Document:

ex_10-5.htm

    
      

      

    

    EXHIBIT 10.5

     

     

    
      EXECUTIVE
EMPLOYMENT AGREEMENT

       

       

      THIS
EXECUTIVE EMPLOYMENT AGREEMENT (the “Agreement”) dated effective
as of October 24, 2008 (“Effective Date”), is made and
entered into by and between BALQON CORPORATION, a Nevada corporation (“Employer”), and HENRY
VELASQUEZ (“Executive”).

       

      R E C I T A L
S

       

      Employer
desires that Executive enter into an employment relationship with Employer in
order to provide the necessary leadership and senior management skills that are
important to the success of Employer. Employer believes that obtaining
Executive’s services as an employee of Employer and the benefits of his business
experience are of material importance to Employer and Employer’s
stockholders.

       

      NOW,
THEREFORE, in consideration of Executive’s employment by Employer and the mutual
promises and covenants contained herein, the receipt and sufficiency of which is
hereby acknowledged, Employer and Executive intend by this Agreement to specify
the terms and conditions of Executive’s employment relationship with
Employer.

       

      1.            
General
Duties of Employer and Executive.

       

      (a)           Employer
agrees to employ Executive and Executive agrees to accept employment by Employer
and to serve Employer in an executive capacity upon the terms and conditions set
forth herein. Employer hereby employs Executive as Vice President Engineering as
of the Effective Date, reporting to the President of Employer (the “President”).  Executive
will also serve as a member of the Board of Directors of Employer (the “Board”).  Executive’s
duties and responsibilities shall be those normally assumed by the Vice
President Engineering of a publicly-owned company similarly situated to
Employer, as well as such other or additional duties, as may from time-to-time
be assigned to Executive by the President. Such other or additional duties shall
be consistent with the senior executive functions set forth above.

       

      (b)           While
employed hereunder, Executive shall use his best efforts to obey the lawful
directions of the Board. Executive shall also use his best efforts to promote
the interests of Employer and to maintain and to promote the reputation of
Employer. While employed hereunder, Executive shall devote his full business
time, efforts, skills and attention to the affairs of Employer and faithfully
perform his duties and responsibilities hereunder.

       

      (c)           While
this Agreement is in effect, Executive may from time to time engage in any
activities that do not compete directly with Employer, provided that such
activities do not interfere with his performance of his duties. Executive shall
be permitted to (i) invest his personal assets as a passive investor in such
form or manner as Executive may choose in his discretion, (ii) participate in
various charitable efforts, and (iii) serve as a member of the Board of
Directors of other corporations which are not competitors of
Employer.

       

      
        
          
          

        

        
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      2.            
Compensation
and Benefits.

       

      (a)           As
compensation for his services to Employer, Employer shall pay to Executive an
annual base salary of $150,000, payable in equal semimonthly payments in
accordance with Employer’s regular payroll policy for salaried employees (the
“Salary”). The
Compensation Committee of the Board (the “Compensation Committee”)
shall perform an annual review of Executive’s Salary based on a review of
Executive’s performance of his duties and Employer’s other compensation
policies. The Compensation Committee may, at its sole discretion, increase (but
not decrease) the Salary at any time, and from time to time; provided, however, that
commencing on the second anniversary of the Effective Date, Executive’s annual
base salary shall be increased to $175,000.

       

      (b)           In
addition to the foregoing Salary, Executive shall be eligible for an annual
incentive bonus (“Incentive
Bonus”) commencing in 2010 with respect to fiscal 2009, based on criteria
determined by the Compensation Committee, at its sole discretion.  The
Incentive Bonus, if any, shall be payable in cash, following the date on which
Employer’s Form 10-K for the previous fiscal year is filed with the Securities
and Exchange Commission, but in no event later than the Short Term Deferral Date
as defined in Section 3(a).

       

      (c)           Upon
Executive’s furnishing to Employer customary and reasonable documentary support
(such as receipts or paid bills) evidencing costs and expenses incurred by him
in the performance of his services and duties hereunder (including, without
limitation, travel and entertainment, cellular telephone, computer and other
home office expenses) and containing sufficient information to establish the
amount, date, place and essential character of the expenditure, Executive shall
be reimbursed for such costs and expenses in accordance with Employer’s normal
expense reimbursement policy.

       

      (d)           Executive
shall be entitled to participate in the medical (including hospitalization),
dental, life and disability insurance plans, to the extent offered by Employer,
and in amounts consistent with Employer’s policy for other senior executive
officers of Employer, with premiums for all such insurance for Executive and his
dependents to be paid by Employer, subject to customary employee
contributions.

       

      (e)           Executive
shall have the right to participate in any additional compensation, benefit,
bonus, pension, stock option, stock purchase, 401(k) or other plan or
arrangement of Employer now or hereafter existing for the benefit of other
senior executive officers of Employer, to the extent offered by Employer, and in
amounts consistent with the Employer’s policy.

       

      (f)       
    Executive shall be entitled to vacation (but in no event
less than three (3) weeks per year), holiday and other paid or unpaid leaves of
absence consistent with Employer’s normal policies for other senior executive
officers of Employer or as otherwise approved by the Board.  Executive
shall be entitled to accrue vacation time for one (1) year.  If
Executive does not take the accrued vacation during the following year, he shall
be paid for the unused vacation at his Salary rate then in effect.

       

      
        
          
          

        

        
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      (g)           Employer
shall purchase and maintain in effect a directors’ and officers’ liability
insurance policy with a minimum limit of liability of $3,000,000 and shall enter
into an indemnification agreement with Executive upon terms and conditions
mutually acceptable to Employer and Executive.

       

      (h)           Employer
agrees, by action of the Nominating and Corporate Governance Committee of the
Board, to nominate Executive as a Class II member of the Board and seek
stockholder approval of such nomination at the 2009 annual meeting of the
stockholders of Employer.

       

      3.          
  Deferred
Compensation.

       

      (a)           This
Agreement is not intended to provide for any deferral of compensation payable
during Executive’s employment pursuant to Section 409A of the Internal
Revenue Code (the “Code”) and, accordingly, any
compensation paid to Executive pursuant to this Agreement during Executive’s
employment is intended to be paid not later than the later of:  (i)
the fifteenth (15th) day of
the third (3rd) month
following the Executive’s first (1st)
taxable year in which such benefit is no longer subject to a substantial risk of
forfeiture, and (ii) the fifteenth (15th) day of
the third (3rd) month
following the first (1st)
taxable year of Employer in which such benefit is no longer subject to a
substantial risk of forfeiture, as determined in accordance with
Section 409A of the Code and any Treasury Regulations and other guidance
issued thereunder.  The date determined under this subsection is
referred to as the “Short-Term
Deferral Date.”  Notwithstanding anything to the contrary
herein, in the event that any compensation paid pursuant to this Agreement
during Executive’s employment is not actually or constructively received by
Executive on or before the Short-Term Deferral Date, to the extent such
compensation, or any portion thereof, constitutes a deferral of compensation
subject to Code Section 409A, then, subject to Section 3(b),
such benefit shall be paid upon Executive’s separation from service, with
respect to Employer and its affiliates within the meaning of Section 409A
of the Code.

