EXHIBIT 10.24
   NEITHER
THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON THE EXERCISE OF THESE
SECURITIES HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES
ACT”), OR ANY STATE SECURITIES LAWS.  THE SECURITIES
REPRESENTED HEREBY MAY NOT BE EXERCISED, OFFERED, SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE ASSIGNED (EACH A “TRANSFER”) EXCEPT (A)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSFER NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (B) TO THE EXTENT THE
TRANSFER DOES NOT CONSTITUTE AND WILL NOT RESULT IN A VIOLATION OF APPLICABLE
FEDERAL OR STATE SECURITIES LAWS, AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT (TO THE EXTENT REQUESTED BY COUNSEL OF THE
COMPANY), THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.  THE HOLDER HEREOF AGREES THAT IT WILL DELIVER, OR CAUSE TO
BE DELIVERED, TO EACH PERSON TO WHOM THE SECURITIES HEREBY REPRESENTED ARE
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND.  THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF
THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
SECURED BY SUCH SECURITIES.
  10%
UNSECURED SUBORDINATED CONVERTIBLE PROMISSORY NOTE
   Note No.:
    __
              ____________,
      2009$__________
              Santa Ana,
      California
  FOR VALUE
RECEIVED, BALQON CORPORATION, a Nevada corporation (“Company”), promises
to pay to _____________________________________ (“Holder”), or its
registered assigns, the principal sum of
_________________________________________ DOLLARS ($_______), or such lesser
amount as shall equal the outstanding principal amount hereof, together with
interest from the date of this 10% Unsecured Subordinated Convertible Promissory
Note (this “Note”) on the unpaid
principal balance at a rate equal to 10% per annum, computed on the basis of the
actual number of days elapsed and a year of three hundred sixty-five (365)
days.  Interest on the outstanding principal balance of this Note
shall be payable quarterly as described in Section 2.
Subject to Section 6, all
unpaid principal, together with any then unpaid and accrued interest and other
amounts payable hereunder, shall be due and payable on the Note Maturity Date
(as defined below). Subject to Section 6, any
unpaid principal and accrued and unpaid interest on the Note Maturity Date shall
be payable in cash. Upon payment in full of all principal and interest payable
hereunder, this Note shall be surrendered to the Company for
cancellation.
  This Note
is being issued pursuant to the terms and conditions contained in that certain
Securities Purchase Agreement of even date herewith between the original Holder
and the Company (the “Securities Purchase
Agreement”) and pursuant to the terms and conditions contained in the
Company’s Confidential Private Placement Memorandum dated March 23, 2009
(the “Memorandum”). This
Note, together with the similar 10% Unsecured Subordinated Convertible
Promissory Notes issued pursuant to the Securities Purchase Agreements and the
Memorandum, are collectively referred to herein as the “Notes.”
  1
  The
following is a statement of the rights of the Holder and the conditions to which
this Note is subject, and to which the Holder, by the acceptance of this Note,
agrees:
  1.             Certain
Definitions.  For purposes of this Note, the following terms
shall have the following respective meanings:
  “Closing Bid Price”
and “Closing Sales
Price” means, for any security as of any date, the last closing bid price
and last closing trade price, respectively, for such security on the principal
securities exchange or trading market where such security is listed or traded as
reported by Bloomberg, or, if such principal market begins to operate on an
extended hours basis and does not designate the closing bid price or the closing
trade price, as the case may be, then the last bid price or the last trade
price, respectively, of such security prior to 4:00:00 p.m., New York time, as
reported by Bloomberg, or, if the foregoing do not apply, the last closing bid
price or last trade price, respectively, of such security in the OTC Bulletin
Board for such security as reported by Bloomberg, or, if no closing bid price or
last trade price, respectively, is reported for such security by Bloomberg, the
average of the bid prices, or the ask prices, respectively, of any market makers
for such security as reported in the “pink sheets” by Pink OTC Markets. If the
Closing Bid Price or the Closing Sale Price cannot be calculated for a security
on a particular date on any of the foregoing bases, the Closing Bid Price or the
Closing Sale Price, as the case may be, of such security on such date shall be
the fair market value as mutually determined by the Company and the
Holder.  All such determinations to be appropriately adjusted for any
stock dividend, stock split, stock combination or other similar transaction
during the applicable calculation period.
  “Common Stock” means
shares of the common stock, $0.001 par value per share, of the
Company.
  “Conversion Shares”
means the shares of Common Stock issuable upon conversion of this
Note.
  “Event of Default”
means any of the events specified as such in Section 5.1.
  “Holder” means the
person or entity specified in the introductory paragraph of this Note or any
transferee that is at the time the registered holder of this Note. The Holder or
any transferee is an “accredited investor” as defined under U.S. federal
securities laws or otherwise will qualify to allow this offering to take place
as a private placement under applicable securities laws.
