Exhibit 10.3

SECOND AMENDMENT

THIS SECOND AMENDMENT (the “Second Amendment”) to Loan and Security Agreement,
dated as of March 30, 2016 (the “Second Amendment Date”), is hereby entered into
by and among Neothetics, Inc. (formerly known as Lithera, Inc., “Borrower”), the
several banks and other financial institutions or entities from time to time
parties to the Loan Agreement (as defined below) (“Lender”), and Hercules
Capital, Inc. (formerly known as Hercules Technology Growth Capital, Inc.,
“Agent”), in its capacity as administrative agent for itself and the
Lender.  Any of the parties named above may be referred to herein as a (“Party”)
and collectively, as the (“Parties”). Any terms not specifically defined herein
shall have the definition ascribed to them in the Loan Agreement and Warrant, as
defined below.

RECITALS

A.Whereas, Lender and Borrower have entered into that certain Loan and Security
Agreement dated June 11, 2014 (as amended from time to time, the “Loan
Agreement”);

B.Whereas, Borrower wishes to make a payment of principal in the amount of
$5,514,057.72; and

C.Whereas, the Parties desire to amend the Loan Agreement in accordance with the
terms of this Second Amendment.  Capitalized terms used and not otherwise
defined herein shall have the meanings ascribed to them in the Loan Agreement.

AGREEMENT

NOW, THEREFORE, the Parties agree as follows:

 

1.

Definitions.

 

(a)New Definitions.  The following definitions are hereby inserted
alphabetically into Section 1.1, as follows:

“Second Amendment Non-Renewable Facility Charge” means $50,000.

“Term Loan Pay-Down Amount” shall mean a prepayment of principal in the amount
of $5,514,057.72 made on the Second Amendment Date;

(b)Amended Definitions.  The following definitions are hereby amended and
restated in their entirety as follows:

“Amortization Date” means October 1, 2016, provided however, if the Interest
Only Extension Conditions are satisfied, then April 1, 2017.

“Facility Charge” means $50,000.

 

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“First Amendment Non-Renewable Facility Charge” means $25,000.

“Interest Only Extension Conditions” shall mean satisfaction of each of the
following events:  (a) no default or Event of Default shall have occurred; and
(b) Borrower shall have completed an equity financing in which the Borrower
sells and issues shares of its capital stock resulting in aggregate gross
proceeds to the Borrower raised on or after the Second Amendment Date of at
least $5,000,000 on or before October 1, 2016.

“Maximum Term Loan Amount” means Four Million and No/100 Dollars ($4,000,000).

 

2.

All references to Agent’s prior name of Hercules Technology Growth Capital, Inc.
shall be revised to reflect Agent’s amended name of Hercules Capital, Inc.

 

3.

Section 2.2(d) of the Loan Agreement is hereby amended in its entirety to read
as follows:

2.2(d)  Payment.  Borrower will pay interest on each Term Loan Advance on the
first business day of each month, beginning the month after the Second Amendment
Date.  Borrower shall repay the aggregate Term Loan principal balance that is
outstanding on the day immediately preceding the Amortization Date, in equal
monthly installments of principal and interest (mortgage style) beginning on the
Amortization Date and continuing on the first Business Day of each month
thereafter, amortized over a 28-month schedule if the Amortization Date is
October 1, 2016, or over a 22-month schedule if the Amortization Date is April
1, 2017.  The entire Term Loan principal balance and all accrued but unpaid
interest hereunder, shall be due and payable on Term Loan Maturity Date, which
such final payment shall include a balloon payment for any remaining principal
balance and all remaining accrued but unpaid interest based on the applicable
amortized schedule.  Borrower shall make all payments under this Agreement
without setoff, recoupment or deduction and regardless of any counterclaim or
defense. Lender will initiate debit entries to the Borrower’s account as
authorized on the ACH Authorization (i) on each payment date of all periodic
obligations payable to Lender under each Term Advance and (ii) out-of-pocket
legal fees and costs incurred by Agent or Lender in connection with Section
11.11 of this Agreement.

4.Section 2.5 of the Loan Agreement is hereby amended in its entirety to read as
follows:

2.5  Prepayment.  At its option upon at least seven (7) Business Days prior
notice to Agent, Borrower may prepay all, but not less than all, of the
outstanding Advances by paying the entire principal balance, all accrued and
unpaid interest thereon, together with a prepayment charge equal to the
following percentage of the Advance amount being prepaid: if such Advance
amounts are prepaid in any of the first twelve (12) months following the Second
Amendment Date, 3.0%; and thereafter, 2.0% (each, a “Prepayment
Charge”).  Borrower agrees that the Prepayment Charge is a reasonable
calculation of

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Lender’s lost profits in view of the difficulties and impracticality of
determining actual damages resulting from an early repayment of the
Advances.  Borrower shall prepay the outstanding amount of all principal and
accrued interest through the prepayment date and the Prepayment Charge upon the
occurrence of a Change in Control. Notwithstanding the foregoing, Agent and
Lender agree to waive the Prepayment Charge if Agent and Lender (in its sole and
absolute discretion) agree in writing to refinance the Advances prior to the
Maturity Date.

5.Section 7.14 of the Loan Agreement is hereby amended in its entirety to read
as follows:

7.14Minimum Unrestricted Cash.  Borrower at all times shall maintain
unrestricted Cash in Deposit Accounts subject to an Account Control Agreement of
at least two (2) times the amount of principal then outstanding under the Term
Loan.

