ex_10-1.htm


    
      

      

    

    EXHIBIT
10.1

     

     

    
      BUSINESS
FINANCING AGREEMENT

       

      
        	 	 	 	 
	Borrower:	BALQON
      CORPORATION	Lender:	BRIDGE BANK,
      National Association
	 	1701 E, Edinger,
      Unite E-3	 	55 Almaden
      Boulevard, Suite 100
	 	Santa Ana, CA
      92705	 	San Jose, CA
      95113


      

       

      This
BUSINESS FINANCING AGREEMENT, dated as of February 18, 2009, is made and entered
into between BRIDGE BANK, NATIONAL ASSOCIATION ("Lender")
and BALQON CORPORATION, a Nevada corporation ("Borrower")
on the following terms and conditions:

      


      
        	
                1.

              	
                FINANCED
      RECEIVABLES.

              


      

      


      
        	
                 
      

              	
                1.1

              	
                Funding Requests.
      Borrower may request that Lender finance Receivables by delivering to
      Lender a Funding Request for the Receivables for which a request for
      financing is made. Lender shall be entitled to rely on all the information
      provided by Borrower to Lender on or with the Funding Request. The lender
      may honor Funding Requests, instructions or repayments given by the
      Borrower (if an individual) or by an Authorized
  Person.

              


      

      


      
        	
                 
      

              	
                1.2

              	
                Acceptance of
      Receivables. Upon acceptance by Lender of any Receivable described
      in a Funding Request, Lender shall make an Advance to Borrower in an
      amount equal to the Advance Rate multiplied by the Receivable Amount of
      such Receivable. Upon Lender's acceptance of the Receivable and payment to
      Borrower of the Advance, the Receivable shall become a "Financed
      Receivable." It shall be a condition to each Advance that (a) all of the
      representations and warranties set forth in Section 5 are true and correct
      on the date of such Advance as though made at and as of each such date and
      (b) no Default has occurred and is continuing, or would result from such
      Advance. Lender has no obligation to finance any Receivable and may
      exercise its sole discretion in determining whether any Receivable is an
      Eligible Receivable before financing such Receivable. In no event shall
      the Lender be obligated to make any Advance that results in an Overadvance
      or while any Overadvance is
outstanding.

              


      

      


      
        	
                 
      

              	
                1.3

              	
                Rights in Respect of Financed
      Receivables. Effective upon Lender's payment of an Advance, Lender
      shall have the exclusive right to receive all Collections on the Financed
      Receivable. Lender shall have, with respect to any goods related to the
      Financed Receivable, all the rights and remedies of an unpaid seller under
      the California Uniform Commercial Code and other applicable law, including
      the rights of replevin, claim and delivery, reclamation and stoppage in
      transit.

              


      

      


      
        	
                 
      

              	
                1.4

              	
                Reserve. The Reserve is
      a book balance maintained on the records of Lender and shall not be a
      segregated fund and is not the property of
  Borrower.

              


      

      


      
        	
                 
      

              	
                1.5

              	
                Due Diligence. Lender
      may audit Borrower's Receivables and any and all records pertaining to the
      Collateral, at Lender's sole discretion and at Borrowers expense. Lender
      may at any time and from time to time contact Account Debtors and other
      persons obligated or knowledgeable in respect of Receivables to confirm
      the Receivable Amount of such Receivables, to determine whether
      Receivables constitute Eligible Receivables, and for any other purpose in
      connection with this Agreement. If any of the Collateral or Borrower's
      books or records pertaining to the Collateral are in the possession of a
      third party, Borrower authorizes that third party to permit Lender or its
      agents to have access to perform inspections or audits thereof and to
      respond to Lender's requests for information concerning such Collateral
      and records.

              


      

      


      
        	
                2.

              	
                COLLECTIONS,
      CHARGES AND REMITTANCES.

              


      

      


      
        	
                 
      

              	
                2.1

              	
                Collections. Subject to
      the Lender's timely receipt of accurate application instructions from the
      Borrower with respect to the source and application of Collections, Lender
      shall credit to Collections with respect to Financed Receivables received
      by Lender to Borrower's Account Balance within three business days of the
      date good funds are received. If no Default has occurred and is
      continuing, Lender agrees to credit the Refundable Reserve with the amount
      of Collections it receives with respect to Receivables other than Financed
      Receivables; provided that
      upon the occurrence and during the continuance of any Default, Lender may
      apply all Collections to the Obligations in such order and manner as
      Lender may determine. Lender has no duty to do any act other than to
      turnover such amounts as required above. If an item of Collections is not
      honored or Lender does not receive good funds for any reason, the amount
      shall be included in the Account Balance as If the Collections had not
      been received and Finance Charges shall accrue
  thereon.

              


      

      


      
        	
                 
      

              	
                2.2

              	
                Financed Receivables Activity
      Report. Within 15 days after the end of each Monthly Period, Lender
      shall send to Borrower a report covering the transactions for that Monthly
      Period, including the amount of all Financed Receivables, all Collections,
      Adjustments, Finance Charges, and other fees and charges. The accounting
      shall be deemed correct and conclusive unless Borrower makes written
      objection to Lender within 30 days after the Lender sends the accounting
      to Borrower.

              


      

      


      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

         

      

      
        	
                 
      

              	
                2.3

              	
                Reconciliations. Unless
      a Default has occurred and is continuing, Lender shall refund to Borrower
      after each Month End, the Refundable Reserve, if positive, calculated for
      such Month End, subject to Lender's rights under Section 3.3 and Lender's
      rights of offset and recoupment. If the Refundable Reserve is negative,
      Borrower shall immediately pay such amount in the same manner as set forth
      in Section 3.3 for Overadvances.

              


      

      


      
        	
                 
      

              	
                2.4

              	
                Adjustments. In the
      event of a breach of Sections 5 or 6, or in the event any Adjustment or
      dispute is asserted by any Account Debtor, Borrower shall promptly advise
      Lender and shall, subject to the Lender's approval, resolve such disputes
      and advise Lender of any Adjustments; provided that
      in no case will the aggregate Adjustments made with respect to any
      Financed Receivable exceed 2% of its original Receivable Amount unless
      Borrower has obtained the prior written consent of Lender. Unless the
      Advance for the disputed Financed Receivable is repaid In full, Lender
      shall have the right. at any time, to take possession of any rejected,
      returned, or recovered personal property. If such possession is not taken
      by Lender, Borrower is to resell it for Lender's account at Borrower's
      expense with the proceeds made payable to Lender. While Borrower retains
      possession of any returned goods. Borrower shall segregate said goods and
      mark them as property of Lender.

