FIRST AMENDED & RESTATED SUPPLY AGREEMENT
CONFIDENTIAL
Exhibit
10.60
[*]
=
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED FROM PUBLIC FILING PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION. THE OMITTED
INFORMATION, WHICH HAS BEEN IDENTIFIED WITH THE SYMBOL “[*],” HAS BEEN FILED
SEPARATELY WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE
24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
FIRST
AMENDED & RESTATED SUPPLY AGREEMENT
This
First Amended & Restated Supply Agreement (“Agreement”)
is
made as of the last date set forth on the signature page hereto (the
“Effective
Date”)
between SOLARFUN
POWER HONG KONG LIMITED,
a
company registered in Hong Kong (hereinafter “SOLARFUN”)
and
HOKU
SCIENTIFIC, INC., a
Delaware corporation (hereinafter “HOKU”).
HOKU
and SOLARFUN are sometimes referred to in the singular as a “Party”
or
in
the plural as the “Parties”.
Recitals
Whereas,
HOKU and SOLARFUN are parties that certain Supply Agreement dated as of November
19, 2007 (the “Supply
Agreement”),
pursuant to which HOKU agreed to sell to SOLARFUN, and SOLARFUN agreed to
purchase from HOKU, polysilicon for SOLARFUN’S general use beginning in calendar
year 2009 for a continuous period of eight years from the date of the first
shipment.
Whereas,
HOKU and SOLARFUN desire to amend and restate the Supply Agreement as
hereinafter set forth to allow SOLARFUN additional time to negotiate with its
banks for issuance of a letter of credit in an amount equal to the Main Deposit;
and such other terms as set forth herein.
Whereas,
HOKU desires to supply polysilicon to SOLARFUN for its general use beginning
in
calendar year 2009 for a continuous period of eight years from the date of
the
first shipment;
Whereas,
in exchange for HOKU’s agreement to allocate the supply of polysilicon, SOLARFUN
desires to provide HOKU with a firm order for polysilicon upon the terms and
conditions provided herein;
NOW,
THEREFORE, in furtherance of the foregoing Recitals and in consideration of
the
mutual covenants and obligations set forth in this Agreement, the Parties hereby
agree as follows:
1. Definitions.
The
following terms used in this Agreement shall have the meanings set forth below:
1.1. “Affiliate”
shall mean, with respect to either Party to this Agreement, any entity that
is
controlled by or under common control with such Party.
1.2. “Agreement”
shall mean this First Amended & Restated Supply Agreement and all
appendices annexed to this Agreement as the same may be amended from time to
time in accordance with the provisions hereof.
1.3. “Escrow
Account”
is the bank deposit account created with the Escrow Agent pursuant to the Escrow
Agreement.
1.4. “Escrow
Agent”
shall mean (A) a bank that is domiciled in and organized under the laws of
one
of the fifty states of the United States of America, and which is reasonably
acceptable to HOKU, or (B) a bank located in China whose obligations and
responsibilities are guaranteed by a bank that is domiciled in and organized
under the laws of one of the fifty states of the United States of America,
and
which is reasonably acceptable to HOKU, or (C) any other bank that is acceptable
to HOKU in its sole discretion, or (D) any successor escrow agent appointed
pursuant to the Escrow Agreement.
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1.5. “Escrow
Agreement”
has the meaning set forth in Section 5.3.1
below.
1.6. “First
Shipment Date”
shall mean the first day of the calendar month in which HOKU commences
deliveries to SOLARFUN of Products pursuant to this Agreement.
1.7. “Facility”
shall mean any facility used by HOKU for the production of the
Product.
1.8. “Minimum
Annual Quantity of Product”
means [*] metric tons ([*] kilograms) of Product during the first Year and
[*]
metric tons ([*] kilograms) during each of the second through eighth Year,
inclusive.
1.9. “Product”
shall mean the raw polysilicon in chunk form manufactured by HOKU and sold
to
SOLARFUN pursuant to this Agreement.
1.10. “Product
Specifications”
shall mean the quality and other specifications set forth on Appendix 2 to
this
Agreement.
1.11. “Term”
shall mean the period during which this Agreement is in effect, as more
specifically set forth in Section 9
of this
Agreement.
1.12. “Total
Deposit”
shall mean all deposits or prepayments made by SOLARFUN to HOKU hereunder
including without limitation the Initial Deposit and the Main Deposit.
1.13. “Year”
shall mean each of the eight (8) twelve-month periods commencing on the First
Shipment Date.
2. Ordering.
Starting
on the First Shipment Date and each Year during the term of this Agreement
thereafter, SOLARFUN agrees to purchase from HOKU, and HOKU agrees to sell
to
SOLARFUN, the Minimum Annual Quantity of Product at the prices set forth on
Appendix 1 to this Agreement (the “Pricing
Schedule”).
This
Agreement constitutes a firm order from SOLARFUN for [*] metric tons of Product
that cannot be cancelled during the term of this Agreement, except as set forth
in Section 9
below.
3. Supply
Obligations.
3.1. HOKU
shall deliver each Year pursuant to this Agreement starting on the First
Shipment Date at least the Minimum Annual Quantity of Product in approximately
equal monthly shipments pursuant to Section 4.1 below; provided however, that
if
HOKU fails to deliver a monthly shipment, then HOKU may deliver any deficiency
within [*] days without breaching this section or incurring any purchase price
adjustment (pursuant to Section 3.3
below).
At any time during the term of this Agreement, HOKU may ship to SOLARFUN up
to
the full cumulative balance of Minimum Annual Quantity of Product to be shipped
through the end of this Contract (an “Excess
Shipment”)
with
SOLARFUN’s written consent. This shipment will be credited against each
subsequent Minimum Annual Quantity of Product. For example, if the Minimum
Annual Quantity of Product for a given Year is [*] metric tons, and if HOKU
delivers [*] metric tons in January, then the next shipment of [*] metric tons
is not required until the following Year.
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3.2. HOKU
intends to manufacture the Products at its Facility; however, notwithstanding
anything to the contrary herein, HOKU may deliver to SOLARFUN Products that
are
manufactured by a third party other than HOKU, where HOKU is acting only as
a
reseller or distributor of such Products; and provided that the Products meet
the Product Specifications and price set forth in this Agreement.
3.3. Except
in
the case of a force majeure pursuant to Section 12
below,
if at any time after [*], HOKU does not supply any Products pursuant to Section
3.1
or
3.2
within
[*] days of the scheduled delivery date, HOKU will provide SOLARFUN with a
purchase price adjustment. Such purchase price adjustment shall be [*] percent
([*]%) of the value of the respective delayed Products for each week or part
thereof that the Product shipment (or part thereof) is delayed beyond the [*]
day grace period. Any
purchase price adjustment as a result of this Section 3.3
will be
paid by HOKU at the end of the term of the applicable calendar quarter.
In lieu of making a cash payment to SOLARFUN pursuant to this Section
3.3,
HOKU
may,
at its option, pay for such purchase price adjustment in the form of a credit
issued for future shipments of Products.
Notwithstanding anything to the contrary, the maximum amount of such purchase
price adjustment shall not exceed [*] percent ([*]%) of the value of the
respective delayed Products. Monthly shipments which are delayed beyond one
hundred fifty (150) days shall be deemed to constitute a material breach of
this
Agreement pursuant to Section 9.2.1
below.
3.4. If
HOKU
delivers any Products to SOLARFUN prior to [*], then SOLARFUN shall pay HOKU
a
premium equal to [*]% of the applicable purchase price for the Products shipped.
4. Shipping
& Delivery.
4.1. Except
as
provided in Section 3.2
above,
shipments shall be made from the Facility on a monthly basis in accordance
with
a shipment schedule that will be provided by HOKU each Year under this Agreement
(the “Shipment
Schedule”)
no later than sixty (60) days prior to the applicable year. The Shipment
Schedule shall provide for approximately equal monthly shipments that add up
to
the Minimum Annual Quantity of Products.
4.2. HOKU
agrees that it will not enter into any additional supply contract with, or
make
any supply commitment to, any third party (not including the long term supply
contracts that have been signed prior to the Effective Date (the
“Pre-existing
Commitments”))
if the aggregate of HOKU’s delivery obligations under all of its supply
contracts (including those with SOLARFUN and its Pre-existing Commitments)
and
such additional supply contract/commitment during any month would exceed the
rated monthly production capacity of all polysilicon reactors at all HOKU
Facilities, as certified by the manufacturer thereof. Subject to the foregoing,
this Section 4.2
shall
not preclude HOKU from (A) entering into supply contracts for additional
capacity from Facility expansion, including pre-sales of potential Facility
expansions, or from increased productivity of the Reactors, or (B) selling
on
the spot market or entering into long-term contracts for the sale of polysilicon
that does not meet the Product Specifications at any time during the term of
this Agreement, provided that HOKU uses commercially reasonable efforts to
meet
the Product Specifications with respect to such polysilicon and that HOKU does
not manufacture polysilicon for the purpose of making such spot market sales
or
fulfilling such long term contracts
4.3. HOKU
will
use commercially reasonable efforts to make its first shipment of Products
to
SOLARFUN on or before July 1, 2009.
