Document:

WARRANT

THE WARRANT EVIDENCED OR CONSTITUTED HEREBY, AND ALL SHARES OF COMMON STOCK
ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (TOGETHER WITH THE REGULATIONS PROMULGATED THEREUNDER, THE "SECURITIES
ACT"), AND MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, PLEDGED OR
HYPOTHECATED WITHIN THE UNITED STATES (AS THE TERM IS DEFINED IN REGULATION S
PROMULGATED UNDER THE SECURITIES ACT) OR TO A U.S. PERSON (AS THAT TERM IS
DEFINED IN REGULATION S) IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FILED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS, UNLESS AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. HEDGING TRANSACTIONS INVOLVING
THESE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES
ACT.

No. W-010                    Warrant to Purchase 169,333 Shares of Common Stock

                        WARRANT TO PURCHASE COMMON STOCK

                                       OF

                            VALENCE TECHNOLOGY, INC.

                            VOID AFTER JUNE 29, 2003

This certifies that, for value received, ACQUA WELLINGTON VALUE FUND LIMITED, or
registered assigns ("Holder") is entitled, subject to the terms set forth below,
to purchase from Valence Technology, Inc. (the "Company"), a Delaware
corporation, 169,333 shares of the Common Stock of the Company, as constituted
on the date hereof (the "Warrant Issue Date"), upon surrender hereof, at the
principal office of the Company referred to below, with the subscription form
attached hereto duly executed, and simultaneous payment therefore in lawful
money of the United States or otherwise as hereinafter provided, at the Exercise
Price as set forth in SECTION 2 below. The number, character and Exercise Price
of such shares of Common Stock are subject to adjustment as provided below. The
term "Warrant" as used herein shall include this Warrant and any warrants
delivered in substitution or exchange therefore as provided herein.

1. TERM OF WARRANT. Subject to the terms and conditions set forth herein, this
Warrant shall be exercisable, in whole or in part, during the term commencing on
the Warrant Issue Date and ending at 5:00 p.m., Pacific Standard Time, on June
29, 2003 (the "Warrant Expiration Date"), and shall be void thereafter.

2. EXERCISE PRICE. The Exercise Price at which this Warrant may be exercised
shall be $18.4547 per share of Common Stock, as adjusted
from time to time pursuant to SECTION 11 hereof.

3. EXERCISE OF WARRANT.

     3.1 The purchase rights represented by this Warrant are exercisable by the
Holder in whole or in part, but not for less than 1,000 shares at a time (or
such lesser number of shares which

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may then constitute the maximum number purchasable; such number being subject to
adjustment as provided in SECTION 11 below), at any time, or from time to time,
during the term hereof as described in SECTION 1 above, by the surrender of this
Warrant and the Notice of Exercise annexed hereto duly completed and executed on
behalf of the Holder, at the office of the Company (or such other office or
agency of the Company as it may designate by notice in writing to the Holder at
the address of the Holder appearing on the books of the Company), upon payment
(i) in cash or by check acceptable to the Company, (ii) by cancellation by the
Holder of indebtedness of the Company to the Holder, or (iii) by a combination
of (i) and (ii), of the purchase price of the shares to be purchased.

     3.2 This Warrant shall be deemed to have been exercised immediately prior
to the close of business on the date of its surrender for exercise as provided
above, and the person entitled to receive the shares of Common Stock issuable
upon such exercise shall be treated for all purposes as the holder of record of
such shares as of the close of business on such date. As promptly as practicable
on or after such date and in any event within ten (10) days thereafter, the
Company at its expense shall issue and deliver to the person or persons entitled
to receive the same a certificate or certificates for the number of shares
issuable upon such exercise. In the event that this Warrant is exercised in
part, the Company at its expense will execute and deliver a new Warrant of like
tenor exercisable for the number of shares for which this Warrant may then be
exercised.

4. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. In lieu of
any fractional share to which the Holder would otherwise be entitled, the
Company shall make a cash payment equal to the Exercise Price multiplied by such
fraction.

5. REPLACEMENT OF WARRANT. On receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction, or mutilation of this Warrant and, in
the case of loss, theft, or destruction, on delivery of an indemnity agreement
reasonably satisfactory in form and substance to the Company or, in the case of
mutilation, on surrender and cancellation of this Warrant, the Company shall
execute and deliver, in lieu of this Warrant, a new warrant of like tenor and
amount. The Holder shall reimburse the Company for all reasonable expenses
incidental to replacement of this Warrant under this SECTION 5.

6. RIGHTS OF STOCKHOLDERS. Subject to SECTIONS 9 and 11 of this Warrant, the
Holder shall not be entitled to vote or receive dividends or be deemed the
holder of Common Stock or any other securities of the Company that may at any
time be issuable on the exercise hereof for any purpose, nor shall anything
contained herein be construed to confer upon the Holder, as such, any of the
rights of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issuance of stock, reclassification of stock, change of par
value, or change of stock to no par value, consolidation, merger, conveyance, or
otherwise) or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until the Warrant shall have been exercised and
the shares of Common Stock purchasable upon the exercise hereof shall have been
issued, as provided herein.

                                     Page 2
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7. TRANSFER OF WARRANT.

     7.1 WARRANT REGISTER. The Company will maintain a register (the "Warrant
Register") containing the names and addresses of the Holder or Holders. Any
holder of this Warrant or any portion thereof may change his address as shown on
the Warrant Register by written notice to the Company requesting such change.
Any notice or written communication required or permitted to be given to the
Holder may be delivered or given by mail to such Holder as shown on the Warrant
Register and at the address shown on the Warrant Register. Until this Warrant is
transferred on the Warrant Register of the Company, the Company may treat the
Holder as shown on the Warrant Register as the absolute owner of this Warrant
for all purposes, notwithstanding any notice to the contrary.

     7.2 WARRANT AGENT. The Company may, by written notice to the Holder,
appoint an agent for the purpose of maintaining the Warrant Register referred to
in Section 7.1 above, issuing the Common Stock or other securities then issuable
upon the exercise of this Warrant, exchanging this Warrant, replacing this
Warrant, or any or all of the foregoing. Thereafter, any such registration,
issuance, exchange, or replacement, as the case may be, shall be made at the
office of such agent.

     7.3 TRANSFERABILITY AND NON-NEGOTIABILITY OF WARRANT. The Holder, by
acceptance hereof, agrees that, absent an effective registration statement filed
with the Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "SECURITIES ACT") covering the disposition or sale of
this Warrant or the Common Stock issued or issuable upon exercise hereof, as the
case may be, and registration or qualification under applicable state securities
laws, such Holder will not sell, transfer, pledge, or hypothecate any or all of
this Warrant or such Common Stock, as the case may be, unless either (i) the
Company has received an opinion of counsel, in form and substance reasonably
satisfactory to the Company, to the effect that such registration is not
required in connection with such disposition or (ii) the sale of such securities
is made pursuant to SEC Rule 144.