  “Insolvency or Liquidation
Proceeding” shall mean (i) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or other similar
case or proceeding, relative to the Company or to its creditors, as such, or to
its assets, or (ii) any liquidation, dissolution, reorganization or winding up
of the Company, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy,
  2
  or (iii)
any assignment for the benefit of creditors or any other marshaling of assets
and liabilities of the Company.
  “Note Maturity Date”
shall mean the earlier of (i) March 31, 2012, or (ii) the date as of
which the outstanding principal and accrued interest on this Note and all other
payments payable hereunder are due and payable to the Holder pursuant to Section 5.2.
  “Reorganization
Securities” shall mean shares of stock of the Company, or its successor,
as reorganized, or other securities of the Company or any other person provided
for by a plan of reorganization, the payment of which is subordinated, at least
to the same extent as this Note, to the payment of all Senior Indebtedness which
may at the time be outstanding and the principal of which is due no earlier than
the principal of this Note, provided that the rights of the holders of the
Senior Indebtedness are not impaired thereby or such holders as a class shall
have approved such plan of reorganization.
  “Representative” shall
mean the trustee, agent or other representative for holders of all or any of the
Senior Indebtedness, if any, designated in the indenture, agreement or other
document creating, evidencing or governing such Senior Indebtedness or pursuant
to which it was issued, or otherwise duly designated by the holders of such
Senior Indebtedness.
  “Senior Indebtedness”
shall mean the principal of and unpaid interest on all indebtedness of the
Company incurred on, before or after the date of this Note (i) for money
borrowed from any bank, savings and loan or other financial institution or any
other person, and is evidenced by notes, bonds, debentures or other written
obligations and (ii) in connection with any renewals or extensions of any
indebtedness described in (i) above; provided, however, that the
term shall not include (a) any lease financing arrangement involving the Company
and (b) indebtedness which by the terms of the instrument creating or evidencing
it is subordinated to or on a parity with this Note.
  Other
capitalized terms not defined in this Note have the same meaning as in the
Securities Purchase Agreement.
  2.         
   Interest.  This
Note will bear interest at a rate of 10% per annum. Accrued interest on this
Note shall be due and payable quarterly on the fifth (5th) day
after the last business day of each calendar quarter beginning with the quarter
ended June 30, 2009, with a final installment due on the Note Maturity
Date, whether by acceleration, scheduled maturity or otherwise, unless such
amounts are converted into Common Stock pursuant to the terms set forth herein.
Subject to Section 6, any
accrued interest on this Note that is due on or prior to the Note Maturity Date
shall be payable in cash.
  3.         
   Prepayment.
At any time after March 31, 2010, upon fifteen (15) days prior written notice to
the Holder (which notice may be sent to the Holder prior to March 31, 2010), the
Company may prepay this Note in whole or in part; provided, however, that: (i)
any prepayment of this Note may only be made in connection with the prepayment
of all Notes issued under the Memorandum on a pro rata basis, based on the
respective aggregate outstanding principal amounts of each such Note, and (ii)
any such prepayment will be applied first to the payment
of expenses due under this Note, second to interest accrued on this Note and
third, if the amount of prepayment exceeds the amount of all such expenses and
accrued interest, to the payment of principal of this Note.
  3
  4.            
Subordination.
  4.1           Subordinated
Notes Subordinate to Senior Indebtedness. The provisions of this Section 4 apply
notwithstanding anything to the contrary contained in this Note. The Company
covenants and agrees, and the Holder, by such Holder’s acceptance hereof,
likewise covenants and agrees, that, to the extent and in the manner hereinafter
set forth in this Section, the indebtedness represented by this Note and the
payment of the principal of and interest on this Note are hereby expressly made
subordinate and subject in right of the prior payment in full of all Senior
Indebtedness. This Section 4
constitutes a continuing offer to all persons who become holders of, or continue
to hold, Senior Indebtedness, each of whom is an obligee hereunder and is
entitled to enforce such holder’s rights hereunder, subject to the provisions
hereof, without any act or notice of acceptance hereof or reliance
hereon.
  4.2           Payment
Over of Proceeds Upon Dissolution, Etc.
  (a)           In
the event of any Insolvency or Liquidation Proceeding, all Senior Indebtedness
shall first be paid in full before the Holder is entitled to receive any direct
or indirect payment or distribution of any cash, property or securities
(excluding Reorganization Securities) on account of the principal of or interest
on this Note.
