Document:

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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-<PAGE>

                                                                   EXHIBIT 10.11

                             STOCK PLEDGE AGREEMENT

         This Stock Pledge Agreement (this "Agreement") is dated as of February
6, 2004 by and between Halsey Drug Co., Inc., a New York corporation (the
"Pledgor"), and Galen Partners III, L.P., a Delaware limited partnership, acting
in its capacity as agent for the Purchasers, as hereinafter defined (the
"Agent"), for the benefit of the Purchasers.

                             PRELIMINARY STATEMENTS

         The Pledgor 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"). It is a condition precedent to the
effectiveness of the Purchase Agreement that the Pledgor shall have executed
this Agreement and made the pledges referred to herein in favor of the Agent,
for the ratable benefit of the Purchasers, as contemplated hereby.

                                    AGREEMENT

         In consideration of the premises and to induce the Purchasers to enter
into the Purchase Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Pledgor hereby
agrees with the Agent as follows:

                                   ARTICLE 1

                             PLEDGE OF PLEDGED STOCK

1.1      DEFINITIONS; INTERPRETATION OF AGREEMENT

         Unless the context otherwise requires, all terms not defined herein or
in the Purchase Agreement shall have the meaning set forth in the New York
Uniform Commercial Code (the "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.

1.2      PLEDGE OF THE PLEDGED STOCK; POWER OF ATTORNEY

         (a)      As security for the prompt payment and performance when due of
the obligations owing by the Pledgor to the Purchasers under the Purchase
Agreement, the Debentures, the other Transaction Documents (as defined in the
Subordination Agreement) and under the agreements, documents and instruments
delivered by the Pledgor pursuant thereto or in connection therewith
(collectively, the "Obligations"), the Pledgor hereby pledges to the Agent, for
the ratable benefit of the Purchasers, and grants to the Agent, for the ratable
benefit of the Purchasers, a lien on and

<PAGE>

security interest having priority over any and all other security interests
(except as otherwise provided in the Subordination Agreement), in the following
(collectively the "Pledged Collateral"): (i) all of the issued and outstanding
shares of common stock of Houba, Inc. ("Houba"), and Axiom Pharmaceutical
Corporation ("Axiom" and, together with Houba, the "Subsidiaries"), which shares
are more particularly described on Schedule A attached hereto (the "Pledged
Stock"), (ii) all additional shares of common stock at any time issued to the
Pledgor by Houba or Axiom, (iii) the certificates evidencing all Pledged
Collateral, (iv) subject to Section 1.6 hereof, all dividends, cash, securities,
investment property, 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 Pledged Stock and such shares and securities, and (v) all proceeds of any
and all Pledged Collateral (including, without limitation, proceeds constituting
any property of the types described above). The Pledgor shall deliver to the
Agent original stock certificates for all of the Pledged Stock, each accompanied
by an undated stock power executed in blank by the Pledgor.

         (b)      The Agent shall have no obligation with respect to the Pledged
Collateral or any other property held or received by it hereunder except to use
reasonable care in the custody thereof. The Agent may hold the Pledged
Collateral in the form in which it is received by it.

         (c)      The Pledgor, to the fullest extent permitted by law, hereby
constitutes and irrevocably appoints the Agent (and any officer or agent of the
Agent, with full power of substitution and revocation) as the Pledgor's true and
lawful attorney-in-fact, in the Pledgor's stead and in the name of the Pledgor
or in the name of the Agent, to transfer, upon the occurrence and during the
continuance of an Event of Default or at any time the Agent, based on all the
facts and circumstances then existing, and in the exercise of its commercially
reasonable credit judgment, believes, and has so notified the Pledgor in
writing, that, in connection with the Purchase Agreement and the agreements,
documents and instruments delivered by the Pledgor pursuant thereto or in
connection therewith, fraud has occurred with respect to the Pledgor or any
other Person controlling, controlled by, or under common control with the
Pledgor which has a material adverse effect on the operations or condition
(financial or otherwise) of the Pledgor and its subsidiaries, taken as a whole
(a "Fraud"), the Pledged Collateral on the books of Houba and Axiom, as
applicable, in whole or in part, to the name of the Agent or such other Person
or Persons as the Agent may designate and, upon the occurrence and during the
continuance of an Event of Default or at any time the Agent, based on all the
facts and circumstances then existing, and in the exercise of its commercially
reasonable credit judgment, believes, and has so notified the Pledgor in
writing, that Fraud has occurred, to take all such other and further actions as
the Pledgor could have taken with respect to the Pledged Collateral which the
Agent in its reasonable judgment determines to be necessary or appropriate to
accomplish the purposes of this Agreement.

