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

EXHIBIT 10.63
 
SECURITIES PURCHASE AGREEMENT
 
This Securities Purchase Agreement (this “Agreement”) is dated as of February
25, 2008, by and among Hoku Scientific, Inc., a Delaware corporation (the
“Company”), and each purchaser identified on the signature pages hereto (each,
including its successors and assigns, a “Purchaser” and collectively, the
“Purchasers”).
 
RECITALS
 
A.           The Company and each Purchaser is executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(2) of the Securities Act of 1933, as amended (the “Securities
Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated by the
United States Securities and Exchange Commission (the “Commission”) under the
Securities Act.

B.           Each Purchaser, severally and not jointly, wishes to purchase, and
the Company wishes to sell, upon the terms and conditions stated in this
Agreement, that aggregate number of shares of the common stock, par value $0.001
per share (the “Common Stock”), of the Company, set forth below such Purchaser’s
name on the signature page of this Agreement (which aggregate amount for all
Purchasers together shall be 2,893,520 shares of Common Stock and shall be
collectively referred to herein as the “Shares”).

C.           The Company has engaged Deutsche Bank Securities Inc. as the
placement agent (the “Placement Agent”) for the offering of the Shares on a
“best efforts” basis.

D.           Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement, substantially in the form attached hereto as Exhibit A (the
“Registration Rights Agreement”), pursuant to which, among other things, the
Company will agree to provide certain registration rights with respect to the
Shares under the Securities Act and the rules and regulations promulgated
thereunder and applicable state securities laws.

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchasers hereby
agree as follows:
 
ARTICLE I.
DEFINITIONS
 
1.1           Definitions.  In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms shall have
the meanings indicated in this Section 1.1:
 
“Action” means any action, suit, inquiry, notice of violation, proceeding
(including any partial proceeding such as a deposition) or investigation pending
or, to the Company’s Knowledge, threatened in writing (or otherwise) against the
Company or any Subsidiary or any of their respective properties or any officer,
director or employee of the Company or any Subsidiary acting in his or her
capacity as an officer, director or employee before or by any federal, state,
county, local or foreign court, arbitrator, governmental or administrative
agency, regulatory authority, stock market, stock exchange or trading facility.
 
 
 

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

 
 
“Affiliate” means, with respect to any Person, any other Person that, directly
or indirectly through one or more intermediaries, Controls, is controlled by or
is under common control with such Person, as such terms are used in and
construed under Rule 144.  With respect to a Purchaser, any investment fund or
managed account that is managed on a discretionary basis by the same investment
manager as such Purchaser will be deemed to be an Affiliate of such Purchaser.
 
“Agreement” shall have the meaning ascribed to such term in the Preamble.
 
“Average Daily Price”  means, for any security as of any date, the VWAP for such
security on the Principal Trading Market, as reported by Bloomberg or, if the
Principal Trading Market is not the principal securities exchange or trading
market for such security, the VWAP of such security on the principal securities
exchange or trading market where such security is listed or traded as reported
by Bloomberg, or if the foregoing do not apply, the VWAP of such security in the
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg, or, if no VWAP is reported for such security by
Bloomberg, the average of the bid prices of any market makers for such security
as reported in the “pink sheets” by Pink Sheets LLC (formerly the National
Quotation Bureau, Inc.).
 
“Business Day” means a day, other than a Saturday or Sunday, on which banks in
New York City are open for the general transaction of business.
 
“Buy-In” has the meaning set forth in Section 4.1(f).

“Buy-In Price” has the meaning set forth in Section 4.1(f).

 “Closing” means the closing of the purchase by the Purchasers listed on Annex A
hereto and sale by the Company of Shares to such Purchasers pursuant to this
Agreement on the Closing Date as provided in Section 2.1(a) hereof.
 
 “Closing Date” means the date on which this Agreement has been executed and
delivered by all parties hereto, unless on such date the conditions set forth in
Sections 2.1, 2.2, 5.1 and 5.2 (other than those to be satisfied at the Closing)
shall not have been satisfied or waived, in which case the Closing Date shall be
on the second (2nd) Trading Day after the date on which the last to be satisfied
or waived of the conditions set forth in Sections 2.1, 2.2, 5.1 and 5.2 (other
than those to be satisfied at the Closing) shall have been satisfied or waived.
 
“Commission” has the meaning set forth in the Recitals.
 
“Common Stock” has the meaning set forth in the Recitals, and also includes any
securities into which the Common Stock may hereafter be reclassified or changed.
 
“Company” has the meaning set forth in the Preamble.
 
 
2

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

 
 
“Company Counsel” means Stoel Rives LLP.

 “Company Deliverables” has the meaning set forth in Section 2.2(a).

 “Company’s Knowledge” means with respect to any statement made to the knowledge
of the Company, that the statement is based upon the actual knowledge of any of
the officers of the Company or its Subsidiaries (or the knowledge such officers
would have after a reasonable inquiry into the matter in question) having
responsibility for the matter or matters that are the subject of the statement.

“Control” (including the terms “controlling”, “controlled by” or “under common
control with”) means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.
 
“Deadline Date” has the meaning set forth in Section 4.1(f).

“Disclosure Materials” has the meaning set forth in Section 3.1(h).
 
“DTC” has the meaning set forth in Section 4.1(c).
 
“Effective Date” means the date on which the initial Registration Statement
required by Section 2(a) of the Registration Rights Agreement is first declared
effective by the Commission.
 
“Effectiveness Deadline” means the date on which the initial Registration
Statement is required to be declared effective by the Commission under the terms
of the Registration Rights Agreement.
 
“Engagement Letter” has the meaning set forth in Section 6.1.
 
“Environmental Laws” has the meaning set forth in Section 3.1(l).
 
“Escrow Agent” has the meaning set forth in Section 2.1(d)(i).

“Escrow Agent Duties” has the meaning set forth in Section 2.1(d)(iii)(A).

“Escrow Amount” has the meaning set forth in Section 2.1(d)(i).

“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any
successor statute, and the rules and regulations promulgated thereunder.
 
“GAAP” means U.S. generally accepted accounting principles, as applied by the
Company.
 
“Indemnified Person” has the meaning set forth in Section 4.7(b).
 
“Intellectual Property” has the meaning set forth in Section 3.1(r).
 
 
3

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

 
 
“Irrevocable Transfer Agent Instructions” means, with respect to the Company,
the Irrevocable Transfer Agent Instructions, in the form of Exhibit D, executed
by the Company and delivered to and acknowledged in writing by the Transfer
Agent.
 
“Legend Removal Date” has the meaning set forth in Section 4.1(c).
 
“Lien” means any lien, charge, claim, encumbrance, security interest, right of
first refusal, preemptive right or other restrictions of any kind.
 
“Material Adverse Effect” means a material adverse effect on the results of
operations, assets, business, prospects, or financial condition of the Company,
except that any of the following, either alone or in combination with each
other, shall not be deemed a Material Adverse Effect: (i) effects caused by
changes or circumstances affecting general market conditions in the U.S. economy
other than those that disproportionately affect the industry in which the
Company operates, (ii) effects resulting from or relating to the execution,
delivery, announcement or performance of this Agreement or the announcement or
disclosure of the sale of the Securities or other transactions contemplated by
this Agreement, (iii) effects caused by any event, occurrence or condition
resulting from or relating to the taking of any action in accordance with this
Agreement, (iv) any natural disaster or any acts of terrorism, sabotage,
military action or war or any escalation or worsening thereof, or (v) effects
resulting from changes in GAAP or applicable laws.
 
“Material Contract” means any contract of the Company that has been filed or was
required to have been filed as an exhibit to the SEC Reports pursuant to Item
601(b)(4) or Item 601(b)(10) of Regulation S-K.

“Material Permits” has the meaning set forth in Section 3.1(p).
 
“New York Courts” means the state and federal courts sitting in the City of New
York, Borough of Manhattan.
 
“Outside Date” means Friday, February 29, 2008
 
“Person” means an individual, corporation, partnership, limited liability
company, trust, business trust, association, joint stock company, joint venture,
sole proprietorship, unincorporated organization, governmental authority or any
other form of entity not specifically listed herein.
 
“Placement Agent” has the meaning set forth in the Recitals.
 
“Placement Agent Fee” means the cash fee to be paid to the Placement Agent for
services rendered to the Company in connection with the offering of the Shares.
 
“Press Release” has the meaning set forth in Section 4.5.
 
 “Principal Trading Market” means the Trading Market on which the Common Stock
is primarily listed on and quoted for trading, which, as of the date of this
Agreement and the Closing Date, shall be the Nasdaq Global Market.
 
 
4

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

 
 
“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
 
“Purchase Price” means $8.64 per share.
 
“Purchaser” and “Purchasers” have the meaning set forth in the Preamble.
 
“Purchaser Deliverables” has the meaning set forth in Section 2.2(b).
 
“Purchaser Party” has the meaning set forth in Section 4.7(a).
 
“Registration Rights Agreement” has the meaning set forth in the Recitals.
 
“Registration Statement” means a registration statement meeting the requirements
set forth in the Registration Rights Agreement and covering the resale by the
Purchasers of the Registrable Securities (as defined in the Registration Rights
Agreement).
 
“Regulation D” has the meaning set forth in the Recitals.
 
“Required Approvals” has the meaning set forth in Section 3.1(e).
 
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
 
“SEC Reports” has the meaning set forth in Section 3.1(h).
 
 “Secretary’s Certificate” has the meaning set forth in Section 2.2(a)(v).
 
“Shares” has the meaning set forth in the Recitals.
 
“Securities Act” means the Securities Act of 1933, as amended.
 
“Short Sales” include, without limitation, (i) all “short sales” as defined in
Rule 200 promulgated under Regulation SHO under the Exchange Act, whether or not
against the box, and all types of direct and indirect stock pledges, forward
sale contracts, options, puts, calls, short sales, swaps, “put equivalent
positions” (as defined in Rule 16a-1(h) under the Exchange Act) and similar
arrangements (including on a total return basis), and (ii) sales and other
transactions through non-U.S. broker dealers or foreign regulated brokers.
 
“Stock Certificates” has the meaning set forth in Section 2.2(a)(ii).
 
“Subscription Amount” means with respect to each Purchaser, the aggregate amount
to be paid for the Shares purchased hereunder as indicated on such Purchaser’s
signature page to this Agreement next to the heading “Aggregate Purchase Price
(Subscription Amount)”.
 
 
5

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

 
 
“Subsidiary” means any entity in which the Company, directly or indirectly, owns
capital stock or holds an equity or similar interest.
 
“Trading Affiliate” has the meaning set forth in Section 3.2(h).
 
“Trading Day” means (i) a day on which the Common Stock is listed or quoted and
traded on its Principal Trading Market (other than the OTC Bulletin Board), or
(ii) if the Common Stock is not listed on a Trading Market (other than the OTC
Bulletin Board), a day on which the Common Stock is traded in the
over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the
Common Stock is not quoted on any Trading Market, a day on which the Common
Stock is quoted in the over-the-counter market as reported in the “pink sheets”
by Pink Sheets LLC (or any similar organization or agency succeeding to its
functions of reporting prices); provided, that in the event that the Common
Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then
Trading Day shall mean a Business Day.
 
“Trading Market” means whichever of the New York Stock Exchange, the American
Stock Exchange, the Nasdaq Global Select Market, the Nasdaq Global Market, the
Nasdaq Capital Market or the OTC Bulletin Board on which the Common Stock is
listed or quoted for trading on the date in question.
 
“Transaction Documents” means this Agreement, the schedules and exhibits
attached hereto, the Registration Rights Agreement, the Irrevocable Transfer
Agent Instructions and any other documents or agreements executed in connection
with the transactions contemplated hereunder.
 
“Transfer Agent” means Continental Stock Transfer & Trust Company, or any
successor transfer agent for the Company.
 
“VWAP” means the daily volume weighted average price of the Company's Common
Stock on the Principal Market as reported by Bloomberg (based on a trading day
from 9:30 am EST to 4:00 pm EST) using the VAP function
 
ARTICLE II.
PURCHASE AND SALE
 
 
2.1
Closing.

 
(a)           Amount.  Subject to the terms and conditions set forth in this
Agreement, at the Closing, the Company shall issue and sell to each Purchaser
listed on Annex A hereto, and each Purchaser listed on Annex A hereto shall,
severally and not jointly, purchase from the Company, such number of Shares
equal to the quotient resulting from dividing (i) the aggregate purchase price
for such Purchaser, as indicated below such Purchaser’s name on the signature
page of this Agreement (the “Subscription Amount”) by (ii) the Purchase Price,
rounded up to the nearest whole Share.
 
(b)           Closing.  The Closing of the purchase and sale of the Shares shall
take place at the offices of Stoel Rives LLP, 101 S. Capitol Blvd., Suite 1900,
Boise, Idaho 83702 on the Closing Date, or at such other location or remotely by
facsimile transmission or other electronic means as the parties may mutually
agree.
 
 
6

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

 
 
(c)           Form of Payment.  On the Closing Date, (i) each Purchaser listed
on Annex A hereto shall wire its Subscription Amount, in United States dollars
and in immediately available funds, in the amount set forth as the “Aggregate
Purchase Price (Subscription Amount)” indicated below such Purchaser’s name on
the applicable signature page hereto by wire transfer to the Company’s account
and (ii) the Company shall irrevocably instruct the Transfer Agent to deliver to
each Purchaser listed on Annex A hereto one or more stock certificates, duly
executed on behalf of the Company and registered in the name of such Purchaser,
evidencing the number of Shares such Purchaser is purchasing as is set forth on
such Purchaser’s signature page to this Agreement next to the heading “Number of
Shares to be Acquired”, within three (3) Business Days after the Closing.
 
(d)           Escrow.

(i)           Simultaneously with the execution and delivery of this Agreement
by a Purchaser, such Purchaser shall promptly cause a wire transfer of
immediately available funds (U.S. dollars) in an amount representing such
Purchaser’s Subscription Amount to be paid to a non-interest bearing escrow
account of Lowenstein Sandler PC (the “Escrow Agent”) set forth on Exhibit G
attached hereto (the aggregate amounts received being held in escrow by the
Escrow Agent are referred to herein as the “Escrow Amount”).  The Escrow Agent
shall hold the Escrow Amount in escrow in accordance with Section 2.1(d)(ii)
below.  

