Document:

Exhibit
10.1

 

 

SUPPLY AGREEMENT

 

This
SUPPLY AGREEMENT (the “Agreement”) is entered into as of 6 Feb., 2008 (the “Effective
Date”), by and between The Tanfield Group, PLC, a Corporation under the laws of
England (“Smith”), with offices located at Vigo Centre, Birtley Rd, Washington,
Tyne & Wear NE38 9DA England, and Valence Technology, Inc., a
Delaware corporation (“Valence”), with offices located at 12201 Technology
Blvd., Suite 150 Austin, TX 78727.

 

RECITALS

 

A.  Smith manufactures and sells electric battery powered
vehicles and equipment;

 

B.  Valence is in the business of development, manufacture, and
sale of rechargeable lithium-ion phosphate batteries and power systems
containing the same, and

 

C.   Smith desires to purchase Valence’s power systems;

 

D.  On the terms set forth in this Agreement, Smith and Valence
have agreed that Valence shall manufacture and sell power systems to Smith.

 

NOW, THEREFORE, Smith
and Valence, intending to be legally bound, do hereby agree as follows:

 

1.             DEFINITIONS

 

The
following capitalized terms used in this Agreement, and not otherwise defined
herein, shall have the meanings given to them below:

 

a)     “Agreement”
means this Supply Agreement.

 

b)    “Days” means calendar days.

 

c)     “Intellectual
Property” means all of the following (whether or not registered in any
jurisdiction) that relate to, or are embodied in, the Valence batteries,
Valence battery packs and Valence power systems: (i) patents, patent
applications, inventions, know-how, trade secrets, designs, ideas, code, and/or
other technical information, (ii) any copyrights, logos, trademarks, trade
names and service marks, (iii) all other proprietary rights recognized
under applicable law; and (iv) all applications and registrations, and the
right to file all applications and registrations, for, and relating to all of
the foregoing.

 

d)    “Materials”
shall mean those raw materials, cut or piece goods, components and subassemblies used in the manufacture of
Valence power systems.

 

e)     “Material
Lead-Time” shall mean the period of time necessary for Valence to procure Material.
Material Lead-Times are subject to vendor availability and are subject to
change.

 

1

 

 

f)     “Firm Order” means a purchase order issued by Smith to
Valence for purchase of Valence power systems pursuant to the terms of this
Agreement.

 

g)    “Party” means either Smith or Valence.

 

h)    “Production Lead-Time” shall mean the period of time necessary for Valence to fulfill a Firm Order for Valence power
systems using on-hand Material.

 

i)      “Rolling Quantity Forecast” shall mean the forecasts
provided by Smith to Valence each calendar month for the three month period
that is three months out beyond the period for which Smith has submitted Firm
Orders, from which Smith may issue Order(s) from time to time in
accordance with the standard Production Lead-Times. Smith will specify the
quantity of Valence power systems it projects will be shipped for each three (3) calendar
month period stated in the Rolling Quantity Forecast.

 

j)      “Valence power systems” means the power systems individually
listed in the schedules to this Agreement and any other power systems
manufactured by Valence and added to this Agreement by way of the addition of a relevant schedule by agreement
between the Parties.

 

2.             APPOINTMENT AS
SUPPLIER; SUPPLY OF POWER SYSTEMS

 

a)     Smith hereby appoints Valence as a supplier of Valence power
systems on the terms stated in this Agreement.

 

b)    Valence will maintain, the knowledge, experience, employees,
equipment and all other resources necessary to successfully manufacture and
supply Valence power systems to Smith in accordance with the terms of this
Agreement.

 

c)     Valence
warrants that the Valence power systems to be delivered under this Agreement
shall be free and clear of any and all liens, encumbrances or defects in title
and shall be conveyed to Smith with lawful and marketable title.

