<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
VALENCE TECHNOLOGY, INC.
--------------------------------
(Name of Issuer)
COMMON STOCK
----------------------
(Title of Class of Securities)
918914-10-2
------------------
(CUSIP Number)
LEV M. DAWSON
VALENCE TECHNOLOGY, INC.
301 CONESTOGA WAY
HENDERSON, NV 89015
(702) 558-1000
----------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
March 5, 1998
-------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box: / /
Check the following box if a fee is being paid with this statement:
(A fee is not required only if the reporting person: (1) has a previous
statement on file reporting beneficial ownership of more than five percent of
the class of securities described in Item 1; and (2) has filed no amendment
subsequent thereto reporting beneficial ownership of five percent or less of
such class.) (See Rule 13d-7).
Note: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom copies
are to be sent.
* The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter the disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") or otherwise subject to the
liabilities of that section of the Exchange Act but shall be subject to all
other provisions of the Exchange Act.
(Continued on following page(s))
Page 1 of 5 pages
<PAGE>
- ---------------------------------- ----------------------------------
CUSIP NO. 918914-10-2 13D Page 2 of 5 Pages
- ---------------------------------- ----------------------------------
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
Lev M. Dawson
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a)/ / (b)/ /
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS
PF
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) / /
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- -------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER 1,808,082
OF -----------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 0
OWNED BY
REPORTING -----------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH 1,808,082
-----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,808,082
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES*
/ /
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
7.3%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- -------------------------------------------------------------------------------
<PAGE>
Page 3 of 5 Pages
ITEM 1: SECURITY AND ISSUER.
Class of Securities: Common Stock
Issuer: Valence Technology, Inc. ("Issuer")
Principal Address: 301 Conestoga Way
Henderson, NV 89015
ITEM 2: IDENTITY AND BACKGROUND.
(a) Reporting Persons:
Lev M. Dawson ("Dawson")
(b) Principal Business Address:
301 Conestoga Way
Henderson, NV 89015
(c) Principal Occupation/Principal Business:
Dawson is the Chairman, Chief Executive Officer and President of
Valence Technology, Inc.
(d) Not applicable.
(e) Not applicable.
(f) Citizenship or Place of Organization:
United States
ITEM 3: SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
On January 1, 1998 Dawson became the Chairman, Chief Executive
Officer and President of Issuer. An option to purchase 39,506 shares was
granted pursuant to the Issuer's 1990 Stock Option Plan, 4,938 of which are
exercisable as of March 31, 1998. An option to purchase 660,494 shares was
granted pursuant to Issuer's 1990 Stock Option Plan, 111,207 of which are
exercisable as of March 31, 1998, and an option to purchase 300,000 shares
was granted outside of any equity plan of the Issuer, 50,511 of which are
exercisable as of March 31, 1998, neither of which are incentive stock
options (the "Nonstatutory Options"). The exercise price of all three options
is $5.0625 per share. The Compensation Committee of the Issuer approved the
early exercise of the Nonstatutory Options on March 5, 1998. The options
permit exercise by cash, shares, full recourse notes or non-recourse notes
secured by independent collateral. The Nonstatutory Options were exercised
on March 5, 1998 with non-recourse promissory notes secured by the shares
acquired upon exercise plus 842,650 shares of the Issuer. Purchased shares
for which the underlying options have not vested are subject to repurchase by
the Issuer.
ITEM 4: PURPOSE OF TRANSACTION
The Reporting Person has no plans or proposals which relates to, or
may result in, any of the matters listed in Items 4(a)-(j) of Schedule 13D.
<PAGE>
Page 4 of 5 Pages
ITEM 5: INTEREST IN SECURITIES OF THE ISSUER.
(a)-(b) The following table sets forth certain information with respect to
beneficial ownership of Issuer's common stock by the Reporting Person. The
percentages set forth in the table reflect 23,765,968 shares outstanding as
certified to the Issuer on February 2, 1998 by Issuer's transfer agent, Boston
EquiServe.
<TABLE>
<CAPTION>
- -----------------------------------------
- -----------------------------------------
<S> <C>
Beneficial Ownership 1,808,082
- -----------------------------------------
Percentage of Class 7.3%
- -----------------------------------------
Sole Voting Power 1,808,082
- -----------------------------------------
Shared Voting Power 0
- -----------------------------------------
Sole Dispositive Power 1,808,082
- -----------------------------------------
Shared Dispositive Power 0
- -----------------------------------------
- -----------------------------------------
</TABLE>
(c) See Item 3 above.
(d) Not applicable.
(e) Not applicable.
ITEM 6: CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
Not applicable.
ITEM 7: EXHIBITS.
10.1 Early Exercise Stock Purchase Agreement dated March 5, 1998
between Valence Technology, Inc. and Lev M. Dawson
regarding option to purchase 660,494 shares, including
exhibits.
10.2 Promissory Note issued by Lev M. Dawson to Valence
Technology, Inc. in the amount of $3,343,750.88 (included
as Exhibit D to Exhibit 10.1).
10.3 Early Exercise Stock Purchase Agreement dated March 5, 1998
between Valence Technology, Inc. and Lev M. Dawson
regarding option to purchase 300,000 shares, including
exhibits.
10.4 Promissory Note issued by Lev M. Dawson to Valence
Technology, Inc. in the amount of $1,518,750 (included as
Exhibit D to Exhibit 10.3).
10.5 Stock Pledge Agreement dated March 5, 1998 by Lev M. Dawson
(included as Exhibit E to Exhibit 10.1 and Exhibit 10.3).
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
March 12, 1998
----------------------------------------
(Date)
/s/ Lev. M. Dawson
----------------------------------------
(Signature)
LEV M. DAWSON
----------------------------------------
(Name/Title)
<PAGE>
EXHIBIT INDEX
Exhibit Number Exhibit
- -------------- -------
10.1 Early Exercise Stock Purchase Agreement dated March 5, 1998
between Valence Technology, Inc. and Lev M. Dawson
regarding option to purchase 660,494 shares, including
exhibits.
10.2 Promissory Note issued by Lev M. Dawson to Valence
Technology, Inc. in the amount of $3,343,750.88 (included
as Exhibit D to Exhibit 10.1).
10.3 Early Exercise Stock Purchase Agreement dated March 5, 1998
between Valence Technology, Inc. and Lev M. Dawson
regarding option to purchase 300,000 shares, including
exhibits.
10.4 Promissory Note issued by Lev M. Dawson to Valence
Technology, Inc. in the amount of $1,518,750 (included as
Exhibit D to Exhibit 10.3).
10.5 Stock Pledge Agreement dated March 5, 1998 by Lev M. Dawson
(included as Exhibit E to Exhibit 10.1 and Exhibit 10.3).
<PAGE>
EXHIBIT 10.1
EARLY EXERCISE STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made by and between VALENCE TECHNOLOGY, INC., a
Delaware corporation (the "Corporation"), and LEV M. DAWSON ("Purchaser").
WITNESSETH:
WHEREAS, Purchaser holds a nonstatutory stock option to purchase shares
of common stock of the Corporation pursuant to the Corporation's 1990 Stock
Option Plan (the "Plan") which Purchaser desires to exercise; and
WHEREAS, Purchaser wishes to take advantage of the early exercise
provision of his option and therefore to enter into this Agreement;
NOW, THEREFORE, IT IS AGREED between the parties as follows:
1. Purchaser hereby agrees to purchase from the Corporation, and the
Corporation hereby agrees to sell to Purchaser, an aggregate of 660,494
shares of the common stock (the "Stock") of the Corporation, for an exercise
price of $5.0625 per share (total exercise price: $3,343,750.88), payable as
follows:
Cash at Closing $0.00
Promissory Note in the form
of Exhibit E (the "Note") $3,343,750.88
Total Exercise Price $3,343,750.88
The closing hereunder shall occur at the offices of the Corporation on
the date of this Agreement or at such other time and place as the parties may
mutually agree upon in writing.
At the closing, Purchaser shall deliver three (3) stock assignments in
the form of Exhibit B, duly endorsed (with date and number of shares left
blank), joint escrow instructions (the "Joint Escrow Instructions") in the
form of Exhibit C, duly executed by Purchaser, and the total exercise price
(including an executed Note in the form of Exhibit D and an executed pledge
agreement in the form of Exhibit E (the "Pledge Agreement") under which all
shares of the Stock acquired by Note as well as 842,650 shares of the
Company's common stock previously owned by Purchaser (the "Additional
Collateral") shall be pledged as collateral security for the payment of the
indebtedness represented by the Note.
At the closing or as soon thereafter as practicable, the Corporation
shall deliver to the Escrow Agent (as defined in paragraph 6 below) share
certificates for all of the Stock that is to be subject to the Purchase
Option (as defined in paragraph 2 below), and shall deliver share
certificates to Purchaser for all of the Stock, if any, that is not to be
subject to the Purchase Option or the Pledge Agreement. The certificates for
all of the Stock that is subject to the Pledge
1.
<PAGE>
Agreement but not the Purchase Option shall be retained by the Corporation as
security pursuant to the Pledge Agreement.
2. The Stock to be purchased by Purchaser pursuant to this Agreement shall
be subject to the following option ("Purchase Option"):
(a) In the event that Purchaser shall cease to be an employee of the
Corporation for any reason (including his death), or no reason, with or
without cause, the Purchase Option may be exercised. The Corporation shall
have the right at any time within the ninety (90) day period after
Purchaser's termination of service with the Company and all Related Companies
or such longer period as may be agreed to by the Company and Purchaser (for
example, for purposes of satisfying the requirements of Section 1202(c)(3) of
the Internal Revenue Code) to purchase from Purchaser or his personal
representative, as the case may be, at the price per share paid by Purchaser
pursuant to this Agreement ("Option Price"), up to but not exceeding the
number of shares of the Stock set forth on Exhibit A hereto which is
incorporated herein by this reference.
