EXHIBIT 10.23
 
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
ONLY PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE OF THE UNITED STATES WITHIN
THE MEANING OF REGULATION S UNDER THE ACT. THESE SECURITIES MAY NOT BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
 
TAITRON COMPONENTS INCORPORATED
4.75% SUBORDINATED PROMISSORY NOTE

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U.S. $1,000,000
 
September 30, 2002

 
Subject to the terms and conditions of this 4.75% Subordinated Note (the
“Note”), TAITRON COMPONENTS INCORPORATED, a California corporation (the
“Company”), for value received, promises to pay to the order of K.S Best
International Co., Ltd. or its registered assigns (the “Noteholder”), whose
address is setforth in Section 9.3 below, the principal amount of (U.S.
$1,000,000), plus simple interest on the unpaid principal balance from the date
hereof at the rate of four and three quarter percent (4.75%) per annum. Such
principal amount plus all accrued but previously unpaid interest will be due and
payable on the third anniversary of the Note Date. Interest payments shall be
made quarterly after the Note Date.
 
Principal and interest payable hereunder shall be paid to the Noteholder in
lawful money of the United States of America by wire transfer to such bank
account or at such other address or location as shall be specified by the
Noteholder. Overdue interest shall bear interest at the rate of four and three
quarter percent (4.75%) per annum from the date on which it is due until paid.
 
The following is a statement of the rights of the Noteholder and the terms and
conditions to which this Note is subject, and to which the Company and the
Noteholder, by the acceptance of this Note, agree.
 
1.  Definitions. As used in this Note, the following terms, unless the context
otherwise requires, shall have the following meanings:
 
1.1  “Company” shall mean the Company and shall include any corporation that
shall succeed to or assume the obligations of the Company under this Note.
 
1.2  “Note Date” shall mean the date on which this Note was originally issued,
which is set forth on the first page of this Note in the heading.
 
1.3  “Merger” shall mean any consolidation of the Company with, or merger of the
Company with or into, another corporation (other than a consolidation or merger
in which the Company is the surviving corporation and which does not result in
any reclassification of, or change in, the outstanding shares of Common Stock),
or any proposed sale or transfer to another corporation of all or substantially
all of the assets of the Company. The Company shall be the “surviving
corporation” in any Merger if the Company, or its shareholders immediately
before the transaction, shall own (immediately after the transaction) equity
securities, other than warrants, options or similar rights to subscribe to or
purchase equity securities, of the surviving or acquiring corporation, or its
parent corporation, possessing more than 50% of the voting power of the
surviving or acquiring corporation or its parent corporation; and in making the
determination of ownership by the shareholders of a corporation, immediately
after the transaction, of equity securities pursuant to the preceding clause,
equity securities which they owned immediately before the transaction as
shareholders of another party to the transaction shall be disregarded.
 
2.  Grant of Option. In conjunction with the issuance of this Note, the Company
grants to Noteholder an option to purchase one hundred thousand shares (100,000)
of the Company’s Class A Common Stock (the Option). The exercise price of the
Option will be the 30 day average closing price of the Company’s Class A Common
Stock prior

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to the Closing Date of this Note. There is no vesting period and therefore the
Option is immediately exercisable. The Option expires three years from the
Closing Date. Shares issued under the Option shall be issued as unregistered
stock and have restrictive legend as follows:
 
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
ONLY PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE OF THE UNITED STATES WITHIN
THE MEANING OF REGULATION S UNDER THE ACT. THESE SECURITIES MAY NOT BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
 
3.  Treatment of Note. To the extent permitted by generally accepted accounting
principles consistently applied, the Company shall treat, account and report
this Note as debt and not equity for accounting purposes and with respect to any
returns filed with federal, state or local tax authorities.
 
4.  Subordination. The Company, for itself and its successors and assigns,
covenants and agrees, and the Noteholder and each successive holder of this
Note, by the acceptance of this Note, likewise covenants and agrees, that the
payment of the principal of and interest and premium, if any, on this Note is
hereby expressly subordinated, to the extent and in the manner hereinafter set
forth, in right of payment to the prior payment in full, in cash, of all the
Company’s “Senior Indebtedness,” and that these subordination provisions are for
the benefit of the holders of Senior Indebtedness.
 
