Exhibit 10.31

 

[ * ] = 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.

 

STEP 3 COLLABORATION AGREEMENT

 

This Step 3 Collaboration Agreement (“Agreement”) is effective as of January 1,
2006, by and between HOKU SCIENTIFIC, INC., a Delaware corporation located at
1075 Opakapaka Street, Kapolei, Hawaii 96707 USA (“HOKU”), and NISSAN MOTOR CO.,
LTD., a Japanese corporation, having its registered office at 2 Takara-cho,
Kanagawa-ku, Yokohama, Kanagawa 220-8623 Japan (“NISSAN” and, together with
HOKU, the “Parties”).

 

BACKGROUND & PURPOSE

 

HOKU is developing HOKU Membrane and HOKU MEA (each as defined below) for use in
proton exchange membrane fuel cells (“PEMFC”).

 

NISSAN develops and manufactures NISSAN Fuel Cells (as defined below).

 

HOKU and NISSAN are parties to that certain MEA Engineering Agreement dated as
of September 1, 2004 (the “Engineering Agreement”) that certain Membrane & MEA
Purchase Agreement dated as of September 1, 2004 (the “Purchase Agreement”), and
that certain Collaboration Agreement dated March 22, 2005 (the “Collaboration
Agreement”) pursuant to which HOKU optimized Automotive HOKU MEA and the
Automotive HOKU MEA Assembly Process, and NISSAN purchased HOKU Membrane and
HOKU MEA for test and evaluation.

 

Subject to the terms set forth herein NISSAN desires HOKU to engineer the Step 3
HOKU MEA for use in automotive PEMFC, and to continue supplying HOKU Products
for test and evaluation by NISSAN.

 

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

 

AGREEMENT

 

1. Definitions. The following terms shall be defined in this Agreement as set
forth below:

 

1.1. “Acquisition” means the sale, conveyance or other disposal of all or
substantially all of the assets or property of a Party, a merger with or into or
consolidation of a Party into any other corporation, limited liability company
or other entity (other than a wholly-owned subsidiary of such Party), or the
merger of any other corporation, limited liability company or other entity into
a Party, or any other corporate reorganization, sale, conveyance or other
disposal of assets, consolidation, reorganization or merger, in which the
shareholders of such Party receive distributions in cash or securities of
another corporation, limited liability company or other entity as a result of
such sale of assets, consolidation, reorganization or merger.

 

1.2. “Agreement” means this Step 3 Collaboration Agreement.

 

1.3. “Automotive HOKU MEA” means the HOKU MEA that is developed by HOKU for use
in automotive PEMFC, regardless of the date or source of development.

 

1.4. “Automotive HOKU MEA Assembly Process” means the process, techniques and
know-how that is developed by HOKU to assemble the Automotive HOKU MEA,
regardless of the date of development or source of development.

 

1.5. “Catalyst” means a Component that typically consists of precious metals
and/or alloys, which helps to initiate and maintain the electrochemical reaction
of fuel and oxidant that is needed to generate electricity in a PEMFC.

 

HOKU Initials & Date /s/ DS 2/13/06   NISSAN Initials & Date /s/ HT 2/13/06

 

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[ * ] = 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.

 

1.6. “Catalyst Support” means the Component used to support the Catalyst in a
PEMFC.

 

1.7. “CCM” means Membrane coated on both sides with Catalyst.

 

1.8. “Collaboration Agreement” has the meaning set forth in the Background &
Purpose of this Agreement.

 

1.9. “Component” means any and all components (including, but not limited to,
Catalyst, Catalyst Support, Electrode, Membrane, Liquid Ionomer, GDL, binder and
seal) incorporated into MEA.

 

1.10. “Confidentiality Agreement” has the meaning set forth in Section 2 below.

 

1.11. “Electrode” means the Component that is the combination of Catalyst and
Catalyst Support, and which consists of an anode and cathode located on opposite
sides of the Membrane in a PEMFC.

 

1.12. “Engineering Agreement” has the meaning set forth in the Background &
Purpose of this Agreement.

 

1.13. “Full-scale HOKU Membrane” means approximately [ * ] of HOKU Membrane.

 

1.14. “Full-scale Automotive HOKU MEA” consists of Automotive HOKU MEA with
Full-scale HOKU Membrane, approximately [ * ] of active Electrode area, and GDL.

 

1.15. “GDL” means the material used to diffuse the fuel and oxidant in a PEMFC.

 

1.16. “HOKU” means HOKU SCIENTIFIC, INC., a Delaware corporation.

 

1.17. “HOKU Authorized Personnel” means the Chief Executive Officer and Chief
Technology Officer of HOKU.

 

1.18. “HOKU Background Intellectual Property” means any and all Intellectual
Property conceived or developed by HOKU prior to or outside the scope of this
Agreement. “HOKU Background Intellectual Property” includes such Intellectual
Property that is owned by HOKU under the Engineering Agreement and the
Collaboration Agreement.

 

1.19. “HOKU Catalyst” means any Catalyst, other than NISSAN Catalyst,
incorporated into any HOKU MEA.

 

1.20. “HOKU Catalyst Support” means any Catalyst Support, other than NISSAN
Catalyst Support, incorporated into any HOKU MEA.

 

1.21. “HOKU CCM” means any CCM developed by HOKU at any time. “HOKU CCM” does
not include such CCM developed solely by NISSAN or by NISSAN and a third party
other than HOKU.

 

1.22. “HOKU Component” means any and all Components developed by HOKU at any
time. “HOKU Component” does not include such Component developed solely by
NISSAN or by NISSAN and a third party other than HOKU.

 

HOKU Initials & Date /s/ DS 2/13/06   NISSAN Initials & Date /s/ HT 2/13/06

 

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[ * ] = 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.

 

1.23. “HOKU Electrode” means any Electrode, other than NISSAN Electrode,
incorporated into any HOKU MEA.

 

1.24. “HOKU Facility” means any facility owned, occupied or leased by HOKU.

 

1.25. “HOKU Foreground Intellectual Property” means any and all Intellectual
Property conceived or developed solely by employees of HOKU under this
Agreement.

 

1.26. “HOKU GDL” means any GDL, other than NISSAN GDL, incorporated into any
HOKU MEA.

 

1.27. “HOKU Intellectual Property” means HOKU Background Intellectual Property,
HOKU Foreground Intellectual Property, Step 3 HOKU MEA Intellectual Property,
all intellectual property related to the Step 3 HOKU MEA Assembly Process and
the Step 3 HOKU Membrane, and all Intellectual Property related to HOKU Products
and processes, techniques and know how used to manufacture HOKU Products that
have been developed under this Agreement.

 

1.28. “HOKU MEA” means all MEA developed by HOKU at any time, including the
Automotive HOKU MEA and the Step 3 HOKU MEA, whether or not patented by HOKU.
“HOKU MEA” does not include NISSAN MEA.