       

      (b)           In
the event that Executive is a “specified employee,” as defined in
Section 409A(a)(2)(B)(i) of the Code as of the date of any separation from
service with respect to Employer and its affiliates, no payment of deferred
compensation subject to Code Section 409A may be made to Executive before
the date that is six (6) months after the date of separation from service (or,
if earlier, the date of death of the specified employee), and, in such case, any
payments shall be accumulated and paid on the first date of the seventh (7th) month
following separation from service; provided, however, that any
payment or portion thereof which is subject to an exemption for separation pay
to specified employees as provided under Treasury Regulation § 1.409A, or is
subject to any other exemption provided under Treasury Regulation § 1.409A
allowing for payment to a specified employee prior to the date that is six (6)
months after the date of separation from service, may be paid to Executive upon
separation from service.

       

      4.         
   Preservation
of Business; Fiduciary Responsibility.  Executive shall use his
best efforts to preserve the business and organization of Employer and to
preserve the business relations of Employer. So long as the Executive is
employed by Employer, Executive shall observe and fulfill proper standards of
fiduciary responsibility attendant upon his service and office.

       

      
        
          
          

        

        
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      5.            
No
Specified Term; Employment at Will.  The employment
relationship between Employer and Executive pursuant to this Agreement is not
for any specific term, but may be terminated with or without cause, by Employer
or by Executive, at any time and for any reason, subject to the rights and
obligations of Employer and Executive as set forth in this
Agreement.  Any modification to the nature of the at-will employment
relationship between Employer and Executive must be made in writing, and must be
signed by Executive and by Employer.

       

      6.          
  Termination.  Employer
or Executive may terminate Executive’s employment under this Agreement at any
time, but only on the following terms:

       

      (a)           Employer
may terminate Executive’s employment under this Agreement at any time for “Due Cause” (as defined in
Appendix I
attached hereto and incorporated herein by this reference) upon the good faith
determination by the Board that Due Cause exists for the termination of the
employment relationship.

       

      (b)           If
Executive is incapacitated by accident, sickness or otherwise so as to render
Executive either:  (i)  unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment that can be expected to result in death or can be expected to last
for a continuous period of not less than twelve (12) months; or (ii) by reason
of any medically determinable physical or mental impairment that can be expected
to result in death or can be expected to last for a continuous period of not
less than twelve (12) months is receiving income replacement benefits for a
period of not less than three (3) months under an accident and health plan
covering employees of Employer; and such incapacity is confirmed by the U.S.
Social Security Administration or in accordance with a disability insurance
program maintained by Employer, Employer may terminate Executive’s employment
under this Agreement upon giving Executive or his legal representative written
notice at least thirty (30) days prior to the termination date, subject to the
provisions of Section 7(b).   Notwithstanding anything expressed or implied above to
the contrary, Employer will fully comply with its obligations under the
Americans with Disabilities Act as well as any other applicable federal, state,
or local law, regulation, or ordinance governing the protection of qualified
individuals with disabilities as well as Employer’s obligation to provide
reasonable accommodation thereunder.

       

      (c)           This
Agreement shall terminate immediately upon Executive’s death, subject to the
provisions of Section 7(b).

       

      (d)           Subject
to the provisions of Section 7(c),
Employer may terminate Executive’s employment under this Agreement at any time
for any reason whatsoever, even without Due Cause, by giving a written notice of
termination to Executive, in which case the employment relationship shall
terminate immediately upon the giving of the notice. If Employer terminates the
employment of Executive other than (i) pursuant to Section 6(a) for
Due Cause, (ii) due to incapacity pursuant to Section 6(b) or
due to Executive’s death pursuant to Section 6(c), or
(iii) Executive’s retirement, then the action by Employer, unless consented to
in writing by Executive, shall be deemed to be a constructive termination by
Employer of Executive’s employment (a “Constructive Termination”),
and, in that event, Executive shall be entitled to receive the compensation set
forth in Section 7(c).

       

      
        
          
          

        

        
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      (e)           Executive
may terminate this Agreement at any time within ninety (90) days of the
occurrence of any event comprising “Good Reason” (as defined in
Appendix I
attached hereto and incorporated herein by this reference); provided, however, that
Executive provides Employer with written notice of the event or condition
constituting Good Reason within thirty (30) days of the initial existence of
such event or condition, and that Employer shall have a period of thirty (30)
days to cure such event or condition and, in the event that Employer fails to
cure such event or condition, Executive shall be entitled to receive the
compensation set forth in Section 7(c).

       

      7.           Effect of
Termination.

       

      (a)           If
the employment relationship is terminated (i) by Employer for Due Cause pursuant
to Section 6(a),
(ii) by Executive breaching this Agreement by refusing to continue his
employment, or (iii) by Executive without Good Reason, then all compensation and
benefits shall cease as of the date of termination, other than: (A) those
benefits that are provided by retirement and benefit plans and programs
specifically adopted and approved by Employer for Executive that are earned and
vested by the date of termination; (B) Executive’s pro rata annual Salary
(as in effect as of the date of termination, payable in the manner as prescribed
in the first sentence of Section 2(a)
through the date of termination; (C) any stock options which have vested as
of the date of termination pursuant to the terms of the agreement granting the
options; and (D) accrued vacation as required by California
law.

       

      (b)           If
Executive’s employment relationship is terminated due to Executive’s incapacity
pursuant to Section 6(b) or
due to Executive’s death pursuant to Section 6(c),
Executive or Executive’s estate or legal representative, shall, subject to Section 3 of
this Agreement, be entitled to (i) those benefits that are provided by
retirement and benefits plans and programs specifically adopted and approved by
Employer for Executive that are earned and vested at the date of termination,
(ii) a prorated Incentive Bonus, payable in the manner as prescribed in the
second sentence of Section 2(b) (to
the extent Executive would otherwise be eligible) for the fiscal year in which
incapacity or death occurs, and (iii) a lump-sum cash payment, payable within
ten (10) business days of separation from service due to death or disability,
but in any event, not later than the Short-Term Deferral Date, in an amount
equal to one (1) year of Executive’s then current annual Salary as set forth in
Section
2(a).