This Section 4 shall constitute a continuing Offer to all persons who, in
reliance upon such provisions, become holders of, or continue to hold, Senior
Indebtedness, and such provisions are made for the benefit of the holders of
Senior Indebtedness, and such holders are made obligees hereunder and they or
each of them may enforce such provisions. Without limiting the generality of the
foregoing, it is acknowledged and agreed that Comerica Bank, is a holder of
Senior Indebtedness, that such provisions are made for its benefit, and that it
may enforce such provisions.
 
4.1  Definitions. As used in this Section 4, and also in Section 5:
 
4.1.1  “Indebtedness” of any corporation shall mean the principal of (and
premium, if any) and unpaid interest, fees and other payments due in connection
with (a) indebtedness which is for money borrowed from others; (b) indebtedness
of any other person for money borrowed guaranteed, directly or indirectly, in
any manner by such corporation, or in effect guaranteed, directly or indirectly,
by such corporation through an agreement, contingent or otherwise; (c) all
indebtedness secured by any mortgage, lien, pledge, charge or other encumbrance
upon property owned by such corporation, even though such corporation has not in
any manner become liable for the payment of such indebtedness; (d) all
indebtedness of such corporation created or arising under any conditional sale,
lease (intended primarily as a financing device), or other title retention
agreement with respect to property acquired by such corporation wherein the
rights and remedies of the seller, lessor or lender under such agreement or
lease in the event of a default are limited to repossession or sale of such
properties; (e) any other obligation whether outstanding on the Note Date or
thereafter created or assumed with respect to which the Company shall be or
become liable which the Company shall designate as “Indebtedness”; and (f)
deferrals, amendments, refinancing, renewals, extensions and refundings of an
such indebtedness.
 
4.1.2  “Senior Indebtedness” shall mean Indebtedness incurred or assumed by the
Company, either before or after the date of this Agreement, which is for money
borrowed or evidenced by bonds, notes, reimbursement agreements in respect of
letters of credit, debentures or similar instruments (a) pursuant to a
short-term instrument which constitutes commercial paper, or (b) the holder or
holders of which are banks, savings institutions, trust companies, insurance
companies, investment trusts, pension funds, pension trusts, employees’
profit-sharing trusts, financial institutions or corporations engaged as the
substantial part of their business or operations in investing funds in
securities, or any other person lending the Company amounts in excess of U.S.
$100,000 or any of them, or (c) obligations which otherwise would have been
considered Senior Indebtedness except that they were created or arose under a
conditional sale, lease (intended primarily as a financing device) or other
similar title retention agreement with respect to the property of the Company or
its Subsidiaries wherein the rights and remedies of the seller, lessor or lender
under such agreement or lease are limited, in the event of default, to
repossession or sale of such properties; provided, however, that there shall be
excluded from the definition of Senior Indebtedness any borrowing which by its
terms ranks on a parity with or is subordinate to the Notes. “Senior
Indebtedness” shall include, in any event, all obligations of the Company from
time to time (whether in respect of principal, interest, fees, charges or
otherwise,

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including, without limitation, any interest accruing subsequent to the filing by
or against Payor of any proceeding brought under Chapter 11 of the U.S.
Bankruptcy Code, whether or not such interest is allowed as a claim in such
proceeding) under or pursuant to that certain Business Loan Agreement dated as
of May 6, 1997, between the Company and Comerica Bank-California, and any
amendment, modification, restatement extension, renewal, refunding, replacement
or refinancing thereof, together with all documents, instruments and agreements
entered into from time to time in connection therewith or pursuant thereto.
 
