Exhibit 10.2

SECURITY AGREEMENT

Security Agreement (this “Agreement”), dated as of March 15, 2011, between Titan
Pharmaceuticals, Inc (“Obligor”) in favor of Deerfield Private Design Fund II,
L.P., Deerfield Private Design International II LP., Deerfield Special
Situations Fund, L.P. and Deerfield Special Situations Fund International
Limited (together, the “Secured Party”).

W I T N E S S E T H:

WHEREAS, Obligor has entered into a Facility Agreement, dated as of the date
hereof (the “Facility Agreement”), with the Secured Party;

NOW, THEREFORE, in consideration of the mutual agreements set forth herein,
Obligor and the Secured Party agree as follows:

1. Grant of Security Interest.

(a) To secure payment and performance of the Obligations (as hereafter defined),
Obligor hereby grants to Secured Party a security interest in all property and
interests in property of Obligor, whether now owned or hereafter acquired or
existing, and wherever located (together with all other collateral security for
the Obligations at any time granted to or held or acquired by Secured Party,
collectively, the “Collateral”), including, without limitation, the following:

 

  (i) all Accounts;

 

  (ii) all Receivables;

 

  (iii) all Equipment;

 

  (iv) all General Intangibles;

 

  (v) all Inventory;

 

  (vi) all Investment Property ; and

 

  (vii) all proceeds and products of (i), (ii), (iii), (iv) (v) and (vi).

Notwithstanding the foregoing, the term “Collateral” shall expressly exclude any
interest of the Borrower in Probuphine which has been licensed, transferred,
assigned, sold and/or contributed by the Borrower to any Person (other than an
Affiliate) at any time.

(b) Perfection of Security Interests.

(i) Obligor authorizes Secured Party (or its agent) to file at any time and from
time to time such financing statements with respect to the Collateral naming
Secured Party or its designee as the secured party and Obligor as debtor, as
Secured Party may require, and including any other information with respect to
Obligor or otherwise required by part 5 of

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Article 9 of the UCC of such jurisdictions as Secured Party may determine,
together with any amendment and continuations with respect thereto, which
authorization shall apply to all financing statements filed on or after the date
hereof. Except as otherwise permitted by Section 9-509(d)(2) of the UCC, in no
event shall Obligor at any time file, or permit or cause to be filed, any
correction statement or termination statement with respect to any financing
statement (or amendment or continuation with respect thereto) naming Secured
Party or its designee as secured party and Obligor or any affiliate of Obligor
as debtor without the prior written consent of Secured Party.

(ii) Obligor shall take any other actions reasonably requested by Secured Party
from time to time to cause the attachment and perfection of, and the ability of
Secured Party to enforce, the security interest of Secured Party in the
Collateral.

2. Covenants. Obligor covenants that:

(a) it shall at all times: (i) be the sole owner of each and every item of
Collateral and (ii) defend the Collateral against the claims and demands of all
persons except for Permitted Liens as defined in the Facility Agreement;

(b) it will comply with the requirements of all agreements relating to premises
where any Collateral is located except where the necessity of compliance
therewith is contested in good faith by appropriate proceedings or where the
failure to so comply, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect;

(c) it will give Secured Party at least twenty (20) days’ prior written notice
of any change to its legal name;

(d) it will give Secured Party at least twenty (20) days’ prior written notice
of any change to its chief executive office or its mailing address; and

(e) it will give Secured Party twenty (20) days’ prior written notice of any
change to its type of organization, jurisdiction of organization or other legal
structure.

(f) in the event Obligor exercises the election described in Section 2.2(b) of
the Facility Agreement, it shall direct the applicable payors under all
agreements that generate Prepayment Revenue (as defined in the Facility
Agreement) to remit 75% of such Prepayment Revenue to a collection account
structured in a manner reasonably satisfactory to Secured Party which will be
swept monthly to Secured Party and the proceeds thereof applied by Secured Party
to repay the Loan pursuant to such Section.

