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The Equity Promissory Note serves as a vital financing instrument in the Philippine business landscape, particularly for companies seeking flexible funding options. This document type is commonly used in bridge financing rounds, early-stage investments, and corporate fundraising where investors desire the security of debt with the potential upside of equity participation. The Equity Promissory Note combines the characteristics of a standard promissory note with conversion rights, allowing the holder to convert the debt into equity shares under specific circumstances. It must comply with Philippine securities laws, including the Securities Regulation Code and relevant SEC regulations. The document typically includes detailed terms regarding interest rates, maturity dates, conversion triggers, pricing mechanisms, and investor protections, making it a sophisticated instrument that bridges the gap between debt and equity financing.

1. Parties: Identifies the Maker (issuing company), the Holder (investor/lender), and any guarantors

2. Background: Explains the context of the note issuance and the intention to allow for equity conversion

3. Definitions: Defines key terms used throughout the document, including conversion price, maturity date, qualified financing, etc.

4. Promise to Pay: States the principal amount, interest rate, and payment terms

5. Interest: Details the interest calculation method, payment frequency, and default interest provisions

6. Conversion Rights: Specifies the conditions and mechanics for converting the note into equity

7. Conversion Price and Mechanisms: Details how the conversion price is determined and the process for executing the conversion

8. Maturity and Payment Terms: Specifies the maturity date and repayment obligations if conversion has not occurred

9. Events of Default: Lists circumstances constituting default and consequences thereof

10. Representations and Warranties: Contains standard representations from both the Maker and Holder

11. Covenants: Lists ongoing obligations of the Maker during the term of the note

12. Notices: Specifies how and where formal communications between parties should be made

13. Governing Law and Jurisdiction: Establishes Philippine law as governing law and specifies jurisdiction for disputes

14. Miscellaneous: Contains standard boilerplate provisions including amendments, assignments, and severability