ex4-1.htm


    EXHIBIT
4.1

     

     

    THIS
WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE OF THE RIGHTS EVIDENCED
HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”). THEY MAY NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO A VALID EXEMPTION FROM REGISTRATION
THEREFROM.  NOTWITHSTANDING THE FOREGOING, THIS WARRANT AND SUCH
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY THIS WARRANT OR THE SECURITIES ISSUABLE
UPON EXERCISE HEREUNDER.

    


    WARRANT
TO PURCHASE

     

    COMMON
STOCK

     

    OF

     

    VALENCE
TECHNOLOGY, INC.

     

    VOID
AFTER MARCH 30, 2013

     

    This
Warrant is issued to iStar Tara LLC, a Delaware limited liability company
(“iStar”),
or its registered assigns ("Holder")
by Valence Technology, Inc., a Delaware corporation (the "Company"),
on March 30, 2010 (the "Warrant Issue
Date").  This Warrant is issued pursuant to the terms of
Amendment No. 2 to Loan and Security Agreement dated March 30, 2010, by and
among the Company, iStar and Carl E. Berg, which amends that certain Loan and
Security Agreement dated as of July 13, 2005, by and among the Company, SFT I,
Inc., a Delaware corporation and the predecessor in interest to iStar, and Mr.
Berg (as amended from time to time, the "Loan
Agreement”).

     

    1. Purchase of Shares. Subject to the terms and
conditions hereinafter set forth, Holder is entitled to purchase from the
Company up to 115,000 fully paid and nonassessable shares of Common Stock (as
hereinafter defined).  The number of shares of Common Stock issuable
pursuant to this Section 1 (the "Shares")
shall be subject to adjustment as provided herein.  The term “Shares”
also shall be deemed to refer to any securities of the Company or any other
issuer for which Shares may be exchanged or surrendered or which may be declared
on or distributed with respect to the Shares at any time prior to the Expiration
Date (as hereinafter defined).  For purposes of this Warrant, “Common
Stock” means (i) the Company’s common stock, $0.001 par value per share,
and (ii) any capital stock into which such Common Stock shall have been changed
or any capital stock resulting from a reclassification of such Common
Stock.

     

    2. Exercise
Price.

     

    The
purchase price for the Shares shall be $1.00 per share, subject to adjustment as
provided herein (the “Warrant Exercise
Price”).

     

    3. Exercise Period. This Warrant will be
exercisable, in whole or in part, during the term commencing on the Warrant
Issue Date and ending at 5:00 p.m. New York City Time on March 30, 2013 (the
“Expiration
Date”).  The Company shall take all such actions as may be
reasonably necessary to assure that all Shares may be so issued without
violation of any applicable law or governmental regulation or any applicable
requirements of any domestic securities exchange (except for official notice of
issuance which shall be immediately delivered by the Company upon each such
issuance).

     

    
      
         


      

      
        1

        
          

        

      

      
         


      

    

    4. Method of
Exercise.

     