3. Remedies.

(a) Upon the occurrence and during the continuance of an Event of Default (as
defined in the Facility Agreement), (i) Secured Party shall have the right to
exercise any right and remedy provided for herein, under the UCC and at law or
equity generally, including, without limitation, the right to foreclose the
security interests granted herein and to realize upon any Collateral by any
available judicial procedure and/or to take possession of and sell any or all of
the Collateral with or without judicial process; and (ii) with or without having
the Collateral at

 

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the time or place of sale, Secured Party may sell the Collateral, or any part
thereof, at public or private sale, at any time or place, in one or more sales,
at such price or prices, and upon such terms, either for cash, credit or future
delivery, as Secured Party may elect in compliance with the UCC.

4. Representations and Warranties. Obligor hereby represents and warrants to
Secured Party that:

(a)      (i) Obligor is a corporation duly organized and validly existing under
the laws of Delaware.

(ii) the exact legal name of Obligor is as set forth on the signature page of
this Agreement. Obligor has not, during the past five years, been known by or
used any other composite or fictitious name or been a party to any merger or
consolidation, or acquired all or substantially all of the assets of any Person,
or acquired any of its properties or assets out of the ordinary course of
business.

(iii) the chief executive office and mailing address of Obligor are located only
at the address identified as such on Schedule 4(a)(iii) and its only other
places of business and the only other locations of Collateral, (other than
Collateral in transit or out for repair), if any, are at the addresses set forth
on Schedule 4(a)(iii).

5. Expenses of Obligor’s Duties; Secured Party’s Right to Perform on Obligor’s
Behalf.

(a) Obligor’s agreements hereunder shall be performed by it at its sole cost and
expense.

(b) If Obligor shall fail to do any act which it has covenanted to do hereunder
which such failure is not cured within thirty (30) days following notice of such
failure by Secured Party to Obligor, Secured Party may (but shall not be
obligated to) do the same or cause it to be done, either in its name or in the
name and on behalf of Obligor, and Obligor hereby irrevocably authorizes Secured
Party so to act.

6. No Waivers of Rights hereunder; Rights Cumulative.

(a) No delay by Secured Party in exercising any right hereunder, or in enforcing
any of the Obligations, shall operate as a waiver thereof, nor shall any single
or partial exercise of any right preclude other or further exercises thereof or
the exercise of any other right. No waiver of any of the Obligations shall be
enforceable against Secured Party unless in writing and signed by an officer of
Secured Party, and unless it expressly refers to the provision affected; any
such waiver shall be limited solely to the specific event waived.

(b) All rights granted Secured Party hereunder shall be cumulative and shall be
supplementary of and in addition to those granted or available to Secured Party
under any other agreement with respect to the Obligations or under applicable
law and nothing herein shall be construed as limiting any such other right.

 

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7. Termination and Release.

(a) This Agreement shall continue in full force and effect until all Obligations
(other than contingent indemnification obligations) shall have been paid and
satisfied in full. Upon the payment in full of all Obligations (other than
contingent indemnification obligations) and the termination or expiration of the
Secured Party’s obligation to make Loans under the Facility Agreement, the
security interest granted hereby shall terminate automatically and all rights to
the Collateral shall automatically revert to the Obligor. Upon any such
termination, the Secured Party shall, at the Obligor’s expense, promptly execute
and deliver to the Obligor all releases and other documents as the Obligor shall
reasonably request to evidence such termination and shall take such other action
reasonably necessary for the release of the Liens created hereby on the
Collateral. For purposes of this Section 7(a), the term “Obligations” shall
expressly exclude any obligations and/or liabilities of the Obligor to the
Secured Party under the Royalty Agreement dated as of the date hereof by and
between the Obligor and the Secured Party (the “Royalty Agreement”) and under
the Warrants. Accordingly, and for the avoidance of doubt, this Agreement and
the related Lien of Secured Party in the Collateral shall terminate
simultaneously with payment in full of all obligations and liabilities of the
Obligor to the Secured Party under the Notes, notwithstanding that any
obligations and/or liabilities of the Obligor to the Secured Party shall
continue to exist under the Royalty Agreement and/or the Warrants.

