<PAGE>


                      CONFIDENTIAL TREATMENT REQUESTED
                   UNDER 17 C.F.R. SECTIONS 200.80(b)(4),
                           200.83 and 240.24b-2










                                                       JOINT VENTURE AGREEMENT
------------------------------------------------------------------------------














between

HANIL TELECOM CO., LTD.

and

VALENCE TECHNOLOGY B.V.

on

JULY 10, 1996


<PAGE>


THIS AGREEMENT, entered into as of July 10, 1996 ("Effective Date") by and 
between Valence Technology B.V. with offices at Hirsch Gebouw, Leidseplein 
29, 1017 PS Amsterdam, The Netherlands ("Valence") and Hanil Telecom Co., 
Ltd., with offices at Wooduk Bldg., 832-2 Yuksam-Dong, Kangnam-Ku, Seoul, 
Korea ("Hanil").

WHEREAS, Valence has the knowledge, expertise and technology to design, 
develop, manufacture and sell solid polymer electrolyte batteries, and 
Valence owns or has rights to certain patents, trademarks, know-how, 
technology and other intellectual property related to the design, 
manufacture, and sell such batteries, and the laminates that are used in such 
batteries;

WHEREAS, Hanil, through its affiliates, has the knowledge, expertise and 
technology to design, develop, manufacture and sale of products that can 
incorporate solid polymer electrolyte batteries;

WHEREAS, Hanil will form a company in Korea for the purpose of carrying on 
the business of designing, manufacturing, marketing, selling, repairing, 
installing, maintaining, exploiting, applying, distributing and dealing in 
products that use such batteries;

WHEREAS, Hanil desires to invite the participation of Valence in such a 
company in order to obtain new capital and technology from Valence, relating 
to the manufacture of solid polymer electrolyte batteries, and Valence is 
willing to participate as shareholders in the ownership and operating of such 
a company;

WHEREAS, the parties hereto in order to give effect to the aforesaid have 
agreed to enter into this Agreement and accordingly are desirous of 
regulating their relationship inter se as shareholders of the joint venture 
company and the activities of the joint venture company in the manner 
hereinafter described.

NOW, THEREFORE, In consideration of the mutual covenants and promises herein 
set forth, Hanil and Valence agree as follows:

1.  DEFINITIONS

1.1   AFFILIATE shall mean any corporation, association or other legal entity 
which directly, or indirectly controls Hanil or Valence, or is controlled by 
Hanil or Valence, or is under common control of Hanil or Valence, where the 
term "control" means the power and ability to direct the management and 
policies of the controlled enterprise through ownership of voting shares of 
the controlled enterprise, or by contract or otherwise.

1.2   APPLICATIONS shall mean any application into which the Batteries may be 
incorporated, except for those applications for which Valence has already 
granted an exclusive license to another party, such as automotive, traction 
and utility load leveling markets licensed to General Motors, and 
personalized lighting systems and uninterruptable power supplies licensed to 
Goldtron Ltd.

1.3   BATTERIES shall mean the advanced rechargeable solid polymer electrolyte 
batteries manufactured by Hanil Valence Co. utilizing Laminates based on the 
solid polymer electrolyte technology owned and licensed by Valence.

1.4   BATTERY LAMINATE SUPPLY AGREEMENT shall mean the agreement to be entered 
into between Hanil Valence Co. and Valence.

1.5   BOARD shall mean the board of directors of Hanil Valence Co.

1.6   GOVERNMENT APPROVAL shall mean of this Agreement, and other Transaction 
Documents, and the parties performance under the Agreement and other 
Transaction Documents ("Agreements and Performance"), such approval of or 
confirmation or consent to the Agreements and Performance together with such 
license, permits, or other permissions reasonably required for the 

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<PAGE>

Agreements and Performance, all as the statutes, decrees, regulations, and 
rules of governmental authority within Korea (collectively "Legal 
Authority"), may require to be obtained in connection with the Agreements and 
Performance from such Legal Authority or from political subdivisions thereof. 
Wherever "Government Approval" is used herein, it shall be interpreted and 
construed to include the requirement that such approval be in form and 
substance acceptable to the parties hereto.

1.7   HANIL INDIVIDUAL SHAREHOLDER shall mean the corporations, associations, 
legal entities and/or individuals listed in Hanil Shares Ownership Exhibit, 
attached hereto as an exhibit.

1.8   HANIL VALENCE CO. shall mean the Korean company Hanil Valence Co., Ltd.

1.9   LAMINATES shall mean cathode, separator and anode laminates, or films, 
of the Battery, produced exclusively by Valence.

1.10  LICENSE AND SUPPORT AGREEMENT shall mean the agreement to be entered 
into between Hanil Valence Co. and Valence.

1.11  TERRITORY shall mean Korea.

1.12  TRANSACTION DOCUMENTS shall mean this Agreement, the License and 
Support Agreement, the Battery Laminate Supply Agreement and any other 
document contemplated in this Agreement or entered into by the parties or 
between each party and Hanil Valence Co. in connection with this Agreement.

1.13  US$ shall mean the lawful currency of the United States of America.

1.14  WON shall mean the lawful currency of Korea.

2.   JOINT VENTURE COMPANY FORMATION

2.1  Within thirty (30) days of the Effective Date of this Agreement, Hanil 
shall form a new Korean company to become, under the name "Hanil Valence Co., 
Ltd."

2.2  The Articles of Incorporation of Hanil Valence Co. shall be as mutually 
agreed upon by the parties.

2.3  Hanil shall cause Hanil Valence Co. to enter into the License and 
Support Agreement, and the Battery Laminate Supply Agreement within sixty 
(60) days of the Effective Date of this Agreement.

3.  REORGANIZATION

3.1  A purpose of this Agreement is to provide for the restructure of 
ownership and operation of Hanil Valence Co. by Valence and Hanil.  Further, 
it is the intention of Valence and Hanil that they will work together in good 
faith within reasonable commercial expectations and requirements to promote 
the Business.