4.2  Payment in Event of Bankruptcy or Similar Event. Upon any receivership,
insolvency, assignment for the benefit of creditors, bankruptcy, reorganization
or arrangements with creditors (whether or not pursuant to bankruptcy or other
insolvency laws), sale of all or substantially all of the assets, dissolution,
liquidation or any other marshalling of the assets and liabilities, of the
Company, or otherwise (a) no amount shall be paid by the Company in respect of
the principal of or interest or premium, if any, on this Note at the time
outstanding, unless and until the principal, premium, if any, and interest upon
all Senior Indebtedness shall first be paid in full, in cash, (b) no claim or
proof of claim shall be filed with the company by or on behalf of the Noteholder
which shall assert any right to receive any payments in respect of the principal
of and interest or premium, if any, on this Note, except subject to the payment
in full of the principal of, premium, if any, and interest on all of the Senior
Indebtedness then outstanding, in cash, (c) any payment or distribution of
assets of the Company of any kind or character, whether in cash, property or
securities to which the holders of the Notes would be entitled except for the
provisions of this Section 4, shall be paid by the liquidating trustee or agent
or other person making such payment or distribution, whether a trustee in
bankruptcy, a receiver or otherwise, directly to the holders of Senior
Indebtedness (pro rata to each holder on the basis of the respective amounts of
Senior Indebtedness owed to such holder), to the extent necessary to pay in
full, in cash, all Senior Indebtedness remaining unpaid after giving effect to
any prior or concurrent payment or distribution to the holders of the Senior
Indebtedness on the Senior Indebtedness, and (d) in the event that,
notwithstanding the foregoing, any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or securities (other
than payments described in the provisos below) shall be received by the holder
of any Note before all Senior Indebtedness is paid in full, in cash, such
payment or distribution shall be received and held in trust for and shall be
paid over to holders of Senior Indebtedness (pro rata to each such holder on the
basis of the respective amounts of Senior Indebtedness owed to such holder), for
application to the payment of all Senior Indebtedness remaining unpaid until all
such Senior Indebtedness shall have been paid in full, in cash, after giving
effect to any prior or concurrent payment or distribution to the holders of the
Senior Indebtedness on the Senior indebtedness; provided, however, that this
Subparagraph (d) shall apply only to payments or distributions received by the
holder of any Note after the commencement of proceedings relating to the winding
up dissolution, liquidation or reorganization of the Company as described in
this Section.
 
(a)        4.3  Subordination upon Default With Respect to Senior Indebtedness
Due, etc. The Company shall not be permitted to make any payments with respect
to this Note if, at the time of the proposed payment, any default shall have
occurred and be continuing with respect to the Senior Indebtedness and written
notice thereof has been given to the Company and the Noteholder invoking a
payment blockage under this Note (a “Payment Blockage Notice”), unless and until
such default shall have been cured or the application of this Section 4.3 to
such default shall have been waived in writing by the holders of the Senior
Indebtedness; provided, however, that: if such default does not relate to the
payment of money to the holders of Senior Indebtedness (a “Nonpayment Default”),
this Section 4.3 shall not prevent the making of any proposed payment under this
Note for a period of more than One Hundred and Eighty (180) consecutive days
after the date that a Payment Blockage Notice is given relating to the
occurrence of such Nonpayment Default unless the Senior Indebtedness has been
declared due and payable in its entirety, in which case no payment or
distribution may be made until (i) the Nonpayment Default has been waived or
cured and such acceleration has been rescinded or annulled, or (ii) the Senior
Indebtedness has been paid in full in cash.
 
4.4  Effect of Subordination. Nothing contained in this Section 4 shall impair,
as between the Company and the Noteholder, the obligation of the Company, which
is absolute and unconditional, to pay the Noteholder the principal hereof and
interest hereon as and when the same become due and payable, or shall prevent
the Noteholder, upon default under this Note, from exercising all rights, power
and remedies otherwise provided herein or by applicable law, all subject to the
rights, if any, of the holders of Senior Indebtedness under this Section 4.
 
4.5  Subrogation. Subject to the payment in full, in cash, of all Senior
Indebtedness and until this Note shall be paid in full, the Noteholder shall be
subrogated (equally and ratably with the holders of all Indebtedness of the
Company which, by its terms, ranks on a parity with this Note) to all rights of
any such holder of Senior Indebtedness to receive payments or distributions of
assets of the Company, but only to the extent the Noteholder has made any
payment to any holder of Senior Indebtedness pursuant to the subordination
provisions of this Note. No such payments or distributions applicable to the
Senior Indebtedness shall, as between the Company and its creditors, other than
the holders of Senior Indebtedness and the Noteholder, be deemed to be a payment
by the Company to or

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on account of this Note; and for the purposes of such subrogation, no payments
or distributions to the holders of Senior Indebtedness to which the Noteholder
would be entitled except for the provisions of this Section 4 shall, as between
the Company and its creditors, other than the holders of Senior Indebtedness and
the Noteholder, be deemed to be a payment by the Company to or on account of the
Senior Indebtedness.
 