              


      

      


      
        	
                 
      

              	
                2.5

              	
                Remittances; Lockbox Account
      Collection Services. Borrower shall (i) immediately notify,
      transfer and deliver to Lender all Collections Borrower receives, (ii)
      deliver to Lender a detailed cash receipts journal on Friday of each week
      until the lockbox is operational, and (iii) immediately enter into a
      collection services agreement acceptable to Lender "Lockbox
      Agreement"). Borrower shall use the lockbox address as the remit to
      and payment address for all of Borrower's Collections and it will be
      considered an immediate Event of Default if this does not occur or the
      lockbox is not operational within 60 days of the date of this Agreement.
      All Collections received to the lockbox or otherwise received by Lender be
      deposited to a non-interest bearing cash collateral account maintained
      with Lender and Borrower will not have access to that
    account.

              


      

      


      
        	
                3.

              	
                RECOURSE
      AND OVERADVANCES.

              


      

      


      
        	
                 
      

              	
                3.1

              	
                Recourse. Advances and
      the other Obligations shall be with full recourse against Borrower. If any
      Advance is not repaid in full within 90 days from the earlier of (a)
      invoice date, or (b) the date on which such Advance is made. Borrower
      shall immediately pay the outstanding amount thereof to
      Lender.

              


      

      


      
        	
                 
      

              	
                3.2

              	
                Overadvances. Upon any
      occurrence of an Overadvance, Borrower shall immediately pay down the
      Advances so that, after giving effect to such payments, no Overadvance
      exists.

              


      

      


      
        	
                 
      

              	
                3.3

              	
                Borrower's Payment. When
      any Overadvance or other amount owing to Lender becomes due, Lender shall
      inform Borrower of the manner of payment which may be anyone or more of
      the following in Lender's sale discretion: (a) in cash immediately upon
      demand therefore; (b) by delivery of substitute invoices and a Funding
      Request acceptable to Lender which shall thereupon become Financed
      Receivables; (c) by deduction from or offset against the Refundable
      Reserve that would otherwise be due and payable to Borrower; (d) by
      deduction from or offset against the amount that otherwise would be
      forwarded to Borrower in respect of any further Advances that may be made
      by Lender; or (e) by any combination of the foregoing as Lender may from
      time to time choose.

              


      

      


      
        	
                4.

              	
                FEES
      AND FINANCE CHARGES.

              


      

      


      
        	
                 
      

              	
                4.1

              	
                Finance Charges. Lender
      may, but is not required to, deduct the amount of accrued Finance Charge
      from Collections received by lender. On each Month End Borrower shall pay
      to Lender any accrued and unpaid Finance Charge as of such Month End.
      Lender may deduct the accrued Finance Charges in calculating the
      Refundable Reserve.

              


      

      


      
        	
                 
      

              	
                4.2

              	
                Fees.

              


      

      


      
        	
                 
      

              	
                (a)

              	
                Processing
      Fee. At the time each Advance is made, Borrower shall pay to Lender
      the Processing Fee with respect to such
Advance.

              


      

      


      
        	
                 
      

              	
                (b)

              	
                Termination
      Fee. In the event this Agreement is terminated prior to the first
      anniversary of the date of this Agreement, Borrower shall pay the
      Termination Fee to Lender, provided such Termination Fee shall be waived
      if this Agreement is terminated in connection with Borrower's entry into
      another financing agreement with
Lender.

              


      

      


      
        	
                 
      

              	
                (c)

              	
                Facility
      Fee. Borrower shall pay the Facility Fee to Lender promptly upon
      the execution of this Agreement and annually thereafter, provided the
      initial Facility Fee earned upon execution of this Agreement, may be paid
      on the earlier of i) the date of the initial Advance or ii) 90 days from
      the execution hereof.

              


      

      


      
        	
                 
      

              	
                (d)

              	
                Recovery
      Fee. If Borrower fails to remit any Collections to Lender as
      provided in Section 2.5, Borrower shall in each case pay to lender the
      Recovery Fee for such Collections.

              


      

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      
        	
                5.

              	
                REPRESENTATIONS AND
      WARRANTIES. Borrower represents and
  warrants:

              


      

      


      
        	
                 
      

              	
                5.1

              	
                With
      respect to each Financed
Receivable:

              


      

      


      
        	
                 
      

              	
                (a)

              	
                It
      is the owner with legal right to sell, transfer and assign
    it;

              


      

      


      
        	
                 
      

              	
                (b)

              	
                The
      correct Receivable Amount is on the Funding Request and is not
      disputed;

              


      

      


      
        	
                 
      

              	
                (c)

              	
                Such
      Financed Receivable is an Eligible
Receivable;

              


      

      


      
        	
                 
      

              	
                (d)

              	
                Lender
      has the right to endorse and/or require Borrower to endorse all payments
      received on Financed Receivables and all proceeds of Collateral;
      and

              


      

      


      
        	
                 
      

              	
                (e)

              	
                No
      representation, warranty or other statement of Borrower in any certificate
      or written statement given to Lender contains any untrue statement of a
      material fact or omits to state a material fact necessary to make the
      statement contained in the certificates or statement not
      misleading.

              


      

      


      
        	
                 
      

              	
                5.2

              	
                Borrower
      is duly existing and in good standing in its state of formation and
      qualified and licensed to do business in. and in good standing in, any
      state in which the conduct of its business or its ownership of property
      requires that it be qualified.

              


      

      


      
        	
                 
      

              	
                5.3

              	
                The
      execution, delivery and performance of this Agreement has been duty
      authorized, and does not conflict with Borrower's organizational
      documents, nor constitute an Event of Default under any material agreement
      by which Borrower is bound. Borrower is not in default under any agreement
      to which or by which it is bound.

              


      

      


      
        	
                 
      

              	
                5.4

              	
                Borrower
      has good title to the Collateral and all inventory is in all material
      respects of good and marketable quality, free from material
      defects.

              


      

      


      
        	
                 
      

              	
                5.5

              	
                Borrower's
      name, form of organization, chief executive office, and the place where
      the records concerning all Financed Receivables and Collateral are kept is
      set forth at the beginning of this Agreement, Borrower is located at its
      address for notices set forth in this
Agreement.

              


      

      


      
        	
                 
      

              	
                5.6

              	
                If
      Borrower owns, holds or has any interest in, any copyrights (whether
      registered, or unregistered), patents or trademarks, and licenses of any
      of the foregoing, such interest has been specifically disclosed and
      identified to Lender in writing.

              


      

      


      
        	
                6.

              	
                MISCELLANEOUS
      PROVISIONS. Borrower will:

              


      

      


      
        	
                 
      

              	
                6.1

              	
                Maintain
      its corporate existence and good standing in its jurisdictions of
      incorporation and maintain its qualification to do business in each
      jurisdiction necessary to Borrower's business or
    operations.

              


      

      


      
        	
                 
      

              	
                6.2

              	
                Give
      Lender at least 30 days prior written notice of changes to its name,
      organization, chief executive office or location of
    records.