 

3.             FIRM ORDER

 

a)     Initially, Smith shall provide Valence with a Firm Order for
Valence Power Systems for a three month period. On or before the first day of
each subsequent calendar month, Smith shall deliver to Valence a Firm Order for
the month three (3) months out (thereby maintaining a three (3) month
Firm Order).

 

b)    Firm Orders may be issued by Smith under this Agreement by
electronic transfer, fax or e-mail to Valence as the Parties may agree. The
terms and conditions of each Order shall be as provided by this Agreement. The
provisions of either Party’s form of purchase order, acknowledgment or other
business forms will not apply to any Order notwithstanding the other Party’s
acknowledgment or acceptance of such form.

 

2

 

 

c)     All Firm Orders are subject to written acceptance by
Valence. Once a Firm Order has been accepted by Valence, the order shall be
non-cancelable and non-amendable, unless the Parties agree in writing to cancel
or amend the Firm Order.

 

d)    Each Firm Order will include: (i) the model or Product
number; (ii) unit quantity and unit price; (iii) availability date at
Valence’s facility; and (iv) other instructions or requirements pertinent
to the Order.

 

e)     If Smith amends its Firm Order to reflect an increase, any
such increase is subject to Valence confirmation based on production schedule
and Material Lead-Times. Valence will make best reasonable efforts to meet the
additional requirements of Smith. Any costs incurred by Valence in order to
expedite Material procurement shall be paid for by Smith, Valence will make
best reasonable efforts to minimize these costs.

 

f)     if Smith’s Firm Order(s) for a given month exceed Smith’s
Rolling Quantity Forecast for that month, then Valence’s standard Lead-Times
shall not apply and Valence shall specify a ship date for the quantity of
Valence power systems exceeding Smith’s Rolling Quantity Forecast. Valence will
make best reasonable efforts to meet the additional requirements of Smith. Any
costs incurred by Valence in order to expedite Material procurement shall be
paid for by Smith, Valence will make best reasonable efforts to minimize these
costs.

 

g)    If Smith amends its Firm Order to reflect a decrease in
projected Valence power systems quantity requirements for any given month, and
Material has already been procured per Smith’s Firm Order, then Smith will
reimburse Valence for non-returnable/non-cancelable Material purchased within
the Material Lead-Time but not used within the term of this Agreement, as well
as any vendor cancellation charges incurred with respect to Materials accepted
for cancellation or return by the vendor. Valence shall use its best reasonable
efforts to minimize its acquisition of such non-returnable/non-cancelable
Material, and will notify Smith in writing of the final cost of such material,
so that Smith may issue a separate Purchase Order to cover the costs of the
non-returnable/non-cancelable Material. Smith may, at its option and expense,
request shipment to Smith of Material paid for by Smith under this Section.

 

4.             FORECAST

 

a)     At the beginning of each month Smith will supply to Valence
written Rolling Quantity Forecast reflecting the quantity of Valence power
systems Smith projects it will request to be shipped in each of three (3) calendar
month starting with the month following the end of the Firm Order period and
for the subsequent two (2) months, thus providing a quantity projection
for a total of six (6) successive calendar months from the date of the
Firm Order.

 

b)    Each
forecast shall supersede all previous forecasts submitted by Smith.

 

3

 

 

c)     The
Rolling Quantity Forecast shall be used by Valence to ensure it has sufficient
quantities of Material available from its suppliers to produce and ship the
quantities of Valence power systems delineated in Smith’s Firm Order.

 

d)    The Rolling Quantity Forecast shall not amount to a binding
commitment by Smith to purchase any amount of products from Valence, nor shall
Smith have any liability to Valence for any Material purchased by Valence for
use in manufacturing any product referred to in such forecast. The Rolling
Quantity Forecast is for information purposes only.

 

e)     When a material suppliers Material Lead Time requires
Valence to place orders with that material supplier for non returnable/non
cancelable material based on quantities notified to Valence in the Rolling
Quantity Forecast, Valence will advise Tanfield of the Material Lead Time
required by that material supplier and obtain Tanfield’s permission to ordering
using that Material Lead Time in advance of placing any such orders, such
permission cannot be reasonably withheld.

