balqon_8k-121410.htm

SECURITIES PURCHASE AGREEMENT

THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”) dated effective as of December 14, 2010 is made by and between Balqon Corporation, a Nevada corporation (the “Company”), and Seven One Limited, a company organized under the laws of the British Virgin Islands (the “Purchaser”).

RECITALS

WHEREAS, the Purchaser desires to purchase, and the Company desires to issue and sell, upon the terms and conditions stated in this Agreement, (i) 7,812,500 shares (the “Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”), and (ii) a warrant (the “Warrant”) in the form attached to this Agreement as Exhibit A to acquire up to 7,812,500 shares (the “Warrant Shares”) of the Company’s Common Stock;

WHEREAS, it is the intention of the parties that on or about the Closing (as defined below) the Company and the Purchaser shall enter into an distribution agreement (the “Distribution Agreement”) pursuant to which, upon terms mutually agreed to by the Company and the Purchaser, the Company will become the exclusive distributor in the United States of lithium iron phosphate batteries and high voltage charging systems manufactured by the Purchaser’s affiliate, Thunder Sky Battery Limited (also known as Winston Battery Limited), for a period of three years;

WHEREAS, in connection with entering into the Distribution Agreement, the Company will issue to the Purchaser (i) 1,375,000 shares of Common Stock (“Distribution Shares”), and (ii) a five-year warrant (“Distribution Warrant”) to purchase up to 1,500,000 shares of Common Stock (“Distribution Warrant Shares”) at an exercise price per share of $1.50; and

WHEREAS, it is the intention of Balwinder Samra, President and Chief Executive Officer of the Company, and Purchaser that on or about the Closing, Mr. Samra and Purchaser shall enter into a voting agreement (the “Voting Agreement”), which Voting Agreement shall provide for certain arrangements and understandings respecting ownership of the Company’s voting securities and other matters as set forth in the Voting Agreement.

NOW, THEREFORE, in consideration of the agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

ARTICLE I

DEFINITIONS

1.1 Definitions. Capitalized terms that are not otherwise defined herein have the meanings given to such terms in this Section 1.1:

“Action” shall have the meaning ascribed to such term in Section 3.1(j).

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.

“Board of Directors” means the board of directors of the Company.

“Bridge Bank” means Bridge Bank, National Association.

“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of California are authorized or required by law or other governmental action to close.

“Closing” shall have the meaning ascribed to such term in Section 2.2.

“Commission” means the United States Securities and Exchange Commission.

“Common Stock” shall have the meaning ascribed to such term in the Recitals hereto.

“Common Stock Equivalents” means any securities of the Company which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

“Disclosure Schedules” shall have the meaning ascribed to such term in Section 3.1.

“Distribution Agreement” shall have the meaning ascribed to such term in the Recitals hereto.

“Environmental Laws” shall have the meaning ascribed to such term in Section 3.1(x).

“Evaluation Date” shall have the meaning ascribed to such term in Section 3.1(r).

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“GAAP” shall have the meaning ascribed to such term in Section 3.1(h).

“Intellectual Property Rights” shall have the meaning ascribed to such term in Section 3.1(o).

“Liens” means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

“Material Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).

“Material Permits” shall have the meaning ascribed to such term in Section 3.1(m).

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.

“Properties” shall have the meaning ascribed to such term in Section 3.1(x).

“Required Approvals” shall have the meaning ascribed to such term in Section 3.1(e).

“Registration Rights Agreement” means that certain Registration Rights Agreement between the Company and Purchaser in the form attached to this Agreement as Exhibit B.

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).

“Securities” means the Shares, the Warrant and the Warrant Shares.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Shares” shall have the meaning ascribed to such term in the Recitals hereto

“Trading Day” means a day on which the principal Trading Market is open for trading.

“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE AMEX, the NASDAQ Capital Market, the NASDAQ Global Market, the NASDAQ Global Select Market, the New York Stock Exchange or the OTC Bulletin Board (or any successors to any of the foregoing).

“Transaction Documents” means this Agreement, the Distribution Agreement, the Registration Rights Agreement, the Warrant, all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.

“Transfer Agent” means Signature Stock Transfer, the current transfer agent of the Company, with a mailing address of 2301 Ohio Drive, Suite 100, Plano, Texas 75093, and any successor transfer agent of the Company.

“Voting Agreement” means that certain Voting Agreement between Balwinder Samra and Purchaser in the form attached to this Agreement as Exhibit C.

“Warrant” shall have the meaning ascribed to such term in the Recitals hereto.

“Warrant Shares” shall have the meaning ascribed to such term in the Recitals hereto.

ARTICLE II

PURCHASE AND SALE

2.1 Issuance, Sale and Delivery of the Shares and Warrant at the Closing. At the Closing, on the terms and subject to the conditions of this Agreement, the Company shall issue and sell to the Purchaser, and the Purchaser shall purchase from the Company, the Shares and a Warrant to purchase the Warrant Shares, for the aggregate purchase price of $5,000,000.

2.2 Closing. The closing (“Closing”) shall take place at 10:00 a.m. at the offices of Rutan & Tucker, LLP, 611 Anton Blvd., Costa Mesa, California, on the date hereof. At the Closing, the Company shall issue to the Purchaser (i) the Shares and (ii) a Warrant in definitive form, registered in the name of the Purchaser representing the right to purchase the Warrant Shares. As payment in full for the Shares and Warrant being purchased by it under this Agreement, and again st delivery of the stock certificate or certificates therefor and Warrant as aforesaid, on the Closing Date, the Purchaser shall pay to the Company by wire transfer or by such other method as may be reasonably acceptable to the Company, in immediately available funds in the amount of $5,000,000. Such amount shall be paid to the account as shall have been designated in writing to the Purchaser at least two (2) business days prior to the date of the Closing by the Company.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

3.1 Representations and Warranties of the Company. Except as set forth in the Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof and shall qualify any representation or otherwise made herein to the extent of the disclosure contained in the corresponding section of the Disclosure Schedules, the Company hereby makes the following representations and warranties to each Purchaser as of the Closing:

(a) Subsidiaries. The Company has no direct or indirect subsidiaries.

(b) Organization and Qualification. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Nevada, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. The Company is not in violation nor default of any of the provisions of its respective articles of incorporation, bylaws or other organizational or charter documents. The Company is duly qualified to conduct business and is in good standing as a foreign corporation in each jurisdiction in which the nature of the business conducted or proper ty owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business or condition (financial or otherwise) of the Company, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

(c) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors or the Company’s stockholders in connection therewith other th an the Required Approvals. Each Transaction Document to which it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

(d) No Conflicts. Subject to the Required Approvals, the execution, delivery and performance by the Company of the Transaction Documents, the issuance and sale of the Securities and the consummation by the Company of the transactions contemplated hereby and thereby to which it is a party do not and will not: (i) conflict with or violate any of the provisions of the Company’s articles of incorporation, bylaws or other organizational or charter documents, (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon an y of the properties or assets of the Company, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company debt or otherwise) or other understanding to which the Company is a party or by which any property or asset of the Company is bound or affected, or (iii) conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.

(e) Filings, Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i) the filings required pursuant to Section 4.9, and (ii) the filing of a Form D with the Commission and such filings as are required to be made under applicable state securiti es laws (collectively, the “Required Approvals”).

(f) Issuance of the Securities. The Shares and the Warrant are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents. The Warrant Shares, when issued in accordance with the terms of the Warrant, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents. The Company will reserve from its duly authorized capital stock a number of shares of Common Stock issuable pursuant to this Agreement and for issuance of the Warrant Shares.

(g) Capitalization. The capitalization of the Company is as set forth in Section 3.1(g) of the Disclosure Schedule. The Company has not issued any capital stock since its most recently filed periodic report under the Exchange Act, other than as set forth on Section 3.1(g) of the Disclosure Schedule, pursuant to the exercise of employee stock options under the Company’s stock option plans, the issuance of shares of Common Stock to employees pursuant to the Company’s employee stoc k purchase plans and pursuant to the conversion and/or exercise of Common Stock Equivalents outstanding as of the date of the most recently filed periodic report under the Exchange Act. No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents. Except as a result of the purchase and sale of the Securities and except as set forth in Section 3.1(g) of the Disclosure Schedule, there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents. The issuance and sale of the Securities will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Purchaser). All of the outstanding shares of capital stock of the Company are validly issued, fully paid and non-assessable, have been issued in compliance with all federal and state securities laws (subject to the filing of a Form D with the Commission and such other filings as are required to be made under applicable state securities laws), and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. No further approval or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities. There are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Compan y, between or among any of the Company’s shareholders.

(h) SEC Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or Section 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SE C Reports”). As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified i n such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.

(i) Material Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements included within the SEC Reports, except as set forth on Section 3.1(i) of the Disclosure Schedule or specifically disclosed in a subsequent SEC Report filed prior to the date hereof: (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accr ued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or disclosed in filings made with the Commission prior to the Closing, (iii) the Company has not altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock option plans. The Company does not have pending before the Commission any request for confidential treatment of information. Except for the issuance of the Securities contemplated by this Agreement, no event, liability, fact, circumstance, occurrence or development has occurred or exists or is reasonably expected to occur or exist with re spect to the Company or its business, properties, operations, assets or financial condition, that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made or deemed made that has not been publicly disclosed at least one (1) Trading Day prior to the date that this representation is made.

(j) Litigation. There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company or its properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) could, if there were an unfavorable de cision, have or reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company. The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company under the Exchange Act or the Securities Act.

(k) Labor Relations. No material labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company, which could reasonably be expected to result in a Material Adverse Effect. None of the Company’s employees is a member of a union that relates to such employee’s relationship with the Company, and neither the Company is a party to a collective bargaining agreement, and the Company believes that their relationships with their employees are good. No executive officer, to the knowledge of the Company, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company to any liability with respect to any of the foregoing matters. The Company is in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(l) Compliance. The Company is not: (i) in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company under), nor has the Company received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) in violation of any judgment, decree or order of any court, arbitrator or governmental body or (iii) in or has not been in violation of any statute, rule, ordinance or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws applicable to its business and all such laws that affect the environment, except in each case as could not have or reasonably be expected to result in a Material Adverse Effect.

(m) Regulatory Permits. The Company possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports, except where the failure to possess such permits could not reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and the Company has not received any notice of proceedings relating to the revocation or modification of any Material Permit.

(n) Title to Assets. The Company has good and marketable title in fee simple to all real property owned by it and good and marketable title in all personal property owned by it that is material to the business of the Company, in each case free and clear of all Liens, except for Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company, Liens for the payment of federal, state or other taxes, the payment of which is neither delinquent nor subject to penalties and Liens set forth on Section 3.1(n) of the Disclosure Schedule. Any real property and facilities held under lease by the Company is held by the Company under valid, subsisting and enforceable leases with which the Company is in compliance.

(o) Patents and Trademarks. The Company has rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights as described in the SEC Reports as necessary or material for use in connection with their respective businesses and which the failure to so have could have a Material Adverse Effect (collectively, the “Intellectual Property Rights”). The Company has not received a notice (written or o therwise) that any of the Intellectual Property Rights used by the Company violates or infringes upon the rights of any Person. To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights. The Company has taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties, except where failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(p) Insurance. The Company is insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company is engaged, including, but not limited to, directors and officers insurance coverage. The Company has no reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost.

(q) Transactions With Affiliates and Employees. Except as set forth in the SEC Reports, none of the officers or directors of the Company and, to the knowledge of the Company, none of the employees of the Company is presently a party to any transaction with the Company (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in wh ich any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner, in each case in excess of $120,000 other than for: (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and (iii) other employee benefits, including stock option agreements under any stock option plan of the Company.

(r) Sarbanes-Oxley; Internal Accounting Controls. The Company is in material compliance with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it as of each Closing. The Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company has established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such disclosure controls and procedures to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. The Company’s certifying officers have evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by the Company’s most recently filed periodic report under the Exchange Act (such date, the “Evaluation Date”). The Compan y presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no changes in the Company’s internal control over financial reporting (as such term is defined in the Exchange Act) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

(s) Certain Fees. No brokerage or finder’s fees or commissions are or will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Transaction Documents. The Purchaser shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by the Transaction Documents.

(t) Listing and Maintenance Requirements. The Common Stock is registered pursuant to Section 12(b) or Section 12(g) of the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating such registration. The Company has not, in the twelve (12) months preceding the date hereof, received notice from any Trading Market on which the Common Stock is or has been listed or quoted to the effect that the Compa ny is not in compliance with the listing or maintenance requirements of such Trading Market. The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements.

(u) No Integrated Offering. Assuming the accuracy of the Purchaser’s representations and warranties set forth in Section 3.2, neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of (i) the Securities Act which would require the registration of any such securities under the Securities Act, or (ii) any applicable shareholder approval provisions of any Trading Market on which any of the securities of the Company are listed or designated.

(v) Tax Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Company has filed all necessary federal, state and foreign income and franchise tax returns and has paid or accrued all taxes shown as due thereon, and the Company has no knowledge of a tax deficiency which has been asserted or threatened against the Company.

(w) Foreign Corrupt Practices. Neither the Company, nor to the knowledge of the Company, any agent or other person acting on behalf of the Company, has: (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company (or made by any person acting on its behalf of which the Company is a ware) which is in violation of law or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.

(x) Environmental Matters. Except as otherwise disclosed in the SEC Reports, the Company is in compliance in all material respects with the terms and conditions of the applicable Environmental Laws, and is also in compliance with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in the Environmental Laws. The Company has not received any notice of whatever form alleging noncompliance with any Environmental Law and, to the knowledge of the Company, no previous owner or operator of any real property leased and/or operated by the Company (collectively, the “Properties”) or any business currently owned or operated by the Company has received any such notice alleging noncompliance with any Environmental Law. None of the Properties or any other assets of the Company include any equipment, machinery, device, or other apparatus that contains polychlorinated biphenyls that is now or ever has been leaking, any asbestos that is or reasonably may be anticipated to become in friable condition, or any underground tank. For purposes herein, Environmental Laws means all federal, state and local laws, rules and regulations relating to pollution or protection of the environment such as laws relating to emissions, discharges, releases or threatened releases of hazardous, toxic or other pollutants, contaminants, chemicals or industrial material, into the natural environment, including, wit hout limitation, into ambient air, surface water, ground water, land surface or subsurface strata or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of hazardous, toxic or other pollutants, contaminants, chemicals or industrial materials, substances or wastes, together with all regulations, rules, codes, plans, decrees, judgments, injunctions, notices and demand letters issued, entered, promulgated or approved thereunder.

