<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-K/A
AMENDMENT NO. 1
AMENDMENT TO ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 1996 COMMISSION FILE NUMBER 0-20028
-------------------
VALENCE TECHNOLOGY, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 77-0214673
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
301 CONESTOGA WAY, HENDERSON, NEVADA 89015
(Address of principal executive offices, including zip code)
(702) 558-1000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
COMMON STOCK (NASDAQ)
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.001 PAR VALUE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in any amendment to this Form 10-K/A. X
------
The approximate aggregate market value of the Common Stock held by non-
affiliates of the Registrant, based upon the last sale price of the Common Stock
reported on the NASDAQ National Market was $88,878,662 as of June 20, 1996.
The number of shares of Common Stock outstanding as of June 20, 1996 was
21,670,000.
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<PAGE>
VALENCE TECHNOLOGY, INC.
INDEX
Page No.
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Item 10. Directors of the Registrant . . . . . . . . . . . . 3
Item 11. Executive Compensation. . . . . . . . . . . . . . . 5
Item 12. Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . . . . . 11
Item 13. Certain Relationships and Related Transactions. . . 12
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . 14
2
<PAGE>
ITEM 10
DIRECTORS OF THE REGISTRANT
The names of the Company's directors and certain information about them are
set forth below; such information for executive officers of the Company is
contained in Part I, Item 1 of the report.
The directors of the Company and their ages as of June 20, 1996, are as
follows:
NAME AGE POSITION HELD WITH THE COMPANY
- --------------------------------------------------------------------------------
Calvin L. Reed 53 Chairman of the Board, President, Chief
Executive Officer
Carl E. Berg(1)(2) 58 Director
Alan F. Shugart(1)(2) 65 Director
- ------------------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Mr. Reed joined the Company as President and Chief Operating Officer in
July 1991 and became a director of the Company in September 1991. In October
1993, Mr. Reed was also appointed Chairman of the Board and Chief Executive
Officer. From April 1987 to June 1991, Mr. Reed was Vice President of Operations
at Seagate Technology, Inc. ("Seagate"), a disk drive manufacturer, where he was
responsible for Singapore and Scotts Valley, California operations. From
February 1982 to April 1987, Mr. Reed was Corporate Vice President and General
Manager of IMI/Corvus Systems, a disk drive and computer peripheral
manufacturer, where he was responsible for manufacturing, engineering,
management information systems and corporate facilities operations.
Mr. Berg helped found the Company and has served on the Board of Directors
since September 1991. For more than the past five years, Mr. Berg has been a
major Silicon Valley industrial real estate developer and a private venture
capital investor. Mr. Berg also serves as a director of Integrated Device
Technology, Inc., Videonics, Inc., and Systems Integrated Research.
Mr. Shugart joined the Company as a director in March 1992. Mr. Shugart has
been the Chief Executive Officer and a director of Seagate since its inception
in 1979. Mr. Shugart also served as Seagate's President from 1979 to 1983 and
from September 1991 to the present. Additionally, Mr. Shugart served as Chairman
of the Board of Seagate from 1979 until September 1991, and from October 1992 to
the present.
3
<PAGE>
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended March 31, 1996, the Board of Directors held
three meetings. The Board has an Audit Committee, a Compensation Committee and a
Non-Officer Stock Option Administration Committee. The Board at large serves as
the Nominating Committee.
The Audit Committee meets with the Company's independent accountants at
least annually to review the results of the annual audit and discuss the
financial statements; recommends to the Board the independent accountants to be
retained and receives and considers the accountants' comments as to controls,
adequacy of staff and management performance and procedures in connection with
audit and financial controls. The Audit Committee met once during the 1996
fiscal year. It currently is composed of two non-employee directors: Messrs.
Berg and Shugart.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation, awards stock options to employees and consultants under
the Company's stock option plans and otherwise determines compensation levels
and performs such other functions regarding compensation as the Board may
delegate. The Compensation Committee is composed of two non-employee directors:
Messrs. Berg and Shugart. It met once during such fiscal year.
