Document:

Exhibit
10.112

     

    FORM
OF SECURITY AGREEMENT

     

    SECURITY
AGREEMENT (this “Agreement”) dated as of
December 22, 2009 between HOKU MATERIALS, INC., a Delaware corporation (together
with its successors and assigns, “HOKU”) and TIANWEI NEW ENERGY
(CHENGDU) WAFER CO., LTD., a People’s Republic of China company (together with
its successors and assigns, “TIANWEI”).

     

    RECITALS

     

    WHEREAS, the parties hereto have
entered into an Amended and Restated Supply Agreement No._____ dated as of the
date hereof (as amended from time to time, the “Supply Agreement”) pursuant to which
HOKU has agreed to sell to TIANWEI, and TIANWEI has agreed to purchase from
HOKU, an aggregate of _______ metric tons of Products over a ten-year
period;

     

    WHEREAS,
HOKU is willing to secure its obligations under the Supply Agreement by granting
Liens on its assets to TIANWEI as provided hereunder;

     

    WHEREAS,
TIANWEI is not willing to purchase Products under the Supply Agreement unless
the foregoing obligations of HOKU are secured as described above;

     

    NOW,
THEREFORE, in consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:

     

    SECTION
1.  Definitions.

     

    (a)        Terms Defined in Supply
Agreement.  Unless otherwise specifically defined herein, each
term used herein which is defined in the Supply Agreement shall have the meaning
assigned to such term in the Supply Agreement.

     

    (b)        Terms Defined in the
UCC.  The following terms that are defined in the UCC are used
herein as so defined: Accounts, Authenticate, Certificated Security, Chattel
Paper, Commodity Account, Commodity Intermediary, Documents, Equipment,
Financial Assets, General Intangibles, Instruments, Inventory, Investment
Property, Letter-of-Credit Rights, Security Entitlement and Uncertificated
Security.

     

    (c)        Additional
Definitions.  The following additional terms, as used herein,
have the following meanings:

     

    “Copyright
License” shall mean any agreement now or hereafter in existence granting
to HOKU, or pursuant to which HOKU grants to any other Person, any right to use,
copy, reproduce, distribute, prepare derivative works, display or publish any
records or other materials on which a Copyright is in existence or may come into
existence.

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    “Copyrights”
shall mean all the following: (i) all copyrights under the laws of the United
States or any other country (whether or not the underlying works of authorship
have been published), all registrations and recordings thereof, all
copyrightable works of authorship (whether or not published), and all
applications for copyrights under the laws of the United States or any other
country, including registrations, recordings and applications in the United
States Copyright Office or in any similar office or agency of the United States,
any State thereof or any other country or any political subdivision thereof,
(ii) all renewals of any of the foregoing, (iii) all claims for, and rights to
sue for, past or future infringements of any of the foregoing, and (iv) all
income, royalties, damages and payments now or hereafter due or payable with
respect to any of the foregoing, including damages and payments for past or
future infringements thereof.

    

    “Deposit
Accounts” shall mean all of HOKU’s “deposit accounts” (as defined in
Section 9-102(a)(29) of the UCC) and all funds standing to the credit
thereof.

    

    “Equity
Interest” shall mean (i) in the case of a corporation, any shares of its
capital stock, (ii) in the case of a limited liability company, any membership
interest therein, (iii) in the case of a partnership, any partnership interest
(whether general or limited) therein, (iv) in the case of any other business
entity, any participation or other interest in the equity or profits thereof,
(v) any warrant, option or other right to acquire any Equity Interest described
in this definition or (vi) any Security Entitlement in respect of any Equity
Interest described in this definition.

    

    “Excluded
Accounts” shall mean any Deposit Account established for the benefit of
HOKU’s Senior Lenders (as defined in Section 3(h) hereof) or as security for the
obligations under the Loan Contracts in connection with the debt financing
provided by such Senior Lenders for the construction of any HOKU
Facility.

    

    “Intellectual
Property” shall mean all intellectual and similar property of HOKU of
every kind and nature now owned or hereafter acquired by HOKU, including
inventions, designs, Patents, Copyrights, Licenses, Trademarks, trade secrets,
confidential or proprietary technical and business information, know-how,
show-how or other data or information, software and databases and all
embodiments or fixations thereof and related documentation, registrations and
franchises, and all additions, improvements and accessions to, and books and
records describing or used in connection with, any of the
foregoing.

    
      
         

      

      
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    “License”
means any Patent License, Trademark License, Copyright License or other license
or sublicense agreement relating to Intellectual Property to which HOKU is a
party.

    

    “Lien”
shall mean any mortgage, pledge, hypothecation, assignment (fiduciary or
otherwise), deposit arrangement, encumbrance, lien (statutory or other),
preference, priority or other security agreement of any kind or nature
whatsoever (including, without limitation, any such encumbrance arising out of
or pursuant to any conditional sale or other title retention agreement, any
financing or similar statement or notice filed under any recording or notice
statute, and any capital lease having substantially the same effect as any of
the foregoing).

    

    “Loan
Contracts” shall mean the Tranche 1 Loan Contract and the Tranche 2 Loan
Contract.

    

    “Patent
License” shall mean any agreement now or hereafter in existence granting
to HOKU, or pursuant to which HOKU grants to any other Person, any right with
respect to any Patent or any invention now or hereafter in existence, whether
patentable or not, whether a patent or application for patent is in existence on
such invention or not, and whether a patent or application for patent on such
invention may come into existence or not.

    

    “Patents”
shall mean (i) all letters patent and design letters patent of the United States
or any other country and all applications for letters patent or design letters
patent of the United States or any other country, including applications in the
United States Patent and Trademark Office or in any similar office or agency of
the United States, any State thereof or any other country or any political
subdivision thereof, (ii) all reissues, divisions, continuations, continuations
in part, revisions and extensions of any of the foregoing, (iii) all claims for,
and rights to sue for, past or future infringements of any of the foregoing and
(iv) all income, royalties, damages and payments now or hereafter due or payable
with respect to any of the foregoing, including damages and payments for past or
future infringements thereof.

    

    “Person”
means an individual, partnership, corporation (including a business trust),
limited liability company, joint stock company, trust, unincorporated
association, joint venture or other entity, or a government or any political
subdivision or agency thereof.

    

    “Proceeds”
means all proceeds of, and all other profits, products, rents or receipts, in
whatever form, arising from the collection, sale, lease, exchange, assignment,
licensing or other disposition of, or other realization upon, any Collateral,
including all claims of HOKU against third parties for loss of, damage to or
destruction of, or for proceeds payable under, or unearned premiums with respect
to, policies of insurance in respect of, any Collateral, and any condemnation or
requisition payments with respect to any Collateral.

    
      
         

      

      
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    “Securities
Accounts” shall mean all of HOKU’s “securities accounts” (as defined in
Section 8-501 of the UCC), including, without limitation, all cash, Financial
Assets and Investment Property standing to the credit thereof at any time and
from time to time.

    

    “Trademark
License” shall mean any agreement now or hereafter in existence granting
to HOKU, or pursuant to which HOKU grants to any other Person, any right to use
any Trademark.

    

    “Trademarks”
shall mean:  (i) all trademarks, trade names, corporate names, company
names, business names, fictitious business names, trade styles, service marks,
logos, brand names, trade dress, prints and labels on which any of the foregoing
have appeared or appear, package and other designs, and all other source or
business identifiers, and all general intangibles of like nature, and the rights
in any of the foregoing which arise under applicable law, (ii) the goodwill of
the business symbolized thereby or associated with each of them, (iii) all
registrations and applications in connection therewith, including registrations
and applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any other
country or any political subdivision thereof, (iv) all renewals of any of the
foregoing, (v) all claims for, and rights to sue for, past or future
infringements of any of the foregoing and (vi) all income, royalties, damages
and payments now or hereafter due or payable with respect to any of the
foregoing, including damages and payments for past or future infringements
thereof.

    

    “Tranche 1 Loan
Contract” shall mean the construction loan agreement for a loan in the
amount of $20,000,000 among Hoku Scientific, Inc., as borrower, Tianwei New
Energy Holdings Co., Ltd., as entrusting lender, and China Construction Bank,
Shuangliu Branch, as bank.

    

    “Tranche 2 Loan
Contract” shall mean the construction loan agreement for a loan in the
amount of $30,000,000 among Hoku Scientific, Inc., as borrower, Tianwei New
Energy Holdings Co., Ltd., as entrusting lender, and China Construction Bank,
Shuangliu Branch, as bank.

    

    “UCC” means
the Uniform Commercial Code as in effect from time to time in the State of New
York; provided that, if
perfection or the effect of perfection or non perfection or the priority of any
Transaction Lien on any Collateral is governed by the Uniform Commercial Code as
in effect in a jurisdiction other than New York, “UCC” means the Uniform
Commercial Code as in effect from time to time in such other jurisdiction for
purposes of the provisions hereof relating to such perfection, effect of
perfection or non perfection or priority.

    
      
         

      

      
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    SECTION
2.  Grant of
Security Interest.

     

    (a)        In
order to secure the repayment by HOKU to TIANWEI of the amounts payable pursuant
to Section 9 of the Supply Agreement, including without limitation, the return
of the Total Deposit, together with all costs and expenses incurred by TIANWEI
in enforcing its security interest in the Collateral, following any of the
events set forth in Sections 9.2.1, 9.2.2, 9.2.3, 9.2.4, 9.2.5 or 12 of the
Supply Agreement, (the “Secured
Obligations”), HOKU hereby grants to TIANWEI a continuing security
interest in all the following property of HOKU, whether now owned or existing or
hereafter acquired or arising and regardless of where located (collectively, the
“Collateral”):
(i) all Accounts; (ii) all Chattel Paper; (iii) all Deposit Accounts (other than
Excluded Accounts); (iv) all Documents; (v) all Equipment; (vi) all Financial
Assets; (vii) all General Intangibles (including (x) any Equity Interests in
other Persons that do not constitute Investment Property and (y) Intellectual
Property); (viii) all Instruments; (ix) all Inventory; (x) all Investment
Property; (xi) all Letter-of-Credit Rights; (xii) all Securities Accounts;
(xiii) all books and records pertaining to the Collateral; and (xiv) all
Proceeds of any and all of the foregoing.

     

    (b)        As
additional security for the Secured Obligations, HOKU shall grant to TIANWEI a
mortgage on its leasehold interest in the property located in Pocatello, Idaho
in form and substance satisfactory to TIANWEI, and HOKU shall deliver or cause
to be delivered to TIANWEI all such instruments and documents (including legal
opinions, title insurance policies and lien searches) as TIANWEI shall
reasonably require.

     

    SECTION
3.  Further
Assurances; General Covenants.

     

    (a)        HOKU
agrees that, from time to time upon the request of TIANWEI, HOKU shall execute
and deliver such further documents and diligently perform such other acts and
things in any jurisdiction as TIANWEI may reasonably request to fully effect the
purposes of this Agreement or to further assure the priority status of the Lien,
which shall be subject to no prior Lien (other than Liens securing the
obligations to the Senior Lenders) granted pursuant hereto, including, without
limitation, (i) executing and filing one or more financing statements pursuant
to the UCC naming TIANWEI as secured party, (ii) executing such other filings
required under the laws of all jurisdictions necessary or appropriate in the
judgment of TIANWEI to perfect or evidence TIANWEI’s security interest in and
Lien on the Collateral (including any filings necessary to perfect TIANWEI’s
second priority security interest in any Intellectual Property constituting
Collateral), (iv) execution of the Collateral Agreements (as defined below) and
(v) causing any third party holding Collateral to acknowledge in a signed
writing that such third party holds such Collateral solely on behalf of, and for
the sole benefit of, TIANWEI and HOKU’S Other Customers.  HOKU hereby
irrevocably authorizes TIANWEI (or TIANWEI’s designee) at any time and from time
to time to execute and file and refile in any jurisdiction any financing
statement, continuation statements, any registration of mortgage or other
documents, as shall be necessary, appropriate or advisable in the judgment of
TIANWEI to create, perfect or evidence its security interest in or Lien on the
Collateral subject to no prior Lien (other than Liens securing the obligations
to the Senior Lenders), or to enable TIANWEI to obtain the full benefits of this
Agreement and to exercise and enforce any of their rights, and remedies with
respect to the Collateral.  HOKU agrees that a carbon photographic,
photostatic or other reproduction of this Agreement or of a financing statement
is sufficient as a financing statement.  HOKU hereby irrevocably
ratifies and approves any filing, registration or recordation in any
jurisdiction by or on behalf of TIANWEI (or TIANWEI’s designee) that has
occurred prior to the date hereof, of any financing statement, registration of
mortgage or otherwise.  HOKU agrees to provide to TIANWEI (or
TIANWEI’s designees) any and all information required under the UCC or the law
of any other applicable jurisdiction for the effective filing of a financing
statement and/or any amendment thereto or continuation thereof or any
registration of a mortgage or otherwise.  TIANWEI shall pay all
document preparation costs (including legal fees) and shall pay any filing or
registration fee in all public offices where filing or registration may be
deemed necessary or appropriate by TIANWEI and any stamp tax, assessment or duty
related to the Collateral.

    
      
         

      

      
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    (b)        HOKU
will deliver to TIANWEI on the date hereof as Collateral hereunder all
certificates representing Certificated Securities then owned by HOKU, in
suitable form for transfer by delivery, or accompanied by duly executed
instruments of transfer or assignment in blank, with signatures appropriately
guaranteed.  Thereafter, whenever HOKU acquires any other certificate
representing a Certificated Security, HOKU will immediately deliver such
certificate to TIANWEI as Collateral hereunder, in suitable form for transfer by
delivery, or accompanied by duly executed instruments of transfer or assignment
in blank, with signatures appropriately guaranteed.

     

    (c)        Promptly
(and in any event within 20 business days) upon the request of TIANWEI, HOKU
will enter into (and cause the relevant issuer to enter into) a control
agreement in form and substance reasonably satisfactory to TIANWEI in respect of
each Uncertificated Security pledged hereunder then owned by HOKU and deliver
such control agreement to TIANWEI (which shall enter into the
same).  Thereafter, whenever HOKU acquires any other Uncertificated
Security pledged hereunder, promptly (and in any event within 20 business days)
upon the request of TIANWEI, HOKU will enter into (and cause the relevant issuer
to enter into) a control agreement in respect of such Uncertificated Security
and deliver such control agreement to TIANWEI (which shall enter into the
same).

     

    (d)        Promptly
(and in any event within 20 business days) upon the request of TIANWEI, HOKU
will, with respect to each Security Entitlement then owned by it, enter into
(and cause the relevant Securities Intermediary to enter into) a control
agreement in form and substance reasonably satisfactory to TIANWEI in respect of
such Security Entitlement and the Securities Account to which the underlying
Financial Asset is credited and will deliver such control agreement to TIANWEI
(which shall enter into the same).  Thereafter, whenever HOKU acquires
any other Security Entitlement, HOKU will promptly (and in any event within 20
business days) upon TIANWEI’s request, cause the underlying Financial Asset to
be credited to a Securities Account that is subject to a control agreement in
form and substance reasonably satisfactory to TIANWEI for the benefit of
TIANWEI.

    
      
         

      

      
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    (e)        Promptly
(and in any event within 20 business days) upon the request of TIANWEI, HOKU
will, with respect to each Deposit Account (other than the Excluded Accounts)
and Commodity Account then maintained by it, enter into (and cause the relevant
depositary bank and Commodity Intermediary to enter into) a control agreement in
form and substance reasonably satisfactory to TIANWEI in respect of such Deposit
Account or Commodity Account, as applicable, and will deliver such control
agreement to TIANWEI (which shall enter into the same).  Thereafter,
whenever HOKU establishes any other Deposit Account (other than the Excluded
Accounts) or Commodity Account, HOKU will promptly (and in any event within 20
business days) upon TIANWEI’s request, cause the relevant depositary bank and
Commodity Intermediary to enter into a control agreement in form and substance
reasonably satisfactory to TIANWEI over such Deposit Account or Commodity
Account for the benefit of TIANWEI.

     

    (f)        Promptly
(and in any event within 20 business days) upon the request of TIANWEI, HOKU
will sign and deliver to TIANWEI, and have recorded, any and all arrangements,
instruments, documents and papers as TIANWEI may require to evidence TIANWEI’s
security interest in any Copyright, Patent or Trademark and the goodwill and the
General Intangibles of HOKU relating thereto or represented
thereby.

     

    (g)        HOKU
shall not, except upon 15 days’ prior written notice to TIANWEI and delivery to
TIANWEI of all additional executed financing statements and other documents
reasonably requested by TIANWEI to maintain the validity, perfection and
priority of the security interests provided for herein, (a) change its
jurisdiction of organization or the location of its chief executive office or
sole place of business or principal residence or (b) change its
name.

     

    (h)        TIANWEI
acknowledges and agrees that the Lien on and security interest in the Collateral
will be a second priority security interest, expressly subordinated to HOKU’s
third-party lenders, which lenders may affiliates of HOKU, that provide debt
financing (the “Senior
Lenders”) for the construction of any HOKU Facility (including but not
limited to the lenders party to the Loan Contracts), and may be subordinated as
a matter of law to other security interests.  If required by the
Senior Lenders, TIANWEI shall enter into subordination agreements with the
Senior Lenders to more fully effectuate the subordination provided for in the
previous sentence, on terms and conditions reasonably acceptable to the Senior
Lenders.

    
      
         

      

      
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    (i)        TIANWEI
shall enter into collateral, intercreditor and other agreements (the “Collateral
Agreements”) with HOKU’s Senior Lenders and with Hoku’s other customers
who provide prepayments for Products (collectively, “HOKU’s Other
Customers”), as may be reasonably necessary to ensure that the security
interest and Lien granted hereby is pari passu with the security interests that
may be granted to HOKU’s Other Customers.  TIANWEI may not
unreasonably refuse to sign any such Collateral Agreement, provided that such
Collateral Agreement establishes that TIANWEI’s security interest created
hereunder has pari passu priority with the security interests securing HOKU’s
obligations with respect to HOKU’s Other Customers, and is expressly
subordinated to the Senior Lenders.

     

    (j)        When
HOKU shall have paid the Secured Obligations in full, the security interest in
and the Lien on the Collateral created hereunder shall
terminate.  Upon any sale or other disposition of Collateral in a
transaction entered into by HOKU in the ordinary course of business, including
the sale of inventory to HOKU’s Other Customers, the security interest in and
Lien on such Collateral shall automatically be released.  Upon
termination of this Agreement, TIANWEI shall, upon the request and at the sole
cost and expense of HOKU, assign, transfer and deliver to HOKU, against receipt
and without recourse to or warranty by TIANWEI, such of the Collateral to be
released (in the case of a release) as may be in possession of TIANWEI and as
shall not have been sold or otherwise applied pursuant to the terms hereof, and,
with respect to any other Collateral, proper documents and instruments
(including UCC-3 termination statements) acknowledging the termination of this
Agreement and the Lien on the Collateral hereunder or the release of such
Collateral, as the case may be.