(ii)           The Escrow Agent shall continue to hold the Escrow Amount in
escrow in accordance with and subject to this Agreement, from the date of its
receipt of the funds constituting the Escrow Amount until the soonest of:

(A)           the termination of this Agreement in accordance with Section 6.17,
in which case, if the Escrow Agent then holds any portion of the Escrow Amount,
then: (1) in the event of a termination by the Company, the Escrow Agent shall
return the portion of the Escrow Amount received from each Purchaser which it
then holds, to each such Purchaser, and in the event of a termination by a
Purchaser, the Escrow Agent shall return the portion of the Escrow Amount
received from such Purchaser which it then holds, to such Purchaser, in
accordance with written wire transfer instructions received from the Purchaser;
and (2) if the Escrow Agent has not received written wire transfer instructions
from any Purchaser before the 30th day after such termination date, then the
Escrow Agent may, in its sole and absolute discretion, either (x) deposit that
portion of the Escrow Amount to be returned to such Purchaser in a court of
competent jurisdiction on written notice to such Purchaser, and the Escrow Agent
shall thereafter have no further liability with respect to such deposited funds,
or (y) continue to hold such portion of the Escrow Amount pending receipt of
written wire transfer instructions from such Purchaser or an order from a court
of competent jurisdiction; OR

(B)           the Closing, receipt of written instructions from the Company and
the Placement Agent that the Closing shall have been consummated, in which case,
the Escrow Agent shall release the Escrow Amount constituting the aggregate
purchase price as follows: (1) to the Placement Agent, the fees payable to such
Placement Agent (which fees shall be set forth in such instructions), and (2)
the balance of the aggregate purchase price to the Company.

 
7

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

 
 
(iii)           The Company and the Purchasers acknowledge and agree for the
benefit of the Escrow Agent (which shall be deemed to be a third party
beneficiary of this Section 2.1(d)) as follows:

(A)           The Escrow Agent: (i) is not responsible for the performance by
the Company, the Purchasers or Placement Agent of this Agreement or any of the
Transaction Documents or for determining or compelling compliance therewith;
(ii) is only responsible for (A) holding the Escrow Amount in escrow pending
receipt of written instructions from the Company and the Placement Agent
directing the release of the Escrow Amount, and (B) disbursing the Escrow Amount
in accordance with the written instructions from the Company and the Placement
Agent, each of the responsibilities of the Escrow Agent in clause (A) and (B) is
ministerial in nature, and no implied duties or obligations of any kind shall be
read into this Agreement against or on the part of the Escrow Agent
(collectively, the “Escrow Agent Duties”); (iii) shall not be obligated to take
any legal or other action hereunder which might in its judgment involve or cause
it to incur any expense or liability unless it shall have been furnished with
indemnification acceptable to it, in its sole discretion; (iv) may rely on and
shall be protected in acting or refraining from acting upon any written notice,
instruction (including, without limitation, wire transfer instructions, whether
incorporated herein or provided in a separate written instruction), instrument,
statement, certificate, request or other document furnished to it hereunder and
believed by it to be genuine and to have been signed or presented by the proper
Person, and shall have no responsibility for making inquiry as to, or for
determining, the genuineness, accuracy or validity thereof, or of the authority
of the Person signing or presenting the same; and (v) may consult counsel
satisfactory to it, and the opinion or advice of such counsel in any instance
shall be full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in accordance with
the opinion or advice of such counsel.  Documents and written materials referred
to in this Section 2.1(d)(iii)(A) include, without limitation, e-mail and other
electronic transmissions capable of being printed, whether or not they are in
fact printed; and any such e-mail or other electronic transmission may be deemed
and treated by the Escrow Agent as having been signed or presented by a Person
if it bears, as sender, the Person’s e-mail address.
 
(B)           The Escrow Agent shall not be liable to anyone for any action
taken or omitted to be taken by it hereunder, except in the case of Escrow
Agent’s gross negligence or willful misconduct in breach of the Escrow Agent
Duties.  IN NO EVENT SHALL THE ESCROW AGENT BE LIABLE FOR INDIRECT, PUNITIVE,
SPECIAL OR CONSEQUENTIAL DAMAGE OR LOSS (INCLUDING BUT NOT LIMITED TO LOST
PROFITS) WHATSOEVER, EVEN IF THE ESCROW AGENT HAS BEEN INFORMED OF THE
LIKELIHOOD OF SUCH LOSS OR DAMAGE AND REGARDLESS OF THE FORM OF ACTION.

(C)           The Company hereby indemnifies and holds harmless the Escrow Agent
from and against any and all loss, liability, cost, damage and expense,
including, without limitation, reasonable counsel fees and expenses, which the
Escrow Agent may suffer or incur by reason of any action, claim or proceeding
brought against the Escrow Agent arising out of or relating to the performance
of the Escrow Agent Duties, except to the extent such action, claim or
proceeding is exclusively the result of the willful misconduct, bad faith or
gross negligence of the Escrow Agent.  

(D)           The Escrow Agent has acted as legal counsel to the Placement Agent
in connection with this Agreement and the other Transaction Documents, is merely
acting as a stakeholder under this Agreement and is, therefore, hereby
authorized to continue acting as legal counsel to the Placement Agent including,
without limitation, with regard to any dispute arising out of this Agreement,
the other Transaction Documents, the Escrow Amount or any other matter.  The
Purchasers hereby expressly consent to permit the Escrow Agent to represent the
Placement Agent in connection with all matters relating to this Agreement,
including, without limitation, with regard to any dispute arising out of this
Agreement, the other Transaction Documents, the Escrow Amount or any other
matter, and hereby waives any conflict of interest or appearance of conflict or
impropriety with respect to such representation.  Each of the Purchasers has
consulted with its own counsel specifically about this Section 2.1(d) to the
extent they deemed necessary, and has entered into this Agreement after being
satisfied with such advice.

 
8

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

 
 
(E)           The Escrow Agent shall have the right at any time to resign for
any reason and be discharged of its duties as escrow agent hereunder (including
without limitation the Escrow Agent Duties) by giving written notice of its
resignation to the Company, the Placement Agent and the Purchasers at least ten
(10) calendar days prior to the specified effective date of such
resignation.  All obligations of the Escrow Agent hereunder shall cease and
terminate on the effective date of its resignation and its sole responsibility
thereafter shall be to hold the Escrow Amount, for a period of ten (10) calendar
days following the effective date of resignation, at which time,

(I)           if a successor escrow agent shall have been appointed and have
accepted such appointment in a writing to both the Company and the Purchasers,
then upon written notice thereof given to each of the Purchasers, the Escrow
Agent shall deliver the Escrow Amount to the successor escrow agent, and upon
such delivery, the Escrow Agent shall have no further liability or obligation;
or

(II)           if a successor escrow agent shall not have been appointed, for
any reason whatsoever, the Escrow Agent shall at its option in its sole
discretion, either (A) deliver the Escrow Amount to a court of competent
jurisdiction selected by the Escrow Agent and give written notice thereof to the
Company, the Placement Agent and the Purchasers, or (B) continue to hold the
Escrow Amount in escrow pending written direction from the Company and the
Placement Agent in form and formality satisfactory to the Escrow Agent.

(F)           In the event that the Escrow Agent shall be uncertain as to its
duties or rights hereunder or shall receive instructions with respect to the
Escrow Amount or any portion thereunder which, in its sole discretion, are in
conflict either with other instructions received by it or with any provision of
this Agreement, the Escrow Agent shall have the absolute right to suspend all
further performance of its duties under this Agreement (except for the
safekeeping of such Escrow Amount) until such uncertainty or conflicting
instructions have been resolved to the Escrow Agent’s sole satisfaction by final
judgment of a court of competent jurisdiction, joint written instructions from
the Company, the Placement Agent and all of the Purchasers, or otherwise.  In
the event that any controversy arises between the Company and one or more of the
Purchasers or any other party with respect to this Agreement or the Escrow
Amount, the Escrow Agent shall not be required to determine the proper
resolution of such controversy or the proper disposition of the Escrow Amount,
and shall have the absolute right, in its sole discretion, to deposit the Escrow
Amount with the clerk of a court selected by the Escrow Agent and file a suit in
interpleader in that court and obtain an order from that court requiring all
parties involved to litigate in that court their respective claims arising out
of or in connection with the Escrow Amount.  Upon the deposit by the Escrow
Agent of the Escrow Amount with the clerk of such court in accordance with this
provision, the Escrow Agent shall thereupon be relieved of all further
obligations and released from all liability hereunder.

 
9

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

 
 

2.2           Closing Deliveries.    (a)  On or prior to the Closing with
respect to the Purchasers listed on Annex A hereto, the Company shall issue,
deliver or cause to be delivered to such Purchaser the following (the “Company
Deliverables”):
 
(i)           this Agreement, duly executed by the Company;
 
(ii)          duly executed Irrevocable Transfer Agent Instructions acknowledged
in writing by the Transfer Agent with the original stock certificates,
evidencing the Shares subscribed for by such Purchaser hereunder, registered in
the name of such Purchaser as set forth on the Stock Certificate Questionnaire
included as Exhibit B-2 hereto (the “Stock Certificates”), delivered within
three (3) Business Days of Closing;
 
(iii)         a legal opinion of Company Counsel, dated as of the Closing Date
and in the form attached hereto as Exhibit C, executed by such counsel and
addressed to the Purchasers and the Placement Agent;
 
(iv)        the Registration Rights Agreement, duly executed by the Company;
 
(v)         a certificate of the Secretary of the Company (the “Secretary’s
Certificate”), dated as of the Closing Date, (a) certifying the resolutions
adopted by the Board of Directors of the Company or a duly authorized committee
thereof approving the transactions contemplated by this Agreement and the other
Transaction Documents and the issuance of the Shares, (b) certifying the current
versions of the certificate of incorporation, as amended, and by-laws of the
Company and (c) certifying as to the signatures and authority of persons signing
the Transaction Documents and related documents on behalf of the Company, in the
form attached hereto as Exhibit E;
 
(vi)        the Compliance Certificate referred to in Section 5.1(g);
 
(vii)       a certificate evidencing the formation and good standing of the
Company issued by the Secretary of State of the State of Delaware, as of a date
within five (5) days of the Closing Date;
 
(viii)      a certificate evidencing the Company’s qualification as a foreign
corporation and good standing issued by the Secretary of State of each State in
which the Company conducts its business as of a date within ten (10) days of the
Closing Date; and
 
(ix)     lock-up agreements, entered into by each of the Company’s directors and
executive officers, in the form attached hereto as Exhibit H.

 
10

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

 

 
(b)           On or prior to the Closing with respect to the Purchasers listed
on Annex A hereto, each such Purchaser shall deliver or cause to be delivered to
the Company the following (the “Purchaser Deliverables”):
 
(i)          this Agreement, duly executed by such Purchaser;
 
(ii)         its Subscription Amount, in United States dollars and in
immediately available funds, in the amount set forth as the “Aggregate Purchase
Price (Subscription Amount)” indicated below such Purchaser’s name on the
applicable signature page hereto by wire transfer to the Company’s account;
 
(iii)        the Registration Rights Agreement, duly executed by such Purchaser;
 
(iv)        a fully completed and duly executed Selling Stockholder
Questionnaire in the form attached as Annex B to the Registration Rights
Agreement; and
 
(v)         a fully completed and duly executed Accredited Investor
Questionnaire and Stock Certificate Questionnaire in the forms attached hereto
as Exhibits B-1 and B-2, respectively.
 
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
 
3.1           Representations and Warranties of the Company.  The Company hereby
represents and warrants as of the date hereof and as of the Closing Date (except
for the representations and warranties that speak as of a specific date, which
shall be made as of such date), to each of the Purchasers and to the Placement
Agent that, except as set forth in the Schedules delivered herewith:
 
(a)           Subsidiaries.  The Company has no direct or indirect Subsidiaries,
other than Hoku Materials, Inc., a Delaware corporation, Hoku Solar, Inc., a
Delaware corporation, Hoku Materials Holdings, Inc., a Delaware corporation,
Hoku Power Investments LLC, a Hawaii limited liability company, and Hoku Power
Project 1 LLC, a Hawaii limited liability company.
 
(b)           Organization and Qualification.  The Company and each of its
Subsidiaries is an entity duly incorporated, validly existing and in good
standing under the laws of the State of Delaware or the State of Hawaii, as
applicable, with the requisite corporate power and authority to own or lease and
use its properties and assets and to carry on its business as currently
conducted.  Neither the Company nor any Subsidiary is in violation of any of the
provisions of its respective certificate or articles of incorporation (however
denominated) or bylaws or other organizational or charter documents.  The
Company and each of its Subsidiaries is duly qualified to conduct business and
is in good standing (if the concept is applicable in the relevant jurisdiction)
as a foreign corporation or other entity in each jurisdiction in which the
nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, would not have a Material Adverse Effect.  The
Company has not received a written notification that any proceeding has been
instituted in any such jurisdiction, revoking, limiting or curtailing, or
seeking to revoke, limit or curtail, such power and authority or qualification,
and to the Company’s knowledge, no proceeding has been instituted in any such
jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit or
curtail, such power and authority or qualification.
 
 
11

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

 
 
(c)           Authorization; Enforcement; Validity.  The Company has the
requisite corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents to which it is a
party and otherwise to carry out its obligations hereunder and thereunder.  The
execution and delivery of each of the Transaction Documents to which it is a
party by the Company and the consummation by it of the transactions contemplated
hereby and thereby (including, but not limited to, the sale and delivery of the
Shares) have been duly authorized by all necessary corporate action on the part
of the Company, and no further corporate action is required by the Company, its
Board of Directors or its stockholders in connection therewith other than in
connection with the Required Approvals.  Each of the Transaction Documents to
which it is a party has been (or upon delivery will have been) duly executed by
the Company and, assuming each of the Transaction Documents constitutes a valid
and binding obligation of the other parties thereto, is, or when delivered in
accordance with the terms hereof, will constitute the legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally the enforcement of, creditors’ rights and remedies or by
other equitable principles of general application. Except as set forth on
Schedule 3.1(c) hereto, there are no shareholder agreements, voting agreements,
preferred investment terms, preemptive rights for existing shareholders, or
other similar arrangements with respect to the Company’s capital stock to which
the Company is a party or, to the Company’s Knowledge, between or among any of
the Company’s stockholders.
 
