Exhibit 4.1


 


THIS NOTE, AND THE SECURITIES ISSUABLE UPON CONVERSION
OF THIS NOTE, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE APPLICABLE
SECURITIES LAWS OF ANY STATE, AND MAY NOT BE PLEDGED, SOLD, ASSIGNED OR OTHERWISE TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT
AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION UNDER SUCH LAWS OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENT. INVESTORS
SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER
OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER, TO THE EFFECT
THAT SUCH PLEDGE, SALE, ASSIGNMENT OR TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND ALL APPLICABLE STATE SECURITIES
LAWS. 





 


ENTASIS THERAPEUTICS HOLDINGS INC.


 


Convertible Promissory Note


 


	$15,000,000.00	February 18,
    2022




 


For value received, Entasis
Therapeutics Holdings Inc., a Delaware corporation (the “Company”), hereby promises to pay to the order of Innoviva
Strategic Opportunities LLC (hereinafter referred to, together with its successors in title and assigns, as the “Holder”),
the principal sum of Fifteen Million Dollars ($15,000,000.00), together with any unpaid interest thereon as set forth below, unless earlier
converted or cancelled pursuant to the terms and conditions set forth below. The outstanding principal of this Note, together with any
unpaid interest thereon, is hereinafter referred to as the “Amount Due.”


 


This Convertible Promissory
Note (this “Note”) is issued by the Company pursuant to that certain Securities Purchase Agreement, dated as of February 17,
2022, by and between the Company and the Holder (the “Purchase Agreement”). Capitalized terms used but not otherwise
defined herein shall have the meanings ascribed to them in the Purchase Agreement.


 


1.            Maturity
and Interest. This Note shall mature and shall become payable on August 18, 2022 (the “Maturity Date”) unless
earlier converted or cancelled pursuant to the terms set forth herein. This Note shall bear interest from, and including, the date of
issuance at a rate of 0.59% per annum to, but excluding, the date of repayment or conversion of the Note. Interest on the Note shall
be computed on the basis of the actual number of days elapsed and a year of 360 days and shall be payable at the Maturity Date. From
and including the Maturity Date, if not converted, and for such time that this Note remains outstanding, this Note shall bear default
interest at a rate of 10.00% per annum (the “Default Rate”), which shall accrue daily and compound monthly to, but
excluding, the date of repayment or conversion of the Note. To the extent that any rate of interest set forth in this Note is higher
than the maximum percentage permitted by law, or lower than the lowest percentage permitted by law to allow this Note to be classified
as indebtedness for United States federal tax purposes, such rate shall be automatically adjusted to such highest or lowest rate (as
applicable) permitted by law.


 






    


     


    

 


2.            Amount
Due.


 


2.1            Payments.
Payment of the Amount Due shall be made in immediately available funds in lawful currency of the United States of America at the offices
of the Holder or at such other place as the Holder hereof shall have designated to the Company in writing. Payment shall be credited
first to any costs, expenses or charges then payable to the Holder, then to accrued interest then due and payable, and then to principal.


 


2.2            Prepayment.
This Note may not be prepaid prior to the Maturity Date without the prior written consent of the Holder; provided, however, immediately
prior to, but conditioned upon, the consummation of a Sale of the Company, the Company may elect to prepay this Note in accordance with
the provisions set forth in Section 2.1 above.


 


3.            Conversion;
Payment upon Financing or Strategic Transaction.


 


3.1            Definitions.
The following terms shall have the respective meanings specified therefor below:


 


“Affiliate”
means, with respect to any specified Person, any other Person who or which, directly or indirectly, controls, or is controlled by, or
is under common control with such specified Person. For purposes of this definition, “control,” “controlled by”
and “under common control with” means the possession, directly or indirectly, of the power to direct or cause the direction
of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.


 


“Common Stock”
means the common stock, par value $0.001 per share, of the Company.


 


“Conversion Price”
means $1.48 (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or similar recapitalization).


 


“Financing”
means any transaction or series of transactions, directly or indirectly, principally for capital raising purposes for the Company, including
the sale of equity, or the incurrence of indebtedness or the issuance of debt securities, or any combination thereof, other than a Sale
of the Company.


 


“Person”
means any individual, corporation, partnership, trust, limited liability company, association or other entity.


 


“Sale of the Company”
means the sale, lease, license, transfer or other disposition, directly or indirectly, of all or substantially all of the assets or intellectual
property, or a sale of a majority of the voting power, of the Company in a single transaction or series of related transactions (including
by way of merger, consolidation, stock sale or otherwise).


