exv10w1



 





Exhibit 10.1




Wm. Smith & Co.




October 18, 2007




Valence Technology, Inc.

12201 Technology Blvd., Suite 150

Austin, Texas 78727




Ladies and Gentlemen:



Valence Technology, Inc., a Delaware corporation (the “Company”), proposes to issue and sell to
certain investors (each an “Investor” and, collectively, the “Investors”), up to 3,000,000 shares
(the “Shares”) of the Company’s common stock, $0.001 par value per share (the “Common Stock”), at a
price no lower than $1.50 per share of Common Stock. This letter agreement confirms our
understanding that the Company desires to engage Wm. Smith & Co. as its placement agent (the
“Placement Agent”) in connection with such issuance and sale of the Shares.



The Company hereby confirms as follows its agreement with the Placement Agent.



1. Agreement to Act as Placement Agent. On the basis of the representations, warranties and
agreements of the Company herein contained and subject to all the terms and conditions of this
Agreement, the Placement Agent agrees to act as the Company’s placement Agent in connection with
the issuance and sale, on a best efforts basis, of the Shares to the Investors for a period of six
months. The Placement Agent shall use commercially reasonable efforts to assist the Company in
obtaining performance by each Investor whose offer to purchase Shares has been solicited by the
Placement Agent and accepted by the Company, but the Placement Agent shall not, except as otherwise
provided in this Agreement, have any liability to the Company in the event any such purchase is not
consummated for any reason. The Company shall pay to the Placement Agent an aggregate amount equal
to 6.0% of the proceeds received by the Company from the sale of the Shares as set forth on the
cover page of the Prospectus (as hereinafter defined). This Agreement shall not give rise to a
commitment by the Placement Agent or any of its affiliates to underwrite or purchase any of the
Shares or otherwise provide any financing. Notwithstanding the foregoing, it is understood and
agreed that the Placement Agent or any of its affiliates may, solely at their discretion and
without any obligation to do so, purchase Shares as principals. The Placement Agent, without the
prior consent of the Company, may appoint any co-Agent or sub-Agent in connection with the issuance
and sale of the Shares and may allocate any portion of such fee to such co-Agent or sub-Agent.



2. Delivery and Payment. The payment of the purchase price for, and delivery of the Shares shall be
made at one or more closings (each a “Closing” and the date on which the Closing occurs, the
“Closing Date”) at such place as the Company and Placement Agent determine. The Placement Agent
shall cause the Investors to wire an amount equal to the
price per share as shown on the cover page of the most recent Prospectus (as hereinafter defined)
for all of the Shares offered hereby to an account designated by the Company, as applicable, and
the Company




 









 







shall deliver the Shares to the Investors, which delivery may be made through the facilities of The
Depository Trust Company. The first such Closing shall take place at such time and date as the
Placement Agent and the Company determine. All actions taken at the Closing shall be deemed to have
occurred simultaneously.



3. Representations and Warranties of the Company. The Company represents and warrants and covenants
to the Placement Agent that:




     (a) A registration statement on Form S-3 (File No. 333-122827) with respect to the Common
Stock of the Company has been prepared by the Company in conformity with the requirements of the
Securities Act of 1933, as amended (the “Act”), and the rules and regulations (the “Rules and
Regulations”) of the Securities and Exchange Commission (the “Commission”) thereunder, and has been
filed with the Commission. The Company and the transactions contemplated by this Agreement meet the
requirements and comply with the conditions for the use of Form S-3. The Registration Statement
meets the requirements of Rule 415 under the Act and complies in all materials respects with said
rule. As used in this Agreement:



          (i) “Applicable Time” means the time of execution of this Agreement;




          (ii) “Effective Date” means any date as of which any part of the Registration Statement became, or
is deemed to have become, effective under the Act in accordance with the Rules and Regulations;




          (iii) “Issuer Free Writing Prospectus” means each “issuer free writing prospectus” (as defined
in Rule 405 of the Rules and Regulations) prepared by or on behalf of the Company or used or
referred to by the Company in connection with the offering of the Shares, each as listed on
Schedule 1 hereto;




          (iv) “Preliminary Prospectus” means any preliminary prospectus relating to the Shares included
in the Registration Statement or filed with the Commission pursuant to Rule 424(b) of the Rules and
Regulations, including any preliminary prospectus supplement thereto relating to the Shares;




          (v) “Pricing Disclosure Materials” means, as of the Applicable Time, the most recent
Preliminary Prospectus, together with each Issuer Free Writing Prospectus filed or used by the
Company on or before the Applicable Time, and the information set forth on Schedule 1 hereto;




          (vi) “Prospectus” means the final prospectus relating to the Shares including any prospectus
supplement thereto relating to the Shares, as filed with the Commission pursuant to Rule 424(b) of
the Rules and Regulations; and




          (vii) “Registration Statement” means, collectively, the various parts of such registration
statement, each as amended as of the Effective Date for such part, including any Preliminary
Prospectus or the Prospectus and all exhibits to such registration statement.




     Any reference to any Preliminary Prospectus or the Prospectus shall be deemed to refer to and
include any documents incorporated or deemed to be incorporated by reference therein



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pursuant to Form S-3 under the Act as of the date of such Preliminary Prospectus or the Prospectus,
as the case may be. Any reference herein to the terms “amend”, “amendment” or “supplement” with
respect to the Registration Statement, any Preliminary Prospectus or the Prospectus shall be deemed
to refer to and include any document filed under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), after the effective date of the Registration Statement, the date of such
Preliminary Prospectus or the date of the Prospectus, as the case may be, which is incorporated
therein by reference.




     (b) The Registration Statement has heretofore become effective under the Act or, with respect
to any registration statement to be filed to register the offer and sale of Shares pursuant to Rule
462(b) under the Act, will be filed with the Commission and become effective under the Act no later
than 10:00 p.m., New York City time, on the date of determination of the public offering price for
the Shares; no stop order of the Commission preventing or suspending the use of any Prospectus, or
the effectiveness of the Registration Statement, has been issued, and no proceedings for such
purpose have been instituted or, to the Company’s knowledge, are contemplated by the Commission.



     (c) The Company was not at the time of the initial filing of the Registration Statement, has
not been since the date of such filing, and will not be on the applicable Closing Date, an
“ineligible issuer” (as defined in Rule 405 under the Act). The Company has been since the time of
initial filing of the Registration Statement and continues to be eligible to use Form S-3 for the
offering of the Shares.



