Exhibit 10.71
 
[*] = 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.
 
EQUIPMENT PURCHASE & SALE AGREEMENT
 
This Equipment Purchase & Sale Agreement (this “Agreement”), entered into as of
April 8, 2008 (the “Effective Date”), by and between PVA TEPLA DANMARK, a
corporation organized and existing under the laws of the Kingdom of Denmark
(hereinafter “SELLER”), and HOKU MATERIALS, INC., a corporation organized and
existing under the laws of the State of Delaware (hereinafter “BUYER”). SELLER
and BUYER are each a “Party” and together, the “Parties.”
 
Recitals
 
WHEREAS, SELLER is a manufacturer and provider of equipment and related services
for the polycrystalline silicon industry;
 
WHEREAS, BUYER is building a manufacturing facility for the production of
polycrystalline silicon in Idaho, USA; and
 
WHEREAS, subject to the terms and conditions set forth in this Agreement, BUYER
intends to purchase from SELLER and SELLER intends to sell to BUYER, the
equipment and other Deliverables (as defined below) for use in BUYER’s
polycrystalline silicon production plant;
 
NOW, THEREFORE, pursuant to the terms and conditions and the mutual
consideration set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are acknowledged hereby, BUYER and SELLER
agree as follows:
 
Agreement
 
1. Definitions. The following capitalized terms used in this Agreement shall
have the meanings set forth below: 
 
1.1. “Certificate of Commissioning” shall mean the certificate, in substantially
the form of Appendix 7 attached to this Agreement, to be signed by an officer of
BUYER and an officer of SELLER after the successful completion of the
Commissioning Test.
 
1.2. “Commissioning Test” shall mean the test to be completed by SELLER in the
presence of BUYER at the Work Site that follows the procedures described in
Appendix 5 to confirm that all Equipment meets the Technical Specifications.
 
1.3. “Deliverables” shall mean, collectively, all Equipment, Technical
Documentation and Technical Services to be provided by SELLER to BUYER pursuant
to this Agreement.
 
1.4. “Equipment” shall mean the following items of equipment as more fully
described in Appendices 1-2:
 
SELLER Initials & Date         25/3-08 JB                                  
 
BUYER Initials & Date   DN 4/8/08                                  

 
Page 1 of 21

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Item
 
Quantity
 
Price Each
 
Total
 
SR-110 Slim rod pullers, as described in Appendix 1
   
[*]
 
 
[*]
 
 
[*]
 
FZ-14M analytic Float zone crystal puller, as described in Appendix 2
   
[*]
 
 
[*]
 
 
[*]
 
 
         
Total 
 
$
6,359,995.00
 

 
SELLER will utilize its best efforts to acquire slim rods on behalf of BUYER.
 
1.5. “Factory Acceptance Certificate” shall mean the certificate, in
substantially the form of Appendix 6 attached to this Agreement, to be signed by
an officer of BUYER and an officer of SELLER after the successful completion of
the Factory Acceptance Test.
 
1.6. “Factory Acceptance Test” shall mean the test to be completed by SELLER in
the presence of BUYER at the SELLER Facility that follows the procedures
described in Appendix 4 to confirm that all Equipment meets the Technical
Specifications.
 
1.7. “Port of Shipment” shall mean Copenhagen, Denmark.
 
1.8. “Port of Unloading” shall mean a port in the USA to be determined by the
BUYER.
 
1.9. “SELLER Facility” shall mean the facility where SELLER is manufacturing the
Equipment, located at Smedetoften 4, DK-3600 Frederikssund, Denmark.
 
1.10. “Technical Documentation” shall mean the documentation (in English
language) that includes the technical data, specifications, drawings,
inspection, erection, commissioning, performance testing, operating and
maintenance of Equipment, as specified in Appendix 3.
 
1.11. “Technical Services” shall have the meaning set forth in Section 6 below.
 
1.12. “Technical Specifications” means the operating and other specifications of
the Equipment set forth on Appendices 1 and 2 attached hereto.
 
1.13. “Warranty Period” shall mean the period beginning on the Effective Date
and ending twelve (12) months after the Certificate of Commissioning has been
signed by BUYER and SELLER. 
 
1.14. “Work Site” shall mean the BUYER’s polysilicon plant located in Pocatello,
Idaho USA.
 
2. Purchase & Sale Commitment
 
2.1. Subject to the terms and conditions set forth herein, BUYER agrees to buy
from SELLER, and SELLER agrees to sell to BUYER, the Deliverables.
 
3. Payment Terms
 
3.1. BUYER shall pay to SELLER the aggregate purchase price for the Equipment
ordered pursuant to this Agreement at the per-unit price set forth in
Section 1.4 above as the total payment for all Deliverables under this Agreement
(the “Agreement Price”) in accordance with the following schedule: 
 
SELLER Initials & Date         25/3-08 JB                                  
 
BUYER Initials & Date   DN 4/8/08                                  

 
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   3.1.1. Within one hundred and twenty (120) days after the Effective Date,
BUYER shall pay to SELLER 30% of the Agreement Price as an initial payment (the
“Initial Payment”). Notwithstanding anything to the contrary in this Agreement,
BUYER may terminate this Agreement at any time prior to making the Initial
Payment, and shall thereupon have no liability or further obligation to SELLER
pursuant to this Agreement.
 
3.1.2. Within thirty (30) days after BUYER and SELLER sign the Factory
Acceptance Certificate, and upon receipt of an invoice from SELLER, BUYER shall
pay to SELLER 50% of the Agreement Price. SELLER shall not be required to ship
the Equipment until such payment has been received by SELLER.
 