     7.4 EXCHANGE OF WARRANT UPON A TRANSFER. On surrender of this Warrant for
exchange, properly endorsed on the Assignment Form and subject to the provisions
of this Warrant with respect to compliance with the Securities Act and with the
limitations on assignments and transfers and contained in this SECTION 7, the
Company at its expense shall issue to, or on the order of, the Holder a new
warrant or warrants of like tenor, in the name of the Holder or as the Holder
(on payment by the Holder of any applicable transfer taxes) may direct, for the
number of shares issuable upon exercise thereof.

     7.5 COMPLIANCE WITH SECURITIES LAWS.

         (a) The Holder, by acceptance hereof, acknowledges that this Warrant
and the shares of Common Stock to be issued upon exercise hereof are being
acquired solely for the Holder's own account and not as a nominee for any other
party, and for investment, and that the Holder will not offer, sell, or
otherwise dispose of this Warrant or any shares of Common Stock to be issued
upon exercise hereof except under circumstances that will not result in a
violation of the Act or any state securities laws. Upon exercise of this
Warrant, the Holder shall, if requested by the Company, confirm in writing, in a
form satisfactory to the Company, that the shares of Common Stock so purchased
are being acquired solely for the Holder's own account and not as a nominee for
any other party, for investment, and not with a view toward distribution or
resale.

                                     Page 3
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         (b) The Holder is not a "U.S. Person" within the meaning of Rule 902(k)
of Regulation S.

         (c) The Warrant was not offered to the Holder in the United States and
at the time of execution of this Warrant and at the time of any offer to the
Holder to enter into this Warrant, the Holder was physically outside of the
United States.

         (d) The Holder is acquiring the Warrant in an "offshore transaction"
(as defined in Rule 902(h) of Regulation S).

         (e) The Holder, by acceptance hereof, acknowledges that the Company has
the exclusive right at its sole discretion to refuse to register any transfer of
the shares of Common Stock to be issued upon exercise of this Warrant not made
in accordance with the provisions of Regulation S promulgated under the
Securities Act of 1933, as amended.

         (f) This Warrant and all shares of Common Stock issued upon exercise
hereof shall be stamped or imprinted with a legend in substantially the
following form (in addition to any legend required by state securities laws):

         THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
         UNDER THE SECURITIES ACT OF 1933, AS AMENDED (TOGETHER WITH THE
         REGULATIONS PROMULGATED THEREUNDER, THE "SECURITIES ACT"), AND MAY NOT
         BE SOLD, OFFERED FOR SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED WITHIN
         THE UNITED STATES (AS THE TERM IS DEFINED IN REGULATION S PROMULGATED
         UNDER THE SECURITIES ACT) OR TO A U.S. PERSON (AS THAT TERM IS DEFINED
         IN REGULATION S) IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
         FILED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS, UNLESS
         AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. HEDGING TRANSACTIONS
         INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE
         WITH THE SECURITIES ACT.

8. RESERVATION OF STOCK. The Company covenants that during the Term this Warrant
is exercisable, the Company will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of Common Stock
upon the exercise of this Warrant and, from time to time, will take all steps
necessary to amend its Certificate of Incorporation (the "Certificate") to
provide sufficient reserves of shares of Common Stock issuable upon exercise of
the Warrant. The Company further covenants that all shares that may be issued
upon the exercise of rights represented by this Warrant, upon exercise of the
rights represented by this Warrant and payment of the Exercise Price, all as set
forth herein, will be free from all taxes, liens, and charges in respect of the
issue thereof (other than taxes in respect of any transfer occurring
contemporaneously or otherwise specified herein). The Company agrees that its
issuance of this Warrant shall constitute full authority to its officers who are
charged with the duty to executing stock certificates to execute and issue the
necessary certificates for shares of Common Stock upon the exercise of this
Warrant.

                                     Page 4
<PAGE>

9. NOTICES.

     9.1 In case:

         (i) The Company shall take a record of the holders of its Common Stock
for the purpose of entitling them to receive any dividend or other distribution,
or any right to subscribe for or purchase any shares of stock of any class or
any other securities, or to receive any other right, or

         (ii) of any capital reorganization of the Company, any reclassification
of the capital stock of the Company, any consolidation or merger of the Company
with or into another corporation, or any conveyance of all or substantially all
of the assets of the Company to another corporation, or

         (iii) of any voluntary dissolution, liquidation of winding-up of the
company, then, and in each such case, the Company will cause to be mailed by
first class or certified mail receipt requested postage prepaid to the Holder a
notice specifying, as the case may be, (A) the date on which a record is to be
taken for the purpose of such dividend, distribution or right, and stating the
amount and character of such dividend, distribution or right, or (B) the date on
which such reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up is to take place, and the time, if any is
to be fixed, as of which the holders of record of Common Stock shall be entitled
to exchange their shares of Common Stock for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
conveyance, dissolution, liquidation or winding-up. Such notice shall be mailed
at least 5 days prior to the date therein specified.

     9.2 MANNER OF NOTICE. Except as may be otherwise provided herein, all
notices, requests, waivers and other communications made pursuant to this
Warrant shall be in writing and shall be conclusively deemed to have been duly
given (a) when hand delivered to the other party; (b) when received when sent by
facsimile at the address and number set forth below; (c) three business days
after deposit in the U.S. mail with first class or certified mail receipt
requested postage prepaid and addressed to the other party as set forth below;
or (d) the next business day after deposit with a national overnight delivery
service, postage prepaid, addressed to the parties as set forth below with
next-business-day delivery guaranteed, provided that the sending party receives
a confirmation of delivery from the delivery service provider.

To Holder:                                  To the Company:

____________________________                Valence Technology, Inc.
____________________________                301 Conestoga Way
____________________________                Henderson, Nevada  89015
____________________________                Attn:  Jay L. King, Chief Financial
____________________________                            Officer
____________________________                Fax Number:  (702) 558-1001

                                     Page 5
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With copies to:                             With copies to:

____________________________                Troop Steuber Pasich Reddick &
____________________________                Tobey, LLP
____________________________                2029 Century Park East, 24th Floor
____________________________                Los Angeles, CA  90067-3010
____________________________                Attn:  Lisa H. Klein
____________________________                Fax Number:  (310) 728-2362

     Each person making a communication hereunder by facsimile shall promptly
confirm by telephone to the person to whom such communication was addressed each
communication made by it by facsimile pursuant hereto but the absence of such
confirmation shall not affect the validity of any such communication. A party
may change or supplement the addresses given above, or designate additional
addresses, for purposes of this SECTION 9 by giving the other party written
notice of the new address in the manner set forth above.

10. AMENDMENTS.

     10.1 Any term of this Warrant may be amended with the written consent of
both the Company and the Holder.

     10.2 No waivers of or exceptions to any term, condition or provision of
this Warrant, in any one or more instances, shall be deemed to be, or construed
as, a further or continuing waiver of any such term, condition or provision.