5. Payments
& Advances.
5.1. HOKU
acknowledges that as of the date of this Agreement, SOLARFUN has provided HOKU
with a deposit of Eleven Million U.S. Dollars (US$11,000,000) via wire transfer
of immediately available funds (the “First
Deposit”)
as advance payment for Products to be delivered under this
Agreement.
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5.2. SOLARFUN
shall pay in cash to HOKU the additional sum of Forty-Four Million U.S. Dollars
(USD $44,000,000.00) (the “Main
Deposit”) as
an
advance payment for Products to be delivered under this Agreement in accordance
with the payment schedule set forth below.
5.2.1. Nineteen
Million U.S. Dollars ($19,000,000) of the Main Deposit (the “Second
Deposit”)
shall
be paid to HOKU on September 30, 2008 (the “Second
Deposit Date”).
5.2.2. Twenty
Million U.S. Dollars (USD $20,000,000) of the Main Deposit (the “Third
Deposit”)
shall
be paid to HOKU on March 31, 2009 (the “Third
Deposit Date”).
5.2.3. Five
Million U.S. Dollars (USD $5,000,000.00) of the Main Deposit (the “Fourth
Deposit”)
shall
be paid to HOKU on March 31, 2010 (the “Fourth
Deposit Date”).
5.3. Escrow
Agreement; Letter of Credit.
5.3.1. On
or
before February 15, 2008, either (A) SOLARFUN shall provide to HOKU an
irrevocable stand-by letter of credit in substantially the form of Appendix
3
attached
hereto (the “Letter
of Credit”)
in the
amount of the Main Deposit, or (B) SOLARFUN, HOKU and the Escrow Agent shall
sign an escrow agreement in substantially the form of Appendix
4
(the
“Escrow
Agreement”),
and
SOLARFUN shall deposit into the Escrow Account the amount of the Main
Deposit.
5.3.1(a) If
the
Letter of Credit is provided pursuant to Section 5.3.1(A)
above, then such Letter of Credit shall be issued to HOKU by a bank domiciled
in
and organized under the laws of one of the fifty states of the United States
of
America, and which is reasonably acceptable to HOKU (the “Issuing
Bank”).
The
Letter of Credit shall be issued in US Dollars for the full amount of the Main
Deposit, and shall be freely assignable by HOKU in connection with any
assignment of this Agreement by HOKU pursuant to Section 13.3
below.
Payment to HOKU of the Second Deposit, Third Deposit and Fourth Deposit shall
be
made by the Issuing Bank upon its receipt of written notice that SOLARFUN has
failed to make such payment on the Second Deposit Date, the Third Deposit Date
or the Fourth Deposit Date, as applicable. The Letter of Credit shall expire
on
the later of the date when (A) the Main Deposit has been paid in full to HOKU
by
SOLARFUN, or (B) the Main Deposit has been paid in full to HOKU by the Issuing
Bank.
5.3.1(b) If
the
Escrow Agreement is entered into pursuant to Section 5.3.1(B)
above, then the Main Deposit may be deposited into the Escrow Account in US
Dollars or Chinese RMB; provided, however, that all payments to HOKU pursuant
to
this Agreement shall be in US Dollars. Payment of the Second Deposit, Third
Deposit and Fourth Deposit shall automatically be made to HOKU from the Escrow
Account pursuant to the Escrow Agreement on the Second Deposit Date, Third
Deposit Date and Fourth Deposit Date, as applicable. Notwithstanding anything
to
the contrary, all payments from the Escrow Account to HOKU shall be made in
US
Dollars, unless HOKU and SOLARFUN otherwise agree in writing. In the event
that
the amount of any payment from the Escrow Account to HOKU in US Dollars is
less
than the Second Deposit, Third Deposit, or Fourth Deposit, as applicable, due
to
currency exchange rates from Chinese RMB to US Dollars, then SOLARFUN shall
be
obligated to immediately pay HOKU in US Dollars the difference between the
actual payment from the Escrow Account and the Second Deposit, Third Deposit
or
Fourth Deposit, as applicable. The final form of the Escrow Agreement may be
different from the form attached as Appendix 4, acceptance of which by the
Parties shall be evidenced by HOKU and SOLARFUN’s execution thereof.
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5.4. HOKU
shall invoice SOLARFUN at or after the time of each shipment of Products to
SOLARFUN. Taxes, customs and duties, if any, will be identified as separate
items on HOKU invoices. All invoices shall be sent to SOLARFUN’s address as
provided herein. Payment terms for all invoiced amounts shall be [*] days from
date of shipment. All payments shall be made in U.S. Dollars. Unless HOKU is
entitled to retain the Total Deposit as liquidated damages pursuant to Section
11
below,
shipments
to SOLARFUN shall be credited against the Total Deposit beginning
in the second Year, as set forth in Appendix
1
(Pricing
Schedule).
5.5. The
prices for the Products do not include any excise, sales, use, import, export
or
other similar taxes, such taxes will not include income taxes or similar taxes,
which taxes will be invoiced to and paid by SOLARFUN, provided that SOLARFUN
is
legally or contractually obliged to pay such taxes. SOLARFUN shall be
responsible for all transportation charges, duties or charges for shipping
and
handling; thus, the price for the Products shall not include any such
charges.
5.6. Late
payments and outstanding balances shall accrue interest at the lesser of [*]%
per annum or the maximum allowed by law.
6. Security
Interest.
6.1. Subject
to receipt of the Initial Deposit and or payment of any portion of the Main
Deposit HOKU hereby grants to SOLARFUN a security interest to secure the
repayment by HOKU to SOLARFUN of the Total Deposit following any of the events
set forth in Section 9.6
below,
which shall be subordinated in accordance with Section 6.2
below,
in all of the tangible and intangible assets related to HOKU’s polysilicon
business (the “Collateral”).
6.2. SOLARFUN
acknowledges and agrees that the security interests and liens in the Collateral
will not be first priority security interests, will be expressly subordinated
to
HOKU’s third-party lenders (the “Senior
Lenders”)
that provide debt financing for the construction of any HOKU Facility, and
may
be subordinated as a matter of law to other security interests, and to security
interests that are created and perfected prior to the security interest granted
to SOLARFUN hereby. SOLARFUN shall enter into subordination agreements with
the
Senior Lenders on terms and conditions reasonably acceptable to the Senior
Lenders.
6.3. In
addition, SOLARFUN shall enter into collateral, intercreditor and other
agreements (the “Collateral
Agreements”)
with
HOKU’s Senior Lenders, and with SANYO Electric Co., Ltd., Suntech Power Holding
Co., Ltd., Global Expertise Wafer Division, Ltd., and HOKU’s other customers who
provide prepayments for Products (collectively, “HOKU’s
Other Customers”),
as may be reasonably necessary to ensure that the security interest granted
hereby is pari passu with the security interests that may be granted to HOKU’s
Other Customers. SOLARFUN may not unreasonably refuse to sign any such
Collateral Agreement, provided that such Collateral Agreement grants SOLARFUN
a
pari passu priority with respect to HOKU’s Other Customers, and is expressly
subordinated to the Senior Lenders.
6.4. The
security interest granted hereby shall continue so long as HOKU continues to
maintain any amount of the Total Deposit, and only to the extent of such
remaining amount of the Total Deposit being held by HOKU, which has not been
credited against the shipment of Products pursuant to this Agreement, or
otherwise repaid to SOLARFUN. Notwithstanding anything to the contrary contained
in this Agreement, the Collateral consisting of real property shall secure
only
the obligations of HOKU to refund any portion of the Total Deposit to SOLARFUN
in accordance with the terms of this Agreement.
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6.5. HOKU
and
SOLARFUN each agree to act in good faith to execute and deliver any additional
document or documents that may be required in furtherance of the foregoing
provisions of this Section 6,
including the Collateral Agreements. Neither HOKU nor SOLARFUN may unreasonably
refuse to sign any such document.
7. Product
Quality Guarantee.
7.1. HOKU
warrants to SOLARFUN that the Products shall meet the Product Specifications.