(b) In addition, and without limiting the foregoing Purchase Option, if
at any time during the term of the Purchase Option, there occurs: (a) a
dissolution or liquidation of the Corporation; (b) a merger or consolidation
involving the Corporation in which the Corporation is not the surviving
corporation; (c) a reverse merger in which the Corporation is the surviving
corporation but the shares of the Corporation's common stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of other securities, cash or otherwise;
or (d) any other capital reorganization in which more than fifty percent
(50%) of the shares of the Corporation entitled to vote are exchanged, then:
(i) if there is no successor to the Corporation, the Corporation shall have
the right to exercise its Purchase Option as to all or any portion of the
Stock then subject to the Purchase Option set forth above to the same extent
as if Purchaser's employment by the Corporation had ceased on the date
preceding the date of consummation of said event or transaction or (ii) the
Purchase Option may be assigned to any successor of the Corporation, and the
Purchase Option shall apply if Purchaser shall cease for any reason to be an
employee of such successor on the same basis as set forth above. In that
case, references herein to the "Corporation" shall be deemed to refer to such
successor.
(c) The Corporation shall be entitled to pay for any shares purchased
pursuant to its Purchase Option at the Corporation's option in cash, by
offset against any indebtedness owing to the Corporation by Purchaser
including without limitation any Note given in payment for the Stock, or a
combination of both.
(d) As used herein, employment with the Corporation shall include
employment with an affiliate of the Corporation. Additionally, as used
herein, references to employee, employment and similar terms shall be deemed
to include the performance of services as a consultant or director, provided,
however, that no rights as an employee shall arise by reason of the use of
such terms.
(e) This Agreement is not an employment contract and nothing in this
Agreement shall be deemed to create in any way whatsoever any obligation on
the part of Purchaser to
2.
<PAGE>
continue in the employ of the Corporation, or of the Corporation to continue
Purchaser in the employ of the Corporation.
3. The Purchase Option may be exercised by giving written notice of
exercise delivered or mailed as provided in paragraph 13. Upon providing of
such notice and payment or tender of the purchase price, the Corporation
shall become the legal and beneficial owner of the Stock being purchased and
all rights and interests therein or related thereto.
4. If from time to time during the term of the Purchase Option there is any
stock dividend or liquidating dividend or distribution of cash and/or
property, stock split or other change in the character or amount of any of
the outstanding securities of the Corporation, then, in such event, any and
all new, substituted or additional securities or other property to which
Purchaser is entitled by reason of his ownership of Stock will be immediately
subject to the Purchase Option and be included in the word "Stock" for all
purposes of the Purchase Option with the same force and effect as the shares
of Stock then subject to the Purchase Option. While the total Option Price
shall remain the same after each such event, the Option Price per share of
Stock upon exercise of the Purchase Option shall be appropriately adjusted.
5. All certificates representing any shares of Stock of the Corporation
subject to the provisions of this Agreement shall have endorsed thereon
legends in substantially the following form:
(a) "The shares represented by this certificate are subject to an
option set forth in an agreement between the corporation and the registered
holder, or his predecessor in interest, a copy of which is on file at the
principal office of this corporation. Any transfer or attempted transfer of
any shares subject to such option is void without the prior express written
consent of the issuer of these shares."
(b) Any legend required to be placed thereon by applicable laws.
6. As security for his faithful performance of the terms of this Agreement
and to insure the availability for delivery of Purchaser's Stock upon
exercise of the Purchase Option herein provided for, Purchaser agrees, at the
closing hereunder (or as soon thereafter as practicable), to deliver (or have
the Corporation deliver on the Purchaser's behalf) to and deposit with
Cooley Godward LLP ("Escrow Agent"), as Escrow Agent in this transaction,
three (3) stock assignments duly endorsed (with date and number of shares
left blank) in the form attached hereto as Exhibit B, together with a
certificate or certificates evidencing all of the Stock subject to the
Purchase Option; said documents are to be held by the Escrow Agent and
delivered by said Escrow Agent pursuant to the Joint Escrow Instructions of
the Corporation and Purchaser set forth in Exhibit C attached hereto and
incorporated herein by this reference, which instructions shall also be
delivered to the Escrow Agent at the closing hereunder (or as soon thereafter
as practicable). The Stock and the Additional Collateral are also subject to
the Pledge Agreement, and possession of the certificates and stock
assignments by the Escrow Agent shall also constitute possession by the
Corporation of such instruments pursuant to the Pledge Agreement.
3.
<PAGE>
7. Purchaser shall not sell or transfer any of the Stock subject to the
Purchase Option or any interest therein or any of the Additional Collateral
or any interest therein so long as such Stock or such Additional Collateral
are subject to the Purchase Option or the Pledge Agreement.
8. The Corporation shall not be required (i) to transfer on its books any
shares of Stock of the Corporation which shall have been sold or transferred
in violation of any of the provisions set forth in this Agreement or (ii) to
treat as owner of such shares or to accord the right to vote as such owner or
to pay dividends to any transferee to whom such shares shall have been so
transferred.
9. Subject to the provisions of paragraphs 7 and 8 above, Purchaser (but
not any unapproved transferee) shall, during the term of this Agreement,
exercise all rights and privileges of a stockholder of the Corporation with
respect to the Stock.
10. The parties agree to execute such further instruments and to take such
further action as reasonably may be necessary to carry out the intent of this
Agreement.
11. Purchaser acknowledges that this Agreement has been prepared on behalf
of the Cooley Godward LLP, counsel to the Company and that Cooley Godward LLP
does not represent, and is not acting on behalf of, Purchaser. Purchaser has
been provided with an opportunity to consult with his own counsel with
respect to this Agreement.
12. With the exceptions of the limitations and conditions set forth in this
Agreement and the documents referred to this Agreement, including without
limitation all attachments and exhibits hereto, and the nonstatutory stock
option agreement between the Corporation and the Purchaser, and applicable
securities laws, the Corporation represents that the Stock, when issued, will
be duly authorized, validly issued, fully paid and non-assessable, free and
clear from any security interests, liens, claims, pledge agreements,
limitations on voting rights, charges or other encumbrances of any nature
whatsoever.
13. Any notice required or permitted hereunder shall be given in writing and
shall be deemed effectively given upon personal delivery or upon deposit in
any United States Post Office Box, by registered or certified mail with
postage and fees prepaid, addressed to the other party hereto at his address
hereinafter shown below his signature or at such other address as such party
may designate by five (5) days' advance written notice to the other party
hereto.
14. This Agreement shall bind and inure to the benefit of the successors and
assigns of the Corporation and, subject to the restrictions on transfer
herein set forth, inure to the benefit of and be binding upon Purchaser, his
heirs, executors, administrators, successors, and assigns. Without limiting
the generality of the foregoing, the Purchase Option of the Corporation
hereunder shall be assignable by the Corporation at any time or from time to
time, in whole or in part.
15. This Agreement constitutes the entire agreement between the parties with
respect to the subject matter hereof. This Agreement may not be amended,
modified or revoked, in whole or in part, except by an agreement in writing
signed by each of the parties hereto.
4.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 5th day of March, 1998.
VALENCE TECHNOLOGY, INC.
By: /s/ David Archibald
-------------------------------
Title: CFO
----------------------------
Address: 301 Conestoga Way
Henderson, NV 89015
PURCHASER
Signature: /s/ Lev M. Dawson
------------------------
Print Name: Lev M. Dawson
-----------------------
Address: 301 Conestoga Way
Henderson, NV 89015
ATTACHMENTS:
Exhibit A Vesting Schedule
Exhibit B Assignment Separate from Certificate
Exhibit C Joint Escrow Instructions
Exhibit D Promissory Note
Exhibit E Pledge Agreement
5.
<PAGE>
EXHIBIT A
VESTING SCHEDULE
NUMBER OF SHARES
IF CESSATION OF EMPLOYMENT OR SERVICE SUBJECT TO
AS A DIRECTOR OR CONSULTANT OCCURS: PURCHASE OPTION:
Before March 31, 1998 660,494 shares
After March 30, 1998
but before June 30, 1998 549,287 shares
After June 29, 1998
but before September 30, 1998 438,080 shares
After September 29, 1998
but before December 31, 1998 326,873 shares
After December 30, 1998
but before March 31, 1999 215,667 shares
After March 30, 1999
but before June 30, 1999 107,833 shares
After June 29, 1999 0 shares
<PAGE>
EXHIBIT B
STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE
<PAGE>
STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Early Exercise Stock
Purchase Agreement between the undersigned and VALENCE TECHNOLOGY, INC., a
Delaware corporation (the "Company"), dated as of ___________, 1998 (the
"Agreement"), ____________ hereby sells, assigns and transfers unto the
Company ______________ (___________) shares of common stock of the Company,
standing in the undersigned's name on the books of the Company represented by
Certificate No. ____________ herewith, and does hereby irrevocably constitute
and appoint ______________ attorney to transfer the said stock on the books of
the Company with full power of substitution in the premises. This Assignment
may be used only in accordance with and subject to the terms and conditions
of the Agreement, in connection with the repurchase of shares of Common Stock
issued to the undersigned pursuant to the Agreement, and only to the extent
that such shares remain subject to the Company's Purchase Option under the
Agreement.