4.6  Reliance by Note Holders. Upon any payment or distribution of assets of the
Company referred to in this Section 4, the holders of the Notes shall be
entitled to rely upon any order or decree made by any court of competent
jurisdiction in which such dissolution, winding up, liquidation or
reorganization proceedings are pending or upon a certificate of the liquidating
trustee or agent or other person making any distribution the holders of Notes
for the purpose of ascertaining the amount of the Senior Indebtedness, the
holders thereof, the amounts paid or distributed thereon and all other facts
pertinent thereto or to this Section 4.
 
4.7  Rights of Holders of Senior Indebtedness Not to Be Impaired. Subject to
Section 4.3 hereof, no right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impair by any act or failure to act on the part of the
Company or by any act or failure to act, in good faith, by any such holder or by
any noncompliance by the Company with the terms, provisions and covenants of
this Note, regardless of any knowledge thereof which any such holder may have or
otherwise be charge with.
 
4.8  When Distribution Must Be Paid Over. In the event that the Company shall
make any payment to the Noteholder on account of the principal or interest on
the Note at the time when such payment is prohibited by Section 4.3, such
payment shall be held by the Noteholder, in trust for the benefit of, and shall
be forthwith over and delivered to, the holders of Senior Indebtedness (pro rata
as to each of such holders on the basis of the amount of Senior Indebtedness
held by them) or their representative or the trustee under the indenture or
other agreement (if any) pursuant to which Senior Indebtedness may have been
issued, as their respective interests may appear, for application to the payment
of all Senior Indebtedness remaining unpaid to the extent necessary to pay all
Senior Indebtedness remaining unpaid to the extent necessary to pay all Senior
Indebtedness in full accordance with its terms, after giving effect to any
concurrent payment or distribution to or for the holders of Senior Indebtedness.
 
If a distribution is made to the holder of this Note that because of this
Section 4.8 should not have been made to it, the holder of this Note who
receives the distribution shall hold it in trust for the holders of Senior
Indebtedness and pay it over to them as their interests may appear.
 
4.9  Notices By Company. The Company shall promptly notify the Noteholder of any
facts known to the Company that would cause a payment of principal of or
interest of this Note to violate this Section 4, but failure to give such notice
shall not affect the subordination of this Note to the Senior Indebtedness
provided in this Section 4.
 
5.  Events of Default. If any of the following events shall occur and be
continuing (each individually referred to as an “Event of Default”), the
Noteholder may declare the entire unpaid principal and accrued interest on this
Note immediately due and payable, without any other presentment, demand, protest
or other notice of any kind or character, all of which are hereby expressly
waived; provided, however, that with respect to the Events of Default described
in Sections 5.2 and 5.3 below, the unpaid principal and accrued interest on this
Note shall automatically become immediately due and payable, without
presentment, demand, protest or other requirements of any kind, all of which are
hereby expressly waived by the Company:
 
5.1  Principal or Interest. (a) Any default in the payment of any part of the
interest of this Note shall occur and such default shall be continuing uncured
or unwaived for 30 days after the Noteholder has given the Company written
notice thereof or (b) the Company’s failure to observe any covenant or other
provision contained in this Note and such failure of observation shall be
continuing uncured or unwaived for 30 days after the Noteholder has given the
Company written notice thereof;
 
5.2  Involuntary Bankruptcy. Within 270 days after the commencement of an action
against the Company seeking any bankruptcy, insolvency, reorganization,
liquidation, dissolution or similar relief under any statute, law or regulation,
such action shall not have been dismissed or all orders or proceedings
thereunder affecting the operations or the business of t he Company stayed, or
the stay of any such order or proceeding shall thereafter be set aside, or
within 270 days after the appointment without the consent or acquiescence of the
Company of any trustee, receiver or liquidator of the Company or of all or any
substantial part of the properties of the Company, such appointment shall not
have been vacated;

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5.3  Voluntary Bankruptcy. The Company shall have commenced a voluntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or shall have consented to the entry of an order for relief
in an involuntary case under any such law, or shall have consented to the
appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian or similar official, of the Company or for any substantial
part of its property, or shall have made any general assignment for the benefit
of creditors, or shall have failed generally to pay its debts as they become due
or shall have admitted in writing its inability to pay its debts generally as
they become due, or shall have taken any corporate action in furtherance of any
of the foregoing; or
 
5.4  Cross-Default. Any declared default of the Company under any Senior
Indebtedness of the Company for borrowed money that gives the holder thereof the
right to accelerate such Senior Indebtedness, and such Senior Indebtedness is in
fact accelerated by such holder, and such acceleration is continuing
unrescinded.
 