 

5.             MANUFACTURE

 

a)     Valence shall procure Materials, manufacture and test the Valence power systems in accordance with its standard Quality Plan
and Specifications.

 

b)    Valence shall notify Smith in writing prior to the implementation of any material change in the Specifications. Any such change must be agreed to by
Tanfield in writing, such agreement not to be unreasonably withheld. No
response from Tanfield to Valence’s written notification within 15 working days
will be considered as acceptance by Tanfield. Except as otherwise provided
herein, Valence is responsible for planning, purchasing and payment for all
materials needed to satisfy its obligations under this Agreement. Valence shall
be responsible for resolving all material, technical and quality issues related
to Valence’s suppliers.

 

c)     Valence shall maintain a complete manufacturing record for Valence power systems to provide traceability to build date.
Valence shall allow Smith to inspect and copy that record, upon request. In the
event that a product recall is required as a result of the supply of defective
product by Valence to Tanfield, Valence must at their own expense provide
assistance and co-operation.

 

d)    Valence will keep all manufacturing records in the same manner
and according to its record retention policy in effect as of the Effective
Date. Valence will inform Smith in writing at least ninety (90) days in advance of any changes to its current record
retention practices and policy that would result in Valence retaining fewer
manufacturing records and/or retaining manufacturing records for a lesser
period of time. At a minimum, Valance shall retain incoming inspection,
in-process and final inspection reports for a minimum of three (3) years.

 

4

 

 

6.             DELIVERY

 

a)     Valence shall package and label all Valence power systems
per the standards for transportation of Class 9 goods. Valence shall make
the Valence power systems available EXW (Ex works) Valence VET, Suzhou, China
(as defined in Incoterms 2000). Smith will arrange transportation through Smith’s
appointed transportation agent. Title and risk of loss or damage to Valence
power systems per this Agreement shall vest with Smith upon making the Valence
power systems available on the availability date to the appointed
transportation agent.

 

b)    Valence shall invoice Smith upon the availability date for
the Valence power systems. Should Smith not pick up any finished Valence power
systems, Valence shall have the right to invoice Smith no earlier than the
availability date indicated on Smith’s Order. Further, the Parties shall
negotiate in good faith a reasonable storage fee for retention of Valence power
systems for which Smith has materially delayed picking up.

 

c)     If Valence fail to supply Valence power systems in line with
the dates contained within Smith’s Firm Order, this failure will be considered
an event of default under section 14.

 

7.             PRICING AND PAYMENT

 

a)     Unless otherwise agreed upon by the Parties in writing during
the term of this Agreement, the prices to be paid by Smith to  Valence for Valence power systems are set out in the
attached schedules.

 

b)    Payments shall be payable by wire transfer to Valence’s
account in U.S. dollars forty-five (45) days following the availability date
set forth in Smith’s Order.

 

c)     Prices are exclusive of shipping charges and all taxes,
customs or duties (other than taxes levied on Valence’s income) that Valence
may be required to collect or pay upon shipment of the Valence power systems.
Shipping charges, taxes or duties incurred by Valence will appear as separate
items on Valence’s invoice. Smith agrees to pay such taxes or duties unless
Smith is exempt from such taxes, customs or duties, in which case Smith will
provide Valence with the appropriate exemption certificate.

 

d)    All
payments shall be made to the address specified on Valence’s invoice. Valence
shall retain a purchase-money security interest in and to the Valence power
systems until full payment is received by Valence. Past due amounts will be
subject to service charges of two (2%) percent per month, or the maximum
allowed by law, whichever is greater. If all the Valence power systems ordered by Smith are not picked up by
Smith at one time, Smith shall remit payment for the actual Valence power
systems available for pick up as set forth in the Smith Order on such
availability date. All shipments and deliveries shall at all times be subject
to Smith’s credit approval by Valence, and Valence may at any time decline to
make any shipments or deliveries except upon receipt of payment or upon terms
and conditions or security arrangement satisfactory to Valence.