Dated: ___________________
/s/ Lev M. Dawson
-------------------------------------
[Signature]
Lev M. Dawson
-------------------------------------
[Print Name]
[INSTRUCTION: Please do not fill in any blanks other than the signature line.
The purpose of this Assignment is to enable the Company to exercise its
repurchase option set forth in the Agreement without requiring additional
signatures on the part of Purchaser.]
<PAGE>
EXHIBIT C
JOINT ESCROW INSTRUCTIONS
<PAGE>
JOINT ESCROW INSTRUCTIONS
COOLEY GODWARD LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
Attn: Andrei M. Manoliu
Dear Sir:
As Escrow Agent for both VALENCE TECHNOLOGY, INC., a Delaware
corporation ("Corporation"), and the undersigned purchaser of stock of the
Corporation ("Purchaser"), you are hereby authorized and directed to hold the
documents delivered to you pursuant to the terms of that certain Early
Exercise Stock Purchase Agreement ("Agreement"), dated March 5 1998, to which
a copy of these Joint Escrow Instructions is attached as Exhibit C, in
accordance with the following instructions:
1. In the event the Corporation or an assignee shall elect to exercise the
Purchase Option set forth in the Agreement, the Corporation or its assignee
will give to Purchaser and you a written notice specifying the number of
shares of stock to be purchased, the purchase price, and the time for a
closing hereunder at the principal office of the Corporation. Purchaser and
the Corporation hereby irrevocably authorize and direct you to close the
transaction contemplated by such notice in accordance with the terms of said
notice.
2. At the closing you are directed (a) to date any stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Corporation against
the simultaneous delivery to you of the purchase price (which may include
suitable acknowledgment of cancellation of indebtedness) of the number of
shares of stock being purchased pursuant to the exercise of the Purchase
Option.
3. Purchaser irrevocably authorizes the Corporation to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as specified in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as his
attorney-in-fact and agent for the term of this escrow to execute with
respect to such securities and other property all documents of assignment
and/or transfer and all stock certificates necessary or appropriate to make
all securities negotiable and complete any transaction herein contemplated.
4. This escrow shall terminate upon expiration or exercise in full of the
Purchase Option, whichever occurs first. Shares of stock held by you for
which the Purchase Option has lapsed as set forth in the Agreement and the
schedule set forth in Exhibit A of the Agreement shall be released hereunder
and delivered to the Purchaser upon request of the Purchaser, PROVIDED,
HOWEVER, that if at the time of such request you are advised by the
Corporation that all or part of the shares over which the Purchase Option has
lapsed are the subject of a pledge or other security agreement, you shall
deliver all or part, as applicable, of such shares to the pledgeholder or
other person designated by
<PAGE>
the Corporation, with delivery of any shares which are not subject to a
pledge or other security agreement to the Purchaser. Upon such delivery to
Purchaser or the pledgeholder or other person designated by the Corporation,
you shall be discharged of all further obligations hereunder with respect to
such shares.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to
Purchaser, you shall deliver all of same to Purchaser and shall be discharged
of all further obligations hereunder; PROVIDED, HOWEVER, that if at the time
of termination of this escrow you are advised by the Corporation that the
property subject to this escrow is the subject of a pledge or other security
agreement, you shall deliver all such property to the pledgeholder or other
person designated by the Corporation.
6. Except as otherwise provided in these Joint Escrow Instructions, your
duties hereunder may be altered, amended, modified or revoked only by a
writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying
or refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties
or their assignees. You shall not be personally liable for any act you may
do or omit to do hereunder as Escrow Agent or as attorney-in-fact for
Purchaser while acting in good faith and any act done or omitted by you
pursuant to the advice of your own attorneys shall be conclusive evidence of
such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law, and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court.
In case you obey or comply with any such order, judgment or decree of any
court, you shall not be liable to any of the parties hereto or to any other
person, firm or corporation by reason of such compliance, notwithstanding any
such order, judgment or decree being subsequently reversed, modified,
annulled, set aside, vacated or found to have been entered without
jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authority or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or
called for hereunder.
10. You shall not be liable for the outlawing of any rights under any
statute of limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall resign by written notice to each party. In the event of any such
termination, the Corporation may appoint any officer or assistant officer of
the Corporation as successor Escrow Agent and Purchaser hereby confirms the
appointment of such successor or successors as his attorney-in-fact and agent
to the full extent of your appointment.
<PAGE>
12. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
13. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities,
you are authorized and directed to retain in your possession without
liability to anyone all or any part of said securities until such dispute
shall have been settled either by mutual written agreement of the parties
concerned or by a final order, decree or judgment of a court of competent
jurisdiction after the time for appeal has expired and no appeal has been
perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
14. Any notice required or permitted hereunder shall be given in writing and
shall be deemed effectively given upon personal delivery, including delivery
by express courier or five days after deposit in the United States Post
Office, by registered or certified mail with postage and fees prepaid,
addressed to each of the other parties hereunto entitled at the following
addresses, or at such other addresses as a party may designate by ten days'
advance written notice to each of the other parties hereto:
CORPORATION: VALENCE TECHNOLOGY, INC.
301 Conestoga Way
Henderson, NV 89015
PURCHASER: LEV M. DAWSON
301 Conestoga Way
Henderson, NV 89015
ESCROW AGENT: COOLEY GODWARD LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
15. By signing these Joint Escrow Instructions you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.
16. You shall be entitled to employ such legal counsel and other experts as
you may deem necessary properly to advise you in connection with your
obligations hereunder. You may rely upon the advice of such counsel, and may
pay such counsel reasonable compensation therefor. The Corporation shall be
responsible for all fees generated by such legal counsel in connection with
your obligations hereunder.
17. This instrument shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. It is
understood and agreed that references to "you" or "your" herein refer to the
original Escrow Agent and to any and all successor Escrow Agents. It is
understood and agreed that the Corporation may at any time or from time to
time assign its rights under the Agreement and these Joint Escrow
Instructions in whole or in part.
<PAGE>
18. This Agreement shall be governed by and interpreted and determined in
accordance with the laws of the State of California, as such laws are applied
by California courts to contracts made and to be performed entirely in
California by residents of that state.
Very truly yours,
VALENCE TECHNOLOGY, INC.
Signature: /s/ David Archibald
------------------------------------
Print Name: David Archibald
------------------------------------
Title: CFO
------------------------------------
PURCHASER:
/s/ Lev M. Dawson
------------------------------------
LEV M. DAWSON
ESCROW AGENT:
COOLEY GODWARD LLP
By: /s/ Deborah A. Marshall
--------------------------
Name: Deborah A. Marshall
------------------------
<PAGE>
EXHIBIT D
PROMISSORY NOTE
<PAGE>
NON-RECOURSE PROMISSORY NOTE
$3,343,750.88 Henderson, Nevada
March 5, 1998
FOR VALUE RECEIVED, the undersigned hereby unconditionally promises to
pay to the order of VALENCE TECHNOLOGY, INC., a Delaware corporation (the
"Company"), at 301 Conestoga Way, Henderson, Nevada, 89015, or at such other
place as the holder hereof may designate in writing, in lawful money of the
United States of America and in immediately available funds, the principal
sum of $3,343,750.88 together with interest accrued from the date hereof on
the unpaid principal at the rate of 5.69% per annum, or the maximum rate
permissible by law (which under the laws of the State of California shall be
deemed to be the laws relating to permissible rates of interest on commercial
loans), whichever is less, as follows:
PRINCIPAL REPAYMENT. The outstanding principal amount hereunder
shall be due and payable in full on September 5, 2005.
INTEREST PAYMENTS. Interest shall be payable annually in arrears
and shall be calculated on the basis of a 360-day year for the actual
number of days elapsed;
PROVIDED, HOWEVER, that in the event that the undersigned's employment by and
all relationships as a director or consultant with the Company or an
Affiliate of the Company (as defined in the Company's 1990 Stock Option Plan)
are terminated for any reason prior to payment in full of this Note, this
Note shall be accelerated and all remaining unpaid principal and interest
shall become due and payable within six months following such termination.
If the undersigned fails to pay any of the principal and accrued
interest when due, the Company, at its sole option, shall have the right to
accelerate this Note, in which event the entire principal balance and all
accrued interest shall become immediately due and payable, and immediately
collectible by the Company pursuant to applicable law.
This Note may be prepaid at any time without penalty. All money paid
toward the satisfaction of this Note shall be applied first to the payment of
interest as required hereunder and then to the retirement of the principal.
This is a non-recourse note. The full amount of this Note is secured
solely by a pledge of shares of Common Stock of the Company, and is subject
to all of the terms and provisions of the Stock Pledge Agreement of even date
herewith between the undersigned and the Company. The Company shall have
recourse only to the "collateral" as such term is defined in the Stock Pledge
Agreement and not to any other assets or properties, tangible or intangible
of the undersigned and the undersigned shall have no personal liability for
amounts due under this Note.
1.
<PAGE>
The undersigned hereby represents and agrees that the amounts due under
this Note are not consumer debt, and are not incurred primarily for personal,
family or household purposes, but are for business and commercial purposes
only.
The undersigned hereby waives presentment, protest and notice of
protest, demand for payment, notice of dishonor and all other notices or
demands in connection with the delivery, acceptance, performance, default or
endorsement of this Note.
The holder hereof shall be entitled to recover, and the undersigned
agrees to pay when incurred, subject to the non-recourse provisions of this
Note, all costs and expenses of collection of this Note, including without
limitation, reasonable attorneys' fees.