         (d)      The powers of attorney granted pursuant to this Agreement and
all authority hereby conferred are granted and conferred solely to protect the
Agent's interests in the Pledged Collateral and shall not impose any duty upon
the attorney-in-fact to exercise such powers. Such powers of attorney shall be
irrevocable prior to the payment in full of the Obligations and shall not be
terminated prior thereto or affected by any act of the Pledgor or other Persons
or by operation of law. The foregoing power of attorney, being coupled with an
interest, is irrevocable so long as any Obligation remains outstanding.

                                       2

<PAGE>

         (e)      Except to the extent that the Agent releases its pledge of any
of the Pledged Collateral, each Person who shall be a transferee of the
beneficial ownership of any of the Pledged Collateral shall be deemed to have
irrevocably appointed the Agent, with full power of substitution and revocation,
as such Person's true and lawful attorney-in-fact in such Person's name and
otherwise to do any and all acts herein permitted and to exercise any and all
powers herein conferred; provided, however, that no Person shall exercise any
such power of attorney unless an Event of Default shall have occurred and be
continuing or from and after such time as such Person has notified the Pledgor
in writing that based on all the facts and circumstances then existing, and in
the exercise of its commercially reasonable judgment, such Person believes that
Fraud has occurred.

1.3      RIGHTS OF PLEDGOR; VOTING

         (a)      During the term of this Agreement and subject to the
Subordination Agreement, and so long as the Pledgor has not received a Voting
Notice (as defined below) from the Agent following (i) the occurrence and during
the continuance of an Event of Default or (ii) from and after such time as the
Agent determines that based on all the facts and circumstances then existing,
and in the exercise of its commercially reasonable judgment, the Agent believes
that Fraud has occurred, the Pledgor shall have the right to vote any of the
Pledged Collateral in all corporate matters except those which would contravene
this Agreement, the Purchase Agreement or any of the agreements, documents and
instruments delivered by the Pledgor and each Subsidiary pursuant thereto unless
the Agent consents in writing thereto.

         (b)      Subject to the Subordination Agreement, upon the occurrence
and during the continuance of an Event of Default or from and after such time as
the Agent has notified the Pledgor in writing that based on all the facts and
circumstances then existing, and in the exercise of its commercially reasonable
judgment, Agent believes that Fraud has occurred, the Pledgor shall give the
Agent at least fifteen (15) days' prior notice of (i) any meeting of
stockholders of any of the Subsidiaries or any meeting of directors of any of
the Subsidiaries convened for any purpose and (ii) any written consent which the
Pledgor proposes to execute as the stockholder of any of the Subsidiaries or
which any of the representatives of the Pledgor proposes to execute as a
director of any of the Subsidiaries. Subject to the Subordination Agreement,
during the continuance of an Event of Default and from and after such time as
the Agent determines that based on all the facts and circumstances then
existing, and in the exercise of its commercially reasonable judgment, the Agent
believes that Fraud has occurred, the Pledgor hereby authorizes the Agent to
send its agents and representatives to any such meeting of stockholders or
directors of any of the Subsidiaries that the Agent wishes to attend, and agrees
to take such steps as may be necessary to confirm and effectuate such authority,
including, without limitation, causing such Subsidiary to give reasonable prior
written notice to the Agent of the time and place of any such meeting and the
principal actions to be taken thereat.

