Document:

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                                  EXHIBIT 10.1
                                  ------------

                              Employment Agreement
                                    between
                      Vyteris, Inc. and Vincent De Caprio

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                              EMPLOYMENT AGREEMENT
                              --------------------

        EMPLOYMENT AGREEMENT, dated as of January 1, 2004, between Vyteris,
Inc., a Delaware corporation (the "Company"), and Vincent De Caprio
("Employee").

        WHEREAS, the Company desires to employ Employee as President and Chief
Executive Officer ("President and CEO");

        WHEREAS, Employee is willing to accept such employment on the terms set
forth herein;

        WHEREAS, Employee was heretofore employed by the Company pursuant to an
employment agreement which has expired (the "Prior Agreement"); and

        WHEREAS, it is intended that this Agreement shall supercede the Prior
Agreement in all respects,

        NOW, THEREFORE, the Company and Employee hereby agree as follows:

        1.      EMPLOYMENT.

                1.1     GENERAL. The Company hereby agrees to employ Employee in
the capacity of President and CEO, and Employee hereby accepts such employment,
upon the terms and subject to the conditions herein contained.

                1.2     DUTIES AND AUTHORITY. During the term of Employee's
employment hereunder, Employee shall serve as the chief executive officer of the
Company and shall have such senior executive responsibilities, duties and
authority as may, from time to time, be assigned to the President and CEO by the
Company's Board of Directors (the "Board"), through its Chairman of the Board or
otherwise. During the term of this Agreement, Employee shall serve the Company,
faithfully and to the best of Employee's ability, and shall devote substantially
all of Employee's business time and efforts to the business and affairs of the
Company (including its subsidiaries and affiliates) and the promotion of its
interests. Employee shall be available to the Company at such times and places
as the Company shall reasonably request during the term hereof Notwithstanding
the foregoing, Employee shall be entitled to pursue charitable and religious
endeavors and to participate in professional organizations, provided that such
activities do not interfere in any material respect with the performance by
Employee of his duties hereunder.

        2.      TERM OF EMPLOYMENT. The term of this Agreement shall commence as
of

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January 1, 2004, and shall continue through December 31, 2005. Thereafter, the
term of this Agreement shall be automatically extended for successive and
additional one-year periods, unless Employee or the Company shall provide a
written notice of termination at least (180) days prior to the end of the
initial term or any extended term (a "180 Day Notice"). The term of this
Agreement is subject to early termination in accordance with the provisions set
forth in Section 4 hereof . The election by the Company or Employee to terminate
this Agreement as of the expiration of the initial term, or as of the end of any
one-year renewal period, as provided in this Section 2 shall not be deemed to be
terminated by the Company under Sections 4.1.2 or 4.1.3 hereof or by Employee
with Good Reason (as defined below), and in such event Employee shall only be
entitled to the compensation set forth in Section 4.2.3 hereof

        3.      COMPENSATION AND BENEFITS.

                3.1     SALARY. During the first twelve months of the term of
this Agreement, the Company shall pay to Employee a base salary at the annual
rate of $280,000. On each anniversary date of the commencement of employment
(the "Then Current Anniversary Date"), the Employee's base salary shall be
reviewed by the Board and may be increased to such rate as the Board, in its
sole discretion, may hereafter from time to time determine. The salary payable
pursuant to this Section 3.1 shall be payable on a bi-weekly basis and is
referred to herein as the "Base Salary".

                3.2     EXPENSES. Employee shall be entitled to receive proper
reimbursement from the Company for all reasonable out-of-pocket expenses
incurred by Employee in performing services under this Agreement, according to
the Company's expense account and reimbursement policies and provided that
Employee shall submit reasonable documentation with respect to such expenses.

                3.3     BONUS. During the term of this Agreement, Employee, as
President and CEO, shall be entitled to receive an annual year-end target
"Variable Bonus" in cash in an amount equal to sixty percent (60%) of Base
Salary. One-half of the Variable Bonus (30% of Base Salary) will be based upon
successfully realizing the revenue objectives for each year as defined in
EXHIBIT A attached to this Agreement, and one-half (30% of Base Salary) of the
Variable Bonus will be based upon successfully achieving the strategic
performance milestones as defined in EXHIBIT B attached to this Agreement. The
Variable Bonus, if any, shall be payable within sixty days after the last day of
each such year, notwithstanding any termination of this Agreement on or after
the last day of such year. Qualification for the Variable Bonus payout shall be
determined by the Board

                3.4     STOCK OPTIONS.

                        3.4.1   The Company hereby grants to the Employee
options to purchase 425,000 shares of the Company's common stock (on a post
reverse split basis) at an exercise

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price of $0.80/share, such grant to be effected pursuant to the Company's 2001
Stock Option Plan (the "Plan"). Such shares shall vest at the rate of 50% upon
completion of the first full year of employment hereunder and the remaining 50%
upon completion of the second full year of employment hereunder Employee shall
have the right to transfer such stock, subject to the applicable restrictions,
to members of Employee's immediate family and to trusts and partnerships
established for the benefit of such family members.

                        3.4.2   With respect to each "Financing" (as hereinafter
defined) effected from March 31, 2004 through and including the "Final Date" (as
hereinafter defined), upon consummation of such Financing the Company shall
grant to the Employee a stock option under the Plan (each, a "Catch-Up Option")
covering a number of shares of the Company's Common Stock equal to the "Catch-Up
Number" (as hereinafter defined) at an exercise price per share of Company
Common Stock equal to the "Derived Price" (as hereinafter defined). Each
Catch-Up Option grant shall be effected pursuant to an option grant agreement in
the form of the option grant agreement annexed hereto as EXHIBIT C. For purposes
of this Section 3.4.2, the following terms shall have the following meanings.

                                3.4.2.1  The term "Financing" shall mean a
financing effected on or after March 31, 2004 pursuant to which the Company
receives cash proceeds in exchange for the issuance of the Company's Common
Stock or a security convertible into, exchangeable into or exercisable for
shares of the Company's Common Stock; provided, however, that the term
"Financing" shall not include the receipt of cash proceeds upon conversion,
exchange or exercise of a security outstanding on the date hereof or upon
exercise of a stock option granted to any employee subsequent to the date
hereof.

                                3.4.2.2  The term "Catch-Up Number" shall mean,
with respect to any Financing, the number of shares of Company Common Stock
which, when added to the Employee's "Pre-Existing Number" (as hereinafter
defined), shall represent four percent (4%) of the sum of (a) the number of
shares of Company Common Stock outstanding upon consummation of such Financing
and (b) the number of shares of Company Common Stock issuable pursuant to all
securities outstanding upon consummation of such Financing to the extent that
such securities are convertible into, exchangeable into or exercisable for
Company Common Stock (including without limitation the options granted pursuant
to this Section 3.4.2), provided, however, that the shares of Common Stock
issuable upon conversion of the Company's Series C Preferred Stock shall not be
included in the number calculated pursuant to this clause "b' except to the
extent that shares of the Company's Series C Preferred Stock are actually
converted into the Company's Common Stock during the term of this Agreement.

                                3.4.2.3  The term "Pre-Existing Number shall
mean, as of the date of consummation of any Financing, the sum of (a) the number
of shares of Company Common Stock issued to the Employee prior to such date as
part of the Company's employee stock option plan in effect at the time of
issuance (including without limitation any shares theretofore

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purchased pursuant to this Section 3.4) or pursuant to any prior employment
agreement with the Company, and (b) the number of shares of Company Common Stock
which the Employee has the right to acquire on such date pursuant to securities
or options convertible or exchangeable into or exercisable for shares of Company
Common Stock (assuming, for such purposes, that all such securities were fully
vested as of such date) issued to the Employee as part of the Company's employee
stock option plan in effect at the time of issuance (including without
limitation any options theretofore issued pursuant to this Section 3.4) or
pursuant to any prior employment agreement with the Company.

                                3.4.2.3  The term "Derived Price" shall mean,
with respect to each Financing, the per share price at which one share of
Company Common Stock is issued in such Financing or, in the case of the issuance
of a security convertible into, exchangeable into or exercisable for Company
Common Stock, the sum of (x) the per share price payable for a security
convertible into, exchangeable into or exercisable for one share of Company
Common Stock and (y) the per share price payable upon such conversion, exchange
or exercise. Thus, by way of example, in the event that the Company issued a
$1,000 aggregate principal amount promissory note that is convertible into 1,000
shares of Company Common Stock, the Derived Price would be $1.00 per share.

                                3.4.2.4  The term "Final Date" shall mean the
earlier of (x) the last day of the term of this Agreement (as extended to the
extent extended hereunder) and (y) the first date on which the cumulative gross
proceeds received by the Company from all Financings effected on or after March
31, 2004 equals twenty seven million dollars($27,000,000).

                3.5     OTHER BENEFITS. Employee shall be entitled to the
following additional benefits:

                        3.5.1   Employee shall be entitled to vacations, at such
times as Employee shall reasonably determine, of at least four weeks each year
of employment hereunder.

                        3.5.2   Employee shall be reimbursed by the Company for
approved and invoiced financial planning services and tax planning services that
he obtains in an amount up to $9,000 for each year of employment hereunder.

                        3.5.3   Employee shall be eligible to receive additional
stock options as determined by the Board from time to time and participate in
the Plan.

                        3.5.4   Employee shall be entitled to receive executive
life insurance benefits in the amount of $1,000,000.

                        3.5.5   Employee shall be entitled to such other
benefits as shall be extended to any other senior executive officer of the
Company during the initial term and any renewal period of this Agreement.

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                3.6     NO OTHER BENEFITS. During the term of this Agreement or
upon any termination hereof, the Company shall have no obligation to pay or
provide, any compensation or benefits other than as set forth herein; provided,
however, that Employee shall be entitled to all benefits available to senior
Employees of the Company under the employee benefit plans, and the policies and
practices, of the Company, determined in accordance with the applicable terms
and provisions of such plans, policies and practices, in each case, as accrued
to the date of termination of employment.