              


      

      


      
        	
                 
      

              	
                6.3

              	
                Pay
      all its taxes including gross payroll, withholding and sales taxes when
      due and will deliver satisfactory evidence of payment to Lender if
      requested.

              


      

      


      
        	
                 
      

              	
                6.4

              	
                If
      requested, provide to Lender a written report within 10 days, if payment
      of any Financed Receivable does not occur by its due date and include the
      reasons for the delay.

              


      

      


      
        	
                 
      

              	
                6.5

              	
                If
      applicable. give Lender copies of all Forms 10-K, 10-Q and 8-K (or
      equivalents) within 5 days of filing with the Securities and Exchange
      Commission, while any Financed Receivable is
  outstanding.

              


      

      


      
        	
                 
      

              	
                6.6

              	
                Execute
      any further instruments and take further action as Lender requests to
      perfect or continue Lender's security interest in the Collateral or to
      affect the purposes of this
Agreement.

              


      

      


      
        	
                 
      

              	
                6.7

              	
                Provide
      Lender with a Compliance Certificate no later than 30 days following each
      quarter end or as requested by
Lender.

              


      

      


      
        	
                 
      

              	
                6.8

              	
                Immediately
      notify, transfer and deliver to Lender all Collections Borrower
      receives.

              


      

      


      
        	
                 
      

              	
                6.9

              	
                Not
      create, incur, assume, or be liable for any indebtedness, other than
      Permitted Indebtedness.

              


      

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      
        	
                 
      

              	
                6.10

              	
                Immediately
      notify Lender if Borrower hereafter obtains any interest in any
      copyrights, patents, trademarks or licenses that are significant in value
      or are material to the conduct of its business or the value of any
      Financed Receivable.

              


      

      


      
        	
                 
      

              	
                6.11

              	
                At
      all times when any Advances are outstanding or upon request, provide to
      Lender no later than 20 days after the end of each month the following
      with respect to Borrower's financial condition and results of operations
      for such month and the period then ending: balance sheet, income
      statement; statement of cash flows, accounts receivable and payable aging,
      deferred revenue report, and such other matters as Lender may
      request.

              


      

      


      
        	
                 
      

              	
                6.12

              	
                Maintain
      its primary depository and operating accounts with Lender and, in the case
      of any deposit accounts not maintained with lender, grant to Lender a
      first priority perfected security interest in and "control" (within the
      meaning of Section 9104 of the California Uniform Commercial Code) of such
      deposit account pursuant to documentation acceptable to
      Lender.

              


      

      


      
        	
                 
      

              	
                6.13

              	
                Provide
      to Lender promptly upon the execution hereof, a Validity Indemnification
      from any shareholder holding more than a 20% stake in the
      Borrower.

              


      

      


      
        	
                 
      

              	
                6.14

              	
                Promptly
      provide to Lender such additional information and documents regarding the
      finances, properties, business or books and records of Borrower or any
      guarantor or any other obligor as Lender may
  request.

              


      

      


      
        	
                7.

              	
                SECURITY INTEREST. To
      secure the prompt payment and performance to Lender of all of the
      Obligations, Borrower hereby grants to Lender a continuing security
      interest in the Collateral. Borrower is not authorized to sell, assign,
      transfer or otherwise convey any Collateral without Lender's prior written
      consent, except for the sale of finished inventory in the Borrower's usual
      course of business. Borrower agrees to sign any instruments and documents
      requested by Lender to evidence, perfect, or protect the interests of
      Lender in the Collateral. Borrower agrees to deliver to Lender the
      originals of all instruments, chattel paper and documents evidencing or
      related to Financed Receivables and Collateral. Borrower shall not grant
      or permit any lien or security in the Collateral or any interest therein
      other than Permitted Liens.

              


      

      


      
        	
                8.

              	
                POWER OF ATTORNEY.
      Borrower irrevocably appoints Lender and its successors and as true and
      lawful attorney in fact, and authorizes Lender (a) to, whether or not
      there has been an Event of Default, (i) demand, collect, receive, sue, and
      give releases to any Account Debtor for the monies due or which may become
      due upon or with respect to the Receivables and to compromise, prosecute,
      or defend any action, claim; case or proceeding relating to the
      Receivables, including the filing of a claim or the voting of such claims
      in any bankruptcy case, all in Lender's name or Borrower's name, as Lender
      may choose; (ii) prepare, file and sign Borrower's name on any notice,
      claim, assignment, demand, draft, or notice of or satisfaction of lien or
      mechanics' lien or similar document; (iii) notify all Account Debtors with
      respect to the Receivables to pay Lender directly; (iv) receive and open
      all mail addressed to Borrower for the purpose of collecting the
      Receivables; (v) endorse Borrower's name on any checks or other forms of
      payment on the Receivables; (vi) execute on behalf of Borrower any and all
      instruments, documents, financing statements and the like to perfect
      Lender's interests in the Receivables and Collateral; debit any Borrower's
      deposit accounts maintained with Lender for any and all Obligations due
      under this Agreement; and (viii) do all acts and things necessary or
      expedient, in furtherance of any such purposes, and (b) to, upon the
      occurrence and during the continuance of an Event of Default, sell,
      assign, transfer, pledge, compromise, or discharge the whole or any part
      of the Receivables. Upon the occurrence and continuation of an Event of
      Default, all of the power of attorney rights granted by Borrower to Lender
      hereunder shall be applicable with respect to all Receivables and all
      Collateral.

              


      

      


      
        	
                9.

              	
                DEFAULT
      AND REMEDIES.

              


      

      


      
        	
                 
      

              	
                9.1

              	
                Events of Default. The
      occurrence of anyone or more of the following shall constitute an Event of
      Default hereunder.

              


      

      


      
        	
                 
      

              	
                (a)

              	
                Failure
      to Pay. Borrower
      fails to make a payment under this
Agreement.

              


      

      


      
        	
                 
      

              	
                (b)

              	
                Lien
      Priority.
      Lender fails to have an enforceable first lien (except for any
      prior liens to which Lender has consented in writing) on or security
      interest in the Collateral.

              


      

      


      
        	
                 
      

              	
                (c)

              	
                False
      Information. Borrower (or any guarantor) has given Lender any
      materially false or misleading information or representations or has
      failed to disclose any material fact relating to the subject matter of
      this Agreement.

              


      

      


      
        	
                 
      

              	
                (d)

              	
                Death.
      Borrower or any guarantor dies or becomes legally incompetent, or if
      Borrower is a partnership, any general partner dies or becomes legally
      incompetent.

              


      

      


      
        	
                 
      

              	
                (e)

              	
                Bankruptcy.
      Borrower (or any guarantor) files a bankruptcy petition, a bankruptcy
      petition is filed against Borrower (or any guarantor) or Borrower (or any
      guarantor) makes a general assignment for the benefit of
      creditors.