 


“Strategic Transaction”
means the sale, lease, license, transfer or other disposition, directly or indirectly, of any assets or intellectual property of the
Company, including the sale of royalties, in each case outside of the ordinary course of business (other than the Sale of the Company),
in a single transaction or series of related transactions.


 









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3.2            Maturity
Date Conversion. During the period beginning on the 30th day prior to the Maturity Date and ending on the day prior to
the Maturity Date (or the next business day if either of such days is not a business day), either the Company or the Holder may elect
to convert this Note into shares of Common Stock by providing written notice to the other party (the “Maturity Date Election
Notice”). In the event that neither the Company nor the Holder deliver such Maturity Date Election Notice, the Amount Due under
this Note shall become immediately due and payable on the Maturity Date. In the event that either the Company or the Holder deliver such
Maturity Date Election Notice, on the Maturity Date, this Note shall automatically, and without any further action of the Holder or the
Company, convert into a number of shares of Common Stock equal to the quotient obtained by dividing (i) the Amount Due on the date
of conversion by (ii) the Conversion Price, rounding down to the nearest whole number of shares.


 


3.3            Optional
Conversion; Payment upon Financing or Strategic Transaction. The Company covenants and agrees that it will provide written notice
to the Holder (a “Company Notice”) of the expected consummation of a Financing or Strategic Transaction. The Company
Notice shall describe the Financing or Strategic Transaction (as applicable) in reasonable detail, including the parties involved, the
terms and the anticipated date of closing of such transaction. The Company shall promptly revise the Company Notice and deliver it to
the Holder in the event of any material change to the information previously provided. The Financing or Strategic Transaction shall not
be consummated prior to the seventh (7th) day following Holder’s receipt of the last Company Notice (or revision thereto)
specifying the terms set forth above. The Company further covenants and agrees that from the period beginning on the delivery of the
Company Notice until the consummation of the Financing or Strategic Transaction, or the confirmation in writing by the Company that it
has abandoned pursuit of the Financing or Strategic Transaction, at the reasonable request of the Holder, the Company will meet with
the Holder and discuss the details of the Financing or Strategic Transaction from time to time. From the date of delivery of the Company
Notice until the date that is five (5) days prior to the consummation of the Financing or Strategic Transaction (the “Optional
Election Period”), the Holder may elect to convert this Note into shares of Common Stock by providing written notice to the
Company (an “Optional Election Notice”). To the extent that such Optional Election Notice is provided, this Note shall
convert into shares of Common Stock immediately prior to the consummation of the Financing or Strategic Transaction. The number of shares
of Common Stock to be issued upon such conversion shall be equal to the quotient obtained by dividing (i) the Amount Due on the
date of conversion by (ii) the Conversion Price, rounding down to the nearest whole number of shares. The Holder may elect to exercise
any Warrants (as defined below) issued pursuant to Section 3.4 prior to the consummation of the Financing or Strategic Transaction
and the Holder shall have all rights associated with the ownership of shares of Common Stock issued upon conversion of this Note or upon
exercise of any Warrant (including preemptive rights) in respect of the applicable Financing or Strategic Transaction. The Holder may
revoke any Optional Election Notice at any time prior to the consummation of the Financing or Strategic Transaction.


 


3.4            Issuance
of Warrants. Upon any conversion of this Note (whether on the Maturity Date, in connection with a Financing or Strategic Transaction
or following Shareholder Approval (as defined below), the Company shall issue and deliver warrants, in the form attached as Exhibit B
to the Purchase Agreement, to the Holder (collectively, the “Warrants”) entitling the Holder to acquire a number of
shares of Common Stock equal to the number of shares of Common Stock issued upon conversion of this Note, at a purchase price per share
equal to the Conversion Price in effect at the time of conversion.





 