(y) Full Disclosure. No representation, warranty or statement made by the Company in this Agreement, or in any other material furnished or to be furnished by the Company to the Purchaser contains any untrue statement of a material fact, or omits to state a material fact required to be stated herein or therein or necessary to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading. There is no fact which the Company has not disclosed to the Purchaser herein and of which the Company or any of its officers, directors or executive employees is aw are which could reasonably be anticipated to have a Material Adverse Effect on the Company or the ability of the Company to continue operating the business in the same manner as the Company has been conducted prior to the Closing Date. The Company has disclosed to the Purchaser all material information relating to the Company or the transactions contemplated by this Agreement.

3.2 Representations and Warranties of the Purchaser. The Purchaser hereby represents and warrants as of the date hereof to the Company as follows (unless as of a specific date therein):

(a) Organization; Authority. The Purchaser is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with full right, corporate or partnership power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and performance by the Purchaser of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary corporate, partnership, limited liability company or si milar action, as applicable, on the part of the Purchaser. Each Transaction Document to which it is a party has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

(b) Own Account. The Purchaser understands that the Securities are “restricted securities” and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Securities as principal for its own account and not with a view to or for distributing or reselling such Securities or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of such Securities in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any o ther persons to distribute or regarding the distribution of such Securities in violation of the Securities Act or any applicable state securities law (this representation and warranty not limiting the Purchaser’s right to sell the Securities pursuant to the Registration Statement or otherwise in compliance with applicable federal and state securities laws).

(c) Purchaser Status. At the time the Purchaser was offered the Securities, it was, and as of the date hereof it is, and on each date on which it exercises any Warrants it will be either: (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act, (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act and/or (iii) a non “U.S. Person” as defined under Regulation S under the Securities Act. The Purchaser is not required to be registered as a broker-dealer under Section 15 of the Exchange Act.

(d) Experience of the Purchaser. the Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment. The Purchaser is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.

(e) General Solicitation. The Purchaser is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.

The Company acknowledges and agrees that the representations contained in Section 3.2 shall not modify, amend or affect such Purchaser’s right to rely on the Company’s representations and warranties contained in this Agreement or any representations and warranties contained in any other Transaction Document or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of the transaction contemplated hereby.

ARTICLE IV

OTHER AGREEMENTS OF THE PARTIES

4.1 Transfer Restrictions.

(a) The Securities may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of Securities other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of the Purchaser or in connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not requ ire registration of such transferred Securities under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights and obligations of the Purchaser under this Agreement.

(b) The Purchaser agrees to the imprinting, so long as is required by this Section 4.1, of a legend on any of the Securities in the following form:

[NEITHER] THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [EXERCISABLE]] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY [AND THE SECURITIES ISSUA BLE UPON [EXERCISE] OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

The Company acknowledges and agrees that the Purchaser may from time to time pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest in some or all of the Securities to a financial institution that is an “accredited investor” as defined in Rule 501(a) under the Securities Act and who agrees to be bound by the provisions of this Agreement and, if required under the terms of such arrangement, the Purchaser may transfer pledged or secured Securities to the pledgees or secured parties. Such a pledge or transfer would not be subject to approval of the Company and no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith. Further, no notice shall be re quired of such pledge. At the Purchaser’s expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the Securities.

4.2 Use of Proceeds. The Company shall use the proceeds from the sale of the Securities in the manner set forth in Schedule 4(2) attached hereto and made a part hereof and shall not, directly or indirectly, use such proceeds for any loan to or investment in any other corporation, partnership, enterprise or other person. Any change in the use of proceeds shall require the consent of Purchaser.

4.3 Indemnification of Purchaser. Subject to the provisions of this Section 4.3, the Company will indemnify and hold the Purchaser and its directors, officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls the Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members, pa rtners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Purchaser Party may suffer or incur as a result of or relating to any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents. If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party. Any Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of counsel, a material conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel. The Company will not be liable to any Purchaser Party under this Agreement (y) for any settlement by a Purchaser Party effected without the Company’s p rior written consent, which shall not be unreasonably withheld or delayed; or (z) to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents.

4.4 Appointment to Board. The Purchaser’s obligations at the Closing are conditioned upon the Purchaser receiving confirmation from the Company that all necessary action on the part of the Company has been taken for Mr. Winston Chung to be appointed as a member and the chairman of the Board of Directors of the Company effective upon the Closing.

4.5 Legal Opinion. The Purchaser’s obligations at the Closing are conditioned upon the Purchaser receiving a legal opinion from Rutan & Tucker, LLP in a form customary in transactions similar to the transactions consummated by this Agreement.

4.6 Accredited Investor and/or Non U.S. Person Certification. The Company’s obligations at the Closing are conditioned upon the Company receiving from the Purchaser certifications and assurances required to ensure compliance with the securities laws of the United States.

4.7 Delivery of Stock Certificate. Within five (5) Trading Days of the Closing, the Company shall deliver to the Purchaser a stock certificate in definitive form, registered in the name of the Purchaser, representing the Shares.

4.8 Reservation of Shares of Common Stock. The Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance pursuant to the Warrant in such amount as may then be required to fulfill its obligations in full under the Warrant.

4.9 Company Deliveries. The Purchaser’s obligations at the Closing are conditioned upon the Purchaser receiving from the Company a good standing certificate from Secretary of State of the State of Nevada dated within 10 days of the Closing, together with a verbal bring-down on the date of the Closing.

4.10 HSR Act Filings. To the extent required with respect to the Shares and the Warrant Shares, the Company will file, and will provide any and all assistance to the Purchaser necessary to enable the Purchaser to file, all notices, reports and other documents required to be filed with governmental entities, including without limitation the Federal Trade Commission and the U.S. Department of Justice, in connection with the transactions set forth in the Transaction Documents. Without limitation, if and as requested by the Purchaser, the Company shall prepare and file, as promptly as practical, one or more Noti fication and Report Forms complying with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), and related laws, rules and regulations. For the avoidance of doubt, after the Closing no Warrant Shares or Distribution Agreement Shares shall be issued to the Purchaser pursuant to the Transaction Documents until such time as any waiting period required by the HSR Act in connection with such issuance shall have expired or been terminated.

4.11 Distribution Agreement. The parties will negotiate in good faith the terms of a Distribution Agreement mutually acceptable to the Company and the Purchaser, which Distribution Agreement shall be executed by the parties thereto at or about the date of the Closing of the purchase and sale of the Shares and Warrant pursuant to the terms and conditions of this Agreement.

4.12 Registration Rights Agreement. The parties will execute and deliver the Registration Rights Agreement at the Closing.

4.13 Voting Agreement. Balwinder Samra and Purchaser will execute and deliver the Voting Agreement at the Closing.

4.14 Further Assurances. The parties agree (i) to furnish upon request to each other such further information, (ii) to execute and deliver to each other such other documents, and (iii) to do such other acts and things, all as the other party may reasonably request for the purpose of carrying out the intent of this Agreement and the documents referred to in this Agreement.

ARTICLE V

MISCELLANEOUS

5.1 Fees and Expenses. Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall pay all Transfer Agent fees, stamp taxes and other taxes and duties levied in connection with the delivery of any Securities to the Purchaser.

5.2 Entire Agreement. The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.

5.3 Notices. Any notice, request, demand or other communication required or permitted to be given to a party pursuant to the provisions of this Agreement will be in writing and will be effective and deemed given under this Agreement on the earliest of: (a) the date of personal delivery, (b) the date of transmission by facsimile, with confirmed transmission and receipt, (c) two (2) days after deposit with a nationally-recognized courier or overnight service and (d) five (5) days after mailing via first-class mail. All notices not delivered personally or by facsimile will be sent with postage and ot her charges prepaid and properly addressed to the party to be notified at the address set forth for such party (i) if to the Purchaser, to Seven One Limited, No. 3 Industrial Zone, Lisonglang Village, Gongming Town, Bao’an Dist., Shenzhen, P.R.C., attention: Mr. Winston Chung, with a copy to Quintairos, Prieto, Wood & Boyer, P.A., One East Broward Boulevard, Suite 1400, Fort Lauderdale, Florida, 33301, attention: Robert Cousins, Esq., facsimile (954) 523-7009, and (ii) if to the Company, to Balqon Corporation., 1420 240th Street, Harbor City, CA 90710, attention: Balwinder Samra, with a copy to Rutan & Tucker LLP, 611 Anton Boulevard, 14th Floor, Costa Mesa, CA 92626, attention: Larry A. Cerutti, facsimile (714) 546-9035. Any party hereto (and such party’s permitted assigns) may change such party’s address for receipt of future notices hereunder by giving written notice to the Company and the Purchaser.

5.4 Amendments; Waivers. This Agreement may not be amended or modified, and no provisions hereof may be waived, without the written consent of the Company and the Purchaser. No action taken pursuant to this Agreement, including without limitation, any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representation, warranty, covenant or agreement contained herein. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a further or continuing waiver of such breac h or as a waiver of any other or subsequent breach. No failure on the part of any party to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such party preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law.

5.5 Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

5.6 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser (other than by merger). The Purchaser may assign any or all of its rights under this Agreement to any Person to whom the Purchaser assigns or transfers any Securities, provided that such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents that apply to the Purchaser.< /div>

5.7 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 4.3.

5.8 Governing Law. This Agreement and any controversy arising out of or relating to this Agreement shall be governed by and construed in accordance with the laws of the State of California without regard to conflict of law principles that would result in the application of any law other than the law of the State of California.

5.9 Dispute Resolution. The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the federal and state courts located within the geographic boundaries of Orange County, California for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the federal and state courts located within the geographic boundaries of Orange County, California and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any s uch suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court. The prevailing party shall be entitled to reasonable attorney’s fees, costs, and necessary disbursements in addition to any other relief to which such party may be entitled.

5.10 Survival. The representations and warranties contained herein shall survive each Closing and the delivery of the Securities for the applicable statute of limitations.

5.11 Attorneys’ Fees. If any action at law or in equity (including arbitration) is necessary to enforce or interpret the terms of the Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.

5.12 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect a s if such facsimile or “.pdf” signature page were an original thereof.

5.13 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be th e intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

5.14 Replacement of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company and the Transfer Agent of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associ ated with the issuance of such replacement Securities.

5.15 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, Purchaser and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agree to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.

5.16 Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the day and year first above written.

BALQON CORPORATION

By:

Balwinder Samra,

Chief Executive Officer

SEVEN ONE LIMITED

By:

Chung Hung Ka,

Chief Executive Officer

EXHIBIT A

WARRANT

EXHIBIT B

REGISTRATION RIGHTS AGREEMENT

EXHIBIT C

VOTING AGREEMENT

SCHEDULE 4.2

USE OF PROCEEDS

Proceeds from the Securities Purchase Agreement shall be used as follows:

1. Manufacturing of Products

2. Inventory

3. Purchase of batteries under the Distribution Agreement

4. Working Capital expenses as agreed upon by Winston Chung

In addition to the restrictions set forth under Section 4(2) of the Agreement, proceeds from the Securities Purchase Agreement may not be used for:

1. Research and Development

2. Repayment of outstanding debentures

3. Executive compensation/bonus, except as otherwise paid in accordance with prior Company practices.

DISCLOSURE SCHEDULE

to the

SECURITIES PURCHASE AGREEMENT

by and between

BALQON CORPORATION,

and

SEVEN ONE LIMITED

This Disclosure Schedule is hereby delivered by Balqon Corporation, a Nevada corporation (the “Company”) in accordance with the provisions of that certain Securities Purchase Agreement by and among the Company and Seven One Limited (the “Purchaser”) (the “Agreement”). Capitalized terms that are used in this Disclosure Schedule and are not defined shall have the meaning set forth in the Agreement.

Any matter set forth in a section of this Disclosure Schedule with respect to a particular representation and warranty in the Agreement shall be deemed an exception to any other representations and warranties in the Agreement to which it may relate provided the disclosure is in sufficient detail to enable a reasonable person to identify such other representations and warranties to which such information is responsive. Failure to provide a cross-reference from one section of this Disclosure Schedule to other applicable sections of this Disclosure Schedule shall not, however, in and of itself be deemed a failure to disclose unless a reasonable person would be unable to determine that the disclosure contained in such section of this Disclosure Schedule applies to other representations or warranties contained in t he Agreement.

Headings have been inserted on the separate sections of this Disclosure Schedule for convenience of reference only and shall not have the effect of amending or changing the content or meaning of the section as set forth in the Agreement.

This Disclosure Schedule, which were prepared by the Company and is hereby delivered to the Purchaser, sets forth exceptions to representations and warranties contained in Article III of the Agreement.

This Disclosure Schedule is part of the Agreement and is incorporated by reference therein.

Section 3.1(g)

The Company has 25,755,014 shares of Common Stock outstanding. The Company also may issue up to (i) 7,500,000 shares of Common Stock under the Company’s 2008 Stock Incentive Plan, (ii) 6,611,647 shares of Common Stock under warrants to purchase Common Stock and (iii) 4,096,650 shares of Common Stock under convertible notes and debentures, each calculated immediately prior to the Closing. The outstanding Common Stock Equivalents are further described in the SEC Reports.

2.	The Company is obligated to issue warrants to purchase an indeterminate number of shares of its common stock pursuant to an agreement with its investor relations firm. On November 17, 2010, the Company issued 5,000 shares to its investor relations firm under this agreement.

Between November 19, 2010 and December 3, 2010, the Company issued $50,000 in principal of its 10% Senior Secured Convertible Promissory Debentures, which debentures are convertible in to 66,666 shares of Common Stock, subject to adjustment, and warrants to purchase 50,000 shares of Common Stock, subject to adjustment, in a private placement transaction. The Company also issued placement agent warrants to purchase up to 4,000 shares of Common Stock, subject to adjustment, in connection with these transactions.