     

    SECTION
4.  Remedies.  If
TIANWEI terminates the Supply Agreement pursuant to Sections 9.2.1, 9.2.2,
9.2.3, 9.2.4, 9.2.5 or 12 thereof:

     

    (a)        If
following termination of the Supply Agreement by TIANWEI, HOKU fails to pay the
amounts payable by HOKU under Section 9 of the Supply Agreement within ten days,
TIANWEI may thereupon exercise from time to time, any and all rights and
remedies of a secured party under the UCC (whether or not in effect in the
jurisdiction where such rights are exercised) or any applicable laws in effect
in any jurisdiction where any rights and remedies may be asserted and any and
all rights and remedies available to it as a result of this Agreement or the
Supply Agreement including, without limitation, the right, to the maximum extent
permitted by law, to exercise all voting, consensual and other powers of
ownership pertaining to the Collateral as if it were the sole and absolute owner
thereof (and HOKU agrees to take all actions as TIANWEI may deem to be required
or appropriate to give effect to such right);

    
      
         

      

      
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    (b)        TIANWEI
may upon ten days’ prior written notice to HOKU of the time and place, with
respect to the Collateral or any part thereof that shall then be or shall
thereafter come into the possession, custody or control of TIANWEI or any of its
agents, sell, lease, assign or otherwise dispose of all or any part of the
Collateral, at such place or places as TIANWEI deems best, and for cash or for
credit or for future delivery, at public or private sale, without demand of
performance or notice of intention to effect any such disposition or of the time
or place thereof (except such notice as is required above or by applicable
statute and cannot be waived), and TIANWEI or any one else may be the purchaser,
lessee, assignee or recipient of any or all of the Collateral so disposed of at
any public sale (or, to the extent permitted by law, at any private sale) and
thereafter hold the same absolutely free from any claim or right of whatsoever
kind, including any right or equity of redemption (statutory or otherwise) of
HOKU, any such demand, notice (other than the notice specified above) and right
or equity being hereby expressly waived and released.  TIANWEI may,
without notice or publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at the time and place
fixed for the sale, and such sale may be made at any time or place to which the
sale may be so adjourned.  With respect to that portion of the
Collateral consisting of “securities” (as defined in Section 8-102(a)(15) of the
UCC), the parties acknowledge and agree that if such Collateral may be sold on a
nationally recognized market, TIANWEI need not furnish HOKU with notice of its
intention to sell such Collateral;

     

    (c)        TIANWEI
may (and to the extent that action by it is required, HOKU will as promptly as
practicable) cause the Collateral (or any portion thereof specified in such
direction) to be transferred of record into the name of TIANWEI or its
nominee.  HOKU will take any and all actions reasonably requested by
TIANWEI to facilitate compliance with this Section 4(c).  If the
provisions of this Section 4(c) are implemented, Sections 3(c) and 3(d) shall
not thereafter apply to any such pledged Collateral that is registered in the
name of TIANWEI or its nominee.  TIANWEI will promptly give to HOKU
copies of any notices and other communications received by TIANWEI with respect
to such pledged Collateral registered in the name of TIANWEI or its
nominee;

     

    (d)        For
the purpose of enabling TIANWEI to exercise rights and remedies under this
Agreement at such time as TIANWEI shall be lawfully entitled to exercise such
rights and remedies, HOKU hereby grants to TIANWEI an irrevocable license
(exercisable without payment of royalty or other compensation to HOKU), to use,
license or sublicense any of the Collateral consisting of Intellectual Property
now owned or hereafter acquired by HOKU, and including in such license access to
all media in which any of the licensed items may be recorded or stored and to
all computer software and programs used for the compilation or printout
thereof.  The use of such license by TIANWEI may be exercised only
upon the termination of the Supply Agreement pursuant to Sections 9.2.1, 9.2.2,
9.2.3, 9.2.4, 9.2.5 or 12 thereof; provided that any license,
sublicense or other transaction entered into by TIANWEI in accordance herewith
shall be binding upon HOKU notwithstanding any subsequent reinstatement of the
Supply Agreement.

    
      
         

      

      
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    (e)        HOKU
recognizes that, by reason of certain prohibitions contained in the Securities
Act of 1933, as amended from time to time, and applicable state securities laws,
or other laws, or because of certain provisions in the organizational documents
of Investment Property, TIANWEI, in the exercise of its rights and remedies upon
the occurrence of any of the events set forth in this Section 4 may, with
respect to any sale of all or any part of the Collateral, limit purchasers to
Persons who are not United States persons and/or who will agree, among other
things, to acquire the Collateral for their own account, for investment and not
with a view to the distribution or resale thereof and who otherwise satisfy
applicable legal and contractual restrictions on the transfer of such
Collateral.  HOKU acknowledges that any such restricted or private
sales may be at prices and on terms less favorable to HOKU than those obtainable
through a public sale without such restrictions, but agrees that such sales are
commercially reasonable so long as sales to TIANWEI or any of its affiliates are
based on arm’s length terms consistent with industry practice.  HOKU
further acknowledges that any specific disclaimer of any warranty of title or
the like by TIANWEI, will not be considered to adversely affect the commercial
reasonableness of any sale of Collateral; and

     

    (f)        TIANWEI
shall incur no liability as a result of the sale of the Collateral, or any part
thereof, at any private sale pursuant to this Section 4 conducted in a
commercially reasonable manner.  HOKU hereby waives any claims against
TIANWEI arising by reason of the fact that the price at which the Collateral may
have been sold at such a private sale was less than the price that might have
been obtained at a public sale or was less than the aggregate amount of the
Total Deposit, even if TIANWEI accepts the first offer received and does not
offer the Collateral to more than one offeree.  HOKU shall remain
liable for any deficiency if the proceeds of any sale or other disposition of
the Collateral are insufficient to pay the Secured Obligations and the fees and
disbursements of any attorney employed by TIANWEI to collect such
deficiency.

     

    SECTION
5.  Authority to
Administer Collateral.  HOKU irrevocably appoints TIANWEI its
true and lawful attorney, with full power of substitution, in the name of HOKU
or otherwise, for the sole use and benefit of TIANWEI, but at HOKU’s expense, to
the extent permitted by law to exercise, at any time and from time to time after
TIANWEI terminates the Supply Agreement pursuant to Sections 9.2.1, 9.2.2,
9.2.3, 9.2.4, 9.2.5 or 12 thereof, all or any of the following powers with
respect to all or any of HOKU’s Collateral:

     

    (a)           to
demand, sue for, collect, receive and give acquittance for any and all monies
due or to become due upon or by virtue thereof;

     

    (b)           to
settle, compromise, compound, prosecute or defend any action or proceeding with
respect thereto;

     

    (c)           to
sell, lease, license or otherwise dispose of the same or the proceeds or avails
thereof, as fully and effectually as if TIANWEI was the absolute owner thereof;
and

    
      
         

      

      
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    (d)           to
extend the time of payment of any or all thereof and to make any allowance or
other adjustment with reference thereto;

     

    provided that, except in the
case of Collateral that is perishable or threatens to decline speedily in value
or is of a type customarily sold on a recognized market, TIANWEI will give HOKU
at least ten days’ prior written notice of the time and place of any public sale
thereof or the time after which any private sale or other intended disposition
thereof will be made.  Any such notice shall (i) contain the
information specified in UCC Section 9-613, (ii) be Authenticated and (iii) be
sent to the parties required to be notified pursuant to UCC Section 9-611(c);
provided further that if TIANWEI fails
to comply with this sentence in any respect, its liability for such failure
shall be limited to the liability (if any) imposed on it as a matter of law
under the UCC.

     

    SECTION
6.  Limitation on
Duty in Respect of Collateral.  Beyond the exercise of
reasonable care in the custody and preservation thereof, TIANWEI will have no
duty as to any Collateral in its possession or control or in the possession or
control of any sub-agent or bailee or any income therefrom or as to the
preservation of rights against prior parties or any other rights pertaining
thereto.  TIANWEI will be deemed to have exercised reasonable care in
the custody and preservation of the Collateral in its possession or control if
such Collateral is accorded treatment substantially equal to that which it
accords its own property, and will not be liable or responsible for any loss or
damage to any Collateral, or for any diminution in the value thereof, by reason
of any act or omission of any sub-agent or bailee selected by TIANWEI in good
faith, except to the extent that such liability arises from TIANWEI’s gross
negligence or willful misconduct.

     

    SECTION
7.  Notices.  Each
notice, request or other communication given to any party hereunder shall be
given in accordance with Section ____ of the Supply Agreement.

     

    SECTION
8.  No Implied
Waivers; Remedies Not Exclusive.  No failure by TIANWEI to
exercise, and no delay in exercising and no course of dealing with respect to,
any right or remedy hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise by TIANWEI of any right or remedy hereunder preclude
any other or further exercise thereof or the exercise of any other right or
remedy.  The rights and remedies specified hereunder are cumulative
and are not exclusive of any other rights or remedies provided by
law.

     

    SECTION
9.  Successors and
Assigns.  This Agreement is for the benefit of TIANWEI and
shall not be assigned or otherwise transferred by HOKU without the express
written consent of TIANWEI.  If all or any part of TIANWEI’s interest
hereunder is assigned or otherwise transferred, the transferor’s rights
hereunder, to the extent applicable to the obligation so transferred, shall be
automatically transferred with such obligation.  This Agreement shall
be binding on HOKU and its successors and assigns.

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    SECTION
10.  Amendments and
Waivers.  Neither this Agreement nor any provision hereof may
be waived, amended, modified or terminated except pursuant to an agreement or
agreements in writing entered into by TIANWEI.  No such waiver,
amendment or modification shall be binding upon HOKU, except with its written
consent.

     

    SECTION
11.  Choice of
Law.  This Agreement shall be construed in accordance with and
governed by the laws of the State of New York, except as otherwise required by
mandatory provisions of law and except to the extent that remedies provided by
the laws of any jurisdiction other than the State of New York are governed by
the laws of such jurisdiction.

     

    SECTION
12.  Waiver of Jury
Trial.  EACH PARTY HERETO WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY
LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO ANY
SECURITY DOCUMENT OR ANY TRANSACTION CONTEMPLATED THEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.

     

    SECTION
13.  Severability.  If
any provision of this Agreement is invalid or unenforceable in any jurisdiction,
then, to the fullest extent permitted by law, (i) the other provisions of this
Agreement shall remain in full force and effect in such jurisdiction and shall
be liberally construed in favor of TIANWEI in order to carry out the intentions
of the parties hereto as nearly as may be possible and (ii) the invalidity or
unenforceability of such provision in such jurisdiction shall not affect the
validity or enforceability thereof in any other jurisdiction.

     

    [Remainder of page is intentionally
blank]

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, the parties hereto
have caused this Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.

    

    
      
        	
                TIANWEI
      NEW ENERGY (CHENGDU) WAFER CO., LTD.

              	 
      	
                HOKU
      MATERIALS, INC.

              
	 
      	 
      	 
      	 
      	 
      
	
                By:

              	 
      	 
      	
                By:

              	 
      
	 
      	 
      	 
      	 
      	 
      
	
                Name:  

              	 
      	 
      	
                Name:  

              	 
      
	 
      	 
      	 
      	 
      	 
      
	
                Title:

              	 
      	 
      	
                Title:

              	 
      

      

    

    
      
         

      

      
        13Exhibit
10.113

     

    December
22,
2009          

    

    Hoku
Scientific, Inc.

    1288 Ala
Moana Blvd., Suite 220

    Honolulu,
Hawaii 96814, USA

    

    Hoku
Materials, Inc.

    1288 Ala
Moana Blvd., Suite 220

    Honolulu,
Hawaii 96814, USA

    

    
      	
              Re: 

            	
              Loan
      Implementation Agreement

            

    

    

    Ladies
and Gentlemen:

    

    Reference
is made to the Securities Purchase Agreement (the “Securities Purchase
Agreement”) dated as of September 28, 2009 between Tianwei New Energy
Holdings Co., Ltd., a corporation organized under the laws of the People’s
Republic of China (“Tianwei”) and Hoku Scientific,
Inc., a Delaware corporation (the “Company”).  Capitalized
terms used and not defined in this letter agreement shall have the meanings
given to them in the Securities Purchase Agreement unless specified
otherwise.

    

    1.      Loan
Implementation.  Pursuant to Section 5.12 of the Securities
Purchase Agreement, Tianwei has agreed to cause the Bank to provide the Company
with $50,000,000 in aggregate debt financing (the “Debt
Financing”).  For good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged and accepted, and intending to
be legally bound hereby, the parties hereto hereby agree to implement the Debt
Financing as follows:

     

    (a)       The
Debt Financing shall be provided to the Company through the Bank in two
tranches: a loan in the amount of $20,000,000 (the “Tranche 1 Loan”) and a loan in
the amount of $30,000,000 (the “Tranche 2 Loan”).

     

    (b)      Within
two (2) Business Days after the completion of all actions by or in respect of or
filings with any Governmental Authority required to permit the consummation of
the Tranche 1 Loan, including the approval by the State Administration of
Foreign Exchange of the PRC and the issuance of the related approval
certificate, (i) each of Tianwei and the Company shall, and Tianwei shall cause
the Bank to, execute and deliver an Entrustment Loan Contract in the form
attached hereto as Exhibit A (and,
subject to Section 8.15 of the Securities Purchase Agreement, a Chinese
translation thereof, reasonably acceptable to Tianwei and the Company) (the
“Tranche 1 Loan
Contract”), and (ii) each of Tianwei, the Company and Hoku Materials
shall execute and deliver a Security Agreement in the form attached hereto as
Exhibit B and a
Mortgage in the form attached hereto as Exhibit C (together,
the “Security
Agreements”) and a Parent Indemnity and Subsidiary Guarantee in the form
attached hereto as Exhibit D (the “Parent Indemnity and Subsidiary
Guarantee”). Each of Tianwei and the Company agrees to use best efforts
to cause the Tranche 1 Loan Contract to be executed and delivered, upon the
terms and subject to the conditions set forth herein, within twenty (20)
Business Days after the Closing Date. Upon the terms and subject to the
conditions set forth in the Tranche 1 Loan Contract, and subject to the further
condition that the security interest and/or liens set forth or created in the
Security Agreements shall have been perfected pursuant to Applicable Laws,
Tianwei shall advance the Tranche 1 Loan to the Company through the
Bank.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (c)      Within
two (2) Business Days after the completion of all actions by or in respect of or
filings with any Governmental Authority required to permit the consummation of
the Tranche 2 Loan, including the approval by the State Administration of
Foreign Exchange of the PRC and the issuance of the related approval
certificate, each of Tianwei and the Company shall, and Tianwei shall cause the
Bank to, execute and deliver an Entrustment Loan Contract in the form attached
hereto as Exhibit
E (and, subject to Section 8.15 of the Securities Purchase Agreement, a
Chinese translation thereof, reasonably acceptable to Tianwei and the Company)
(the “Tranche 2 Loan
Contract;” and together with the Tranche 1 Loan Contract, the “Loan Contracts”). Each of
Tianwei and the Company agrees to use best efforts to cause the Tranche 2 Loan
Contract to be executed and delivered, upon the terms and subject to the
conditions set forth herein, within sixty (60) calendar days after the Closing
Date. Upon the terms and subject to the conditions set forth in the Tranche 2
Loan Contract, Tianwei shall advance the Tranche 2 Loan to the Company through
the Bank.

     

    (d)      Each
of the Company and Hoku Material agrees to, from time to time upon the request
of Tianwei, execute and deliver such further documents and diligently perform
such other acts and things in any jurisdiction as Tianwei may reasonably request
to fully effect the purposes of the Loan Contracts and the Parent Indemnity and
Subsidiary Guarantee or to further assure the priority status of the security
interests and liens created pursuant to the Security Agreements.

     

    2.      Amendment to Securities
Purchase Agreement.  Tianwei and the Company hereby agree that
the Securities Purchase Agreement is hereby amended as follows:

     

    (a)      The
definition of “Entrustment Loan Contract” set forth in Section 1.01 of the
Securities Purchase Agreement is amended and restated as follows:

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    “Entrustment Loan Contract”
means the Tranche 1 Loan Contract and the Tranche 2 Loan Contract (as each such
term is defined the letter agreement dated as of the Closing Date among Buyer,
the Company and Hoku Materials).”

     

    (b)      Section
3.02 of the Securities Purchase Agreement is amended and restated in its
entirety as follows:

     

    “Section
3.02.  Corporate
Authorization.  The execution, delivery and performance by the
Company of this Agreement and the other Transaction Documents and the
consummation by the Company of the transactions contemplated hereby and thereby
are within the Company’s corporate powers and have been duly authorized by all
necessary corporate action on the part of the Company.  Prior to the
date hereof, the Company has obtained the written approval of NASDAQ with
respect to the consummation of the transactions contemplated by this Agreement
by the Company without obtaining the approval of the Company’s stockholders
pursuant to NASDAQ Listing Rule 5635(f) (the “NASDAQ
Exemption”).  The Company has heretofore made available to
Buyer a complete and correct copy of the NASDAQ Exemption.  In
reliance on the NASDAQ Exemption, no approval of the stockholders of the Company
is required in connection with the consummation of the transactions contemplated
by this Agreement.  This Agreement has been, the other Transaction
Documents (other than the Entrustment Loan Contract) will be at the Closing, and
the Entrustment Loan Contract will be upon the execution and delivery thereof,
duly executed and delivered by the Company and, assuming the due authorization,
execution and delivery by Buyer, this Agreement constitutes, and the other
Transaction Documents (other than the Entrustment Loan Contract) will constitute
at the Closing, and the Entrustment Loan Contract will constitute upon the
execution and delivery thereof, legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms, except that such enforceability (i) may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws, now
or hereafter in effect, affecting or relating to creditors’ rights and remedies
generally and (ii) is subject to general principles of equity.”

     

    (c)       Section
4.02 of the Securities Purchase Agreement is amended and restated in its
entirety as follows:

     

    “Section
4.02.  Corporate
Authorization.  The execution, delivery and performance by
Buyer of this Agreement and the other Transaction Documents and the consummation
by Buyer of the transactions contemplated hereby and thereby are within Buyer’s
corporate powers and have been duly authorized by all necessary corporate action
on the part of Buyer. This Agreement has been, and the other (other than the
Entrustment Loan Contract) will be at the Closing, and the Entrustment Loan
Contract will be upon the execution and delivery thereof, duly executed and
delivered by Buyer and, assuming the due authorization, execution and delivery
by the Company, this Agreement constitutes, and the other Transaction Documents
(other than the Entrustment Loan Contract) will constitute at the Closing, and
the Entrustment Loan Contract will constitute upon the execution and delivery
thereof, legal, valid and binding obligations of Buyer, enforceable against
Buyer in accordance with their respective terms, except that such enforceability
(i) may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws, now or hereafter in effect, affecting or
relating to creditors’ rights and remedies generally and (ii) is subject to
general principles of equity.”