6.Exhibits and Schedules.  Exhibit F and Schedule 1.1 are hereby amended
restated in their entireties by the revised forms of Exhibit F and Schedule 1.1
attached to this Amendment and incorporated herein.

7.Effect of this Second Amendment.  The provisions of this Second Amendment
shall be effective for all parties effective as of the Second Amendment
Date.  Except as necessary to carry out the intent of this Second Amendment and
as specifically modified pursuant hereto, no other changes or modifications to
the Loan Agreement are intended or implied and in all other respects such
documents shall continue to be and shall remain unchanged and in full force and
effect in accordance with their respective terms, and are hereby specifically
ratified, reaffirmed and confirmed by all parties hereto as of the effective
date hereof.  

8.Borrower represents and warrants that the representations and warranties
contained in the Loan Agreement are true and correct in all material respects as
of the date of this Second Amendment (except to the extent such representations
and warranties contained in the Loan Agreement speak as of an earlier date in
which case such representations and warranties are true and correct in all
material respects as of such earlier date).

9.This Second Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one instrument.

10.Conditions Precedent.  As a condition to the effectiveness of this Second
Amendment, Agent shall have received, in form and substance satisfactory to
Agent, the following:

(a)this Second Amendment fully executed by the Parties;

(b)a fully executed Warrant Modification Agreement;

 

(c)the Term Loan Pay-Down Amount;

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(d)the Prepayment Charge of $110,281.16 applicable with respect to the Term Loan
Pay-Down Amount; 

(e)the Second Amendment Non-Renewable Facility Charge, which shall be deemed
earned as of the Second Amendment Date;

(f)an amount equal to all Agent’s expenses incurred through the Second Amendment
Date; and

(g)such other documents, and completion of such other matters, as Agent may
reasonably deem necessary or appropriate.

 

[Signature page follows]

 

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Exhibit 10.3

IN WITNESS WHEREOF, the Parties have executed this Second Amendment on the date
first written above.

BORROWER:

NEOTHETICS, INC.

Signature:_/s/ Susan A. Knudson ____

Print Name:_Susan A. Knudson_______

Title:_Chief Financial Officer___

 

 

AGENT:

HERCULES CAPITAL, INC.

Signature:_/s/ Jennifer Choe  __________________

Jennifer Choe, Assistant General Counsel

 

 

LENDER:

HERCULES TECHNOLOGY III, L.P.
a Delaware limited partnership

 

By:

Hercules Technology SBIC Management, LLC, its General Partner

 

By:

Hercules Capital, Inc., its Manager

 

By:

_/s/ Jennifer Choe____________________
Jennifer Choe, Assistant General Counsel

 

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EXHIBIT F

COMPLIANCE CERTIFICATE

Hercules Capital, Inc. (as “Agent”)
400 Hamilton Avenue, Suite 310
Palo Alto, CA 94301

 

Reference is made to that certain Loan and Security Agreement dated June 11,
2014, as amended, and all ancillary documents entered into in connection with
such Loan and Security Agreement all as may be amended from time to time,
(hereinafter referred to collectively as the “Loan Agreement”) by and among
Hercules Capital, Inc. (formerly known as Hercules Technology Growth Capital,
Inc., the “Agent”), the several banks and other financial institutions or
entities from time to time party thereto (collectively, the “Lender”) and
Hercules Capital, Inc., as agent for the Lender (the “Agent”) and Neothetics,
Inc. (the “Company”) as Borrower. All capitalized terms not defined herein shall
have the same meaning as defined in the Loan Agreement.

The undersigned is an Officer of the Company, knowledgeable of all Company
financial matters, and is authorized to provide certification of information
regarding the Company; hereby certifies that in accordance with the terms and
conditions of the Loan Agreement, the Company is in compliance for the period
ending ___________ of all covenants, conditions and terms and hereby reaffirms
that all representations and warranties contained therein are true and correct
on and as of the date of this Compliance Certificate with the same effect as
though made on and as of such date, except to the extent such representations
and warranties expressly relate to an earlier date, after giving effect in all
cases to any standard(s) of materiality contained in the Loan Agreement as to
such representations and warranties.  Attached are the required documents
supporting the above certification.  The undersigned further certifies that
these are prepared in accordance with GAAP (except for the absence of footnotes
with respect to unaudited financial statement and subject to normal year end
adjustments) and are consistent from one period to the next except as explained
below.

REPORTING REQUIREMENT

REQUIRED

CHECK IF ATTACHED

Interim Financial Statements

Monthly within 30 days

 

Interim Financial Statements

Quarterly within 30 days

 

Audited Financial Statements

FYE within 150 days

 

 

 

 

 

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FINANCIAL COVENANT

 

 

Outstdg Principal

Unrestricted Cash

Minimum Unrestricted Cash

2x principal outstanding under the Term Loan

$______

$________

 

Very Truly Yours,

 

NEOTHETICS, INC.

 

 

By:

____________________________

Name:   _____________________________

 

Its:

____________________________

 

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SCHEDULE 1.1

COMMITMENTS

LENDER

TERM COMMITMENT

HERCULES TECHNOLOGY III, L.P.

$4,000,000

TOTAL COMMITMENTS

$4,000,000