  (b)           The
holders of Senior Indebtedness (or their respective Representatives) shall be
entitled to receive directly, for application to the payment thereof (to the
extent necessary to pay all such Senior Indebtedness in full after giving effect
to any substantially concurrent payment or distribution to the holders of such
Senior Indebtedness), any payment or distribution of any kind or character,
whether in cash, property or securities (excluding Reorganization Securities but
including any payment or distribution, except Reorganization Securities, which
may be payable or deliverable by reason of the payment of any other indebtedness
of the Company being subordinated to the payment of this Note) which may be
payable or deliverable in respect of this Note in any such Insolvency or
Liquidation Proceeding.
  (c)           In
the event that, notwithstanding the foregoing provisions of this Section 4.2, the
Holder shall have received any payment from or distribution of assets of the
Company in an Insolvency or Liquidation Proceeding or the estate created by the
commencement of any such Insolvency or Liquidation Proceeding, of any kind or
character in respect of this Note whether in cash, property or securities
(excluding Reorganization Securities but including any payment or distribution,
except Reorganization Securities, which may be payable or deliverable by reason
of the payment of any other indebtedness of the Company being subordinated to
the payment of this Note) before all Senior Indebtedness is paid in
full, then and in such event such payment or distribution shall be received and
held in trust for and shall be paid over to the holders of the Senior
Indebtedness remaining unpaid (or their respective Representatives), to the
extent necessary to pay all such Senior Indebtedness in full after giving effect
to any substantially concurrent payment or distribution to the holders of such
Senior Indebtedness, for application to the payment in full of such Senior
Indebtedness.
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  4.3           Default
on Senior Indebtedness.
  (a)           If
there exists a default in the payment when due (whether at maturity or upon
acceleration or mandatory repayment, or on any principal installment payment
date or interest payment date, or otherwise) of any Senior Indebtedness (a
“Payment
Default”) and such default shall not have been cured or waived in writing
by or on behalf of the requisite percentage of the holders of such Senior
Indebtedness (or their Representative, if any), then any payment on account of
principal of or interest on this Note which the Holder would then be entitled to
receive, but for the provisions of this Section 4.3(a),
shall instead be paid over to the holders of such Senior Indebtedness (or their
Representative, if any) until all amounts of Senior Indebtedness then due and
payable have been paid in full, prior to any direct or indirect payment by or on
behalf of the Company to the holder of any principal of or interest on this
Note.
  (b)           The
Company may not, directly or indirectly, make, and the Holder may not ask,
demand, take or receive from or on behalf of the Company, any payment on account
of the principal of or interest on this Note during the period (a “Deferral Period”)
from the date the Company and/or the Holder receive from a holder of Senior
Indebtedness a notice (a “Deferral Notice”)
of:
  (i)           the
existence of a Payment Default; or
  (ii)           the
existence of any event of default (other than a Payment Default) under any
agreement or instrument pursuant to which any Senior Indebtedness is issued, in
each instance as now in effect or as hereafter from time to time modified or
amended, without the necessity of any consent by or notice to the Holders (a
“Specified Covenant
Default”);
  until the
earlier of (i) the date such Payment Default or Specified Covenant Default is
cured, waived in writing or otherwise ceases to exist and (ii) the one hundred
eightieth (180th) day
after receipt by the Company and/or by the holder of this Note of such Deferral
Notice; provided, however, that (x)
only one Deferral Notice relating to the same Payment Default or Specified
Covenant Default may be given, (y) no subsequent Deferral Notice may be given
with respect to any Payment Default or Specified Covenant Default existing at
the time an effective Deferral Notice is given and (z) if any such Deferral
Notice has been given, no subsequent Deferral Notice with respect to any number
of different Payment Defaults or Specified Covenant Defaults shall be effective
until the later of (1) the date such subsequent Deferral Notice is received by
the Company and the holders of
Subordinated Debentures and (2) the three hundred sixty-fifth (365th) day
after receipt of the then most recent prior effective Deferral Notice. So long
as any Senior Indebtedness is outstanding, the Holder shall give the holders of
the Senior Indebtedness five (5) business days prior written notice of any
proposed demand for payment or institution of proceedings with respect to this
Note (which notice may be given during a Deferral Period provided that the
proposed demand for payment is not to be made or the proposed proceedings are
not to be instituted until the expiration of such Deferral Period).
  5
  (c)           Upon
termination of any Deferral Period the Company shall resume payments on account
of the principal of and interest on this Note subject to the obligation of the
Company and the Holder to pay over to the holders of Senior Indebtedness amounts
otherwise payable on account of the principal of and interest on this Note
pursuant to the provisions of, and in the circumstances specified in, this Section 4.
  (d)           During
the first one hundred twenty (120) days of any Deferral Period, payment on
account of this Note may not be accelerated unless a voluntary Insolvency or
Liquidation Proceeding shall be instituted by the Company or an involuntary
Insolvency or Liquidation Proceeding shall be instituted against the Company and
such proceeding remains undismissed for a period of sixty (60) days. So long as
any Senior Indebtedness is outstanding, the Holder shall give the holders of the
Senior Indebtedness five (5) business days’ prior written notice of any proposed
acceleration with respect to this Note (which notice may be given during a
Deferral Period provided that the proposed acceleration is not to be effective
until the expiration of such Deferral Period).