5.5  Remedies. If any of the foregoing Events of Default shall have occurred and
be continuing, the Noteholder may proceed to protect and enforce its rights
under this Note by an action in law, suit in equity or other appropriate
proceeding, whether for specific performance of any agreement contained in this
Note or for an injunction against a violation of any terms of this Note or in
aid of the exercise of any power granted by this Note or by law. In case any
action is brought arising from a breach of any provision of this Note, the
non-prevailing party shall pay to the prevailing party all of the prevailing
party’s fees and expenses, including without limitation reasonable attorneys’
fees, relating to such action. No course of dealing and no delay on the part of
the Noteholder in exercising any right shall operate as a waiver thereof or
otherwise prejudice the Noteholder’s rights, powers or remedies. No right, power
or remedy conferred by this Note upon the Noteholder shall be exclusive of any
right, power or remedy referred to in this Note, or now or hereafter available
at law, in equity, by statute or otherwise.
 
5.6  Unpaid Interest. In case any one or more Events of Default shall occur and
be continuing, any due but unpaid interest shall continue to remain due and
accrue interest thereon at the rate of four and three quarter percent (4.75%)
per annum from the date on which it is due until paid.
 
6.  No Shareholder Rights. This Note shall not entitle the Noteholder to any
voting rights or other rights as a shareholder of the Company, prior to
conversion hereof.
 
7.  Redemption. This Note shall be subject to redemption under the circumstances
set forth in this Section 7.
 
7.1  Optional Redemption. The Company, at its option, may redeem in whole or in
part the principal amount of this Note at any time or from time to time on or
after the first anniversary of the Note Date. Upon redemption of this Note, the
Company also shall pay to the Noteholder the interest relating to such redeemed
principal amount which is accrued and unpaid to the date of redemption plus a
premium as set forth below in Section 7.2.
 
7.2  Premium. The premium for purposes of this Section 7 shall be calculated as
follows:
 
(a)  if redemption of this Note pursuant to this Section 7 occurs on or after
the first anniversary of the Note Date but before the second anniversary of the
Note Date, the premium shall be an amount equal to two percent (2%) of the
principal amount of this Note which is so redeemed;
 
(b)  if the redemption of this Note occurs after the second anniversary of the
Note Date, there shall be no prepayment premium.
 
7.3  Notice of Redemption. At least 30 but not more than 60 days prior to the
date fixed for any redemption (the “Redemption Date”), notice shall be given to
the Noteholder of the election of the Company to redeem all or a specified
portion of the principal amount of this Note (the “Redemption Notice”). The
Redemption Notice shall specify the place at which payment may be obtained and
the date on which the Noteholder’s Conversion Rights as to the amount to be
redeemed shall terminate pursuant to Section 2 and calling upon the Noteholder
to surrender this Note to the Company in the manner and at the place designated.
On the Redemption Date, the Noteholder shall surrender this Note to the Company
in the manner and at the place designated in the Redemption Notice, and
thereupon redemption shall be made to the Noteholder and this Note shall be
cancelled. In the event that less than all of the principal amount of this Note
is redeemed, upon surrender of this Note to the Company, the Company shall
execute and deliver to the Noteholder a new Note of Notes of authorized
denominations in principal amount equal to the unpaid principal amount of this
Note.

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7.4  Cessation of Rights. From and after the Redemption Date, unless there has
been a default in redemption, all interest on the redeemed principal amount
shall cease to accrue and all rights of the Noteholder as a holder of this Note
shall cease with respect to the principal amount redeemed and, with respect to
such amount, this Note thereafter shall not be deemed to be outstanding for any
purpose whatsoever.
 
7.5  Undertaking. By acceptance of this Note, the Noteholder agrees to execute
and deliver such documents as may reasonably be requested from time to time by
the Company in order to implement the foregoing provisions of this Section 7.
 