This Note shall be governed by, and construed, enforced and interpreted
in accordance with, the laws of the State of California, excluding conflict
of laws principles that would cause the application of laws of any other
jurisdiction.
Signed /s/ Lev M. Dawson
---------------------------
LEV M. DAWSON
2.
<PAGE>
EXHIBIT E
PLEDGE AGREEMENT
<PAGE>
STOCK PLEDGE AGREEMENT
1. As collateral security for the payment of those certain $3,343,750.88
and $1,518,750.00 non-recourse promissory notes (the "Notes") issued this
date to VALENCE TECHNOLOGY, INC., a Delaware corporation ("Pledgee"), by the
undersigned (hereinafter called "indebtedness"), the undersigned hereby
assigns, transfers to and pledges with the Pledgee the securities listed on
Schedule 1 hereto which were this day delivered to be deposited with Pledgee,
together with any stock rights, rights to subscribe, dividends paid in cash
or other property in connection with the complete or partial liquidation of
Pledgee, stock dividends, dividends paid in stock, new securities or other
property except cash dividends other than liquidating dividends to which the
undersigned is or may hereafter become entitled to receive on account of such
property, and in the event that the undersigned receives any such, the
undersigned will immediately deliver it to Pledgee to be held by Pledgee
hereunder in the same manner as the property originally pledged hereunder.
All such certificates or instruments shall be accompanied by appropriate duly
executed instruments of transfer or assignment (including, without
limitation, stock powers) in blank, all in form attached hereto as Exhibit A.
The 660,494 and the 300,000 shares of the Company's common stock purchased
by the undersigned pursuant to those certain Early Exercise Stock Purchase
Agreements by and between the Pledgee and the undersigned of even date
herewith and herewith assigned, transferred to and pledged with Pledgee under
this paragraph are hereinafter called "initial collateral." The 842,650
shares of the Company's common stock previously held by the undersigned and
herewith assigned, transferred to and pledged with Pledgee under this
paragraph are hereinafter call "additional collateral." All property
(together the initial collateral and the additional collateral) assigned,
transferred to and pledged with Pledgee under this paragraph is hereinafter
called "collateral."
2. At any time, without notice, and at the expense of the undersigned,
Pledgee in its name or in the name of its nominee or of the undersigned may,
but shall not be obligated to: (1) collect by legal proceedings or otherwise
all dividends (except cash dividends other than liquidating dividends),
interest, principal payments and other sums now or hereafter payable upon or
on account of said collateral; (2) enter into any extension, reorganization,
deposit, merger, or consolidation agreement, or any agreement in any way
relating to or affecting the collateral, and in connection therewith may
deposit or surrender control of such collateral thereunder, accept other
property in exchange for such collateral and do and perform such acts and
things as it may deem proper, and any money or property received in exchange
for such collateral shall be applied to the indebtedness or thereafter held
by it pursuant to the provisions hereof; (3) insure, process and preserve the
collateral; (4) cause the collateral to be transferred to its name or to the
name of its nominee; (5) exercise as to such collateral all the rights,
powers, and remedies of an owner, except that so long as the indebtedness is
not in default the undersigned shall retain all voting rights as to the
collateral.
3. The undersigned agrees to pay prior to delinquency all taxes, charges,
liens and assessments against the collateral, and upon the failure of the
undersigned to do so Pledgee at its option may pay any of them and shall be
the sole judge of the legality or validity thereof and the amount necessary
to discharge the same.
<PAGE>
4. All advances, charges, costs and expenses, including reasonable
attorneys' fees, incurred or paid by Pledgee in exercising any right, power
or remedy conferred by this agreement, or in the enforcement thereof, shall
become a part of the indebtedness secured hereunder and shall be paid to
Pledgee by the undersigned immediately and without demand.
5. At the option of Pledgee and without necessity of demand or notice, all
or any part of the indebtedness of the undersigned shall immediately become
due and payable irrespective of any agreed maturity, upon the happening of
any of the following events: (1) failure to keep or perform any of the terms
or provisions of this agreement; (2) default in the payment of principal or
interest when due; (3) the levy of any attachment, execution or other process
against the collateral; or (4) the insolvency, commission of an act of
bankruptcy, general assignment for the benefit of creditors, filing of any
petition in bankruptcy or for relief under the provisions of Title 11, United
States Code, Bankruptcy, of, by, or against the undersigned.
6. In the event of the nonpayment of any indebtedness when due, whether by
acceleration or otherwise, or upon the happening of any of the events
specified in the last preceding paragraph, Pledgee may then, or at any time
thereafter, at its election, apply, set off, collect or sell in one or more
sales, or take such steps as may be necessary to liquidate and reduce to cash
in the hands of Pledgee in whole or in part, with or without any previous
demands or demand of performance or notice or advertisement, the whole or any
part of the collateral in such order as Pledgee may elect, and any such sale
may be made either at public or private sale at its place of business or
elsewhere, or at any broker's board or securities exchange, either for cash
or upon credit or for future delivery; PROVIDED, HOWEVER, that if such
disposition is at private sale, then the purchase price of the collateral
shall be equal to the public market price then in effect, or, if at the time
of sale no public market for the collateral exists, then, in recognition of
the fact that the sale of the collateral would have to be registered under
the Securities Act of 1933 and that the expenses of such registration are
commercially unreasonable for the type and amount of collateral pledged
hereunder, Pledgee and the undersigned hereby agree that such private sale
shall be at a purchase price mutually agreed to by Pledgee and the
undersigned or, if the parties cannot agree upon a purchase price, then at a
purchase price established by a majority of three independent appraisers
knowledgeable of the value of such collateral, one named by the undersigned
within 10 days after written request by the Pledgee to do so, one named by
Pledgee within such 10 day period, and the third named by the two appraisers
so selected, with the appraisal to be rendered by such body within 30 days of
the appointment of the third appraiser. The cost of such appraisal,
including all appraiser's fees, shall be charged against the proceeds of sale
as an expense of such sale. Pledgee may be the purchaser of any or all
collateral so sold and hold the same thereafter in its own right free from
any claim of the undersigned or right of redemption. Demands of performance,
notices of sale, advertisements and presence of property at sale are hereby
waived, and Pledgee is hereby authorized to sell hereunder any evidence of
debt pledged to it. Any sale hereunder may be conducted by any officer or
agent of Pledgee.
7. The proceeds of the sale of any of the collateral and all sums received
or collected by Pledgee from or on account of such collateral shall be
applied by Pledgee to the payment of expenses incurred or paid by Pledgee in
connection with any sale, transfer or delivery of the collateral, to the
payment of any other costs, charges, attorneys' fees or expenses mentioned
<PAGE>
herein, and to the payment of the indebtedness or any part hereof, all in
such order and manner as Pledgee in its discretion may determine. Pledgee
shall pay any balance to the undersigned.
8. Pledgee shall be under no duty or obligation whatsoever to make or give
any presentments, demands for performance, notices of non-performance,
protests, notices of protest or notices of dishonor in connection with any
obligations or evidences of indebtedness held by Pledgee as collateral, or in
connection with any obligations or evidences of indebtedness which constitute
in whole or in part the indebtedness secured hereunder.
9. Pledgee may at any time deliver the collateral or any part thereof to
the undersigned and the receipt of the undersigned shall be a complete and
full acquittance for the collateral so delivered, and Pledgee shall
thereafter be discharged from any liability or responsibility therefor.
10. Upon the transfer of all or any part of the indebtedness Pledgee may
transfer all or any part of the collateral and shall be fully discharged
thereafter from all liability and responsibility with respect to such
collateral so transferred, and the transferee shall be vested with all the
rights and powers of Pledgee hereunder with respect to such collateral so
transferred; but with respect to any collateral not so transferred Pledgee
shall retain all rights and powers hereby given.
11. Until all indebtedness shall have been paid in full the power of sale
and all other rights, powers and remedies granted to Pledgee hereunder shall
continue to exist and may be exercised by Pledgee at any time and from time
to time irrespective of the fact that the indebtedness or any part thereof
may have become barred by any statute of limitations, or that the personal
liability of the undersigned may have ceased.
12. Pledgee agrees that so long as the indebtedness is not in default,
shares of Pledgee's common stock held hereunder as collateral for the
indebtedness may be released at the request of the undersigned from pledge as
the indebtedness is paid. Other than as agreed to by the undersigned and
Pledgee, such releases shall be the largest number of shares of Pledgee's
common stock such that the shares constituting the additional collateral
shall have a value equal to or greater than the remaining amount of principal
indebtedness and such that the shares constituting the initial collateral
shall have a value equal to or greater than fifty percent (50%) of the
remaining amount of principal indebtedness. Release from pledge, however,
shall not result in release from the provisions of those certain Joint Escrow
Instructions, of even date herewith, among the parties to this Pledge
Agreement and the Escrow Agent named therein or from the Purchase Option of
Pledgee, set forth in the Early Exercise Stock Purchase Agreements, of even
date herewith, between the parties to this Pledge Agreement.
13. Notwithstanding anything to the contrary contained herein or in the
Notes, Pledgee agrees that the indebtedness is non-recourse as to the
undersigned (and the undersigned's assets other than the collateral) and that
it shall not seek any personal judgment against the undersigned with respect
to the indebtedness and shall look only to the collateral pledged hereunder,
provided however, that the foregoing shall not in any way limit, impair or
otherwise affect any rights Pledgee may have to proceed against the
undersigned for intentional and willful fraud or misrepresentations on the
part of or by the undersigned.