The Non-Officer Stock Option Administration Committee administers the
Company's 1990 Stock Option Plan only for non-officer employees and makes grants
to such employees not in excess of 14,500 shares. All option grants in excess of
this limit and all grants to officers must be approved by the Compensation
Committee or the Board at large. The Non-Officer Stock Option Committee is
composed of Mr. Reed.
During the fiscal year ended March 31, 1996, each Board member attended 75%
or more of the aggregate of the meetings of the Board and of the committees on
which he served, held during the period for which he was a director or committee
member, respectively.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act ("Section 16(a)") requires the Company's
directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Commission
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Officers, directors and greater than
ten percent stockholders are required by Commission regulation to furnish the
Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended March 31, 1996, all Section
16(a) filing requirements applicable to its officers, directors and greater than
ten percent beneficial owners were complied with.
4
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ITEM 11
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
The Company's non-employee directors receive no cash compensation, but are
eligible for reimbursement for their expenses incurred in connection with
attendance at Board meetings in accordance with Company policy. Directors who
are employees of the Company do not receive separate compensation for their
services as directors, but are eligible to receive stock options under the
Company's 1990 Stock Option Plan (the "1990 Plan").
Each non-employee director of the Company also receives stock option grants
pursuant to the 1996 Non-Employee Directors' Stock Option Plan (the "Directors'
Plan"), which is subject to stockholder approval. Only non-employee directors of
the Company or an affiliate of such directors (as defined in the Code) are
eligible to receive options under the Directors' Plan. The plan provides that
new directors will receive an initial stock option of 100,000 shares of common
stock upon their election to the Board. The exercise price for this initial
option will be the fair market value on the day it is granted. This initial
option will vest one-fifth on the first and second anniversaries of the grant of
the option, and quarterly over the next three years. On each anniversary of the
director's election to the Board, the director will receive an annual stock
option in the amount of 100,000 shares less the total amount of unvested shares
remaining in the initial option and any annual options previously granted. The
exercise price for this new option will be the fair market value on the day it
is granted. This annual option will vest quarterly over a three year period. A
director who had been granted an option prior to the adoption of the Directors'
Plan will start receiving annual grants on the anniversary date of that
director's prior grant. A director who had not received an option upon becoming
a director will receive an initial stock option of 100,000 shares on the date of
the adoption of the plan, and then receive annual options on the anniversary
dates of that grant. No options granted under the Directors' Plan may be
exercised until the plan is approved by the stockholders.
During the last fiscal year, the Company granted options covering 100,000
shares to Carl Berg, and 80,000 shares to Alan Shugart, non-employee directors
of the Company, at an exercise price per share of $4.50, under the Directors'
Plan. The fair market value of such Common Stock on the date of grant was $4.50
per share (based on the closing sales price reported in the NASDAQ National
Market for the date of grant). As of July 14, 1996, no options had been
exercised under the Directors' Plan.
5
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EXECUTIVE COMPENSATION
Executive officers are eligible to receive stock options under the 1990
Plan.
The following table shows for the fiscal years ended March 31, 1996, March
26, 1995 and March 27, 1994, certain compensation awarded or paid to, or earned
by the Company's Chief Executive Officer and its other four most highly
compensated executive officers at March 31, 1996 (the "Named Executive
Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long
Term
Other Compen-
Annual Annual sation All Other
Compensation Compen Awards Compen-
------------ ------
Name and Fiscal Salary Bonus sation Options(1) sation
Principal Position Year ($) ($) ($) (#) ($)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Calvin L. Reed 1996 $250,000 -- -- 30,000 $4,854(2,4)
President and Chief 1995 $252,115 -- -- 150,000 $49,923(2,3)
Executive Officer 1994 $247,115 -- -- -- $4,176(2)
William J. Masuda 1996 $175,000 -- -- -- $476(4)
Executive Vice President,1995 $165,084 -- -- 100,000 --
Worldwide Operations 1994 $141,156 -- -- -- $625(4)
R. Joseph Horning 1996 $145,600 -- $12,500(5) 10,000 $48,531(3)
Vice President, 1995 $141,241 -- -- 136,000 --
Engineering 1994 $123,558 -- $14,705(5) -- --
Bradley A Perkins 1996 $130, 000 -- $11,898(5) 10,000 $7,679(3,4)
Vice President and 1995 $128,269 -- -- 97,000 --
General Counsel 1994 $124,346 -- -- 60,000 --
Ralph Brodd 1996 $127,404 -- $13,035(5) 80,000 $28,331(3,4)
Vice President, Research 1995 $109,038 -- -- 15,000 --
and Development 1994 $71,632 -- -- -- --t\
</TABLE>
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(1) The Company has no stock appreciation rights ("SARs").