    (a)           Subject
to the terms and conditions hereof, this Warrant may be exercised by Holder, in
whole or in part, at any time on any Business Day (as hereinafter defined) on or
after the opening of business on the Warrant Issue Date hereof and prior to
11:59 P.M. New York Time on the Expiration Date by (i) delivery of a written
notice, in the form of the subscription form attached as Exhibit A hereto (the
“Exercise
Notice”), of Holder’s election to exercise this Warrant, which notice
shall specify the number of  Shares to be purchased, (ii) (A) payment
to the Company of an amount equal to the Warrant Exercise Price multiplied by
the number of Shares as to which this Warrant is being exercised (the “Aggregate
Exercise Price”) by wire transfer of immediately available funds (or by
check if the Company has not provided Holder with wire transfer instructions for
such payment) or (B) by notifying the Company that this Warrant is being
exercised pursuant to a Cashless Exercise (as hereinafter defined), and (iii)
unless Holder has previously delivered this Warrant to the Company and it or a
new replacement Warrant has not yet been delivered to Holder, the surrender to a
common carrier for overnight delivery to the Company as soon as practicable
following such date, this Warrant (or an indemnification undertaking with
respect to this Warrant in the case of its loss, theft or
destruction).  In the event of any exercise of the rights represented
by this Warrant in compliance with this Section 4(a), the Company shall on the
second (2nd) Business Day (the “Warrant Share
Delivery Date”) following the date of its receipt of the Exercise Notice,
the Aggregate Exercise Price (or notice of Cashless Exercise) and (unless Holder
has previously delivered this Warrant to the Company and it or a new replacement
Warrant has not yet been delivered to Holder) this Warrant (or an
indemnification undertaking with respect to this Warrant in the case of its
loss, theft or destruction) (the “Exercise Delivery
Documents”), (A) provided that the transfer agent is participating in The
Depository Trust Company (“DTC”) Fast
Automated Securities Transfer Program and provided that Holder is eligible to
receive shares through DTC, credit such aggregate number of shares of Common
Stock to which Holder shall be entitled to Holder’s or its designee’s balance
account with DTC or (B) issue and deliver to the address specified in the
Exercise Notice, a certificate, registered in the name of Holder or its
designee, for the number of shares of Common Stock to which the Holder shall be
entitled.  Upon (x) delivery of the Exercise Notice and (y) the
Aggregate Exercise Price referred to in clause (ii)(A) above or notification to
the Company of a Cashless Exercise, the Holder shall be deemed for all corporate
purposes to have become the holder of record of the Shares with respect to which
this Warrant has been exercised, irrespective of the date of delivery of this
Warrant as required by clause (iii) above or the certificates evidencing such
Shares.

     

    (b)           While
this Warrant remains outstanding and exercisable, Holder may elect to receive
shares equal to the value of this Warrant (or any portion thereof remaining
unexercised) by surrender of this Warrant at the principal office of the Company
together with notice of such election, in which event the Company shall issue to
Holder a number of shares of  Common Stock computed using the
following formula (a “Cashless
Exercise”):

     

    
      
         


      

      
        2

        
          

        

      

      
         


      

    

    


     

    
      	
              X
      =  

            	
              Y (A-B) 

                   
      A

              

            


    

    


    
      	
               
      

            	
              Where
      X

            	
              =

            	
              the
      number of shares of Common Stock to be issued to
  Holder.

            


    

    


    
      	
               
      

            	
              Y

            	
              =

            	
              the
      number of shares of Common Stock being exercised under this Warrant (on
      the trading day immediately preceding the date of such
      calculation).

            


    

    


    
      	
               
      

            	
              A

            	
              =

            	
              the
      Weighted Average Price (as hereinafter defined) of one share of the
      Company’s Common Stock (on the trading day immediately preceding the date
      of such calculation).

            


    

    


    
      	
               
      

            	
              B

            	
              =

            	
              Exercise
      Price (as adjusted to the date of such
  calculation).

            


    

    


    (c)           The
following words and terms as used in this Warrant shall have the following
meanings:

     

    (i)           “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.

     

    (ii)           “Principal
Market” means the principal securities exchange or trading market for a
security.

     

    (iii)           “Warrant Delivery
Date” means the date this Warrant is deemed delivered hereunder for
purposes of exercise.

     

    (iv)           “Weighted Average
Price” means, for any security as of any date, the dollar volume-weighted
average price for such security on its Principal Market during the period
beginning at 9:30 a.m., New York City Time (or such other time as the Principal
Market publicly announces is the official open of trading), and ending at 4:00
p.m., New York City Time (or such other time as the Principal Market publicly
announces is the official close of trading), as reported by Bloomberg Financial
Markets (“Bloomberg”)
through its “Volume at Price” functions (ignoring any trade of more than 10,000
shares of such security pursuant to an individual transaction (subject to
adjustment for stock splits, stock dividends, stock combinations and other
similar transactions involving such security after the Warrant Delivery Date)),
or, if the foregoing does not apply, the dollar volume-weighted average price of
such security in the over-the-counter market on the electronic bulletin board
for such security during the period beginning at 9:30 a.m., New York City Time
(or such other time as such over-the-counter market publicly announces is the
official open of trading), and ending at 4:00 p.m., New York City Time (or such
other time as such over-the-counter market publicly announces is the official
close of trading), as reported by Bloomberg, or, if no dollar volume-weighted
average price is reported for such security by Bloomberg for such hours, the
average of the highest closing bid price and the lowest closing ask price of any
of the market makers for such security as reported in the “pink sheets” by the
National Quotation Bureau, Inc.  If the Weighted Average Price cannot
be calculated for such security on such date on any of the foregoing bases, the
Weighted Average Price of such security on such date shall be the fair market
value as mutually determined by the Company and the Holder.