     (d) The Registration Statement, at the time it became effective, as of the date hereof, and at
the Closing Date conformed and will conform in all material respects to the requirements of the Act
and the Rules and Regulations. The Preliminary Prospectus conformed, and the Prospectus will
conform, when filed with the Commission pursuant to Rule 424(b) and on the Closing Date to the
requirements of the Act and the Rules and Regulations. The documents incorporated by reference in
any Preliminary Prospectus or the Prospectus conformed, and any further documents so incorporated
will conform, when filed with the Commission, to the requirements of the Exchange Act or the Act,
as applicable, and the rules and regulations of the Commission thereunder.



     (e) The Registration Statement did not, as of the Effective Date, contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.



     (f) The Prospectus will not, as of its date and on the Closing Date, contain an untrue
statement of a material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the Company makes no representation or warranty with
respect to any statement contained in the Prospectus in reliance upon and in conformity with
information concerning a Placement Agent and furnished in writing by such Placement Agent to the
Company expressly for use in the Prospectus, as set forth in Section 8(b).



     (g) The documents incorporated by reference in any Preliminary Prospectus or the Prospectus
did not, and any further documents filed and incorporated by reference therein will



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not, when filed with the Commission, contain an untrue statement of a material fact or omit to
state a material fact required to be stated in such document or necessary to make the statements in
such document, in light of the circumstances under which they were made, not misleading.




     (h) The Pricing Disclosure Materials did not, as of the Applicable Time, contain an untrue
statement of a material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that the Company makes no representation or warranty with
respect to any statement contained in the Pricing Disclosure Materials in reliance upon and in
conformity with information concerning a Placement Agent and furnished in writing by such Placement
Agent to the Company expressly for use in the Pricing Disclosure Materials, as set forth in Section
8(b).



     (i) Each Issuer Free Writing Prospectus, when considered together with the Pricing Disclosure
Materials as of the Applicable Time, did not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading; provided, however, that
the Company makes no representation or warranty with respect to any statement contained in the
Issuer Free Writing Prospectus in reliance upon and in conformity with information concerning a
Placement Agent and furnished in writing by such Placement Agent to the Company expressly for use
in the Issuer Free Writing Prospectus, as set forth in Section 8(b).



     (j) Each Issuer Free Writing Prospectus conformed or will conform in all material respects to
the requirements of the Act and the Rules and Regulations on the date of first use, and the Company
has complied or will comply with any filing requirements applicable to such Issuer Free Writing
Prospectus pursuant to the Rules and Regulations. Each Issuer Free Writing Prospectus, as of its
issue date and at all subsequent times through the completion of the public offer and sale of the
Shares, did
not, does not and will not include any information that conflicted, conflicts or will conflict
with the information contained in the Registration Statement or the Prospectus, including any
document incorporated by reference therein that has not been superseded or modified. The Company
has not made any offer relating to the Shares that would constitute an Issuer Free Writing
Prospectus without the prior written consent of the Placement Agent. The Company has retained in
accordance with the Rules and Regulations all Issuer Free Writing Prospectuses that were not
required to be filed pursuant to the Rules and Regulations.



     (k) The Company is, and at the Closing Date will be, duly organized, validly existing and in
good standing under the laws of the State of Delaware. The Company (i) has, and at the Closing Date
will have, full power and authority to conduct all the activities conducted by it, to own or lease
all the assets owned or leased by it and to conduct its business as described in the Registration
Statement and the Prospectus and (ii) is, and at the Closing Date will be, duly licensed or
qualified to do business and in good standing as a foreign organization in all jurisdictions in
which the nature of the activities conducted by it or the character of the assets owned or leased
by it makes such licensing or qualification necessary; except, in each case, where the failure to
be so qualified or in good standing or have such power or authority would not, individually or in
the aggregate, have a material adverse effect or would not reasonably be expected to have a
material adverse effect on or affecting the business, properties, management,



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financial position, stockholders’ equity or results of operations of the Company. Complete and
correct copies of the articles or certificate of incorporation and of the bylaws of the Company and
all amendments thereto have been delivered or made available to the Placement Agent, and no changes
therein will be made subsequent to the date hereof and prior to the Closing Date.




     (l) The issued and outstanding shares of capital stock of the Company have been validly
issued, are fully paid and non-assessable and, other than as set forth in the Registration
Statement, are not subject to any preemptive rights, rights of first refusal or similar rights. The
Company has an authorized, issued and outstanding capitalization as set forth in the Prospectus as
of the dates referred to therein. The descriptions of the securities of the Company in the
Registration Statement and the Prospectus are, and at the Closing Date will be, complete and
accurate in all respects. Except as set forth in the Registration Statement and the Prospectus, the
Company does not have outstanding any rights (other than stock options or other equity awards under
the Company’s equity incentive and stock purchase plans) or warrants to subscribe for, or any
securities or obligations convertible into, or exchangeable for, or any contracts or commitments to
issue or sell, any shares of capital stock or other securities.



     (m) The Company has full legal right, power and authority to enter into this Agreement and
perform the transactions contemplated hereby. The Agreement has been authorized and validly
executed and delivered by the Company and are legal, valid and binding agreements of the Company
enforceable against the Company in accordance with their respective terms, subject to the effect of
applicable bankruptcy, insolvency or
similar laws affecting creditors’ rights generally and equitable principles of general
applicability.



     (n) The issuance and sale of the Shares have been duly authorized by the Company, and the
Shares, when issued and paid for in accordance with the Agreement, will be duly and validly issued,
fully paid and non-assessable and will not be subject to preemptive or similar rights. The holders
of the Shares will not be subject to personal liability by reason of being such holders. The
Shares, when issued, will conform in all material respects to the description thereof set forth in
or incorporated into the Prospectus.



     (o) The financial statements and the related notes included in the Registration Statement and
the Prospectus present fairly, in all material respects, the financial condition of the Company as
of the dates thereof and the results of operations and cash flows at the dates and for the periods
covered thereby in conformity with generally accepted accounting principles (“GAAP”). No other
financial statements or schedules of the Company or any other entity are required by the Act or the
Rules and Regulations to be included in the Registration Statement or the Prospectus. All
disclosures contained in the Registration Statement, the Pricing Disclosure Materials and the
Prospectus regarding “non-GAAP financial measures” (as such term is defined by the Rules and
Regulations) comply with Regulation G of the Exchange Act and Item 10 of Regulation S-K under the
Act, to the extent applicable. The Company does not have any material liabilities or obligations,
direct or contingent (including any off-balance sheet obligations), not disclosed in the
Registration Statement, the Pricing Disclosure Materials and the Prospectus.