 

5

 

 

e)     Valence
reserves the right, among other remedies, to delay or suspend further
deliveries, whether or not firm Orders have been placed by Smith, upon failure
by Smith to make any payment which is due hereunder within fifteen (15) days
after receiving notice from Valence that any such payment is past due and
unpaid.

 

8.             WARRANTY AND INDEMNIFICATION, AND
INSURANCE

 

a)     Warranty on any Valence Power Systems is set out on the Schedule
relating to the individual power system.

 

b)    THE WARRANTIES HEREIN SECTION (a) AND (b) ARE
EXCLUSIVE, AND IN LIEU OF ALL OTHER WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, INCLUDING BUT NOT LIMITED TO THE
WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT, WHICH ARE HEREBY EXPRESSLY
DISCLAIMED.

 

c)     Smith will integrate Valence power systems with products it
intends to sell. Smith shall defend, indemnify and hold Valence harmless from
any claim, demand, cause of action or damage for which Valence might become
liable arising from or in connection with Smith’s integration of the Valence
power system with its products, except to the extent such claim, demand, cause
of action or damage arises from any defect in the Valence power system or
results from any negligence of Valence or breach of any Valence obligation
hereunder. Valence shall defend, indemnify and hold Smith harmless from any
claim, demand, cause of action or damage for which Smith might become liable arising from any defect
in a Valence power system or results from any negligence of Valence or breach
of any Valence obligation hereunder. Each Party’s indemnification obligations
hereunder shall survive expiration or termination of this Agreement.

 

d)    For the term of this Agreement, and for five (5) years
thereafter, each Party shall maintain product liability and commercial general liability insurance, on an occurrence basis, with insurers with a
Best’s rating of B+  or better and with
limits of coverage not less than $3,000,000 per claim and $15,000,000 per year
in the aggregate. Each party shall provide certificates of such insurance to
the other Party upon request.

 

9.             CUSTOMER SUPPORT AND TRAINING

 

a)     Smith
shall provide technical assistance to its customers. Valence shall provide
reasonable support as requested by Smith.

 

b)    Smith
may develop and offer training courses to assist its customers in the proper installation,
use, and maintenance of Valence power systems used by Smith in its electric
vehicles. Valence shall provide suggestions for such training courses, and the
content of such training courses shall be subject to approval by Valence.

 

6

 

 

10.          TRADEMARKS AND INTELLECTUAL PROPERTY

 

All copyright, patent or
other intellectual property in and to the Valence power systems, including all
related documentation thereto, are the sole, exclusive and confidential
property of Valence. Use of Valence’s trademarks, trade names, logos and
designations on Smith’s products is contingent upon the Parties entering into,
and shall be governed by, Valence’s standard Trademark License Agreement. Smith
shall not remove or destroy any copyright notices, trademarks or other
proprietary markings on the Valence power systems, or documentation or other
materials related to the Valence power systems.

 

11.          COMPLIANCE

 

Each Party shall comply
with all laws, rules, and regulations applicable to its performance of this
Agreement or to the Valence power systems. Without limiting the generality of
the foregoing sentence, each Party represents that all Valence power systems
will be shipped in conformance with government or freight regulations and
requirements applicable there to.