 

1.29. “HOKU Membrane” means all Membrane developed by HOKU at any time, whether
or not patented by HOKU, including, without limitation, (i) the Step 3 HOKU
Membrane; (ii) all materials used in any such Membrane; (iii) all solid polymer
and Liquid Ionomer forms of any such Membrane; (iv) all formulations of any such
Membrane, including monomer and polymer formulations; and (v) all reinforcements
adjacent to any such Membrane, regardless of the date of development or the
source of development.

 

1.30. “HOKU Product” means Automotive HOKU MEA, HOKU Catalyst, HOKU Catalyst
Support, HOKU CCM, HOKU Components, HOKU Electrode, HOKU GDL, HOKU MEA, HOKU
Membrane, Step 3 HOKU MEA and Step 3 HOKU Membrane.

 

1.31. “Intellectual Property” means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications and invention disclosures, together with
all reissues, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof; (b) all copyrightable works, all copyrights, and all
applications, registrations, and renewals in connection therewith; (c) all trade
secrets and confidential business information (including without limitation,
ideas, research and development, know-how, formulas, compositions, prototypes,
manufacturing and production processes and techniques, technical data, designs,
drawings, bills of materials, specifications, customer and supplier lists,
contracts, pricing and cost information, and business and marketing plans and
proposals); (d) all computer software and firmware (including related data,
routines and documentation) in any media, type of code and format; (e) all
trademarks and service marks (whether registered or not); and (f) all other
proprietary rights of the foregoing items (a) through (e) of this definition and
derivatives thereof in whatever tangible or intangible form, medium or
embodiments.

 

1.32. “Joint Foreground Intellectual Property” means all Intellectual Property
conceived or developed by one or more employees of HOKU and one or more
employees of NISSAN under this Agreement. All Joint Foreground Intellectual
Property shall be documented by both a HOKU Authorized Personnel and a NISSAN
scientist in a joint book labeled: “Project Unity: Work Towards to Joint
Foreground Intellectual Property,” and signed and dated by both persons.

 

HOKU Initials & Date /s/ DS 2/13/06   NISSAN Initials & Date /s/ HT 2/13/06

 

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[ * ] = 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.

 

1.33. “Joint Laboratory” means a laboratory facility located within the HOKU
Facilities that may include a single cell and limited short stack testing
equipment, and which is used by NISSAN and/or HOKU to evaluate HOKU Membrane and
Automotive HOKU MEA pursuant to this Agreement.

 

1.34. “Liquid Ionomer” means a liquid electrolyte substance that is used to
combine the Catalyst on the Electrode with Membrane for use in PEMFC.

 

1.35. “MEA” means CCM, 5-Layer MEA and 5-Layer MEA With Seal.

 

1.36. “5-Layer MEA” means a membrane electrode assembly for electrochemical
devices such as fuel cells and electrolyzers, which consists of a Membrane,
Liquid Ionomer, two Electrodes (anode and cathode), a Catalyst and Catalyst
Support, and GDL.

 

1.37. “5-Layer MEA With Seal” means a 5-Layer MEA with the addition of seals or
gaskets.

 

1.38. “Membrane” means a solid polymer electrolyte used in PEMFC to separate two
Electrodes (anode and cathode) and conduct protons to facilitate the
electrochemical reaction that generates electricity from fuel and oxidant in a
PEMFC.

 

1.39. “NISSAN” means NISSAN MOTOR CO., LTD., a Japanese corporation.

 

1.40. “NISSAN Affiliates” means NISSAN’s associated companies in which it
controls, directly or indirectly, greater than fifty percent (50%) of the voting
power.

 

1.41. “NISSAN Background Intellectual Property” means any and all Intellectual
Property conceived or developed by NISSAN prior to or outside the scope of this
Agreement.

 

1.42. “NISSAN Catalyst” means the Catalyst developed solely by NISSAN or by
NISSAN and a third party other than HOKU at any time.

 

1.43. “NISSAN Catalyst Support” means any Catalyst Support developed solely by
NISSAN or by NISSAN and a third party other than HOKU at any time.

 

1.44. “NISSAN Derivative Process” means any process to assemble MEA that is
developed solely by NISSAN or by NISSAN and a third party other than HOKU after
this Agreement and which is (i) an improvement on any Automotive HOKU MEA
Assembly Process that is licensed to NISSAN pursuant to this Agreement; and
(ii) not otherwise included in the definition of HOKU Intellectual Property.

 

1.45. “NISSAN Electrode” means any Electrode developed solely by NISSAN or by
NISSAN and a third party other than HOKU at any time.

 

1.46. “NISSAN Facility” means a facility owned, operated or leased exclusively
by NISSAN.

 

1.47. “NISSAN Foreground Intellectual Property” means any and all Intellectual
Property conceived or developed solely by employees of NISSAN under this
Agreement.

 

HOKU Initials & Date /s/ DS & 2/13/06   NISSAN Initials & Date /s/ HT 2/13/06

 

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[ * ] = 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.

 

1.48. “NISSAN Fuel Cells” means PEMFC stacks, integrated systems and balance of
plant developed solely by NISSAN or by NISSAN and a third party other than HOKU
at any time, for use in trucks and passenger vehicles produced by NISSAN, NISSAN
Affiliates or RENAULT.

 

1.49. “NISSAN GDL” means the GDL developed solely by NISSAN or by NISSAN and a
third party other than HOKU at any time.

 

1.50. “NISSAN Intellectual Property” means NISSAN Background Intellectual
Property and NISSAN Foreground Intellectual Property and Intellectual Property
related to the NISSAN Derivative Process; provided, however, that under no
circumstances shall NISSAN Intellectual Property include any HOKU Intellectual
Property.

 

1.51. “NISSAN MEA” means any MEA developed solely by NISSAN or by NISSAN and a
third party other than HOKU that incorporates Components other than HOKU
Components, whether or not patented by NISSAN, regardless of the date of
development or the source of development. NISSAN MEA may not include any MEA
made with the Automotive HOKU MEA Assembly Process.

 

1.52. “PEMFC” means proton exchange membrane fuel cells.

 

1.53. “Purchase Agreement” has the meaning set forth in the Background & Purpose
of this Agreement.

 

1.54. “RENAULT” means RENAULT s.a.s., a corporation duly incorporated and
existing under the laws of France and having its head office at 13/15 Quai
Alphonse Le Gallo 92513 Boulogne-billancourt, France.

 

1.55. “Step 2 Cross-check Goals” has the meaning set forth in the Collaboration
Agreement.

 

1.56. “Step 3 Cross-check Goals” means all of the goals identified in the table
labeled “Step 3 Cross-check Goals and Dates” on Exhibit B attached hereto.

 

1.57. “Step 3 Guidelines” means all of the guidelines identified in the columns
labeled “Step 3 Guidelines” on Exhibit A attached hereto; provided, however,
that the numeric values in the column titled “Step 3 Guidelines” are tentative
and may be modified by mutual written agreement between the Parties.

