Collateral; second, to interest due
on any of the Obligations and any fees payable under this Agreement; and third,
to the principal of the Obligations. If any deficiency shall arise, Guarantors
shall remain liable to Agent and Purchasers therefor.

5.3      POWER OF ATTORNEY

         Each Guarantor hereby irrevocably authorizes and appoints the Agent, or
any Person or agent the Agent may designate, as such Guarantor's
attorney-in-fact, at such Guarantor's cost and expense, to exercise all of the
following powers upon and at any time after the occurrence and during the

                                       12
<PAGE>

continuance of an Event of Default, which powers, being coupled with an
interest, shall be irrevocable until all of the Obligations owing by such
Guarantor shall have been paid and satisfied in full:

         (a)      accelerate or extend the time of payment, compromise, issue
credits, bring suit or administer and otherwise collect Accounts or proceeds of
any Collateral;

         (b)      receive, open and dispose of all mail addressed to such
Guarantor and notify postal authorities to change the address for delivery
thereof to such address as the Agent may designate;

         (c)      give customers indebted on Accounts notice of the Agent's
interest therein, or to instruct such customers to make payment directly to the
Agent for such Guarantor's account;

         (d)      convey any item of Collateral to any purchaser thereof;

         (e)      give any notices or record any liens under Section 4.3 hereof;
and

         (f)      make any payments or take any acts under Section 4.6 hereof.

         The Agent's authority under this 5.3 shall include, without limitation,
the authority to execute and give receipt for any certificate of ownership or
any document, transfer title to any item of Collateral, sign such Guarantor's
name on all financing statements or any other documents deemed necessary or
appropriate to preserve, protect or perfect the security interest in the
Collateral and to file the same, prepare, file and sign such Guarantor's name on
any notice of lien, assignment or satisfaction of lien or similar document in
connection with any Account and prepare, file and sign such Guarantor's name on
a proof of claim in bankruptcy or similar document against any customer of such
Guarantor, and to take any other actions arising from or incident to the rights,
powers and remedies granted to the Agent in this Agreement. This power of
attorney is coupled with an interest and is irrevocable by such Guarantor.

5.4      WAIVER OF CLAIMS

         Except as otherwise provided in this Agreement, EACH GUARANTOR HEREBY
WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE AND JUDICIAL HEARING
IN CONNECTION WITH THE AGENT'S TAKING POSSESSION OF OR DISPOSING OF ANY OF THE
COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING
FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH ANY GUARANTOR
WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES
OR OF ANY STATE, and each Guarantor hereby further waives, to the extent
permitted by law:

         (a)      all damages occasioned by such taking of possession except any
damages which are the direct result of the Agent's gross negligence or willful
misconduct;

         (b)      all other requirements as to the time, place and terms of sale
or other requirements with respect to the enforcement of the Agent's rights
hereunder, except as expressly provided herein;

                                       13
<PAGE>

and

         (c)      all rights of redemption, appraisement, valuation, stay,
extension or moratorium now or hereafter in force under any applicable law in
order to prevent or delay the enforcement of this Agreement or the absolute sale
of the Collateral or any portion thereof, and such Guarantor, for itself and all
who may claim under it, insofar as it or they now or hereafter lawfully may,
hereby waives the benefit of all such laws.

         Any sale of, or the grant of options to purchase, or any other
realization upon any Collateral shall operate to divest all right, title,
interest, claim and demand, either at law or in equity, of such Guarantor
therein and thereto, and shall be a perpetual bar both at law and in equity
against such Guarantor and against any and all persons claiming or attempting to
claim the Collateral so sold, optioned or realized upon, or any part thereof,
from, through and under such Guarantor.

5.5      REMEDIES CUMULATIVE

         Each and every right, power and remedy hereby specifically given to the
Agent shall be in addition to every other right, power and remedy specifically
given under this Agreement, under the Purchase Agreement or under other
documentation relating thereto or now or hereafter existing at law or in equity,
or by statute, and each and every right, power and remedy whether specifically
herein given or otherwise existing may be exercised from time to time or
simultaneously and as often and in such order as may be deemed expedient by the
Agent. All such rights, powers and remedies shall be cumulative and the exercise
or the beginning of exercise of one shall not be deemed a waiver of the right to
exercise of any other or others. No delay or omission of the Agent in the
exercise of any such right, power or remedy and no renewal or extension of any
of the Obligations shall impair any such right, power or remedy or shall be
construed to be a waiver of any default or Event of Default or any acquiescence
therein.