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (d)       Section
6.02(e) of the Securities Purchase Agreement is amended and restated in its
entirety as follows:

     

    “(e)     (i)
The Company shall have executed and delivered to Buyer the Investor Rights
Agreement, (ii) Hoku Materials shall have executed and delivered to Buyer the
Supply Agreement Amendments and (iv) the current directors and executive
officers of the Company shall have executed and delivered to Buyer the Lock-Up
Agreements.”

     

    (e)      Section
6.03(d) of the Securities Purchase Agreement is amended and restated in its
entirety as follows:

     

    “(d)     Buyer
shall have executed and delivered to the Company the Investor Rights Agreement
and the Supply Agreement Amendments.”

     

    3.      Miscellaneous.

     

    (a)      Hoku
Materials hereby represents and warrants to Tianwei that the purpose of the Debt
Financing is in compliance with laws and regulations, and the project relating
to which the Debt Financing is to be used has been approved by the competent
Governmental Authorities if necessary.

     

    (b)      If
any provision contained in this letter agreement shall for any reason be held
invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provisions of this
letter agreement, but this letter agreement shall be construed as if such
invalid, illegal or unenforceable provision had never been contained
herein.

     

    (c)      This
letter agreement shall be binding upon and shall inure to the benefit of and be
enforceable by each of the parties hereto and their respective successors and
permitted assigns (but no other persons).  Any assignment by the
Company or Hoku Materials of any of its rights or obligations under this letter
agreement shall be subject to the prior written consent of Tianwei.

     

    (d)      No
amendment or waiver of any provision of this letter agreement shall be binding
unless executed in writing by each of the parties hereto.  No oral
amendments or modifications of this letter agreement shall be binding between
the parties.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    (e)      This
letter agreement together with the Loan Contracts, Security Agreements and the
Parent Indemnity and Subsidiary Guarantee constitutes the entire agreement
between the parties hereto pertaining to the subject matter hereof.

     

    (f)       This
letter agreement shall be governed by and construed in accordance with the law
of the State of New York, without regard to the conflicts of law rules of such
state.

     

    [Remainder of page is intentionally
blank]

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    
      
        
          
            
              
                	Very
      truly yours,
	 	 
      	 
      
	 	
                        TIANWEI
      NEW ENERGY

                        HOLDINGS
      CO., LTD

                      
	 	 
      	 
      
	 	
                        By:

                      	
                          /s/
      Qiang Ding

                      
	 	 
      	
                        Title:
      Legal
Representative

                      

              

            

          

        

      

    

     

    Agreed
and accepted:

     

    
      
        
          	
                  HOKU
      SCIENTIFIC, INC.

                
	 
      	 
      
	
                  By:

                	
                    /s/
      Dustin M. Shindo

                
	 
      	
                  Title:
      President and CEO

                

        

      

    

    

    
      
        
          	
                  HOKU
      MATERIALS, INC.

                
	 
      	 
      
	
                  By:

                	
                    /s/
      Dustin M. Shindo

                
	 
      	
                  Title:
      President and CEO

                

        

      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    [English
Translation of Tranche 1 Entrustment Loan Contract]

    

    EXHIBIT A
TO

    LOAN IMPLEMENTATION
AGREEMENT

    

    among

    

    HOKU
SCIENTIFIC, INC.

    

    as
Borrower

    

    TIANWEI
NEW ENERGY HOLDINGS CO., LTD.

    

    as
Entrusting Lender

    

    and

    

    CHINA
CONSTRUCTION BANK CORPORATION SHUANGLIU SUB-

    BRANCH

    

    as
Agent

    

    
      
        

      

    ENTRUSTMENT
LOAN CONTRACT

     

    
      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    This
Entrustment Loan
Contract (this “Contract”) is entered
into

    

    BY
AND BETWEEN

    

    HOKU SCIENTIFIC, INC. as
borrower, a corporation formed under the laws of the State of Delaware and
located at 1288 Ala Moana Blvd., Suite 220, Honolulu, Hawaii 96814, the United
States of America, its fax number being + 1 808-682-7807 and its telephone
number being + 1 808-682-7800 (“Party A”);

    

    TIANWEI NEW ENERGY HOLDINGS CO.,
LTD. as entrusting lender, located at No 1, Tianwei Road, Southwest
Airport Economic Development Zone, Chengdu, China 610200 with Qiang Ding as its
legal representative (or principal officer), its fax number being
+86-28-6705-0035 and its telephone number being +86-28-6705-0002 (“Party B”); and

    

    CHINA CONSTRUCTION BANK CORPORATION
SHUANGLIU SUB-BRANCH as agent, located at [address, post code] with [•]
as its principal officer, its fax number being [•] and its telephone number
being [•] (“Party
C”);

     

    Party A,
Party B and Party C hereinafter are collectively referred to as the “Parties” and individually as a
“Party”.

    

    WHEREAS

    

    Upon the
request of Party A, Party B hereby entrusts Party C to release an entrustment
loan to Party A.

    

    NOW,
THEREFORE upon consultation, the Parties hereto agree as follows:

    

    
      	
              1. 

            	
              LOAN
      AMOUNT

            

    

    

    The
amount of the loan that Party B entrusts Party C to release to Party A hereunder
shall be U.S. Dollar TWENTY MILLION (the “Loan”).

    

    
      	
              2. 

            	
              PURPOSE
      OF THE LOAN

            

    

    

    Party A
shall utilize the Loan for the purpose of satisfying vendor payables outstanding
as of the date hereof, payables relating to pilot testing and achieving at least
40 metric tons of solar-grade polysilicon that meet customer specifications at
the polysilicon plant currently being constructed by Hoku Materials, Inc., a
wholly-owned subsidiary of Party A (“Hoku Materials”), in
Pocatello, Idaho, and other uses approved by the board of directors of Party
A.  Party A hereby guarantees that such purpose shall comply with
applicable laws, regulations, rules, and policies of PRC and of the country
where Party A is located.  Party A may not utilize any part of the
Loan for any other purpose without consent of  Party B and a written
notice of such consent to Party C.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              3. 

            	
              TERM
      OF THE LOAN

            

    

    

    The term
of the Loan shall be two years, commencing from the effective date hereof and
expiring on the second anniversary of the effective date hereof (the “Term”).

    

    Where the
above commencement date is inconsistent with the date set forth on the Loan-to
Deposit Certificate (“LDC”, or Loan Receipt), the
date set forth on the LDC for the first advance of the Loan shall be the
commencement date of the Term and the expiry date of the Term shall be adjusted
accordingly.  The LDC shall constitute an integral part of this
Contract and have the equal legal force as this Contract.

    

    
      	
              4.

            	
              INTEREST
      RATE ON THE LOAN, INTEREST CALCULATION AND
  SETTLEMENT

            

    

    

    The
interest rate on the Loan shall be 5.94% per annum (such interest shall be
calculated on a daily basis and the daily interest rate shall equal to the
annual interest rate divided by 360 days).

    

    The
interest on the Loan shall be calculated and settled by the following
methods:

    

    The
interest on the Loan shall be calculated on the basis of the actual number of
days elapsed in a year of 365 days and settled quarterly in arrears at the end
of each quarter of the bank (each, an “interest settlement
date”).

    

    
      	
              5.

            	
              DELIVERY
      OF THE ENTRUSTMENT FUNDS AND RELEASE OF THE
LOAN

            

    

    

    
      
        	  	
                5.1

              	
                Party
      B shall deliver a sufficient amount of the entrustment funds to Party C
      prior to the release date set forth on the Notification to Release
      Entrustment Loan.

              

      

    

    

    
      The
entrustment loan fund account hereunder is not and shall not be construed as
Party B’s deposit account with Party C and the balance therein is not and shall
not be construed as Party B’s deposit balance with Party C.  Such
account is established only for the purpose of Party C’s internal account
treatment and no interest shall accrue on the balance in such
account.

    

    

    
      	  	
              5.2 

            	
              Conditions
      precedent to advance the Loan:

            

    

    

    
      
        	  	
                (1)

              	
                Party
      C has received the entrustment funds, and such funds are free of seizure,
      freezing or mandatory transfer by any competent
  authority;

              

      

    

     

    
      
        	  	
                (2)

              	
                Party
      C has received the Notification to Release Entrustment Loan from Party
      B;

              

      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      
        	  	
                (3)

              	
                Party
      A has opened a special foreign exchange deposit account, where the Loan is
      in a foreign currency;

              

      

    

     

    
      
        	  	
                (4)

              	
                neither
      Party A nor Party B has breached any provision
  herein.

              

      

    

    

    
      	
            	
              5.3

            	
              Where
      the amount of the entrustment funds actually delivered by Party B to Party
      C is less than the amount of the advance agreed to be released, Party C
      may refuse the release.  If Party B has expressly instructed
      Party C in the Notification to Release Entrustment Loan to release the
      loan in the amount of the entrustment funds actually delivered, Party C
      may release the loan to Party A in such  amount as actually
      delivered, and Party A shall not raise any objection
      thereto.

            

    

    

    
      	  	
              5.4

            	
              The
      Loan shall be advanced in accordance with the schedule specified
      below:

            

    

    

    The
advance schedule shall be as follows:

    

    
      
        
          
            
              	 
      	
                      Advance
      Date(d/m/y)

                    	 	
                      Amount

                    
	 
      	 
      	 	 
      
	
                      1

                    	
                      effective
      date of this Contract

                    	 	
                      US$20
      million

                    

            

          

        

      

    

    

    
      	
            	
              5.5

            	
              Where
      Party C fails to release the Loan in accordance with this Contract due to
      any reason attributable to Party B, Party B shall be solely liable to
      Party A for such failure and Party C shall not be liable in any
      way.

            

    

    

    
      	
              6. 

            	
              SECURITY
      FOR THE LOAN

            

    

    

    
      	
               
      

            	
              6.1

            	
              The
      Loan shall be secured in the form of items (1) and (2)
    below

            

    

    

    
      	
               
      

            	
              (1)

            	
              a
      security agreement to be executed by Party A, Party B and Hoku Materials;
      and

            

    

    

    
      	
               
      

            	
              (2)

            	
              a
      mortgage to be executed by Party B, Hoku Materials and Alliance Title
      & Escrow Corp.

            

    

    

    
      	
               
      

            	
              6.2

            	
              Where
      registration is required for the security to be effective or enforceable,
      Party B shall be solely responsible for such
  registration.

            

    

    

    
      	
               
      

            	
              6.3

            	
              Both
      the security provider and the security shall be supervised by Party B
      alone, unless otherwise agreed between Party B and Party C in
      writing.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              7. 

            	
              REPAYMENT

            

    

    

    
      	
               
      

            	
              7.1

            	
              General
      Principles of Repayment

            

    

    

    
      	
               
      

            	
              Unless
      Party A and Party B have agreed otherwise in writing and notified Party C
      of such agreement in writing, Party A’s repayment hereunder shall be in
      the order of interest first and principal second adhering to the principle
      that the interest shall be fully repaid concurrently with the repayment in
      full of all the principal amounts.

            

    

    

    
      	
               
      

            	
              7.2

            	
              Interest
      Payment

            

    

    

    
      	
               
      

            	
              Party
      A shall pay Party B through Party C any due interest on each interest
      settlement date.  The first interest payment date shall be the
      first interest settlement date after advance of the Loan.  All
      the interest and principal amounts outstanding shall be paid in full on
      the date the Term expires.

            

    

    

    
      	
               
      

            	
              7.3

            	
              Principal
      Repayment

            

    

    

    
      	
               
      

            	
              Party
      A shall repay the principal of the Loan in accordance with the following
      schedule:

            

    

    

    
      
        
          
            
              	 
      	
                      Repayment
      Date(d/m/y)

                    	 	
                      Amount

                    
	 
      	 
      	 	 
      
	
                      1

                    	
                      second
      anniversary of the effective date of this Contract

                    	 	
                      US$20
      million

                    

            

          

        

      

    

    

    In case
of any adjustment to the above schedule, Party A and Party B shall enter into a
written agreement and notify Party C in writing of such agreement.

    

    
      	  	
              7.4 

            	
              Repayment
      Method

            

    

    

    Party A
shall deposit a sufficient amount into its bank account at Party C before the
repayment date and each interest settlement date and transfer such amount to
repay the Loan (Party C may also debit such amount from such account to repay
the Loan), or transfer such amount from another bank account of Party A to repay
the Loan.

    

    
      	  	
              7.5 

            	
              Prepayment

            

    

    

    Subject
to the consent between Party A and Party B and a written notice of such consent
being sent to Party C, Party A may prepay all or any part of the principal of
and the interest on the Loan.

    

    The
interest on any principal so prepaid shall be calculated on the basis
of  the number of days actually lapsed and the interest rate specified
herein.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    If Party
A is required to repay the Loan in installments and prepays part of the
principal, the prepaid amount shall be applied in the reverse order of the
repayment schedule.  After partial prepayment, the outstanding Loan
shall still be subject to the interest rate provided herein.

    

    With
respect to any prepaid loan, Party C is not obligated to return any handling
charges that it has previously received.

    

    
      	  	
              7.6 

            	
              Repayment
      through Party C

            

    

    

    
      	
               
      

            	
              (1)

            	
              Party
      A shall make all repayments  through Party C and may not make
      any repayment directly to Party B.  Party C shall promptly
      notify Party B upon its receipt of any repayment from Party
    A.

            

    

    

    
      	
               
      

            	
              Upon
      its receipt of any repayment directly from Party A, Party B shall promptly
      notify Party C thereof and deliver such repayment to Party C for Party C
      to complete appropriate account treatment in accordance with the normal
      repayment procedures.

            

    

    

    
      	
               
      

            	
              (2)

            	
              In
      case of any breach of this Contract by Party A or Party B that renders
      Party C unable to complete appropriate account treatment in a timely and
      accurate manner or unable to perform its tax withholding obligations,
      Party A and Party B shall be jointly and severally liable for any and all
      consequences arising therefrom and for any and all losses suffered by
      Party C.

            

    

    

    
      	  	
              7.7 

            	
              Principles
      of Repayment upon Multiple Loans Due
  Simultaneously

            

    

    

    Where any
proprietary loan provided by Party C to Party A matures concurrently with any
entrustment loan provided by Party C to Party A at the request of Party B, Party
C may apply Party A's repayment to first repay such proprietary loan if
Party A does not designate the order of such repayment, Party C may also debit
any of Party A's accounts with Party C for the purpose of repaying first such
proprietary loan.

     

    Where
there are multiple entrustment loans by Party C to Party A at the request of
Party B and such loans mature concurrently, Party A shall designate the order of
such repayment, failing which Party C may at its sole discretion determine the
order of the repayment.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              8. 

            	
              WITHHOLDING
      OF BUSINESS TAX AND OTHER TAXES

            

    

    

    
      	
               
      

            	
              8.1

            	
              Party
      C may withhold in accordance with applicable laws any business tax and
      other taxes payable by Party B in connection with the entrustment loan
      hereunder.

            

    

    

    
      	
               
      

            	
              8.2

            	
              Party
      A and Party B shall not agree between them that Party A pays the interest
      on the Loan directly to Party B.  In case Party A pays any
      interest directly to Party B, Party C may debit any of Party A’s or Party
      B’s accounts in any currency with Party C for a corresponding amount to
      fully satisfy its tax withholding
obligations.

            

    

    

    
      	
               
      

            	
              8.3

            	
              Where
      Party C fails to perform its withholding obligations due to any reason
      attributable to Party A or Party B, which results in Party C suffering
      penalties by the tax authority, or advancing any tax payment, or incurring
      any other liabilities, Party A and Party B shall be jointly and severally
      liable for full compensation.

            

    

    

    
      	
              9. 

            	
              HANDLING
      CHARGES AND OTHER FEES AND EXPENSES

            

    

    

    
      	
               
      

            	
              9.1

            	
              The
      handling charges under this Contract shall be paid in accordance with Item
      (3) below:

            

    

    

    
      	  	
              (1) 

            	
              by
      Party A.

            

    

     

    
      	  	
              (2) 

            	
              by
      Party B.

            

    

    

    
      	  	
              (3) 

            	
              50%
      by Party A and 50% by Party B.

            

    

    

    
      	
               
      

            	
              9.2

            	
              The
      party obligated to pay the handling charges (the “Payer”) shall punctually
      and fully pay to Party C the handling charges in connection with the Loan
      in accordance with this Section 9, regardless of whether or not Party A
      has repaid the principal, or interest or has committed any other breach
      hereunder.  In case the lender-borrower relationship between
      Party A and Party B or the entrustment relationship between Party B and
      Party C is void, any handling charges received by Party C will not be
      returned. The Payer shall remain obligated to pay any payable and
      outstanding handling charges.

            

    

    

    
      	
               
      

            	
              9.3

            	
              The
      rate, schedule and methods of payment of the handling charges shall be as
      follows:

            

    

    

    
      	
               
      

            	
              The
      handling charges for the Loan shall be 0.2% of the entrusting amount
      (which means the amount released under this Contract) per annum and shall
      be payable in advance in U.S. dollars for the full Term (two years) upon
      the advance of the Loan.  If the Loan is overdue or the Term is
      extended, additional handling charges shall be payable pursuant to the
      then applicable standard rate for handling charges for entrustment
      loan.  The handling charges for the Loan shall be payable
      regardless of whether the principal and interest of the Loan are repaid or
      paid on time.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              9.4

            	
              In
      case the Payer defaults on payment of any handling charges in accordance
      with the above provisions, Party C is entitled to charge a default fee on
      such unpaid handling charges at a rate of 0.1% per day commencing from the
      date of such default, and may also debit any of such Payer’s accounts with
      Party C in any currency for payment of such charges and
    fees.

            

    

    

    
      	
               
      

            	
              9.5

            	
              The
      costs and expenses in association with the legal service, insurance,
      valuation/appraisal, registration, custody, authentication and
      notarization arising in connection with this Contract or the security
      related thereto shall be borne by Party A and Party B in equal
      portions.

            

    

    

    
      	
               
      

            	
              Party
      C shall not bear any costs and expenses hereunder.  Where Party
      C advances any costs and expenses, including without limitation, any
      legal, attorney fees, registration fees, notarization fees and public
      announcement fees, Party A and Party B shall each reimburse Party C half
      of such advances within 10 working days after the issuance by Party C of a
      written notice, or Party C may debit any of Party A’s or Party B’s
      accounts with Party C for such
reimbursement.

            

    

    

    
      	
               
      

            	
              9.6

            	
              Party
      A and Party B shall be jointly and severally liable to Party C in
      connection with obligations as specified in this Section
  9.

            

    

    

    
      	
              10. 