  (e)           In
the event that, notwithstanding the foregoing provisions of this Section 4.3, any
payment shall be made by or on behalf of the Company and received by the Holder
at a time after the giving of a Deferral Notice and during a Deferral Period,
then such payment shall be held in trust for the benefit of and shall be
immediately paid over to the holders of Senior Indebtedness remaining unpaid or
their respective Representatives, for application to the payment in full of all
Senior Indebtedness in accordance with its terms (after giving effect to any
prior or substantially concurrent payment to the holders of such Senior
Indebtedness).
  4.4           Subrogation
to Rights of Holders of Senior Indebtedness. After all amounts payable
under or in respect of Senior Indebtedness are paid in full, the Holder shall be
subrogated to the extent of the payments or distributions made to the holders
of, or otherwise applied to payment of, such Senior Indebtedness pursuant to the
provisions of this Section 4
(equally and ratably with the holders of all indebtedness of the Company which
by its express terms is subordinate and subject in right of payment to Senior
Indebtedness to substantially the same extent as this Note is so subordinate and
subject in right of payment and which is entitled to like rights of
subrogation), to the rights of the holders of such Senior Indebtedness (or their
respective Representatives) to receive payments and distributions of cash,
property and securities applicable to the Senior Indebtedness
until the principal of and interest on this Note shall be paid in full. For
purposes of such subrogation, no payments or distributions to the holders of the
Senior Indebtedness (or their respective Representatives) of any cash, property
or securities to which the Holder would be entitled except for the provisions of
this Section 4, and
no payments over pursuant to the provisions of this Section 4 to the
holders of Senior Indebtedness (or their respective Representatives) by the
Company or the Holder shall, as among the Company and its creditors (other than
holders of Senior Indebtedness and the Holder), be deemed to be a payment or
distribution by the Company to or on account of Senior Indebtedness it being
understood that the provisions of this Section 4 are
solely for the purpose of defining the relative rights of the holders of Senior
Indebtedness on the one hand and the Holder on the other hand.
  6
  If any
payment or distribution to which the Holder would otherwise have been entitled
but for the provisions of this Section 4 shall
have been applied, pursuant to the provisions of this Section 4, to
the payment of all amounts payable under the Senior Indebtedness, then and in
such case, the Holder shall be entitled to receive (equally and ratably with the
holders of all indebtedness of the Company which by its express terms is
subordinate and subject in right of payment to Senior Indebtedness to
substantially the same extent as this Note is subordinate and subject in right
of payment and which is entitled to like rights) from the holders of such Senior
Indebtedness (or their respective Representatives) any substantially
contemporaneous payments or distributions received by such holders of Senior
Indebtedness (or their respective Representatives) in excess of the amount
sufficient to pay in full all obligations payable under or in respect of such
Senior Indebtedness.
  4.5           Rights of
Holders Not to Be Impaired. Nothing contained in this Section 4 or
elsewhere in this Note is intended to or shall:
  (a)           impair,
as among the Company, its creditors other than holders or Senior Indebtedness
and the Holder, the obligation of the Company, which is absolute and
unconditional, to pay to the Holder the principal of and premium, if any, and
interest on this Note as and when the same shall become due and payable in
accordance with their terms; or
  (b)           affect
the relative rights against the Company of the Holder of this Note and creditors
of the Company other than the holders of Senior Indebtedness; or
  (c)           prevent
the Holder from exercising all remedies otherwise permitted by applicable law
upon default subject to the rights, if any, under this Section 4 of the
holders of Senior Indebtedness to receive payments or distributions otherwise
payable or deliverable to, or received by, such holder upon the exercise of any
such remedy and subject to the restriction on acceleration set forth in Section 4.3(d).
  4.6           Effectuation
of Subordination. If the Holder does not file a proper claim or proof of
debt in the form required in any Insolvency or Liquidation Proceeding prior to thirty
(30) days before the expiration of the time to file such claims or proofs, then
the holders of the Senior Indebtedness, or their Representatives, are hereby
authorized, and shall have the right (without any duty), to file an appropriate
claim for and on behalf of such holder.
  7
  4.7           No Waiver
of Subordination Provisions. No right of any present or future holder of
any Senior Indebtedness, or Representative thereof, to enforce subordination as
herein provided shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Company or by any act or failure to act
by any such holder or Representative thereof, or by any noncompliance by the
Company with the terms, provisions and covenants of this Note regardless of any
knowledge thereof which any such holder or Representative thereof may have or be
otherwise charged with.
