Exhibit 10.1

 

**AMENDMENT AND EXCHANGE AGREEMENT**

This Amendment andExchange Agreement (the “**Agreement**”), dated effective as of March 30, 2011, is by and between Balqon corporation,a Nevada corporation (the “**Company**”), and the holder identified on the signature page hereto (“**Holder**”).

R E C I T A L S

A.	Between March20, 2009 and June 30, 2009, pursuant to the terms and conditions of a Confidential Private Placement Memorandum dated March 23,2009 (the “**2009 Memorandum**”), the Company issued (i) $1,000,000 in aggregate principal amount of its 10% UnsecuredSubordinated Convertible Promissory Notes of which $916,500 in aggregate principal amount is currently outstanding (the “**2009Notes**”) and (ii) warrants (the “**2009 Warrants**”) to purchase shares of the Company’s common stock,$0.001 par value per share (the “**Common Stock**”) to certain investors (“the **2009 Investors**”).

B.	Between February5, 2010 and April 12, 2010, pursuant to the terms of a Confidential Private Placement Memorandum dated September 1, 2009, as supplementedby that certain Supplement No. 1 to Confidential Private Placement Memorandum dated January 22, 2010 (the “**2010 Memorandum**”),the Company issued (i) $1,500,000 in aggregate principal amount of its 10% Unsecured Subordinated Convertible Promissory Notesof which $1,300,000 in aggregate principal amount is currently outstanding (the “**2010 Notes**”) and (ii) warrants(the “**2010 Warrants**”) to purchase shares of Common Stock to certain investors (the “**2010 Investors**”).

C.	On or about«A», subject to the terms and conditions of a certain Securities Purchase Agreement (the “**Existing SecuritiesPurchase Agreement**”) and pursuant to the terms and conditions of the 2009 Memorandum, the Company issued to the Holder(i) $«B» in aggregate principal amount of its 2009 Notes (the “**Note**”) and (ii) a 2009 Warrant (the“**Warrant**”) to purchase up to «C» shares of Common Stock. Capitalized terms not defined herein shallhave the meaning as set forth in the Existing Securities Purchase Agreement as amended hereby.

D.	The Companyand the Holder desire to enter into this Agreement, pursuant to which, among other things, (i) the Company and the Holder shallexchange the Holder’s Note with a current aggregate principal amount of $«D» (the “**Existing Note**”)for a 10% Secured Subordinated Convertible Promissory Note (the “**Exchanged Note**”), with the same outstandingaggregate principal amount as the Existing Note, convertible into Common Stock in accordance therewith (the Exchanged Note as converted,the “**Exchanged Note Conversion Shares**”) and (ii) the Company and the Holder shall exchange the Holder’sWarrant (“**Existing Warrant**”) currently exercisable into «C» shares of Common Stock for a warrantto purchase Common Stock of the Company (the “**Exchanged Warrant**”), exercisable into «C» shares ofCommon Stock (the Exchanged Warrant as exercised, the “**Exchanged Warrant Shares**”).

E.	The Companydesires to enter into separate Amendment and Exchange Agreements with each of the 2009 Investors and the 2010 Investors. The 2009Investors that enter into such Amendment and Exchange Agreements, in addition to participating in an exchange transaction, willagree to amend the 2009 Note held by such 2009 Investor to extend the 2009 Note’s maturity date from March 31, 2012 untilthe Closing Date (as defined below).

A G R E E M E N T

1.	Exchange.At the Closing, the Holder and the Company shall exchange (i) the Existing Note for the Exchanged Note and (ii) the Existing Warrantfor the Exchanged Warrant. At the Closing (as defined below), the following transactions shall occur (such transactions in thisSection 1, the “Exchange”):

1.1	Delivery.In exchange for (i) the Existing Note, the Company shall deliver or cause to be delivered to the Holder the Exchanged Note and(ii) the Existing Warrant, the Company shall deliver or cause to be delivered to the Holder the Exchanged Warrant. The Holder shalldeliver or cause to be delivered to the Company (or its designee) the Existing Note and the Existing Warrant, as soon as commerciallypracticable following the Closing. As of the Closing Date, all of the Holder’s rights under the Existing Note and the ExistingWarrant shall be extinguished.

1.2	Other Documents.At the Closing, the Company and the Holder shall execute and/or deliver such other documents and agreements as are customary andreasonably necessary to effectuate the Exchange, including, without limitation, a Security Agreement (as defined below).

