VALENCE TECHNOLOGY INC
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>4
<FILENAME>exhibit_10-1.txt
<TEXT>

                                                                  EXECUTION COPY


                          SECURITIES PURCHASE AGREEMENT

     SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of November 30,
2004, by and among Valence Technology, Inc., a Delaware corporation, with
headquarters located at 6504 Bridge Point Parkway, Suite 415, Austin, Texas
78730 (the "COMPANY"), and the investors listed on the Schedule of Buyers
attached hereto (individually, a "BUYER" and collectively the "BUYERS").

     A. The Company and each Buyer desire to enter into this transaction to
purchase the securities set forth herein pursuant to a currently effective shelf
registration statement on Form S-3, which has at least $7,500,000 in unallocated
securities registered thereunder (Registration Number 333-67942) (the
"REGISTRATION STATEMENT"), which Registration Statement has been declared
effective in accordance with the Securities Act of 1933, as amended (the "1933
ACT"), by the United States Securities and Exchange Commission (the "SEC").

     B. Each Buyer wishes to purchase, and the Company wishes to sell, upon the
terms and conditions stated in this Agreement, that aggregate number of shares
of common stock, par value $.001 per share, of the Company (the "COMMON STOCK"),
set forth opposite such Buyer's name in column (4) on the Schedule of Buyers
(which aggregate amount for all Buyers together shall be 2,475,248 shares of
Common Stock and shall collectively be referred to herein as the "PURCHASED
SHARES").

     NOW, THEREFORE, the Company and Buyer hereby agree as follows:

     1.   PURCHASE AND SALE OF COMMON SHARES.

          (a)  PURCHASE OF COMMON SHARES.

               (i)  COMMON SHARES. Subject to the satisfaction (or waiver) of
                    the conditions set forth in Sections 5 and 6 below, the
                    Company shall issue and sell to Buyer, and Buyer agrees to
                    purchase from the Company on the Closing Date (as defined
                    below), the Common Shares (the "CLOSING").

               (ii) CLOSING. The Closing shall occur on the Closing Date at the
                    offices of Schulte Roth & Zabel LLP, 919 Third Avenue, New
                    York, New York 10022.

               (iii) PURCHASE PRICE. The purchase price (the "PURCHASE PRICE")
                    of the Common Shares to be purchased by Buyer at the Closing
                    shall be equal to $3.03 per Common Share or $7,500,000 in
                    the aggregate.

          (b)  CLOSING DATE. The date and time of the Closing (the "CLOSING
               DATE") shall be 1:00 p.m., New York Time, on December 1, 2004
               after notification of satisfaction (or waiver) of the conditions
               to the Closing set forth in Sections 5 and 6 below (or such later
               time or date as is mutually agreed to by the Company and Buyer).
               As used herein, "BUSINESS DAY" means any day other than Saturday,
               Sunday or other day on which commercial banks in the City of New
               York are authorized or required by law to remain closed.


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          (c)  FORM OF PAYMENT. On the Closing Date, (i) Buyer shall pay the
               Purchase Price to the Company for the Common Shares to be issued
               and sold to Buyer at the Closing, by wire transfer of immediately
               available funds in accordance with the Company's written wire
               instructions, and (ii) the Company shall cause the Company's
               transfer agent (the "TRANSFER AGENT") through the Depository
               Trust Company ("DTC") Fast Automated Securities Transfer Program,
               to credit such aggregate number of Purchased Shares that such
               Buyer is purchasing as is set forth opposite such Buyer's name in
               column (4) of the Schedule of Buyers to such Buyer's or its
               designee's balance account with DTC through its Deposit
               Withdrawal Agent Commission system as specified by such Buyer.

     2.   BUYER'S REPRESENTATIONS AND WARRANTIES.

     Buyer represents and warrants with respect that:

          (a)  INFORMATION. Buyer and its advisors, if any, have been furnished
               with all materials relating to the business, finances and
               operations of the Company and materials relating to the offer and
               sale of the Securities which have been requested by Buyer. Buyer
               and its advisors, if any, have been afforded the opportunity to
               ask questions of the Company. Neither such inquiries nor any
               other due diligence investigations conducted by Buyer or its
               advisors, if any, or its representatives shall modify, amend or
               affect Buyer's right to rely on the Company's representations and
               warranties contained herein. Buyer understands that its
               investment in the Securities involves a high degree of risk.
               Buyer has sought such accounting, legal and tax advice as it has
               considered necessary to make an informed investment decision with
               respect to its acquisition of the Securities.

          (b)  NO GOVERNMENTAL REVIEW. Buyer understands that no United States
               federal or state agency or any other government or governmental
               agency has passed on or made any recommendation or endorsement of
               the Securities or the fairness or suitability of the investment
               in the Securities nor have such authorities passed upon or
               endorsed the merits of the offering of the Securities.

          (c)  AUTHORIZATION; VALIDITY; ENFORCEMENT. This Agreement has been
               duly and validly authorized, executed and delivered on behalf of
               Buyer and shall constitute the legal, valid and binding
               obligations of such Buyer enforceable against Buyer in accordance
               with their respective terms, except as such enforceability may be
               limited by general principles of equity or to applicable
               bankruptcy, insolvency, reorganization, moratorium, liquidation
               and other similar laws relating to, or affecting generally, the
               enforcement of applicable creditors' rights and remedies.

          (d)  ORGANIZATION. Buyer is duly organized and validly existing in
               good standing under the laws of the jurisdiction of its
               organization, and has the requisite power and authorization to
               execute and deliver this Agreement and to consummate the
               transaction contemplated hereby.

          (e)  NO CONFLICTS. The execution, delivery and performance of this
               Agreement by Buyer and the consummation by Buyer of the
               transactions contemplated hereby will not (i) result in a
               violation of the constituent documents of Buyer or (ii) conflict
               with, or constitute a



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               default (or an event which with notice or lapse of time or both
               would become a default) under, or give to others any rights of
               termination, amendment, acceleration or cancellation of, any
               material agreement, indenture or instrument to which Buyer is a
               party, or (iii) result in a violation of any law, rule,
               regulation, order, judgment or decree applicable to such Buyer or
               by which any property or asset of Buyer is bound or affected,
               except in the case of clauses (ii) and (iii), for such breaches
               or defaults as would not be reasonably expected to have a
               material adverse effect on Buyer's ability to consummate the
               transactions contemplated hereby.

          (f)  NO SHORT SALES. During the one (1) month period prior to the date
               hereof, Buyer has not engaged in short sales of the Common Stock
               in amounts that exceed the sum of the number of shares of Common
               Stock held by Buyer and its affiliates and the number of shares
               of Common Stock issuable pursuant to the exercise or conversion
               of any other security (without regard to limitations on exercise
               or conversion contained therein, if any) held by Buyer and its
               affiliates.

     3.   REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

     The Company represents and warrants to Buyers that:

          (a)  ORGANIZATION AND QUALIFICATION. The Company and its
               "SUBSIDIARIES" (which for purposes of this Agreement means any
               entity in which the Company, directly or indirectly, owns at
               least 10% of the capital stock or holds a comparable equity or
               similar interest) are entities duly organized and validly
               existing in good standing under the laws of the jurisdiction in
               which they are organized, and have the requisite corporate or
               other power and authorization to own their properties and to
               carry on their business as now being conducted. Other than
               Valence Technology (Nevada), Inc., a wholly-owned Subsidiary, the
               Company does not have any domestic "Significant Subsidiaries" as
               defined in Regulation S-X promulgated by the Securities and
               Exchange Commission (the "SEC"). Each of the Company and its
               Subsidiaries is duly qualified as a foreign entity to do business
               and is in good standing in every jurisdiction in which its
               ownership of property or the nature of the business conducted by
               it makes such qualification necessary, except to the extent that
               the failure to be so qualified or be in good standing would not
               reasonably be expected to have a Material Adverse Effect. As used
               in this Agreement, "MATERIAL ADVERSE EFFECT" means any material
               adverse effect on the business, properties, assets, operations,
               results of operations, condition (financial or otherwise) or
               prospects of the Company and its Subsidiaries, taken as a whole,
               or on the transactions contemplated hereby or by the agreements
               and instruments to be entered into in connection herewith, or on
               the authority or ability of the Company to perform its
               obligations under the Agreement. The Company has no Subsidiaries
               except (i) as set forth on Schedule 21.1 of the Company's Annual
               Report on Form 10-K for the year ended March 31, 2004 filed with
               the SEC on June 18, 2004 (the "PRIOR 10K") and (ii) Valence
               Technology Suzhou, Ltd. and Valence Energy-Tech (Suzhou), Ltd.,
               both of which are Chinese limited liability corporations that
               were formed following the date of the Prior 10K.

