SECURITY AGREEMENT
 
(PARENT)
 
THIS SECURITY AGREEMENT (this "Agreement"), dated as of this ____ day of March,
2009, is made by and between Vyteris, Inc., a Nevada corporation (“Parent”), and
Ferring Pharmaceuticals, Inc., a Delaware corporation (the "Ferring”).
 
Recitals
 
A.           Reference is hereby made to (a) the Letter Agreement dated the date
hereof by and among Parent, Vyteris, Inc, a Delaware corporation and Parent’s
wholly-owned subsidiary (“Vyteris”), and Ferring (the “Letter Agreement”); (b)
the License and Development Agreement dated as of September 27, 2004, as amended
prior to the date hereof and pursuant to the Letter Agreement, by and between
Ferring and Vyteris (the “License Agreement”); and (c) the Supply Agreement
dated September 27, 2004, as amended prior to the date hereof and pursuant to
the Letter Agreement, by and between Ferring and Vyteris (together with the
related Technical Agreement by and between Ferring and Vyteris, the “Supply
Agreement”) (all of the foregoing, together with the Transaction Documents (as
defined in the Letter Agreement), the “Underlying Agreements”).

B.           In order to induce Ferring to enter into the Letter Agreement and
the other Transactions Documents (as defined therein) and for other good and
valuable consideration, receipt and sufficiency of which are hereby
acknowledged, and as security for the performance by Parent of the Obligations
(as hereinafter defined), Parent has agreed to grant to Ferring, for the benefit
of Ferring, a security interest in the Collateral (as hereinafter defined) on
the terms and conditions hereinafter set forth.

NOW, THEREFORE, Parent and Ferring, intending to be legally bound, hereby agree
as follows:

1.         Definitions.
 
 (a)           "Collateral" shall mean all personal property of Parent, wherever
located, and whether now owned or hereafter acquired or arising, including,
without limitation, all:
 
(i)            Accounts;
 
(ii)           Chattel paper, including Electronic Chattel Paper;
 
(iii)          Goods, including all Inventory and Equipment and any accessions
thereto;
 
(iv)          Instruments, including Promissory Notes;
 
(v)           Investment Property;
 

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(vi)          Documents;
 
(vii)         Deposit Accounts;
 
(viii)        Commercial Tort Claims, if any, identified on Schedule A annexed
hereto;
 
(ix)           Letter-of-Credit Rights;
 
(x)           General Intangibles, including Payment Intangibles and Software;
 
(xi)           Supporting Obligations; and
 
(xii)          to the extent not listed above as original collateral proceeds
and products of the foregoing.
 
           (b)           “Obligations" shall mean all obligations, liabilities
and indebtedness of Parent to Ferring, whether now existing or hereafter
created, absolute or contingent, direct or indirect, due or not, whether created
directly or acquired by assignment or otherwise, including, without limitation,
arising under or relating to any of the Underlying Agreements; all fees, costs,
expenses and indemnity obligations of Parent to Ferring hereunder or thereunder;
any amendments, extensions, renewals  and increases of or to any of the
foregoing; and all costs and expenses of Ferring incurred in the modification,
enforcement, collection and otherwise in connection with any of the foregoing,
including reasonable attorneys' fees and expenses.
 
                      (c)           "UCC" shall mean the Uniform Commercial
Code, as adopted and enacted and as in effect from time to time in the State
whose law governs pursuant to the Section 22 of this Agreement entitled
"Governing Law and Jurisdiction.  Terms used herein which are defined in the UCC
and not otherwise defined herein shall have the respective meanings ascribed to
such terms in the UCC. To the extent the definition of any category or type of
collateral is modified by any amendment, modification or revision to the UCC,
such modified definition will apply automatically as of the date of such
amendment, modification or revision.
 
2.         Grant of Security Interest. To secure the Obligations, Parent hereby
assigns and grants to Ferring, as secured party, a continuing first priority
lien on and a security interest in the Collateral.
 
3.         Change in Name or Locations. Parent hereby agrees that if the
location of the Collateral changes from the locations listed on Exhibit "A"
hereto and made part hereof (other than transport to its headquarter in Fair
Lawn, New Jersey), or if Parent changes its name, its type of organization, its
state of organization or its chief executive office or establishes a name under
which it may do business that is not listed as a tradename on Exhibit "A"
hereto, Parent will immediately notify Ferring in writing of the additions or
changes.
 
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4.         Representations and Warranties. Parent represents, warrants and
covenants to Ferring that: (a) all information, including its type of
organization, jurisdiction of organization and chief executive office, are as
set forth on Exhibit "A" hereto and are true and correct on the date hereof;
(b) Parent has paid to the manufacturer(s) and all supplier(s) of the Collateral
the entire purchase payable therefor, and no amounts remain to be paid to any
such manufacturer or supplier for or in connection with the acquisition by
Parent of the Collateral; (c) as of date hereof, the Collateral is located at
the locations listed on Exhibit “A” hereto; (d) Parent has good, marketable and
indefeasible title to the Collateral, has not made any prior sale, pledge,
encumbrance, assignment or other disposition of any of the Collateral, and the
Collateral is free from all encumbrances and rights of setoff of any kind except
the lien in favor of Ferring created by this Agreement; and any liens or
security interests of Spencer Trask Specialty Group, LLC (the “Subordinate
Lienholder”), which are subject, junior and subordinate to the lien and security
interest granted to Ferring hereunder pursuant to a Subordination Agreement
dated as of the date hereof among the Subordinate Lienholder and Ferring;
(e) except as herein provided, Parent will not hereafter without Ferring's prior
written consent sell, pledge, encumber, assign or otherwise dispose of any of
the Collateral or permit any right of setoff, lien or security interest to exist
thereon except to Ferring; (f) Parent will defend the Collateral against all
claims and demands of all persons and entities at any time claiming the same or
any interest therein; (g) Ferring's security interest in the Collateral
constitutes and will continue to constitute a perfected first priority security
interest in favor of Ferring; and (h) each of this Agreement and the other
Underlying Agreements has been duly authorized, executed and delivered by Parent
and constitutes its legal, valid and binding obligations, enforceable in
accordance with their respective terms.
 