11. ADJUSTMENTS. The Exercise Price and the number of shares purchasable
hereunder are subject to adjustment from time to time as follows:

     11.1 MERGER, SALE OF ASSETS, ETC. If at any time, while this Warrant, or
any portion thereof, is outstanding and unexpired there shall be (i) a
reorganization (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein), (ii) a merger or
consolidation of the company with or into another corporation in which the
Company is not the surviving entity, or a reverse triangular merger in which the
company is the surviving entity but the shares of the Company's capital stock
outstanding immediately prior to the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash, or
otherwise, or (iii) a sale or transfer of the company's properties and assets
as, or substantially as, an entirety to any other person, then, as a part of
such reorganization, merger, consolidation, sale or transfer, lawful provision
shall be made so that the holder of this Warrant shall thereafter be entitled to
receive upon exercise of this Warrant during the period specified herein and
upon payment of the Exercise Price then in effect, the number of shares of stock
or other securities or property of the successor corporation resulting from such
reorganization, merger, consolidation, sale or transfer which a holder of the
shares deliverable upon exercise of this Warrant would have been entitled to
receive in such reorganization, consolidation, merger, sale or transfer if this
Warrant had been exercised immediately before such reorganization, merger,
consolidation, sale or transfer, all subject to further adjustment as provided
in this SECTION 11. The foregoing provisions of this Section 11.2 shall
similarly apply to successive reorganizations, consolidations, mergers, sales
and transfers and to the stock or securities of any other corporation that are
at the time receivable upon the exercise of this Warrant. If the per share
consideration payable to the Holder hereof for shares in connection with any
such transaction is in a form other than cash or marketable securities, then the
value of such

                                     Page 6
<PAGE>

consideration shall be determined in good faith by the Company's Board of
Directors. In all events, appropriate adjustment (as determined in good faith by
the Company's Board of Directors) shall be made in the application of the
provisions of this Warrant with respect to the rights and interests of the
Holder after the transaction, to the end that the provisions of this Warrant
shall be applicable after that event, as near as reasonably may be, in relation
to any shares or other property deliverable after that event upon exercise of
this Warrant.

     11.2 RECLASSIFICATION, ETC. If the Company, at any time while this Warrant,
or any portion thereof, remains outstanding and unexpired, shall, by
reclassification of securities or otherwise, change any of the securities as to
which purchase rights under this Warrant exist into the same or a different
number of securities of any other class or classes, this Warrant shall
thereafter represent the right to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities which were subject to the purchase rights under this Warrant
immediately prior to such reclassification or other change; the Exercise Price
therefore shall be appropriately adjusted, all subject to further adjustment as
provided in SECTION 11.

     11.3 SPLIT, SUBDIVISION OR COMBINATION OF SHARES. If the Company at any
time while this Warrant, or any portion thereof, remains outstanding and
unexpired shall split, subdivide or combine the securities as to which purchase
rights under this Warrant exist, into a different number of securities of the
same class, the Exercise Price for such securities shall be proportionately
decreased in the case of a split or subdivision or proportionately increased in
the case of a combination.

     11.4 ADJUSTMENTS FOR DIVIDENDS IN STOCK OR OTHER SECURITIES OR PROPERTY. If
while this Warrant, or any portion hereof, remains outstanding and unexpired the
holders of the securities as to which purchase rights under this Warrant exist
at the time shall have received, or, on or after the record date fixed for the
determination of eligible stockholders of the Company, shall have become
entitled to receive, without payment therefore, other or additional stock or
other securities or property (other than cash) of the Company by way of
dividend, then and in each case, this Warrant shall represent the right to
acquire, in addition to the number of shares of the security receivable upon
exercise of this Warrant, and without payment of any additional consideration
therefore, the amount of such other or additional stock or other securities or
property (other than cash) of the Company which such holder would hold on the
date of such exercise had it been the holder of record of the security
receivable upon exercise of this Warrant on the date hereof and had thereafter,
during the period from the date hereof to and including the date of such
exercise, retained such shares and/or all other additional stock available by it
as aforesaid during such period, giving effect to all adjustments called for
during such period by the provisions of this SECTION 11.

     11.5 CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each adjustment
or readjustment pursuant to this SECTION 11, the Company at its expense shall
promptly compute such adjustment or readjustment in accordance with the terms
hereof and furnish to each holder of this Warrant a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Company shall, upon the written
request, at any time, of any such holder, furnish or cause to be furnished to
such holder a like certificate setting forth: (i) such adjustments and
readjustments; (ii) the Exercise Price at the time in effect; and (iii) the
number of shares and the amount, if any, of other property which at the time
would be received upon the exercise of the Warrant.

                                     Page 7
<PAGE>

     11.6 NO IMPAIRMENT. The Company will not, by any voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Company, but will at all times in good faith
assist in the carrying out of all the provisions of this SECTION 11 and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the holders of this Warrant against impairment.

12. MISCELLANEOUS.

     12.1 HEADINGS. The headings in this Warrant are for purposes of convenience
in reference only, and shall not be deemed to constitute a part hereof.

     12.2 LAW GOVERNING. This Warrant shall be construed and enforced in
accordance with, and governed by, the laws of the State of California.

     12.3 SEVERABILITY. If any term, provision, covenant or restriction of this
Warrant is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Warrant shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.

     12.4 COUNTERPARTS. For the convenience of the parties, any number of
counterparts of this Warrant may be executed by the parties hereto and each such
executed counterpart shall be, and shall be deemed to be, an original
instrument.

     12.5 SATURDAYS, SUNDAYS AND HOLIDAYS. If the Warrant Expiration Date falls
on a Saturday, Sunday or legal holiday, the Warrant Expiration Date shall
automatically be extended until 5:00 p.m. the next business day.

     12.6 ENTIRE AGREEMENT. This Warrant contains the sole and entire agreement
and understanding of the parties with respect to the entire subject matter of
this Warrant, and any and all prior discussions, negotiations, commitments and
understandings, whether oral or otherwise, related to the subject matter of this
Warrant are hereby merged herein.

     IN WITNESS WHEREOF, Valence Technology, Inc. has caused this Warrant to be
executed by its officers thereunto duly authorized.

Dated:  June 29, 2000

                                          VALENCE TECHNOLOGY, INC.

                                          By:
                                          Title:

HOLDER:  ACQUA WELLINGTON VALUE FUND LIMITED

By:
Title:

                                     Page 8
<PAGE>

                               NOTICE OF EXERCISE

                            ------------------------

     (1) The undersigned hereby elects to purchase _________ shares of Common
Stock of Valence Technology, Inc., pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price for such shares in
full.

     (2) In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the shares of Common Stock are being acquired solely for the
account of the undersigned and not as a nominee for any other party, and for
investment, and that the undersigned will not offer, sell, or otherwise dispose
of any such shares of Common Stock except under circumstances that will not
result in a violation of the Securities Act of 1933, as amended, or any state
securities laws.