<PAGE>
14. Any forbearance or failure or delay by Pledgee in exercising any right,
power or remedy hereunder shall not be deemed to be a waiver of such right,
power or remedy, and any single or partial exercise of any right, power or
remedy hereunder shall not preclude the further exercise thereof; and every
right, power and remedy of Pledgee shall continue in full force and effect
until such right, power or remedy is specifically waived by an instrument in
writing executed by Pledgee.
Dated: March 5, 1998
/s/ Lev M. Dawson
---------------------------------------
LEV M. DAWSON
ATTACHMENT:
Schedule 1
Exhibit A
<PAGE>
SCHEDULE 1
TO
PLEDGE AGREEMENT
<PAGE>
SCHEDULE I
Attached to and forming a part of that certain Pledge Agreement ("PLEDGE
AGREEMENT") dated as of March 5, 1998, executed by LEV M. DAWSON in favor of
VALENCE TECHNOLOGY, INC. ("PLEDGEE").
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
STOCK ISSUER CLASS OF STOCK TYPE OF STOCK CERTIFICATE NUMBER OF SHARES
COLLATERAL NUMBERS
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Valence Technology, Inc. Common Initial 960,494
- --------------------------------------------------------------------------------------------------
Valence Technology, Inc. Common Additional 842,650
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
Total 1,803,144
- --------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT A
STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE
<PAGE>
STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Stock Pledge Agreement
(the "Stock Pledge Agreement") between the undersigned and VALENCE
TECHNOLOGY, INC., a Delaware corporation (the "Company"), dated as of
___________, 1998 (the "Agreement"), ___________ hereby sells, assigns and
transfers unto the Company ___________ (________) shares of common stock of
the Company, standing in the undersigned's name on the books of the Company
represented by Certificate No. ___________ herewith, and does hereby
irrevocably constitute and appoint _____________ attorney to transfer the
said stock on the books of the Company with full power of substitution in the
premises. This Assignment may be used only in accordance with and subject to
the terms and conditions of the Stock Pledge Agreement, in connection with
the shares of Common Stock pledge by the undersigned pursuant to the Stock
Pledge Agreement, and only to the extent that such shares remain subject to
the Conditions of the Stock Pledge Agreement.
Dated: _________________
/s/ Lev M. Dawson
-----------------------------------
[Signature]
Lev M. Dawson
-----------------------------------
[Print Name]
[INSTRUCTION: Please do not fill in any blanks other than the signature line.
The purpose of this Assignment is to enable the Company to exercise its rights
as set forth in the Stock Pledge Agreement without requiring additional
signatures on the part of Purchaser.]
<PAGE>
EXHIBIT 10.3
EARLY EXERCISE STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made by and between VALENCE TECHNOLOGY, INC., a
Delaware corporation (the "Corporation"), and LEV M. DAWSON ("Purchaser").
WITNESSETH:
WHEREAS, Purchaser holds a nonstatutory stock option to purchase shares
of common stock of the Corporation not granted pursuant to a plan which
Purchaser desires to exercise; and
WHEREAS, Purchaser wishes to take advantage of the early exercise
provision of his option and therefore to enter into this Agreement;
NOW, THEREFORE, IT IS AGREED between the parties as follows:
1. Purchaser hereby agrees to purchase from the Corporation, and the
Corporation hereby agrees to sell to Purchaser, an aggregate of 300,000
shares of the common stock (the "Stock") of the Corporation, for an exercise
price of $5.0625 per share (total exercise price: $1,518,750.00), payable as
follows:
Cash at Closing $ 0.00
Promissory Note in the form of
Exhibit E (the "Note") $1,518,750.00
Total Exercise Price $1,518,750.00
The closing hereunder shall occur at the offices of the Corporation on
the date of this Agreement or at such other time and place as the parties may
mutually agree upon in writing.
At the closing, Purchaser shall deliver three (3) stock assignments in
the form of Exhibit B, duly endorsed (with date and number of shares left
blank), joint escrow instructions (the "Joint Escrow Instructions") in the
form of Exhibit C, duly executed by Purchaser, and the total exercise price
(including an executed Note in the form of Exhibit D and an executed pledge
agreement in the form of Exhibit E (the "Pledge Agreement") under which all
shares of the Stock acquired by Note as well as 842,650 shares of the
Company's common stock previously owned by Purchaser (the "Additional
Collateral") shall be pledged as collateral security for the payment of the
indebtedness represented by the Note.
At the closing or as soon thereafter as practicable, the Corporation
shall deliver to the Escrow Agent (as defined in paragraph 8 below) share
certificates for all of the Stock that is to be subject to the Purchase
Option (as defined in paragraph 2 below), and shall deliver share
certificates to Purchaser for all of the Stock, if any, that is not to be
subject to the Purchase Option or the Pledge Agreement. The certificates for
all of the Stock that is subject to the Pledge
1.
<PAGE>
Agreement but not the Purchase Option shall be retained by the Corporation as
security pursuant to the Pledge Agreement.
2. The Stock to be purchased by Purchaser pursuant to this Agreement shall
be subject to the following option ("Purchase Option"):
(a) In the event that Purchaser shall cease to be an employee of the
Corporation for any reason (including his death), or no reason, with or
without cause, the Purchase Option may be exercised. The Corporation shall
have the right at any time within the ninety (90) day period after
Purchaser's termination of service with the Company and all Related Companies
or such longer period as may be agreed to by the Company and Purchaser (for
example, for purposes of satisfying the requirements of Section 1202(c)(3) of
the Internal Revenue Code) to purchase from Purchaser or his personal
representative, as the case may be, at the price per share paid by Purchaser
pursuant to this Agreement ("Option Price"), up to but not exceeding the
number of shares of the Stock set forth on Exhibit A hereto which is
incorporated herein by this reference.
(b) In addition, and without limiting the foregoing Purchase Option, if at
any time during the term of the Purchase Option, there occurs: (a) a
dissolution or liquidation of the Corporation; (b) a merger or consolidation
involving the Corporation in which the Corporation is not the surviving
corporation; (c) a reverse merger in which the Corporation is the surviving
corporation but the shares of the Corporation's common stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of other securities, cash or otherwise;
or (d) any other capital reorganization in which more than fifty percent
(50%) of the shares of the Corporation entitled to vote are exchanged, then:
(i) if there is no successor to the Corporation, the Corporation shall have
the right to exercise its Purchase Option as to all or any portion of the
Stock then subject to the Purchase Option set forth above to the same extent
as if Purchaser's employment by the Corporation had ceased on the date
preceding the date of consummation of said event or transaction or (ii) the
Purchase Option may be assigned to any successor of the Corporation, and the
Purchase Option shall apply if Purchaser shall cease for any reason to be an
employee of such successor on the same basis as set forth above. In that
case, references herein to the "Corporation" shall be deemed to refer to such
successor.
(c) The Corporation shall be entitled to pay for any shares purchased
pursuant to its Purchase Option at the Corporation's option in cash, by
offset against any indebtedness owing to the Corporation by Purchaser
including without limitation any Note given in payment for the Stock, or a
combination of both.
(d) As used herein, employment with the Corporation shall include employment
with an affiliate of the Corporation. Additionally, as used herein,
references to employee, employment and similar terms shall be deemed to
include the performance of services as a consultant or director, provided,
however, that no rights as an employee shall arise by reason of the use of
such terms.
(e) This Agreement is not an employment contract and nothing in this
Agreement shall be deemed to create in any way whatsoever any obligation on
the part of Purchaser to continue in
2.
<PAGE>
the employ of the Corporation, or of the Corporation to continue Purchaser in
the employ of the Corporation.
3. The Purchase Option may be exercised by giving written notice of
exercise delivered or mailed as provided in paragraph 15. Upon providing of
such notice and payment or tender of the purchase price, the Corporation
shall become the legal and beneficial owner of the Stock being purchased and
all rights and interests therein or related thereto.
4. If from time to time during the term of the Purchase Option there is any
stock dividend or liquidating dividend or distribution of cash and/or
property, stock split or other change in the character or amount of any of
the outstanding securities of the Corporation, then, in such event, any and
all new, substituted or additional securities or other property to which
Purchaser is entitled by reason of his ownership of Stock will be immediately
subject to the Purchase Option and be included in the word "Stock" for all
purposes of the Purchase Option with the same force and effect as the shares
of Stock then subject to the Purchase Option. While the total Option Price
shall remain the same after each such event, the Option Price per share of
Stock upon exercise of the Purchase Option shall be appropriately adjusted.
5. All certificates representing any shares of Stock of the Corporation
subject to the provisions of this Agreement shall have endorsed thereon
legends in substantially the following form:
(i) "The shares represented by this certificate are subject to an
option set forth in an agreement between the corporation and the registered
holder, or his predecessor in interest, a copy of which is on file at the
principal office of this corporation. Any transfer or attempted transfer of
any shares subject to such option is void without the prior express written
consent of the issuer of these shares."
(ii) "These securities have not been registered under the
Securities Act of 1933. They may not be sold, offered for sale, pledged or
hypothecated in the absence of an effective registration statement as to the
securities under said Act or an opinion of counsel satisfactory to the
corporation that such registration is not required."
(iii) Any legend required to be placed thereon by applicable laws.
6. Purchaser acknowledges that he is aware that the Stock to be issued to
him by the Corporation pursuant to this Agreement has not been registered
under the Securities Act of 1933, as amended (the "Act"), on the basis that
no distribution or public offering of the Stock is to be effected, and in
this connection acknowledges that the Corporation is relying on the following
representations. In this connection, Purchaser warrants and represents to
the Corporation that he is acquiring the Stock for investment and not with a
view to or for sale in connection with any distribution of the Stock or with
any present intention of distributing or selling the Stock and he does not
presently have reason to anticipate any change in circumstances or any
particular occasion or event which would cause him to sell the Stock.