3.2  Following the Effective Date but no later than Valence's initial 
subscription pursuant to Article 4.1 below, Hanil shall cause Hanil Valence 
Co. to be reorganized as a joint venture company in accordance with the 
Foreign Capital Inducement Act, other relevant laws of Korea and this 
Agreement.

3.3  Hanil Valence Co. shall be a joint stock company (Chusikhoesa) named in 
Korean "Chusikhoesa Hanil Valence," and in English "Hanil Valence Co., Ltd."

3.4  The business objects of Hanil Valence Co. shall be as follows:

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                          CONFIDENTIAL TREATMENT REQUESTED

     3.4.1  the design, application, manufacture, distribution and sale 
     of the Battery utilizing Laminates supplied by Valence, [
                                             ] for Applications in the 
     Territory;

     3.4.2  foreign trade business for the importation of raw materials 
     and manufacturing facilities/equipment; and

     3.4.3  any and all acts, things, business and activities that are 
     related, incidental or conducive directly or indirectly to the 
     attainment of the foregoing object.

3.5  Within thirty (30) days of the Effective Date hereof, Hanil shall cause 
the Articles of Incorporation of Hanil Valence Co. to be amended in such form 
to be agreed by Valence and Hanil.  In case of any conflict between the 
provisions of this Agreement and the Articles of Incorporation of the Hanil 
Valence Co., the provisions of this Agreement shall prevail.

4.   REPRESENTATIONS AND WARRANTIES

4.1  Hanil hereby represents and warrants that:

     4.1.1  The total number of shares of Hanil Valence Co. authorized 
     for the issuance is one million six hundred thousand (1,600,000) 
     shares of common stocks having a par value of five thousand won 
     (Won 5,000) each.
     
     4.1.2  The total number of shares of Hanil Valence Co. issued and 
     outstanding at the time of incorporation is four hundred thousand 
     (400,000) shares of common stock having a par value of five 
     thousand won (Won 5,000) each, for a paid-in capital of two billion 
     won (Won 2,000,000,000).

     4.1.3  The number of shares owned by the Hanil Individual 
     Shareholders is as listed in Hanil Shares Ownership Exhibit, and 
     the Hanil Individual Shareholders shall collectively subscribe to 
     those shares for two billion won (Won 2,000,000,000), as paid-in 
     capital.  All the shares owned by the Hanil Individual Shareholders 
     must be controlled and voted as single block of shares by Hanil.  
     Since, other than Hanil, the Hanil Individual Shareholders are not 
     parties to this Agreement, Hanil shall take complete responsibility 
     that the Hanil Individual Shareholders abide by all terms of this 
     Agreement and shall indemnify and hold harmless Valence from any 
     and all damages and other expenses that may arise from any action 
     by the other Hanil Individual Shareholders.

     4.1.4  All of the assets and the liabilities of Hanil Valence Co. 
     as of the date of Valence's initial subscription are as per the 
     balance sheet, profit and loss statement and list of assets, which 
     shall be prepared and delivered to Valence as of the date of 
     Valence's initial subscription of its shares.

4.2  Hanil hereby agrees that in the event there are any shortages in the 
total assets described in the said balance sheet or if there are any 
liabilities or claims of third parties which are not disclosed in the balance 
sheet, Hanil shall jointly and severally make such deficits good and settle 
any of such liabilities and claims at their own cost and expense.  Hanil 
hereby commits that there will be no changes in assets and liabilities of 
Hanil Valence Co. from the Effective Date  to the date of Valence's initial 
subscription of its shares, except such changes as normally occur in the 
ordinary operation of a business. Hanil declares and promises that any and 
all of the assets are and will be free of liens, encumbrances, leases, 
ownership of third parties, particular claims, and limitations or threatened 
limitations resulting either from earlier agreements or from laws or 
regulations in force in Korea as of the date of Valence's initial 
subscription of its shares, except as disclosed in the above balance sheet, 
and except as required for the normal and ordinary operations of Hanil 
Valence Co.

Page 4

<PAGE>

5.  INCREASE OF CAPITAL AND PARTICIPATION

5.1  No later than ninety (90) days following the Effective Date, Hanil shall 
cause Hanil Valence Co. to increase its paid-in capital to four billion won 
(Won 4,000,000,000) and issue four hundred thousand (400,000) new shares of 
common stock, which new shares shall be subscribed solely by Valance at the 
par value. Provided, however, that the foregoing subscription of Valence 
shall be subject to the satisfaction of following conditions;

     5.1.1  all necessary Government Approvals have been obtained, 
     including approvals on this Agreement, the License and Support 
     Agreement, and any tax privileges available under the Foreign 
     Capital Inducement Act of Korea; and

     5.1.2  The revision of the Articles of incorporation of Hanil 
     Valence Co. to both parties satisfaction.

5.2    One (1) year after the Effective Date, or sooner upon mutual agreement 
of the parties, Valence and Hanil shall cause Hanil Valence Co. to increase 
its paid-in capital to eight billion won (Won 8,000,000,000)  and issue an 
additional eight hundred thousand (800,000) new shares of common stock, for a 
total of one million six hundred thousand (1,600,000) shares of common stock, 
which new shares subscribed equally by Valence and Hanil at the par value.  
The detailed schedule for said subscription shall be as agreed upon between 
the parties.

5.3   Upon the completion of subscriptions set forth in sections 5.1 and 5.2 
above, the equity ownership and the shareholding ratio of Valence and Hanil 
shall be as follows:

     Valence   800,000 shares     4,000,000,000 Won     50%
     Hanil     800,000 shares     4,000,000,000 Won     50%
     ___________________________________________________________
     Total   1,600,000 shares     8,000,000,000 Won    100%

5.4  All shares issued by Hanil Valence Co. shall be common shares registered 
in nominative form evidenced by share certificates bearing a legend as 
follows:

     "This certificate is held subject to the terms of an agreement 
     between Valence Technology B.V. and certain local entities referred 
     to as Hanil in the aforementioned agreement, a copy of which is on 
     file at the principal office of the Company.  Any transfer of 
     shares in violation of aforementioned agreement shall be 
     ineffective against the Company; and any violation of this 
     restriction may result in termination of the aforementioned 
     agreement and in the liquidation of the Company."