 

12.          LIABILITY

 

UNLESS OTHERWISE STATED
IN THIS AGREEMENT, NEITHER PARTY WILL BE LIABLE FOR ANY SPECIAL OR
CONSEQUENTIAL DAMAGES OF THE OTHER ARISING OUT OF ANY PERFORMANCE OF THIS
AGREEMENT OR IN FURTHERANCE OF THE PROVISIONS OR OBJECTIVES OF THIS AGREEMENT,
REGARDLESS OF WHETHER SUCH DAMAGES ARE BASED ON TORT, WARRANTY, CONTRACT OR ANY
OTHER LEGAL THEORY, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

 

13.          CONFIDENTIAL INFORMATION

 

a)     Each
Party hereby acknowledges that all of the Confidential Information disclosed or
revealed to the receiving Party hereunder is disclosed solely to permit the
receiving Party to exercise its rights and perform its obligations under this
Contract. Each Party agrees that it shall not use any of the Confidential
Information for any other purpose, and shall not disclose or reveal any of the
Confidential information to any third Party or Affiliate, without the prior
written authorization of the disclosing Party, which the disclosing Party may
withhold in its sole discretion; provided however, that prior written
authorization of the disclosing Party shall not be required for the receiving
Party to disclose the Confidential Information to those of the receiving Party’s
employees, agents or representatives that (i) require access to the
Confidential Information in order to permit the receiving Party to exercise its
rights and perform its obligations hereunder, and (ii) have executed a
nondisclosure agreement, in a form satisfactory to the disclosing Party, which
effectively prohibits the unauthorized use or disclosure of the Confidential
information.

 

7

 

 

14.          TERM AND TERMINATION

 

a)     Unless this Agreement has been terminated earlier in accordance
with its terms, the term of this Agreement will commence as of the Effective
Date and shall continue for three (3) years from Effective Date, Within
thirty (30) days prior to the end of any year of this Agreement the Parties agree to negotiate
any changes to the terms.

 

b)    Either Party may terminate this Agreement for material
default of the other Party upon thirty (30) days written notice to the other,
if, during such thirty (30) day notice period, the default is not corrected to
the reasonable satisfaction of the non-defaulting Party. In addition, to the
extent permitted by applicable law, either Party may terminate this Agreement
immediately by giving written notice if such other Party has entered into or
committed any act of liquidation, bankruptcy, insolvency, receivership or
assignment for the benefit of creditors.

 

c)     If a Party terminates this Agreement because of the other
Party’s default and failure to cure as set forth, above, such termination shall
be without prejudice to all remedies available to the non-defaulting party, at
law or in equity.

 

d)    The
Parties’ indemnification and obligations regarding confidential information
shall survive expiration or termination of this Agreement.

 

e)     Unless terminated by Tanfield owing to a material default by
Valence under 14 b), upon termination or expiration of this Agreement, Smith
shall pay Valence for:

 

i)      100%
of the direct cost of all Material in Valence’s possession which is not
returnable to the vendors, whether in raw form or work in process, provided
such Materials were purchased in accordance with Smith’s Rolling Quantity
Forecast and/or Smith’s Order(s);

 

ii)     100% of the direct cost of all Materials on order and not
cancelable, provided such Materials were purchased in accordance with Rolling
Quantity Forecast and/or Smith’s Order(s);

 

iii)    any charges incurred with respect to Materials accepted for
cancellation or return by the vendor; and

 

iv)   any
finished Valence power systems already manufactured as of the
termination/expiration date, provided such Valence power systems were
manufactured in accordance with the Orders or manufactured in advance with
Smith’s prior written consent.

 

f)     The termination of this agreement shall have the effect of
terminating any Firm Order which has been placed but not fulfilled at the time
of termination and Tanfield shall have no further liability in relation
thereto.

 

8

 

 

15.          MISCELLANEOUS

 

a)     Assignment. Neither Party may assign its rights or delegate its duties
under this Agreement without the prior written consent of the other. However,
each Party shall consent to any such assignment which is to an entity acquiring all (or substantially all)
of the assets of the assigning Party.

 

b)    Waiver.
The failure by  either Party to
require performance by the other Party of any of its obligations hereunder
shall in no manner affect the right of such Party to enforce the same at a
later time. No waiver by either Party of any condition, or of the breach of any
provision of this Agreement, whether by conduct or otherwise shall be deemed to
be or construed as a further or continuing waiver thereof.