            	
              PARTY
      A’S RIGHTS AND OBLIGATIONS

            

    

    

    
      	  	
              10.1 

            	
              Party
      A’s Rights

            

    

    

    Party A
has the right to:

    

    
      	
               
      

            	
              (1)

            	
              request
      Party B to notify Party C to release the Loan in accordance with this
      Contract;

            

    

    

    
      	
               
      

            	
              (2)

            	
              utilize
      the Loan for the purpose agreed
herein;

            

    

    

    
      	
               
      

            	
              (3)

            	
              subject
      to the requirements of Party B, apply to Party B for an extension of the
      Term and execute an extension agreement with Party B and Party C after its
      application is accepted by both Party B and Party
  C;

            

    

    

    
      	
               
      

            	
              (4)

            	
              require
      both Party B and Party C to keep confidential the relevant information
      furnished by Party A except provided otherwise by law, regulations, rules
      or this Contract; and

            

    

    

    
      	
               
      

            	
              (5)

            	
              reject
      Party B or Party C or any of their employees asking for bribe, and lodge a
      complaint with the competent authority about such misconduct and any other
      act of Party B or Party C that may violate any PRC laws and
      regulations.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	  	
              10.2 

            	
              Party
      A’s Obligations

            

    

    

    
      	
               
      

            	
              (1)

            	
              Party
      A shall utilize the Loan in accordance with the purpose as provided
      herein, and shall not misappropriate any Loan proceeds.  Party A
      shall support and cooperate with Party B in its inspection of Party A’s
      utilization of the Loan proceeds hereunder.  Party A shall
      furnish Party B with its financial and accounting information as well as
      manufacturing and operating information as requested by Party B and shall
      ensure the accuracy, completeness and validity of any information it
      provides.

            

    

    

    
      	
               
      

            	
              (2)

            	
              Party
      A shall promptly notify Party B upon the occurrence of any of the
      following events to Party A:

            

    

    

    
      	
               
      

            	
              (i)

            	
              contracting,
      trustee (receiver) being appointed, lease, shareholding restructuring,
      investment, joint operation, mergers and acquisitions, acquisition and
      restructuring, division, joint venture, applying for temporary cessation
      of operation or dissolution, revocation, applying for
      (or  subject to an application for) bankruptcy, change of
      controlling shareholders/actual controllers, transfer of material assets,
      suspension of production or operation, significant penalty imposed by
      regulatory authorities, cancellation of registration, revocation of
      business license, involvement in material legal proceedings, severe
      deterioration in operation and financial condition, legal
      representative/principal officer being unable to perform their duties;
      or

            

    

     

    
      	
               
      

            	
              (ii)

            	
              any
      change to Party A’s name, legal representative (or principal officer),
      registered address, business scope, registered capital, or articles of
      association or any other registration with industrial and commercial
      authority;

            

    

    

    
      	
               
      

            	
              (3)

            	
              Party
      A shall perform any other obligation of Party A as provided
      herein.

            

    

    

    
      	
              11. 

            	
              PARTY
      B’S RIGHTS AND OBLIGATIONS

            

    

    

    
      	
               
      

            	
              11.1

            	
              As
      the lender hereunder, Party B shall enjoy all the rights and interests as
      a lender and assume all the obligations, responsibilities and risks as a
      lender.

            

    

    

    
      	
               
      

            	
              11.2

            	
              Party
      B shall conduct an independent review of the feasibility and legality of
      the project related to the Loan hereunder, and of the creditworthiness,
      repayment ability, and performance ability of Party A and/or the security
      provider, and shall make an independent judgment and assume any risks that
      may arise from the failure of the recovery of the Loan on time and in
      full.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              11.3

            	
              After
      the release of the Loan, Party B shall continuously supervise Party A’s
      utilization of the Loan and pay close attention to Party A’s operating and
      financial condition and repayment ability, and shall promptly take
      appropriate measures upon the occurrence of any event to Party A that may
      adversely affect the realization of Party B’s creditor’s
      rights.  Party B understands and agrees that Party C has no
      obligation in this respect.

            

    

    

    
      	
               
      

            	
              11.4

            	
              Party
      B’s obligations to Party C hereunder shall not be affected by the failure
      of Party A to repay the principal or interest, nor by any breach of this
      Contract or any violation of law, nor by the invalidity of the
      lender-borrower relationship
hereunder.

            

    

    

    
      	
               
      

            	
              11.5

            	
              Party
      B has the right to inspect and supervise Party A’s utilization of the Loan
      and to request Party A to provide Party A’s financial and accounting
      information as well as manufacturing and operating information and shall
      keep the above information confidential, unless otherwise provided by
      applicable laws, regulations or rules or otherwise required by competent
      authorities.

            

    

    

    
      	
               
      

            	
              11.6

            	
              Upon
      the maturity of the Loan, Party B shall promptly demand payment, bring
      lawsuits against Party A and/or the security provider, apply for
      enforcement, declare creditor’s rights in bankruptcy proceedings, and/or
      take any other remedies permitted by law, as the case may
      be.  Party C shall not be held liable in any way even though it
      is obligated to assist Party B in the recovery of the
  Loan.

            

    

    

    
      	
               
      

            	
              11.7

            	
              Any
      instruction issued by Party B to Party C shall be timely, clear, complete,
      consistent and in compliance with laws and this Contract, otherwise, Party
      C may refuse to follow such instruction.  In the case of such
      refusal, Party B shall be liable for any and all consequences arising
      therefrom.  Party B shall be liable for any and all legal
      consequences arising from any act by Party C pursuant to instructions of
      Party B.

            

    

    

    
      	
               
      

            	
              11.8

            	
              Party
      B shall  not request Party C to issue any deposit certificate
      with respect to any entrustment funds.  Even if Party C issues a
      deposit certificate in any form with respect to any entrustment funds,
      Party B shall  not transfer, pledge or otherwise dispose of such
      deposit certificate and shall return it to Party C prior to Party C’s
      release to Party A of  the Loan.  Party B shall not
      request Party C to make any payment or hold Party C liable by invoking
      such deposit certificate.

            

    

    

    
      	
               
      

            	
              11.9

            	
              Other
      rights and obligations of Party B agreed
herein.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              12. 

            	
              PARTY
      C’S RIGHTS AND OBLIGATIONS

            

    

    

    
      	
               
      

            	
              12.1

            	
              Party
      C shall assist Party B in the supervision of the use by Party A
      of  the Loan  for the agreed
  purposes.

            

    

    

    
      	
               
      

            	
              “Party
      C shall assist Party B in the  supervision” shall mean that, in
      respect of each loan advance, Party C shall provide to Party B with the
      statements of Party A’s deposit account with Party C to which such advance
      has been  credited  for the
      period  commencing from the date of such  advance
      being credited to the date that falls twenty-four months
      thereafter.

            

    

    

    
      	
               
      

            	
              12.2

            	
              Party
      C has the right to provide to Party B any information about Party A
      relating  to the Loan or  to  Party A’s
      deposits, loans and settlement practices with Party
  C.

            

    

    

    
      	
               
      

            	
              12.3

            	
              Party
      C shall not be liable for any dispute between Party B and Party A or for
      any act of Party A or Party B that violates law or
      regulations.

            

    

    

    
      	
               
      

            	
              12.4

            	
              Where
      Party A fails to punctually repay the Loan in full and Party
      C  compensates Party B in accordance with a court judgment or
      arbitral award, any and all the rights of Party B against Party A and/or
      the security provider shall be promptly assigned to Party C.  In
      such case, Party A shall not raise any objection to such assignment and
      shall perform the obligations and liabilities to Party C immediately after
      receipt of a written notice from Party
B.

            

    

    

    
      	
               
      

            	
              12.5

            	
              Party
      C shall assist Party B in the recovery of the Loan in accordance with the
      following provisions:

            

    

    

    
      	
               
      

            	
              (1)

            	
              prior
      to the maturity of the principal of the Loan (including the principal
      payable in installments)

            

    

    

    Party C
shall calculate and settle the interest on the Loan in accordance with the
relevant provisions herein.  After each installment
repayment  by Party A, Party C shall complete appropriate account
treatment and report to Party B about the amount and time of such repayment and
the amount of the outstanding principal and interest.  Following its
receipt of the above financial information reported by Party C, Party B shall
promptly check such information and raise any question about or disagreement to
such information, if any, to Party C within 5 working days.  Party C
shall not be liable for any loss suffered by Party A or Party B arising from the
failure of Party B to raise such question or disagreement as required
above.  If on any interest settlement date Party A fails to pay the
relevant interest on the Loan, Party C shall notify Party B thereof in
writing.

    

    
      	  	
              (2) 

            	
              after
      the maturity of the principal of the
Loan

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              (i)

            	
              If
      Party A repays punctually and in full upon the maturity of the principal
      of the Loan, Party C shall credit  the appropriate account
      following normal procedures and notify Party B thereof in a timely
      manner.  If Party A fails to repay punctually and in full, Party
      C shall notify Party B in writing of such failure and shall, within one
      month thereafter, make demand, once and only once, for repayment by Party
      A .  Party C shall be deemed to have fulfilled its obligation of
      assistance in the recovery of the Loan as long as Party C has issued a
      written demand in accordance with the name, address and telephone fax)
      number provided by Party A or Party B, or there is proof that Party C has
      demanded Party A for repayment  by any other
    means.

            

    

    

    
      	
               
      

            	
              (ii)

            	
              If
      Party B  desires to entrust Party C to continue the
      assistance  in the Loan recovery after all the principal
      matures, it shall execute a separate written entrustment agreement with
      Party C in respect thereof.  Where Party B and Party C fail to
      reach such  agreement within one month after
      such  maturity date, all the obligations of Party C hereunder
      shall automatically terminate forthwith and Party C has the right to write
      off the accounts relating to the
Loan.

            

    

    

    
      	
               
      

            	
              (3)

            	
              Party
      C’s obligations to assist Party B in the recovery of the Loan shall be
      limited to those specified in this
Section.

            

    

    

    
      
        	
              	
                12.6

              	
                Party
      C shall have no obligation to participate in any litigation, arbitration,
      bankruptcy proceedings relating to the Loan and the security related
      thereto, nor shall it have any obligation towards Party B to dispose of
      any debt-offsetting assets.

              

      

    

    

    
      	
              13. 

            	
              EVENT
      OF DEFAULT AND LIABILITIES

            

    

    

    
      
        	  	
                13.1

              	
                Party
      A’s Events of Default and
Liabilities

              

      

    

    

    
      
        	  	
                (1)

              	
                Any
      of the following events shall constitute an event of default of Party
      A:

              

      

    

    

    
      	
               
      

            	
              (i)

            	
              any
      breach by Party A of any provision of this Contract, and in the case of
      any breach other than breach of any of Sections 2, 4, 7.2 and 7.3, Party A
      fails to cure such breach within fifteen (15) working days of receipt of
      written notice from Party B or Party C;
and

            

    

    

    
      	
               
      

            	
              (ii)

            	
              any
      event that in the reasonable opinion of Party B may adversely affect the
      realization of its creditor’s rights
hereunder.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      
        	  	
                (2)

              	
                Party
      A’s liabilities for default:

              

      

    

    

    Upon the
occurrence of any of the above events, Party B may adopt any one or more of the
following remedial measures:

    

    
      	
               
      

            	
              (i)

            	
              request
      Party A to remedy its default within a specified time
    limit;

            

    

    

    
      	
               
      

            	
              (ii)

            	
              notify
      Party C to suspend  the part of the Loan yet to be
      released;

            

    

    

    
      	
               
      

            	
              (iii)

            	
              charge
      default interest (if any) as provided
herein;

            

    

    

    
      	
               
      

            	
              (iv)

            	
              accelerate
      the maturity of all principal and interests and demand immediate payment
      by Party A; and

            

    

    

    
      	
               
      

            	
              (v)

            	
              any
      other remedial measures permitted by
law.

            

    

    

    
      	  	
              13.2 

            	
              Party
      B’s Events of Default and Liabilities for
  Default

            

    

    

    
      	
               
      

            	
              (1)

            	
              Any
      of the following events shall constitute an event of default of Party
      B:

            

    

    

    
      	
               
      

            	
              (i)

            	
              failure
      of Party B to deliver sufficient entrustment funds to Party C in a timely
      manner, or failure of release of the Loan as provided
      herein  for any other reason attributable to Party
      B;

            

    

    

    
      	
               
      

            	
              (ii)

            	
              the
      source of entrustment funds being in violation of law or regulations, or
      any representation or warranty of Party B being false, inaccurate or
      incomplete;

            

    

    

    
      	
               
      

            	
              (iii)

            	
              failure
      of Party B to pay Party C punctually and fully any Loan handling charges;
      and

            

    

    

    
      	
               
      

            	
              (iv)

            	
              any
      breach by Party B of any other provision
herein.

            

    

    

    
      	
               
      

            	
              (2)

            	
              Party
      B’s liabilities for default:

            

    

    

    
      	
               
      

            	
              (i)

            	
              Upon
      the occurrence of an event of default of Party B, Party A has the right to
      request Party B to remedy such default within a specified time limit and
      to compensate losses and/or take any other remedial
    measures.

            

    

    

    
      	
               
      

            	
              (ii)

            	
              Party
      C has the right to adopt any one or more of the following remedial
      measures upon the occurrence of any event of default of Party
      B:

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              (A)

            	
              request
      Party B to remedy its default within a specified time
    limit;

            

    

    

    
      	
               
      

            	
              (B)

            	
              refuse
      to provide  entrustment loan  services for Party
      B;

            

    

    

    
      	
               
      

            	
              (C)

            	
              directly
      debit any account of Party B for handling
  charges;

            

    

    

    
      	
               
      

            	
              (D)

            	
              request
      Party B to compensate losses;

            

    

    

    
      	
               
      

            	
              (E)

            	
              terminate
      the entrustment relationship between Party B and Party C;
    and

            

    

    

    
      	
               
      

            	
              (F)

            	
              any
      other measures permitted by law.

            

    

    

    
      	  	
              13.3 

            	
              Party
      C’s Events of Default and Liabilities for
  Default:

            

    

    

    
      	
               
      

            	
              (1)

            	
              If
      Party C delays without any justifiable reason in releasing the Loan to
      Party A after Party B delivers sufficient entrustment funds to Party C in
      accordance with this Contract, Party B has the right to request Party C to
      release the Loan immediately.

            

    

    

    
      	
               
      

            	
              (2)

            	
              If
      Party C fails to perform its obligations to assist Party B in the recovery
      of the Loan in accordance with this Contract, which results in Party B
      being unable to punctually recover the principal and the interest on the
      Loan, and Party B is not at fault, Party C shall to the extent of and in
      proportion to Party C’s fault be liable for direct losses suffered by
      Party B.

            

    

    

    
      	
              14. 

            	
              REPRESENTATIONS
      AND WARRANTIES

            

    

    

    
      	  	
              14.1

            	
              Party
      A hereby represents and warrants as
follows:

            

    

    

    
      	
               
      

            	
              (1)

            	
              it
      has read all the provisions in this Contract and fully knows and
      understands the meaning and legal consequences
  thereof;

            

    

    

    
      	
               
      

            	
              (2)

            	
              the
      execution and performance of this Contract by Party A is in compliance
      with laws of the country in which Party A is located, administrative
      regulations, rules and Party A’s certificate of incorporation and bylaws
      and has been approved by its board of directors and, if necessary, the
      competent government authorities of the country where Party A is located;
      and

            

    

     

    
      	
               
      

            	
              (3)

            	
              the
      purpose of the Loan is in compliance with laws and regulations, and the
      project relating to which the Loan is to be used has been approved by the
      competent authorities if necessary.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	  	
              14.2 

            	
              Party
      B hereby represents and warrants as
follows:

            

    

    

    
      	
               
      

            	
              (1)

            	
              it
      has the legal qualification to entrust any other person to release the
      Loan;

            

    

    

    
      	
               
      

            	
              (2)

            	
              the
      entrustment fund comes from legal sources and not from bank financing, nor
      from corporate or public funds deposited in the name of an individual, nor
      from any fund that is prohibited from being used for entrustment loan
      purposes under applicable laws, regulations or
  rules;

            

    

    

    
      	
               
      

            	
              (3)

            	
              it
      has the lawful right and has been approved by competent authorities to
      dispose of the entrustment funds;
and

            

    

    

    
      	
               
      

            	
              (4)

            	
              grant
      of the Loan is not for the purpose of violation or evasion of any PRC
      laws, regulations, rules or regulatory measures, and does not cause any
      damage to any lawful interests of the State, any collective organization
      or any third party.

            

    

    

    
      	
              15.

            	
              MISCELLANEOUS

            

    

    

    
      	  	
              15.1 

            	
              Direct
      Debit Right

            

    

    

    Party C
is entitled to debit, without prior notice to either Party A or Party B, any
account of Party A or Party B at China Construction Bank in RMB or other
currencies to pay all amounts payable to Party C by Party A or Party B under
this Contract.  Party A or Party B shall assist Party C to complete
any procedures for foreign exchange settlement or sale, and Party A or Party B
shall bear the risk of exchange rate fluctuation.

     

    
      	
               
      

            	
              15.2

            	
              Party
      C’s Records as Evidence

            

    

    

    Unless
there is any reliable and definitive evidence to the contrary, Party C’s
internal records of principal, interest, expenses and repayment, receipts,
vouchers made or retained by Party C during the course of drawdown, repayment,
interest payment, and records and vouchers relating to collections by Party C
shall constitute valid evidence of the creditor-debtor relationship between
Party A and Party B and the performance of obligations by Party C. Party A and
Party B hereby agree that they shall not raise any objection
thereto.

     

    
      	
               
      

            	
              15.3

            	
              Assignment
      and Succession

            

    

    

    
      	
               
      

            	
              (1)

            	
              Any
      assignment by Party A of any of its rights or obligations hereunder shall
      be subject to the written consent of both Party B and Party
    C.

            

    

    

    
      	
               
      

            	
              (2)

            	
              Any
      assignment by Party B of any of its rights or obligations hereunder shall
      be subject to the written consent of Party
C.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              (3)

            	
              Any
      assignment by Party C of any of its rights or obligations hereunder shall
      be subject to the written consent of Party B; provided however that, in
      case of any merger, division, setting up subsidiaries or organizational or
      business function restructuring of China Construction Bank, Party C’s
      rights and obligations hereunder may be assigned to or succeeded by a
      third party with  legal qualification to operate entrustment
      loan business as long as Party C issues a notice to Party A and Party B
      through correspondence, telephone or press
  release.

            

    

    

    
      	  	
              15.4 

            	
              Consequences
      of Invalidity or Rescission

            

    

    

    In case
the entrustment relationship and/or lender-borrower relationship hereunder
are/or is invalid or rescinded pursuant to any law,

    

    
      	
               
      

            	
              (1)

            	
              If
      the entrustment relationship between Party B and Party C is valid while
      the lender-borrower relationship between Party A and Party B is invalid or
      rescinded, Party C shall not be held liable,
and

            

    

    

    
      	
               
      

            	
              (i)

            	
              where
      Party C has not delivered the entrustment funds to Party A, it shall
      return the entrustment funds to Party B without any
    interest;

            

    

    

    
      	
               
      

            	
              (ii)

            	
              where
      Party C has delivered the entrustment funds to Party A, Party B shall
      directly request Party A to return the entrustment funds and Party C shall
      not be liable for any losses suffered by Party B arising therefrom;
      and

            

    

    

    
      	
               
      

            	
              (iii)

            	
              where
      any third party has suffered losses as a result of such invalidity or
      rescission, Party A and Party B shall be liable in proportion
      to  their respective fault and Party C shall not
      be  liable.