         (c)      Notwithstanding the occurrence of an Event of Default or the
determination by the Agent that based on all the facts and circumstances then
existing, and in the exercise of its commercially reasonable judgment, the Agent
believes that Fraud has occurred, and subject to the Subordination Agreement,
the Pledgor may continue to exercise the voting rights of the Pledgor as herein
described (and subject to the limitations herein) except to the extent that the
Agent elects to exercise voting power (as determined by it in its sole
discretion) by providing written notice to the

                                       3

<PAGE>

Pledgor at any time during the continuance of an Event of Default or from and
after such time as the Agent has determined that based on all the facts and
circumstances then existing, and in the exercise of its commercially reasonable
judgment, the Agent believes that Fraud has occurred (a "Voting Notice"),
whereupon the Agent shall have the exclusive right during the continuance of an
Event of Default and after the Agent's determination of Fraud to exercise such
rights to the extent specified in such Voting Notice, and the Pledgor shall take
all such steps as may be necessary to effectuate such rights until the Agent
notifies the Pledgor in writing of the release of such rights. Once any such
Event of Default has been cured or waived and such cure or waiver is confirmed
by the Agent to the Pledgor in writing, any relevant Voting Notice shall be
deemed to be rescinded.

1.4      NO RESTRICTIONS ON TRANSFER

         The Pledgor warrants and represents that, except as provided pursuant
to (a) that certain Stock Pledge Agreement dated March 10, 1998 between the
Pledgor and the 1998 Debentureholders, (b) that certain Stock Pledge Agreement
dated May 26, 1999 between the Pledgor and the holders of the 1999 Debentures,
(c) that certain Stock Pledge Agreement dated March 29, 2000 between the Pledgor
and Watson, and (d) that certain Stock Pledge Agreement dated December 20, 2002
between the Pledgor and the 2002 Debentureholders, there are no restrictions on
the transfer of the Pledged Stock (except for such restrictions imposed by
operation of law), that there are no options, warrants or rights pertaining
thereto, and that the Pledgor has the right to transfer the Pledged Stock free
of any encumbrances and without the consent of the creditors of the Pledgor or
the consent of any of the Subsidiaries or any other Person or any governmental
agency whatsoever.

1.5      NO TRANSFER OF LIENS; ADDITIONAL SECURITIES

         The Pledgor agrees that it will not sell, transfer or convey any
interest in, or suffer or permit any lien or encumbrance to be created upon or
with respect to, any of the Pledged Collateral during the term of this
Agreement, except to or in favor of the Agent, or as agreed to in writing in
advance by the Agent in accordance with the terms of the Purchase Agreement and
the Subordination Agreement. The Pledgor shall not cause, suffer or permit any
Subsidiary to issue any common or preferred stock, or any other equity security
or any other instruments convertible into equity securities, to any Person,
unless the Agent otherwise consents in writing (which consent may be withheld in
the Agent's reasonable credit judgment).

1.6      ADJUSTMENTS OF CAPITAL STOCK; PAYMENT AND APPLICATION OF DIVIDENDS

         Subject to the Subordination Agreement and the Purchase Agreement, in
the event that during the term of this Agreement any stock dividend,
reclassification, readjustment or other change is declared or made in the
capital structure of any Subsidiary or if any other or additional shares of
stock of any Subsidiary are issued to the Pledgor, all new, substituted and
additional shares or other securities issued by reason of any such change or
acquisition shall immediately be delivered by the Pledgor to the Agent and shall
be deemed to be part of the Pledged Collateral under the terms of this Agreement
in the same manner as the shares of capital stock originally pledged hereunder.
Subject to the Subordination Agreement and the Purchase Agreement, upon the
occurrence and during the continuance of an Event of Default and from and after
such time as the Agent determines that based

                                       4

<PAGE>

on all the facts and circumstances then existing, and in the exercise of its
commercially reasonable judgment, the Agent believes that Fraud has occurred,
all cash dividends received by or payable to the Pledgor in respect of the
Pledged Collateral, including any additional shares of stock or investment
property received by the Pledgor as a result of the Pledgor's record ownership
of the Pledged Stock, shall immediately be delivered by the Pledgor to the
Agent, to be held by the Agent as Pledged Collateral hereunder or to be applied
by the Agent against the Obligations. Upon the occurrence and during the
continuance of an Event of Default or from and after such time as the Agent
determines that based on all the facts and circumstances then existing, and in
the exercise of its commercially reasonable judgment, the Agent believes that
Fraud has occurred, the Pledgor will not demand and will not be entitled to
receive, any cash dividends or other income, interest or property in or with
respect to the Pledged Collateral, and if the Pledgor receives any of the same,
the Pledgor shall immediately deliver it to the Agent to be held by it and
applied as provided in the preceding sentence.