              


      

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      
        	
                 
      

              	
                (f)

              	
                Receivers.
      A receiver or similar official is appointed for a substantial portion of
      Borrower's (or any guarantor's) business, or the business is
      terminated.

              


      

      


      
        	
                 
      

              	
                (g)

              	
                Judgments.
      Any judgments or arbitration awards are entered against Borrower (or any
      guarantor), or Borrower (or any guarantor) enters into any settlement
      agreements with respect to any litigation or arbitration and the aggregate
      amount of all such judgments, awards, and agreements exceeds
      $50,000.

              


      

      


      
        	
                 
      

              	
                (h)

              	
                Material
      Adverse Change. A material adverse change occurs, or is reasonably
      likely to occur, in Borrower's (or any guarantor's) business condition
      (financial or otherwise), operations, properties or prospects, or ability
      to repay the credit.

              


      

      


      
        	
                 
      

              	
                (i)

              	
                Cross-default.
      Any default occurs under any agreement in connection with any credit
      Borrower (or any guarantor) or any of Borrower's related entities or
      affiliates has obtained from anyone else or which Borrower (or any
      guarantor) or any of Borrower's related entities or affiliates has
      guaranteed (other than trade amounts payable incurred in the ordinary
      course of business and not more than 60 days past
  due).

              


      

      


      
        	
                 
      

              	
                (j)

              	
                Default
      under Related Documents. Any default occurs under any guaranty,
      subordination agreement, security agreement, deed of trust, mortgage, or
      other document required by or delivered in connection with this agreement
      or any such document is no longer in
effect.

              


      

      


      
        	
                 
      

              	
                (k)

              	
                Other
      Agreements. Borrower (or any guarantor) or any of Borrower's
      related entities or affiliates fails to meet the conditions of, or fails
      to perform any obligation under any other agreement Borrower (or any
      guarantor) or any of Borrower's related entities or affiliates has with
      Lender or any affiliate of Lender.

              


      

      


      
        	
                 
      

              	
                (l)

              	
                Change
      of Control. The holders of the capital ownership of the Borrower as
      of the date hereof cease to own and control, directly and indirectly, at
      least 51% of the capital ownership of the
  Borrower.

              


      

      


      
        	
                 
      

              	
                (m)

              	
                Other
      Breach Under Agreement. Borrower fails to meet the conditions of,
      or fails to perform any obligation under, any term of this Agreement not
      specifically referred to above.

              


      

      


      
        	
                 
      

              	
                9.2

              	
                Remedies. Upon the
      occurrence of an Event of Default, (1) without implying any obligation to
      do so, Lender may cease making Advances or extending any other financial
      accommodations to Borrower; (2) all or a portion of the Obligations shall
      be, at the option of and upon demand by Lender, or with respect to an
      Event of Default described in Section 9.1(e), automatically and without
      notice or demand, due and payable in full; and (3) Lender shall have and
      may exercise all the rights and remedies under this Agreement and under
      applicable law, including the rights and remedies of a secured party under
      the California Uniform Commercial Code, all the power of attorney rights
      described in Section 8 with respect to all Collateral, and the right to
      collect, dispose of, sell, lease, use, and realize upon all Financed
      Receivables and all Collateral in any commercial reasonable
      manner.

              


      

      


      
        	
                10.

              	
                ACCRUAL OF INTEREST. All
      interest and finance charges hereunder calculated at an annual rate shall
      be based on a year of 360 days, which results in a higher effective rate
      of interest than if a year of 365 or 366 days were used. If any amount due
      under Section 4.2, amounts due under Section 11, and any other Obligations
      not otherwise bearing interest hereunder is not paid when due, such amount
      shall bear interest at a per annum rate equal to the Finance Charge
      Percentage until the earlier of (i) payment in good funds or (ii) entry of
      a trial judgment thereof, at which time the principal amount of any money
      judgment remaining unsatisfied shall accrue interest at the highest rate
      allowed by applicable law.

              


      

      


      
        	
                11.

              	
                FEES, COSTS AND EXPENSES;
      INDEMNIFICATION. The Borrower will pay to Lender upon demand all
      fees, costs and expenses(including the reasonable fees of attorneys and
      professionals and their reasonable costs and expenses) that Lender incurs
      or may from time to time impose in connection with any of the following:
      (a) preparing, negotiating, administering, and enforcing this Agreement or
      any other agreement executed in connection herewith, including any
      amendments, waivers or consents in connection with any of the foregoing,
      (b) any litigation or dispute (whether instituted by Lender, Borrower or
      any other person) in any way relating to the Financed Receivables, the
      Collateral, this Agreement Or any other agreement executed in connection
      herewith or therewith, (c) enforcing any rights against Borrower or any
      guarantor, or any Account Debtor, (d) protecting or enforcing its interest
      in the Financed Receivables or the Collateral, (e) collecting the Financed
      Receivables and the Obligations, or (f) the representation of Lender in
      connection with any bankruptcy case or insolvency proceeding involving
      Borrower, any Financed Receivable, the Collateral, any Account Debtor, or
      any guarantor. Borrower shall indemnify and hold Lender harmless from and
      against any and all claims, actions, damages, costs, expenses, and
      liabilities of any nature whatsoever arising in connection with any of the
      foregoing.

              


      

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      
        	
                12.

              	
                INTEGRATION, SEVERABILITY
      WAIVER, AND CHOICE OF LAW. This Agreement and any related security
      or other agreements required by this Agreement, collectively: (a)
      represent the sum of the understandings and agreements between Lender and
      Borrower concerning this credit; (b) replace any prior oral or written
      agreements between Lender and Borrower concerning this credit; and (c) are
      intended by Lender and Borrower as the final, complete and exclusive
      statement of the terms agreed to by them. In the event of any conflict
      between this Agreement and any other agreements required by this
      Agreement, this Agreement will prevail. If any provision of this Agreement
      is deemed invalid by reason of law, this Agreement will be construed as
      not containing such provision and the remainder of the Agreement shall
      remain in full force and effect. Lender retains all of its rights, even if
      it makes an Advance after a default. If Lender waives a default, it may
      enforce a later default. Any consent or waiver under, or amendment of,
      this Agreement must be in writing, and no such consent, waiver, or
      amendment shall imply any obligation by Lender to make any subsequent
      consent, waiver, or amendment. THIS AGREEMENT SHALL BE GOVERNED BY AND
      INTERPRETED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
      CALIFORNIA.

              


      

      


      
        	
                13.

              	
                NOTICES; TELEPHONIC AND TELEFAX
      AUTHORIZATIONS. All notices shall be given to lender and borrower
      at the addresses or faxes (or e-mail, if applicable) set forth on the
      signature page of this agreement and shall be deemed to have been
      delivered when actually received at the designated address. Lender may
      honor telephone, fax, e-mail or telefax instructions for Advances or
      repayments given, or purported to be given, by anyone of the Authorized
      Persons. Borrower will indemnify and hold Lender harmless from all
      liability, loss, and costs in connection with any act resulting from
      telephone or telefax instructions Lender reasonably believes are made by
      any Authorized Person. This paragraph will survive this Agreement’s
      termination, and will benefit Lender and its officers, employees, and
      agents.