 

1.58. “Step 3 HOKU MEA” means such specific Automotive HOKU MEA comprising Step
3 HOKU Membrane and a specific combination of Components that is developed by
HOKU under this Agreement using the Step 3 HOKU MEA Assembly Process, and which
is described with particularity in a written disclosure that is signed by both
Parties prior to the termination or expiration of this Agreement.

 

1.59. “Step 3 HOKU MEA Assembly Process” means the specific Automotive HOKU MEA
Assembly Process that is developed by HOKU under this Agreement, to assemble the
Step 3 HOKU MEA. This includes any process to apply NISSAN Catalyst, NISSAN
Catalyst Support, NISSAN Electrode, or NISSAN GDL to the Step 3 HOKU MEA that is
developed by HOKU under this Agreement, but excludes any assembly or
manufacturing process of any HOKU Components incorporated into the Step 3 HOKU
MEA.

 

HOKU Initials & Date /s/ DS 2/13/06   NISSAN Initials & Date /s/ HT 2/13/06

 

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[ * ] = 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.

 

1.60. “Step 3 HOKU MEA Intellectual Property” means all Intellectual Property
related to the Step 3 HOKU MEA, excluding (i) any Intellectual Property related
to the Step 3 HOKU MEA Assembly Process, (ii) any Intellectual Property related
to the HOKU Components incorporated into the Step 3 HOKU MEA, (iii) NISSAN
Intellectual Property, and (iv) Joint Foreground Intellectual Property.

 

1.61. “Step 3 HOKU Membrane” means the specific HOKU Membrane that is developed
by HOKU under this Agreement, and which is described with particularity in a
written disclosure that is signed by both Parties prior to the termination or
expiration of this Agreement.

 

1.62. “Sub-scale HOKU Membrane” is [ * ] of HOKU Membrane.

 

1.63. “Sub-scale HOKU CCM” consists of Sub-scale HOKU Membrane coated on each
side with [ * ] of Catalyst.

 

1.64. “Sub-scale Automotive HOKU MEA” consists of Automotive HOKU MEA with
Sub-scale HOKU Membrane, a [ * ] active Electrode area, and GDL.

 

2. Confidentiality; Extension of Confidentiality Agreement Term.

 

2.1. Without limiting the terms of the Mutual Confidentiality Agreement (the
“Confidentiality Agreement”) dated January 15, 2004, by and between the Parties,
the terms of this Agreement and all information and materials disclosed by the
Parties pursuant to this Agreement shall be deemed Confidential Information as
defined in the Confidentiality Agreement, except for the permitted disclosures
set forth in Section 10 below. By execution of this Agreement, the Parties agree
to extend the term of the Confidentiality Agreement until the expiration or
termination of this Agreement; provided, however, that each Party’s obligations
to protect the confidentiality of any information disclosed prior to termination
shall continue for a period of five (5) years after such expiration or
termination.

 

2.2. Notwithstanding Section 2.1 above, NISSAN may disclose Confidential
Information as defined in the Confidentiality Agreement to NISSAN Affiliates and
RENAULT; provided, however, that (i) NISSAN shall disclose to HOKU the names of
all such NISSAN Affiliates that have received Confidential Information,
(ii) NISSAN shall impose on NISSAN Affiliates and RENAULT the same
confidentiality obligations as NISSAN owes herein and pursuant to the
Confidentiality Agreement, and (iii) NISSAN shall be liable for any breach of
the terms of the Confidentiality Agreement by RENAULT or the NISSAN Affiliates.

 

2.3. Notwithstanding Section 2.1 above and the terms of the Confidentiality
Agreement, HOKU may file a copy of this Agreement with the United States
Securities & Exchange Commission; provided, however, that HOKU shall use
commercially reasonable efforts to obtain confidential treatment from the United
States Securities & Exchange Commission for all product pricing and technical
information set forth in this Agreement.

 

3. Completion of Collaboration Agreement. The Parties mutually acknowledge and
agree that (i) HOKU has satisfied its obligations to the satisfaction of NISSAN
pursuant to the Collaboration Agreement, and (ii) the execution of this
Agreement constitutes the Step Completion Verification (as defined in the
Collaboration Agreement) for the Step 2 Cross-check Goals.

 

4. Scope of Work. HOKU agrees to further optimize HOKU Membrane, Automotive HOKU
MEA and Automotive HOKU MEA Assembly Process for integration into the NISSAN
Fuel Cells in accordance with the Step 3 Guidelines and Step 3 Cross-check
Goals.

 

HOKU Initials & Date /s/ DS 2/13/06   NISSAN Initials & Date /s/ HT 2/13/06

 

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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

 

4.1. Location of Work. All work related to this Agreement shall be performed at
the HOKU Facility in Hawaii, or at another location that is mutually agreed in
writing by the Parties. NISSAN shall have the option, at its cost, to locate one
of its employees in the Joint Laboratory on a full or part-time basis during the
term of this Agreement for the sole purpose of evaluating Automotive HOKU MEA in
single cells to verify the progress that HOKU is making towards the Step 3
Guidelines. HOKU shall have no obligation to disclose to such NISSAN employee
any HOKU Intellectual Property beyond the extent necessary for the collaboration
between the Parties hereunder. Any such NISSAN employee shall have unrestricted
access to the Joint Laboratory from 9:00 a.m. until 6:00 p.m., Monday through
Friday, but shall not be permitted to enter any other laboratory or research
facility within the HOKU Facility unless accompanied by one of the HOKU
Authorized Personnel.

 

4.2. Work Timing. Work related to this Agreement shall occur between January 1,
2006 and September 30, 2006.

 

5. Intellectual Property.

 

5.1. Ownership.

 

5.1.1. Except as specifically set forth in Sections 5.3, 5.4, and 11.3.1, as
between the Parties, HOKU has the exclusive worldwide ownership and rights with
respect to all HOKU Intellectual Property and all Joint Foreground Intellectual
Property.

 

5.1.2. Except as expressly set forth herein, as between the Parties, NISSAN has
the exclusive worldwide ownership and rights with respect to all NISSAN
Intellectual Property.

 

5.2. No Transfer of Rights.

 

5.2.1. Except as specifically set forth in Sections 5.3, 5.4, and 11.3.1, no
rights are granted to NISSAN with respect to HOKU Intellectual Property or Joint
Foreground Intellectual Property.

 

5.2.2. Except as specifically set forth herein, no rights are granted to HOKU
with respect to NISSAN Intellectual Property.

 

5.3. Licenses. The Parties hereby agree that following each Party’s substantial
satisfaction of its respective obligations under this Agreement (including any
amendments hereof), including, without limitation, all payment obligations set
forth in Section 9, then:

 

5.3.1. HOKU will grant to NISSAN a non-exclusive, non-transferable,
royalty-free, fully-paid, worldwide license, without the right to grant any
sublicense, to the Step 3 HOKU MEA Intellectual Property; provided, however,
that (1) the foregoing license may only be used by NISSAN to make or have made
MEA that incorporates HOKU Membrane purchased from HOKU or its authorized
agent/distributor, and (2) NISSAN may use a subcontractor for the purpose of
having such product made by such subcontractor only after receiving written
permission from HOKU to do so, which permission shall not be unreasonably
withheld.

