Document:

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                                                                   EXHIBIT 10.11

                                SECOND AMENDMENT

                                       TO

                                 LOAN AGREEMENT

         THIS SECOND AMENDMENT TO LOAN AGREEMENT, dated as of December 20, 2002
(the "Second Amendment"), 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").

                                    RECITALS

         WHEREAS, Borrower and Lender are parties to that certain Loan
Agreement, dated as of March 29, 2000, as amended by a certain Amendment to Loan
Agreement dated as of March 31, 2000 (as so amended, the "Loan Agreement"); and

         WHEREAS, pursuant to a certain Debenture Purchase Agreement dated of
even date herewith (the "2002 Purchase Agreement") executed by Borrower in favor
of the several purchasers named therein (the "Purchasers"), Borrower will issue
its 5% Convertible Senior Secured Debentures due March 31, 2006 in the aggregate
principal amount of up to approximately $35,000,000 (the "2002 Debentures"); and

         WHEREAS, as a condition to their investment in the 2002 Debentures, the
Purchasers have required that Lender amend the Loan Agreement to extend the
maturity date of the Loan Agreement from March 31, 2003 to March 31, 2006; and

         WHEREAS, as a condition to its agreement to so extend the Maturity
Date, the Lender has required that (i) the $3,901,331 principal amount of
Borrower's payment obligations to Watson as of the date hereof under that
certain Core Products Supply Agreement (as hereinafter defined) be added to the
Borrower's secured Obligations under the Loan Agreement (such new obligations,
the "New Obligations"), and (ii) that the interest rate on both the $17,500,000
principal amount currently outstanding pursuant to the Loan Agreement be
increased to the interest rate on the New Obligations; and

         NOW, THEREFORE, the parties hereto agree as follows.
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                                    AGREEMENT

         1.       Article One of the Loan Agreement is hereby amended in its
entirety to read as follows:

              "1. AMOUNT AND TERMS OF LOAN.

                  1.1      Term Loans. Subject to the terms herein, Lender has
         previously loaned to Borrower the aggregate principal amount of
         Seventeen Million Five Hundred Thousand Dollars ($17,500,000), and, as
         described in this Second Amendment, is adding to such principal amount
         the additional principal amount of Three Million Nine Hundred and One
         Thousand Three Hundred Thirty One Dollars ($3,901,331), representing
         excess payments made by Lender to Borrower pursuant to that certain
         Finished Goods Supply Agreement (Core Products), as defined and
         provided in Section 12.15 hereof (collectively, the "Loan").
         Notwithstanding any prepayment of the Loan by Borrower, sums repaid
         hereunder may not be re-borrowed.

                  1.2      Promissory Notes. Borrower's obligation to pay the
         principal of, and interest on, the Loan shall be evidenced by two
         secured promissory notes (the "Notes"), duly executed and delivered by
         Borrower, the first such Note (the "Replacement Note") to be in the
         form attached as Exhibit A to this Second Amendment and representing
         the $17,500,000 principal balance originally loaned to Borrower
         pursuant to the Loan Agreement, and the second such Note (the "New
         Note") to be in the form attached as Exhibit B to this Second Amendment
         and representing the $3,901,331 principal balance being added to the
         Obligations as described in this Second Amendment. Upon execution and
         delivery of the Replacement Note, the Secured Promissory Note dated
         March 31, 2000 issued by Borrower to Lender in the principal amount of
         $17,500,000 shall be null and void and of no further legal force or
         effect."

         2.       The definition of "Obligations" set forth in Section 12.1 of
the Loan Agreement is hereby amended in its entirety to read as follows:

              " '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 and the New

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         Note, 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 or the New Note, all charges,
         expenses, fees and reasonable attorney's fees."