(d)           No Conflicts.  The execution, delivery and performance by the
Company of the Transaction Documents to which it is a party and the consummation
by the Company of the transactions contemplated hereby or thereby (including,
without limitation, the issuance of the Shares) do not and will not (i) conflict
with or violate any provisions of the Company’s certificate of incorporation or
bylaws or otherwise result in a violation of the organizational documents of the
Company, (ii) conflict with, or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, result in the
creation of any Lien upon any of the properties or assets of the Company or give
to others any rights of termination, amendment, acceleration or cancellation
(with or without notice, lapse of time or both) of, any Material Contract or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company is subject or decree (including federal and state
securities laws and regulations and the rules and regulations, assuming the
correctness of the representations and warranties made by the Purchasers herein,
of any self regulatory organization to which the Company or its securities are
subject , including all applicable Trading Markets), or by which any property or
asset of the Company is bound or affected), except in the case of clause (ii)
and (iii) such as would not, individually or in the aggregate, have a Material
Adverse Effect.
 
(e)           Filings, Consents and Approvals.  The Company is not required to
obtain any consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal, state, local
or other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the Transaction Documents
(including the issuance of the Shares), other than (i) the filing with the
Commission of one or more Registration Statements in accordance with the
requirements of the Registration Rights Agreement, (ii) filings required by
applicable state securities laws, (iii) the filing of a Notice of Sale of
Securities on Form D with the Commission under Regulation D of the Securities
Act, (iv) the filing of any requisite notices and/or application(s) to the
Principal Trading Market for the issuance and sale of the Common Stock and the
listing of the Common Stock for trading or quotation, as the case may be,
thereon in the time and manner required thereby, (v) the filings required in
accordance with Section 4.11 of this Agreement and (vi) those that have been
made or obtained prior to the date of this Agreement (collectively, the
“Required Approvals”).   Subject to the accuracy of the representations and
warranties of each Purchaser set forth in Section 3.2 hereof, the Company has
taken all action necessary to exempt (i) the issuance and sale of the Shares and
(ii) the other transactions contemplated by the Transaction Documents from the
provisions of any stockholder rights plan or other “poison pill” arrangement,
any anti-takeover, business combination or control share law or statute binding
on the Company or to which the Company or any of its assets and properties may
be subject and any provision of the Company’s certificate of incorporation or
bylaws that is or could reasonably be expected to become applicable to the
Purchasers as a result of the transactions contemplated hereby, including
without limitation, the issuance of the Shares and the ownership, disposition or
voting of the Shares by the Purchasers or the exercise of any right granted to
the Purchasers pursuant to this Agreement or the other Transaction Documents.
 
 
12

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

 
 
(f)            Issuance of the Shares.  The Shares have been duly authorized
and, when issued and paid for in accordance with the terms of the Transaction
Documents, will be duly and validly issued, fully paid and nonassessable and
free and clear of all Liens, other than restrictions on transfer provided for in
the Transaction Documents or imposed by applicable securities laws, and shall
not be subject to preemptive or similar rights of shareholders.  Assuming the
accuracy of the representations and warranties of the Purchasers in this
Agreement, the Shares will be issued in compliance with all applicable federal
and state securities laws.  Subject to the accuracy of the representations made
by the Purchasers in Section 3.2 hereof, the Shares will be issued and sold to
the Purchasers in compliance with applicable exemptions from (A) the
registration and prospectus delivery requirements of the Securities Act and (B)
the registration and qualification requirements of all applicable securities
laws of the states of the United States and any other jurisdiction represented
by a Purchaser in an Accredited Investor Questionnaire to be its jurisdiction of
residence.
 
(g)           Capitalization.  The number of shares and type of all authorized,
issued and outstanding capital stock, options and other securities of the
Company (whether or not presently convertible into or exercisable or
exchangeable for shares of capital stock of the Company) has been set forth in
the SEC Reports and has changed since the date of such SEC Reports only to
reflect stock option exercises that do not, individually or in the aggregate,
have a material affect on the issued and outstanding capital stock, options and
other securities.  All of the outstanding shares of capital stock of the Company
are duly authorized, validly issued, fully paid and non-assessable, have been
issued in compliance in all material respects with all applicable federal and
state securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase any capital stock of the Company.  Except as specified in Schedule
3.1(g), (i) no shares of the Company's capital stock are subject to preemptive
rights or any other similar rights or any liens or encumbrances suffered or
permitted by the Company; (ii) except for 854,600 shares subject to outstanding
employee stock options and restricted stock awards granted to employees of the
Company or its Subsidiaries, there are no outstanding options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, or exercisable or
exchangeable for, any shares of capital stock of the Company, or contracts,
commitments, understandings or arrangements by which the Company is or may
become bound to issue additional shares of capital stock of the Company or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, or
exercisable or exchangeable for, any shares of capital stock of the Company;
(iii) there are no outstanding debt securities, notes, credit agreements, credit
facilities or other agreements, documents or instruments evidencing indebtedness
of the Company or by which the Company is or may become bound; (iv) there are no
financing statements securing obligations in any material amounts, either singly
or in the aggregate, filed in connection with the Company;  (v) there are no
agreements or arrangements under which the Company is obligated to register the
sale of any of their securities under the Securities Act (except the
Registration Rights Agreement); (vi) there are no outstanding securities or
instruments of the Company or which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company is or may become bound to redeem a security of
the Company; (vii) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities; (viii) the Company does not have any stock appreciation rights
or “phantom stock” plans or agreements or any similar plan or agreement; and
(ix) the Company has no liabilities or obligations required to be disclosed in
the SEC Reports (as defined herein) but not so disclosed in the SEC Reports,
other than those incurred in the ordinary course of the Company's businesses and
which, individually or in the aggregate, do not or would not have a Material
Adverse Effect.
 

 
13

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

 
 
(h)           SEC Reports.  The Company has filed all reports, schedules, forms,
statements and other documents required to be filed by it under the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, for twelve (12)
months preceding the date hereof (or such shorter period as the Company was
required by law or regulation to file such material) (the foregoing materials,
including the exhibits thereto and documents incorporated by reference therein,
being collectively referred to herein as the “SEC Reports” and together with
this Agreement and the Schedules to this Agreement (if any), the “Disclosure
Materials”), on a timely basis or has received a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration of any such
extension.   As of their respective filing dates, or to the extent corrected by
a subsequent restatement, the SEC Reports complied in all material respects with
the requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
 
(i)            Financial Statements.  The financial statements of the Company
included in the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing (or to the extent corrected
by a subsequent restatement).  Such financial statements have been prepared in
accordance with GAAP applied on a consistent basis during the periods involved,
except as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated Subsidiaries taken as a
whole as of and for the dates thereof and the results of operations and cash
flows for the periods then ended, subject, in the case of unaudited statements,
to normal, year-end audit adjustments.  Each of the Material Contracts to which
the Company or any of its Subsidiaries is a party or to which the property or
assets of the Company or any of its Subsidiaries is subject has been filed as an
exhibit to the SEC Reports. Except as set forth in the financial statements of
the Company included in the SEC Reports filed prior to the date hereof or as
described on Schedule 3.1(i), neither the Company nor any of its Subsidiaries
has incurred any liabilities, contingent or otherwise, except those incurred in
the ordinary course of business, consistent (as to amount and nature) with past
practices since the date of such financial statements, none of which,
individually or in the aggregate, have had or could reasonably be expected to
have a Material Adverse Effect.
 
 
14

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

 
 
(j)           Tax Matters.  The Company and each of its Subsidiaries (i) has
prepared and filed all foreign, federal and state income and all other tax
returns, reports and declarations required by any jurisdiction to which it is
subject, (ii) has paid all taxes and other governmental assessments and charges
that are material in amount, shown or determined to be due on such returns,
reports and declarations, except those being contested in good faith, with
respect to which adequate reserves have been set aside on the books of the
Company and (iii) has set aside on its books provisions reasonably adequate for
the payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply, except, in the case of clauses (i) and
(ii) above, where the failure to so pay or file any such tax, assessment, charge
or return would not have a Material Adverse Effect. There are no tax liens or
claims pending or, to the Company’s Knowledge, threatened against the Company or
any Subsidiary or any of their respective assets or property. Except as
described on Schedule 3.1(j), there are no outstanding tax sharing agreements or
other such arrangements between the Company and any Subsidiary or other
corporation or entity.
 
(k)           Material Changes.  Since the date of the latest financial
statements included within the SEC Reports, except as specifically disclosed in
the SEC Reports, (i) there have been no events, occurrences or developments that
have had or would reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect, (ii) the Company has not incurred any
material liabilities (contingent or otherwise) other than (A) trade payables,
accrued expenses and other liabilities incurred in the ordinary course of
business consistent with past practice and (B) immaterial liabilities not
required to be reflected in the Company's financial statements pursuant to GAAP
or required to be disclosed in filings made with the Commission, (iii) the
Company has not materially altered its method of accounting or the manner in
which it keeps its accounting books and records, (iv) the Company has not
declared or made any dividend or distribution of cash or other property to its
stockholders or purchased, redeemed or made any agreements to purchase or redeem
any shares of its capital stock (other than in connection with repurchases of
unvested stock issued to employees of the Company), (v) the Company has not
issued any equity securities to any officer, director or Affiliate, except
Common Stock issued in the ordinary course as dividends on outstanding preferred
stock or pursuant to existing Company stock option or stock purchase plans or
executive and director corporate arrangements disclosed in the SEC Reports ,
(vi) there has not been any material change or amendment to, or any waiver of
any material right under, any Material Contract under which the Company or any
of its assets is bound or subject, (vii) the Company has not lost the services
of any key employee or experienced a material change in the composition or
duties of the senior management of the Company or any Subsidiary, and (viii)
there has been no change or amendment to the Company’s certificate of
incorporation or bylaws. Except for the issuance of the Securities contemplated
by this Agreement or as set forth on Schedule 3.1(k), no event, liability or
development has occurred or exists with respect to the Company or its business,
properties, operations or financial condition that would be required to be
disclosed by the Company under applicable securities laws at the time this
representation is made that has not been publicly disclosed at least one (1)
Trading Day prior to the date that this representation is made.
 

 
15

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

 
 
(l)           Environmental Matters.  Neither the Company nor any of its
Subsidiaries (i) is in violation of any applicable statute, rule, regulation,
decision or order of any governmental agency or body or any court, domestic or
foreign, relating to the use, disposal or release of hazardous or toxic
substances or relating to the protection or restoration of the environment or
human exposure to hazardous or toxic substances, in each case as in effect at or
prior to the Closing (collectively, “Environmental Laws”), (ii) owns or operates
any real property contaminated with any substance that is in violation of any
Environmental Laws, (iii) is liable for any off-site disposal or contamination
pursuant to any Environmental Laws, or (iv) is subject to any claim relating to
any Environmental Laws; which violation, contamination, liability or claim has
had or would have, individually or in the aggregate, a Material Adverse Effect;
and there is no pending or, to the Company’s Knowledge, threatened investigation
that might lead to such a claim.
 
(m)           Litigation.  Except as disclosed in the SEC Reports, there is no
Action which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Shares or (ii) would
reasonably be expected to, if there were an unfavorable decision, individually
or in the aggregate, have a Material Adverse Effect.  Neither the Company nor
any Subsidiary, nor any director or officer thereof, is or has been the subject
of any Action involving a claim of violation of or liability under federal or
state securities laws or a claim of breach of fiduciary duty.  There has not
been, and to the Company’s Knowledge, there is not pending any investigation by
the Commission involving the Company or any current or former director or
officer of the Company.
 
(n)           Employment Matters.  No material labor dispute exists or, to the
Company’s Knowledge, is imminent with respect to any of the employees of the
Company or any of its Subsidiaries which would have a Material Adverse
Effect.  None of the Company’s or any Subsidiary’s employees is a member of a
union that relates to such employee’s relationship with the Company or one of
its Subsidiaries, and neither the Company nor any of its Subsidiaries is a party
to a collective bargaining agreement, and the Company believes that its
relationship with its employees is good.     The Company is, and at all times
has been, in compliance in all material respects with all applicable laws
respecting employment (including laws relating to classification of employees
and independent contractors) and employment practices, terms and conditions of
employment, wages and hours, and immigration and naturalization.  The Company
has not violated in any material respect any laws, regulations, orders or
contract terms, affecting the collective bargaining rights of employees, labor
organizations or any laws, regulations or orders affecting employment
discrimination, equal opportunity employment, or employees’ health, safety,
welfare, wages and hours.
 
(o)           Compliance.  Neither the Company nor any of its Subsidiaries (i)
is in default under or in violation of (and no event has occurred that has not
been waived that, with notice or lapse of time or both, would result in a
default by the Company or any of its Subsidiaries under), nor has the Company or
any of its Subsidiaries received written notice of a claim that it is in default
under or that it is in violation of, any Material Contract (whether or not such
default or violation has been waived), (ii) is in violation of any order of any
court, arbitrator or governmental body having jurisdiction over the Company or
its properties or assets, or (iii) is  or has been in violation of, or in
receipt of notice that it is in violation of, any statute, rule or regulation of
any governmental authority applicable to the Company, except in each case as
would not, individually or in the aggregate, have a Material Adverse Effect.
 
 
16

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

 
 
(p)           Regulatory Permits.  The Company and each of its Subsidiaries
possesses all certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary to conduct its
business as described in the SEC Reports, except where the failure to possess
such permits, individually or in the aggregate, has not and would not have,
individually or in the aggregate, a Material Adverse Effect (“Material Permits”)
and neither the Company nor any of its Subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such Material
Permits and the Company is unaware of any facts or circumstances that the
Company would reasonably expect to give rise to the revocation or modification
of any Material Permits..
 