     (p) PMB Helin Donovan, LLP (the “Accountants”), who have reported on such financial statements
and schedules, are, to the knowledge of the Company, registered independent public accountants with
respect to the Company as required by the Act and the



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Rules and Regulations and by the rules of the Public Accounting Oversight Board. The financial
statements of the Company and the related notes and schedules included in the Registration
Statement and the Prospectus have been prepared in conformity with the requirements of the Act and
the Rules and Regulations and present fairly the information shown therein.




     (q) Except as set forth in the Registration Statement and the Prospectus, there is and has
been no failure on the part of the Company, or to its knowledge after due inquiry, any of the
Company’s directors or officers, in their capacities as such, to comply with any applicable
provisions of the Sarbanes Oxley Act of 2002 and the rules and regulations promulgated therewith
(the “Sarbanes Oxley Act”), including without limitation Section 402 related to loans and Sections
302 and 906 related to certifications.



     (r) The Company maintains systems 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 accountability; (iii) access to assets is permitted only in
accordance with management’s general or specific authorization; and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rule 13a-15) for the Company and designed such
disclosure controls and procedures to ensure that material information relating to the Company is
made known to the certifying officers by others within those entities, particularly during the
period in which the Company’s Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as the
case may be, is being prepared. The Company’s certifying officers have evaluated the effectiveness
of the Company’s disclosure controls and procedures as of the end of the period covered by the Form
10-K for the year ended March 31, 2007 (such date, the “Evaluation Date”). The Company presented in
its Form 10-K for the year ended March 31, 2007 the conclusions of the certifying officers about
the effectiveness of the disclosure controls and procedures based on their evaluations as of the
Evaluation Date.



     (s) Except as set forth in or otherwise contemplated by the most recent Preliminary
Prospectus, since the date of the most recent financial statements of the Company included or
incorporated by reference in the most recent Preliminary Prospectus and prior to Closing, (i) there
has not been and will not have been any change in the capital stock of the Company or long-term
debt of the Company or any dividend or distribution of any kind declared, set aside for payment,
paid or made by the Company on any class of capital stock, or any material adverse change, in the
business, properties, management, financial position, stockholders’ equity, or results of
operations of the Company taken as a whole (a “Material Adverse Change”) and (ii) the Company has
not sustained or will sustain any material loss or material interference with its business from
fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor
disturbance or dispute or any action, order or decree of any court or arbitrator or governmental or
regulatory authority, except in each case as otherwise disclosed in the Registration Statement and
the Prospectus.



     (t) Since the date as of which information is given in the most recent Preliminary Prospectus,
the Company has not entered and will not enter prior to the Closing into any



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transaction or agreement, not in the ordinary course of business, that is material to the Company
or incurred or will incur prior to the Closing any liability or obligation, direct or contingent,
not in the ordinary course of business, that is material to the Company.




     (u) The Company has good and valid title in fee simple to all items of real property and good
and valid title to all tangible personal property described in the Registration Statement or the
Prospectus as being owned by them that are material to the businesses of the Company, in each case
free and clear of all liens, encumbrances and claims except those that (i) do not materially
interfere with the use made and proposed to
be made of such property by the Company or (ii) would not reasonably be expected, individually
or in the aggregate, to have a Material Adverse Effect. Any real property described in the
Registration Statement or the Prospectus as being leased by the Company or that is material to the
business of the Company is held by it under valid, existing and enforceable leases, except those
that (A) do not materially interfere with the use made or proposed to be made of such property by
the Company or (B) would not be reasonably expected, individually or in the aggregate, to have a
Material Adverse Effect.



     (v) The Company is not, nor upon completion of the transactions contemplated herein will it
be, an “investment company” or “promoter” or “principal underwriter” for an “investment company,”
as such terms are defined in the Investment Company Act of 1940, as amended (the “Investment
Company Act”).



     (w) There are no legal, governmental or regulatory actions, suits or proceedings pending, nor,
to the Company’s knowledge, any legal, governmental or regulatory investigations, to which the
Company is a party or to which any property of the Company is the subject that, individually or in
the aggregate, would reasonably be expected to have a Material Adverse Effect or materially and
adversely affect the ability of the Company to perform its obligations under the Agreement
(collectively, the “Actions”); to the Company’s knowledge, no such Actions are threatened by any
governmental or regulatory authority or threatened by others; and there are no current or pending
legal, governmental or regulatory investigations, actions, suits or proceedings that are required
under the Act to be described in the Prospectus that are not so described.



     (x) The Company has, and at the Closing Date will have, (i) all governmental licenses,
permits, consents, orders, approvals and other authorizations necessary to carry on its respective
business as presently conducted except where the failure to have such governmental licenses,
permits, consents, orders, approvals and other authorizations would not have a Material Adverse
Effect, (ii) complied with all laws, regulations and orders applicable to either it or its
business, except where the failure to so comply would not have a Material Adverse Effect, and (iii)
performed all its obligations required to be performed, and is not, and at the Closing Date will
not be, in default, under any indenture, mortgage, deed of trust, voting trust agreement, loan
agreement, bond, debenture, note agreement, lease, contract or other agreement or instrument
(collectively, a “contract or other agreement”) to which it is a party or by which its property is
bound or subject, except where such default would not have a Material Adverse Effect, and, to the
Company’s knowledge, no other party under any material contract or other agreement to which it is a
party is in default in any respect thereunder where such default would have a Material Adverse
Effect. The Company is not in violation of any provision of its organizational or governing
documents.



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     (y) All consents, authorizations, approvals and orders required for the execution and delivery
of the Agreement have been obtained, including approval of stockholders of the Company as
necessary, except such as may be required under state securities or Blue Sky Laws or the by-laws
and rules of the Financial Industry Regulatory Authority, Inc. (the “FINRA”) or the Nasdaq Capital
Market in connection with the
distribution of the Shares by the Placement Agent.