3.1.3. Within thirty (30) days after BUYER and SELLER sign the Certificate of
Commissioning, and upon receipt of an invoice from SELLER, BUYER shall pay to
SELLER 15% of the Agreement Price Following receipt of such payment, title to
the Equipment shall pass to BUYER, free and clear of all liens, third party
claims and encumbrances.
 
3.1.4. Within thirty (30) days after the later of (A) the expiration of the
Warranty Period (as defined in Section 1.13 above), and (B) the final settlement
or adjudication of all outstanding warranty claims pursuant to Section 7.3
below, BUYER shall pay to SELLER a final payment of 5% of the Agreement Price
less all amounts that have been validly deducted to satisfy warranty claims
pursuant to Section 7.3 below.
 
3.2. The Agreement Price includes all excise, sales, use, import, export or
other similar taxes (collectively “Taxes”) levied by Germany, Denmark, the
European Union, or any other authority in Europe, which shall be for SELLER’s
account; provided that the Agreement Price does not include Taxes levied by the
United States, the State of Idaho, or any other authority in the United States,
which shall be for BUYER’s account.
 
3.3. BUYER shall provide SELLER with five (5) copies of each invoice for the
applicable payment pursuant to Section 3.1 above. Shipping costs and expenses,
Taxes, customs and duties, if any, will be identified as separate items on
SELLER’s invoices. All invoices shall be sent to BUYER’s address specified in
Section 15.4 below, unless an alternate address is provided. All payments shall
be made in U.S. Dollars.
 
3.4. BUYER shall be responsible for all transportation charges, duties or other
charges for shipping and handling; thus, the price for the Deliverables shall
not include any such charges; provided, however, that the Equipment shall be in
one lot suitably packed for sea transport to the Work Site, FOB Port of
Shipment, according to Incoterms 2000; and provided, further, that SELLER shall
pay for all shipping, insurance, and related costs and expenses incurred in
transporting the Equipment from the SELLER Facility to the Port of Shipment
until the Equipment is transferred FOB to the common carrier.
 
3.5. All payments to SELLER shall be effected by wire transfer to SELLER’s bank
pursuant to the following account information:
 
Danske Bank
Holmens Kanal 2-12
DK-1092 Copenhagen K
Denmark
Telex 27000-SWIFT-BIC: DABAKKK
IBAN No. DK 1530003430288997
Account no. 3430 288997
 
SELLER Initials & Date         25/3-08 JB                                  
 
BUYER Initials & Date   DN 4/8/08                                  

 
Page 3 of 21

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PVA TePla Danmark
 
4. Shipment; Documentation & Packing
 
4.1. Timing of Shipment. Provided that SELLER has been paid in the aggregate 80%
of the Agreement Price, all Equipment shall be delivered FOB to the Port of
Shipment, within ten (10) months after BUYER pays to SELLER the Initial Payment
(the “Shipment Date”); provided, however, that SELLER shall use its best efforts
to deliver one (1) SR-110 Slim rod puller (as described in Appendix 1) FOB to
the Port of Shipment within six (6) months after BUYER pays to SELLER the
Initial Payment (and provided that, prior to shipment, SELLER has been paid in
the aggregate 80% of the applicable purchase price for such one (1) Slim rod
puller prior to shipment), except that SELLER shall not be liable for paying
liquidated damages pursuant to Section 4.4 below if SELLER is unable to meet
this six-month delivery date.
 
4.2. Shipping Documentation. Prior to shipment, SELLER shall remit to BUYER the
following documentation:
 
4.2.1. At least fourteen (14) days prior to shipment of the Equipment, SELLER
shall notify BUYER by Fax of the following information:
 

 
(a)
Total volume

 
(b)
Total gross weight of packages

 
(c)
Total number of packages

 
(d)
Port of Shipment

 
(e)
Port of Unloading

 
(f)
Name, weight, IMCO No. (as per International Maritime Dangerous Goods Code) of
the dangerous and/or inflammable goods

 
4.2.2. At least fourteen (14) days prior to shipment of the Equipment, SELLER
shall send to BUYER via international courier at least six (6) copies of the
following:
 

 
(a)
Detailed packing list describing with specificity all Equipment included with
the applicable shipment, including Equipment specification, type, quantity,
unit/total price, unit weight, unit/total volume, the overall dimensions of each
package (length x width x height), and the total number of packages

 
(b)
Description of any dangerous and/or inflammable goods indicating names,
properties, special protective measures and handling methods in case of accident

 
(c)
Description of the special precautions for the Equipment that requires special
storage and transportation.

 
4.2.3. Within ten (10) calendar days before the expected departure date of the
carrying vessel from the Port of Shipment, SELLER shall notify BUYER the
nationality of the carrying vessel, estimated date of shipment, estimated date
of arrival at the Port of Unloading, name of the Equipment, Equipment item no.,
quantity, weight, volume and other relevant matters.
 
4.2.4. Within two (2) days after the loading of the Equipment on the ocean
vessel, SELLER shall airmail one (1) duplicate copy of the Bill of Lading,
signed commercial invoice, ex-works quality certificate of origin and packing
list to BUYER.
 
4.3. Risk of Loss. Risk of loss shall pass to BUYER FOB Port of Shipment;
provided, however, that in the case of (A) the Equipment is shipped on deck or
via transshipment; or (B) the Equipment is not insured in time by BUYER because
SELLER has failed to provide the documentation required by Section 4.2 above,
then SELLER shall be liable for any and all damage to the Equipment.
Notwithstanding anything to the contrary in this Agreement, if the Equipment is
lost or damaged during ocean transportation, SELLER shall upon the request from
BUYER, provide replacement Equipment and Technical Documentation for the same
Agreement Price and pursuant to the same terms and conditions described in this
Agreement.
 