Section 3.1(i)

1.	Between November 19, 2010 and December 3, 2010, the Company issued $50,000 in principal of its 10% Senior Secured Convertible Promissory Debentures.

Section 3.1(n)

The Company is party to a Business Financing Agreement (the “Credit Agreement”) with Bridge Bank, National Association (the “Lender”) pursuant to which the Lender has provided the Company with an accounts receivable based credit facility in the aggregate amount of up to $2,000,000 (the “Credit Facility”). The Credit Facility is secured by a continuing first priority security interest in all the Company’s personal property (subject to customary exceptions). At September 30, 2010 there was $219,463 outstanding and $47,262 was available under the terms of the Credit Facility. At December 31, 2009, $128,150 was outstanding and $6,190 was available under the terms of the Credit Facility.

The Company has issued $850,000 in principal of its 10% Senior Secured Convertible Promissory Debentures. The Debentures are secured by a security interest in all of the Company’s personal property (subject to customary exceptions), which security interest is subject to and subordinate to the security interest under the Company’s secured credit facilities with one or more financial institution, in an amount of up to $2,500,000 in the aggregate.

EX-10.2 3 ex10-2.htm REGISTRATION RIGHTS AGREEMENT ex10-2.htm

Exhibit 10.2

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (this “Agreement”) is made and entered into as of December ____, 2010 by and between Balqon Corporation, a Nevada corporation (the “Company”), and Seven One Limited, a company organized under the laws of the British Virgin Islands (the “Purchaser”).

This Agreement is made in connection with the issuance (i) of Shares and a Warrant pursuant to a certain Securities Purchase Agreement by and between the Company and the Purchaser dated as of the date hereof (the “Purchase Agreement”) and (ii) the Distribution Shares and the Distribution Warrant issued to the Purchaser in connection with entering into the Distribution Agreement.

The Company is obligated to register for resale certain securities (collectively, including any shares of Common Stock issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing, the “Previous Shares”) offered and sold under the terms of (i) a Confidential Private Placement Memorandum dated March 23, 2009, (ii) a certain Confidential Private Placement Memorandum dated September 22, 2009 as supplemented by that certain Supplement No. 1 to Confidential Private Placement Memorandum dated January 22, 2010, and (iii) a certain Confidential Private Placement Memorandum dated May 25, 2010, as amended by Supplement No. 1 to Confidential Private Placement Memorandum d ated July 21, 2010. In addition, the Company has filed a registration statement with the Commission in respect of other shares of Common Stock, which registration statement has been declared effective and is required to be amended to incorporate certain information contained in the Company’s filings under the Exchange Act since the effective date of such registration statement.

The Company and the Purchaser hereby agree as follows:

1. Definitions. Capitalized terms used and not otherwise defined herein that are defined in the Purchase Agreement shall have the meanings given such terms in the Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings:

“Advice” shall have the meaning set forth in Section 6(c).

“Commission” means the Securities and Exchange Commission.

“Cut-back” and “Cut-back Shares” shall have the meanings set forth in Section 2(a).

“Effectiveness Period” shall have the meaning set forth in Section 2(a).

“Holder” or “Holders” means the holder or holders, as the case may be, from time to time of Registrable Securities.

“Indemnified Party” shall have the meaning set forth in Section 5(c).

“Indemnifying Party” shall have the meaning set forth in Section 5(c).

“Losses” shall have the meaning set forth in Section 5(a).

“Other Shares” shall have the meaning set forth in Section 2(a).

“Plan of Distribution” shall have the meaning set forth in Section 2(a).

“Previous Shares” shall have the meaning set forth in the Recitals.

“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened.

“Prospectus” means the prospectus included in a Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by a Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.

“Registrable Securities” means all of (i) the Shares, (ii) the Distribution Shares, (iii) the Warrant Shares, (iv) the Distribution Warrant Shares and (v) any shares of Common Stock issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing.

“Registration Statement” means the registration statements required to be filed hereunder, including (in each case) the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement.

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such rule.

“Rule 415” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such rule.

“Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such rule.

“Securities Act” the Securities Act of 1933, as amended.

“Selling Shareholder Questionnaire” shall have the meaning set forth in Section 3(a).

2. Registration Statement.

(a) On or before April 15, 2011, subject to the Company’s obligation to register the Previous Shares, the Company shall prepare and file with the Commission a Registration Statement covering the resale of 100% of the Registrable Securities for an offering to be made on a continuous basis pursuant to Rule 415; provided, however, that if after the Company files a Registration Statement with the Commission covering the Registrable Securities the Commission takes the position that the offering of some or all of the securities included in the Registration Statemen t are not eligible to be made on a delayed or continuous basis under the provisions of Rule 415, the Company shall amend the Registration Statement prior to its effectiveness to remove from the Registration Statement such portion of the Registrable Securities (the “Cut-back Shares”) and/or agree to such restrictions and limitations on the registration and resale of the Registrable Securities as the Commission may require to assure the Company’s compliance with the requirements of Rule 415 (collectively, the “SEC Restrictions”). The Company’s obligation to file a Registration Statement pursuant to this Section 2 shall be subject to the Company first meeting its obligations to register the Previous Shares. The Company intends to meet its registration obligations with respe ct to the Previous Shares by including in the Registration Statement all Previous Shares along with the Registrable Securities. In the event of a cut-back pursuant to this Section 2(a) (a “Cut Back”) and unless the SEC Restrictions require otherwise, the registration of the Registrable Securities shall be subject to the priority registration of the Previous Shares such that the securities that are entitled to be included in the registration shall first be allocated to the Previous Shares (subject to such allocation priorities as set forth in the registration rights agreements for such Previous Shares) and second to the Registrable Securities. In the event that holders of securities other than the Registrable Securities and the Previous Shares are entitled to registration rights (“Othe r Shares”), the securities that are entitled to be included in the registration shall first be allocated to the Previous Shares, second to the Registrable Securities and, thereafter, to the Other Shares, subject to such allocation priorities as set forth in the registration rights agreements for such Other Shares. The Registration Statement shall contain the “Plan of Distribution” section substantially in the form attached hereto as Annex A, with such changes as are reasonably required to respond to any comments to such section by the Commission and to comply with then applicable securities laws. Subject to the terms of this Agreement, the Company shall use its reasonable efforts to cause such Registration Statement to be declared effective under the Securities Act as promptly as possible after the filing thereof, and shall use its co mmercially reasonable efforts to keep such Registration Statement continuously effective under the Securities Act until the earlier of (A) the date that is two years after the date the Registration Statement is initially declared effective, (B) the date that is six months after the date on which all the Warrant Shares and the Distribution Shares are issued to the Holders, (C) the date on which there ceases to be outstanding any Registrable Securities, and (D) the date on which the Company receives an opinion from its legal counsel to the effect that Rule 144 is available for the resale of all Registrable Securities except for the requirement for the Company to be in compliance with the current public information requirements of Rule 144 (the “Effectiveness Period”).

(b) The parties hereto agree that the Company will not be required to use a Registration Statement for any registration in which securities of the Company are sold to an underwriter for reoffering to the public, and the Company will in no event be required to cooperate with or pay for any such underwritten offering.

3. Registration Procedures. In connection with the Company’s registration obligations hereunder, the Company shall:

(a) Not less than three trading days prior to the filing of each Registration Statement or any related Prospectus or any amendment or supplement thereto (including any document that would be incorporated or deemed to be incorporated therein by reference), the Company shall, (i) furnish to each Holder copies of the “Principal and Selling Stockholders” and “Plan of Distribution” sections of such Registration Statement, if such sections have been revised since the previous filing of such Registration Statement or any amendment or supplement thereto, which sections will be subject to the review of such Holders, and (ii) cause its officers and directors, counsel and indepen dent certified public accountants to respond to such inquiries as shall be necessary, in the reasonable opinion of respective counsel, to conduct a reasonable investigation within the meaning of the Securities Act. The Company shall not file a Registration Statement or any such Prospectus or any amendments or supplements thereto to which the Holders of a majority of the Registrable Securities included in such Registration Statement shall reasonably object in good faith, provided that, the Company is notified of such objection in writing no later than two trading days after the Holders have been so furnished copies of such documents. In order to be included in such registration, each Holder agrees to furnish to the Company a completed questionnaire related to such registration (a “Questionnaire”) not less than three calendar days after written request therefore has been made by the Company. The securi ties owned by any Holder who fails to timely forward to the Company the completed Questionnaire shall be excluded from the registration.

(b) (i) Prepare and file with the Commission such amendments, including post-effective amendments, to a Registration Statement and the Prospectus used in connection therewith as may be necessary to keep a Registration Statement continuously effective as to the Registrable Securities not subject to the Cut-Back for the Effectiveness Period; (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement (subject to the terms of this Agreement), and as so supplemented or amended to be filed pursuant to Rule 424; (iii) respond as promptly as reasonably possible to any comments received from the Commission with respect to a Registration Statement or any amend ment thereto and, upon written request by the Holders of at least 25% of the Registrable Securities included in such Registration Statement, as promptly as reasonably possible provide such Holders with true and complete copies of all material written correspondence from and to the Commission relating to a Registration Statement; and (iv) comply in all material respects with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by a Registration Statement during the applicable period in accordance (subject to the terms of this Agreement) with the intended methods of disposition by the Holders thereof set forth in such Registration Statement as so amended or in such Prospectus as so supplemented.

(c) Use its commercially reasonable efforts to notify the Holders (which notice shall, pursuant to clauses (ii) through (vi) hereof, be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made) as promptly as reasonably possible and (if requested by any Holder of at least 25% of the Registrable Securities included in a Registration Statement) confirm such notice in writing (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to a Registration Statement has been filed; (B) when the Commission notifies the Company whether there will be a “review” of such Registration Statement and whenever the Commissi on comments in writing on such Registration Statement; and (C) with respect to a Registration Statement or any post-effective amendment, when the same has become effective; (ii) of any request by the Commission or any other federal or state governmental authority for amendments or supplements to a Registration Statement or Prospectus or for additional information; (iii) of the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose; (v) of the occurrence of any event or passage of time that makes the financial statements included in a Regi stration Statement ineligible for inclusion therein or any statement made in a Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to a Registration Statement, Prospectus or other documents so that, in the case of a Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and (vi) the occurrence or existence of any pending corporate development with respect to the Company that the Company believes may be material and that, in the determination of the Company, makes it not in the best interest of the Company to allow continued availability of a Registration Statement or Prospectus; provided that any and all of such information shall be kept confidential by each Holder until such information otherwise becomes public, unless disclosure by a Holder is required by law; provided, further, that notwithstanding each Holder’s agreement to keep such information confidential, the Holders make no acknowledgement that any such information is material, non-public information.

(d) Use its commercially reasonable efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order suspending the effectiveness of a Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment.

(e) Furnish to each Holder, without charge, to the extent requested in writing by such Holder, at least one conformed copy of each such Registration Statement and each amendment thereto, including financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference, and all exhibits to such Registration Statement (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission.

(f) Promptly deliver to each Holder, without charge, as many copies of the Prospectus or Prospectuses (including each form of prospectus) and each amendment or supplement thereto as such Holder may reasonably request in writing in connection with resales by such Holder. Subject to the terms of this Agreement, the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto, except after the giving on any notice pursuant to Section 3( c).

(g) Prior to any resale of Registrable Securities by a Holder, use its commercially reasonable efforts to register or qualify or cooperate with the selling Holders in connection with the registration or qualification (or exemption from the registration or qualification) of such Registrable Securities for the resale by the Holder under the securities or Blue Sky laws of such jurisdictions within the United States as any Holder reasonably requests in writing, to keep each registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things reasonably necessary to enable the disposition in such jurisdictions of the Registrabl e Securities covered by each Registration Statement; provided, that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified, subject the Company to any material tax in any such jurisdiction where it is not then so subject or file a general consent to service of process in any such jurisdiction.

(h) If requested by a selling Holder, cooperate with such Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates shall be free, to the extent permitted by applicable law, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holder may request.

(i) Upon the occurrence of any event contemplated by this Section 3, as promptly as reasonably possible under the circumstances taking into account the Company’s good faith assessment of any adverse consequences to the Company and its stockholders of the premature disclosure of such event, prepare a supplement or amendment, including a post-effective amendment, to a Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither a Registration Statement nor such Pro spectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Company notifies the Holders in accordance with clauses (ii) through (vi) of Section 3(c) above to suspend the use of any Prospectus until the requisite changes to such Prospectus have been made, then the Holders shall suspend use of such Prospectus. The Company will use its commercially reasonable efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable. The Company shall be entitled to exercise its right under this Section 3(i) to suspend the availability of a Registration Statement and Prospectus for a period not to exceed 40 trading days (which need not be consecu tive days) in any 12 month period.

(j) Comply with all applicable rules and regulations of the Commission until the end of the Effectiveness Period.

(k) The Company may require each selling Holder to furnish to the Company a certified statement as to the number of shares of Common Stock beneficially owned by such Holder and the person who has voting and dispositive control over such shares. The Company shall have no obligation to keep a Prospectus usable or to give notice that a Prospectus is not usable by a particular Holder, and the Company will have no liability for, to the extent such Prospectus is not usable by such Holder because current information with respect to such Holder is not included therein because such Holder has not provided information to the Company in accordance with Section 3(a) or this Section 3(k).

(l) Notwithstanding any provision of this Agreement to the contrary, it shall not be a breach or violation of any obligation of the Company hereunder if the Company fails to take any action otherwise required hereunder because, in its reasonable determination, such action would require the Company to disclose material, non-public information that the Company has a bona fide business or legal reason for not disclosing regardless of whether the Company caused such material, non-public information to exist.