          (b)  AUTHORIZATION; ENFORCEMENT; VALIDITY. The Company has the
               requisite corporate power and authority to enter into and perform
               its obligations under this Agreement and to issue the Securities
               in accordance with the terms hereof and thereof. The execution
               and delivery of this Agreement by the Company and the
               consummation by the Company of the


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               transactions contemplated hereby, including, without limitation,
               the issuance of the Common Shares have been duly authorized by
               the Company's Board of Directors and no further consent or
               authorization is required by the Company, its Board of Directors
               or its stockholders. This Agreement has been duly executed and
               delivered by the Company, and constitute the legal, valid and
               binding obligations of the Company enforceable against the
               Company in accordance with its terms, except as such
               enforceability may be limited by general principles of equity or
               applicable bankruptcy, insolvency, reorganization, moratorium,
               liquidation or similar laws relating to, or affecting generally,
               the enforcement of applicable creditors' rights and remedies.

          (c)  ISSUANCE OF SECURITIES. The Common Shares are duly authorized
               and, upon issuance in accordance with the terms hereof, shall be
               free from all taxes, liens and charges with respect to the issue
               thereof. The "Plan of Distribution" section under the
               Registration Statement permits the issuance and sale of the
               Purchased Shares hereunder. Upon receipt of the Securities, the
               Buyers will have good and marketable title to such Purchased
               Shares and the Purchased Shares will be freely tradable on The
               Nasdaq SmallCap Market (the "PRINCIPAL MARKET"). The Purchased
               Shares constitute less than 10% of the issued and outstanding
               shares of Common Stock of the Company.

          (d)  NO CONFLICTS. The execution, delivery and performance of the
               Agreement by the Company and the consummation by the Company of
               the transactions contemplated hereby (including, without
               limitation, the issuance of the Common Shares) will not (i)
               result in a violation of the certificate of incorporation, any
               certificate of designations, preferences and rights of any
               outstanding series of preferred stock or bylaws of the Company or
               any Subsidiary or (ii) conflict with, or constitute a default (or
               an event which with notice or lapse of time or both would become
               a default) under, or give to others any rights of termination,
               amendment, acceleration or cancellation of, any material
               agreement, indenture or instrument to which the Company or any of
               its Subsidiaries is a party, or (iii) result in a violation of
               any law, rule, regulation, order, judgment or decree (including
               federal and state securities laws and regulations and the rules
               and regulations of the Principal Market) applicable to the
               Company or any of its Subsidiaries or by which any property or
               asset of the Company or any of its Subsidiaries is bound or
               affected.

          (e)  CONSENTS. All consents, authorizations, orders, filings and
               registrations which the Company is required as of the Closing
               Date to obtain to execute, deliver or perform any of its
               obligations under or contemplated by this Agreement in accordance
               with its terms have been obtained or effected on or prior to the
               Closing Date. The Company and its Subsidiaries are unaware of any
               facts or circumstances which might reasonably be expected to
               prevent the Company from obtaining or effecting any of the
               foregoing. The Company is not in violation of the listing
               requirements of the Principal Market and has no knowledge of any
               facts which would reasonably lead to delisting or suspension of
               the Common Stock in the foreseeable future.

          (f)  ACKNOWLEDGMENT REGARDING BUYER'S PURCHASE OF SECURITIES. The
               Company acknowledges and agrees that Buyer is acting solely in
               the capacity of an arm's length purchaser with respect to the
               Agreement and the transactions contemplated hereby. The Company
               further acknowledges that Buyer is not acting as a financial
               advisor or fiduciary of the Company (or in any similar capacity)
               with respect to the Agreement and the transactions contemplated
               hereby, and any advice given by Buyer or any of its
               representatives or agents in



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               connection with the Agreement and the transactions contemplated
               hereby is merely incidental to Buyer's purchase of the
               Securities. The Company further represents to Buyer that the
               Company's decision to enter into the Agreement has been based
               solely on (i) the independent evaluation by the Company and its
               representatives and (ii) Buyer's representations, warranties,
               covenants and other terms contained in the Agreement.

          (g)  PLACEMENT AGENT'S FEES. The Company shall be responsible for the
               payment of any placement agent's fees, financial advisory fees,
               or brokers' commissions (other than for persons engaged by Buyer
               or its investment advisor) relating to or arising out of the
               transactions contemplated hereby. The Company shall pay, and hold
               Buyer harmless against, any liability, loss or expense
               (including, without limitation, attorney's fees and out-of-pocket
               expenses) arising in connection with any such claim. The Company
               acknowledges that it has engaged A.G. Edwards & Sons, Inc. as
               placement agent (the "Agent") in connection with the sale of the
               Common Shares. Other than the Agent, the Company has not engaged
               any placement agent or other agent in connection with the sale of
               the Common Shares.

          (h)  NO INTEGRATED OFFERING. None of the Company, its Subsidiaries,
               any of their affiliates, and any Person acting on their behalf
               has, directly or indirectly, made any offers or sales of any
               security or solicited any offers to buy any security, under
               circumstances that would require registration of any of the
               Securities under the 1933 Act or cause this offering of the
               Securities to be integrated with prior offerings by the Company
               for purposes of the 1933 Act or any applicable stockholder
               approval provisions, including, without limitation, under the
               rules and regulations of any exchange or automated quotation
               system on which any of the securities of the Company are listed
               or designated.

          (i)  APPLICATION OF TAKEOVER PROTECTIONS; RIGHTS AGREEMENT. The
               Company and its board of directors have taken all necessary
               action, if any, in order to render inapplicable any control share
               acquisition, business combination, poison pill (including any
               distribution under a rights agreement) or other similar
               anti-takeover provision under the Certificate of Incorporation
               (as defined in Section 3(p) or the laws of the state of its
               incorporation which is or could become applicable to any Buyer as
               a result of the transactions contemplated by this Agreement,
               including, without limitation, the Company's issuance of the
               Securities and Buyer's ownership of the Securities. The Company
               has not adopted a stockholder rights plan or similar arrangement
               relating to accumulations of beneficial ownership of Common Stock
               or a change in control of the Company.

          (j)  SEC DOCUMENTS; FINANCIAL STATEMENTS. Since December 31, 2002, the
               Company has filed all reports, schedules, forms, statements and
               other documents required to be filed by it with the SEC pursuant
               to the reporting requirements of the Securities Exchange Act of
               1934, as amended (the "1934 ACT") (all of the foregoing filed
               prior to the date hereof, or in connection with the Closing
               subsequent to the date hereof, filed prior to the date of the
               Closing, and all exhibits included therein and financial
               statements and schedules thereto and documents incorporated by
               reference therein being hereinafter referred to as the "SEC
               DOCUMENTS"). The Company has delivered to Buyer or its
               representatives true, correct and complete copies of the SEC
               Documents not available on the EDGAR system. As of their
               respective dates, the SEC Documents complied in all material
               respects with the requirements of the 1934 Act and the rules and
               regulations of the SEC promulgated thereunder applicable to the
               SEC Documents, and none



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               of the SEC Documents, at the time they were filed with the SEC,
               contained any untrue statement of a material fact or omitted to
               state a material fact required to be stated therein or necessary
               in order to make the statements therein, in the light of the
               circumstances under which they were made, not misleading. As of
               their respective dates, the financial statements of the Company
               included in the SEC Documents complied as to form in all material
               respects with applicable accounting requirements and the
               published rules and regulations of the SEC with respect thereto.
               Such financial statements have been prepared in accordance with
               generally accepted accounting principles, consistently applied,
               during the periods involved (except (i) as may be otherwise
               indicated in such financial statements or the notes thereto, or
               (ii) in the case of unaudited interim statements, to the extent
               they may exclude footnotes or may be condensed or summary
               statements) and fairly present in all material respects the
               financial position of the Company as of the dates thereof and the
               results of its operations and cash flows for the periods then
               ended (subject, in the case of unaudited statements, to normal
               year-end audit adjustments). No other information provided by or
               on behalf of the Company to Buyer which is not included in the
               SEC Documents contains any untrue statement of a material fact or
               omits to state any material fact necessary in order to make the
               statements therein, in the light of the circumstance under which
               they are or were made, not misleading.