            

    

    

    
      	
               
      

            	
              (2)

            	
              If
      the entrustment relationship is held invalid or rescinded while the
      lender-borrower relationship is
valid,

            

    

    

    
      	
               
      

            	
              (i)

            	
              where
      Party C has not delivered the entrustment funds to Party A, it shall
      return the entrustment funds to Party B without any interest;
      and

            

    

    

    
      	
               
      

            	
              (ii)

            	
              where
      Party C has delivered the entrustment funds to Party A, Party A and Party
      B shall resolve the issues relating to the entrustment funds through
      consultations in accordance with applicable laws and Party C shall not be
      liable in  any way.

            

    

    

    
      	
               
      

            	
              (3)

            	
              If
      both the entrustment relationship and the lender-borrower relationship
      are  invalid or
rescinded,

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              (i)

            	
              where
      Party C has not delivered the entrustment funds to Party A, it shall
      return the entrustment funds to Party B without any
    interest;

            

    

    

    
      	
               
      

            	
              (ii)

            	
              where
      Party C has delivered the entrustment funds to Party A, Party B shall
      directly request Party A to return the entrustment funds and Party C shall
      not be liable for any losses suffered by Party B;
  and

            

    

    

    
      	
               
      

            	
              (iii)

            	
              where
      any third party has suffered losses as a result of such invalidity or
      rescission, Party A and Party B shall be liable in proportion
      to  their respective fault and Party C shall not
      be  liable.

            

    

    
      	
               
      

            	
              .

            

    

    
      	
               
      

            	
              15.5

            	
              Party
      B shall supervise and inspect Party A, and obtain information about Party
      A through other channels and shall not rely on Party C in
      this  respect.  Party C may at its sole discretion,
      report to Party B the information it possesses; provided however that,
      Party C shall not be liable for the promptness, truthfulness,
      completeness, accuracy and validity of any such
    information.

            

    

    

    
      	
               
      

            	
              15.6

            	
              In
      the event of any change to the address or other contact information of any
      Party set forth herein, such Party shall promptly notify the other Parties
      of such change in writing.  Such Party shall be liable for any
      loss caused by its failure of giving prompt notice of such
      change.

            

    

    

    
      	
               
      

            	
              15.7

            	
              Any
      rights that Party C has under law or this Contract shall not be
      interpreted as the obligations of Party C.  In case Party C
      fails to exercise or waives  any of such rights, neither Party A
      nor Party B may hold Party C legally liable on this
  ground.

            

    

    

    
      	
               
      

            	
              15.8

            	
              Notification
      to Release Entrustment Loan, conformations, acknowledgements, certificates
      and other documents relating to this Contract shall constitute integral
      parts of this Contract.

            

    

    

    
      	
               
      

            	
              15.9

            	
              This
      Contract shall be executed in six (6)
  counterparts.

            

    

    

    
      	  	
              15.10

            	
              Governing
      Law

            

    

    

    This
Contract shall be governed by the laws of the People’s Republic of China
(excluding the Hong Kong Special Administrative Region, the Macau Special
Administrative Region and Taiwan for the purposes of this Contract
only).

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              15.11

            	
              Dispute
      Resolution

            

    

    

    Any
dispute arising from the performance of this Contract may be settled by
consultation.  If the dispute cannot be resolved through consultation,
such dispute shall be resolved pursuant to clause (ii) below:

     

    
      	
               
      

            	
              (i)

            	
              the
      People’s court within the jurisdiction where Party C is located;
      or

            

    

     

    
      	
               
      

            	
              (ii)

            	
              arbitration
      at the local branch of the China International Economic and Trade
      Arbitration Commission in the principal place of business of Party
      B.  The arbitration award shall be final and binding on the
      Parties hereto.

            

    

     

    The
provisions hereunder not subject to the dispute shall remain enforceable during
the process of litigation or arbitration.

     

    
      	  	
              15.12 

            	
              Effectiveness
      of This Contract

            

    

    

    This
Contract shall become effective upon:

     

    
      	
               
      

            	
              (i)

            	
              signing
      by the legal representative/(principal officer) or authorized
      representative of Party A and Party B and being affixed with the company
      chop of Party B; and

            

    

     

    
      	
               
      

            	
              (ii)

            	
              signing
      by the principal officer or authorized representative of Party C and being
      affixed with the company chop of Party
C.

            

    

     

    [Signature
Page Follows]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Party
A

    

    HOKU
SCIENTIFIC, INC.

    

    By the
legal representative (principal officer) or authorized
representative:

    

    Signature:
__________________________

    

    Date:
_____________________

     

    Party B (company
chop)

    

    TIANWEI
NEW ENERGY HOLDINGS CO., LTD.

    

    By the
legal representative (principal officer) or authorized
representative:

    

    Signature:
________________________

    

    Date:
_____________________

     

    Party C (company
chop)

    

    CHINA
CONSTRUCTION BANK CORPORATION SHUANGLIU SUB-BRANCH

    

    By the
principal officer or authorized representative:

    

    Signature:
________________________

    

    Date:
_____________________

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT B
TO

    LOAN IMPLEMENTATION
AGREEMENT

     

    SECURITY
AGREEMENT

     

    dated as
of

     

    ________
__, 2009

     

    among

     

    HOKU
SCIENTIFIC, INC.

     

    and

     

    HOKU
MATERIALS, INC.,

     

    as lien
grantors

     

    and

     

    TIANWEI
NEW ENERGY HOLDINGS CO., LTD.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    TABLE
OF CONTENTS 

     

    
      
        
          	 
      	
                  Page

                
	 
      	 
      
	
                  Section
      1.  Definitions

                	
                  2

                
	
                  Section
      2.  Grant of Transaction Liens

                	
                  9

                
	
                  Section
      3.  Representations and Warranties

                	
                  11

                
	
                  Section
      4.  Further Assurances; General Covenants

                	
                  13

                
	
                  Section
      5.  Recordable Intellectual Property

                	
                  15

                
	
                  Section
      6.  Investment Property

                	
                  16

                
	
                  Section
      7.  Deposit Accounts

                	
                  17

                
	
                  Section
      8.  Commercial Tort Claims

                	
                  18

                
	
                  Section
      9.  Transfer of Record Ownership

                	
                  18

                
	
                  Section
      10.  Right to Vote Securities

                	
                  19

                
	
                  Section
      11.  Certain Cash Distributions

                	
                  19

                
	
                  Section
      12.  Remedies upon Event of Default

                	
                  19

                
	
                  Section
      13.  Application of Proceeds

                	
                  21

                
	
                  Section
      14.  Fees and Expenses; Indemnification

                	
                  21

                
	
                  Section
      15.  Authority to Administer Collateral

                	
                  22

                
	
                  Section
      16.  [reserved].

                	
                  23

                
	
                  Section
      17.  Limitation on Duty in Respect of Collateral

                	
                  23

                
	
                  Section
      18.  Termination of Transaction Liens; Release of
      Collateral.

                	
                  23

                
	
                  Section
      19.  Notices

                	
                  24

                
	
                  Section
      20.  No Implied Waivers; Remedies Not Exclusive

                	
                  24

                
	
                  Section
      21.  Successors and Assigns

                	
                  24

                
	
                  Section
      22.  Amendments and Waivers

                	
                  25

                
	
                  Section
      23.  Choice of Law

                	
                  25

                
	
                  Section
      24.  Waiver of Jury Trial

                	
                  25

                
	
                  Section
      25.  Severability

                	
                  25

                

        

      

    

     

    
      
         

      

      
        i

        
          

        

      

      
         

      

    

    SCHEDULES:

     

    
      
        
          
            
              	
                      Schedule
      1

                    	
                      Equity
      Interests In Subsidiaries And Affiliates Owned By
  Grantors

                    
	 	 
	
                      Schedule
      2

                    	
                      Investment
      Property Owned By Grantors

                    
	 	 
	
                      Schedule
      3

                    	
                      Material
      Commercial Tort Claims

                    
	 	 
	
                      Schedule
      4

                    	
                      Existing
      Permitted
Liens

                    

            

          

        

      

    

     

    
      
         

      

      
        ii

        
          

        

      

      
         

      

    

    SECURITY
AGREEMENT

     

    SECURITY
AGREEMENT dated as of ______ __, 2009 (“Agreement”) among Hoku
Scientific, Inc., a Delaware corporation (“Party A” and the “Parent Indemnitor”), Tianwei
New Energy Holdings Co., Ltd., a People’s Republic of China company (“Party B” and the “Secured Party”) and Hoku
Materials, Inc., a Delaware corporation (the “Subsidiary Guarantor”, and
together with Party A, the “Grantors”).  Certain
capitalized terms used in this Agreement have the meanings ascribed to them in
Section 1.

     

    WHEREAS,
Party A, as borrower, Party B, as entrusting lender and China Construction Bank
Corporation Shuangliu Sub-Branch, a People’s Republic of China bank (“CCB”), as bank have entered
into the Tranche 1 Loan Contract dated as of the date hereof (the “Tranche 1 Loan Contract”) and
the Tranche 2 Loan Contract dated as of the date hereof (the “Tranche 2 Loan Contract” and
together with the Tranche 1 Loan Contract, the “Loan Contracts”);

     

    WHEREAS,
pursuant to each Loan Contract, Party B agreed to entrust a Loan to CCB for the
benefit of, and release to, Party A;

     

    WHEREAS,
the Parent Indemnitor and Party B have entered into the Parent Indemnity (the
“Parent Indemnity”), and
the Subsidiary Guarantor and Party B have entered into the Subsidiary Guarantee
(the “Subsidiary
Guarantee”), each contained in the letter agreement dated as of the date
hereof (the “Parent Indemnity
and Subsidiary Guarantee Letter Agreement”);

     

    WHEREAS,
pursuant to the Parent Indemnity, the Parent Indemnitor agreed to indemnify the
foregoing obligations of Party A and is willing to secure its indemnitee thereof
by granting Liens on its assets to the Secured Party as provided in the Security
Documents;

     

    WHEREAS,
pursuant to the Subsidiary Guarantee, the Subsidiary Guarantor agreed to
guarantee the foregoing obligations of Party A and is willing to secure its
guarantee thereof by granting Liens on its assets to the Secured Party as
provided in the Security Documents;

     

    WHEREAS,
Party B and CCB are not willing to enter into the Loan Contracts, unless the
foregoing obligations of each of the Grantors are secured as described above and
this Agreement is duly executed and delivered to the Secured Party;

     

    NOW,
THEREFORE, in consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    SECTION 1.  Definitions.  (a) Terms Not Defined
Herein.  Unless otherwise expressly indicated, terms not
otherwise defined in subsection (b) or (c) of this Section have, as used herein,
the respective meanings provided for in the Loan Contracts.

     

    (b)    Terms Defined in
UCC.  As used herein, each of the following terms has the
meaning specified in the UCC:

     

    
      
        
          	
                  Term

                	 	
                  UCC

                
	
                  Account

                	 	
                  9-102

                
	
                  Authenticate

                	 	
                  9-102

                
	
                  Certificated
      Security

                	 	
                  8-102

                
	
                  Chattel
      Paper

                	 	
                  9-102

                
	
                  Commercial
      Tort Claim

                	 	
                  9-102

                
	
                  Commodity
      Account

                	 	
                  9-102

                
	
                  Commodity
      Customer

                	 	
                  9-102

                
	
                  Commodity
      Intermediary

                	 	
                  9-102

                
	
                  Deposit
      Account

                	 	
                  9-102

                
	
                  Document

                	 	
                  9-102

                
	
                  Entitlement
      Holder

                	 	
                  8-102

                
	
                  Entitlement
      Order

                	 	
                  8-102

                
	
                  Equipment

                	 	
                  9-102

                
	
                  Financial
      Asset

                	 	
                  8-102
      & 103

                
	
                  General
      Intangibles

                	 	
                  9-102

                
	
                  Instrument

                	 	
                  9-102

                
	
                  Inventory

                	 	
                  9-102

                
	
                  Investment
      Property

                	 	
                  9-102

                
	
                  Letter-of-Credit
      Right

                	 	
                  9-102

                
	
                  Record

                	 	
                  9-102

                
	
                  Securities
      Account

                	 	
                  8-501

                
	
                  Securities
      Intermediary

                	 	
                  8-102

                
	
                  Security

                	 	
                  8-102
      & 103

                
	
                  Security
      Entitlement

                	 	
                  8-102

                
	
                  Supporting
      Obligations

                	 	
                  9-102

                
	
                  Uncertificated
      Security

                	 	
                  8-102

                

        

      

    

    

    (c)    Additional
Definitions.  The following additional terms, as used herein,
have the following meanings:

     

    “Account Control Agreement” means a
Commodity Control Agreement, a Deposit Account Control Agreement or a Securities
Account Control Agreement.

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    “Cash Distributions” means
dividends, interest and other distributions and payments (including proceeds of
liquidation, sale or other disposition) made or received in cash upon or with
respect to any Collateral.

     

    “Collateral” means all
property, whether now owned or hereafter acquired, on which a Lien is granted or
purports to be granted to the Secured Party pursuant to the Security
Documents.  When used with respect to a specific Grantor, the term
“Collateral” means all its property on which such a Lien is granted or purports
to be granted.

     

     “Collateral Accounts” means the
Controlled Commodity Accounts, the Controlled Deposit Accounts and the
Controlled Securities Accounts.

     

     “Commodity Account Control
Agreement” means, with respect to any Commodity Account of any Grantor, a
Commodity Account Control Agreement in form and substance reasonably
satisfactory to Party B among such Grantor, the Secured Party and the relevant
Commodity Intermediary.

     

    “Control” has the meaning
specified in UCC Section 8-106, 9-104, 9-105, 9-106 or 9-107, as may be
applicable to the relevant Collateral.

     

     “Controlled Commodity Account”
means a Commodity Account that is subject to a Commodity Account Control
Agreement.

     

    “Controlled Deposit Account”
means a Deposit Account that is subject to a Deposit Account Control
Agreement.

     

     “Controlled Securities Account”
means a Securities Account that (i) is maintained in the name of a Grantor at an
office of a Securities Intermediary located in the United States and (ii)
together with all Financial Assets credited thereto and all related Security
Entitlements, is subject to a Securities Account Control Agreement among such
Grantor, the Secured Party and such Securities Intermediary.

     

    “Copyright License” means any
agreement now or hereafter in existence granting to any Grantor, or pursuant to
which any Grantor grants to any other Person, any right to use, copy, reproduce,
distribute, prepare derivative works, display or publish any records or other
materials on which a Copyright is in existence or may come into
existence.

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     “Copyrights” means all the
following: (i) all copyrights under the laws of the United States or any other
country (whether or not the underlying works of authorship have been published),
all registrations and recordings thereof, all copyrightable works of authorship
(whether or not published), and all applications for copyrights under the laws
of the United States or any other country, including registrations, recordings
and applications in the United States Copyright Office or in any similar office
or agency of the United States, any State thereof or any other country or any
political subdivision thereof, (ii) all renewals of any of the foregoing, (iii)
all claims for, and rights to sue for, past or future infringements of any of
the foregoing, and (iv) all income, royalties, damages and payments now or
hereafter due or payable with respect to any of the foregoing, including damages
and payments for past or future infringements thereof.

     

    “Copyright Security Agreement”
means a Copyright Security Agreement, in form and substance reasonably
satisfactory to Party B, executed and delivered by a Grantor in favor of the
Secured Party.

     

    “Deposit Account Control
Agreement” means, with respect to any Deposit Account of any Grantor, a
Deposit Account Control Agreement in form and substance reasonably satisfactory
to Party B among such Grantor, the Secured Party and the relevant Depositary
Bank.

     

     “Depositary Bank” means a bank
at which a Controlled Deposit Account is maintained.

     

    “Equity Interest” means (i) in
the case of a corporation, any shares of its capital stock, (ii) in the case of
a limited liability company, any membership interest therein, (iii) in the case
of a partnership, any partnership interest (whether general or limited) therein,
(iv) in the case of any other business entity, any participation or other
interest in the equity or profits thereof, (v) any warrant, option or other
right to acquire any Equity Interest described in this definition or (vi) any
Security Entitlement in respect of any Equity Interest described in this
definition.

     

    “Event of Default” means the
occurrence of any of the following events:

     

    (i) the occurrence of any
“Event of Default” under, and as defined in, any Loan Contract;

     

    (ii) a
failure by any Grantor to observe or perform any covenant or agreement contained
in any Security Document, and such failure shall continue unremedied for a
period of 15 days after notice thereof from the Secured Party to the relevant
Grantor;

     

    (iii) any
Transaction Lien purported to be created under any Security Document shall cease
to be, or shall be asserted by any Grantor not to be, a valid and perfected Lien
in favor of the Secured Party on any Collateral, with the priority required by
the applicable Security Document; or

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    (iv) any
representation or warranty made or deemed made by or on behalf of any Grantor
under or in connection with any Security Document shall prove to have been
incorrect in any material respect on the date made or deemed
made.

     

    “Foreign Subsidiary” means any
subsidiary of any Grantor which is a “controlled foreign corporation” within the
meaning of the Internal Revenue Code of 1986, as amended from time to
time.

     

    “Grantors” has the meaning set
forth in the Preamble of this Agreement.

     

    “Intellectual Property” means
all intellectual and similar property of any Grantor of every kind and nature
now owned or hereafter acquired by any Grantor, including inventions,
discoveries, designs, Patents, Copyrights, Licenses, Trademarks, trade secrets,
confidential or proprietary technical and business information, industrial
property rights, know-how, show-how or other data or information, software and
databases, moral rights, publicity rights and privacy rights, and all
embodiments or fixations thereof and related documentation, registrations and
franchises, and all additions, improvements and accessions to, and books and
records describing or used in connection with, any of the
foregoing.

     

    “Intellectual Property Filing”
means (i) with respect to any Patent, Patent License, Trademark or Trademark
License, the filing of the applicable Patent Security Agreement or Trademark
Security Agreement with the United States Patent and Trademark Office, together
with an appropriately completed recordation form, and (ii) with respect to any
Copyright or Copyright License, the filing of the applicable Copyright Security
Agreement with the United States Copyright Office, together with an
appropriately completed recordation form, in each case sufficient to record the
Transaction Lien granted to the Secured Party in such Recordable Intellectual
Property.

     

    “Intellectual Property Security
Agreement” means a Copyright Security Agreement, a Patent Security
Agreement or a Trademark Security Agreement.

     

    “Issuer Control Agreement”
means an issuer control agreement in form and substance reasonably satisfactory
to Party B.

     

    “License” means any Patent
License, Trademark License, Copyright License or other license or sublicense
agreement relating to Intellectual Property to which any Grantor is a
party.

     

    “Lien” means, with respect to
any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation,
encumbrance, charge or security interest in, on or of such asset, (b) the
interest of a vendor or a lessor under any conditional sale agreement, capital
lease or title retention agreement (or any financing lease having substantially
the same economic effect as any of the foregoing) relating to such asset and (c)
in the case of securities, any purchase option, call or similar right of a third
party with respect to such securities.