  Without
in any way limiting the generality of the foregoing paragraph, the holders of
Senior Indebtedness (or their Representatives, if applicable) may, at any time
and from time to time, without the consent of or notice to the Holder, without
incurring responsibility to the Holder and without impairing or releasing the
subordination and other benefits provided in this Section 4 or the
obligations hereunder of the Holder to the holders of Senior Indebtedness, do
any one or more of the following all without notice to the Holder and even if
any right of reimbursement or subrogation or other right or remedy of the Holder
is affected, impaired or extinguished thereby:
  (a)           change
the manner, place or terms of payment or change or extend the time of payment
of, or renew, exchange, amend or alter, the terms of any Senior Indebtedness,
any security therefor or guaranty thereof or any liability of the Company or any
guarantor to such holder, or any liability incurred directly or indirectly in
respect thereof, or otherwise  amend, renew, exchange, modify or
supplement in any manner Senior Indebtedness or any instrument evidencing or
guaranteeing or securing the same or any agreement under which Senior
Indebtedness is outstanding;
  (b)           sell,
exchange, release, surrender, realize upon, enforce or otherwise deal with in
any manner and any order any property pledged, mortgaged or otherwise securing
Senior Indebtedness or any liability of the Company or any guarantor to such
holder, or any liability incurred directly or indirectly in respect
thereof;
  (c)           settle
or compromise any Senior Indebtedness or any other liability of the Company or
any guarantor of the Senior Indebtedness to such holder or any security therefor
or any liability incurred directly or indirectly in respect thereof and apply
any sums by whomsoever paid and however realized to any liability (including,
without limitation, Senior Indebtedness) in any manner or order;
and
  (d)           fail
to take or to record or otherwise perfect, for any reason or for no reason, any
lien or security interest securing Senior Indebtedness by whomsoever granted,
exercise or delay in or refrain from exercising any right or remedy
against the Company or any security or any guarantor or any other person, elect
any remedy and otherwise deal freely with the Company and any security and any
guarantor of the Senior Indebtedness or any liability of the Company or any
guarantor to such holder or any liability incurred directly or indirectly in
respect thereof.
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  4.8           Reliance
on Court Orders; Evidence of Status. Upon any payment or distribution of
assets of the Company referred to in Section 4.2, the
Holder shall be entitled to rely upon a certificate of the receiver, trustee in
bankruptcy, liquidating trustee, agent or other person making such payment or
distribution delivered to the Holder for the purpose of ascertaining the persons
entitled to participate in such payment or distribution, the holders of Senior
Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Section 4.
  In the
absence of any such receiver, trustee in bankruptcy, liquidating trustee, agent
or other person, the holder of this Note shall be entitled to rely upon a
written notice by a person representing himself to be a holder of Senior
Indebtedness (or a Representative on behalf of such holder) as evidence that
such person is a holder of Senior Indebtedness (or is such a Representative) for
any relevant purpose. In the event that any holder determines in good faith that
further evidence is  required with respect to the right of any person
as a holder of Senior Indebtedness (or such a Representative), as to the extent
to which such person is entitled to participate in such payment or distribution,
and as to other facts pertinent to the rights of such person under this Section 4, such
holder may request such person to furnish evidence to the reasonable
satisfaction of such holder as to the amount of Senior Indebtedness held by such
person, the extent to which such person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
person under this Section 4, and
if such evidence is not furnished such holder may defer (without liability to
any holder of Senior Indebtedness or any Representative of such holder) any
payment to such person pending judicial determination as to the right of such
person to receive such payment or until such time as such holder shall be
otherwise satisfied as to the right of such person to receive such
payment.
  4.9           Not to
Prevent Events of Default. The failure to make a payment on account of
the principal of or interest on this Note by reason of any provision of this
Section 4
shall not be construed as preventing the occurrence of a default or an Event of
Default under this Note. Except as expressly provided in Section 4.3(d),
nothing in this Section 4 shall
affect the rights of the Holder to accelerate the maturity of this Note in
accordance with its terms.
  4.10           Amendments.
Without the prior written consent of the holders of the Senior Indebtedness, the
Company and the Holder shall not (i) amend, supplement or otherwise modify any
provision of this Section 4, (ii)
accelerate the payment of the principal of or interest on this Note or (iii) if
such amendment would have a material adverse effect on the holders of the Senior
Indebtedness, amend, supplement or otherwise modify any other provision of this
Note.
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  5.           
 Default.