          (k)  ABSENCE OF CERTAIN CHANGES. Since December 31, 2003, there has
               been no material adverse change and no material adverse
               development in the business, properties, operations, condition
               (financial or otherwise), results of operations or prospects of
               the Company or its Subsidiaries; provided, that any adjustments
               to the carrying value of the Company's tangible or intangible
               assets on its balance sheets (resulting from its periodic review
               in connection with its annual audit) relating to the potential
               transition by the Company to alternative battery constructions
               shall not be deemed to constitute a breach of this Section 3(1).
               Since December 31, 2003, the Company has not (i) declared or paid
               any dividends (other than on its Series C Preferred Stock, (ii)
               sold any assets, individually or in the aggregate, in excess of
               $100,000 outside of the ordinary course of business or as
               disclosed in the SEC Documents or (iii) had capital expenditures,
               individually or in the aggregate, in excess of $1,500,000. The
               Company has not taken any steps to seek protection pursuant to
               any bankruptcy law nor does the Company have any knowledge or
               reason to believe that its creditors intend to initiate
               involuntary bankruptcy proceedings or any actual knowledge of any
               fact which would reasonably lead a creditor to do so. The Company
               is not as of the date hereof, and after giving effect to the
               transactions contemplated hereby to occur at the Closing, will
               not be Insolvent (as defined below). For purposes of this Section
               3(1), "INSOLVENT" means (i) the Company is unable to pay its
               debts and liabilities, subordinated, contingent or otherwise, as
               such debts and liabilities become absolute and matured, (ii) the
               Company intends to incur or believes that it will incur debts
               that would be beyond its ability to pay as such debts mature or
               (iii) the Company has unreasonably small capital with which to
               conduct the business in which it is engaged as such business is
               now conducted and is proposed to be conducted.

          (l)  NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR CIRCUMSTANCES
               No event, liability, development or circumstance has occurred or
               exists, or is contemplated to occur, with respect to the Company
               or its Subsidiaries or their respective business, properties,
               prospects, operations or financial condition, that would be
               required to be disclosed by the Company under applicable
               securities laws on a registration statement on Form S-1 filed
               with the


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               SEC relating to an issuance and sale by the Company of its Common
               Stock and which has not been publicly announced.

          (m)  CONDUCT OF BUSINESS; REGULATORY PERMITS. Neither the Company nor
               its Subsidiaries is in violation of any term of or in default
               under its Certificate of Incorporation, any Certificate of
               Designations, Preferences and Rights of any outstanding series of
               preferred stock of the Company or Bylaws or their organizational
               charter or bylaws, respectively (except, with respect to the
               Subsidiaries, for violations that would not, individually or in
               the aggregate, reasonably be expected to have a Material Adverse
               Effect). Neither the Company nor any of its Subsidiaries is in
               violation of any judgment, decree or order or any statute,
               ordinance, rule or regulation applicable to the Company or its
               Subsidiaries, and neither the Company nor any of its Subsidiaries
               will conduct its business in violation of any of the foregoing,
               except for violations which would not, individually or in the
               aggregate, reasonably be expected to have a Material Adverse
               Effect. Without limiting the generality of the foregoing, the
               Company is not in violation of any of the material rules,
               regulations or requirements of the Principal Market and has no
               knowledge of any facts or circumstances which would reasonably
               lead to delisting or suspension of the Common Stock by the
               Principal Market in the foreseeable future. Since December 31,
               2002 (i) the Common Stock has been designated for quotation or
               listed on the Principal Market, (ii) trading in the Common Stock
               has not been suspended by the SEC or the Principal Market and
               (iii) the Company has received no communication, written or oral,
               from the SEC or the Principal Market regarding the suspension or
               delisting of the Common Stock from the Principal Market. The
               Company and its Subsidiaries possess all certificates,
               authorizations and permits issued by the appropriate federal,
               state or foreign regulatory authorities necessary to conduct
               their respective businesses, except where the failure to possess
               such certificates, authorizations or permits would not reasonably
               be expected to have, individually or in the aggregate, a Material
               Adverse Effect, and neither the Company nor any such Subsidiary
               has received any notice of proceedings relating to the revocation
               or modification of any such certificate, authorization or permit.

          (n)  FOREIGN CORRUPT PRACTICES. Neither the Company, nor any of its
               Subsidiaries, nor any director, officer, agent, employee or other
               Person acting on behalf of the Company or any of its Subsidiaries
               has, in the course of its actions for, or on behalf of, the
               Company (i) used any corporate funds for any unlawful
               contribution, gift, entertainment or other unlawful expenses
               relating to political activity; (ii) made any direct or indirect
               unlawful payment to any foreign or domestic government official
               or employee from corporate funds; (iii) violated or is in
               violation of any provision of the U.S. Foreign Corrupt Practices
               Act of 1977, as amended; or (iv) made any unlawful bribe, rebate,
               payoff, influence payment, kickback or other unlawful payment to
               any foreign or domestic government official or employee.

          (o)  TRANSACTIONS WITH AFFILIATES. Except as disclosed on the Prior
               10K, the Company's Schedule 14A filed with the SEC on September
               30, 2004, and any of the Company's Quarterly Reports on Form 10Q
               or Periodic Reports filed in Form 8-K filed with the SEC since
               the Prior 10K was filed and other than the grant of stock options
               pursuant to compensation or similar arrangements with officers,
               directors or employees, none of the officers, directors or
               employees of the Company is presently a party to any transaction
               with the Company or any of its Subsidiaries (other than for
               ordinary course services as employees, officers or directors),
               including any contract, agreement or other arrangement providing
               for the furnishing of services



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               to or by, providing for rental of real or personal property to or
               from, or otherwise requiring payments to or from any such
               officer, director or employee or, to the knowledge of the
               Company, any corporation, partnership, trust or other entity in
               which any such officer, director, or employee has a substantial
               interest or is an officer, director, trustee or partner.

          (p)  EQUITY CAPITALIZATION. As of the date hereof, the authorized
               capital stock of the Company consists of (x) 200,000,000 shares
               of Common Stock, of which as of the date hereof, 80,969,808 are
               issued and outstanding (none of which are treasury shares),
               10,246,425 shares are reserved for issuance pursuant to the
               Company's stock option and purchase plans and 1,889,315 shares
               are reserved for issuance pursuant to securities exercisable or
               exchangeable for, or convertible into, shares of Common Stock,
               and (y) 10,000,000 shares of preferred stock, of which 1,000 are
               designated as Series C Preferred Stock, of which as of the
               Closing Date, none will be issued and outstanding; of which 431
               are designated as Series C1 Preferred Stock, of which as of the
               Closing Date, 431 shares will be issued and outstanding; and of
               which 430 are designated Series C2 Preferred Stock, of which as
               of the Closing Date, 430 shares will be outstanding. All of such
               outstanding shares have been, or upon issuance will be, validly
               issued and are fully paid and nonassessable. Except as disclosed
               on the Prior 10K, the Company's Schedule 14A filed with the SEC
               on September 30, 2004, or any of the Company's Quarterly Reports
               on Form 10Q or Periodic Reports on Form 8-K filed with the SEC
               since the Prior 10K was filed: (i) no shares of the Company's
               capital stock are subject to preemptive rights or any other
               similar rights or any liens or encumbrances suffered or permitted
               by the Company; (ii) there are no outstanding options, warrants,
               scrip, rights to subscribe to, calls or commitments of any
               character whatsoever relating to, or securities or rights
               convertible into, or exercisable or exchangeable for, any shares
               of capital stock of the Company or any of its Subsidiaries, or
               contracts, commitments, understandings or arrangements by which
               the Company or any of its Subsidiaries is or may become bound to
               issue additional shares of capital stock of the Company or any of
               its Subsidiaries or options, warrants, scrip, rights to subscribe
               to, calls or commitments of any character whatsoever relating to,
               or securities or rights convertible into, or exercisable or
               exchangeable for, any shares of capital stock of the Company or
               any of its Subsidiaries; (iii) there are no outstanding debt
               securities, notes, credit agreements, credit facilities or other
               agreements, documents or instruments evidencing Indebtedness (as
               defined in Section 3(r)) of the Company or any of its
               Subsidiaries or by which the Company or any of its subsidiaries
               is or may become bound; (iv) there are no financing statements
               securing obligations in any material amounts, either singly or in
               the aggregate, filed in connection with the Company; (v) there
               are no agreements or arrangements under which the Company or any
               of its Subsidiaries is obligated to register the sale of any of
               their securities under the 1933 Act; (vi) there are no
               outstanding securities or instruments of the Company or any of
               its Subsidiaries which contain any redemption or similar
               provisions, and there are no contracts, commitments,
               understandings or arrangements by which the Company or any of its
               Subsidiaries is or may become bound to redeem a security of the
               Company or any of its Subsidiaries; (vii) there are no securities
               or instruments containing anti-dilution or similar provisions
               that will be triggered by the issuance of the Securities; (viii)
               the Company does not have any stock appreciation rights or
               "phantom stock" plans or agreements or any similar plan or
               agreement; and (ix) the Company and its Subsidiaries have no
               liabilities or obligations required to be disclosed in the SEC
               Documents (as defined herein) but not so disclosed in the SEC
               Documents, other than (with respect to each of (i) through (ix)
               above) which, individually or in the aggregate, do not or would
               not reasonably be expected to have a Material Adverse Effect. The
               Company has furnished to Buyer true, correct