For each shipment, this warranty shall survive for [*] days after the applicable
shipment date (the “Warranty
Period”).
Upon release of the Products to a common carrier or freight forwarder, FOB
origin, HOKU warrants that the Products shall be free of all liens, mortgages,
encumbrances, security interests or other claims or rights. HOKU will, upon
prompt notification and compliance with HOKU’s instructions, refund or replace,
at SOLARFUN’s sole option, any Product which does not meet the Product
Specifications, and SOLARFUN shall comply with the inspection and return goods
policy described in Section 8
below
with respect to such Products. No employee, agent or representative of HOKU
has
the authority to bind HOKU to any oral representation or warranty concerning
the
Products. Any oral representation or warranty made prior to the purchase of
any
Product and not set forth in writing and signed by a duly authorized officer
of
HOKU shall not be enforceable by SOLARFUN. HOKU makes no warranty and shall
have
no obligation with respect to damage caused by or resulting from accident,
misuse, neglect or unauthorized alterations to the Products.
7.2. HOKU
EXPRESSLY DISCLAIMS ALL OTHER WARRANTIES, WHETHER EXPRESS, IMPLIED OR STATUTORY,
INCLUDING THE WARRANTIES OF MERCHANTABILITY, AND FITNESS FOR A PARTICULAR
PURPOSE. HOKU’s sole responsibility and SOLARFUN’s exclusive remedy for any
claim arising out of the purchase of any Product is a refund or replacement,
as
described above. In no event shall HOKU’s liability exceed the purchase price
paid therefore; nor shall HOKU be liable for any claims, losses or damages
of
any individual or entity or for lost profits or any special, indirect,
incidental, consequential, or exemplary damages, howsoever arising, even if
HOKU
has been advised of the possibility of such damages.
7.3. HOKU
shall, at its own expense, indemnify and hold SOLARFUN and its Affiliates
harmless from and against any expense or loss resulting from any actual or
alleged infringement of any patent, trademark, trade secret, copyright, mask
work or other intellectual property related to the Products, and shall defend
at
its own expense, including attorneys fees, any suit brought against SOLARFUN
or
SOLARFUN’s Affiliates alleging any such infringement. SOLARFUN agrees that: (i)
SOLARFUN shall give HOKU prompt notice in writing of any such suit; (ii) if
HOKU
provides evidence reasonably satisfactory to SOLARFUN of HOKU’s financial
ability to defend the matter vigorously and pay any reasonably foreseeable
damages, SOLARFUN shall permit HOKU, through counsel of HOKU’s choice, to answer
the charge of infringement and defend such suit (but SOLARFUN, or SOLARFUN’s
Affiliate may be represented by counsel and participate in the defense at its
own expense); and (iii) SOLARFUN shall give HOKU all needed information,
assistance, and authority, at HOKU’s expense, to enable HOKU to defend such
suit. In case of a final award of damages in any such suit HOKU shall pay such
award, but shall not be responsible for any settlement made without its prior
consent. Except as otherwise expressly set forth herein, HOKU disclaims any
obligation to defend or indemnify SOLARFUN, its officers, agents, or employees,
from any losses, damages, liabilities, costs or expenses which may arise out
of
the acts of omissions of ▇▇▇▇.
▇. Inspection
and Return Goods Policy.
8.1. An
inspection of appearance of each shipment of Product shall be made by SOLARFUN
in accordance with sound business practice upon the delivery of the Product,
and
in no case later than [*]
after
delivery at SOLARFUN’s factory. SOLARFUN shall inform HOKU promptly, and in no
case later than [*]
after
delivery of Product, in case of any obvious damages or other obvious defects
to
the Product which SOLARFUN discovers under the inspection of
appearance.
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8.2. SOLARFUN
shall perform final inspection of the Product upon introducing the Product
into
SOLARFUN’s production process. Such inspection shall take place during the
Warranty Period. If the Product does not meet the Product Specifications,
SOLARFUN shall notify HOKU in writing without undue delay after the inspection
and, together with the notification, submit documentary evidence of the result
of the final inspection whereupon HOKU shall have the right to undertake its
own
inspection prior to any return of the Products pursuant to Section 8.3
below.
8.3. Products
may be returned to HOKU within the later of (a) [*] after discovery of a defect
consistent with Sections 8.1
and
8.2
above;
and (b) [*] after HOKU completes its inspection and confirms the defect pursuant
to Section 8.2
above,
for replacement or a refund including all return shipment expenses. To assure
prompt handling, HOKU shall provide SOLARFUN a return goods authorization number
within 48 hours of SOLARFUN’s request. Provided that HOKU communicates this
number to SOLARFUN within such timeframe, SOLARFUN will reference this number
on
return shipping documents. Returns made without the authorization number
provided by HOKU in accordance with the foregoing may be subject to HOKU’s
reasonable charges due to HOKU’s additional handling costs. HOKU reserves the
right to reverse any credit issued to SOLARFUN if, upon return, such Product
is
determined by a predetermined third party not to be defective.
9. Term
and Termination.
9.1. The
term
of this Agreement shall begin on the Effective Date and provided that the first
delivery of the Product under this Agreement shall occur in 2009 or earlier,
and
unless previously terminated as hereinafter set forth, shall remain in force
for
a period of eight Years beginning with the First Shipment Date.
9.2. Each
Party may, at its discretion, upon written notice to the other Party, and in
addition to its rights and remedies provided under this Agreement or any other
agreement executed in connection with this Agreement and at law or in equity,
terminate this Agreement in the event of any of the following:
9.2.1. Upon
a
material breach of the other Party of any material provision in this Agreement,
and failure of the other Party to cure such material breach within sixty (60)
days after written notice thereof;
provided, however, that such cure period shall not modify or extend the 150-day
cure period for HOKU’s delivery obligations pursuant to Section 3.3
above;
and provided, further that such sixty (60) day cure period shall not apply
to
SOLARFUN’s failure to make any payment to HOKU pursuant to this Agreement. In
the event of SOLARFUN’s failure to make payment on the 30-day payment terms set
forth in Section 5.4
hereof,
termination by HOKU shall require the issuance of a written notice of default
containing the threat of immediate termination if payment is not made within
an
additional grace period of not less than ten (10) business days.
9.2.2. Upon
the
voluntary or involuntary initiation of bankruptcy or insolvency proceedings
against the other Party; provided, that for an involuntary bankruptcy or
insolvency proceeding, the Party subject to the proceeding shall have sixty
(60)
working days within which to dissolve the proceeding or demonstrate to the
terminating Party’s satisfaction the lack of grounds for the initiation of such
proceeding;
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9.2.3. If
the
other Party (i) becomes unable, or admits in writing its inability, to pay
its
debts generally as they mature, (ii) becomes insolvent (as such term may be
defined or interpreted under any applicable statute); or
9.2.4. In
accordance with the provisions of Section 12
(Force
Majeure) below.
9.2.5. Without
limiting the foregoing, SOLARFUN shall have the right to terminate this
Agreement if the First Shipment Date does not occur on or before December 31,
2009.
9.3.
9.4. HOKU
shall have the right to terminate this Agreement if on or before February 15,
2008 SOLARFUN has failed to either (A) enter into the Escrow Agreement with
HOKU
and the Escrow Agent and deposit the Main Deposit into the Escrow Account
pursuant to Section 5.3.1
above,
or (B) deliver the Letter of Credit pursuant to Section 5.3.1
above,
in which case, HOKU shall be entitled to retain the Initial Deposit as
liquidated damages.
9.5. Upon
the
expiration or termination of this Agreement howsoever arising, the following
Sections shall survive such expiration or termination: Sections 1
(Definitions); Section 7
(Product
Quality Guarantee), Section 8
(Inspection and Return Goods Policy); Section 9
(Term
and Termination); Section 10
(Liability); Section 11
(Liquidated Damages); and Section 13
(General
Provisions).
9.6. If
SOLARFUN terminates this Agreement pursuant to Section 9.2.1,
9.2.2,
9.2.3,
9.2.4,
9.2.5
or 12
then any funds remaining on the Total Deposit on such date of termination shall
be returned to SOLARFUN; provided however that if SOLARFUN is in material breach
of this Agreement at the time it terminates this Agreement, then HOKU shall
not
be required to repay any remaining amount of the Total Deposit up to the amounts
of HOKU’s direct loss from such material breach (unless SOLARFUN cures such
breach within the applicable cure period) or SOLARFUN’s other outstanding and
unpaid obligations hereunder (including, without limitation, obligations under
Section 11).
“Funds
remaining”
on the Total Deposit are funds not applied against SOLARFUN’s purchase of
Product, pursuant to Section 5.4
above,
for Product actually shipped to SOLARFUN hereunder.