8.  Registration, Transfer and Exchange of the Note. The Company shall keep at
its principal office a register in which it will provide for the registration
and transfer of this Note, at its own expense (excluding transfer taxes).
Subject to compliance with applicable laws and the restrictions on transfer
described herein, this Note and all rights hereunder are transferable and
assignable at the office of the Company, by the Noteholder in person or by the
duly authorized representative of the Noteholder, upon surrender of this Note.
If this Note is surrendered at said office for registration of transfer or
exchange (accompanied in the case of a registration) or transfer by a written
instrument of transfer in satisfactory to the Company, at its expense, shall
deliver in exchange one or more new Notes in denominations as requested by the
Noteholder (but in no case less than U.S. $100,000), for the aggregate unpaid
principal amount. Any note or notes issued in a transfer or exchange shall carry
the same rights to interest (unpaid and to accrue) carried by this Note so
transferred or exchanged so that there will not be any loss or gain of interest
on the Note surrendered. Prior to due presentation for registration of transfer,
the Company may treat the person in whose name this Note is registered as the
owner and holder of this Note for the purpose of receiving payment of principal
of and interest on this Note and for all other purposes whatsoever.
 
Prior to the sale or transfer of any Note, the Noteholder shall surrender said
Note to the Company in exchange for a new Note in the principal amount equal to
the unpaid balance of principal of the Note surrendered.
 
9.  Miscellaneous.
 
9.1  Successors and Assigns. Subject to the foregoing terms and conditions, the
rights and obligations of the Company and the Noteholder shall inure to the
benefit of and be binding upon the respective executors, administrators, heirs,
transferees, successors and assigns of the Company and the Noteholder.
 
9.2  Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO AGREEMENTS
BETWEEN CALIFORNIA RESIDENTS ENTERED INTO AND TO BE PERFORMED ENTIRELY WITHIN
CALIFORNIA. ANY US PERSON WHO HOLDS THIS NOTE IS SUBJECT TO LIMITATIONS UNDER
THE US INCOME TAX LAWS.
 
9.3  Notices. Except as otherwise provided herein, all communications hereunder
shall be in writing or by either telecopier of telegraph and, if to the Company,
shall be mailed, telecopied or telegraphed or delivered to Taitron Components
Incorporated, 28040 West Harrison Parkway, Valencia, CA 91355; and if to the
Noteholder, shall be mailed, telecopied, telegraphed or delivered to K.S. Best
International Co., Ltd., Room 704 Kowloon Building, 555 Nathan Rd, Kowloon, Hong
Kong. All notices given by telecopy or telegraph shall be promptly confirmed by
letter. Any party hereto may by notice so given change its address for future
notice hereunder.
 
9.4  Severability. In case any provision of this Note shall be invalid, illegal
or unenforceable, it shall, to the extent practicable, be modified so as to make
it valid, legal and enforceable and to retain as nearly as practicable, the
intent of the parties, and the validity, legality and enforceability of the
remaining provisions of this Note shall not in any way be affected or impaired
thereby.
 
9.5  Waiver and Amendment. Any provision of this Note may be amended, waived or
modified upon the written consent of the transferee, successor or assign of the
Noteholder or, if such Note has been transferred by the Noteholder, the holders
of at least fifty-one per cent (51%) of the aggregate principal amount of all of
the Notes then outstanding.
 
9.6  Lost, Stolen, Mutilated or Destroyed Note. If this Note is lost, stolen,
mutilated or destroyed, the Company shall, on such terms as to indemnity or
otherwise as it may reasonable impose (which shall, in the case of a mutilated
Note, include the surrender and cancellation thereof), issue a new Note of like
denomination and tenor as the Note so lost, stolen, mutilated or destroyed.

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9.7  Titles and Headings. The titles and headings contained in this Note are
intended for reference and shall not by themselves determine the construction or
interpretation of this Note.
 
9.8  Entire Agreement. This Note delivered pursuant hereto and thereto,
constitute the full and entire understanding and agreement between the parties
with respect to the subjects hereof and thereof.
 
IN WITNESS WHEREOF, the Company has caused this Note to be issued as of the date
first written above.
 
TAITRON COMPONENTS INCORPORATED
By:
 
        /s/ Stewart Wang

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Stewart Wang, President & CEO