                                    ARTICLE 6

                            MISCELLANEOUS PROVISIONS

6.1      NOTICES

         All notices, approvals, consents or other communications required or
desired to be given hereunder shall be delivered in person, by facsimile
transmission followed promptly by first class mail, by a nationally recognized
courier service marked for next business day delivery or by overnight mail, and
delivered if to the Agent, then to the attention of Bruce F. Wesson, c/o Galen
Partners III, L.P., 610 Fifth Avenue, Fifth Floor, New York, New York, 10020,
fax no. (212) 218-4990], with a copy to George N. Abrahams, Esq., c/o Wolf,
Block, Schorr and Solis-Cohen, 250 Park Avenue, New York, New York, 10177, fax
no. (212) 986-0604, and if to the Guarantors, then to c/o Halsey Drug Co., Inc.,
attention of Mr. Andrew D. Reddick, 695 N. Perryville Road, Rockford, Illinois,
61107, with a copy to John P. Reilly, Esq., St. John & Wayne, L.L.C., 2 Penn
Plaza East, Newark, New Jersey, 07105, fax no. (973) 491-3555.

                                       14
<PAGE>

6.2      HEADINGS

         The headings in this Agreement are for purposes of reference only and
shall not affect the meaning or construction of any provision of this Agreement.

6.3      SEVERABILITY

         The provisions of this Agreement are severable, and if any clause or
provision shall be held invalid or unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability shall affect, in that
jurisdiction only, such clause or provision, or part thereof, and shall not in
any manner affect such clause or provision in any other jurisdiction or any
other clause or provision of this Agreement in any jurisdiction.

6.4      AMENDMENTS, WAIVERS AND CONSENTS

         Any amendment or waiver of any provision of this Agreement and any
consent to any departure by any Guarantor from any provision of this Agreement
shall be effective only if made or given in writing signed by the Agent.

6.5      INTERPRETATION OF AGREEMENT

         All terms not defined herein or in the Purchase Agreement shall have
the meaning set forth in the applicable Uniform Commercial Code. Acceptance of
or acquiescence in a course of performance rendered under this Agreement shall
not be relevant in determining the meaning of this Agreement even though the
accepting or acquiescing party had knowledge of the nature of the performance
and opportunity for objection.

6.6      CONTINUING SECURITY INTEREST

         This Agreement shall create a continuing security interest in the
Collateral and shall (a) remain in full force and effect until the Security
Interest Termination Date, (b) be binding upon each Guarantor, and its
successors and assigns and (b) inure to the benefit of the Agent and its
successors and assigns.

6.7      REINSTATEMENT

         To the extent permitted by law, this Agreement shall continue to be
effective or be reinstated if at any time any amount received by the Agent in
respect of the Obligations owing by the Guarantors is rescinded or must
otherwise be restored or returned by the Agent upon the occurrence or during the
pendency of any Event of Default, all as though such payments had not been made.

6.8      SURVIVAL OF PROVISIONS

         All representations, warranties and covenants of the Guarantors
contained herein shall survive the execution and delivery of this Agreement, and
shall terminate only upon the full and final indefeasible payment and
performance by the Guarantors of the Obligations secured hereby.

                                       15
<PAGE>

6.9      SETOFF

         The Agent shall have all rights of setoff available at law or in
equity.

6.10     POWER OF ATTORNEY

         In addition to the powers granted to the Agent under Section 5.3, each
Guarantor hereby irrevocably authorizes and appoints the Agent, or any Person or
agent the Agent may designate, as such Guarantor's attorney-in-fact, at such
Guarantor's cost and expense, to exercise all of the following powers, which
being coupled with an interest, shall be irrevocable until all of the
Obligations shall have been indefeasibly paid and satisfied in full:

         (a)      after the occurrence of an Event of Default, to receive, take,
endorse, sign, assign and deliver, all in the name of the Agent or such
Guarantor, any and all checks, notes, drafts, and other documents or instruments
relating to the Collateral; and

         (b)      to request, at any time from customers indebted on Accounts,
verification of information concerning the Accounts and the amounts owing
thereon.

6.11     INDEMNIFICATION; AUTHORITY OF AGENT

         Neither the Agent nor any director, officer, employee, attorney or
agent of the Agent shall be liable to any Guarantor for any action taken or
omitted to be taken by it or them hereunder, except for its or their own gross
negligence or willful misconduct, nor shall the Agent be responsible for the
validity, effectiveness or sufficiency of this Agreement or of any document or
security furnished pursuant hereto. The Agent and its directors, officers,
employees, attorneys and agents shall be entitled to rely on any communication,
instrument or document reasonably believed by it or them to be genuine and
correct and to have been signed or sent by the proper person or persons. Each
Guarantor agrees to indemnify and hold harmless the Agent and any other person
from and against any and all costs, expenses (including reasonable fees,
expenses and disbursements of attorneys and paralegals (including, without
duplication, reasonable charges of inside counsel)), claims or liability
incurred by the Agent or such person hereunder, unless such claim or liability
shall be due to willful misconduct or gross negligence on the part of the Agent
or such person.