  5.1           Events of
Default. If any of the following events (each, an “Event of Default” and
collectively, “Events
of Default”) shall occur:
  (a)           the
Company shall default in the payment of any part of the principal of this
Note;
  (b)           the
Company shall default in the payment of any installment of interest on this Note
for more than fifteen (15) days after the same shall become due and
payable;
  (c)           the
Company shall breach or default in the performance of any covenant or warranty
of the Company in this Note, and continuance of such breach for a period of
thirty (30) days after there has been given, by registered or certified mail, to
the Company by the holder of this Note, a written notice specifying such breach
or default and requiring it to be remedied;
  (d)           a
court having jurisdiction in the premises shall enter a decree or order for
relief in respect of the Company in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) of the Company or for any substantial part of its
property, or ordering the winding-up or liquidation of its affairs, and such
decree or order shall remain unstayed and in effect for a period of sixty (60)
consecutive days; or
  (e)           the
Company shall commence a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, shall consent to the
entry of an order for relief in an involuntary case under any such law, or shall
consent to the appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator (or other similar official) of the
Company or for any substantial part of its property, or shall make any general
assignment for the benefit of creditors, or shall fail generally to pay its
debts as they become due, or shall take any corporate action in furtherance of
any of the foregoing;
  then and
in any such event the holder of this Note may at any time (unless all defaults
theretofore or thereupon shall have been remedied) at its option, by written
notice to the Company, declare this Note to be due and payable, whereupon the
same shall forthwith mature and become due and payable without presentment,
demand, protest or other notice, all of which are hereby waived.
  5.2           Remedies
on and Notices of Default. Subject to the provisions of Section 4, in
case any one or more Events of Default shall occur, the Holder may proceed to
protect and enforce the rights of such holder by a suit in equity, action at law
or other appropriate proceeding, whether for the specific performance of any
agreement contained in this Note, or for an injunction against a violation of
any of the terms or provisions hereof or thereof, or in aid of the exercise of
any power granted hereby or thereby or by law. In
case of a default under this Note, the Company will pay to the Holder such
further amount as shall be sufficient to cover the reasonable cost and expense
of enforcement, including, without limitation, reasonable attorneys’ fees. If
the Holder shall give any notice or take any other action in respect of a
claimed default, the Company shall forthwith give written notice thereof to all
other holders of similarly subordinated notes at the time outstanding,
describing the notice or action and the nature of the claimed default. No course
of dealing and no delay on the part of any holder of this Note in exercising any
right shall operate as a waiver thereof or otherwise prejudice such holder’s
rights or the rights of the holder of any similarly subordinated notes. No
remedy conferred by this Note upon the holder shall be exclusive of any other
remedy referred to herein or now or hereafter available at law, in equity, by
statute or otherwise.
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  6.           Conversion.
  6.1           Automatic
Conversion. If at any time after one hundred eighty (180) days after the
issuance of this Note the Closing Bid Price or Closing Sales Price, as the case
may be, of a share of the Company’s Common Stock equals or exceeds $4.50
(subject to appropriate adjustment in the event of a stock split, stock
dividend, combination or similar event) for twenty (20) consecutive trading
days, then the principal amount of this Note shall automatically convert into
shares of Common Stock at the Conversion Price (as defined below). Accrued and
unpaid interest on the date of such automatic conversion shall be paid in cash
by the Company. The conversion will be deemed to have occurred as of the close
of business on such twentieth (20th)
consecutive trading day. The Company shall notify the Holder in writing within
one (1) trading day after any automatic conversion, and will cause certificate
representing the Conversion Shares to be issued within three (3) trading days
after automatic conversion, and will deliver those certificates to the Holder by
overnight courier immediately after receipt of the original of this Note for
cancellation.
  6.2           Conversion
Procedure in the Event of Automatic Conversion. In the event of automatic
conversion, the outstanding principal under this Note will convert automatically
without any further action by the Company whether or not the Note is surrendered
to the Company or its transfer agent. The Company will not be obligated to issue
certificates evidencing the securities issuable upon automatic conversion of
this Note unless this Note is either delivered to the Company or its transfer
agent, or the Holder notifies the Company or its transfer agent that this Note
has been mutilated, lost, stolen or destroyed and executes an agreement
reasonably satisfactory to the Company to indemnify the Company from any loss
incurred by it in connection with this Note. At its expense, the Company will,
as soon as reasonably practicable thereafter, issue and deliver to the Holder a
certificate for the number of shares of Common Stock to which the Holder will be
entitled upon conversion (bearing such legends as are required by applicable
state and federal securities laws in the opinion of counsel to the Company),
together with a check payable to the Holder for any cash amounts payable as
described in Section 6.1
(with respect to accrued and unpaid interest) and Section 6.5
(with respect to fractional shares).
  6.3           Voluntary
Conversion. The Holder may, at any time before this Note has been repaid
in full, elect to convert all or any portion of the outstanding principal into
shares of Common Stock at the Conversion Price.
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  6.4           Conversion
Procedure in the Event of Voluntary Conversion.