1.3	PurchasePrice. The Exchanged Note shall be issued to the Holder in exchange for the Existing Note and the Exchanged Warrant shall beissued to the Holder in exchange for the Existing Warrant, in each case, without the payment of any additional consideration.

1.4	Closing.The closing of the Exchange (the “**Closing**”) shall occur on April 30, 2012 if the conditions to closingspecified in this Agreement have been satisfied or duly waived (or such other date and time as is mutually agreed to by the Companyand holders of 50% of the outstanding principal amount of the 2009 Notes and 2010 Notes) (the “**Closing Date**”).

2.	Amendmentsto Transaction Documents.

2.1	Ratifications.Except as otherwise expressly provided herein, the Existing Securities Purchase Agreement and each other Transaction Document,is, and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects, except that on andafter the Closing Date: (i) all references in the Existing Securities Purchase Agreement to “this Agreement”, “hereto”,“hereof”, “hereunder” or words of like import referring to the Existing Securities Purchase Agreement shallmean the Existing Securities Purchase Agreement as amended by this Agreement and (ii) all references in the other Transaction Documents,to the “Securities Purchase Agreement”, “thereto”, “thereof”, “thereunder” or wordsof like import referring to the Securities Purchase Agreement shall mean the Existing Securities Purchase Agreement as amendedby this Agreement.

2.2	Amendmentto 2009 Notes. To the extent the Existing Note is a 2009 Note, the defined term “Note Maturity Date” under theExisting Note shall be hereby amended to mean April 30, 2012.

2.3	ExchangedNote. The Exchanged Note will be issued on the Closing Date and will be substantially similar to the Existing Note, with thefollowing material differences:

(a)	Theinitial Conversion Price under the Exchanged Note shall be $0.40 per share of Common Stock.

(b)	Thedefined term “Note Maturity Date” under the Exchanged Note shall mean the earlier of (i) March 31, 2013, or (ii)the date as of which the outstanding principal and accrued interest on the Exchanged Note and all other payments payable thereunderare due and payable to the Holder pursuant to a provision similar to Section 5.2 of the Existing Note.

(c)	TheExchanged Note shall be secured by a lien on all of the Company’s assets (the “**Lien**”), which lien shallbe subordinated to (i) all of the Company’s secured indebtedness existing on the Closing Date and (ii) money borrowed (orto be borrowed) by the Company from any bank, savings and loan or other commercial or financial institutions in an amount of upto $2,500,000. The Exchanged Note shall rank paripassu with (i) all 10% Secured Subordinated Convertible PromissoryNotes exchanged for 2009 Notes and (ii) all 10% Secured Subordinated Convertible Promissory Notes exchanged for 2010 Notes.

(d)	Theterm “Conversion Price” will be subject to a standard “full ratchet” anti-dilution adjustment which, inthe event that the Company issues or is deemed to have issued securities, except for customary excluded securities, at a pricelower than the then applicable Conversion Price, the Conversion Price shall be reduced to equal the price at which the Companyissued or is deemed to have issued its Common Stock.

2.4	ExchangedWarrant. The Exchanged Warrant will be issued on the Closing Date and will be substantially similar to the Existing Warrant,with the following material differences:

(a)	Theinitial Exercise Price of one share of Common Stock under the Exchanged Warrant shall be $0.40.

(b)	TheExchanged Warrant shall be void if the purchase rights represented by the Exchanged Warrant are not exercised before the closeof business on March 31, 2015.

(c)	 TheExercise Price will be subject to a standard “full ratchet” anti-dilution adjustment which, in the event that the Companyissues or is deemed to have issued securities, except for customary excluded securities, at a price lower than the then applicableExercise Price, the Exercise Price shall be reduced to equal the price at which the Company issued or is deemed to have issuedits Common Stock.

2.5	Amendmentsto Transaction Documents. On and after the Closing Date, each of the Transaction Documents shall be amended as follows:

(a)	Thedefined term “Note” shall be amended and restated as “Exchanged Note (as defined in the Amendment and ExchangeAgreement)”.

(b)	Thedefined term “Conversion Shares” shall be amended and restated as “Exchanged Note Conversion Shares (as definedin the Amendment and Exchange Agreement)”.

(c)	Thedefined term “Warrant” shall be amended and restated as “Exchanged Warrant (as defined in the Amendment and ExchangeAgreement)”.

(d)	Thedefined term “Warrant Shares” shall be amended and restated as “Exchanged Warrant Shares (as defined in the Amendmentand Exchange Agreement)”.