 

5.3.2. HOKU will grant to NISSAN a non-exclusive, non-transferable,
royalty-free, fully-paid, worldwide license, without the right to grant any
sublicense, to the Step 3 HOKU MEA Assembly Process; provided, however, that
(1) the foregoing license may only be used by NISSAN to make or have made MEA
that incorporates HOKU Membrane purchased from HOKU or its authorized
agent/distributor; and (2) NISSAN may use a subcontractor for the purpose of
having the MEA made by

 

HOKU Initials & Date /s/ DS 2/13/06   NISSAN Initials & Date /s/ HT 2/13/06

 

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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

 

such subcontractor only after receiving written permission from HOKU to do so,
which permission shall not be unreasonably withheld. The foregoing license shall
not be construed to grant any right to NISSAN to make or manufacture MEA
(including, without limitation Step 3 HOKU MEA) using the Step 3 HOKU MEA
Assembly Process for resale of MEA itself to any third party except for resale
of such MEA as repair parts for the vehicles of NISSAN.

 

5.3.3. The granting of any license by HOKU pursuant to this Agreement shall
include disclosure of all relevant information and granting of a non-exclusive,
non-transferable, royalty-free, fully-paid, worldwide license, without the right
to grant any sublicense, to HOKU Background Intellectual Property owned or
controlled by HOKU at the time the license is granted, to the extent required
for NISSAN to make MEA that includes HOKU Membrane using the Step 3 HOKU MEA
Intellectual Property or Step 3 HOKU MEA Assembly Process; provided, however,
that HOKU shall not be required to disclose any information regarding, and no
license shall be granted pursuant to this paragraph to, any materials or
processes used to produce or manufacture any HOKU Component incorporated into
the Step 3 HOKU MEA.

 

5.3.4. NISSAN will grant to HOKU an exclusive, non-transferable, royalty-free,
fully-paid, worldwide license, without the right to grant any sublicense, to use
any NISSAN Derivative Process to make, or have made any MEA; provided, however,
that until December 31, 2011, HOKU’s use and practice of the foregoing license
shall exclude all automotive PEMFC applications. Notwithstanding the exclusivity
of the foregoing license, (i) NISSAN shall have unlimited rights to use the
NISSAN Derivative Process to make any MEA for use in any NISSAN PEMFC; and
(ii) NISSAN may grant a license to each NISSAN Affiliate and RENAULT.

 

5.4. Joint Foreground Intellectual Property.

 

5.4.1. Assignment of Joint Foreground Intellectual Property to HOKU. In order to
vest in HOKU the full rights of ownership in the Joint Foreground Intellectual
Property, NISSAN hereby assigns any and all rights and ownership it may have in
such Joint Foreground Intellectual Property by virtue of any claim to joint
development or invention, and NISSAN agrees to sign instruments of assignment
and other documents that may be legally required to perfect HOKU’s sole
ownership of such Joint Foreground Intellectual Property, and NISSAN shall cause
its employees who are inventors of such Joint Foreground Intellectual Property
to sign instruments of assignment and other documents that may be legally
required to transfer sole ownership of such Joint Foreground Intellectual
Property to HOKU.

 

5.4.2. NISSAN License to Joint Foreground Intellectual Property. After the
assignment of the ownership of the Joint Foreground Intellectual Property
pursuant to Section 5.4.1 above, and following each Party’s substantial
satisfaction of its respective obligations under this Agreement, including,
without limitation, all payment obligations set forth in Section 9, and if the
Joint Foreground Intellectual Property is required for NISSAN to make the Step 3
HOKU MEA pursuant to Section 5.3.1 above, then HOKU will grant to NISSAN a
non-exclusive, non-transferable, royalty-free, fully-paid, worldwide license to
use and practice the Joint Foreground Intellectual Property, without the right
to grant any sublicense.

 

5.5. Notwithstanding anything to the contrary herein, NISSAN may grant a
sublicense to each NISSAN Affiliate and RENAULT to each of the licenses granted
to NISSAN by HOKU pursuant to Sections 5.3.1, 5.3.2, 5.3.3 and 5.4.2 of this
Agreement; provided, however, that (1) the foregoing sublicense may only be used
by NISSAN Affiliates and RENAULT to make or have made MEA that incorporates HOKU
Membrane purchased from HOKU or its authorized agent/distributor, and (2) NISSAN
Affiliates and RENAULT may use a subcontractor for the purpose of having such
product

 

HOKU Initials & Date /s/ DS 2/13/06   NISSAN Initials & Date /s/ HT 2/13/06

 

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[ * ] = 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.

 

made by such subcontractor only after receiving written permission from HOKU to
do so, which permission shall not be unreasonably withheld. The foregoing
sublicense shall not be construed to grant any right to NISSAN Affiliates and
RENAULT to make or manufacture MEA using the Step 3 HOKU MEA Assembly Process
for resale of MEA itself to any third party except for resale of such MEA as
repair parts for the vehicles of NISSAN Affiliates or RENAULT.

 

5.6. Patent Prosecution.

 

5.6.1. As between the Parties, and except as set forth in Section 5.6.4 below,
HOKU shall be solely responsible for filing all patents, trademarks and
copyrights related to all HOKU Intellectual Property.

 

5.6.2. As between the Parties, NISSAN shall be solely responsible for filing all
patents, trademarks and copyrights related to NISSAN Intellectual Property.

 

5.6.3. As between the Parties, [ * ] shall be solely responsible for filing all
patents, trademarks and copyrights related to the Step 3 HOKU MEA Intellectual
Property and the Joint Foreground Intellectual Property. With respect to patents
relating to the Step 3 HOKU MEA Intellectual Property and the Joint Foreground
Intellectual Property, [ * ] shall promptly notify [ * ] of the contents of such
patents, and the Parties shall discuss in good faith whether any [ * ]
Intellectual Property is incorporated into such patents. If any [ * ]
Intellectual Property is incorporated into such patent, and if [ * ] agrees that
[ * ] Intellectual Property is disclosed in the patent application, [ * ] agrees
to cooperate in good faith with [ * ] patent prosecution procedure.