       

      (c)           In
the event of a termination of this Agreement as a result of Constructive
Termination, or by Executive for Good Reason, then Employer shall, subject to
Section 3
of this Agreement:

       

      (i)          
pay to Executive on the date of termination his Salary in effect as of the date
of termination through the end of the month during which the termination occurs
plus credit for any vacation earned but not taken;

       

      (ii)           pay
to Executive on the first business day following the expiration of the
revocation period described in Section 7(d)
(provided Executive has not tendered his revocation), but in any event, not
later than the Short-Term Deferral Date, as severance pay an amount equal to two
(2) times Executive’s then current annual Salary;

       

      
        
          
          

        

        
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      (iii)           pay
to Executive  the prorated Incentive Bonus, to the extent Executive
would otherwise be eligible for any, for the fiscal year during which
termination occurs, payable as provided in Section 2(a);

       

      (iv)           maintain,
at Employer’s expense, in full force and effect, for Executive’s continued
benefit, all medical insurance to which Executive was entitled immediately prior
to the date of termination until the earliest of (i) eighteen (18) months or
(ii) the date or dates that Executive’s continued participation in Employer’s
medical insurance plan is not possible under the terms of the plans (the
earliest of (i) and (ii) is referred to herein as the “Benefits Date”). If
Employer’s medical insurance plan does not allow Executive’s continued
participation in the plan, then Employer will pay to Executive, in monthly
installments, from the date on which Executive’s participation in the medical
insurance is prohibited until the date that is eighteen (18) months after the
date of termination, an amount equal to the monthly premium or premiums for
COBRA coverage with respect to Executive for the discontinued medical insurance;
and

       

      (v)           pay
to Executive on the date of termination a lump-sum cash payment equal to
eighteen (18) times the estimated monthly COBRA premiums at the time of
termination (taking into account all known or anticipated premium increases) to
be used by Executive to maintain Executive’s continued medical insurance
coverage for an additional period of eighteen (18) months, pursuant to
Cal-COBRA, following the expiration of the COBRA reimbursement payments set
forth in Section
7(c)(iv).

       

      (d)           Executive
shall be entitled to the payments and benefits described in subsections 7(c)(ii) and
(iv) only if Executive signs an appropriate separation agreement in a
form acceptable to Employer, which includes a release of all claims against
Employer to the fullest extent permitted by law, such agreement actually enters
into effect following any revocation period required by law, and Executive
complies fully with any continuing obligations under this
Agreement.

       

      (e)           Executive
shall not be required to mitigate damages or the amount of any payment provided
for under this Agreement by seeking other employment or otherwise, nor shall the
amount of any payment provided for under this Agreement be reduced by any
compensation earned by Executive as the result of employment by another Employer
after the date of termination, or otherwise.

       

      (f)            Except
as expressly provided herein, the provisions of this Agreement, and any payment
or benefit provided for hereunder, shall not reduce any amounts otherwise
payable, or in any way diminish Executive’s existing rights, or rights which
would accrue solely as a result of the passage of time, under any Employer
Benefit Plan, employment agreement or other contract, plan or
arrangement.

       

      (g)           The
amount of any payment provided under this Agreement shall not be reduced by
reason of any present value calculation.

       

      
        
          
          

        

        
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      (h)           Upon
termination of this Agreement, compensation and benefits shall be paid to the
Executive as set forth in the applicable subsection of this Section 7 and
stock grants or options granted to Executive, if any, shall be governed by the
provisions of all stock grant or option agreements between Employer and
Executive. In the event of a termination of this Agreement by Executive for Good
Reason, all other rights and benefits Executive may have under the employee
and/or executive benefit plans and arrangements of Employer generally shall be
determined in accordance with the terms and conditions of those plans and
arrangements.

       

      8.            
Covenants
of Confidentiality, Nondisclosure and Noncompetition.

       

      (a)           During
the term of this Agreement, Employer will provide to Executive certain
confidential and proprietary information owned by Employer as more fully
described below. Executive acknowledges that he occupies or will occupy a
position of trust and confidence with Employer, and that Employer would be
irreparably damaged if Executive were to breach the covenants set forth in this
Section 8(a).  Accordingly,
Executive agrees that he will not, without the prior written consent of
Employer, at any time during the term of this Agreement or any time thereafter,
except as may be required by competent legal authority or as required by
Employer to be disclosed in the course of performing Executive’s duties under
this Agreement for Employer, use or disclose to any person, firm or other legal
entity, any confidential records, secrets or information obtained by Executive
during his employment hereunder related to Employer or any parent, subsidiary or
affiliated person or entity (collectively, “Confidential Information”).
Confidential Information shall include, without limitation, information about
Employer’s Inventions (as defined in Section 9(a)),
customer lists and product pricing, data, know-how, formulae, processes, ideas,
past, current and planned product development, market studies, computer software
and programs, database and network technologies, strategic planning and risk
management. Executive acknowledges and agrees that all Confidential Information
of Employer and/or its affiliates will be received in confidence and as a
fiduciary of Employer. Executive will exercise utmost diligence to protect and
guard the Confidential Information.

       

      (b)           Executive
agrees that he will not, without the express written consent of the Board, take
with him upon the termination of this Agreement, any document or paper, or any
photocopy or reproduction or duplication thereof, relating to any Confidential
Information.

       

      (c)           
Executive agrees that he will, upon the termination of his employment, return
all Employer’s property including but not limited to vehicles leased or owned by
Employer, mobile telephone, fuel card, personal computer, all documents, working
papers, information whether stored on computer disc or otherwise, and all other
records relating to Employer and its business.  Executive agrees that
he will confirm in writing that he has complied with this clause, if requested
to do so by Employer, within seven (7) days of receipt of such a
request.

       

      (d)           Executive
agrees that, while Executive is employed with Employer, he will not, either
directly or indirectly, have an interest in any business (whether as manager,
operator, licensor, licensee, partner, 5% or greater equity holder, employee,
consultant, director, advisor or otherwise) competitive with Employer or any of
its business activities or solicit individuals or other entities that are
customers or competitors of Employer.  Executive further agrees that,
for a period of twenty-four (24) months after the date of termination of this
Agreement (the “Restricted
Period”), Executive shall not use Employer’s trade secrets, either
directly or indirectly, to compete in any way with the business of Employer and
will not solicit individuals or other entities that are customers or competitors
of Employer during the six-month period immediately prior to the date of
termination of this Agreement, to terminate or change their contracts or
business relations with Employer. Executive also agrees that, for the Restricted
Period, he will not, either directly or indirectly, solicit any employee of
Employer to terminate his employment with Employer.

       

      
        
          
          

        

        
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      (e)           For
purposes of this Section 8, “Employer” shall include any
of its parents, subsidiaries or any other entity in which it holds a 50% or
greater equity interest.

       

      9.           Inventions.

       

      (a)           Any
and all inventions, product, discoveries, improvements, processes, formulae,
manufacturing methods or techniques, designs or styles, software applications or
programs (collectively, “Inventions”) made, developed
or created by Executive, alone or in conjunction with others, during regular
hours of work or otherwise, during the term of Executive’s employment with
Employer and for a period of two years thereafter that may be directly or
indirectly related to the business of, or tests being carried out by, Employer,
or any of its parents, subsidiaries, shall be promptly disclosed by Executive to
Employer and shall be Employer’s exclusive property. The following provisions of
the California Labor Code shall supplement this Section 9(a):

       

      SECTION 2870
OF THE CALIFORNIA LABOR CODE

       

      Application
of Provisions Providing that Employee Shall Assign or Offer to Assign Rights in
Invention to Employer.

