Document:

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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK [*], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]

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                                SUPPLY AGREEMENT

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                                     between

                           FERRING PHARMACEUTICALS INC

                                       and

                              VYTERIS INCORPORATED

<PAGE>

INDEX

Supply Agreement

Article
1.     Definitions
2.     Supplies of Product
3.     Prices and Payments
4.     API
5.     Exclusivity
6.     Confidentiality
7.     Intellectual Property Rights
8.     Quality of Products
9.     Recalls and Regulatory Actions
10.    Limitation of Liability
11.    Representations and Warranties
12.    Insurance
13.    Indemnification
14.    Term and Termination
15.    Force Majeure
16.    Governing Law
17.    Resolution of Disputes
18.    Miscellaneous

Appendices

1      Product, Transfer Prices and Payment
2      Logistic Arrangements
3      Contact Persons
4      Technical Agreement (including appendices)

                                      -2-
<PAGE>

THIS SUPPLY AGREEMENT IS EFFECTIVE ______ 2004 ("EFFECTIVE DATE"), BY AND
BETWEEN:

1)      Vyteris Incorporated, a company organized and existing under the laws of
Delaware, of 13-01 Pollitt Drive, Fair Lawn, NJ 07410, USA (hereinafter referred
to as the "Vyteris")

        and

2)      Ferring Pharmaceuticals Inc., a company organized and existing under the
        laws of Delaware, of 400 Rella Boulevard, Suite 300, Suffern NY 10901,
        USA
(hereinafter referred to as the "Ferring")

WHEREAS:

(1) Vyteris has or has access to the organisation and know how required to
manufacture certain medical devices.

(2) Ferring desires to purchase certain medical devices from Vyteris and Vyteris
desires to manufacture and sell such medical devices to Ferring;

(3) the Parties wish to enter into this agreement governing the manufacture and
supply of the medical devices to give effect to the arrangements outlined above.

The Parties therefore agree as follows:

ARTICLE 1 - DEFINITIONS

For purposes of this agreement, the terms defined in this article shall have the
respective meanings set forth below:

1.1     "Affiliate" of a Party shall mean any corporation, partnership or other
        entity controlling, controlled by or under common control with such
        Party.

1.2     "Agreement" shall mean this supply agreement and the appendices hereto,
        including any agreed amendments and additions.

1.3     "Active or "Active Pharmaceutical Ingredient" or "API" shall mean [*].

1.4     "Finished Commercial Product" shall mean Finished Packaged Goods
        together with such final commercial packaging, information leaflets and
        other materials as Ferring shall so elect in the form intended to be
        received by the patient.

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<PAGE>

1.5     "Finished Packaged Goods" shall mean the patches and a controller(s)
        packaged in a carton. --

1.6     "Party" shall mean Vyteris or Ferring and, when used in the plural,
        shall mean Vyteris and Ferring

1.7     "Patch" is described in section 1.12 of the License and Development
        Agreement

1.8     "Product" shall mean the commercial product that uses an iontophoretic
        drug delivery system for the [*] that is developed pursuant to the
        License consisting of a patch and a controller.

1.9     "Product Specifications" shall mean the mutually-agreed specifications
        for the Product as defined in section 1.12. The details of these Product
        Specifications will not be available until completion of the Development
        Project under the Development Agreement of even date and approved by the
        FDA.

1.10    "Technical Agreement" shall mean the technical agreement attached hereto
        as APPENDIX 4.

ARTICLE 2 - SUPPLIES OF PRODUCT

2.1     SUPPLIES

        Subject to the terms and conditions hereof, Vyteris shall sell to
        Ferring, and Ferring shall purchase from Vyteris the Finished Packaged
        Goods ordered by Ferring in accordance with Section 2.2.

2.2     FORECASTS, PURCHASE ORDERS, ORDER SIZES AND ORDER FREQUENCy

        The logistic arrangements for Vyteris' manufacture and supply of
        Finished Packaged Goods to Ferring, including forecasts, procedures for
        purchase orders, order sizes, order frequency, and delivery shall be
        performed in accordance with the terms and conditions of Appendix 2.
        Such Appendix shall be updated whenever necessary by mutual agreement of
        the Parties.

ARTICLE 3 - PRICES AND PAYMENTS

        The Products shall be sold by Vyteris and purchased by Ferring at the
        prices and on the terms set out in Appendix 1. Such appendix shall be
        updated whenever necessary by mutual agreement of the Parties.

                                      -4-
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ARTICLE 4 - API

4.1     API SUPPLY

        Ferring shall supply free of charge to Vyteris the API necessary to meet
        Ferring's forecasted purchases on the basis of Ferring's forecasts and
        Vyteris' reported manufacturing schedule and API inventory levels.

4.2     API OWNERSHIP

        Title to the API will at all times remain vested in Ferring. Vyteris
        will provide to Ferring monthly reports on API inventory. Vyteris will
        be responsible for all accidental and negligent losses of or damage to
        API following delivery to it by Ferring's designated third party
        supplier. Ordinary losses within agreed limits associated with the
        manufacturing process and detailed in the Technical Agreement attached
        hereto shall not be considered accidental or negligent losses.

ARTICLE 5 - EXCLUSIVITY

        On the terms and subject to the conditions set forth in this Agreement,
        Vyteris shall manufacture for and supply the Product to Ferring on an
        exclusive basis, and Ferring shall purchase its requirements of the
        Product exclusively from Vyteris during the term of this Agreement save
        that Vyteris, in the first calendar year that Ferring forecasts the
        purchase of one million (1,000,000) patches, shall at Ferring's request
        and expense establish within a reasonable of time a second source at a
        facility agreeable to Ferring from which Vyteris shall be permitted to
        source a portion of its annual needs in each calendar year. It is
        understood that the use at Ferring's request of two manufacturing
        sources may result in Product not being produced as cost effectively at
        either the original or the second site if not produced in sufficiently
        large volumes. Where a significant difference in cost of goods arises as
        a result of low volume production at either source the parties shall
        meet and agree on equitable solution adjustments to the transfer prices
        of goods made at either or both sources sufficient to compensate Vyteris
        for any cost inefficiencies resulting from Ferring's request that a
        second source be used.

ARTICLE 6 - CONFIDENTIALITY

6.1     CONFIDENTIAL INFORMATION

        Each of the parties agrees to hold in confidence any confidential or
        proprietary information disclosed to it by the other. Each party will
        take such precautions as it normally takes with its own confidential or
        proprietary information to prevent the improper disclosure to an
        independent third party of information disclosed to it pursuant to this
        Agreement. Notwithstanding the preceding provision, the obligation of
        confidence with respect to information disclosed does not include:
        (i)     information which, at the time of disclosure, is known to the
                recipient, as evidenced by records of the recipient;

                                      -5-
<PAGE>

        (ii)    information which, at the time of disclosure, is published,
                known publicly, or is otherwise in the public domain;
        (iii)   information which, after disclosure, is published, becomes known
                publicly or otherwise becomes part of the public domain through
                no fault of the recipient;
        (iv)    information which has been or is disclosed to the recipient in
                good faith by a third party who was not and is not under any
                obligation of confidence or secrecy at the time of such
                disclosure;
        (v)     information which is required to be submitted to a governmental
                agency for the purpose of obtaining product approval, provided
                that the recipient will make a good faith attempt to obtain
                confidential treatment of the information by such agency;
        (vi)    information which has been developed by the recipient
                independent of any confidential information disclosed to it by
                the other Party hereunder; and
        (vii)   information which the recipient is required by law to disclose.

6.2     RETURN OF CONFIDENTIAL INFORMATION

        Upon termination of this Agreement, each Party will promptly return to
        the other any confidential or proprietary information disclosed to it by
        the other prior to termination and destroy internal documents
        encompassing any confidential or proprietary information subject to
        regulatory requirements;, except for one copy of disclosed confidential
        or proprietary information which may be retained by the recipient's
        legal counsel for the sole purpose of ensuring compliance with
        continuing obligations hereunder. Furthermore each Party agrees to keep
        confidential such information for a period of 5 (five) years after the
        effective date of such termination.

ARTICLE 7 - INTELLECTUAL PROPERTY RIGHTS

7.1     Except as is necessary for the proper performance of this Agreement by
        the Parties or as set out herein, no license, express or implied is
        granted by this Agreement by either Party to the other under any of its
        intellectual property rights.

7.2     Title to and property in all manufacturing records (which shall include
        but not be limited to all batch documentation and validation data) of
        Vyteris shall be and remain at all times exclusively vested in Vyteris.
        Ownership of intellectual property relating to process improvements
        shall be owned in accordance with the relevant provisions of the License
        and Development Agreement between the Parties of even date.

7.3     No process improvements or changes, in accordance with the Technical
        Agreement shall be employed by Vyteris in the manufacture of the
        Finished Packaged Goods unless the Parties have previously in writing
        agreed to the terms upon which such process improvements or changes are
        to be employed by Vyteris.