(q)           Title to Assets.  Except as set forth on Schedule 3.1(q), the
Company and each of its Subsidiaries has good and marketable title in fee simple
to all real property owned by it that is material to the business of the Company
and its Subsidiaries, taken as a whole, and good and marketable title to all
tangible personal property owned by it that is material to the business of the
Company, in each case free and clear of all liens, encumbrances and defects
except such as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such property
by the Company and liens for the payment of federal, state or other taxes, the
payment of which is neither delinquent nor subject to penalties.  Any real
property and facilities held under lease by the Company are held by it under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company and its Subsidiaries.
 
(r)           Patents and Trademarks.  The Company and each of its Subsidiaries
owns, possesses, licenses or has other rights to use all foreign and domestic
patents, patent applications, trade and service marks, trade and service mark
registrations, trade names, copyrights, licenses, inventions, trade secrets,
technology and other proprietary rights and processes (collectively, the
“Intellectual Property”) necessary for the conduct of its businesses as now
conducted.  The Company Intellectual Property is free and clear of any pledge,
lien, security interest, encumbrance, claim or equitable interest, whether
imposed by agreement, contract, understanding, law, equity or otherwise, except
where any failure to have such adequate licenses or other rights of use to such
Intellectual Property, individually or in the aggregate, would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect or
except as described in the SEC Reports. Except where such violations or
infringements would not have, either individually or in the aggregate, a
Material Adverse Effect, (a) to the Company’s Knowledge, there are no rights of
third parties to any such Intellectual Property; (b) to the Company’s Knowledge,
there is no infringement by third parties of any such Intellectual Property; (c)
there is no pending or, to the Company’s Knowledge, threatened action, suit,
proceeding or claim by others challenging the Company’s rights in or to any such
Intellectual Property; (d) there is no pending or, to the Company’s Knowledge,
threatened action, suit, proceeding or claim by others challenging the validity
or scope of any such Intellectual Property; and (e) there is no pending or, to
the Company’s Knowledge, threatened action, suit, proceeding or claim by others
that the Company and/or any Subsidiary infringes or otherwise violates any
patent, trademark, copyright, trade secret or other proprietary rights of
others.
 
 
17

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

 
 
(s)           Insurance.  The Company is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
the Company believes to be prudent  in the businesses and locations in which the
Company is engaged.  Neither the Company nor any of its Subsidiaries has
received any notice of cancellation of any such insurance, nor does the Company
have any Knowledge that it or any of its Subsidiaries will be unable to renew
its existing insurance coverage for the Company as and when such coverage
expires or to obtain similar coverage from similar insurers as may be necessary
to continue its business without a significant increase in cost.
 
(t)             Questionable Payments.  Neither the Company nor any Subsidiary
nor, to the Company’s Knowledge, any of their respective current or former
stockholders, directors, officers, employees, agents or other Persons acting on
behalf of the Company or any Subsidiary, has on behalf of the Company or any
Subsidiary or in connection with their respective businesses: (a) used any
corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity; (b) made any direct or
indirect unlawful payments to any governmental officials or employees from
corporate funds; (c) established or maintained any unlawful or unrecorded fund
of corporate monies or other assets; (d) made any false or fictitious entries on
the books and records of the Company or any Subsidiary; (e) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment of
any nature; or (f) taken any actions that would violate the U.S. Foreign Corrupt
Practices Act of 1977, as amended.
 
(u)           Transactions With Affiliates and Employees.  Except as set forth
in the SEC Reports, none of the officers or directors of the Company and, to the
Company’s Knowledge, none of the employees of the Company, is presently a party
to any transaction with the Company or any Subsidiary (other than as holders of
stock options and/or warrants, and for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the Company’s Knowledge, any entity in which
any officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
 
(v)           Internal Accounting Controls. Except as disclosed in the SEC
Reports, the Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset and liability
accountability, (iii) access to assets or incurrence of liabilities is permitted
only in accordance with management's general or specific authorization, and (iv)
the recorded accountability for assets and liabilities is compared with the
existing assets and liabilities at reasonable intervals and appropriate action
is taken with respect to any differences.
 
(w)           Sarbanes-Oxley; Disclosure Controls.  The Company has established
and maintains disclosure controls and procedures (as such term is defined in
Rules 13a-15 and 15d-15 under the Exchange Act). Since the date of the most
recent evaluation of such disclosure controls and procedures, there have been no
significant changes in internal controls or in other factors that could
significantly affect internal controls, including any corrective actions with
regard to significant deficiencies and material weaknesses. The Company is in
compliance in all material respects with all of the provisions of the
Sarbanes-Oxley Act of 2002 which are applicable to it, except where such
noncompliance would not have, individually or in the aggregate, a Material
Adverse Effect.
 
 
18

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

 
 
(x)            Certain Fees. No person or entity will have, as a result of the
transactions contemplated by this Agreement, any valid right, interest or claim
against or upon the Company or a Purchaser for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of the Company, other than the Placement Agent with respect
to the offer and sale of the Shares (which placement agent fees are being paid
by the Company).
 
(y)           Private Placement. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2 of this Agreement and
the accuracy of the information disclosed in the Accredited Investor
Questionnaires, no registration under the Securities Act is required for the
offer and sale of the Shares by the Company to the Purchasers under the
Transaction Documents.
 
(z)            Registration Rights. Other than each of the Purchasers or as set
forth in Schedule 3.1(z) hereto, no Person has any right (including piggyback
registration rights) to cause the Company to effect the registration under the
Securities Act of any securities of the Company other than those securities
which are currently registered on an effective registration statement on file
with the Commission.
 
(aa)          No Directed Selling Efforts or General Solicitation. Neither the
Company nor any Person acting on its or its behalf has conducted any “general
solicitation” or “general advertising” (as those terms are used in Regulation D)
in connection with the offer or sale of any of the Shares.
 
(bb)          No Integrated Offering. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2, none of the Company or
its Subsidiaries nor any Person acting on their behalf has, directly or
indirectly, at any time within the past six months, made any offers or sales of
any Company security or solicited any offers to buy any security under
circumstances that would (i) eliminate the availability of the exemption from
registration under Regulation D under the Securities Act in connection with the
offer and sale by the Company of the Shares as contemplated hereby or (ii) cause
the offering of the Shares pursuant to the Transaction Documents to be
integrated with prior offerings by the Company for purposes of any applicable
law, regulation or shareholder approval provisions, including, without
limitation, under the rules and regulations of any Trading Market on which any
of the securities of the Company are listed or designated.
 
(cc)           No Manipulation of Stock. Neither the Company nor, to its
Knowledge, any Affiliate has taken, directly or indirectly, any action designed
to or which has constituted or which would reasonably be expected to cause or
result, under the Exchange Act or otherwise, in the stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Securities.
 
(dd)          Listing and Maintenance Requirements. The Company’s Common Stock
is registered pursuant to Section 12(b) of the Exchange Act, and the Company has
taken no action designed to terminate the registration of the Common Stock under
the Exchange Act nor has the Company received any notification that the
Commission is contemplating terminating such registration.  The Company has not,
in the 12 months preceding the date hereof, received written notice  from any
Trading Market on which the Common Stock is or has been listed or quoted to the
effect that the Company is not in compliance with the listing or maintenance
requirements of such Trading Market.  The Company is in compliance in all
material respects with the listing and maintenance requirements for continued
trading of the Common Stock on the Principal Trading Market.
 
 
19

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

 
 
(ee)           Investment Company. The Company is not required to be registered
as, and is not an Affiliate of, and immediately following the Closing will not
be required to register as, an “investment company” within the meaning of the
Investment Company Act of 1940, as amended.
 
(ff)           Application of Takeover Protections; Rights Agreements. The
Company and its board of directors have taken all necessary action, if any, in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Company's charter documents
or the laws of the State of Delaware that is or could reasonably be expected to
become applicable to any of the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including, without limitation, the Company's issuance of
the Shares and the Purchasers' ownership of the Shares.
 
(gg)          Disclosure.  The Company confirms that neither it nor any of its
officers or directors nor any other Person acting on its or their behalf has
provided, and it has not authorized the Placement Agent to provide, any
Purchaser or its respective agents or counsel with any information that it
believes constitutes or could reasonably be expected to constitute material,
non-public information except insofar as the existence, provisions and terms of
the Transaction Documents and the proposed transactions hereunder may constitute
such information, all of which will be disclosed by the Company in the Press
Release as contemplated by Section 4.8 hereof. The Company understands and
confirms that the Purchasers will rely on the foregoing representations in
effecting transactions in securities of the Company.  No event or circumstance
has occurred or information exists with respect to the Company or any of its
Subsidiaries or its or their business, properties, operations or financial
conditions, which, under applicable law, rule or regulation, requires public
disclosure or announcement by the Company but which has not been so publicly
announced or disclosed (assuming for this purpose that the Company’s reports
filed under the Exchange Act are being incorporated into an effective
registration statement filed by the Company under the Securities Act), except
for the announcement of this Agreement and related transactions.
 
(hh)          Acknowledgment Regarding Purchasers’ Purchase of the Shares. The
Company acknowledges and agrees that each of the Purchasers is acting solely in
the capacity of an arm’s length purchaser with respect to the Transaction
Documents and the transactions contemplated hereby and thereby.  The Company
further acknowledges that no Purchaser is acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated thereby and any advice
given by any Purchaser or any of their respective representatives or agents in
connection with the Transaction Documents and the transactions contemplated
thereby is merely incidental to the Purchasers’ purchase of the Shares.    The
Company represents and warrants that no Purchase will, as a result of the
transactions contemplated by this Agreement, become an Affiliate of the Company.
 
 
20

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

 
 
(ii)           No Additional Agreements. The Company does not have any agreement
or understanding with any Purchaser with respect to the transactions
contemplated by the Transaction Documents other than as specified in the
Transaction Documents.
 
(jj)           Form S-3 Eligibility. As of the date hereof, the Company meets,
and has no Company Knowledge of any facts or circumstances that would cause it
not to continue to meet, the eligibility requirements contained in Section I.A.
and in Section I.B.3 of the General Instructions to Form S-3 to register
securities with the SEC on a registration statement on Form S-3 under the
Securities Act.
 
3.2           Representations and Warranties of the Purchasers.  Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows:
 
(a)           Organization; Authority.  Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the applicable Transaction Documents and otherwise to carry out
its obligations hereunder and thereunder. The execution, delivery and
performance by such Purchaser of the transactions contemplated by this Agreement
have been duly authorized by all necessary corporate or, if such Purchaser is
not a corporation, such partnership, limited liability company or other
applicable like action, on the part of such Purchaser.  Each of this Agreement
and the Registration Rights Agreement has been duly executed by such Purchaser,
and, assuming each such agreement constitutes a valid and binding obligation of
the other parties thereto, when delivered by such Purchaser in accordance with
the terms hereof, will constitute the valid and legally binding obligation of
such Purchaser, enforceable against it in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors’ rights and remedies or by
other equitable principles of general application.
 
(b)           No Conflicts.  The execution, delivery and performance by such
Purchaser of this Agreement and the Registration Rights Agreement and the
consummation by such Purchaser of the transactions contemplated hereby and
thereby do not and will not (i) conflict with or result in a violation of the
organizational documents of such Purchaser, (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
such Purchaser is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment  or decree (including federal and state securities
laws) applicable to such Purchaser, except in the case of clauses (ii) and (iii)
above, for such conflicts, defaults, rights or violations which would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of such Purchaser to perform its obligations
hereunder.
 
(c)           Investment Intent.  Such Purchaser understands that the Shares are
“restricted securities” and have not been registered under the Securities Act or
any applicable state securities law and is acquiring the Shares as principal for
its own account and not with a view to, or for distributing or reselling such
Shares or any part thereof in violation of the Securities Act or any applicable
state securities laws, provided, however, that by making the representations
herein, such Purchaser does not agree to hold any of the Shares for any minimum
period of time and reserves the right, subject to the provisions of this
Agreement and the Registration Rights Agreement, at all times to sell or
otherwise dispose of all or any part of such Shares pursuant to an effective
registration statement under the Securities Act or under an exemption from such
registration and in compliance with applicable federal and state securities
laws.  Such Purchaser is acquiring the Shares hereunder in the ordinary course
of its business. Such Purchaser does not presently have any agreement, plan or
understanding, directly or indirectly, with any Person to distribute or effect
any distribution of any of the Shares (or any securities which are derivatives
thereof) to or through any person or entity; such Purchaser is not a registered
broker-dealer under Section 15 of the Exchange Act or an entity engaged in a
business that would require it to be so registered as a broker-dealer.
 
 
21

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

 
 
(d)           Purchaser Status.  At the time such Purchaser was offered the
Shares, it was, and at the date hereof it is, an “accredited investor” as
defined in Rule 501(a) under the Securities Act.
 
(e)           General Solicitation.   Such Purchaser is not purchasing the
Shares as a result of any advertisement, article, notice or other communication
regarding the Shares published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other
general advertisement or general solicitation.
 
(f)           Experience of Such Purchaser.  Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Shares, and has so
evaluated the merits and risks of such investment.  Such Purchaser is able to
bear the economic risk of an investment in the Shares and, at the present time,
is able to afford a complete loss of such investment.
 
(g)           Access to Information.  Such Purchaser acknowledges that it has
had the opportunity to review the Disclosure Materials and has been afforded (i)
the opportunity to ask such questions as it has deemed necessary of, and to
receive answers from, representatives of the Company concerning the terms and
conditions of the offering of the Shares and the merits and risks of investing
in the Shares; (ii) access to information about the Company and its respective
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information that the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment. Neither such
inquiries nor any other investigation conducted by or on behalf of such
Purchaser or its representatives or counsel shall modify, amend or affect such
Purchaser's right to rely on the truth, accuracy and completeness of the
Disclosure Materials and the Company's representations and warranties contained
in the Transaction Documents.  Such Purchaser has sought such accounting, legal
and tax advice as it has considered necessary to make an informed decision with
respect to its acquisition of the Shares.
 