5.         Personal Property.  The Collateral shall remain personal property at
all times. Parent shall not affix any of the Collateral to real property in any
manner which would change its nature from that of personal property to real
property or to a fixture.
 
6.         Enforceability of Security Interests.  Upon the execution of this
Agreement by Parent and the filing of financing statements properly describing
the Collateral and identifying Parent, as the grantor and Ferring, as the
secured party, in the applicable jurisdiction required pursuant to the UCC,
security interests and liens granted to the Ferring, as the secured party under
Section 2 hereof shall constitute valid, perfected and first priority security
interests and liens in and to the Collateral of Parent, other than Collateral
which may not be perfected by filing under the UCC, in each case enforceable
against all third parties and securing the payment of the Obligations.
 
7.         Parent's Covenants. Parent covenants that it shall:
 
(a)           from time to time and at all reasonable times allow Ferring, by or
through any of its officers, agents, attorneys, or accountants, to examine or
inspect the Collateral, wherever located.  Parent shall do, obtain, make,
execute and deliver all such additional and further acts, things, deeds,
assurances and instruments as Ferring may require to vest in and assure to
Ferring its rights hereunder and in or to the Collateral, and the proceeds
thereof, including waivers from landlords, warehousemen and mortgagees.  Parent
agrees that Ferring has full power and authority to collect, compromise,
endorse, sell or otherwise deal with the Collateral in its own name or that of
Parent at any time upon an Event of Default (as defined below);
 
(b)           keep the Collateral in good order and repair at all times and
immediately notify Ferring of any event causing a material loss or decline in
value of the Collateral, whether or not covered by insurance, and the amount of
such loss or depreciation;
 
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(c)           only use or permit the Collateral to be used in accordance with
all applicable federal, state, county and municipal laws and regulations; and
 
(d)           have and maintain public liability and property damage insurance
at all times with respect to all Collateral against such risks, including fire
(including so-called extended coverage), theft, sprinkler leakage, and other
risks (including risk of flood if any Collateral is maintained at a location in
a flood hazard zone and, for the period that the Collateral is being transported
to Parent’s headquarters located in Fair Lawn, New Jersey, risks of loss during
transportation) as Ferring may require, in such form, in such amount, for such
period and written by such companies as may be satisfactory to Ferring in its
sole discretion.  Each such casualty insurance policy shall contain a standard
Loss Payable Clause issued in favor of Ferring under which all losses thereunder
shall be paid to Ferring as Ferring's interests may appear.  Each public
liability policy shall name Ferring as an additional insured.  Such policies
shall expressly provide that the requisite insurance cannot be altered or
canceled without at least thirty (30) days prior written notice to Ferring and
shall insure Ferring notwithstanding the act or neglect of Parent.  Upon
Ferring's demand, Parent shall furnish Ferring with duplicate original policies
of insurance or such other evidence of insurance as Ferring may require.  In the
event of failure to provide insurance as herein provided, Ferring may, at its
option, obtain such insurance and Parent shall pay to Ferring, on demand, the
cost thereof.  Proceeds of insurance may be applied by Ferring to reduce the
Obligations or to repair or replace Collateral, all in Ferring's sole
discretion.
 
8.         Negative Pledge; No Transfer. Parent will not sell or offer to sell
or otherwise transfer or grant or allow the imposition of a lien or security
interest upon the Collateral except for the existing subordinate security
interest in favor of the Subordinate Lienholder, will not allow any third party
to gain control of all or any part of the Collateral, and will not use any
portion thereof in any manner inconsistent with this Agreement or with the terms
and conditions of any policy of insurance thereon.
 
9.         Further Assurances. By its signature hereon, Parent hereby
irrevocably authorizes Ferring to execute (on behalf of Parent) and file against
Parent one or more financing, continuation or amendment statements pursuant to
the UCC in form satisfactory to Ferring in all jurisdictions in which such
filing is deemed by Ferring to be necessary or desirable in order to perfect,
preserve and protect its security interests.  If required by Ferring, Parent
will execute all documentation necessary for Ferring to obtain and maintain
perfection of its security interests in the Collateral.
 
10.       Events of Default; Remedies. Upon the occurrence of any breach or
default by Parent or Vyteris of any of the Underlying Agreements or the
Obligations (an "Event of Default") and at any time thereafter, Ferring may
declare all Obligations secured hereby immediately due and payable and shall
have, in addition to any remedies provided herein or by any applicable law or in
equity, all the remedies of a secured party under the UCC. Ferring's remedies
include, but are not limited to, the right to (a) peaceably by its own means or
with judicial assistance enter Parent’s premises and take possession of the
Collateral without prior notice to Parent or the opportunity for a hearing; (b)
render the Collateral unusable; (c) dispose of the Collateral on Parent’s
premises; and (d) require Parent to assemble the Collateral and make it
available to Ferring at a place designated by Ferring.  Ferring will give Parent
reasonable notice of the time and place of any public sale thereof or of the
time after which any private sale or any other intended disposition thereof is
to be made.  The requirements of commercially reasonable notice shall be met if
such notice is sent to Parent at least five (5) days before the time of the
intended sale or disposition.  Expenses of retaking, holding, preparing for
disposition, disposing or the like shall include Ferring's reasonable attorneys'
fees and legal expenses, incurred or expended by Ferring to enforce any payment
due it under this Agreement either as against Parent, or in the prosecution or
defense of any action, or concerning any matter growing out of or connection
with the subject matter of this Agreement and the Collateral pledged hereunder.
Parent waives all relief from all appraisement or exemption laws now in force or
hereafter enacted.
 
