Exhibit 10.32

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

 

Confidential & Proprietary

 

MATERIAL TRANSFER & COLLABORATIVE TESTING AGREEMENT

 

This Material Transfer & Collaborative Testing Agreement (“Agreement”) is
effective this 5th day of December, 2005, by and between: HOKU SCIENTIFIC, INC.,
a Delaware corporation (“HOKU”), and SANYO ELECTRIC CO., LTD., a Japanese
corporation (“SANYO” and, together with HOKU, the “Parties”).

 

BACKGROUND & PURPOSE

 

HOKU is developing a proprietary membrane (“HOKU Membrane”) and proprietary
membrane electrode assembly (“HOKU MEA”) that incorporates HOKU Membrane for use
in proton exchange membrane fuel cell (“PEMFC”). HOKU is actively seeking
development partners and customers for HOKU Membrane and HOKU MEA.

 

SANYO develops and manufactures PEMFC components, stacks, and integrated systems
for residential applications (the “SANYO Products”).

 

HOKU and SANYO desire HOKU to (i) engineer, test, manufacture and ship HOKU
Samples (as defined in Section 3 below) to SANYO at the address set forth on the
signature page to this Agreement (the “SANYO Facility”) to allow SANYO to verify
the performance and durability of the HOKU Samples, as set forth in this
Agreement; and (ii) conduct collaborative tests on HOKU Samples (as defined in
Section 4 below), each as set forth in this Agreement.

 

For good and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the Parties agree as follows:

 

AGREEMENT

 

1. Confidentiality. Without limiting the confidentiality terms set forth in
Sections 7 and 8 of the Amended Agreement (the “Hoku/Sanyo Agreement”) dated
September 30, 2004, by and between the Parties, the terms of this Agreement, the
HOKU Samples (as defined below), and the results of any testing performed
pursuant to this Agreement, shall be deemed Confidential Information as defined
in the Hoku/Sanyo Agreement.

 

2. SANYO Specifications. Exhibit A attached to this Agreement is a drawing of
SANYO’s dimensional requirements for HOKU MEA to be tested by SANYO pursuant to
this Agreement (the “SANYO Test Cell Geometry”).

 

3. HOKU Samples. HOKU shall (i) engineer HOKU MEA to meet the SANYO Test Cell
Geometry requirements; (ii) produce HOKU MEA in the quantities described on
Exhibit B (the “HOKU Samples”); and (iii) deliver the HOKU Samples to the [ * ].
HOKU and SANYO shall mutually agree to the delivery date of the HOKU Samples. In
providing the HOKU Samples to SANYO, this transfer of materials constitutes a
limited non-exclusive license to SANYO to test and evaluate the HOKU Samples as
set forth in this Agreement.

 

4. Collaborative Testing. HOKU and SANYO shall conduct the tests of the HOKU
Samples as described on Exhibit C attached hereto using [ * ] test equipment at
the SANYO Facility (“Collaborative Testing”). SANYO shall maintain custody and
control of the HOKU Samples inside the SANYO Facility at all times, and shall
not send the HOKU Samples to any other facility for testing or invite any third
party to the SANYO Facility to witness the Collaborative Testing without the
prior written approval of HOKU. HOKU shall have the right to send up to two
(2) representatives to SANYO at the start and at the end of the Collaborative
Testing.

 

SANYO Initials & Date /s/ YI 12/16/05   HOKU Initials & Date /s/ DS 12/18/05

 

Page 1 of 8

--------------------------------------------------------------------------------

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

 

Confidential & Proprietary

 

5. Collaborative Testing Results. Upon completion of the Collaborative Testing,
SANYO shall provide HOKU with a written summary of the results of the
Collaborative Testing (the “Collaborative Testing Report”), comparing actual
results to SANYO’s target values. Such results shall be considered the
Confidential Information of both Parties pursuant to the Confidentiality
Agreement.

 

6. Costs. Each Party shall bear its own costs and expenses incurred in
connection with the Collaborative Testing; provided, however, that SANYO shall
pay HOKU the amount set forth on Exhibit B for the HOKU Samples ordered pursuant
to Section 3 above. SANYO may order additional HOKU Samples by submitting a
purchase order to HOKU. The price for each additional HOKU Sample shall be the
same as the price on Exhibit B. In addition, SANYO shall pay HOKU a total flat
fee of $250,000 for the Collaborative Testing described in Section 4 above.
SANYO shall also pay all applicable sales taxes, excise taxes ($10,415.00),
duties, shipping and insurance charges. Hoku shall provide an invoice to Sanyo
upon execution of this Agreement for $260,415.00 (Collaborative Testing fee and
excise tax), and Sanyo shall pay that amount by February 28, 2006. All purchases
of HOKU Samples shall be separately invoiced, and all payments shall be due and
payable [ * ] after shipment of the HOKU Samples by HOKU.