                                      -6-
<PAGE>

ARTICLE 8 - QUALITY OF PRODUCTS

8.1     QUALITY OF PRODUCTS

        The Products sold by Vyteris to Ferring pursuant hereto will be
        manufactured in all material respects in accordance with the Technical
        Agreement and its appendices.

8.2     The Technical Agreement shall set forth the Parties' obligations with
        respect to manufacturing quality audits by FDA and Ferring.

8.3     DEFECTIVE PRODUCTS

        Ferring will inspect Product delivered to Ferring in accordance with the
        Technical Agreement attached hereto however in the event that any
        quantity of the Product delivered to Ferring or its designee pursuant
        hereto fails to satisfy the requirements of this Section 8 including,
        without limitation, a failure to meet the Product Specification, the
        Ferring may reject the same by giving notice to the Vyteris within
        forty-five (45) days after receipt of such Product. Such notice will
        specify the manner in which the Product fails to meet the Product
        Specification or is otherwise defective. Any Products not rejected
        within such forty-five (45) day period shall be deemed accepted by
        Ferring. Any claims for failure to so conform or for such defects shall
        be made in writing by Ferring to Vyteris, indicating the non-conforming
        characteristics of the Products.

        Vyteris will, upon receipt of such written notification by Ferring,
        replace the defective Product and pay all freight and duty with respect
        to such replacement, provided however, that Ferring or its designee has
        stored the Products under proper conditions.

        In the event of any dispute as to whether any quantity of the Product
        delivered to Ferring or its designee fails to meet the requirements of
        this Section 8, such dispute shall be resolved by an independent testing
        organization acceptable to both Vyteris and Ferring.

        Nothing in this section shall prevent Ferring from pursuing a claim and
        recovering compensation from Vyteris for such Product in the event that
        such defects are not discovered until after the elapse of forty five
        days from delivery provided that Ferring followed the inspection
        requirements set forth in the Technical Agreement attached hereto, and
        such inspection did not reveal such defects.

8.4     Supplier must provide Product that meets a failure rate that is defined
        in the Technical Agreement - attached hereto.

ARTICLE 9 - RECALLS AND REGULATORY ACTIONS

9.1     RECALLS; COOPERATION

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        If either Party believes that a Product recall is appropriate, such
        Party will immediately notify the other Party prior to taking any action
        and the Parties will cooperate with each other in determining the
        necessity and nature of such action. If the Parties determine that a
        Product recall should be initiated, whether or not such recall has been
        requested or ordered by any governmental agency, Vyteris will fully
        cooperate with Ferring in notifying customers to return all such Product
        and will follow any other reasonable instructions provided by Ferring.

9.2     COMMUNICATIONS WITH REGULATORY AUTHORITIES

        Ferring shall be primarily responsible and shall have the principal
        right to interface with the FDA or other regulatory authority with
        respect to the Product. Vyteris shall be primarily responsible and shall
        have the principal right to interface with the FDA or other regulatory
        authority with respect to the Device Master File for the Product, and
        may communicate with the FDA or any regulatory authority regarding the
        Device Master File, provided that Vyteris shall provide copies to
        Ferring of all such communications.

9.3     COMPLAINTS AND INVESTIGATIONS

        Ferring shall be responsible for interfacing with its customers
        regarding all Product complaints and inquiries. Vyteris has the option
        to meet quarterly with Ferring to review complaints and inquiries.
        Vyteris shall cooperate fully with Ferring to conduct reasonable
        investigations to evaluate the complaint or inquiry. Ferring shall be
        responsible for contacting its customers for the purposes of such
        investigations. If Vyteris receives any information regarding adverse
        reactions or defects of the Products, Vyteris shall promptly inform
        Ferring thereof. Each party shall reasonably cooperate with the other in
        sharing any information that may constitute an adverse experience or
        complaint related to the Products and shall designate a representative
        responsible for the exchange of such information.

9.4     LIABILITY FOR RECALL COSTS

        If a Product recall is necessary for any reason, Vyteris and Ferring
        will investigate the cause of such recall and will bear the costs of
        such recall in proportion to the responsibility of each Party for the
        error necessitating the recall, if the result of an error, or, if not
        the result of an error, on such other equitable basis to which the
        Parties shall agree.

9.5     CONFIDENTIALITY

        All communications relating to any Recall will be held in confidence and
        will be subject to the terms of Article 6 of this Agreement; provided,
        however, that no Party shall be prohibited by this Section 9.5 from
        making any disclosure or providing any notice that may be required under
        applicable law.

                                      -8-
<PAGE>

ARTICLE 10 - LIMITATION OF LIABILITY

10.1    LOST, DAMAGED OR DESTROYED INGREDIENTS

        Vyteris's liability under this Agreement for any and all claims for
        lost, damaged or destroyed API that cannot be reworked is limited to a
        maximum of [*] per Vyteris production lot of Product or the cost of the
        API (to Ferring), whichever is less.

10.2    SPECIAL DAMAGES

        In no event shall either Party be liable to the other Party or to any
        other person for any special, consequential, exemplary or incidental
        damages (including lost or anticipated revenues or profits relating to
        the same), arising from or relating to this Agreement or the subject
        matter thereof.

10.3    WAIVER OF CLAIMS

        Ferring hereby waives or agrees to waive all claims against Vyteris for
        damages arising from lost, damaged or destroyed API that cannot be
        reworked to the extent that such claims exceed [*] per Vyteris
        production lot of Product (including costs, expenses, and attorneys'
        fees).

        The Parties specifically agree that any claims that Ferring may have
        against Vyteris exceeding the waiver amounts listed above (including
        costs, expenses, and attorneys' fees) will be made, if at all, against
        Ferring's insurance policy, if one exists.

ARTICLE 11 - REPRESENTATIONS AND WARRANTIES

11.1    VYTERIS

        Vyteris warrants that it shall during the term of this Agreement comply
        at all times in all material respects with the requirements set forth by
        the relevant regulatory authorities for the manufacture of Products for
        medical use.

        Vyteris warrants that it has the rights and licenses to supply the
        Products to Ferring as contemplated hereby and that it shall maintain
        such rights and licenses during the term hereof.

        Vyteris warrants that the Product shall be manufactured in all material
        respects in accordance with current Good Manufacturing Practices and in
        conformity with the Product Specifications, and that the Product shall
        be free from material defects.

11.2    INDEPENDENT CONTRACTORS

        The Parties are independent contractors, and this Agreement shall not be
        deemed to constitute either Party (or any of its employees) a partner,
        joint venturer, franchisee, servant, agent, or employee of the other.
        Except as otherwise expressly provided herein, no Party may make any
        representation, warranty or

                                      -9-
<PAGE>

        commitment, whether express or implied, on behalf of or incur any
        charges or expenses for, or in the name of, any other Party.

ARTICLE 12 - INSURANCE

        Vyteris carries the risk for loss of or damage to the Product and any
        intermediates, starting materials and packaging materials until delivery
        of the Product to Ferring. Vyteris shall put in place and maintain
        during the term hereof adequate insurance for such risks. Any risks of
        loss of product after delivery in accordance with Appendix 2 shall be
        the responsibility of Ferring.

ARTICLE 13 - INDEMNIFICATION

13.1    INDEMNIFICATION

        Each Party will indemnify, defend and hold the other party harmless from
        and against any and all claims, judgments, costs, awards, expenses
        (including reasonable attorneys' fees) and liabilities of every kind to
        any third party arising out of any breach by such Party of its
        warranties and covenants or other obligations contained herein; provided
        that, with respect to product liability, Vyteris will be liable for
        claims arising from its fault or negligence in manufacturing the
        Product, and Ferring will be liable for claims arising from its fault or
        negligence in labeling, marketing, selling or distributing the Product.

13.2    Vyteris undertakes to indemnify, defend and hold harmless Ferring
        against all expenses arising in connection with third party claims of
        infringement of patent or other intellectual property rights, relating
        to the iontophoretic methodology or techniques used by Vyteris in the
        manufacturing of the Product.

13.3    NOTIFICATION

        Any party asserting a right to indemnification hereunder shall notify
        the other party as soon as reasonably practicable after forming a belief
        that a claim exists that may be subject to the indemnification
        provisions of this Section 13, but in no event later than thirty (30)
        days after receiving notice of any third party claim, provide the other
        party with all available information and assistance and afford the other
        party the opportunity, at such other party's expense, to defend or
        settle the claim; The indemnified Party shall provide reasonable
        cooperation to the indemnifying Party in defense of any such claims or
        suits, including, but not limited to, affording complete access to all
        relevant records. Nothing herein shall prevent the indemnified Party
        from retaining counsel of its choice, at such Party's expense, to
        monitor the defense, trial, or settlement of this matter, and the
        indemnifying Party and its counsel shall reasonably cooperate with such
        counsel.