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3.5            Conversion
Limitations. If the number of equity securities issuable upon conversion of this Note or exercise of the Warrants is limited by operation
of law without the approval of the holders of shares of Common Stock (including pursuant to Nasdaq Listing Rule 5635(d) or
any other rules or requirements of any stock exchange on which the securities of the Company are listed) (the “Stockholder
Approval”), the Company shall issue the maximum amount of equity securities issuable upon conversion of this Note or exercise
the Warrants absent such Shareholder Approval; it being understood that in connection with such partial conversion, the Company shall
issue an equal number of shares of Common Stock and Warrants. Following any such partial conversion, the remaining portion of this Note
will remain outstanding and the Company shall use reasonable best efforts to obtain the Stockholder Approval, including by calling a
meeting of stockholders to seek the Stockholder Approval, recommending that holders of shares of Common Stock vote in favor of the Shareholder
Approval and soliciting proxies in connection with such meeting. The Holder shall vote or cause to be voted the maximum number of shares
of Common Stock then owned by the Holder and that it is allowed to vote in accordance with applicable law or stock exchange requirements
in favor of any such Shareholder Approval; it being understood that in no event shall the Holder or its affiliates be required to exercise
any warrants (including the Warrants) or acquire any additional shares of Common Stock. Following the partial conversion of this Note
on the Maturity Date in accordance with Section 3.2, for so long as the Company continues to comply with its obligations in this
Section 3.5, the remaining Amount Due on the Note shall no longer accrue interest. To the extent that, and for so long that, the
Company ceases to comply with its obligations under this Section 3.5, interest shall accrue on the remaining Amount Due at the Default
Rate in accordance with the penultimate sentence of Section 1; provided that no such interest shall accrue if the Company ceases
to comply with this Section 3.5 due to the Holder’s failure to comply with its obligations hereunder. Upon receipt of such
Stockholder Approval, the remaining Amount Due under this Note may be converted into shares of Common Stock and Warrants equal to the
quotient obtained by dividing (i) the applicable remaining Amount Due by (ii) the Conversion Price then in effect, rounding
down to the nearest whole number of shares.


 


3.6            Fractional
Shares. No fractional shares of any of the Company’s equity securities will be issued in connection with any conversion of
this Note.


 


3.7            Certificate.
As promptly as practicable after the conversion of this Note, the Company at its expense will issue and deliver to the Holder, upon surrender
of this Note, a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion.


 


4.            Demand;
Default. This Note shall, at the election of the Holder, become immediately due and payable, upon notice and demand by the Holder
(except in the case of clauses (a) through (d) below, which shall not require notice or demand), upon the occurrence of any
of the following events of default (individually, an “Event of Default” and collectively, “Events of Default”):


 


		(a)	the Company fails to make any payment
                                            when due under this Note on the applicable due date;



 


		(b)	the liquidation, dissolution or insolvency
                                            of the Company, or the appointment of a receiver, trustee, liquidator or custodian for the
                                            Company of a material part of its property;



 






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		(c)	the making of a general assignment by
                                            the Company or any subsidiary thereof for the benefit of its creditors;



 


		(d)	the Company’s breach of any of
                                            its material obligations under the Purchase Agreement or this Note;



 


		(e)	the
                                            Company or any subsidiary thereof becomes a debtor or alleged debtor in a case under the
                                            U.S. Bankruptcy Code or similar law or becomes the subject of any other bankruptcy or similar
                                            proceeding for the general adjustment of its debts or for its liquidation (whether on a voluntary
                                            or involuntary basis); or



 


		(f)	the Company’s Board of Directors
                                            or stockholders adopt a resolution for the liquidation, dissolution or winding up of the
                                            Company.



 


Upon the occurrence of any Event of Default,
all accrued but unpaid expenses, accrued but unpaid interest, all principal and any other amounts outstanding under this Note shall (i) in
the case of any Event of Default under Section 4(a), Section 4.(b), Section 4(c), or Section 4(e) hereof,
become immediately due and payable in full pursuant to the terms of Section 2.1 hereof without further notice, presentment,
demand, or protest of any kind by Holder, and (ii) in the case of any Event of Default pursuant to Section 4.1(d) hereof,
become immediately due and payable upon written notice by or on behalf of Holder to the Company after a thirty (30) day cure period is
given to the Company and such item has not been cured.


 


5.            No
Set-Off. All payments by the Company under this Note shall be made without set-off or counterclaim and be without any deduction or
withholding for any taxes or fees of any nature, unless the obligation to make such deduction or withholding is imposed by law.


 


6.            Seniority;
Security Interest. This Note shall be senior in all respects (including right of payment) to all other indebtedness of the Company
incurred subsequent to the issuance of this Note, and all other indebtedness of the Company incurred subsequent to the issuance of this
Note shall be expressly subordinated to this Note. The incurrence by the Company of any indebtedness subsequent to the issuance of this
Note not in compliance with this Section 6 shall be deemed an Event of Default. This Note will not be secured.


 


7.            General.


 


7.1            Transfers;
Successors and Assigns.


 


(i)            This
Note, and the obligations and rights of the parties hereunder, shall be binding upon and inure to the benefit of the Company, the holder
of this Note, and their respective heirs, successors and assigns; provided, however, that the Company may not transfer or assign its
obligations hereunder, by operation of law or otherwise, without the consent of the Holder; and provided further that the Holder may
not transfer or assign its rights hereunder, by operation of law of otherwise, except to an Affiliate, a direct or indirect equity holder
of Holder or a successor to all or a substantial portion of the assets of the assets of Holder, without the consent of the Company.