     (z) Neither the execution of the Agreement, nor the issuance, offering or sale of the Shares,
nor the consummation of any of the transactions contemplated herein and therein, nor the compliance
by the Company with the terms and provisions hereof and thereof will conflict with, or will result
in a breach of, any of the terms and provisions of, or has constituted or will constitute a default
under, or has resulted in or will result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company pursuant to the terms of any contract or
other agreement to which the Company may be bound or to which any of the property or assets of the
Company is subject, except (i) such conflicts, breaches or defaults as may have been waived and
(ii) such conflicts, breaches and defaults that would not have a Material Adverse Effect; nor will
such action result (x) in any violation of the provisions of the organizational or governing
documents of the Company, or (y) in any material violation of the provisions of any statute or any
order, rule or regulation applicable to the Company or of any court or of any federal, state or
other regulatory authority or other government body having jurisdiction over the Company.



     (aa) There is no document or contract of a character required to be described in the
Registration Statement or the Prospectus or to be filed as an exhibit to the Registration Statement
which is not described or filed as required. All such contracts to which the Company is a party
have been authorized, executed and delivered by the Company, constitute valid and binding
agreements of the Company, and are enforceable against the Company in accordance with the terms
thereof, subject to the effect of applicable bankruptcy, insolvency or similar laws affecting
creditors’ rights generally and equitable principles of general applicability.



     (bb) No statement, representation or warranty made by the Company in this
Agreement or made in any certificate or document required by this Agreement to be delivered to the
Placement Agent or the Investors was or will be, when made, inaccurate, untrue or incorrect in any
material respect.



     (cc) The Company and its directors, officers or controlling persons have not taken, directly
or indirectly, any action intended, or which might reasonably be expected, to cause or result,
under the Act or otherwise, in, or which has constituted, stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of the Common Stock.



     (dd) No holder of securities of the Company has rights to the registration of any securities
of the Company as a result of the filing of the Registration Statement or the transactions
contemplated by this Agreement, except for such rights as have been waived or satisfied.



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     (ee) The Common Stock is currently listed on the NASDAQ Capital Market. The Company has no
reason of which it is currently aware to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing and maintenance
requirements.



     (ff) The Company is not involved in any material labor dispute nor is any such dispute known
by the Company to be threatened.



     (gg) The business and operations of the Company have been and are being conducted in
compliance with all applicable laws, ordinances, rules, regulations, licenses, permits, approvals,
plans, authorizations or requirements relating to occupational safety and health, or pollution, or
protection of health or the environment (including, without limitation, those relating to
emissions, discharges, releases or threatened releases of pollutants, contaminants or hazardous or
toxic substances, materials or wastes into ambient air, surface water, groundwater or land, or
relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport
or handling of chemical substances, pollutants, contaminants or hazardous or toxic substances,
materials or wastes, whether solid, gaseous or liquid in nature) of any governmental department,
commission, board, bureau, agency or instrumentality of the United States, any state or political
subdivision thereof, or any foreign jurisdiction, and all applicable judicial or administrative
agency or regulatory decrees, awards, judgments and orders relating thereto, except where the
failure to be in such compliance will not, individually or in the aggregate, have a Material
Adverse Effect; and the Company has not received any notice from any governmental instrumentality
or any third party alleging any material violation thereof or liability thereunder (including,
without limitation, liability for costs of investigating or remediating sites containing hazardous
substances and/or damages to natural resources) that, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect.



     (hh) Except as disclosed in the Registration Statement, (i) the Company owns or has obtained
valid and enforceable licenses or options for the inventions, patent applications, patents,
trademarks (both registered and unregistered), trade names, copyrights and trade secrets necessary
for the conduct of its respective business as currently conducted (collectively, the “Intellectual
Property”); and (ii) (a) there are no third parties who have any ownership rights to any
Intellectual Property that is owned by, or has been licensed to, the Company for the products
described in the Registration Statement that would preclude the Company from conducting its
business as currently conducted and have a Material Adverse Effect, except for the ownership rights
of the owners of the Intellectual Property licensed or optioned by the Company; (b) there are
currently no sales of any products that would constitute an infringement by third parties of any
Intellectual Property owned, licensed or optioned by the Company, which infringement would have a
Material Adverse Effect; (c) there is no pending or, to the Company’s knowledge, threatened action,
suit, proceeding or claim by others challenging the rights of the Company in or to any Intellectual
Property owned, licensed or optioned by the Company, other than claims which would not reasonably
be expected to have a Material Adverse Effect; (d) there is no pending or, to the Company’s
knowledge, threatened action, suit, proceeding or claim by others challenging the validity or scope
of any Intellectual Property owned, licensed or optioned by the Company, other than
actions, suits, proceedings and claims which would not reasonably be expected to have a
Material Adverse Effect; and (e) there is no pending or, to the Company’s knowledge, threatened
action, suit, proceeding or claim by others that the Company infringes or otherwise violates any
patent, trademark, copyright, trade secret or other proprietary right of



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others, other than actions, suits, proceedings and claims which would not reasonably be expected to
have a Material Adverse Effect.




     (ii) The Company has filed all necessary federal, state and foreign income and franchise tax
returns and have paid or accrued all taxes shown as due thereon, and the Company has no knowledge
of any tax deficiency which has been or might be asserted or threatened against it which could have
a Material Adverse Effect.



     (jj) On the Closing Date, all stock transfer or other taxes (other than income taxes) which
are required to be paid in connection with the sale and transfer of the Shares to be sold hereunder
will be, or will have been, fully paid or provided for by the Company and all laws imposing such
taxes will be or will have been fully complied with.



     (kk) The Company maintains insurance of the types and in the amounts that the Company
reasonably believes is adequate for its businesses and as is customary for companies engaged in
similar businesses,



     (ll) Neither the Company, nor, to the knowledge of the Company, any director, officer, agent
or employee of the Company, has directly or indirectly, (i) made any unlawful contribution to any
candidate for public office, or failed to disclose fully any contribution in violation of law, (ii)
made any payment to any federal or state governmental officer or official, or other person charged
with similar public or quasi-public duties, other than payments required or permitted by the laws
of the United States or any jurisdiction thereof, (iii) violated or is in violation of any
provisions of the U.S. Foreign Corrupt Practices Act of 1977 or (iv) made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment.



     (mm) The Company has not distributed and, prior to the later to occur of the Closing Date and
completion of the distribution of the Shares, will not distribute any offering material in
connection with the offering and sale of the Shares other than any Preliminary Prospectus, the
Prospectus and any Issuer Free Writing Prospectus to which the Placement Agent have consented.