10. Liability.
10.1. IN
NO
EVENT SHALL EITHER PARTY BE LIABLE FOR INDIRECT, SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES OR FOR EXEMPLARY OR PUNITIVE DAMAGES, EVEN IF SOLARFUN
OR
HOKU HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
10.2. NEITHER
PARTY’S TOTAL LIABILITY TO THE OTHER FOR ANY KIND OF LOSS, DAMAGE OR LIABILITY
ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT, UNDER ANY THEORY OF
LIABILITY, SHALL EXCEED IN THE AGGREGATE THE TOTAL DEPOSIT, EXCEPT WITH RESPECT
TO SOLARFUN’S CONTINUING OBLIGATION TO PURCHASE THE PRODUCTS AS SET FORTH
HEREIN.
11. Liquidated
Damages.
THE
PARTIES ACKNOWLEDGE AND AGREE THAT ANY BREACH OF THIS AGREEMENT BY SOLARFUN
MAY
CAUSE IRREPARABLE AND IMMEASURABLE DAMAGE TO HOKU. BECAUSE IT IS DIFFICULT
TO
MEASURE THESE DAMAGES, IN THE EVENT THAT THIS AGREEMENT IS TERMINATED BY HOKU
PURSUANT TO SECTION 9.2.1,
9.2.2,
9.2.3,
9.2.4,
or
9.4,
THEN
HOKU SHALL BE ENTITLED TO RETAIN AS LIQUIDATED DAMAGES, THE TOTAL DEPOSIT (OR
ANY REMAINING PORTION THEREOF NOT CREDITED AGAINST PRODUCT SHIPMENTS). ANY
AMOUNTS DUE FOR UNDELIVERED PRODUCT UNDER THIS AGREEMENT ARE STILL DUE, UNLESS
OTHERWISE AGREED BY BOTH PARTIES IN WRITING.
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CONFIDENTIAL
12. Force
Majeure.
Neither
Party shall be liable to the other Party for failure of or delay in performance
of any obligation under this Agreement, directly, or indirectly, owing to acts
of God, war, war-like condition, embargoes, riots, strike, lock-out and other
events beyond its reasonable control which were not reasonably foreseeable
and
whose effects are not capable of being overcome without unreasonable expense
and/or loss of time to the affected Party (i.e., the Party that is unable to
perform). If such failure or delay occurs, the affected Party shall notify
the
other Party of the occurrence thereof as soon as possible, and the Parties
shall
discuss the best way to resolve the event of force majeure. If the conditions
of
Force Majeure continue to materially impede performance of any material
obligation under this Agreement for a period of more than three (3) consecutive
calendar months, then the non-affected Party shall be entitled to terminate
this
Agreement by 30 days’ prior written notice to the other Party.
13. General
Provisions.
13.1. This
Agreement shall be construed under and governed by the laws of the State of
California, U.S.A.
13.2. Upon
notice from one Party to the other of a dispute hereunder, the Parties agree
to
hold a meeting within thirty (30) days of receipt of such notice with at least
one (1) representative from each Party who has decision-making authority for
such company. At this meeting, the Parties will attempt to resolve the dispute
in good faith. If, after the meeting, the dispute has not been resolved, only
then may a Party resort to litigation. Any proceeding to enforce or to resolve
disputes relating to this Agreement shall be brought in California, USA. In
any
such proceeding, neither Party shall assert that such a court lacks jurisdiction
over it or the subject matter of the proceeding.
13.3. HOKU
may
assign this Agreement to any of its Affiliates, and may assign its rights under
this Agreement to any collateral agent as collateral security for HOKU’s secured
obligations in connection with the financing a HOKU Facility, without the
consent of SOLARFUN. Except as stated in the previous sentence, neither HOKU
nor
SOLARFUN may assign this Agreement to a third party without the prior written
consent of the other Party, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, an assignment of this Agreement by either Party
in connection with a merger, acquisition, or sale of all or substantially all
of
the assets or capital stock of such Party shall not require the consent of
the
other Party. If this Agreement is assigned effectively to a third party, this
Agreement shall bind upon successors and assigns of the Parties
hereto.
13.4. Except
as
provided elsewhere in this Agreement, a notice is effective only if the Party
giving or making the notice has complied with this Section 13.4
and if
the addressee has received the notice. A notice is deemed to have been received
as follows:
|
(a)
|
If
a notice is delivered in person, or sent by registered or certified
mail,
or nationally or internationally recognized overnight courier, upon
receipt as indicated by the date on the signed receipt;
or
|
|
(b)
|
If
a notice is sent by facsimile, upon receipt by the Party giving the
notice
of an acknowledgment or transmission report generated by the machine
from
which the facsimile was sent indicating that the facsimile was sent
in its
entirety to the addressee’s facsimile number.
|
Page
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CONFIDENTIAL
Each
Party giving a notice shall address the notice to the appropriate person at
the
receiving Party at the address listed below or to a changed address as the
Party
shall have specified by prior written notice:
SOLARFUN:
SOLARFUN
POWER HONG KONG LIMITED
In
care
of: JIANGSU LINYANG SOLARFUN CO., LTD.
▇▇.
▇▇▇
▇▇▇▇▇▇▇ ▇▇.,
▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
People’s
Republic of China
Tel:
▇▇▇-▇▇-▇▇▇▇-▇▇▇▇
Fax:
▇▇▇-▇▇-▇▇▇▇-▇▇▇▇
Attn:
▇▇▇▇▇▇▇ ▇▇▇▇, VP of Business Development
E-Mail:
[*]
HOKU:
HOKU
SCIENTIFIC, INC.
▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn:
▇▇.
▇▇▇▇▇▇ ▇▇▇▇▇▇, CEO
E-mail:
[*]
Facsimile:
▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
13.5. The
waiver by either Party of the remedy for the other Party’s breach of or its
right under this Agreement will not constitute a waiver of the remedy for any
other similar or subsequent breach or right.
13.6. If
any
provision of this Agreement is or becomes, at any time or for any reason,
unenforceable or invalid, no other provision of this Agreement shall be affected
thereby, and the remaining provisions of this Agreement shall continue with
the
same force and effect as if such unenforceable or invalid provisions had not
been inserted in this Agreement.
13.7. No
changes, modifications or alterations to this Agreement shall be valid unless
reduced to writing and duly signed by respective authorized representatives
of
the Parties.
13.8. No
employment, agency, trust, partnership or joint venture is created by, or shall
be founded upon, this Agreement. Each Party further acknowledges that neither
it
nor any Party acting on its behalf shall have any right, power or authority,
implied or express, to obligate the other Party in any way.
13.9. Neither
Party shall make any announcement or press release regarding this Agreement
or
any terms thereof without the other Party’s prior written consent; provided,
however, that the Parties will work together to issue a joint press release
within two (2) days after execution of this Agreement. Notwithstanding the
foregoing, either Party may publicly disclose the material terms of this
Agreement pursuant to the United States Securities Act of 1933, as amended,
the
United States Securities Exchange Act of 1934, as amended, or other applicable
law; provided, however, that the Party being required to disclose the material
terms of this Agreement shall provide reasonable advance notice to the other
Party, and shall use commercially reasonable efforts to obtain confidential
treatment from the applicable governing entity for all pricing and technical
information set forth in this Agreement.
13.10. This
Agreement constitutes the entire agreement between the Parties and supersedes
all prior proposal(s), discussions and agreements, including, without
limitation, the Supply Agreement, relative to the subject matter of this
Agreement and neither of the Parties shall be bound by any conditions,
definitions, warranties, understandings or representations with respect to
such
subject matter other than as expressly provided herein. No oral explanation
or
oral information by either Party hereto shall alter the meaning or
interpretation of this Agreement.
13.11. The
headings are inserted for convenience of reference and shall not affect the
interpretation and or construction of this Agreement.
13.12. Words
expressed in the singular include the plural and vice-versa.
