THIS
PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAW. NEITHER
THIS NOTE NOR ANY OF THE SHARES OF COMMON STOCK ISSUABLE UPON
EXCHANGE OF THIS NOTE MAY BE SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR
STATE LAW OR AN EXEMPTION FROM SUCH REGISTRATIONS REQUIREMENTS AND
OPINION OF COUNSEL THAT SUCH REGISTRATION IS NOT
REQUIRED.
CHINA WIND SYSTEMS,
INC.
12% Note due February 7,
2011
FOR VALUE RECEIVED, China Wind Systems, Inc., a
Delaware corporation (the “Company”), hereby promises
to pay to the order of Barron Partners, L.P. (“Registered
Holder”) the principal amount of eighty thousand dollars
($80,000), on February 7, 2011, subject to earlier prepayment as
hereinafter provided. Interest on such principal amount
shall be payable at the rate of twelve percent (12%) per annum on
the third (7th) day of August, November, February and May of each
year, with the first interest payment being due on November 7,
2009, and a final payment due on the maturity
date. Interest shall be paid to the person who is the
Registered Holder of this Note on the fifteenth day of the
month. If any payment of interest on or principal of
this Note is due is on a day on not a business day, such payment
shall be made on the next day which is a business day. A
business day shall mean a day other than a day on which banks in
the City of New York are permitted or required to be closed.
Payments of principal and interest shall be made in lawful money of
the United States of America and payment of principal shall be made
against presentment of this Note. This Note has been
issued pursuant to a purchase agreement (the “Purchase
Agreement”) dated August 7, 2009 between the Company and
Barron Partners LP.
ARTICLE 1.
Events of Default and
Acceleration
(a)
Events of Default Defined . The entire unpaid
principal amount of this Note, together with interest thereon
shall, on written notice from Registered Holders holding at least a
majority of the then outstanding principal amount of the Notes if
any one or more Events of Default shall have occurred (for any
reason whatsoever and whether such happening shall be voluntary or
involuntary or be affected or come about by operation of law
pursuant to or in compliance with any judgment, decree or order of
any court or any order, rule or regulation of any administrative or
governmental body) and be continuing. An Event of
Default shall occur:
(i) if failure shall be made
in the due and punctual payment of the principal of the Notes when
and as the same shall become due and payable whether at maturity or
otherwise, including any payment due as a result of the exercise of
the rights set forth in Section 1(b) of this Note, and such failure
shall have continued for five (5) business days;
(ii) if failure shall be made
in the due and punctual payment of any installment of interest on
the Notes when and as the same shall become due and payable, and
such failure shall have continued for ten (10) business days after
receipt of notice of such failure; or
(iii) if failure shall be made
in the delivery of shares of the Company’s common stock, par
value $0.001 per share (“Common Stock”), pursuant to
Article 2 of this Note, and such failure shall continue for five
(5) business days after receipt of notice of such failure;
or
(iv) if a court of competent
jurisdiction shall enter an order, judgment or decree appointing,
without consent of the Company, a receiver, trustee or liquidator
of the Company or of all or any substantial part of the property of
the Company, or approving a petition filed against the Company
seeking a reorganization or arrangement of the Company under the
Federal bankruptcy laws or any other applicable law or statute of
the United States of America or any State thereof, or any
substantial part of the property of the Company shall be
sequestered; and such order, judgment or decree shall
not be vacated or set aside or stayed within sixty (60) days from
the date of the entry thereof.
(v) failure on the part of
Company to duly to observe or perform in any material respect the
covenants or agreements on the part of Company contained in this
Note or the Securities Purchase Agreement by and among the Issuer
and the investors party thereto, including the Noteholder, dated
the date of this Note (the “Transaction Documents”) and
not otherwise covered in this Section 1(a), for a period of ten
(10) business days after the date on which written notice
specifying such failure, stating that such notice is a
“Notice of Default” hereunder and demanding that Issuer
remedy the same, shall have been given by registered or certified
mail, return receipt requested, or by an international overnight
carrier service which provides evidence of delivery, to Company and
its counsel.
(vi) any representation,
warranty or other statement in this Note or any of the other
Transaction Documents, shall be false, incorrect, incomplete or
misleading in any material respect when made or furnished and such
misrepresentation relates to an event, fact, occurrence, condition
(financial or otherwise) or operating results in each such case
with respect to the Company taken as a whole, and such
misrepresentation or breach of warranty shall not be corrected, if
it can be corrected, within thirty (30) days after notice thereof
is given to the Company..
(vii) Any indebtedness under
any bonds, debentures, notes or other evidences of indebtedness for
money borrowed (or any guarantees thereof, excluding this Note and
the other Transactions Documents) by Company in an aggregate
principal amount in excess of $50,000 is not paid when due either
at its stated maturity or upon acceleration thereof, after the
expiration of all applicable grace periods and extensions, and such
indebtedness is not discharged, or such acceleration is not
rescinded or annulled.
(viii) Any Transaction Document
or any material term thereof shall cease to be, or be asserted by
Issuer not to be, a legal, valid and binding obligation of Issuer
enforceable in accordance with its terms.
(ix) The issuance of the Note
is prohibited by any governmental authority in the Peoples’
Republic of China or any law or regulation promulgated by such
authority.
(b)
Rights of Note Registered Holder .
(i) In each case where an
Event of Default occurs in Section 1(a) above, the holders (the
“Majority Holders”) of a majority in principal amount
of the Notes, by notice in writing to Issuer (the “
Acceleration Notice ”), may, at their option, declare
the outstanding principal hereunder and all accrued and unpaid
interest hereon and thereon to be due and payable immediately, and
upon any such declaration the same shall become immediately due and
payable.
(ii) The Company shall
reimburse the Investor, on demand, for any and all costs and
expenses, including (but not limited to) reasonable attorney fees
and court costs, incurred by the Investor in collecting
or otherwise enforcing this Note or in attempting to
do any of the foregoing. During any period in which an
Event of Default has occurred and is continuing, Issuer shall pay
interest on the unpaid principal balance hereof at an aggregate
rate per annum equal to 24% per annum or the maximum rate permitted
by applicable law, whichever is lower.
(iii) Nothing in this Note
shall be construed to mo