     (3) Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:

                                            ----------------------------------
                                            [Name]

                                            -----------------------------------
                                            [Name]

     (4) Please issue a new Warrant for the unexercised portion of the attached
Warrant in the name of the undersigned or in such other name as is specified
below:

                                            ----------------------------------
                                            [Name]

                                            -----------------------------------

----------------                            -----------------------------------
[Date]                                      [Signature]

                                     Page 9
<PAGE>

                                 ASSIGNMENT FORM

     FOR VALUE RECEIVED, the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the Assignee named below all of the rights of
the undersigned under the within Warrant, with respect to the number of shares
of Common Stock set forth below:

NAME OF ASSIGNEE           ADDRESS                                NO. OF SHARES
-------------------------------------------------------------------------------

and does hereby irrevocably constitute and appoint ___________________ to make
such transfer on the books of Valence Technology, Inc. maintained for the
purpose, with full power of substitution in the premises.

         The undersigned also represents that, by assignment hereof, the
Assignee acknowledges that this Warrant and the shares of stock to be issued
upon exercise hereof are being acquired for investment and that the Assignee
will not offer, sell or otherwise dispose of this Warrant or any shares of stock
to be issued upon exercise hereof except under circumstances which will not
result in a violation of the Securities Act of 1933, as amended, or any state
securities laws. Further, the Assignee has acknowledged that upon exercise of
this Warrant, the Assignee shall, if requested by the Company, confirm in
writing, in a form satisfactory to the Company, that the shares of stock so
purchased are being acquired for investment and not with a view toward
distribution or resale.

DATED:

                                   -----------------------------
                                   Signature of Holder

                                   ------------------------------
                                   (Witness)REGISTRATION RIGHTS AGREEMENT

         This Registration Rights Agreement is made and entered into as of June
28, 2000 (this "Agreement"), by and between Valence Technology, Inc., a Delaware
corporation (the "Company"), and Acqua Wellington Value Fund Ltd., a limited
liability company organized under the laws of the Commonwealth of the Bahamas
(the "Buyer").

         This Agreement is being entered into pursuant to the Purchase
Agreement, dated as of the date hereof, by and between the Company and the Buyer
(the "PURCHASE AGREEMENT").

         The Company and the Buyer hereby agree as follows:

     1.  DEFINITIONS.

         Capitalized terms used and not otherwise defined herein shall have the
meanings given such terms in the Purchase Agreement. As used in this Agreement,
the following terms shall have the following meanings:

         "ADVICE" shall have the meaning set forth in Section 3(m).

         "AFFILIATE" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "CONTROL," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "AFFILIATED," "controlling" and "CONTROLLED" have meanings
correlative to the foregoing.

         "BLACKOUT PERIOD" shall have the meaning set forth in Section 3(n).

         "BOARD" shall have the meaning set forth in Section 3(n).

         "BUSINESS DAY" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the state of
New York generally are authorized or required by law or other government actions
to close.

         "COMMISSION" means the Securities and Exchange Commission.

         "COMMON STOCK" means the Company's Common Stock, no par value.

         "EFFECTIVENESS DATE" means with respect to the Registration Statement
the earlier of the 120th day following the Closing Date, before which the
Company will use its reasonable best efforts to cause the registration statement
to become effective, and the date which is within five (5) Business Days of the
date on which the Commission informs the Company that the Commission (i) will
not review the Registration Statement or (ii) that the Company may request the
acceleration of the effectiveness of the Registration Statement.

<PAGE>

         "EFFECTIVENESS PERIOD" shall have the meaning set forth in Section 2.

         "EVENT" shall have the meaning set forth in Section 7(d).

         "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

         "FILING DATE" means the date the Registration Statement is filed which
date, using the Company's best efforts, shall be the 45th day following the
Closing Date.

         "HOLDER" or "HOLDERS" means the holder or holders, as the case may be,
from time to time of Registrable Securities including, including without
limitation, the Buyer and their assignees.

         "INDEMNIFIED PARTY" shall have the meaning set forth in Section 5(c).

         "INDEMNIFYING PARTY" shall have the meaning set forth in Section 5(c).

         "LIQUIDATED DAMAGES" shall have the meaning set forth in Section 7(d).

         "LOSSES" shall have the meaning set forth in Section 5(a).

         "NASDAQ" shall mean the Nasdaq National Market.

         "PERSON" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.

         "PROCEEDING" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.

         "PROSPECTUS" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference in such Prospectus.

         "REGISTRABLE SECURITIES" means the shares of Common Stock (A) issued
pursuant to the Purchase Agreement (the "Common Shares") and (B) issuable upon
exercise of the Warrants (the "Warrant Shares") and upon any stock split, stock
dividend, recapitalization or similar event with respect to such Common Shares
or Warrant Shares; PROVIDED, HOWEVER, that Registrable Securities shall include
(but not be limited to) a number of shares of Common Stock equal to no less than
100% of the maximum number of shares of Common Stock which would be issuable
pursuant to the issuance of Common Shares pursuant to the Purchase Agreement and
upon exercise of the Warrants, assuming such exercise occurred on the Closing
Date.

                                     Page 2
<PAGE>

Notwithstanding anything herein contained to the contrary, such registered
shares of Common Stock shall be allocated to the Holder based on the total
number of Registrable Securities issued or issuable as of each date that a
Registration Statement, as amended, relating to the resale of the Registrable
Securities is declared effective by the Commission.

         "REGISTRATION STATEMENT" means the registration statement and any
additional registration statements contemplated by Section 2, including (in each
case) the Prospectus, amendments and supplements to such registration statement
or Prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference in such registration
statement.

         "RULE 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

         "RULE 158" means Rule 158 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

         "RULE 415" means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

         "SECURITIES ACT" means the Securities Act of 1933, as amended.

         "SPECIAL COUNSEL" means any special counsel to the Holders, for which
the Holders will be reimbursed by the Company pursuant to Section 4.

         "WARRANTS" means the warrants to purchase shares of Common Stock issued
in connection with the Purchase Agreement, and any other warrants of like tenor
issued in substitution or exchange thereof.

      2.  REGISTRATION. On or prior to the Filing Date the Company shall
prepare and file with the Commission a "shelf" Registration Statement covering
all Registrable Securities for an offering to be made on a continuous basis
pursuant to Rule 415. The Registration Statement shall be on Form S-3 (except if
the Company is not then eligible to register for resale the Registrable
Securities on Form S-3, in which case such registration shall be on another
appropriate form in accordance herewith). The Company shall (i) not permit any
securities other than the Registrable Securities to be included in the
Registration Statement, (ii) use its reasonable best efforts to cause the
Registration Statement to be declared effective under the Securities Act
(including filing with the Commission a request for acceleration of
effectiveness in accordance with Rule 12dl-2 promulgated under the Exchange Act
within five (5) Business Days of the date that the Company is notified (orally
or in writing, whichever is earlier) by the Commission that a Registration
Statement will not be "reviewed," or not be subject to further review) as soon
as possible after the filing thereof, but in any event prior to the
Effectiveness Date, and to keep such Registration Statement continuously
effective under the Securities Act until such date as is the earlier of (x) the
date when all Registrable Securities covered by such Registration Statement have
been sold or (y) the date on which the Registrable Securities may be

                                     Page 3
<PAGE>

sold without any restriction pursuant to Rule 144(k) as determined by the
counsel to the Company pursuant to a written letter, addressed to the Company's
transfer agent to such effect (the "EFFECTIVENESS PERIOD").