5.5  It is the firm intention of the parties that their ownership of Hanil 
Valence Co. and its stock shall always be equal.  Any change in the equal 
ownership of Hanil Valence Co. and its stock shall only be effective upon 
unanimous approval of the Board and shareholders.  If a change in this equal 
ownership is so approved and additional shares are created, the following 
terms shall apply:

     5.5.1  Valence and Hanil shall have preemptive rights in each 
     additional issue of shares in Hanil Valence Co. in proportion to 
     their existing shareholdings at the time of issuance.

     5.5.2  Should any shareholder not wish, or not be able to take up 
     and pay for its proportionate shares of any such additional issue 
     of shares, that shareholder shall immediately offer its rights in 
     writing to the other shareholder. In the event offered shares have 
     not been taken up by other party within thirty (30) days following 
     its offer, such shares shall be disposed in accordance with the 
     resolution of the Board.

     5.5.3  However, prior to Hanil offering such shares in section 
     5.5.2 to Valence, any such Hanil Individual Shareholder may first 
     offer its rights to the other Hanil Individual Shareholders in 
     proportion the total shareholding of such other members in Hanil 
     Valence Co., and the Hanil Individual Shareholders shall be free to 
     alter their respective proportions of shareholding within the fifty 
     percent (50%) shareholding allotted to the Hanil Individual 
     Shareholders as a 

Page 5

<PAGE>


     group.  Only if no other Hanil Individual Shareholders agrees to 
     take up the shares of that Hanil Individual Shareholders will such 
     shares be offered to Valence.

     5.5.4  If Valence is not able to take up its proportionate share of 
     any additional issue of shares due to its failure to secure the 
     Government Approval for such subscription, Valence shall be 
     entitled to designate any person qualified acceptable to Hanil, 
     such acceptance shall not unreasonably be withheld, in its place to 
     take up the shares.

6.   GOVERNMENT APPROVAL

6.1  After the execution of this Agreement, Hanil, with Valence's assistance 
as required, shall take all necessary steps to obtain the Government Approval 
required for the foreign investment by Valence pursuant to this Agreement, 
including without limitation any tax privileges available under the Foreign 
Capital Inducement Act of Korea.  The parties shall cooperate fully with each 
other, including providing necessary information, and shall furnish 
satisfactory evidence of the obtaining of Government Approval.  Valence shall 
have a right of access to all correspondence and discussions with the Korean 
authorities and the right to make representations or to be present when 
representations are made to such authorities.

6.2  In the event that the Government Approval has not been obtained within 
ninety (90) days after the Effective Date, either party shall have the right 
and option, exercisable by notice in writing served upon the other party, to 
declare this Agreement, and the License and Support, and Laminate Supply 
Agreements, if executed, null and void and of no effect.  In such event, each 
of the parties hereto shall thereupon be relieved from any and all 
obligations and commitments hereunder, and no party shall be liable to any 
other on any account whatsoever, expect that if Valence has received the 
license and support fee from Hanil Valence Co. and has not paid Hanil Valence 
Co. for the subscribed shares, Valence shall return the fee to Hanil Valence 
Co.  The aforementioned period of ninety (90) days may be extended by mutual 
agreement in writing by the parties.

6.3  If any of the provisions contained in this Agreement regarding the 
restructure of Hanil Valence Co. should not be approved by the appropriate 
authority, then the parties agree to make such amendments thereto as shall be 
acceptable to the said appropriate authority, without prejudice to their 
underlying purpose and intention for this Agreement, and are completely 
acceptable to each party.

6.4  The expense directly relating to the obtaining of Government Approval on 
the investment of Valence shall be borne by Hanil Valence Co., while the 
expenses relating to the preparation, negotiation and execution of this 
Agreement and other agreements supplementary hereto shall be borne by each 
party which incurs such expenses.  In the event Hanil fails to obtain the 
approval of the Korean Government, such expenses relating the Government 
Approval shall be born by Hanil.

7.  TRANSFER OF SHARES

7.1  Without the written consent of the other party, neither party shall 
sell, assign, transfer or otherwise dispose its shares of Hanil Valence Co., 
except in the case of a Hanil Individual Shareholder to:

     7.1.1  another Hanil Individual Shareholder;

     7.1.2  any direct-line descendant of such Hanil Individual Shareholder; or

     7.1.3  an Affiliate of such Hanil Individual Shareholder,

or in case of Valence to an Affiliate of Valence.  If Hanil or Valence is the 
party so disposing of such shares, then such disposal shall be contingent on 
that party's guarantee, to the other party, assuring 

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<PAGE>

that the Affiliate shall carry out all of that party's obligations under this 
Agreement, and written agreement from the Affiliate assuming such obligations.

7.2  Any such a disposal permitted by section 7.1, other than by a party to 
an Affiliate, shall be processed strictly in accordance with Article 335 to 
Article 335-5 of the Commercial Code of Korea.

7.3  No party, or other Hanil Individual Shareholder, shall pledge, 
hypothecate or otherwise apply collateral, or for any other purpose, or in 
any other manner, encumber shares of Hanil Valence Co. such as could result 
in an involuntary transfer or assignment of such shares to third parties, 
unless consent to such pledge, hypothecation or other such application has 
been received in writing from the other party.

7.4  Should a Hanil Individual Shareholder so dispose, or so encumber shares 
of Hanil Valence Co. as prohibited by this section 7, Hanil shall do 
everything in its power to correct the situation, and shall indemnify and 
hold harmless Hanil Valence Co. and Valence from any and all damages and 
other expenses that may arise from any action by the Hanil Individual 
Shareholder or any other party, resulting from such prohibited disposal or 
encumberance.