                                      -10-
<PAGE>

ARTICLE 14 - TERM AND TERMINATION

14.1    TERM

        This Agreement shall become effective on the date of receipt by Vyteris
        of the first purchase order for production of a full scale batch that
        will be used for commercial sale, which may be earlier than the date of
        FDA approval for commercial sale and shall remain in full force for
        fifteen (15) years, unless terminated earlier by either Party in
        accordance with this Agreement.

14.2    OPTION TO RENEW

        Ferring shall have the option to request an extension of this Agreement
        no less than thirty-six (36) months prior to expiration. If, after one
        hundred and eighty (180) days from Ferring's notice that it wishes to
        enter into extension discussions, Vyteris declines to enter into
        negotiations or fails to accept terms no less financially beneficial
        than set out herein, then Ferring shall be free to find another supplier
        and Vyteris shall provide such staff and/or equipment as may be
        reasonably necessary to effect a technology transfer to the new
        manufacturer. In addition, Vyteris shall at Ferring's request produce
        safety stock of up to twelve (12) months during the final twelve (12)
        months of the Supply Agreement. The royalty shall be payable on sales of
        such safety stock on a first in, first out basis.

        If Ferring does not exercise its option or the Parties are unable to
        reach agreement on commercial terms, Vyteris shall be under no
        obligation to provide any technology transfer to Ferring or its new
        supplier.

14.3    TERMINATION FOR CAUSE

        Except as otherwise provided in Article 15 below regarding Force
        Majeure, either Party may terminate this Agreement:

        (a) upon or after the breach of any material provision of this Agreement
        or the License by the other Party if the other Party has not cured a
        curable breach within forty five (45) days after written notice thereof
        by the non-breaching Party; or

        (b) if the other Party voluntarily commences any action for or seeks any
        arrangement with its creditors, or for liquidation, reorganization
        (other than for corporate reorganization), dissolution or relief under
        any bankruptcy, insolvency or similar law; or

        (c) if a proceeding is commenced or an order, judgment or decree is
        entered seeking an arrangement with its creditors or the liquidation,
        reorganization, dissolution of the other Party or any similar act or any
        other relief under any bankruptcy, insolvency or similar law against the
        other Party, without its consent, which continues undismissed or
        unstayed for a period of forty five (45) days. During the first twelve
        months from the start of commercial production which shall include the
        period of manufacture of any validation batch completed within

                                      -11-
<PAGE>

        three months of receipt of marketing authorization and where necessary
        pricing approval in any country for purposes of (a) above, a failure by
        Vyteris to supply Ferring with Products pursuant to this Agreement that
        is not cured within forty-five (45) days following receipt of written
        notice from Ferring of such failure shall not constitute grounds for
        terminating this Agreement if, within fifteen (15) days following
        receipt of such notice, Vyteris provides Ferring with written notice and
        evidence reasonably satisfactory to Ferring that the failure has
        resulted from circumstances beyond the reasonable control of Vyteris and
        not as a result of obligations to supply products to persons other than
        Ferring ("Remediation Notice"). Such Remediation Notice shall include a
        written plan (the "Remediation Plan") setting forth the actions that
        Vyteris shall take to cure the supply failure as soon as commercially
        possible, and shall be subject to the review and approval by Ferring,
        which shall not be unreasonably withheld, conditioned or delayed.
        Vyteris shall not be considered in breach of Section 14.3(a) as a result
        of the supply failure if the Remediation Plan is approved by Ferring and
        Vyteris fulfills all of its supply and related obligations under such
        plan within the time periods provided thereby. Vyteris shall use its
        best efforts to cure any supply failure, and shall be considered in
        breach under Section 14.3(a) if it fails to perform any of its
        obligations under the Remediation Plan in a manner reasonably
        satisfactory to Ferring.

14.4    EFFECT OF EXPIRATION OR TERMINATION

        Expiration or termination of this Agreement shall not relieve the
        Parties of any obligation accruing prior to such expiration or
        termination, and the provisions of this section 14.5, section 14.6 and
        the Articles 6, 7, 8, 10, 13, 16 & 17 shall survive the expiration or
        termination of this Agreement.

14.5    REMAINING STOCK

        In the event of termination other than as a result of breach by Ferring,
        Ferring shall have the right, but not the obligation, to purchase all
        usable stock of the Product which was manufactured for Ferring.

ARTICLE 15 - FORCE MAJEURE

        Any significant unexpected event which is beyond the reasonable control
        of a party for which such party cannot reasonably have been expected to
        have taken account and including, but without prejudice to the foregoing
        generality, events resulting from an act of God, lightning, fire, flood,
        earthquake, accumulation of snow or ice, lack of water arising from
        weather or environmental problems, strike, lock-out or other industrial
        disturbance, act of the public enemy, war declared or undeclared; threat
        of war; terrorist act; blockade, revolution, riot, insurrection, civil
        commotion, public demonstration, sabotage, act of vandalism, prevention
        from or hindrance in obtaining any raw materials, energy or other
        supplies,

                                      -12-
<PAGE>

        explosion, fault or failure of plant or machinery (which could not have
        been prevented by good industry practice); government restraint, act of
        legislature or a directive or requirement of the competent authority
        affecting a party or its subcontractor providing that such party or its
        subcontractor's lack of funds shall not be interpreted as a cause beyond
        such party's reasonable control. In the event that such causes continue
        for more than three (3) consecutive months, each party will have the
        right to terminate the Agreement and neither of the Parties will have a
        right to reimbursement or any claim for damages as a result of the
        cancellation of this Agreement.

ARTICLE 16 - GOVERNING LAW

        This Agreement and any and all matters arising directly or indirectly
        herefrom, including without limitation the execution, validity,
        construction and effect hereof, shall be governed by and construed and
        enforced in accordance with the internal laws of the State of New York
        applicable to agreements made and to be performed entirely in such
        state, without giving effect to the conflict of law principles thereof.
        The Parties expressly agree that the United Nations Convention on
        Contracts for the International Sale of Goods shall not apply to this
        Agreement or any Party's performance hereunder.

ARTICLE 17 - RESOLUTION OF DISPUTES

        Any disputes arising from or related to this Agreement shall be resolved
        in accordance with the procedures set out in Appendix C of the
        Development and License Agreement between the Parties of even date.

                                      -13-
<PAGE>

ARTICLE 18 - MISCELLANEOUS

18.1    NOTICES

        All notices and other communications required or permitted to be given
        or made pursuant to this Agreement shall be in writing signed by the
        sender and shall be deemed duly given (a) on the date delivered, if
        personally delivered, (b) on the date sent by telecopier with automatic
        confirmation by the transmitting machine showing the proper number of
        pages were transmitted without error providing such transmission was
        during normal business hours on a normal business day or if not the
        first normal business day thereafter, (c) on the business day after
        being sent by Federal Express or another recognized overnight mail
        service which utilizes a written form of receipt for next day or next
        business day delivery, or (d) three (3) business days after mailing, if
        mailed by United States postage-prepaid certified or registered mail,
        return receipt requested, in each case addressed to the applicable party
        to the address set forth below in this Section 18.1, or to such other
        address as the addressee shall have last furnished in writing below;
        provided that a party may change its address for receiving notice by the
        proper giving of notice hereunder:

        FERRING PHARMACEUTICALS INC            400 Rella Boulevard,
                                               Suite 300
                                               Suffern, NY 10901
                                               USA
                                               (Attention:  President)

          with a copy to

           FERRING INTERNATIONAL CENTER SA     Avenue du Rhodanie 40
                                               CH 1007 Lausanne
                                               Switzerland
                                               (Att General Counsel)

         VYTERIS INC                           13-01 Pollitt Drive
                                               Fair Lawn, NJ 07410
                                               USA
                                               (Attention:Chief Executive
                                               Officer)

18.2    ASSIGNMENT

        Neither party may assign this agreement to a third party without the
        prior written consent of the other party. Notwithstanding the foregoing,
        either party may assign its rights and obligations under this Agreement
        without the consent of the other party to any company: (a) that is an
        Affiliate; (b) with which it may merge or consolidate; (c) to whom it
        may transfer substantially all of its assets to which this Agreement
        relates; or (d) by which it may be acquired (including in each case any
        company created as a new vehicle upon any such merger, transfer or

                                      -14-
<PAGE>

        acquisition), provided that: (1) such company undertakes directly to the
        other original party under this Agreement to be bound by the terms of
        this Agreement; and (2) upon such merger, transfer or acquisition, all
        rights under this Agreement are also vested in such company and (3) in
        the case of Vyteris such company can demonstrate to Ferring's reasonable
        satisfaction that the successor company is fully capable or carrying out
        Vyteris' obligations hereunder .

18.3    AMENDMENTS

        No change, modification, extension, termination or waiver of this
        Agreement (or its Appendices), or any of the provisions herein
        contained, shall be valid unless made in writing and signed by duly
        authorized representatives of the Parties hereto.