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11.       Indemnification.  Parent agrees to indemnify the Ferring and hold it
harmless from and against any and all injuries, claims, damages, judgments,
liabilities, costs and expenses (including, without limitation, reasonable fees
and disbursements of counsel), charges and encumbrances which may be incurred by
or asserted against Ferring in connection with or arising out of any assertion,
declaration or defense of the Ferring's rights or security interest under the
provisions of this Agreement, permitting it to collect, settle or adjust
Accounts or to deal with account debtors in any way or in connection with the
realization, repossession, safeguarding, insuring or other protection of the
Collateral or in connection with the collecting, perfecting or protecting the
Ferring's liens and security interests hereunder.
 
12.       Power of Attorney. Parent does hereby make, constitute and appoint any
officer or agent of Ferring as Parent’s true and lawful attorney-in-fact, with
power to (a) endorse the name of Parent or any of Parent’s officers or agents
upon any notes, checks, drafts, money orders, or other instruments of payment or
Collateral that may come into Ferring's possession in full or part payment of
any Obligations; (b) sue for, compromise, settle and release all claims and
disputes with respect to, the Collateral; and (c) sign, for Parent, such
documentation required by the UCC, or supplemental intellectual property
security agreements; granting to Parent’s said attorney full power to do any and
all things necessary to be done in and about the premises as fully and
effectually as Parent might or could do.  Parent hereby ratifies all that said
attorney shall lawfully do or cause to be done by virtue hereof.  This power of
attorney is coupled with an interest and is irrevocable.
 
13.       Payment of Expenses. At its option, Ferring may discharge taxes,
liens, security interests or such other encumbrances as may attach to the
Collateral, may pay for required insurance on the Collateral and may pay for the
maintenance, appraisal or reappraisal, and preservation of the Collateral, as
determined by Ferring to be necessary. Parent will reimburse Ferring on demand
for any payment so made or any expense incurred by Ferring pursuant to the
foregoing authorization, and the Collateral also will secure any advances or
payments so made or expenses so incurred by Ferring.
 
14.       Notices. All notices, demands, requests, consents, approvals and other
communications required or permitted hereunder ("Notices") must be in writing
and will be effective upon receipt.  Notices may be given in any manner to which
the parties may separately agree, including electronic mail.  Without limiting
the foregoing, first-class mail, facsimile transmission and commercial courier
service are hereby agreed to as acceptable methods for giving Notices.
Regardless of the manner in which provided, Notices may be sent to a party's
address as set forth above or to such other address as any party may give to the
other for such purpose in accordance with this section.
 
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15.       Preservation of Rights. No delay or omission on Ferring's part to
exercise any right or power arising hereunder will impair any such right or
power or be considered a waiver of any such right or power, nor will Ferring's
action or inaction impair any such right or power.  Ferring's rights and
remedies hereunder are cumulative and not exclusive of any other rights or
remedies which Ferring may have under other agreements, at law or in equity.
 
16.       Illegality. If any provision contained in this Agreement should be
invalid, illegal or unenforceable in any respect, it shall not affect or impair
the validity, legality and enforceability of the remaining provisions of this
Agreement.
 
17.       Changes in Writing. No modification, amendment or waiver of, or
consent to any departure by Parent from, any provision of this Agreement will be
effective unless made in a writing signed by Ferring, and then such waiver or
consent shall be effective only in the specific instance and for the purpose for
which given.  No notice to or demand on Parent will entitle Parent to any other
or further notice or demand in the same, similar or other circumstance.
 
18.       Entire Agreement. This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, between
the parties with respect to the subject matter hereof.
 
19.       Counterparts. This Agreement may be signed in any number of
counterpart copies and by the parties hereto on separate counterparts, but all
such copies shall constitute one and the same instrument.  Delivery of an
executed counterpart of signature page to this Agreement by facsimile
transmission shall be effective as delivery of a manually executed
counterpart.  Any party so executing this Agreement by facsimile transmission
shall promptly deliver a manually executed counterpart, provided that any
failure to do so shall not affect the validity of the counterpart executed by
facsimile transmission.
 
20.       Successors and Assigns. This Agreement will be binding upon and inure
to the benefit of Parent and Ferring and their respective successors and
assigns; provided, however, that Parent may not assign this Agreement in whole
or in part without Ferring's prior written consent and Ferring at any time may
assign this Agreement in whole or in part.
 
21.       Interpretation. In this Agreement, unless Ferring and Parent otherwise
agree in writing, the singular includes the plural and the plural the singular;
references to statutes are to be construed as including all statutory provisions
consolidating, amending or replacing the statute referred to; the word "or"
shall be deemed to include "and/or", the words "including", "includes" and
"include" shall be deemed to be followed by the words "without limitation";
references to articles, sections (or subdivisions of sections) or exhibits are
to those of this Agreement; and references to agreements and other contractual
instruments shall be deemed to include all subsequent amendments and other
modifications to such instruments, but only to the extent such amendments and
other modifications are not prohibited by the terms of this Agreement.  Section
headings in this Agreement are included for convenience of reference only and
shall not constitute a part of this Agreement for any other purpose.
 
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22.       Governing Law and Jurisdiction. This Agreement will be interpreted and
the rights and liabilities of the parties hereto determined in accordance with
the laws of the State of New Jersey, except that the laws of the State of Nevada
shall govern the creation, perfection and foreclosure of the liens created
hereunder on such property or any interest therein.  Parent hereby irrevocably
consents to the exclusive jurisdiction of any state or federal court in the City
of Newark, State of New Jersey; provided that nothing contained in this
Agreement will prevent Ferring from bringing any action, enforcing any award or
judgment or exercising any rights against Parent individually, against any
security or against any property of Parent within any other county, state or
other foreign or domestic jurisdiction.  Ferring and Parent agree that the venue
provided above is the most convenient forum for both Ferring and Parent.  Parent
waives any objection to venue and any objection based on a more convenient forum
in any action instituted under this Agreement.
 