     

    
      
         


      

      
        3

        
          

        

      

      
         


      

    

    (d)           If
this Warrant is submitted for exercise, unless the rights represented by this
Warrant shall have expired or shall have been fully exercised, the Company
shall, as soon as practicable and in no event later than five (5) Business Days
after the Warrant Delivery Date and at its own expense, issue a new Warrant
identical in all respects to this Warrant exercised except it shall represent
rights to purchase the number of Shares purchasable immediately prior to such
exercise under this Warrant, less the number of Shares with respect to which
such Warrant is exercised (together with, in the case of a Cashless Exercise,
the number of Shares surrendered in lieu of payment of the Exercise
Price).

     

    (e)           No
fractional shares of Common Stock are to be issued upon the exercise of this
Warrant, but rather the number of shares of Common Stock issued upon exercise of
this Warrant shall be rounded up or down to the nearest whole
number.  In lieu of any fractional shares, the Company shall pay cash
to the Holder equal to such fraction multiplied by the Weighted Average Price
for a share of Common Stock as of the date of exercise.

     

    (f)           In
the case of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the Shares, the Company shall promptly issue to the
holder the number of Shares that are not disputed and resolve such dispute in
accordance with Section 11.

     

    5. Issuance of
Shares.

     

    The
Company covenants that the Shares, when issued pursuant to the exercise of this
Warrant, will be duly and validly issued, fully paid and nonassessable and free
from all taxes, liens, and charges with respect to the issuance
thereof.  The Company covenants that it will at all times keep
available such number of authorized shares of its Common Stock, free from all
preemptive rights with respect thereto, as will be sufficient to permit the
exercise of this Warrant for the full number of Shares specified
herein.

     

    6. Adjustment of Exercise
Price and Number of Shares.

     

    The
number of and kind of securities purchasable upon exercise of this Warrant and
the Exercise Price shall be subject to adjustment from time to time as
follows:

     

    (a)           If
the Company shall at any time prior to the expiration of this Warrant subdivide
its Common Stock, by split-up or otherwise, or combine its Common Stock, or
issue additional shares of its Common Stock as a dividend with respect to any
shares of its Common Stock, the number of Shares issuable on the exercise of
this Warrant shall forthwith be proportionately increased in the case of a
subdivision or stock dividend, or proportionately decreased in the case of a
combination.  If the Company shall at any time subdivide the
outstanding shares of Common Stock or issue additional shares as a dividend, the
Exercise Price then in effect immediately before that subdivision shall be
proportionately decreased, and, if the Company shall at any time combine the
outstanding shares of Common Stock, the Exercise Price then in effect
immediately before that combination shall be proportionately
increased.  Any adjustment under this Section 6(a) shall become
effective at the close of business on the date the subdivision or combination
becomes effective, or as of the record date of such dividend, or in the event
that no record date is fixed, upon the making of such dividend.

     

    
      
         


      

      
        4

        
          

        

      

      
         


      

    

    (b)           If
the Common Stock issuable upon exercise of this Warrant shall be changed into
the same or a different number of shares of any other series or class or classes
of stock, whether by capital reorganization, reclassification, or otherwise
(other than a subdivision or combination of shares or stock dividend provided
for above), Holder shall, on its exercise, be entitled to purchase, in lieu of
the Common Stock which Holder would have become entitled to purchase but for
such change, a number of shares of such other series or class or classes of
stock equivalent to the number of shares of Common Stock that would have been
subject to purchase by Holder on exercise of this Warrant immediately before the
change.