(2) Life insurance premium payments.
(3) Relocation expenses (moving expenses, tax gross-up payments related to sale
of home, meals, relocation payment, travel expenses, etc.) related to the
Company's move to Henderson, Nevada.
(4) Patent award payments. Patent awards are granted to employees of the
Company for inventions made by employees for which they have submitted
invention disclosures to the Company, for which the Company has filed a
patent application with the United States Patent and Trademark Office, or
for which a patent has been issued by the United States Patent and
Trademark Office.
(5) Amounts forgiven under loans provided to the Named Executive Officer by the
Company.
6
<PAGE>
STOCK OPTION GRANTS AND EXERCISES
The following tables show for the fiscal year ended March 31, 1996, certain
information regarding options granted to, exercised by, and held at year end by
the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
-----------------
Percent of
Total Potential Realizable
Options Value at Assumed
Granted to Annual Rates of Stock
Options Employees Exercise Expira- Price Appreciation
Granted in Fiscal Price tion for Option Term(3)
Name (#)(1) Year(2) ($/Sh) Date 5% ($) 10% ($)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Calvin L. Reed 30,000 5.1% $4.50 3/24/06 $85,050 $214,650
William J. Masuda 15,000 2.6% $4.50 3/24/06 $42,525 $107,325
R. Joseph Horning 10,000 1.7% $4.50 3/24/06 $28,350 $71,550
Bradley A. Perkins 10,000 1.7% $4.50 3/24/06 $28,350 $71,550
Ralph Brodd 70,000 12.1% $2.69 5/02/05 $118,629 $299,397
10,000 1.7% $4.50 3/24/06 $28,350 $71,550
</TABLE>
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(1) Options granted under the 1990 Plan vest over a five year period, 20% after
one year, an additional 20% after two years and 5% every three months
thereafter. During 1996, the Company issued options exercisable over a two-
year period with 12.5% of the options becoming exercisable every three
months through the option vesting period, and options exercisable over a
three-year period with 8.3% of the options becoming exercisable every three
months through the option vesting period. The Board of Directors may reprice
the options under the terms of the Company's 1990 Plan. The Company has no
SARs.
(2) Based on an aggregate of 578,100 options granted to employees, including
the Named Executive Officers, in fiscal year 1996.
(3) The potential realizable value is calculated based on the term of the
option at its time of grant, 10 years, compounded annually. It is
calculated by assuming that the stock price on the date of grant
appreciates at the indicated annual rate, compounded annually for the
entire term of the option and that the option is exercised and sold on the
last day of its term for the appreciated stock price. No gain to the
optionee is possible unless the stock price increases over the option term,
which will benefit all stockholders.
7
<PAGE>
The following table shows the number and value of the unexcercised options
held by each of the Named Executive Officers on March 31, 1996:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR, AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Shares Options at Options at
Acquired Value FY-End (#) FY-End ($)(2)
on Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
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<S> <C> <C> <C> <C>
Calvin L. Reed 0 $0 531,099(1) / 127,500 $1,969,352(1) / $48,750
William J. Masuda 0 $0 86,250 / 88,750 $256,725 / $125,875
R. Joseph Horning 0 $0 57,200 / 136,800 $37,528 / $84,232
Bradley A. Perkins 0 $0 49,100 / 95,900 $98,206 / $86,654
Ralph Brodd 0 $0 31,500 / 87,500 $89,765 / $140,075
</TABLE>
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(1) Does not include 221,406 vested options awarded to Mr. Reed's former wife
pursuant to a marital dissolution decree.