(b) If any Collateral shall be sold, transferred or otherwise disposed of by the
Obligor in a transaction permitted by the Facility Agreement, then the Secured
Party, at the request and sole expense of the Obligor, shall promptly execute
and deliver to the Obligor all releases and other documents, and take such other
action, reasonably necessary for the release of the Liens created hereby on such
Collateral.

8. Governing Law; Jurisdiction; Certain Waivers.

(a) This Agreement shall be governed by and construed in accordance with the
laws of the State of New York applied to contracts to be performed wholly within
such State. Any judicial proceeding brought by or against Obligor with respect
to any of the Obligations or this Agreement may be brought in any court of
competent jurisdiction in such State, and, by execution and delivery of this
Agreement, Obligor accepts for itself and in connection with its properties,
generally and unconditionally, the non-exclusive jurisdiction of such court and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with this Agreement. Obligor hereby waives personal service of any and all
process upon it and consents that all such service of process may be made by
certified or registered mail (return receipt requested) directed to Obligor at
its address set forth in Section 10, and service so made shall be deemed
completed five (5) days after the same shall have been so deposited in the mails
of the United States of America. Nothing herein shall affect the right to serve
process in any manner permitted by law or shall limit the right of Secured Party
to bring proceedings against Obligor in the courts of any other jurisdiction.
Obligor waives any objection to jurisdiction and venue of any action instituted
hereunder and shall not assert any defense based on lack of jurisdiction or
venue or based upon forum non conveniens. Any judicial proceeding by Obligor
against Secured Party involving, directly or indirectly, any matter or claim in
any way arising out of,

 

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related to or connected with this Agreement or any related agreement, shall be
brought only in a federal or state court located in The City of New York, State
of New York.

(b) EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY CAUSE OF ACTION ARISING UNDER THIS AGREEMENT OR ANY OTHER AGREEMENT
DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO
IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE, AND EACH PARTY HEREBY CONSENTS THAT ANY SUCH
CAUSE OF ACTION SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY, AND THAT ANY
PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES HERETO
TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

9. Additional Definitions. As used herein:

(a) All terms used herein which are defined in Article 1 or Article 9 of the UCC
shall have the meanings given therein unless otherwise defined in this
Agreement. All references to the plural herein shall also mean the singular and
to the singular shall also mean the plural unless the context otherwise
requires. All references to Obligor and Secured Party pursuant to the
definitions set forth in the recitals hereto, or to any other person herein,
shall include their respective successors and assigns. The words “hereof”,
“herein”, “hereunder”, “this Agreement” and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not any particular
provision of this Agreement and as this Agreement now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced. The
word “including” when used in this Agreement shall mean “including, without
limitation”.

“Obligations” means:

(1) the full and prompt payment by Obligor when due of all obligations and
liabilities to Secured Party, whether now existing or hereafter arising, under
the Financing Documents and the due performance and compliance by Obligor with
the terms thereof;

(2) any and all sums advanced in accordance with the terms of the Financing
Documents or applicable law by Secured Party in order to preserve the Collateral
or to preserve the Secured Party’s security interest in the Collateral; and

(3) in the event of any proceeding for the collection or enforcement of any
obligations or liabilities of Obligor referred to in the immediately preceding
clauses (1) and (2) the reasonable expenses of re-taking, holding, preparing for
sale, selling or otherwise disposing of or realizing on the Collateral, or of
any other exercise by Secured Party of its rights hereunder, together with
reasonable and documented attorneys’ fees and court costs.

 

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“Person” or “person” shall mean any individual, sole proprietorship,
partnership, corporation limited liability company, limited liability
partnership, business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.