 

5.6.4. No Obligation to Maintain. [ * ] recognizes and agrees that [ * ] is
under no duty whatsoever to [ * ] hereunder with respect to any patent
applications or patents related to the Step 3 HOKU MEA Intellectual Property,
the Step 3 HOKU MEA Assembly Process or Joint Foreground Intellectual Property:
(i) to continue prosecution of any patent application; (ii) to conduct such
prosecution in a manner other than as [ * ] may so choose; (iii) to maintain any
patent or patent application; or (iv) to file a divisional or continuation
application. [ * ] may therefore, in its sole discretion, abandon or otherwise
discontinue prosecution of any and all patents and/or applications related to
the Step 3 HOKU MEA Intellectual Property, the Step 3 HOKU MEA Assembly Process
or the Joint Foreground Intellectual Property. In the event that [ * ] desires
to abandon or discontinue maintenance of the Step 3 HOKU MEA Intellectual
Property or the Joint Foreground Intellectual Property, [ * ] shall notify [ * ]
of such abandonment or discontinuation of the Step 3 HOKU MEA Intellectual
Property or the Joint Foreground Intellectual Property. If, upon such
notification, [ * ] desires to maintain any patents related to the Step 3 HOKU
MEA Intellectual Property or the Joint Foreground Intellectual Property at its
own cost, [ * ] shall immediately transfer to [ * ] its ownership of such
patents.

 

5.7. Patent Filing, Maintenance, Infringement and Defense.

 

5.7.1. HOKU shall be responsible for the legal fees and all other costs
associated with maintaining and defending all claims and actions (including,
without limitation, patent infringement claims) associated with HOKU
Intellectual Property and Joint Foreground Intellectual Property.

 

5.7.2. NISSAN shall be responsible for the legal fees and all other costs
associated with maintaining and defending all claims and actions (including,
without limitation, patent infringement claims) associated with NISSAN
Intellectual Property.

 

HOKU Initials & Date /s/ DS 2/13/06   NISSAN Initials & Date /s/ HT 2/13/06

 

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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

 

5.7.3. If either Party or any affiliate, sublicensee, distributor or customer of
either Party is sued by a third party charging infringement of patent rights
that are purported to dominate a claim of the Step 3 HOKU MEA, such Party will
promptly notify the other Party in writing and discuss how to deal with such
action. Each Party agrees to keep the other Party reasonably informed of all
developments in connection with any such action.

 

6. Production and Delivery of HOKU Products. In connection with the work to be
performed by HOKU and NISSAN pursuant to this Agreement, NISSAN agrees to
purchase from HOKU, and HOKU agrees to manufacture and deliver to NISSAN,
certain HOKU Products in accordance with the provisions of this Section 6.

 

6.1. Purchase Orders. NISSAN may submit written purchase orders for the unit
volume per each type of unit of HOKU Product that is listed in the column
labeled “Unit Description” on Exhibit C or Exhibit D, as applicable, and HOKU
shall produce the quantity of HOKU Product specified on the NISSAN purchase
order. HOKU shall have no obligation to produce or deliver any HOKU Product that
is not listed on Exhibit C or Exhibit D.

 

6.2. NISSAN Components. NISSAN may request that [*] or [*] be included in [*].
Addition of such NISSAN Components shall be limited to [*] and [*]. Such
Components must be supplied to HOKU at NISSAN’s expense in a timely manner. HOKU
shall use its best efforts to include such Components in [*].

 

6.3. HOKU Components. HOKU acknowledges that NISSAN may use HOKU Components,
excluding HOKU Membrane, purchased from HOKU or its authorized
agent/distributor, for the purpose of making and having made MEA consisting of
Components not all sourced from HOKU; provided however that NISSAN may use a
subcontractor for the purpose of having such product made by such subcontractor
only after receiving written permission from HOKU to do so, which permission
shall not be unreasonably withheld. Notwithstanding the foregoing, HOKU shall
have no obligation to sell HOKU Components to NISSAN.

 

6.4. Planned Delivery Schedule. The Parties will discuss and settle on a
mutually acceptable delivery date relative to the quantity of product ordered by
NISSAN and the production capacity of HOKU; however, such delivery date is not
to be later than September 30, 2006.

 

6.5. Delivery to HOKU Facility. Unless otherwise specified in accordance with
Section 6.6 below, all Automotive HOKU MEA, HOKU Components, and HOKU Products
produced pursuant to Section 6 above shall be delivered to the HOKU Facility for
evaluation at the HOKU Facility to assess the progress towards meeting the Step
3 Cross-check Goals, pursuant to Section 4.2 above.

 

6.6. Delivery to NISSAN Facility.

 

6.6.1. NISSAN may request in writing the delivery of [*], [*], [*], and [*] for
testing at a NISSAN Facility, and HOKU shall, subject to the conditions set
forth in Section 6.6.2 below, be required to deliver such [*], [*], [*] or [*]
to such NISSAN Facility on the applicable delivery date to be settled pursuant
to Section 6.4 above. In providing the [*], [*], [*] and [*] to NISSAN, this
transfer of materials constitutes a limited non-exclusive license to NISSAN to
test and evaluate the [*], [*], [*] and [*] as set forth in this Agreement.

 

HOKU Initials & Date /s/ DS 2/13/06   NISSAN Initials & Date /s/ HT 2/13/06

 

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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

 

6.6.2. Conditions for Delivery to NISSAN Facility. In addition to the matters
set forth above, the following conditions must be satisfied for all deliveries
of [*], [*], [*] and [*] to any NISSAN Facility pursuant to Section 6.6.1 above:

 

(a) HOKU shall have an opportunity to review and approve (such approval not to
be unreasonably withheld) any NISSAN testing protocol at least ten (10) days
prior to the scheduled delivery of [*], [*], [*] and/or [*] to a NISSAN
Facility.

 

(b) HOKU shall be notified of the exact location of the NISSAN Facility where
such testing will take place, and HOKU shall be entitled (but not required) to
send up to two (2) members of its research team to witness any such testing of
[*], [*], [*] and [*] at the NISSAN Facility.

 

(c) Immediately after testing is completed, all samples of [*], [*], [*] and [*]
delivered to a NISSAN Facility shall be returned to HOKU or destroyed by
incineration in the presence of HOKU Authorized Personnel.

 

(d) HOKU shall be provided with a written copy of the results of any testing by
NISSAN of [*], [*], [*] and [*].

 

7. Relationship of the Parties. Neither Party shall be under any legal
obligation of any kind whatsoever 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.

 

7.1. Nothing in this Agreement shall preclude HOKU from working alone or with a
third party to develop Membrane, Liquid Ionomer, MEA (including, without
limitation, all Components thereof and Automotive HOKU MEA, and all Components
thereof), HOKU Intellectual Property or any other technology or product related
to fuel cells and their components, and processes related thereto (including,
without limitation, the Automotive HOKU MEA Assembly Process), or from
manufacturing, marketing and selling any HOKU Product (including, without
limitation, all HOKU Components and Automotive HOKU MEA, Step 3 HOKU MEA, and
all Components thereof) and such other fuel cell products, components and
processes (including, without limitation, the Step 3 HOKU MEA Assembly Process),
or grant licenses to HOKU Intellectual Property, to any third party, including
NISSAN’s competitors; provided, however, that under no circumstances shall the
foregoing be construed as an implied or express waiver by NISSAN of any claims
that NISSAN may assert against HOKU or any third party for infringement of
NISSAN Intellectual Property as a result of such development work,
manufacturing, marketing, selling or licensing.