4. Registration Expenses. All fees and expenses incident to the performance of or compliance with this Agreement by the Company shall be borne by the Company whether or not any Registrable Securities are sold pursuant to a Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses (A) with respect to filings required to be made with the trading market on which the Common Stock is then listed for trading, and (B) in compliance with applicable sta te securities or Blue Sky laws reasonably agreed to by the Company in writing (including without limitation, fees and disbursements of counsel for the Company in connection with Blue Sky qualifications or exemptions of the Registrable Securities and determination of the eligibility of the Registrable Securities for investment under the laws of such jurisdictions as requested in writing by the Holders), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities and of printing prospectuses if the printing of prospectuses is reasonably requested by the Holders of a majority of the Registrable Securities included in a Registration Statement), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions co ntemplated by this Agreement. In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any trading market as required hereunder. In no event shall the Company be responsible for any broker or similar commissions or, except to the extent provided for in the Transaction Documents, any legal fees or other costs of the Holders.

5. Indemnification.

(a) Indemnification by the Company. The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Holder, the officers, directors, agents, brokers (including brokers who offer and sell Registrable Securities as principal as a result of a pledge or any failure to perform under a margin call of Common Stock), investment advisors and employees of each of them, each Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, agents and employees of each such controllin g Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred, arising out of or relating to any untrue or alleged untrue statement of a material fact contained in a Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading, except to the extent, but only to the extent, that (i) such untrue statements or omissions are based solely upon information regarding such H older furnished in writing to the Company by such Holder expressly for use therein, or to the extent that such information relates to such Holder or such Holder’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved or was not objected to in writing by such Holder expressly for use in a Registration Statement, such Prospectus or such form of Prospectus or in any amendment or supplement thereto (it being understood that each Holder has expressly approved Annex A hereto for this purpose) or (ii) in the case of an occurrence of an event of the type specified in Section 3(c)(ii)-(vi), the use by such Holder of an outdated or defective Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated or defective and prior to the receipt by such Holder of the Advice contemplated in Section 6(d). 0;The Company shall notify the Holders promptly of the institution, threat or assertion of any Proceeding arising from or in connection with the transactions contemplated by this Agreement of which the Company is aware.

(b) Indemnification by Holders. Each Holder shall, severally and not jointly, indemnify and hold harmless each other Holder, the Company, its directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses, as incurred, to the extent arising out of or based solely upon: (x) such Holder’s failure to comply with the prospectus deliver y requirements of the Securities Act, or (y) in the case of an occurrence of an event of the type specified in Section 3(c)(ii)-(vi), the use by such Holder of an outdated or defective Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated or defective and prior to the receipt by such Holder of the Advice contemplated in Section 6(d) or (z) any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any Prospectus, or any form of prospectus, or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading (i) to the extent, but only to the extent, that such untrue statement or omission is contained in any inf ormation so furnished in writing by such Holder to the Company specifically for inclusion in such Registration Statement or such Prospectus or (ii) to the extent that such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, or to the extent that such information relates to such Holder or such Holder’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved or was not objected to in writing by such Holder expressly for use in a Registration Statement (it being understood that each Holder has expressly approved Annex A hereto for this purpose), such Prospectus or such form of Prospectus or in any amendment or supplement thereto. In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the net proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation.

(c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying Party shall have the right to assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and th e payment of all fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have prejudiced the Indemnifying Party.

An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such fees and expenses; (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party shall reasonably believe that a material conflict of interest is likely to exist if the same counsel were to represent such I ndemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and the reasonable fees and expenses of one separate counsel shall be at the expense of the Indemnifying Party). The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding.

Subject to the terms of this Agreement, all reasonable fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten trading days following written notice thereof to the Indemnifying Party; provided, that the Indemnified Party shall promptly reimburse the Indemnifying Party for that portion of such fees and expenses applicable to such actions for which such Indemnified Party is not entitled to indemnification hereunder, determined based upon the relative faults of the parties.

(d) Contribution. If the indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless for any Losses, then each Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The r elative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in this Agreement, any reasonable attorneys’ or other reasonable fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance with its terms.

The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 5(d), no Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the proceeds actually received by such Holder from the sale of the Registrable Securities subject to the Proceeding exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such un true or alleged untrue statement or omission or alleged omission, except in the case of fraud by such Holder.

The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties.

6. Miscellaneous.

(a) Entire Agreement. The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.

(b) Compliance. Each Holder covenants and agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it in connection with sales of Registrable Securities pursuant to a Registration Statement.

(c) Discontinued Disposition. Each Holder agrees by its acquisition of such Registrable Securities that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Section 3(c), such Holder will forthwith discontinue disposition of such Registrable Securities under a Registration Statement until such Holder’s receipt of the copies of the supplemented Prospectus and/or amended Registration Statement or until it is advised in writing (the “Advice”) by the Company that the use of the applicable Prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus or Registration Statement. The Company will use its commercially reasonable efforts to ensure that the use of the Prospectus may be resumed as promptly as it practicable.

(d) Notices. All notices and other communications required or permitted to be provided to a party hereunder shall be given in accordance with Section 5.3 of the Purchase Agreement.

(e) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and the Holders of a majority of the then outstanding Registrable Securities. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders and that does not directly or indirectly affect the rights of other H olders may be given by Holders of all of the Registrable Securities to which such waiver or consent relates; provided, however, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the immediately preceding sentence.

(f) Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

(g) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder. The Company may not assign its rights or obligations hereunder without the prior written consent of all of the Holders of the then-outstanding Registrable Securities except in the case of a merger (or similar transaction) in which case the surviving entity shall succeed to the rights and obligations of the Company.

(h) No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

(i) Governing Law. This Agreement and any controversy arising out of or relating to this Agreement shall be governed by and construed in accordance with the laws of the State of California without regard to conflict of law principles that would result in the application of any law other than the law of the State of California.

(j) Dispute Resolution. The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the federal and state courts located within the geographic boundaries of Orange County, California for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the federal and state courts located within the geographic boundaries of Orange County, California and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court. The prevailing party shall be entitled to reasonable attorney’s fees, costs, and necessary disbursements in addition to any other relief to which such party may be entitled.

(k) Attorneys’ Fees. If any action at law or in equity (including arbitration) is necessary to enforce or interpret the terms of the Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.

(l) Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

(m) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated an d declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

(n) Remedies. In the event of a breach by the Company or by a Holder, of any of their obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Company and each Holder agree that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate.

(o) No Inconsistent Agreements. The Company has not, as of the date hereof, nor shall the Company, during the period beginning on or after the date of this Agreement and ending at the end of the Effectiveness Period, enter into any agreement with respect to its securities without the prior written consent of all of the Holders of the then-outstanding Registrable Securities, that would conflict with the provisions hereof.

(p) Independent Nature of Holders’ Obligations and Rights. The obligations of each Holder hereunder are several and not joint with the obligations of any other Holder hereunder, and no Holder shall be responsible in any way for the performance of the obligations of any other Holder hereunder. Nothing contained herein or in any other agreement or document delivered at any closing, and no action taken by any Holder pursuant hereto or thereto, shall be deemed to constitute the Holders as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Holders are in any way acting in concert with respect to such obligations or the transactions contemplated by this Agreement. Each Holder shall be entitled to protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other Holder to be joined as an additional party in any Proceeding for such purpose.

IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above.

BALQON CORPORATION

By:

Name: Balwinder Samra

Title: President

SEVEN ONE LIMITED

By:

Name: Chung Hung Ka

Title: Chief Executive Officer

ANNEX A

Plan of Distribution

The selling security holders may, from time to time, sell any or all of their shares of common stock on any stock exchange, market or trading facility on which the shares are traded or quoted in private transactions. These sales may be at prevailing market prices at the time of sale, or at privately negotiated prices. The selling security holders may use any one or more of the following methods when selling shares of our common stock:

·	ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

·	block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

·	purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

·	an exchange distribution in accordance with the rules of the applicable exchange;

·	privately negotiated transactions;

·	short sales;

·	broker-dealers may agree with the selling security holders to sell a specified number of such shares at a stipulated price per share;

·	a combination of any such methods of sale; and

·	any other method permitted pursuant to applicable law.

The selling security holders may also sell shares of our common stock under Rule 144 under the Securities Act, if available, rather than under this prospectus.

Broker-dealers engaged by the selling security holders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling security holders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. The selling security holders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved. Any profits on the resale of shares of common stock by a broker-dealer acting as principal might be deemed to be underwriting discounts or commissions under the Securities Act. Discounts, concessions, commissions and similar selling expenses, if any, attributable to the sale of shares will be borne by a selling s ecurity holder. The selling security holders may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of the shares if liabilities are imposed on that person under the Securities Act.

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The selling security holders may from time to time pledge or grant a security interest in some or all of the shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock from time to time under this prospectus after we have filed a supplement to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act supplementing or amending the list of selling security holders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus.

The selling security holders also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus and may sell the shares of common stock from time to time under this prospectus after we have filed a supplement to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act supplementing or amending the list of selling security holders to include the pledgee, transferee or other successors in interest as selling security holders under this prospectus.

The selling security holders and any broker-dealers or agents that are involved in selling the shares of common stock may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares of common stock purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.

We are required to pay all fees and expenses incident to the registration of the shares of common stock. We have agreed to indemnify the selling security holders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.

The selling security holders have advised us that they have not entered into any agreements, understandings or arrangements with any underwriters or broker-dealers regarding the sale of their shares of common stock, nor is there an underwriter or coordinating broker acting in connection with a proposed sale of shares of common stock by any selling security holder. If we are notified by any selling security holder that any material arrangement has been entered into with a broker-dealer for the sale of shares of common stock, if required, we will file a supplement to this prospectus. If the selling security holders use this prospectus for any sale of the shares of common stock, they will be subject to the prospectus delivery requirements of the Securities Act.

The anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of our common stock and activities of the selling security holders.

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EX-10.3 4 ex10-3.htm DISTRIBUTION AGREEMENT ex10-3.htm

Exhibit 10.3

DISTRIBUTION AGREEMENT

THIS DISTRIBUTION AGREEMENT (“Agreement”) is entered into this 14th day of December, 2010 by and between Seven One Limited, a company organized under the laws of the British Virgin Islands (“SOL”), and Balqon Corporation, a Nevada corporation (“Distributor”).

RECITALS

A. SOL is an affiliate of Thunder Sky Battery Limited (also known as Winston Battery Limited).

B. Thunder Sky Battery Limited manufactures and sells lithium iron phosphate batteries and high voltage charging systems (collectively, the “Products”) and has granted SOL an exclusive worldwide right to distribute the Products and SOL desires to enter into an exclusive distribution agreement with Balqon to enhance sales of the Products in the United States (the “Territory”).

C. Balqon desires to sell the Products to end users and resellers within the United States pursuant to an exclusive distribution agreement with SOL.

NOW THEREFORE, in consideration of the mutual covenants and agreements set forth herein, the parties agree as follows.

1. Appointment.

(a) SOL hereby appoints Distributor as its exclusive authorized Distributor for the promotion, marketing and sale of the Products in the Territory, and Distributor hereby accepts such appointment.

(b) In consideration of the appointment, effective on the date of this Agreement, Distributor hereby issues SOL (i) 1,375,000 shares (the “Distribution Shares”) of Distributor’s common stock, $0.001 par value per share (“Common Stock”) and (ii) a five-year warrant (the “Distribution Warrant”) to purchase up to 1,500,000 shares of Common Stock (the “Distribution Warrant Shares”) at an exercise price of $1.5 0 per share in the form attached hereto as Exhibit A.

(c) As further consideration of the appointment, Distributor agrees to register for resale with the Securities and Exchange Commission the Distribution Shares and the Distribution Warrant Shares pursuant to the terms of that certain Registration Rights Agreement of even date herewith between Distributor and SOL.

2. Term. The initial term of this Agreement shall commence on the date of this Agreement and shall continue until December 31, 2013, unless earlier terminated in accordance with Section 11 below. Thereafter, this Agreement will automatically renew for successive one (1) year terms, unless earlier terminated in accordance with Section 11 below.

3. Promotion and Sales.

(a) Distributor shall use its best efforts to promote, market and sell the Products within the Territory. Distributor agrees to maintain a fully qualified sales organization in order to fulfill its responsibilities under this Agreement and conduct a continuing program of quality sales promotion activities for the Products. During the term of this Agreement, Distributor shall not promote, market or sell any lithium iron phosphate batteries and high voltage charging systems or similar products within the Territory that directly compete with the Products.

(b) Distributor shall maintain facilities in the territory assigned so as to favorably reflect on the Products and quality image of SOL.

(c) Distributor shall provide prompt and courteous service to customer inquiries or complaints relating to the Products. Distributor shall at all times properly represent the Products and shall not make, directly or indirectly, any false misleading, or disparaging representations to any customers or persons in regards to the Products.

(d) SOL agrees to permit Distributor to identify itself as its authorized exclusive Distributor for Products and use the trademarks of SOL in connection with the Distributor’s effort to sell and promote the Products.

(e) SOL, upon mutual agreement with Distributor, shall permit Distributor to brand, package and/or private label products as deemed necessary by Distributor in connection with Distributor’s efforts to market, promote and sell the Products.

(f) Distributor shall provide, in reasonable detail, all data reasonably requested by SOL including sales forecasts as well as data on the overall marketplace, market segments, market opportunities and other information related to the Products marketed hereunder; as an aid in measuring SOL’s market potential therein and in planning its marketing efforts, including use of or applications for Products, suggestions for modification or improvements to Products and the like. Such data shall be limited to that specifically related to the Products.

(g) Distributor shall keep accurate accounts, books and records relating to the business of Distributor with respect to Products, in accordance with generally accepted accounting principles and practices and sufficient to ascertain compliance by Distributor with its obligations under this Agreement.

(h) SOL may periodically change design, models, features of Products, add new Products, or discontinue distribution of any or all Products without any accountability to Distributor in connection with any Products ordered by Distributor or Distributor’s inventory of the Products.

(i) Distributor shall comply fully with all applicable laws and regulations, including the U. S. Foreign Corrupt Practices Act, refrain from taking any action which would cause SOL to be in violation of any such law and regulations, and keep SOL informed of any applicable laws or regulations of the territory or any political sub-division or agency thereof, as well as of any amendments thereto, whether proposed or adopted, which may affect the rights and obligations of the parties, or promotion, sales, service or maintenance of Products. If at any time, after the effective date hereof, this Agreement or the performance of its obligations by Distributor or SOL is no longer in compliance with any federal, state or local law or regulations, this Agreement shall be appropriately amended by the parties so as to be in compliance with those laws or regulations or terminated by either party.