     (nn) Each material employee benefit plan, within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”), that is maintained, administered or
contributed to by the Company or any of its affiliates for employees or former employees of the
Company has been maintained in material compliance with its terms and the requirements of any
applicable statutes, orders, rules and regulations, including but not limited to ERISA and the
Internal Revenue Code of 1986, as amended (the “Code”); no prohibited transaction, within the
meaning of Section
406 of ERISA or Section 4975 of the Code, has occurred which would result in a material
liability to the Company with respect to any such plan excluding transactions effected pursuant to
a statutory or administrative exemption; and for each such plan that is subject to the funding
rules of Section 412 of the Code or Section 302 of ERISA, no “accumulated funding deficiency” as
defined in Section 412 of the Code has been incurred, whether or not waived, and the fair market
value of the assets of each such plan (excluding for these purposes accrued but unpaid
contributions) exceeds the present value of all benefits accrued under such plan determined using
reasonable actuarial assumptions.



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     (oo) No relationship, direct or indirect, exists between or among the Company, on the one
hand, and the directors, officers, stockholders, customers or suppliers of the Company, on the
other, which is required by the Act to be disclosed in the Registration Statement and the
Prospectus and is not so disclosed.



     (pp) The Company has not sold or issued any securities that would be integrated with the
offering of the Shares contemplated by this Agreement pursuant to the Act, the Rules and
Regulations or the interpretations thereof by the Commission.



     (qq) The Company is not a party to any contract, agreement or understanding with any person
(other than this Agreement) that would give rise to a valid claim against the Company or the
Placement Agent (or the Placement Agent’ co-agent or sub-agent, if any) for a brokerage commission,
finder’s fee or like payment in connection with the offering and sale of the Shares.


4. Agreements of the Company. The Company covenants and agrees with the Placement Agent as follows:




     (a) The Registration Statement has become effective, and if Rule 430A is used or the filing of
the Prospectus is otherwise required under Rule 424(b), the Company will file the Prospectus
(properly completed if Rule 430A has been used), subject to the prior approval of the Placement
Agent, pursuant to Rule 424(b) within the prescribed time period and will provide a copy of such
filing to the Placement Agent promptly following such filing.



     (b) The Company will not, during such period as the Prospectus would be required by law to be
delivered in connection with sales of the Shares by an underwriter or dealer in connection with the
offering contemplated by this Agreement, file any amendment or supplement to the Registration
Statement or the Prospectus unless a copy thereof shall first have been submitted to the Placement
Agent within a reasonable period of time prior to the filing thereof and the Placement Agent shall
not have reasonably objected thereto in good faith.



     (c) The Company will notify the Placement Agent promptly, and will, if requested, confirm such
notification in writing, (1) when any post-effective amendment to the Registration Statement
becomes effective, but only during the period mentioned in
Section 4(b); (2) of any request by the Commission for any amendments to the Registration
Statement or any amendment or supplements to the Prospectus or any Issuer Free Writing Prospectus
or for additional information related to the offering of the Shares or for additional information
related to the Registration Statement, the Prospectus or any Issuer Free Writing Prospectus, but
only during the period mentioned in Section 4(b); (3) of the issuance by the Commission of any stop
order preventing or suspending the effectiveness of the Registration Statement, or the initiation
of any proceedings for that purpose or the threat thereof, but only during the period mentioned in
Section 4(b); (4) of becoming aware of the occurrence of any event during the period mentioned in
Section 4(b) that in the reasonable judgment of the Company makes any statement made in the
Registration Statement or the Prospectus untrue in any material respect or that requires the making
of any changes in the Registration Statement or the Prospectus in order to make the statements
therein, in light of the circumstances in which they are made, not misleading; and (5) of receipt
by the Company of any notification with respect to any suspension of the qualification of the
Shares for offer and sale in any jurisdiction. If at any time the Commission shall issue any



11









 




order suspending the effectiveness of the Registration Statement in connection with the offering
contemplated hereby, the Company will make every reasonable effort to obtain the withdrawal of any
such order at the earliest possible moment. If the Company has omitted any information from the
Registration Statement, pursuant to Rule 430A, it will use its best efforts to comply with the
provisions of and make all requisite filings with the Commission pursuant to said Rule 430A and to
notify the Placement Agent promptly of all such filings.




     (d) If, at any time when a Prospectus relating to the Shares is required to be delivered under
the Act, the Company becomes aware of the occurrence of any event as a result of which the
Prospectus, as then amended or supplemented, would, in the reasonable judgment of counsel to the
Company, include any untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under which they were
made, not misleading, or the Registration Statement, as then amended or supplemented, would, in the
reasonable judgment of counsel to the Company, include any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein not misleading, or if for
any other reason it is necessary, in the reasonable judgment of counsel to the Company, at any time
to amend or supplement the Prospectus or the Registration Statement to comply with the Act or the
Rules and Regulations, the Company will promptly notify the Placement Agent and, subject to Section
4(b) hereof, will promptly prepare and file with the Commission, at the Company’s expense, an
amendment to the Registration Statement or an amendment or supplement to the Prospectus that
corrects such statement or omission or effects such compliance and will deliver to the Placement
Agent, without charge, such number of copies thereof as the Placement Agent may reasonably request.
The Company consents to the use of the Prospectus or any amendment or supplement thereto by the
Placement Agent.



     (e) The Company will furnish, upon request, to the Placement Agent and its
counsel, without charge (i) one conformed copy of the Registration Statement as originally
filed with the Commission and each amendment thereto, including financial statements and schedules,
and all exhibits thereto, and (ii) so long as a prospectus relating to the Shares is required to be
delivered under the Act, as many copies of each Issuer Free Writing Prospectus, Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto as the Placement Agent may
reasonably request.



     (f) The Company will comply with all the undertakings contained in the Registration Statement.



     (g) Prior to the sale of the Shares to the Investors, the Company will cooperate with the
Placement Agent and their counsel in connection with the registration or qualification of the
Shares for offer and sale under the state securities or Blue Sky laws of such jurisdictions as the
Placement Agent may reasonably request; provided, that in no event shall the Company be obligated
to qualify to do business in any jurisdiction where it is not now so qualified or to take any
action which would subject it to general service of process in any jurisdiction where it is not now
so subject.



     (h) The Company will apply the net proceeds from the offering and sale of the Shares in the
manner set forth in the Prospectus under the caption “Use of Proceeds.”