         3.       A new Section 12.15 is hereby added to the Loan Agreement as
follows:

              "12.15 Core Products Supply Agreement. Borrower and Lender are
         parties to a certain Finished Goods Supply Agreement (Core Products)
         dated March 29, 2000 (the "Original Core Products Supply Agreement"),
         as amended by that certain Amendment and Supplement No. 1 to Finished
         Goods Supply Agreement (Core Products) dated as of August 8, 2001 (the
         "Amendment to Core Products Supply Agreement," and together with the
         Original Core Products Supply Agreement as so amended, the "Core
         Products Supply Agreement"). In accordance with the terms of the
         Original Core Products Supply Agreement, Lender made certain minimum
         quarterly payments to Borrower resulting in payments to Borrower
         exceeding the purchase price of the quantities of products provided by
         Borrower to Lender under the Core Products Supply Agreement. As a
         result, Borrower and Lender executed the Amendment to Core Products
         Supply Agreement providing, among other items, (i) for the parties'
         agreement on the amount by which Lender's aggregate minimum quarterly
         payments made through and including the quarter ended December 31, 2000
         exceeded the aggregate purchase price of the products supplied by
         Borrower during such period (the "Excess Payments"), and (ii) for
         Borrower's repayment obligation to Lender of the Excess Payments.
         Borrower and Lender acknowledge and agree that the outstanding balance
         of the Excess Payments as of December 20, 2002 equals Three Million
         Nine Hundred and One Thousand Three Hundred Thirty One Dollars
         ($3,901,331) (the "Core Products Amount"). In accordance with the terms
         of Article One hereof, the Core Products Amount has been added to the
         Obligations of Borrower hereunder. On the date of execution by the
         parties of the Second Amendment, Borrower shall execute and deliver to
         Lender the New Note, which shall evidence the New Obligations. Borrower
         and Lender covenant and agree to execute the Second Amendment to
         Finished Goods Supply Agreement (Core Products) in the form attached as
         Exhibit C to the Second Amendment in order to give effect to the terms
         of this Section 12.15."

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         4.       Limitation of Amendment. Except as amended above, the terms of
the Loan Agreement shall remain in full force and effect.

         5.       Governing Law. This Second Amendment 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 Second Amendment were negotiated.

         6.       Counterparts. This Second Amendment 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 Second
Amendment 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.

By:____________________________             By:_________________________________
Name:  Michael Reicher                      Name:  _____________________________
Title: Chief Executive Officer              Title: _____________________________

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                                    EXHIBIT A

                                Replacement Note
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                                    EXHIBIT B

                                    New Note
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                                    EXHIBIT C

                          Second Amendment to Finished
                     Goods Supply Agreement (Core Products)<PAGE>
                                                                   EXHIBIT 10.12

                             SECURED PROMISSORY NOTE

$17,500,000                                                   December 20, 2002
                                                              Corona, California

1.       Promise to Pay. For good and valuable consideration, the receipt of
which is hereby acknowledged, HALSEY DRUG CO., INC., a New York corporation
("Maker"), promises to pay to WATSON PHARMACEUTICALS, INC., a Nevada corporation
("Watson"), or order (either, the "Holder"), on the Maturity Date (as defined
below), unless sooner paid as provided in Section 4 hereof, the principal sum of
Seventeen Million Five Hundred Thousand Dollars ($17,500,000), plus accrued
unpaid interest thereon. The outstanding principal balance of this Note shall
bear interest at a variable rate equal to the prime rate announced from time to
time by Bank of America (the "Prime Rate") plus four and one-half percent (4.5%)
per annum (the "Interest Rate") from the date such principal amount becomes
outstanding to the date the principal sum is paid in full; provided, however,
that if this Note is not paid in full on the Maturity Date, the unpaid balance
of the Note shall bear interest therefrom and until paid at the Default Rate (as
defined below). Payments of interest shall be due on the each March 31, June 30,
September 30 and December 31 during the term of this Note commencing December
31, 2002. All payments under this Note shall be made to the order of the Holder
at 311 Bonnie Circle, Corona, California, 92880, or such other address as Holder
may designate in writing to Maker, in U.S. dollars, and shall be applied first
to accrued unpaid interest, if any, and then to principal.