18.4    ENTIRE AGREEMENT

        This Agreement and the Appendices, together with the License and all
        Exhibits thereto, hereto embody the entire understanding between the
        Parties and supersede any prior understanding and agreements (whether or
        not in writing) between and among them respecting the subject matter
        hereof. There are no other representations, agreements, arrangements or
        understandings, oral or written, between the Parties hereto relating to
        the subject matter of this Agreement.

18.5    SEVERABILITY

        Any of the provisions of this Agreement which are determined to be
        invalid or unenforceable in any jurisdiction shall be ineffective to the
        extent of such invalidity or unenforceability in such jurisdiction,
        without rendering invalid or unenforceable the remaining provisions
        hereof and without affecting the validity or enforceability of any of
        the terms of this Agreement in any other jurisdiction.

18.6    WAIVER

        The waiver by either Party hereto of any right hereunder or the failure
        to perform or of a breach by the other Party shall not be deemed a
        waiver of any other right hereunder or of any other breach or failure by
        said other Party whether of a similar nature or otherwise.

18.7    COUNTERPARTS

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

                                      -15-
<PAGE>

In Witness Whereof, the Parties have caused this Agreement to be executed by
their duly authorized representatives.

FERRING PHARMACEUTICALS INC.               VYTERIS INCORPORATED

/s/ [Signature of Authorized Person]       /s/ [Signature of Authorized Person]
------------------------------------       ------------------------------------
Print name: [Authorized Person]            Print name: [Authorized Person]
Title: President & CEO                     Title: President & CEO
Date: 9/27/04                              Date: 9/27/04

                                      -16-
<PAGE>

APPENDIX 1 to Supply Agreement between Vyteris Incorporated and Ferring
Pharmaceuticals Inc., effective March ___, 2004

PRODUCT TRANSFER PRICES AND PAYMENT

1.  PRODUCT TRANSFER PRICE

Cost Schedule for Finished Packaged Goods

The transfer price shall be based on the number of patches purchased. Price does
not include the API (to be provided by Ferring) nor packaging into Final
Commercial Product.

[*]

o       Year one prices to be determined on a blended cost basis across the
relevant volume ranges
o       Subsequent year prices at rate based on total annual purchase during
that year. Payment will be on the basis on forecast and any adjustment made
within thirty days of year end.
o       [*]
o       Minimum purchase of 250,000 patches/year.

The above prices are based on the parties' present knowledge regarding the
anticipated Product specification and configuration, and current economic
conditions. In the event that the anticipated cost to manufacture the Product
increases as a result of extraordinary increases in costs of components or
materials or changes made to the product specification or configuration such
that there is a material change in cost of manufacture, the parties shall, at
Vyteris's request, discuss and agree to a fair and equitable upward adjustment
to the transfer price schedule set forth in paragraph 1 of this Appendix.

2.  MINIMUM PURCHASES

Ferring agrees to a minimum annual purchase requirement of [*]. Such requirement
shall be met at Ferring's option, either by [*]. Such payment, if any, shall be
made within 30 days after the end of the annual period.

                                      -17-
<PAGE>

3. SAMPLES
Vyteris agrees to provide Ferring with Product samples at Vyteris' standard cost
through the first five years post commercial launch of the Product. Such cost
shall not exceed, however, the marginal price for that year.

4.  PAYMENT
Prices payable by Ferring to Vyteris shall be paid by Ferring within 30 (thirty)
days after receipt of the invoice to be sent upon dispatch of the Products the
invoice refers to. Delays may be necessary if there are production or quality
issues that are impacting Ferring's release of the Product.

5.  CURRENCY
The payments due shall be payable to Vyteris in US dollars.

6.  INVOICE ADDRESS
Invoices to Ferring are to be sent to:

Ferring Pharmaceuticals Inc
Attn. Accounts Payable
400 Rella Boulevard
Suite 300
Suffern, New York 10901

                                      -18-
<PAGE>

APPENDIX 2 to Supply Agreement between Vyteris Incorporated and Ferring
Pharmaceuticals Inc., effective [insert date], 2004

LOGISTIC ARRANGEMENTS

1.      FORECASTS

Ferring shall provide Vyteris, no later than ten (10) business days after
Ferring's receipt of notification from the FDA that it has been approved to
market the Product in the United States (or prior to such time at Ferring's
discretion), a written non-binding rolling demand forecast for the Products
covering a period of 18 (eighteen) months and indicating the quantity of
Products that Ferring then anticipates it will require Vyteris to produce and
deliver to Ferring each month during such eighteen (18) month period ("Product
Order Forecast"). Such eighteen (18) month Product Order Forecast shall be
updated by Ferring monthly on the first day of the month on a non-binding
rolling basis.

Within 5 (five) business days after receipt of the forecast Vyteris is to
confirm its capability of delivering the Product according to the first nine
months of the forecast. Vyteris will make all efforts to meet Ferring's demand
schedule.

2.      PURCHASE ORDER / ORDER CONFIRMATION

Ferring shall provide to Vyteris, at any time prior to regulatory approval to
market the Product in the United States, and no later than ten (10) business
days after such regulatory approval, an initial binding, non-cancelable purchase
order for the Products to be delivered within such reasonable time period to
which the parties may agree, specifying the desired quantity of Product, dates
for shipments and shipping instructions (a "Purchase Order"). Thereafter, firm
Purchase Orders shall be sent to Vyteris from Ferring at least four (4) months
before delivery. Vyteris is to confirm each firm Purchase Order in a written
order confirmation within 5 (five) business days after receipt of the firm
Purchase Order. Vyteris will make all efforts to meet Ferring's demand schedule.

Notwithstanding anything contained herein to the contrary, each Purchase Order
submitted by Ferring shall be for a minimum quantity of Products equal to
eighty- percent (80%) of the quantity of Products set forth in the most recent
Product Order Forecast furnished by Ferring under this paragraph 1 of this
Agreement for such calendar quarter.

Notwithstanding any other provisions of this Appendix or the Agreement, provided
that Vyteris shall have used commercially reasonable efforts to manufacture and
supply the quantity of Products ordered by Ferring, Vyteris shall have no
liability to Ferring for any failure, nor shall it constitute a breach of this
Agreement, for Vyteris to fail to supply Products under any Purchase Order
submitted by Ferring to Vyteris for any applicable calendar quarter to the
extent that such Purchase Order exceeds one hundred twenty-five

                                      -19-
<PAGE>

percent (125%) of the amount of Products forecast by Ferring in the most recent
Product Order Forecast submitted by it to Vyteris for the applicable calendar
quarter. With respect to Product ordered more than twelve months after the first
commercial sale of Product for such orders that are less than 125% of Forecasat
Ferring shall be entitled to a discount of five percent (5%)per month for Late
Delivery so long as such delivery remains outstanding. "Late Delivery" in this
section means delivery more than 30 days after the committed delivery date
stated in the accepted order.

3.      VYTERIS COMPONENT ORDERS

Ferring will pay for any components purchased by Vyteris in good faith as the
basis of a four month lead time and Ferring's most recent forecast to the extent
such components cannot be used for further manufacture.

4.      DELIVERY TERMS

The Products are to be delivered Ex Works (INCOTERMS 2000) at Vyteris' plant;
however Vyteris shall be responsible for loading Products on to the vehicles of
Ferring's nominated carrier.

In the event of conflict, the terms of the Supply Agreement (and its appendices)
shall take precedence over Incoterms 2000.

Such title as Vyteris has in Products and risk of loss or of damage to Products
shall remain with Vyteris until Products are loaded onto the carrier's vehicle
by Vyteris for shipment at Vyteris's plant, at which time title and risk of loss
or damage shall transfer to Ferring. Ferring shall (i) arrange for shipping and
insurance, to be paid by Ferring. Products shall be transported in accordance
with the Product Specifications.

5.      DELAY

In the event Vyteris cannot meet the confirmed delivery date it shall inform
Ferring in writing as early as possible before the confirmed delivery date
together with the new delivery date (or the best estimate for the new date).

6.      TRANSPORT AND STORAGE OF PRODUCTS

Vyteris and Ferring will transport and store the Products based on the
appropriate storage conditions established during the Development Program.