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               and complete copies of the Company's Certificate of
               Incorporation, as amended and as in effect on the date hereof
               (together with any certificate of designations of any outstanding
               series of preferred stock of the Company, the "CERTIFICATE OF
               INCORPORATION"), and the Company's Bylaws, as amended and as in
               effect on the date hereof (the "BYLAWS"), and the terms of all
               securities convertible into, or exercisable or exchangeable for,
               Common Stock and the material rights of the holders thereof in
               respect thereto.

          (q)  INDEBTEDNESS AND OTHER CONTRACTS. Neither the Company nor any of
               its subsidiaries (i) except as disclosed in the financial
               statements included in the Prior 10K and each Quarterly Report on
               Form 10-Q filed by the Company since the filing of the Prior 10K
               (including the notes thereto), has any outstanding Indebtedness
               (as defined below), (ii) except as disclosed in the Prior 10K and
               each Quarterly Report on Form 10-Q filed by the Company since the
               filing of the Prior 10K, is a party to any contract, agreement or
               instrument, the violation of which, or default under which, by
               the other party(ies) to such contract, agreement or instrument
               would reasonably be expected to result in a Material Adverse
               Effect, (iii) is in violation of any term of or in default under
               any contract, agreement or instrument relating to any
               Indebtedness, except where such violations and defaults would not
               reasonably be expected to result, individually or in the
               aggregate, in a Material Adverse Effect, or (iv) is a party to
               any contract, agreement or instrument relating to any
               Indebtedness, the performance of which, in the judgment of the
               Company's officers, has or is expected to have a Material Adverse
               Effect. For purposes of this Agreement: (x) "INDEBTEDNESS" of any
               Person means, without duplication (A) all indebtedness for
               borrowed money, (B) all obligations issued, undertaken or assumed
               as the deferred purchase price of property or services (other
               than trade payables entered into in the ordinary course of
               business), (C) all reimbursement or payment obligations with
               respect to letters of credit, surety bonds and other similar
               instruments, (D) all obligations evidenced by notes, bonds,
               debentures or similar instruments, including obligations so
               evidenced incurred in connection with the acquisition of
               property, assets or businesses, (E) all indebtedness created or
               arising under any conditional sale or other title retention
               agreement, or incurred as financing, in either case with respect
               to any property or assets acquired with the proceeds of such
               indebtedness (even though the rights and remedies of the seller
               or bank under such agreement in the event of default are limited
               to repossession or sale of such property), (F) all monetary
               obligations under any leasing or similar arrangement which, in
               connection with generally accepted accounting principles,
               consistently applied for the periods covered thereby, is
               classified as a capital lease, (G) all indebtedness referred to
               in clauses (A) through (F) above secured by (or for which the
               holder of such indebtedness has an existing right, contingent or
               otherwise, to be secured by) any mortgage, lien, pledge, change,
               security interest or other encumbrance upon or in any property or
               assets (including accounts and contract rights) owned by any
               Person, even though the Person which owns such assets or property
               has not assumed or become liable for the payment of such
               indebtedness, and (H) all Contingent Obligations in respect of
               indebtedness or obligations of others of the kinds referred to in
               clauses (A) through (G) above; (y) "CONTINGENT OBLIGATION" means,
               as to any Person, any direct or indirect liability, contingent or
               otherwise, of that Person with respect to any indebtedness,
               lease, dividend or other obligation of another Person if the
               primary purpose or intent of the Person incurring such liability,
               or the primary effect thereof, is to provide assurance to the
               obligee of such liability that such liability will be paid or
               discharged, or that any agreements relating thereto will be
               complied with, or that the holders of such liability will be
               protected (in whole or in part) against loss with respect
               thereto; and (z) "PERSON" means



                                       9
<PAGE>


               an individual, a limited liability company, a partnership, a
               joint venture, a corporation, a trust, an unincorporated
               organization and a government or any department or agency
               thereof.

          (r)  ABSENCE OF LITIGATION. There is no action, suit, proceeding,
               inquiry or investigation before or by the Principal Market, any
               court, public board, government agency, self-regulatory
               organization or body pending or, to the knowledge of the Company,
               threatened against or affecting the Company, the Common Stock or
               any of the Company's Subsidiaries or any of the Company's or the
               Company's Subsidiaries' officers or directors in their capacities
               as such, except (i) as disclosed under Item 3 ("Legal
               Proceedings") of the Company's Prior 10-K or (ii) such as are not
               reasonably be expected to have, individually or in the aggregate,
               a Material Adverse Effect.

          (s)  INSURANCE. The Company and each of its Subsidiaries are insured
               by insurers of recognized financial responsibility against such
               losses and risks and in such amounts as management of the Company
               believes to be prudent and customary in the businesses in which
               the Company and its Subsidiaries are engaged. Neither the Company
               nor any such Subsidiary has been refused any insurance coverage
               sought or applied for and neither the Company nor any such
               Subsidiary has any reason to believe that it will not be able to
               renew its existing insurance coverage as and when such coverage
               expires or to obtain similar coverage from similar insurers as
               may be necessary to continue its business at a cost that would
               not have a Material Adverse Effect.

          (t)  EMPLOYEE RELATIONS. (i) Neither the Company nor any of its
               Subsidiaries is a party to any collective bargaining agreement or
               employs any member of a union. The Company and its Subsidiaries
               believe that their relations with their employees are good. No
               executive officer of the Company (as defined in Rule 501(f) of
               the 1933 Act) has notified the Company that such officer intends
               to leave the Company or otherwise terminate such officer's
               employment with the Company. No executive officer of the Company,
               to the knowledge of the Company, is, or is now expected to be, in
               violation of any material term of any employment contract,
               confidentiality, disclosure or proprietary information agreement,
               non-competition agreement, or any other contract or agreement or
               any restrictive covenant, and, to the knowledge of the Company,
               the continued employment of each such executive officer does not
               subject the Company or any of its Subsidiaries to any material
               liability with respect to any of the foregoing matters.

               (i)  The Company and its Subsidiaries are in compliance with all
                    federal, state, local and foreign laws and regulations
                    respecting employment and employment practices, terms and
                    conditions of employment and wages and hours, except where
                    failure to be in compliance would not, either individually
                    or in the aggregate, reasonably be expected to result in a
                    Material Adverse Effect.

          (u)  TITLE. The Company and its Subsidiaries have good and marketable
               title to all personal property owned by them which is material to
               the business of the Company and its subsidiaries, in each case
               free and clear of all liens, encumbrances and defects except (i)
               mortgages on the Company's manufacturing facility in Northern
               Ireland, (ii) assets pledged under security agreements between
               the Company and Berg & Berg Enterprises, LLC and/or its
               affiliates, (iii) liens for taxes not yet delinquent, (iv)
               mechanics' and materialmen's liens (and



                                       10
<PAGE>


               other similar liens), and liens under operating and similar
               agreements, to the extent the same relate to expenses incurred in
               the ordinary course of business and that are not yet due, (v)
               that are routine Governmental Approvals, or (vi) such as do not
               materially affect the value of such property and do not interfere
               with the use made and proposed to be made of such property by the
               Company and any of its Subsidiaries. Except as disclosed under
               Item 2 ("Properties") in the Prior 10K, neither the Company nor
               any of its Subsidiaries owns any real property. Any real property
               and facilities held under lease by the Company and any of its
               Subsidiaries are held by them under valid, subsisting and
               enforceable leases with such exceptions as are not material and
               do not interfere with the use made and proposed to be made of
               such property and buildings by the Company and its Subsidiaries.