 

c)     Amendments. This Agreement may not be amended except in writing by both Parties.

 

d)    Severability.
If any provision of this Agreement is held invalid or unenforceable, such
provision shall be deleted, and, if possible, replaced by a provision that
achieves the intent of the
Parties.

 

e)     Relationship Between the Parties. Nothing in this Agreement is intended nor shall be construed to constitute Smith or
Valence as partners or joint
venturers. Neither Party shall have the express or implied authority to assume
or create any obligations on behalf of or in the name of the other Party.

 

f)     Correspondence and Notices. Extraordinary notices and communications (including but not limited to notices of termination, force majeure, material breach, change of
address) shall be in writing and sent by prepaid registered or certified mail,
or by facsimile, and shall be deemed to have been properly served to the
addressee upon receipt of such written communication, at the address for the
Party written herein above.

 

g)    Choice of
Law. This Agreement is subject to and governed by the English Law. Valence and Smith hereby agree that any
suit to enforce or compel the performance of any provision of this Agreement,
to obtain a remedy for any breach of this Agreement, to obtain the construction
of any provision of this Agreement, or otherwise to determine the legal effect
of this Agreement, shall be brought solely in the English Courts. The
prevailing party in any dispute under this Agreement shall be entitled to its
reasonable attorneys fees and costs.

 

h)    Force Majeure. Neither Party shall be liable to the other for delay or
failure in performing any of its obligations if and to the extent that such
failure or delay is due to circumstances beyond its control that it could not
have avoided by the exercise of reasonable diligence. It shall notify the other
Party promptly should such circumstances arise, giving an indication of the
likely extent and duration thereof, and shall use all commercially reasonable efforts to resume performance of its obligations as soon as
practicable.

 

i)      Representations and Warranties. Each Party represents and warrants that: (1) it is duly
organized and validly existing under the laws of the state or country of its
organization and has full corporate power and authority to enter into this Agreement and to carry out
the provisions hereof, (2) it is duly authorized to execute and deliver this
Agreement and

 

9

 

 

to
perform its obligations hereunder, and (3) the execution, delivery and
performance of this Agreement by either Party does not conflict with any
agreement, instrument or understanding, oral or written, to which it is a Party
or by which it may be bound, nor violate any law or regulation of any court,
governmental body or administrative or other agency having authority over it.

 

j)      Entire
Agreement. This Agreement together with its Exhibits and further agreements
mentioned herein constitutes the entire agreement of the Parties with respect
to the subject matter hereof as of its date, and supersedes all prior
agreements, understandings, representations and proposals, written or oral, relating
thereto.

 

k)     Counterparts.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.

 

	
  The Tanfield Group,
  PLC:

  	
   

  	
  Valence
  Technology, Inc.:

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Charles Brooks

  	
   

  	
  By:

  	
  /s/ Robert L. Kanode

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
  Charles Brooks

  	
  Name:

  	
  Robert L. Kanode

  
	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  Finance Director

  	
  Title:

  	
  President &
  CEO

  
	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
  February 6, 2008

  	
   

  	
  Date:

  	
  February 6, 2008

  	
   

  
								

 

10

 

**CONFIDENTIAL TREATMENT
REQUESTED**

 

Schedule A

 

U-Charge®
U27-12XP power system

 

1.             Valence’s
U-Charge® U27-12XP power system [is a power system having
a nominal 12.8 volt and 130 amp hour]

 

PRICE

 

The price for the
U-Charge® U27-12XP power system              $[****]
in US Dollars. This price to include cells, packaging battery management system
and warranty as set out below

 

[****]

 

Technical
Specification of U charge XP Power System Family and the definition of a module
are as in appended documentation.