        4.0     TERMINATION OF EMPLOYMENT.

                4.1     EVENTS OF TERMINATION. Employee's employment hereunder
shall terminate prior to the expiration of the term set forth in Section 2
hereof upon the occurrence of any one or more of the following events:

                        4.1.1   DEATH. In the event of Employee's death,
Employee's employment shall terminate on the date of death.

                        4.1.2   TERMINATION BY THE COMPANY FOR CAUSE. The
Company may, at its option, terminate the Employee's employment for "Cause" (as
defined herein), provided that (a) the Company gives notice of termination to
Employee, (b) Employee and his counsel are thereafter entitled to meet with the
Board to discuss such termination and (c) the Board concludes that Cause exists
for termination. Employee's employment shall terminate on the date on which the
Board makes such determination. For purposes hereof, "Cause" shall mean
Employee's (i) conviction of, guilty plea to or confession of guilt of a felony,
(ii) commission of fraudulent, illegal or dishonest acts, (iii) willful
misconduct or gross negligence which reasonably could be expected to be
materially injurious to the business, operations or reputation of the Company
(monetarily or otherwise) or (iv) after a written warning and a reasonable
opportunity to cure non-performance, failure to perform Employee's material
duties as assigned to Employee pursuant to the terms of this Agreement from time
to time or failure to cure any other material breach of this Agreement.

                        4.1.3   WITHOUT CAUSE BY THE COMPANY. The Company may,
at its option, terminate Employee's employment for any reason whatsoever (other
than for Cause) by giving 90 days prior written notice of termination to
Employee.

                        4.1.4   TERMINATION BY EMPLOYEE. Employee may terminate
Employee's employment for any reason whatsoever by giving 90 days prior notice
of termination to the Company, except that Employee may terminate Employee's
employment for Good Reason by giving 15 days prior notice of termination.
Employee shall be deemed to have terminated employment hereunder for "Good
Reason" in the event that Employee terminates such

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employment after (i) the Company has breached any of its material obligations
hereunder and fails to cure such breach promptly after receipt of written notice
of such breach, (ii) Employee's principal business office is located more than
40 miles from Mountain Lakes, New Jersey, (iii) the Employee either is removed
from the Board or is not re-elected to the Board, (iv) the Board designates an
individual other than the Employee to be the chief executive officer of the
Company or otherwise materially and substantively diminishes the Employee's
duties (it being understood that notwithstanding any other provision herein, the
Company's employment of a president who reports to the Employee or the Company's
employment of a chief operating officer who reports to the Employee shall not
constitute Good Reason or (v) a Change in Control (as defined herein). For
purposes of this Agreement, the term "Change in Control" shall mean the
occurrence of any of the following events (other than in the context of a
"Permitted Event", as defined herein) with respect to the Company:

                        (A)     the consummation of any consolidation or merger
of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company's common stock ("Common
Stock") would be converted into cash, securities or other property, other than a
merger of the Company in which the holders of the shares of the Company's Common
Stock immediately prior to the merger own at least two thirds of the outstanding
common stock of the surviving corporation immediately after the merger; or

                        (B)     the consummation of any sale, lease, exchange or
other transfer (in one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Company, other than to a subsidiary
or affiliate.

The following events shall constitute "Permitted Events" hereunder:

                        (X)     the merger of the Company with a public company,
or a subsidiary of a public company, in which the stockholders of the Company
prior to such merger own a majority of the outstanding common stock of the
surviving corporation immediately after the merger;

                        (Y)     the initial public offering of the Company; or

                        (Z)     any other transaction pursuant to which the
existing majority stockholder of the Company (the "Current Majority
Stockholder") ceases to own a majority of the Company's Common Stock if, upon
consummation of such transaction, no stockholder or group of related
stockholders (other than the Current Majority Stockholder and its affiliates)
owns more than 20% of the Company's Common Stock (calculated on a fully diluted
basis).

                        4.1.5   DISABILITY. In the event of Employee's
Disability (as defined herein), the Company will have the option to terminate
Employee's employment by giving a written notice of termination to Employee.
Such notice shall specify the date of termination,

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which date shall not be earlier than 60 days after such notice is given. For
purposes of this Agreement, "Disability" means the inability of Employee to
substantially perform Employee's duties hereunder for 135 days out of 225
consecutive days as a result of a physical or mental illness, all as determined
in good faith by the Board.

                4.2     COMPANY'S OBLIGATIONS UPON TERMINATION. Following the
termination of Employee's employment under the circumstances described below,
the Company shall pay to Employee the following compensation and provide the
following benefits in full satisfaction and final settlement of any and all
claims and demands that Employee now has or hereafter may have under this
Agreement:

                        4.2.1   TERMINATION WITHOUT CAUSE BY THE COMPANY OR BY
THE EMPLOYEE WITH GOOD REASON. In the event that Employee's employment shall be
terminated by the Company pursuant to Section 4.1.3 or shall be terminated by
the Employee for Good Reason pursuant to Section 4.1.4, (a) the Company shall
pay Employee all Base Salary and any Variable Bonus earned but unpaid through
the date of termination, (b) the Company shall pay Employee the target Variable
Bonus for the year of this Agreement (that is, either the first 12 months of the
term or the second twelve months of the term) in which termination occurs, (c)
all shares issued pursuant to Section 3.4.1 shall be deemed fully vested, (d)
all stock options granted to Employee by the Company (including stock options
granted pursuant to Sections 3.4.1 and 3.4.2 prior to the date of termination
but excluding stock options not yet granted pursuant to Section 3.4.2) shall be
deemed fully exercisable and shall remain exercisable for a period of 12 months
after such termination, (e) for a period of 12 months from the date of
termination (or for a period from the date of termination through the last day
of the then current term, if (I) the Company delivers a 180 Day Notice in
accordance with Section 2 not more than 190 days prior to the last day of the
then current term and (II) thereafter this Agreement is terminated by the
Company pursuant to Section 4.1.3 or by the Employee for Good Reason pursuant to
Section 4.1.4), the Company shall pay Employee Base Salary and shall continue to
provide Employee with all health, medical and insurance benefits provided
hereunder, and (f) the Employee shall be entitled to all benefits under all
employee benefit plans in which he is a participant. In addition, the Company
shall reimburse Employee for any expenses incurred through the date of such
termination in accordance with Section 3.2 hereof

                        4.2.2   TERMINATION BY EMPLOYEE WITHOUT GOOD REASON OR
BY THE COMPANY FOR CAUSE. In the event that Employee's employment shall be
terminated by Employee without Good Reason pursuant to Section 4.1.4 (or if
Employee voluntarily resigns otherwise than with Good Reason in accordance with
such Section prior to the expiration of the then current term of this Agreement)
or by the Company pursuant to Section 4.1.2, Employee shall be entitled to no
further compensation or other benefits under this Agreement other than any Base
Salary and any Variable Bonus earned on or prior to the date of such
termination, but not yet paid, and such benefits as have accrued pursuant to any
applicable employee benefit plans of the Company. In addition, the Company shall
reimburse Employee for any expenses

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incurred through the date of such termination in accordance with Section 3.2
hereof

                        4.2.3   TERMINATION UPON EXPIRATION OF THE EMPLOYMENT
TERM. Upon expiration of the term of this Agreement, Employee shall be entitled
to no further compensation or other benefits under this Agreement other than
Base Salary earned, but unpaid, through the date of termination, and any
Variable Bonus earned on or prior to the end of such term, but not yet paid and
such benefits as have accrued pursuant to any applicable employee benefit plans
of the Company. In addition, the Company shall reimburse Employee for any
expenses incurred through the date of such termination in accordance with
Section 3.2 hereof.

                        4.2.4   TERMINATION DUE TO DEATH. In the event that
Employee's employment shall be terminated by the Company pursuant to Section
4.1.1, the Company shall pay Employee or Employee's estate (a) all Base Salary
earned but unpaid through the date of termination, (b) any Variable Bonus earned
on or prior to the date of termination, but not yet paid and (c) such benefits
as have accrued pursuant to any applicable employee benefit plans of the
Company. In addition, the Company shall reimburse Employee for any expenses
incurred through the date of termination in accordance with Section 3.2 hereof

                        4.2.5   TERMINATION DUE TO DISABILITY. In the event that
Employee's employment shall be terminated by the Company pursuant to Section
4.1.1, (a) the Company shall pay Employee all Base Salary earned but unpaid
through the date of termination, (b) the Company shall pay Employee the target
Variable Bonus for the year of this Agreement in which termination occurs, pro
rated to reflect the portion of the year prior to the date of termination, (c)
all shares issued pursuant to Section 3.4.1 shall be deemed fully vested, (d)
all stock options granted to Employee by the Company (including stock options
granted pursuant to Sections 3.4.1 and 3.4.2 prior to the date of termination
but excluding stock options not yet granted pursuant to Section 3.4.2) shall be
deemed fully exercisable and shall remain exercisable for a period of 12 months
after such termination, (e) for a period of 12 months from the date of
termination (or for a period from the date of termination through the last day
of the then current term, if (I) the Company delivers a 180 Day Notice in
accordance with Section 2 not more than 190 days prior to the last day of the
then current term and (II) thereafter this Agreement is terminated by the
Company pursuant to Section 4.1.1), the Company shall pay Employee Base Salary
(less any amounts received by the Employee from any insurance provided by the
Company or any governmental entity with respect to such Disability) and shall
continue to provide Employee with all health, medical and insurance benefits
provided hereunder and (f) the Employee shall be entitled to all benefits under
all employee benefit plans in which he is a participant. In addition, the
Company shall reimburse Employee for any expenses incurred through the date of
such termination in accordance with Section 3.2 hereof

                4.3     NATURE OF PAYMENTS. All amounts to be paid by the
Company to Employee pursuant to this Section 4 (other than Base Salary or
reimbursement of expenses or amounts paid pursuant to Section 4.2.4) shall be
considered by the parties to be severance

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payments. In the event that such payments shall be treated as damages, it is
expressly acknowledged by the parties that damages to Employee for termination
of employment would be difficult to ascertain and the above amounts are
reasonable estimates thereof and are not a penalty.