8.   MEETINGS AND RESOLUTIONS OF SHAREHOLDERS

8.1   The Board shall decide the time and place for convening all meetings of 
the shareholders except where Korean law provides otherwise, and notice 
thereof shall be given as set forth in the Articles of Incorporation of the 
Hanil Valence Co.

8.2   All actions and resolutions of the shareholders (except where a special 
resolution of the shareholders is required by Korean law) shall be adopted by 
the affirmative vote of a majority of the voting shares represented at a 
meeting where more than fifty percent (50%) of the issued and outstanding 
shares are represented.  All Hanil shares, including all shares held by Hanil 
Individual Shareholders, and all Valence shares voting at the meeting, must 
be voted as a block by Hanil and Valence, respectively.

8.3   The chairman of the Board shall serve as the chairman of the 
shareholder meetings.  In the event the chairman of the Board cannot serve as 
chairman of a shareholder meeting, a director nominated by the Board shall 
serve as chairman of the shareholder meeting.

8.4   The agenda of the annual general shareholder meeting shall include the 
following items:

     8.4.1  annual financial statements including the official report of 
     the Statutory Auditor;

     8.4.2  removal and appointment of directors;

     8.4.3  appointment of the statutory auditor;

     8.4.4  remuneration and severance pay for the directors and 
     statutory auditor; and

     8.4.5  declaration of dividends.


9.   BOARD OF DIRECTORS

9.1   Valence and Hanil shall exercise their respective voting rights in 
Hanil Valence Co. and take such other steps as are necessary to ensure that:

     9.1.1  the Board of Hanil Valence Co. shall consist of six (6) 
     members;

     9.1.2  Valence and Hanil shall have the right to designate the 
     equal number of directors, and that initial three (3) directors 
     designated by Valence shall be elected on the date of Valence's 
     initial subscription to shares of Hanil Valence Co.;

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     9.1.3  the Board shall select a president / representative director 
     of the Hanil Valence Co. and the parties shall cause the nomination 
     and election of the president / representative director by the 
     shareholders

     9.1.4  the president / representative director shall serve as 
     president / representative director of Hanil Valence Co.

     9.1.5  the term of office of each director shall be two (2) years; 
     and if (and only if) a party wishes to replace any of its nominated 
     directors with or without cause, the other party will vote 
     accordingly; provided, however, that if such dismissal is without 
     cause, the party proposing the dismissal shall indemnify and hold 
     harmless Hanil Valence Co., and the other party, for any and all 
     damages and other expenses that may arise from such action.

9.2  In case the position of a director of Hanil Valence Co. becomes vacant 
for any reason.  Valence and Hanil agree to cause their shares to be voted to 
elect as a replacement a person nominated by the party who nominated the 
person whose office is vacant.

9.3  The Board shall be responsible for the establishment of the business 
policy and the supervision of the management of Hanil Valence Co. in 
accordance with this Agreement, the Articles of Incorporation, and 
resolutions of the shareholders.  The day-to-day business matters shall be 
carried out by the president / representative director, in accordance with 
the Articles of Incorporation, resolutions of the shareholders, resolutions 
of the Board, and any corporate regulations of Hanil Valence Co.

9.4  Meetings of the Board may be called by the president / representative 
director whenever he or she deems necessary or at the request of any 
director. Notice of Board meetings shall be given as set forth in the 
Articles or Incorporation of Hanil Valence Co.  The regular Board meeting 
shall be convened four (4) times per each fiscal year.

9.5  All actions and resolutions taken at a meeting of the Board shall be 
adopted by a majority vote of all Directors present at the meeting, except 
that at least one (1) Board member appointed by each party must vote in favor 
of the action or resolution for it to be adopted.  At least one (1) Board 
member appointed by each party shall be present to constitute a quorum for a 
Board meeting.  The chairman shall not have the right to cast a tie-breaking 
vote.

9.6  The president / representative director shall serve as the chairman of 
Board meetings, unless otherwise agreed by the parties.

9.7  The following corporate actions shall not be taken unless authorized in 
advance by a resolution of the Board:

     9.7.1   convening and determining the agenda of any general meeting 
     of shareholders;
     
     9.7.2   authorization of any documents and supplementary schedules 
     thereto to be submitted to a meeting of shareholders;
     
     9.7.3   election and dismissal of president / representative 
     director;
     
     9.7.4   establishing, relocating or closing of subsidiaries, 
     branches, plants or any other facility of Hanil Valence Co.;
     
     9.7.5   adopting, amending or repealing any company major 
     regulation;
     
     9.7.6   issuance of new shares;
     
     9.7.7   disposal of unsubscribed or odd shares;
     
     9.7.8   transfer of shares;

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     9.7.9   issuance of debentures or convertible bonds;

     9.7.10  issuance of bond with warranty;

     9.7.11  acquisition of any license or other use of technology which 
     costs in excess of one hundred thousand dollars (US$100,000.00), or 
     the Won equivalent or in deviation of the annual budget;

     9.7.12  acquisition or sale of any assets with a value in excess of 
     two hundred million won (Won 200,000,000) and in deviation of the 
     annual budget;

     9.7.13  any of the following transactions in an amount in excess of 
     five hundred million won (Won 500,000,000):

          9.7.13.1 borrowing funds;

          9.7.13.2 pledging, mortgaging or otherwise encumbering 
          any assets (tangible or intangible) as security for loans 
          or otherwise; and

          9.7.13.3 incurring any other commitment, contractual or 
          otherwise, other than in the normal course of  business;

     9.7.14  any making of loans;

     9.7.15  recommending to the shareholders any merger or sale of all, 
     of substantially all, of the whole of the assets, undertaking, or 
     business of Hanil Valence Co.