Page
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CONFIDENTIAL
IN
WITNESS WHEREOF, the Parties have executed this First Amended & Restated
Supply Agreement as of the date last set forth below.
| SOLARFUN: | HOKU: | |||
| SOLARFUN POWER HONG KONG LIMITED | HOKU SCIENTIFIC, INC. | |||
| By: | /s/ ▇▇▇▇▇▇▇ ▇▇▇▇ | By: | /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇ | |
| Name: | ▇▇▇▇▇▇▇ ▇▇▇▇ | Name: | ▇▇▇▇▇▇ ▇▇▇▇▇▇ | |
| Title: | VP of Business Development | Title: | Chairman & CEO | |
| Authorized Signatory | Authorized Signatory | |||
| Date: |
January
6, 2008
|
Date: |
January
7, 2008
|
|
CORPORATE
GUARANTY
As
an
inducement for HOKU to enter into this Agreement with SOLARFUN, it is hereby
agreed that the undersigned does hereby guaranty to HOKU the prompt, punctual
and full payment of all monies now or hereinafter due HOKU from SOLARFUN, and
agrees to the following:
|
a)
|
Until
termination, this guaranty is unlimited as to amount or duration
and shall
remain in full force and effect notwithstanding any extension, compromise,
adjustment, forbearance, waiver, release or discharge of any party
obligor
or guarantor.
|
|
b)
|
The
obligations of the undersigned shall be at the election of HOKU,
shall be
primary and not necessarily secondary, and HOKU shall not be required
to
exhaust its remedies as against SOLARFUN prior to enforcing its rights
under this guaranty against the
undersigned.
|
|
c)
|
The
guaranty hereunder shall be unconditional and absolute and the undersigned
waives all rights of subrogation and set-off until all sums under
this
guaranty are fully paid. The undersigned further waives all suretyship
defenses or defenses in the nature thereof,
generally.
|
|
d)
|
The
guaranty shall be valid and continuing during the term of this Agreement.
|
|
e)
|
The
undersigned warrants and represents it has full authority to enter
into
this guaranty.
|
|
f)
|
This
guaranty shall be binding upon and inure to the benefit of the parties,
their successors, assigns and personal
representatives.
|
|
g)
|
This
guaranty shall be construed and enforced under the laws of the State
of
California, USA
|
JIANGSU
LINYANG SOLARFUN CO., LTD.
|
By:
|
/s/
▇▇▇▇▇▇▇ ▇▇▇▇
|
Date:
|
January
6, 2008
|
|
|
Name:
|
▇▇▇▇▇▇▇
▇▇▇▇
|
|||
|
Title:
|
VP
of Business Development
|
|||
| Authorized Signatory | ||||
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CONFIDENTIAL
Appendix
1
Pricing
Schedule
[*]
If
there
is uncertainty in price between the delivery period and the total quantity
for
that period based on the table above, the price assigned to the quantity shall
prevail. For example, the first [*] MT shall be invoiced at $[*].
Page
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CONFIDENTIAL
Appendix
2
Product
Specifications
[*]
The
size
distribution of the Products shipped shall be as follows:
[*]
Product
Specifications shall be tested in accordance with the following procedures:
graphite furnace atomic absorption spectroscopy, inductively coupled plasma-mass
spectroscopy and Fourier transform infrared absorption
spectroscopy.
Page
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CONFIDENTIAL
APPENDIX
3
Form
of
Letter of Credit
[This
Letter of Credit may be replaced by a Letter of Credit that is mutually
acceptable to HOKU and the Issuing Bank.]
IRREVOCABLE
Standby Letter of Credit
STANDBY
L/C FOR PAYMENT
TO:
HOKU
SCIENTIFIC, INC., a Delaware corporation (“Beneficiary”)
▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
Attn:
▇▇.
▇▇▇▇▇▇ ▇▇▇▇▇▇, CEO
E-mail:
[*]
DEAR
SIRS,
We
refer
to that certain First Amended & Restated Supply Agreement dated as of __,
2007, (hereinafter referred to as the “Hoku Supply Agreement”) signed between
you and SOLARFUN POWER HONG KONG LIMITED, located at No. ▇▇▇ ▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, People’s Republic of China (hereinafter referred to as
“Solarfun”).
Subject
to the terms and conditions set forth herein, we, [Bank Name] (“we” or “XXXX”),
hereby unconditionally and irrevocably issue this Irrevocable Standby Letter
of
Credit no.
(the
“Standby Letter of Credit”) in your favor for the account of Solarfun in the
amount of USD44000000.00 (Forty-Four Million U.S. Dollars) (hereinafter referred
to as the “Total L/C Amount”).
Capitalized
terms used herein without definition shall have the respective meanings set
forth in Annex A.
We
hereby
agree as follows:
(a) The
Beneficiary may draw under this Standby Letter of Credit at any time on or
prior
to the then applicable Expiry Date (as such term is hereinafter defined) by
presenting XXXX with an appropriately completed 1st Demand, 2nd Demand or 3rd
Demand (each hereinafter referred to as a “Demand”) in the applicable form
attached hereto.
(b) XXXX
will
not be obliged to make payment under this Standby Letter of Credit if, after
giving effect to any such payment, the aggregate of all payments made by it
under this Standby Letter of Credit would exceed the Total L/C
Amount.
Documents
required:
(a) Each
of
the 1st Demand, the 2nd Demand and the 3rd Demand shall be made by letter in
substantially the form attached hereto as Annex B, Annex C and Annex D,
respectively, and must be received by XXXX, by delivery in person or by
facsimile transmission, at its address and by the particular department or
officer (if any) as follows, provided that the original of any such Demand
shall
be sent to XXXX by overnight courier for receipt by XXXX within two Business
Days of the date of any such facsimile transmission:
[Insert
XXXX address/information]
Page
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CONFIDENTIAL
All
payments under this Standby Letter of Credit shall be made in United States
Dollars, for value, in immediately available funds by wire transfer to such
account as may be designated by the Beneficiary in the applicable Demand. If
a
Demand is presented in compliance with the terms of this Standby Letter of
Credit to XXXX by 12:00 p.m. New York City time on any Business Day, payment
will be made on the same Business Day and if such Demand is so presented to
XXXX
after 12:00 p.m. New York City time on any Business Day, payment will be made
by
12:00 p.m. New York City time on the following Business Day.
This
Standby Letter of Credit is effective as of the date hereof and shall remain
in
effect until the first anniversary of the date hereof; provided that this
Standby Letter of Credit shall be automatically extended without amendment
for
successive one-year periods from the present or any future scheduled expiration
date hereof, until the earlier of (A) the date when XXXX is notified in writing
by the Beneficiary that Solarfun is no longer obligated to pay the Main Deposit
pursuant to the Hoku Supply Agreement, or (B) the date when XXXX has paid the
Total L/C Amount to the Beneficiary (the present or any future expiration date
as aforesaid is referred to herein as the “Expiry Date”).
This
Standby Letter of Credit will be maintained in the Total L/C Amount until the
Expiry Date; provided, however, that the Total L/C Amount may be reduced by
the
amount paid to Beneficiary after any drawing hereunder by the Beneficiary.
Partial drawings under this Letter of Credit are permitted.
All
banking charges of this Standby Letter of Credit, including any transfer fees,
advising bank charges and negotiating bank charges, are for the account of
Solarfun.
Except
as
expressly stated herein, this undertaking is not subjected to any contract,
agreement, condition or qualification. The obligation and liabilities of us
under this Standby Letter of Credit shall be independent.
This
Standby Letter of Credit sets forth the full terms of our undertaking and such
undertaking shall not in any way be modified, amended or amplified by reference
to any document or instrument referred to herein or to which this Standby Letter
of Credit relates and shall not be deemed to incorporate by reference any such
document or instrument.
This
Standby Letter of Credit is governed by the laws of the State of New York.
The
courts of the State of New York in the County of New York or of the United
States of America in the Southern District of New York shall have exclusive
jurisdiction to settle any dispute arising out of or in connection with this
Standby Letter of Credit.
This
Standby Letter of Credit may be transferred upon presentation to us of a signed
transfer certificate in the form of Annex E hereto accompanied by this Standby
Letter of Credit, in which you irrevocably transfer to the relevant transferee
all of your rights hereunder, whereupon we agree to either issue a substitute
letter of credit to such transferee or endorse such transfer on the reverse
of
this Standby Letter of Credit. This Standby Letter of Credit may not otherwise
be transferred without our consent.
Any
Demand should reach our counter at least two Business Days before the Expiry
Date. This Standby Letter of Credit shall automatically become null and void
upon the Expiry Date, whether it is returned to us or not; provided, however,
that in the event of an act of God, riot, civil commotion, insurrection, war
or
any other cause beyond XXXX’s control that interrupts XXXX’s business and causes
the place for presentation of this Standby Letter of Credit to be closed for
business on the last day for presentation, the Expiry Date will be automatically
extended without amendment to a date fifteen calendar days after the place
for
presentation reopens for business.