23.       WAIVER OF JURY TRIAL. EACH OF VYTERIS AND FERRING IRREVOCABLY WAIVES
ANY AND ALL RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
CLAIM OF ANY NATURE RELATING TO THIS AGREEMENT, ANY DOCUMENTS EXECUTED IN
CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH
DOCUMENTS.  VYTERIS AND FERRING ACKNOWLEDGE THAT THE FOREGOING WAIVER IS KNOWING
AND VOLUNTARY.
 
24.       Survival.  The representations and warranties of Parent made or deemed
made herein and Sections 11 and 13 hereof shall survive the execution and
delivery of this Agreement.
 
25.       Termination; Release.  This Agreement shall terminate ninety-one (91)
days following satisfaction of both of the following (the “Product Delivery”):
 
(a)           the receipt by Ferring from Vyteris of the materials and supplies
specified on Schedule 2 attached hereto (with respect to which the design scope
(the "Design") and budget have been already agreed by the Joint Development
Team(as defined in the License Agreement)) sufficient for Ferring, in its
discretion, to commence Phase III clinical trials in the United States with
respect to the Product (as defined in the License Agreement), and
 
(b)           the confirmation by Ferring to Vyteris, in writing, that (i) such
materials and supplies conform with the terms and conditions of the License
Agreement, the Supply Agreement, the Design and the other applicable
specifications, and (ii) neither Vyteris nor Parent has breached or defaulted
under (nor has Ferring alleged in good faith that such breach or default has
occurred) any of the Underlying Agreements.
 
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Notwithstanding the foregoing, this Agreement shall terminate on May 31, 2010
even if Product Delivery has not occurred if, and only if, (a) Vyteris and
Ferring agree in writing in good faith that the cause of such failure of Product
Delivery was caused by a Force Majeure Event, and (b) Ferring has confirmed in
writing that neither Vyteris nor Parent has breached or defaulted under or with
respect to (nor has Ferring alleged in good faith that such breach or default
has occurred under or with respect to) any of the Underlying Agreements.  As
used herein, a “Force Majeure Event” means a significant unexpected event which
is beyond the reasonable control of Vyteris and Parent with respect to which
neither Vyteris nor Parent could reasonably be expected to have taken account
and which could not have been prevented by good industry practice.  It is
understood and agreed that if Ferring requests that Vyteris perform additional
Phase II tests (outside the current scope of work) in connection with Phase II
activities related to the Product (as defined in the License Agreement), and
Vyteris’s performance of such tests causes a delay in Product Delivery past May
31, 2010, then such delay shall be deemed “caused by a Force Majeure Event” so
long as the delay was not caused by a breach or default by Vyteris or Parent
under or with respect to (and Ferring has not alleged in good faith that such
breach or default has occurred under or with respect to) any of the Underlying
Agreements.
 
Parent acknowledges that it has read and understood all the provisions of this
Agreement, including the waiver of jury trial, and has been advised by counsel
as necessary or appropriate.
 
[signatures on next page]
 
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IN WITNESS the due execution hereof as a document under seal, as of the date
first written above.
 
ATTEST:
 
VYTERIS, INC., a Nevada corporation
        /s/ Joseph N. Himy   
By:
 /s/ Haro Hartounian
Name: Joseph N. Himy
   
Name: Haro Hartounian
Title:   Chief Financial Officer and
   
Title:   Chief Executive Officer
            Principal Accounting Officer              
 
  FERRING PHARMACEUTICALS, INC.            
By:
 /s/ Wayne C. Anderson
Name:
   
Name: Wayne C. Anderson
Title:
   
Title:   President and CEO

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EXHIBIT "A"
TO SECURITY AGREEMENT
 
1.
Parent’s form of organization: corporation

 
2.
Parent’s State of organization: Nevada.

 
3.
Address of Parent’s chief executive office, including the County: 13-01 Pollitt
Drive, Fair Lawn, Bergen County, NJ 07410

 
4.
Parent’s EIN:  84 139 4211

 
5.
Parent’s organizational ID# (if any exists): None

 
6.
Address for books and records, if different: None

 
7.
Address of Collateral location as of date of this Agreement: 13-01 Pollitt
Drive, Fair Lawn, Bergen County, NJ 07410.

 
8.
Address of location of Parent’s facility in Fair Lawn, New Jersey, including
County and name and address of landlord or owner if location is not owned by
Parent:  13-01 Pollitt Drive, Fair Lawn, Bergen County, NJ 07410. Landlord is
Lincoln Fair Lawn Associates, with offices c/o Marcus Associates Property
Management, Inc., 90 Main Street, Suite 301, Hackensack, NJ 07001.

 
9. 
Other names or tradenames now or formerly used by Parent:  Vyteris Holdings
(Nevada), Inc. (former name).

 

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Schedule 1
 
Materials and Supplies
 

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SECURITY AGREEMENT
 
THIS SECURITY AGREEMENT (this "Agreement"), dated as of this ____ day of March,
2009, is made by and between Vyteris, Inc., a Delaware corporation (“Vyteris”),
and Ferring Pharmaceuticals, Inc., a Delaware corporation (the "Ferring”).
 
Recitals
 
A.           Reference is hereby made to (a) the Letter Agreement dated the date
hereof by and among Vyteris, Vyteris, Inc., a Nevada corporation (“Parent”), and
Ferring (the “Letter Agreement”); (b) the License and Development Agreement
dated as of September 27, 2004, as amended prior to the date hereof and pursuant
to the Letter Agreement, by and between Ferring and Vyteris (the “License
Agreement”); and (c) the Supply Agreement dated September 27, 2004, as amended
prior to the date hereof and pursuant to the Letter Agreement, by and between
Ferring and Vyteris (together with the related Technical Agreement by and
between Ferring and Vyteris, the “Supply Agreement”) (all of the foregoing,
together with the Transaction Documents (as defined in the Letter Agreement),
the “Underlying Agreements”).