     9.7.16  recommending to the shareholders any sale of any major 
     asset (tangible or intangible);

     9.7.17    recommending to the shareholders dissolution or 
     liquidation of any business of Hanil Valence Co.;

     9.7.18    recommending to the shareholders any change in the 
     business activities of Hanil Valence Co.;

     9.7.19    recommending to the shareholders any diversification of 
     the existing business;

     9.7.20    recommending to the shareholders any changes to the 
     Articles of Incorporation of Hanil Valence Co.;

     9.7.21    acquisition of a company, or any portion, or shares in a 
     company;

     9.7.22    selecting, hiring, discharging, and setting of 
     compensation of officers over the level of department chief 
     "Bujang" in Korean), upon the recommendation of the president / 
     representative director, including those who are responsible for:

               9.7.22.1    manufacturing, operations (i.e. Chief 
               Operating Officer, Vice President of Manufacturing);

               9.7.22.2   finance (i.e. Chief Financial Officer);

               9.7.22.3   engineering, research and development (i.e. 
               Chief Technical Officer, Vice President of Engineering, 
               Vice President of Research and Development); and

               9.7.22.4   sales, marketing (i.e. Vice President of 
               Marketing and Sales);

     9.7.23    approval of annual budget and business plans;

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     9.7.24    any matters affecting this Agreement or other 
     agreements executed by Hanil Valence Co. and its shareholders, 
     including the Affiliates of such shareholder; and

     9.7.25    election of outside independent accounting firm.


10.  STATUTORY AUDITOR

Hanil Valence Co. shall have one (1) statutory auditor, who shall be elected 
at a shareholders meeting and perform the duties as provided in the Articles 
of Incorporation and in accordance with the Korean Commercial Code.  The term 
of office of the statutory auditor shall commence from the date of acceptance 
of office and expire at the close of the ordinary general meeting of 
shareholders convened with respect to the last fiscal year which ends on or 
before a date two (2) years from the date of acceptance of office.

11.  FISCAL YEAR AND ACCOUNTING RECORDS

11.1   The fiscal year of Hanil Valence Co. shall commence on January 1 and 
end on December 31 of each year.  Provided that the first fiscal year shall 
commence on the date of incorporation and end on December 31 of the same year.

11.2   Hanil Valence Co. shall maintain accounting books, records and 
supporting documents in accordance with generally accepted accounting 
principles and practices in Korea.  Hanil Valence Co. shall also provide its 
unaudited quarterly report of operation to each of its shareholders no later 
than thirty days (30) days after each calendar quarter.  The unaudited 
quarterly report of operation to be delivered to Valence shall be prepared in 
conformity with the accounting principles and practices of Valence and United 
States Generally Accepted Accounting Principles ("US-GAAP").

11.3   Immediately upon the end of each fiscal year, Hanil Valence Co. shall 
submit to the shareholders the balance sheet and profit and loss statement 
prepared both in the Korean and English languages.  Further, Hanil Valence 
Co. shall keep its accounting books and records at its head office for 
inspection by the shareholders or their representatives.

11.4   Hanil Valence Co., at its own expense, shall be audited annually by an 
outside independent audit firm.  Such firm shall provide the parties with a 
financial report in English and Korean languages, in accordance with 
generally accepted accounting principles of Korea and in conformity with the 
account principles and practices of Valence and US-GAAP.

12.  COMPENSATION OF DIRECTORS AND STATUTORY AUDITOR

12.1   Unless mutually agreed otherwise, only directors of Hanil Valence Co., 
who are also employees of Hanil Valence Co. shall be compensated.  The other 
Board members and the statutory auditor shall only be reimbursed for such 
travel and other expenses as are reasonably incurred in their attendance of 
Board meeting.

12.2   Other than the president / representative director, directors who are 
also employees of Hanil Valence Co. may only serve as part-time employees. 
Should such a director / employee become a full-time employee, then that 
director shall immediately resign from the Board.  The Board shall determine 
the compensation of any such part-time director / employees.

12.3   Other than the president / representative director, director / 
employees only may serve in such a dual capacity during the first two (2) 
years from the Effective Date of this Agreement.  At the end of two (2) 
years, any such director / employee shall either resign from the Board or 
shall terminate their employment with Hanil Valence Co. 

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                          CONFIDENTIAL TREATMENT REQUESTED

13.  INDEBTEDNESS AND ADDITIONAL CAPITALIZATION

13.1   Without any additional consideration, Hanil shall provide thirty-two 
billion won (Won 32,000,000,000) in loan guarantees from Hanil to Hanil 
Valence Co.

13.2   After Hanil Valence Co. has used all the loan guarantees provided by 
Hanil under section 13.1, the parties hereto agree that in the event any 
additional working capital is required by Hanil Valence Co., such working 
capital shall be met, either by the increase of paid-in capital, by direct 
shareholder loan or by providing bank guarantees for the favor of Hanil 
Valence Co., always subject to the mutual agreement of the parties and in 
proportion to their respective shareholding ratio.

13.3  While the parties have no current expectation that they will do so, 
should the parties mutually agree that additional capitalization is required, 
the parties shall contribute equally to any such additional capitalization in 
order to maintain the equal ownership of Hanil Valence Co.

14.  VARIOUS UNDERTAKINGS

14.1  Hanil Valence Co. shall have the right to make, have made, use and sell 
Batteries for Applications in the Territory.

14.2  Hanil shall use its best efforts to procure suitable premises on terms 
and conditions acceptable to Hanil Valence Co. for the purpose of 
manufacturing the Batteries, however, the setting up of any manufacturing 
plants in Korea shall be at Hanil Valence Co.'s sole cost and expense.

14.3  Hanil shall use its best endeavors to procure the relevant personnel 
required by Hanil Valence Co. in respect of the management, administration 
and operations of Hanil Valence Co. as well as the marketing of Hanil Valence 
Co.'s products.

14.4  The parties acknowledge that other, potentially broader, business 
opportunities may arise in the future, and either party may raise such 
opportunities with the other party.  In such an event, the parties may 
mutually agreed to alter this Agreement, if necessary, to pursue such 
opportunities.