     3.  REGISTRATION PROCEDURES.

         In connection with the Company's registration obligations hereunder,
the Company shall:

         (a) Prepare and file with the Commission on or prior to the Filing
Date, a Registration Statement on Form S-3 (or if the Company is not then
eligible to register for resale the Registrable Securities on Form S-3 such
registration shall be on another appropriate form in accordance herewith) in
accordance with the method or methods of distribution thereof as specified by
the Holder (except if otherwise directed by the Holder), and use its reasonable
best efforts to cause the Registration Statement to become effective and remain
effective as provided herein; PROVIDED, HOWEVER, that not less than five (5)
Business Days prior to the filing of the Registration Statement or any related
Prospectus or any amendment or supplement thereto (including any document that
would be incorporated therein by reference), the Company shall (i) furnish to
the Holder and any Special Counsel, copies of all such documents proposed to be
filed, which documents (other than those incorporated by reference) will be
subject to the timely review of such Special Counsel, and (ii) at the request of
the Holder cause its officers and directors, counsel and independent certified
public accountants to respond to such inquiries as shall be necessary, in the
reasonable opinion of counsel to such Holder, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall not
file the Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Holder or any Special Counsel shall reasonably
object in writing within three (3) Business Days of their receipt thereof.

         (b) (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to the Registration Statement as may be necessary to
keep the Registration Statement continuously effective as to the applicable
Registrable Securities for the Effectiveness Period and prepare and file with
the Commission such additional Registration Statements in order to register for
resale under the Securities Act all of the Registrable Securities; (ii) cause
the related Prospectus to be amended or supplemented by any required Prospectus
supplement, and as so supplemented or amended to be filed pursuant to Rule 424
(or any similar provisions then in force) promulgated under the Securities Act;
(iii) respond promptly to any comments received from the Commission with respect
to the Registration Statement or any amendment thereto and promptly provide the
Holder true and complete copies of all correspondence from and to the Commission
relating to the Registration Statement; and (iv) comply in all material respects
with the provisions of the Securities Act and the Exchange Act with respect to
the disposition of all Registrable Securities covered by the Registration
Statement during the applicable period in accordance with the intended methods
of disposition by the Holders thereof set forth in the Registration Statement as
so amended or in such Prospectus as so supplemented.

         (c) Notify the Holders of Registrable Securities to be sold and any
Special Counsel promptly (and, in the case of (i)(A) below, not less than five
(5) Business Days prior to

                                     Page 4
<PAGE>

such filing) and (if requested by any such Person) confirm such notice in
writing no later than three (3) Business Days following the day (i)(A) when a
Prospectus or any Prospectus supplement or post-effective amendment to the
Registration Statement is proposed to be filed; (B) when the Commission notifies
the Company whether there will be a "review" of such Registration Statement and
whenever the Commission comments in writing on such Registration Statement and
(C) with respect to the Registration Statement or any post-effective amendment,
when the same has become effective; (ii) of any request by the Commission or any
other Federal or state governmental authority for amendments or supplements to
the Registration Statement or Prospectus or for additional information; (iii) of
the issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement covering any or all of the Registrable Securities or
the initiation of any Proceedings for that purpose; (iv) if at any time any of
the representations and warranties of the Company contained in any agreement
contemplated hereby ceases to be true and correct in all material respects; (v)
of the receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any
Proceeding for such purpose; and (vi) of the occurrence of any event that makes
any statement made in the Registration Statement or Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in any
material respect or that requires any revisions to the Registration Statement,
Prospectus or other documents so that, in the case of the Registration Statement
or the Prospectus, as the case may be, it will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.

         The Company shall promptly furnish to Special Counsel, without charge,
(i) any correspondence from the Commission or the Commission's staff to the
Company or its representatives relating to any Registration Statement and (ii)
promptly after the same is prepared and filed with the Commission, a copy of any
written response to the correspondence received from the Commission.

         (d) Use its reasonable best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of, (i) any order suspending the effectiveness of
the Registration Statement or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.

         (e) If requested by the Holder of a majority in interest of the
Registrable Securities, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment to the Registration Statement such information as the
Company reasonably agrees should be included therein and (ii) make all required
filings of such Prospectus supplement or such post-effective amendment as soon
as practicable after the Company has received notification of the matters to be
incorporated in such Prospectus supplement or post-effective amendment.

         (f) Furnish to the Holder and any Special Counsel, without charge, at
least one conformed copy of each Registration Statement and each amendment
thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, and all exhibits
to the extent requested by such Person (including those

                                     Page 5
<PAGE>

previously furnished or incorporated by reference) promptly after the filing of
such documents with the Commission.

         (g) Promptly deliver to the Holder and any Special Counsel, without
charge, as many copies of the Registration Statement, Prospectus or Prospectuses
(including each form of prospectus) and each amendment or supplement thereto as
such Persons may reasonably request; and the Company hereby consents to the use
of such Prospectus and each amendment or supplement thereto by each of the
selling Holders in connection with the offering and sale of the Registrable
Securities covered by such Prospectus and any amendment or supplement thereto.

         (h) Prior to any public offering of Registrable Securities, use its
reasonable best efforts to register or qualify or cooperate with the selling
Holders and any Special Counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Holder reasonably requests
in writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a Registration Statement;
PROVIDED, HOWEVER, that the Company shall not be required to qualify generally
to do business in any jurisdiction where it is not then so qualified or to take
any action that would subject it to general service of process in any such
jurisdiction where it is not then so subject or subject the Company to any
material tax in any such jurisdiction where it is not then so subject.

         (i) Cooperate with the Holder to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold pursuant
to a Registration Statement and to enable such Registrable Securities to be in
such denominations and registered in such names as the Holder may request at
least two (2) Business Days prior to any sale of Registrable Securities.

         (j) Upon the occurrence of any event contemplated by Section 3(c)(vi),
as promptly as possible, prepare a supplement or amendment, including a
post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.

         (k) Use its reasonable best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on Nasdaq and any other
securities exchange, quotation system, market or over-the-counter bulletin
board, if any, on which similar securities issued by the Company are then listed
as and when required pursuant to the Purchase Agreement.

         (l) Comply in all material respects with all applicable rules and
regulations of the Commission and make generally available to its security
holders earning statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 not later than forty-five (45) days after the end of
any twelve (12)-month period (or ninety (90) days after the end of

                                     Page 6
<PAGE>

any twelve (12)-month period if such period is a fiscal year) commencing on the
first day of the first fiscal quarter of the Company after the effective date of
the Registration Statement, which statement shall conform to the requirements of
Rule 158.

         (m) Require each selling Holder to furnish to the Company information
regarding such Holder and the distribution of such Registrable Securities as is
required by law to be disclosed in the Registration Statement, and the Company
may exclude from such registration the Registrable Securities of any such Holder
who fails to furnish such information within a reasonable time prior to the
filing of each Registration Statement, supplemented Prospectus and/or amended
Registration Statement.