          (v)  INTELLECTUAL PROPERTY RIGHTS. The Company and its Subsidiaries
               own or possess adequate rights or licenses to use all trademarks,
               trade names, service marks, service mark registrations, service
               names, patents, patent rights, copyrights, inventions, licenses,
               approvals, governmental authorizations, trade secrets and other
               intellectual property rights ("INTELLECTUAL PROPERTY RIGHTS")
               necessary to conduct their respective businesses as now
               conducted. None of the Company's Intellectual Property Rights
               have expired or terminated, or are expected to expire or
               terminate within two (2) years from the date of this Agreement,
               except for those which would not reasonably be expected to have,
               individually or in the aggregate, a Material Adverse Effect. The
               Company does not have any knowledge, of any infringement by the
               Company or its Subsidiaries of Intellectual Property Rights of
               others. There is no claim, action or proceeding being made or
               brought, or to the knowledge of the Company, being threatened,
               against the Company or its Subsidiaries regarding its
               Intellectual Property Rights except such as would not reasonably
               be expected to have, individually or in the aggregate, a Material
               Adverse Effect. The Company does not have any knowledge of any
               facts or circumstances which might give rise to any of the
               foregoing infringements or claims, actions or proceedings. The
               Company and its Subsidiaries have taken reasonable security
               measures to protect the secrecy, confidentiality and value of all
               of their intellectual properties.

          (w)  ENVIRONMENTAL LAWS. The Company and its Subsidiaries (i) are in
               compliance with any and all Environmental Laws (as hereinafter
               defined), (ii) have received all permits, licenses or other
               approvals required of them under applicable Environmental Laws to
               conduct their respective businesses and (iii) are in compliance
               with all terms and conditions of any such permit, license or
               approval where, in each of the foregoing clauses (i), (ii) and
               (iii), the failure to so comply could be reasonably expected to
               have, individually or in the aggregate, a Material Adverse
               Effect. The term "ENVIRONMENTAL LAWS" means all federal, state,
               local or foreign laws relating to pollution or protection of
               human health or the environment (including, without limitation,
               ambient air, surface water, groundwater, land surface or
               subsurface strata), including, without limitation, laws relating
               to emissions, discharges, releases or threatened releases of
               chemicals, pollutants, contaminants, or toxic or hazardous
               substances or wastes (collectively, "HAZARDOUS MATERIALS") into
               the environment, or otherwise relating to the manufacture,
               processing, distribution, use, treatment, storage, disposal,
               transport or handling of Hazardous Materials, as well as all
               authorizations, codes, decrees, demands or demand letters,
               injunctions, judgments, licenses, notices or notice letters,
               orders, permits, plans or regulations issued, entered,
               promulgated or approved thereunder.



                                       11
<PAGE>


          (x)  SUBSIDIARY RIGHTS. The Company or one of its Subsidiaries has the
               unrestricted right to vote, and (subject to limitations imposed
               by applicable law) to receive dividends and distributions on, all
               capital securities of its material Subsidiaries as owned by the
               Company or such Subsidiary.

          (y)  TAX STATUS. The Company and each of its Subsidiaries (i) has made
               or filed all federal and state income and all other tax returns,
               reports and declarations required by any jurisdiction to which it
               is subject, (ii) has paid all taxes and other governmental
               assessments and charges that are material in amount, shown or
               determined to be due on such returns, reports and declarations,
               except those being contested in good faith and (iii) has set
               aside on its books provision reasonably adequate for the payment
               of all taxes for periods subsequent to the periods to which such
               returns, reports or declarations apply. There are no unpaid taxes
               in any material amount claimed to be due by the taxing authority
               of any jurisdiction, and the officers of the Company know of no
               basis for any such claim.

          (z)  INTERNAL ACCOUNTING CONTROLS. The Company and each of its
               Subsidiaries maintain a system of internal accounting controls
               sufficient to provide reasonable assurance that (i) transactions
               are executed in accordance with management's general or specific
               authorizations, (ii) transactions are recorded as necessary to
               permit preparation of financial statements in conformity with
               generally accepted accounting principles and to maintain asset
               and liability accountability, (iii) access to assets or
               incurrence of liabilities is permitted only in accordance with
               management's general or specific authorization and (iv) the
               recorded accountability for assets and liabilities is compared
               with the existing assets and liabilities at reasonable intervals
               and appropriate action is taken with respect to any difference.

          (aa) SARBANES-OXLEY ACT. The Company is in compliance with any and all
               applicable requirements of the Sarbanes-Oxley Act of 2002 that
               are effective as of the date hereof, and any and all applicable
               rules and regulations promulgated by the SEC thereunder that are
               effective as of the date hereof, except where such noncompliance
               would not have a Material Adverse Effect.

          (bb) REGISTRATION STATEMENT.

               (i)  The Company has filed with the SEC, on August 17, 2001, a
                    "shelf" registration statement on Form S-3 under the 1933
                    Act, and the rules and regulations of the SEC promulgated
                    thereunder (the "RULES AND REGULATIONS"). Such registration
                    statement, as amended at the time it became effective,
                    including the exhibits and information (if any) deemed to be
                    part of such registration statement at the time of
                    effectiveness pursuant to Rule 430A or 434(d) under the 1933
                    Act, is hereinafter referred to as the "REGISTRATION
                    STATEMENT". The Registration Statement was declared
                    effective by the SEC on August 17, 2001, and no stop order
                    suspending the effectiveness of the Registration Statement
                    has been issued and, to the Company's knowledge, no
                    proceeding for that purpose has been initiated or threatened
                    by the SEC. The Company proposes to file the Prospectus (as
                    defined below) with the SEC pursuant to Rule 424(b) of the
                    Rules and Regulations. The Prospectus Supplement, in the
                    form in which it is to be filed with the Commission pursuant
                    to Rule 424(b) of the Rules and Regulations, along with the
                    Prospectus included as part of the Registration Statement
                    (as updated through the date hereof) is hereinafter referred
                    to as the "PROSPECTUS," except that if any revised
                    prospectus



                                       12
<PAGE>


                    or prospectus supplement shall be provided by the Company
                    prior to the Closing Date for use in connection with the
                    offering and sale of the Common Shares which differs from
                    the Prospectus (whether or not such revised prospectus or
                    prospectus supplement is required to be filed by the Company
                    pursuant to Rule 424(b) of the Rules and Regulations), the
                    term "Prospectus" shall refer to such revised prospectus or
                    prospectus supplement, as the case may be, from and after
                    the time it is first provided for such use. Any reference
                    herein to the Registration Statement or the Prospectus shall
                    be deemed to refer to and include the documents incorporated
                    by reference therein pursuant to Item 12 of Form S-3 which
                    were filed under the Exchange Act on or before the last to
                    occur of the effective date of the Registration Statement,
                    the date of Prospectus, and any reference herein to the
                    terms "amend", "amendment" or "supplement" with respect to
                    the Registration Statement, or the Prospectus shall be
                    deemed to refer to and include (i) the filing of any
                    document under the Exchange Act after the effective date of
                    the Registration Statement, the date of such Prospectus, as
                    the case may be, which is incorporated therein by reference
                    and (ii) any such document so filed.

               (ii) Upon the filing or first delivery to the Buyer of the
                    Prospectus, the Registration Statement (and any
                    post-effective amendment thereto) and the Prospectus (as
                    amended or as supplemented if the Company shall have filed
                    with the Commission any amendment or supplement to the
                    Registration Statement or the Prospectus) contained and will
                    contain all statements which are required to be stated
                    therein in accordance with the 1933 Act and the Rules and
                    Regulations, complied and will comply in all material
                    respects with the 1933 Act and the Rules and Regulations,
                    and did not and 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 the light of the circumstances under which they
                    were made, in the case of the Prospectus) not misleading.
                    The Company has not distributed any offering material in
                    connection with the offering and sale of the Common Shares,
                    other than the Registration Statement and the Prospectus.

          (cc) LISTING.

               (i)  The offer and sale of the Common Shares by the Company to
                    the Buyer at the Closing will be made pursuant to the
                    Registration Statement and the Prospectus, and will comply
                    in all material respects with the requirements of the 1933
                    Act, the 1934 Act and the rules and regulations promulgated
                    thereunder.