       

      (a)           Any
provision in an employment agreement which provides that an employee shall
assign, or offer to assign, any of his or her rights in an invention to his or
her employer shall not apply to an invention that the employee developed
entirely on his or her own time without using employer’s equipment, supplies,
facilities, or trade secret information except for those inventions that
either:

       

      (1)             Relate
at the time of conception or reduction to practice of the invention to
employer’s business, or actual or demonstrably anticipated research or
development of employer; or

       

      (2)             Result
from any work performed by the employee for employer.

       

      (b)           To
the extent a provision in an employment agreement purports to require an
employee to assign an invention otherwise excluded from being required to be
assigned under subdivision (a), the provision is against the public policy of
this state and is unenforceable.

       

      
        
          
          

        

        
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      (b)           Executive
will, upon Employer’s request and without additional compensation, execute any
documents necessary or advisable in the opinion of Employer’s legal counsel to
direct the issuance of patents to Employer with respect to Inventions that are
to be Employer’s exclusive property under this Section 9 or to
vest in Employer title to the Inventions; the expense of securing any patent,
however, shall be borne by Employer.

       

      (c)           Executive
will hold for Employer’s sole benefit any Invention that is to be Employer’s
exclusive property under this Section 9 for
which no patent is issued.

       

      10.           No
Violation.  Executive represents that he is not bound by any
Agreement with any former employer or other party that would be violated by
Executive’s employment by Employer.

       

      11.           Injunctive
Relief.  Executive acknowledges that the breach, or threatened
breach, by Executive of the provisions of this Agreement shall cause irreparable
harm to Employer, which harm cannot be fully redressed by the payment of damages
to Employer. Accordingly, Employer shall be entitled, in addition to any other
right or remedy it may have at law or in equity, to seek an injunction or
restraining Executive from any violation or threatened violation of this
Agreement.

       

      12.           Dispute
Resolution.  Subject to Section 11, all
claims, disputes and other matters in controversy (“dispute”) arising, directly
or indirectly out of or related to this Agreement, or the breach thereof,
whether contractual or noncontractual, and whether during the term or after the
termination of this Agreement, shall be resolved exclusively according to the
procedures set forth in this Section 12, and
not through resort to any judicial proceedings.

       

      (a)           Neither
party shall commence an arbitration proceeding pursuant to the provisions of
Section 12(b)
unless that party first gives a written notice (a “Dispute Notice”) to the other
party setting forth the nature of the dispute. The parties shall attempt in good
faith to resolve the dispute by mediation under the American Arbitration
Association Commercial Mediation Rules in effect on the date of the Dispute
Notice. If the parties cannot agree on the selection of a mediator within twenty
(20) days after delivery of the Dispute Notice, the mediator will be selected by
the American Arbitration Association. If the dispute has not been resolved by
mediation within sixty (60) days after delivery of the Dispute Notice, then the
dispute shall be determined by arbitration in accordance with the provisions
below.

       

      (b)           Any
dispute that is not settled by mediation as provided in Section 12(a)
shall be resolved by arbitration in Orange County, California, before a single
arbitrator appointed by the American Arbitration Association or its successor.
The determination of the arbitrator shall be final and absolute. The arbitrator
shall be governed by the duly promulgated rules and regulations of the American
Arbitration Association or its successor then in effect, and the pertinent
provisions of the laws of the State of California relating to arbitration. The
decision of the arbitrator may be entered as a final judgment in any court of
the State of California or elsewhere. The prevailing party in any such
arbitration shall also be entitled to recover reasonable attorneys’,
accountants’ and experts’ fees and costs of suit in addition to any other relief
awarded the prevailing party.

       

      
        
          
          

        

        
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      13.           Miscellaneous.

       

      (a)           If
any provisions contained in this Agreement is for any reason held to be totally
invalid or unenforceable, such provision will be fully severable, and in lieu of
such invalid or unenforceable provision there will be added automatically as
part of this Agreement a provision as similar in terms as may be valid and
enforceable.

       

      (b)           All
notices and other communications required or permitted hereunder or necessary or
convenience in connection herewith shall be in writing and shall be deemed to
have been given when mailed by registered mail or certified mail, return receipt
requested or hand delivered, as follows (provided that notice of change of
address shall be deemed given only when received):

       

      
        	
                 
      

              	
                If
      to Employer:

              	
                Balqon
      Corporation

              

      

      
        	
                 
      

              	
                1701
      E. Edinger, Unit E-3

              

      

      
        	
                 
      

              	
                Santa
      Ana, CA 92705

              

      

      
        	
                 
      

              	
                Attention:
      Board of Directors

              

      

       

      
        	
                 
      

              	
                If
      to Executive:

              	
                Henry
      Velasquez

              

      

      
        	
                 
      

              	___________________________

      

      
        	
                 
      

              	___________________________

      

       

      or to
such other names or addresses as Employer or Executive, as the case may be,
shall designate by notice to the other party hereto in the manner specified in
this Section 13(b).

       

      (c)           This
Agreement shall be binding upon and inure to the benefit of Employer, its
successors, legal representatives and assigns, and Executive, his heirs,
executors, administrators, representatives, legatees and permitted assigns.
Executive agrees that his rights and obligations hereunder are personal to him
and may not be assigned without the express written consent of Employer. If
Executive should die while any amounts are due to him pursuant to this
Agreement, all such amounts shall be paid to Executive’s devisee, legatee or
other designee, or if there be no such designee, to Executive’s estate. Employer
will require any successor or assign (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of Employer, by Agreement in form and substance satisfactory to
Executive and his legal counsel, expressly, absolutely and unconditionally to
assume and agree to perform this Agreement in the same manner and to the same
extent that Employer would be required to perform each of them if no such
succession or assignment had taken place. Any failure of Employer to obtain such
agreement prior to the effectiveness of any such succession or assignment shall
be a material breach of this Agreement and shall entitle Executive to terminate
Executive’s employment for Good Reason. As used in this Agreement, “Employer” means Balqon
Corporation and any successor or assign to its business and/or assets which
executes and delivers the Agreement provided for in this Section or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law. If at any time during the term of this Agreement Executive is
employed by any company a majority of the voting securities of which is then
owned by Employer, “Employer” as used in this Agreement shall in addition
include that subsidiary company. In that event, Employer agrees that it shall
pay or shall cause the subsidiary company to pay any amounts owed to Executive
pursuant to this Agreement.

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      (d)           This
Agreement replaces and merges all previous agreements and discussions relating
to the same or similar subject matters between Executive and Employer with
respect to the subject matter of this Agreement (other than any option agreement
dated prior to the Effective Date between Executive and Employer), including
without limitation that certain Employment Agreement dated effective as of
August 4, 2008 between Balqon Corporation, a California corporation (“Balqon California”), and
Executive, which Employment Agreement was assumed by Employer upon the closing
of the merger between Employer and Balqon California. This Agreement may not
be modified in any respect by any verbal statement, representation or agreement
made by any employee, officer, or representative of Employer or by any written
agreement unless signed by an officer of Employer who is expressly authorized by
Employer to execute that document.

       

      (e)           The
laws of the State of California will govern the interpretation, validity and
effect of this Agreement without regard to principles of conflicts of law, the
place of execution or the place for performance thereof.