         If the Registration Statement refers to any Holder by name or otherwise
as the holder of any securities of the Company, then such Holder shall have the
right to require (if such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar federal statute then in force) the
deletion of the reference to such Holder in any amendment or supplement to the
Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.

         Each Holder covenants and agrees that (i) it will not sell any
Registrable Securities under the Registration Statement until it has received
copies of the Prospectus as then amended or supplemented as contemplated in
Section 3(g) and notice from the Company that such Registration Statement and
any post-effective amendments thereto have become effective as contemplated by
Section 3(c) and (ii) it and its officers, directors or Affiliates, if any, will
comply with the prospectus delivery requirements of the Securities Act as
applicable to them in connection with sales of Registrable Securities pursuant
to the Registration Statement.

         Each Holder agrees by its acquisition of such Registrable Securities
that, upon receipt of a notice from the Company of the occurrence of any event
of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v),
3(c)(vi) or 3(n), such Holder will forthwith discontinue disposition of such
Registrable Securities under the Registration Statement until such Holder's
receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement contemplated by Section 3(j), or until it is advised in writing (the
"ADVICE") by the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement.

         (n) If (i) there is material non-public information regarding the
Company which the Company's Board of Directors (the "BOARD") reasonably
determines not to be in the Company's best interest to disclose and which the
Company is not otherwise required to disclose, or (ii) there is a significant
business opportunity (including, but not limited to, the acquisition or
disposition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or other similar transaction) available to
the Company which the Board reasonably determines not to be in the Company's
best interest to disclose and which the Company would be required to disclose
under the Registration Statement, then, for the period of 180 days after the
date the Registration Statement has been declared effective by the Commission
(the "PERIOD"), the Company may suspend effectiveness of a registration
statement and suspend the sale of Registrable Securities under a Registration
Statement for a period not to exceed twenty (20)

                                     Page 7
<PAGE>

consecutive days, provided that the Company may not suspend its obligation
during the Period for more than forty - five (45) days in the aggregate (each, a
"BLACKOUT PERIOD"); PROVIDED, HOWEVER, that no such suspension shall be
permitted for consecutive twenty (20) day periods, arising out of the same set
of facts, circumstances or transactions.

         (o) Within two (2) Business Days after the Registration Statement which
includes the Registrable Securities is ordered effective by the Commission, the
Company shall deliver, and shall cause legal counsel for the Company to deliver,
to the transfer agent for such Registrable Securities (with copies to the
Holders whose Registrable Securities are included in such Registration
Statement) confirmation that the Registration Statement has been declared
effective by the Commission in the form attached hereto as EXHIBIT A.

     4.   REGISTRATION EXPENSES

         All reasonable fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company
whether or not the Registration Statement is filed or becomes effective and
whether or not any Registrable Securities are sold pursuant to the Registration
Statement. The fees and expenses referred to in the foregoing sentence shall
include, without limitation the following: (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the Nasdaq and each other securities exchange or market
on which Registrable Securities are required hereunder to be listed, (B) with
respect to filings required to be made with the Commission, and (C) in
compliance with state securities or Blue Sky laws), (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses if the printing of
prospectuses is requested by the holders of a majority of the Registrable
Securities included in the Registration Statement), (iii) messenger, telephone
and delivery expenses, (iv) fees and disbursements of counsel for the Company
and (v) fees and expenses of all other Persons retained by the Company in
connection with the consummation of the transactions contemplated by this
Agreement, including, without limitation, the Company's independent public
accountants (including the expenses of any comfort letters or costs associated
with the delivery by independent public accountants of a comfort letter or
comfort letters). In addition, the Company shall be responsible for all of its
internal expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder.

     5.   INDEMNIFICATION

         (a) INDEMNIFICATION BY THE COMPANY. The Company shall, notwithstanding
any termination of this Agreement, indemnify and hold harmless the Buyer, its
permitted assignees, officers, directors, agents, brokers (including brokers who
offer and sell Registrable Securities as principal as a result of a pledge or
any failure to perform under a margin call of Common Stock), investment advisors
and employees, each Person who controls any such Buyer or permitted assignee
(within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) and the officers, directors, agents and employees of each such
controlling

                                     Page 8
<PAGE>

Person, and the respective successors, assigns, estate and personal
representatives of each of the foregoing, to the fullest extent permitted by
applicable law, from and against any and all claims, losses, damages,
liabilities, penalties, judgments, costs (including, without limitation, costs
of investigation) and expenses (including, without limitation, reasonable
attorneys' fees and expenses) (collectively, "LOSSES"), arising out of or
relating to any untrue or alleged untrue statement of a material fact contained
in the Registration Statement, the final Prospectus, as supplemented or amended,
if applicable, or arising out of or relating to any omission or alleged omission
of a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, except to the extent, but only to the extent, that such
untrue statements or omissions are based solely upon information regarding such
Holder furnished in writing to the Company by such Holder expressly for use
therein, which information was reviewed and expressly approved in writing by
such Holder and Special Counsel expressly for use in the Registration Statement,
such Prospectus or such form of Prospectus or in any amendment or supplement
thereto or as a result of the failure of the Holder to deliver a Prospectus, as
amended or supplemented, to a purchaser in connection with an offer or sale. The
Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of an
Indemnified Party (as defined in Section 5(c) hereof) and shall survive the
transfer of the Registrable Securities by the Holders.

         (b) INDEMNIFICATION BY BUYER. Buyer and its permitted assignees shall,
severally and not jointly, indemnify and hold harmless the Company, the
directors, officers, agents and employees, each Person who controls the Company
(within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, agents or employees of such
controlling Persons, and the respective successors, assigns, estate and personal
representatives of each of the foregoing, to the fullest extent permitted by
applicable law, from and against all Losses, as incurred, arising solely out of
or based solely upon any untrue statement of a material fact contained in the
Registration Statement, any Prospectus, or any form of prospectus, or arising
solely out of or based solely upon any omission of a material fact required to
be stated therein or necessary to make the statements therein (in the case of
any Prospectus or form of prospectus or supplement thereto, in the light of the
circumstances under which they were made) not misleading, to the extent, but
only to the extent, that such untrue statement or omission is contained in or
omitted from any information so furnished in writing by such Holder or the
Special Counsel to the Company specifically for inclusion in the Registration
Statement or such Prospectus and that such information was reasonably relied
upon by the Company for use in the Registration Statement, such Prospectus or
such form of prospectus or to the extent that such information relates to such
Holder or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement, such Prospectus or such form of
Prospectus Supplement. Notwithstanding anything to the contrary contained
herein, the Holder shall be liable under this Section 5(b) for only that amount
as does not exceed the net proceeds to such Holder as a result of the sale of
Registrable Securities pursuant to such Registration Statement.

                                     Page 9
<PAGE>

         (c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"INDEMNIFIED PARTY"), such Indemnified Party promptly shall notify the Person
from whom indemnity is sought (the "INDEMNIFYING PARTY) in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally determined by a court
of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have materially and adversely prejudiced
the Indemnifying Party.

