September 15, 2003


Mr. Stephan Godevais
3903 Benedict Lane
Austin, TX 78746

Reference:  Your original employment offer dated May 1, 2001

Dear Stephan:

     The Board of Directors is pleased to amend the initial employment terms
with you in your capacity as Chairman of the Board of Directors, Chief Executive
Officer and President of Valence Technology, Inc. (the "Company"). This letter
outlines the terms of our amended employment agreement. If it is agreeable to
you, please so indicate by executing a copy of this letter in the space provided
for below, and returning it to the undersigned. The key terms are as follows:

1. Capacity and Duties. You shall serve the Company as its Chairman of the Board
of Directors, Chief Executive Officer and President and shall report directly to
the Board of Directors of the Company (the "Board of Directors"). Subject to the
direction and control of the Board of Directors, you shall have the full
authority and responsibility to operate and manage, on a day to day basis, the
business and affairs of the Company, and shall perform such other duties and
responsibilities as are currently prescribed by the Bylaws of the Company and
which are customarily vested in the office of the chairman of the board of
directors, chief executive officer and president of a corporation. You shall
devote your business time, energy and efforts faithfully and diligently to
promote the Company's interests. The foregoing shall not preclude you from
engaging in appropriate professional, educational, civic, charitable or
religious activities or from devoting a reasonable amount of time to private
investments, provided that such activities do not interfere or conflict with
your duties to the Company. Except for routine travel incident to the business
of the Company, you shall perform your duties and obligations under this
Agreement from an office provided by the Company in Austin, Texas.

2. Nomination to the Board of Directors. The Company agrees to nominate you to
the Board of Directors for all periods during which you serve as Chief Executive
Officer and President of the Company and to use its best efforts to cause the
shareholders to cast their votes in favor of your continued election to the
Board. You agree to resign from the Board of Directors of the Company and each
of its subsidiaries at such time as you no longer serve the Company as its
Chairman of the Board of Directors, Chief Executive Officer and President.

3. Compensation. During the term of your employment with the Company, your
salary shall be at an annualized rate of five hundred thousand dollars
($500,000). Commencing on January 1, 2004, and on each anniversary thereafter
(each, an "Adjustment Date"), or from time to time at the sole discretion of the
Board of Directors, your salary shall be reviewed by the Board of Directors and
may be increased, but may never be decreased, in the sole discretion of the
Board of Directors. The Company may deduct from your salary amounts sufficient
to cover applicable federal, state and/or local income tax withholdings and any
other amounts, which the Company is required to withhold by applicable law. In
the event you or the Company terminates your employment, for any reason, you
will earn the base salary prorated to the date of termination.



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4. Stock Options. You have been granted stock options under the Company's stock
incentive programs. In the event of a Change of Control in the Company,
termination without Good Cause or resignation with Good Reason (each as defined
below), all options granted prior to the effective date of the transaction shall
immediately vest and become exercisable on the date of such Change of Control.

5. Benefits. During the term of your employment, if and to the extent eligible
you shall be entitled to participate in all operative executive officer benefit
and welfare plans of the Company then in effect ("Company Benefit Plans"),
including, to the extent then in effect, group life, medical, disability and
other insurance plans, all on the same basis generally applicable to the
executives of the Company; provided, however, that nothing contained in this
paragraph shall, in any manner whatsoever, directly or indirectly, require or
otherwise prohibit the Company from amending, modifying, curtailing,
discontinuing or otherwise terminating, any Company Benefit Plan at any time
effective upon notification to you.

6. Payments on Change in Control or Termination for Other than Good Cause or
Resignation for Good Reason.

          6.1 If during the twenty four (24) months commencing on the Acceptance
Date of this amended agreement, there occurs a Change in Control (as defined in
Section 6.3 below) of the Company, the Company terminates your employment for
other than Good Cause (as defined in Section 6.2 below), or you resign for Good
Reason (as defined in Section 6.4 below), the Company shall (a) pay to you, on
the fifth day following the date on which the Change of Control, termination or
resignation occurs (which for purposes of this Section 6, shall be the
Termination Date), a lump sum payment of an amount equal to five hundred
thousand dollars ($500,000) and (b) provide you with continued group health
insurance coverage for one (1) year following the termination date, on the same
terms as during your employment, provided that the Company's carrier allows for
such coverage continuation. In the event the Company's carrier does not allow
such coverage continuation, the Company will pay the monthly premium for group
health benefits for a period of twelve (12) months, provided that you elect to
continue such benefits and remain eligible to receive the benefits in accordance
with the applicable provisions of COBRA. If your health insurance coverage
included your dependents immediately prior to the Termination Date, such
dependents shall also be covered at the Company's expense. In the event a Change
in Control, a termination for other than Good Cause or you resign for Good
Reason or otherwise following such twenty four (24) month period, you shall be
entitled to receive only your base salary then in effect, prorated to the date
of termination, and any benefits and expense reimbursement to which you are
entitled by virtue of your employment with the Company and indemnification for
acts and decisions made while in your role as Chairman of the Board of
Directors, Chief Executive Officer and President to the Company.