       

      (f)        
   Executive and Employer shall execute and deliver any and all
additional instruments and agreements that may be necessary or proper to carry
out the purposes of this Agreement.

       

      (g)           The
descriptive headings of the several sections of this Agreement are inserted for
convenience only and do not constitute a party of this Agreement.

       

      (h)           This
Agreement may be executed in one or more counterparts, all of which shall be
considered one and the same Agreement.

       

      (i)         
  Executive acknowledges that Executive has had the opportunity to
read this Agreement and discuss it with advisors and legal counsel, if Executive
has so chosen. Executive also acknowledges the importance of this Agreement and
that Employer is relying on this Agreement in entering into an employment
relationship with Executive.

       

      The
undersigned, intending to be legally bound, have executed this Agreement
effective as of the date first written above.

      
         

        
          
            	 	
                    BALQON
      CORPORATION

                  	 
	 	 	 	 
	
                    
                      Date:  October
      24, 2008

                    

                  	
                    By:
      

                  	/s/ Balwinder
      Samra	 
	 	 	
                    Balwinder
      Samra, Chairman
      of the Nominating

                    and
      Corporate Governance Committee

                  	 
	 	 	 	 
	
                    Date:  October
      24, 2008

                  	
                    By:
      

                  	/s/
      Henry Velasquez	 
	 	 	
                    

                      HENRY
      VELASQUEZ

                    

                  	 

          

        

         

      

      
        
          
            
            

          

          
            11

            
              

            

          

          
            
            

          

        

      

       

      APPENDIX I

       

      Additional
Definitions

       

      For
purposes of this Agreement, the following additional capitalized terms shall
have the respective definitions set forth below:

       

      Benefit
Plan. The term “Benefit
Plan” means any benefit plan or arrangement (including, without
limitation, Employer’s profit sharing or stock option or stock incentive plans,
if any, and medical, disability and life insurance plans) in which Executive is
participating (or any other plans providing Executive with substantially similar
benefits).

       

      Due
Cause. The term “Due
Cause” means any of the following events:

       

      (a)           any
intentional misapplication by Executive of Employer’s funds or other material
assets, or any other act of dishonesty injurious to Employer committed by
Executive; or

       

      (b)           Executive’s
conviction of (i) a felony or (ii) a crime involving moral turpitude;
or

       

      (c)           Executive’s
use or possession of any controlled substance or chronic abuse of alcoholic
beverages, which use or possession the Board reasonably determines renders
Executive unfit to serve in his capacity as a senior executive of Employer;
or

       

      (d)           Executive’s
breach, nonperformance or nonobservance of any of the terms of this Agreement,
including but not limited to Executive’s failure to adequately perform his
duties or comply with the reasonable directions of the Board.

       

      Notwithstanding
anything in the foregoing subsections (c) or (d) to the contrary, Employer shall
not terminate Executive under subsections (c) or (d) unless the Board first
provides Executive with a written memorandum describing in detail how his
performance hereunder is not satisfactory and Executive is given a reasonable
period of time (not less than thirty (30) days) to remedy the unsatisfactory
performance related by the Board to Executive in that memorandum. A
determination of whether Executive has satisfactorily remedied the
unsatisfactory performance shall be promptly made by a majority of the
disinterested directors of the Board at the end of the period provided to
Executive for remedy and their determination shall be final.

       

      Good
Reason. The term “Good
Reason” as used in this Agreement shall mean any of the following which
occur without Executive’s written consent and provided that
Executive notifies Employer’s Board in writing of the event
or condition constituting “Good Reason” within thirty (30) days of the initial
existence of such event or condition, that Executive intends to terminate his
employment for such Good Reason, specifying the Good Reason, and Employer fails
to remedy the specified event or condition within thirty (30) days after receipt
of such notice:

       

      
        
          
          

        

        
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      (a)           the
material diminution in Executive’s authority, duties, or responsibilities; a
material diminution in Executive’s titles or offices; any removal of Executive
from or any failure to reelect Executive to any of his positions as an officer,
except in connection with the termination of his employment for disability;
Retirement; Executive’s death; or by Executive other than for Good
Reason;

       

      (b)           a
purported reduction by Employer in Executive’s base salary amounting to a
material diminution in such salary to an amount less than the greater of (i) the
base salary as in effect on the date hereof or (ii) 10% below the base salary in
effect at the time of the purported reduction; or

       

      (c)           a
failure by Employer to comply with any material provision resulting in a
material breach by Employer of this Agreement which has not been cured within 30
days after notice of noncompliance has been given by Executive to Employer, or
if the failure is not capable of being cured in that time, a cure shall not have
been diligently initiated by Employer within the 30 day period;

       

      provided, however, that any of
the foregoing actions shall not be considered to be Good Reason if the action is
undertaken by Employer as a termination for Due Cause.

       

       

      13ex_10-6.htm

    
      
        

        

      

      EXHIBIT
10.6

       

       

      AMENDED
AND RESTATED

      REGISTRATION
RIGHTS AGREEMENT

       

      This
Amended and Restated Registration Rights Agreement (this “Agreement”) is made
and entered into as of __________, 2008, among Balqon Corporation, a California
corporation (the “Company”), and the
purchasers signatory hereto (each such purchaser is a “Purchaser” and
collectively, the “Purchasers”).

       

      The
parties entered into a Registration Rights Agreement dated July 11, 2008,
pursuant to the Senior Secured Convertible Promissory Notes, dated July 11,
2008, as amended on __________, 2008, between the Company and the Purchasers
(the “Notes”).

       

      The
Company and the Purchasers hereby agree as follows:

       

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

       

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

       

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

       

      “Filing Date” means,
with respect to the Registration Statement required hereunder, the 60th
calendar day following the effectiveness of the Merger.

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      “Registrable
Securities” means all of (i) the Shares issuable pursuant to the Notes,
(ii) the shares of Common Stock issuable upon exercise of the Warrants to
purchase Company Common Stock issued in connection with the Notes (the
“Warrants”), and (iii) any shares of Common Stock issued or issuable upon
any stock split, dividend or other distribution, recapitalization or similar
event with respect to the foregoing.