Page
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CONFIDENTIAL
In
the
event that a Demand fails to comply with the terms of this Standby Letter of
Credit, we shall provide the Beneficiary prompt notice of the same stating
the
reasons therefor and shall upon your instructions hold any non-conforming Demand
and other documents at your disposal or return the non-conforming Demand and
other documents to the Beneficiary at the address set forth above by delivery
in
person or facsimile transmission (with originals thereof sent by overnight
courier for receipt within two Business Days). Upon being notified that the
Demand was not effected in compliance with this Standby Letter of Credit, the
Beneficiary may attempt to correct such non-complying Demand in accordance
with
this Standby Letter of Credit.
All
notices to the Beneficiary shall be delivered to its representatives at the
address set forth above (or to any other representative(s)/address(es) which
may
be designated by written notice from the Beneficiary delivered to us from time
to time prior to termination hereof).
Except
so
far as otherwise expressly stated, this Standby Letter of Credit is subject
to
the Uniform Rules and Customs for Documentary Letters of Credit (Publication
of
the International Chamber of Commerce #500, 1993 revision) or as most recently
published by the International Chamber of Commerce.
Page
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CONFIDENTIAL
Annex
A
Definitions
“Business
Day” means a day (other than a Saturday or Sunday) on which banks are open for
general business in the United States.
“1st
Demand” means a demand for payment in an amount not to exceed $19,000,000
(Nineteen Million US Dollars) in the form of Annex B to this Standby Letter
of
Credit.
“2nd
Demand” means a demand for payment in an amount not to exceed $20,000,000
(Twenty Million US Dollars) in the form of Annex C to this Standby Letter of
Credit.
“3rd
Demand” means a demand for payment in an amount not to exceed $5,000,000 (Five
Million US Dollars) in the form of Annex D to this Standby Letter of
Credit.
“HOKU”
means Hoku Scientific, Inc., a Delaware corporation.
“HOKU
Supply Agreement” is the First Amended & Restated Supply Agreement which has
been entered into by HOKU and SOLARFUN on ___________, 2007 and is the
underlying agreement of this Stand-by Letter of Credit.
“Main
Deposit” has the meaning set forth in the Hoku Supply Agreement.
“Subsequent
Transferee” means a purchaser, successor, assignee and/or designee of Hoku's
rights, title and interest in, to and under this Standby Letter of
Credit.
“Total
L/C Amount” means Forty-four Million U.S. Dollars ($44,000,000).
Page
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CONFIDENTIAL
ANNEX
B
1st
Demand
To: [ISSUING
BANK]
[Date]
Standby
Letter of Credit No. [__________] (the “Standby Letter of Credit”)
1st
Demand
Dear
Sirs,
We
refer
to the Standby Letter of Credit. Terms defined in the Standby Letter of Credit
have the same meaning when used in this Demand.
1. We
certify that the sum of Nineteen Million U.S. Dollars ($19,000,000) is due
under
the Hoku Supply Agreement and Solarfun has breached its payment obligations
and
failed to pay the Second Deposit on the Second Deposit Date pursuant to Section
5.4.1 of the Hoku Supply Agreement. We therefore demand payment of the above
sum.
2. Payment
should be made to the following account:
Name:
Account
Number:
Bank:
3. The
date
of this Demand is not earlier than September 30, 2008, or later than the Expiry
Date.
Yours
faithfully
(Authorized
Signatory)
For
[BENEFICIARY]
Page
18 of
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CONFIDENTIAL
ANNEX
C
2nd
Demand
To: [ISSUING
BANK]
[Date]
Standby
Letter of Credit No. [__________] (the “Standby Letter of Credit”)
2nd
Demand
Dear
Sirs,
We
refer
to the Standby Letter of Credit. Terms defined in the Standby Letter of Credit
have the same meaning when used in this Demand.
1. We
certify that the sum of Twenty Million U.S. Dollars ($20,000,000) is due under
the Hoku Supply Agreement and Solarfun has breached its payment obligations
and
failed to pay the Third Deposit on the Third Deposit Date pursuant to Section
5.4.2 of the Hoku Supply Agreement. We therefore demand payment of the above
sum.
2. Payment
should be made to the following account:
Name:
Account
Number:
Bank:
3. The
date
of this Demand is not earlier than March 31, 2009, or later than the Expiry
Date.
Yours
faithfully
(Authorized
Signatory)
For
[BENEFICIARY]
Page
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CONFIDENTIAL
ANNEX
D
3rd
Demand
To: [ISSUING
BANK]
[Date]
Standby
Letter of Credit No. [__________] (the “Standby Letter of Credit”)
3rd
Demand
Dear
Sirs,
We
refer
to the Standby Letter of Credit. Terms defined in the Standby Letter of Credit
have the same meaning when used in this Demand.
1. We
certify that the sum of Five Million U.S. Dollars ($5,000,000) is due under
the
Hoku Supply Agreement and Solarfun has breached its payment obligations and
failed to pay the Fourth Deposit on the Fourth Deposit Date pursuant to Section
5.4.3 of the Hoku Supply Agreement. We therefore demand payment of the above
sum.
2. Payment
should be made to the following account:
Name:
Account
Number:
Bank:
3. The
date
of this Demand is not earlier than March 31, 2010, or later than the Expiry
Date.
Yours
faithfully
(Authorized
Signatory)
For
[BENEFICIARY]
Page
20 of
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CONFIDENTIAL
ANNEX
E
Transfer
of Letter of Credit
[Date]
Delivered
under [insert Bank name],
Irrevocable
Standby Letter of Credit No. [_____],
dated
[__________].
[_______________]
[_______________]
[_______________]
Attention:
[_______________]
Ladies
and Gentlemen:
Reference
is made to [insert Bank name], Irrevocable Standby Letter of Credit No. [_____]
dated [_______](the “Letter of Credit”), issued by you in favor of us. Any
capitalized terms used, but not defined, herein shall have its respective
meaning as set forth in the Letter of Credit.
For
value
received, the undersigned, as Beneficiary under the Letter of Credit, hereby
irrevocably assigns and transfers to [__________] (the “Transferee”) all rights
of the undersigned to draw under the Letter of Credit in their
entirety.
By
this
transfer, all rights of the undersigned, as Beneficiary under the Letter of
Credit, are transferred to the Transferee, and the Transferee shall have the
sole rights with respect to the Letter of Credit relating to any amendments
thereof and any notices thereunder. All amendments to the Letter of Credit
are
to be consented to by the Transferee without necessity of any consent of or
notice to the undersigned.
Simultaneously
with the delivery of this notice to you, copies of this notice are being
transmitted to the Transferee.
The
Letter of Credit is returned herewith, and we ask you to either issue a
substitute letter of credit for the benefit of the Transferee or endorse the
transfer on the reverse thereof, and forward it directly to the Transferee
with
your customary notice of transfer.
Yours
faithfully
(Authorized
Signatory)
For
[BENEFICIARY]
ACKNOWLEDGED:
(Authorized
Signatory)
For
[SUCCESSOR
BENEFICIARY]
Page
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CONFIDENTIAL
APPENDIX
4
Form
of
Escrow Agreement
[This
Escrow Agreement may be replaced by an Escrow Agreement that is mutually
acceptable to HOKU and SOLARFUN, acceptance of which shall be evidenced by
their
execution thereof.]
This
ESCROW AGREEMENT (this “Agreement”)
is
entered into as of _______________, 2007 (the “Effective
Date”),
by
and among HOKU SCIENTIFIC, INC., a Delaware corporation (hereinafter
“HOKU”),
SOLARFUN
POWER HONG KONG LIMITED, a
company
registered in Hong Kong (hereinafter
“SOLARFUN”),
and
[_____________________], as Escrow Agent (the “Escrow
Agent”),
(collectively, the “Parties”).
BACKGROUND
On
_______________, 2007, the Parties hereto entered into a Supply Agreement
(“Supply
Agreement”),
pursuant to which HOKU has agreed to sell Product (as defined in the Supply
Agreement) to SOLARFUN over a fixed period of time. Pursuant to the terms of
the
Supply Agreement, SOLARFUN is obligated to make advance deposits to HOKU.
The
execution and delivery of this Agreement by the Parties is required as a
condition to HOKU’s completing the transactions contemplated by the Supply
Agreement. Each term utilized but not otherwise defined herein shall have the
meaning given to such term in the Supply Agreement.
Escrow
Agent is not a party to the Supply Agreement. Therefore, Escrow Agent has no
duties or obligations under said Supply Agreement.
TERMS
NOW,
THEREFORE, in consideration of the mutual covenants contained herein and
intending to be legally bound, the parties hereto agree as follows:
1. Escrow
Account.
1.1. Escrow
Funds.