1.7      WARRANTS AND OPTIONS

         In the event that during the term of this Agreement subscription
warrants or other rights or options shall be issued to the Pledgor in connection
with the Pledged Collateral, all such stock warrants, rights and options shall
forthwith be assigned to the Agent by the Pledgor, and such stock warrants,
rights and options shall be, and, if exercised by the Pledgor, all new stock
issued pursuant thereto shall be, pledged by the Pledgor to the Agent to be held
as, and shall be deemed to be part of, the Pledged Collateral under the terms of
this Agreement in the same manner as the shares of capital stock originally
pledged hereunder.

1.8      RETURN OF PLEDGED COLLATERAL UPON TERMINATION

         Upon the Security Interest Termination Date and the termination of the
Purchase Agreement, the Agent shall cause to be transferred or returned to the
Pledgor all of the stock pledged by the Pledgor herein and any money, property
and rights received by the Agent pursuant hereto, to the extent the Agent has
not taken, sold or otherwise realized upon the same as permitted hereunder,
together with all other documents reasonably required by the Pledgor to evidence
termination of the pledge contemplated hereby.

                                    ARTICLE 2

                           EVENTS OF DEFAULT; REMEDIES

2.1      RIGHTS OF AGENT UPON DEFAULT

         Upon the occurrence and during the continuance of any Event of Default
and from and after such time as the Agent determines that based on all the facts
and circumstances then existing, and in the exercise of its commercially
reasonable judgment, the Agent believes that Fraud has occurred, subject to the
Subordination Agreement, the Agent shall have and at any time may exercise with
respect to the Pledged Collateral, the proceeds thereof, and any other property
or money held by the Agent hereunder, all rights and remedies available to it
under law, including, without limitation,

                                       5

<PAGE>

those given, allowed or permitted to a secured party by or under the Code, and
all rights and remedies provided for herein and in the Purchase Agreement.

2.2      DISPOSITION OF PLEDGED STOCK

         (a)      Without limiting the foregoing, in the event that the Agent
elects to sell the Pledged Stock (such term including, for purposes of this
Section 2.2, the Pledged Stock and all other shares of stock or securities at
any time forming part of the Pledged Collateral), the Agent shall have the power
and right in connection with any such sale, exercisable at its option and in its
absolute discretion, to sell, assign, and deliver the whole or any part of the
Pledged Stock or any additions thereto at a private or public sale for cash, on
credit or for future delivery and at such price as the Agent deems to be
satisfactory. Notice of any public sale shall be sufficient if it describes the
Pledged Collateral to be sold in general terms, and is published 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 2.2 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 Pledgor at its
address set forth in Section 5.5 hereof or such other address as the Pledgor 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.

         (b)      Because federal and state securities laws may restrict the
methods of disposition of the Pledged Stock which are readily available to the
Agent, and specifically because a public sale thereof may be impossible or
impracticable by reason of certain restrictions under the Securities Act or
under applicable "blue sky" or other state securities laws as now or hereafter
in effect, the Pledgor agrees that the Agent may from time to time attempt to
sell the Pledged Stock by means of a private placement restricting the offering
or sale to a limited number of prospective purchasers who meet suitability
standards the Agent deems appropriate and who agree that they are purchasing for
their own accounts for investment and not with a view to distribution, and the
Agent's acceptance of the highest offer obtained therefrom shall be deemed to be
a commercially reasonable disposition of the Pledged Stock. To the extent
permitted by law, the Agent or its assigns may purchase all or any part of the
Pledged Stock and any purchaser thereof shall thereafter hold the same
absolutely free from any right or claim of any kind. To the fullest extent
permitted by law, the Agent shall not be obligated to make any such sale
pursuant to notice and may, without notice or publication, adjourn any public or
private sale by announcement at the time and place fixed for the sale, and such
sale may be held at any time or place to which the same may be adjourned. If any
of the Pledged Stock is sold by the Agent upon credit or for future delivery,
the Agent shall not be liable for the failure of the purchaser to pay for same
and, in such event, the Agent may resell such Pledged Stock and the Pledgor
shall continue to be liable to the Agent for the full amount of the Obligations
to the extent the Agent does not receive full and final payment in cash
therefor.