               (ii) The Company's Common Stock is registered pursuant to Section
                    12(g) of the 1934 Act and is listed on the Principal Market,
                    and the Company has taken no action designed to, or likely
                    to have the effect of, terminating the registration of the
                    Common Shares under the 1934 Act or de-listing the Common
                    Shares from the Principal Market, nor to the Company's
                    knowledge is the National Association of Securities Dealers,
                    Inc., currently contemplating terminating such listing. The
                    Company has not, in the 12 months preceding the date hereof,
                    received notice from the Principal Market to the effect that
                    the Company is not in compliance with the listing or
                    maintenance requirements of the Principal Market. The
                    Company is, and has no reason to believe that it will not in
                    the foreseeable future continue to be, in compliance with
                    all such listing and maintenance requirements. The issuance
                    and sale of the Securities hereunder does not contravene the
                    rules and regulations of the Principal Market and no
                    shareholder approval is required for the Company to fulfill
                    its obligations under this Agreement.


                                       13
<PAGE>


                    The Company and the Common Shares meet the criteria for
                    continued listing and trading on the Principal Market.

     4.   COVENANTS.

          (a)  BEST EFFORTS. Each party shall use its best efforts timely to
               satisfy each of the conditions to be satisfied by it as provided
               in Sections 5 and 6 of this Agreement.

          (b)  REPORTING STATUS. Until the date on which Buyer shall have sold
               all of the Common Shares (the "REPORTING PERIOD"), the Company
               shall file all reports required to be filed with the SEC pursuant
               to the 1934 Act, and the Company shall not terminate its status
               as an issuer required to file reports under the 1934 Act even if
               the 1934 Act or the rules and regulations thereunder would
               otherwise permit such termination.

          (c)  USE OF PROCEEDS. The Company will use the proceeds from the sale
               of the securities for working capital purposes and not for the
               repayment of any outstanding Indebtedness of the Company or any
               of its Subsidiaries.

          (d)  LISTING. The Company shall promptly secure the listing of all of
               the Purchased Shares upon each national securities exchange and
               automated quotation system, if any, upon which shares of Common
               Stock are then listed (subject to official notice of issuance)
               and shall maintain such listing of all Purchased Shares from time
               to time issuable under the terms of this Agreement. The Company
               shall maintain the Common Stock's authorization for quotation on
               the Principal Market. Neither the Company nor any of its
               Subsidiaries shall take any action which would be reasonably
               expected to result in the delisting or suspension of the Common
               Stock on the Principal Market. The Company shall pay all fees and
               expenses in connection with satisfying its obligations under this
               Section 4(e).

          (e)  FEES. Subject to Section 7 below at the Closing, the Company
               shall pay a nonaccountable expense allowance of $20,000 to
               Riverview Group, LLC (a Buyer) or its designees, which amount
               shall be withheld by such Buyer from its Purchase Price at the
               Closing. The Company shall be responsible for the payment of any
               placement agent's fees, financial advisory fees, or broker's
               commissions relating to or arising out of the transactions
               contemplated hereby, including, without limitation, any fees or
               commissions payable to the Agent. The Company shall pay, and hold
               Buyer harmless against, any liability, loss or expense
               (including, without limitation, reasonable attorney's fees and
               out-of-pocket expenses) arising in connection with claim relating
               to any such payment. Except as otherwise set forth in this
               Agreement or in the Registration Rights Agreement, each party to
               this Agreement shall bear its own expenses in connection with the
               sale of the Securities to Buyer.

          (f)  DISCLOSURE OF TRANSACTIONS AND OTHER MATERIAL INFORMATION. As
               soon as practicable on the first Business Day following the
               execution and delivery of this Agreement, the Company shall issue
               a press release reasonably acceptable to the Buyers disclosing
               all material terms of the transactions contemplated hereby. On or
               before 8:30 a.m., New York Time, on the second Business Day
               following the execution and delivery of this Agreement, the
               Company shall file a Current Report on Form 8-K describing the
               terms of the transactions contemplated by this Agreement in the
               form required by the 1934 Act, and attaching this


                                       14
<PAGE>



               Agreement (and all schedules to this Agreement) as an exhibit to
               such filing (including all attachments, the "8-K FILING"). From
               and after the filing of the 8-K Filing with the SEC, Buyer shall
               not be in possession of any material, nonpublic information
               received from the Company, any of its Subsidiaries or any of its
               respective officers, directors, employees or agents, that is not
               disclosed in the 8-K Filing. The Company shall not, and shall
               cause each of its Subsidiaries and its and each of their
               respective officers, directors, employees and agents, not to,
               provide Buyer with any material nonpublic information regarding
               the Company or any of its subsidiaries from and after the filing
               of the 8-K Filing with the SEC without the express written
               consent of Buyer. Subject to the foregoing, neither the Company
               nor any Buyer shall issue any press releases or any other public
               statements with respect to the transactions contemplated hereby;
               PROVIDED, HOWEVER, that the Company shall be entitled, without
               the prior approval of any Buyer, to make any press release or
               other public disclosure with respect to such transactions (i) in
               substantial conformity with the 8-K Filing and contemporaneously
               therewith and (ii) as is required by applicable law and
               regulations, including the applicable rules and regulations of
               the Principal Market (provided that in the case of clause (i)
               each Buyer shall be consulted by the Company (although the
               consent of such Buyer shall not be required) in connection with
               any such press release or other public disclosure prior to its
               release).

          (g)  CONDUCT OF BUSINESS. The business of the Company and its
               Subsidiaries shall not be conducted in violation of any law,
               ordinance or regulation of any governmental entity, except where
               such violations would not result, either individually or in the
               aggregate, in a Material Adverse Effect.

     5.   CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.

     The obligation of the Company hereunder to issue and sell the Common Shares
to Buyer at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are
for the Company's sole benefit and may be waived by the Company at any time in
its sole discretion by providing Buyer with prior written notice thereof:

          (a)  Buyer shall have executed this Agreement and delivered the same
               to the Company.

          (b)  Buyer shall have delivered to the Company the Purchase Price for
               the Common Shares being purchased by Buyer at the Closing by wire
               transfer of immediately available funds pursuant to the wire
               instructions provided by the Company.

          (c)  The representations and warranties of Buyer shall be true and
               correct in all material respects as of the date when made and as
               of the Closing Date as though made at that time (except for
               representations; and warranties that speak as of a specific
               date), and Buyer shall have performed, satisfied and complied in
               all material respects (except for covenants, agreements and
               conditions that are qualified by materiality, which shall be
               complied with in all respects) with the covenants, agreements and
               conditions required by this Agreement to be performed, satisfied
               or complied with by Buyer at or prior to the Closing Date. The
               Company shall have received a certificate, executed by an
               authorized representative, dated as of the Closing Date, to the
               foregoing effect in the form attached hereto as EXHIBIT A.



                                       15
<PAGE>


     6.   CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.

     The obligation of Buyer hereunder to purchase the Common Shares at the
Closing is subject to the satisfaction, at or before the Closing Date, of each
of the following conditions, provided that these conditions are for Buyer's sole
benefit and may be waived by Buyer at any time in its sole discretion by
providing the Company with prior written notice thereof:

          (a)  The Company shall have executed and delivered to Buyer (i) the
               Agreement and (ii) the Common Shares being purchased by Buyer at
               the Closing pursuant to this Agreement.

          (b)  Buyer shall have received the opinion of Akin Gump Strauss Hauer
               & Feld LLP, the Company's counsel, dated as of the Closing Date,
               in substantially the form of EXHIBIT B attached hereto.

          (c)  The Company shall have delivered to Buyer a certificate
               evidencing the incorporation and good standing of the Company and
               of Valence Technology (Nevada), Inc., in each such corporation's
               state of incorporation issued by the Secretary of State of such
               state of incorporation as of a date within ten (10) days of the
               Closing Date.

          (d)  The Company shall have delivered to Buyer a certificate
               evidencing the Company's qualification as a foreign corporation
               and good standing issued by the Secretary of State of the State
               of Texas as of a date within ten (10) days of the Closing Date.

          (e)  The Company shall have delivered to Buyer a certified copy of the
               Certificate of Incorporation as certified by the Secretary of
               State of the State of Delaware within ten (10) days of the
               Closing Date.

          (f)  The Company shall have delivered to Buyer a certificate, executed
               by an Assistant Secretary of the Company and dated as of the
               Closing Date, as to (i) the resolutions consistent with Section
               3(b) as adopted by the Company's Board of Directors in a form
               reasonably acceptable to Buyer (the "RESOLUTIONS"), (ii) the
               Certificate of Incorporation and (iii) the Bylaws, each as in
               effect at the Closing, in the form attached hereto as EXHIBIT C.