SELLER Initials & Date         25/3-08 JB                                  
 
BUYER Initials & Date   DN 4/8/08                                  

 
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4.4. Damages for Late Delivery; Liquidated Damages. SELLER shall pay to BUYER
liquidated damages (the “Liquidated Damages”) if (A) the Factory Acceptance
Certificate has not been signed by SELLER and BUYER, or (B) the Equipment has
not been delivered FOB to the Port of Shipment on or before the Shipment Date.
The Liquidated Damages shall be calculated as follows:
 

 
a)
If the Equipment is delivered within four weeks after the Shipment Date, the
liquidated damages shall be zero point 5 percent (0.5%) of the Agreement Price
per week beyond the Shipment Date.

 
b)
If the Equipment is delivered after the fourth week, then, in addition to the
Liquidated Damages pursuant to sub-paragraph (a) above, the Liquidated Damages
shall be one percent (1%) of the Agreement Price for each week after the fourth
week from the Shipment Date.

 
c)
Less than one week shall not be counted as a complete week for calculation of
the Liquidated Damages.

 
d)
The total amount of the Liquidated Damages shall not exceed five percent (5.0%)
of the Agreement Price.

Notwithstanding anything to the contrary in this Agreement: (A) the payment of
Liquidated Damages shall not release SELLER from its obligation to deliver the
Deliverables; and (B) any delay beyond sixty (60) days from the Shipment Date
shall constitute a material breach of this Agreement by SELLER.
 
4.5. Packing and Marking
 
4.5.1. Unless otherwise specified in the Agreement, the Equipment shall be
packed by SELLER in new wooden cases, and all packing expenses shall be for
SELLER’s account. Necessary measures shall be taken to protect the Equipment
from damages caused by moisture, rain, rust, corrosion, shock and to ensure the
Equipment will withstand handling, loading and unloading as well as long
distance ocean and inland transportation for the safe arrival of the Equipment
at the Work Site.
 
4.5.2. The loose accessories in all packages and bundles shall be labeled by
SELLER indicating the name of the Equipment to which such accessories are
related, the name of the accessories and their position number, and any
accessory number marked on assembly drawings. Spare parts and tools shall be
marked with the word “Spare parts or tools” in addition to the above mentioned
particulars.
 
4.5.3. SELLER shall, on four (4) adjacent sides of each crate, conspicuously
mark the following information in English with indelible paint:
 

 
(a)
Shipping mark

 
(b)
Destination

 
(c)
Consignee

 
(d)
Name of Equipment and item No.

 
(e)
Case/bale No.

 
(f)
Gross/net weight

 
(g)
Measurement

 
SELLER Initials & Date         25/3-08 JB                                  
 
BUYER Initials & Date   DN 4/8/08                                  

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4.5.4. Should the Equipment weigh more than 2 metric tons, the weight, gravity
and hoisting positions shall be marked in English with international trade
transportation marks on the four adjacent sides on each case so as to facilitate
unloading and handling. In accordance with different requirements in loading,
unloading and shipping, the package shall be conspicuously marked with “Handle
with care, right side up, keep dry” in English and with appropriate
international trade marks.
 
4.5.5. The following documents shall be enclosed in each package of the
Equipment:
 

 
(a)
Two (2) duplicate copies of detailed packing list

 
(b)
Two (2) duplicate copies of quality certificate

 
(c)
Two duplicate copies of Technical Documentation for relevant Equipment

 
4.5.6. Sufficient shores or chocks shall be provided in order to prevent the
Equipment from moving inside the containers. SELLER shall be liable for any
damage to the Equipment thus incurred due to the negligence of SELLER.
 
4.5.7. In case of container transportation, SELLER shall examine the condition
of the containers, so that only those in good condition shall be used for
delivery of the Equipment. SELLER shall use wooden crates free from any insect
infestation. Should insect infestation be found in quarantine inspection, SELLER
shall bear the cost incurred in fumigation or replacement of the creates at the
Port of Unloading, and the liquidated damages provision of Section 4.4 above
shall apply to any delay in shipment caused by such quarantine inspection.
 
4.5.8. If the Equipment is damaged or lost due to improper packing or inadequate
protective measure, SELLER shall be responsible for repair, replacement or
compensation in accordance with the Agreement. If the Equipment is
mis-transported due to mistake or ambiguousness in package or shipping marks,
SELLER shall bear additional expenses thus incurred.
 
5. Standards & Inspections
 
5.1. Standards. SELLER shall engineer, design and construct the Equipment
according to the Appendices attached hereto, using professional engineering,
construction and procurement practices. All Equipment shall be engineered and
constructed to meet all applicable standards for operation in Idaho, USA,
including, without limitation, ASME, NEC, UL, and any others required to meet
standards in Pocatello, Idaho and the United States as determined by the BUYER.
 
5.2. Factory Acceptance Test.
 
5.2.1. SELLER shall inspect the Equipment to confirm that it meets the Technical
Specifications, and shall thereupon send the ex-works quality certificate to
BUYER, with notification of the planned date for the Factory Acceptance Test.
The date for the Factory Acceptance Test must be no earlier than two (2) weeks
from the date when the notification is received by BUYER, and shall be no later
than nine (9) months after BUYER pays the Initial Payment to SELLER.
 
5.2.2. BUYER will send its technical representatives and inspectors to SELLER’s
Facility to complete the Factory Acceptance Test together with SELLER’s
technical representatives and inspectors. In addition to BUYER’s inspectors,
BUYER’s lenders and shareholders may also send their inspectors. The expenses of
sending BUYER’s inspectors, or the inspectors of BUYER’s lenders and
shareholders, shall be for BUYER’s account. 
 