4. Product Service.

(a) Distributor acknowledges the importance of the service responsibilities under this agreement. Distributor shall establish and maintain quality service operations as recommended by SOL, including trained personnel, proper tools and equipment and service facilities in order to fulfill its responsibilities under this agreement. Such service operations shall provide to owners of the Products prompt, courteous and quality service.

(b) Distributor shall be responsible for and agrees to perform inspection, preparation and pre-delivery steps prior to delivery of the Products to purchaser thereof. It shall be Distributor’s responsibility to determine whether or not the Products meet the needs of the customer based upon use intended by customer.

(c) Distributor shall provide to owners of the Products such general service and repair for the Products as may be necessary. Any or all charges therefore shall be reasonable and consistent with those prevailing in the territory and all such services and charges shall be in accordance with the applicable law.

(d) Distributor agrees to perform all warranty service on all Products brought to Distributor, whether or not sold by Distributor. Distributor shall perform such warranty service in accordance with the policies of SOL as they may be issued from time to time in the SOL service and warranty manuals and bulletins.

5. Relationship of SOL and Distributor. Distributor acknowledges that it is and will be an independent contractor and not an employee, partner or joint venturer of or with SOL, and is not and will not be subject to the control of SOL. Neither Distributor nor any officer or employee of Distributor shall, in any event, have any right, collectively or individually, to bind SOL, to make any representations or warranties, to accept service of process, to receive notice, or to perform any act or obligation on behalf of SOL except as specifically authorized in writing by SOL in its sole discretion. Neither SOL nor any officer or employ ee of SOL shall, in any event, have any right, collectively or individually, to bind Distributor, to make any representations or warranties, to accept service of process, to receive notice, or to perform any act or obligation on behalf of Distributor except as specifically authorized in writing by Distributor in its sole discretion.

6. Trademarks and Trade names. Distributor agrees not to use in any way, or to remove, alter or change in any way, any SOL trademark, trade name, logo or other commercial symbol, contained on any of the Products, packaging or otherwise, without the prior written permission of SOL which may be withheld in its sole discretion. Distributor agrees that it will not add, by sticker or any other device, its own or any other trademark, trade name, logo or other commercial symbol to any Product without the prior written permission of SOL.

7. Serial Numbers. Under no circumstances, shall Distributor remove, alter or change in any way the serial number assigned to any of the Products by SOL. Distributor is aware that any such action restricts SOL from accurately tracking the manufacturing origin and warranty information associated with the Products.

8. Unauthorized Dealer/Distributors. Distributor shall immediately report to SOL any sales or distribution of Products or any other SOL merchandise in the Territory which Distributor may have reason to suspect is unauthorized. Distributor also agrees to participate and cooperate with SOL in the prosecution of any such unauthorized distribution or sale if so requested by SOL.

9. Product Liability Insurance. Distributor shall obtain adequate product liability insurance policies covering the Products and name SOL as an additional insured party on any and all such product liability insurance policies. Distributor shall immediately report to SOL the termination or suspension of any such policies.

10. Terms of Purchase.

(a) SOL shall sell the Products to Distributor and Distributor shall purchase the Products from SOL in accordance with the terms and conditions set forth herein and upon the terms and conditions contained in purchase orders provided by SOL for use by Distributor.

(b) Distributor shall order the Products from SOL in accordance with the then current ordering procedures established by SOL. SOL reserves the right, in its sole discretion, to accept the order, reject any order, either in whole or in part (unless the order states that it must be accepted in its entirety), placed by Distributor, without prejudicing the relationship between SOL and Distributor. SOL will promptly notify Distributor of any delays which will postpone its promised shipment date of any accepted order.

(c) Distributor shall pay SOL the price and any other charges for the Products as set forth on price schedules provided by SOL to Distributor.

(d) Distributor shall pay the purchase price for the Products at the time of delivery thereof, unless SOL has approved other terms of credit for Distributor, and agrees to pay within terms of the invoice. Payments due from Distributor shall be made to SOL in United States Dollars and invoices shall be sent by SOL in the same currency. SOL may cancel any order placed by Distributor or refuse shipment thereof should Distributor fail to meet any payment term, credit, or financial requirement of SOL.

(e) Shipment of Products by SOL to Distributor will be made in a manner determined by Distributor. Title and risk of loss or damage to the product shall pass to Distributor at the time SOL delivers possession of the product to a carrier at SOL’s plant or warehouse or other facility without regard to notification of shipment or selection of carrier.

(f) Distributor represents and warrants that all Products purchased hereunder are purchased for resale in the ordinary course of Distributor’s business. Distributor agrees that it is responsible for and shall comply with all laws calling for the collection and / or payment of all taxes, including sales and use taxes and ad valorem taxes.

(g) Distributor agrees to pay reasonable cancellation charges with respect to any Products ordered and cancelled by Distributor.

(h) Full legal and beneficial ownership to such Products shall remain vested in SOL until such time as SOL shall have received payment in full of the relevant invoice amount. Distributor shall execute such security agreements and other documents that SOL may reasonably request to perfect the security interest, subject to the security interests held by current secured creditors of Distributor. Notwithstanding the foregoing, Distributor is authorized to sell the Products in the ordinary course of its business and thereby to pass Product title thereto to the purchaser thereof and SOL’s security interest shall continue in the proceeds of that sale.

(i) Distributor undertakes to SOL that it shall cause all Products purchased by it pursuant to this Agreement to be insured to their full replacement value with insurers of good repute approved in writing by SOL and, pending the passage of full legal and beneficial ownership therein pursuant to Section 5(h), shall cause the interest of SOL therein to be noted on the relative policy of insurance.

(j) Distributor shall be responsible for all applicable federal, state and local sales, use, personal property, inventory and other taxes that may be assessed on any Product sold or other SOL property in Distributor’s possession at the time such tax is assessed or determined. Distributor shall also be responsible for any applicable local, state and federal taxes resulting from Distributor’s purchase of the Products to the extent that such taxes are not included in SOL’s prices.

11. Termination.

(a) Except as otherwise required by local law, either party may terminate this Agreement without cause upon three hundred sixty-five (365) days’ prior written notice to the other party given at any time. All other terminations hereunder are deemed for cause.

(b) Either party may terminate this Agreement upon thirty (30) days’ prior written notice if the other party is in breach of this Agreement or has defaulted in the performance of any of its obligations under this Agreement and such breach or default remains uncured within the notice period.

(c) Either party may terminate this Agreement upon twenty-four (24) hours’ prior written notice if or when it is discovered in such party’s good faith judgment that the other party has acted in such a manner as to require immediate termination of this Agreement, including, but not limited to the following:

(i) intentionally or in a willful, wanton or reckless manner, made any material, false representation, report or claim relative hereto;

(ii) violated another’s copyright or trademark;

(iii) become insolvent, invoked as a debtor any laws relating to the relief of debtors’ or creditors’ rights, or has had such laws invoked against it;

(iv) become involved in any liquidation or termination of business;

(v) been adjudicated bankrupt;

(vi) been involved in an assignment for the benefit of its creditors;

(vii) if the other party admits in writing the inability to pay debts as they mature;

(viii) if a trustee or receiver is appointed for the other or for any part of the other’s assets by any court; or

(ix) the other party ceases to do business as a going concern.

(d) Except as may be provided elsewhere in this Agreement, upon termination or expiration of this Agreement pursuant to this Section 11, or expiration hereof, neither party shall be liable to the other, either for compensation or for damages of any kind or character whatsoever, whether on account of the loss by SOL or Distributor of present or prospective profits on sales or anticipated sales, or expenditures, investments or commitments made in connection therewith or in connection with the establishment, development or maintenance of Distributor’s business, or on account of any other cause or thing whatsoever, provided that termination sh all not prejudice or otherwise affect the rights or liabilities of the parties with respect to Products theretofore marketed pursuant to this Agreement, or any indebtedness then owing by either party to the other under this Agreement.

(e) Upon termination of this Agreement, or expiration hereof, all rights granted to Distributor under or pursuant to this Agreement shall cease and Distributor shall:

(i) Within thirty (30) days after termination and at Distributor’s expense, Distributor shall return to SOL all Proprietary Information (as defined below) previously furnished by SOL and all sales literature, etc., previously furnished by SOL and technical assistance and sales training materials previously furnished by SOL still in Distributor’s possession, and shall advise SOL of all unfilled orders for Product which Distributor cannot fill from its remaining stock;

(ii) return to SOL all SOL owned or licensed equipment and software provided to Distributor under this Agreement; and

(iii) cease holding itself out, in any manner, as a Distributor of SOL’s Products.

(f) Upon expiration or termination of this Agreement: SOL shall have the right upon termination or expiration to inspect and will have the option to repurchase all Product then owned by Distributor (which are unused and in factory-shipped condition) at the original price paid by Distributor, less any prior credits granted for such Product.

(g) Distributor shall use its best efforts to continue selling to its customers the Product in its inventory during the final ninety (90) days of this Agreement. Upon expiration of this Agreement or within thirty (30) days after notice of termination, Distributor shall provide SOL with a preliminary inventory of the Products and quantities of Product to be repurchased. Upon termination, Distributor will provide SOL with an updated, final version of the inventory list to be repurchased. SOL shall be granted ninety (90) days from the date of expiration or termination to repurchase said inventory. Distributor agrees to follow SOL’s reasonable shipping instructions and schedules for the repurchased inventory. Th e terminating party shall bear transport costs and all risk of loss or damage during shipment.

12. Warranties.

(a) The Products sold to Distributor hereunder pursuant to any purchase order shall, notwithstanding the language contained on such purchase order, be sold solely on the basis of such warranties and guarantees as SOL may specify from time to time in writing. All representations, warranties or conditions whether express, collateral or implied by statute, common law or otherwise as to: (i) the state, quality, condition or performance of the Products, (ii) the Products’ fitness for any particular purpose, or (iii) the Products’ correspondence with description or samples are hereby unconditionally excluded to the fullest extent permitted by law except as otherwise provided by SOL in writing.

(b) Distributor shall offer and shall require its dealers to offer for sale the Products only on the basis of SOL’s published warranty and neither Distributor nor its dealers shall have authority to, and shall not, make any representations related to SOL’s warranty other than those made therein. Distributor shall deliver and shall require its dealers to deliver the warranty to the original retail purchaser at the time of delivery of the Products to the purchaser. SOL reserves the right to amend, modify or cancel the aforesaid warranty at any time, effective for Products sold after the date Distributor receives notice of such amendment, modification or cancellation. In t he event that Distributor or its dealers offers or if laws in Distributor’s Territory require a warranty in excess of SOL’s warranty, Distributor assumes responsibility for such additional warranty.

13. Intellectual Property.

(a) Distributor acknowledges and shall cause its dealers to acknowledge SOL’s sole ownership of all designs, trademarks, trade names, service marks, trade secrets and inventions or improvements, whether or not patented or patentable or registered or registrable under the laws of any country, which are associated with the Products. Distributor acknowledges that it has paid no consideration for the use of the Trademark, or for the use of any logos, copyrights, trade secrets, trade names or designations used by SOL in connection with the marketing and distribution of the Products and, except as expressly provided herein, nothing contained in this Agreement shall give Distributor any right, title or i nterest in or to any of them. Distributor acknowledges that SOL owns or retains copyright or other proprietary rights in all Products and agrees that it will not at any time during or after this Agreement assert or claim an interest to or do anything that may adversely affect the validity or enforceability of any trademark (including the Trademark (as defined below)), trade name, trade secret, copyright, or logo belonging to or licensed to SOL (including, without limitation, any acts, or assistance to any act, which may infringe or lead to the infringement of any copyright to the Products).

(b) All Products sold by Distributor shall bear the trademark(s) as specified in writing by SOL to Distributor (collectively, the “Trademark”) and no other trademarks or trade names, and Distributor shall not modify, add to or otherwise change the design, format or form of the Trademark or the trade name of SOL. Distributor agrees not to attach any additional trademarks, logos or trade designations to any Products without the prior written approval of SOL. Distributor further agrees not to affix any trademark (including the Trademark) logo or trade name belonging to or licensed to SOL to any Products or to any containers or storage medium not used in connection with the distributi on of the Products without the prior written approval of SOL. Upon expiration or termination of this Agreement, the Distributor shall forthwith cease use of all of SOL’s trademarks (including the Trademark), logos and designations, and shall not thereafter use, advertise or display any name, mark or logo which is, or any part of which is deceptively similar to or substantially identical to any such designations associated with any of the Products.

(c) SOL grants to Distributor during the term of this Agreement a royalty-free, non-exclusive license to use the Trademark in connection with the promotion and sale of the Products in the Territory as provided herein. Distributor shall not use or incorporate the Trademark or the trade names of SOL in or as a part of a trade name, corporate name, or business name unless written approval is given in advance by SOL.

(d) Upon direction by SOL, Distributor will immediately execute all such documents and do all such things as may be necessary to effect the cancellation and cessation of use of the Trademark or the corporate or business names or trade names of SOL and the change of Distributor’s name in accordance with SOL’s direction. For this purpose, in the event Distributor fails to act within a reasonable time, Distributor hereby appoints the officers of SOL jointly and severally to be Distributor’s true and lawful attorneys for and in Distributor’s name to execute all such documents and do all such things as are necessary to effect the cancellation and cessation of use of the Trademark or t he corporate or business names or trade names of SOL and the change of Distributor’s name in accordance with SOL’s direction.

(e) Distributor acknowledges that considerable time and money have been expended to create the goodwill associated with the Trademark and SOL’s trade names Distributor will always act in a manner that would maintain the quality and goodwill associated with the Trademark and the corporate or business names or the trade names of SOL, and Distributor shall not use them in any manner likely to confuse, mislead or deceive the public, or be injurious or inimical to the goodwill and best interests of SOL. Nothing contained herein shall give Distributor any interest in or right to the Trademark and SOL’s trade names except as is expressly granted herein. Any goodwill generated by Distribu tor in relation to any use by Distributor of SOL’s intellectual property, including, but not limited to the Trademark or the corporate or business names or trade names of SOL, is for the benefit of and shall be owned exclusively by SOL.

