Exhibit 10.3
 
HOKU CORPORATION

PERFORMANCE SHARE AWARD AGREEMENT

RECITALS

A.           The Corporation has implemented the Plan for the purpose of
providing incentives to attract, retain and motivate eligible Employees and
consultants and other independent advisors to continue their service
relationship with the Corporation.
 
B.           Participant is to render valuable services to the Corporation (or a
Subsidiary), and this Agreement is executed pursuant to, and is intended to
carry out the purposes of, the Plan in connection with the Corporation’s
issuance of shares of Common Stock to Participant thereunder.
 
C.           All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix A.
 
NOW, THEREFORE, it is hereby agreed as follows:
 
1.           Grant of Performance Shares.  The Corporation hereby awards to
Participant, as of the Award Date indicated below, an award (the “Award”) of
Performance Shares under the Plan.  Each Performance Share which vests pursuant
to the terms of this Agreement shall provide Participant with the right to
receive one share of Common Stock on the designated issuance date.  The number
of shares of Common Stock subject to the awarded Performance Shares, the
applicable performance vesting requirement(s) for those shares, the date on
which those vested shares of Common Stock shall become issuable and the
remaining terms and conditions governing the Award, including the applicable
service vesting requirements, shall be as set forth in this Agreement.
 

AWARD SUMMARY
Participant
___________________________________________
   
Award Date:
 

Designated Number of Per-formance Shares:
The actual number of shares of Common Stock that may become issuable pursuant to
the Performance Shares awarded under this Agreement shall be determined in
accordance with the Vesting Schedule set forth below and Schedule I to this
Agreement. For purposes of the calculations set forth in the Performance Vesting
section of the Vesting Schedule and Schedule I to this Agreement, the designated
number of Performance Shares to be utilized is _____________ shares.

 
 

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Vesting Schedule:
Performance Vesting:  Attached Schedule I specifies the Performance Goals to be
attained for the specified Performance Period. Within sixty (60) days after the
completion of that Performance Period, the Administrator shall determine and
certify the actual level of attainment for each Performance Goal. On the basis
of that certified level of attainment, the number of Performance Shares will be
determined in accordance with Schedule I. The number of shares resulting from
such calculation shall constitute the maximum number of shares of Common Stock
in which Participant may vest under this Award and shall be designated the
“Performance-Qualified Shares.”  In no event may the number of such
Performance-Qualified Shares exceed the number of Performance Shares specified
in the Number of Performance Shares section above.
 
To the extent any Performance Goal is attained at a level below the target
level, a portion of the Performance Shares, as determined in accordance with
Schedule I shall be forfeited, and any such forfeited Performance Shares shall
be immediately cancelled.  Participant shall thereupon cease to have any further
right, title or interest in the shares of Common Stock underlying those
cancelled Performance Shares.
 
Continuous Service Vesting.  If Participant remains in Continuous Service
through the completion of the Performance Period, Participant shall, on the date
on which the Administrator certifies the attained level of the Performance Goals
for that Performance Period, vest in one hundred percent (100%) of the
Performance-Qualified Shares.  If Participant does not remain in Continuous
Service through the completion of the Performance Period, all of the Performance
Shares shall be forfeited and any such forfeited Performance Shares shall be
immediately cancelled.  Participant shall thereupon cease to have any further
right, title or interest in the shares of Common Stock underlying those
cancelled Performance Shares.
 
Change in Control Vesting.  The shares of Common Stock underlying the
Performance Shares subject to this Award may also vest on an accelerated basis
in accordance with Paragraph 4 should a Change in Control occur prior to the
completion of the Performance Period.
 
Issuance Date:
The shares of Common Stock which actually vest and become issuable  pursuant to
the terms of this Agreement shall be issued in accordance with the provisions of
this Agreement applicable to the particular circumstances under which such
vesting occurs.
 

2.           Limited Transferability.  Prior to the actual issuance of the
shares of Common Stock which vest hereunder, Participant may not transfer any
interest in the Performance Shares subject to this Award or the underlying
shares of Common Stock.  However, any shares of Common Stock which vest
hereunder but otherwise remain unissued at the time of Participant’s death may
be transferred pursuant to the provisions of Participant’s will or the laws of
inheritance or to Participant’s designated beneficiary or beneficiaries of this
Award.  Participant may make such a beneficiary designation at any time by
filing the appropriate form with the Plan Administrator or its designee.
 