SELLER Initials & Date         25/3-08 JB                                  
 
BUYER Initials & Date   DN 4/8/08                                  

 
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5.2.3. Prior to commencement of the Factory Acceptance Test, SELLER shall
provide BUYER with technical instruction in the operation and maintenance of the
Equipment as described in Appendix 4. After completing the technical
instruction, SELLER shall commence the Factory Acceptance Test, and provided
that the Equipment meets the Technical Specifications, BUYER and SELLER shall
sign the Factory Acceptance Certificate. SELLER shall ship the Equipment to
BUYER as soon as practicable after successful completion of the Factory
Acceptance Test, as evidenced by the Factory Acceptance Certificate signed by
SELLER and BUYER; provided, however, that the SELLER may not ship the Equipment
until the Factory Acceptance Certificate has been signed by BUYER; provided,
however, that if BUYER does not attend the Factory Acceptance Test after having
been given notification in accordance with Section 5.2.1 above, and if SELLER
conducts the Factory Acceptance Test in BUYER’s absence, and confirms that the
Equipment meets the Technical Specifications, then SELLER may sign the Factory
Acceptance Certificate and the Factory Acceptance Test shall have been deemed
completed without the Factory Acceptance Certificate being signed by BUYER.
 
5.2.4. In addition to the foregoing, BUYER, its authorized representatives and
its lenders, shareholders and their respective authorized representatives, may
inspect the Equipment at any time prior to delivery of the Equipment FOB to the
Port of Shipment. The expenses of any such inspection shall be for BUYER’s
account.
 
5.2.5. The Factory Acceptance Test shall not be a substitute for the inspection
of the Equipment at the Port of Unloading or the Work Site, or as a substitute
for the Commissioning Test, and the Factory Acceptance Test shall not release
SELLER from its warranty obligations as further specified in this Agreement.
 
5.3. Installation and Commissioning Test.
 
5.3.1. Equipment installation and servicing shall be carried out by BUYER under
the supervision of SELLER at the Work Site, and SELLER’s qualified technical
representatives shall provide technical instruction to BUYER during installation
and prior to completion of the Commissioning Test as described in Appendix 5 to
this Agreement.
 
5.3.2. BUYER and SELLER shall conduct the Commissioning Test to confirm that the
Equipment operates in accordance with the Technical Specifications. Provided
that all of the Technical Specifications for the Equipment are satisfied, BUYER
and SELLER shall each sign the Certificate of Commissioning; provided, however,
that if BUYER does not attend the Commissioning Test, and if SELLER conducts the
Commissioning Test in BUYER’s absence, and confirms that the Equipment meets the
Technical Specifications, then SELLER may sign the Certificate of Commissioning
and the Commissioning Test shall have been deemed completed without the
Certificate of Commissioning being signed by BUYER. 
 
5.4. Notwithstanding anything to the contrary in this Agreement, BUYER or
SELLER’s execution of the Factory Acceptance Certificate or the Certificate of
Commissioning shall not release SELLER from its warranty for the Equipment as
described in Section 7 below.
 
6. Technical Services. SELLER agrees to provide technical information regarding
the Equipment to BUYER, and to BUYER’s designated engineering and construction
contractors (the “Contractors”), and to attend meetings in the USA with the
Contractors, participate in telephone conference calls with BUYER and the
Contractors, and draft and respond to written correspondence, including e-mail
to and from BUYER and the Contractors (collectively, the “Technical Services”).
The scope of the technical information to be provided to the Contractors shall
be limited to the information that is required for the Contractors to perform
the engineering design work for the Work Site. The cost and expense of the
Technical Services is included in the Agreement Price.
 
SELLER Initials & Date         25/3-08 JB                                  
 
BUYER Initials & Date   DN 4/8/08                                  

 
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7. Representations and Warranties.
 
7.1. General. SELLER represents, warrants, and covenants that:
 
7.1.1. SELLER will not, in the course of performing its obligations under this
Agreement, infringe or misappropriate, and neither the Deliverables nor any
element thereof will infringe or misappropriate, any intellectual property right
of any other person or entity;
 
7.1.2. neither the Deliverables nor any element thereof will be subject to any
restriction, mortgage, lien, claim, pledge, security interest, or encumbrance
when delivered by SELLER to BUYER FOB Port of Shipment;
 
7.1.3. SELLER will not grant, directly or indirectly, any right or interest in
the Deliverables to any other person;
 
7.1.4. SELLER has full right, power, and authority to enter into and perform
this Agreement without the consent of any third party, including the right to
grant all licenses granted by SELLER (if any) in this Agreement;
 
7.1.5. All individuals who contribute to or participate in the conception,
creation, or development of the Deliverables will have unconditionally and
irrevocably assigned all of their right, title, and interest in and to the
Deliverables (and all intellectual property rights thereto) to SELLER (or
directly to BUYER) before being allowed to begin performing work pursuant to
this Agreement;
 
7.1.6. SELLER will comply with all laws, regulations, and ordinances applicable
to SELLER’s performance of its obligations under this Agreement, including
export control laws, and has obtained (or before performing its obligations
under this Agreement will obtain) all governmental permits and licenses required
for SELLER to perform its obligations under this Agreement; and
 
7.1.7. SELLER will take all necessary or reasonable precautions to prevent
injury to any person (including BUYER employees) or damage to any property
(including BUYER property) during the term of this Agreement.
 