(h)            Certain Trading Activities.  Other than with respect to the
transactions contemplated herein, since the time that such Purchaser was first
contacted by the Company, the Placement Agent or any other Person regarding the
transactions contemplated hereby, neither the Purchaser nor any Affiliate of
such Purchaser which (x) had knowledge of the transactions contemplated hereby,
(y) has or shares discretion relating to such Purchaser’s investments or trading
or information concerning such Purchaser’s investments, including in respect of
the Shares, and (z) is subject to such Purchaser’s review or input concerning
such Affiliate’s investments or trading (collectively, “Trading Affiliates”) has
directly or indirectly, nor has any Person acting on behalf of or pursuant to
any understanding with such Purchaser or Trading Affiliate, effected or agreed
to effect any purchases or sales of the securities of the Company (including,
without limitation, any Short Sales involving the Company’s securities).
Notwithstanding the foregoing, in the case of a Purchaser and/or Trading
Affiliate that is, individually or collectively, a multi-managed investment
vehicle whereby separate portfolio managers manage separate portions of such
Purchaser's or Trading Affiliate’s assets and the portfolio managers have no
direct knowledge of the investment decisions made by the portfolio managers
managing other portions of such Purchaser's or Trading Affiliate’s assets, the
representation set forth above shall apply only with respect to the portion of
assets managed by the portfolio manager that have knowledge about the financing
transaction contemplated by this Agreement.  Other than to other Persons party
to this Agreement, such Purchaser has maintained the confidentiality of all
disclosures made to it in connection with this transaction (including the
existence and terms of this transaction). Notwithstanding the foregoing, and
except as otherwise provided in Section 4.10, no Purchaser makes any
representation, warranty or covenant hereby that it will not engage in Short
Sales in the securities of the Company after the effectiveness of the
Registration Statement as described in Section 4.10.
 
 
22

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

 
 
(i)           Brokers and Finders.  No Person will have, as a result of the
transactions contemplated by this Agreement, any valid right, interest or claim
against or upon the Company or any Purchaser for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of the Purchaser.
 
(j)           Independent Investment Decision.  Such Purchaser has independently
evaluated the merits of its decision to purchase Shares pursuant to the
Transaction Documents, and such Purchaser confirms that it has not relied on the
advice of any other Purchaser’s business and/or legal counsel in making such
decision.  Such Purchaser understands that nothing in this Agreement or any
other materials presented by or on behalf of the Company to the Purchaser in
connection with the purchase of the Shares constitutes legal, tax or investment
advice.  Such Purchaser has consulted such legal, tax and investment advisors as
it, in its sole discretion, has deemed necessary or appropriate in connection
with its purchase of the Shares.  Such Purchaser understands that each of the
Placement Agent has acted solely as the agent of the Company in this placement
of the Securities and such Purchaser has not relied on the business or legal
advice of each of the Placement Agent or any of its agents, counsel or
Affiliates in making its investment decision hereunder, and confirms that none
of such Persons has made any representations or warranties to such Purchaser in
connection with the transactions contemplated by the Transaction Documents.
 
(k)           Reliance on Exemptions. Such Purchaser understands that the Shares
being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of, and such
Purchaser’s compliance with, the representations, warranties, agreements,
acknowledgements and understandings of such Purchaser set forth herein in order
to determine the availability of such exemptions and the eligibility of such
Purchaser to acquire the Shares.
 
 
23

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

 
 
(l)             No Governmental Review. Such Purchaser understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Shares or
the fairness or suitability of the investment in the Shares nor have such
authorities passed upon or endorsed the merits of the offering of the Shares.
 
(m)           Regulation M. Such Purchaser is aware that the anti-manipulation
rules of Regulation M under the Exchange Act may apply to sales of Common Stock
and other activities with respect to the Common Stock by the Purchasers.
 
(n)           Residency.  Such Purchaser’s principal executive offices are in
the jurisdiction set forth immediately below Purchaser’s name on the applicable
signature page attached hereto.
 
The Company and each of the Purchasers acknowledge and agree that no party to
this Agreement has made or makes any representations or warranties with respect
to the transactions contemplated hereby other than those specifically set forth
in this Article III and the Transaction Documents.
 
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
 
 
4.1
Transfer Restrictions.

 
(a)           Compliance with Laws.  Notwithstanding any other provision of this
Article IV, each Purchaser covenants that the Shares may be disposed of only
pursuant to an effective registration statement under, and in compliance with
the requirements of, the Securities Act, or pursuant to an available exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act, and in compliance with any applicable state and federal
securities laws.  In connection with any transfer of the Shares other than (i)
pursuant to an effective registration statement, (ii) to the Company, (iii) to
an Affiliate of a Purchaser, (iv) pursuant to Rule 144 (provided that the
Purchaser provides the Company with reasonable assurances (in the form of seller
and broker representation letters) that the Shares may be sold pursuant to such
rule) or Rule 144A or (v) pursuant to Rule 144(b)(1)(i) following the applicable
holding period or (vi) in connection with a bona fide pledge as part of a margin
account or other lending arrangement, the Company may require the transferor
thereof to provide to the Company an opinion of counsel selected by the
transferor and reasonably acceptable to the Company, the form and substance of
which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration of such transferred Shares
under the Securities Act.  As a condition of transfer, any such transferee shall
agree in writing to be bound by the terms of this Agreement and shall have the
rights of a Purchaser under this Agreement and the Registration Rights
Agreement.
 
(b)           Legends.  Certificates evidencing the Shares shall bear any legend
as required by the “blue sky” laws of any state and a restrictive legend in
substantially the following form until such time as they are not required under
Section 4.1(c): (and a stock transfer order may be placed against transfer of
the certificates for the Shares):
 
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES LAWS.  THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OR (B) AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS AS EVIDENCED
BY A LEGAL OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS
TRANSFER AGENT OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
BY THE SECURITIES.
 
 
24

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

 
 
In addition, if any Purchaser is an Affiliate of the Company, certificates
evidencing the Shares issued to such Purchaser shall bear a customary
“affiliates” legend.
 
(c)           Removal of Legends.  The legend set forth in Section 4.1(b) above
shall be removed and the Company shall issue a certificate without such legend
or any other legend to the holder of the applicable Shares upon which it is
stamped or issue to such holder by electronic delivery at the applicable balance
account at the Depository Trust Company (“DTC”), if (i) such Shares are
registered for resale under the Securities Act (provided that, if the Purchaser
is selling pursuant to the effective registration statement registering the
Shares for resale, the Purchaser agrees only to sell such Shares during such
time that such registration statement is effective and not withdrawn or
suspended, and only as permitted by such registration statement), (ii) such
Shares are sold or transferred pursuant to Rule 144 (if the transferor is not an
Affiliate of the Company), or (iii) such Shares are eligible for sale pursuant
to the last sentence of Rule 144(b)(1)(i).  Following the earlier of (i) the
Effective Date or (ii) Rule 144(b)(1)(i) becoming available for the resale of
the Shares, the Company shall deliver to the Transfer Agent irrevocable
instructions that the Transfer Agent shall reissue a certificate representing
the applicable Shares without legend upon receipt by the Transfer Agent of the
legended certificates for such Shares or an Exercise Notice, as the case may
be.  Any fees (with respect to the Transfer Agent, Company Counsel or otherwise)
associated with the issuance of such opinion or the removal of such legend shall
be borne by the Company.  Following the Effective Date, or at such earlier time
as a legend is no longer required for certain Securities, the Company will no
later than three (3) Trading Days following the delivery by a Purchaser to the
Company or the Transfer Agent (with notice to the Company) of a legended
certificate representing such Shares (endorsed or with stock powers attached,
signatures guaranteed, and otherwise in form necessary to affect the reissuance
and/or transfer) (such third Trading Day, the “Legend Removal Date”), deliver or
cause to be delivered to such Purchaser, a certificate representing such Shares
that is free from all restrictive and other legends.  The Company may not make
any notation on its records or give instructions to the Transfer Agent that
enlarge the restrictions on transfer set forth in this Section
4.1.  Certificates for Shares subject to legend removal hereunder may be
transmitted by the Transfer Agent to the Purchasers by crediting the account of
the transferee’s Purchaser’s prime broker with DTC.

 
25

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

 
 
(d)           Irrevocable Transfer Agent Instructions.   The Company shall issue
irrevocable instructions to its transfer agent, and any subsequent transfer
agent, in the form of Exhibit D attached hereto (the “Irrevocable Transfer Agent
Instructions”). The Company represents and warrants that no instruction other
than the Irrevocable Transfer Agent Instructions or instructions consistent
therewith referred to in this Section 4.1(d) will be given by the Company to its
transfer agent in connection with this Agreement, and that the Securities shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement, the other Transaction Documents and
applicable law. The Company acknowledges that a breach by it of its obligations
under this Section 4.1(d) will cause irreparable harm to a Purchaser.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Section 4.1(d) will be inadequate and agrees, in the
event of a breach or threatened breach by the Company of the provisions of this
Section 4.1(d), that a Purchaser shall be entitled, in addition to all other
available remedies, to an order and/or injunction restraining any breach and
requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required.

(e)           Acknowledgement.  Each Purchaser hereunder acknowledges its
primary responsibilities under the Securities Act and accordingly will not sell
or otherwise transfer the Shares or any interest therein without complying with
the requirements of the Securities Act.  While the Registration Statement
remains effective, each Purchaser hereunder may sell the Shares in accordance
with the plan of distribution contained in the Registration Statement and, if it
does so, it will comply therewith and with the related prospectus delivery
requirements unless an exemption therefrom is available.  Each Purchaser,
severally and not jointly with the other Purchasers, agrees that if it is
notified by the Company in writing at any time that the Registration Statement
registering the resale of the Shares is not effective or that the prospectus
included in such Registration Statement no longer complies with the requirements
of Section 10 of the Securities Act, the Purchaser will refrain from selling
such Shares until such time as the Purchaser is notified by the Company that
such Registration Statement is effective or such prospectus is compliant with
Section 10 of the Exchange Act, unless such Purchaser is able to, and does, sell
such Shares pursuant to an available exemption from the registration
requirements of Section 5 of the Securities Act.  Both the Company and its
Transfer Agent, and their respective directors, officers, employees and agents,
may rely on this subsection (e), and each Purchaser hereunder will indemnify and
hold harmless each of such persons from any breaches or violations of this
paragraph.

(f)            Buy-In.  If the Company shall fail for any reason or for no
reason to issue to a Purchaser unlegended certificates within three (3) Business
Days of receipt of all documents necessary for the removal of the legend set
forth above (the “Deadline Date”), then, in addition to all other remedies
available to such Purchaser, if on or after the Business Day immediately
following such three (3) Business Day period, such Purchaser purchases (in an
open market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the holder of shares of Common Stock that such
Purchaser anticipated receiving from the Company without any restrictive legend
(a “Buy-In”), then the Company shall, within three (3) Business Days after such
Purchaser’s request and in such Purchaser’s sole discretion, either (i) pay cash
to the Purchaser in an amount equal to such Purchaser’s total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased (the “Buy-In Price”), at which point the Company’s obligation to
deliver such certificate (and to issue such shares of Common Stock) shall
terminate, or (ii) promptly honor its obligation to deliver to such Purchaser a
certificate or certificates representing such shares of Common Stock and pay
cash to the Purchaser in an amount equal to the excess (if any) of the Buy-In
Price over the product of (a) such number of shares of Common Stock, times (b)
the Average Daily Price on the Deadline Date.

 
26

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

 
 
4.2           Furnishing of Information.  In order to enable the Purchasers to
sell the Shares under Rule 144 of the Securities Act, for a period of two years
from the Closing, the Company shall use its commercially reasonable efforts to
timely file (or obtain extensions in respect thereof and file within the
applicable grace period) all reports required to be filed by the Company after
the date hereof pursuant to the Exchange Act.  During such two year period, if
the Company is not required to file reports pursuant to such laws, it will
prepare and furnish to the Purchasers and make publicly available in accordance
with Rule 144(c) such information as is required for the Purchasers to sell the
Shares under Rule 144.
 
4.3            Form D and Blue Sky.  The Company agrees to timely file a Form D
with respect to the Shares as required under Regulation D and to provide a copy
thereof to each Purchaser who requests a copy in writing promptly after such
filing.  The Company, on or before the Closing Date, shall take such action as
the Company shall reasonably determine is necessary in order to obtain an
exemption for or to qualify the Shares for sale to the Purchasers at the Closing
pursuant to this Agreement under applicable securities or “Blue Sky” laws of the
states of the United States (or to obtain an exemption from such qualification),
and shall provide evidence of any such action so taken to the Purchasers who
request in writing such evidence on or prior to the Closing Date.  The Company
shall make all filings and reports relating to the offer and sale of the Shares
required under applicable securities or “Blue Sky” laws of the states of the
United States following the Closing Date.
 
4.4           No Integration.  The Company shall not, and shall use its
commercially reasonable efforts to ensure that no Affiliate of the Company
shall, sell, offer for sale or solicit offers to buy or otherwise negotiate in
respect of any security (as defined in Section 2 of the Securities Act) that
will be integrated with the offer or sale of the Shares in a manner that would
require the registration under the Securities Act of the sale of the Shares to
the Purchasers, or that will be integrated with the offer or sale of the Shares
for purposes of the rules and regulations of any Trading Market such that it
would require shareholder approval prior to the closing of such other
transaction unless shareholder approval is obtained before the closing of such
subsequent transaction.
 