        5.      NON-SOLICITATION: NONCOMPETITION.

                5.1     During the term of this Agreement and for a period of
one year thereafter (following termination for any reason, subject to the
provisions of Section 5.2), Employee shall not:

                        5.1.1   induce or attempt to induce, directly or
indirectly, any then current customer or client of the Company to cease doing
business, in whole or in part, with the Company or solicit or divert, directly
or indirectly, the business of any such customer or client, or any identified
potential customer or client, for Employee's own account or for the account of
any other person or entity;

                        5.1.2   solicit or induce, directly or indirectly, any
person or entity, including any third-party service provider, distributor or
supplier of the Company, to terminate its relationship with the Company or
otherwise interfere with such relationship;

                        5.1.3   for Employee's own account or for the account of
any other person or entity, solicit, interfere with or endeavor to cause,
directly or indirectly, any employee or agent of the Company or induce or
attempt to induce, directly or indirectly, any employee or agent of the Company
to leave employment or terminate its agency with the Company or induce or
attempt to induce, directly or indirectly, any such employee or agent to breach
an employment or agency agreement or arrangement with the Company; or

                        5.1.4   either for Employee or on behalf of any person
or entity, directly or indirectly own, control or participate in the ownership
or control of, or be employed by or on behalf of, any business which is similar
to and is competitive with the business of the Company, within the United States
of America or any country in which the Company then conducts or proposes to
conduct business, without the express written consent of the Company.

                5.2     Notwithstanding any provision hereunder to the contrary,
the provisions of Sections 5.1.1, 5.1.2 and 5.1.4 shall not apply following the
termination of Employee's employment by the Company without Cause pursuant to
Section 4.2.1.

        6.      PROPERTY RIGHTS. With respect to information, inventions and
discoveries developed, made or conceived of by Employee, either alone or with
others, at any time during Employee's employment by the Company and whether or
not within working hours, arising out of such employment or pertinent to any
field of business or research in which, during such employment, the Company is
engaged or (if such is known to or ascertainable by Employee) is

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considering engaging, Employee agrees:

                6.1     that all such information, inventions and discoveries,
whether or not patented or patentable, shall be and remain the exclusive
property of the Company;

                6.2     to disclose promptly to an authorized representative of
the Company all such o information in Employee's possession as to possible
applications and uses thereof;

                6.3     not to file any patent application relating to any such
invention or discovery except with the prior written consent of an authorized
officer of the Company;

                6.4     that Employee hereby waives and releases any and all
rights Employee may have in and to such information, inventions and discoveries
and hereby assigns to the Company and/or its nominees all of Employee's right,
title and interest in them, and all Employee's right, title and interest in any
patent, patent application, copyright or other property right based thereon.
Employee hereby irrevocably designates and appoints the Company and each of its
duly authorized officers and agents as Employee's agent and attorney-in-fact to
act for Employee and in Employee's behalf and stead to execute and file any
document and to do all other lawfully permitted acts to further the prosecution,
issuance and enforcement of any such patent, patent application, copyright or
other property right with the same force and effect as if executed and delivered
by Employee; and

                6.5     at the request of the Company and without expense to
Employee, to execute such documents and perform such other acts as the Company
deems necessary or appropriate for the Company to obtain patents on such
inventions in a jurisdiction or jurisdictions designated by the Company, and to
assign to the Company or its designee such inventions and any patent
applications and patents relating thereto.

        7.      CONFIDENTIALITY. With respect to the information, inventions and
discoveries referred to in Section 6 hereof, and also with respect to all other
information, whatever its nature and form and whether obtained orally, by
observation, from graphic materials or otherwise (except such as is generally
available to the public or such as Employee shall be compelled by legal process
to disclose), obtained by Employee during or as a result of Employee's
employment by the Company and relating to any invention, improvement,
enhancement, product, know-how, formula, software, process, apparatus, design,
concept or other creation of the Company, or to any use of any of them, or to
materials, tolerances, specifications, costs (including, without limitation,
manufacturing costs), prices, or any plans of the Company, or to any other trade
secret or proprietary information of the Company, Employee agrees:

                7.1     to hold all such information, inventions and discoveries
in strict confidence and not to publish or otherwise disclose any thereof to any
person or entity other than the Company, except with the prior written consent
of an authorized officer of the Company;

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                7.2     to take all reasonable precautions to assure that all
such information, inventions and discoveries are properly protected from access
by unauthorized persons;

                7.3     to make no use of nor exploit in any way any such
information, invention or discovery except as required in the performance of
Employee's employment duties for the Company; and

                7.4     upon termination of Employee's employment by the
Company, or at any time upon request of the Company, to deliver to it all
graphic materials and all substances, models, software, prototypes and the like
containing or relating to any such information, invention or discovery, all of
which graphic materials and other things shall be and remain the exclusive
property of the Company.

        For purposes of this Agreement, the term "graphic materials" includes,
without limitation, letters, memoranda, reports, notes, notebooks, books of
account, drawings, prints, specifications, formulae software, data print-outs,
microfilms, magnetic tapes and disks and other documents and recordings,
together with all copies, excerpts and summaries thereof

        8.      GROSS-UP PAYMENT.

                8.1     Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of the Employee (whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
required under this Section 8) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), or any interest or penalties are incurred by the Employee with respect
to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), then
the Employee shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Employee of all taxes
(including any interest or penalties imposed with respect to such taxes)
including, without limitation, any income and employment taxes and Excise Tax,
imposed upon the Gross-Up Payment but before deduction for any federal, state or
local income tax upon the Payment, the Employee retains an amount equal to the
sum of (x) the Payment and (y) an amount equal to the product of any deductions
disallowed because of the inclusion of the Gross-Up Payment in the Employee's
adjusted gross income for federal income tax purposes and the highest applicable
marginal rate of federal income taxation for the calendar year in which the
Gross-Up Payment is to be made. For purposes of determining the amount of the
Gross-Up Payment, the Employee shall be deemed to (1) pay applicable federal
income taxes at the highest applicable marginal rates of federal income taxation
(including surcharges) for the calendar year in which the Gross-Up Payment is to
be made, (2) pay applicable state and local income taxes at the highest
applicable marginal rate of taxation

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(including surcharges) for the calendar year in which the Gross-Up Payment is to
be made, net of the maximum reduction in federal income taxes which could be
obtained from deduction of such state and local taxes and (3) have otherwise
allowable deductions for federal income tax purposes at least equal to those
disallowed because of the inclusion of the Gross-Up Payment in the Employee's
adjusted gross income.

                8.2     Subject to the provisions of Section 8.1, all
determinations required to be made under this Section 8, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by the public accounting firm that is retained by the Company as of the date
immediately prior to the Change in Control (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and the Employee
within fifteen (15) business days of the receipt of notice from the Company or
the Employee that there has been a Payment, or such earlier time as is requested
by the Company (collectively, the "Determination"). In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting the Change in Control, the Employee may appoint another
nationally recognized public accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company and the Company shall enter into any agreement requested
by the Accounting Firm in connection with the performance of the services
hereunder. The Gross-Up Payment under this Section 8 with respect to any Payment
shall be made no later than thirty (30) days following the date of such Payment.
If the Accounting firm determines that no Excise Tax is payable by the Employee,
it shall furnish the Employee with a written opinion to such effect, and to the
effect that failure to report the Excise Tax, if any, on the Employee's
applicable federal income tax return will not result in the imposition of a
negligence or similar penalty. The Determination by the Accounting Firm shall be
binding upon the Company and the Employee. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the Determination, it is
possible that Gross-Up-Payments which will not have been made by the Company
should have been made ("Underpayment") or Gross-Up Payments are made by the
Company which should not have been made ("Overpayment"), consistent with the
calculations required to be made hereunder. In the event that the Employee
thereafter is required to make payment of any additional Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment (together with interest at the rate provided in
Section 1274(g)(2)(B) of the Code) shall be promptly paid by the Company to or
for the benefit of the Employee. In the event the amount of the Gross-Up Payment
exceeds the amount necessary to reimburse the Employee for his Excise Tax, the
Accounting Firm shall determine the amount of the Overpayment that has been made
and any such Overpayment (together with interest at the rate provided in Section
1274(b)(2) of the Code) shall be promptly paid by the Employee to or for the
benefit of the Company. The Employee shall cooperate, to the extent his expenses
are reimbursed by the Company, with any reasonable requests by the Company in
connection with any contests or disputes with the Internal Revenue Service in
connection with the Excise Tax.

                                       12
<PAGE>

        9.      NO CONFLICTS. Employee agrees and acknowledges that Employee's
employment by the Company and compliance with this Agreement do not and will not
breach any agreement made by Employee to keep in confidence information acquired
by Employee prior to or outside of Employee's employment with the Company.
Employee will comply with any and all valid obligations which Employee may now
have to prior employers or to others relating to confidential information,
inventions or discoveries which are the property of those prior employers or
others, as the case may be. Employee has supplied or shall promptly supply to
the Company upon its request a copy of each written agreement setting forth any
such obligation. Employee hereby agrees and acknowledges that Employee has not
brought and will not bring with Employee for use in the performance of duties at
the Company any materials, documents or information of a former employer or any
third party that are not generally available to the public, unless Employee has
express written authorization from the owner thereof for possession and use or
Employee otherwise has undisputed proprietary rights to such material documents
or information.

        10.     SPECIFIC PERFORMANCE. Without intending to limit the remedies
available to the Company, Employee agrees that damages at law would be an
inadequate remedy to the Company in the event that Employee shall breach or
attempt to breach any of the provisions of Sections 5, 6, 7, 8 or 9 hereof and
that the Company may apply for and, without the posting of any bond or other
security, upon proof of breach or threatened breach of any of the covenants
contained in such Sections, have injunctive relief in any court of competent
jurisdiction to restrain the breach or threatened breach of, or otherwise to
enforce specifically, any of the covenants contained in such Sections. Such
injunctive relief in such court shall be available to the Company in lieu of any
arbitration proceeding pursuant to Section 12 hereof

        11.     SURVIVAL. The provisions of Sections 5, 6, 7, 8, 10, 12, 13.1
and 13.4 shall survive any termination of this Agreement. In furtherance and not
in limitation of the preceding sentence, Employee's obligations under Sections
5, 6 and 7 hereof shall remain in effect throughout Employee's employment by the
Company, unaffected by any transfer to a subsidiary or affiliate of the Company.