       

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

       

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

       

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

       

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

       

      2.            
Shelf Registration.

       

      (a)           On
or prior to the Filing Date, the Company shall prepare and file with the
Commission a Registration Statement covering the resale of 100% of the
Registrable Securities for an offering to be made on a continuous basis pursuant
to Rule 415; provided, however, that if the SEC takes the position that the
offering of some or all of the Registrable Securities is not eligible to be made
on a delayed on continuous basis under the provisions of Rule 415, the Company
shall amend the Registration Statement prior to its effectiveness to remove from
the Registration Statement such portion of the Registrable Securities (the
“Cut-back Shares”) and/or agree to such restrictions and limitations on the
registration and resale of the Registrable Securities as the SEC may require to
assure the Company’s compliance with the requirements of Rule 415 (collectively
the “SEC Restrictions”).  Any Cut-back shall be allocated to the
Holders of Registrable Securities on a pro rata basis, unless the SEC
Restrictions require otherwise.  In the event there are holders of
securities other than the Registrable Securities who are entitled to
registration rights (“Other Shares”), the securities that are entitled to be
included in the registration shall first be allocated to the Holders of
Registrable Securities, and thereafter to the holders of the Other Shares,
subject to such allocation priorities as are set forth in the registration
rights agreements for such Other Shares.  Such Registration Statement
shall contain (unless otherwise directed by the Holders of a majority of the
Registrable Securities included in such Registration Statement) the “Plan of Distribution”
section substantially in the form attached hereto as Annex A, with such
changes as are reasonably required to respond to the actual plan of distribution
or any comments to such section by the Commission and to comply with then
applicable securities laws.  Subject to the terms of this Agreement,
the Company shall use its commercially reasonable efforts to cause such
Registration Statement to be declared effective under the Securities Act as
promptly as possible after the filing thereof, and shall use its commercially
reasonable efforts to keep such Registration Statement continuously effective
under the Securities Act until the earlier of (A) the date that is two years
after the date on which all the Shares are issued to the Holders, (B) the date
on which there ceases to be outstanding any Registrable Securities, and (C) the
date on which the Company receives an opinion from its legal counsel to the
effect that all Registrable Securities can be freely traded without the
continued effectiveness of a Registration Statement (the “Effectiveness
Period”).

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

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

       

      3.          
 Registration
Procedures

       

      In
connection with the Company’s registration obligations hereunder, the Company
shall:

       

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

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      (b)           (i)
Prepare and file with the Commission such amendments, including post-effective
amendments, to a Registration Statement and the Prospectus used in connection
therewith as may be necessary to keep a Registration Statement continuously
effective as to the applicable Registrable Securities for the Effectiveness
Period and prepare and file with the Commission such additional Registration
Statements in order to register for resale under the Securities Act all of the
Registrable Securities; (ii) cause the related Prospectus to be amended or
supplemented by any required Prospectus supplement (subject to the terms of this
Agreement), and as so supplemented or amended to be filed pursuant to Rule 424;
(iii) respond as promptly as reasonably possible to any comments received from
the Commission with respect to a Registration Statement or any amendment thereto
and, upon written request by any Holder of at least 25% of the Registrable
Securities included in such Registration Statement, as promptly as reasonably
possible provide such Holders with true and complete copies of all material
written correspondence from and to the Commission relating to a Registration
Statement; and (iv) comply in all material respects with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
Registrable Securities covered by a Registration Statement during the applicable
period in accordance (subject to the terms of this Agreement) with the intended
methods of disposition by the Holders thereof set forth in such Registration
Statement as so amended or in such Prospectus as so supplemented.

       

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

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

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

       

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

       

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

       

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

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

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

       

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

       

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

       

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

       

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

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

      

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

       

      5.            
Indemnification

       

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

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

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

       

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

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

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

       

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

       

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

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

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

       

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

       

      6.            
Miscellaneous

       

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

       

      (b)           No Piggyback on
Registrations.  Except as set forth on Schedule 6(b)
attached hereto, neither the Company nor any of its security holders (other than
the Holders in such capacity pursuant hereto) may include securities of the
Company in the initial Registration Statement other than the Registrable
Securities.

       

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

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      (d)           Discontinued
Disposition.  Each Holder agrees by its acquisition of such
Registrable Securities that, upon receipt of a notice from the Company of the
occurrence of any event of the kind described in Section 3(c), such Holder will
forthwith discontinue disposition of such Registrable Securities under a
Registration Statement until such Holder’s receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement or until it is
advised in writing (the “Advice”) by the
Company that the use of the applicable Prospectus may be resumed, and, in either
case, has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement.  The Company will use its commercially
reasonable efforts to ensure that the use of the Prospectus may be resumed as
promptly as it practicable.  The Company agrees and acknowledges that
any periods during which the Holder is required to discontinue the disposition
of the Registrable Securities hereunder shall be subject to the provisions of
Section 2(b).

       

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

       

      (f)           Notices. All notices and other communications
required or permitted to be provided to a party hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile
(provided the sender receives a machine-generated confirmation of successful
transmission) or e-mail prior to 5:00 p.m. (Los Angeles, California time) on a
business day, (ii) the next business day after the date of transmission, if such
notice or communication is delivered via facsimile or e-mail on a day that is
not a business day or later than 4:59 p.m. (Los Angeles, California time) on any
business day, (iii) the business day following the date of mailing, if sent
overnight by an overnight courier service nationally recognized in the United
States, or (iv) upon actual receipt by the party to whom such notice is required
to be given. The address for such notices and communications for a party shall
be as set forth on the signature pages to the Notes or such other address as may
be designated in writing hereafter, in the same manner, by such
party.

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      (g)           Successors and
Assigns. This Agreement shall inure to the benefit of and be binding upon
the successors and permitted assigns of each of the parties and shall inure to
the benefit of each Holder.  The Company may not assign its rights or
obligations hereunder without the prior written consent of all of the Holders of
the then-outstanding Registrable Securities except in the case of a merger (or
similar transaction) in which case the surviving entity shall succeed to the
rights and obligations of the Company.  Each Holder may assign their
respective rights hereunder in the manner and to the Persons as permitted under
the Notes, provided however that at least $100,000 of Registrable Securities are
assigned to an assignee who seeks to assert registration rights under this
agreement.

       

      (h)           No Inconsistent
Agreements.  Except as set forth in Schedule 6(h),
neither the Company nor any of its subsidiaries has entered, as of the date
hereof, nor shall the Company or any of its subsidiaries, during the period
beginning on or after the date of this Agreement and ending at the end of the
Effectiveness Period, enter into any agreement with respect to its securities,
that would have the effect of impairing the rights granted to the Holders in
this Agreement or otherwise conflicts with the provisions
hereof.  Except as set forth on Schedule 6(h),
neither the Company nor any of its subsidiaries has previously entered into any
agreement granting any registration rights with respect to any of its securities
to any Person that have not been satisfied in full.

       

      (i)           Execution and
Counterparts.  This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same
Agreement.  In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.

       

      (j)           Governing
Law.  All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be determined with the
provisions of the Notes.

       

      (k)           Cumulative
Remedies.  The remedies provided herein are cumulative and not
exclusive of any remedies provided by law.

       

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

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      (m)           Headings.  The
headings in this Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof.