         (c)      Except as otherwise provided in the Purchase Agreement or by
applicable law, the Agent shall have the sole right to determine the order in
which Obligations shall be deemed discharged by the application of the proceeds
of Pledged Stock or any other property or money held

                                       6

<PAGE>

hereunder or any amount realized thereon.

                                    ARTICLE 3

                         REPRESENTATIONS AND WARRANTIES

         The Pledgor represents and warrants to the Agent that:

3.1      CAPITALIZATION; GOOD TITLE

         (a)      All shares of Pledged Stock are fully paid, duly and properly
issued, nonassessable and owned by the Pledgor free and clear of any lien or
encumbrance of any kind whatsoever, excepting those herein granted to the Agent
and those granted to the holders of the Existing Debentures and Watson. The
Pledged Stock constitutes all of the outstanding securities of any class or kind
of all of the Subsidiaries.

         (b)      Except in the case of the liens granted to the holders of the
Existing Debentures and Watson, no effective financing statement or other
instrument similar in effect covering all or any part of the Pledged Collateral
is on file in any recording office.

3.2      VALID SECURITY INTEREST

         The pledge of the Pledged Collateral pursuant to this Agreement creates
a valid and perfected first-priority security interest, in accordance with and
subject to the Subordination Agreement, securing the payment of the Obligations,
and all filings and other actions necessary or desirable to perfect and protect
such security interest having been duly made or taken.

3.3      CONSENTS

         No authorization, approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required for (a)
the pledge by the Pledgor of the Pledged Collateral pursuant to this Agreement,
the grant by the Pledgor of the assignment or security interest granted hereby
or the execution, delivery or performance of this Agreement by the Pledgor, (b)
the perfection of or exercise by the Agent of its rights and remedies provided
for in this Agreement, or (c) the exercise by the Agent of the voting or other
rights provided for in this Agreement or the remedies in respect of the Pledged
Collateral pursuant to this Agreement (except as may be required in connection
with a judicial foreclosure, if applicable, or the disposition of the Pledged
Stock by laws affecting the offering and sale of securities generally).

3.4      AUTHORIZATION; ENFORCEABILITY

         The Pledgor has full right, power and authority to enter into this
Agreement and to grant the security interest in the Pledged Collateral made
hereby, and this Agreement constitutes the legal, valid and binding obligation
of the Pledgor enforceable against the Pledgor in accordance with its terms,
except as the enforceability thereof may be (a) limited by bankruptcy,
insolvency,

                                       7

<PAGE>

reorganization, moratorium or similar laws affecting the enforceability of
creditors' rights generally, and (b) subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).

3.5      NO CONFLICT

         The execution, delivery and performance by the Pledgor of this
Agreement will not result in any violation, conflict with, or result in a breach
of any of the terms of, or constitute a default under, any agreements,
contracts, court orders or consent decrees, the Certificate of Incorporation or
the By-laws, as amended, of the Pledgor.

                                    ARTICLE 4

                             INDEMNITY AND EXPENSES

4.1      INDEMNITY

         The Pledgor agrees to and hereby indemnifies the Agent and each of the
Purchasers from and against any and all Losses arising out of, or in connection
with, or resulting from this Agreement (including, without limitation,
enforcement of this Agreement) unless resulting from or arising out of the gross
negligence or willful misconduct of the Agent or such Purchaser.

4.2      EXPENSES

         The Pledgor agrees promptly upon the Agent's or such Purchaser's demand
to pay or reimburse the Agent or such Purchaser for all reasonable expenses
(including, without limitation, reasonable fees and disbursements of counsel)
incurred by the Agent or such Purchaser in connection with (a) any modification
or amendment to or waiver of any provision of this Agreement requested by the
Pledgor, (b) the custody or preservation of the Pledged Collateral, (c) any
actual or attempted sale or exchange of, or any enforcement, collection,
compromise or settlement respecting, the Pledged Collateral or any other
property or money held hereunder or any other action taken by the Agent or such
Purchaser hereunder reasonably necessary to enforce its rights, whether directly
or as attorney-in-fact pursuant to the power of attorney herein conferred, or
(d) the failure by the Pledgor to perform or observe any of the provisions
hereof. All such expenses shall be deemed a part of the Obligations for all
purposes of this Agreement and the Agent may apply the Pledged Collateral or any
other property or money held hereunder to payment of or reimbursement for such
expenses after notice and demand to the Pledgor.

