September 18, 2003


Mr. Terry Standefer
8209 Crabtree Drive
Austin, TX 78750

Reference:  Your original employment offer dated August 14, 2001

Dear Terry:

     I am pleased to amend the initial employment terms with you in your
capacity as President of Operations 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 as the President of Operations and shall
report directly to Stephan Godevais, Chairman of the Board of Directors, Chief
Executive Officer and President of the Company. Subject to the direction and
control of the Chairman of the Board of Directors, Chief Executive Officer and
President of the Company, you shall have the full authority and responsibility
to operate and manage, on a day-to-day basis, the Operations business and
affairs of the Company. 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. Compensation. During the term of your employment with the Company, your
salary shall be at an annualized rate of one hundred eighty thousand dollars
($180,000). 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
Chairman of the Board of Directors, Chief Executive Officer and President of the
Company, your salary shall be reviewed by the Chairman of the Board of
Directors, Chief Executive Officer and President of the Company and may be
increased, but may never be decreased, in the sole discretion of the Chairman of
the Board of Directors, Chief Executive Officer and President of the Company.
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.

3. 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.


<PAGE>


4. 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.

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

          5.1 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 5.3 below) of the Company, the Company terminates your employment for
other than Good Cause (as defined in Section 5.2 below), or you resign for Good
Reason (as defined in Section 5.4 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 5, shall be the
Termination Date), a lump sum payment of an amount equal to ninety thousand
dollars ($90,000) and (b) provide you with continued group health insurance
coverage for six (6) months 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 six (6) 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 President of Technology of the Company.

             5.2 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 President of
Operations, 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. 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 your
employment with the Company and indemnification for acts and decisions made
while in your role as President of Technology of the Company.

             5.3 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


<PAGE>


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.

          5.4 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 President
of Operations 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 5.3),
(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 5.3)
occurs or (f) 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.

6. 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.

7. 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.

8. 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.

     To indicate your acceptance of the Company's offer, please sign and date
this letter in the space provided below and return it to me. 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 Chairman of the
Board of Directors, Chief Executive Officer and President of the Company and by
you.


<PAGE>



     Terry, you have been a wonderful addition to our executive management team.
I am looking forward to continue working with you as President of Operations of
Valence Technology, Inc.




Sincerely,


/s/ Stephan Godevais                                       9/18/03
----------------------                             -------------------------
Stephan Godevais                                   Date: September 18, 2003




ACCEPTED AND AGREED TO:


/s/ Terry Standefer                                        9/18/03
---------------------------                         -------------------------
Terry Standefer                                     Date: September 18, 2003



Cc:  Bob Borron