         An Indemnified Party shall have the right to employ separate counsel in
any such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a conflict of interest is likely to
exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.

         All reasonable fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within twenty (20) Business Days of written notice thereof to the
Indemnifying Party (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; PROVIDED, that
the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder or pursuant to applicable law).

         (d) CONTRIBUTION. If a claim for indemnification under Section 5(a) or
5(b) is unavailable to an Indemnified Party because of a failure or refusal of a
governmental authority to enforce such indemnification in accordance with its
terms (by reason of public policy or otherwise), then each Indemnifying Party,
in lieu of indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Losses, in

                                    Page 10
<PAGE>

such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party and Indemnified Party in connection with the actions,
statements or omissions that resulted in such Losses as well as any other
relevant equitable considerations. The relative fault of such Indemnifying Party
and Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission of a material fact, has been
taken or made by, or relates to information supplied by, such Indemnifying,
Party or Indemnified Party, and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any Losses shall
be deemed to include, subject to the limitations set forth in Section 5(c), any
reasonable attorneys' or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for in
this Section was available to such party in accordance with its terms.
Notwithstanding anything to the contrary contained herein, the Holder shall be
liable or required to contribute under this Section 5(c) for only that amount as
does not exceed the net proceeds to such Holder as a result of the sale of
Registrable Securities pursuant to such Registration Statement.

         The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.

         The indemnity and contribution agreements contained in this Section are
in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.

     6.   RULE 144.

         As long as any Holder owns Common Shares, Warrants or Warrant Shares,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to Section 13(a) or 15(d) of the
Exchange Act and to promptly furnish the Holders with true and complete copies
of all such filings. As long as any Holder owns Common Shares, Warrants or
Warrant Shares, if the Company is not required to file reports pursuant to
Section 13(a) or 15(d) of the Exchange Act, it will prepare and furnish to the
Holders and make publicly available in accordance with Rule 144(c) promulgated
under the Securities Act annual and quarterly financial statements, together
with a discussion and analysis of such financial statements in form and
substance substantially similar to those that would otherwise be required to be
included in reports required by Section 13(a) or 15(d) of the Exchange Act, as
well as any other information required thereby, in the time period that such
filings would have been required to have been made under the Exchange Act. The
Company further covenants that it will take such further action as any Holder
may reasonably request, all to the extent required from time to time to enable
such Person to sell Common Shares and Warrant Shares without registration under
the Securities Act within the limitation of the exemptions provided by Rule 144
promulgated under the Securities Act, including providing any legal opinions of
counsel to the Company referred to in the Purchase Agreement. Upon the request
of any Holder, the Company shall deliver to such Holder a written certification
of a duly authorized officer as to whether it has complied with such
requirements. This Agreement shall terminate on the date on which the
Registrable Securities may be sold without restriction pursuant to Rule 144(k)
of the Securities Act.

     7.   MISCELLANEOUS.

         (a) REMEDIES. In the event of a breach by the Company or by a Holder,
of any of their obligations under this Agreement, each Holder or the Company, as
the case may be, in addition to being entitled to exercise all rights granted by
law and under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.

         (b) NO INCONSISTENT AGREEMENTS. Neither the Company nor any of its
subsidiaries has, as of the date hereof entered into and currently in effect,
nor shall the Company or any of its Affiliates, on or after the date of this
Agreement, enter into any agreement with respect to its securities that is
inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. Without limiting the generality
of the foregoing, without the written consent of the Holders of a majority of
the then outstanding Registrable Securities, the Company shall not grant to any
Person the right to request the Company to register any securities of the
Company under the Securities Act if the rights so granted are inconsistent with
the rights granted to Holders set forth herein, or otherwise prevent the Company
with complying with all of its obligations hereunder.

         (c) NO PIGGYBACK ON REGISTRATIONS. Neither the Company nor any of its
security holders (other than the Holders in such capacity pursuant hereto) may
include securities of the Company in the Registration Statement.

         (d) FAILURE TO FILE REGISTRATION STATEMENT AND OTHER EVENTS. The
Company and the Holders agree that the Holders will suffer damages if the
Registration Statement is not filed on or prior to the Filing Date and not
declared effective by the Commission on or prior to the Effectiveness Date and
maintained in the manner contemplated herein during the Effectiveness Period or
if certain other events occur. The Company and the Holders further agree that it
would not be feasible to ascertain the extent of such damages with precision.
Accordingly, if (i) the Registration Statement is not filed on or prior to the
Filing Date, or is not declared effective by the Commission on or prior to the
Effectiveness Date (or in the event an additional Registration Statement is
filed because the actual number of Common Shares and Common Stock into which the
Warrants are exercisable exceeds the number of shares of Common Stock initially
registered is not filed and declared effective within the time periods set forth
in Section 2), or (ii) the Company fails to file with the Commission a request
for acceleration in accordance with Rule 12dl-2 promulgated under the Exchange
Act within five (5) Business Days of the date that the Company is notified
(orally or in writing, whichever is earlier)

                                    Page 11
<PAGE>

by the Commission that a Registration Statement will not be "reviewed," or not
subject to further review, or (iii) the Registration Statement is filed with and
declared effective by the Commission but thereafter ceases to be effective as to
all Registrable Securities at any time during the Period, without being
succeeded within a reasonable period by a subsequent Registration Statement
filed with and declared effective by the Commission, or (iv) during the Period,
trading in the Common Stock shall be suspended for any reason for more than
three (3) Business Days in the aggregate, or (v) the Company has breached
Section 3(n) of this Agreement (any such failure or breach being referred to as
an "EVENT"), the Company shall pay as liquidated damages for such failure and
not as a penalty (the "LIQUIDATED DAMAGES") to each Holder an amount equal to
two percent (2%) of such Holder's pro rata share of the purchase price paid by
all Holders for all shares of Common Shares purchased and then outstanding
pursuant to the Purchase Agreement for each thirty (30) day period, or portion
thereof, following the Event until the applicable Event has been cured. Payments
to be made pursuant to this Section 7(d) shall be due and payable immediately
upon demand at the option of the Holders in cash. The parties agree that the
Liquidated Damages represent a reasonable estimate on the part of the parties,
as of the date of this Agreement, of the amount of damages that may be incurred
by the Holders if the Registration Statement is not filed on or prior to the
Filing Date or has not been declared effective by the Commission on or prior to
the Effectiveness Date and maintained in the manner contemplated herein during
the Effectiveness Period or if any other Event as described herein has occurred.

         (e) SPECIFIC ENFORCEMENT, CONSENT TO JURISDICTION.

              (i) The Company and the Holders acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Registration Rights Agreement or the Purchase Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Registration
Rights Agreement or the Purchase Agreement and to enforce specifically the terms
and provisions hereof or thereof, this being in addition to any other remedy to
which any of them may be entitled by law or equity.