              


      

      


      
        	
                14.

              	
                DEFINITIONS
      AND CONSTRUCTION.

              


      

      


      
        	
                 
      

              	
                14.1

              	
                Definitions. In this
      Agreement:

              


      

      


      "Account
Balance" means at any time the aggregate of the Receivable Amounts of all
Financed Receivables at such time, as reflected on the records maintained by
Lender.

      


      "Account
Debtor" has the meaning in the California Uniform Commercial Code and
includes any person liable on any Receivable, including without limitation, any
guarantor of any Receivable and any issuer of a letter of credit or banker's
acceptance assuring payment thereof.

      


      "Adjustments"
means all discounts, allowances, disputes, offsets, defenses, rights of
recoupment, rights of return, warranty claims, or short payments, asserted by or
on behalf of any Account Debtor with respect to any Financed
Receivable.

      


      "Advance"
means as to any Receivable, the advance made by Lender to Borrower in respect of
such Receivable pursuant to Section 1.2.

      


      "Advance
Rate" means 80% or such greater or lesser percentage as Lender may from
time to time establish in its sole discretion upon notice to
Borrower.

      


      "Agreement"
means this Business Financing Agreement.

      


      "Authorized
Person" means any of Borrower (if an individual) or anyone of the
individuals authorized to sign on behalf of Borrower.

      


      "Cash
Reserve" means for any Financed Receivable which has been paid in full
during a Monthly Period, the amount by which the amount(s) paid on such Financed
Receivable exceeds the Advance made on such Financed Receivable.

      


      "Collateral"
means all of Borrower's rights and interest in any and all personal property,
whether now existing or hereafter acquired or created and wherever located, and
all products and proceeds thereof and accessions thereto, including but not
limited to the following (collectively, the "Collateral"): (a) all accounts
(including health care insurance receivables), chattel paper (including tangible
and electronic chattel paper), inventory (including all goods held for sale or
lease or to be furnished under a contract for service, and including returns and
repossessions), equipment (including all accessions and additions thereto),
instruments (including promissory notes), investment property (including
securities and securities entitlements), documents (including negotiable
documents), deposit accounts, letter of credit rights, money, any commercial
tort claim of Borrower which is now or hereafter identified by Borrower or
Lender, general intangibles (including payment intangibles and software), goods
(including fixtures) and all of Borrower's books and records with respect to any
of the foregoing, and the computers and equipment containing said books and
records; and (b) any and all cash proceeds and/or noncash proceeds thereof,
including without limitation, insurance proceeds, and all supporting obligations
and the security therefore or for any right to payment.

      


      "Collections"
means all payments from or on behalf of an Account Debtor with respect to
Receivables.

      


      "Compliance
Certificate" means a certificate in the form attached as Exhibit A to this
Agreement by an Authorized Person that, among other things, the representations
and warranties set forth in this Agreement are true and correct as of the date
such certificate is delivered.

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

      


      "Credit
Limit" means $500,000, which is intended to be the maximum amount of
Advances at any time outstanding.

      


      "Default"
means any Event of Default or any event that with notice, lapse of time or
otherwise would constitute an Event of Default.

      


      "Eligible
Receivable" means a Receivable that satisfies all of the
following:

      


      
        	
                 
      

              	
                (a)

              	
                The
      Receivable has been created by Borrower in the ordinary course of
      Borrower's business and without any obligation on the part of Borrower to
      render any further performance.

              


      

      


      
        	
                 
      

              	
                (b)

              	
                There
      are no conditions which must be satisfied before Borrower is entitled to
      receive payment of the Receivable, and the Receivable does not arise from
      COD sales, consignments or guaranteed
sales.

              


      

      


      
        	
                 
      

              	
                (c)

              	
                The
      Account Debtor upon the Receivable does not claim any defense to payment
      of the Receivable, whether well founded or
  otherwise.

              


      

      


      
        	
                 
      

              	
                (d)

              	
                The
      Receivable is not the obligation of an Account Debtor who has asserted or
      may be reasonably be expected to assert any counterclaims or offsets
      against Borrower (including offsets for any "contra accounts" owed by
      Borrower to the Account Debtor for goods purchased by Borrower or for
      services performed for Borrower).

              


      

      


      
        	
                 
      

              	
                (e)

              	
                The
      Receivable represents a genuine obligation of the Account Debtor and to
      the extent any credit balances exist in favor of the Account Debtor, such
      credit balances shall be deducted in calculating the Receivable
      Amount.

              


      

      


      
        	
                 
      

              	
                (f)

              	
                Borrower
      has sent an invoice to the Account Debtor in the amount of the
      Receivable.

              


      

      


      
        	
                 
      

              	
                (g)

              	
                Borrower
      is not prohibited by the laws of the state where the Account Debtor is
      located from bringing an action in the courts of that state to enforce the
      Account Debtor's obligation to pay the Receivable. Borrower has taken all
      appropriate actions to ensure access to the courts of the state where
      Account Debtor is located, including, where necessary; the filing of a
      Notice of Business Activities Report or other similar with the applicable
      state agency or the qualification by Borrower as a foreign corporation
      authorized to transact business in such
state.

              


      

      


      
        	
                 
      

              	
                (h)

              	
                The
      Receivable is owned by Borrower free of any title defects or any liens or
      interests of others except the security interest in favor of Lender, and
      Lender has a perfected, first priority security interest in such
      Receivable.

              


      

      


      
        	
                 
      

              	
                (i)

              	
                The
      Account Debtor on the Receivable is not any of the following (i) an
      employee, affiliate, parent or subsidiary of Borrower, or an entity which
      has common officers or directors with Borrower, (ii) the U.S. government
      or any agency or department of the U.S. government unless Lender agrees in
      writing to accept the Receivable, Borrower complies with the procedures in
      the Federal Assignment of Claims Act of 1940 (41 U.S.C.§15) with respect
      to the Receivable, and the underlying contract expressly provides that
      neither the U.S. government nor any agency or department thereof shall
      have the right of set-off against Borrower; or (iii) any person or entity
      located in a foreign country unless (A) the Receivable is supported by an
      irrevocable letter of credit issued by a bank acceptable to Lender, and
      (B) if requested by Lender, the original of such letter of credit and/or
      any usance drafts drawn under such letter of credit and accepted by the
      issuing or confirming bank have been delivered to
  Lender.