4.5           Securities Laws Disclosure; Publicity. By 9:00 a.m., New York City
time, on the Trading Day immediately following the execution of this Agreement,
the Company shall issue a press release (the “Press Release”) reasonably
acceptable to the Placement Agent disclosing all material terms of the
transactions contemplated hereby.  On or before 9:00 a.m., New York City time,
on the second Trading Day immediately following the execution of this Agreement,
the Company will file a Current Report on Form 8-K with the Commission
describing the terms of the Transaction Documents (and including as exhibits to
such Current Report on Form 8-K the material Transaction Documents (including,
without limitation, this Agreement and the Registration Rights Agreement)).
Notwithstanding the foregoing, the Company shall not publicly disclose the name
of any Purchaser or an Affiliate of any Purchaser, or include the name of any
Purchaser or an Affiliate of any Purchaser in any press release or filing with
the Commission (other than the Registration Statement) or any regulatory agency
or Trading Market, without the prior written consent of such Purchaser, except
(i) as required by federal securities law in connection with (A) any
registration statement contemplated by the Registration Rights Agreement and (B)
the filing of final Transaction Documents (including signature pages thereto)
with the Commission and (ii) to the extent such disclosure is required by law,
request of the Staff of the Commission or Trading Market regulations, in which
case the Company shall provide the Purchasers with prior written notice of such
disclosure permitted under this subclause (ii). From and after the issuance of
the Press Release, no Purchaser shall be in possession of any material,
non-public information received from the Company, any Subsidiary or any of their
respective officers, directors, employees or agents, that is not disclosed in
the Press Release unless a Purchaser shall have executed a written agreement
regarding the confidentiality and use of such information.  Each Purchaser,
severally and not jointly with the other Purchasers, covenants that until such
time as the transactions contemplated by this Agreement are required to be
publicly disclosed by the Company as described in this Section 4.5, such
Purchaser will maintain the confidentiality of all disclosures made to it in
connection with this transaction (including the existence and terms of this
transaction).
 
 
27

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

 
 
4.6           Non-Public Information.  Except with respect to the material terms
and conditions of the transactions contemplated by the Transaction Documents,
the Company shall not and shall cause each of its officers, directors, employees
and agents, not to, provide any Purchaser with any material, non-public
information regarding the Company from and after the filing of the Press Release
without the express written consent of such Purchaser, unless prior thereto such
Purchaser shall have executed a written agreement regarding the confidentiality
and use of such information.
 
 
4.7
Indemnification.

 
(a)           Indemnification of Purchasers.  In addition to the indemnity
provided in the Registration Rights Agreement, the Company will indemnify and
hold each Purchaser and its directors, officers, shareholders, members,
partners, employees and agents (and any other Persons with a functionally
equivalent role of a Person holding such titles notwithstanding a lack of such
title or any other title), each Person who controls such Purchaser (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act),
and the directors, officers, shareholders, agents, members, partners or
employees (and any other Persons with a functionally equivalent role of a Person
holding such titles notwithstanding a lack of such title or any other title) of
such controlling person (each, a “Purchaser Party”) harmless from any and all
losses, liabilities, obligations, claims, contingencies, damages, costs and
expenses, including all judgments, amounts paid in settlements, court costs and
reasonable, documented attorneys’ fees and costs of investigation that any such
Purchaser Party may suffer or incur, as a result of or relating to third party
claims against such Purchaser relating to any breach of any of the
representations, warranties, covenants or agreements made by the Company in this
Agreement or in the other Transaction Documents, provided that such a claim for
indemnification relating to any breach of any of the representations or
warranties made by the Company in this Agreement is made within two (2) years
from the Closing.  The Company will not be liable to any Purchaser Party under
this Agreement to the extent, but only to the extent that a loss, claim, damage
or liability is attributable to any Purchaser Party’s fraud, gross negligence,
willful misconduct or breach of any of the representations, warranties,
covenants or agreements made by such Purchaser Party in this Agreement or in the
other Transaction Documents.
 
(b)           Conduct of Indemnification Proceedings.  Promptly after receipt by
any Person (the “Indemnified Person”) of notice of any demand, claim or
circumstances which would or might give rise to a claim or the commencement of
any action, proceeding or investigation in respect of which indemnity may be
sought pursuant to Section 4.7(a), such Indemnified Person shall promptly notify
the Company in writing and the Company shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to such Indemnified
Person, and shall assume the payment of all fees and expenses; provided,
however, that the failure of any Indemnified Person so to notify the Company
shall not relieve the Company of its obligations hereunder except to the extent
that the Company is actually and materially prejudiced by such failure to
notify.  In any such proceeding, any Indemnified Person shall have the right to
retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Person unless: (i) the Company and the
Indemnified Person shall have mutually agreed in writing to the retention of
such counsel; (ii) the Company shall have failed promptly to assume the defense
of such proceeding and to employ counsel reasonably satisfactory to such
Indemnified Person in such proceeding; or (iii) in such action there is, in the
reasonable opinion of such separate counsel, a material conflict on any material
issue between the position of the Company and the position of such Indemnified
Person, in which case the Company shall be responsible for the reasonable,
documented fees and expenses of no more than one such separate counsel.  The
Company shall not be liable for any settlement of any proceeding effected
without its written consent, which consent shall not be unreasonably withheld,
delayed or conditioned.  Without the prior written consent of the Indemnified
Person, which consent shall not be unreasonably withheld, delayed or
conditioned, the Company shall not effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party and indemnity could have been sought hereunder by such
Indemnified Party, unless such settlement includes an unconditional release of
such Indemnified Person from all liability arising out of such proceeding.
 
 
28

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

 
 
4.8           Listing of Securities.  In the time and manner required by the
Principal Trading Market, the Company shall prepare and file with such Trading
Market an additional shares listing application covering all of the Shares and
shall use its commercially reasonable efforts to take all steps necessary to
maintain, so long as any other shares of Common Stock shall be so listed, such
listing.
 
4.9           Use of Proceeds.  The Company intends to use the net proceeds from
the sale of the Shares hereunder for working capital and general corporate
purposes.
 
4.10          Dispositions and Confidentiality After The Date Hereof. Each
Purchaser shall not, and shall cause its Trading Affiliates not to, engage in
any transactions in the Company’s securities (including, without limitation, any
Short Sales involving the Company’s securities) during the period from the date
hereof until the earlier of such time as (i) the transactions contemplated by
this Agreement are first publicly announced as described in Section 4.5 or (ii)
this Agreement is terminated in full pursuant to Section 6.17.  Notwithstanding
the foregoing, in the case of a Purchaser that is a multi-managed investment
vehicle whereby separate portfolio managers manage separate portions of such
Purchaser's assets and the portfolio managers have no direct knowledge of the
investment decisions made by the portfolio managers managing other portions of
such Purchaser's assets, the representation set forth above shall apply only
with respect to the portion of assets managed by the portfolio manager that have
knowledge about the financing transaction contemplated by this Agreement.  Each
Purchaser understands and acknowledges, severally and not jointly with any other
Purchaser, that the Commission currently takes the position that covering a
short position established prior to effectiveness of a resale registration
statement with shares included in such registration statement would be a
violation of Section 5 of the Securities Act, as set forth in Item 65, Section 5
under Section A, of the Manual of Publicly Available Telephone Interpretations,
dated July 1997, compiled by the Office of Chief Counsel, Division of
Corporation Finance.
 
 
29

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

 
 
ARTICLE V.
CONDITIONS PRECEDENT TO CLOSING

5.1           Conditions Precedent to the Obligations of the Purchasers to
Purchase Shares at the Closing.  The obligation of each Purchaser listed on
Annex A hereto to acquire Shares at the Closing is subject to the fulfillment to
such Purchaser’s satisfaction, on or prior to the Closing Date, of each of the
following conditions, any of which may be waived by such Purchaser (as to itself
only) in writing or deemed waived by such Purchaser’s proceeding with the
Closing:
 
(a)           Representations and Warranties.  The representations and
warranties of the Company contained herein shall be true and correct in all
material respects as of the date when made and as of the Closing Date, as though
made on and as of such date, except for such representations and warranties that
speak as of a specific date or time other than the Closing Date, which
representations and warranties shall be true and correct in all material
respects as of such date or time.
 
(b)           Performance.  The Company shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by it at or prior to the Closing.
 
(c)           No Injunction.  No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits the consummation of any of the transactions contemplated by the
Transaction Documents and which could, individually or in the aggregate, have a
Material Adverse Effect.
 
(d)           Consents. The Company shall have obtained any and all consents,
permits, approvals, registrations and waivers from any governmental authority or
regulatory body of the United States or any state required for consummation of
the purchase and sale of the Shares at the Closing (including all Required
Approvals), all of which shall be and remain so long as necessary in full force
and effect.
 
(e)           Adverse Changes.  Since the date of the execution of this
Agreement, no event or series of events shall have occurred that has had or
would reasonably be expected to have a Material Adverse Effect.
 
(f)            No Suspensions of Trading in Common Stock; Listing.  The Common
Stock (i) shall be designated for quotation or listed on the Principal Trading
Market and (ii) shall not have been suspended, as of the Closing Date, by the
Commission or the Principal Trading Market from trading on the Principal Trading
Market, except for any suspensions of trading of not more than one Business Day
solely to permit dissemination of material information regarding the Company.
 
(g)           Company Deliverables. The Company shall have delivered the Company
Deliverables in accordance with Section 2.2(a).
 
(h)           Compliance Certificate. The Company shall have delivered to each
Purchaser a certificate, dated as of the Closing Date and signed by its Chief
Executive Officer or its Chief Financial Officer, dated as of the Closing Date,
certifying to the fulfillment of the conditions specified in Sections 5.1(a) and
(b) in the form attached hereto as Exhibit F.
 
 
30

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

 
 
(i)           Termination. This Agreement shall not have been terminated as to
such Purchaser in accordance with Section 6.17 herein.
 
5.2           Conditions Precedent to the Obligations of the Company to sell
Shares at the Closing.  The Company's obligation to sell and issue the Shares to
each Purchaser listed on Annex A hereto at the Closing is subject to the
fulfillment to the satisfaction of the Company on or prior to the Closing Date
of the following conditions, any of which may be waived by the Company in
writing or deemed waived by the Company’s proceeding with the Closing:
 
(a)           Representations and Warranties. The representations and warranties
made by such Purchaser in Section 3.2 hereof shall be true and correct in all
material respects as of the date when made, and as of the Closing Date as though
made on and as of such date, except for representations and warranties that
speak as of a specific date, which representations and warranties shall be true
and correct in all material respects as of such date or time.
 
(b)           Performance. Such Purchaser shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by such Purchaser at or prior to the Closing Date.
 
(c)           No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits the consummation of any of the transactions contemplated by the
Transaction Documents.
 
(d)           Consents.  The Company shall have obtained any and all consents,
permits, approvals, registrations and waivers from any governmental authority or
regulatory body of the United States or any state required for consummation of
the purchase and sale of the Shares, all of which shall be and remain so long as
necessary in full force and effect.
 
(e)           Purchaser Deliverables. Such Purchaser shall have delivered its
Purchaser Deliverables in accordance with Section 2.2(b).
 
(f)           Termination. This Agreement shall not have been terminated as to
such Purchaser in accordance with Section 6.17 herein.
 
ARTICLE VI.
MISCELLANEOUS
 
6.1           Fees and Expenses.  At the Closing, the Company shall reimburse
the Placement Agent for the reasonable fees and expenses in connection with the
transactions contemplated by this Agreement pursuant to its obligations under
its engagement letter with the Placement Agent dated as of January 14, 2008 (the
“Engagement Letter”), including, the expenses of counsel to the Placement Agent
(which fees shall include, without limitation, the fees and expenses associated
with the negotiation, preparation and execution and delivery of this Agreement
and the other Transaction Documents and any amendments, modifications or waivers
thereto), subject to the consent of the Company for fees and expenses in excess
of $50,000 in the aggregate.  The Company and the Purchasers shall each pay the
fees and expenses of their respective advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by such party in connection
with the negotiation, preparation, execution, delivery and performance of this
Agreement.  The Company shall pay all Transfer Agent fees, stamp taxes and other
taxes and duties levied in connection with the sale and issuance of the
Securities to the Purchasers. Each party acknowledges that Lowenstein Sandler PC
has rendered legal advice to the Placement Agent and not to such party in
connection with the transactions contemplated hereby, and that such party has
relied for such matters on the advice of its own respective counsel.
 
 
31

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

 
 
6.2           Entire Agreement.  The Transaction Documents, together with the
Exhibits and Schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements,
understandings, discussions and representations, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such
documents, exhibits and schedules.  At or after the Closing, and without further
consideration, the Company and the Purchasers will execute and deliver to the
other such further documents as may be reasonably requested in order to give
practical effect to the intention of the parties under the Transaction
Documents.
 
6.3           Notices.  Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (a) the date of
transmission, if such notice or communication is delivered via facsimile
(provided the sender receives a machine-generated confirmation of successful
transmission) at the facsimile number specified in this Section prior to 5:00
p.m., New York City time, on a Trading Day, (b) the next Trading Day after the
date of transmission, if such notice or communication is delivered via facsimile
at the facsimile number specified in this Section on a day that is not a Trading
Day or later than 5:00 p.m., New York City time, on any Trading Day, (c) the
Trading Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service with next day delivery specified, or (d) upon actual
receipt by the party to whom such notice is required to be given.  The address
for such notices and communications shall be as follows:
 
If to the Company:
Hoku Scientific, Inc.

1075 Opakapaka Street
Kapolei, HI
Telephone No.: (808) 682-7800
Facsimile No.:  (808) 682-7807
Attention:  President and Chief Executive Officer

 
 
With a copy to:
Stoel Rives LLP

101 S. Capitol Blvd., Suite 1900
Boise, Idaho 83702
Telephone No.:   (208) 389-9000
Facsimile No.:   (208) 389-9040
Attention:   Paul M. Boyd, Esq.

 
32

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

 

If to a Purchaser:
To the address set forth under such Purchaser’s name on the signature page
hereof;

or such other address as may be designated in writing hereafter, in the same
manner, by such Person.

6.4           Amendments; Waivers; No Additional Consideration.  No provision of
this Agreement may be waived or amended except in a written instrument signed,
in the case of an amendment, by the Company and the Purchasers holding or having
the right to acquire a majority of the Shares on a fully-diluted basis at the
time of such amendment or, in the case of a waiver, by the party against whom
enforcement of any such waiver is sought.  No waiver of any default with respect
to any provision, condition or requirement of this Agreement shall be deemed to
be a continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right.  No consideration shall be offered or
paid to any Purchaser to amend or consent to a waiver or modification of any
provision of any Transaction Document unless the same consideration is also
offered to all Purchasers who then hold Securities.
 