7.2. Performance. SELLER further represents and warrants that: (A) during the
Warranty Period, the Deliverables will fully conform to the requirements, and
other terms in the Appendices and elsewhere in this Agreement, including,
without limitation, the Technical Specifications; (B) the Technical
Documentation shall be to its best knowledge, complete, clear and correct so as
to meet the requirements of design, inspection, erection, commissioning,
performance test, operation and maintenance of the Equipment; and (C) the
Equipment shall be completely brand new and comply in materials, workmanship in
all respects with the quality and Technical Specifications.
 
7.3. Warranty Claims. 
 
7.3.1. Notice of Claim. Claims by BUYER for breach of any of SELLER’s warranties
set forth in this Agreement shall be made without undue delay after the
discovery thereof. 
 
7.3.2. SELLER’s Responsibilities. In the event of SELLER’s breach of any
warranty during the Warranty Period, without limiting any other rights or
remedies BUYER may have, and provided that BUYER has provided notice pursuant to
Section 7.3.1 above, SELLER will at its discretion promptly repair or replace
the Deliverables at no additional charge to BUYER. In the event that the
warranty claim applies to Equipment, BUYER and SELLER shall attempt to fix the
problem through BUYER’s remote technical assistance; provided, however, that if
the Equipment cannot be fixed within 48 hours, then SELLER shall dispatch
qualified technical representatives to the Work Site within 48 hours thereafter
to provide on-site professional and technical service. IF SELLER DOES NOT ARRIVE
AT BUYER’S WORK SITE WITHIN ONE WEEK AFTER CONFIRMATION FROM SELLER OF SUCH A
NOTIFICATION, THEN SELLER SHALL PAY BUYER $5,000 PER DAY FOR EACH DAY THAT THE
EQUIPMENT IS NOT OPERATIONAL DUE TO THE BREACH OF WARRANTY.
 
SELLER Initials & Date         25/3-08 JB                                  
 
BUYER Initials & Date   DN 4/8/08                                  

 
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8. Indemnification. Notwithstanding Section 12 hereof, SELLER will indemnify and
hold harmless BUYER and its affiliates, employees, and agents from and against
any and all liabilities, losses, damages, costs, and other expenses (including
attorneys’ and expert witnesses’ costs and fees) arising from or relating to any
breach of any representation, warranty, covenant, or obligation of SELLER in
this Agreement or any intentional misconduct or negligence by SELLER or any of
SELLER’s agents or subcontractors in performing its obligations under this
Agreement. In the event of any third-party claim, demand, suit, or action (a
“Claim”) for which BUYER (or any of its affiliates, employees, or agents) is or
may be entitled to indemnification hereunder, BUYER may, at its option, require
SELLER to defend such Claim at SELLER’s sole expense. SELLER may not agree to
settle any such Claim without BUYER’s express prior written consent.
 
9. Non-solicitation. During the term of this Agreement and for twelve (12)
months thereafter, SELLER will not directly or indirectly solicit, induce, or
attempt to induce any employee or independent contractor to terminate or breach
any employment, contractual, or other relationship with BUYER.
 
10. Termination & Cancellation
 
10.1. The term of this Agreement shall begin on the Effective Date and, unless
previously terminated as hereinafter set forth, shall remain in force until the
expiration of the Warranty Period.
 
10.2. 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: 
 
10.2.1. 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 one hundred eighty (180) days after written notice thereof; provided,
however, that such cure period shall not modify or extend the sixty (60) day
cure period for SELLER’s delivery obligations pursuant to Section 4.4 above; and
provided, further that such one hundred eighty (180) day cure period shall not
apply to BUYER’s failure to make any payment to SELLER pursuant to this
Agreement. In the event of BUYER’s failure to make payment on the 30-day payment
terms set forth in Section 3.1 hereof, termination by SELLER 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.
 
10.2.2. 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;
 
SELLER Initials & Date         25/3-08 JB                                  
 
BUYER Initials & Date   DN 4/8/08                                  

 
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10.2.3. 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
 
10.2.4. In accordance with the provisions of Section 11 below.
 
10.3. In addition to BUYER’s termination rights pursuant to Section 10.2 above,
BUYER may terminate this Agreement upon written notice to SELLER, and without
any further obligation or liability to SELLER, for any of the following reasons:
 
10.3.1. For BUYER’s convenience at any time prior to payment of the Initial
Payment to SELLER;
 
10.3.2. If SELLER does not sign the Consent or provide the Legal Opinion
pursuant to Section 13 below;
 
10.3.3. If at any time prior to delivery of the Equipment, FOB Port of Shipment,
BUYER has a justifiable reason to believe that SELLER will be more than sixty
(60) days late in the delivery of the Equipment, BUYER may immediately cancel
this agreement and shall, in addition to all other rights and remedies available
in law and equity, be entitled to a refund of the Initial Payment plus the
maximum amount of liquidated damages payable pursuant to Section 4.4 above.
 
10.4. SELLER may terminate this Agreement without any further obligation or
liability to BUYER if BUYER has not paid the Initial Payment within one hundred
eighty (180) days after the Effective Date. Upon such termination, each of BUYER
and SELLER shall be released from any further obligations or liability to the
other Party under this Agreement.
 
10.5. Upon the expiration or termination of this Agreement howsoever arising,
the following Sections shall survive such expiration or termination: Sections 1
(Definitions), 7.3 (Warranty Claims), 8 (Indemnification), 9 (Non-solicitation),
10 (Termination & Cancellation), 11 (Force Majeure), 12 (Limitations of
Liability), and 14 (General Provisions).
 