(f) During the term of this Agreement and thereafter, Distributor shall not apply for or acquire the registration of the Trademark or the corporate or business names or trade names of SOL, except as is expressly granted herein. Distributor agrees and shall cause its dealers to agree to take no action, the effect of which would be to divest SOL of any design, trademark, trade name, service mark, patent or trade secret rights associated with the Products, and shall not be deemed by anything contained in this Agreement or done pursuant to it to acquire any right, title or interest in or to any designs, trademarks, service marks or trade names, inventions or improvements now or hereafter embodied in the Pro ducts whether or not such invention or improvement is patented or patentable or registered or registrable under the laws of any country. Upon termination of this Agreement, Distributor agrees to cease to use and shall cause its dealers to cease to use all of SOL’s trademarks, service marks, trade names, trade secrets and other confidential or proprietary information in any way.

(g) Distributor shall not disclose, during the period of this Agreement or at any time thereafter, to any outside person, any commercial, technical or business information which Distributor has obtained from SOL, and which information was not specifically intended for public use or distribution by Distributor. Distributor shall take reasonable precautions, contractual and otherwise, to prevent unauthorized disclosure or use of such information by any of its employees/associates and dealers.

14. Indemnification.

(a) As a separate and independent undertaking, Distributor shall indemnify and hold harmless SOL from and against any and all loss, damage, injury, liability, costs, expenses and claims therefor, howsoever caused on account of injuries to or death of any person and/or on account of damage to any property which may result from actions of Distributor, its dealers, their servants, agents, contractors and/or employees under or in connection with the terms of this Agreement. Distributor assumes sole responsibility for quality of workmanship in the installation, maintenance and repairs made by the Distributor or its dealers of SOL’s Products. SOL shall promptly notify Distributor in writing u pon learning of any such claim or potential claim, and Distributor shall have the option of handling the defense of the same through counsel of its choice, in which event SOL shall provide reasonable cooperation and assistance at its own expense, provided that any out of pocket expense of SOL in complying with this provision shall be borne by Distributor.

(b) SOL shall indemnify and hold Distributor harmless from and against any and all liabilities, losses, damages, injuries, costs, expenses, causes of action, claims, demands, assessments and similar matters, including without limitation reasonable attorneys’ fees, resulting from or arising out of design or manufacture of the Products, including, without limitation, claims for product liability and claims under any warranties given by SOL, but excluding any claim arising from or in connection with any act or omission by Distributor or any officer, agent or employee of Distributor. Distributor shall promptly notify SOL in writing upon learning of any such claim or potential claim, and SOL shall have the option of handling the defense of the same through counsel of its choice, in which event Distributor shall provide reasonable cooperation and assistance at its own expense, provided that any out of pocket expense of Distributor in complying with this provision shall be borne by SOL.

15. Use of Proprietary Information.

(a) All information which one party furnishes to the other under or in contemplation of this Agreement and designated as proprietary (“Proprietary Information”) shall remain the property of the furnishing party. Distributor shall not remove or alter and shall require its dealers not to remove or alter any name, signs or other marks on the Products or take any steps to alter the construction or design of the Products. Distributor shall comply and shall cause its dealers to comply fully with all labeling and packaging requirements established by applicable statutes, rules and regulations. Distributor shall n ot and shall cause its dealers to not make any alterations or additions to the labeling and packaging of the Products without SOL’s prior written approval, except for the purpose of complying with such legal requirements.

(b) Unless the party furnishing Proprietary Information consents in writing, the receiving party shall:

(i) hold the Proprietary Information in confidence, except for any part of such Proprietary Information which is known to it free of any obligation to keep in confidence or which is now generally known to the public or which later becomes generally known to the public through acts not attributable to such receiving party;

(ii) not reproduce or copy such Proprietary Information, in whole or in part;

(iii) if reproduced, include any copyright and proprietary notices on all such copies and mark all media containing such copies with a warning that the Proprietary Information is subject to restrictions contained in an agreement with the furnishing party and that such Proprietary Information is the property of the furnishing party; and

(iv) return or destroy such Proprietary Information when no longer needed or, if such Proprietary Information is recorded on an erasable storage medium, erase it.

(c) Proprietary Information shall be clearly and conspicuously marked as such by the disclosing party. Any information disclosed without such marking shall be considered unrestricted as to its use and shall not be protected hereunder unless such disclosed information is identified orally as confidential or proprietary at the time of disclosure and is subsequently furnished to the receiving party in a document clearly and conspicuously marked proprietary within twenty (20) days of the initial disclosure. All Proprietary Information supplied by either party shall remain the property of and shall be returned promptly to the disclosing party upon its request.

(d) A party receiving Proprietary Information owned or controlled by a disclosing party shall use reasonable care not to disclose such information to any third party. Reasonable care shall be the same degree of care the receiving party normally accords its own information of similar kind and importance. A party shall not be liable for inadvertent or accidental disclosure of Proprietary Information of another, provided such reasonable care was used for protecting the received information. Neither party shall be liable for disclosure of Proprietary Information if made in response to a valid order of court or authorized agency of government, provided, however, that notice first be given to the party owning or control ling the Proprietary Information in order that a protective order, if appropriate, may be sought by such owning or controlling party. Nothing in this Section 15 shall restrict a disclosing party from using, disclosing, or disseminating its own Proprietary Information in any way.

(e) Proprietary Information furnished pursuant to this Agreement shall not be used by a receiving party except in the performance of this Agreement and only for any specific purpose for which the Proprietary Information was furnished by the disclosing party. Proprietary Information shall not be disclosed within the receiving party’s organization to persons other than those to whom it is directed by the disclosing party and shall not be disclosed to any other associate, affiliate or subsidiary entity, division or group of the receiving party. Furnishing of information under the protection of this Section 15 shall not be construed to convey any license for any patent, trademark, copyright or other intellectual property of any other party.

(f) A receiving party shall have no obligation with respect to any information which:

(i) was already known by the receiving party without restriction prior to receipt from a disclosing party; or

(ii) is or becomes publicly known through no wrongful act of the receiving party; or

(iii) is received from a third party without similar restriction and without breach of these conditions; or

(iv) is independently developed by the receiving party; or

(v) is released or disclosed to a third party without restriction by a disclosing party.

(g) Upon termination or expiration of this Agreement, each party shall return promptly any and all Proprietary Information of the disclosing party, shall purge its own records of any and all Proprietary Information of the disclosing party, and shall certify to the disclosing party in writing that all records have been purged of such Proprietary Information to preserve the rights of the disclosing party therein. The obligations imposed by this Agreement shall expire with respect to each certifying party seven (7) years from the date of such certification to the disclosing party.

16. Force Majeure. Except with respect to Distributor’s obligation to make timely payments when due, neither party shall be held responsible for any delay or failure in performance of any part of this Agreement to the extent such delay or failure is caused by fire, flood, explosion, war, strike, embargo, government requirement, civil or military authority, act of God, nature or the public enemy, inability to secure material or transportation facilities, inadequate yield of products despite SOL’s reasonable efforts, act or omission of carriers or any other causes beyond its reasonable control.

17. Audit. Distributor shall maintain accurate and complete accounts, books and records relating to the business of Distributor with respect to Products, in accordance with generally accepted accounting principles and practices and sufficient so that they may be readily audited to ascertain compliance by Distributor with its obligations under this Agreement. These records shall be held until all costs and expenses have been finally determined under this Agreement and payment or final adjustment of payment, as the case may be, has been made. Distributor shall permit SOL or SOL’s representative to examine and audit these records and al l supporting records, upon reasonable notice, every three (3) months during the term of this Agreement. Distributor agrees to provide SOL with access to all books and records for the twelve (12) months preceding the date of the audit. Audits shall be made not later than twelve (12) months after the expiration date of this Agreement.

18. Miscellaneous.

(a) This Agreement shall not in any way create the relationship of principal and agent between SOL and Distributor in no circumstances shall Distributor, its agents or employees be considered as agents of SOL. Distributor shall not create or attempt to assume to create any obligation or make any contract, agreement, representation or warranty on behalf of or in the name of SOL, except those authorized in writing by SOL. Distributor shall indemnify and hold SOL harmless from any costs and liability caused by any unauthorized acts prohibited by this paragraph, whether by Distributor, its agents or employees.

(b) Distributor represents and warrants that the Distribution Shares and Distribution Warrant (collectively, the “Securities”) have been duly authorized and validly issued and are issued to SOL free and clear of all liens, charges, encumbrances and security interests (except for those restrictions imposed on the securities by federal and state securities laws).

(c) SOL acknowledges that the Securities are being acquired for its own account and for investment and not with a view to the public resale or distribution thereof. SOL is capable of bearing the economic risks of an investment in the Securities and fully understands the speculative nature of the Securities and the possibility of such loss. SOL acknowledges that it has been furnished with information regarding the Distributor and further acknowledges that it has had an opportunity to ask questions of and receive answers from duly designated representatives of the Distributor. SOL acknowledges that the Securities have not been registered under the Securities Act of 1933, as amended (“Act”), or any state securities laws and may not be sold or otherwise transferred or disposed of except pursuant to an effective registration statement under the Act and any applicable state securities laws, or an opinion of counsel satisfactory to counsel to the issuer that an exemption from registration under the act and any applicable state securities laws is available.

(d) This Agreement contains the entire understanding of the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into this Agreement.

(e) Any notice, request, demand or other communication required or permitted to be given to a party pursuant to the provisions of this Agreement will be in writing and will be effective and deemed given under this Agreement on the earliest of: (a) the date of personal delivery, (b) the date of transmission by facsimile, with confirmed transmission and receipt, (c) two (2) days after deposit with a nationally-recognized courier or overnight service and (d) five (5) days after mailing via first-class mail. All notices not delivered personally or by facsimile will be sent with postage and other charges prepaid and properly addressed to the party to be notified at the address set forth for such p arty (i) if to SOL, to China Winston Battery Limited, No. 3 Industrial Zone, Lisonglang Village, Gongming Town, Bao’an Dist., Shenzhen, P.R.C., attention: Mr. Winston Chung, with a copy to Quintairos, Prieto, Wood & Boyer, P.A., attention: Robert J. Cousins, Esq., facsimile (954) 253-7008, and (ii) if to the Company, to Balqon Corporation., 1420 240th Street, Harbor City, CA 90710, attention: Balwinder Samra, with a copy to Rutan & Tucker LLP, 611 Anton Boulevard, 14th Floor, Costa Mesa, CA 92626, attention: Larry A. Cerutti, facsimile (714) 546-9035. Any party hereto (and such party’s permitted assigns) may change such party’s address for receipt of future notices hereunder by giving written notice to the Company and the Purchaser

(f) This Agreement may not be amended or modified, and no provisions hereof may be waived, without the written consent of SOL and Distributor. No action taken pursuant to this Agreement, including without limitation, any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representation, warranty, covenant or agreement contained herein. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a further or continuing waiver of such breach or as a waiver of any other or subsequent breach. No failure on the part of any party to exercise, and n o delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such party preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law.

(g) The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

(h) This Agreement and any controversy arising out of or relating to this Agreement shall be governed by and construed in accordance with the laws of the State of Nevada without regard to conflict of law principles that would result in the application of any law other than the law of the State of California.

(i) The parties (i) hereby irrevocably and unconditionally submit to the jurisdiction of the federal and state courts located within the geographic boundaries of Orange County, California for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (ii) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the federal and state courts located within the geographic boundaries of Orange County, California and (iii) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court. The prevailing party shall be entitled to reasonable attorney’s fees, costs, and necessary disbursements in addition to any other relief to which such party may be entitled.

(j) If any action at law or in equity (including arbitration) is necessary to enforce or interpret the terms of the Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.

(k) This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

(l) If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants a nd restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

[Signatures contained on following page]

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

SEVEN ONE LIMITED

By:

Chung Hung Ka,

Chief Executive Officer

BALQON CORPORATION

By:

Balwinder Samra,

President and Chief Executive Officer

EXHIBIT A

FORM OF DISTRIBUTION WARRANT

EX-10.4 5 ex10-4.htm FORM OF WARRANT ex10-4.htm

Exhibit 10.4

NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON THE EXERCISE OF THESE SECURITIES HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS. THE SECURITIES REPRESENTED HEREBY MAY NOT BE EXERCISED, OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED (EACH A “TRANSFER”) EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSFER NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (B) TO THE EXTENT THE TRANSFER DOES NOT CONSTITUTE AND WILL NOT RESULT IN A VIOLATION O F APPLICABLE FEDERAL OR STATE SECURITIES LAWS, AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT (TO THE EXTENT REQUESTED BY COUNSEL OF THE COMPANY), THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THE HOLDER HEREOF AGREES THAT IT WILL DELIVER, OR CAUSE TO BE DELIVERED, TO EACH PERSON TO WHOM THE SECURITIES HEREBY REPRESENTED ARE TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES.

STOCK PURCHASE WARRANT

BALQON CORPORATION

Warrant No. SO-1

Original Issue Date: December 14, 2010

THIS CERTIFIES that, for value received, Seven One Limited, a company organized under the laws of the British Virgin Islands (the “Holder”), is entitled, upon the terms and subject to the conditions hereinafter set forth, to subscribe for and purchase, from BALQON CORPORATION, a Nevada corporation (the “Company”), at any time immediately after the Original Issue Date upon the terms and subject to the conditions set forth herein, from the Company, 7,812,500 shares of Common Stock of the Company. The “Exercise Price” of one share of Common Stock under this Warrant shall be $0.64, subject to adjustment as provided herein. If the purchase rights represented by this Warrant are not exercised before the close of business on the day preceding the fifth anniversary of the date of this Warrant, this Warrant shall be void. This “Warrant” is issued in connection with Securities Purchase Agreement, dated December __, 2010, between the Company and the Holder (the “Securities Purchase Agreement”). Capitalized terms not otherwise defined herein shall have the meanings ascribed to them as set forth in the Securities Purchase Agreement.

1. Title of Warrant. Prior to the expiration hereof and subject to compliance with applicable laws, this Warrant and all rights hereunder are transferable, in whole or in part, at the office or agency of the Company, referred to in Section 2 hereof, by the holder hereof in person or by duly authorized attorney, upon surrender of this Warrant together with the Assignment Form annexed hereto properly endorsed.