          6.2 For purposes of the Agreement, "Good Cause" shall mean and include
termination by reason of (a) your conviction (including any plea of guilty or no
contest) of (i) any felony or misdemeanor involving the embezzlement, theft or
misappropriation of monies or other property of the Company and (ii) any felony
involving the embezzlement, theft or misappropriation of monies or other
property or crime of moral turpitude; (b) your willful and continued neglect by
you of your duties as Chairman of the Board of Directors, Chief Executive
Officer and President, but only if such neglect continues for 30 days following
receipt by you of written notice from the Company specifying such breach and
demanding that you cure such breach, and (c) your willful failure to abide by
the Company's policies applicable to your employment. Any determination of
existence of "Good Cause" for purposes of this Agreement may be made only by the
good faith action of a majority of the Board (not including you if you are a
Director) after a reasonable opportunity for you and your counsel to appear
before the Board. In the event your employment is terminated in accordance for
"Good Cause," you shall be entitled to receive only your base salary then in
effect, prorated to the date of termination, and any benefits and expense
reimbursement to which you are entitled by virtue of


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your employment with the Company and indemnification for acts and decisions made
while in your role as Chairman of the Board of Directors, Chief Executive
Officer and President of the Company.

          6.3 For purposes of this Agreement, "Change in Control" of the Company
shall be deemed to have occurred if (a) there shall be consummated (i) any
consolidation or merger of the Company into or with another Person (as such term
is used in Sections 13(d)(3) and 14(d)(2) of the Securities and Exchange Act of
1934, as amended (the "Exchange Act,")), if the shareholders of the Company
immediately prior to such consolidation or merger (collectively, the "Company
Shareholders") own less that 50% of the voting control of the surviving
corporation immediately after the merger or consolidation, or (ii) any sale,
lease or other transfer (in one transaction or a series of related transactions)
of all or substantially all of the assets of the Company; (b) any Person other
than Carl Berg or any entity owned or affiliated with him shall become the
beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of
voting securities of the Company representing more than fifty percent (50%) of
the voting control of the Company, (c) a liquidation of the Company.

          6.4 Voluntary Resignation for Good Reason. You may voluntarily resign
your position with the Company for Good Reason, at any time, on thirty (30) days
advance written notice. You will be deemed to have resigned for "Good Reason" if
you resign following any of the circumstances: (a) the Company relocates your
principal work location from Austin, Texas without your agreement (b) the
Company assigns to you any duties inconsistent with your position as Chairman of
the Board, Chief Executive Officer and President of the Company, or
substantially diminishes your status, responsibilities or organizational
position (c) your Base Salary is reduced more than ten percent (10%) (d) the
Company (i) fails to continue in effect at a level at least equal to the
compensation or benefits (or formulas therefore) in effect immediately prior to
a Change of Control (as defined in Paragraph 6.3), (ii) any compensation plan in
which you participated prior to the Change of Control, including, but not
limited to, the Company's incentive compensation plans or benefits which has
the effect of substantially diminishing the level of your overall benefits
received under the Agreement, unless an equitable arrangement has been made with
respect to such compensation plan or benefits that you have approved (e) a
Change of Control (as defined in Paragraph 6.3) occurs (f) you are involuntarily
removed from the Company's Board of Directors or the stockholders of the Company
vote to remove you from the Company's Board in any vote taken for that purpose
(except where you have been terminated for "Good Cause" as defined in Paragraph
6.2) or (g) the Company has breached a material provision of the Agreement that
has not been cured within thirty (30) days of written notice from you to the
Company.

7. Business Expenses. You will be reimbursed for all reasonable, out-of-pocket
business expenses incurred in the performance of your duties on behalf of the
Company. To obtain reimbursement, expenses must be submitted promptly with
appropriate supporting documentation in accordance with the Company's policies.

8. Dispute Resolution. All disputes arising in connection with your employment
shall be settled by arbitration in the county in which the principal executive
offices of the Company is located at the time the dispute arises. The Company
and you will execute a separate arbitration agreement in customary form
evidencing such agreement.

9. Miscellaneous. Because of the nature of the Company's business, you executed
a Confidentiality Agreement in the Company's standard form as a condition of
your employment with the Company. The Agreement may be modified by the Company
from time to time, and as a condition of continued employment you agree to
execute any amended Agreement. Except as may be otherwise set forth herein, your
employment with the Company will be on an at-will basis, meaning that either you
or the Company may terminate the employment at any time, with or without notice,
and with or without Good Cause. No employee of the Company may alter your status
as an at-will employee.


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     To indicate your acceptance of the Company's offer, please sign and date
this letter in the space provided below and return it to the Board. A duplicate
original is enclosed for your records. This letter sets forth the terms of your
employment with the Company as of this date and supersedes any prior
representations or agreements whether written or oral. This letter may not be
modified or amended except by a written agreement, signed by the Board of
Directors of the Company and by you.

     Stephan, you have been a wonderful addition to our executive management
team. We are looking forward to continue working with you as Chairman of the
Board of Directors, Chief Executive Officer and President of Valence Technology,
Inc.


Sincerely,


/s/ Carl Berg               /s/ Bert Roberts            /s/ Al Shugart
-------------------         -------------------         -------------------
Carl Berg                    Bert Roberts                Al Shugart






ACCEPTED AND AGREED TO:


/s/ Stephan B. Godevais                                  9/15/03
---------------------------                       ---------------------------
Stephan B. Godevais                                Date: September 15, 2003