SECURITY AGREEMENT

THIS SECURITY AGREEMENT (this " Agreement "), dated as of this _____ day of July, 2008, is made by and between VYTERIS, INC. (the " Borrower "), and FERRING PHARMACEUTICALS, INC. (the " Holder ").

1.           The Borrower desires that the Holder make a loan to the Borrower (the “ Loan ”) in the principal amount of $2,500,000.00, and it is beneficial to the Borrower that the Loan be made.

2.           The Loan will be evidenced by a certain Secured Note, of even date herewith (the “ Note ” or “ Secured Note ”) executed by Borrower in favor of the Holder .

3.           In order to induce the Holder to make the Loan and for other good and valuable consideration, receipt of which is acknowledged, and as security for the performance by the Borrower of the Obligations (as hereinafter defined), the Borrower, has agreed to grant to the Holder, for the benefit of the Holder, a security interest in the Collateral (as such term is hereinafter defined), on the terms and conditions hereinafter set forth.

NOW, THEREFORE, the Borrower and the Holder, intending to be legally bound, hereby agree as follows:

1.           Definitions.

(a)           " Collateral " shall mean the Borrower's equipment more fully described on Exhibit "A" attached hereto and made a part hereof (the " Equipment "); all goods and general intangibles relating to, arising from or embedded in the Equipment, all cash and non-cash proceeds (including insurance proceeds) of the Equipment, all products thereof and all additions and accessions thereto, substitutions therefor and replacements thereof.

(b)           “ Obligations " shall mean all obligations of the Borrower the Holder under the Note (whether for principal, interest or otherwise, and including any interest accruing thereon after maturity, or after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding); and any amendments, extensions, renewals  and increases of or to any of the foregoing, and all costs and expenses of the Holder incurred in the modification, enforcement, collection and otherwise in connection with any of the foregoing, including reasonable attorneys' fees and expenses.

(c)           " UCC " means the Uniform Commercial Code, as adopted and enacted and as in effect from time to time in the State whose law governs pursuant to the Section of this Agreement entitled " Governing Law and Jurisdiction ."  Terms used herein which are defined in the UCC and not otherwise defined herein shall have the respective meanings ascribed to such terms in the UCC. To the extent the definition of any category or type of collateral is modified by any amendment, modification or revision to the UCC, such modified definition will apply automatically as of the date of such amendment, modification or revision.

2.             Grant of Security Interest.    To secure the Obligations, the Borrower, as debtor, hereby assigns and grants to the Holder, as secured party, a continuing first priority lien on and security interest in the Collateral.

3.             Change in Name or Locations.    The Borrower hereby agrees that if the location of the Collateral changes from the locations listed on Exhibit "A" hereto and made part hereof (other than transport to its headquarters in Fair Lawn New Jersey), or if the Borrower changes its name, its type of organization, its state of organization or its chief executive office or establishes a name under which it may do business that is not listed as a tradename on Exhibit "A" hereto, the Borrower will immediately notify the Holder in writing of the additions or changes.

4.             Representations and Warranties.    The Borrower represents, warrants and covenants to the Holder that: (a) all information, including its type of organization, jurisdiction of organization and chief executive office, are as set forth on Exhibit "A" hereto and are true and correct on the date hereof; (b) the Borrower has paid to the manufacturer(s) and all supplier(s) of the Collateral the entire purchase payable therefor, and no amounts remain to be paid to any such manufacturer or supplier for or in connection with the acquisition by the Borrower of the Collateral; (c) as of date hereof, the Collateral is located at the location listed on Exhibit “A” hereto; (d) the Borrower has good, marketable and indefeasible title to the Collateral, has not made any prior sale, pledge, encumbrance, assignment or other disposition of any of the Collateral, and the Collateral is free from all encumbrances and rights of setoff of any kind except the lien in favor of the Holder created by this Agreement; and any liens or security interests of Spencer Trask Specialty Group, LLC and/or its affiliates (the “ Subordinate Lienholders ”), which are subject, junior and subordinate to the lien and security interest granted to the Holder hereunder pursuant to a Subordination Agreement dated as of the date hereof among the Subordinate Lienholders and the Holder; (e) except as herein provided, the Borrower will not hereafter without the Holder's prior written consent sell, pledge, encumber, assign or otherwise dispose of any of the Collateral or permit any right of setoff, lien or security interest to exist thereon except to the Holder; (f) the Borrower will defend the Collateral against all claims and demands of all persons and entities at any time claiming the same or any interest therein; (g) the Holder's security interest in the Collateral constitutes and will continue to constitute a first priority security interest in favor of the Holder and (h) each of this Agreement and the other Loan Documents (as defined in the Note) has been duly authorized, executed and delivered by the Borrower and constitutes its legal, valid and binding obligations, enforceable in accordance with their respective terms, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, moratorium or other similar laws affecting creditors’ rights generally.

5.             Personal Property .  The Collateral shall remain personal property at all times. The Borrower shall not affix any of the Collateral to real property in any manner which would change its nature from that of personal property to real property or to a fixture.

6.             Borrower's Covenants.    The Borrower covenants that it shall:

(a)           from time to time and at all reasonable times allow the Holder, by or through any of its officers, agents, attorneys, or accountants, to examine or inspect the Collateral, wherever located.  The Borrower shall do, obtain, make, execute and deliver all such additional and further acts, things, deeds, assurances and instruments as the Holder may reasonably require to vest in and assure to the Holder its rights hereunder and in or to the Collateral, and the proceeds thereof, including waivers from landlords, warehousemen and mortgagees.  The Borrower agrees that the Holder has full power and authority to collect, compromise, endorse, sell or otherwise deal with the Collateral in its own name or that of the Borrower at any time upon an Event of Default;

(b)           keep the Collateral in good order and repair at all times and immediately notify the Holder of any event causing a material loss or decline in value of the Collateral, whether or not covered by insurance, and the amount of such loss or depreciation;

(c)           only use or permit the Collateral to be used in accordance with all applicable federal, state, county and municipal laws and regulations;

(d)           no later than October 31, 2008, cause the Collateral to be transported from its current location in Germany to the Borrower’s facility in Fair Lawn, New Jersey (or another location within the U.S. acceptable to both Holder and Borrower) (the “ Borrower’s Facility ”), and immediately notify the Holder in writing upon the arrival of the Collateral at the Borrower’s Facility;

(e)           have and maintain public liability and property damage insurance at all times with respect to all Collateral against such risks, including fire (including so-called extended coverage), theft, sprinkler leakage, and other risks (including risk of flood if any Collateral is maintained at a location in a flood hazard zone and, for the period that the Collateral is being transported to the Borrower’s Facility, risks of loss during transportation) as the Holder may require, in such form, in such amount, for such period and written by such companies as may be satisfactory to the Holder in its sole discretion.  Each such casualty insurance policy shall contain a standard Lender's Loss Payable Clause issued in favor of the Holder under which all losses thereunder shall be paid to the Holder as the Holder's i