        12.     ARBITRATION. Any controversy or claim based on, arising out of
or relating to the interpretation and performance of this Agreement or any
termination hereof shall be solely and finally settled by arbitration under the
rules of the American Arbitration Association, and judgment on the award
rendered in the arbitration may be entered in any court having jurisdiction
thereof. Any such arbitration shall be in the State of New Jersey, and shall be
submitted to a single arbitrator appointed by the mutual consent of the parties
or, in the absence of such consent, by application of any party to the American
Arbitration Association. A decision of the arbitrator shall be final and binding
upon the parties, and the arbitrator shall be authorized to apportion fees and
expenses (including counsel fees and expenses) as the arbitrator shall deem
appropriate. In the absence of any such apportionment, the fees and expenses of
the arbitrator

                                       13
<PAGE>

shall be borne equally by each party, and each party will bear the fee and
expenses of its own attorney. The parties agree that this clause has been
included to rapidly and inexpensively resolve any disputes between them with
respect to this Agreement 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 pursuant to
Section 10 hereof

        13.     MISCELLANEOUS.

                13.1    GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey without regard
to principles of conflicts of laws.

                13.2    ENTIRE AGREEMENT; AMENDMENT. This Agreement and the
exhibits annexed hereto between the Company and Employee contain the complete
understanding and agreement between the parties hereto with respect to the
subject matter hereof, and supersede all prior understandings and agreements,
written or oral, between the parties hereto relating to the subject matter
hereof This Agreement may not be amended or modified except in a writing signed
by the parties hereto.

                13.3    ASSIGNMENT. This Agreement, and the rights and
obligations hereunder, shall not be assignable or delegable by any party hereto
without the prior written consent of the other party, except (a) with respect to
an assignment by the Company to any affiliate of the Company or (b) pursuant to
a merger or consolidation involving the Company or pursuant to the sale of all
or substantially all of the assets of the Company.

                13.4    SEVERABILITY. In the event that any provision or portion
of this Agreement shall be determined to be invalid or unenforceable for any
reason, in whole or in part, (i) the remaining provisions of this Agreement
shall be unaffected thereby and shall remain in full force and effect to the
fullest extent permitted by law and (ii) any such invalidity or unenforceability
shall be deemed replaced by a term or provision determined by the parties as
coming closest to expressing the intention of the invalid or unenforceable term
or provision.

                13.5    NOTICE. Any notice to be given hereunder shall be in
writing and either delivered in person, by nationally recognized overnight
courier, by facsimile or by registered or certified first class mail, postage
prepaid with return receipt requested, addressed (a) if to the Company, to
Vyteris, Inc., 13-01 Pollitt Drive, Fair Lawn, NJ 07419, attention: Donald F.
Farley, Chairman of the Board, Facsimile No. (201) 703-1158, with a copy to
Donald F. Farley, CEO, Spencer Trask Specialty Group, LLC, 535 Madison Avenue,
New York, NY 10022, Facsimile No. (212) 486-7392, and with a copy to Lowenstein
Sandler PC, 65 Livingston Avenue, Roseland, New Jersey 07068 Facsimile No.:(973)
597-2351, attention Peter H. Ehrenberg, Esq. and (b) if to the Employee, to
Vincent De Caprio, 86 Ball Road, Mountain

                                       14
<PAGE>

Lakes, New Jersey 07046. Notices delivered personally shall be deemed given as
of actual receipt; notices sent via facsimile transmission shall be deemed given
as of one business day following sender's receipt from sender's facsimile
machine of written confirmation of transmission thereof, notices sent by
overnight courier shall be deemed given as of one business day following
sending; and notices mailed shall be deemed given as of five business days after
proper mailing. Any party may change its address in a notice given to the other
party in accordance with this section 13.5.

                13.6    SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective heirs,
legal representatives, successors (including, without limitation, any successor
by merger or sale of all or substantially all assets) and permitted assigns.

                13.7    FURTHER ASSURANCES. Employee and the Company shall
execute and deliver all instruments and other documents which, in the opinion of
the Company or the Employee, may be necessary or appropriate to carry out the
terms of this Agreement.

                13.8    DEADLINES. The Section headings in this Agreement are
for convenience of reference only and shall not affect its interpretation.

                13.9    INTERPRETATION. For purposes of Sections 5, 6, 7, 8 and
9, the "Company" shall include any subsidiary or affiliate of the Company for
which Employee renders services.

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

                13.11   NO MITIGATION. Employee shall have no obligation to
mitigate damages hereunder.

                                       15
<PAGE>

        IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto as of the date first above written.

VYTERIS, INC.

By:  /s/ Donald F. Farley
     ---------------------------------------
     Name:   Donald F. Farley
     Title:  Chairman of the Board

By:  /s/ Vincent De Caprio, Ph.D
     ---------------------------------------
     Name:   Vincent De Caprio, Ph.D

                                       16
<PAGE>

                                    EXHIBIT A

                            ANNUAL REVENUE MILESTONES

YEAR 1 ( FISCAL 2004):   $2,500,000  gross revenues

        a.      All Braun revenues credited against the objectives shall be
                revenues generated according to the terms of the commercial
                agreement between Braun and Company.
        b.      Research and development payments from third parties shall be
                credited against the revenue objectives.

YEAR 2 ( FISCAL 2005):

        a.      To be in accordance with the Company's 2005 budget and any other
                reasonable revenue goals that may be agreed between Employee and
                the Board of Directors.
        b.      As with Year 1, terms a. and b. shall apply.

                                       17
<PAGE>
<TABLE>
<CAPTION>
<S>                                                                             <C>
---------------------- ------------------------------------------------------------------------------- ---------------
                                                         EXHIBIT B
---------------------- ------------------------------------------------------------------------------- ---------------

---------------------- ------------------------------------------------------------------------------- ---------------
                                            STRATEGIC OBJECTIVES AND MILESTONES
---------------------- ------------------------------------------------------------------------------- ---------------

---------------------- ------------------------------------------------------------------------------- ---------------
PRIORITY               YEAR 1 (2004):  To be completed before December 31, 2004                         COMPLETION
                                                                                                            DATE
---------------------- ------------------------------------------------------------------------------- ---------------

---------------------- ------------------------------------------------------------------------------- ---------------
Critical               1.       Launch LidoSiteTM:
---------------------- ------------------------------------------------------------------------------- ---------------
                                -    -  Secure FDA approval                                                  2Q
---------------------- ------------------------------------------------------------------------------- ---------------
                                -    -  Produce initial stocking order                                       4Q
---------------------- ------------------------------------------------------------------------------- ---------------

---------------------- ------------------------------------------------------------------------------- ---------------
Critical               2.       Establish a post-launch marketing capability to maximize LidoSite
                                launch value to the Company
---------------------- ------------------------------------------------------------------------------- ---------------
                                -  Hire dedicated LidoSite marketing/product manager                         3Q
---------------------- ------------------------------------------------------------------------------- ---------------
                                -  Secure PR/IR firm and implement a PR/communications plan                  2Q
---------------------- ------------------------------------------------------------------------------- ---------------

---------------------- ------------------------------------------------------------------------------- ---------------
Critical               3.       Install expanded LidoSite manufacturing capacity
---------------------- ------------------------------------------------------------------------------- ---------------
                                -  Install PMK300                                                            4Q
---------------------- ------------------------------------------------------------------------------- ---------------
                                -  Complete the necessary facility modifications to accommodate              4Q
                                   manufacturing
---------------------- ------------------------------------------------------------------------------- ---------------
                                -  Lease additional space as required a favorable terms                      3Q
---------------------- ------------------------------------------------------------------------------- ---------------

---------------------- ------------------------------------------------------------------------------- ---------------
Critical               4.       Support efforts to fully capitalize the Company as approved by the
                                Board of Directors and shareholders.
---------------------- ------------------------------------------------------------------------------- ---------------
                                -  Conduct appropriate analysis and documentation                            3Q
---------------------- ------------------------------------------------------------------------------- ---------------
                                -  Support "road shows"                                                      2Q
---------------------- ------------------------------------------------------------------------------- ---------------
                                -  Create budgets and resource appropriately to support these                4Q
                                   activities and post-capitalization requirements (e.g., public
                                   reporting)
---------------------- ------------------------------------------------------------------------------- ---------------

---------------------- ------------------------------------------------------------------------------- ---------------
Critical               5.       Implement appropriate financial constraints to keep expenditures             Q4
                                within Board-Approved budget
---------------------- ------------------------------------------------------------------------------- ---------------

---------------------- ------------------------------------------------------------------------------- ---------------
Development            6.       Initiate first round of Phase I clinical studies for the infertility
                                product (Neptune)
---------------------- ------------------------------------------------------------------------------- ---------------
                                -  Produce clinical prototypes in compliance with cGMP for Ferring           2Q
---------------------- ------------------------------------------------------------------------------- ---------------
                                -  Support all regulatory filings by Ferring                               Ongoing
---------------------- ------------------------------------------------------------------------------- ---------------

---------------------- ------------------------------------------------------------------------------- ---------------
Development            7.       Complete first round of Phase I clinical studies for the migraine
                                product.
---------------------- ------------------------------------------------------------------------------- ---------------
</TABLE>

                                       18
<PAGE>
<TABLE>
<CAPTION>
<S>                                                                             <C>
---------------------- ------------------------------------------------------------------------------- ---------------
                                -  Produce clinical prototypes in compliance with cGMP                       3Q
---------------------- ------------------------------------------------------------------------------- ---------------
                                -  File an IND and/or other regulatory notification documents as             3Q
                                   appropriate
---------------------- ------------------------------------------------------------------------------- ---------------
                                -  Create an updated data and business pitch and revisit prospects for       4Q
                                   partnerships
---------------------- ------------------------------------------------------------------------------- ---------------

---------------------- ------------------------------------------------------------------------------- ---------------
Development            8.       Secure at least one new development agreement on an additional
                                compound.
---------------------- ------------------------------------------------------------------------------- ---------------
                                -  Negotiate and finalize terms of the deal (term sheet)                     4Q
---------------------- ------------------------------------------------------------------------------- ---------------