B.           In order to induce Ferring to enter into the Letter Agreement and
the other Transactions Documents (as defined therein) and for other good and
valuable consideration, receipt and sufficiency of which are hereby
acknowledged, and as security for the performance by Vyteris of the Obligations
(as hereinafter defined), Vyteris has agreed to grant to Ferring, for the
benefit of Ferring, a security interest in the Collateral (as hereinafter
defined) on the terms and conditions hereinafter set forth.

NOW, THEREFORE, Vyteris and Ferring, intending to be legally bound, hereby agree
as follows:

1.         Definitions.
 
(a)           "Collateral" shall mean all personal property of Vyteris, wherever
located, and whether now owned or hereafter acquired or arising, including,
without limitation, all:
 
(i)            Accounts;
 
(ii)           Chattel paper, including Electronic Chattel Paper;
 
(iii)          Goods, including all Inventory and Equipment and any accessions
thereto;
 
(iv)          Instruments, including Promissory Notes;
 
(v)           Investment Property;
 
(vi)          Documents;
 
(vii)         Deposit Accounts;
 

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(viii)        Commercial Tort Claims, if any, identified on Schedule A annexed
hereto;
 
(ix)           Letter-of-Credit Rights;
 
(x)           General Intangibles, including Payment Intangibles and Software;
 
(xi)           Supporting Obligations; and
 
(xii)          to the extent not listed above as original collateral proceeds
and products of the foregoing.
 
Notwithstanding the foregoing, with respect to Collateral constituting patents,
the foregoing shall only include all of Vyteris’s right, title and interest in
and to (A) Vyteris’s now owned or otherwise existing and hereafter acquired or
arising (i) patents and patent applications referred to in the License Agreement
(including the “Vyteris Patents” referred to therein), (ii) patents and patent
applications relating to inventions or technology made, created, developed or
reduced to practice in connection with the License Agreement, and (iii) any
other patents and patent applications owned or controlled by Vyteris and
necessary, useful or desirable to Ferring’s manufacture, marketing, sale
testing, development or use of the Product (as defined in the License
Agreement), including, without limitation the patents and patent applications
listed on Schedule 1 attached hereto; (B) (i) all renewals thereof, (ii) all
income, royalties, damages and payments now and hereafter due and/or payable
under or with respect to any of the foregoing, including, without limitation,
payments under all licenses entered into in connection therewith and damages and
payments for past or future infringements or dilutions thereof, (iii)  the right
to sue for past, present and future infringements or dilutions thereof, (iv) the
goodwill of Vyteris’s business symbolized by the foregoing and connected
therewith, and (v) all of the Vyteris’s rights corresponding thereto throughout
the world; and (C) all proceeds and products of any and all of the foregoing,
including, without limitation, license royalties and proceeds of the
infringement suits.  Vyteris hereby agrees that promptly after it becomes aware
of the existence of any Collateral described in this paragraph, it shall notify
Ferring in writing thereof.
 
(b)           “Obligations" shall mean all obligations, liabilities and
indebtedness of Vyteris to Ferring, whether now existing or hereafter created,
absolute or contingent, direct or indirect, due or not, whether created directly
or acquired by assignment or otherwise, including, without limitation, arising
under or relating to any of the Underlying Agreements; all fees, costs, expenses
and indemnity obligations of Vyteris to Ferring hereunder or thereunder; any
amendments, extensions, renewals  and increases of or to any of the foregoing;
and all costs and expenses of Ferring incurred in the modification, enforcement,
collection and otherwise in connection with any of the foregoing, including
reasonable attorneys' fees and expenses.
 
(c)           "UCC" shall mean the Uniform Commercial Code, as adopted and
enacted and as in effect from time to time in the State whose law governs
pursuant to the Section 22 of this Agreement entitled "Governing Law and
Jurisdiction”.  Terms used herein which are defined in the UCC and not otherwise
defined herein shall have the respective meanings ascribed to such terms in the
UCC.  To the extent the definition of any category or type of collateral is
modified by any amendment, modification or revision to the UCC, such modified
definition will apply automatically as of the date of such amendment,
modification or revision.
 
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2.         Grant of Security Interest. To secure the Obligations, Vyteris hereby
assigns and grants to Ferring, as secured party, a continuing first priority
lien on and a security interest in the Collateral.
 
3.         Change in Name or Locations. Vyteris hereby agrees that if the
location of the Collateral changes from the locations listed on Exhibit "A"
hereto and made part hereof (other than transport to its headquarter in Fair
Lawn, New Jersey), or if Vyteris changes its name, its type of organization, its
state of organization or its chief executive office or establishes a name under
which it may do business that is not listed as a tradename on Exhibit "A"
hereto, Vyteris will immediately notify Ferring in writing of the additions or
changes.
 
4.         Representations and Warranties. Vyteris represents, warrants and
covenants to Ferring that: (a) all information, including its type of
organization, jurisdiction of organization and chief executive office, are as
set forth on Exhibit "A" hereto and are true and correct on the date hereof;
(b) Vyteris has paid to the manufacturer(s) and all supplier(s) of the
Collateral the entire purchase payable therefor, and no amounts remain to be
paid to any such manufacturer or supplier for or in connection with the
acquisition by Vyteris of the Collateral; (c) as of date hereof, the Collateral
is located at the locations listed on Exhibit “A” hereto; (d) Vyteris has good,
marketable and indefeasible title to the Collateral, has not made any prior
sale, pledge, encumbrance, assignment or other disposition of any of the
Collateral, and the Collateral is free from all encumbrances and rights of
setoff of any kind except the lien in favor of Ferring created by this
Agreement; and any liens or security interests of Spencer Trask Specialty Group,
LLC (the “Subordinate Lienholder”), which are subject, junior and subordinate to
the lien and security interest granted to Ferring hereunder pursuant to a
Subordination Agreement dated as of the date hereof among the Subordinate
Lienholder and Ferring; (e) except as herein provided, Vyteris will not
hereafter without Ferring's prior written consent sell, pledge, encumber, assign
or otherwise dispose of any of the Collateral or permit any right of setoff,
lien or security interest to exist thereon except to Ferring; (f) Vyteris will
defend the Collateral against all claims and demands of all persons and entities
at any time claiming the same or any interest therein; (g) Ferring's security
interest in the Collateral constitutes and will continue to constitute a
perfected first priority security interest in favor of Ferring; and (h) each of
this Agreement and the other Underlying Agreements has been duly authorized,
executed and delivered by Vyteris and constitutes its legal, valid and binding
obligations, enforceable in accordance with their respective terms. With the
prior written consent of Ferring in each instance, Vyteris may (i) grant liens
to trade creditors in the ordinary course of business on machinery, supplies and
other materials purchased for which a purchase money security interest is
generally granted, and (ii) enter into other ordinary course transactions for
the lease purchase of machinery and equipment and the like.
 
