EXHIBIT 10.3
PROMISSORY NOTE
AMOUNT OF LOAN: $***500,000.00***USD FIVE HUNDRED THOUSAND AND NO/100***
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00000 Xxxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Dated: JUNE 21, 2006
Valence Technology, Inc., a Delaware corporation ("BORROWER"), for value
received, hereby promises to pay to the order of Xxxx & Xxxx Enterprises LLC
("LENDER"), in lawful money of the United States of America, the aggregate
principal amount of US $ FIVE HUNDRED THOUSAND AND NO CENTS (US$ 500.000.00).
1. PRINCIPAL AND INTEREST PAYMENTS; PREPAYMENTS. The outstanding principal
balance and accrued interest owing under this Note from June 20, 2006, shall be
due and payable in full on September 20, 2006, or such earlier date as may be
provided in the Loan Agreement (defined in paragraph 4, below). Interest shall
be due on the unpaid principal balance of this Note from time to time at the
rates set forth in the Loan Agreement. This Note may, without premium or
penalty, be prepaid in whole or in part, prior to the stated maturity date as
provided in the Loan Agreement. Any partial prepayment shall be applied first to
unpaid accrued interest and the balance, if any, shall be applied to principal.
No amounts prepaid hereunder may be reborrowed.
2. CONVERSION RIGHTS. On any trading day (Conversion Date) during the term
of this Promissory Note, Lender may convert the outstanding principal balance
and accrued interest owing under this Note into shares of common stock of the
Borrower by so notifying Borrower. The number of shares that Borrower shall
issue to Lender in exchange for the outstanding principal balance and accrued
interest owing under this Note, shall be determined by dividing the outstanding
principal balance and accrued interest owing under this Note by the closing bid
price of the common stock on the principal market on the trading day immediately
prior to the Conversion Date (the "CONVERSION PRICE"), PROVIDED HOWEVER, that
the Conversion price can be no lower than $1.70, the closing bid price of
Borrower's common stock on June 20, 2006, the trading day before the date
hereof. If the number of shares to be issued would create a fractional share of
common stock, such fractional share shall be disregarded and the number of
shares of common stock issuable shall be rounded to the nearest whole number of
shares. Within two Business Days after the Conversion Date, the Company shall
cause its Transfer Agent to prepare a certificate in the name of Lender
representing the number of shares as determined in accordance with this
paragraph. If Lender converts the outstanding principal balance and accrued
interest owing under this Note to shares of common stock this Promissory Note
shall be satisfied and of no further effect.
3. PLACE AND MANNER OF PAYMENT. All amounts payable hereunder shall be
payable in immediately available funds to Lender at 00000 Xxxxxxx Xxxxx,
Xxxxxxxxx, XX 00000, unless another place of payment is specified in writing by
Xxxxxx. All payments shall be Promissory Note RAW 2006 made in immediately
available funds.
4. OTHER AGREEMENTS. This Note evidences indebtedness incurred under that
certain Loan Agreement dated October 5, 2001 between Borrower and Lender (as
amended from time to time,
the "LOAN AGREEMENT"), and is secured by a security interest granted pursuant to
that certain Security Agreement between Borrower and Lender (as amended from
time to time, the "SECURITY AGREEMENT.") Reference is made to the Loan Agreement
and the Security Agreement for a description of the terms and conditions upon
which the Note was issued, the rights, limitations of rights, obligations and
duties of Borrower and the holder of the Note, and certain definitions of terms,
all of which are incorporated herein by reference (and all capitalized terms
used herein without definition shall have the meaning set forth in the Loan
Agreement.)
5. DEFAULT. In the case an Event of Default shall occur, the aggregate
unpaid principal balance plus accrued interest on this Note shall become or may
be declared to be due and payable in the manner and with the effect provided in
the Loan Agreement.
6. WAIVER; EXPENSES. Borrower waives presentment and demand for payment,
notice of dishonor, protest and notice of protest of this Note and all other
demands or notices, and shall pay all Lender Expenses relating to this Note or
the enforcement by Lender of its rights hereunder.
7. GOVERNING LAW. This Note shall be governed by, and construed and
enforced 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.
8. SUCCESSORS AND ASSIGNS. The provisions of this Note shall inure to the
benefit of and be binding on any successor to Borrower and shall extend to any
holder hereof.
* * *
IN WITNESS WHEREOF, the undersigned has duly executed this Promissory Note
as of the first date above written.
A VALENCE TECHNOLOGY, INC.,
A DELAWARE CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
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Name: Xxxxx X. Xxxxxxx
Its: CEO & President