(2) Based on the fair market value of the Company's Common Stock as of March
31, 1996 ($4.3125) minus the exercise price of the options multiplied by
the number of shares underlying the option.
EMPLOYMENT AGREEMENTS
In May 1991, the Company entered into an agreement with Mr. Reed pursuant
to which Mr. Reed joined the Company as its President and Chief Operating
Officer for an annual salary of $250,000. The Company also granted Mr. Reed an
option to purchase 700,000 shares of common stock at an exercise price of $0.25
per share, with 20% vested immediately and the remainder vesting over a four-
year period.
In January 1993, the Company entered into an employment agreement with Mr.
Horning pursuant to which the Company retained Mr. Horning as its Director of
Product Engineering for an annual salary of $125,000. The Company granted Mr.
Horning an option to purchase 22,000 shares of common stock at an exercise price
of $22.75 per share, vesting over a five-year period. In addition, the Company
agreed to pay Mr. Horning's relocation expense. The Company also loaned Mr.
Horning $45,000 pursuant to a loan agreement, in which the Company forgave the
loan at a rate of $15,000 per year of his employment. Mr. Horning became a Vice
President of the Company in September 1993.
8
<PAGE>
OPTION REPRICING INFORMATION
The following table shows certain information concerning option repricings
received by any Named Officer during the last ten years.
TEN YEAR OPTION/SAR REPRICINGS
Length of
Number Market Original
of Price of Exercise Option
Options/ Stock at Price at Term
SARs Time of Time of Remaining
Repriced Repricing Repricing New at Date of
or or or Exercise Repricing
Amended Amendment Amendment Price or
Name Date (#) ($) ($) ($) Amendment
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R. Joseph Horning 01/18/93 22,000 $11.50 $22.75 $11.50 4.75 years
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended March 31, 1996, the Compensation Committee
consisted of Messrs. Shugart and Berg.
In July 1990, Mr. Berg loaned the Company $520,000 for a seven year term at
an interest rate of 10% per annum and the Company issued a warrant exercisable
for an aggregate of 130,000 shares of common stock to Mr. Berg. This warrant was
exercised on March 31, 1992 at $4.40 per share by cancellation of indebtedness
under such loan. From July 1990 to March 1992 the Company issued additional
warrants exercisable for an aggregate of 1,222,825 shares of common stock to
Baccarat Electronics, Inc., an entity affiliated with Mr. Berg, at an exercise
price of $4.00 per share, in consideration for a loan agreement in which such
entity agreed to lend the Company an aggregate of up to $5,000,000 (the "Loan
Agreement"). Under the terms of the Loan Agreement, the Company executed a
promissory note payable in full in July 1995 with 9% interest per annum through
July 1993 and the prime rate thereafter. In addition, to secure its obligations
under the promissory note, the Company granted to the entity a security interest
in all of the Company's assets. In August 1992, the Company entered into an
amendment to the Loan Agreement which allows the Company to borrow, prepay and
re-borrow up to the full $5,000,000 principal under the promissory note on a
revolving basis and provided that the lender will subordinate its security
interest to other lenders when the loan balance is at zero. In September 1992,
the Company paid in full all interest and principal outstanding under the Loan
Agreement. As of March 31, 1996, the Company had no outstanding balance under
the Loan Agreement.
The Company had two facilities in San Jose, California, which it no longer
occupies, under a five-year lease commencing May 1, 1993 with Berg & Berg
Developers. Carl E. Berg, a director of the Company, is a general partner of
Berg & Berg Developers. The Company has sublet, through Berg & Berg Developers,
both facilities for the entire term remaining on the lease, thereby releasing
the Company from any further obligation.