15.  DIVIDEND POLICY

15.1  The dividends of Hanil Valence Co. shall be such as shall be 
recommended by the Board, to the shareholders from time to time who shall act 
in the best interests of Hanil Valence Co. when making any recommendations 
therefore it being the intention of the parties to distribute profits by way 
of dividends subject to commercial necessity for reinvestment in Hanil 
Valence Co. and subject to such method of distribution being to the mutual 
advantage of the shareholders.

15.2  Should the payment of dividends to Valence be restricted by the Korean 
Government in any way, Valence shall have the right to terminate this 
Agreement, as well as the License and Support Agreement and the Laminate 
Supply Agreement, if the amount restricted is equal to, or in excess of, the 
equivalent of [                                                ] and the 
amount has been restricted for at least six (6) months.

16.  PAYMENTS

16.1  Any and all cash distributions or remittances of any kind, including, 
but not limited to dividends, damages for breach of this Agreement or other 
Transaction Documents, and distributions which may be made upon liquidation, 
dissolution, or reorganization, which may be payable to Valence by Hanil or 
Hanil Valence Co., shall be paid in United States Dollars, or other form 
elected by Valence, and remitted to such bank as may reasonably be designated 
by Valence.

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16.2  If, for any reason, Government Approval cannot be obtained by Hanil or 
Hanil Valence Co., for any such payment, Hanil shall provide for such payment 
in a manner acceptable to Valence.

17.  TERM AND TERMINATION

17.1  This Agreement shall continue in effect until terminated pursuant to 
the provisions of this Agreement or by mutual agreement of the parties.

17.2  A party shall be deemed to have breached or defaulted if;

     17.2.1    any representation, warranty or statement by such party in any
     Transaction Document or in any document delivered under any of them is not
     complied with or is or proves to have been incorrect in any material
     respect when made; or

     17.2.2    such party does not perform or comply with any one or more of its
     material obligations under any Transaction Document and such party in
     breach shall fail to rectify that breach within sixty (60) days of written
     notice of breach being given to that party in the terms of this Section.

17.3  In the event a party commits a material breach or default, as described 
above in Section 17.2, the other party hereto shall, without prejudice to any 
other rights and remedies such party may have, be entitled by notice in 
writing to the party in breach or default to terminate this Agreement 
forthwith as against such party and thereupon such defaulting party shall 
transfer, at no cost, all of its shares in Hanil Valence Co. to the other 
party and shall cause any directors appointed by such party to resign from 
office.

17.4  Save as hereinafter provided, Hanil or Valence shall be entitled to 
forthwith terminate this Agreement if the License and Support Agreement, or 
Battery Laminate Supply Agreement, is terminated or ceases to be in full 
force and effect for any reason whatsoever and without prejudice to any other 
rights and remedies.  If the License and Support Agreement, or Battery 
Laminate Supply Agreement, was terminated because of a breach or default by 
Hanil or Hanil Valence Co., then Hanil Valence Co. shall immediately be 
liquidated and any surplus proceeds distributed to the shareholders.  If, 
however, the License and Support Agreement, or Battery Laminate Supply 
Agreement, was terminated  because of a breach or default of Valence, then 
Valence shall transfer, at no cost, all of its shares in Hanil Valence Co. to 
Hanil and shall cause any directors appointed by Valence to resign from 
office.

17.5  In the event that a party becomes insolvent, dissolves, or other wise 
ceases to exist, this Agreement shall immediately terminate.  Further, in 
such an event, Hanil Valence Co. shall be immediately and automatically 
liquidated and dissolved, with its surplus assets (if any) upon such 
liquidation distributed to the shareholders.

17.6  The termination of this Agreement from any cause shall not release any 
party hereto from any liability which at the time of termination has already 
accrued to any party hereto, or which thereafter may accrue in respect of any 
act or omission prior to such termination.

17.7  In the event of any termination of this Agreement, regardless of cause 
or breach by either party, the License and Support Agreement and Battery 
Laminate Supply Agreement shall immediately be terminated.

17.8  If Hanil does not receive all necessary approvals from the Korean 
government within ninety (90) days of the Effective Date of this Agreement, 
then this Agreement, the License and Support Agreement and Laminate Supply 
Agreement shall immediately be terminated.

17.9  In the event that this Agreement is terminated, for any reason, and 
Hanil Valence Co. survives, according to the terms of this Agreement, then 
the party who retains ownership shall immediate change the name of Hanil 
Valence Co. to remove the other party's name from the joint 

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venture company's name (i.e. if Hanil retained ownership, it would remove 
"Valence" from "Hanil Valence Co., Ltd.).

18.  GOOD FAITH AND RELATIONSHIP BETWEEN PARTIES

18.1  In entering into this Agreement the parties hereto recognize that it is 
impracticable to make provisions for every contingency that may arise in the 
course of the performance thereof. If by reason of any unforeseen occurrence 
or development the operation of this Agreement is likely to cause any 
inequitable hardship to any of the parties hereto, the parties hereto shall 
negotiate immediately in good faith as to what manner the terms and 
conditions of this Agreement may be modified in order to provide an equitable 
solution in so far as such is possible within the spirit of this Agreement 
for such unforeseen occurrence or development.

18.2  The parties hereto hereby agree and declare that they will execute and 
do all such acts and things as are necessary and within their power and 
authority for the time being to carry into effect and/or to comply with the 
provisions of this Agreement, including voting by Board members and the 
voting of shares.

18.3  Nothing in this Agreement shall be construed to imply the existence of 
a partnership between the parties hereto other than as shareholders in Hanil 
Valence Co. in accordance with the terms of this Agreement.  Valence and 
Hanil each represent and warrant to the other that they have entered into no 
contracts, nor are subject to any obligations, which prevent them from 
entering into and performing this Agreement.  It is understood and agreed 
that Valence and Hanil are, and at all times shall remain, independent 
contractors.  At no time shall either Party represent to any third party that 
it is the agent of the other for any reason whatsoever. Valence and Hanil 
further covenant that no authorization shall be given to any employee to act 
for the other Party to this Agreement.  In no event shall either Party at any 
time have authority to make any contracts or commitments on behalf of or as 
an agent of the other or otherwise make use of its relationship with the 
other, without the other's express consent in each instance.