Purchaser recognizes that the Stock must be held indefinitely unless it is
subsequently registered under the Act or an exemption from
3.
<PAGE>
such registration is available and, further, recognizes that the Corporation
is under no obligation to register the Stock or to comply with any exemption
from such registration.
7. Purchaser is aware that the Stock may not be sold pursuant to Rule 144
adopted under the Act unless certain conditions are met and until Purchaser
has held the Stock as set forth in Rule 144 for at least one (1) year.
Whether or not the Purchase Option is exercised or has lapsed, Purchaser
further agrees not to make any disposition of any of the Stock in any event
unless and until:
(a) There is then in effect a registration statement under the Act covering
such proposed disposition and such disposition is made in accordance with
such registration statement; or
(b) (i) Purchaser shall have notified the Corporation of the proposed
disposition and shall have furnished the Corporation with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii)
Purchaser shall have given the Corporation an opinion of counsel, which
opinion and counsel shall be satisfactory to the Corporation, to the effect
that such disposition will not require registration of the Stock under the
Act.
8. As security for his faithful performance of the terms of this Agreement
and to insure the availability for delivery of Purchaser's Stock upon
exercise of the Purchase Option herein provided for, Purchaser agrees, at the
closing hereunder (or as soon thereafter as practicable), to deliver (or have
the Corporation deliver on the Purchaser's behalf) to and deposit with
Cooley Godward LLP ("Escrow Agent"), as Escrow Agent in this
transaction, three (3) stock assignments duly endorsed (with date and number
of shares left blank) in the form attached hereto as Exhibit B, together with
a certificate or certificates evidencing all of the Stock subject to the
Purchase Option; said documents are to be held by the Escrow Agent and
delivered by said Escrow Agent pursuant to the Joint Escrow Instructions of
the Corporation and Purchaser set forth in Exhibit C attached hereto and
incorporated herein by this reference, which instructions shall also be
delivered to the Escrow Agent at the closing hereunder (or as soon thereafter
as practicable). The Stock and the Additional Collateral are also subject to
the Pledge Agreement, and possession of the certificates and stock
assignments by the Escrow Agent shall also constitute possession by the
Corporation of such instruments pursuant to the Pledge Agreement.
9. Purchaser shall not sell or transfer any of the Stock subject to the
Purchase Option or any interest therein or any of the Additional Collateral
or any interest therein so long as such Stock or such Additional Collateral
is subject to the Purchase Option or the Pledge Agreement.
10. The Corporation shall not be required (i) to transfer on its books any
shares of Stock of the Corporation which shall have been sold or transferred
in violation of any of the provisions set forth in this Agreement or (ii) to
treat as owner of such shares or to accord the right to vote as such owner or
to pay dividends to any transferee to whom such shares shall have been so
transferred.
4.
<PAGE>
11. Subject to the provisions of paragraphs 9 and 10 above, Purchaser (but
not any unapproved transferee) shall, during the term of this Agreement,
exercise all rights and privileges of a stockholder of the Corporation with
respect to the Stock.
12. The parties agree to execute such further instruments and to take such
further action as reasonably may be necessary to carry out the intent of this
Agreement.
13. Purchaser acknowledges that this Agreement has been prepared on behalf
of the Cooley Godward LLP, counsel to the Company and that Cooley Godward LLP
does not represent, and is not acting on behalf of, Purchaser. Purchaser has
been provided with an opportunity to consult with his own counsel with
respect to this Agreement.
14. With the exceptions of the limitations and conditions set forth in this
Agreement and the documents referred to this Agreement, including without
limitation all attachments and exhibits hereto, and the nonstatory stock
option agreement between the Corporation and the Purchaser, and applicable
securities laws, the Corporation represents that the Stock, when issued, will
be duly authorized, validly issued, fully paid and non-assessable, free and
clear from any security interests, liens, claims, pledge agreements,
limitations on voting rights, charges or other encumbrances of any nature
whatsoever.
15. Any notice required or permitted hereunder shall be given in writing and
shall be deemed effectively given upon personal delivery or upon deposit in
any United States Post Office Box, by registered or certified mail with
postage and fees prepaid, addressed to the other party hereto at his address
hereinafter shown below his signature or at such other address as such party
may designate by five (5) days' advance written notice to the other party
hereto.
16. This Agreement shall bind and inure to the benefit of the successors and
assigns of the Corporation and, subject to the restrictions on transfer
herein set forth, inure to the benefit of and be binding upon Purchaser, his
heirs, executors, administrators, successors, and assigns. Without limiting
the generality of the foregoing, the Purchase Option of the Corporation
hereunder shall be assignable by the Corporation at any time or from time to
time, in whole or in part.
17. This Agreement constitutes the entire agreement between the parties with
respect to the subject matter hereof. This Agreement may not be amended,
modified or revoked, in whole or in part, except by an agreement in writing
signed by each of the parties hereto.
5.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 5th day of March, 1998.
VALENCE TECHNOLOGY, INC.
By: /s/ David Archibald
-------------------------------
Title: CFO
----------------------------
Address: 301 Conestoga Way
Henderson, NV 89015
PURCHASER
Signature: /s/ Lev M. Dawson
------------------------
Print Name: Lev M. Dawson
-----------------------
Address: 301 Conestoga Way
Henderson, NV 89015
ATTACHMENTS:
Exhibit A Vesting Schedule
Exhibit B Assignment Separate from Certificate
Exhibit C Joint Escrow Instructions
Exhibit D Promissory Note
Exhibit E Pledge Agreement
6.
<PAGE>
EXHIBIT A
VESTING SCHEDULE
NUMBER OF SHARES
SUBJECT TO
IF CESSATION OF EMPLOYMENT OCCURS: PURCHASE OPTION:
Before March 31, 1998 300,000 shares
After March 30, 1998
but before June 30, 1998 249,489 shares
After June 29, 1998
but before September 30, 1998 198,978 shares
After September 29, 1998
but before December 31, 1998 148,467 shares
After December 30, 1998
but before March 31, 1999 97,956 shares
After March 30, 1999
but before June 30, 1999 48,978 shares
After June 29, 1999 0 shares
<PAGE>
EXHIBIT B
STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE
<PAGE>
STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Early Exercise Stock
Purchase Agreement between the undersigned and VALENCE TECHNOLOGY, INC., a
Delaware corporation (the "Company"), dated as of ___________, 1998 (the
"Agreement"), ____________ hereby sells, assigns and transfers unto the
Company ______________ (___________) shares of common stock of the Company,
standing in the undersigned's name on the books of the Company represented by
Certificate No. ____________ herewith, and does hereby irrevocably constitute
and appoint ______________ attorney to transfer the said stock on the books of
the Company with full power of substitution in the premises. This Assignment
may be used only in accordance with and subject to the terms and conditions
of the Agreement, in connection with the repurchase of shares of Common Stock
issued to the undersigned pursuant to the Agreement, and only to the extent
that such shares remain subject to the Company's Purchase Option under the
Agreement.
Dated: ___________________
/s/ Lev M. Dawson
-------------------------------------
[Signature]
Lev M. Dawson
-------------------------------------
[Print Name]
[INSTRUCTION: Please do not fill in any blanks other than the signature line.
The purpose of this Assignment is to enable the Company to exercise its
repurchase option set forth in the Agreement without requiring additional
signatures on the part of Purchaser.]
<PAGE>
EXHIBIT C
JOINT ESCROW INSTRUCTIONS
<PAGE>
JOINT ESCROW INSTRUCTIONS
COOLEY GODWARD LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
Attn: Andrei M. Manoliu
Dear Sir:
As Escrow Agent for both VALENCE TECHNOLOGY, INC., a Delaware
corporation ("Corporation"), and the undersigned purchaser of stock of the
Corporation ("Purchaser"), you are hereby authorized and directed to hold the
documents delivered to you pursuant to the terms of that certain Early
Exercise Stock Purchase Agreement ("Agreement"), dated March 5 1998, to which
a copy of these Joint Escrow Instructions is attached as Exhibit C, in
accordance with the following instructions:
1. In the event the Corporation or an assignee shall elect to exercise the
Purchase Option set forth in the Agreement, the Corporation or its assignee
will give to Purchaser and you a written notice specifying the number of
shares of stock to be purchased, the purchase price, and the time for a
closing hereunder at the principal office of the Corporation. Purchaser and
the Corporation hereby irrevocably authorize and direct you to close the
transaction contemplated by such notice in accordance with the terms of said
notice.
2. At the closing you are directed (a) to date any stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Corporation against
the simultaneous delivery to you of the purchase price (which may include
suitable acknowledgment of cancellation of indebtedness) of the number of
shares of stock being purchased pursuant to the exercise of the Purchase
Option.
3. Purchaser irrevocably authorizes the Corporation to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as specified in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as his
attorney-in-fact and agent for the term of this escrow to execute with
respect to such securities and other property all documents of assignment
and/or transfer and all stock certificates necessary or appropriate to make
all securities negotiable and complete any transaction herein contemplated.