12









 





     (i) The Company will use its best efforts to ensure that the Shares are listed or quoted on
the Nasdaq Capital Market at the time of the Closing and to maintain such listing.



     (j) The Company will not at any time, directly or indirectly, take any action intended, or
which might reasonably be expected, to cause or result in, or which will constitute, stabilization
of the price of the Shares to facilitate the sale or resale of any of the Shares.


5. Agreements of the Placement Agent. The Placement Agent agrees that it shall not include any
“issuer information” (as defined in Rule 433 under the Act) in any “free writing prospectus” (as
defined in Rule 405) used or referred to by such Placement Agent without the prior consent of the
Company (any such issuer information with respect to whose use the Company has given its consent,
“Permitted Issuer Information”). The Placement Agent also agree to provide to each Investor, prior
to the Closing, a copy of the Prospectus and any amendments or supplements thereto.



6. Expenses. Whether or not the transactions contemplated by this Agreement are consummated or this
Agreement is terminated, the Company will pay all costs and expenses incident to the performance of
the obligations of the Company under this Agreement, including but not limited to costs and
expenses of or relating to (1) the preparation, printing and filing of the Registration Statement
(including each pre- and post-effective amendment thereto) and exhibits thereto, any Issuer Free
Writing Prospectus, each Preliminary Prospectus, the Prospectus and any amendments or supplements
thereto, including all fees, disbursements and other charges of counsel and
accountants to the Company, (2) the preparation and delivery of certificates representing the
Shares, (3) furnishing (including costs of shipping and mailing) such copies of the Registration
Statement (including all pre- and post-effective amendments thereto), the Prospectus and any
Preliminary Prospectus or Issuer Free Writing Prospectus, and all amendments and supplements
thereto, as may be requested for use in connection with the direct placement of the Shares, (4) the
listing of the Common Stock on the NASDAQ Capital Market, (5) the registration or qualification of
the Shares for offer and sale under the securities or Blue Sky laws of such jurisdictions
designated pursuant to Section 5(g), and the preparation and printing of preliminary, supplemental
and final Blue Sky memoranda, and (6) fees, disbursements and other charges of counsel to the
Company. The Company shall reimburse the Placement Agent for all reasonable travel, legal and other
out-of-pocket expenses in an aggregate amount not to exceed $25,000.



7. Conditions of the Obligations of the Placement Agent. The obligations of the Placement Agent
hereunder are subject to the following conditions:




     (a) (a)(i) No stop order suspending the effectiveness of the Registration Statement shall have
been issued, and no proceedings for that purpose shall be pending or threatened by any securities
or other governmental authority (including, without limitation, the Commission), (ii) no order
suspending the effectiveness of the Registration Statement or the qualification or registration of
the Shares under the securities or Blue Sky laws of any jurisdiction shall be in effect and no
proceeding for such purpose shall be pending before, or threatened, to the Company’s knowledge, or
in writing by, any securities or other governmental authority (including, without limitation, the
Commission), (iii) any request for additional information on the part of the staff of any
securities or other governmental authority (including, without



13









 




limitation, the Commission) shall have been complied with to the satisfaction of the staff of the
Commission or such authorities and (iv) after the date hereof and prior to the Closing no amendment
or supplement to the Registration Statement, any Issuer Free Writing Prospectus or the Prospectus
shall have been filed unless a copy thereof was first submitted to the Placement Agent and the
Placement Agent did not object thereto in good faith.




     (b) Since the respective dates as of which information is given in the Registration Statement
and the Prospectus, there shall not have been a Material Adverse Change or any development
involving a prospective Material Adverse Effect in the business, properties, management, financial
condition or results or operations of the Company.



     (c) Each of the representations and warranties of the Company contained herein shall be true
and correct in all material respects at the Closing Date, as if made on such date, and all
covenants and agreements herein contained to be performed on the part of the Company and all
conditions herein contained to be fulfilled or complied with by the Company at or prior to the
Closing Date shall have been duly performed, fulfilled or complied with in all material respects.



     (d) The Placement Agent shall have received an opinion, dated the Closing Date of Akin Gump
Strauss Hauer & Feld LLP, as counsel to the Company, in form and substance reasonably satisfactory
to the Placement Agent, with respect to the matters set forth in Exhibit A hereto.



     (e) At the Closing Date, there shall be furnished to the Placement Agent a certificate, dated
the date of its delivery, signed by each of the Chief Executive Officer and the Chief Financial
Officer of the Company, in the form attached as Exhibit B-1 hereto, and a certificate of its
Secretary in the form attached as Exhibit B-2 hereto.



     (f) The Shares shall be qualified for sale in such states as the Placement Agent may
reasonably request.



     (g) The Company shall have prepared and filed with the Commission a Current Report on Form 8-K
including as an exhibit thereto this Agreement.



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8. Indemnification.




     (a) The Company shall indemnify and hold harmless the Placement Agent, its
directors, officers, employees and agents and each person, if any, who controls any of the
Placement Agent within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, from
and against any and all losses, claims, liabilities, expenses and damages, joint or several,
(including any and all investigative, legal and other expenses reasonably incurred in connection
with, and any amount paid in settlement of, any action, suit or proceeding or any claim asserted),
to which it, or any of them, may become subject under the Act or other Federal or state statutory
law or regulation, at common law or otherwise, insofar as such losses, claims, liabilities,
expenses or damages arise out of or are based on any untrue statement or alleged untrue statement
of any material fact contained in any Preliminary Prospectus, the Registration Statement, the
Prospectus, any Issuer Free Writing Prospectus, each as amended and supplemented, or arises out of
or is based upon the omission or alleged omission to state in any Preliminary Prospectus, the
Registration Statement, the Prospectus or any Issuer Free Writing Prospectus, each as amended or
supplements, a material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading; provided, however,
that the Company will not be liable to the extent that such loss, claim, liability, expense or
damage arises from the sale of the Shares in the public offering to any person and is based solely
on an untrue statement or omission or alleged untrue statement or omission made in reliance on and
in conformity with information relating to the Placement Agent, furnished in writing to the Company
by the Placement Agent expressly for inclusion in the Registration Statement, any Preliminary
Prospectus, the Prospectus or any Issuer Free Writing Prospectus, which information the parties
agree is limited as set forth in Section 10(d) below). This indemnity agreement will be in addition
to any liability which the Company may otherwise have.