6.5           Construction.  The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.  The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any
party.  This Agreement shall be construed as if drafted jointly by the parties,
and no presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of the authorship of any provisions of this Agreement or any of
the Transaction Documents.
 
6.6           Successors and Assigns.  The provisions of this Agreement shall
inure to the benefit of and be binding upon the parties and their successors and
permitted assigns.  This Agreement, or any rights or obligations hereunder, may
not be assigned by the Company without the prior written consent of the
Purchasers.  Any Purchaser may assign its rights hereunder in whole or in part
to any Person to whom such Purchaser assigns or transfers any Shares in
compliance with the Transaction Documents and applicable law, provided such
transferee shall agree in writing to be bound, with respect to the transferred
Shares, by the terms and conditions of this Agreement that apply to the
“Purchasers”.
 
6.7            No Third-Party Beneficiaries.  This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except (i) the Placement Agent is an intended third party
beneficiary of Article III hereof , (ii) the Escrow Agent is an intended third
party beneficiary of Section 2.1(d), and (iii) each Purchaser Party is an
intended third party beneficiary of Section 4.7, and the Placement Agent, the
Escrow Agent, or each Purchaser Party, as the case may be, may enforce the
provisions of such Sections directly against the parties with obligations
thereunder.
 
6.8           Governing Law.  All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof.  Each
party agrees that all Proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or its respective
Affiliates, employees or agents) shall be commenced exclusively in the New York
Courts.  Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any Proceeding, any claim that it is not personally subject to the
jurisdiction of any such New York Court, or that such Proceeding has been
commenced in an improper or inconvenient forum.  Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.  EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
 
 
33

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

 
 
6.9           Survival.  The representations and warranties contained herein
shall survive the Closing and the delivery of the Shares for a period of two (2)
years from the Closing Date.  The agreements and covenants contained herein
shall survive for the applicable statute of limitations.
 
6.10           Execution.  This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart.  In the event that any signature is
delivered by facsimile transmission, or by e-mail delivery of a “.pdf” format
data file, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile signature page were an original thereof.
 
6.11           Severability.  If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
 
6.12           Replacement of Shares.  If any certificate evidencing any Shares
is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be
issued in exchange and substitution for and upon cancellation thereof, or in
lieu of and substitution therefor, a new certificate, but only upon receipt of
evidence reasonably satisfactory to the Company and the Transfer Agent of such
loss, theft or destruction and the execution by the holder thereof of a
customary lost certificate affidavit of that fact and an agreement to indemnify
and hold harmless the Company and the Transfer Agent for any losses in
connection therewith or, if required by the Transfer Agent, a bond in such form
and amount as is required by the Transfer Agent.  The applicants for a new
certificate under such circumstances shall also pay any reasonable third-party
costs associated with the issuance of such replacement Shares.  If a replacement
certificate evidencing any Shares is requested due to a mutilation thereof, the
Company may require delivery of such mutilated certificate as a condition
precedent to any issuance of a replacement.
 
 
34

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

 
 
6.13           Remedies.  In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents.  The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agree to waive in any
action for specific performance of any such obligation (other than in connection
with any action for a temporary restraining order) the defense that a remedy at
law would be adequate.
 
6.14           Payment Set Aside.  To the extent that the Company makes a
payment or payments to any Purchaser pursuant to any Transaction Document or a
Purchaser enforces or exercises its rights thereunder, and such payment or
payments or the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
 
6.15           Adjustments in Share Numbers and Prices. In the event of any
stock split, subdivision, dividend or distribution payable in shares of Common
Stock (or other securities or rights convertible into, or entitling the holder
thereof to receive directly or indirectly shares of Common Stock), combination
or other similar recapitalization or event occurring after the date hereof, each
reference in any Transaction Document to a number of shares or a price per share
shall be deemed to be amended to appropriately account for such event.
 
6.16           Independent Nature of Purchasers' Obligations and Rights.  The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document.  The decision of each Purchaser to
purchase Shares pursuant to the Transaction Documents has been made by such
Purchaser independently of any other Purchaser and independently of any
information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company or any Subsidiary which may
have been made or given by any other Purchaser or by any agent or employee of
any other Purchaser, and no Purchaser and any of its agents or employees shall
have any liability to any other Purchaser (or any other Person) relating to or
arising from any such information, materials, statement or opinions.  Nothing
contained herein or in any Transaction Document, and no action taken by any
Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert or as
a group with respect to such obligations or the transactions contemplated by the
Transaction Documents.  Each Purchaser acknowledges that no other Purchaser has
acted as agent for such Purchaser in connection with making its investment
hereunder and that no Purchaser will be acting as agent of such Purchaser in
connection with monitoring its investment in the Securities or enforcing its
rights under the Transaction Documents.  Each Purchaser shall be entitled to
independently protect and enforce its rights, including without limitation the
rights arising out of this Agreement or out of the other Transaction Documents,
and it shall not be necessary for any other Purchaser to be joined as an
additional party in any proceeding for such purpose.  The Company acknowledges
that each of the Purchasers has been provided with the same Transaction
Documents for the purpose of closing a transaction with multiple Purchasers and
not because it was required or requested to do so by any Purchaser. The
Company’s obligations to each Purchaser under this Agreement are identical to
its obligations to each other Purchaser other than such differences resulting
solely from the number of Shares purchased by such Purchaser, but regardless of
whether such obligations are memorialized herein or in another agreement between
the Company and a Purchaser.
 
 
35

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

 
 
6.17           Termination. This Agreement may be terminated and the sale and
purchase of the Shares abandoned at any time prior to the Closing, by either the
Company or any Purchaser listed on Annex A hereto (with respect to itself only),
upon written notice to the other, if the Closing has not been consummated on or
prior to 5:00 p.m., New York City time, on the Outside Date; provided, however,
that the right to terminate this Agreement under this Section 6.17 shall not be
available to any Person whose failure to comply with its obligations under this
Agreement has been the cause of or resulted in the failure of the Closing to
occur on or before such time.  Nothing in this Section 6.17 shall be deemed to
release any party from any liability for any breach by such party of the terms
and provisions of this Agreement or the other Transaction Documents or to impair
the right of any party to compel specific performance by any other party of its
obligations under this Agreement or the other Transaction Documents.  In the
event of a termination pursuant to this Section, the Company shall promptly
notify all non-terminating Purchasers.  Upon a termination in accordance with
this Section, the Company and the terminating Purchaser(s) shall not have any
further obligation or liability (including arising from such termination) to the
other, and no Purchaser will have any liability to any other Purchaser under the
Transaction Documents as a result therefrom.
 
 
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGES TO FOLLOW]

 
36

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

 

IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 

 
HOKU SCIENTIFIC, INC.
         
By:
/s/ Dustin Shindo
    Name:
Dustin M. Shindo
    Title:
President and Chief Executive Officer
              LOWENSTEIN SANDLER PC              
By:
/s/ Lowenstein Sandler PC
 
 
Name:
Michael Maline
 
 
Title:
Member of the Firm
           
Solely for purposes of Section 2.1(d)

 
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGES FOR PURCHASERS FOLLOW]

 
37

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

 
 
Suntech Power International Co., Ltd.

 
 NAME OF PURCHASER:
Suntech Power International Co., Ltd.

 
 

 
By:
/s/ Steven Chan
 
Name: Steven Chan
 
Title: Director
         
By:
/s/ Jeremy Stokes
 
Name: Jeremy Stokes
 
Title: Director

 
 

 
Aggregate Purchase Price (Subscription Amount):
 
$20,000,000.00
 

 
Number of Shares to be Acquired:
2,314,815

 
Tax ID No.:
         
Address for Notice:

 
 

 
c/o Suntech America
   
188 The Embarcadero, 8th Floor
   
San Francisco, CA 94105
 

 
Telephone No.:
415-882-9922
       
Facsimile No.:
415-882-9923
       
Attention:
Steven Chan

Delivery Instructions:
(if different than above)

c/o
 
       
Street:
 
       
City/State/Zip:
 
       
Attention:
 
       
Telephone No.
 
 

 
38

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

 
 

 
NAME OF PURCHASER:
Investcorp Interlachen
   
Multi-Strategy Fund Limited
   
By: Interlachen Capital Group LP,
   
Authorized Signatory

     
By:
/s/ Gregg T. Colburn
 
Name: Gregg T. Colburn
 
Title: Authorized Signatory

     
Aggregate Purchase Price (Subscription Amount):
 
$3,500,003.52
 

 
Number of Shares to be Acquired:
405,093

 
Tax ID No.:
98-0472068
       
Address for Notice:

 
800 Nicolett Mall
   
Suite 2500
   
Minneapolis, MN 55402
 

       
Telephone No.:
612-659-4407
       
Facsimile No.:
612-659-4457
       
Attention:
Gregg Colburn / Legal

 
Delivery Instructions:
(if different than above)
 
c/o
 
       
Street:
 
       
City/State/Zip:
 
       
Attention:
 
       
Telephone No.
 
 

 
39

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

 
 

 
NAME OF PURCHASER:
Capital Ventures International
   
by: Heights Capital Management, Inc.
   
its authorized agent
     

     
By:
/s/ Martin Kobinger
 
Name: Martin Kobinger
 
Title: Investment Manager

 
Aggregate Purchase Price (Subscription Amount):
 
$1,499,999.04
 

 
Number of Shares to be Acquired:
173,611

 
Tax ID No.:
51-0395477
       
Address for Notice:

 
c/o Heights Capital Management
   
101 California Street, Suite 3250
   
San Francisco, CA 94111
 

       
Telephone No.:
415-403-6500
       
Facsimile No.:
415-403-6525
       
Attention:
Martin Kobinger

Delivery Instructions:
(if different than above)
 
c/o
 
       
Street:
 
       
City/State/Zip:
 
       
Attention:
 
       
Telephone No.
 
 

 
 
40

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

 

ANNEX A

Purchasers

Suntech Power International, Ltd.
Interlachen Capital Group LP
Heights Capital Management, Inc.

 

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

 
 
EXHIBITS:
 
A:
Form of Registration Rights Agreement

B-1:
Accredited Investor Questionnaire

B-2:
Stock Certificate Questionnaire

C:
Form of Opinion of Company Counsel

D:
Irrevocable Transfer Agent Instructions

E:
Form of Secretary’s Certificate

F:
Form of Officer’s Certificate

G:
Wire Instructions

H:
Form of Lock-Up Agreements

 

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

 

EXHIBIT A
 
FORM OF REGISTRATION RIGHTS AGREEMENT

 
2

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

 

Instruction Sheet
(to be read in conjunction with the entire Securities Purchase Agreement and
Registration Rights Agreement)

A.           Complete the following items in the Securities Purchase Agreement
and/or Registration Rights Agreement:

 
1.
Provide the information regarding the Purchaser requested on the signature
pages. The Securities Purchase Agreement and the Registration Rights Agreement
must be executed by an individual authorized to bind the Purchaser.

 
2.
Exhibit B-1 – Accredited Investor Questionnaire:

 
Provide the information requested by the Accredited Investor Questionnaire

 
3.
Exhibit B-2 Stock Certificate Questionnaire:

 
Provide the information requested by the Stock Certificate Questionnaire

 
4.
Annex B to the Registration Rights Agreement -- Selling Securityholder Notice
and Questionnaire

 
Provide the information requested by the Selling Securityholder Notice and
Questionnaire

 
5.
Return the signed Securities Purchase Agreement and Registration Rights
Agreement to:

[                                   ]
[                                   ]
[                                   ]
New York, NY [       ]
Tel:
Fax:
Email:

B.
Instructions regarding the transfer of funds for the purchase of Shares have
been provided to the Purchasers.

 
3

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

 
 
EXHIBIT B-1

ACCREDITED INVESTOR QUESTIONNAIRE

(ALL INFORMATION WILL BE TREATED CONFIDENTIALLY)

To:           Hoku Scientific, Inc.

This Investor Questionnaire (“Questionnaire”) must be completed by each
potential investor in connection with the offer and sale of the shares of the
common stock, par value $0.001 per share (the “Shares”), of Hoku Scientific,
Inc., a Delaware corporation (the “Corporation”).  The Shares are being offered
and sold by the Corporation without registration under the Securities Act of
1933, as amended (the “Act”), and the securities laws of certain states, in
reliance on the exemptions contained in Section 4(2) of the Act and on
Regulation D promulgated thereunder and in reliance on similar exemptions under
applicable state laws.  The Corporation must determine that a potential investor
meets certain suitability requirements before offering or selling Shares to such
investor.  The purpose of this Questionnaire is to assure the Corporation that
each investor will meet the applicable suitability requirements.  The
information supplied by you will be used  in determining whether you meet such
criteria, and reliance upon the private offering exemptions from registration is
based in part on the information herein supplied.
 
This Questionnaire does not constitute an offer to sell or a solicitation of an
offer to buy any security.  Your answers will be kept strictly
confidential.  However, by signing this Questionnaire, you will be authorizing
the Corporation to provide a completed copy of this Questionnaire to such
parties as the Corporation deems appropriate in order to ensure that the offer
and sale of the Shares will not result in a violation of the Act or the
securities laws of any state and that you otherwise satisfy the suitability
standards applicable to purchasers of the Shares.  All potential investors must
answer all applicable questions and complete, date and sign this
Questionnaire.  Please print or type your responses and attach additional sheets
of paper if necessary to complete your answers to any item.
 
PART A.                      BACKGROUND INFORMATION

Name of Beneficial Owner of the Shares:
 

Business Address:
   
(Number and Street)

     
(City)
(State)
(Zip Code)

Telephone Number:
(
)
 

If a corporation, partnership, limited liability company, trust or other entity:

Type of entity:
 

State of formation:
 
 
Approximate Date of formation:
 

 
4

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

 
Set forth in the space provided below the (i) state(s), if any, in the United
States in which you maintained your principal office during the past two years
and the dates during which you maintained your office in each state, and
(ii) state(s), if any, in which you pay income taxes:
 

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

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

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

 
 Were you formed for the purpose of investing in the securities being offered?