          (g)  The representations and warranties of the Company shall be true
               and correct as of the date when made and as of the Closing Date
               as though made at that time (except for representations and
               warranties that speak as of a specific date) and the Company
               shall have performed, satisfied and complied in all material
               respects (except for covenants, agreements and conditions that
               are qualified by materiality, which shall be complied with in all
               respects) with the covenants, agreements and conditions required
               by the Agreement to be performed, satisfied or complied with by
               the Company at or prior to the Closing Date. Buyer shall have
               received a certificate, executed by the Chief Executive Officer
               of the Company, dated as of the Closing Date, to the foregoing
               effect and as to such other matters as may be reasonably
               requested by Buyer in the form attached hereto as EXHIBIT D.

          (h)  The Company shall have delivered to Buyer a letter from the
               Company's transfer agent certifying the number of shares of
               Common Stock outstanding as of a date within five (5) days of the
               Closing Date.



                                       16
<PAGE>


          (i)  The Common Stock (A) shall be designated for quotation or listed
               on the Principal Market and (B) shall not have been suspended by
               the SEC or the Principal Market from trading on the Principal
               Market nor shall suspension by the SEC or the Principal Market
               have been threatened either (I) in writing by the SEC or the
               Principal Market or (II) by falling below the minimum listing
               maintenance requirements of the Principal Market.

          (j)  The Company shall have obtained all governmental, regulatory or
               third party consents and approvals, if any, necessary for the
               sale of the Common Shares.

          (k)  The Company shall have delivered to Buyer such other documents
               relating to the transactions contemplated by this Agreement as
               Buyer or its counsel may reasonably request.

     7.   TERMINATION. In the event that the Closing shall not have occurred
          with respect to Buyer on or before five (5) Business Days from the
          date hereof due to the Company's or Buyer's failure to satisfy the
          conditions set forth in Sections 5 and 6 above (and the nonbreaching
          party's failure to waive such unsatisfied condition(s)), the
          nonbreaching party shall have the option to terminate this Agreement
          with respect to such breaching party at the close of business on such
          date without liability of any party to any other party; PROVIDED,
          HOWEVER, if this Agreement is terminated pursuant to this Section 7,
          the Company shall remain obligated to reimburse the non-breaching
          Buyers for the expenses described in Section 4(e) above.

     8.   MISCELLANEOUS.

          (a)  GOVERNING LAW; JURISDICTION; JURY TRIAL. All questions concerning
               the construction, validity, enforcement and interpretation of
               this Agreement shall be governed by the internal laws of the
               State of New York, without giving effect to any choice of law or
               conflict of law provision or rule (whether of the State of New
               York or any other jurisdictions) that would cause the application
               of the laws of any jurisdictions other than the State of New
               York. Each party hereby irrevocably submits to the non-exclusive
               jurisdiction of the state and federal courts sitting in The City
               of New York, Borough of Manhattan, for the adjudication of any
               dispute hereunder or in connection herewith or with any
               transaction contemplated hereby or discussed herein, and hereby
               irrevocably waives, and agrees not to assert in any suit, action
               or proceeding, any claim that it is not personally subject to the
               jurisdiction of any such court, that such suit, action or
               proceeding is brought in an inconvenient forum or that the venue
               of such suit, action or proceeding is improper. Each party hereby
               irrevocably waives personal service of process and consents to
               process being served in any such suit, action or proceeding by
               mailing a copy thereof to such party at the address for such
               notices to it under this Agreement and agrees that such service
               shall constitute good and sufficient service of process and
               notice thereof. Nothing contained herein shall be deemed to limit
               in any way any right to serve process in any manner permitted by
               law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE,
               AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF
               ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
               THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.


                                       17
<PAGE>


          (b)  COUNTERPARTS. This Agreement may be executed in two or more
               identical counterparts, all of which shall be considered one and
               the same agreement and shall become effective when counterparts
               have been signed by each party and delivered to the other party;
               provided that a facsimile signature shall be considered due
               execution and shall be binding upon the signatory thereto with
               the same force and effect as if the signature were an original,
               not a facsimile signature.

          (c)  HEADINGS. The headings of this Agreement are for convenience of
               reference and shall not form part of, or affect the
               interpretation of, this Agreement.

          (d)  SEVERABILITY. If any provision of this Agreement shall be invalid
               or unenforceable in any jurisdiction, such invalidity or
               unenforceability shall not affect the validity or enforceability
               of the remainder of this Agreement in that jurisdiction or the
               validity or enforceability of any provision of this Agreement in
               any other jurisdiction.

          (e)  ENTIRE AGREEMENT; AMENDMENTS. This Agreement supersedes all other
               prior oral or written agreements between Buyer, the Company,
               their affiliates and Persons acting on their behalf with respect
               to the matters discussed herein, and this Agreement and the
               instruments referenced herein contain the entire understanding of
               the parties with respect to the matters covered herein and
               therein and, except as specifically set forth herein or therein,
               neither the Company nor Buyer makes any representation, warranty,
               covenant or undertaking with respect to such matters. No
               provision of this Agreement may be amended other than by an
               instrument in writing signed by the Company and Buyer. No
               provision hereof may be waived other than by an instrument in
               writing signed by the party against whom enforcement is sought.
               No such amendment shall be effective to the extent that it
               applies to less than all of the holders of the Common Shares then
               outstanding. No consideration shall be offered or paid to any
               Person to amend or consent to a waiver or modification of any
               provision of this Agreement unless the same consideration also is
               offered to all of the parties to this Agreement. The Company has
               not, directly or indirectly, made any agreements with any Buyers
               relating to the terms or conditions of the transactions
               contemplated by this Agreement except as set forth in this
               Agreement.

          (f)  NOTICES. Any notices, consents, waivers or other communications
               required or permitted to be given under the terms of this
               Agreement must be in writing and will be deemed to have been
               delivered: (i) upon receipt, when delivered personally; (ii) upon
               receipt, when sent by facsimile (provided confirmation of
               transmission is mechanically or electronically generated and kept
               on file by the sending party); or (iii) one Business Day after
               deposit with an overnight courier service, in each case properly
               addressed to the party to receive the same. The addresses and
               facsimile numbers for such communications shall be:

        If to the Company:

               Valence Technology, Inc.
               Bridge Point Parkway, Suite 415
               Austin, Texas  78730
               Telephone:    (512) 527-2900
               Facsimile:    (512) 527-2910
               Attention:    President and CEO



                                       18
<PAGE>


        with a copy to:

               Akin Gump Strauss Hauer & Feld LLP
               2029 Century Park East, 24th Floor
               Los Angeles, California  90067
               Telephone:    (310) 229-1000
               Facsimile:    (310) 229-1001
               Attention:    C.N. Franklin Reddick, III, Esq.


     If to a Buyer, to its address and facsimile number set forth on the
Schedule of Buyers, with copies to such Buyer's representatives as set forth on
the Schedule of Buyers, or to such other address and/or facsimile number and/or
to the attention of such other Person as the recipient party has specified by
written notice given to each other party five (5) days prior to the
effectiveness of such change with a copy (for informational purposes) to Schulte
Roth & Zabel LLP, 919 Third Avenue, New York, New York 10022, Facsimile: (212)
593-5955, Telephone:(212) 756-2376, Attention: Eleazer Klein, Esq. Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated by
the sender's facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission or (C) provided by an
overnight courier service shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from an overnight courier service in accordance
with clause (i), (ii) or (iii) above, respectively.

          (g)  SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
               inure to the benefit of the parties and their respective
               successors and assigns. Neither party shall assign this Agreement
               or any rights or obligations hereunder without the prior written
               consent of the other party.

          (h)  NO THIRD PARTY BENEFICIARIES. This Agreement is intended for the
               benefit of the parties hereto and their respective permitted
               successors and assigns, and is not for the benefit of, nor may
               any provision hereof be enforced by, any other Person.

          (i)  SURVIVAL. Unless this Agreement is terminated under Section 7,
               the representations and warranties of the Company and Buyer
               contained in Sections 2 and 3, the agreements and covenants set
               forth in Sections 4 and 8 shall survive the Closing. Each Buyer
               shall be responsible only for its own representations,
               warranties, agreements and covenants hereunder.

          (j)  FURTHER ASSURANCES. Each party shall do and perform, or cause to
               be done and performed, all such further acts and things, and
               shall execute and deliver all such other agreements,
               certificates, instruments and documents, as the other party may
               reasonably request in order to carry out the intent and
               accomplish the purposes of this Agreement and the consummation of
               the transactions contemplated hereby.


                                       19
<PAGE>


          (k)  INDEMNIFICATION.