4. This escrow shall terminate upon expiration or exercise in full of the
Purchase Option, whichever occurs first. Shares of stock held by you for
which the Purchase Option has lapsed as set forth in the Agreement and the
schedule set forth in Exhibit A of the Agreement shall be released hereunder
and delivered to the Purchaser upon request of the Purchaser, PROVIDED,
HOWEVER, that if at the time of such request you are advised by the
Corporation that all or part of the shares over which the Purchase Option has
lapsed are the subject of a pledge or other security agreement, you shall
deliver all or part, as applicable, of such shares to the pledgeholder or
other person designated by
<PAGE>
the Corporation, with delivery of any such shares which are not subject to a
pledge or other security agreement to the Purchaser. Upon such delivery to
Purchaser or the pledgeholder or other person designated by the Corporation,
you shall be discharged of all further obligations hereunder with respect to
such shares.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to
Purchaser, you shall deliver all of same to Purchaser and shall be discharged
of all further obligations hereunder; PROVIDED, HOWEVER, that if at the time
of termination of this escrow you are advised by the Corporation that the
property subject to this escrow is the subject of a pledge or other security
agreement, you shall deliver all such property to the pledgeholder or other
person designated by the Corporation.
6. Except as otherwise provided in these Joint Escrow Instructions, your
duties hereunder may be altered, amended, modified or revoked only by a
writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying
or refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties
or their assignees. You shall not be personally liable for any act you may
do or omit to do hereunder as Escrow Agent or as attorney-in-fact for
Purchaser while acting in good faith and any act done or omitted by you
pursuant to the advice of your own attorneys shall be conclusive evidence of
such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law, and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court.
In case you obey or comply with any such order, judgment or decree of any
court, you shall not be liable to any of the parties hereto or to any other
person, firm or corporation by reason of such compliance, notwithstanding any
such order, judgment or decree being subsequently reversed, modified,
annulled, set aside, vacated or found to have been entered without
jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authority or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or
called for hereunder.
10. You shall not be liable for the outlawing of any rights under any
statute of limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall resign by written notice to each party. In the event of any such
termination, the Corporation may appoint any officer or assistant officer of
the Corporation as successor Escrow Agent and Purchaser hereby confirms the
appointment of such successor or successors as his attorney-in-fact and agent
to the full extent of your appointment.
<PAGE>
12. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
13. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities,
you are authorized and directed to retain in your possession without
liability to anyone all or any part of said securities until such dispute
shall have been settled either by mutual written agreement of the parties
concerned or by a final order, decree or judgment of a court of competent
jurisdiction after the time for appeal has expired and no appeal has been
perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
14. Any notice required or permitted hereunder shall be given in writing and
shall be deemed effectively given upon personal delivery, including delivery
by express courier or five days after deposit in the United States Post
Office, by registered or certified mail with postage and fees prepaid,
addressed to each of the other parties hereunto entitled at the following
addresses, or at such other addresses as a party may designate by ten days'
advance written notice to each of the other parties hereto:
CORPORATION: VALENCE TECHNOLOGY, INC.
301 Conestoga Way
Henderson, NV 89015
PURCHASER: LEV M. DAWSON
301 Conestoga Way
Henderson, NV 89015
ESCROW AGENT: COOLEY GODWARD LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
15. By signing these Joint Escrow Instructions you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.
16. You shall be entitled to employ such legal counsel and other experts as
you may deem necessary properly to advise you in connection with your
obligations hereunder. You may rely upon the advice of such counsel, and may
pay such counsel reasonable compensation therefor. The Corporation shall be
responsible for all fees generated by such legal counsel in connection with
your obligations hereunder.
17. This instrument shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. It is
understood and agreed that references to "you" or "your" herein refer to the
original Escrow Agent and to any and all successor Escrow Agents. It is
understood and agreed that the Corporation may at any time or from time to
time assign its rights under the Agreement and these Joint Escrow
Instructions in whole or in part.
<PAGE>
18. This Agreement shall be governed by and interpreted and determined in
accordance with the laws of the State of California, as such laws are applied
by California courts to contracts made and to be performed entirely in
California by residents of that state.
Very truly yours,
VALENCE TECHNOLOGY, INC.
Signature: /s/ David Archibald
-------------------------------------
Print Name: David Archibald
-------------------------------------
Title: CFO
-------------------------------------
PURCHASER:
/s/ Lev M. Dawson
-------------------------------------
LEV M. DAWSON
ESCROW AGENT:
COOLEY GODWARD LLP
By: /s/ Deborah A. Marshall
------------------------------
Name: Deborah A. Marshall
------------------------------
<PAGE>
EXHIBIT D
PROMISSORY NOTE
<PAGE>
NON-RECOURSE PROMISSORY NOTE
$1,518,750.00 Henderson, Nevada
March 5, 1998
FOR VALUE RECEIVED, the undersigned hereby unconditionally promises to
pay to the order of VALENCE TECHNOLOGY, INC., a Delaware corporation (the
"Company"), at 301 Conestoga Way, Henderson, Nevada, 89015, or at such other
place as the holder hereof may designate in writing, in lawful money of the
United States of America and in immediately available funds, the principal
sum of $1,518,750.00 together with interest accrued from the date hereof on
the unpaid principal at the rate of 5.69% per annum, or the maximum rate
permissible by law (which under the laws of the State of California shall be
deemed to be the laws relating to permissible rates of interest on commercial
loans), whichever is less, as follows:
PRINCIPAL REPAYMENT. The outstanding principal amount hereunder
shall be due and payable in full on September 5, 2007.
INTEREST PAYMENTS. Interest shall be payable annually in arrears
and shall be calculated on the basis of a 360-day year for the actual
number of days elapsed;
PROVIDED, HOWEVER, that in the event that the undersigned's employment by and
all relationships as a director or consultant with the Company or an
Affiliate of the Company (as defined in the Company's 1990 Stock Option Plan)
are terminated for any reason prior to payment in full of this Note, this
Note shall be accelerated and all remaining unpaid principal and interest
shall become due and payable within six months following such termination.
If the undersigned fails to pay any of the principal and accrued
interest when due, the Company, at its sole option, shall have the right to
accelerate this Note, in which event the entire principal balance and all
accrued interest shall become immediately due and payable, and immediately
collectible by the Company pursuant to applicable law.
This Note may be prepaid at any time without penalty. All money paid
toward the satisfaction of this Note shall be applied first to the payment of
interest as required hereunder and then to the retirement of the principal.
This is a non-recourse note. The full amount of this Note is secured
solely by a pledge of shares of Common Stock of the Company, and is subject
to all of the terms and provisions of the Stock Pledge Agreement of even date
herewith between the undersigned and the Company. The Company shall have
recourse only to the "collateral" as such term is defined in the Stock Pledge
Agreement and not to any other assets or properties, tangible or intangible,
of the undersigned, and the undersigned shall have no personal liability for
amounts due under this Note.
<PAGE>
The undersigned hereby represents and agrees that the amounts due under
this Note are not consumer debt, and are not incurred primarily for personal,
family or household purposes, but are for business and commercial purposes
only.
The undersigned hereby waives presentment, protest and notice of
protest, demand for payment, notice of dishonor and all other notices or
demands in connection with the delivery, acceptance, performance, default or
endorsement of this Note.
The holder hereof shall be entitled to recover, and the undersigned
agrees to pay when incurred, subject to the non-recourse provisions of this
Note, all costs and expenses of collection of this Note, including without
limitation, reasonable attorneys' fees.
This Note shall be governed by, and construed, enforced and interpreted
in accordance with, the laws of the State of California, excluding conflict
of laws principles that would cause the application of laws of any other
jurisdiction.
Signed /s/ Lev M. Dawson
------------------------------
LEV M. DAWSON
<PAGE>
EXHIBIT E
PLEDGE AGREEMENT
<PAGE>
STOCK PLEDGE AGREEMENT
1. As collateral security for the payment of those certain $3,343,750.88
and $1,518,750.00 non-recourse promissory notes (the "Notes") issued this
date to VALENCE TECHNOLOGY, INC., a Delaware corporation ("Pledgee"), by the
undersigned (hereinafter called "indebtedness"), the undersigned hereby
assigns, transfers to and pledges with the Pledgee the securities listed on
Schedule 1 hereto which were this day delivered to be deposited with Pledgee,
together with any stock rights, rights to subscribe, dividends paid in cash
or other property in connection with the complete or partial liquidation of
Pledgee, stock dividends, dividends paid in stock, new securities or other
property except cash dividends other than liquidating dividends to which the
undersigned is or may hereafter become entitled to receive on account of such
property, and in the event that the undersigned receives any such, the
undersigned will immediately deliver it to Pledgee to be held by Pledgee
hereunder in the same manner as the property originally pledged hereunder.
All such certificates or instruments shall be accompanied by appropriate duly
executed instruments of transfer or assignment (including, without
limitation, stock powers) in blank, all in form attached hereto as Exhibit A.
The 660,494 and the 300,000 shares of the Company's common stock purchased
by the undersigned pursuant to those certain Early Exercise Stock Purchase
Agreements by and between the Pledgee and the undersigned of even date
herewith and herewith assigned, transferred to and pledged with Pledgee under
this paragraph are hereinafter called "initial collateral." The 842,650
shares of the Company's common stock previously held by the undersigned and
herewith assigned, transferred to and pledged with Pledgee under this
paragraph are hereinafter call "additional collateral." All property
(together the initial collateral and the additional collateral) assigned,
transferred to and pledged with Pledgee under this paragraph is hereinafter
called "collateral."