9
<PAGE>
In September 1990, the Company issued an aggregate of 500,000 shares of
common stock to four stockholders affiliated with the then majority holder of
Innocell in exchange for payments aggregating $5,000. As partial consideration
for the settlement of the Company's disagreements with the holders of the other
55% interest in Innocell and with the four stockholders, in March 1992, Mr. Berg
obtained for a cash payment of $131,250 irrevocable options to repurchase an
aggregate of 375,000 shares of common stock from the four stockholders
exercisable at $5.00 per share. Because of certain Danish tax considerations,
the four stockholders would not grant the options to the Company. Mr. Berg
agreed to hold such options for the benefit of the Company. The Company
exercised such options in October 1993 for an aggregate of $1,875,000. The
Company has reimbursed Mr. Berg for all of his costs (including the $131,250
option payment) and indemnified him for any liability incurred in connection
with this transaction. In connection with the acquisition of the options from
the four stockholders, Mr. Berg obtained letters of credit aggregating
$1,875,000 to support the option exercise price. The Company has paid $1,875,000
as substitute collateral for the collateral made available by Mr. Berg.
In March 1992, in connection with the acquisition of the remaining
interests in its Danish subsidiary, the Company borrowed an additional
$1,100,000 from Mr. Berg at the prime rate plus 2%, payable on the earlier of
September 30, 1992 or 10 days after the closing of an underwritten public
offering. Such amount plus interest was repaid in May 1992.
During fiscal year 1993, the Company purchased $134,000 of computer
equipment from Actrix Computers, Inc. During fiscal year 1994, the Company
purchased an additional $114,129 of computer equipment from Actrix Computers,
Inc. Mr. Berg is President and substantial owner of Actrix Computers, Inc. The
Company believes that the prices it has paid for the computer equipment are
comparable to prices generally available in the market.
10
<PAGE>
ITEM 12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's common stock as of May 15, 1996 by: (i) each director and
nominee for director; (ii) each of the executive officers in the Summary
Compensation table; (iii) all executive officers and directors of the Company as
a group; and (iv) all those known by the Company to be beneficial owners of more
than five percent (5%) of its common stock.
BENEFICIAL OWNERSHIP(1)
Beneficial Owner Number of Shares Percent of Total
- --------------------------------------------------------------------------------
Carl E. Berg(2) 4,047,822 17.68%
10050 Bandley Drive, Cupertino, CA 95014
Bell Communications Research, Inc. 1,500,000 6.92%
445 South Street, Morristown, NJ 07960
Calvin L. Reed(3) 542,349 2.44%
William J. Masuda(3) 96,875 *
Alan F. Shugart(3) 91,666 *
Bradley A. Perkins(3) 57,200 *
R. Joseph Horning(3) 50,850 *
Ralph Brodd(3) 38,250 *
All directors and executive officers as a
group (8 persons)(4) 4,938,012 20.76%
- -------------------------
* Less than one percent (1%)
(1) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13G filed with the Securities and
Exchange Commission (the "Commission"). Unless otherwise indicated in the
footnotes to this table and subject to community property laws where
applicable, each of the stockholders named in this table has sole voting
and investment power with respect to the shares indicated as beneficially
owned. Applicable percentage ownership is based on 21,670,000 shares of
common stock outstanding on May 15, 1996, adjusted as required by rules
promulgated by the Commission.
(2) Includes 150,000 shares held by Mr. Berg; 1,222,825 shares issuable upon
exercise of warrants held by Baccarat Electronics, Inc., of which Mr. Berg
is President and principal stockholder; 2,499,997 shares held by Baccarat
Development Partnership for which Mr. Berg serves as the President of the
corporate general partner; 105,000 shares held by Berg & Berg Enterprises,
Inc. and 70,000 shares held by Berg & Berg Profit Sharing Plan U/A 1/1/80
FBO Carl E. Berg Basic Transfer Carl E. Berg, Trustee. Does not include
80,000 shares held in trust for Mr. Berg's children. Mr. Berg is not a
trustee of the trust and he disclaims beneficial ownership of such shares.
(3) All shares are issuable upon exercise of options that are exercisable
within 60 days of May 15, 1996.
(4) Includes 1,222,825 shares issuable upon exercise of warrants and 890,190
issuable upon exercise options.
11
<PAGE>
ITEM 13
CERTAIN TRANSACTIONS
In July 1992, the Company entered into a relocation loan agreement with Mr.