     

    (c)           The
form of this Warrant need not be changed because of any adjustment in the number
of shares of Common Stock purchasable upon its exercise.  A Warrant
issued after any adjustment upon any partial exercise or in replacement may
continue to express the same number of shares of Common Stock (appropriately
reduced in the case of partial exercise) as are stated on the face of this
Warrant as initially issued, and that number of shares shall be considered to
have been so changed at the close of business on the date of
adjustment.

     

    7. Purchase Rights; Organic
Change.

     

    (a)           Any
recapitalization, reorganization, reclassification, consolidation, merger, sale
of all or substantially all of the Company's assets to another person or entity
or other transaction, in each case which is effected in such a way that holders
of Common Stock are entitled to receive securities or assets with respect to or
in exchange for Common Stock is referred to herein as an “Organic
Change.”   Prior to the consummation of any (i) sale of
all or substantially all of the Company's assets to an acquiring person or
entity or (ii) other Organic Change following which the Company is not a
surviving entity, the Company will secure from the person or entity purchasing
such assets or the person or entity issuing the securities or providing the
assets in such Organic Change (in each case, the “Acquiring
Entity”) a written agreement (in form and substance mutually satisfactory
to Holder, the Company and the Acquiring Entity) to deliver to Holder in
exchange for this Warrant, a security of the Acquiring Entity evidenced by a
written instrument substantially similar in form and substance to this Warrant
and mutually satisfactory to Holder, the Company and the Acquiring Entity
(including, an adjusted exercise price equal to the value for the Common Stock
reflected by the terms of such consolidation, merger or sale, and exercisable
for a corresponding number of shares of Common Stock acquirable and receivable
upon exercise of this Warrant, if the value so reflected is less than the
Exercise Price in effect immediately prior to such consolidation, merger or
sale). In the event that an Acquiring Entity is directly or indirectly
controlled by an entity whose common stock or similar equity interest is listed,
designated or quoted on a securities exchange or trading market, if requested in
writing by Holder, the Company shall use its reasonable best efforts to effect
the ability of Holder to elect to treat such entity as the Acquiring Entity for
purposes of this Section. Prior to the consummation of any other Organic Change,
the Company shall use its reasonable efforts to make appropriate provision (in
form and substance reasonably satisfactory to Holder) to insure that Holder
thereafter will have the right to acquire and receive in lieu of or in addition
to (as the case may be) the shares of Common Stock immediately theretofore
acquirable and receivable upon the exercise of this Warrant, such shares of
stock, securities or assets that would have been issued or payable in such
Organic Change with respect to or in exchange for the number of shares of Common
Stock which would have been acquirable and receivable upon the exercise of this
Warrant as of the date of such Organic Change.

     

    
      
         


      

      
        5

        
          

        

      

      
         


      

    

    8. Noncircumvention.  The
Company hereby covenants and agrees that the Company will not, by amendment of
its Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities, or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of this Warrant, and will at all times in good faith carry out
all the provisions of this Warrant and take all action as may be required to
protect the rights of Holder. Without limiting the generality of the foregoing,
the Company (i) will not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, (ii) will take all such actions as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant, and
(iii) will take all action necessary to reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of effecting the
exercise of the Warrant, 100% of the number of shares of Common Stock as shall
from time to time be necessary to effect the exercise of the
Warrant.

     

    9. Notice of Certain
Events.

     

    If at any
time prior to the termination or full exercise of the Warrant:

     

    (a)           the
Company shall pay any dividend payable in stock upon its Common Stock or make
any distribution to the holders of its Common Stock;

     

    (b)           there
shall be any reclassification of the Common Stock of the Company;

     

    (c)           there
shall be any consolidation or merger of the Company with or into, or sale of
substantially all of its assets to, another entity, or any other Organic Change;
or

     

    (d)           there
shall be a voluntary or involuntary dissolution, liquidation or winding-up of
the Company;

     

    then, in
any one or more of such cases, the Company shall give Holder at least 20 days
prior written notice of the date on which the books of the Company shall close
or a record shall be taken for such dividend or distribution or for determining
rights to vote in respect to say such other address of Holder as shown on the
books of the Company.