               (i)  In consideration of Buyer's execution and delivery of the
                    Agreement and acquiring the Securities hereunder and in
                    addition to all of the Company's other obligations under the
                    Agreement, the Company shall defend, protect, indemnify and
                    hold harmless Buyer and all of its stockholders, partners,
                    members, officers, directors, employees and direct or
                    indirect investors and any of the foregoing Persons' agents
                    or other representatives (including, without limitation,
                    those retained in connection with the transactions
                    contemplated by this Agreement) (collectively, the
                    "INDEMNITEES") from and against any and all actions, causes
                    of action, suits, claims, losses, costs, penalties, fees,
                    liabilities and damages, and expenses in connection
                    therewith (irrespective of whether any such Indemnitee is a
                    party to the action for which indemnification hereunder is
                    sought), and including reasonable attorneys' fees and
                    disbursements (the "INDEMNIFIED LIABILITIES"), incurred by
                    any Indemnitee as a result of, or arising out of, or
                    relating to (a) any material inaccuracy of any
                    representation or warranty made by the Company in this
                    Agreement, (b) any material breach of any covenant,
                    agreement or obligation of the Company contained in this
                    Agreement or (c) any cause of action, suit or claim brought
                    or made against such Indemnitee by a third party (including
                    for these purposes a derivative action brought on behalf of
                    the Company) and arising out of or resulting from (i) the
                    execution, delivery, performance or enforcement of this
                    Agreement, (ii) any transaction financed or to be financed
                    in whole or in part, directly or indirectly, with the
                    proceeds of the issuance of the Securities, (iii) any
                    disclosure made by Buyer pursuant to Section 4(f), or (iv)
                    the status of Buyer as an investor in the Company (other
                    than in connection with any action such Buyer may have taken
                    or may have failed to taken). To the extent that the
                    foregoing undertaking by the Company may be unenforceable
                    for any reason, the Company shall make the maximum
                    contribution to the payment and satisfaction of each of the
                    Indemnified Liabilities which is permissible under
                    applicable law.

               (ii) Promptly after receipt by an Indemnitee under this Section
                    8(k) of notice of the commencement of any action or
                    proceeding (including any governmental action or proceeding
                    involving an Indemnified Liability, such Indemnitee shall,
                    if a claim for an Indemnified Liability is to be made
                    against the Company under this Section 8(k), deliver to the
                    Company a written notice of the commencement thereof, and
                    the Company shall have the right to participate in, and, to
                    the extent the Company so desires to assume control of the
                    defense thereof with counsel mutually satisfactory to the
                    Company and the Indemnitee; provided, however that the
                    Indemnitee shall have the right to retain its own counsel
                    with the fees and expenses of not more than one counsel to
                    be for such Indemnitee to be paid by the Company, if, in the
                    reasonable opinion of counsel retained by the Company, the
                    representation by such counsel of the Indemnitee would be
                    inappropriate due to actual or potential differing interests
                    between such Indemnitee and any other party represented by
                    such counsel in such proceeding. The Indemnitee shall
                    cooperate fully with the Company in connection with any
                    negotiation or defense of any such action or claim for
                    Indemnified Liabilities by the Company and shall furnish to
                    the Company all information reasonably available to the
                    Indemnitee which relates to such action or claim. The
                    Company shall keep the Indemnitee fully apprised at all
                    times as to the status of the defense or any settlement
                    negotiations with respect thereto. The Company shall not be
                    liable for any settlement of any action, claim, or
                    proceeding effected without its prior written consent,
                    provided, however, that the Company shall not unreasonably
                    withhold, delay or condition its consent. The Company shall
                    not, without the prior written consent of the Indemnitee,
                    consent to entry of any judgment or enter into any
                    settlement or other compromise which does not include as an
                    unconditional term thereof the giving by the claimant or
                    plaintiff to


                                       20
<PAGE>



                    such Indemnitee of a release from all liability in respect
                    to such Indemnified Liabilities or litigation related
                    thereto. Following indemnification as provided for
                    hereunder, the Company shall be subrogated to all rights of
                    the Indemnitee with respect to all third parties, firms or
                    corporations relating to the matter for which
                    indemnification has been made. The failure to deliver
                    written notice to the Company within a reasonable time of
                    the commencement of any such action shall not relieve the
                    Company of any liability to the Indemnitee under this
                    Section 8(k), except to the extent that the Company is
                    prejudiced in its ability to defend such action. The
                    indemnification required by this Section 8(k) shall be made
                    by periodic payments of the amount thereof during the course
                    of the investigation or defense, as and when bills are
                    received or Indemnified Liabilities are incurred.

               (l)  NO STRICT CONSTRUCTION. The language used in this Agreement
                    will be deemed to be the language chosen by the parties to
                    express their mutual intent, and no rules of strict
                    construction will be applied against any party.

               (m)  REMEDIES. Buyer shall have all rights and remedies set forth
                    in this Agreement and all rights and remedies which such
                    holders have been granted at any time under any other
                    agreement or contract and all of the rights which such
                    holders have under any law. Any Person having any rights
                    under any provision of this Agreement shall be entitled to
                    enforce such rights specifically (without posting a bond or
                    other security), to recover damages by reason of any breach
                    of any provision of this Agreement and to exercise all other
                    rights granted by law. Furthermore, the Company recognizes
                    that in the event that it fails to perform, observe, or
                    discharge any or all of its obligations under this
                    Agreement, any remedy at law may prove to be inadequate
                    relief to Buyer. The Company therefore agrees that Buyer
                    shall be entitled to seek temporary and permanent injunctive
                    relief in any such case without the necessity of proving
                    actual damages and without posting a bond or other security.

               (n)  PAYMENT SET ASIDE. To the extent that the Company makes a
                    payment or payments to Buyer hereunder or Buyer enforces or
                    exercises its rights hereunder or thereunder, and such
                    payment or payments or the proceeds of such enforcement or
                    exercise or any part thereof are subsequently invalidated,
                    declared to be fraudulent or preferential, set aside,
                    recovered from, disgorged by or are required to be refunded,
                    repaid or otherwise restored to the Company, a trustee,
                    receiver or any other Person under any law (including,
                    without limitation, any bankruptcy law, state or federal
                    law, common law or equitable cause of action), then to the
                    extent of any such restoration the obligation or part
                    thereof originally intended to be satisfied shall be revived
                    and continued in full force and effect as if such payment
                    had not been made or such enforcement or setoff had not
                    occurred.

                            [SIGNATURE PAGE FOLLOWS]



                                       21
<PAGE>

     IN WITNESS WHEREOF, each Buyer and the Company have caused this Securities
Purchase Agreement to be duly executed as of the date first written above.

                                            COMPANY:


                                            VALENCE TECHNOLOGY, INC.


                                            By: /s/  Kevin Mischnick
                                            ------------------------------------
                                            Name:  Kevin Mischnick
                                            Title: Vice President of Finance

                                            BUYER:


                                            RIVERVIEW GROUP, LLC


                                            By: /s/ Terry Feeney
                                            ------------------------------------
                                            Name:  Terry Feeney
                                            Title: Authorized Signatory



                                       22
<PAGE>

<TABLE>
<CAPTION>

                               SCHEDULE OF BUYERS


               (1)                   (2)               (3)        (4)            (5)

                                                    AGGREGATE
                                                    PURCHASE   AGGREGATE        LEGAL
                                                    PRICE OF   NUMBER OF  REPRESENTATIVE'S
                                                    PURCHASED  PURCHASED     ADDRESS AND
              BUYER         ADDRESS AND FACSIMILE    SHARES    SHARES     FACSIMILE NUMBER
-------------------------------------------------------------------------------------------------------------
<S>            <C>          <C>                    <C>         <C>        <C>
       Riverview Group LLC  666 Fifth Avenue      $7,500,000  2,475,248    Schulte Roth & Zabel LLP
                            New York, New York                             919 Third Avenue
                            Attention:  Manager                            New York, New York 10022
                            Facsimile: (212)841-4141                       Attention: Eleazer Klein, Esq.
                            Telephone: (212)841-4100                       Facsimile: (212) 593-5955
                            Residence:  New York                           Telephone: (212) 756-2376

</TABLE>

                                       23
<PAGE>


                                    EXHIBITS

Exhibit A      Form of Buyer's Officer's Certificate
Exhibit B      Opinion of Company's Counsel
Exhibit C      Form of Company's Secretary's Certificate
Exhibit D      Form of Seller's Officer's Certificate


                                       24

</TEXT>
</DOCUMENT>