(e)	Thedefined term “Amendment and Exchange Agreement” shall mean “that certain Amendment and Exchange Agreement, datedas of March 30, 2012, by and between the Company and the Purchaser”.

(f)	Thedefined term “Transaction Documents” shall be amended to include the Amendment and Exchange Agreement and the SecurityAgreement.

3.	Holder’sRepresentations and Warranties. As a material inducement to the Company to enter into this Agreement and consummate the Exchange,the Holder represents, warrants and covenants with and to the Company as of the date hereof and as of the Closing Date as follows:

3.1	Ownershipof Existing Note. The Holder owns the Existing Note free and clear of any liens (other than the obligations pursuant to thisAgreement and applicable securities laws).

3.2	Relianceon Exemptions. The Holder understands that the Exchanged Note and the Exchanged Warrant (collectively, the “**ExchangedSecurities**”) are being offered and exchanged in reliance on specific exemptions from the registration requirements ofUnited States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and theHolder’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Holder setforth herein in order to determine the availability of such exemptions and the eligibility of the Holder to acquire the ExchangedSecurities.

3.3	No GovernmentalReview. The Holder understands that no United States federal or state agency or any other government or governmental agencyhas passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment in theExchanged Securities nor have such authorities passed upon or endorsed the merits of the offering of the Exchanged Securities.

3.4	Validity;Enforcement. This Agreement to which the Holder is a party have been duly and validly authorized, executed and delivered onbehalf of the Holder and shall constitute the legal, valid and binding obligations of the Holder enforceable against the Holderin accordance with their respective terms, except as such enforceability may be limited by general principles of equity or to applicablebankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, theenforcement of applicable creditors’ rights and remedies.

3.5	No Conflicts.The execution, delivery and performance by the Holder of this Agreement and the consummation by the Holder of the transactionscontemplated hereby will not (i) result in a violation of the organizational documents of the Holder or (ii) conflict with, orconstitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others anyrights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Holder isa party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securitieslaws) applicable to the Holder, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or violationswhich would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of theHolder to perform its obligations hereunder.

3.6	InvestmentRepresentations.

(a)	TheCompany has made available to the Holder all the information reasonable available to the Company that the Holder has requestedfor deciding whether to acquire the Exchanged Securities. The Holder confirms that it has been given sufficient access to informationregarding the Company in connection with its decision to acquire the Exchanged Securities, including the opportunity to ask questionsof, and receive answers from, persons acting on behalf of the Company and concerning the Company’s financial affairs, prospectsand condition.

(b)	TheHolder (i) is resident in or otherwise subject to the securities legislation of the United States, and the issuance of the ExchangedSecurities to the Holder has occurred only in the United States; (ii) by reason of its or his business or financial expertise,has the capacity to protect its or his own interests in connection with its or his acquisition of the Securities; and (iii) isan “accredited investor” as defined in Rule 501 of Regulation D of the Securities Act. The Holder is not a registeredbroker dealer registered under Section 15(a) of the Exchange Act, or a member of the Financial Industry Regulatory Authority (“FINRA”),or an entity engaged in the business of being a broker dealer. Except as otherwise disclosed in writing to the Company on or priorto the date of this Agreement, the Holder is not affiliated with any broker dealer registered under Section 15(a) of the ExchangeAct, or a member of FINRA or an entity engaged in the business of being a broker dealer.

(c)	TheHolder is (i) acquiring the Exchanged Securities, (ii) upon conversion of the Exchanged Note will acquire the Exchanged ConversionShares issuable upon conversion thereof, and (iii) upon exercise of the Exchanged Warrant will acquire the Exchanged WarrantShares issuable upon exercise thereof, in the ordinary course of business for its own account and not with a view towards, or forresale in connection with, the public sale or distribution thereof, except pursuant to sales registered under the Securities Actor under an exemption from such registration and in compliance with applicable federal and state securities laws, and the Holderdoes not have a present arrangement to effect any distribution of the Securities to or through any person or entity.

(d)	TheHolder acknowledges that (i) a limited public market exists for the shares of Common Stock, and no assurances can be given by theCompany that any of the Exchanged Conversion Shares or Exchanged Warrant Shares will be registered for resale under the SecuritiesAct, (ii) he, she or it must and shall bear the economic risk of holding the Exchanged Securities, which may be for an indefiniteperiod of time, because at the time such Exchanged Securities are issued they will not have been registered under the SecuritiesAct or any other securities law and, therefore, cannot be sold unless they are subsequently registered under applicable federaland state securities laws or an exemption from such registration is available; (iii) the Exchanged Securities may not be resoldor transferred on the official stock transfer records of Company without furnishing to Company an opinion of counsel reasonablyacceptable to Company that such sale or transfer of the Exchanged Securities will not violate the registration provisions of applicablefederal and state securities laws; and (iv) certificates representing the Securities shall have endorsed on them a restrictivelegend to this effect as set forth in Section 3.3 of the Existing Securities Purchase Agreement.

