EXHIBIT 10.3


                                 PROMISSORY NOTE



     THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED OR UNDER ANY STATE SECURITIES LAWS. IT 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
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS
SOLD PURSUANT TO RULE 144 OF SUCH ACT.


     THIS NOTE WILL BE ISSUED WITH ORIGINAL ISSUE DISCOUNT ("OID") WITHIN THE
MEANING OF SECTION 1275 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED. THE
ISSUE DATE OF THIS NOTE IS OCTOBER 5, 2001. THE HOLDER MAY CONTACT THE
CHIEF FINANCIAL OFFICER OF VALENCE TECHNOLOGY, INC. AT 301 CONESTOGA WAY,
HENDERSON, NEVADA 89015 TO RECEIVE A CALCULATION OF THE ISSUE PRICE OF THIS
NOTE, THE YIELD TO MATURITY AND THE AMOUNT OF OID ON THIS NOTE.




                                                       6504 Bridgepoint Parkway
$20,000,000.00                                                    Austin, Texas


Dated:  October 5, 2001

     Valence Technology, Inc., a Delaware corporation ("BORROWER"), for value
received, hereby promises to pay to the order of Berg & Berg Enterprises, LLC
("LENDER"), in lawful money of the United States of America, the aggregate
principal amount of Twenty Million Dollars ($20,000,000.00) or, if less, the
aggregate amount of all Loans (as defined in the Loan Agreement defined in
paragraph 4, below) as set forth on the attached Schedule A, payable in the
manner set forth below.


     1. PRINCIPAL AND INTEREST PAYMENTS; PREPAYMENTS. The outstanding principal
balance and accrued interest owing under this Note shall be due and payable in
full on September 30, 2005 or such earlier date as may be provided in the Loan
Agreement. Interest shall be due on the unpaid principal balance of this Note
from time to time at the rates set forth in the Loan Agreement. This Note may,
without premium or penalty, be prepaid in whole or in part, prior to the stated
maturity date as provided in the Loan Agreement. Any partial prepayment shall be
applied first to unpaid accrued interest and the balance, if any, shall be
applied to principal. No amounts prepaid hereunder may be reborrowed.


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     2. RECORD OF PAYMENTS. All Loans and all prepayments and repayments of
principal and interest with respect to this Note shall be evidenced by notations
made by Lender on Schedule A attached hereto and incorporated herein, PROVIDED,
HOWEVER, that the failure to make such notations shall not limit or otherwise
affect the obligations of Borrower hereunder with respect to the repayment of
principal or the payment of interest on the Loans.


     3. PLACE AND MANNER OF PAYMENT. All amounts payable hereunder shall be
payable in immediately available funds to Lender at 10050 Bandley Drive,
Cupertino, CA 95014, unless another place of payment is specified in writing by
Lender. All payments shall be made in immediately available funds.


     4. OTHER AGREEMENTS. This Note evidences indebtedness incurred under that
certain Loan Agreement between Borrower and Lender (as amended from time to
time, the "LOAN AGREEMENT"), and is secured by a security interest granted
pursuant to that certain Security Agreement between Borrower and Lender (as
amended from time to time, the "SECURITY Agreement".) Reference is made to the
Loan Agreement and the Security Agreement for a description of the terms and
conditions upon which the Note was issued, the rights, limitations of rights,
obligations and duties of Borrower and the holder of the Note, and certain
definitions of terms, all of which are incorporated herein by reference (and all
capitalized terms used herein without definition shall have the meaning set
forth in the Loan Agreement.)

     5. DEFAULT. In the case an Event of Default shall occur, the aggregate
unpaid principal balance plus accrued interest on this Note shall become or may
be declared to be due and payable in the manner and with the effect provided in
the Loan Agreement.

     6. WAIVER; EXPENSES. Borrower waives presentment and demand for payment,
notice of dishonor, protest and notice of protest of this Note and all other
demands or notices, and shall pay all Lender Expenses relating to this Note or
the enforcement by Lender of its rights hereunder.

     7. GOVERNING LAW. This Note shall be governed by, and construed and
enforced in accordance with, the laws of the State of California, excluding
conflict of laws principles that would cause the application of laws of any
other jurisdiction.

     8. SUCCESSORS AND ASSIGNS. The provisions of this Note shall inure to the
benefit of and be binding on any successor to Borrower and shall extend to any
holder hereof.


                                      * * *


     IN WITNESS WHEREOF, the undersigned has duly executed this Promissory Note
as of the first date above written.


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                                            VALENCE TECHNOLOGY, INC.,
                                            a Delaware Corporation


                                            By:  /S/ STEPHAN B. GODEVAIS
                                                -------------------------------

                                            Its: CEO AND PRESIDENT
                                                -------------------------------


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