 

7.1.1. Notwithstanding anything to the contrary in Section 7.1 above, HOKU may
not sell any HOKU Product other than HOKU MEA to any automotive company for any
commercial purpose other than test and evaluation of such HOKU Product. In
addition, HOKU may not sell or otherwise provide Automotive HOKU MEA to any
automotive company if such Automotive HOKU MEA is identical in all respects to
the Automotive HOKU MEA then being tested and evaluated by NISSAN pursuant to
this Agreement. The restrictions set forth in this Section 7.1.1 shall terminate
on September 30, 2006.

 

HOKU Initials & Date /s/ DS 2/13/06   NISSAN Initials & Date /s/ HT 2/13/06

 

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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

 

7.2. Nothing in this Agreement shall preclude NISSAN from working alone or with
a third party to develop fuel cell technologies that compete with HOKU Membrane
or HOKU MEA, or from purchasing products from HOKU’s competitors; provided,
however, that under no circumstances shall the foregoing be construed as an
implied or express waiver by HOKU of any claims that HOKU may assert against
NISSAN or any third party for infringement of HOKU Intellectual Property as a
result of such development work or purchasing.

 

7.3 Nothing in this Agreement shall, either expressly or implicitly, be
construed as a promise or undertaking by NISSAN to purchase any mass-produced
HOKU Products from HOKU.

 

8. No Analysis. NISSAN agrees not to make or have made any analysis, observation
of the chemical composition and/or physical characteristics or to perform any
experiment on any HOKU Product, without the prior written consent of HOKU,
except as specifically set forth in this Agreement.

 

9. Costs & Compensation.

 

9.1. Except as set forth in Sections 9.2, 9.3 and 9.7 below, each Party shall
bear its own costs and expenses incurred in connection with such Party’s
performance under this Agreement.

 

9.2. As payment for the work to be performed by HOKU pursuant to Section 4
above, NISSAN shall pay HOKU Two Million Nine Hundred Fifty Thousand U.S.
Dollars ($2,950,000), as follows:

 

9.2.1. Cash payment of $2,710,000, upon execution of this Agreement as an
engineering expense. NISSAN is responsible for any taxes, fees, or government
charges due in Japan.

 

9.2.2. Additional aggregate cash payment of $240,000, as an engineering expense
on July 31, 2006. NISSAN is responsible for any taxes, fees, or government
charges due in Japan.

 

9.3. The payments described above do not include HOKU Products to be ordered by
NISSAN. The price per unit of HOKU Product shall be equal to the price quoted on
Exhibit C or Exhibit D, as applicable. The pricing for any HOKU Product that is
not specifically listed on Exhibit C or Exhibit D shall be negotiated and agreed
by the Parties in good faith.

 

9.4. With regard to payment by NISSAN set forth in Section 9.2.1, HOKU shall
deliver to NISSAN an invoice and NISSAN shall immediately pay HOKU the amount
specified in the invoice.

 

9.5. With regard to payment by NISSAN set forth in Sections 9.2.2 and 9.3, HOKU
shall deliver to NISSAN an invoice and NISSAN shall, within sixty (60) days
after receipt of such invoice from HOKU, pay HOKU the amount specified in the
invoice.

 

9.6. Payment & Delivery Terms. All payments made to HOKU pursuant to this
Agreement shall be net of any applicable sales or excise taxes, duties,
shipping, handling and insurance charges. All shipments shall be F.O.B. origin.

 

HOKU Initials & Date /s/ DS 2/13/06   NISSAN Initials & Date /s/ HT 2/13/06

 

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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

 

9.7. [ * ] shall provide any specialized equipment that it requires or desires
in the Joint Laboratory, and shall be responsible for all compensation,
relocation, travel, living and other expenses of any [ * ] employee working in
the Joint Laboratory. [ * ] shall bear all reasonable and ordinary overhead
costs associated with the operation of the Joint Laboratory such as rent,
electricity, water, telephone and Internet, and common laboratory safety
equipment.

 

10. Press Releases & Marketing Materials. Within two days after the execution of
this Agreement, HOKU and NISSAN shall issue a joint press release disclosing the
material terms of this Agreement.

 

11. Miscellaneous.

 

11.1. Term. The term of this Agreement shall commence on January 1, 2006 and
shall continue until September 30, 2006 unless earlier terminated in accordance
with Section 11.2 below.

 

11.2. Termination.

 

11.2.1. This Agreement may be terminated by mutual written agreement of the
Parties.

 

11.2.2. NISSAN may terminate this Agreement upon written notice to HOKU under
the following circumstances:

 

(a) Any material breach by HOKU of the material covenants of this Agreement,
except for a failure by HOKU to achieve any technical milestone, and failure by
HOKU to cure such breach within thirty (30) days after written notice from
NISSAN.

 

(b) HOKU files a petition in bankruptcy, a petition in bankruptcy is filed
against it, or HOKU becomes insolvent, bankrupt, or makes a general assignment
for the benefit of creditors or goes into receivership.

 

11.2.3. HOKU may terminate this Agreement upon written notice to NISSAN under
the following circumstances:

 

(a) Any failure by NISSAN to make any payment to HOKU pursuant to Sections 9.

 

(b) Any material breach by NISSAN of the other covenants of this Agreement, and
failure by NISSAN to cure such breach within thirty (30) days after written
notice from HOKU.

 

(c) Any breach by NISSAN of Section 8 of this Agreement.

 

11.3. Rights Upon Termination.

 

11.3.1. If NISSAN terminates this Agreement for the reason detailed in
Section 11.2.2, then NISSAN shall be entitled to the following rights:

 

(a) HOKU will grant to NISSAN a non-exclusive, non-transferable, royalty-free,
fully-paid, worldwide license, without the right to grant any sublicense, to the
Step 3 HOKU MEA Intellectual Property; provided, however, that (1) the foregoing
license may only be used by

 

HOKU Initials & Date /s/ DS 2/13/06   NISSAN Initials & Date /s/ HT 2/13/06

 

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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

 

NISSAN to make or have made MEA that incorporates HOKU Membrane purchased from
HOKU or its authorized agent/distributor, and (2) NISSAN may use a subcontractor
for the purpose of having such product made by such subcontractor only after
receiving written permission from HOKU to do so, which permission shall not be
unreasonably withheld.