     

    10. Exercise, Transfer and
Exchange Restrictions.

     

    The
Company shall maintain at its principal executive offices (or such other office
or agency of the Company as it may designate by notice to the holder hereof), a
register for this Warrant, in which the Company shall record the name and
address of the person  or entity in whose name this Warrant has been
issued, as well as the name and address of each transferee.  The
transfer, surrender or exchange of any of this Warrant or Common Stock issued
upon exercise of this Warrant is subject to any restrictions on transfer imposed
by state and federal securities laws.  This Warrant and all rights
hereunder are transferable, in whole or in part, on the books of the Company
maintained for that purpose at its principal offices by Holder upon surrender of
the Warrant properly endorsed.

     

    
      
         


      

      
        6

        
          

        

      

      
         


      

    

    11. Dispute
Resolution.

     

    (a)           In
the case of a dispute as to the arithmetic calculation of the Exercise Price or
the arithmetic calculation of the Shares, the Company shall submit the disputed
arithmetic calculations via facsimile or other electronic transmission within
two (2) Business Days of receipt of the Exercise Notice giving rise to such
dispute, as the case may be, to Holder. Holder and the Company shall determine
the correct arithmetic calculation within three (3) Business Days of such
disputed arithmetic calculation being transmitted to Holder. If Holder and the
Company are unable to agree upon correct arithmetic calculation of the Exercise
Price or the Shares within such time, then the Company shall, within two
Business Days submit via facsimile or other electronic transmission the disputed
calculation to an independent, reputable nationally recognized accounting firm
selected by the Company and approved by Holder. The Company shall cause the
accounting firm to perform the calculation and notify the Company and Holder of
the results no later than ten (10) Business Days from the time it receives the
disputed determinations or calculations. Such accounting firm's determination
shall be binding upon all parties absent manifest error.

     

    (b)           In
the case of a dispute as to the determination of fair market value of a security
to determine the Exercise Price, the Company shall submit the disputed
determination via facsimile or other electronic transmission within two (2)
Business Days of receipt of the Exercise Notice giving rise to such dispute, as
the case may be, to Holder. If Holder and the Company are unable to agree upon
such determination or calculation of the Exercise Price or the Shares within
three (3) Business Days of such disputed determination being submitted to the
Holder, then the Company shall, within two Business Days submit via facsimile or
other electronic transmission the disputed determination of the Exercise Price
to an independent, reputable investment bank selected by the Company and
approved by the Holder. The Company shall cause the investment bank or the
accountant, as the case may be, to perform the determinations and notify the
Company and Holder of the results no later than ten (10) Business Days from the
time it receives the disputed determinations or calculations. Such investment
bank's determination shall be binding upon all parties absent manifest
error.

     

    (c)           The
fees and expenses associated with the determinations made by such investment
bank or accountant shall be paid by the party whose determination or calculation
as initially presented to the investment bank or accountant is further from the
final determination or calculation of the investment bank or accountant (or
shared equally by the Company and Holder if the final determination or
calculation is at the midpoint of the determinations or calculations presented
by the Company and the Holder).

     

    12. Replacement.

     

    If this
Warrant is lost, stolen, mutilated or destroyed, the Company shall promptly, on
receipt of an indemnification undertaking reasonably satisfactory to the Company
(or in the case of a mutilated Warrant, the Warrant), issue a new Warrant of
like denomination and tenor as this Warrant so lost, stolen, mutilated or
destroyed.

     

    13. Legends.

     

    It is
understood that the certificates evidencing Shares may bear the following legend
if applicable:

     

    
      
         


      

      
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    “These
securities have not been registered under the Securities Act of 1933, as
amended. They may not be sold, offered for sale, pledged or hypothecated in the
absence of a registration statement in effect with respect to the securities
under such Act or an opinion of counsel reasonably satisfactory to the Company
that such registration is not required or unless sold pursuant to Rule 144 of
such Act.”