5.         Personal Property.  The Collateral shall remain personal property at
all times. Vyteris shall not affix any of the Collateral to real property in any
manner which would change its nature from that of personal property to real
property or to a fixture.
 
6.         Enforceability of Security Interests.  Upon the execution of this
Agreement by Vyteris and the filing of financing statements properly describing
the Collateral and identifying Vyteris, as the grantor and Ferring, as the
secured party, in the applicable jurisdiction required pursuant to the UCC,
security interests and liens granted to the Ferring, as the secured party under
Section 2 hereof shall constitute valid, perfected and first priority security
interests and liens in and to the Collateral of Vyteris, other than Collateral
which may not be perfected by filing under the UCC, in each case enforceable
against all third parties and securing the payment of the Obligations.
 
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7.         Vyteris's Covenants. Vyteris covenants that it shall:
 
(a)           from time to time and at all reasonable times allow Ferring, by or
through any of its officers, agents, attorneys, or accountants, to examine or
inspect the Collateral, wherever located.  Vyteris shall do, obtain, make,
execute and deliver all such additional and further acts, things, deeds,
assurances and instruments as Ferring may require to vest in and assure to
Ferring its rights hereunder and in or to the Collateral, and the proceeds
thereof, including waivers from landlords, warehousemen and mortgagees.  Vyteris
agrees that Ferring has full power and authority to collect, compromise,
endorse, sell or otherwise deal with the Collateral in its own name or that of
Vyteris at any time upon an Event of Default (as defined below);
 
(b)           keep the Collateral in good order and repair at all times and
immediately notify Ferring of any event causing a material loss or decline in
value of the Collateral, whether or not covered by insurance, and the amount of
such loss or depreciation;
 
(c)           only use or permit the Collateral to be used in accordance with
all applicable federal, state, county and municipal laws and regulations; and
 
(d)           have and maintain public liability and property damage insurance
at all times with respect to all Collateral against such risks, including fire
(including so-called extended coverage), theft, sprinkler leakage, and other
risks (including risk of flood if any Collateral is maintained at a location in
a flood hazard zone and, for the period that the Collateral is being transported
to Vyteris’s headquarters located in Fair Lawn, New Jersey, risks of loss during
transportation) as Ferring may require, in such form, in such amount, for such
period and written by such companies as may be satisfactory to Ferring in its
sole discretion.  Each such casualty insurance policy shall contain a standard
Loss Payable Clause issued in favor of Ferring under which all losses thereunder
shall be paid to Ferring as Ferring's interests may appear.  Each public
liability policy shall name Ferring as an additional insured.  Such policies
shall expressly provide that the requisite insurance cannot be altered or
canceled without at least thirty (30) days prior written notice to Ferring and
shall insure Ferring notwithstanding the act or neglect of Vyteris.  Upon
Ferring's demand, Vyteris shall furnish Ferring with duplicate original policies
of insurance or such other evidence of insurance as Ferring may require.  In the
event of failure to provide insurance as herein provided, Ferring may, at its
option, obtain such insurance and Vyteris shall pay to Ferring, on demand, the
cost thereof.  Proceeds of insurance may be applied by Ferring to reduce the
Obligations or to repair or replace Collateral, all in Ferring's sole
discretion.
 
8.         Negative Pledge; No Transfer. Vyteris will not sell or offer to sell
or otherwise transfer or grant or allow the imposition of a lien or security
interest upon the Collateral except for the existing subordinate security
interest in favor of the Subordinate Lienholder, will not allow any third party
to gain control of all or any part of the Collateral, and will not use any
portion thereof in any manner inconsistent with this Agreement or with the terms
and conditions of any policy of insurance thereon.
 
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9.         Further Assurances. By its signature hereon, Vyteris hereby
irrevocably authorizes Ferring to execute (on behalf of Vyteris) and file
against Vyteris one or more financing, continuation or amendment statements
pursuant to the UCC in form satisfactory to Ferring in all jurisdictions in
which such filing is deemed by Ferring to be necessary or desirable in order to
perfect, preserve and protect its security interests.  If required by Ferring,
Vyteris will execute all documentation necessary for Ferring to obtain and
maintain perfection of its security interests in the Collateral.
 
10.       Events of Default; Remedies. Upon the occurrence of any breach or
default by Vyteris or Parent of any of the Underlying Agreements or the
Obligations (an "Event of Default") and at any time thereafter, Ferring may
declare all Obligations secured hereby immediately due and payable and shall
have, in addition to any remedies provided herein or by any applicable law or in
equity, all the remedies of a secured party under the UCC. Ferring's remedies
include, but are not limited to, the right to (a) peaceably by its own means or
with judicial assistance enter Vyteris’s premises and take possession of the
Collateral without prior notice to Vyteris or the opportunity for a hearing; (b)
render the Collateral unusable; (c) dispose of the Collateral on Vyteris’s
premises; and (d) require Vyteris to assemble the Collateral and make it
available to Ferring at a place designated by Ferring.  Ferring will give
Vyteris reasonable notice of the time and place of any public sale thereof or of
the time after which any private sale or any other intended disposition thereof
is to be made.  The requirements of commercially reasonable notice shall be met
if such notice is sent to Vyteris at least five (5) days before the time of the
intended sale or disposition.  Expenses of retaking, holding, preparing for
disposition, disposing or the like shall include Ferring's reasonable attorneys'
fees and legal expenses, incurred or expended by Ferring to enforce any payment
due it under this Agreement either as against Vyteris, or in the prosecution or
defense of any action, or concerning any matter growing out of or connection
with the subject matter of this Agreement and the Collateral pledged hereunder.
Vyteris waives all relief from all appraisement or exemption laws now in force
or hereafter enacted.
 