1.1.1. The
Escrow Funds, initially in an amount equal to Forty-Four Million U.S. Dollars
(US$44,000,000) (the “Escrow
Funds”),
shall
be deposited on the date hereof with, and shall be held from and after the
date
hereof by, the Escrow Agent in a separate account located in the United States
(the “Escrow
Account”)
for
the benefit of HOKU and SOLARFUN, as provided in this Agreement. The Escrow
Agent shall not make any payment or distribution from the Escrow Account except
as, and in the manner, expressly provided in this Agreement; provided, however,
that the Escrow Funds shall remain the property of SOLARFUN until such time
as
such funds are required under the terms of this Agreement to be delivered to
HOKU, at which time the portion of such Escrow Funds required to be delivered
to
HOKU shall become the property of HOKU.
1.1.2. Concurrently
with the execution of this Agreement, SOLARFUN has delivered the Escrow Funds
to
the Escrow Agent pursuant to Section 5.4.1 of the Supply Agreement.
1.1.3. The
Escrow Agent shall maintain the Escrow Account reflecting (i) the amount of
the
Escrow Funds deposited with Escrow Agent as of the date of this Agreement,
plus
(ii) all amounts earned or realized on any cash or Permitted Investments (as
defined below), minus (iii) all amounts distributed pursuant to Section 1.3
of
this Agreement.
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1.1.4. Except
as
expressly provided in Section 1.1.1 or elsewhere herein, none of the Parties
shall have any right, title or interest in or possession of the Escrow Funds.
Therefore, (i) none of the Parties shall have the ability to pledge, convey,
hypothecate or grant a security interest in any portion of the Escrow Funds
unless and until such funds have been disbursed to such party in accordance
with
this Agreement and (ii) until disbursed pursuant to this Agreement, the Escrow
Agent shall be in sole possession of the Escrow Funds and agrees not to
acknowledge requests that it act as, and nothing contained in this Agreement
shall be deemed to constitute the Escrow Agent as, custodian for any party
for
purposes of perfecting a security interest therein. Accordingly, the Parties
agree that no person or entity shall have any right to have or to hold any
of
the Escrow Funds as collateral for any obligation and shall not be able to
obtain a security interest in any assets (tangible or intangible) contained
in
or relating to the Escrow Account.
1.2. Investments.
1.2.1. Any
cash
held in the Escrow Account shall, pending disbursement, be invested in Permitted
Investments. For purposes of this Agreement, “Permitted
Investments”
shall
mean (i) U.S. Treasuries in accordance with written instructions of HOKU and
SOLARFUN; (ii) U.S. Federal Agencies in accordance with written instructions
of
HOKU and SOLARFUN; and (iii) Money Market Funds in accordance with written
instructions of HOKU and SOLARFUN (a “Joint
Direction”).
1.2.2. The
Escrow Agent may purchase or sell to itself or any affiliate, as principal
or
agent. Such investment, if registerable, shall be registered in the name of
the
Escrow Agent for the benefit of the Parties and held by the Escrow Agent. The
Escrow Agent shall be entitled to sell or redeem any such investments as
necessary to make any payments or distributions required under this Agreement.
The Escrow Agent may act as purchaser or agent in the making or disposing of
any
investments. The Escrow Agent shall have no responsibility or liability for
any
diminution of the Funds held in the Escrow Account which may result from any
investment made pursuant to this Agreement, including any losses on any
investment required to be liquidated prior to maturity in order to make a
payment or distribution required hereunder.
1.2.3. Such
investments will be made as soon as possible following the availability of
such
funds to the Escrow Agent for investment, taking into consideration the
regulations and requirements (including cut-off times) of the Federal Reserve
wire system, the investment provider and the Escrow Agent, and compliance with
standard operating procedures of such parties.
1.2.4. Investments
designation may be changed through written instructions jointly by HOKU and
SOLARFUN to the Escrow Agent, substantially in the form of a letter specifying
other Permitted Investments meeting the requirements of the Agreement. Such
change in the designation will become effective upon receipt by the Escrow
Agent.
1.2.5. As
and
when any cash is needed for a payment under this Agreement, the Escrow Agent
shall cause a sufficient amount of the Permitted Investments to be converted
into cash. Escrow Agent shall convert such Permitted Investments as specified
by
HOKU and SOLARFUN or, if HOKU and SOLARFUN shall fail to so specify within
five
Business Days of a request therefore, as determined by Escrow Agent in its
sole
discretion.
1.2.6. Any
and
all interest, dividends and other income (including capital gains)
(“Income”)
earned
on the Escrow Funds shall not be included as part of the Escrow Funds and shall
remain as the sole property of SOLARFUN. The Escrow Agent shall distribute
to
SOLARFUN such income or gains quarterly during the term of this Agreement.
Any
losses from the Permitted Investments shall first be offset from Income and
then
deducted from the Escrow Funds. All Parties hereto shall file all tax returns
consistent with such treatment. Escrow Agent shall not be responsible for any
tax reporting hereunder.
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1.3. Claim
Procedure.
1.3.1. Nineteen
Million U.S. Dollars (USD $19,000,000.00) of the Escrow Funds shall be paid
to
HOKU from the Escrow Account on September 30, 2008.
1.3.2. Twenty
Million U.S. Dollars (USD $20,000,000) of the Escrow Funds shall be paid to
HOKU
from the Escrow Account on March 31, 2009.
1.3.3. Five
Million U.S. Dollars (USD $5,000,000.00) of the Escrow Funds shall be paid
to
HOKU from the Escrow Account on March 31, 2010.
1.3.4. Distributions
of the Escrow Funds shall be made in cash to the extent available in the Escrow
Account, including cash derived from the liquidation of Permitted Investments
in
accordance with Section 1.2 hereof.
1.3.5. Joint
Direction.
Notwithstanding any other provision of this Agreement, the Escrow Agent shall
promptly deliver all or any part of the Escrow Funds in accordance with the
terms of a Joint Direction, unless a final order of a court of competent
jurisdiction prohibits the Escrow Agent from complying with the terms thereof.
Any amount distributed pursuant to this Section 1.3.4 shall be deducted from
the
Escrow Account.
1.3.6. Release
to SOLARFUN.
The
Escrow Agent shall release the entire amount of the Escrow Funds then being
held
by the Escrow Agent to SOLARFUN within fifteen (15) Business Days after
SOLARFUN’s delivery to the Escrow Agent of the written confirmation of each of
HOKU and SOLARFUN that the Escrow Funds are to be released to SOLARFUN pursuant
to Section 8.6 of the Supply Agreement. In the event that HOKU fails to provide
written confirmation of the release of the Escrow Funds to SOLARFUN pursuant
to
Section 8.6 of the Supply Agreement, then SOLARFUN may elect (by providing
written notice to the Escrow Agent and HOKU) to resolve the controversy pursuant
to the dispute resolution provisions of Section 12.2 of the Supply Agreement.
If
such a dispute resolution results in a finding that Section 8.6 requires the
Escrow Funds to be released to SOLARFUN, then the Escrow Agent shall immediately
deliver to SOLARFUN such Escrow Funds.
1.4. Distributions
and Termination of Escrow.
1.4.1. This
Agreement shall terminate on the earlier to occur of (i) the disbursement to
HOKU or SOLARFUN of all Escrow Funds pursuant to Section 1.3 above; or (ii)
upon
receipt of a Joint Direction ordering such distribution. The date when this
Agreement terminates shall be the “Termination
Date”.
1.4.2. On
the
Termination Date, this Agreement shall terminate and the Escrow Agent shall
distribute to SOLARFUN the then remaining balance of the Escrow Account.
2. The
Escrow Agent.
2.1. Acceptance
of Appointment as Escrow Agent. The Escrow Agent, by signing this Agreement,
accepts the appointment as Escrow Agent and agrees to hold and distribute all
Escrow Funds in accordance with the terms of this Agreement.
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2.2. Liability
of Agent. The Escrow Agent shall be obligated to perform only the duties
described in this Agreement. The Escrow Agent may rely on any instrument or
signature believed by it to be genuine and to have been signed or presented
by
the proper party or parties duly authorized to do so. The Escrow Agent shall
not
be liable for any action taken or omitted by it in good faith and believed
by it
to be authorized, nor for any action taken or omitted by it in accordance with
advice of counsel, and shall not be liable for any mistake of fact or error
of
judgment or for any acts or omissions of any kind unless caused by its willful
misconduct or gross negligence. Each party (other than the Escrow Agent) agrees
jointly and severally, to indemnify the Escrow Agent and to hold it harmless
against any and all liabilities, including reasonable attorneys’ fees, incurred
by it as a consequence of that party’s action, and the parties (other than the
Escrow Agent) agree jointly and severally to indemnify the Escrow Agent and
to
hold it harmless against any and all liabilities, including reasonable
attorneys’ fees, incurred by it which are not a consequence of any party’s
action, except in either case for the Escrow Agent’s own willful misconduct or
gross negligence. The indemnity contained in this Section 2.2 shall survive
the
termination of this Agreement and the resignation or removal of the Escrow
Agent.