              


      

      


      
        	
                 
      

              	
                (j)

              	
                The
      Receivable is not in default (a Receivable will be considered in default
      if any of the following occur: (i) the Receivable is not paid within 90
      days from its invoice date; (ii) the Account Debtor obligated upon the
      Receivable suspends business, makes a general assignment for the benefit
      of creditors, or fails to pay its debts generally as they come due; or
      (iii) any petition is filed by or against the Account Debtor obligated
      upon the Receivable under any bankruptcy law or any other law or laws for
      the relief of debtors).

              


      

      


      
        	
                 
      

              	
                (k)

              	
                The
      Receivable does not arise from the sale of goods which remain in
      Borrower's possession or under Borrower's
  control.

              


      

      


      
        	
                 
      

              	
                (l)

              	
                The
      Receivable is not evidenced by a promissory note or chattel paper, nor is
      the Account Debtor obligated to Borrower under any other obligation which
      is evidenced by a promissory note.

              


      

      


      
        	
                 
      

              	
                (m)

              	
                The
      Receivable is otherwise acceptable to
Lender.

              


      

      


      “Event of
Default” has the meaning set forth in Section 9.1.

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

      


      "Facility
Fee" means a payment of an annual fee equal to 0.40 percentage points of
the Formula Account Balance due upon the date of this Agreement and each
anniversary thereof until this Agreement is terminated pursuant to Section 17
hereof.

      


      "Finance
Charge" means for each Monthly Period an interest amount equal to the
Finance Charge Percentage of the average daily Account Balance outstanding
during such Monthly Period.

      


      "Finance
Charge Percentage" means a rate per year equal to the Prime Rate plus
2.00 percentage points plus an additional 5.00 percentage points during any
period that an Event of Default has occurred and is continuing.

      


      "Financed
Receivable" means a Receivable for which Lender makes an Advance pursuant
to a Funding Request.

      


      "Formula
Account Balance" means the dollar amount resulting from dividing the
Credit Limit by the Advance Rate in effect at the time of
calculation.

      


      "Funding
Request” means a writing signed by an authorized representative of
Borrower which accurately identifies the Receivables which Lender, at its
election, is being requested to finance, and includes for each such Receivable
the correct amount owed by the Account Debtor, the name and address of the
Account Debtor, the invoice number, the invoice date and the account code in the
form of the invoice schedule attached as Exhibit B hereto,
together with copies of invoices and such other supporting documentation as the
Lender may from time to time request.

      


      "Lender"
means Bridge Bank, National Association, and its successors and
assigns.

      


      "Month
End" means the last calendar day of each Monthly Period.

      


      "Monthly
Period" means each calendar month.

      


      "Obligations"
means all liabilities and obligations of Borrower to Lender of any kind or
nature, present or future, arising under or in connection with this Agreement or
under any other document, instrument or agreement, whether or not evidenced by
any note, guarantee or other instrument, whether arising on account or by
overdraft, whether direct or indirect (including those acquired by assignment)
absolute or contingent, primary or secondary, due or to become due, now owing or
hereafter arising, and however acquired; including, without limitation, all
Advances, Finance Charges, fees, interest, expenses, professional fees and
attorneys' fees.

      


      "Overadvance"
means at any time an amount equal to the greater of the following amounts (if
any): (a) the amount by which the total amount of the Advances exceeds the
Credit Limit and (b) the amount equal to the sum of (i) the total outstanding
amounts of all Advances made with respect to Receivables which were not, or have
ceased to be, Eligible Receivables and the amount by which the total outstanding
amount of all Advances (other than those under clause (i) above)) exceeds the
product of (x) the Advance Rate and (y) the total outstanding Receivable Amounts
of the Eligible Receivables in respect of which such Advances were
made.

      


      "Permitted Indebtedness"
means:

      


      
        	
                 
      

              	
                (a)

              	
                Indebtedness
      under this Agreement or that is otherwise owed to the
    Lender.

              


      

       

      
        	
                 
      

              	
                (b)

              	
                Indebtedness
      existing on the date hereof and specifically disclosed on a schedule to
      this Agreement.

              


      

      


      
        	
                 
      

              	
                (c)

              	
                Purchase
      money indebtedness (including capital leases) incurred to acquire capital
      assets in ordinary course of business and not exceeding $100,000 in total
      principal amount at any time
outstanding.

              


      

      


      
        	
                 
      

              	
                (d)

              	
                Other
      Indebtedness in an aggregate amount not to exceed $50,000 at any time
      outstanding; provided that such indebtedness is junior in priority (if
      secured) to the Obligations and provided that the incurrence of such
      Indebtedness does not otherwise cause and Event of Default
      hereunder.

              


      

      


      
        	
                 
      

              	
                (e)

              	
                Indebtedness
      incurred in the refinancing of any indebtedness set forth in (a) through
      (d) above, provided that the principal amount thereof is not increased or
      the terms thereof are not modified to impose more burdensome terms upon
      the Borrower.

              


      

      


      
        	
                 
      

              	
                (f)

              	
                Subordinated
      Debt.

              


      

      


      
        	
                 
      

              	
                "Permitted
      Liens" means:

              


      

      


      
        	
                 
      

              	
                (a)

              	
                Liens
      securing any of the indebtedness described in clauses (a) through (d) of
      the definition of Permitted
Indebtedness.

              


      

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      
        	
                 
      

              	
                (b)

              	
                Liens
      for taxes, fees, assessments or other governmental charges or levies,
      either not delinquent or being contested in good faith by appropriate
      proceedings, provided the same have no priority over any of Lender's
      security interests.

              


      

      


      
        	
                 
      

              	
                (c)

              	
                Liens
      incurred in connection with the extension, renewal or refinancing of the
      indebtedness described in clause (e) of the definition of Permitted
      Indebtedness, provided that any extension, renewal or replacement lien
      shall be limited to the property encumbered by the existing lien and the
      principal amount of the indebtedness being extended, renewed or refinanced
      does not increase.

              


      

      


      
        	
                 
      

              	
                (d)

              	
                Liens
      securing Subordinated Debt.

              


      

      


      "Prime
Rate" means the greater of 4.00% per year or the variable rate of
interest, per annum, most recently announced by lender as its "Prime Rate",
whether or not such announced rate is the lowest rate available from
Lender.

      


      "Processing
Fee" means a fee equal to 1.00% of the Receivable Amount of each Financed
Receivable.

      


      "Recovery
Fee" means for each item of Collections which the Borrower has failed to
remit as required by the Agreement, a fee equal to the lesser of $5,000 or 5% of
the amount of such item, but in no case less than $1,000.

      


      "Receivable
Amount" means as to any Receivable, the Receivable Amount due from the
Account Debtor after deducting all discounts, credits, offsets, payments or
other deductions of any nature whatsoever, whether or not claimed by the Account
Debtor.

      


      "Receivables"
means Borrower's rights to payment arising in the ordinary course of Borrower's
business, including accounts, chattel paper, instruments, contract rights,
documents, general intangibles, letters of credit, drafts, and bankers
acceptances.