11. 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 performance of SELLER is delayed for Force Majeure for a
cumulative period of thirty (30) days or more, SELLER will use commercially
reasonable efforts to transition its production of the Equipment for the
duration of the Force Majeure to an alternate source. 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 (and, only if SELLER is the affected Party, SELLER has not used
commercially reasonable efforts to transition its production of the Deliverables
as provided in the immediately preceding sentence), then the non-affected Party
shall be entitled to terminate this Agreement by 30 days prior written notice to
the other Party. 
 
SELLER Initials & Date         25/3-08 JB                                  
 
BUYER Initials & Date   DN 4/8/08                                  

 
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12. Limitations of Liability
 
12.1. IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR INDIRECT, SPECIAL, INCIDENTAL
OR CONSEQUENTIAL DAMAGES OR FOR EXEMPLARY OR PUNITIVE DAMAGES, EVEN IF BUYER OR
SELLER HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
 
 
12.2. EXCEPT FOR BUYER’S OBLIGATION TO PAY THE AGREEMENT PRICE, 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 FIFTY PERCENT (50%) OF THE AGREEMENT PRICE.
 
13. Financing. SELLER acknowledges that BUYER will be financing the construction
of its polysilicon production plant, including the Work Site, through a
combination of debt, equity and prepayments from BUYER’s customers. SELLER
hereby acknowledges and consents to BUYER’s assignment, in connection with
BUYER’s financing of the construction, development and operation of improvements
to the Work Site, as collateral security for its obligations relating thereto,
of all of BUYER’s rights, title and interest in, to and under this Agreement
(the “Assigned Interests”) to the financial institution named as Collateral
Agent for the Secured Parties (as defined below) (together with its successors,
designees and assigns in such capacity, the “Agent”) pursuant to a Security
Agreement to be made by BUYER in connection with such financing in favor of the
Agent for the benefit of certain secured parties described therein (the “Secured
Parties”) and in that certain Collateral Agency and Intercreditor Agreement (as
amended, restated, supplemented or otherwise modified from time to time, the
“Intercreditor Agreement”) to be made in connection with such financing among
BUYER, Hoku Materials Holdings, Inc., the Agent, and the other Secured Parties
party thereto. SELLER shall not unreasonably withhold consent to the transfer of
BUYER’s interest under this Agreement to the Agent or any purchaser, successor,
assignee and/or designee (a “Subsequent Transferee”) of the Assigned Interests
at a foreclosure sale or by a conveyance by BUYER in lieu of foreclosure and
agrees that, notwithstanding any provision hereof to the contrary, upon such
foreclosure, sale or conveyance, the Agent or such Subsequent Transferee shall
be substituted for BUYER under this Agreement and SELLER shall perform its
obligations hereunder in favor of the Agent or the Subsequent Transferee, as the
case may be.
 
14. SELLER’s Representations & Warranties. SELLER hereby represents and warrants
to BUYER that the following are true and correct:
 
14.1. SELLER is a corporation duly incorporated and validly existing in good
standing under the laws of the Kingdom of Denmark.
 
14.2. This Agreement has been duly authorized by all requisite corporate action
and duly executed and delivered by authorized officers of SELLER, and
constitutes the valid obligations of SELLER, legally binding upon and
enforceable against SELLER in accordance with its terms, except as such
enforceability may be limited by (a) bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors’ rights generally, and
(b) general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
 
14.3. The execution and delivery of this Agreement, and fulfillment of and
compliance with the respective provisions of this Agreement, does not conflict
with, or result in a breach of the terms, conditions or provisions of, or
constitute a default under, or result in any violation of, or result in the
creation of any lien upon any of the properties or assets of SELLER pursuant to,
or require any authorization, consent, approval, exemption, or other action by
or notice to or filing with any court, administrative or governmental body or
other person or entity pursuant to, the charter or by-laws of SELLER, any
applicable law, statute, rule or regulation or (insofar as is known to us after
having made due inquiry with respect thereto) any agreement, instrument, order,
judgment or decree to which SELLER is a party or otherwise subject.
 
SELLER Initials & Date         25/3-08 JB                                  
 
BUYER Initials & Date   DN 4/8/08                                  

 

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15. General Provisions.
 
15.1. Governing Law; Venue. This Agreement is governed by the laws of the State
of Idaho, USA, without reference to any conflict of laws principles that would
require the application of the laws of any other jurisdiction. The United
Nations Convention on Contracts for the International Sale of Goods does not
apply to this Agreement. SELLER irrevocably consents to the personal
jurisdiction of the state and federal courts located in the State of Idaho, USA,
for any suit or action arising from or related to this Agreement, and waives any
right SELLER may have to object to the venue of such courts. SELLER further
agrees that these courts will have exclusive jurisdiction over any such suit or
action initiated by SELLER against BUYER. SELLER also irrevocably waives any
right SELLER may have to a jury trial.
 
15.2. Severability. If any provision of this Agreement is, for any reason, held
to be invalid or unenforceable, the other provisions of this Agreement will be
unimpaired and the invalid or unenforceable provision will be deemed modified so
that it is valid and enforceable to the maximum extent permitted by law.
 
15.3. No Assignment. Except for assignment of payments due to SELLER pursuant to
this Agreement, as collateral security for SELLER’s payment obligations to a
third party financial lender, this Agreement and SELLER’s rights and obligations
under this Agreement may not be assigned, delegated, or otherwise transferred,
in whole or in part, by operation of law or otherwise, by SELLER without BUYER’s
express prior written consent. Any attempted assignment, delegation, or transfer
in violation of the foregoing will be null and void. BUYER may assign this
Agreement, or any of its rights under this Agreement to any third party with or
without SELLER’s consent.
 