 
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3.           Stockholder Rights and Dividend Equivalents.  The holder of this
Award shall not have any stockholder rights, including voting, dividend or
liquidation rights, with respect to the shares of Common Stock subject to the
Award until Participant becomes the record holder of those shares upon their
actual issuance following the Corporation’s collection of the applicable
Withholding Taxes.
 
4.           Change in Control.  The following provisions shall apply to the
extent a Change in Control is consummated prior to the completion of the
Performance Period.
 
(a)           Should Participant remain in Continuous Service through the
effective date of that Change in Control, then Participant shall immediately
vest in that number of shares of Common Stock equal to the designated number of
Performance Shares set forth in Paragraph 1, without regard to the Company’s
achievement of the Performance Goals.
 
(b)           The shares of Common Stock underlying the Performance Shares in
which Participant vests in accordance with the foregoing provisions of this
Paragraph 4 shall be issued on the effective date of such Change in Control or
as soon as administratively practicable thereafter, but in no event more than
fifteen (15) business days after such effective date.  Alternatively, those
vested shares of Common Stock shall be converted into the right to receive the
same consideration per share of Common Stock payable to the other stockholders
of the Corporation in consummation of the Change in Control, and such
consideration shall be distributed to Participant within fifteen (15) business
days following the effective date of that Change in Control. Each issuance or
distribution made under this Paragraph 4(b) shall be subject to the
Corporation’s collection of the applicable Withholding Taxes.
 
(c)           Except for the shares of Common Stock in which Participant vests
in accordance with this Paragraph 4, Participant shall cease to have any further
right or entitlement to any additional shares of Common Stock under this
Agreement following the effective date of the Change in Control.
 
(d)           This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
 
5.           Adjustment in Shares.  Should any change be made to the Common
Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares, spin-off transaction, extraordinary
dividend or distribution or other change affecting the outstanding Common Stock
as a class without the Corporation’s receipt of consideration, or should the
value of the outstanding shares of Common Stock be substantially reduced as a
result of a spin-off transaction or an extraordinary dividend or distribution,
or should there occur any merger, consolidation or other reorganization, then
equitable adjustments shall be made by the Administrator to the total number
and/or class of securities issuable pursuant to this Award in order to reflect
such change.  In the event of any Change in Control transaction, the provisions
of Paragraph 4 shall be controlling.
 
 
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6.           Issuance of Vested Shares.
 
(a)           Except as otherwise provided in Paragraph 4, the shares of Common
Stock in which Participant vests pursuant to the Performance and Continuous
Service vesting provisions of Paragraph 1 shall be issued as soon as
administratively practicable following the completion of that Performance
Period, but in no event more than fifteen (15) business days after the
completion of such Performance Period.
 
(b)           The Corporation shall, on the applicable issuance date, issue to
or on behalf of Participant a certificate (which may be in electronic form) for
the shares of Common Stock in which Participant vests pursuant to the
Performance and Continuous Service vesting provisions of Paragraph 1 or the
special vesting provisions of Paragraph 4.
 
(c)           Except as otherwise provided in Paragraph 4, no shares of Common
Stock shall be issued prior to the completion of the Performance Period.  No
fractional shares of Common Stock shall be issued pursuant to this Award, and
any fractional share resulting from any calculation made in accordance with the
terms of this Agreement shall be rounded down to the next whole share.
 
(d)           The Corporation shall collect the applicable Withholding Taxes
with respect to the shares of Common Stock that vest and become issuable under
this Award in accordance with Paragraph 7.
 
(e)           Except as otherwise provided in Paragraph 4 or Paragraph 7, the
settlement of all Performance Shares which vest under the Award shall be made
solely in shares of Common Stock.
 
7.           Collection of Withholding Taxes.
 
(a)           Until such time as the Corporation provides the Participant with
notice to the contrary, the Corporation shall collect the Withholding Taxes
required to be withheld with respect to the issuance of the Shares that vest
hereunder through an automatic Share withholding procedure pursuant to which the
Corporation will withhold, at the time of such issuance, a portion of
the  Shares with a Fair Market Value (measured as of the issuance date) equal to
the amount of such Withholding Taxes (the “Share Withholding Method”); provided,
however, that the amount of any Shares so withheld shall not exceed the amount
necessary to satisfy the Corporation‘s required tax withholding obligations
using the minimum statutory withholding rates for federal and state tax
purposes, including payroll taxes, that are applicable to supplemental taxable
income. The Participant shall be notified in writing in the event such Share
Withholding Method is no longer available.
 