 

7. No Rights. SANYO, as recipient of the HOKU Samples, does not acquire any
right, title or interest in the HOKU Samples extending beyond the limited grant
in Section 3 above. No rights are granted to SANYO to use the HOKU Samples for
purposes of sale, consultation, provision of services or any other commercial
purposes under this Agreement. This Agreement does not restrict the right of
HOKU to distribute HOKU Samples to other commercial or non-commercial entities.
HOKU has no obligation to grant a license to SANYO, and HOKU may grant exclusive
or nonexclusive licenses to others who may be investigating, testing, evaluating
or using HOKU Samples. This Agreement does not in any way change or amend the
rights granted to SANYO by HOKU as part of the Hoku/Sanyo Agreement.

 

8. Return of HOKU Samples. SANYO agrees that all HOKU Samples remain the
property of HOKU. At the earlier of (i) the written request of HOKU, and
(ii) upon completion of the Collaborative Testing, all HOKU Samples shall be
returned to HOKU or destroyed in the presence of an authorized HOKU
representative.

 

9. No Analysis of HOKU Samples. SANYO agrees not to make or have made any
analysis, observation of the chemical composition and/or physical
characteristics or to perform any experiment on the HOKU Samples, except for the
agreed upon Collaborative Testing.

 

10. Warranty Disclaimer. THE HOKU SAMPLES PROVIDED TO SANYO ARE PROVIDED AS IS,
WITHOUT ANY WARRANTY OF MERCHANTIBILITY OR FITNESS FOR A PARTICULAR PURPOSE OR
ANY OTHER WARRANTY, EXPRESS OR IMPLIED. HOKU MAKES NO REPRESENTATION OR WARRANTY
THAT THE USE OF THE HOKU SAMPLES WILL NOT INFRINGE ANY PATENT OR OTHER
PROPRIETARY RIGHT OF A THIRD PARTY. THE HOKU SAMPLES SHALL BE USED SOLELY FOR
THE COLLABORATIVE TESTING.

 

11. Relationship of the Parties. Neither Party shall be under any legal
obligation of any kind whatsoever with respect to the other Party except for the
matters specifically agreed to herein. Nothing contained in this Agreement shall
be construed as constituting the relationship of the Parties to be one of
agent/principal, partner, joint-venture or employer/employee, or cause any Party
to be liable for any of the debts or obligations of the other, nor shall any
Party have the right or authority to act for, incur any liability or obligation
of any kind, express, or implied, in the name of or on behalf of any other Party
hereto. This Agreement is non-exclusive, and either Party remains free to
negotiate or enter into similar relationships with others.

 

SANYO Initials & Date /s/ YI 12/16/05   HOKU Initials & Date /s/ DS 12/18/05

 

Page 2 of 8

--------------------------------------------------------------------------------

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

 

Confidential & Proprietary

 

12. Miscellaneous.

 

12.1. Term. The term of this Agreement shall commence on January 1, 2006 and
shall terminate on July 31, 2006 (the “Initial Term”). All Collaborative Testing
shall be completed during the Initial Term.

 

12.2. Severability. If any provision of this Agreement shall be held invalid by
any court of competent jurisdiction, such provision shall be modified to the
extent necessary to make it enforceable or, if necessary, shall be inoperative,
and the remainder of this Agreement shall remain binding upon the Parties
hereto.

 

12.3. Counterparts. This Agreement may be executed in several counterparts,
including counterparts transmitted by telecopier, telefax, or any similar means
of electronic transmission, each of which shall be an original, and all of which
together shall constitute but one and the same instrument.

 

12.4. No Third Party Beneficiaries. This Agreement confers no rights whatsoever
upon any persons, other than the Parties hereto.

 

12.5. Waiver. No failure on the part of any Party to exercise, and no delay in
exercising, any right hereunder shall operate as waiver thereof, nor shall any
single or partial exercise of any right hereunder by any Party preclude any
other or further exercise of any other right and no waiver shall be valid unless
in a signed writing, and then only to the extent specifically set forth in such
writing. No waiver of any right hereunder shall operate as a waiver of any other
or of the same or similar right on another occasion.

 

12.6. Governing Law and Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of Hawaii applicable to
agreements made and to be performed in the State of Hawaii, without giving
effect to conflicts of law principles. The parties also consent to personal
jurisdiction over them in the courts of the State of Hawaii. Service of process
upon any party shall be sufficient if made in accordance with the laws of the
State of Hawaii or in accordance with the notice provision in this Agreement.

 

12.7. Injunctive Relief. Each Party agrees that the restrictions set forth
herein are necessary and reasonable in order to protect the interests of the
other Party and that any violations of the terms set forth herein will cause
irreparable injury to the non-breaching Party. Each Party further agrees that
money damages would not be a sufficient remedy for any breach of this Agreement.
As a result, each Party hereby agrees that upon any breach of the covenants and
agreements set forth herein, the non-breaching Party will be entitled to
specific performance and injunctive relief as remedies for any such breach
without the necessity of posting a bond, given the disparate sizes of the
parties. Such remedies will not be deemed to be the exclusive remedies for any
breach of the Agreement but will be in addition to all other remedies available
at law or in equity to the non-breaching Party.

 

12.8. Notices. Notices required or appropriate to be given under this Agreement
shall be given by hand delivery or facsimile or electronic mail transmission and
by certified mail return receipt requested, to the address set forth on the
signature page hereto, or in such other manner as shall be agreed to in writing
by the Parties.

