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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 dated 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).
 
 
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“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.
 
 
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“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
Statement 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
respect 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 (“Other 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 commercially 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”).
 
 
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(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 independent 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 securities 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
amendment 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.
 
 
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(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 Commission
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
Registration 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.
 
 
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(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 Registrable 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
Prospectus 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
consecutive days) in any 12 month period.
 
 
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(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 state 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 contemplated 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.
 
 
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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 controlling 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
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, 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).  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.
 
 
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(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 delivery 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
information 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 the
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 Indemnified 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.
 
 
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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 relative 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
untrue or alleged untrue statement or omission or alleged omission, except in
the case of fraud by such Holder.
 
 
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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 Holders 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.
 
 
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(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.
 
 
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(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 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.
 
(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.
 
 
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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

 
 
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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 security 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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