19.  LIMITATION OF LIABILITY

In no event shall either party be liable for any indirect, special, 
incidental or consequential damages resulting from its performance or failure 
to perform under this Agreement, whether due to a breach of contract, breach 
of warranty, or such party's negligence.

20.  CONFIDENTIALITY AND PUBLIC DISCLOSURE

20.1  "Confidential Information" shall mean that information of either party 
which is disclosed to the other party or Hanil Valence Co. ("Recipient") by 
reason of the parties' relationship under the Joint Venture Agreement, either 
directly or indirectly in any written or recorded form, orally, or by 
drawings or inspection of parts or equipment, and, either in writing and 
marked as confidential or proprietary, or if oral, reduced to writing 
similarly marked within thirty (30) days of disclosure.

20.2  Recipient shall receive and use the Confidential Information only for 
performance of Recipient's obligations under the Joint Venture Agreement, and 
will not use Confidential Information for any other purpose, and shall not 
disclose such Confidential Information to any person or persons who do not 
need to have knowledge of such Confidential Information in the course of 
their employment. 

20.3  It is expressly understood that Recipient shall not be liable for 
disclosure of any Confidential Information if the same was in the public 
domain at the time it was disclosed; was known to Recipient at the time of 
disclosure; is disclosed with the prior written approval of the other party 
hereto; is disclosed after five (5) years from the termination of the Joint 
Venture Agreement; was independently developed by Recipient; or becomes known 
to Recipient, on a non-confidential 

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<PAGE>

basis, from a source other than the other party hereto, without breach of the 
Joint Venture Agreement or this letter by Recipient.

20.4  Each party hereto shall not, except as authorized by the Board, or 
required by any applicable law or regulation of Korea, the Cayman Islands, 
the Netherlands or the United States of America, reveal to any person, firm 
or company any of the trade secrets, secret or confidential operations, 
processes or dealings or confidential information of Hanil Valence Co. or any 
information concerning the organization, business, finances, transitions or 
affairs of Hanil Valence Co. which may come to his knowledge under the Joint 
Venture Agreement and shall keep with complete secrecy all trade secrets and 
other confidential information entrusted to it and shall not use or attempt 
to use any such information in any manner which may injure or cause loss 
either directly or indirectly to Hanil Valence Co. or its business or may be 
likely to do so.

20.5  Valence and Hanil agree that the terms and conditions of the Joint 
Venture Agreement and this letter shall not be disclosed to any other party 
without the prior written consent of the other, which consent should not be 
unreasonably withheld.  Neither Valence nor Hanil shall publish or use any 
advertising, sales promotion, press release or publicity matters relating to 
the Joint Venture Agreement or this letter, without the prior written 
approval of the other, which approval shall not be unreasonably withheld.  
Notwithstanding the foregoing, either party may make such disclosures and 
press releases as are necessary to meet its disclosure and regulatory 
requirements under the laws, regulation and rules of Korea, the Cayman 
Islands, the Netherlands or the United States of America.

20.6  Hanil Valence Co shall place all its employees and contractors under 
appropriate confidential and intellectual property rights agreements prior to 
such persons receiving any confidential information or doing any work for 
Hanil Valence Co.

21.  TRADEMARKS AND ADVERTISING, AND SAFETY

21.1  Hanil Valence Co. shall market and sell the Batteries for the 
Applications under names, trade marks, trade names, designs, logos and get-up 
and all other trademark rights relating to the marketing and sale of the 
Batteries for the Applications shall belong to and be the absolute property 
of the joint venture company.

21.2  Valence may require Batteries to be marked with the Valence logo and 
name in a reasonable size so as to be noticed by a consumer of such 
Batteries.  Any promotional material produced by Hanil Valence Co. that 
specifically references any Battery performance specifications or promotes 
the additional value of such Batteries, shall also include a reference to 
Valence and an appropriate promotional copy supplied by Valence, upon 
Valence's request.  Valence must approve any specifications prior to 
publication or distribution outside Hanil Valence Co. or Valence.

21.3  Because Valence's logo and/or name will be on the Batteries, Valence 
shall have right to stop manufacturing, sales and/or distribution of 
Batteries, if, in Valence's sole judgement, there is any safety defect.  
Additionally, Valence shall have the right to cause the joint venture company 
to conduct a recall of Batteries, if such a defect is discovered in Batteries 
already distributed outside the joint venture company.  Hanil Valence Co. 
shall install and maintain a lot tracking system adequate to allow an 
effective and timely recall.  Further, Valence shall review design and 
quality of products to assure such products meet Valence's design and quality 
standards.

21.4  Each party recognizes the right, title, and interest of the other party 
and its affiliates in and to all service marks, trademarks, and trade names 
used by the other and agrees not to use any of the other party's service 
marks, trademarks, and trade names without the other party's express written 
permission.

22.  INTELLECTUAL PROPERTY CROSS-LICENSE

22.1  Valence and Hanil shall grant Hanil Valence Co. a non-exclusive, 
world-wide, royalty-free, non-transferable, non-sublicensable, personal 
license to all intellectual property created by

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<PAGE>


Valence or Hanil during the term of the exclusive license that directly 
relates to Joint Venture Markets, specifically not including intellectual 
property related to the composition or manufacturing of Laminates.

22.2  Hanil Valence Co. shall grant Valence, and its Affiliates, a 
non-exclusive, world-wide, royalty-free, non-transferable, non-sublicensable, 
personal license to all intellectual property created by the joint venture 
during the term of the exclusive license that directly relates to the 
composition or manufacturing of Batteries or Laminates, or relates to 
charging or other control circuitry suitable for Batteries. Notwithstanding 
the forgoing, such license shall be assignable incident to the transfer of 
all or substantially all of its, or an Affiliate's, business.