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    “Loan” has the meaning set
forth in Section 1 of each Loan Contract.

     

    “Loan Contracts” has the
meaning set forth in the Recitals of this Agreement.

     

    “Material Commercial Tort
Claim” means a Commercial Tort Claim involving a claim for more than
$50,000.

     

    “Mortgage” shall have the
meaning ascribed to it in the Loan Contracts.

     

    “Opinion of Counsel” means a
written opinion of legal counsel (who may be counsel to a Grantor or other
counsel, in either case approved by the Secured Party) addressed and delivered
to the Secured Party.

     

    “own” refers to the possession
of sufficient rights in property to grant a security interest therein as
contemplated by UCC Section 9-203, and “acquire” refers to the
acquisition of any such rights.

     

    “Parent Indemnitee” has the
meaning set forth in the Preamble of this Agreement.

     

    “Parent Indemnitor” has the
meaning set forth in the Preamble of this Agreement.

     

    “Parent Indemnity and Subsidiary
Guarantee Letter Agreement” has the meaning set forth in the Preamble of
this Agreement.

     

    “Party A” has the meaning set
forth in the Preamble of this Agreement.

     

    “Party B” has the meaning set
forth in the Preamble of this Agreement.

     

    “Patent License” means any
agreement now or hereafter in existence granting to any Grantor, or pursuant to
which any Grantor grants to any other Person, any right with respect to any
Patent or any invention now or hereafter in existence, whether patentable or
not, whether a patent or application for patent is in existence on such
invention or not, and whether a patent or application for patent on such
invention may come into existence or not.

     

    “Patents” means (i) all letters
patent and design letters patent of the United States or any other country and
all applications for letters patent or design letters patent of the United
States or any other country, including applications in the United States Patent
and Trademark Office or in any similar office or agency of the United States,
any State thereof or any other country or any political subdivision thereof,
(ii) all reissues, divisions, continuations, continuations in part, revisions
and extensions of any of the foregoing, (iii) all claims for, and rights to sue
for, past or future infringements of any of the foregoing and (iv) all income,
royalties, damages and payments now or hereafter due or payable with respect to
any of the foregoing, including damages and payments for past or future
infringements thereof.

    
      
         

      

      
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    “Patent Security Agreement”
means a Patent Security Agreement in form and substance reasonably satisfactory
to Party B, executed and delivered by a Grantor in favor of the Secured
Party.

     

    “Perfection Certificate” means,
with respect to any Grantor, a certificate in form and substance reasonably
satisfactory to Party B, executed by an officer of such Grantor.

     

    “Permitted Liens” means (i)
Liens for taxes not yet due or which are being contested in good faith and by
appropriate proceedings, if adequate reserves with respect thereto are
maintained on the books of the applicable Person in accordance with GAAP, (ii)
carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like
Liens arising in the ordinary course of business which are not overdue for a
period of more than 30 days or which are being contested or intended to be
timely contested in good faith and by appropriate proceedings, (iii) liens
securing cash deposits or prepayments in respect of the sale of Inventory
provided to any Grantor by any customers and perfected prior to the date hereof,
(iv) liens existing on the date hereof and listed on Schedule 4, and (v) the
Transaction Liens.

     

    “Pledged”, when used in
conjunction with any type of asset, means at any time an asset of such type that
is included (or that creates rights that are included) in the Collateral at such
time.  For example, “Pledged Equity Interest” means an Equity Interest
that is included in the Collateral at such time.

     

    “Post-Petition Interest” means
any interest that accrues after the commencement of any case, proceeding or
other action relating to the bankruptcy, insolvency or reorganization of any one
or more of the Grantors (or would accrue but for the operation of applicable
bankruptcy or insolvency laws), whether or not such interest is allowed or
allowable as a claim in any such proceeding.

     

    “Proceeds” means all proceeds
of, and all other profits, products, rents or receipts, in whatever form,
arising from the collection, sale, lease, exchange, assignment, licensing or
other disposition of, or other realization upon, any Collateral, including all
claims of the relevant Grantor against third parties for loss of, damage to or
destruction of, or for proceeds payable under, or unearned premiums with respect
to, policies of insurance in respect of, any Collateral, and any condemnation or
requisition payments with respect to any Collateral.

    
      
         

      

      
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    “Recordable Intellectual
Property” means (i) any Patent registered with the United States Patent
and Trademark Office, and any Patent License with respect to a Patent so
registered, (ii) any Trademark registered with the United States Patent and
Trademark Office, and any Trademark License with respect to a Trademark so
registered, (iii) any Copyright registered with the United States Copyright
Office and any Copyright License with respect to a Copyright so registered, and
all rights in or under any of the foregoing.

     

    “Release Condition” means all
the Secured Obligations and Transaction Liens under the Loan Contracts, the
Parent Indemnity, the Subsidiary Guarantee and the Security Documents shall have
been fully satisfied or terminated.

     

    “Secured Obligations” means (i)
all indemnitee obligations (including Post-Petition Interest thereon) of the
Parent Indemnitor pursuant to the Parent Indemnity, (ii) all guarantee
obligations of the Subsidiary Guarantor pursuant to the Subsidiary Guarantee and
(iii) all other obligations of each Grantor under the Security
Documents.

     

    “Secured Party” has the meaning
set forth in the Preamble of this Agreement.

     

    “Securities Account Control
Agreement” means, when used with respect to a Securities Account, a
Securities Account Control Agreement in form and substance reasonably
satisfactory to Party B among the relevant Securities Intermediary, the relevant
Grantor and the Secured Party.

     

    “Security Documents” means this
Agreement, the Mortgage, any Deposit Account Control Agreements, any Issuer
Control Agreements, any Securities Account Control Agreements, any Intellectual
Property Security Agreements and all other supplemental or additional security
agreements, control agreements, mortgages or similar instruments delivered in
connection with the Loan Contracts and this Agreement.

     

    “Subsidiary Guarantee” has the
meaning set forth in the Preamble of this Agreement.

     

    “Subsidiary Guarantor” has the
meaning set forth in the Preamble of this Agreement.

     

    “Trademark License” means any
agreement now or hereafter in existence granting to any Grantor, or pursuant to
which any Grantor grants to any other Person, any right to use any
Trademark.

    
      
         

      

      
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    “Trademarks”
means:  (i) all trademarks, trade names, corporate names, company
names, business names, fictitious business names, trade styles, service marks,
logos, brand names, certification marks, trade dress, domain names and any other
indications of origin, prints and labels on which any of the foregoing have
appeared or appear, package and other designs, and all other source or business
identifiers, and all general intangibles of like nature, and the rights in any
of the foregoing which arise under applicable law, (ii) the goodwill of the
business symbolized thereby or associated with each of them, (iii) all
registrations and applications in connection therewith, including registrations
and applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any other
country or any political subdivision thereof, (iv) all renewals of any of the
foregoing, (v) all claims for, and rights to sue for, past or future
infringements of any of the foregoing and (vi) all income, royalties, damages
and payments now or hereafter due or payable with respect to any of the
foregoing, including damages and payments for past or future infringements
thereof.

     

    “Trademark Security Agreement”
means a Trademark Security Agreement, in form and substance reasonably
satisfactory to Party B, executed and delivered by a Grantor in favor of the
Secured Party.

     

    “Tranche 1 Loan Document” has
the meaning set forth in the Preamble of this Agreement.

     

    “Tranche 2 Loan Document” has
the meaning set forth in the Preamble of this Agreement.

     

    “Transaction Liens” means the
Liens granted by the Grantors under the Security Documents.

     

    “UCC” means the Uniform
Commercial Code as in effect from time to time in the State of New York; provided that, if perfection
or the effect of perfection or non-perfection or the priority of any Transaction
Lien on any Collateral is governed by the Uniform Commercial Code as in effect
in a jurisdiction other than New York, “UCC” means the Uniform Commercial Code
as in effect from time to time in such other jurisdiction for purposes of the
provisions hereof relating to such perfection, effect of perfection or
non-perfection or priority.

     

    SECTION 2.  Grant of Transaction
Liens.  (a) Each Grantor, in order to secure the Secured
Obligations, grants to the Secured Party a continuing security interest in and
Lien upon all the following property of such Grantor, whether now owned or
existing or hereafter acquired or arising and regardless of where
located:

     

    (i)          all
Accounts;

    
      
         

      

      
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    (ii)         all
Chattel Paper;

     

    (iii)        all
cash and Deposit Accounts;

     

    (iv)        all
Documents;

     

    (v)         all
Equipment;

     

    (vi)        all
General Intangibles (including (x) any Equity Interests in other Persons that do
not constitute Investment Property and (y) any Intellectual
Property);

     

    (vii)       all
Instruments;

     

    (viii)      all
Inventory;

     

    (ix)         all
Investment Property;

     

    (x)          the
Commercial Tort Claims described in Schedule 3;

     

    (xi)         all
Letter-of-Credit Rights;

     

    (xii)        all
books and records (including customer lists, credit files, computer programs,
printouts and other computer materials and records) of such Grantor pertaining
to any of its Collateral;

     

    (xiii)       such
Grantor’s ownership interest in (1) its Collateral Accounts, (2) all Financial
Assets credited to its Collateral Accounts from time to time and all Security
Entitlements in respect thereof and (3) all cash held in its Collateral Accounts
from time to time; and

     

    (xiv)       all
Proceeds of the Collateral described in the foregoing clauses (i) through
(xi);

     

    provided that the following
property is excluded from the foregoing security interests: (A) motor vehicles
the perfection of a security interest in which is excluded from the Uniform
Commercial Code in the relevant jurisdiction, (B) voting Equity Interests in any
Foreign Subsidiary, to the extent (but only to the extent) required to prevent
the Collateral from including more than 66% of all voting Equity Interests in
such Foreign Subsidiary and (C) any property to the extent that the grant of a
security interest therein is prohibited by any applicable law or regulation,
requires a consent not obtained of any governmental authority pursuant to any
applicable law or regulation, or is prohibited by, or constitutes a breach or
default under or results in the termination of or requires any consent not
obtained under, any contract, license, agreement, instrument or other document
evidencing or giving rise to such property or, in the case of any Investment
Property, any applicable shareholder or similar agreement, except to the extent
that such law or regulation or the term in such contract, license, agreement,
instrument or other document or shareholder or similar agreement providing for
such prohibition, breach, default or termination or requiring such consent is
ineffective under applicable law. Each Grantor shall upon request of the Secured
Party use all reasonable efforts to obtain any such required consent that is
reasonably obtainable.

    
      
         

      

      
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    (b)        With
respect to each right to payment or performance included in the Collateral from
time to time, the Transaction Lien granted therein includes a continuing
security interest in (i) any Supporting Obligation that supports such payment or
performance and (ii) any Lien that (x) secures such right to payment or
performance or (y) secures any such Supporting Obligation.

     

    (c)        The
Transaction Liens are granted as security only and shall not subject the Secured
Party to, or transfer or in any way affect or modify, any obligation or
liability of any Grantor with respect to any of the Collateral or any
transaction in connection therewith.

     

    SECTION 3.  Representations and
Warranties.  Each Grantor represents and warrants
that:

     

    (a)        Such
Grantor is duly organized, validly existing and in good standing under the laws
of the jurisdiction identified as its jurisdiction of organization in its
Perfection Certificate.

     

    (b)        With
respect to each Grantor, Schedule 1 lists all Equity Interests owned by such
Grantor as of the date hereof.  Such Grantor holds all such Equity
Interests directly (i.e., not through a
Subsidiary, a Securities Intermediary or any other Person).

     

    (c)        With
respect to each Grantor, Schedule 2 lists, as of the date hereof, (i) all
Securities owned by such Grantor (except Securities evidencing Equity Interests)
and (ii) all Securities Accounts to which Financial Assets are credited in
respect of which such Grantor owns Security Entitlements.

     

    (d)        Grantor
owns no Commodity Account in respect of which such Grantor is the Commodity
Customer.

     

    (e)        All
Pledged Equity Interests owned by such Grantor are owned by it free and clear of
any Lien other than (i) the Transaction Liens and (ii) any Permitted
Liens.  All shares of capital stock included in such Pledged Equity
Interests (including shares of capital stock in respect of which such Grantor
owns a Security Entitlement) have been duly authorized and validly issued and
are fully paid and non-assessable.  None of such Pledged Equity
Interests is subject to any option to purchase or similar right of any
Person.  Such Grantor is not and will not become a party to or
otherwise bound by any agreement which restricts in any manner the rights of any
present or future holder of any Pledged Equity Interest with respect
thereto.

    
      
         

      

      
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    (f)        Such
Grantor has good and marketable title to all its Collateral (subject to
exceptions that are, in the aggregate, not material), free and clear of any Lien
other than Permitted Liens.

     

    (g)        Such
Grantor has not performed any acts that might prevent the Secured Party from
enforcing any of the provisions of the Security Documents or that would limit
the Secured Party in any such enforcement.  No financing statement,
security agreement, mortgage or similar or equivalent document or instrument
covering all or part of the Collateral owned by such Grantor is on file or of
record in any jurisdiction in which such filing or recording would be effective
to perfect or record a Lien on such Collateral, except financing statements,
mortgages or other similar or equivalent documents with respect to Permitted
Liens.  After the date hereof, no Collateral owned by such Grantor
will be in the possession or under the Control of any other Person having a
claim thereto or security interest therein.

     

    (h)        The
Transaction Liens on all Collateral owned by such Grantor (i) have been validly
created, (ii) will attach to each item of such Collateral on the date hereof
(or, if such Grantor first obtains rights thereto on a later date, on such later
date) and (iii) when so attached, will secure all the Secured
Obligations.

     

    (i)        Such
Grantor has delivered a Perfection Certificate to the Secured Party. With
respect to each Grantor, information set forth therein is correct and complete
as of the date hereof. Within 60 days from the date hereof, such Grantor will
furnish to the Secured Party a file search report from each UCC filing office
listed in its Perfection Certificate, showing the filing made at such filing
office to perfect the Transaction Liens on its Collateral.

     

    (j)        Upon
(i) the filing of a UCC financing statement in proper and appropriate form in
the relevant filing office with respect to any Grantor, to the extent that the
security interest granted hereunder in the Collateral of such Grantor may be
perfected by filing a UCC financing statement, and (ii) the taking of possession
in the case of Collateral with respect to which a security interest may be
perfected through possession, such security interest will constitute a perfected
security interest in such Collateral.  When, in addition to the filing
of such UCC financing statements, the applicable Intellectual Property Filings
have been made with respect to such Grantor’s Recordable Intellectual Property
(including any future filings required pursuant to Sections 4(a) and 5(a)), the
Transaction Liens will constitute perfected security interests in all right,
title and interest of such Grantor in its Recordable Intellectual Property to
the extent that security interests therein may be perfected by such filings,
prior to all Liens and rights of others therein except Permitted
Liens.  Except for (i) the filing of such UCC financing statements and
(ii) such Intellectual Property Filings, no registration, recordation or filing
with any governmental body, agency or official is required in connection with
the execution or delivery of the Security Documents or is necessary for the
validity or enforceability thereof or for the perfection or due recordation of
the Transaction Liens or for the enforcement of the Transaction
Liens.  Upon execution and delivery of an Account Control Agreement in
respect of each Collateral Account, the security interest of the Secured Party
with respect to such Collateral Account shall be perfected by
Control.

    
      
         

      

      
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    (k)        Such
Grantor has taken, and will continue to take, all actions necessary under the
UCC to perfect its interest in any Accounts or Chattel Paper purchased or
otherwise acquired by it, as against its assignors and creditors of its
assignors.

     

    SECTION 4.  Further Assurances; General
Covenants.  Each Grantor covenants as follows:

     

    (a)        Such
Grantor will, from time to time, at such Grantor’s expense, execute, deliver,
file and record any statement, assignment, instrument, document, agreement or
other paper and take any other action (including any Intellectual Property
Filing) that from time to time may be necessary or desirable, or that the
Secured Party may reasonably request, in order to:

     

    (i)        create,
preserve, perfect, confirm or validate the Transaction Liens on such Grantor’s
Collateral;

     

    (ii)       in
the case of Pledged Deposit Accounts and Pledged Investment Property, cause the
Secured Party to have Control thereof;

     

    (iii)      enable
the Secured Party to obtain the full benefits of the Security Documents;
or

     

    (iv)      enable
the Secured Party to exercise and enforce any of its rights, powers and remedies
with respect to any of such Grantor’s Collateral.

     

    Such
Grantor authorizes the Secured Party to execute and file such financing
statements or continuation statements in such jurisdictions with such
descriptions of collateral (including “all assets” or “all personal property” or
other words to that effect) and other information set forth therein as the
Secured Party may reasonably deem necessary or desirable for the purposes set
forth in the preceding sentence.  Each Grantor also ratifies its
authorization for the Secured Party to file in any such jurisdiction any initial
financing statements or amendments thereto if filed prior to the date
hereof.  The Secured Party is further authorized to file with the
United States Patent and Trademark Office or United States Copyright Office (or
any successor office or any similar office in any other country) such documents
as may reasonably be necessary or advisable for the purpose of perfecting,
confirming, continuing, enforcing or protecting the security interests granted
by each Grantor, without the signature of any Grantor, and naming any Grantor or
the Grantors as debtors and the Secured Party as secured party.  The
relevant Grantor will pay the costs of, or incidental to, any Intellectual
Property Filings and any recording or filing of any financing or continuation
statements or other documents recorded or filed pursuant
hereto.

    
      
         

      

      
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    (b)        Such
Grantor will not (i) change its name or organizational form or structure, (ii)
change its location (determined as provided in UCC Section 9-307) or (iii)
become bound, as provided in UCC Section 9-203(d) or otherwise, by a security
agreement entered into by another Person, unless it shall have given the Secured
Party prior notice thereof and delivered an Opinion of Counsel with respect
thereto in accordance with Section 4(c).

     

    (c)        At
least 30 days before it takes any action contemplated by Section 4(b), such
Grantor will, at its expense, cause to be delivered to the Secured Party an
Opinion of Counsel, in form and substance reasonably satisfactory to Party B, to
the effect that (i) all financing statements and amendments or supplements
thereto, continuation statements and other documents required to be filed or
recorded in order to perfect and protect the Transaction Liens against all
creditors of and purchasers from such Grantor after it takes such action (except
any continuation statements specified in such Opinion of Counsel that are to be
filed more than six months after the date thereof) have been filed or recorded
in each office necessary for such purpose, (ii) all fees and taxes, if any,
payable in connection with such filings or recordations have been paid in full
and (iii) except as otherwise agreed by the Secured Party, such action will not
adversely affect the perfection or priority of the Transaction Lien on any
Collateral to be owned by such Grantor after it takes such action or the
accuracy of such Grantor’s representations and warranties herein relating to
such Collateral.