  (a)           Each
voluntary conversion of this Note shall be effected by the surrender of this
Note at the principal office of the Company at any time during normal business
hours, together with a written notice by the Holder stating that the Holder
desires to convert the entire, or a specified increment of, principal of this
Note into Common Stock. Each conversion of a Note will be deemed to have been
effected as of the close of business on the date on which this Note has been
surrendered and the notice has been received, and at that time, the rights of
the Holder of this Note will cease and the person or persons in whose name or
names any certificate or certificates for Common Stock are to be issued upon
conversion will be deemed to have become the Holder or Holders of record of the
shares of Common Stock represented thereby.
  (b)           Within
two (2) trading days after a conversion has been effected, the Company will
deliver to the converting holder:
  (i)           a
certificate or certificates representing the number of shares of Common Stock
issuable by reason of conversion in such name or names and such denomination or
denominations as the converting holder has specified; and
  (ii)           a
replacement Note representing the principal amount of this Note delivered to the
Company in connection with the conversion but which was not
converted.
  (c)           The
issuance of certificates for Common Stock upon conversion of this Note will be
made without charge to the Holder for any tax in respect thereof or other cost
incurred by the Company in connection with conversion and the related issuance
of Common Stock. Upon conversion of any portion of this Note, the Company will
take all actions as are necessary in order to ensure that the Common Stock
issuable with respect to conversion will be validly issued, fully paid and
nonassessable.
  (d)           The
Company will not close its books against the transfer of this Note or of the
shares of Common Stock issued or issuable upon conversion of this Note in any
manner which interferes with the timely conversion of this Note, and will at all
times reserve for issuance the maximum number of shares of Common Stock into
which this Note is convertible.
  6.5           Fractional
Shares; Interest. No fractional shares shall be issued upon conversion of
this Note. In lieu of Company issuing any fractional shares to Holder upon the
conversion of this Note, Company shall pay to Holder an amount in cash equal to
the product obtained by multiplying the Conversion Price applied to effect such
conversion by the
fraction of a share not issued pursuant to the previous sentence. Upon
conversion of this Note in full or the payment of outstanding amounts specified
in this Note, the Company shall be released from all its obligations and
liabilities under this Note.
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  6.6           Conversion
Price. The initial Conversion Price shall be $1.00 per share of Common
Stock. The Conversion Price shall be subject to adjustment as described in Section 7.
  7.           Conversion
Price Adjustments.
  7.1           Adjustments
for Stock Splits and Subdivisions.  In the event Company should
at any time or from time to time after the date of issuance hereof fix a record
date for the effectuation of a split or subdivision of the outstanding shares of
Common Stock or the determination of holders of Common Stock entitled to receive
a dividend or other distribution payable in additional shares of Common Stock
without payment of any consideration by such holders for the additional shares
of Common Stock, then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion
Price shall be appropriately decreased so that the number of shares of Common
Stock issuable upon conversion of this Note shall be increased in proportion to
such increase of outstanding shares.
  7.2           Adjustments
for Reverse Stock Splits.  If the number of shares of Common
Stock outstanding at any time after the date hereof is decreased by a
combination of the outstanding shares of Common Stock, then, following the
record date of such combination, the Conversion Price shall be appropriately
increased so that the number of shares of Common Stock issuable on conversion
hereof shall be decreased in proportion to such decrease in outstanding
shares.
  7.3           Notices
of Record Date, Etc. In the event of:
  (a)           Any
taking by Company of a record of the holders of any class of securities of the
Company for the purpose of determining the holders thereof who are entitled to
receive any dividend (other than a cash dividend payable out of earned surplus
at the same rate as that of the last such cash dividend theretofore paid) or
other distribution or any right to subscribe for, purchase or otherwise acquire
any shares of stock of any class or any other securities or property, or to
receive any other right; or
  (b)           Any
capital reorganization of Company, any reclassification or recapitalization of
the capital stock of Company or any transfer of all or substantially all of the
assets of the Company to any other Person or any consolidation or merger
involving the Company; or
  (c)           Any
voluntary or involuntary dissolution, liquidation or winding-up of the
Company,
  13
  the
Company will mail to the Holder at least ten (10) days prior to the earliest
date specified therein, a notice specifying (A) the date on which any such
record is to be taken for the purpose of such dividend, distribution or right
and the amount and character of such dividend, distribution or right; and (B)
the date on which any such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation or winding-up is expected to
become effective and the record date for determining shareholders entitled to
vote thereon.
  7.4           Reservation
of Stock Issuable Upon Conversion.  The Company shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock for the purpose of effecting the conversion of this Note such
number of its shares of Common Stock as shall from time to time be sufficient to
effect the conversion of this Note; and if at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the
conversion of the entire outstanding principal amount of this Note, without
limitation of such other remedies as shall be available to the Investor of this
Note, Company will use its best efforts to take such corporate action as may, in
the opinion of counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purposes.