      


      "Refundable
Reserve" means for any Month End:

      


      
        	
                 
      

              	
                (a)

              	
                The
      sum of (i) the total of the Cash Reserves as to all Financed Receivables
      as of such Month End and (ii) the
      amount of Collections received Lender during the Monthly Period
      with respect to Receivables other than Financed Receivables and not
      previously remitted to Borrower,

              


      

      


      minus

      


      
        	
                 
      

              	
                (b)

              	
                The
      total for that Monthly Period ending on such Month End
  of:

              


      

      


      
        	
                 
      

              	
                (i)

              	
                Processing
      Fee, Facility Fee, and Recovery
Fees;

              


      

      


      
        	
                 
      

              	
                (ii)

              	
                Finance
      Charges;

              


      

      


      
        	
                 
      

              	
                (iii)

              	
                Adjustments;

              


      

      


      
        	
                 
      

              	
                (iv)

              	
                Any
      outstanding Overadvance Amounts;

              


      

      


      
        	
                 
      

              	
                (v)

              	
                all
      amounts due, including professional fees and expenses, as set forth in
      Section 11 for which oral or written demand has been made by Lender to
      Borrower during that Monthly Period to the extent Lender has agreed to
      accept payment thereof by deduction from the Refundable Reserve;
      and

              


      

      


      
        	
                 
      

              	
                (vi)

              	
                all
      amounts collected by Borrower on Financed Receivables during the Monthly
      Period and not remitted to Lender.

              


      

       

      "Reserve"
means as to any Financed Receivable the amount by which the Receivable Amount of
the Financed Receivable exceeds the Advance on that Financed
Receivable.

       

      "Reserve
Percentage" means 100% less the Advance Rate.

       

      "Subordinated
Debt" means indebtedness of Borrower that is expressly subordinated to
the indebtedness of Borrower owed to lender pursuant to a subordination
agreement satisfactory in form and substance to Lender.

       

      "Termination
Fee" means a payment equal to 1.00% of the Formula Account
Balance.

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

      


      
        	
                 
      

              	
                14.2

              	
                Construction:

              


      

      


      
        	
                 
      

              	
                (a)

              	
                In
      this Agreement: (i) references to the plural include the singular and to
      the singular include the plural; (ii) references to any gender include any
      other gender; (iii) the terms "include" and "including" are not limiting;
      (iv) the term "or" has the inclusive meaning represented by the phrase
      "and/or," (v) unless otherwise specified, section and subsection
      references are to this Agreement, and (vi) any reference to any statute,
      law, or regulation shaff include aff amendments thereto and revisions
      thereof.

              


      

      


      
        	
                 
      

              	
                (b)

              	
                Neither
      this Agreement nor any uncertainty or ambiguity herein shall be construed
      or resolved using any presumption against either Borrower or Lender,
      whether under any rule of construction or otherwise. On the contrary, this
      Agreement has been reviewed by each party hereto and their respective
      counsel. In case of any ambiguity or uncertainty, this Agreement shall be
      construed and interpreted according to the ordinary meaning of the words
      used to accomplish fairly the purposes and intentions of all parties
      hereto.

              


      

      


      
        	
                 
      

              	
                (c)

              	
                Titles
      and section headings used in this Agreement are for convenience only and
      shall not be used in interpreting this
  Agreement.

              


      

      


      
        	
                15.

              	
                JURY TRIAL WAIVER. THE
      UNDERSIGNED ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A
      CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED UNDER CERTAIN CIRCUMSTANCES.
      TO THE EXTENT PERMITIED BY LAW, EACH PARTY, AFTER CONSULTING (OR HAVING
      HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF ITS, HIS OR HER CHOICE,
      KNOWINGLY AND VOLUNTARILY, AND FOR THE MUTUAL BENEFIT OF ALL PARTIES,
      WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION ARISING OUT
      OF OR RELATED TO THIS AGREEMENT OR ANY OTHER DOCUMENT, INSTRUMENT OR
      AGREEMENT BETWEEN THE UNDERSIGNED
PARTIES.

              


      

      


      
        	
                16.

              	
                JUDICIAL REFERENCE
      PROVISION.

              


      

      


      
        	
                 
      

              	
                16.1

              	
                In
      the event the Jury Trial Waiver set forth above is not enforceable, the
      parties elect to proceed under this Judicial Reference
      Provision.

              


      

      


      
        	
                 
      

              	
                16.2

              	
                With
      the exception of the items specified in clause (c), below, any
      controversy, dispute or claim (each, a "Claim") between the parties
      arising out of or" relating to this Agreement or any other document,
      instrument-or agreement between the undersigned parties (collectively in
      this Section, the "Loan Documents"), will be resolved by a reference
      proceeding in California in accordance with the provisions of Sections 638
      et seq. of the California Code of Civil Procedure ("CCP"), or their
      successor sections, which shall constitute the exclusive remedy for the
      resolution of any Claim, including whether the Claim is subject to the
      reference proceeding. Except as otherwise provided in the Loan Documents,
      venue for the reference proceeding will be in the state or federal court
      in the county or district where the real property involved in the action,
      if any, is located or in the state or federal court in the county or
      district where venue is otherwise appropriate under applicable law (the
      "Court").

              


      

      


      
        	
                 
      

              	
                16.3

              	
                The
      matters that shall not be subject to a reference are the following: (i)
      nonjudicial foreclosure of any security interests in real or personal
      property, (ii) exercise of self-help remedies (including, without
      limitation, set-off), (iii) appointment of a receiver and (iv) temporary,
      provisional or ancillary remedies (including, without limitation, writs of
      attachment, writs of possession, temporary restraining orders or
      preliminary injunctions). This reference provision does not limit the
      right of any party to exercise or oppose any of the rights and remedies
      described in clauses (i) and (ii) or to seek or oppose from a court of
      competent jurisdiction any of the items described in clauses (iii) and
      (iv). The exercise of, or opposition to, any of those items does not waive
      the right of any party to a reference pursuant to this reference provision
      as provided herein.

              


      

      


      
        	
                 
      

              	
                16.4

              	
                The
      referee shall be a retired judge or justice selected by mutual written
      agreement of the parties. If the parties do not agree within ten (10) days
      of a written request to do so by any party, then, upon request of any
      party, the referee shall be selected by the Presiding Judge of the Court
      (or his or her representative). A request for appointment of a referee may
      be heard on an ex parte or expedited basis, and the parties agree that
      irreparable harm would result ex parte relief is not granted. Pursuant to
      CCP § 170.6. each party shall have one peremptory challenge to the referee
      selected by the Presiding Judge of the Court (or his or her
      representative).