     

    (d)        If
any of its Collateral is in the possession or control of a warehouseman, bailee
or agent at any time, such Grantor will (i) notify such warehouseman, bailee or
agent of the relevant Transaction Liens, (ii) instruct such warehouseman, bailee
or agent to hold all such Collateral for the Secured Party’s account subject to
the Secured Party’s instructions (which shall permit such Collateral to be
removed by such Grantor in the ordinary course of business until the Secured
Party notifies such warehouseman, bailee or agent that an Event of Default has
occurred and is continuing), (iii) cause such warehouseman, bailee or agent to
Authenticate a Record acknowledging that it holds possession of such Collateral
for the Secured Party’s benefit and (iv) make such Authenticated Record
available to the Secured Party.

    
      
         

      

      
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    (e)        Such
Grantor will not sell, lease, exchange, assign or otherwise dispose of, or grant
any option with respect to, any of its Collateral; provided that such Grantor
may do any of the foregoing unless (i) doing so would violate a provision of
this Agreement or the Loan Contracts or (ii) an Event of Default shall have
occurred and be continuing and either (A) the Secured Party shall have notified
such Grantor that its right to do so is terminated, suspended or otherwise
limited or (B) the maturity of any or all of any Secured Obligations shall have
been accelerated.  Concurrently with any sale, lease or other
disposition (except a sale or disposition to another Grantor or a lease)
permitted by the foregoing proviso, the Transaction
Liens on the assets sold or disposed of (but not in any Proceeds arising from
such sale or disposition) will cease immediately without any action by the
Secured Party.  The Secured Party will, at Party A’s expense, execute
and deliver to the relevant Grantor such documents as such Grantor shall
reasonably request to evidence the fact that any asset so sold or disposed of is
no longer subject to a Transaction Lien.

     

    (f)        Such
Grantor will, promptly upon request, provide to the Secured Party all
information and evidence concerning such Grantor’s Collateral that the Secured
Party may reasonably request from time to time to enable it to enforce the
provisions of the Security Documents.

     

    SECTION 5.  Recordable Intellectual
Property.  Each Grantor covenants as follows:

     

    (a)        Promptly
(and in any event within 20 business days) upon request by Party B, each Grantor
will promptly sign and deliver to the Secured Party Intellectual Property
Security Agreements with respect to all Recordable Intellectual Property then
owned by it. Within 30 days after each December 31 thereafter, it will sign and
deliver to the Secured Party an appropriate Intellectual Property Security
Agreement covering any Recordable Intellectual Property owned by it on such
December 31 that is not covered by any previous Intellectual Property Security
Agreement so signed and delivered by it.  In each case, it will
promptly make all Intellectual Property Filings necessary to record the
Transaction Liens on such Recordable Intellectual Property.

     

    (b)        Upon
the occurrence and during the continuance of an Event of Default, each Grantor
shall use its best efforts to obtain all requisite consents or approvals by the
licensor of each Copyright License, Patent License or Trademark License under
which such Grantor is a licensee to effect the assignment of all such Grantor’s
right, title and interest thereunder to Party B for the benefit of the Secured
Party.

    
      
         

      

      
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    SECTION 6.  Investment
Property.  Each Grantor represents, warrants and covenants as
follows:

     

    (a)        Certificated
Securities.  On the date hereof, each Grantor will deliver to
the Secured Party as Collateral hereunder all certificates representing Pledged
Certificated Securities then owned by such Grantor.  Thereafter,
whenever such Grantor acquires any other certificate representing a Pledged
Certificated Security, such Grantor will immediately deliver such certificate to
the Secured Party as Collateral hereunder. The provisions of this subsection are
subject to the limitation in Section 6(g) in the case of voting Equity Interests
in a Foreign Subsidiary.

     

    (b)        Uncertificated
Securities.  Upon request by Party B, each Grantor will
promptly (and in any event within 20 business days) enter into (and cause the
relevant issuer to enter into) an Issuer Control Agreement in respect of each
Pledged Uncertificated Security then owned by such Grantor and deliver such
Issuer Control Agreement to the Secured Party (which shall enter into the
same).  Thereafter, whenever such Grantor acquires any other Pledged
Uncertificated Security, such Grantor will enter into (and cause the relevant
issuer to enter into) an Issuer Control Agreement in respect of such Pledged
Uncertificated Security and deliver such Issuer Control Agreement to the Secured
Party (which shall enter into the same).  The provisions of this
subsection are subject to the limitation in Section 6(g) in the case of voting
Equity Interests in a Foreign Subsidiary.

     

    (c)        Security Entitlements. Upon
request by Party B, each Grantor will, with respect to each Security Entitlement
then owned by it, promptly enter into (and cause the relevant Securities
Intermediary to enter into) a Securities Account Control Agreement in respect of
such Security Entitlement and the Securities Account to which the underlying
Financial Asset is credited and will deliver such Securities Account Control
Agreement to the Secured Party (which shall enter into the
same).  Thereafter, whenever such Grantor acquires any other Security
Entitlement, such Grantor will, as promptly as practicable, cause the underlying
Financial Asset to be credited to a Controlled Securities Account.

     

    (d)        Agreement as to Applicable
Jurisdiction.  In respect of all Security Entitlements owned by
such Grantor, and all Securities Accounts to which the related Financial Assets
are credited, the Securities Intermediary’s jurisdiction (determined as provided
in UCC Section 8-110(e)) will at all times be located in the United
States.

     

    (e)        Delivery of Pledged
Certificates.  All Pledged Certificates, when delivered to the
Secured Party, will be in suitable form for transfer by delivery, or accompanied
by duly executed instruments of transfer or assignment in blank, with signatures
appropriately guaranteed, all in form and substance reasonably satisfactory to
Party B.

    
      
         

      

      
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    (f)        Communications.  Each
Grantor will promptly give to the Secured Party copies of any notices and other
communications received by it with respect to (i) Pledged Securities registered
in the name of such Grantor or its nominee and (ii) Pledged Security
Entitlements as to which such Grantor is the Entitlement Holder.

     

    (g)        Foreign
Subsidiaries.  A Grantor will not be obligated to comply with
the provisions of this Section at any time with respect to any voting Equity
Interest in a Foreign Subsidiary if and to the extent (but only to the extent)
that such voting Equity Interest is excluded from the Transaction Liens at such
time pursuant to clause (B) of the proviso at the end of Section 2.

     

    (h)        Certification of Limited Liability
Company and Partnership Interests.  Any limited liability
company and any partnership controlled by any Grantor shall either (i) not
include in its operative documents any provision that any Equity Interests in
such limited liability company or such partnership be a “security” as defined
under Article 8 of the Uniform Commercial Code, or (ii) certificate any Equity
Interests in any such limited liability company or such
partnership.  To the extent an interest in any limited liability
company or partnership controlled by any Grantor and pledged hereunder is
certificated or becomes certificated, each such certificate shall be delivered
to the Secured Party pursuant to Section 6(a) and such Grantor shall fulfill all
other requirements under Section 6 applicable in respect thereof.

     

    SECTION 7.  Deposit
Accounts.  Each Grantor represents, warrants and covenants as
follows:

     

    (a)        Promptly
(and in any event within 20 business days) upon the request of Party B, each
Grantor shall, with respect to each Deposit Account and Commodity Account then
maintained by it, enter into (and cause the relevant Depositary Bank and
Commodity Intermediary to enter into) a Deposit Account Control Agreement and
Commodity Account Control Agreement, as applicable, in form and substance
reasonably satisfactory to Party B in respect of such Deposit Account or
Commodity Account, as applicable, and will deliver such control agreement to the
Secured Party (which shall enter into the same).  Thereafter, all cash
owned by such Grantor will be deposited, upon or promptly after the receipt
thereof, in one or more Controlled Deposit Accounts.  Whenever any
Grantor establishes any other Deposit Account or Commodity Account, such Grantor
shall promptly (and in any event within 20 business days) upon the Party B’s
request, cause the relevant Depositary Bank and Commodity Intermediary to enter
into a Deposit Account Control Agreement and Commodity Account Control
Agreement, as applicable, in form and substance reasonably satisfactory to Party
B over such Deposit Account or Commodity Account for the benefit of the Secured
Party.

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    (b)        In
respect of each Controlled Deposit Account, the Depositary Bank’s jurisdiction
(determined as provided in UCC Section 9-304) will at all times be a
jurisdiction in which Article 9 of the Uniform Commercial Code is in
effect.

     

    (c)        The
Secured Party agrees that it will not (i) originate any instructions directing
disposition of funds in any Deposit Account or any other instruction in respect
of the Deposit Accounts or (ii) issue a Notice of Control or Notice of Exclusive
Control (as defined in the relevant Deposit Account Control Agreement) in
respect of any Deposit Account unless, in either case, an Event of Default shall
have occurred and be continuing, and in each case the Secured Party shall
promptly provide a copy to Party A of such instructions or notice.

     

    (d)         So
long as the Secured Party has Control of a Controlled Deposit Account, the
Transaction Lien on such Controlled Deposit Account will be perfected, subject
to no prior Liens or rights of others (except CCB’s right to deduct its normal
operating charges and any uncollected funds previously credited
thereto).

     

    SECTION 8.  Commercial Tort
Claims.  Each Grantor represents, warrants and covenants that
Schedule 3 accurately describes, with the specificity required to satisfy
Official Comment 5 to UCC Section 9-108, each Material Commercial Tort Claim
with respect to which such Grantor is the claimant as of the date
hereof.

     

    SECTION 9.  Transfer of Record
Ownership.  At any time when an Event of Default shall have
occurred and be continuing, the Secured Party may (and to the extent that action
by it is required, the relevant Grantor, if directed to do so by the Secured
Party, will as promptly as practicable) cause each of the Pledged Securities (or
any portion thereof specified in such direction) to be transferred of record
into the name of the Secured Party or its nominee.  Each Grantor will
take any and all actions reasonably requested by the Secured Party to facilitate
compliance with this Section.  If the provisions of this Section are
implemented, Section 6(b) shall not thereafter apply to any Pledged Security
that is registered in the name of the Secured Party or its
nominee.  The Secured Party will promptly give to the relevant Grantor
copies of any notices and other communications received by the Secured Party
with respect to Pledged Securities registered in the name of the Secured Party
or its nominee.

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    SECTION 10.  Right to Vote
Securities.  (a) Unless an Event of Default shall have occurred
and be continuing, each Grantor will have the right, from time to time, to vote
and to give consents, ratifications and waivers with respect to any Pledged
Security owned by it and the Financial Asset underlying any Pledged Security
Entitlement owned by it, and the Secured Party will, upon receiving a written
request from such Grantor, deliver to such Grantor or as specified in such
request such proxies, powers of attorney, consents, ratifications and waivers in
respect of any such Pledged Security that is registered in the name of the
Secured Party or its nominee or any such Pledged Security Entitlement as to
which the Secured Party or its nominee is the Entitlement Holder, in each case
as shall be specified in such request and be in form and substance reasonably
satisfactory to Party B.

     

    (b)      If
an Event of Default shall have occurred and be continuing, Party B on behalf of
the Secured Party will have the exclusive right to the extent permitted by law
to vote, to give consents, ratifications and waivers and to take any other
action with respect to the Pledged Investment Property, the other Pledged Equity
Interests and the Financial Assets underlying the Pledged Security Entitlements,
with the same force and effect as if the Secured Party were the absolute and
sole owner thereof, and each Grantor will take all such action as Party B may
reasonably request from time to time to give effect to such right.

     

    SECTION 11.  Certain Cash
Distributions.  At any time after Party B shall have requested
that Deposit Account Control Agreements be executed in respect of any Deposit
Accounts of any Grantor pursuant to Section 7(a) above, Cash Distributions with
respect to any Pledged Equity Interest or Pledged Debt of such Grantor that is
not held in a Collateral Account (whether held in the name of a Grantor or in
the name of Party B or its nominee) shall be deposited, promptly upon receipt
thereof, in a Controlled Deposit Account of the relevant Grantor.

     

    SECTION 12.  Remedies upon Event of
Default.  (a) If an Event of Default shall have occurred and be
continuing, the Secured Party may exercise any or all of the remedies available
to it under the Security Documents.

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    (b)      Without
limiting the generality of the foregoing, if an Event of Default shall have
occurred and be continuing, the Secured Party may exercise all the rights of a
secured party under the UCC (whether or not in effect in the jurisdiction where
such rights are exercised) with respect to any Collateral and, in addition, the
Secured Party may, without being required to give any notice, except as herein
provided or as may be required by mandatory provisions of law, sell or otherwise
dispose of the Collateral or any part thereof in one or more parcels at public
or private sale, at any exchange, broker’s board or at any of the Secured
Party’s offices or elsewhere, for cash, on credit or for future delivery, at
such time or times and at such price or prices and upon such other terms as the
Secured Party may deem commercially reasonable, irrespective of the impact of
any such sales on the market price of the Collateral.  To the maximum
extent permitted by applicable law, the Secured Party may be the purchaser of
any or all of the Collateral at any such sale and shall be entitled, for the
purpose of bidding and making settlement or payment of the purchase price for
all or any portion of the Collateral sold at any such public sale, to use and
apply all of any part of the Secured Obligations as a credit on account of the
purchase price of any Collateral payable at such sale.  Upon any sale
of Collateral by the Secured Party (including pursuant to a power of sale
granted by statute or under a judicial proceeding), the receipt of the Secured
Party or of the officer making the sale shall be a sufficient discharge to the
purchaser or purchasers of the Collateral so sold and such purchaser or
purchasers shall not be obligated to see to the application of any part of the
purchase money paid to the Secured Party or such officer or be answerable in any
way for the misapplication thereof.  Each purchaser at any such sale
shall hold the property sold absolutely free from any claim or right on the part
of any Grantor, and each Grantor hereby waives (to the extent permitted by law)
all rights of redemption, stay or appraisal that it now has or may at any time
in the future have under any rule of law or statute now existing or hereafter
enacted.  The Secured Party shall not be obliged to make any sale of
Collateral regardless of notice of sale having been given.  The
Secured Party may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so
adjourned.  To the maximum extent permitted by law, each Grantor
hereby waives any claim against the Secured Party arising because the price at
which any Collateral may have been sold at such a private sale was less than the
price that might have been obtained at a public sale, even if the Secured Party
accepts the first offer received and does not offer such Collateral to more than
one offeree.  The Secured Party may disclaim any warranty, as to title
or as to any other matter, in connection with such sale or other disposition,
and its doing so shall not be considered adversely to affect the commercial
reasonableness of such sale or other disposition.

     

    (c)       If
the Secured Party sells any of the Collateral upon credit, the Grantors will be
credited only with payment actually made by the purchaser, received by the
Secured Party and applied in accordance with Section 13 hereof.  In
the event the purchaser fails to pay for the Collateral, the Secured Party may
resell the same, subject to the same rights and duties set forth
herein.

     

    (d)       Notice
of any such sale or other disposition shall be given to the relevant Grantor(s)
as (and if) required by Section 15.

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    (e)       For
the purpose of enabling the Secured Party to exercise rights and remedies under
this Agreement at such time as the Secured Party shall be lawfully entitled to
exercise such rights and remedies, each Grantor hereby grants to the Secured
Party an irrevocable license (exercisable without payment of royalty or other
compensation to the Grantors), to use, license or sublicense any of the
Collateral consisting of Intellectual Property now owned or hereafter acquired
by such Grantor, and including in such license access to all media in which any
of the licensed items may be recorded or stored and to all computer software and
programs used for the compilation or printout thereof.  The use of
such license by the Secured Party may be exercised only upon the occurrence and
during the continuation of an Event of Default; provided, however, that any license,
sublicense or other transaction entered into by the Secured Party in accordance
herewith shall be binding upon each Grantor notwithstanding any subsequent cure
of an Event of Default.

     

    SECTION 13.  Application of
Proceeds.  (a) If an Event of Default shall have occurred and
be continuing, the Secured Party may apply (i) any cash held in the Collateral
Accounts and (ii) the proceeds of any sale or other disposition of all or any
part of the Collateral, in the following order of priorities:

     

    first, to pay the expenses of
such sale or other disposition, including reasonable compensation to agents of
and counsel for the Secured Party, and all expenses, liabilities and advances
incurred or made by the Secured Party in connection with the Security Documents,
and any other amounts then due and payable to the Secured Party pursuant to
Section 14;

     

    second, to pay all Secured
Obligations ratably ; and

     

    finally, if (and only if) the
Release Condition, have been satisfied, to pay to the relevant Grantor, or as a
court of competent jurisdiction may direct, any surplus then remaining from the
proceeds of the Collateral owned by it;

     

    provided that Collateral
owned by a subsidiary and any proceeds thereof shall be applied pursuant to the
foregoing clauses first
and second only
to the extent permitted by the limitations set forth in Section 4 of the Parent
Indemnity and Subsidiary Guarantee Letter Agreement.

     

    SECTION 14.  Fees and Expenses;
Indemnification.  (a) Each Grantor agrees, jointly and
severally, to forthwith upon demand pay to the Secured Party:

     

    (i)        the
amount of any taxes that the Secured Party may have been required to pay by
reason of the Transaction Liens or to free any Collateral from any other Lien
thereon;

     

    (ii)       the
amount of any and all reasonable out-of-pocket expenses, including transfer
taxes and reasonable fees and expenses of counsel and other experts, that the
Secured Party may incur in connection with (x) the administration or enforcement
of the Security Documents, including such expenses as are incurred to preserve
the value of the Collateral or the validity, perfection, rank or value of any
Transaction Lien, (y) the collection, sale or other disposition of any
Collateral or (z) the exercise by the Secured Party of any of its rights or
powers under the Security Documents;

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

    (iii)        the
amount of any fees that any Grantor shall have agreed in writing to pay to the
Secured Party and that shall have become due and payable in accordance with such
written agreement; and

     

    (iv)        the
amount required to indemnify the Secured Party for, or hold it harmless and
defend it against, any loss, liability or expense (including the reasonable fees
and expenses of its counsel and any experts or agents appointed by it hereunder)
incurred or suffered by the Secured Party in connection with the Security
Documents, except to the extent that such loss, liability or expense arises from
the Secured Party’s gross negligence or willful misconduct or a breach of any
duty that the Secured Party has under this Agreement (after giving effect to
Section 17).

     

    Any such
amount not paid to the Secured Party on demand will bear interest for each day
thereafter until paid at a rate per annum equal to the sum of 2% plus the rate
applicable to the Loans.

     

    (b)        If
any transfer tax, documentary stamp tax or other tax is payable in connection
with any transfer or other transaction provided for in the Security Documents,
Party A will pay such tax and provide any required tax stamps to the Secured
Party or as otherwise required by law.

     

    (c)        The
Grantors shall, jointly and severally, indemnify each of the Secured Parties and
their respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an “Indemnitee”) against, and hold
each Indemnitee harmless from, any and all liabilities, losses, damages, costs
and expenses of any kind arising out of, or in connection with the Loan
Contracts or any Security Document,  except to the extent that such
loss, liability or expense arises from such Indemnitee’s gross negligence or
willful misconduct.