 

(b) HOKU will grant to NISSAN a non-exclusive, non-transferable, royalty-free,
fully-paid, worldwide license, without the right to grant any sublicense, to the
Step 3 HOKU MEA Assembly Process; provided, however, that (1) the foregoing
license may only be used by NISSAN to make or have made MEA that incorporates
HOKU Membrane purchased from HOKU or its authorized agent/distributor; and
(2) NISSAN may use a subcontractor for the purpose of having the MEA made by
such subcontractor only after receiving written permission from HOKU to do so,
which permission shall not be unreasonably withheld. The foregoing license shall
not be construed to grant any right to NISSAN to make or manufacture MEA
(including, without limitation Step 3 HOKU MEA) using the Step 3 HOKU MEA
Assembly Process for resale of MEA itself to any third party except for resale
of such MEA as repair parts for the vehicles of NISSAN.

 

(c) The granting of any license by HOKU pursuant to this Section 11.3.1 shall
include disclosure of all relevant information and granting of a non-exclusive,
non-transferable, royalty-free, fully-paid, worldwide license, without the right
to grant any sublicense to HOKU Background Intellectual Property owned or
controlled by HOKU at the time the license is granted, to the extent required
for NISSAN to make MEA that comprises HOKU Membrane using the Step 3 HOKU MEA
Intellectual Property or Step 3 HOKU MEA Assembly Process; provided, however,
that HOKU shall not be required to disclose any information regarding, and no
license shall be granted pursuant to this paragraph to, any materials or
processes used to produce or manufacture any HOKU Component incorporated into
the Step 3 HOKU MEA.

 

(d) If the Joint Foreground Intellectual Property is required for NISSAN to make
the Step 3 HOKU MEA pursuant to Section 11.3.1(a) above, then HOKU will grant to
NISSAN a non-exclusive, non-transferable, royalty-free, fully-paid, worldwide
license to use and practice the Joint Foreground Intellectual Property, without
the right to grant any sublicense.

 

(e) Notwithstanding anything to the contrary herein, NISSAN may grant a
sublicense to each NISSAN Affiliate and RENAULT to each of the licenses granted
to NISSAN by HOKU pursuant to Sections 11.3.1(a), (b) (c) and (d) of this
Agreement; provided, however, that (1) the foregoing sublicense may only be used
by NISSAN Affiliates and RENAULT to make or have made MEA that incorporates HOKU
Membrane purchased from HOKU or its authorized agent/distributor, and (2) NISSAN
Affiliates and RENAULT may use a subcontractor for the purpose of having such
product made by such subcontractor only after receiving written permission from
HOKU to do so, which permission shall not be unreasonably withheld. The
foregoing sublicense shall not be construed to grant any right to NISSAN
Affiliates and RENAULT to make or manufacture MEA using the Step 3 HOKU MEA
Assembly Process for resale of MEA itself to any third party except for resale
of MEA as repair parts for the vehicles of NISSAN Affiliates or RENAULT.

 

11.4. Force Majeure. Neither Party shall be liable in damages, nor shall the
provisions of Section 11.3 be applicable, if either Party terminates this
Agreement and such termination is caused by conditions beyond that Party’s
control including, but not limited to acts of God, government restrictions
(including the denial or cancellation of any export or other necessary license),
wars, insurrections or terrorism.

 

11.5. 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.

 

HOKU Initials & Date /s/ DS 2/13/06   NISSAN Initials & Date /s/ HT 2/13/06

 

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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

 

11.6. 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.

 

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

 

11.8. 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.

 

11.9. Disputes.

 

11.9.1. Amicable Resolution. HOKU and NISSAN mutually desire that friendly
collaboration will develop between the Parties. Accordingly, the Parties shall
try to resolve in a friendly manner all disagreements and misunderstandings
connected with each Party’s respective rights and obligations under this
Agreement, including any amendments hereof.

 

11.9.2. Mediation and Alternate Dispute Resolution. Except for disputes with
respect to intellectual property which must be submitted to a court of competent
jurisdiction, to the extent that any misunderstanding or dispute cannot be
resolved agreeably in a friendly manner, the dispute will be mediated by a
mutually-acceptable mediator to be chosen by HOKU and NISSAN within forty-five
(45) days after written notice by one of the parties demanding mediation.
Neither Party may unreasonably withhold consent to the selection of a mediator,
however, by mutual agreement either HOKU or NISSAN may postpone mediation until
each has completed specified but limited discovery with respect to a dispute.
The parties may also agree to attempt some other form of alternative dispute
resolution (“ADR”) in lieu of mediation, including by way of example and without
limitation neutral fact-finding or a mini-trial. Any mediation or ADR under this
Agreement shall take place in the County of Santa Clara, State of California,
U.S.A. The Federal Rules of Civil Procedure and Evidence shall exclusively apply
in any mediation or ADR between the Parties pursuant to this Agreement.

 

Any dispute, other than a dispute with respect to intellectual property which
must be submitted to a court of competent jurisdiction, which the Parties cannot
resolve through negotiation, mediation or other form of ADR within six months of
the date of the initial demand for it by one of the Parties may then be
submitted to the courts for resolution. The use of any ADR procedures will not
be construed under the doctrines of laches, waiver or estoppel to affect
adversely the rights of either party. Nothing in this Section 11.9.2 will
prevent either Party from resorting to judicial proceedings (subject to
Section 11.10 below) if (i) good faith efforts to resolve the dispute under
these procedures have been unsuccessful or (ii) interim relief from a court is
necessary to prevent serious and irreparable injury to one party or to others.

 

11.9.3. Attorney’s Fees. If any action at law or in equity (including mediation
or ADR) is necessary to enforce or interpret the terms of this Agreement the
prevailing Party shall be entitled to reasonable attorneys’ fees, costs and
disbursements in addition to any other relief to which such Party may be
entitled.

 

HOKU Initials & Date /s/ DS 2/13/06   NISSAN Initials & Date /s/ HT 2/13/06

 

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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

 

11.10. Consent to Jurisdiction and Forum Selection. The parties hereto agree
that all actions or proceedings arising in connection with this Agreement that
result in judicial proceedings in accordance with Section 11.9 (inclusive) of
this Agreement shall be tried and litigated exclusively in the state and federal
courts located in the County of Santa Clara, State of California, U.S.A. The
aforementioned choice of venue is intended by the parties to be mandatory and
not permissive in nature, thereby precluding the possibility of litigation
between the parties with respect to or arising out of this Agreement in any
jurisdiction other than that specified in this paragraph. Each party hereby
waives any right it may have to assert the doctrine of forum non convenience or
similar doctrine or to object to venue with respect to any proceeding brought in
accordance with this paragraph, and stipulates that the state and federal courts
located in the County of Santa Clara, State of California, U.S.A. shall have in
personal jurisdiction and venue over each of them for the purpose of litigating
any dispute, controversy, or proceeding arising out of or related to this
Agreement. Each party hereby authorizes and accepts service of process
sufficient for personal jurisdiction in any action against it as contemplated by
this paragraph by registered or certified mail, return receipt requested,
postage prepaid, to its address for the giving of notices as set forth in this
Agreement. Any final judgment rendered against a party in any action or
proceeding shall be conclusive as to the subject of such final judgment and may
be enforced in other jurisdictions in any manner provided by law.