Documents

The following documents are to be sent before delivery of the Product:
1)       purchase order                              by Ferring
2)       purchase order confirmation                 by Vyteris

                                      -20-
<PAGE>

3)       deviation report when necessary             by Vyteris
4)       delivery notification                       by Vyteris
5)       Production and Packaging records
6)       Vyteris Release

The following documents are to be sent together with the delivery of the
Product:
1)       despatch notice                             by Vyteris
2)       forwarding documents                        by Vyteris

The following documents are to be sent by separate mail.
1)       invoice                                     by Vyteris
2)       Certificate of Analysis by fax to  by Vyteris
     Senior Manager Quality  fax  845-770-2661

                                      -21-
<PAGE>

APPENDIX 3 to Supply Agreement between Vyteris Incorporated and Ferring
Pharmaceuticals, Inc., effective 2004

CONTACT PERSONS

At Vyteris                              At Ferring

Commercial matters:                 Commercial matters:

President                               President
Vyteris Inc.                            Ferring Pharmaceuticals Inc.
13-01 Pollitt Drive                     400 Rella Boulevard, Suite 300
Fair Lawn                               Suffern
New Jersey 07410                        NY 109010
USA

Logistic matters:                       Logistic matters:

Director of Materials Management        Senior Management Manufacturing Services
Vyteris Inc.                            Ferring Pharmaceuticals Inc.
13-01 Pollitt Drive                     400 Rella Boulevard, Suite 300
Fair Lawn                               Suffern
New Jersey 07410                        NY 109010
USA

Quality / Technical                     Quality / Technical
matters:                                matters:

Associate Director, Quality Assur.      Senior Manager, Quality Services
Vyteris Inc.                            Ferring Pharmaceuticals Inc.
13-01 Pollitt Drive                     400 Rella Boulevard, Suite 300
Fair Lawn                               Suffern
New Jersey 07410                        NY 109010
USA

                                      -22-
<PAGE>

APPENDIX 4 to Supply Agreement between Vyteris Incorporated and Ferring
Pharmaceuticals Inc., effective 2004

TECHNICAL AGREEMENT

                                      -23-<PAGE>

                              EMPLOYMENT AGREEMENT

        This Employment Agreement ("AGREEMENT"), dated as of September 24, 2002,
is entered into between VYTERIS, INC., a Delaware corporation, having a place of
business at 13-01 Pollitt Drive, Fair Lawn, New Jersey 07410 ("EMPLOYER"), and
C. GREGORY ARNOLD, an individual residing at 8841 S. Tracy Drive, Sandy, Utah
84093 ("Employee").

        WHEREAS, Employer desires to employ Employee as a full-time employee of
Employer; and

        WHEREAS, Employee is willing to accept such employment on the terms and
conditions set forth in this Agreement.

        NOW, THEREFORE, in consideration of the mutual agreements set forth
herein, Employer and Employee hereby agree as follows:

                                   ARTICLE I
                EMPLOYMENT, POSITION DUTIES AND RESPONSIBILITIES

        1.01    EMPLOYMENT. Employer agrees to, and does hereby, employ
Employee, and Employee agrees to, and does hereby accept such employment, upon
the terms and subject to the conditions set forth in this Agreement. Employee
represents and warrants to Employer that (i) Employee has the legal capacity to
execute and perform this Agreement, (ii) this Agreement is a valid and binding
agreement enforceable against Employee according to its terms, and (iii) the
execution and performance of this Agreement by Employee does not violate the
terms of any existing agreement or understanding to which Employee is a party or
by which Employee may be bound.

        1.02    POSITION, DUTIES AND AUTHORITY. During the Term (as defined
below), Employee shall serve as Vice President, Manufacturing Operations of the
Employer or in such other position or capacity as Employer shall request and
shall have such responsibilities, duties and authority as may, from time to
time, be reasonably assigned by Employer's Board of Directors ("Board"), the
President of the Employer and/or the President's nominee. During the Term,
Employee shall serve Employer, faithfully and to the best of Employee's ability,
and shall devote all of Employee's business time, attention, skill and efforts
exclusively to the business and affairs of Employer (including its subsidiaries
and affiliates) and the promotion of its interests. Notwithstanding the
foregoing, Employee may engage in charitable, educational, religious, civic and
similar types of activities (all of which shall be deemed to benefit Employer)
to the extent that such activities do not inhibit or prohibit the performance of
Employee's duties hereunder or inhibit or conflict in any way with the business
of Employer, its subsidiaries and affiliates. Employee's principal base of
operation for the performance of Employee's duties under this Agreement shall be
in the State of New Jersey; provided, however, that Employee shall perform such
duties and responsibilities at such other places as shall from time to time be
reasonably necessary to fulfill Employee's obligations under this Agreement in
the discretion of Employer.

<PAGE>

                                   ARTICLE II
                                      TERM

        2.01    TERM OF EMPLOYMENT. Employee's employment shall commence on
October 21, 2002 ("COMMENCEMENT DATE") and, subject to earlier termination
pursuant to Article I hereof, shall continue until October 21, 2005 (the
"TERM").

                                  ARTICLE III
                            COMPENSATION AND EXPENSES

        3.01    COMPENSATION AND BENEFITS. For all services rendered by Employee
in any capacity during the Term, including, without limitation, services as an
officer, director or member of any committee of Employer, or any subsidiary,
affiliate or division thereof, Employee shall be compensated as follows
(subject, in each case, to the provisions of Article IV below):

                (A)     BASE SALARY. During the Term, Employer shall pay to
Employee a base salary at the rate of $175,000 on an annualized basis ("BASE
SALARY"). Employee's Base Salary shall be subject to periodic review which shall
occur at least annually and such periodic increases as the Board shall deem
appropriate in accordance with Employer's procedures and practices in effect
from time to time regarding the salaries of employees. Base Salary shall be
payable in accordance with the customary payroll practices of Employer, but in
no event less frequently than twice per month.

                (B)     DISCRETIONARY BONUS. Commencing with calendar year 2003,
during the Term, Employee may, based upon Employee's satisfactory performance
(as determined by Employer) with respect to identified goals and objectives, be
eligible for an annual cash bonus ("BONUS"). The goals, objectives, criteria and
other terms and conditions with respect to the Bonus for any calendar year will
be jointly determined by Employee and Employer at the beginning of each such
calendar year; provided, however, they may be subject to change from time to
time as reasonably determined by Employer. Employee's target Bonus for the
calendar years 2003, 2004 and 2005 shall be 10%, 15% and 20% of Employee's Base
Salary, respectively, prorated for the period of Employee's employment during
such calendar year. Employee understands and agrees that he shall not be
eligible for a Bonus with respect to his performance or otherwise in calendar
year 2002.

        Bonus awards, if any, shall be determined after the close of Employer's
fiscal year and distributed on a date determined by the annual compensation
calendar established by the Compensation Committee of Employer from time to
time. In order to be eligible to receive any Bonus payment, except as otherwise
specifically set forth in Section 4.02, Employee must be employed by Employer
both at the time the amount of the Bonus, if any, is determined, and at the time
the Bonus is to be paid.

                (C)     SIGN-ON STOCK OPTION GRANT. On the Commencement Date,
Employer shall grant to Employee stock options covering 100,000 shares of common
stock of Employer. Such stock options shall be subject to the terms and
conditions established within the Vyteris, Inc. 2001 Stock Option Plan (the
"PLAN") and a separate stock option grant agreement between Employer and
Employee that sets forth, among other things, the exercise price, expiration
date and vesting schedule of such options.

                                       -2-
<PAGE>

                (D)     INCENTIVE STOCK OPTION GRANTS. During the Term,
following one full calendar year of employment, Employee shall be eligible to
receive from time to time incentive stock option grants in amounts to be
approved by Employer's Compensation Committee in its sole discretion and which
shall be granted, if at all, after the close of a fiscal year and on a date
determined by the annual compensation calendar established from time to time.
Incentive stock option grants will be based upon a combination of company
performance and performance by Employee, as determined by Employer in its sole
discretion. Such stock option grants will be subject the terms and conditions
established within the Plan or any successor stock option plan as may be in
place from time to time and a separate stock option grant agreement between
Employer and Employee that sets forth, among other things, the exercise price,
expiration date and vesting schedule of such options.

                (E)     BENEFITS. During the Term, Employee shall be entitled to
participate in all Employer's employee benefit plans and programs as Employer
maintains from time to time during the Term for the benefit of its
similarly-situated employees, in each case subject to the eligibility
requirements and other terms and provisions of such plans or programs. Employer
may amend, modify or rescind any employee benefit plan or program and change
employee contribution levels without notice in its discretion.

                (F)     VACATION SICK AND PERSONAL DAYS. During the Term,
Employee shall be entitled to 4 weeks paid vacation, and sick and personal days
in accordance with Employer's policies with respect to such vacation, sick and
personal days in place from time to time.

        3.02    EXPENSES. Employee shall be entitled to receive reimbursement
from Employer for all reasonable out-of-pocket expenses incurred by Employee
during the Term in connection with the performance of Employee's duties and
obligations under this Agreement, according to Employer's expense account and
reimbursement policies in place from time to time and provided that Employee
shall submit reasonable documentation with respect to such expenses.

        3.03    RELOCATION ALLOWANCE. Employee shall be entitled to a Relocation
Offset Allowance ("ALLOWANCE") of up to $30,000, grossed-up for income tax
purposes. Allowances will be paid to Employee at the grossed-up amount as such
relocation expenses are incurred and within 30 days of submission by Employee to
Employer of any invoices or other such valid documentation of the expense. All
expenses reimbursement amounts are to be approved by Employer prior to
reimbursement to Employee. To qualify for the Allowance, Employee is expected to
relocate to within reasonable commuting distance from the Employer's location in
Fair Lawn, NJ. In the event Employee voluntarily terminates his employment
pursuant to Section 4.01(D) or otherwise prior to the expiration of the Term or
Employer terminates Employee's employment for Cause pursuant to Section 4.01(B)
prior to the expiration of the Term, Employee will be liable for repaying to
Employer in full the portion of the Allowance paid to Employee and Employee
hereby authorizes Employer, at its option, to deduct any such amounts from any
amounts owed by Employer to Employee upon termination of this Agreement, with
the balance, if any, to be paid directly by Employee.