     (b) The Placement Agent will indemnify and hold harmless the Company and,
each person, if any, who controls the Company within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, each director of the Company and each officer of the Company who
signs the Registration Statement, to the same extent as the foregoing indemnity from the Company to
the Placement Agent, but only insofar as losses, claims, liabilities, expenses or damages arise out
of or are based on any untrue statement or omission or alleged untrue statement or omission made in
reliance on and in conformity with information relating to the Placement Agent furnished in writing
to the Company by the Placement Agent expressly for use in the Registration Statement, any
Preliminary Prospectus, the Prospectus or any Issuer Free Writing Prospectus. This indemnity
agreement will be in addition to any liability that the Placement Agent might otherwise have. The
Company acknowledges that, for all purposes under this Agreement, the name of the Placement Agent
and the paragraph relating to Placement Agent’ fees and reimbursement of expenses appearing under
the caption “Plan of Distribution” in the Prospectus constitute the only information relating to
the Placement Agent furnished in writing to the Company by the Placement Agent expressly for
inclusion in the Registration Statement, any Preliminary Prospectus or the Prospectus.



     (c) Any party that proposes to assert the right to be indemnified under this Section 8 will,
promptly after receipt of notice of commencement of any action against such party in respect of
which a claim is to be made against an indemnifying party or parties under this



15









 




Section 8, notify each such indemnifying party of the commencement of such action, enclosing a copy
of all papers served, but the omission so to notify such indemnifying party will not relieve it
from any liability that it may have to any indemnified party under the foregoing provisions of this
Section 8 unless, and only to the extent that, such omission results in the forfeiture of
substantive rights or defenses by the indemnifying party. If any such action is brought against any
indemnified party and it notifies the indemnifying party of its commencement, the indemnifying
party will be entitled to participate in and, to the extent that it elects by delivering written
notice to the indemnified party promptly after receiving notice of the commencement of the action
from the indemnified party, jointly with any other indemnifying party similarly notified, to assume
the defense of the action, with counsel reasonably satisfactory to the indemnified party, and after
notice from the indemnifying party to the indemnified party of its election to assume the defense,
the indemnifying party will not be liable to the indemnified party for any legal or other expenses
except as provided below and except for the reasonable costs of investigation subsequently incurred
by the indemnified party in connection with the defense. The indemnified party will have the right
to employ its own counsel in any such action, but the fees, expenses and other charges of such
counsel will be at the expense of such indemnified party unless (1) the employment of counsel by
the indemnified party has been authorized in writing by the indemnifying party, (2) the indemnified
party has reasonably concluded (based on advice of counsel) that a conflict exists (based on advice
of counsel to the indemnified party) between the indemnified party and the indemnifying party that
would prevent the counsel selected by the indemnifying party from representing the indemnified
party (in which case the indemnifying party will not have the right to direct the defense of such
action on behalf
of the indemnified party) or (3) the indemnifying party has not in fact employed counsel to assume
the defense of such action within a reasonable time after receiving notice of the commencement of
the action, in each of which cases the reasonable fees, disbursements and other charges of counsel
will be at the expense of the indemnifying party or parties. It is understood that the indemnifying
party or parties shall not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one
separate firm admitted to practice in such jurisdiction at any one time for all such indemnified
party or parties. All such fees, disbursements and other charges will be reimbursed by the
indemnifying party promptly as they are incurred. The indemnifying party will not, without the
prior written consent of the indemnified party (which consent will not be unreasonably withheld),
settle or compromise or consent to the entry of any judgment in any pending or threatened claim,
action, suit or proceeding in respect of which indemnification has been sought hereunder, unless
such settlement, compromise or consent includes an unconditional release of the indemnified party
from all liability arising out of such claim, action, suit or proceeding. An indemnifying party
will not be liable for any settlement of any action or claim effected without its written consent
(which consent will not be unreasonably withheld).




     (d) In order to provide for just and equitable contribution in circumstances in which the
indemnification provided for in the foregoing paragraphs of this Section 8 is applicable in
accordance with its terms but for any reason is held to be unavailable from the Company or the
Placement Agent, the Company and the Placement Agent will contribute to the total losses, claims,
liabilities, expenses and damages (including any investigative, legal and other expenses reasonably
incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding
or any claim asserted, but after deducting any contribution received by the Company from persons
other than the Placement Agent such as persons who control the Company within



16









 




the meaning of the Act or the Exchange Act, officers of the Company who signed the
Registration Statement and directors of the Company, who also may be liable for contribution) to
which the Company and the Placement Agent may be subject in such proportion as shall be appropriate
to reflect the relative benefits received. The relative benefits received shall be deemed to be in
the same proportion as the total net proceeds from the offering (before deducting Company expenses)
received by the Company as set forth in the table on the cover page of the Prospectus bear to the
fee received by the Placement Agent hereunder. If, but only if, the allocation provided by the
foregoing sentence is not permitted by applicable law, the allocation of contribution shall be made
in such proportion as is appropriate to reflect not only the relative benefits referred to in the
foregoing sentence but also the relative fault of the Company and the Placement Agent, with respect
to the statements or omissions which resulted in such loss, claim, liability, expense or damage, or
action in respect thereof, as well as any other relevant equitable considerations with respect to
such offering. Such relative fault shall be determined by reference to whether the untrue or
alleged untrue statement of a material fact or omission or alleged omission to state a material
fact relates to information
supplied by the Company or the Placement Agent, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such statement or omission.
The Company and the Placement Agent agree that it would not be just and equitable if contributions
pursuant to this Section 8(d) were to be determined by pro rata allocation or by any other method
of allocation which does not take into account the equitable considerations referred to herein. The
amount paid or payable by an indemnified party as a result of the loss, claim, liability, expense
or damage, or action in respect thereof, referred to above in this Section 8(d) shall be deemed to
include, for purpose of this Section 8(d), any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 8(d), the Placement Agent shall not be required to
contribute any amount in excess of the fee received by it, and no person found guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) will be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation. For purposes of this
Section 8(d), any person who controls a party to this Agreement within the meaning of the Act or
the Exchange Act will have the same rights to contribution as that party, and each officer of the
Company who signed the Registration Statement will have the same rights to contribution as the
Company, subject in each case to the provisions hereof. Any party entitled to contribution,
promptly after receipt of notice of commencement of any action against such party in respect of
which a claim for contribution may be made under this Section 8(d), will notify any such party or
parties from whom contribution may be sought, but the omission so to notify will not relieve the
party or parties from whom contribution may be sought from any other obligation it or they may have
under this Section 8(d). No party will be liable for contribution with respect to any action or
claim settled without its written consent (which consent will not be unreasonably withheld).