2.3. Advice
of Counsel. The Escrow Agent shall be entitled to consult with counsel of
its choice with respect to the interpretation of the provisions hereof, and
any
other legal matters relating hereto, and shall be fully protected in taking
any
action or omitting to take any action in good faith in accordance with the
advice of such counsel.
2.4. Fees
of Escrow Agent. The Escrow Agent shall serve hereunder in consideration of
the fees described on Schedule A attached hereto and the reimbursement of any
expenses and other charges reasonably incurred by the Escrow Agent in connection
with the performance of its duties hereunder. Except as provided in Sections
2.2
and 2.7, all such fees, expenses and other charges of the Escrow Agent (the
“Escrow
Agent Fees and Expenses”)
shall be paid by SOLARFUN
and deducted from the Income prior to distribution of Income to SOLARFUN. This
Section 2.4 shall survive the termination of this Agreement and the resignation
or removal of the Escrow Agent. Legal fees incurred by the Escrow Agent to
establish this Agreement shall be paid by the Escrow Agent.
2.5. Statements.
The Escrow Agent shall mail to HOKU and SOLARFUN a written accounting of all
transactions relating to the Escrow Account not less frequently than
quarterly.
2.6. Successor.
If the Escrow Agent at any time resigns, refuses to act or is removed pursuant
to a Joint Direction, then a successor Escrow Agent shall be jointly selected
by
HOKU and SOLARFUN, or if HOKU and SOLARFUN cannot agree, the successor Escrow
Agent shall be selected by SOLARFUN. Any successor Escrow Agent shall be a
national banking association which has a net worth in excess of $1,000,000,000
and has a principal place of business located in the United States of
America.
2.7. Conflict.
In the event of any conflicting or inconsistent claims or demands being made
in
connection with the subject matter of this Agreement, or in the event that
the
Escrow Agent is in doubt as to what action it should take hereunder, the Escrow
Agent may, at its option, refuse to comply with any claims or demands on it,
or
refuse to take any other action hereunder so long as such disagreement continues
or such doubt exists, and in any such event, the Escrow Agent shall not be
or
become liable in any way or to any person for its failure or refusal to act,
and
the Escrow Agent shall be entitled to continue to refrain from acting until
(i)
the rights of all parties have been fully and finally adjudicated by a court
of
competent jurisdiction and the Escrow Agent has received a copy of such
adjudication, or (ii) all differences shall have been settled and all doubt
resolved by agreement among all of the parties, and the Escrow Agent shall
have
been notified thereof in writing signed by all such parties. In addition to
the
foregoing rights, in the event the Escrow Agent has any doubt as to the course
of action it should take under this Agreement, the Escrow Agent is hereby
authorized to petition any court of competent jurisdiction for instructions
or
to interplead the Escrow Funds into such court. The parties agree to the
jurisdiction of the court selected by the Escrow Agent over their persons as
well as the Escrow Funds, waive personal service of process, and agree that
service of process by certified or registered mail, return receipt requested,
to
the addresses provided in or pursuant to Section 3.6 for each party shall
constitute adequate service. The parties to the Agreement hereby agree, jointly
and severally, to indemnify and hold the Escrow Agent harmless from any
liability or losses occasioned thereby and to pay any and all of its fees,
costs, expenses, and counsel fees and expenses incurred in any such action
and
agree that, on such petition or interpleader action, the Escrow Agent, its
servants, agents employees or officers will be relieved of further
liability.
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2.8. Resignation
of Escrow Agent. The Escrow Agent may resign for any reason, upon 30 days
written notice to the HOKU and SOLARFUN. Upon expiration of such 30 day notice
period, the Escrow Agent may deliver all cash and other property in its
possession, after the payment of all fees and expenses of the Escrow Agent,
under this Agreement to any successor Escrow Agent appointed jointly by HOKU
and
SOLARFUN, or if no successor Escrow Agent has been so appointed, to any court
of
competent jurisdiction in the State of California. SOLARFUN hereby agrees to
pay
any and all of the Escrow Agent’s fees, costs, expenses, and counsel fees and
expenses incurred in any such petition or action required to be filed by Escrow
Agent. Upon either such delivery, the Escrow Agent shall be released from any
and all liability under this Agreement. A termination under this Section shall
in no way affect reimbursement of expenses, indemnity and fees. The Escrow
Agent
shall have the right to deduct from the Escrow Funds to be transferred to any
successor agent any unpaid fees and expenses.
3. Miscellaneous.
3.1. Successors;
Heirs and Assigns. The provisions of this Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors, heirs and assigns; provided, however, that, except for assignments
by HOKU of its rights under this Agreement to the Collateral Agent (as defined
in the Supply Agreement) as collateral security for the Secured Obligations
(as
defined in the Supply Agreement) as contemplated by the Intercreditor Agreement
(as defined in the Supply Agreement) and the Consent (as defined in the Supply
Agreement), no party may assign, delegate or otherwise transfer any of its
rights or obligations under this Agreement without the consent of the other
parties hereto. Notwithstanding the foregoing, an assignment of this Agreement
by any of the parties hereto in connection with a merger, acquisition, or sale
of all or substantially all of the assets or capital stock of such party shall
not require the consent of any other party to this Agreement.
3.2. Survival.
All agreements, representations and warranties made in this Agreement or in
any
document delivered pursuant to this Agreement shall survive the execution and
delivery of this Agreement and the delivery of any such documents.
3.3. Governing
Law. This Agreement shall be governed by and construed in accordance with
the laws of the State of California, without giving effect to principles of
conflicts of laws.
3.4. Counterparts;
Headings. This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but such counterparts shall together
constitute but one and the same agreement. The Article and Section headings
in
this Agreement are inserted for convenience of reference only and shall not
constitute a part of this Agreement.
3.5. Entire
Agreement. This Agreement and the Supply Agreement and the schedules,
exhibits and documents referred to herein and therein contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior negotiations, agreements and undertakings among the parties
with respect to such subject matter. There are no restrictions, promises,
warranties, covenants or undertakings other than those expressly set forth
herein and therein.
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3.6. Notices.
All notices, requests, demands and other communications hereunder shall be
in
writing, and shall be deemed to have been duly given if delivered by overnight
courier, sent by mail to the respective parties or personally delivered
addressed as follows:
If
to
SOLARFUN:
SOLARFUN
POWER HONG KONG LIMITED
In
care
of: JIANGSU LINYANG SOLARFUN CO., LTD.
▇▇.
▇▇▇
▇▇▇▇▇▇▇ ▇▇.,
▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
People’s
Republic of China
Tel:
Fax:
Attn:
E-Mail:
If
to
HOKU:
HOKU
SCIENTIFIC, INC.
▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn:
▇▇.
▇▇▇▇▇▇ ▇▇▇▇▇▇, CEO
E-mail:
[*]
Facsimile:
▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
If
to
Escrow Agent:
[__________________]
[___________________]
[___________________]
Attn.:
E-mail:
Facsimile:
or
to
such other address as such party may designate by written notice to the other
parties hereto. Any such notices, requests, demands or other communications
shall be deemed to have been duly given when received if delivered personally
or, if mailed, on the date five (5) days after the date so deposited in the
mails, postage prepaid, return receipt requested or on the day following the
day
sent if sent by prepaid overnight delivery service. Notices, requests and other
communications hereunder may be delivered by electronic facsimile transmission
(fax) if confirmation by sender is made within three (3) Business Days by mail
or personal delivery. All periods of notice shall be measured from the date
of
deemed delivery thereof.
3.7. Amendment
or Modification of this Agreement. This Agreement may be amended or modified
at any time with the written agreement of Escrow Agent, HOKU and
SOLARFUN.
3.8. Severability.
Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of
such
provision in any other jurisdiction.
[This
space intentionally left blank.]
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IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
on
the day and year first written above.
| SOLARFUN | HOKU: | |||
| SOLARFUN POWER HONG KONG LIMITED | HOKU SCIENTIFIC, INC. | |||
| By: | By: | |||
| Name: | Name: | |||
| Title: | Title: | |||
| Authorized Signatory | Authorized Signatory | |||
| ESCROW AGENT: | ||||
| [__________________] | ||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| Authorized Signatory | ||||
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Schedule
A
Escrow
Fee Schedule
[Schedule
sent separately]
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