       

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

       

      *************************

       

       

       

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

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

       

       

      
        
          	 	BALQON
      CORPORATION	 
	 	 	 	 
	
                   

                	
                  By:
      

                	/s/ Balwinder
      Samra	 
	 	 	Name:
      B. Samra	 
	 	 	Title:  President	 

        

      

       

       

      [SIGNATURE
PAGE OF HOLDERS FOLLOWS]

       

       

       

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

      [SIGNATURE
PAGE OF HOLDERS]

      
 

      Name of
Holder: __________________________

      

      Signature of Authorized Signatory of
Holder: __________________________

      

      Name of
Authorized Signatory: _________________________

      

      Title of
Authorized Signatory: __________________________

      

      

      

      [SIGNATURE
PAGES CONTINUE]

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

      ANNEX
A

       

      Plan of
Distribution

       

       

      We are
registering the shares of common stock on behalf of the selling stockholders. A
“selling stockholder” is a person named on page ___ and also includes any donee,
pledgee, transferee, assignee, distributee or other successor-in-interest
selling shares received after the date of this prospectus from a selling
stockholder as a gift, pledge, partnership or limited liability company
distribution or other non-sale related transfer.  The selling
stockholders may offer their shares of common stock at prevailing market prices,
at prices related to the prevailing market prices, at negotiated prices or at
fixed prices or in competitively bid transactions.  Each selling
stockholder reserves the right to accept or reject, in whole or in part, any
proposed purchase of shares, whether the purchase is to be made directly or
through agents.

       

      The
selling stockholders may offer their shares of common stock at various times in
one or more of the following transactions:

       

      
        	
                 
      

              	
                ·

              	
                in
      ordinary brokers’ transactions and transactions in which the broker
      solicits purchasers;

              

      

       

      
        	
                 
      

              	
                ·

              	
                purchases
      by a broker-dealer for its account pursuant to this
      prospectus;

              

      

       

      
        	
                 
      

              	
                ·

              	
                in
      transactions involving cross or block
trades;

              

      

       

      
        	
                 
      

              	
                ·

              	
                in
      transactions “at the market” to or through market makers in the common
      stock or into an existing market for the common
  stock;

              

      

       

      
        	
                 
      

              	
                ·

              	
                in
      other ways not involving market makers or established trading markets,
      including direct sales of the shares to purchasers or sales of the shares
      effected through agents;

              

      

       

      
        	
                 
      

              	
                ·

              	
                through
      transactions in options, swaps or other derivatives which may or may not
      be listed on an exchange;

              

      

       

      
        	
                 
      

              	
                ·

              	
                in
      privately negotiated transactions;

              

      

       

      
        	
                 
      

              	
                ·

              	
                in
      transactions to cover short sales;

              

      

       

      
        	
                 
      

              	
                ·

              	
                in
      underwritten transactions; or

              

      

       

      
        	
                 
      

              	
                ·

              	
                in
      a combination of any of the foregoing
  transactions.

              

      

       

      The
selling stockholders also may sell all or a portion of their shares in open
market transactions in accordance with Rule 144 under the Securities Act
provided that they meet the criteria and conform to the requirements of that
rule.

       

      From time
to time, one or more of the selling stockholders may pledge or grant a security
interest in some or all of the shares owned by them.  If the selling
stockholders default in performance of their secured obligations, the pledges or
secured parties may offer and sell the shares from time to time by this
prospectus.  The selling stockholders also may transfer and donate
shares in other circumstances.  The number of shares beneficially
owned by selling stockholders will decrease as and when the selling stockholders
transfer or donate their shares or default in performing obligations secured by
their shares.  The plan of distribution for the shares offered and
sold under this prospectus will otherwise remain unchanged, except that the
transferees, donees, pledges, other secured parties or other
successors-in-interest will be selling stockholders for purposes of this
prospectus.

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

       

      The
selling stockholders may sell short the common stock.  The selling
stockholders may deliver this prospectus in connection with such short sales and
use the shares offered by this prospectus to cover such short
sales.

       

      The
selling stockholders may enter into hedging transactions with broker-dealers in
connection with distributions of the shares or otherwise.  In such
transactions, the broker-dealers may engage in short sales of the shares in the
course of hedging the positions they assume with the selling stockholder,
including positions assumed in connection with distributions of the shares by
such broker-dealers.  A selling stockholder also may enter into option
or transactions with broker-dealers that involve the delivery of shares to the
broker-dealers, who may then resell or otherwise transfer such
shares.  In addition, a selling stockholder may loan or pledge shares
to a broker-dealer, which may sell the loaned shares or, upon a default by the
selling stockholder of the secured obligation, may sell or otherwise transfer
the pledged shares.

       

      We have
advised the selling stockholders that during such times as they may be engaged
in a distribution of the shares, they are required to comply with
Regulation M under the Securities Exchange Act. With some exceptions,
Regulation M prohibits any selling stockholder, any affiliated purchasers
and other persons who participate in such a distribution from bidding for or
purchasing, or attempting to induce any person to bid for or purchase, any
security which is the subject of the distribution until the entire distribution
is complete.

       

      The
selling stockholders may use broker-dealers to sell their shares of common
stock.  If this occurs, broker-dealers will either receive discounts
or commission from the selling stockholders, or they will receive commissions
from the purchasers of shares of common stock for whom they acted as
agents.  These brokers may act as dealers by purchasing any and all of
the shares covered by this prospectus either as agents for others or as
principals for their own accounts and reselling these securities under the
prospectus.

       

      The
selling stockholders and any broker-dealers or other persons acting on behalf of
parties that participate in the distribution of the shares may be considered
underwriters under the Securities Act.  As such, any commissions or
profits they receive on the resale of the shares may be considered underwriting
discounts and commissions under the Securities Act.  Neither we nor
any selling stockholders can presently estimate the amount of such
compensation.

       

      As of the
date of this prospectus, we are not aware of any agreement, arrangement or
understanding between any broker or dealer and any of the selling stockholders
with respect to the offer or sale of the shares under this prospectus. If we
become aware of any agreement, arrangement or understanding, to the extent
required under the Securities Act, we will file a supplemental prospectus to
disclose:

       

      
        	
                 
      

              	
                ·

              	
                the
      name of any the broker-dealers;

              

      

       

      
        	
                 
      

              	
                ·

              	
                the
      number of shares involved;

              

      

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

       

      
        	
                 
      

              	
                ·

              	
                the
      price at which the shares are to be
sold;

              

      

       

      
        	
                 
      

              	
                ·

              	
                the
      number of shares involved;

              

      

       

      
        	
                 
      

              	
                ·

              	
                the
      price at which the shares are to be
sold;

              

      

       

      
        	
                 
      

              	
                ·

              	
                the
      commissions paid or discounts or concessions allowed to broker-dealers,
      where applicable;

              

      

       

      
        	
                 
      

              	
                ·

              	
                that
      the broker-dealers did not conduct any investigation to verify the
      information set out in this prospectus, as supplemented;
    and

              

      

       

      
        	
                 
      

              	
                ·

              	
                other
      facts material to the transaction.

              

      

       

      In
addition, when we are notified by a selling stockholder that a donee, pledgee,
transferee, assignee, distributee or other successor-in-interest intends to sell
more than 500 shares of common stock, we will file a supplement to this
prospectus.

       

      Certain
of the agreements with the selling stockholders contain reciprocal
indemnification provisions between us and the selling stockholders to indemnify
each other against certain liabilities, including liabilities under the
Securities Act, which may be based upon, among other things, any untrue
statement or alleged untrue statement of a material fact or any omission or
alleged omission of a material fact.

