Valence Technology, Inc. - Current Report

Item 8.01 Other Events.

On June 26, 2008, Berg & Berg Enterprises, LLC (“Berg & Berg”) advanced to the Company two million five hundred thousand dollars ($2,500,000) as a loan to be used to cover working capital requirements. Subsequently, the Company and Berg & Berg agreed to provide for up to ten million dollars ($10,000,000) in such interim working capital loans from time to time in order for Berg & Berg and/or certain of its affiliates to supplement the Company’s working capital and other financial needs. In connection therewith, on July 2, 2008, the Company executed a promissory note (the “Promissory Note”) in aggregate principal amount of two million five hundred thousand dollars ($2,500,000) in favor of Berg & Berg for the initial advance. The Promissory Note is payable on August 15, 2008 and bears interest at a rate of 8.0% per annum. At the election of Berg & Berg, all principal and accrued but unpaid interest then outstanding under the Promissory Note may be used as full or partial, as the case may be, satisfaction of the purchase price of the Company’s equity securities in the event Berg & Berg purchases any of the Company’s equity securities after the date of the Promissory Note. The managing member of Berg & Berg is Carl E. Berg, who is the Chairman of the Company’s Board of Directors and the principal stockholder of the Company.

It is the intention of the Company to either repay this Promissory Note on or before its maturity date or, subject to its cash flow requirements, issue equity securities to Berg & Berg in exchange for the cancellation of all or part of its then-outstanding obligations under the Promissory Note. Unless the obligations thereunder are first repaid, Berg & Berg has expressed its current intention to use the outstanding obligations under the Promissory Note as payment of the purchase price for the Company’s equity securities. The price of any such shares is anticipated to be the closing bid price on the date on which any such purchase occurs. The terms of any notes subsequently issued pursuant to the interim funding arrangement described above are anticipated to be similar.

This summary of the terms of the Promissory Note is qualified in its entirety by the text of the Promissory Note, a copy of which is attached to this Form 8-K as Exhibit 10.1 and is incorporated herein by reference.

Valence Technology, Inc. - Current Report