 

WARRANTY

 

Valence warrants that
the U-Charge® U27-12XP power
systems delivered hereunder shall be free from defects in material and
workmanship under normal use and service for a period of two (2) years
from the date of shipment from Valence’s facility. If during such two year
period: (i) Valence is notified promptly in writing upon discovery of any
defect in the Valence power systems, including a detailed description of such
defect; (ii) such U-Charge® U27-12XP power
systems are returned to Valence in accordance with Valence’s then current RMA
procedures; and (iii) Valence’s examination of such U-Charge® U27-12XP power
systems discloses to Valence’s satisfaction that such U-Charge® U27-12XP power
systems are defective and such defects are not caused by accident, abuse,
misuse, neglect, alteration, improper installation, repair or alteration by
someone other than Valence, improper testing, or use contrary to any
instructions issued by Valence; then within a reasonable time Valence shall (at
its sole option) either replace with the same or equivalent model or credit
Smith for such U-Charge® U27-12XP power systems. Valence shall return
any U-Charge® U27-12XP power
systems replaced under this warranty to Smith, transportation prepaid. In the
event that Valence confirm that such U-Charge® U27-12XP power
systems are defective, Valence shall reimburse to Tanfield the costs of
returning such defective systems to Valence. The performance of this warranty
does not extend the warranty period for any U-Charge® U27-12XP power
systems beyond the period

 

**Confidential
treatment has been requested for the portions of this agreement marked by
asterisks. Omitted materials for which confidential treatment has been
requested have been filed directly with the Securities & Exchange
Commission.**

 

11

 

**CONFIDENTIAL TREATMENT
REQUESTED**

 

applicable
to the U-Charge® U27-12XP power systems originally delivered.
The foregoing warranty constitutes Valence’s exclusive liability, and the
exclusive remedy of Smith, for any breach of any warranty or other nonconformity
of the U-Charge® U27-12XP power systems covered by this
acknowledgment.

 

12

 

**CONFIDENTIAL TREATMENT REQUESTED**

 

Schedule B

 

EpochTM E-27 power systems

 

2.        The Valence EpochTM E-27 power system [is a power system having a nominal 12.8 volt and 130 amp hour]

 

PRICE

 

a)     The
price for EpochTM E-27 power systems is $[****] in US Dollars
[****]. This price to include cells, packaging battery management system and
warranty as set out below

 

b)    [****].

 

c)     [****].

 

i.      [****].

 

ii.     [****].

 

**Confidential
treatment has been requested for the portions of this agreement marked by
asterisks. Omitted materials for which confidential treatment has been
requested have been filed directly with the Securities & Exchange
Commission.**

 

13

 

**CONFIDENTIAL TREATMENT REQUESTED**

 

[definition of
module  to be determined by June 1,
2008 as the product development proceeds]

 

[technical
specification to be determined by June 1, 2008 as the product development
proceeds]

 

WARRANTY

 

Valence
warrants that the EpochTM E-27 power systems delivered hereunder
shall be free from defects in material and workmanship under normal use and
service for a period of five (5) years from the date of shipment from
Valence’s facility.

 

(i)    If
during the initial three (3) year period of the five (5) year
warranty period: (i) Valence is notified promptly in writing upon
discovery of any defect in the Valence power systems, including a detailed description
of such defect; (ii) such EpochTM E27 power systems are
returned to Valence (if so requested by Valence) in accordance with Valence’s
then current RMA procedures; and (iii) Valence’s examination or the
examination by Smith of such EpochTM E-27 power systems discloses to
Valence’s satisfaction that such EpochTM E-27 power systems are
defective and such defects are not caused by accident, abuse, misuse, neglect,
alteration, improper installation, repair or alteration by someone other than
Valence, improper testing, or use contrary to any instructions issued by
Valence: then within a reasonable time Valence shall (at its sole option}
either (i) replace with the same or equivalent model or credit Smith for
such EpochTM  E-27 power
systems or (ii) provide replacement parts for Smith to repair such EpochTM
E-27 power systems, Valence shall return any EpochTM  E-27 power system replaced under this
warranty to Smith, transportation prepaid. In the event that Valence confirm
that such U-Charge® U27- 12XP power systems are defective, Valence
shall reimburse to Tanfield the costs of returning such defective systems to
Valence. The performance of this warranty does not extend the warranty period
for any EpochTM E-27 power system beyond the period applicable to the
EpochTM E-27 power system originally delivered. The foregoing
warranty constitutes Valence’s exclusive liability, and the exclusive remedy of
Smith, for any breach of any warranty or other nonconformity of the EpochTM
E-27 power system covered by this acknowledgment.