11.       Indemnification.  Vyteris agrees to indemnify the Ferring and hold it
harmless from and against any and all injuries, claims, damages, judgments,
liabilities, costs and expenses (including, without limitation, reasonable fees
and disbursements of counsel), charges and encumbrances which may be incurred by
or asserted against Ferring in connection with or arising out of any assertion,
declaration or defense of the Ferring's rights or security interest under the
provisions of this Agreement, permitting it to collect, settle or adjust
Accounts or to deal with account debtors in any way or in connection with the
realization, repossession, safeguarding, insuring or other protection of the
Collateral or in connection with the collecting, perfecting or protecting the
Ferring's liens and security interests hereunder.
 
12.       Power of Attorney. Vyteris does hereby make, constitute and appoint
any officer or agent of Ferring as Vyteris’s true and lawful attorney-in-fact,
with power to (a) endorse the name of Vyteris or any of Vyteris’s officers or
agents upon any notes, checks, drafts, money orders, or other instruments of
payment or Collateral that may come into Ferring's possession in full or part
payment of any Obligations; (b) sue for, compromise, settle and release all
claims and disputes with respect to, the Collateral; and (c) sign, for Vyteris,
such documentation required by the UCC, or supplemental intellectual property
security agreements; granting to Vyteris’s said attorney full power to do any
and all things necessary to be done in and about the premises as fully and
effectually as Vyteris might or could do.  Vyteris hereby ratifies all that said
attorney shall lawfully do or cause to be done by virtue hereof.  This power of
attorney is coupled with an interest and is irrevocable.
 
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13.       Payment of Expenses. At its option, Ferring may discharge taxes,
liens, security interests or such other encumbrances as may attach to the
Collateral, may pay for required insurance on the Collateral and may pay for the
maintenance, appraisal or reappraisal, and preservation of the Collateral, as
determined by Ferring to be necessary. Vyteris will reimburse Ferring on demand
for any payment so made or any expense incurred by Ferring pursuant to the
foregoing authorization, and the Collateral also will secure any advances or
payments so made or expenses so incurred by Ferring.
 
14.       Notices. All notices, demands, requests, consents, approvals and other
communications required or permitted hereunder ("Notices") must be in writing
and will be effective upon receipt.  Notices may be given in any manner to which
the parties may separately agree, including electronic mail.  Without limiting
the foregoing, first-class mail, facsimile transmission and commercial courier
service are hereby agreed to as acceptable methods for giving Notices.
Regardless of the manner in which provided, Notices may be sent to a party's
address as set forth above or to such other address as any party may give to the
other for such purpose in accordance with this section.
 
15.       Preservation of Rights. No delay or omission on Ferring's part to
exercise any right or power arising hereunder will impair any such right or
power or be considered a waiver of any such right or power, nor will Ferring's
action or inaction impair any such right or power.  Ferring's rights and
remedies hereunder are cumulative and not exclusive of any other rights or
remedies which Ferring may have under other agreements, at law or in equity.
 
16.       Illegality. If any provision contained in this Agreement should be
invalid, illegal or unenforceable in any respect, it shall not affect or impair
the validity, legality and enforceability of the remaining provisions of this
Agreement.
 
17.       Changes in Writing. No modification, amendment or waiver of, or
consent to any departure by Vyteris from, any provision of this Agreement will
be effective unless made in a writing signed by Ferring, and then such waiver or
consent shall be effective only in the specific instance and for the purpose for
which given.  No notice to or demand on Vyteris will entitle Vyteris to any
other or further notice or demand in the same, similar or other circumstance.
 
18.       Entire Agreement. This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, between
the parties with respect to the subject matter hereof.
 
19.       Counterparts. This Agreement may be signed in any number of
counterpart copies and by the parties hereto on separate counterparts, but all
such copies shall constitute one and the same instrument.  Delivery of an
executed counterpart of signature page to this Agreement by facsimile
transmission shall be effective as delivery of a manually executed
counterpart.  Any party so executing this Agreement by facsimile transmission
shall promptly deliver a manually executed counterpart, provided that any
failure to do so shall not affect the validity of the counterpart executed by
facsimile transmission.
 
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20.       Successors and Assigns. This Agreement will be binding upon and inure
to the benefit of Vyteris and Ferring and their respective successors and
assigns; provided, however, that Vyteris may not assign this Agreement in whole
or in part without Ferring's prior written consent and Ferring at any time may
assign this Agreement in whole or in part.
 
21.       Interpretation. In this Agreement, unless Ferring and Vyteris
otherwise agree in writing, the singular includes the plural and the plural the
singular; references to statutes are to be construed as including all statutory
provisions consolidating, amending or replacing the statute referred to; the
word "or" shall be deemed to include "and/or", the words "including", "includes"
and "include" shall be deemed to be followed by the words "without limitation";
references to articles, sections (or subdivisions of sections) or exhibits are
to those of this Agreement; and references to agreements and other contractual
instruments shall be deemed to include all subsequent amendments and other
modifications to such instruments, but only to the extent such amendments and
other modifications are not prohibited by the terms of this Agreement.  Section
headings in this Agreement are included for convenience of reference only and
shall not constitute a part of this Agreement for any other purpose.
 