                                    ARTICLE 5

                                  MISCELLANEOUS

5.1      AGENT MAY PERFORM

         If the Pledgor fails to perform any representation, warranty, covenant
or agreement required to be performed by it contained herein, the Agent may, but
shall not be obligated to, perform, or

                                       8

<PAGE>

cause performance of, such representation, warranty, covenant or agreement, and
the out-of-pocket expenses of the Agent incurred in connection therewith shall
be payable by the Pledgor.

5.2      WAIVERS AND AMENDMENT

         The rights and remedies given hereby are in addition to all others
however arising, but it is not intended that any right or remedy be exercised in
any jurisdiction in which such exercise would be prohibited by law. No action,
failure to act or knowledge of the Agent shall be deemed to constitute a waiver
of any power, right or remedy hereunder, nor shall any single or partial
exercise thereof preclude any further exercise thereof or the exercise of any
other power, right or remedy. Any right or power of the Agent hereunder in
respect of the Pledged Collateral and any other property or money held hereunder
may at the option of the Agent be exercised as to all or any part of the same
and the term the "Pledged Collateral" wherever used herein, unless the context
clearly requires otherwise, shall be deemed to mean (and shall be read as) "the
Pledged Collateral and any other property or money held hereunder or any part
thereof." This Agreement shall not be amended nor shall any right hereunder be
deemed waived except by a written agreement expressly setting forth the
amendment or waiver and signed by the Agent.

5.3      CONTINUING SECURITY INTEREST; ASSIGNMENTS OF SECURED DEBT

         This Agreement shall create a continuing security interest having
priority over any and all security interests (except as otherwise provided in
the Subordination Agreement) in the Pledged Collateral and shall (a) remain in
full force and effect until the Security Interest Termination Date, (b) be
binding upon the Pledgor, and the Pledgor's successors and assigns, and upon
each of the Subsidiaries, and their successors and assigns, and (c) inure,
together with the rights and remedies of the Agent and the Purchasers hereunder,
to the benefit of the Agent, its successors and permitted assigns. Without
limiting the generality of the foregoing clause (c), the Agent may assign or
otherwise transfer all or any portion of its rights and obligations under this
Agreement to any other Person, to the extent and in the manner provided in the
Purchase Agreement and the Subordination Agreement and such other Person shall
thereupon become vested with all the benefits in respect hereof granted to the
Agent herein; the Agent shall, however, retain all of its rights and powers with
respect to any part of the Pledged Collateral not transferred. Any agent or
nominee of the Agent shall have the benefit of this Agreement as if named herein
and may exercise all the rights and powers given to the Agent hereunder.

5.4      GOVERNING LAW; CONSENT TO JURISDICTION

         (a)      This Agreement and the rights of the parties hereunder shall
be governed in all respects by 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.

         (b)      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 to

                                       9

<PAGE>

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 in the courts of any other jurisdiction.

         (c)      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 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.

5.5      NOTICES

         All notices hereunder shall be in writing (except only as otherwise
provided in Section 5.2) and shall be conclusively deemed to have been received
and shall be effective (a) on the day on which delivered if delivered personally
(including delivery by courier or overnight mail providing evidence of
delivery), or transmitted by telex or telegram or telecopier with transmission
confirmed, or (b) five (5) days after the date on which the same is deposited in
the United States mail (certified or registered if required under Section 5.4),
with postage prepaid and properly addressed, and any notice mailed shall be
addressed:

         (a)      in the case of the Pledgor, to:

                  Halsey Drug Co., Inc.
                  695 N. Perryville Road
                  Rockford, Illinois 61107
                  Telecopier No.: (815) 399-9710

                  with copies to:

                  St. John & Wayne
                  2 Penn Plaza East
                  Newark, New Jersey 07105
                  Attention: John P. Reilly, Esq.
                  Telephone No.: (973) 491-3600
                  Telecopier No.: (973) 491-3555

         (b)      in the case of the Agent, to:

                  Galen Partners III, L.P.
                  610 Fifth Avenue, Fifth Floor

                                       10

<PAGE>

                  New York, NY 10020
                  Telecopier No.: (212) 218-4999
                  Attention: Bruce F. Wesson
                  with a copies to:

                  Wolf, Block, Schorr & Solis-Cohen
                  250 Park Avenue
                  New York, NY  10177
                  Attention: George N. Abrahams, Esq.
                  Telephone No.:  (212) 986-1116
                  Telecopier No.: (212)  986-0604

or at such other address as the party giving such notice shall have been advised
of in writing for such purpose by the party to whom or to which the same is
directed.