9. Termination.




     (a) The obligations of the Placement Agent under this Agreement may be terminated at any time
prior to the date on which the Company and the Placement Agent agree to the price of the Shares to
be sold pursuant to this Agreement, by notice to the Company from the Placement Agent, without
liability on the part of the Placement Agent if, prior to delivery and payment for the Shares, in
the sole judgment of the Placement Agent (i) trading in the Common Stock of the Company shall have
been suspended by the Commission or by the Nasdaq Capital



17









 




Market, (ii) trading in securities generally on Nasdaq, the New York Stock Exchange or the American
Stock Exchange shall have been suspended or limited or minimum or maximum prices shall have been
generally established on any of such exchange or additional material governmental restrictions, not
in force on the date of this Agreement, shall have been imposed upon trading in securities
generally by any of such exchange or by order of the Commission or any court or other governmental
authority, (iii) a general banking moratorium shall have been declared by Federal or New York State
authorities, or (iv) any material adverse change in the financial or securities markets in the
United States or any outbreak or material escalation of hostilities or declaration by the United
States of a national emergency or war or other calamity or crisis shall have occurred, the effect
of any of which is such as to make it, in the sole judgment of the Placement Agent, impracticable
or inadvisable to market the Shares on the terms and in the manner contemplated by the Prospectus.




     (b) This Agreement may be terminated at any time prior to the Closing Date, by notice to the
Placement Agent from the Company, without liability on the part of the Company.



     (c) If this Agreement shall be terminated pursuant to any of the provisions hereof, or if the
sale of the Shares provided for herein is not consummated because any condition to the obligations
of the Placement Agent set forth herein is not satisfied or because of any refusal, inability or
failure on the part of the Company or to perform any agreement herein or comply with any provision
hereof, the Company will, subject to demand by the Placement Agent, reimburse the Placement Agent
for all out-of-pocket expenses incurred in connection herewith in an aggregate amount not to exceed
$25,000.


10. No
Fiduciary Duty. The Company acknowledges and agrees that in connection with this offering,
sale of the Shares or any other services the Placement Agent may be deemed to be providing
hereunder, notwithstanding any preexisting relationship, advisory or otherwise, between the parties
or any oral representations or assurances previously or subsequently made by the Placement Agent:
(i) no fiduciary or agency relationship between the Company, on the one hand, and the Placement
Agent, on the other, exists; (ii) the Placement Agent are not acting as advisors, experts or
otherwise, to the Company, including, without limitation, with respect to the determination of the
offering price of the Shares, and such relationship between the Company, on the one hand, and the
Placement Agent, on the other, is entirely and solely commercial, based on arms-length
negotiations; (iii) any duties and obligations that the Placement Agent may have to the Company
shall be limited to those duties and obligations specifically stated herein; and (iv) the Placement
Agent and their respective affiliates may have interests that differ from those of the Company. The
Company hereby waives any claims that it may have against the Placement Agent with respect to any
breach of fiduciary duty in connection with this offering.



11.
Notices. Notice given pursuant to any of the provisions of this Agreement shall be in writing
and, unless otherwise specified, shall be mailed or delivered (a) if to the Company, at the office
of the Company, 12201 Technology Blvd., Suite 150, Austin, TX 78727, Attention: Chief Financial
Officer with copies to Akin Gump Strauss Hauer & Feld LLP, 2029 Century Park East, Suite 2400, Los
Angeles, CA 90067, Attention: Frank Reddick, (b) if to the Placement Agent, at the office of Wm.
Smith & Co., 1700 Lincoln Street, Suite 2545, Denver CO 80203, Attention: William S. Smith, with
copies to Holme Roberts & Owen LLP, 1700 Lincoln Street, Suite 4100, Denver, CO 80203, Attention:
Garth B. Jensen. Any such notice shall be effective only upon




18









 







receipt. Any notice under Section 11 may be made by facsimile or telephone, but if so made shall be
subsequently confirmed in writing.



12.
Survival. The respective representations, warranties, agreements, covenants, indemnities and
other statements of the Company and the Placement Agent set forth in this Agreement or made by or
on behalf of them, respectively, pursuant to this Agreement shall remain in full force and effect,
regardless of (i) any investigation made by or on behalf of the Company, any of its officers or
directors, the Placement Agent or any controlling person referred to in Section 10 hereof and (ii)
delivery of and payment for the Shares. The respective agreements, covenants, indemnities and other
statements set forth in Sections 6 and 8 hereof shall remain in full force and effect, regardless
of any termination or cancellation of this Agreement.



13. Successors. This Agreement shall inure to the benefit of and shall be binding upon the parties
hereto and their respective successors and legal representatives, and to the benefit of the
employees, officers and directors and controlling persons referred to in Section 10 hereof, and no
other person will have any right or obligation hereunder.



14. Applicable Law. The validity and interpretations of this Agreement, and the terms and
conditions set forth herein, shall be governed by and construed in accordance with the laws of the
State of New York without giving effect to any provisions relating to conflicts of laws.



15. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the same instrument.



16. Entire Agreement. This Agreement constitutes the entire understanding between the parties
hereto as to the matters covered hereby and supersedes all prior understandings, written or oral,
relating to such subject matter.





19











 





 Please confirm that the foregoing correctly sets forth the agreement between the
Company and the Placement Agent.




	 	 	 	 	 	 	 
	 	 	 Very truly yours, 	 	 
	 
	 	 	 	 	 	 
	 	 	 WM. SMITH & CO. 	 	 
	 
	 	 	 	 	 	 
	 

	 	 By:
	 	/s/ William S. Smith	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 Name:
	 	 William S. Smith 	 	 
	 
	 	 	 	 	 	 
	 

	 	 Title:
	 	 President 	 	 





 Confirmed as of the date first above mentioned:



 VALENCE TECHNOLOGY, INC.




	 	 	 	 	 
	 By:

	 	/s/ Robert L. Kanode
	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 Name:

	 	Robert L. Kanode	 	 
	 
	 	 	 	 
	 Title:

	 	President & CEO	 	 






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