2. Exercise of Warrant.

(a) The purchase rights represented by this Warrant are exercisable by the Holder by the surrender of this Warrant and the Notice of Exercise annexed hereto duly completed and executed on behalf of the Holder, at the office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the Holder at the address of the Holder appearing on the books of the Company), upon payment in cash, certified check or wire transfer of funds, of the aggregate Exercise Price for that number of Warrant Shares then being purchased.

(b) This Warrant shall be deemed to have been exercised immediately prior to the close of business on the Exercise Date (as defined below), and the person entitled to receive the shares of Common Stock issuable upon such exercise shall be treated for all purposes as the holder of record of such shares as of the close of business on such date. As promptly as practicable on or after such date and in any event within ten (10) days thereafter, the Company at its expense shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of shares issuable upon such exercise. In the event that this Warrant is exercised in part, the Company at its expense will execute and deliver a new Warrant of like tenor exercisable for the number of shares for which this Warrant may then be exercised. Each exercise hereof shall constitute the reaffirmation by the holder hereof that the representations and warranties contained in Section 3.2 of the Securities Purchase Agreement are true and correct in all respects with respect to the Holder of the Warrant as of the time of such exercise. “Exercise Date” when used herein means the date on which the Holder shall have delivered to the Company (i) this Warrant and the Notice of Exercise annexed hereto duly completed and executed on behalf of the Holder and (ii) payment in cash, certified check or wire transfer of the aggregate Exercise Price for that number of Warrant Shares then being purchased.

(c) If, at any time the Holder submits a Notice of Exercise, and the Company does not have sufficient authorized but unissued and unreserved shares of Common Stock available to effect such exercise (an “Exercise Default”), the Company shall issue to the Holder all of the shares of Common Stock which are then available (i.e. authorized but unissued and unreserved) to effect such exercise. The portion of this Warrant which the Holder included in its Exercise Notice and which exceeds the amount which is then exercisable into available shares of Common Stock (the “Excess Amount”) shall, notwithstanding anything to the contrary contained herein, not be exercisable for Common Stock in accordance with the terms hereof until (and at the Holder’s option at any time thereafter) the date additional shares of Common Stock are authorized by the Company to permit such exercise, at which time the Exercise Price in respect thereof shall be the lesser of (i) the Exercise Price on the Exercise Default Date (as defined below) and (ii) the Exercise Price on the Exercise Date thereafter elected by the Holder in respect thereof. The day the holder submits a Notice of Exercise giving rise to an Exercise Default (the “Exercise Default Date”).

3. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. With respect to any fraction of a share called for upon the exercise of this Warrant, an amount equal to such fraction multiplied by the then current price at which each share may be purchased hereunder shall be paid in cash to the holder of this Warrant.

4. Charges, Taxes and Expenses. Issuance of certificates for shares of Common Stock upon the exercise of this Warrant shall be made without charge to the holder hereof for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the holder of this Warrant or in such name or names as may be directed by the holder of this Warrant; provided, however, that in the event certificates for shares of Common Stock are to be issued in a name other than the name of the holder of this Warrant, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the holder hereof; and provided further, that upon any transfer involved in the issuance or delivery of any certificates for shares of Common Stock, the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Holder of the Warrant shall be responsible for income taxes due under federal, state, or other law, if any, if any such tax is due.

5. No Rights as Stockholders. This Warrant does not entitle the holder hereof to any voting rights or other rights as a stockholder of the Company prior to the exercise thereof. Nothing in this Warrant shall be construed to give any person, firm or corporation (other than the Company and the Holder of this Warrant) any legal or equitable right, remedy or claim, it being agreed that this Warrant shall be for the sole and exclusive benefit of the Company and the Holder of this Warrant.

6. Exchange and Registry of Warrant. This Warrant is exchangeable, upon the surrender hereof by the registered holder at the above-mentioned office or agency of the Company, for a new Warrant of like tenor and dated as of such exchange. The Company shall maintain at the above-mentioned office or agency a registry showing the name and address of the registered holder of this Warrant. This Warrant may be surrendered for exchange, transfer or exercise, in accordance with its terms, at such office or agency of the Company, and the Company shall be entitled to rely in all respects, prior to written notice to the contrary, upon such registry.

7. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it, and upon reimbursement to the Company of all reasonable expenses incidental thereto, and upon surrender and cancellation of this Warrant, if mutilated, the Company will make and deliver a new Warrant of like tenor and dated as of such cancellation, in lieu of this Warrant.

8. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday or a Sunday or shall be a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a legal holiday.

9. Transferability and Nonnegotiability of Warrant. This Warrant may not be transferred or assigned in whole or in part without compliance with all applicable federal and state securities laws by the transferor and the transferee (including the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, if such are requested by the Company). Subject to the provisions of this Warrant with respect to compliance with the Securities Act, title to this Warrant may be transferred by endorsement (by the Holder executing the Assignment Form annexed hereto) and delivery in the same manner as a negotiable instrument tran sferable by endorsement and delivery.

10. Compliance With Securities Laws.

(a) The Holder of this Warrant represents and warrants that this Warrant and the shares of Common Stock to be issued upon exercise hereof are being acquired solely for the Holder’s own account and not as a nominee for any other party, and for investment, and that the Holder will not offer, sell or otherwise dispose of this Warrant or any shares of Common Stock to be issued upon exercise hereof except under circumstances that will not result in a violation of the Securities Act or any state securities laws. Upon exercise of this Warrant, the Holder shall, if requested by the Company, confirm in writing, in a form satisfactory to the Company, that the shares of Common Stock so p urchased are being acquired solely for the Holder’s own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale.

(b) This Warrant and all shares of Common Stock issued upon exercise hereof shall be stamped or imprinted with a legend in substantially the following form (in addition to any legend required by state securities laws):

NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON THE EXERCISE OF THESE SECURITIES HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS. THE SECURITIES REPRESENTED HEREBY MAY NOT BE EXERCISED, OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED (EACH A “TRANSFER”) EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSFER NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (B) TO THE EXTENT THE TRANSFER DOES NOT CONSTITUTE AND WILL NOT RESULT IN A VIOLATION OF APPLICABLE FEDERAL OR STATE SECURITIES LAWS, AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT (TO THE EXTENT REQUESTED BY COUNSEL OF THE COMPANY), THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THE HOLDER HEREOF AGREES THAT IT WILL DELIVER, OR CAUSE TO BE DELIVERED, TO EACH PERSON TO WHOM THE SECURITIES HEREBY REPRESENTED ARE TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES.

11. Early Termination and Reclassification.

(a) Merger, Sale of Assets, etc. If all or any portion of this Warrant is exercised subsequent to a merger, consolidation, exchange of shares, reorganization, or other similar event (“Change in Control”) occurring after the date hereof, as a result of which shares shall be changed into cash, other property, or the same or a different number of shares of the same or another class or classes of securities of the Company or another entity, the Holder exercising this Warrant shall receive, for the exercise price, the aggregate amount of cash or ot her property and the aggregate number of shares and class of securities which the Holder would have received if this Warrant was exercised immediately before the Change in Control. If an adjustment under this section would create a fractional share or a right to acquire a fractional share, the fractional share will be rounded up to, and issued as, a whole share. If, pursuant to a Change of Control event, the shares shall be exchanged solely for cash (in such case, a “Triggering Event”), then the Company shall give the Holder written notice describing the material terms and conditions of such impending transaction not later than ten (10) days prior to the stockholders’ meeting called to approve such transaction (or such longer period if required by the General Corporation Law of the State of California), or ten (10) days prior to the closing of such transaction (or such longer period if required by the Gen eral Corporation Law of the State of California), whichever is earlier, and shall also notify the holder of this Warrant of the final approval of such transaction.

(b) Reclassification, etc. If the Company at any time shall, by subdivision, combination or reclassification of securities or otherwise, change any of the securities to which purchase rights under this Warrant exist into the same or a different number of securities of any class or classes, this Warrant shall thereafter be to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities which were subject to the purchase rights under this Warrant immediately prior to such subdivision, combination, reclassification or other change. If shares of the Company’s Common Stock are subdivided or combined into a greater or smaller number of shares of Common Stock, the purchase price under this Warrant shall be proportionately reduced in case of subdivision of shares or proportionately increased in the case of combination of shares and the number of shares of Common Stock purchasable under this Warrant shall be proportionally increased in the case of a subdivision and decreased in the case of combination, in all cases by the ratio which the total number of shares of Common Stock to be outstanding immediately after such event bears to the total number of shares of Common Stock outstanding immediately prior to such event.

(c) Cash Distributions. No adjustment on account of cash dividends or interest on the Company’s Common Stock or other securities purchasable hereunder will be made to the purchase price under this Warrant.

(d) Authorized Shares. The Company covenants that during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of Common Stock upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of the Company’s Common Stock upon the exercise of the purchase rights under this W arrant.

12. Miscellaneous.

(a) Issue Date. The provisions of this Warrant shall be construed and shall be given effect in all respect as if it had been issued and delivered by the Company on the date hereof. This Warrant shall be binding upon any successors or assigns of the Company. This Warrant shall constitute a contract under the laws of the State of California and for all purposes shall be construed in accordance with and governed by the laws of said state.

(b) Restrictions. The holder hereof acknowledges that the Common Stock acquired upon the exercise of this Warrant may have restrictions upon its resale imposed by state and federal securities laws.

(c) Waivers and Amendments. Any term of this Warrant may be amended with the written consent of the Company and the Holder.

(d) Notices. Unless otherwise provided, any notice required or permitted under this Warrant shall be given in writing and shall be deemed effectively given as hereinafter described (i) if given by personal delivery, then such notice shall be deemed given upon such delivery, (ii) if given by telex, facsimile or e-mail, then such notice shall be deemed given upon receipt of confirmation of complete transmittal, (iii) if given by mail, then such notice shall be deemed given upon the earlier of (A) receipt of such notice by the recipient or (B) three days after such notice is deposited in first class mail, postage prepaid, and (iv) if given by an internationally recognized overnight air courier, then such notice shall be deemed given one business day after delivery to such carrier. All notices shall be addressed as follows: if to the Holder of the Warrant, at its address as set forth in the Company’s books and records and, if to the Company, at the address as follows, or at such other address as the Holder of the Warrant, or the Company may designate by ten days’ advance written notice to the other:

If to the Company:

Balqon Corporation

1420 240th Street

Harbor City, California 90710

Facsimile: (310) 326-3058

Attention: Balwinder Samra

(e) Binding Agreement; Assignment. The terms and conditions of this Warrant shall inure to the benefit of and be binding upon the respective successors and permitted assigns of the parties. Nothing in this Warrant, express or implied, is intended to confer upon any third party any rights, remedies, obligations, or liabilities under or by reason of this Warrant. This Warrant may not be assigned by Holder (other than to a Related Person) without the prior written consent of the Company. “Related Person” shall mea n with respect to any Holder (i) any affiliate of such person, (ii) any investment fund, investment account or investment entity whose investment manager, investment advisor or general partner, is such Holder or any affiliate of such Holder or any member, partner, officer or employee of such Holder or any affiliate of such Holder, (iii) any member or partner of any Holder specified in clause (i) or (ii) above, and (iv) any officer or employee of any person specified in clause (i), (ii) or (iii) above.

IN WITNESS WHEREOF, BALQON CORPORATION has caused this Warrant to be executed by its officers thereunto duly authorized.

BALQON CORPORATION

By:

Title: President and Chief Executive Officer

NOTICE OF EXERCISE

To: BALQON CORPORATION

(1) The undersigned hereby exercises its rights to purchase ____________ shares of Common Stock of BALQON CORPORATION pursuant to the provisions of Section 2(a) of the attached Warrant, and tenders herewith payment of the purchase price for such shares in full.

(2) In exercising this Warrant, the undersigned hereby confirms and acknowledges that the shares of Common Stock to be issued upon exercise thereof are being acquired solely for the account of the undersigned and not as a nominee for any other party, and for investment, and that the undersigned will not offer, sell or otherwise dispose of any such shares of Common Stock except under circumstances that will not result in a violation of the Securities Act, or any applicable state securities laws.

(3) In exercising this Warrant, the undersigned hereby affirms that the representations and warranties contained in Section 3.2 of the Securities Purchase Agreement are true and correct in all material respects.

(4) Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned or in such other name as specified below:

(Name)

(5) Please issue a new Warrant for the unexercised portion of the attached Warrant in the name of the undersigned or in such other name as is specified below:

(Name)

___________________

(Date)

(Signature)

ASSIGNMENT FORM

FOR VALUE RECEIVED, the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under the within Warrant, with respect to the number of shares of Common Stock set forth below:

Name of Assignee	Address	No. of Shares

and does hereby irrevocable constitute and appoint _______________________ Attorney to make such transfer on the books of BALQON CORPORATION, maintained for the purpose, with full power of substitution in the premises.

The undersigned also represents that, by assignment hereof, the Assignee acknowledges that this Warrant and the shares of Common Stock to be issued upon exercise hereof or conversion thereof are being acquired for investment and that the Assignee will not offer, sell or otherwise dispose of this Warrant or any shares of Common Stock to be issued upon exercise hereof or conversion thereof except under circumstances which will not result in a violation of the Securities Act or any state securities laws. Further, the Assignee has acknowledged that upon exercise of this Warrant, the Assignee shall, if requested by the Company, confirm in writing, in a form satisfactory to the Company, that the shares of Common Stock so purchased are being acquired for investment and not with a view toward distribution or resa le.