 
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(b)           Should any Shares vest under the Award when the Share Withholding
Method is not available, then the Withholding Taxes shall be collected from the
Participant through either of the following alternatives:
 
-      the Participant’s delivery of his or her separate check payable to the
Corporation in the amount of such Withholding Taxes, or
 
-      the use of the proceeds from a next-day sale of the Shares issued to the
Participant, provided and only if (i) such a sale is permissible under the
Corporation’s trading policies governing the sale of Common Stock, (ii) the
Participant makes an irrevocable commitment, on or before the vesting date for
those Shares, to effect such sale of the Shares and (iii) the transaction is not
otherwise deemed to constitute a prohibited loan under Section 402 of the
Sarbanes-Oxley Act of 2002.
 
8.           Benefit Limit. In the event the vesting and issuance of the
Performance Shares subject to this Award would constitute a parachute payment
under Code Section 280G, the vesting and issuance of those Performance Shares
shall be subject to reduction to the extent necessary to assure that the number
of shares of Common Stock which vest and are issued under this Award will be
limited to the greater of (i)  the number of shares of Common Stock which can
vest and be issued without triggering a parachute payment under Code Section
280G or (ii)  the maximum number of shares of Common Stock which can vest and be
issued under this Award so as to provide the Participant with the greatest
after-tax amount of such vested and issued shares of Common Stock after taking
into account any excise tax the Participant may incur under Code Section 4999
with respect to those shares of Common Stock and any other benefits or payments
to which the Participant may be entitled in connection with any change in
control or ownership of the Corporation or the subsequent termination of the
Participant’s Continuous Service.
 
9.           Compliance with Laws and Regulations.  The issuance of shares of
Common Stock pursuant to the Award shall be subject to compliance by the
Corporation and Participant with all applicable requirements of law relating
thereto and with all applicable regulations of the Stock Exchange on which the
Common Stock is listed for trading at the time of such issuance.
 
10.           Notices.  Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices.  Any notice required to
be given or delivered to Participant shall be in writing and addressed to
Participant at the most current address then indicated for Participant on the
Corporation’s employee records or shall be delivered electronically to
Participant through the Corporation’s electronic mail system. All notices shall
be deemed effective upon personal delivery or delivery through the Corporation’s
electronic mail system or upon deposit in the U.S. mail, postage prepaid and
properly addressed to the party to be notified.
 
11.           Successors and Assigns.  Except to the extent otherwise provided
in this Agreement, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the Corporation and its successors and assigns and
Participant, Participant’s assigns, the legal representatives, heirs and
legatees of Participant’s estate and any beneficiaries of the Award designated
by Participant.
 
 
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12.           Construction.
 
(a)           This Agreement and the Award evidenced hereby are made and granted
pursuant to the Plan and are in all respects limited by and subject to the terms
of the Plan.  In the event of any conflict between the provisions of this
Agreement and the terms of the Plan, the terms of the Plan shall be controlling.
All decisions of the Administrator with respect to any question or issue arising
under the Plan or this Agreement shall be conclusive and binding on all persons
having an interest in the Award.
 
(b)           It is the intention of the parties that the provisions of this
Agreement comply with the requirements of the short-term deferral exception of
Section 409A of the Code and Treasury Regulations Section
1.409A-1(b)(4).  Accordingly, to the extent there is any ambiguity as to whether
one or more provisions of this Agreement would otherwise contravene the
requirements or limitations of Code Section 409A applicable to such short-term
deferral exception, then those provisions shall be interpreted and applied in a
manner that does not result in a violation of the requirements or limitations of
Code Section 409A and the Treasury Regulations thereunder that apply to such
exception.
 
13.           Governing Law.  The interpretation, performance and enforcement of
this Agreement shall be governed by the laws of the State of Delaware without
resort to that State’s conflict-of-laws rules.
 
14.           Employment at Will.  Nothing in this Agreement or in the Plan
shall confer upon Participant any right to remain in Continuous Service for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Corporation (or any Parent or Subsidiary employing or
retaining Participant) or of Participant, which rights are hereby expressly
reserved by each, to terminate Participant’s Continuous Service at any time for
any reason, with or without cause.
 
 
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IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year
first indicated above.
 

 
HOKU CORPORATION.
       
By:
   
Title:
       
PARTICIPANT
       
Signature:
   
Address:
       

 
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APPENDIX A
 
DEFINITIONS
 
The following definitions shall be in effect under the Agreement:
 
A.           Administrator shall mean the Compensation Committee of the Board
acting in its capacity as administrator of the Plan.
 
B.           Agreement shall mean this Performance Share Award Agreement.
 
C.           Award shall mean the award of Performance Shares made to
Participant pursuant to the terms of this Agreement.
 