        3.04    TEMPORARY LIVING EXPENSES. Employee shall be entitled to
reimbursement for temporary living expenses of up to $2,000 per month for a
period not exceeding the first 6 months of the Term. All temporary living
reimbursement expenses are to be first approved by

                                       -3-
<PAGE>

Employer and shall cover only those expenses associated with rent, lodging and
utilities incurred prior to Employee obtaining permanent lodging within a
reasonable commuting distance of Fair Lawn, New Jersey, as substantiated by
reasonable invoices.

        3.05    MORTGAGE DIFFERENTIAL. In order to partially compensate Employee
for any increased costs associated with obtaining permanent housing, commencing
upon Employee's purchase of a permanent residence within a reasonable commuting
distance of Fair Lawn, New Jersey, during the Term, as additional compensation,
Employer shall pay to Employee: (a) during first year of the Term, a sum equal
to the lesser of (i) $1,750 per month, and (ii) the excess of Employee's monthly
interest payment with respect to the purchase money mortgage on such permanent
residence over the monthly interest payment paid by Employee with respect to the
first mortgage on his current home in Sandy, Utah (the "MORTGAGE DIFFERENTIAL");
(b) during second year of the Term, a sum equal to the lesser of (i) $1,250 per
month, and (ii) the Mortgage Differential, and (c) during the third year of the
Term, a sum equal to the lesser of (i) $750 per month, and (ii) the Mortgage
Differential.

                                   ARTICLE IV
                                   TERMINATION

        4.01    EVENTS OF TERMINATION. This Agreement and Employee's employment
hereunder shall terminate upon the occurrence of any one or more of the
following events:

                (A)     DEATH. In the event of Employee's death, this Agreement
and Employee's employment hereunder shall automatically terminate on the date of
death.

                (B)     TERMINATION BY EMPLOYER FOR CAUSE. Employer may, at its
option, terminate this Agreement and Employee's employment hereunder for Cause
(as defined herein) upon giving notice of termination to Employee. Employee's
employment shall terminate on the date on which such notice shall be given. For
purposes hereof, "Cause" shall mean Employee's (i) conviction of, guilty plea to
or confession of guilt of a felony or act involving moral turpitude, (ii)
commission of a fraudulent, illegal or dishonest act, (iii) willful misconduct
or gross negligence which reasonably could be expected to be injurious in the
reasonable discretion of Employer to the business, operations or reputation of
Employer or any of its affiliates or subsidiaries (monetarily or otherwise),
(iv) violation of Employer's policies or procedures in effect from time to time,
(v) failure to perform Employee's duties as assigned to Employee from time to
time, or (vi) other material breach of this Agreement (including, without
limitation, a breach of Employee's obligations under Article V hereof).

                (C)     WITHOUT CAUSE BY EMPLOYER. Employer may, at its option,
at any time terminate Employee's employment for no reason or for any reason
whatsoever (other than for Cause) by giving two (2) weeks prior written notice
(or payment of two (2) weeks Base Salary in lieu of notice) to Employee of its
intention to terminate this Agreement and Employee's employment hereunder.

                (D)     TERMINATION BY EMPLOYEE. Employee may terminate this
Agreement and Employee's employment hereunder for no reason or for any reason
whatsoever by giving (30) days prior written notice of termination to Employer;
provided, however, that Employer reserves

                                       -4-
<PAGE>

the right to accept Employee's notice of termination and to accelerate such
notice and make Employee's termination effective immediately, or on any other
date prior to Employee's intended last day of work as Employer deems
appropriate.

                (E)     DISABILITY. To the extent permitted by law, in the event
of Employee's physical or mental disability which prevents Employee from
performing Employee's duties under this Agreement for a period of at least 90
consecutive days in any 12-month period or 120 non-consecutive days in any
12-month period, Employer may terminate this Agreement and Employee's employment
hereunder upon written notice to Employee.

                (F)     MUTUAL AGREEMENT. This Agreement and Employee's
employment hereunder may be terminated at any time by the mutual agreement of
Employer and Employee.

                (G)     EXPIRATION OF TERM. This Agreement and Employee's
employment hereunder shall automatically terminate upon the expiration of the
Term. Any employment of Employee by Employer after expiration of the Term, in
the absence of a written employment agreement or written extension hereof, shall
be deemed employment at-will.

        4.02    EFFECT OF TERMINATION. In the event of termination of this
Agreement and Employee's employment hereunder in accordance with Section 4.01 or
otherwise, this Agreement shall terminate and, except as set forth in the
following sentence, Employer's sole obligation under this Agreement shall be to:
(a) pay Employee (or Employee's estate in the event of Employee's death), Base
Salary earned, but not yet paid to Employee, prior to the effective date of such
termination; and (b) reimburse Employee for any expenses incurred by Employee
through the date of such termination in accordance with Section 3.02 hereof.
Notwithstanding the foregoing, in the event Employer terminates this Agreement
without Cause pursuant to Section 4.01(C) at any time prior to the expiration of
the Term, subject to Employee executing a general release in a form satisfactory
to Employer, Employer shall also pay to Employee (i) Base Salary for the shorter
of one hundred eighty (180) days or until the expiration of the Term, payable in
accordance with the customary payroll practices of Employer (but in any event,
not less frequently than twice per month), (ii) any Bonus awarded prior to the
date of termination with respect to performance in the calendar year prior to
the calendar year in which the date of termination occurred, but not yet paid,
payable on the date such Bonus was otherwise to be paid, (iii) a pro-rata
portion (based upon the date of termination) of the amount of the Bonus, if any,
awarded by Employer for the calendar year in which the date of termination
occurred, as determined by the Employer at the end of such calendar year,
payable on the date such Bonus was otherwise to have been paid, and (iv) any
amounts owed but unpaid by Employer to Employee pursuant to Sections 3.03, 3.04
and 3.05 through the date of termination.

                                   ARTICLE V
           CONFIDENTIALITY, ASSIGNMENT OF INVENTIONS, NON-COMPETITION,
                      NON-SOLICITATION AND OTHER COVENANTS

        5.01    CONFIDENTIALITY. While working or performing services for
Employer or otherwise, Employee may develop or acquire knowledge in Employee's
work or from directors, officers, employees, agents or consultants of Employer
and its subsidiaries and affiliates (collectively, the "COMPANY") or otherwise
of Confidential Information relating to the Company,

                                       -5-
<PAGE>

its business or potential business. "Confidential Information" includes all
trade secrets, know-how, show-how, theories, technical, operating, financial,
and other business information, whether or not reduced to writing or other
medium and whether or not marked or labeled confidential, proprietary or the
like, specifically including, but not limited to, information regarding source
codes, software programs, computer systems, algorithms, formulae, apparatus,
concepts, creations, costs (including, without limitation, manufacturing costs),
plans, materials, enhancements, tolerances, research, specifications, works of
authorship, techniques, documentation, models and systems, sales and pricing
techniques, designs, inventions, discoveries, products, improvements,
modifications, methodology, processes, concepts, records, files, memoranda,
reports, plans, proposals, price lists, client, customer, supplier,
collaborator/partner or distributor information, product development and project
procedures. Confidential Information does not include general skills, experience
or information that is generally available to the public, other than information
which has become generally available as a result of Employee's direct or
indirect act or omission.

        With respect to Confidential Information of the Company:

                (A)     Employee will use Confidential Information only in the
performance of Employee's duties for Employer. Employee will not use
Confidential Information at any time (during or after Employee's employment with
Employer) for Employee's personal benefit, for the benefit of any other
individual or entity, or in any manner adverse to the interests of the Company
and its clients and customers;

                (B)     Employee will not disclose Confidential Information at
any time (during or after Employee's employment with Employer) except to
authorized Employer personnel, unless Employer consents in advance in writing or
unless the Confidential Information indisputably becomes of public knowledge or
enters the public domain (other than through Employee's direct or indirect act
or omission);

                (C)     Employee will safeguard the Confidential Information by
all reasonable steps and abide by all policies and procedures of Employer in
effect from time to time regarding storage, copying and handling of documents;
and

                (D)     Employee will return all materials, substances, models,
software, prototypes and the like containing and/or relating to Confidential
Information, together with all other property of the Company (all of which shall
remain the exclusive property of the Company) and its clients and customers, to
Employer when Employee's employment relationship with Employer terminates or
otherwise on demand and, at that time Employee will certify to Employer, in
writing and under oath, in the form attached hereto as Exhibit A, that Employee
has complied with this Agreement. Employee shall not retain any copies or
reproductions of correspondence, memoranda, reports, notebooks, drawings,
photographs, databases, diskettes, or other documents or electronically stored
information of any kind relating in any way to the business, potential business
or affairs of the Company and its clients and customers.