  8.          
 Successors
and Assigns.  Subject to the restrictions on transfer described
in Sections 10
and 11, the rights and obligations of Company and the Holder shall be
binding upon and benefit the successors, assigns, heirs, administrators and
transferees of the parties.
  9.         
  Waiver
and Amendment.  Any provision of this Note may be amended,
waived or modified upon the written consent of Company and the holders of a
majority in principal amount of the Notes.
  10.           Transfer
of this Note or Securities Issuable on Conversion Hereof.  With
respect to any offer, sale or other disposition of this Note or securities into
which such Note may be converted, the Holder will give written notice to the
Company prior thereto, describing briefly the manner thereof, together with a
written opinion of the Holder’s counsel, or other evidence if reasonably
satisfactory to the Company, to the effect that such offer, sale or other
distribution may be effected without registration or qualification (under any
federal or state law then in effect). Upon receiving such written notice and
reasonably satisfactory opinion, if so requested, or other evidence, the
Company, as promptly as practicable, shall notify the Holder that the Holder may
sell or otherwise dispose of this Note or such securities, all in accordance
with the terms of the notice delivered to Company.  If a determination
has been made pursuant to this Section 10 that
the opinion of counsel for the Holder, or other evidence, is not reasonably
satisfactory to the Company, the Company shall so notify Investor promptly after
such determination has been made.  Each Note thus transferred and each
certificate representing the securities thus transferred shall bear a legend as
to the applicable restrictions on transferability in order to ensure compliance
with the Securities Act, unless in the opinion of counsel for the Company such
legend is not required in order to ensure compliance with the Securities
Act.  The Company may issue stop transfer instructions to its transfer
agent in connection with such restrictions.  Subject to the foregoing
transfers of this Note shall be registered upon registration books maintained
for such purpose by or on behalf of the Company as provided in the Securities
Purchase Agreement.  Prior to presentation of this Note for
registration of transfer, the Company shall
treat the registered Holder hereof as the owner and the Holder of this Note for
the purpose of receiving all payments of principal and interest hereon and for
all other purposes whatsoever, whether or not this Note shall be overdue and the
Company shall not be affected by notice to the contrary.
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  11.           Assignment
by the Company.  Neither this Note nor any of the rights,
interests or obligations hereunder may be assigned, by operation of law or
otherwise, in whole or in part, by Company without the prior written consent of
Investor.
  12.           Notices.  All
notices, requests, demands, consents, instructions or other communications
required or permitted hereunder shall in writing and faxed, mailed or delivered
to each party at the respective addresses of the parties as set forth in the
Securities Purchase Agreement, or at such other address or facsimile number as
the Company shall have furnished to Investor in writing.  All such
notices and communications shall be effective (i) when sent by Federal Express
or other overnight service of recognized standing, on the business day following
the deposit with such service; (ii) when mailed, by registered or certified
mail, first class postage prepaid and addressed as aforesaid through the United
States Postal Service, upon receipt; (iii) when delivered by hand, upon
delivery; and (iv) when faxed, upon confirmation of receipt.
  13.           Pari
Passu Notes.  The Holder acknowledges and agrees that the
payment of all or any portion of the outstanding principal amount of this Note
and all interest hereon shall be pari passu in right of payment and in all other
respects to the other Notes issued pursuant to the Securities Purchase Agreement
or pursuant to the terms of such Notes.  In the event the Holder
receives payments in excess of its pro rata share of the Company’s payments to
the holders of all of the Notes, then the Holder shall hold in trust all such
excess payments for the benefit of the holders of the other Notes and shall pay
such amounts held in trust to such other holders upon demand by such
holders.
  14.           Payment.  Payment
shall be made in lawful tender of the United States.
  15.           Usury.
In the event any interest is paid on this Note which is deemed to be in excess
of the then legal maximum rate, then that portion of the interest payment
representing an amount in excess of the then legal maximum rate shall be deemed
a payment of principal and applied against the principal of this
Note.
  16.           Waivers.  The
Company hereby waives notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor and all other notices or demands
relative to this instrument.
  17.           Governing
Law.  This Note and all actions arising out of or in connection
with this Note shall be governed by and construed in accordance with the laws of
the State of California, without regard to the conflicts of law provisions of
the State of California, or of any other state.
  [signature
page follows]
  15
  IN
WITNESS WHEREOF, the Company has caused this Note to be issued as of the date
first written above.
  BALQON
      CORPORATION,
                    a
      Nevada corporationBy:
                  /s/
      Balwinder SamraBalwinder
      Samra, Chief Executive Officer






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