2.       Maturity Date. The date that this Note shall mature, and the principal
amount outstanding hereunder, plus accrued unpaid interest thereon and any
charges pertaining thereto, shall become due and payable (the "Maturity Date")
shall be March 31, 2006.

3.       Loan and Security Agreements. Maker and Watson are party to that
certain Loan Agreement, dated as of March 29, 2000, as amended by that certain
Amendment to Loan Agreement dated as of March 31, 2000 and as further amended by
that certain Second Amendment to Loan Agreement dated as of December 20, 2002
(as so amended, the "Loan Agreement"). The full and punctual payment and
performance of this Note by Maker are secured and guaranteed by the Company
General Security Agreement, the Company Collateral Assignments, the Stock Pledge
Agreement, the Guaranties, the Guarantors Security Agreement, the Guarantor
Collateral Assignments and the Mortgage, as those terms are defined in the Loan
Agreement (the "Security Agreements"). The security interest granted to Holder
under the Security Agreements extends to the proceeds of any sale or other
transfer or disposition of such assets, whether by Maker, its affiliates, the
Holder or any other person, that occurs prior to the payment in full of this
Note. Copies of the Loan Agreement and the Security Agreements may be obtained
from Maker without charge.
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4.       Prepayments. Maker may voluntarily prepay this Note either in whole or
in part without penalty or premium.

5.       Waivers. Maker hereby waives diligence, presentment for payment,
demand, protest, notice of non-payment, notice of dishonor, notice of protest,
and any and all other notices and demands whatsoever. Maker shall remain bound
under this Note until all principal and interest and any other amounts that are
payable hereunder or under the Loan Agreement or the Security Agreements have
been paid in full, notwithstanding any extensions or renewals granted with
respect to this Note or the release of any party liable hereunder or any
security for the payment of this Note. Maker, and any and all endorsers hereof,
also waive the right to plead any and all statutes of limitations as a defense
to any demand on this Note or any and all obligations or liabilities arising out
of or in connection with this Note, the Loan Agreement or the Security
Agreements, to the fullest extent permitted by law.

6.       Events of Default. Any of the following events shall constitute an
event of default by Maker under this Note (an "Event of Default"):

         (a)      the failure of Maker to pay to Holder, on the Maturity Date,
any and all principal amounts due and owing under this Note;

         (b)      the failure of Maker to pay to Holder interest payments when
due; or

         (c)      there occurs any other event or circumstance that constitutes
an "Event of Default" as defined in Section 9.1 of the Loan Agreement.

Upon the occurrence of any Event of Default, as defined hereinabove, at Holder's
option, Holder may declare immediately due and payable, and on any such
declaration there shall become immediately due and payable, the entire unpaid
principal balance of this Note, together with all accrued and unpaid interest
under this Note and any other sums owing at the time of such declaration
pursuant to this Note, the Loan Agreement or the Security Agreements, and Holder
shall be entitled to exercise all rights and remedies available to Holder under
this Note, under the Loan Agreement and the Security Agreements and under
applicable law, all of which rights and remedies shall be cumulative. Without
limiting the generality of the foregoing, upon the occurrence of an Event of
Default, the interest rate at which interest shall accrue on the principal sum
and any other amounts that are due under this Note shall increase to the lower
of (i) the Prime Rate plus six and one-half percent (6.5%) per annum or (ii) the
maximum interest rate permitted under applicable law (the "Default Rate"), until
all such amounts have been paid in full.

7.       No Waiver by Holder. Any delay or omission on the part of Holder to
exercise any of Holder's rights or remedies hereunder, under the Loan Agreement
or the Security Agreements or under applicable law, including, without
limitation, the right to accelerate amounts owing under this Note, shall not be
deemed a waiver of that right or remedy or of any other right or remedy of
Holder in respect thereof. The acceptance by Holder of any payment pursuant to
the terms of this Note which is less than payment in full of all

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amounts due and payable at the time of such payment shall not constitute a
waiver of the right to exercise any of the Holder's rights or remedies under
this Note, the Loan Agreement, the Security Agreements or under applicable law
at that time or at any subsequent time or nullify any prior exercise of any such
rights or remedies without the express written consent of Holder, except as and
to the extent provided to the contrary by applicable law.