6.12     RELEASE; TERMINATION OF AGREEMENT

         Subject to the provisions of Section 6.7 of this Agreement, this
Agreement shall terminate upon full and final indefeasible payment and
performance of all the Obligations owing by each Guarantor. At such time, the
Agent shall, at the request of any Guarantor, reassign and redeliver to such
Guarantor all of the Collateral hereunder which has not been sold, disposed of,
retained or applied by the Agent in accordance with the terms hereof. Such
reassignment and redelivery shall be without warranty by or recourse to the
Agent, except as to the absence of any prior assignments by the Agent of its
interest in the Collateral, and shall be at the expense of such Guarantor.

                                       16
<PAGE>

6.13     COUNTERPARTS

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

6.14     GOVERNING LAW

         This Agreement and the rights of the parties hereunder shall be
governed by, and construed in accordance with, the laws of the State of New York
wherein the terms of this Agreement were negotiated, excluding to the greatest
extent permitted by law any rule of law that would cause the application of the
laws of any jurisdiction other than the State of New York.

6.15     SUBMISSION TO JURISDICTION

         (a)      Each of the parties hereto hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of any New York State court or United States Federal court sitting
in New York City, and any appellate court from any thereof, in any action or
proceeding arising our of or relating to this Agreement or any of the other
Transaction Documents (as defined in the Purchase Agreement) to which it is a
party, or for recognition or enforcement of any judgment, and each of the
parties hereto irrevocably and unconditionally agrees that all claims in respect
of any such action or proceeding may be heard and determined in any such New
York State court or, to the fullest extent permitted by law, in such United
States Federal court. Each of the parties hereto agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the right that any party may otherwise have to bring
any action or proceeding relating to this Agreement or any of the other
Transaction Documents (as defined in the Purchase Agreement) in the courts of
any other jurisdiction.

         (b)      Each of the parties hereto irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or in relation to this Agreement or any
other Transaction Document (as defined in the Purchase Agreement) to which it is
a party in any such New York State or United States Federal court sitting in New
York City. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance
of such action or proceeding in any such court.

6.16     SERVICE OF PROCESS

         EACH GUARANTOR HEREBY IRREVOCABLY AGREES THAT SERVICE OF PROCESS IN ANY
LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE EFFECTED BY
MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH
GUARANTOR AT ITS ADDRESS SET FORTH IN SECTION 6.1 HEREOF.

                                       17
<PAGE>

6.17     LIMITATION OF LIABILITY

         THE AGENT SHALL NOT HAVE ANY LIABILITY TO ANY GUARANTOR (WHETHER
SOUNDING IN TORT, CONTRACT, OR OTHERWISE) FOR LOSSES SUFFERED BY ANY GUARANTOR
IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO THE TRANSACTIONS OR
RELATIONSHIPS CONTEMPLATED BY THIS AGREEMENT, OR ANY ACT, OMISSION OR EVENT
OCCURRING IN CONNECTION THEREWITH, UNLESS IT IS DETERMINED BY A FINAL AND
NONAPPEALABLE JUDGMENT OR COURT ORDER BINDING ON THE AGENT, THAT THE LOSSES WERE
THE RESULT OF ACTS OR OMISSIONS CONSTITUTING GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT.

6.18     DELAYS; PARTIAL EXERCISE OF REMEDIES

         No delay or omission of the Agent to exercise any right or remedy
hereunder, whether before or after the happening of any Event of Default, shall
impair any such right or shall operate as a waiver thereof or as a waiver of any
such Event of Default. No single or partial exercise by the Agent of any right
or remedy shall preclude any other or further exercise thereof, or preclude any
other right or remedy.

6.19     JURY TRIAL

         EACH OF THE GUARANTORS AND THE AGENT HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED
ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY TRANSACTION
DOCUMENT OR THE ACTIONS OF ANY PARTY IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE OR ENFORCEMENT THEREOF.

6.20     SUBJECT TO SUBORDINATION AGREEMENT

         Notwithstanding anything to the contrary contained herein, the rights
and remedies of the Agent and the Purchasers, and the obligations of the
Guarantors, under this Agreement are subject to the Subordination Agreement, as
it may be amended, supplemented or otherwise modified from time to time.

                           [SIGNATURE PAGE TO FOLLOW]

                                       18
<PAGE>

         IN WITNESS WHEREOF, each Guarantor has caused this Guarantors General
Security Agreement to be duly executed and delivered as of the date first
written above.

                                          HOUBA, INC.

                                          By:_________________________________
                                          Name:
                                          Title:

                                          AXIOM PHARMACEUTICAL
                                          CORPORATION

                                          By:_________________________________
                                          Name:
                                          Title:

         By its acceptance hereof, as of the day and year first above written,
the Agent agrees to be bound by the provisions hereof applicable to it.

                                          GALEN PARTNERS III, L.P.

                                          By:________________________________
                                          Name:
                                          Title:

<PAGE>

                                   SCHEDULE A

SECTION 3.3

-        Houba

                  16235 State Road 17, Culver, Indiana 46511.

-        Axiom

                  695 N. Perryville Road, Rockford, Illinois 61107.

                                      -20-