       

      We have
agreed to pay substantially all of the expenses incidental to the registration,
offering and sale to the public of the shares of common stock covered by this
prospectus, other than commissions, fees and discounts of underwriters, brokers,
dealers and agents, if any.

       

      It is
possible that a significant number of shares could be sold at the same
time.  Such sales, or the perception that such sales could occur, may
adversely affect prevailing market prices for the common stock.

       

      This
offering by any selling stockholder will terminate on the date on which the
selling stockholder has sold all of such selling stockholder’s
shares.

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

       

      Annex
B

       

      ___________

       

      Selling
Securityholder Notice and Questionnaire

       

      The
undersigned beneficial owner of common stock, par value $0.___ per share (the
“Common
Stock”), of Balqon Corporation, (the “Company”), (the
“Registrable
Securities”) understands that the Company has filed or intends to file
with the Securities and Exchange Commission (the “Commission”) a
registration statement on Form S-1 (the “Registration
Statement”) for the registration and resale under Rule 415 of the
Securities Act of 1933, as amended (the “Securities Act”), of
the Registrable Securities, in accordance with the terms of the Registration
Rights Agreement, dated as of __________, 2008 (the “Registration Rights
Agreement”), among the Company and the Purchasers named
therein.  A copy of the Registration Rights Agreement is available
from the Company upon request at the address set forth below.  All
capitalized terms not otherwise defined herein shall have the meanings ascribed
thereto in the Registration Rights Agreement.

       

      Certain
legal consequences arise from being named as a selling securityholder in the
Registration Statement and the related prospectus.  Accordingly,
holders and beneficial owners of Registrable Securities are advised to consult
their own securities law counsel regarding the consequences of being named or
not being named as a selling securityholder in the Registration Statement and
the related prospectus.

       

      NOTICE

       

      The
undersigned beneficial owner (the “Selling
Securityholder”) of Registrable Securities hereby elects have the resale
of the Registrable Securities owned by it and listed below in Item 3 (unless
otherwise specified under such Item 3) covered by the Registration
Statement.

       

      You must complete and return
this questionnaire to the Company in order for your Registrable Securities to be
included in the Registration Statement.

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

       

      The
undersigned hereby provides the following information to the Company and
represents and warrants that such information is accurate:

       

      QUESTIONNAIRE

       

      
        	
                 
      

              	
                1.

              	
                Name.

              

      

       

      
        	
                 
      

              	
                (a)

              	
                Full
      Legal Name of Selling Securityholder

              
	 	 	 

      

       

      
        	
                 
      

              	
                (b)

              	
                Full
      Legal Name of Registered Holder (if not the same as (a) above) through
      which Registrable Securities Listed in Item 3 below are
    held:

              
	 	 	 

      

       

      
        	
                 
      

              	
                (c)

              	
                Full
      Legal Name of Natural Control Person (which means a natural person who
      directly or indirectly alone or with others has power to vote or dispose
      of the securities covered by the questionnaire):

              
	 	 	 

      

       

      
        
          	
                   
      

                	
                  2. 

                	
                  Address
      for Notices to Selling Securityholder:

                
	 	 	 
	 	 	 
	 	 	 

        

      

      
      

      
      

       

      
        	Telephone:	 
	Fax:	 
	Email:	 
	Contact
      Person:	 

      

      
         

        
          	
                   
      

                	
                  3.

                	
                  Beneficial
      Ownership of Registrable
Securities:

                

        

         

      

      
        	
                 
      

              	
                (a)

              	
                Type
      and Number of Registrable Securities beneficially
owned:

              
	 	 	 
	 	 	 
	 	 	 

      

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

      
        
           

          
            	
                     
      

                  	
                    4. 

                  	
                    Broker-Dealer
      Status:

                  

          

           

        

      

      
        	
                 
      

              	
                (a)

              	
                Are
      you a broker-dealer?

              

      

       

      Yes                         No   

       

      
        	
                 
      

              	
                (b)

              	
                If
      “yes” to Section 4(a), did you receive your Registrable Securities as
      compensation for investment banking services to the
    Company?

              

      

       

      Yes                         No   

      
         

      

      
        	 	
                Note:

              	
                If
      no, the Commission’s staff has indicated that you should be identified as
      an underwriter in the Registration
Statement.

              

      

       

      
        	
                 
      

              	
                (c)

              	
                Are
      you an affiliate of a
broker-dealer?

              

      

       

      Yes                         No   

       

      
        	
                 
      

              	
                (d)

              	
                If
      you are an affiliate of a broker-dealer, do you certify that you bought
      the Registrable Securities in the ordinary course of business, and at the
      time of the purchase of the Registrable Securities to be resold, you had
      no agreements or understandings, directly or indirectly, with any person
      to distribute the Registrable
Securities?

              

      

       

      Yes                         No   

      
         

      

      
        	 	
                Note:

              	
                If
      no, the Commission’s staff has indicated that you should be identified as
      an underwriter in the Registration
Statement.

              

      

       

      
        
           

          
            	
                     
      

                  	
                    5. 

                  	
                    Beneficial
      Ownership of Other Securities of the Company Owned by the Selling
      Securityholder.

                  

          

        

      

       

      Except
as set forth below in this Item 5, the undersigned is not the beneficial or
registered owner of any securities of the Company other than the Registrable
Securities listed above in Item 3.

       

      
        	
                 
      

              	
                (a)

              	
                Type
      and Amount of other securities of the Company beneficially owned by the
      Selling Securityholder:

              
	 	 	 
	 	 	 
	 	 	 

      

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

      
        
          
             

            
              	
                       
      

                    	
                      6.

                    	
                      Relationships
      with the Company:

                    

            

          

        

      

       

      Except
as set forth below, neither the undersigned nor any of its affiliates, officers,
directors or principal equity holders (owners of 5% of more of the equity
securities of the undersigned) has held any position or office or has had any
other material relationship with the Company (or its predecessors or affiliates)
during the past three years.

       

      
        	
                 
      

              	
                State
      any exceptions here:

              
	 	 
	 	 
	 	 

      

       

      The
undersigned agrees to promptly notify the Company of any inaccuracies or changes
in the information provided herein that may occur subsequent to the date hereof
at any time while the Registration Statement remains effective.

       

      By
signing below, the undersigned consents to the disclosure of the information
contained herein in its answers to Items 1 through 6 and the inclusion of such
information in the Registration Statement and the related prospectus and any amendments or supplements
thereto.  The undersigned understands that such information
will be relied upon by the Company in connection with the preparation or
amendment of the Registration Statement and the related prospectus.

       

      IN
WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice
and Questionnaire to be executed and delivered either in person or by its duly
authorized agent.

       

      
        
          	 	 	 	 	 
	Dated: 	
                   

                	
                  Beneficial
      Owner:  

                	
                   

                

        

         

        
          	 	
                   

                	 	
                  By: 
        

                	
                   

                
	 	 	 	 	
                  Name:

                  Title:

                

        

      

      
 

      PLEASE
FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN
THE ORIGINAL BY OVERNIGHT MAIL, TO:

      

       

      22

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