(e)	TheHolder acknowledges that: (i) there is no government or other insurance covering such Exchanged Securities; and (ii) there arerisks associated with the acquisition of the Exchanged Securities.

(f)	TheHolder, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financialmatters so as to be capable of evaluating the merits and risks of the prospective investment in the Exchanged Securities, and hasso evaluated the merits and risks of such investment. Such Holder understands that it must bear the economic risk of this investmentin the Exchanged Securities indefinitely, and is able to bear such risk and is able to afford a complete loss of such investment.

(g)	Ifthe Holder is not a United States person (as defined by Section 7701(a)(30) of the Code), the Holder hereby represents thatit has satisfied itself as to the full observance of the laws of its jurisdiction in connection with any invitation to subscribefor the Exchanged Securities or any use of this Agreement, including (i) the legal requirements within its jurisdiction for thepurchase of the Exchanged Securities, (ii) any foreign exchange restrictions applicable to such purchase, (iii) any governmentalor other consents that may need to be obtained, and (iv) the income tax and other tax consequences, if any, that may be relevantto the purchase, holding, redemption, sale, or transfer of the Exchanged Securities. The Holder’s acquisition of and continuedbeneficial ownership of the Exchanged Securities will not violate any applicable securities or other laws of the Holder’sjurisdiction.

3.7	Exculpation.The Holder acknowledges that it is not relying upon any Person, other than the Company and its officers and directors, in makingits investment or decision to invest in the Company.

3.8	Residence.If the Holder is an individual, then the Holder resides in the state or province identified in the address of the Holder set forthon the Holder’s signature page hereto; if the Holder is a partnership, corporation, limited liability company or other entity,then the office or offices of the Holder in which its principal place of business is identified in the address or addresses ofthe Holder set forth on the Holder’s signature page hereto.

4.	Conditionsto Company’s Obligations Hereunder.

The obligationsof the Company to the Holder hereunder are subject to the satisfaction of each of the following conditions, provided that theseconditions are for the Company's sole benefit and may be waived by the Company at any time in its sole discretion by providingthe Holder with prior written notice thereof:

4.1	The Holdershall have duly executed this Agreement and delivered the same to the Company.

4.2	The Holdershall have duly executed the Accredited Investor Questionnaire attached as **Exhibit A** hereto and delivered the same to theCompany.

4.3	The representationsand warranties of the Holder shall be true and correct in all material respects as of the date when made and as of the ClosingDate as though made at that time (except for representations and warranties that speak as of a specific date which shall be trueand correct as of such specified date), and the Holder shall have performed, satisfied and complied in all material respects withthe covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Holder ator prior to the Closing Date.

4.4	The Companyshall have obtained all governmental, regulatory or third party consents and approvals, if any, necessary for the consummationof the Exchange.

4.5	The Company’sboard of directors shall have duly authorized the Exchange.

4.6	The Holdershall have duly executed and delivered a security agreement evidencing the Lien (the “**Security Agreement**”).

5.	Conditionsto Holder’s Obligations Hereunder.

The obligationsof the Holder hereunder are subject to the satisfaction of each of the following conditions, provided that these conditions arefor the Holder's sole benefit and may be waived by the Holder at any time in its sole discretion by providing the Company withprior written notice thereof:

5.1	The Companyshall have duly executed and delivered this Agreement to the Holder.

5.2	The Companyshall have duly executed and delivered to the Holder the Exchanged Note and the Exchanged Warrant.

5.3	The Companyshall have obtained all governmental, regulatory or third party consents and approvals, if any, necessary for the consummationof the Exchange.

5.4	The Companyshall have duly executed and delivered the Security Agreement.

6.	Miscellaneous.

6.1	Termination.This Agreement may be terminated by the Company or the Holder if the Closing does not occur on or before April 30, 2012.

6.2	MiscellaneousProvisions. Section 9 of the Existing Securities Purchase Agreement (as amended hereby) is hereby incorporated by referenceherein, *mutatis mutandis*.

 

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IN WITNESS WHEREOF, theparties hereto have executed this Amendment and Exchange Agreement to be effective as of the day and year first above written.