 


(ii)            Notwithstanding
anything else in this Note to the contrary, the right of any Holder (or transferee) to receive principal or interest payments under this
Note may be transferred only through the surrender of the current Note and reissuance of a new note by the Company pursuant to the provisions
of this paragraph. The foregoing language is intended to cause this Note to be in “registered form” as defined in Treasury
Regulations Sections 5f.103-1(c) and 1.871-14(c) and shall be interpreted and applied consistently therewith.


 






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7.2            No
Rights or Liabilities as Stockholder; No Personal Liability. Other than as set forth in the Definitive Documents, this Note does
not by itself entitle the Holder to any voting rights or other rights as a stockholder of the Company. In the absence of conversion of
this Note, no provisions of this Note, and no enumeration herein of the rights or privileges of the Holder, shall cause the Holder to
be a stockholder of the Company in respect of any of the Company’s equity securities which would be issued in connection with any
conversion of this Note. Holder agrees that no past, present or future stockholder, director, officer or employee of the Company shall
have any personal liability under the Securities Purchase Agreement or this Note for any claim based on, or in respect of, or by reason
of, such obligations or their creation and Holder waives and releases all such liability. Holder recognizes and agrees that such waiver
and release are part of the consideration for the issuance of the Note.


 


7.3            Further
Assurances. In the case of any conflict between this Note and the Securities Purchase Agreement, the provisions of the Securities
Purchase Agreement shall control and govern, except to the extent expressly provided herein. From time to time, the Holder and the Company
shall execute and deliver to the other party such additional documents as may reasonably be required to carry out the terms of this Note
and any agreements executed in connection herewith.


 


7.4            Amendment.
This Note may be amended or modified, or compliance with any term, covenant, agreement, condition or provision set forth herein may be
omitted or waived, either generally or in a particular instance, and either retroactively or prospectively, upon written consent of the
Company and the Holder.


 


7.5            Notices.
All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given
upon the earlier of actual receipt or: (a) personal delivery to the party to be notified, (b) when sent, if sent by electronic
mail during normal business hours of the recipient, and if not sent during normal business hours, then on the recipient’s next
business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid,
or (d) one (1) business day after deposit with a nationally recognized overnight courier, freight prepaid, specifying next
business day delivery, with written verification of receipt. All communications shall be sent to the respective parties at their address
as set forth in Section 9.1 of the Securities Purchase Agreement, or to such e-mail address, facsimile number or address as subsequently
modified by written notice given in accordance with this Section 7.5. If notice is given to the Company, a copy shall also
be sent to Jack S. Bodner and Matthew C. Franker of Covington & Burling LLP at [***] and [***], respectively, which copy shall
not constitute notice.


 





 


7.6            Severability.
If one or more provisions of this Note are held to be invalid or unenforceable under applicable law, such provision shall be excluded
from this Note and the balance of this Note shall be interpreted as if such provision were so excluded and shall be enforceable in accordance
with its terms.


 


7.7            Governing
Law. This Note, any Warrants, and the obligations of the Company hereunder shall be governed by and interpreted and determined in
accordance with, the laws of the State of New York as to matters within the scope thereof, and as to all other matters shall be governed
by, and construed in accordance with, the internal laws of the State of New York (excluding the laws and rules of law applicable
to conflicts or choice of law).


 


[Signature on following page]


 






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IN WITNESS WHEREOF, this
Note has been duly executed on behalf of the undersigned on the day and in the year first written above.


 


	ENTASIS THERAPEUTICS HOLDINGS INC.	 
	 	 
	By:	  /s/
    Michael Gutch, Ph.D.	 
	Name:	Michael Gutch,
    Ph.D.	 
	Title:  	Chief Financial
    and Business Officer	 




 


Address:


c/o Entasis Therapeutics Holdings Inc. 


35 Gatehouse Drive 


Waltham, MA 02451


 


Acknowledged and agreed by Holder:


 


	INNOVIVA
    STRATEGIC OPPORTUNITIES LLC	 
	 	 
	By: 	/s/
    Pavel Raifeld	 
	Name:	Pavel Raifeld	 
	Title:	Chief Executive
    Officer	 




 


Address:


c/o Innoviva, Inc. 


1350 Old Bayshore Highway Suite 400 


Burlingame, CA 94010


 


[Signature Page to Convertible Promissory
Note]