Masuda, Executive Vice President, Worldwide Operations of the Company pursuant
to which the Company agreed to lend up to $100,000 at an annual interest rate of
6% due and payable on December 31, 1992. Mr. Masuda repaid the loan in July
1993.
See "Compensation Committee Interlocks and Insider Participation" for a
description certain transactions between the Company and Mr. Berg.
LIMITATION OF LIABILITY AND INDEMNIFICATION
The Company's Bylaws provide that the Company will indemnify its directors
and executive officers and may indemnify its other officers, employees and other
agents to the fullest extent permitted by Delaware law. The Company is also
empowered under its Bylaws to enter into indemnification contracts with its
directors and officers and to purchase insurance on behalf of any person whom it
is required or permitted to indemnify. Pursuant to this provision, the Company
has entered into indemnity agreements with each of its directors and officers.
In addition, the Company's Second Restated Certificate of Incorporation
provides that to the fullest extent permitted by Delaware law, the Company's
directors will not be personally liable for monetary damages for breach of the
directors' fiduciary duty of care to the Company and its stockholders. This
provision in the Certificate of Incorporation does not eliminate the duty of
care, and in appropriate circumstances equitable remedies such as an injunction
or other forms of non-monetary relief would remain available under Delaware law.
Each director will continue to be subject to liability for breach of the
director's duty of loyalty to the Company, for acts or omissions not in good
faith or involving intentional misconduct or knowing violations of law, for acts
or omissions that the director believes to be contrary to the best interests of
the Company or its stockholders, for any transaction from which the director
derived an improper personal benefit, for acts or omissions involving a reckless
disregard for the director's duty to the Company or its stockholders when the
director was aware or should have been aware of a risk of serious injury to the
Company or its stockholders, for acts or omissions that constitute an unexecuted
pattern of inattention that amounts to an abdication of the director's duty to
the Company or its stockholders, for improper transactions between the director
and the Company and for improper distributions to stockholders and loans to
directors and officers. This provision also does not affect a director's
responsibilities under any other laws, such as the federal securities laws or
state or federal environmental laws.
The Company has obtained directors and officers liability insurance with
coverage of $2,000,000.
In May 1994, a series of class action lawsuits was filed in the United
States District Court for the Northern District of California against the
Company and certain of its present and former officers and directors. These
lawsuits were consolidated, and in September 1994 the plaintiffs filed a
consolidated and amended class action complaint. Following the Court's Orders on
motions to dismiss the complaint, which were granted in part and denied in part,
the plaintiffs filed an amended complaint in October 1995 ("Complaint"). The
Complaint alleges violations of the federal securities laws against the
Company, certain of its present and former officers and directors, and the
underwriters of the Company's public stock offerings, claiming that the
defendants issued a series of false and misleading statements, including
filings with the Securities and Exchange Commission, with regard to the
Company's business and future prospects. The plaintiffs seek to represent a
class of persons who purchased the Company's common stock between May 7, 1992
and August 10, 1994. The Complaint seeks unspecified compensatory and
punitive damages, attorney's fees and costs. On January 23, 1996, the Court
dismissed, with prejudice, all claims against the underwriters of the
Company's public stock offerings, and one claim against the Company and its
present and former officers and directors. On April 29, 1996, the Court
dismissed with prejudice all remaining claims against a present director and
limited claims against a former officer and director to the period when that
person was an officer. The Company believes that it has meritorious defenses
and intends to defend the lawsuit vigorously. The Company has also made a
claim under its directors and officers liability insurance.
12
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company and its officers and directors
have been informed that in the opinion of the Securities and Exchange Commission
(the "Commission") such indemnification is against public policy as expressed in
the Securities Act and is therefore unenforceable.
13
<PAGE>
---------------------------------
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this amendment to be signed
on its behalf by the undersigned, thereunto duly authorized on the 29th day of
July, 1996.
VALENCE TECHNOLOGY, INC.
By: /s/ David P. Archibald
-------------------------------
David P. Archibald
Vice President and
Chief Financial Officer
14