---------------------- ------------------------------------------------------------------------------- ---------------
Development            9.       Rebuild the R&D capability of the Company to an extent it supports
                                new product and new technology programs as indicated in the 2004
                                operating plan.
---------------------- ------------------------------------------------------------------------------- ---------------
                                -  Staff the Neptune project as committed to in the Ferring agreement        3Q
---------------------- ------------------------------------------------------------------------------- ---------------
                                -  Establish an internal research function (not relying solely on Univ.      4Q
                                   of Geneva)
---------------------- ------------------------------------------------------------------------------- ---------------

---------------------- ------------------------------------------------------------------------------- ---------------
Development            10.      Establish the appropriate regulatory and clinical leadership for the
                                Company to support post-marketing LidoSite activities and new product
                                development plans and activities.
---------------------- ------------------------------------------------------------------------------- ---------------
                                -  Hire a VP Regulatory Affairs                                              4Q
---------------------- ------------------------------------------------------------------------------- ---------------
                                -  Bring on a clinical advisor (consultant or employee)                      2Q
---------------------- ------------------------------------------------------------------------------- ---------------

---------------------- ------------------------------------------------------------------------------- ---------------
                       YEAR 2:  To be completed before December 31, 2005.
---------------------- ------------------------------------------------------------------------------- ---------------

---------------------- ------------------------------------------------------------------------------- ---------------

---------------------- ------------------------------------------------------------------------------- ---------------
                       To be determined by December 31, 2004, based upon approved 2005 operating
                       plan and results of 2004, and appended to this Exhibit.
---------------------- ------------------------------------------------------------------------------- ---------------
</TABLE>

                                       19
<PAGE>

                                    EXHIBIT C
                                    ---------

                             STOCK OPTION AGREEMENT
                             ----------------------

                               as of June 9, 2004

        The parties to this Stock Option Agreement (this "Agreement") are
Vyteris, Inc., a Delaware corporation having its principal place of business in
Fair Lawn, New Jersey (the "Company") and Vincent De Caprio, an employee of the
Company (the "Optionee").

        The Company desires to have the Optionee serve as an employee of the
Company and to provide the Optionee with an incentive to put forth maximum
effort for the success of the business.

        The Company has adopted the Vyteris, Inc. 2001 Stock Option Plan (the
"Plan") to attract and retain highly competent employees and to provide an
incentive in motivating selected employees, officers, directors and consultants
to achieve long-term corporate objectives. Capitalized terms used in this
Agreement, unless otherwise defined herein, shall have the meanings given to
such terms in the Plan.

        This Agreement sets forth the terms and conditions applicable to options
to purchase shares of the Common Stock of the Company, par value $.0001 per
share (the "Common Stock"), granted to the Optionee under the Plan as of the
date first above written (the "Grant Date").

        Accordingly, intending to be legally bound hereby, the parties agree as
follows:

                                    ARTICLE I
                                GRANT OF OPTIONS

        1.1     Subject to the terms and conditions of this Agreement, the
Company hereby grants to the Optionee as of the Grant Date the right and option
to purchase from the Company up to, but not exceeding in the aggregate, 425,000
shares of Common Stock, at an exercise price of $ .80 per share (the "Options"),
and for the period beginning on the Grant Date and ending on December 31, 2013
(the "Option Term").

        1.2     The Options are not incentive stock options within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended.

                                       20
<PAGE>

                                   ARTICLE II

                      VESTING, EXERCISE AND TAX WITHHOLDING

        2.1     Unless sooner vested or terminated pursuant to this Agreement,
the Options granted to the Optionee hereunder shall vest in accordance with the
following schedule:

                                              Number of Shares
        DATE OF VESTING                     FOR WHICH OPTIONS VEST

        12/31/2004                          50% of Shares covered by the Options
        12/31/2005                          50% of Shares covered by the Options

On and after the date Options have vested, they may be exercised at any time and
from time to time during the Option Term, subject to earlier termination in
accordance with Article III of this Agreement. Upon the termination of any of
the Options pursuant to such Article III, the Options so terminated shall cease
to be exercisable and the Optionee shall have no further rights under this
Agreement with respect to the Options so terminated.

        2.3     The Company, in its sole discretion, shall have the right (but
shall not in any case be obligated), exercisable at any time after the Grant
Date, to vest the Options, in whole or in part, prior to the time the Options
would otherwise vest under the terms of this Agreement.

        2.4     Vested Options shall be exercised by the Optionee (i) by
delivering to the Company a Notice in the form set forth as Appendix A annexed
hereto, together with a check payable to the order of the Company, or (ii) in
such other manner as may be permitted by the Company.

        2.5     The Company shall notify the Optionee of the amount of
withholding tax or other tax, if any, that must be paid under federal and, where
applicable, state and local law in connection with the exercise of the Options
or the sale of shares of Common Stock subject to the Options. The Optionee shall
meet his or her withholding requirement (i) by direct payment to the Company in
cash of the amount of any taxes required to be withheld with respect to such
exercise, or (ii) in such other manner as may be permitted by the Company.

                                   ARTICLE III
                            TERMINATION OF EMPLOYMENT

        3.1     In the event of the termination of employment of the Optionee by
the Optionee or the Company and its subsidiaries for any reason whatsoever other
than death, Permanent Disability (as defined in Section 3.2) or retirement after
attainment of age 65, (i) any Options that were not vested prior to the date of
such termination of employment shall terminate on such date and (ii) any Options
that were vested prior to the date of such termination of employment (and which
were not previously exercised) shall terminate on the ninetieth (90th) day
following the date of such termination of

                                       21
<PAGE>

employment or the last day of the Option Term, whichever is earlier.

        3.2     In the event of the termination of the employment of the
Optionee by reason of death, Permanent Disability or retirement after attainment
of age 65, those unexercised Options that were vested prior to the date of such
termination (and which were not previously exercised) shall terminate on the
earlier of (i) the first anniversary of the date of such termination and (ii)
the last day of the Option Term. Any Options that were not vested prior to the
date of such termination shall terminate as of the date of such termination. As
used in this Agreement, the term "Permanent Disability" means the Optionee being
deemed to have suffered a disability that makes the Optionee eligible for
immediate benefits under any long-term disability plan of the Company, as in
effect from time to time.

        3.3     In the event of termination of employment, the Company, in its
sole discretion, shall have the right (but shall not in any case be obligated),
exercisable on or at any time after the Grant Date, to permit an Option to be
exercised, in whole or in part, after its expiration date described in Section
3.1 or Section 3.2, but not after the expiration of the Option Term.

        3.4     For purposes of this Agreement, there shall have been a
termination of employment of the Optionee if the Optionee is no longer an
employee, consultant, director or officer of the Company or of any of its
subsidiaries.

                                   ARTICLE IV
                                  MISCELLANEOUS

        4.1     The number and kind of shares subject to outstanding Options and
the option price for such shares shall be appropriately adjusted to reflect any
stock dividend, stock split, combination or exchange of shares, merger,
consolidation or other change in capitalization with a similar substantive
effect upon the Options. The Company shall have the power and sole discretion to
determine the amount of the adjustment to be made in each case.

        4.2     After any merger, reorganization, consolidation, exchange,
transfer of assets or other transaction having a similar effect involving the
Company (collectively, a "Merger"), in which the Company is the surviving
corporation, the Optionee shall, at no additional cost, be entitled upon any
exercise of the Options to receive (subject to any required action by
shareholders), in lieu of the number of shares of Common Stock receivable or
exercisable pursuant to such Options, the number and class of shares or other
securities to which the Optionee would have been entitled pursuant to the terms
of the Merger if, at the time of the Merger, the Optionee had been the holder of
record of a number of shares equal to the number of shares receivable or
exercisable pursuant to the Options. Comparable rights shall accrue to the
Optionee in the event of successive Mergers of the character described above. In
the event of a

                                       22
<PAGE>

Merger in which the Company is not the surviving corporation, the surviving,
continuing, successor, or purchasing corporation, as the case may be (the
"Acquiring Corporation"), shall either assume the Company's rights and
obligations under this Stock Option Agreement or substitute comparable options
in respect of the Acquiring Corporation's stock for such outstanding Options. In
the event the Acquiring Corporation elects not to assume or substitute
comparable options for such outstanding Options, the Board of Directors of the
Company shall provide that any unexercisable and/or unvested portion of the
outstanding Options shall be immediately exercisable and vested as of a date
prior to such Merger or consolidation, as the Board so determines. The exercise
and/or vesting of the Options that was permissible solely by reason of this
Section 4.2 shall be conditioned upon the consummation of the Merger or
consolidation. Any Options which are neither assumed by the Acquiring
Corporation nor exercised as of the date of the Merger shall terminate effective
as of the effective date of the Merger.

        For purposes of this Stock Option Agreement, all outstanding Options
will be considered assumed if, following the consummation of the Merger, the
option confers the right to purchase or receive, for each share of stock subject
to the Option immediately prior to the consummation of the Merger, the
consideration (whether stock, cash, or other securities property) received in
the Merger by holders of Common Stock for each share of the Company's Common
Stock held on the effective date of the transaction (and if holders were offered
a choice of consideration, the type chosen by the holders of a majority of the
outstanding shares of the Company's Common Stock); provided, however, that if
such consideration received in the Merger is not solely common stock of the
successor corporation or its parent, the Committee may, with the consent of the
successor corporation, provide for the consideration to be received upon the
exercise of the Option, for each share of stock subject to the Option, to be
solely common stock of the successor corporation or its parent or subsidiary
equal in fair market value to the per share consideration received by holders of
the Company's Common Stock in the Merger.

        4.3     Any outstanding Option which is assumed or replaced in the event
of a Merger and does not otherwise accelerate at that time will automatically
accelerate in the event that the Optionee's service terminates through an
"Involuntary Termination" effected within eighteen (18) months following the
effective date of such Merger. Any Option so accelerated will remain exercisable
until the earlier of (i) the expiration of the Option Term or (ii) the end of
the one-year period measured from the date of the Involuntary Termination. An
Involuntary Termination will be deemed to occur upon (i) the Optionee's
involuntary dismissal or discharge by the Company or its subsidiaries or their
successors for reasons other than cause or (ii) the Optionee's voluntary
resignation following (A) a reduction in the Optionee's level of compensation
(including base salary, fringe benefits and any corporate-performance based
bonus or incentive programs) by more than ten percent or (B) a relocation of the
Optionee's place of employment by more than fifty (50) miles, provided and only
if such reduction or relocation is effected by the Company or its subsidiaries
or their successor without the Optionee's written consent.