              (ii) Both the Company and the Buyer (i) hereby irrevocably submit
to the jurisdiction of the United States District Court for the Southern
District of New York and the courts of the State of New York located in New York
county for the purposes of any suit, action or proceeding arising out of or
relating to this Agreement or the Purchase Agreement and (ii) hereby waive, and
agree not to assert in any such suit, action or proceeding, any claim that it is
not personally subject to the jurisdiction of such court, that the suit, action
or proceeding is brought in an inconvenient forum or that the venue of the suit,
action or proceeding is improper. Both the Company and the Buyer consent to
process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing in this Section 7(e) shall affect
or limit any right to serve process in any other manner permitted by law.

         (f) AMENDMENTS AND WAIVERS. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or

                                    Page 12
<PAGE>

consents to departures from the provisions hereof may not be given, unless the
same shall be in writing and signed by the Company and a majority of the
Holders.

         (g) NOTICES. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earlier of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified for notice prior to 5:00 p.m., eastern standard time,
on a Business Day, (ii) the Business Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified for notice later than 5:00 p.m., eastern time, on any date and
earlier than 11:59 p.m., eastern time, on such date, (iii) the Business Day
following the date of mailing, if sent by nationally recognized overnight
courier service or (iv) actual receipt by the party to whom such notice is
required to be given.

               (x)   if to the Company:

                     Valence Technology, Inc.
                     301 Conestoga Way
                     Henderson, Nevada  89015
                     Tel. No.: (702) 558-1015
                     Fax No.: (702) 558-1310
                     Attn:   Jay L. King

                     with a copy to:

                     Troop Steuber Pasich Reddick & Tobey, LLP
                     2029  Century Park East, Suite 2400
                     Los Angeles, CA  90067
                     Tel. No.: (310) 728-3362
                     Fax No.: (310) 728-2362
                     Attn: Lisa H. Klein

               (y)   if to the Buyer:

                     Acqua Wellington Value Fund Ltd.
                     c/o Fortis Fund Services (Bahamas) Ltd.
                     Montague Sterling Centre
                     East Bay Street, P.O. Box SS-6238
                     Nassau, Bahamas
                     Tel. No.: (242) 394-2700
                     Fax No.:  (242) 394-9667
                     Attn:   Mr. Anthony L. M. Inder Rieden

or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice.

                                    Page 13
<PAGE>

         (h) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns
and shall inure to the benefit of each Holder and its successors and assigns.
The Company may not assign this Agreement or any of its rights or obligations
hereunder without the prior written consent of a Majority of Holders. Each Buyer
may assign its rights hereunder in the manner and to the Persons as permitted
under the Purchase Agreement with the prior consent of the Company, which
consent shall not be unreasonably withheld.

         (i) ASSIGNMENT OF REGISTRATION RIGHTS. The rights of each Holder
hereunder, including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this Agreement, shall be
assignable by each Holder to any transferee of such Holder of all or a portion
of the shares of Registrable Securities if: (i) the Holder agrees in writing
with the transferee or assignee to assign such rights, and a copy of such
agreement is furnished to the Company within a reasonable time after such
assignment, (ii) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of (a) the name and address of such
transferee or assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned, (iii) following such
transfer or assignment the further disposition of such securities by the
transferee or assignees is restricted under the Securities Act and applicable
state securities laws, (iv) at or before the time the Company receives the
written notice contemplated by clause (ii) of this Section, the transferee or
assignee agrees in writing with the Company to be bound by all of the provisions
of this Agreement, and (v) such transfer shall have been made in accordance with
the applicable requirements of the Purchase Agreement and shall be for no less
than 50% of the Registrable Securities. In addition, each Holder shall have the
right to assign its rights hereunder to any other Person with the prior written
consent of the Company, which consent shall not be unreasonably withheld. The
rights to assignment shall apply to the Holders (and to subsequent) successors
and assigns.

         (j) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.

         (k) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of law thereof. This Agreement shall not be interpreted or
construed with any presumption against the party causing this Agreement to be
drafted.

         (l) CUMULATIVE REMEDIES. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.

         (m) SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, illegal, void or unenforceable in any
respect, the remainder of the terms, provisions, covenants and restrictions set
forth herein shall remain in full force and effect and shall in no way be
affected, impaired or invalidated, and the parties hereto shall use

                                    Page 14
<PAGE>

their reasonable efforts to find and employ an alternative means to achieve the
same or substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.

         (n) HEADINGS. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.

         (o) SHARES HELD BY THE COMPANY AND ITS AFFILIATES. Whenever the consent
or approval of Holders of a specified percentage of Registrable Securities is
required hereunder, Registrable Securities held by the Company or its Affiliates
(other than any Holder or transferees or successors or assigns thereof if such
Holder is deemed to be an Affiliate solely by reason of its holdings of such
Registrable Securities) shall not be counted in determining whether such consent
or approval was given by the Holders of such required percentage and shall not
be counted as outstanding.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                    Page 15
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.

                                    VALENCE TECHNOLOGY, INC.

                                    By:  /S/ JAY L. KING
                                       -------------------------------------
                                         Name:  Jay L. King
                                         Title:

                                    ACQUA WELLINGTON VALUE FUND LTD.

                                    By:
                                       ------------------------------------
                                         Name:
                                         Title:

<PAGE>

                                                                     EXHIBIT A

                         FORM OF NOTICE OF EFFECTIVENESS
                            OF REGISTRATION STATEMENT

[TRANSFER AGENT]
[ADDRESS]
Attn:  _____________

              Re:      VALENCE TECHNOLOGY, INC.

Ladies and Gentlemen:

         We are counsel to Valence Technology, Inc., a California corporation
(the "COMPANY"), and have represented the Company in connection with that
certain Purchase Agreement (the "PURCHASE AGREEMENT"), dated as of ______ __,
2000, by and between the Company and the Buyer named therein pursuant to which
the Company issued to the Buyer shares (the "COMMON SHARES") of its Common
Stock, no par value (the "COMMON STOCK"), and issued warrants (the "WARRANTS")
to purchase shares of the Company's Common Stock. Pursuant to the Purchase
Agreement, the Company has also entered into a Registration Rights Agreement
with the Buyer (the "REGISTRATION RIGHTS AGREEMENT"), dated as of ______ __,
2000, pursuant to which the Company agreed, among other things, to register the
Registrable Securities (as defined in the Registration Rights Agreement),
including the Common Shares and the shares of Common Stock issuable upon
exercise of the Warrants, under the Securities Act of 1933, as amended (the
"1933 ACT"). In connection with the Company's obligations under the Registration
Rights Agreement, on ________________, 2000, the Company filed a Registration
Statement on Form ___ (File No. 333-________) (the "REGISTRATION STATEMENT")
with the Securities and Exchange Commission (the "SEC") relating to the resale
of the Registrable Securities which names each of the present Holders as a
selling stockholder thereunder.

         In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge,
after telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and, accordingly, the
Registrable Securities are available for resale under the 1933 Act in the manner
specified in, and pursuant to the terms of the Registration Statement.

                                              Very truly yours,

                                              By:

cc:      [HOLDER]

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