8.       Governing Law. This Note shall be governed by and construed
according to and enforced under the internal laws of the State of California
without giving effect to its choice of laws rules.

9.       Enforcement of the Note. Maker agrees that the Superior Court in and
for the County of Orange, California shall have exclusive jurisdiction over any
disputes, between the Maker and Holder and any action, suit or other proceeding
brought by Maker or Holder relating to the interpretation or enforcement of this
Note, and Maker agrees as follows: (a) Maker shall accept and not contest the
personal or subject matter jurisdiction of such Court; (b) Maker shall accept
and not object to or challenge the venue of such Court or assert the doctrine of
forum non conveniens with respect to such Court; (c) Maker shall accept and not
contest the validity or effectiveness of service of process in any such action,
suit or other proceeding by registered or certified first class mail; and (d) TO
THE MAXIMUM EXTENT PERMITTED BY LAW, MAKER WAIVES AND SHALL WAIVE ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR OTHER PROCEEDING BROUGHT WITH RESPECT TO THIS
NOTE OR ITS ENFORCEMENT OR INTERPRETATION. If Maker fails to pay any amounts due
hereunder when due, or if an Event of Default occurs, then Maker shall pay all
costs of enforcement and collection, including, without limitation, reasonable
attorneys' fees and costs incurred by Holder, whether or not enforcement and
collection includes the filing of a lawsuit, and whether or not that lawsuit is
prosecuted to judgment. The costs of enforcement and collection shall be added
to the principal amount of the Note and shall accrue interest at the Default
Rate from the date incurred by Holder to the date paid by Maker.

10.      Binding Nature. The provisions of this Note shall be binding on Maker
and shall inure to the benefit of Holder.

11.      Usury Savings Provisions. In the event Holder receives any sums under
this Note which constitute interest in an amount in excess of that permitted by
any applicable law, then, all such sums constituting interest in excess of that
permitted to be paid under applicable law shall, at Holder's option, either be
credited to the payment of principal owing hereunder or returned to Maker. The
provisions of this Section 11 control the other provisions of this Note and any
other agreement between Maker and Holder.

12.      Severability. If, but only to the extent that, any provision of this
Note shall be invalid or unenforceable, then, such offending provision shall be
deleted from this Note, but only to the extent necessary to preserve the
validity and effectiveness of this Note to the fullest extent permitted by
applicable law.

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13.      Interpretation. No provision of this Note shall be interpreted for or
against Maker or Holder because that person or that person's legal
representative drafted such provision. Unless otherwise indicated elsewhere in
this Note, (a) the term "or" shall not be exclusive, (b) the term "including"
shall mean "including, but not limited to," and (c) the terms "below," "above,"
"herein," "hereof," "hereto," "hereunder" and other terms similar to such terms
shall refer to this Note as a whole and not merely to the specific section,
subsection, paragraph or clause where such terms may appear. The section and
sub-section headings in this Note are included for convenience of reference only
and shall be ignored in the construction or interpretation of this Note.

14.      Replacement Note. This Note is issued in accordance with that certain
Second Amendment to Loan Agreement dated as of December 20, 2002, between Maker
and Watson (the "Second Amendment"), and is issued by Maker in replacement of
and substitution for, and represents the agreement of Maker and Watson to
increase the interest rate on, and extend the maturity date of, that certain
Secured Promissory Note issued by Maker to Watson in the principal amount of
$17,500,000 dated March 31, 2000 (the "Original Note"). Upon execution and
delivery of this Secured Promissory Note to Watson, the Original Note shall be
null and void and of no further legal force or effect.

                           [SIGNATURE PAGE TO FOLLOW]

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                                                   "MAKER"

                                                   HALSEY DRUG CO., INC.

                                                   ___________________________
                                                   By:  Michael Reicher
                                                   Its: Chief Executive Officer

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