 

11.11. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws (and not the laws of conflicts) of the State
of California, U.S.A.

 

11.12. 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 following address or in such
other manner as shall be agreed to in writing by the Parties.

 

If to NISSAN:

 

NISSAN MOTOR CO., LTD.

1, Natsushima-cho, Yokosuka-shi

Kanagawa 220-8623 Japan

Facsimile:         [ * ]

Phone:              [ * ]

E-mail:              [ * ]

Attn: Hideyuki Tamura, General Manager

 

If to HOKU:

 

HOKU SCIENTIFIC, INC.

1075 Opakapaka Street

Kapolei, Hawaii 96707 USA

Facsimile:         (808) 682-7807

Phone:              (808) 682-7800

E-mail:              [ * ]

Attn: Dustin Shindo, Chairman & CEO

 

11.13. 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.

 

11.14. 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.

 

11.15. Assignment. This Agreement may not be assigned by either Party without
the prior written consent of the other Party; provided, however, that this
Agreement may be assigned by HOKU without the consent of NISSAN if such
assignment is in connection with an Acquisition of HOKU. In such case, HOKU will
notify NISSAN at least fifteen (15) days prior to such Acquisition of HOKU.

 

11.16. Integration of Prior Agreements; Amendment. Except for NISSAN’s payment
obligations set forth in Section 9 of the Collaboration Agreement, and except as
set forth in Section 2

 

HOKU Initials & Date /s/ DS 2/13/06   NISSAN Initials & Date /s/ HT 2/13/06

 

Page 16 of 22

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[ * ] = 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.

 

above, this Agreement sets forth the entire understanding of the Parties
regarding the matters set forth herein and supersedes all prior agreements,
whether oral or written, regarding the subject matter hereof. In the event of
any disagreement between the terms of this Agreement, the Engineering Agreement,
the Purchase Agreement or the Collaboration Agreement, the terms of this
Agreement shall be binding on the Parties. Any amendment to this Agreement must
be in writing and signed by the Parties.

 

11.17. Warranty Disclaimer. HOKU PRODUCTS DELIVERED TO NISSAN 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 PRODUCTS WILL NOT INFRINGE ANY PATENT OR OTHER
PROPRIETARY RIGHT OF A THIRD PARTY. THE HOKU PRODUCT SAMPLES SHALL BE USED
SOLELY FOR THE PURPOSES STATED IN THIS AGREEMENT.

 

11.18. Limitation of Damages. EXCEPT FOR A BREACH OF SECTION 8, NEITHER PARTY
SHALL BE LIABLE TO THE OTHER PARTY FOR SPECIAL OR CONSEQUENTIAL DAMAGES,
INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOST PROFITS OR LOST OPPORTUNITIES.

 

11.19. Survival. The following provisions of this Agreement shall survive its
termination or expiration: Sections 2 (inclusive), 5 (inclusive), 7.1, 8, 9
(inclusive), 11.3 (inclusive), 11.9 (inclusive), 11.10, 11.11, 11.17 and 11.18.

 

(Signature Page Immediately Follows)

 

HOKU Initials & Date /s/ DS 2/13/06   NISSAN Initials & Date /s/ HT 2/13/06

 

Page 17 of 22

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[ * ] = 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.

 

IN WITNESS WHEREOF, the Parties have executed this Step 3 Collaboration
Agreement as of the date of last signature (execution) below.

 

NISSAN:

 

NISSAN MOTOR CO., LTD.

  

HOKU:

 

HOKU SCIENTIFIC, INC.

By:   

/s/ Hideyuki Tamura

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

   By:   

/s/ Dustin M. Shindo

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

Name:    Hideyuki Tamura    Name:    Dustin M. Shindo Title:   

General Manager

Technology Research Laboratory No. 2

   Title:    Chairman & CEO Date:    2/13/06    Date:    2/13/06

Nissan Motor Co., Ltd.

Authorized Signatory

  

Hoku Scientific, Inc.

Authorized Signatory

 

SIGNATURE PAGE TO STEP 3 COLLABORATION AGREEMENT

 

(Page 18 of 22)

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[ * ] = 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.

 

EXHIBIT A

 

STEP 3 GUIDELINES

 

Performance

 

     Step 3 Guidelines

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

Performance

  

Membrane

   [ * ]    [ * ]       [ * ]    [ * ]       [ * ]    [ * ]       [ * ]    [ * ]
        • [ *]
        • [ *]
        • [ * ]
        • [ * ]
        • [ * ]       [ * ]    [ * ]       [ * ]    [ * ]       [ * ]    [ * ]
        • [ * ]
        • [ * ]       [ * ]    [ * ]
[ *]       [ * ]    [ * ]       [ * ]    [ * ]   

MEA

   [ * ]    [ * ] [ * ]       [ * ]    [ * ]
[ * ]       [ * ]    [ * ]
[ * ]

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

*  All comparisons to [ * ] products shall be based on data from tests performed
on [ * ] by [ * ] at the [ * ] Facility.

 

Durability

Item

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

   Step 3 Guidelines

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

Reliability

  

Durability

   [ * ]    [ * ]       [ * ]    [ * ]       [ * ]
[ * ]
[ * ]    [ * ]

 

HOKU Initials & Date /s/ DS 2/13/06   NISSAN Initials & Date /s/ HT 2/13/06

 

Exhibit A

 

(Page 19 of 22)

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[ * ] = 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.

 

EXHIBIT B

 

STEP 3 CROSS-CHECK GOALS & DATES

 

Item

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

 

Goal

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

 

Start Date

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

 

Finish Date

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

[ * ]

  [ * ]   [ * ]    

[ * ]

[ * ]

[ * ]

  [ * ]   [ * ]    

 

HOKU Initials & Date /s/ DS 2/13/06   NISSAN Initials & Date /s/ HT 2/13/06

 

Exhibit B

 

(Page 20 of 22)

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

[ * ] = 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.

 

EXHIBIT C

 

SUB-SCALE PRICING SCHEDULE

 

STEP 3 PRICING

 

Unit Description

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

   Unit Price

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

Sub-scale Automotive HOKU MEA

   [*]

Sub-scale HOKU CCM

   [*]

Sub-scale HOKU GDL

   [*]

Sub-scale HOKU Membrane

   [*]

 

HOKU Initials & Date /s/ DS 2/13/06   NISSAN Initials & Date /s/ HT 2/13/06

 

Exhibit C

 

(Page 21 of 22)

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[ * ] = 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.

 

EXHIBIT D

 

HOKU FULL-SCALE PRODUCT PRICING SCHEDULE

 

STEP 3 PRICING

 

Unit Description

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

   Unit Price

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

Full-scale Automotive HOKU MEA

   [*]

Full-scale HOKU Membrane

   [*]

 

HOKU Initials & Date /s/ DS 2/13/06   NISSAN Initials & Date /s/ HT 2/13/06

 

Exhibit D

 

(Page 22 of 22)