23.  DISPUTE RESOLUTION

23.1   Each party agrees that any dispute between the parties, the Board, or 
shareholders relating to this Agreement will first be submitted in writing to 
a panel consisting of the Chairman of Hanil Cement Mfg. Co., Ltd. and the 
Chairman of Valence Technology, Inc., who will promptly meet and confer in an 
effort to resolve such dispute.  Any decisions of the Chairmen, that are 
jointly agreed to in writing, will be final and binding on the parties.  In 
the event the Chairmen are unable to resolve any dispute within thirty (30) 
days after submission to them, either party may then refer such dispute to a 
mediation in accordance with the immediately succeeding paragraph.

23.2  If the parties are unable to settle any dispute arising out of this 
Agreement in accordance with the immediately preceding paragraph, then the 
dispute shall be submitted to a mutually-acceptable neutral advisor for 
mediation, fact-finding or other form of Alternate Dispute Resolution (ADR) 
selected by the parties.  Neither party may unreasonably withhold acceptance 
of such an advisor, and his or her selection must be made within forty-five 
(45) days after written notice by one party demanding the use of ADR.  The 
cost of such mediation or other ADR procedure shall be shared equally by the 
parties.

23.3  Any dispute which is not so resolved between the parties within three 
(3) months of the date of the initial demand by either party for mediation or 
another ADR procedure may then be submitted to the courts for resolution.  
The use of any ADR procedures will not be construed under the doctrines of 
laches, waiver or estoppel to affect adversely the rights of either party.  
Nothing in this section will prevent either party from resorting to judicial 
proceedings if:

     23.3.1    good faith efforts to resolve the dispute under these 
     procedures have been unsuccessful; or

     23.3.2    interim relief from a court is necessary to prevent 
     serious and irreparable injury to one party or to the other.

24.  GENERAL

24.1  Neither party may assign its rights or obligations under this Agreement 
without the prior consent of the other, and any purported assignment without 
such consent shall have no force or effect, except that a party may assign 
this Agreement incident to the transfer of all or substantially all of its 
business.  Subject to the foregoing, this Agreement shall bind and inure to 
the benefit of the respective parties hereto and their successors and assigns.

24.2  No failure or delay by either party to enforce or take advantage of any 
provision or right under this Agreement shall constitute a subsequent waiver 
of that provision or right, nor shall it be deemed to be a waiver of any of 
the other terms and conditions of this Agreement. 

24.3  Neither party to this Agreement shall be liable for its failure to 
perform any of its obligations hereunder during any period in which such 
performance is prevented by any cause beyond its reasonable control.  In the 
event of any such delay the date of delivery or performance hereunder shall 
be extended by a period equal to the time lost by reason of such delay.

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<PAGE>

24.4  The validity, performance and construction of this Agreement shall be 
governed by the laws of the State of New York, United States (excluding its 
conflict of laws provisions). Notwithstanding the foregoing, the structure, 
operation and management of Hanil Valence Co. shall be governed by the 
substantive laws of Korea.

24.5  Each party hereto shall bear its own costs and expenses in respect of 
the preparation, negotiation, finalize and execution of this Agreement and 
the other agreements or documents contemplated herein.

24.6  Each party shall comply with all applicable laws in performing under 
this Agreement.

24.7  All notices or communications to be given under this Agreement shall be 
in writing and shall be deemed delivered upon hand delivery, upon 
acknowledged telex  or facsimile communication, or seven (7) days after 
deposit in the mail, postage prepaid, by certified, registered or first class 
mail, addressed to the parties at their addresses set forth above.

24.8  In the event that any provision of this Agreement is prohibited by any 
law governing its construction, performance or enforcement, such provision 
shall be ineffective to the extent of such prohibition without invalidating 
thereby any of the remaining provisions of the Agreement.

24.9  The terms and conditions of this Agreement may not be superseded, 
modified, or amended except in writing which states that it is such a 
modification, and is signed by an authorized representative of each party 
hereto.  This Agreement shall not be modified, supplemented, qualified, or 
interpreted by any trade usage or prior course of dealing not made a part of 
the order by its express terms.

24.10 Section titles used herein are for reference only and shall not be for 
purposes of interpretation.

24.11 This Agreement may be executed in several counterparts, each of which 
shall be deemed an original and all of which shall constitute one and the 
same instrument. 

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24.12 This Agreement, including exhibits, and the other Transaction 
Documents, constitutes the entire Agreement between the parties as to the 
subject matter hereof, and supersedes and replaces all prior or 
contemporaneous agreements, written or oral, regarding such subject matter, 
and shall take precedence over any additional or conflicting terms which may 
be contained in either party's purchase orders or order acknowledgment forms. 
 In the event of any conflict between the provisions of this Agreement and 
the Articles of Incorporation of Hanil Valence Co., the provisions of this 
Agreement shall prevail over the Articles of Incorporation.

ACCEPTED AND AGREED:

VALENCE TECHNOLOGY B.V.                    HANIL TELECOM CO., LTD.

By:                                       By:
   -----------------------------------        ---------------------------------
signature of authorized representative    signature of authorized representative

Melvern Slates
--------------------------------------    -------------------------------------
printed name                              printed name

Managing Director
--------------------------------------    -------------------------------------
title                                     title

--------------------------------------    -------------------------------------
date                                      date

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<PAGE>

                       CONFIDENTIAL TREATMENT REQUESTED


Hanil Shares Ownership Exhibit


The amount, price and percentage of Hanil's first, and second, subscriptions 
shall be as follows:


                             Shares         Cost in Won              Percentage
-------------------------------------------------------------------------------
[







                                                                              ]
-------------------------------------------------------------------------------
Totals                      400,000        2,000,000,000               100.00


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