     

    14. No Stockholder
Rights.

     

    Prior to
exercise of this Warrant, except as otherwise provided in this Warrant, Holder
shall not be entitled to any rights of a stockholder with respect to the Shares,
including (without limitation) the right to vote such Shares, receive dividends
or other distributions thereon, exercise preemptive rights or be notified of
stockholder meetings, and such Holder shall not be entitled to any notice or
other communication concerning the business or affairs of the
Company.

     

    15. Successors and
Assigns.

     

    The terms
and provisions of this Warrant shall inure to the benefit of, and be binding
upon, the Company and Holder and their respective successors and
assigns.

     

    16. Amendments and
Waivers.

     

    Any term
of this Warrant may be amended and the observance of any term of this Warrant
may be waived (either generally or in a particular instance and either
retroactively or prospectively), with the written consent of the Company and
Holder.

     

    17. Notices.

     

    All
notices required under this Warrant shall be deemed to have been given or made
for all purposes (a) upon personal delivery, (b) upon confirmation receipt that
the communication was successfully sent to the applicable number if sent by
facsimile; (c) one Business Day after being sent, when sent by recognized
overnight courier service, or (d) five days after posting when sent by
registered or certified mail.  Notices to the Company shall be sent to
the principal offices of the Company, attention General Counsel (or at such
other place as the Company shall notify Holder in writing), with a copy (which
shall not constitute notice to the Company) to Andrews Kurth LLP, 111 Congress
Avenue, Suite 1700, Austin, Texas 78701, Attention:  J. Matthew Lyons
(Facsimile:  512-320-9292).  Notices to Holder shall be sent
to the address of Holder on the books of the Company (or at such other place as
Holder shall notify the Company in writing).

     

    18. Attorneys'
Fees.

     

    If any
action of law or equity is necessary to enforce or interpret the terms of this
Warrant, the prevailing party shall be entitled to its reasonable attorneys'
fees, costs and disbursements in addition to any other relief to which it may be
entitled.

     

    19. Captions.

     

    The
section and subsection headings of this Warrant are inserted for convenience of
reference only and shall not constitute a part of this Warrant in construing or
interpreting any provision hereof.

     

    20. Governing
Law.

     

    All questions concerning the
construction, validity, enforcement and interpretation of this Warrant 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 jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of New York.

     

    
      
         


      

      
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    21. Representations and
Warranties of Holder.

     

    Holder hereby represents and warrants
that as of the date hereof and the date of any exercise of this
Warrant:

     

    (a)           Holder
is an “accredited investor” as defined in Rule 501 under the Securities
Act;

     

    (b)           Holder
has had an opportunity to ask questions and receive answers from the Company
regarding the business, properties, prospects and financial condition of the
Company and the acquisition of this Warrant and the Shares issuable upon
exercise;

     

    (c)           Holder
has experience with investments in securities of companies in the stage of
development and industry of the Company and acknowledges that it is able to fend
for itself, can bear the economic risk of its investment, and has such knowledge
and experience in financial or business matters that it is capable of evaluating
the merits and risks of the investment in this Warrant and the Shares issuable
upon exercise;

     

    (d)           Holder
understands that this Warrant and the Shares issuable upon exercise hereof have
not been registered under the Securities Act in reliance upon a specific
exemption therefrom, which exemption depends upon, among other things, the bona
fide nature of Holder’s investment intent as expressed herein.  Holder
understands that this Warrant and the Shares issued upon any exercise hereof
must be held indefinitely unless subsequently registered under the Securities
Act and qualified under applicable state securities laws, or unless exemption
from such registration and qualification are otherwise available;
and

     

    (e)           Holder
has not been formed for the purpose of acquiring this Warrant and is acquiring
this Warrant as of the Warrant Issue Date and the Shares issuable upon the
exercise of this Warrant for its own account, not as a nominee or agent, only
for investment and not with a view to the distribution or resale thereof,
without prejudice, however, to Holder’s right to transfer this Warrant or the
Shares in compliance with applicable laws.