                                       23
<PAGE>

        4.4     Nothing contained in this Agreement shall be deemed to confer
upon the Optionee, in the Optionee's capacity as a holder of Options, any right
to prevent or to approve or vote upon any of the corporate actions described in
this Article IV. The existence of the Options granted hereunder shall not affect
in any way the right or the power of the Company or its shareholders to make or
authorize any or all adjustments, recapitalizations, reorganizations or other
changes in the Company's capital structure or its business, or any merger or
consolidation of the Company, or any issue of bonds, debentures, preferred or
prior preference stocks ahead of or affecting the Common Stock or the rights
thereof, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding, whether of a similar character or otherwise.

        4.5     Whenever the term "the Optionee" is used in any provision of
this Agreement under circumstances where the provision should logically be
construed to apply to the executors, the administrators, or the person or
persons to whom Options may be transferred by will or by the laws of descent and
distribution or otherwise, the term "the Optionee" shall be deemed to include
such person or persons.

        4.6     Unless otherwise determined by the Company in writing, the
Options granted hereunder are not transferable by the Optionee otherwise than by
will or the laws of descent and distribution and are exercisable during the
Optionee's lifetime only by the Optionee. No assignment or transfer of the
Options granted hereunder, or of the rights represented thereby, whether
voluntary or involuntary, by operation of law or otherwise (except by will or
the laws of descent and distribution or as otherwise determined by the Company
in writing), shall vest in the assignee or transferee any interest or right
herein whatsoever, but immediately upon any such assignment or transfer the
Options shall terminate and become of no further effect.

        4.7     The Optionee shall not be deemed for any purpose to be a
shareholder of the Company in respect of any shares as to which the Options
shall not have been exercised as herein provided.

        4.8     Nothing in this Agreement shall confer upon the Optionee any
right to continue in the employ of the Company or any of its subsidiaries or
shall affect the right of the Company and its subsidiaries to terminate the
employment of the Optionee (as such phrase is described in Section 3.4 of this
Agreement), with or without cause.

        4.9     Nothing in this Agreement or otherwise shall obligate the
Company to vest any of the Options, to permit the Options to be exercised other
than in accordance with the terms hereof or to grant any waivers of the terms of
this Agreement, regardless of what actions the Company, the Board or the
Committee may take or waivers the Company, the Board or the Committee may grant
under the terms of or with respect to any options now or hereafter granted to
any other person or any other options granted to the Optionee.

                                       24
<PAGE>

        4.10    Notwithstanding any other provision, hereof, the Optionee shall
not exercise the Options granted hereunder, and the Company shall not be
obligated to issue any shares to the Optionee hereunder, if the exercise thereof
or the issuance (or such purchase) of such shares would constitute a violation
by the Optionee or the Company of any provision of any law or regulation of any
governmental authority. Any determination in this connection by the Company
shall be final and binding. The Company shall in no event be obligated to
register any securities pursuant to the Securities Act of 1933 (as the same
shall be in effect from time to time) or to take any other affirmative action in
order to cause the exercise of the Options or the issuance of shares pursuant
thereto to comply with any law or regulation of any governmental authority.

        4.11    No amounts of income received by the Optionee pursuant to this
Agreement shall be considered compensation for purposes of any pension or
retirement plan, insurance plan or any other employee benefit plan of the
Company or its subsidiaries, unless otherwise provided in such plan.

        4.12    Every notice or other communication relating to this Agreement
shall be in writing and shall be mailed to or delivered to the party for whom it
is intended at such address as may from time to time be designated by it in a
notice mailed or delivered to the other party as herein provided; PROVIDED,
HOWEVER, that unless and until some other address be so designated, all notices
or communications by the Optionee to the Company shall be mailed or delivered to
the President of the Company at its headquarters in Fair Lawn, New Jersey and
all notices or communications by the Company to Optionee may be given to the
Optionee personally or may be mailed to the Optionee at the Optionee's home
address as reflected in the Company's records.

        4.13    This Agreement shall be governed by the laws of the State of
Delaware applicable to agreements made and performed wholly within the State of
Delaware (regardless of the laws that might otherwise govern under applicable
conflicts of laws principles).

        4.14    As used in this Agreement, unless the context otherwise requires
(i) references to "Articles" or "Sections" are to articles or sections of this
Agreement, (ii) "hereof", "hereunder", "hereunder" and comparable tends refer to
this Agreement in its entirety and not to any particular part of this Agreement,
(iii) references to any gender include references to all genders, (iv)
"including" means including without limitation, and (v) headings of the various
articles and sections are for convenience of reference only.

        4.15    This Agreement and the Plan (the terms of which are incorporated
by reference herein) sets forth a complete understanding between the parties
with respect to its subject matter and supersedes all prior and contemporaneous
agreements and understandings with respect thereto. Except as expressly set
forth in this Agreement, the Company makes no representations, warranties or
covenants to the Optionee with respect to this Agreement or its subject matter,
including with respect to (i) the current or future value of the shares subject
to the Options and (ii) whether the option price is equal to less than or
greater than the fair market

                                       25
<PAGE>

value of a share of Common Stock. Any modification, amendment or waiver of this
Agreement will be effective only if it is in writing signed by the Company and
the Optionee. The failure of any party to enforce at any time any provision of
this Agreement shall not be construed to be a waiver of that or any other
provision of this Agreement.

        4.16    TAX CONSEQUENCES. Some of the federal tax consequences relating
to this Option, as of the date of this Option, are set forth below. THIS SUMMARY
IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO
CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION
OR DISPOSING OF THE SHARES.

                A.      GRANT OF THE OPTION. The grant of an Option will not
result in the imposition of a tax under the federal income tax laws.

                B.      EXERCISING THE OPTION.

                        (1)     NONSTATUTORY STOCK OPTION ("NSO"). The Optionee
may incur regular federal income tax liability upon exercise of a NSO. The
Optionee will be treated as having received compensation income (taxable at
ordinary income tax rates) equal to the excess, if any, of the fair market value
of the exercised shares on the date of exercise over their aggregate exercise
price. If the Optionee is an employee or a former employee, the Company will be
required to withhold from the Optionee's compensation or collect from the
Optionee and pay to the applicable taxing authorities an amount in cash equal to
a specified percentage of this compensation income at the time of exercise, and
may refuse to honor the exercise and refuse to deliver shares if such
withholding amounts are not delivered at the time of exercise.

                        (2)     INCENTIVE STOCK OPTION ("ISO"). If this Option
qualifies as an ISO, the Optionee will have no regular federal income tax
liability upon its exercise, although the excess, if any, of the fair market
value of the exercised shares on the date of exercise over their aggregate
exercise price will be treated as an adjustment to alternative minimum taxable
income for federal tax purposes and may subject the Optionee to alternative
minimum tax in the year of exercise. In the event that the Optionee ceases to be
an employee but remains an officer, director or consultant to the Company or its
subsidiaries, any Incentive Stock Option of the Optionee that remains
unexercised shall cease to qualify as an Incentive Stock Option and will be
treated for tax purposes as a Nonstatutory Stock Option on the date three (3)
months and one (1) day following such change of status.

                C.      DISPOSITION OF SHARES.

                        (1)     NSO. If the Optionee holds shares acquired upon
exercise of an NSO ("NSO Shares") for at least one year, any gain realized on
disposition of the NSO Shares will be treated as long-term capital gain for
federal income tax purposes.

                                       26
<PAGE>

                        (2)     ISO. If the Optionee holds shares acquired upon
exercise of an ISO ("ISO Shares") for at least one year after exercise and two
years after the grant date, any gain realized on disposition of the ISO Shares
will be treated as long-term capital gain for federal income tax purposes. If
the Optionee disposes of ISO Shares within one year after exercise or within two
years after the grant date, any gain realized on such disposition will be
treated as compensation income (taxable at ordinary income rates) to the extent
of the excess, if any, of the lesser of (A) the difference between the fair
market value of the ISO Shares acquired on the date of exercise and the
aggregate exercise price, or (B) the difference between the sale price of such
ISO Shares and the aggregate exercise price. Any additional gain will be taxed
as capital gain, short-term or long-term depending on the period that the ISO
Shares were held.

                        (3)     NOTICE OF DISQUALIFYING DISPOSITION OF ISO
SHARES. If the Optionee sells or otherwise disposes of any of the ISO Shares
acquired pursuant to an ISO on or before the later of (i) two years after the
grant date, or (ii) one year after the exercise date, the Optionee shall
promptly notify the Company in writing of such disposition. The Optionee agrees
that he or she may be subject to income tax withholding by the Company on the
compensation income recognized from such early disposition of ISO Shares by
payment in cash or out of the current earnings paid to the Optionee.

        4.17.   LOCK-UP AGREEMENT; OTHER AGREEMENTS. If requested by the Company
at any time prior to the date, if any, on which the Securities and Exchange
Commission declares effective a registration statement filed by the Company
under the Securities Act of 1933 in connection with an initial public offering
of the Company's securities (the "SEC Effective Date", the Optionee shall
execute a lock-up agreement, in such form as the Committee shall determine,
precluding the Optionee from selling, pledging, hypothecating, selling short or
in any other manner transferring, during a period commencing on or about the SEC
Effective Date and expiring on or about 180 days after the SEC Effective Date,
any ISO Shares or NSO Shares owned by the Optionee as of the SEC Effective Date
or acquired by the Optionee during such 180 day period. Should the Optionee fail
to execute such agreement, the Optionee shall be deemed to be restricted, in the
same manner as the Directors of the Company agree to be restricted from selling
any capital stock of the Company owned by such Directors, from selling,
pledging, hypothecating, selling short or in any other manner transferring,
during a period commencing on the SEC Effective Date and expiring 180 days after
the SEC Effective Date, any ISO Shares or NSO Shares owned by the Optionee as of
the SEC Effective Date or acquired by the Optionee during such 180 day period.