              


      

      


      
        	
                 
      

              	
                16.5

              	
                The
      parties agree that time is of the essence in conducting the reference
      proceedings. Accordingly, the referee shall be requested, subject to
      change in the time periods specified herein for good cause shown, to (i)
      set the matter for a status and trial-setting conference within fifteen
      (15) days after the date of selection of the referee, (ii) if practicable,
      try all issues of law or fact within one hundred twenty (120) days after
      the date of the conference and (iii) report a statement of decision within
      twenty (20) days after the matter has been submitted for
      decision.

              


      

      


      
        	
                 
      

              	
                16.6

              	
                The
      referee will have power to expand or limit the amount and duration of
      discovery. The referee may set or extend discovery deadlines or cutoffs
      for good cause, including a party's failure to provide requested discovery
      for any reason whatsoever. Unless otherwise ordered based upon good cause
      shown, no party shall be entitled to "priority" in conducting discovery,
      depositions may be taken by either party upon seven (7) days written
      notice, and all other discovery shall be responded to within fifteen (15)
      days after service. All disputes relating to discovery which cannot be
      resolved by the parties shall be submitted to the referee whose decision
      shall be final and binding.

              


      

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      
        	
                 
      

              	
                16.7

              	
                Except
      as expressly set forth herein, the referee shall determine the manner in
      which the reference proceeding is conducted including the time and place
      of hearings, the order of presentation of evidence, and all other
      questions that arise with respect to the course of the reference
      proceeding. All proceedings and hearings conducted before the referee,
      except for trial, shall be conducted without a court reporter, except that
      when any party so requests, a court reporter will be used at any hearing
      conducted before the referee, and the referee will be provided a courtesy
      copy of the transcript. The party making such a request shall have the
      obligation to arrange for and pay the court reporter. Subject to the
      referee's power to award costs to the prevailing party, the parties will
      equally share the cost of the referee and the court reporter at
      trial.

              


      

      


      
        	
                 
      

              	
                16.8

              	
                The
      referee shall be required to determine all issues in accordance with
      existing case law and the statutory laws of the State of California. The
      rules of evidence applicable to proceedings at law in the State of
      California will be applicable to the reference proceeding. The referee
      shall be empowered to enter equitable as well as legal relief, enter
      equitable orders that be binding on the parties and rule on any motion
      which would be authorized in a court proceeding, including without
      limitation motions for summary judgment or summary adjudication. The
      referee shall issue a decision at the close of the reference proceeding
      which disposes of all claims of the parties that are the subject of the
      reference. Pursuant to CCP § 644, such decision shall be entered by the
      Court as a judgment or an order in the same manner as if the action had
      been tried by the Court and any such decision will be final, binding and
      conclusive. The parties reserve the right to appeal from the final
      judgment or order or from any appealable decision or order entered by the
      referee. The parties reserve the right to findings of fact, conclusions of
      laws, a written statement of decision, and the right to move for a new
      trial or a different judgment, which new trial, if granted, is also to be
      a reference proceeding under this
provision.

              


      

      


      
        	
                 
      

              	
                16.9

              	
                If
      the enabling legislation which provides for appointment of a referee is
      repealed (and no successor statute is enacted), any dispute between the
      parties that would otherwise be determined by reference procedure will be
      resolved and determined by arbitration. The arbitration will be conducted
      by a retired judge or justice, in accordance with the California
      Arbitration Act §1280 through §1294.2 of the CCP as amended from time to
      time. The limitations with respect to discovery set forth above shall
      apply to any such arbitration
proceeding.

              


      

       

      
        
          	
                   
      

                	
                  16.10

                	
                  
                    THE
      PARTIES RECOGNIZE AND AGREE THAT ALL CONTROVERSIES, DISPUTES AND CLAIMS
      RESOLVED UNDER THIS REFERENCE PROVISION WILL BE DECIDED BY A REFEREE AND
      NOT BY A JURY. AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH
      COUNSEL OF ITS, HIS OR HER OWN CHOICE, EACH PARTY KNOWINGLY AND
      VOLUNTARILY, AND FOR THE MUTUAL BENEFIT OF ALL PARTIES, AGREES THAT THIS
      REFERENCE PROVISION WILL APPLY TO ANY CONTROVERSY, DISPUTE OR CLAIM
      BETWEEN OR AMONG THEM ARISING OUT OF OR IN ANY WAY RELATED TO, THIS
      AGREEMENT OR THE OTHER LOAN
DOCUMENTS.

                  

                


        

         

      

      
        	
                17.

              	
                TERM AND TERMINATION.
      Borrower and Lender each have the right to terminate the financing of
      Receivables under this Agreement at any time upon notice to the other:
      provided
      that no such termination shall affect Lender's security interest in the
      Financed Receivables and other Collateral, and this Agreement shall
      continue to be effective, and the obligations of Borrower to Indemnify
      Lender with respect to the expenses, damages, losses, costs and
      liabilities described in Section 11 shall survive until all applicable
      statute of limitations periods with respect to actions that may be brought
      against Lender have run, and Lender's rights and remedies hereunder shall
      survive any such termination, until all transactions entered into and
      Obligations incurred hereunder or in connection herewith have been
      completed and satisfied in full. Upon any such termination, Borrower
      shall, upon demand by Lender, immediately repay all Advances then
      outstanding.

              


      

      


      
        	
                18.

              	
                OTHER AGREEMENTS. (i)
      Any security agreements, liens and/or security interests securing payment
      of any obligations of Borrower owing to Lender or affiliates also secure
      the Obligations, and are valid and subsisting and are not adversely
      affected by execution of this Agreement. An Event of Default under this
      Agreement constitutes a default under other outstanding agreements between
      Borrower and lender or its affiliates; (ii) Lender reserves the right to
      issue press releases, advertisements, and other promotional materials
      describing any successful outcome of services provided on Borrower's
      behalf. Borrower agrees that Lender shall have the right to identify
      Borrower by name in those
materials.

              


      

      


      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      IN
WITNESS WHEREOF, Borrower and Lender have executed this Agreement on the day and
year above written.

      


      
        
          	BORROWER	 	 	LENDER	 
	 	 	 	 	 
	BALQON
      CORPORATION	 	 	BRIDGE
      BANK, NATIONAL ASSOCIATION	 
	 	 	 	 	 
	
                  /s/
      Balwinder Samra

                	 	 	
                  /s/
      Sarah Henderson

                	 
	
                  Name:
      Balwinder Samra

                	 	 	
                  Name:
      Sarah Henderson

                	 
	
                  Title:
      President/CEO

                	 	 	
                  Title:
      VP

                	 
	 	 	 	 	 
	Address
      for Notices:	 	 	Address
      for Notices:	 
	1701
      E, Edinger, Unit E-3	 	 	
                  55
      Almaden Blvd.

                	 
	Santa
      Ana, CA 92705	 	 	San
      Jose, CA 95113	 
	Tel:
      (714) 836-6342	 	 	Fax:
      (408) 423-8510	 
	Fax:
      (714) 200-0585