“UCC” shall mean the Uniform Commercial Code as in effect in the State of New
York and any successor statute, as in effect from time to time (except that
terms used herein which are defined in the Uniform Commercial Code as in effect
in the State of New York on the date hereof shall continue to have the same
meaning notwithstanding any replacement or amendment of such statute except as
Secured Party may otherwise determine) or, when the context implies, the Uniform
Commercial Code as in effect from time to time in any other applicable
jurisdiction.

The words “it” or “its” as used herein shall be deemed to refer to individuals
and to business entities.

10. Notices. Any communication required or permitted pursuant to this Agreement
shall be deemed given (a) when personally delivered to any officer of the party
to whom it is addressed, (b) on the earlier of actual receipt thereof or five
(5) days following posting thereof by certified or registered mail, postage
prepaid, return receipt requested, or (c) upon actual receipt thereof when sent
by a recognized overnight delivery service, or (d) upon actual receipt thereof
when sent by telecopier to the number set forth below with telephone
communication confirming receipt and subsequently confirmed by registered or
certified mail, return receipt requested, or by recognized overnight delivery
service to the address set forth below, in each case addressed to the applicable
party at its address set forth below or at such other address as has been
furnished in writing by such party to the other by like notice:

 

  (A) If to Obligor:

400 Oyster Point Road

Suite 506

South San Francisco, CA 94080

Attention: Chief Executive Office

Telecopier: (650) 244-4956

With a copy to:

Loeb & Loeb LLP

345 Park Avenue

New York, NY 10154

Attention: Fran Stoller

Facsimile: (212) 214-0706

 

  (B) If to Secured Party:

Deerfield Private Design Fund II, L.P.

780 Third Avenue, 37th Floor

New York, New York 10017

 

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Attention: Structured Products

Facsimile: (212) 599-3075

With a copy to:

Katten Muchin Rosenman LLP

575 Madison Avenue

New York, New York 10022-2585

Attention: Mark I. Fisher

Facsimile: (212) 940-6621

Any requirement under applicable law of reasonable notice by Secured Party to
Obligor of any event shall be met if notice is given to Obligor in the manner
prescribed above at least five (5) days before (a) the date of such event or
(b) the date after which such event will occur.

11. General.

(a) This Agreement shall be binding upon the assigns or successors of Obligor
and shall inure to the benefit of and be enforceable by Secured Party and its
successors, permitted transferees and permitted assigns.

(b) Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof in that jurisdiction or affecting the validity or
enforceability of such provision in any other jurisdiction.

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Dated in New York, New York as of the date first above written.

 

OBLIGOR: TITAN PHARMACEUTICALS, INC. By:  

/s/ Sunil Bhonsle

  Name: Sunil Bhonsle   Title: President SECURED PARTY: DEERFIELD PRIVATE DESIGN
FUND II, L.P. By: Deerfield Capital, L.P., General Partner By: J. E. Flynn
Capital LLC, General Partner By:  

/s/ David Clark

  Name: David Clark   Title: Authorized Signatory

DEERFIELD PRIVATE DESIGN

INTERNATIONAL II, L.P.

By: Deerfield Capital, L.P., General Partner By: J. E. Flynn Capital LLC,
General Partner By:  

/s/ David Clark

  Name: David Clark   Title: Authorized Signatory

SIGNATURE PAGE TO

SECURITY AGREEMENT

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DEERFIELD SPECIAL SITUATIONS FUND, L.P. By: Deerfield Capital, L.P., General
Partner By: J. E. Flynn Capital LLC, General Partner By:  

/s/ David Clark

Name:   David Clark Title:   Authorized Signatory

DEERFIELD SPECIAL SITUATIONS FUND INTERNATIONAL LIMITED By:  

/s/ David Clark

  Name: David Clark   Title: Authorized Signatory

 

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SCHEDULE 4(a)(iii)

TO

SECURITY AGREEMENT

Chief Executive Office and Mailing Address of Obligor:

400 Oyster Point Blvd.

Suite 505

South San Francisco, CA 94080

Other Collateral Locations:

None