     

    


     

    [Remainder
of page intentionally left blank.

    Signature
page follows.]

     

    
      
         


      

      
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    IN
WITNESS WHEREOF, the Company caused this Warrant to be executed by an officer
thereunto duly authorized.

     

    


    VALENCE
TECHNOLOGY, INC.

    


    By:        /s/ Robert L. Kanode

    Name:   Robert
L. Kanode        

    Title:     President
and Chief Executive Officer

    
 

    
      
         


      

      
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    EXHIBIT A TO
WARRANT

     

    EXERCISE
NOTICE

     

    TO BE
EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT

     

    VALENCE
TECHNOLOGY, INC.

     

    The
undersigned holder hereby exercises the right to purchase _________________ of
the shares of Common Stock (“Warrant Shares”) of Valence
Technology, Inc., a Delaware corporation (the “Company”), evidenced by the
attached Warrant (the “Warrant”).  Capitalized
terms used herein and not otherwise defined shall have the respective meanings
set forth in the Warrant.

     

    1.           Form of Exercise
Price.  The Holder intends that payment of the Warrant Exercise
Price shall be made as:

     

    
      	
               
      

            	
              ____________

            	
              a
      “Cash
      Exercise” with respect
      to ___________________ Warrant Shares;
and/or

            


    

     

    
      	
               
      

            	
              ____________

            	
              a
      “Cashless
      Exercise” with respect
      to ______________ Warrant Shares.1

            


    

     

    2.           Payment of Exercise
Price.  In the event that the holder has elected a Cash
Exercise with respect to some or all of the Warrant Shares to be issued pursuant
hereto, the holder shall pay the Aggregate Exercise Price in the sum of
$___________________ to the Company in accordance with the terms of the
Warrant.

     

    3.           Delivery of Warrant
Shares.  The Company shall deliver __________ Warrant Shares in
accordance with the terms of the Warrant in the following name and to the
following address:

     

    Issue
to:   __________________________________________________________________

     

    Facsimile
Number:_____________________________________________________

     

    DTC
Participant Number and Name (if electronic book entry
transfer):_______________

     

    Account
Number  (if electronic book entry
transfer):____________________________

     

    Date:
_______________ __, ______

     

    


    [Name of
Registered Holder]

    


    By:       _________________________

    Name:  _________________________

    Title:    _________________________

     

     

    

      
        

      

    

    
      
        	
                1

              	
                Upon
      a Cashless Exercise, provide the calculation of the number of Shares,
      including the Weighted Average Price used for such
      calculation.

              


      

       

      
        
           


        

        
          11

          
            

          

        

        
           


        

      

    

    ACKNOWLEDGMENT

    


    The
Company hereby acknowledges receipt of this Exercise Notice and hereby directs
[TRANSFER AGENT] to
issue the above indicated number of shares of Common Stock in accordance with
the Transfer Agent Instructions dated ________________, 20__ from the Company
and acknowledged and agreed to by [TRANSFER AGENT].

    


    VALENCE
TECHNOLOGY, INC.

    


    


    


    By:        ____________________________   

    Name:   ____________________________

    Title:     ____________________________

     

    
      
         


      

      
        12

        
          

        

      

      
         


      

    

    EXHIBIT B TO
WARRANT

    


    FORM OF
WARRANT POWER

    


    


    FOR VALUE
RECEIVED, the undersigned does hereby assign and transfer to ________________,
Federal Identification No. __________, a warrant to purchase ____________ shares
of the capital stock of Valence Technology, Inc., a Delaware corporation,
standing in the name of the undersigned on the books of said
corporation.  The undersigned does hereby irrevocably constitute and
appoint ______________, attorney to transfer the warrants of said corporation,
with full power of substitution in the premises.

    


    


    Dated:  _________,
20__


    


    


    ____________________________________

    


    Name:         _____________________________

    Title:           _____________________________

    


     

     

    13