 

SANYO Initials & Date /s/ YI 12/16/05   HOKU Initials & Date /s/ DS 12/18/05

 

Page 3 of 8

--------------------------------------------------------------------------------

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

 

Confidential & Proprietary

 

12.9. Headings. The Section headings contained in this Agreement are not part of
this Agreement, are for the convenience of reference only and shall not affect
the meaning, construction or interpretation of this Agreement.

 

12.10. Binding Effect. This Agreement shall be binding upon and shall inure to
the benefit of each of the Parties hereto and their respective successors and
assigns.

 

12.11. Assignment. This Agreement may not be assigned by either Party without
the prior written consent of the Parties.

 

12.12. Integration of Prior Agreements; Amendment. This Agreement and the
Hoku/Sanyo Agreement set forth the entire understanding of the Parties regarding
the matters set forth herein and therein, and supersedes all prior agreements,
whether oral or written, regarding the subject matter hereof; provided, however,
that the Hoku/Sanyo Agreement shall survive the execution and termination of
this Agreement. Any amendment to this Agreement must be in writing and signed by
the Parties.

 

12.13. Currency. All references to currencies in this Agreement shall be U.S.
Dollars, and all payments made pursuant to this Agreement shall be in U.S.
Dollars.

 

(Signature Page Immediately Follows)

 

SANYO Initials & Date /s/ YI 12/16/05   HOKU Initials & Date /s/ DS 12/18/05

 

Page 4 of 8

--------------------------------------------------------------------------------

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

 

Confidential & Proprietary

 

IN WITNESS WHEREOF, the Parties have executed this Material Transfer &
Collaborative Testing Agreement as of the date first set forth above.

 

SANYO:    HOKU: SANYO ELECTRIC COMPANY, LTD.    HOKU SCIENTIFIC, INC. By:   

/s/ Yasuhiko Itoh

--------------------------------------------------------------------------------

   By:   

/s/ Dustin Shindo

--------------------------------------------------------------------------------

Name:    Yasuhiko Itoh    Name:    Dustin Shindo Title:   

General Manager

Authorized Signatory

   Title:   

Chief Executive Officer

Authorized Signatory

SANYO Facility:          

SANYO ELECTRIC COMPANY, LTD.

R&D Headquarters

1-1-1, Sakata, Oizumi-Machi, Ora-Gun

Gunma, 370-0596, Japan

Fax: [ * ]

Attn: Yasuhiko Itoh, General Manager

   HOKU SCIENTIFIC, INC.
1075 Opakapaka Street
Kapolei, Hawaii 96707-1887
USA
Fax: 808-682-7807
Attn: Dustin Shindo, CEO

 

SIGNATURE PAGE TO MATERIAL TRANSFER & COLLABORATIVE TESTING AGREEMENT

 

PAGE 5 OF 8

--------------------------------------------------------------------------------

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

 

Confidential & Proprietary

 

EXHIBIT A

 

SANYO TEST CELL GEOMETRY

 

[ * ]

    [ * ]

    [ * ]

 

[ * ]

 

        [ * ]

            [ * ]

 

SANYO Initials & Date /s/ YI 12/16/05   HOKU Initials & Date /s/ DS 12/18/05

 

Page 6 of 8

--------------------------------------------------------------------------------

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

 

Confidential & Proprietary

 

EXHIBIT B

 

HOKU SAMPLES

 

HOKU Samples shall include the following:

 

Sample Description

--------------------------------------------------------------------------------

   Active Electrode
Area

--------------------------------------------------------------------------------

  Total Membrane
Area

--------------------------------------------------------------------------------

  Number of
Units

--------------------------------------------------------------------------------

  Unit Cost

--------------------------------------------------------------------------------

  Total Cost

--------------------------------------------------------------------------------

[ * ]

   [*]   [*]
[*]   [*]   [*]   [*]

[ * ]

   [*]
[*]   [*]
[*]   [*]   [*]   [*]                  TOTAL   [*]

 

SANYO Initials & Date /s/ YI 12/16/05   HOKU Initials & Date /s/ DS 12/18/05

 

Page 7 of 8

--------------------------------------------------------------------------------

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

 

Confidential & Proprietary

 

EXHIBIT C

 

COLLABORATIVE TESTING

 

HOKU and SANYO shall perform the following tests of the HOKU Samples pursuant to
Section 4 of the Material Transfer & Collaborative Testing Agreement.

 

Test Description

--------------------------------------------------------------------------------

   Start Date

--------------------------------------------------------------------------------

  End Date

--------------------------------------------------------------------------------

  Location

--------------------------------------------------------------------------------

[ * ]

   [*]   [*]   SANYO

[ * ]

[ * ]

   [*]   [*]   SANYO

[ * ]

[ * ]

   [*]   [*]   SANYO

[ * ]

[ * ]

   [*]   [*]   SANYO

- [*]

- [*]

- [*]

- [*]

            

 

SANYO Initials & Date /s/ YI 12/16/05   HOKU Initials & Date /s/ DS 12/18/05

 

Page 8 of 8