15.4. Notices. Each Party must deliver all notices, consents, and approvals
required or permitted under this Agreement in writing to the other Party at the
address listed below by courier, by certified or registered mail (postage
prepaid and return receipt requested), or by a nationally-recognized overnight
carrier. Notice will be effective upon receipt or refusal of delivery. Each
Party may change such Party’s address for receipt of notice by giving notice of
such change to the other Party.
 
BUYER:
HOKU MATERIALS, INC.
One Hoku Way
Pocatello, Idaho 83204 USA
Attn: Mr. Karl Taft, CTO
E-mail: [*]
Facsimile: +1 (808) 682-7807

With a copy to:

HOKU SCIENTIFIC, INC.
1075 Opakapaka Street
Kapolei, Hawaii 96707, USA
Attn: Mr. Dustin Shindo, CEO
E-mail: [*]
Facsimile: +1 (808) 682-7807
 
SELLER Initials & Date         25/3-08 JB                                  
 
BUYER Initials & Date   DN 4/8/08                                  

 
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SELLER:

PVA TEPLA Danmark
Smedetoften 4
DK-3600 Frederikssund
Denmark
Attn: Jens Borregaard
E-mail: [*]
Facsimile: +45 4733 7099
 
15.5. Legal Fees. The prevailing Party in any litigation between the Parties
relating to this Agreement will be entitled to recover such Party’s reasonable
attorneys’ fees and court costs, in addition to any other relief that such Party
may be awarded.
 
15.6. Publicity. 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 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,
any rules of the German Stock Exchange that are applicable to SELLER, 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 technical
information set forth in this Agreement.
 
15.7. Remedies. BUYER’s remedies for any breach of this Agreement by SELLER will
include damages, injunctive relief, specific performance, and restitution.
SELLER acknowledges that any breach of this Agreement by SELLER would cause
irreparable injury to BUYER for which monetary damages would not be an adequate
remedy and, therefore, BUYER will be entitled to injunctive relief (including
specific performance). The rights and remedies provided to each Party in this
Agreement are cumulative and in addition to any other rights and remedies
available to such Party at law or in equity.
 
15.8. Construction. Section headings are included in this Agreement merely for
convenience of reference; they are not to be considered part of this Agreement
or used in the interpretation of this Agreement. When used in this Agreement,
“including” means “including without limitation.” Whenever BUYER’s consent or
approval is required under this Agreement, BUYER may grant or deny its consent
or approval in its sole and absolute discretion. No rule of strict construction
will be applied in the interpretation or construction of this Agreement.
 
15.9. Waiver. All waivers must be in writing and signed by the Party to be
charged. Any waiver or failure to enforce any provision of this Agreement on one
occasion will not be deemed a waiver of any other provision or of such provision
on any other occasion.
 
15.10. Entire Agreement; Amendments. This Agreement is the final, complete, and
exclusive agreement of the Parties with respect to the subject matter hereof and
supersedes and merges all prior or contemporaneous communications and
understandings between the Parties. No modification of or amendment to this
Agreement will be effective unless in writing and signed by the Party to be
charged.
 
[This space intentionally left blank.]
 
SELLER Initials & Date         25/3-08 JB                                  
 
BUYER Initials & Date   DN 4/8/08                                  

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IN WITNESS WHEREOF, the parties have executed this Equipment Purchase & Sale
Agreement as of the date first set forth above.
 
SELLER:
 
BUYER:
     
PVA TEPLA AG
 
HOKU MATERIALS, INC.
     
By:
/s/ JENS BORREGAARD
 
By:
/s/ DARRYL NAKAMOTO
     
Name:
Jens Borregaard
 
Name:
Darryl Nakamoto
     
Title:
Branch Manager
 
Title:
CFO
Authorized Signatory
 
Authorized Signatory

 
SELLER Initials & Date         25/3-08 JB                                  
 
BUYER Initials & Date   DN 4/8/08                                  

 
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APPENDIX 1 
 
Technical Specification for SR-110 Slim Rod Puller
 
[*]
 
SELLER Initials & Date         25/3-08 JB                                  
 
BUYER Initials & Date   DN 4/8/08                                  

 
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APPENDIX 2
 
Technical Specifications of FZ-14M analytical puller
 
[*]
 
SELLER Initials & Date         25/3-08 JB                                  
 
BUYER Initials & Date   DN 4/8/08                                  

 
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APPENDIX 3
 
Specification of Documents
 
For the Equipment, detailed information will be given in the form of text,
diagrams and drawings.
 
In general the documents will contain:
 
General Description
 
Installation Instructions
 
Operation Instructions
 
Troubleshooting Instructions
 
Maintenance Instructions
 
Assembly Drawings
 
Electrical Diagrams
 
Hydraulic Diagrams
 
Pneumatic Diagrams
 
Gas Diagrams
 
Complete Part Lists
 
Especially for crystal growth, very detailed information will be given. Each
process step will be explained with text and drawings, and guidelines for the
proper setting of all adjustable growth parameters will be given for each set of
diameter of input polysilicon and diameter of output Silicon single crystal.
 
Furthermore general information on handling, preparation and cleaning of Silicon
will be given.
 
Schedule
 
Documentation for preparation of installation sites:
4 weeks from effective date of Agreement
   
Final documentation as mentioned above:
2 weeks after shipment

 
SELLER Initials & Date         25/3-08 JB                                  
 
BUYER Initials & Date   DN 4/8/08                                  

 
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APPENDIX 4
 
Procedure for Factory Acceptance Test
 
1. Technical Training in Operation and Maintenance of Equipment.
 
Prior to commencement of the Factory Acceptance Test at the SELLER Facility
SELLER shall provide BUYER with the following training in the operation and
maintenance of the Equipment:
 
The training will fall in two parts: first in PVA TePla workshop in Denmark in
relation to FAT (factory acceptance tests) and later in Hoku plant in relation
to installation, commissioning and final acceptance. For each type of equipment
the topics will be: Overall description of equipment, installation, operation,
and maintenance. The total time spent during FAT for this purpose two week and
the total at Hoku-site 6 weeks incl. time for installation supervision. The
reason it is taken together is that the installation process is often quite
practical also used for demonstration of certain aspects of the equipment.
 