        5.02    ASSIGNMENT OF DEVELOPMENTS. Employee will disclose promptly and
fully to Employer and to no one else: (i) all inventions, ideas, improvements,
discoveries, works

                                       -6-
<PAGE>

modifications, processes, software programs, works of authorship, documentation,
formulae, techniques, designs, methods, trade secrets, technical specifications
and technical data, know-how and show-how, concepts, expressions or other
developments whatsoever or any interest therein (whether or not patentable or
registrable under copyright, trademark or similar statutes or subject to
analogous protection) made, authored, devised, developed, discovered, reduced to
practice, conceived or otherwise obtained by Employee ("Developments"), solely
or jointly with others, during the course of Employee's employment with Employer
which (a) are related to the business of the Company or any of the products or
services being researched, developed, distributed, manufactured or sold by the
Company or which may be used in relation therewith or (b) result from tasks
assigned to Employee by the Company; (ii) any Development which is related to
the business of the Company and in which Employee had an assignable interest at
the time of Employee's first employment by Employer; or (iii) any Development
made using the time, materials or facilities of the Company, even if such
Development does not relate to the business of the Company. The determination as
to whether a Development is related to the business of the Company shall be made
solely by an authorized representative of Employer. Any Development relating to
the business of the Company and disclosed to the Company within six (6) months
following the termination of Employee's employment with Employer shall be deemed
to fall within the provisions of this Section 5.02. The "business of the
Company" as used in this Section 5.02 includes the actual business currently
conducted by the Company, as well as any business in which the Company proposes
to engage. Employee agrees that all such Developments listed above and the
benefits thereof are and shall immediately become the sole and absolute property
of Employer from conception, as "works made for hire" (as that term is used
under the U.S. Copyright Act of 1976, as amended) or otherwise. Employee shall
have no interest in any Developments. To the extent that title to any
Developments or any materials comprising or including any Developments does not,
by operation of law, vest in Employer, Employee hereby irrevocably assigns to
Employer all of Employee's right, title and interest, including, without
limitation, tangible and intangible rights such as patent rights, trademarks and
copyrights, that Employee may have or may acquire in and to all such
Developments, benefits and/or rights resulting therefrom, and agrees promptly to
execute any further specific assignments related to such Developments, benefits
and/or rights at the request of Employer. Employee also hereby assigns to
Employer, or waives if not assignable, all of Employee's "moral rights" in and
to all such Developments, and agrees promptly to execute any further specific
assignments or waivers related to moral rights at the request of Employer.

        Employee agrees to assist Employer without charge for so long as
Employee is an employee of Employer and for as long thereafter as may be
necessary (but at Employer's expense including reasonable compensation to
Employee if Employee is no longer an employee of Employer): (1) to apply,
obtain, register and renew for, and vest in, Employer's benefit alone (unless
Employer otherwise directs), patents, trademarks, copyrights, mask works, and
other protection for such Developments in all countries, and (2) in any
controversy or legal proceeding relating to Developments. In the event that
Employer is unable to secure Employee's signature after reasonable effort in
connection with any patent, trademark, copyright, mask work or other similar
protection relating to a Development, Employee hereby irrevocably designates and
appoints Employer and its duly authorized officers and agents as Employee's
agent and attorney-in-fact, to act for and on Employee's behalf and stead to
execute and file any such application and to do all other lawfully permitted
acts to further the prosecution and issuance of patents,

                                       -7-
<PAGE>

trademarks, copyrights, mask works or other similar protection thereon with the
same legal force and effect as if executed by Employee.

        5.03    OBLIGATIONS TO OTHER PERSONS. Except for those described on
Exhibit B annexed hereto (if any), Employee does not have any non-disclosure or
other written or verbal agreements to any other individual or entity (including
without limitation, any previous employer) concerning proprietary or
confidential information that Employee learned of during any previous employment
or associations over the past nine (9) years. Employee shall not disclose to the
Company or induce the Company to use any secret or confidential information or
material belonging to others, including, without limitation, Employee's former
employers, if any. Except for those described on Exhibit B annexed hereto,
Employee does not have any non-competition agreements, non-solicitation
agreements or other restrictive covenants with any previous employer or other
individual or entity. Employee has provided to Employer copies of each of the
agreements described on Exhibit B.

        5.04    COVENANT AGAINST COMPETITION AND SOLICITATION.

                (a)     Employee acknowledges and understands that, in view of
the position that Employee holds or will hold as an employee of Employer,
Employee's relationship with Employer will afford Employee extensive access to
Confidential Information of the Company. Employee therefore agrees that during
the course of Employee's employment with Employer and for a period of 12 months
after termination of Employee's employment with Employer (for any reason or no
reason) (collectively, "RESTRICTED PERIOD"), Employee shall not: (i) anywhere
within the United States of America or any other country in which the Company
then conducts or proposes to conduct business, either directly or indirectly, as
an owner, stockholder, member, partner, joint venturer, officer, director,
consultant, independent contractor, agent or employee, engage in any business or
other commercial activity which is engaged in or is seeking to engage in a
"competitive business." As used in this Agreement, the term "competitive
business" shall mean any individual or enterprise engaged in the development,
research, marketing, distribution or sale of electronically enhanced transdermal
drug delivery technologies or systems or any other business competitive with the
type of business conducted by Employer on the date of termination.
Notwithstanding anything contained herein to the contrary, in the event that
Employee is terminated without Cause by Employer pursuant to Section 4.01(C),
for purposes of Sections 5.04 (a) and (b) the "Restricted Period" shall be
deemed to mean the period during the course of Employee's employment with
Employer and for a period of 6 months after termination of Employee's employment
with Employer (for any reason or no reason).

                (b)     Employee further agrees that, during the Restricted
Period, Employee shall not, directly or indirectly, either on Employee's own
behalf or on behalf of any other individual or commercial enterprise: (i)
contact, communicate, solicit or transact any business with or assist any third
party in contacting, communicating, soliciting or transacting any business with
(A) any of the customers or clients of the Company, (B) any prospective
customers of the Company being solicited at the time of Employee's termination,
or (C) any individual or entity who or which was within the most recent twelve
(12) month period a customer or client of Company, for the purpose of inducing
such customer or client or potential customer or client to be connected to or
benefit from any competitive business or to terminate its or their business
relationship with the Company; (ii) solicit, induce or assist any third party in
soliciting or

                                       -8-
<PAGE>

inducing any individual or entity who is then (or was at any time within the
preceding 12 months) an employee, consultant, independent contractor or agent of
Company) to leave the employment of the Company or cease performing services for
the Company; (iii) hire or engage or assist any third party in hiring or
engaging, any individual or entity that is or was (at any time within the
preceding 12 months) an employee, consultant, independent contractor or agent of
the Company, or (iv) solicit, induce or assist any third party in soliciting or
inducing any other person or entity (including, without limitation, any
third-party service provider or distributor) to terminate its relationship with
the Company or otherwise interfere with such relationship. 5.05
NON-DISPARAGEMENT. Employee will not at any time (during or after Employee's
employment with Employer) disparage the reputation of the Company, its clients,
customers and its or their respective officers, directors, agents or employees.
Employer shall take reasonable measures to cause its directors and executive
officers to not, at any time (during or after Employee's employment with
Employer), disparage the reputation of Employee.

        5.06    COOPERATION. Employee agrees to cooperate both during and after
Employee's employment with Employer, at Employer's sole cost and expense, with
the investigation by the Company involving the Company or any employee or agent
of the Company.

        5.07    REASONABLE RESTRICTIONS/DAMAGES INADEQUATE REMEDY. Employee
acknowledges that the restrictions contained in this Article V are reasonable
and necessary to protect the legitimate interests of the Company and that any
breach by Employee of any provision contained in this Article V will result in
immediate irreparable injury to the Company for which a remedy at law would be
inadequate. Employee further acknowledges that the restrictions contained in
this Article V will not prevent Employee from earning a livelihood during the
Restricted Period. Accordingly, Employee acknowledges that Company shall be
entitled to temporary or permanent injunctive or other equitable relief against
Employee in the event of any breach or threatened breach by Employee of the
provisions of this Article V, in addition to any other remedy that may be
available to the Company whether at law or in equity.