D.           Award Date shall mean the date the Performance Shares are awarded
to Participant pursuant to the Agreement and shall be the date indicated in
Paragraph 1 of the Agreement.
 
E.           Board shall mean the Corporation’s Board of Directors.
 
F.           Change in Control shall mean a change in ownership or control of
the Corporation effected through any of the following transactions:
 
 (i)           a merger or consolidation in which the Corporation is not the
surviving entity and in which one person or a group of related persons (other
than the Corporation or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Corporation) acquires
ownership of securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation’s outstanding securities;
 
(ii)           the sale, transfer or other disposition of all or substantially
all of the assets of the Corporation in complete liquidation or dissolution of
the Corporation;
 
(iii)           any reverse merger in which the Corporation is the surviving
entity but in which one person or a group of related persons (other than the
Corporation or a person that directly or indirectly controls, is controlled by,
or is under common control with, the Corporation) acquires ownership of
securities possessing more than fifty percent (50%) of the total combined voting
power of the Corporation’s outstanding securities;
 
(iv)           the acquisition, directly or indirectly by any person or related
group of persons (other than the Corporation or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Corporation), of beneficial ownership (within the meaning of Rule 13d-3 of the
1934 Act) of securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation’s outstanding securities pursuant to a
tender or exchange offer made directly to the Corporation’s stockholders; or
 
 
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(v)           a change in the composition of the Board over a period of twelve
(12) consecutive months or less such that a majority of the Board members cease,
by reason of one or more contested elections for Board membership, to be
comprised of individuals who either (A) have been Board members continuously
since the beginning of such period or (B) have been elected or nominated for
election as Board members during such period by at least a majority of the Board
members described in clause (A) who were still in office at the time the Board
approved such election or nomination.
 
I.            Code shall mean the Internal Revenue Code of 1986, as amended.
 
J.            Common Stock shall mean shares of the Corporation’s common stock.
 
K.           Continuous Service shall have the meaning assigned to such term in
the Plan.
 
L.           Corporation shall mean Hoku Corporation, a Delaware corporation,
and any successor corporation to all or substantially all of the assets or
voting stock of Hoku Corporation which shall by appropriate action adopt the
Plan.
 
M.           Employee shall mean an individual who is in the employ of the
Corporation (or any Subsidiary), subject to the control and direction of the
employer entity as to both the work to be performed and the manner and method of
performance.
 
N.           Fair Market Value shall have the meaning assigned to such term in
the Plan.
 
O.           1934 Act shall mean the Securities Exchange Act of 1934, as amended
from time to time.
 
P.           Participant shall mean the person to whom the Award is made
pursuant to the Agreement.
 
Q.           Performance Goals shall mean the performance goals specified on
attached Schedule I which must be attained in order to satisfy the performance
vesting requirements for the shares of Common Stock subject to this Award.
 
R.           Performance Period shall mean the period specified on attached
Schedule I over which the attainment of the Performance Goals is to be measured.
 
S.           Performance-Qualified Shares shall mean the maximum number of
shares of Common Stock in which Participant can vest based on the level at which
the Performance Goals for the Performance Period are attained and shall be
calculated in accordance with the provisions of this Agreement.  In no event
shall the number of such Performance-Qualified Shares exceed the number of
Performance Shares designated in Paragraph 1 of this Agreement.
 
 
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T.           Performance Share shall mean a phantom share of Common Stock
awarded under this Agreement which will entitle Participant to receive one share
of Common Stock pursuant to this Award upon the satisfaction of the performance
and Continuous Service vesting requirements applicable to such Award.
 
U.           Plan shall mean the Corporation’s 2005 Equity Incentive Plan.
 
V.           Stock Exchange shall mean the American Stock Exchange, the Nasdaq
Capital or Global Market or the New York Stock Exchange.
 
W.           Subsidiary shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
 
X.           Vesting Schedule shall mean the schedule set forth in Paragraph 1
of the Agreement, pursuant to which the Performance Shares and the underlying
shares of Common Stock are to vest upon the satisfaction of the performance and
Continuous Service vesting requirements applicable to this Award.
 
Y.           Withholding Taxes shall mean the federal, state and local income
taxes and the employee portion of the federal, state and local employment taxes
required to be withheld by the Corporation in connection with the vesting and
issuance of the shares of Common Stock which vest under of the Award and any
other amounts distributable in replacement or substitution of such shares.
 
 
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SCHEDULE I
PERFORMANCE PERIOD AND PERFORMANCE GOALS