The FAT will include 2 weeks of training for the BUYER at the SELLER Facility.
 
2. Factory Acceptance Test.
 
Phase I. In the first part of the test it will be shown that the Equipment
complies with the Technical Specifications with respect to movement of spindles
(precision and range of rotation and vertical movement), alignment and end
vacuum.
 
Phase II. In the second part of the tests, the operational performance will be
proven as follows:
 
[*]
 
SELLER will for the purpose of these tests supply the following poly silicon:
 
Two source rods Ø45 x 900 mm, two poly rods Ø 80 – 85 mm x 800 mm and 4 core
rods Ø 20 x 100 mm.
 
SELLER Initials & Date         25/3-08 JB                                  
 
BUYER Initials & Date   DN 4/8/08                                  

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Appendix 5
 
Procedures for Commissioning Test
 
1. Technical Training in Operation and Maintenance of Equipment.
 
Prior to commencement of the Commissioning Test at the Work Site, SELLER shall
provide BUYER with the following training in the operation and maintenance of
the Equipment:
 
[Describe amount of time for training, and topics to be covered with some
specificity.]
 
The training will fall in two parts: first in PVATePla workshop in Denmark in
relation to FAT (factory acceptance tests) and later in Hoku plant in relation
to installation, commissioning and final acceptance. For each type of equipment
the topics will be: Overall description of equipment, installation, operation,
and maintenance. The total time spent during FAT for this purpose is two weeks
and the total at Hoku-site is 6 weeks incl. time for installation supervision.
The reason it is taken together is that the installation process is often quite
practical also used for demonstration of certain aspects of the equipment.
 
The 6 weeks for commissioning shall include a minimum of 750 hours of Technical
Services from qualified SELLER personnel.
 
2. Commissioning Test Certificate.
 
Phase I. In the first part of the test it will be shown that the Equipment
complies with the Technical Specifications with respect to movement of spindles
(precision and range of rotation and vertical movement), alignment and end
vacuum.
 
Phase II. In the second part of the tests, the operational performance will be
proven as follows:
 
[*]
 
SELLER will for the purpose of these tests supply the following poly silicon:
 
Two source rods Ø45 x 900 mm, two poly rods Ø 80 – 85 mm x 800 mm and 4 core
rods Ø 20 x 100 mm.
 
Additional silicon for training of BUYER’s personnel will be supplied by BUYER
 
SELLER Initials & Date         25/3-08 JB                                  
 
BUYER Initials & Date   DN 4/8/08                                  

 
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Appendix 6
 
Factory Acceptance Certificate
 
This Factory Acceptance Certificate is being signed pursuant to Section 5.2.2 of
the Equipment Purchase & Sale Agreement (the “Agreement”) dated _______________,
2007, by and between HOKU MATERIALS, INC., and PVA TEPLA AG. Capitalized terms
not otherwise defined herein have the meaning set forth in the Agreement.
 
By signing below, each party hereby certifies to the successful completion of
the Factory Acceptance Test and confirms the following:
 
1.
Each of the seven (7) SR-110 Slim Rod Pullers with the serial numbers listed
below meets the Technical Specifications set forth on Appendix 1 to the
Agreement.

Serial Number:                                              
Serial Number:                                          
Serial Number:                                          
Serial Number:                                          
Serial Number:                                          
Serial Number:                                          
Serial Number:                                          

2.
The FZ-14M analytic float zone crystal puller with the serial number listed
below meets the Technical Specifications set forth on Appendix 2 to the
Agreement.

 
Serial Number:                                           
 
PVA TEPLA AG
 
HOKU MATERIALS, INC.
     
By:
        
By:
           
Name:
     
Name:
           
Title:
    
Title:
     
Authorized Signatory
 
Authorized Signatory

 
SELLER Initials & Date         25/3-08 JB                                  
 
BUYER Initials & Date   DN 4/8/08                                  

 
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Appendix 7
 
Certificate of Commissioning
 
This Certificate of Commissioning is being signed pursuant to Section 5.3.2 of
the Equipment Purchase & Sale Agreement (the “Agreement”) dated _______________,
2007, by and between HOKU MATERIALS, INC., and PVA TEPLA AG. Capitalized terms
not otherwise defined herein have the meaning set forth in the Agreement.
 
By signing below, each party hereby certifies to the successful completion of
the Commissioning Test and confirms the following:
 
1.
Each of the seven (7) SR-110 Slim Rod Pullers with the serial numbers listed
below meets the Technical Specifications set forth on Appendix 1 to the
Agreement.

Serial Number:                                              
Serial Number:                                          
Serial Number:                                          
Serial Number:                                          
Serial Number:                                          
Serial Number:                                          
Serial
Number:                                                                              
 
2.
The FZ-14M analytic float zone crystal puller with the serial number listed
below meets the Technical Specifications set forth on Appendix 2 to the
Agreement.

 
Serial Number:                                          
 
PVA TEPLA AG
 
HOKU MATERIALS, INC.
     
By:
        
By:
           
Name:
     
Name:
           
Title:
    
Title:
     
Authorized Signatory
 
Authorized Signatory

 
SELLER Initials & Date         25/3-08 JB                                  
 
BUYER Initials & Date   DN 4/8/08                                  

 
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