        If requested by the Committee at the time of exercise of any portion or
all of the Options, the Optionee shall execute such other agreements as the
Committee shall identify, provided that such agreements are comparable, in all
material respects, to agreements which other holders of the Company's Common
Stock have been, or will be, requested to execute.

        4.18.   EARLY EXERCISE. Notwithstanding the vesting schedule described
in this Agreement, if the Committee notifies the Optionee in writing that the
Optionee may exercise the

                                       27
<PAGE>

Options (or any portion of the Options) during its term at any time as to shares
that have not vested (the "Unvested Shares"), the Optionee may do so, provided
that at the time of such exercise the Optionee deliver to the Company, in
addition to the other exercise documentation required hereby, an executed copy
of a Restricted Stock Purchase Agreement attached as EXHIBIT B to the Plan,
along with its attachments, as applicable (the "Restricted Stock Agreement"),
whereby, among other things, the Optionee agrees to grant to the Company certain
repurchase rights, at cost, with respect to the Unvested Shares, as more fully
set forth therein, which repurchase rights shall lapse over time with respect to
the Unvested Shares in accordance with the vesting schedule described in this
Agreement.

        By the Optionee's signature and the signature of the Company's
representative below, the Optionee and the Company agree that this Option is
granted under and governed by the terms and conditions of the Plan and this
Option Agreement. The Optionee has reviewed the Plan and this Option Agreement
in their entirety, has received a copy of a question and answer memorandum
describing the Plan, has had an opportunity to obtain the advice of counsel
prior to executing this Option Agreement and fully understands all provisions of
the Plan and this Option Agreement. The Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Committee
upon any questions relating to the Plan and this Option Agreement. The Optionee
further agrees to notify the Company upon any change in the Optionee's residence
address.

        IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.

                                      VYTERIS, INC.

                                      By:_______________________________________
                                            Vincent DeCaprio, President

                                      OPTIONEE:
                                      ------------------------------------------
                                             FIRST       LAST

                                       28
<PAGE>

                                   APPENDIX A

                            EXERCISE OF STOCK OPTION

        1.      EXERCISE. Pursuant to the provisions of the Stock Option
Agreement entered into as of June 30, 2003 between Vyteris, Inc. (the "Company")
and the undersigned (the "Agreement"), the undersigned (the "Purchaser") hereby
exercise the Options granted under the terms of the Agreement (the "Options") to
the extent of ________ shares of the Common Stock of the Company (the "Shares").
The Purchaser delivers to the Company herewith the following in payment for the
Shares:

        o       $_________ in cash

        o       Stock certificates for _____________ shares of Common Stock

        2.      REPRESENTATIONS OF PURCHASER. Purchaser acknowledges that
Purchaser has received, read and understood the Plan and the Option Agreement
and agrees to abide by and be bound by their terms and conditions. Unless the
Company is a public corporation which has registered the shares issuable under
the Plan under the Securities Act of 1933, the Purchaser confirms the
representations set forth below:

                The Purchaser is acquiring the Shares for his/her own account
        and the Shares were acquired by him/her for the purpose of investment
        and not with a view to distribution or resale thereof in violation of
        the Securities Act of 1933 (the "Securities Act"). The Purchaser
        understands that none of the Shares has been registered under the
        Securities Act or any other applicable securities laws, and, therefore,
        cannot be resold unless they are subsequently registered under the
        Securities Act and other applicable securities laws or unless an
        exemption from such registration is available. The Purchaser agrees not
        to resell or otherwise dispose of all or any part of the Shares
        purchased by him/her except as permitted by law, including, without
        limitation, any regulations under the Securities Act and other
        applicable securities laws. The Purchaser understands that the Company
        does not have any present intention and is under no obligation to
        register the Shares under the Securities Act and other applicable
        securities laws. The Purchaser further represents that the Purchaser
        understands and agrees that all certificates evidencing any of the
        Shares, whether upon initial issuance or upon any transfer thereof,
        shall bear a legend, prominently stamped or printed thereon, reading
        substantially as follows:

        "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
        UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS.
        THESE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER
        SALE,

                                       29
<PAGE>

        TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF (1) AN EFFECTIVE
        REGISTRATION STATEMENT COVERING SUCH SECURITIES UNDER THE SECURITIES ACT
        OF 1933 AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) AN OPINION OF
        COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT EXEMPTION FROM
        REGISTRATION THEREUNDER IS AVAILABLE."

                The Purchaser is able to bear the economic risk of this
        investment including a complete loss of the investment.

        3.      RIGHTS AS SHAREHOLDER. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Shares,
notwithstanding the Purchaser's exercise of the Options. The Shares so acquired
shall be issued to the Optionee as soon as practicable after exercise of the
Options. No adjustment will be made for a dividend or other right for which the
record date is prior to the date of issuance, except as otherwise provided in
the Plan.

        4.      TAX CONSULTATION. Purchaser understands that Purchaser may
suffer adverse tax consequences as a result of Purchaser's purchase or
disposition of the Shares. Purchaser represents that Purchaser has consulted
with any tax consultants Purchaser deems advisable in connection with the
purchase or disposition of the Shares and that Purchaser is not relying on the
Company for any tax advice.

        6.      ENTIRE AGREEMENT; GOVERNING LAW. The Plan and Option Agreement
are incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and the Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser's interest except by
means of a writing signed by the Company and Purchaser. This agreement is
governed by the internal substantive laws, but not the choice of law rules, of
the State of Delaware.

Date: ___________________                ___________________________
                                                  Purchaser

                                         ___________________________
                                                   Address

                                         ___________________________
                                            Social Security Number

                                       30<PAGE>

                                  EXHIBIT 10.2
                                  ------------

                              Employment Agreement
                                    between
                        Vyteris, Inc. and James Garrison

<PAGE>

                              EMPLOYMENT AGREEMENT

        This Employment Agreement ("Agreement"), dated as of December 15, 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
James Garrison, an individual residing at 19 Howard Street, Verona, New Jersey
07044 ("Employee").

        WHEREAS, Employer desires to employ Employee as Vice President Business
Development 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 Business Development of Employer, or
subject to provision 4.01 of this Agreement, 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 assigned by the Employer's Board of
Directors, the president of the Employer and/or the president's nominee,
including, without limitation, the duties and responsibilities set forth on
EXHIBIT A attached hereto. 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 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 under this Agreement shall
commence on January 1, 2003 (the "Commencement Date") and, subject to earlier
termination pursuant to Article IV hereof, shall continue until December 31,
2005 (the "Term"); provided, however, that unless either party gives written
notice to the other at least 180 days prior to the expiration of the
then-current Term that such party elects not to renew this Agreement, the
then-current Term shall be automatically extended for additional one-year
periods. The election of Employer or the Employee not to extend the then-current
Term, as provided in this Section 2.01 shall not be deemed to a termination by
Employer under Sections 4.01(B) or 4.01(C) or by Employee for Good Reason, and
in such event Employee shall only be entitled to the compensation set forth in
Section 4.02 (ii).

                                  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 S 150,000 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 adjustments as the Board of Directors of
Employer ("Board") shall deem appropriate in accordance with Employer's
procedures and practices in effect from time to time regarding the salaries of
employees. The term "Base Salary" as used in this Agreement shall refer to Base
Salary as may be adjusted from time to time. 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)     BONUS. During the Term following the completion of one full
calendar year of employment, Employee shall also be entitled to an annual bonus,
in such amount as may be determined by the Board ("Discretionary Bonus").
Employee's target Discretionary Bonus shall be 30% of Base Salary on an
annualized basis. The Discretionary Bonus, if any, shall be determined as of the
end of each full calendar year of employment, payable within sixty days after
the last day of each such year. Qualification for the Discretionary Bonus shall
be established by the Board and shall be related to achievement of Employer's
operating plan, budgets and strategic development milestones/objectives
established by the Board from time to time.

Except as otherwise specifically set forth in Section 4.02, to be eligible to
receive any Discretionary Bonus, or any portion thereof, Employee must be
employed by Employer both at the time the amount of the Discretionary Bonus, if
any, is determined, and at the time any such bonus is to be paid.

                                      -2-
<PAGE>

Exhibit B lists the current Discretionary Bonus payment milestones/objectives,
which milestones and objectives may be modified by Employer from time to time in
its sole discretion.

        (C)     INCENTIVE STOCK OPTION GRANTS. During the Term, 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's Compensation Committee 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.

        (D)     BENEFITS. During the Term, Employee shall be entitled to
participate in all Employer's employee benefit plans and programs (excluding
severance plans, if any) as Employer generally maintains from time to time
during the Term for the benefit of its 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 amounts to benefit costs without notice
in its discretion.

        (E)     VACATION SICK AND PERSONAL DAYS. During the Term, Employee shall
be entitled to paid vacation, 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; provided, however, that Employee shall be entitled to
no less than 3 weeks paid vacation per year.

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.

                                   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,

                                      -3-
<PAGE>

(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) after a written and specific warning and a reasonable
opportunity to cure material and repeated non-performance, failure to perform
Employee's duties as assigned to Employee from time to time, or (v) 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 thirty (30) days prior written notice (or
payment of thirty (30) days 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 with or without Good Reason by giving (30)
days prior written notice of termination to Employer; provided, however, that
Employer reserves 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, and pay Employee for the entire thirty (30) days or to the
intended date of termination of such notice. For purposes of this Agreement,
"Good Reason" shall mean, in the absence of a written consent of Employee:

        (i)             any action by Employer which results in a material
diminution in Employee's title, position, authority or duties from those
contemplated by Section 1.02, other than isolated actions which are remedied by
Employer promptly after receipt of written notice thereof given by Employer;

        (ii)            any material failure by Employer to comply with any
material provision of this Agreement, other than isolated and inadvertent
failures and which are remedied by Employer promptly after receipt of written
notice thereof given by Employee; and

        (iii)           the requirement by Employer that the Employee be based
in an office that is located more than 50 miles from Employee's principal place
of employment on the Commencement Date.

        Notwithstanding the foregoing, placing Employee on a paid leave for up
to 90 days, pending a determination of whether is a basis to terminate Employee
for "Cause", shall not constitute a "Good Reason".