 

(ii)   If
during the last two (2) year period of the five (5) year warranty
period: (i) Valence is notified promptly in writing upon discovery of any
defect in the Valence power systems, including a detailed description of such
defect; (ii) such EpochTM E-27 power systems are returned to
Valence (if so requested by Valence) in accordance with Valence’s then current
RMA procedures; and (iii) Valence’s examination or the examination by
Smith of such EpochTM E-27 power systems discloses to Valence’s
satisfaction that such EpochTM 
E-27 power systems are defective and such defects are not caused by
accident, abuse, misuse, neglect, alteration, improper installation, repair or
alteration by someone other than Valence, improper testing, or use contrary to
any instructions issued by Valence; then within a reasonable time Valence shall
(i) provide Smith with a credit totaling 1/60th of the original purchase
price of the repair parts for each remaining month in such two year warranty
term, which can be used toward the purchase of such repair parts for the EpochTM
E-27 power systems at the then prevailing price for such repair parts, or (ii) provide
Smith with a credit totaling

 

14

 

**CONFIDENTIAL TREATMENT REQUESTED**

 

1/60th of the
original purchase price for each remaining month in such two year warranty
term, which can be used toward the purchase of new replacement EpochTM  E-27 power systems at the then prevailing
price for such EpochTM E-27 power system. In the event that Valence
confirm that such U-Charge® U27-12XP power systems are defective, Valence
shall reimburse to Tanfield the costs of returning such defective systems to
Valence,

 

15Exhibit 10.2

 

 

	
   

  	
   

  	
  February 8,
  2008

  
	
   

  	
   

  	
   

  
	
  Mr. Carl
  E. Berg

  	
   

  	
   

  
	
  Berg &
  Berg Enterprises, LLC.

  	
   

  	
   

  
	
  10050
  Bandley Drive

  	
   

  	
   

  
	
  Cupertino,
  CA 95014

  	
   

  	
   

  

 

Re:
Share Purchase

 

Dear
Mr. Berg:

 

This
letter is entered into in connection with an agreement entered into by Berg &
Berg Enterprises, LLC. (Berg & Berg) and Valence
Technology, Inc.

 

Pursuant to the agreement reached today, Berg & Berg has
funded One Million Dollars ($1,000,000.00) to Valence, to purchase 492,611 shares
of common stock.  The per share price of
the common stock sold to Berg & Berg is $2.03 which represents the
closing bid price of the common stock on the principal market on February 7,
2008.

 

	
   

  	
  Sincerely,

  
	
   

  	
   

  
	
   

  	
  VALENCE
  TECHNOLOGY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/
  Robert L. Kanode

  	
   

  
	
   

  	
  Robert
  L. Kanode

  
	
   

  	
  Chief
  Executive Officer

  
	
   

  	
   

  
	
  ACCEPTED AND AGREED:

  	
   

  
	
   

  	
   

  
	
  Berg &
  Berg, LLC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Carl E. Berg

  	
   

  	
   

  
	
  Carl
  E. Berg

  	
   

  
				

 

Valence Technology, Inc.
12201 Technology Blvd., Suite 150, Austin, Texas 78727

Tel: 512-527-2900, Fax:
512-527-2910

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