5.6      SEVERABILITY; ENTIRE AGREEMENT

         (a)      If any provision of this Agreement shall be invalid, illegal,
or unenforceable in any jurisdiction, the validity, legality or enforceability
of any such provision in any other jurisdiction shall not be affected or
impaired, and to the extent any provision is held invalid, illegal or
unenforceable, then such provision shall be deemed severable from, and shall in
no way affect the validity or enforceability of the remaining provisions of this
Agreement.

         (b)      This Agreement, the Company General Security Agreement, and
the Subordination Agreement constitute the entire agreement of the Pledgor and
replaces any other or prior agreements or undertakings, with respect to the
subject matter hereof, and there are no other agreements or undertakings, oral
or written, respecting such subject matter which are intended to have any force
or effect after the execution hereof.

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

5.7      SUCCESSORS AND ASSIGNS; HEADINGS

         This Agreement shall be binding upon and shall inure to the benefit of
the Pledgor and the Agent and their respective successors and permitted assigns.
Section headings used herein are for convenience only and shall not affect the
meaning or construction of any of the provisions hereof.

5.8      COUNTERPARTS

         This Agreement may be executed in any number of counterparts, each
executed counterpart constituting an original but all counterparts together
constituting only one instrument.

5.9      FURTHER ASSURANCES

                                       11

<PAGE>

         Pledgor and the Agent shall execute, in a proper and timely manner, at
or after the date hereof, such additional documents and instruments as may be
reasonably requested by the other parties in connection with the consummation or
confirmation of the transactions contemplated by this Agreement.

5.10     NO ASSIGNMENT

         This Agreement may not be assigned by the Pledgor without the prior
express written consent of the Agent.

5.11     WAIVERS OF JURY TRIAL

         THE PLEDGOR AND, BY ITS ACCEPTANCE HEREOF, THE AGENT HEREBY IRREVOCABLY
WAIVE 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.

5.12     WAIVERS OF CONSEQUENTIAL DAMAGES

         NEITHER THE PLEDGOR OR THE AGENT, NOR ANY EMPLOYEE AGENT OR ATTORNEY OF
EITHER OF THEM, SHALL BE LIABLE TO THE OTHER FOR CONSEQUENTIAL DAMAGES ARISING
FROM ANY BREACH OF CONTRACT, TORT OR OTHER WRONG RELATING TO THIS AGREEMENT OR
THE ESTABLISHMENT, ADMINISTRATION OR COLLECTION OF THE OBLIGATIONS, EXCEPT FOR
BAD FAITH.

                           [SIGNATURE PAGE TO FOLLOW]

                                       12

<PAGE>

         IN WITNESS WHEREOF, the Pledgor has caused this Stock Pledge Agreement
to be executed by its duly authorized officer as of the date first written
above.

                                         HALSEY DRUG CO., INC.

                                         By:________________________________
                                            Name:  Andrew D. Reddick
                                            Title: President and Chief Executive
                                                   Officer

Accepted and Agreed to:

GALEN PARTNERS III, L.P.
on behalf of itself and as Agent
By: Claudius, L.L.C., General Partner

By:______________________
   Name:
   Title:

<PAGE>

                                   SCHEDULE A

                            Designation and Number of
                    shares of capital stock owned by Pledgor

<TABLE>
<CAPTION>
                           Certificate                                          Number of
       Issuer                  No.                   Designation                  Shares
-----------------------------------------------------------------------------------------
<S>                        <C>               <C>                                <C>
Houba, Inc.                     1            Common Stock, $.01 par value           100
Axiom Pharmaceutical            1            Common Stock, $.01 par value           100
Corporation
</TABLE>

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