2. At any time, without notice, and at the expense of the undersigned,
Pledgee in its name or in the name of its nominee or of the undersigned may,
but shall not be obligated to: (1) collect by legal proceedings or otherwise
all dividends (except cash dividends other than liquidating dividends),
interest, principal payments and other sums now or hereafter payable upon or
on account of said collateral; (2) enter into any extension, reorganization,
deposit, merger, or consolidation agreement, or any agreement in any way
relating to or affecting the collateral, and in connection therewith may
deposit or surrender control of such collateral thereunder, accept other
property in exchange for such collateral and do and perform such acts and
things as it may deem proper, and any money or property received in exchange
for such collateral shall be applied to the indebtedness or thereafter held
by it pursuant to the provisions hereof; (3) insure, process and preserve the
collateral; (4) cause the collateral to be transferred to its name or to the
name of its nominee; (5) exercise as to such collateral all the rights,
powers, and remedies of an owner, except that so long as the indebtedness is
not in default the undersigned shall retain all voting rights as to the
collateral.
3. The undersigned agrees to pay prior to delinquency all taxes, charges,
liens and assessments against the collateral, and upon the failure of the
undersigned to do so Pledgee at its option may pay any of them and shall be
the sole judge of the legality or validity thereof and the amount necessary
to discharge the same.
<PAGE>
4. All advances, charges, costs and expenses, including reasonable
attorneys' fees, incurred or paid by Pledgee in exercising any right, power
or remedy conferred by this agreement, or in the enforcement thereof, shall
become a part of the indebtedness secured hereunder and shall be paid to
Pledgee by the undersigned immediately and without demand.
5. At the option of Pledgee and without necessity of demand or notice, all
or any part of the indebtedness of the undersigned shall immediately become
due and payable irrespective of any agreed maturity, upon the happening of
any of the following events: (1) failure to keep or perform any of the terms
or provisions of this agreement; (2) default in the payment of principal or
interest when due; (3) the levy of any attachment, execution or other process
against the collateral; or (4) the insolvency, commission of an act of
bankruptcy, general assignment for the benefit of creditors, filing of any
petition in bankruptcy or for relief under the provisions of Title 11, United
States Code, Bankruptcy, of, by, or against the undersigned.
6. In the event of the nonpayment of any indebtedness when due, whether by
acceleration or otherwise, or upon the happening of any of the events
specified in the last preceding paragraph, Pledgee may then, or at any time
thereafter, at its election, apply, set off, collect or sell in one or more
sales, or take such steps as may be necessary to liquidate and reduce to cash
in the hands of Pledgee in whole or in part, with or without any previous
demands or demand of performance or notice or advertisement, the whole or any
part of the collateral in such order as Pledgee may elect, and any such sale
may be made either at public or private sale at its place of business or
elsewhere, or at any broker's board or securities exchange, either for cash
or upon credit or for future delivery; PROVIDED, HOWEVER, that if such
disposition is at private sale, then the purchase price of the collateral
shall be equal to the public market price then in effect, or, if at the time
of sale no public market for the collateral exists, then, in recognition of
the fact that the sale of the collateral would have to be registered under
the Securities Act of 1933 and that the expenses of such registration are
commercially unreasonable for the type and amount of collateral pledged
hereunder, Pledgee and the undersigned hereby agree that such private sale
shall be at a purchase price mutually agreed to by Pledgee and the
undersigned or, if the parties cannot agree upon a purchase price, then at a
purchase price established by a majority of three independent appraisers
knowledgeable of the value of such collateral, one named by the undersigned
within 10 days after written request by the Pledgee to do so, one named by
Pledgee within such 10 day period, and the third named by the two appraisers
so selected, with the appraisal to be rendered by such body within 30 days of
the appointment of the third appraiser. The cost of such appraisal,
including all appraiser's fees, shall be charged against the proceeds of sale
as an expense of such sale. Pledgee may be the purchaser of any or all
collateral so sold and hold the same thereafter in its own right free from
any claim of the undersigned or right of redemption. Demands of performance,
notices of sale, advertisements and presence of property at sale are hereby
waived, and Pledgee is hereby authorized to sell hereunder any evidence of
debt pledged to it. Any sale hereunder may be conducted by any officer or
agent of Pledgee.
7. The proceeds of the sale of any of the collateral and all sums received
or collected by Pledgee from or on account of such collateral shall be
applied by Pledgee to the payment of expenses incurred or paid by Pledgee in
connection with any sale, transfer or delivery of the collateral, to the
payment of any other costs, charges, attorneys' fees or expenses mentioned
<PAGE>
herein, and to the payment of the indebtedness or any part hereof, all in
such order and manner as Pledgee in its discretion may determine. Pledgee
shall pay any balance to the undersigned.
8. Pledgee shall be under no duty or obligation whatsoever to make or give
any presentments, demands for performance, notices of non-performance,
protests, notices of protest or notices of dishonor in connection with any
obligations or evidences of indebtedness held by Pledgee as collateral, or in
connection with any obligations or evidences of indebtedness which constitute
in whole or in part the indebtedness secured hereunder.
9. Pledgee may at any time deliver the collateral or any part thereof to
the undersigned and the receipt of the undersigned shall be a complete and
full acquittance for the collateral so delivered, and Pledgee shall
thereafter be discharged from any liability or responsibility therefor.
10. Upon the transfer of all or any part of the indebtedness Pledgee may
transfer all or any part of the collateral and shall be fully discharged
thereafter from all liability and responsibility with respect to such
collateral so transferred, and the transferee shall be vested with all the
rights and powers of Pledgee hereunder with respect to such collateral so
transferred; but with respect to any collateral not so transferred Pledgee
shall retain all rights and powers hereby given.
11. Until all indebtedness shall have been paid in full the power of sale
and all other rights, powers and remedies granted to Pledgee hereunder shall
continue to exist and may be exercised by Pledgee at any time and from time
to time irrespective of the fact that the indebtedness or any part thereof
may have become barred by any statute of limitations, or that the personal
liability of the undersigned may have ceased.
12. Pledgee agrees that so long as the indebtedness is not in default,
shares of Pledgee's common stock held hereunder as collateral for the
indebtedness may be released at the request of the undersigned from pledge as
the indebtedness is paid. Other than as agreed to by the undersigned and
Pledgee, such releases shall be the largest number of shares of Pledgee's
common stock such that the shares constituting the additional collateral
shall have a value equal to or greater than the remaining amount of principal
indebtedness and such that the shares constituting the initial collateral
shall have a value equal to or greater than fifty percent (50%) of the
remaining amount of principal indebtedness. Release from pledge, however,
shall not result in release from the provisions of those certain Joint Escrow
Instructions, of even date herewith, among the parties to this Pledge
Agreement and the Escrow Agent named therein or from the Purchase Option of
Pledgee, set forth in the Early Exercise Stock Purchase Agreements, of even
date herewith, between the parties to this Pledge Agreement.
13. Notwithstanding anything to the contrary contained herein or in the
Notes, Pledgee agrees that the indebtedness is non-recourse as to the
undersigned (and the undersigned's assets other than the collateral) and that
it shall not seek any personal judgment against the undersigned with respect
to the indebtedness and shall look only to the collateral pledged hereunder,
provided however, that the foregoing shall not in any way limit, impair or
otherwise affect any rights Pledgee may have to proceed against the
undersigned for intentional and willful fraud or misrepresentations on the
part of or by the undersigned.
<PAGE>
14. Any forbearance or failure or delay by Pledgee in exercising any right,
power or remedy hereunder shall not be deemed to be a waiver of such right,
power or remedy, and any single or partial exercise of any right, power or
remedy hereunder shall not preclude the further exercise thereof; and every
right, power and remedy of Pledgee shall continue in full force and effect
until such right, power or remedy is specifically waived by an instrument in
writing executed by Pledgee.
Dated: March 5, 1998
/s/ Lev M. Dawson
----------------------------------
LEV M. DAWSON
ATTACHMENT:
Schedule 1
Exhibit A
<PAGE>
SCHEDULE 1
TO
PLEDGE AGREEMENT
<PAGE>
SCHEDULE I
Attached to and forming a part of that certain Pledge Agreement ("PLEDGE
AGREEMENT") dated as of March 5, 1998, executed by LEV M. DAWSON in favor of
VALENCE TECHNOLOGY, INC. ("PLEDGEE").
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
STOCK ISSUER CLASS OF STOCK TYPE OF STOCK CERTIFICATE NUMBER OF SHARES
COLLATERAL NUMBERS
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Valence Technology, Inc. Common Initial 960,494
- --------------------------------------------------------------------------------------------------
Valence Technology, Inc. Common Additional 842,650
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
Total 1,803,144
- --------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT A
STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE
<PAGE>
STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Stock Pledge Agreement
(the "Stock Pledge Agreement") between the undersigned and VALENCE
TECHNOLOGY, INC., a Delaware corporation (the "Company"), dated as of
___________, 1998 (the "Agreement"), ___________ hereby sells, assigns and
transfers unto the Company ___________ (________) shares of common stock of
the Company, standing in the undersigned's name on the books of the Company
represented by Certificate No. ___________ herewith, and does hereby
irrevocably constitute and appoint _____________ attorney to transfer the
said stock on the books of the Company with full power of substitution in the
premises. This Assignment may be used only in accordance with and subject to
the terms and conditions of the Stock Pledge Agreement, in connection with
the shares of Common Stock pledge by the undersigned pursuant to the Stock
Pledge Agreement, and only to the extent that such shares remain subject to
the Conditions of the Stock Pledge Agreement.
Dated: _________________
/s/ Lev M. Dawson
-----------------------------------
[Signature]
Lev M. Dawson
-----------------------------------
[Print Name]
[INSTRUCTION: Please do not fill in any blanks other than the signature line.
The purpose of this Assignment is to enable the Company to exercise its rights
as set forth in the Stock Pledge Agreement without requiring additional
signatures on the part of Purchaser.]