        5.08    SEPARATE COVENANTS. In the event that any court of competent
jurisdiction shall determine that any one or more of the provisions contained in
this Article V shall be unenforceable in any respect, then such provision shall
be deemed limited and restricted to the extent that the court shall deem the
provision to be enforceable. It is the intention of the parties to this
Agreement that the covenants and restrictions in this Article V be given the
broadest interpretation permitted by law. The invalidity or unenforceability of
any provision of this Article V shall not affect the validity or enforceability
of any other provision hereof. The covenants and restrictions contained in this
Article V shall be deemed a series of separate covenants and restrictions one
for each of the fifty states of the United States of America. If, in any
judicial or arbitration proceedings, a court of competent jurisdiction or
arbitration panel should refuse to enforce all of the separate covenants and
restrictions in this Article V, then such unenforceable covenants and
restrictions shall be eliminated from the provisions of this Agreement for the
purpose of such proceeding to the extent necessary to permit the remaining
separate covenants and restrictions to be enforced in such proceeding.

        5.09    SURVIVAL. Article V shall survive the termination of this
Agreement.

                                       -9-
<PAGE>

                                   ARTICLE VI
                                  MISCELLANEOUS

        6.01    BENEFIT OF AGREEMENT AND ASSIGNMENT. This Agreement shall inure
to the benefit of the Company and its successors and assigns (including, without
limitation, the purchaser of all or substantially all of its assets) and shall
be binding upon Employer and its successors and assigns. This Agreement shall
also inure to the benefit of and be binding upon Employee and Employee's heirs,
administrators, executors and assigns. Employee may not assign or delegate
Employee's duties under this Agreement, without the prior written consent of
Employer.

        6.02    NOTICES. Any notice required or permitted hereunder shall be in
writing and shall be sufficiently given if personally delivered or if sent by
telecopier, overnight delivery service or by registered or certified mail,
postage prepaid, with return receipt requested, addressed in the case of the
Company to:

                Vyteris, Inc.
                13-01 Pollitt Drive
                Fair Lawn, New Jersey 07410 Attn:

        and in the case of Employee to:

                C. Gregory Arnold
                8841 S. Tracy Drive
                Sandy, Utah 84093

Any party may notify the other party in writing of the change in address by
giving notice in the manner provided in this Section 6.02. Service of process in
connection with any suit, action or proceeding (whether arbitration or
otherwise) may be served on each party hereto anywhere in the world by the same
methods as are specified for the giving of notices under this Agreement.

        6.03    ENTIRE AGREEMENT. This Agreement contains the entire agreement
of the parties hereto with respect to the terms and conditions of Employee's
employment during the Term and activities following termination of this
Agreement and supersedes any and all prior agreements and understandings,
whether written or oral, between the parties with respect to the subject matter
of this Agreement. This Agreement may not be changed or modified except by an
instrument in writing, signed by both the president of Employer and Employee.

        6.04    NO ATTACHMENT. Except as required by law, no right to receive
payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or
to execution, attachment, levy, or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect; provided, however, that nothing in this Section
6.04 shall preclude the assumption of such rights by executors, administrators
or other legal representatives of Employer or her estate and their assigning any
rights hereunder to the person or persons entitled thereto.

                                      -10-
<PAGE>

        6.05    SOURCE OF PAYMENT. All payments provided for under this
Agreement shall be paid in cash from the general funds of Employer. Employer
shall not be required to establish a special or separate fund or other
segregation of assets to assure such payments, and, if Employer shall make any
investments to aid it in meeting its obligations hereunder, Employee shall have
no right, title or interest whatever in or to any such investments except as may
otherwise be expressly provided in a separate written instrument relating to
such investments. Nothing contained in this Agreement, and no action taken
pursuant to its provisions, shall create or be construed to create a trust of
any kind, or a fiduciary relationship, between Employer and Employee or any
other person. To the extent that any person acquires a right to receive payments
from Employee hereunder, such right, without prejudice to rights which employees
may have, shall be no greater than the right of an unsecured creditor of
Employer.

        6.06    NO WAIVER. The waiver by other party of a breach of any
provision of this Agreement shall not operate or be construed as a continuing
waiver or as a consent to or waiver of any subsequent breach hereof.

        6.07    HEADINGS. The Article and Section headings in this Agreement are
for the convenience of reference only and do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.

        6.08    GOVERNING LAW AND DISPUTE RESOLUTION. Any and all actions or
controversies arising out of this Agreement or Employee's employment, including,
without limitation, tort claims, shall be construed and enforced in accordance
with the internal laws of the State of New Jersey, without regard to the choice
of law principles thereof. Except with respect to the Company's right to seek
injunctive or other equitable relief (including, without limitation, pursuant to
Section 5.07), any dispute, controversy or claim based on, arising out of or
relating to the interpretation and performance of this Agreement, Employee's
employment or any termination hereof or thereof or any matter relating to the
foregoing shall be solely submitted to and finally settled by arbitration by a
single arbitrator in accordance with the then-current rules of the American
Arbitration Association ("AAA"), including without limitation any claims for
discrimination under any applicable federal, state or local law or regulation.
Any such arbitration shall be conducted in the New Jersey office of the AAA
located closest to Employer's New Jersey office. The single arbitrator shall be
appointed from the AAA's list of arbitrators by the mutual consent of the
parties or, in the absence of such consent, by application of any party to the
AAA. A decision of the arbitrator shall be final end binding upon the parties.
The parties agree that this clause has been included to rapidly and
inexpensively resolve any disputes between them with respect to this Agreement
or Employee's employment and that this clause shall be grounds for dismissal of
any court action commenced by either party with respect to this Agreement, other
than (i) post-arbitration actions seeking to enforce an arbitration award and
(ii) actions seeking appropriate equitable or injunctive relief , including,
without limitation, pursuant to Section 5.07 hereof. Employer and the Employee
shall share equally the fees, costs and expenses of the arbitration, unless the
arbitrators modify the allocation of fees, costs and expenses because they have
determined that fairness dictates other than an equal allocation between the
parties. Each party shall be responsible for its own legal fees, costs of its
experts and expenses of its witnesses. The arbitrator shall be empowered to
award equitable or injunctive relief, but may not award punitive damages. Any
award rendered shall be final, binding and conclusive (without the right to an
appeal, unless such appeal is based on fraud by

                                      -11-
<PAGE>

the other party in connection with the arbitration process) upon the parties and
any judgment on such award may be enforced in any court having jurisdiction,
unless otherwise provided by law. Employer and Employee knowingly and
voluntarily agree to this arbitration provision and acknowledge that arbitration
shall be instead of any civil litigation, meaning that Employee and Employer are
each waiving any rights to a jury trial.

        6.09    VALIDITY. The invalidity or enforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision or provisions of this Agreement, which shall remain in full
force and effect.

        6.10    EMPLOYEE WITHHOLDINGS AND DEDUCTIONS. All payments to Employee
hereunder shall be subject to such withholding and other employee deductions as
may be required by law.

        6.11    COUNTERPARTS. This Agreement may be executed in one more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.

        6.12    AGREEMENT TO TAKE ACTIONS. Each party to this Agreement shall
execute and deliver such documents, certificates, agreements and other
instruments, and shall take all other actions, as may be reasonably necessary or
desirable in order to perform his/her or its obligations under this Agreement.

        IN WITNESS WHEREOF, Employer and Employee have duly executed this
Agreement as of the date first written above.

                                       EMPLOYER:

                                       VYTERIS, INC.

                                       By: /s/ Vincent De Caprio
                                          --------------------------------------
                                           10-28-2002
                                       -----------------------------------------

                                       EMPLOYEE:

                                       By: /s/ C. Gregory Arnold, individually
                                          --------------------------------------

                                      -12-

<PAGE>

                                    EXHIBIT A
                             FORM OF ACKNOWLEDGMENT

        My employment with Vyteris, Inc. ("EMPLOYER") is terminated. I have
reviewed my Employment Agreement with Employer dated ________________, ____
("AGREEMENT"), and I swear, under oath, that:

        1.      I have complied and will continue to comply with all provisions
of Article V.

        2.      I understand that all property and documents of Employer and its
subsidiaries and affiliates (collectively "COMPANY"), including all copies of
them, and all other tangible property, including property stored or maintained
in an electronic format, made by or made available to me in the course of my
employment with Employer, whether or not they contain Confidential Information
(as defined in the Agreement), are and remain the property of Employer. I have
delivered to Employer all such property, documents and materials, including any
copies, summaries, compilations or excerpts of them and other materials in my
possession.

        3.      I have assigned and confirm the assignment to the Company of any
and all right, title, and interest that I have or have had in any and all
Developments (as defined in the Agreement) and all other property (tangible and
intangible), documents and materials, relating in any way to my service for
Employer and/or its affiliates, and further agree to take such action and
execute such further documents, instruments and agreements, at Employer's
expense, as may be requested by the Company to effect the foregoing.

        4.      I understand and acknowledge that all of the Confidential
Information (as defined in the Agreement) of the Company, its clients and
customers and potential clients and customers that I have learned, contributed
to or that has been disclosed to me during my employment with the Company is the
property of the Company and may not be used or copied by me or by others or
disclosed to others. I understand that the misappropriation of the Confidential
Information, Developments or tangible property of the Company is punishable by
law.

        5.      I am now providing services to the following and my provision of
services to those individuals or entities will not conflict with my Agreement
with Employer.

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