Yes ____                      No ____

If an individual:

Residence Address:
   
(Number and Street)

     
(City)
(State)
(Zip Code)

Telephone Number:
(
)
 

Age:
 
 
Citizenship:
 
 
Where registered to vote:
 
 

Set forth in the space provided below the state(s), if any, in the United States
in which you maintained your residence during the past two years and the dates
during which you resided in each state:
 

 
Are you a director or executive officer of the Corporation?

Yes ____                      No ____
 
Social Security or Taxpayer Identification No.
 

PART B.                      ACCREDITED INVESTOR QUESTIONNAIRE

 
In order for the Company to offer and sell the Shares in conformance with state
and federal securities laws, the following information must be obtained
regarding your investor status. Please initial each category applicable to you
as a Purchaser of Shares of the Company.
 
 
__ (1)
A bank as defined in Section 3(a)(2) of the Securities Act, or any savings and
loan association or other institution as defined in Section 3(a)(5)(A) of the
Securities Act whether acting in its individual or fiduciary capacity;

 
5

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

 
 
 
__ (2)
A broker or dealer registered pursuant to Section 15 of the Securities Exchange
Act of 1934;

 
__ (3)
An insurance company as defined in Section 2(13) of the Securities Act;

 
__ (4)
An investment company registered under the Investment Company Act of 1940 or a
business development company as defined in Section 2(a)(48) of that Act;

 
__ (5)
A Small Business Investment Company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business Investment Act
of 1958;

 
__ (6)
A plan established and maintained by a state, its political subdivisions, or any
agency or instrumentality of a state or its political subdivisions, for the
benefit of its employees, if such plan has total assets in excess of $5,000,000;

 
__ (7)
An employee benefit plan within the meaning of the Employee Retirement Income
Security Act of 1974, if the investment decision is made by a plan fiduciary, as
defined in Section 3(21) of such act, which is either a bank, savings and loan
association, insurance company, or registered investment adviser, or if the
employee benefit plan has total assets in excess of $5,000,000 or, if a
self-directed plan, with investment decisions made solely by persons that are
accredited investors;

 
__ (8)
A private business development company as defined in Section 202(a)(22) of the
Investment Advisers Act of 1940;

 
__ (9)
An organization described in Section 501(c)(3) of the Internal Revenue Code, a
corporation, Massachusetts or similar business trust, or partnership, not formed
for the specific purpose of acquiring the Shares, with total assets in excess of
$5,000,000;

 
 
__ (10)
A trust, with total assets in excess of $5,000,000, not formed for the specific
purpose of acquiring the Shares, whose purchase is directed by a sophisticated
person who has such knowledge and experience in financial and business matters
that such person is capable of evaluating the merits and risks of investing in
the Company;

 
 
__ (11)
A natural person whose individual net worth, or joint net worth with that
person’s spouse, at the time of his purchase exceeds $1,000,000;

 
 
__ (12)
A natural person who had an individual income in excess of $200,000 in each of
the two most recent years, or joint income with that person’s spouse in excess
of $300,000, in each of those years, and has a reasonable expectation of
reaching the same income level in the current year;

 
6

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

 
 
 
___(13)
  An executive officer or director of the Company;

___(14)
An entity in which all of the equity owners qualify under any of the above
subparagraphs. If the undersigned belongs to this investor category only, list
the equity owners of the undersigned, and the investor category which each such
equity owner satisfies:

(Continue on a separate piece of paper, if necessary.)

A.
FOR EXECUTION BY AN INDIVIDUAL:
                   
By
   
 
           
Date
 
Print Name:
               
B.
FOR EXECUTION BY AN ENTITY:
                   
Entity Name:
                                 
By
   
 
           
Date
 
Print Name:
   
 
    Title:                
C.
ADDITIONAL SIGNATURES (if required by partnership, corporation or trust
document):
             
 
   
Entity Name:
                                 
By
   
 
           
Date
 
Print Name:
   
 
    Title:                                  
Entity Name:
                                 
By
   
 
           
Date
 
Print Name:
         
Title:
   

 
7

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

 
 
EXHIBIT B-2
 
STOCK CERTIFICATE QUESTIONNAIRE
 
Pursuant to Section 2.2(b) of the Agreement, please provide us with the
following information:
 
1.
The exact name that the Shares are to be registered in (this is the name that
will appear on the stock certificate(s)).  You may use a nominee name if
appropriate:
           
2.
The relationship between the Purchaser of the Shares and the Registered Holder
listed in response to Item 1 above:
           
3.
The mailing address, telephone and telecopy number of the Registered Holder
listed in response to Item 1 above:
         
 
 
     
 
 
     
 
 
     
 
 
4.
The Tax Identification Number (or, if an individual, the Social Security Number)
of the Registered Holder listed in response to Item 1 above:
   

 
8

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

 
 
EXHIBIT C
 
FORM OF OPINION OF COMPANY COUNSEL
 
[To Come.]

 
9

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

 
 
SCHEDULE A

Opinion Addressees

 

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

 

SCHEDULE B

Material Agreements

 

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

 
 
EXHIBIT D
 
FORM OF IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
 
As of [MM/DD], 2008
 
Continental Stock Transfer & Trust Company
17 Battery Place, 8th Floor
New York, NY 10004
Attn:  Greg Denman
 
 
Ladies and Gentlemen:
 
Reference is made to that certain Securities Purchase Agreement, dated as of
[MM/DD], 2008 (the “Agreement”), by and among Hoku Securities, Inc., a Delaware
corporation (the “Company”), and the purchasers named on the signature pages
thereto (collectively, and including permitted transferees, the “Holders”),
pursuant to which the Company is issuing to the Holders shares (the “Shares”) of
Common Stock of the Company, par value $0.001 per share (the “Common Stock”).
 
This letter shall serve as our irrevocable authorization and direction to you
(provided that you are the transfer agent of the Company at such time and the
conditions set forth in this letter are satisfied), subject to any stop transfer
instructions that we may issue to you from time to time, if any to issue
certificates representing shares of Common Stock upon transfer or resale of the
Shares.
 
You acknowledge and agree that so long as you have received (a) written
confirmation from the Company’s legal counsel that EITHER (1) a registration
statement covering resales of the Shares has been declared effective by the
Securities and Exchange Commission (the “Commission”) under the Securities Act
of 1933, as amended (the “Securities Act”), or (2) the Shares have been sold in
conformity with Rule 144 under the Securities Act (“Rule 144”) or are eligible
for sale under with Rule 144(b)(1)(i) if applicable, a copy of such registration
statement, then, unless otherwise required by law, within three (3) business
days of your receipt of a notice of transfer or Shares, you shall issue the
certificates representing the Shares registered in the names of such Holders or
transferees, as the case may be, and such certificates shall not bear any legend
restricting transfer of the Shares thereby and should not be subject to any
stop-transfer restriction; provided, however, that if such Shares are not
registered for resale under the Securities Act, or able to be sold under Rule
144, then the certificates for such Shares shall bear the following legend:

 
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES LAWS.  THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OR (B) AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS AS EVIDENCED
BY A LEGAL OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS
TRANSFER AGENT OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
BY THE SECURITIES.
 

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

 
                Please be advised that the Holders are relying upon this letter
as an inducement to enter into the Agreement and, accordingly, each Holder is a
third party beneficiary to these instructions.
 
                Please execute this letter in the space indicated to acknowledge
your agreement to act in accordance with these instructions.
 

 
Very truly yours,
           
HOKU SCIENTIFIC, INC.
           
By:
     
Name:
     
Title:
   

Acknowledged and Agreed:

[
]
           
By:
     
Name:
     
Title:
     

Date:  [MM/DD], 2008

 

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

 

Annex II
FORM OF NOTICE OF EFFECTIVENESS OF REGISTRATION STATEMENT

[NAME OF TRANSFER AGENT]
[Address]
[Address]
Attn:
 
       
Re: Hoku Scientific, Inc.

Ladies and Gentlemen:
Hoku Scientific, Inc., a Delaware corporation (the “Company”) has entered into
that certain Securities Purchase Agreement, dated as of _____________, 2008,
entered into by and among the Company and the buyers named therein
(collectively, the “Purchasers”) pursuant to which the Company issued to the
Purchasers shares of the Company’s common stock, $0.001 par value per share (the
“Common Stock”).  Pursuant to that certain Registration Rights Agreement of even
date, the Company agreed to register the resale of the Common Stock (the
“Registrable Securities”), under the Securities Act of 1933, as amended (the
“Securities Act”). In connection with the Company’s obligations under the
Registration Rights Agreement, on                     , ____, the Company filed
a Registration Statement on Form S-3 (File No. 333-                    ) (the
“Registration Statement”) with the Securities and Exchange Commission (the
“Commission”) relating to the Registrable Securities which names each of the
Purchasers as a selling stockholder thereunder.

In connection with the foregoing, we advise you that a member of the
Commission’s staff has advised us by telephone that the Commission has entered
an order declaring the Registration Statement effective under the Securities Act
at ____ [a.m.][p.m.] on __________, ____, and we have no knowledge, after
telephonic inquiry of a member of the staff, that any stop order suspending its
effectiveness has been issued or that any proceedings for that purpose are
pending before, or threatened by, the Commission and the Registrable Securities
are available for resale under the Securities Act pursuant to the Registration
Statement.
 
This letter shall serve as our standing notice to you that the Common Stock may
be freely transferred by the Purchasers pursuant to the Registration Statement.
You need not require further letters from us to effect any future legend-free
issuance or reissuance of shares of Common Stock to the Purchasers or the
transferees of the Purchasers, as the case may be, as contemplated by the
Company’s Irrevocable Transfer Agent Instructions dated __________, ____,
provided at the time of such reissuance, the Company has not otherwise notified
you that the Registration Statement is unavailable for the resale of the
Registrable Securities. This letter shall serve as our standing instructions
with regard to this matter.

     
Very truly yours,
     
HOKU SCIENTIFIC, INC.
     
By:

 

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

 

EXHIBIT E
 
FORM OF SECRETARY’S CERTIFICATE

The undersigned hereby certifies that he is the duly elected, qualified and
acting Secretary of Hoku Scientific, Inc., a Delaware corporation (the
"Company"), and that as such he is authorized to execute and deliver this
certificate in the name and on behalf of the Company and in connection with the
Securities Purchase Agreement, dated as of [MM/DD], 2008, by and among the
Company and the investors party thereto (the "Securities Purchase Agreement"),
and further certifies in his official capacity, in the name and on behalf of the
Company, the items set forth below.  Capitalized terms used but not otherwise
defined herein shall have the meaning set forth in the Securities Purchase
Agreement.
 
1.
Attached hereto as Exhibit A is a true, correct and complete copy of the
resolutions duly adopted by the Board of Directors of the Company at a meeting
of the Board of Directors held on [MM/DD], 2008.  Such resolutions have not in
any way been amended, modified, revoked or rescinded, have been in full force
and effect since their adoption to and including the date hereof and are now in
full force and effect.

 
2.
Attached hereto as Exhibit B is a true, correct and complete copy of the Amended
and Restated Certificate of Incorporation of the Company, together with any and
all amendments thereto currently in effect, and no action has been taken to
further amend, modify or repeal such Certificate of Incorporation, the same
being in full force and effect in the attached form as of the date hereof.

 
3.
Attached hereto as Exhibit C is a true, correct and complete copy of the Amended
and Restated Bylaws of the Company and any and all amendments thereto currently
in effect, and no action has been taken to further amend, modify or repeal such
Bylaws, the same being in full force and effect in the attached form as of the
date hereof.

 
4.
Each person listed below has been duly elected or appointed to the position(s)
indicated opposite his name and is duly authorized to sign the Securities
Purchase Agreement and each of the Transaction Documents on behalf of the
Company, and the signature appearing opposite such person’s name below is such
person’s genuine signature.

 

Name
Position
Signature
Dustin M. Shindo
President and Chief Executive Officer
 
     
Darryl S. Nakamoto
Chief Financial Officer, Treasurer and Secretary
 

IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of this ____
day of ________, 2008.
 
 

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

 
 

     
Darryl S. Nakamoto
 
Secretary

 
I, Dustin M. Shindo, President and Chief Executive Officer, hereby certify that
Darryl S. Nakamoto is the duly elected, qualified and acting Secretary of the
Company and that the signature set forth above is his true signature.
 
 

     
Dustin M. Shindo
 
President and Chief Executive Officer

 

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

 

EXHIBIT A

Resolutions
 
 

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

 

EXHIBIT B
 
Amended and Restated Certificate of Incorporation
 
 

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

 

EXHIBIT C
 
Amended and Restated Bylaws
 
 
 

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

 
 
EXHIBIT F
 
 
FORM OF OFFICER’S CERTIFICATE
 

The undersigned, the President and Chief Executive Officer of Hoku Scientific,
Inc., a Delaware corporation (the "Company"), pursuant to Section 5.1(g) of the
Securities Purchase Agreement, dated as of [MM/DD], 2008, by and among the
Company and the investors signatory thereto (the "Securities Purchase
Agreement"), hereby represents, warrants and certifies to such investors as
follows (capitalized terms used but not otherwise defined herein shall have the
meaning set forth in the Securities Purchase Agreement):

1.
The representations and warranties of the Company contained herein are true and
correct in all material respects as of the date when made and as of the Closing
Date, as though made on and as of such date, except for such representations and
warranties that speak as of a specific date or time other than the Closing Date,
which representations and warranties shall be true and correct in all material
respects as of such date or time.

2.
The Company have been performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by it at or prior to the
Closing.

IN WITNESS WHEREOF, the undersigned has executed this certificate this ___ day
of __________, 2008.

       
Dustin M. Shindo
   
President and Chief Executive Officer
 

 

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

 

EXHIBIT G
 
WIRE INSTRUCTIONS
 
Wire Room of:
PNC Bank New Jersey

Caldwell, NJ
ABA # 031207607
For credit to:
Lowenstein Sandler PC

Special Trust Account I
Account # 8025720174

For International wires please use SWIFT Code: PNCCUS33

 

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

 

EXHIBIT H
FORM OF LOCK-UP AGREEMENT
 

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