22.       Governing Law and Jurisdiction. This Agreement will be interpreted and
the rights and liabilities of the parties hereto determined in accordance with
the laws of the State of New Jersey, except that the laws of the State of
Delaware shall govern the creation, perfection and foreclosure of the liens
created hereunder on such property or any interest therein.  Vyteris hereby
irrevocably consents to the exclusive jurisdiction of any state or federal court
in the City of Newark, State of New Jersey; provided that nothing contained in
this Agreement will prevent Ferring from bringing any action, enforcing any
award or judgment or exercising any rights against Vyteris individually, against
any security or against any property of Vyteris within any other county, state
or other foreign or domestic jurisdiction.  Ferring and Vyteris agree that the
venue provided above is the most convenient forum for both Ferring and
Vyteris.  Vyteris waives any objection to venue and any objection based on a
more convenient forum in any action instituted under this Agreement.
 
23.       WAIVER OF JURY TRIAL. EACH OF VYTERIS AND FERRING IRREVOCABLY WAIVES
ANY AND ALL RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
CLAIM OF ANY NATURE RELATING TO THIS AGREEMENT, ANY DOCUMENTS EXECUTED IN
CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH
DOCUMENTS.  VYTERIS AND FERRING ACKNOWLEDGE THAT THE FOREGOING WAIVER IS KNOWING
AND VOLUNTARY.
 
24.       Survival.  The representations and warranties of Vyteris made or
deemed made herein and Sections 11 and 13 hereof shall survive the execution and
delivery of this Agreement.
 
25.       Termination; Release.  This Agreement shall terminate ninety-one (91)
days following satisfaction of both of the following (the “Product Delivery”):
 
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(a)           the receipt by Ferring from Vyteris of the materials and supplies
specified on Schedule 2 attached hereto (with respect to which the design scope
(the "Design") and budget have been already agreed by the Joint Development Team
(as defined in the License Agreement)) sufficient for Ferring, in its
discretion, to commence Phase III clinical trials in the United States with
respect to the Product (as defined in the License Agreement), and
 
(b)           the confirmation by Ferring to Vyteris, in writing, that (i) such
materials and supplies conform with the terms and conditions of the License
Agreement, the Supply Agreement, the Design and the other applicable
specifications, and (ii) neither Vyteris nor Parent has breached or defaulted
under (nor has Ferring alleged in good faith that such breach or default has
occurred) any of the Underlying Agreements.
 
Notwithstanding the foregoing, this Agreement shall terminate on May 31, 2010
even if Product Delivery has not occurred if, and only if, (a) Vyteris and
Ferring agree in writing in good faith that the cause of such failure of Product
Delivery was caused by a Force Majeure Event, and (b) Ferring has confirmed in
writing that neither Vyteris nor Parent has breached or defaulted under or with
respect to (nor has Ferring alleged in good faith that such breach or default
has occurred under or with respect to) any of the Underlying Agreements.  As
used herein, a “Force Majeure Event” means a significant unexpected event which
is beyond the reasonable control of Vyteris and Parent with respect to which
neither Vyteris nor Parent could reasonably be expected to have taken account
and which could not have been prevented by good industry practice.  It is
understood and agreed that if Ferring requests that Vyteris perform additional
Phase II tests (outside the current scope of work) in connection with Phase II
activities related to the Product (as defined in the License Agreement), and
Vyteris’s performance of such tests causes a delay in Product Delivery past May
31, 2010, then such delay shall be deemed “caused by a Force Majeure Event” so
long as the delay was not caused by a breach or default by Vyteris or Parent
under or with respect to (and Ferring has not alleged in good faith that such
breach or default has occurred under or with respect to)  any of the Underlying
Agreements.
 
Vyteris acknowledges that it has read and understood all the provisions of this
Agreement, including the waiver of jury trial, and has been advised by counsel
as necessary or appropriate.
 
[signatures on next page]
 
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IN WITNESS the due execution hereof as a document under seal, as of the date
first written above.
 
ATTEST:
 
VYTERIS, INC., a Delaware corporation
        /s/ Joseph N. Himy   
By:
 /s/ Haro Hartounian
Name: Joseph N. Himy
   
Name: Haro Hartounian
Title:   Chief Financial Officer and
   
Title:   Chief Executive Officer
            Principal Accounting Officer              
 
  FERRING PHARMACEUTICALS, INC.            
By:
 /s/ Wayne C. Anderson
Name:
   
Name: Wayne C. Anderson
Title:
   
Title:   President and CEO

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EXHIBIT A
TO SECURITY AGREEMENT
 
1.
Vyteris’s form of organization: corporation

 
2.
Vyteris’s State of organization: Delaware.

 
3.
Address of Vyteris’s chief executive office, including the County: 13-01 Pollitt
Drive, Fair Lawn, Bergen County, NJ 07410

 
4.
Vyteris’s EIN:  13 4129116

 
5.
Vyteris’s organizational ID# (if any exists): None

 
6.
Address for books and records, if different: None

 
7.
Address of Collateral location as of date of this Agreement: 13-01 Pollitt
Drive, Fair Lawn, Bergen County, NJ 07410 and (solely with respect to certain
equipment known as PMK300 (which is a web concerting machine manufactured in
Germany by Harro Hofliger) and all accessories thereto, Helmholtzstrabe 4,
D-71571 Allmersbach i.T., Germany.

 
8.
Address of location of Vyteris’s facility in Fair Lawn, New Jersey, including
County and name and address of landlord or owner if location is not owned by
Vyteris:  13-01 Pollitt Drive, Fair Lawn, Bergen County, NJ 07410. Landlord is
Lincoln Fair Lawn Associates, with offices c/o Marcus Associates Property
Management, Inc., 90 Main Street, Suite 301, Hackensack, NJ 07001.

 
9.
Other names or tradenames now or formerly used by Vyteris:  Drug Delivery
Technologies, Inc. (former name).

 

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Schedule 1
TO SECURITY AGREEMENT
 
Certain Patents
 
See Attached
 

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Schedule 2
TO SECURITY AGREEMENT
 
Materials and Supplies
 
See Attached
 

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