Dated: ___________________

Signature of Holder

EX-10.5 6 ex10-5.htm FORM OF DISTRIBUTION WARRANT ex10-5.htm

Exhibit 10.5

STOCK PURCHASE WARRANT

BALQON CORPORATION

Warrant No. SO-2

Original Issue Date: December 14, 2010

THIS CERTIFIES that, for value received, Seven One Limited, a company organized under the laws of the British Virgin Islands (the “Holder”), is entitled, upon the terms and subject to the conditions hereinafter set forth, to subscribe for and purchase, from BALQON CORPORATION, a Nevada corporation (the “Company”), at any time immediately after the Original Issue Date upon the terms and subject to the conditions set forth herein, from the Company, 1,500,000 shares of Common Stock of the Company (the “Warrant Shares”). The “Exercise Price” of one share of Common Stock under this Warrant shall be $1.50, subject to adjustment as provided herein. If the purchase rights represented by this Warrant are not exercised before the close of business on the day preceding the fifth anniversary of the date of this Warrant, this Warrant shall be void. This “Warrant” is issued in connection with a certain Distribution Agreement, dated December 14, 2010, between the Company and the Holder. On December 14, 2010, the Company and the Holder also entered into a certain Securities Purchase Agreement (the “Securities Purchase Agreement”). Capitalized terms not otherwise defined herein shall have the meanings ascribed to them as set forth in the Securities Purchase Agreement.

2. Exercise of Warrant.

4. Charges, Taxes and Expenses. Issuance of certificates for shares of Common Stock upon the exercise of this Warrant shall be made without charge to the holder hereof for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the holder of this Warrant or in such name or names as may be directed by the holder of this Warrant; provided, however, that in the event certificates for shares of Common Stock are to be issued in a name other than the name of the holder of this Warrant, this Warrant when surrendere d for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the holder hereof; and provided further, that upon any transfer involved in the issuance or delivery of any certificates for shares of Common Stock, the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Holder of the Warrant shall be responsible for income taxes due under federal, state, or other law, if any, if any such tax is due.

10. Compliance With Securities Laws.

NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON THE EXERCISE OF THESE SECURITIES HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS. THE SECURITIES REPRESENTED HEREBY MAY NOT BE EXERCISED, OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED (EACH A “TRANSFER”) EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSFER NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (B) TO THE EXTENT THE TRANSFER DOES NOT CONSTITUTE AND WILL NOT RESULT IN A VIOLATION OF APPLICABLE FEDERAL OR STATE SECURITIES LAWS, AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT (TO THE EXTENT REQUESTED BY COUNSEL OF THE COMPANY), THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THE HOLDER HEREOF AGREES THAT IT WILL DELIVER, OR CAUSE TO BE DELIVERED, TO EACH PERSON TO WHOM THE SECURITIES HEREBY REPRESENTED ARE TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES.

11. Early Termination and Reclassification.

12. Miscellaneous.

(b) Restrictions. The holder hereof acknowledges that the Common Stock acquired upon the exercise of this Warrant may have restrictions upon its resale imposed by state and federal securities laws.

(c) Waivers and Amendments. Any term of this Warrant may be amended with the written consent of the Company and the Holder.

If to the Company:

Balqon Corporation

1420 240th Street

Harbor City, California 90710

Facsimile: (310) 326-3058

Attention: Balwinder Samra

IN WITNESS WHEREOF, BALQON CORPORATION has caused this Warrant to be executed by its officers thereunto duly authorized.

BALQON CORPORATION

By:

Title: President and Chief Executive Officer

NOTICE OF EXERCISE

To: BALQON CORPORATION

(4) Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned or in such other name as specified below:

(Name)

(5) Please issue a new Warrant for the unexercised portion of the attached Warrant in the name of the undersigned or in such other name as is specified below:

(Name)

___________________

(Date)

(Signature)

ASSIGNMENT FORM

Name of Assignee	Address	No. of Shares

Dated: ___________________

Signature of Holder

EX-99.1 7 ex99-1.htm VOTING AGREEMENT ex99-1.htm

Exhibit 99.1

VOTING AGREEMENT

THIS VOTING AGREEMENT (“Agreement”) is made and entered into as of December 14, 2010 (the “Effective Date”) by and among Balqon Corporation, a Nevada corporation (the “Company”), Balwinder Samra, an individual (“Samra”) and Seven One Limited, a company organized under the laws of the British Virgin Islands (“Seven One”).

RECITALS

A. The Company and Seven One are concurrently entering into a Securities Purchase Agreement (the “Purchase Agreement”) whereby Seven One is purchasing shares of the Company’s common stock, $0.001 par value per share (“Common Stock”), and warrants to purchase shares of Common Stock.

B. In connection with the Purchase Agreement, the Company and Seven One, an affiliate of Thunder Sky Battery Limited (also known as Winston Battery Limited), have entered into a Distribution Agreement and, in connection therewith, the Company has issued additional shares of Common Stock and additional warrants to purchase shares of Common Stock to Seven One.

C. Upon consummation of the transactions contemplated by the Purchase Agreement, Seven One will become a significant stockholder of the Company and Winston Chung (“Chung”) will be elected to the Board of Directors of the Company (as constituted from time to time, the “Board of Directors”).

D. As a condition to its willingness to enter into the Purchase Agreement, Seven One has required that the Company and Samra enter into this Agreement; and to induce the Company to enter into the Purchase Agreement, Samra, a significant stockholder of the Company, is willing to agree to certain arrangements and understandings respecting his share ownership in the Company and certain other matters as set forth in this Agreement.

E. As a condition to its willingness to enter into the Purchase Agreement, the Company has required that Seven One enter into this Agreement, and to induce the Company to enter into the Purchase Agreement, Seven One is willing to agree to certain arrangements and understandings respecting its share ownership in the Company and certain other matters as set forth in this Agreement.

F. The Company and Samra believe that the terms of this Agreement and the transactions contemplated hereby are in the best interests of both the Company and its stockholders, and the Company and Samra will benefit substantially from the performance of the transactions and obligations hereunder.

NOW, THEREFORE, in consideration of the premises and of the mutual agreements and covenants set forth herein, and intending to be legally bound hereby, the parties hereto hereby agree as follows:

1. Voting Securities. For the purposed of this Agreement, “Voting Securities” means the Common Stock and any other securities of the Company or its successors that are entitled by their terms to vote generally in the election of directors of the Company or its successors and all options, rights, warrants and other securities convertible into, or exercisable or exchangeable for, any shares of the Common Stock or other securities possessing such voting rights.

2. Voting Agreement.

(a) Election of Chung as a Director. From the Effective Date and ending on December 31, 2013 (the “Termination Date”), Samra hereby agrees to (i) vote (or cause to be voted) all of the Voting Securities which Samra is entitled to vote (or to provide his written consent thereto), at any annual, special or other meeting of the stockholders of Company, and at any adjournment or adjournments thereof, or pursuant to any consent in lieu of a meeting or otherwise, in such a manner as to ensure that Chung is appointed or elected a member of the Board of Directors.

(b) Election of Samra as a Director. From the Effective Date and ending on the Termination Date, Seven One hereby agrees to (i) vote (or cause to be voted) all of the Voting Securities which Seven One is entitled to vote (or to provide his written consent thereto), at any annual, special or other meeting of the stockholders of Company, and at any adjournment or adjournments thereof, or pursuant to any consent in lieu of a meeting or otherwise, in such a manner as to ensure that Samra is appointed or elected a member of the Board of Directors.

(c) Nomination of Chung and Samra for Election. From the Effective Date and ending on the Termination Date, subject to the provisions of the charter of the Company’s Nominating Committee and applicable law, the Company agrees that it will take all reasonable actions to ensure that both Chung and Samra are nominated for election at any annual, special or other meeting of the stockholders of Company, and at any adjournment or adjournments thereof, or pursuant to any consent in lieu of a meeting or otherwise.

(d) Permitted Transfers. From the Effective Date and ending on the Termination Date, and subject to applicable securities laws, either party may publicly sell any Voting Securities on the Over-the-Counter Bulletin Board or other established trading market or exchange where the Voting Securities may trade in the future, without being bound to the terms of this Agreement. Any party may (i) privately sell or (ii) transfer all or a portion of their Voting Securities by will or under the laws of descent and distribution and to a trust, partnership, limited liability company, corporation, custodianship or other fiduciary acc ount for the benefit of the holder and/ or his spouse or immediate family member, so long as the acquirer or transferee agrees to be bound by the terms of this Agreement as if he were a party hereto. Any transfer of shares of Voting Securities that is not a permitted transfer under this Section 2(d) shall be null and void and of no force or effect.

3. Revocation of Proxies. Samra hereby revokes any and all previous proxies with respect to any shares of the Common Stock. Each of Seven One and Samra agrees not to grant any subsequent proxies with respect to any Company common stock until after the Termination Date.

4. Representations and Warranties; Covenants. Each of the parties hereto hereby severally represents, warrants and covenants to each of the other parties hereto that (i) he or it has the requisite capacity, power and authority to enter into and perform this Agreement, (ii) he or it has duly and validly executed and delivered this Agreement and this Agreement constitutes his or its legal, valid, and binding obligation, enforceable against him or it, as applicable, in accordance with the terms of the Agreement, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorg anization or other similar laws affecting creditors’ rights generally and by general equitable principles (regardless of whether enforceability is considered in a proceeding in equity or at law) and (iii) the performance of this Agreement by such party will not require him, her or it to obtain the consent, waiver or approval of any person or other third party and will not violate, result in a breach of or constitute a default under any statute, regulation, agreement, judgment, consent, decree or restriction by which he, she or it is bound.

5. General Provisions.

(a) Termination. This Agreement shall terminate upon the Termination Date.

(b) Capacity; No Limitation on Discretion as Director. This Agreement is intended solely to apply to the exercise by each of Samra and Seven One in his its individual capacity of rights attaching to ownership of Company common stock. Samra does not make any agreement or understanding herein in his capacity as a director or officer of the Company. Nothing herein will limit or affect any actions taken by Samra in his capacity as an officer or directors of the Company to comply with his fiduciary obligations as an officer or director of the Company.

(c) Notices. Any notice, request, demand or other communication required or permitted to be given to a party pursuant to the provisions of this Agreement will be in writing and will be effective and deemed given under this Agreement on the earliest of: (a) the date of personal delivery, (b) the date of transmission by facsimile, with confirmed transmission and receipt, (c) two (2) days after deposit with a nationally-recognized courier or overnight service and (d) five (5) days after mailing via first-class mail. All notices not delivered personally or by facsimile will be sent with postage and other charges prepaid and properly addressed to the party to be notified at the address set forth for such party (i) if to the Purchaser, to Seven One Limited, No. 3 Industrial Zone, Lisonglang Village, Gongming Town, Bao’an Dist., Shenzhen, P.R.C., attention: Mr. Winston Chung, with a copy to Quintairos, Prieto, Wood & Boyer, P.A., One East Broward Boulevard, Suite 1400, Fort Lauderdale, Florida 33301, attention: Robert Cousins, Esq., facsimile (954) 523-7009, and (ii) if to the Company, to Balqon Corporation., 1420 240th Street, Harbor City, CA 90710, attention: Balwinder Samra, with a copy to Rutan & Tucker LLP, 611 Anton Boulevard, 14th Floor, Costa Mesa, CA 92626, attention: Larry A. Cerutti, facsimile (714) 546-9035. Any party hereto (and such party’s permitted assigns) may change such party’s address for receipt of future notices hereunder by giving written notice to the Company and the Purchaser.

(d) Entire Agreement. This Agreement contains the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into this Agreement.

(e) Amendments; Waivers. This Agreement may not be amended or modified, and no provisions hereof may be waived, without the written consent of the parties hereto. No action taken pursuant to this Agreement, including without limitation, any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representation, warranty, covenant or agreement contained herein. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a further or continuing waiver of such breach or as a w aiver of any other or subsequent breach. No failure on the part of any party to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such party preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law.

(f) Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

(g) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns.

(j) Dispute Resolution. The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the federal and state courts located within the geographic boundaries of Orange County, California for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the federal and state courts located within the geographic boundaries of Orange County, California and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any s uch suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court. The prevailing party shall be entitled to reasonable attorney’s fees, costs, and necessary disbursements in addition to any other relief to which such party may be entitled.

(k) Survival. The representations and warranties herein contained shall survive indefinitely following the termination of this Agreement, subject to applicable statutes of limitation.

(l) Attorneys’ Fees. If any action at law or in equity (including arbitration) is necessary to enforce or interpret the terms of the Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.

(m) Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

(n) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

(o) Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each party to this Agreement will be entitled to specific performance under this Agreement. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in this Agreement and hereby agree to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.

[Signature Page Follows]

IN WITNESS WHEREOF, the parties have executed this Voting Agreement as of the date first written above.

THE COMPANY:

SEVEN ONE:

SAMRA:

BALQON CORPORATION

By:

Balwinder Samra

It’s President and Chief Executive Officer

SEVEN ONE LIMITED

By:

Chung Hung Ka

It’s Chief Executive Officer

Balwinder Samra, an individual

-----END PRIVACY-ENHANCED MESSAGE-----


Exhibit No.		Description
10.1		Securities Purchase Agreement, dated December 14, 2010, by and between Balqon Corporation and Seven One Limited (*)(#)
10.2		Registration Rights Agreement, dated December 14, 2010, by and between Balqon Corporation and Seven One Limited (*)
10.3		Distribution Agreement, dated December 14, 2010, by and between Balqon Corporation and Seven One Limited (*)(#)
10.4		Form of Warrant issued by Balqon Corporation on December 14, 2010 to Seven One Limited (*)
10.5		Form of Distribution Warrant issued by Balqon Corporation on December 14, 2010 to Seven One Limited (*)
10.6		Form of Indemnification Agreement (1)
99.1		Voting Agreement, dated December 14, 2010, by and among the Company, Seven One Limited and Balwinder Samra (*)(#)

Exhibit No.		Description
10.1		Securities Purchase Agreement, dated December 14, 2010, by and between Balqon Corporation and Seven One Limited
10.2		Registration Rights Agreement, dated December 14, 2010, by and between Balqon Corporation and Seven One Limited
10.3		Distribution Agreement dated December 14, 2010, by and between Balqon Corporation and Seven One Limited
10.4		Form of Warrant issued by Balqon Corporation on December 14, 2010 to Seven One Limited
10.5		Form of Distribution Warrant issued by Balqon Corporation on December 14, 2010 to Seven One Limited
99.1		Voting Agreement, dated December 14, 2010, by and among the Company, Seven One Limited and Balwinder Samra

	BALQON CORPORATION

Date: December 16, 2010	By:	/s/ BALWINDER SAMRA
		Balwinder Samra, President and Chief Executive Officer