        (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 120 consecutive
days in any 12-month period or 150 non-consecutive days in any 12-month period,
Employer may terminate this Agreement and Employee's employment hereunder upon
at least 30 days' prior 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.

                                      -4-
<PAGE>

        (G)     EXPIRATION OF TERM. This Agreement and Employee's employment
hereunder shall automatically terminate upon the expiration of the Term.

4.02    EMPLOYER'S OBLIGATIONS UPON TERMINATION.

        (i)             FOR CAUSE; OTHER THAN FOR GOOD REASON. If, during the
Term, Employer shall terminate this Agreement and Employee's employment
hereunder for Cause or Employee shall terminate this Agreement and Employee's
employment hereunder other than for Good Reason, Employer's sole obligation to
Employee under this Agreement shall be to (a) pay to Employee Base Salary
earned, but not yet paid to Employee, prior to the date of such termination, and
(b) reimburse Employee for any expenses incurred by Employee through the date of
termination in accordance with Section 3.02.

        (ii)            EXPIRATION OF TERM. Upon the expiration of the Term,
Employer's sole obligation to Employee under this Agreement shall be to (a) pay
to Employee Base Salary earned, but not yet paid to Employee, prior to the date
of such termination, (b) reimburse Employee for any expenses incurred by
Employee through the date of termination in accordance with Section 3.02, (c)
pay to Employee any Discretionary Bonus earned or awarded with respect to
performance in the calendar year(s) prior to the calendar year in which such
termination occurred, but not yet paid to Employee.

        (iii)           DEATH. If, during the Term, this Agreement and
Employee's employment hereunder shall terminate as a result of Employee's death,
Employer's sole obligation to Employee's estate under this Agreement shall be to
(a) pay to Employee's estate Base Salary earned, but not yet paid to Employee,
prior to the date of such termination, (b) reimburse Employee's estate for any
expenses incurred by Employee through the date of termination in accordance with
Section 3.02, (c) pay to Employee's estate any Discretionary Bonus earned or
awarded prior to the date of termination with respect to performance in the
calendar year(s) prior to the calendar year in which the date of termination
occurred, but not yet paid.

        (iv)            DISABILITY. If, during the Term, this Agreement and
Employee's employment hereunder shall terminate as a result of Employee's
Disability, Employer's sole obligation to Employee under this Agreement shall be
to (a) pay to Employee Base Salary earned, but not yet paid to Employee, prior
to the date of such termination, (b) reimburse Employee for any expenses
incurred by Employee through the date of termination in accordance with Section
3.02, (c) pay to Employee any Discretionary Bonus earned or awarded prior to the
date of termination with respect to performance in the calendar year(s) prior to
the calendar year in which the date of termination occurred, but not yet paid.

        (v)             WITHOUT CAUSE; FOR GOOD REASON. If, during the Term,
Employer shall terminate this Agreement and Employee's employment hereunder
without Cause or Employee terminates this Agreement and Employee's employment
hereunder for Good Reason, Employer's sole obligation to Employee under this
Agreement shall be to: (a) pay to Employee Base Salary earned, but not yet paid
to Employee, prior to the date of such termination, (b) reimburse Employee for
any expenses incurred by Employee through the date of termination in accordance
with Section 3.02, (c) pay to Employee any Fixed Annual Bonus or Discretionary
Bonus earned or awarded prior to the date of termination with respect to
performance in the calendar year(s). prior to the calendar year in which the
date of termination occurred, but not yet paid, (d) pay to

                                      -5-
<PAGE>

Employee a pro-rata portion (based upon the date of termination) of the amount
of the Discretionary Bonus, if any, awarded by Employer for the calendar year in
which the date of termination occurred, as determined by Employer at the end of
such calendar year, payable on the date such bonus was otherwise to be paid, and
(e) pay to Employee a lump sum equal to 6 months of Employee's Base Salary.

In addition to the payments and benefits set forth in this Section 4.02, amounts
which are vested benefits or which Employee is otherwise entitled to receive
under any plan, program, policy or practice (with the exception of those
relating to severance) on the date of termination, shall be payable in
accordance with such plan, policy, practice or agreement. Except with respect to
Base Salary earned through the date of termination, but not yet paid, and
unreimbursed expenses incurred through the date of termination, Employer shall
not be required to make the payments and provide the benefits specified in this
Section 4.02 unless Employer executes and delivers to Employer a general release
in favor of Employer, its affiliates and their respective officers, directors
and employees from all liability (other than the payments and benefits under
this Agreement) in a form reasonably satisfactory to Employer.

                                    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
affiliates (collectively, the "Company") or otherwise of Confidential
Information relating to the Company, its business, potential business or that of
its clients and customers. "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 and its
clients and customers:

        (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

                                      -6-
<PAGE>

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 [B], 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 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 one year 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 at any time during
the period of Employee's employment. 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,

                                      -7-
<PAGE>

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 provided it does not unreasonably interfere with employment (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, 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 below (if any),
Employee does not have any non-disclosure or other obligations 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. 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 below, if any, 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 below.

[If none, write "None". If any, list]       NONE

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

                                      -8-
<PAGE>

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.

        (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 or
clients 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 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 Employer, its
affiliates and their respective clients, customers and its or their respective
officers, directors, agents or employees.

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 business 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.

                                      -9-
<PAGE>

5.08    [INTENTIONALLY OMITTED]

5.09    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.

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

                                   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.                               with a copy to:
13-01 Pollitt Drive                         Lowenstein Sandler PC
Fair Lawn, New Jersey 07410                 65 Livingston Avenue
                                            Roseland, New Jersey 07068
Attn:   Vincent De Caprio                   Attn: Peter Ehrenberg
        President

and in the case of Employee to:             James Garrison
                                            19 Howard Street
                                            Verona, NJ 07044

                                      -10-
<PAGE>

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.

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 Employer
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    LIMITATION AS TO AMOUNTS PAYABLE. In the event that any payment,
coverage or benefit provided under this Agreement would, in the opinion of
counsel for Employer, not be deemed to be deductible in whole or in part in the
calculation of the Federal income tax of Employer, or any other person making
such payment or providing such coverage or benefit, by reason of Section 280G of
the Internal Revenue Code of 1986, as amended (the "Code"), the aggregate
payments, coverages or benefits provided under this Agreement shall be reduced
to the "safe harbor" level under Section 280G so that the entire amount which is
paid to Employee shall be deductible notwithstanding the provisions of Section
280G of the Code.

6.07    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.

6.08    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.

                                      -11-
<PAGE>

6.09    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 and Employee's
right to seek injunctive or other equitable relief (including, without
limitation, pursuant to Article V), 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 Section 6.09 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 Article V hereof. Employer
shall pay the pay the fees of the arbitrator and each party shall be responsible
for its own legal fees, costs of its experts and expenses of its witnesses. The
arbitrator's remedial authority shall equal the remedial power that a court with
competent jurisdiction over the parties and their dispute would have. Any award
rendered shall be final, binding and conclusive (without the right to an appeal,
unless such appeal is based on fraud by 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 acknowledge that it is the intention of the parties that
this Section 6.09 shall apply to all disputes, controversies and claims,
including, without limitation, any rights or claims Employee may have under the
Age Discrimination in Employment Act of 1967, the Americans with Disabilities
Act, Title VII of the Civil Rights Act of 1964, the Equal Pay Act, the New
Jersey Law Against Discrimination, the Conscientious Employee Protection Act and
all other federal, state or local laws, rules or regulations relating to
employment discrimination or otherwise pertaining to this Agreement, Employee's
employment or termination thereof. 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.

6.10    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.

6.11    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.

6.12    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.

                                      -12-
<PAGE>

6.13    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: Vincent De Caprio
                                           -----------------
                                           1/22/2003

                                       EMPLOYEE:

                                       BY: James Garrison
                                           --------------
                                           1/22/2003, individually

                                      -13-
<PAGE>

                                   EXHIBIT [B]

                             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.

_________________________________
(Signature)
Name:____________________________
Address:_________________________

Subscribed and sworn to before me this ____ day of _____, _____,

_________________________________
(Notary Public)

                                      -14-
<PAGE>

                           EXEMPT POSITION DESCRIPTION

---------------------------------------- ------------------------ --------------
             POSITION TITLE                    INCUMBENT               BAND
---------------------------------------- ------------------------ --------------
  Vice President, Business Development       James Garrison            N/A
---------------------------------------- ------------------------ --------------
               DEPARTMENT                                LOCATION
---------------------------------------- ---------------------------------------
     Business Development/Marketing                     Fair Lawn
---------------------------------------- ---------------------------------------
                DIVISION                                   DATE
---------------------------------------- ---------------------------------------
                   N/A                                   08/16/02
---------------------------------------- ---------------------------------------
                                GENERAL FUNCTION
--------------------------------------------------------------------------------

The Vice President of Business Development will report to the President and be
responsible for identifying and generating new business within the
pharmaceutical, biotechnology drug delivery and healthcare industries.

--------------------------------------------------------------------------------
                                 RESPONSIBILITY
--------------------------------------------------------------------------------

ESSENTIAL DUTIES AND RESPONSIBILITIES INCLUDE THE FOLLOWING. OTHER DUTIES MAY BE
ASSIGNED

        o       Managing the prospecting, lead generation and collaboration
                activities within business development; assessing partner
                requirements; and negotiating development, licenses and supply
                contracts.

        o       Maintaining responsibility for the ongoing management of new
                corporate partner arrangements post successful competition of
                licensing efforts.

        o       As a member of and in concert with the Senior Management team,
                develop a strategic direction/strategy for the company including
                product and technology portfolio decisions, business strategies
                and marketing plans to support the growth of the enterprise.

        o       Working in tandem with appropriate groups such as R & D,
                Finance, Regulatory and other areas of the organization,
                participating in project alignment with the setting and
                employing of company goals.

        o       Maintaining a current knowledge base of biotechnology and
                pharmaceutical industry leaders, trends marketed products, and
                clinical-stage pipeline products to make specific
                recommendations on specific products or collaborative
                opportunities. Participate in the development of sound business
                cases based on in-depth analyses of market size, financial
                opportunity, unmet customer needs, competitive landscape, and
                the company's competitive advantages and ability to
                differentiate its value offering.

                                      -15-

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