     

    SECTION 15.  Authority to Administer
Collateral.  Each Grantor irrevocably appoints the Secured
Party its true and lawful attorney, with full power of substitution, in the name
of such Grantor, for the sole use and benefit of the Secured Party, but at Party
A’s expense, to the extent permitted by law to exercise, at any time and from
time to time while an Event of Default shall have occurred and be continuing,
all or any of the following powers with respect to all or any of such Grantor’s
Collateral:

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

     

    (a)        to
demand, sue for, collect, receive and give acquittance for any and all monies
due or to become due upon or by virtue thereof,

     

    (b)        to
settle, compromise, compound, prosecute or defend any action or proceeding with
respect thereto,

     

    (c)        to
sell, lease, license or otherwise dispose of the same or the proceeds or avails
thereof, as fully and effectually as if the Secured Party were the absolute
owner thereof, and

     

    (d)        to
extend the time of payment of any or all thereof and to make any allowance or
other adjustment with reference thereto;

     

    provided that, except in the
case of Collateral that is perishable or threatens to decline speedily in value
or is of a type customarily sold on a recognized market, the Secured Party will
give the relevant Grantor at least ten days’ prior written notice of the time
and place of any public sale thereof or the time after which any private sale or
other intended disposition thereof will be made. Any such notice shall (i)
contain the information specified in UCC Section 9-613, (ii) be Authenticated
and (iii) be sent to the parties required to be notified pursuant to UCC Section
9-611(c); provided
that, if the Secured Party fails to comply with this sentence in any respect,
its liability for such failure shall be limited to the liability (if any)
imposed on it as a matter of law under the UCC.

     

    SECTION 16.  [reserved].

     

    SECTION 17.  Limitation on Duty in
Respect of Collateral.  Beyond the
exercise of reasonable care in the custody and preservation thereof, the Secured
Party will have no duty as to any Collateral in its possession or control or in
the possession or control of any sub-agent or bailee or any income therefrom or
as to the preservation of rights against prior parties or any other rights
pertaining thereto.  The Secured Party will be deemed to have
exercised reasonable care in the custody and preservation of the Collateral in
its possession or control if such Collateral is accorded treatment substantially
equal to that which it accords its own property, and will not be liable or
responsible for any loss or damage to any Collateral, or for any diminution in
the value thereof, by reason of any act or omission of any sub-agent or bailee
selected by the Secured Party in good faith, except to the extent that such
liability arises from the Secured Party’s gross negligence or willful
misconduct.

     

    SECTION 18.  Termination of
Transaction Liens; Release of Collateral. 

     

    (a)        The
Transaction Liens granted by each Grantor shall terminate when all the Release
Condition is satisfied.

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    (b)        At
any time before the Transaction Liens granted by each Grantor shall terminate,
Party B may in its sole discretion, on behalf of the Secured Party, at the
written request of the relevant Grantor, release any Collateral.

     

    (c)        Upon
any termination of a Transaction Lien or release of Collateral, the Secured
Party will, at the expense of the relevant Grantor, execute and deliver to such
Grantor such documents as such Grantor shall reasonably request to evidence the
termination of such Transaction Lien or the release of such Collateral, as the
case may be.

     

    SECTION 19.  Notices.  Each notice,
request or other communication given to any party hereunder shall be in writing
and shall be delivered by hand or overnight courier service, mailed by certified
or registered mail or sent by telecopier as follows:

     

    (a) Party
A, the Parent Indemnitor, the Subsidiary Guarantor or the Grantors:

     

    1288 Ala
Moana Blvd., Suite 220

    Honolulu,
Hawaii 96814

    Attention:
Chief Executive Officer

    Facsimile
No.: + 1 808-682-7807

     

    (b) Party
B or the Secured Party:

     

    No. 1,
Tianwei Road,

    Southwest Airport Economic Development Zone,

    Chengdu, China 610200

    Attention:
Wei Xia

    Facsimile
No.: +86-28-6705-0035

     

    SECTION 20.  No Implied Waivers;
Remedies Not Exclusive.  No failure by
the Secured Party to exercise, and no delay in exercising and no course of
dealing with respect to, any right or remedy under any Security Document shall
operate as a waiver thereof; nor shall any single or partial exercise by the
Secured Party of any right or remedy under in connection with any of the Secured
Obligations preclude any other or further exercise thereof or the exercise of
any other right or remedy.  The rights and remedies specified in
connection with the Secured Obligations are cumulative and are not exclusive of
any other rights or remedies provided by law.

     

    SECTION 21.  Successors and
Assigns.  This Agreement
is for the benefit of the Secured Party.  If all or any part of the
Secured Party’s interest in any Secured Obligation is assigned or otherwise
transferred, the transferor’s rights hereunder, to the extent applicable to the
obligation so transferred, shall be automatically transferred with such
obligation.  This Agreement shall be binding on the Grantors and their
respective successors and assigns; provided that no Grantor may
assign or otherwise transfer its obligations hereunder without the express
written consent of Party B and any purported assignment in violation of this
provision shall be null and void.

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    SECTION 22.  Amendments and
Waivers.  Neither this
Agreement nor any provision hereof may be waived, amended, modified or
terminated except pursuant to an agreement or agreements in writing entered into
by the Secured Party.  No such waiver, amendment or modification shall
be binding upon any Grantor, except with its written consent.

     

    SECTION 23.  Choice of
Law.  This Agreement
shall be construed in accordance with and governed by the laws of the State of
New York, except as otherwise required by mandatory provisions of law and except
to the extent that remedies provided by the laws of any jurisdiction other than
the State of New York are governed by the laws of such
jurisdiction.

     

    SECTION 24.  Waiver of Jury
Trial.  EACH PARTY
HERETO WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT
MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY
ARISING OUT OF OR RELATING TO ANY SECURITY DOCUMENT OR ANY TRANSACTION
CONTEMPLATED THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION.

     

    SECTION 25.  Severability.  If any provision
of any Security Document is invalid or unenforceable in any jurisdiction, then,
to the fullest extent permitted by law, (i) the other provisions of the Security
Documents shall remain in full force and effect in such jurisdiction and shall
be liberally construed in favor of the Secured Party in order to carry out the
intentions of the parties thereto as nearly as may be possible and (ii) the
invalidity or unenforceability of such provision in such jurisdiction shall not
affect the validity or enforceability thereof in any other
jurisdiction.

     

    [Remainder of page is intentionally
blank]

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.

     

    
      
        
          	
                  HOKU
      SCIENTIFIC, INC.

                
	 
	
                  By:

                	 
      
	 
      	
                  Name:

                	 
      
	 
      	
                  Title:

                	 
      

        

      

    

    

    
      
        
          	
                  HOKU
      MATERIALS, INC.

                
	 
	
                  By:

                	 
      
	 
      	
                  Name:

                	 
      
	 
      	
                  Title:

                	 
      

        

      

    

    

    
      
        
          	
                  TIANWEI
      NEW ENERGY HOLDINGS CO., LTD.

                
	 
	
                  By:

                	 
      
	 
      	
                  Name:

                	 
      
	 
      	
                  Title:

                	 
      

        

      

    

     

    
      [Signature
Page to Security Agreement]

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SCHEDULE 1

     

    EQUITY INTERESTS IN SUBSIDIARIES AND AFFILIATES OWNED BY
GRANTORS

    (as
of ______ __, 2009)

     

    
      	
              
                Issuer

              

            	 	
              
                Jurisdiction

                of

                Organization

              

            	 	
              
                Owner
      of

                Equity
      Interest

              

            	 	
              
                Percentage

                Owned

              

            	 	
              
                Number
      of

                Shares
      or

                Units

              

            	 
	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 
	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 
	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 
	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 
	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 
	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 

    

     

    
      
        
        

      

      
        S-1-1

        
          

        

      

      
        
        

      

    

     

    SCHEDULE 2

     

    INVESTMENT PROPERTY OWNED BY GRANTORS

    (other
than Equity Interests in Subsidiaries and Affiliates)

    (as
of ______ __, 2009)

     

    PART
1 — Securities

     

    
      	
              
                Issuer

              

            	 	
              
                Jurisdiction

                of

                Organization

              

            	 	
              
                Owner
      of Securities

              

            	 	
              
                Amount

                Owned

              

            	 	
              
                Type
      of

                Security

              

            	 
	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 
	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 
	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 
	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 
	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 

    

     

    PART
2 — Securities Accounts

     

    The
Grantors own Security Entitlements with respect to Financial Assets credited to
the following Securities Accounts:

     

    
      	
              
                Owner

              

            	 	
              
                Securities

                Intermediary

              

            	 	
              
                Account
      Number

              

            	 
	 
      	 	 
      	 	 
      	 
	 
      	 	 
      	 	 
      	 
	 
      	 	 
      	 	 
      	 
	 
      	 	 
      	 	 
      	 
	 
      	 	 
      	 	 
      	 

    

    

    
      
        
        

      

      
        S-2-1

        
          

        

      

      
        
        

      

    

     

    SCHEDULE 3

     

    MATERIAL COMMERCIAL TORT CLAIMS

     

    Describe
each existing Material Commercial Tort Claim with the specificity required to
satisfy Official Comment 5 to UCC Section 9-108.

     

    
      
        
        

      

      
        S-3-1

        
          

        

      

      
        
        

      

    

    

    SCHEDULE
4

     

    EXISTING
PERMITTED LIENS

     

    Pursuant
to (i) the letter agreement between Hoku Materials, Inc. and Trance, TCS
Americas dated as of September 4, 2009 and (ii) the UCC financing statement
filed on September 30, 2009 with the Idaho Secretary of State with the filing
number B 2009-1070274-2, Trane US, Inc.’s security interest in the following
equipment located at the Hoku job site in Pocatello, Idaho:

     

    20-HVA-AHU-001,
20-HVA-AHU-002, 20-HVA-AHU-003, 20-HVA-AHU-004, 20-HVA-AHU-005, 20-HVA-AHU-006,
20-HVA-AHU-007, 20-HVA-AHU-008, 20-HVA-CAF-0001, 20-HVA-CAF-0002,
20-HVA-EFN-001, 20-HVA-EFN-002, 20-HVA-EFN-003, 20-HVA-EFN-004, 20-HVA-EFN-005,
20-HVA-EFN-006, 20-HVA-ERC-0001, 20-HVA-ERC-0002, 20-HVA-ERC-0003,
20-HVA-ERC-0004, 20-HVA-ERC-0005, 20-HVA-ERC-0006

     

    
      
        
        

      

      
        S-4-1

        
          

        

      

      
        
        

      

    

     

    EXHIBIT C
TO

    LOAN IMPLEMENTATION
AGREEMENT

    

    RECORDING
REQUESTED BY AND

    WHEN
RECORDED RETURN TO:

    

    Joshua
Erez

    Davis
Polk & Wardwell LLP

    450
Lexington Avenue

    New
York, NY 10017 

    
      
        
          
            	 
      	
                     

                  	  
      

          

        

      

      (Space
Above For Recorder’s Use)

       

    

    DEED
OF TRUST, SECURITY AGREEMENT AND FIXTURE FILING

     

    
      	
              GRANTOR: 

            	
              HOKU
      MATERIALS, INC., a Delaware
corporation

            

    

     

    
      	
              TRUSTEE: 

            	
              ALLIANCE
      TITLE & ESCROW CORP.

            

    

     

    
      	
              BENEFICIARY:

            	
              TIANWEI
      NEW ENERGY HOLDINGS CO., LTD., a People’s Republic of China
      company

            

    

     

    DATE:                              
    ___________, 2009

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    DEED
OF TRUST, SECURITY AGREEMENT AND FIXTURE FILING

     

    THIS DEED
OF TRUST, SECURITY AGREEMENT AND FIXTURE FILING (the “Deed of Trust”) effective
as of ________ __, 2009, by HOKU MATERIALS, INC., a Delaware
corporation, whose address is 1288 Ala Moana Blvd., Suite 220, Honolulu,
Hawaii 96814, the United States of America, as grantor (the “Grantor”), ALLIANCE TITLE & ESCROW
CORP., whose address is P.O. Box 1176, 2350 Via Caporatti, Pocatello,
Idaho 83201, as trustee (the “Trustee”), and TIANWEI NEW ENERGY HOLDINGS CO.,
LTD., a People’s Republic of China company, its successors and assigns,
whose address is No 1, Tianwei Road, Southwest Airport Economic Development
Zone, Chengdu, China 610200, as beneficiary (the “Beneficiary”).

     

    RECITALS

     

    A.           Pursuant
to the that letter agreement (the “Loan Implementation Agreement”) dated as of
December 22, 2009 among Hoku Scientific, Inc. (the “Parent Indemnitor”), Grantor
and Beneficiary, Parent Indemnitor, as borrower, Beneficiary, as entrusting
lender, and China Construction Bank Corporation Shuangliu Sub-Branch, a People’s
Republic of China bank (“CCB”), as agent, have entered into the Tranche 1 Loan
Contract dated as of the date hereof (the “Tranche 1 Loan Contract”) and, as
obligated under the Loan Implementation Agreement, will enter into the Tranche 2
Loan Contract (the “Tranche 2 Loan Contract” and together with the Tranche 1
Loan Contract, the “Entrustment Loan Contract”).

     

    B.           Pursuant
to the Entrustment Loan Contract, Beneficiary agreed to entrust a loan to CCB
for the benefit of, and release to, Parent Indemnitor (the “Entrustment
Loan”).

     

    C.           Parent
Indemnitor and Beneficiary have entered into the Parent Indemnity (the “Parent
Indemnity”), and Grantor and Beneficiary have entered into the Subsidiary
Guarantee (the “Subsidiary Guarantee”), each contained in the letter agreement
dated as of the date hereof (the “Parent Indemnity and Subsidiary Guarantee
Letter Agreement”).  Pursuant to the Parent Indemnity, the Parent
Indemnitor agreed to indemnify the foregoing obligations of Beneficiary and is
willing to secure its indemnitee thereof by granting liens on its assets to the
Beneficiary.  Pursuant to the Subsidiary Guarantee, Grantor agreed to
guarantee the foregoing obligations of Parent Indemnitor and is willing to
secure its guarantee thereof by granting liens on its assets to the
Beneficiary.

     

    D.           Beneficiary,
as a condition precedent to the extension of credit and the making of the
Entrustment Loan, has required that Grantor provide Beneficiary with security
for the foregoing obligations as well as for the performance, observance and
discharge by Grantor or Parent Indemnitor of various covenants, conditions and
agreements made by Grantor or Parent Indemnitor to, with, in favor of, and for
the benefit of, Beneficiary with respect to such obligations and
security.

     

    E.           In
addition, Grantor and Tianwei New Energy (Chengdu) Wafer Co., Ltd. (“Tianwei
Wafer”), an affiliate of Beneficiary have entered into an Amended and Restated
Supply Agreement No. 1 and an Amended and Restated Supply Agreement No. 2, each
dated as of December 22, 2009 (collectively, the “Supply Agreements”), pursuant
to which Grantor has agreed to sell to Beneficiary, and Beneficiary has agreed
to purchase from Grantor, a certain amount of Products (as defined in the Supply
Agreements) over a ten-year period.  Beneficiary is not willing to
purchase Products under the Supply Agreements unless the obligations of Grantor
under the Supply Agreements are secured.  Grantor is willing to secure
its obligations under the Supply Agreements by granting liens on its assets to
Beneficiary.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    1.           Grants
of Security.

     

    1.1           Property Granted. In
consideration of and in order to secure the repayment, observance, performance
and discharge by Parent Indemnitor and Grantor of the Secured Obligations (as
defined in Section 1.4 below), Grantor grants, bargains, sells, aliens, remises,
releases, conveys, assigns, transfers, pledges, delivers, sets over,
hypothecates, warrants, and confirms to Trustee, in trust, with power of sale,
for the benefit and security of Beneficiary, as beneficiary hereunder, subject
to the terms and conditions of this Deed of Trust, all estate, right, title and
interest that Grantor now has or may later acquire in and to the following
described properties, rights and interests and all replacements of,
substitutions for, and additions thereto (all of which are referred to below as
the “Property”):

     

    1.1.1       Real Property.  The
leasehold interest in real property in Bannock County, Idaho, described in
Exhibit A attached hereto and made a part hereof (the “Real Property”), which
Real Property is located within an incorporated city or village.

     

    1.1.2       Improvements.  All
buildings, structures and other improvements of any kind, nature or description
now or hereafter erected, constructed, placed or located upon the Real Property
(the “Improvements”).

     

    1.1.3       Appurtenances.  All
tenements, hereditaments, strips and gores of land, rights-of-way, easements,
privileges and other appurtenances now or hereafter belonging or in any way
appertaining to the Real Property, including, without limitation, all right,
title and interest of the Grantor in any after-acquired right, title, interest,
remainder or reversion, in and to the beds of any ways, streets, avenues, roads,
alleys, passages and public places, open or proposed, in front of, running
through, adjoining or adjacent to the Real Property; to the extent owned by
Grantor, all minerals, royalties, gas rights, water, water rights, water stock,
flowers, shrubs, lawn plants, crops, trees, timber and other emblements now or
hereafter located on, under, or above all or any part of the Real Property (the
“Appurtenances”).

     

    1.1.4       Leases and
Rents.  All leases and other agreements affecting the use,
enjoyment or occupancy of all or any part of the Real Property or the
Improvements heretofore or hereafter entered into whether before or after the
filing by or against Grantor of any petition for relief under 11 U.S.C. 101, et
seq. (the “Bankruptcy Code”), as the same may be amended from time to time (the
“Leases”) and all right, title and interest of Grantor, its successors and
assigns therein and thereunder, including, without limitation, cash or
securities deposited thereunder to secure the performance by the lessees of
their obligations thereunder and all rents, additional rents, revenues, income,
issues and profits (including all oil and gas or other mineral royalties and
bonuses) from the Real Property and the Improvements whether paid or accruing
before or after the filing by or against Grantor of any petition for relief
under the Bankruptcy Code (the “Rents”) and all proceeds from the sale or other
disposition of the Leases and the right to receive and apply the Rents to the
payment of the Secured Obligations (defined below).

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    1.1.5       Condemnation
Awards.  Any and all awards, payments or settlements, including
interest thereon, and the right to receive the same, as a result of (a) the
exercise of the right of eminent domain, (b) the alteration of the grade of any
street, and (c) any other injury, damage or casualty to, taking of, or decrease
in the value of, the Property, to the extent of all amounts that may be secured
by this Deed of Trust at the date of any such award or payment, including but
not limited to Reasonable Attorneys’ Fees (as defined below), costs, and
disbursements incurred by Beneficiary in connection with the collection of such
award or payment.

     

    1.1.6       Fixtures and Personal
Property.  All machinery, equipment, fixtures (including, but
not limited to all heating, air conditioning, plumbing, lighting, communications
and elevator fixtures) and other property of every kind and nature whatsoever
owned by Grantor, or in which Grantor has or shall have an interest, now or
hereafter located upon the Real Property or the Improvements, or appurtenant
thereto, and used in connection with the present or future operation and
occupancy of the Real Property and the Improvements and all building equipment,
materials and supplies of any nature whatsoever owned by Grantor, or in which
Grantor has or shall have an interest, now or hereafter located upon the Real
Property and the Improvements, or appurtenant thereto, or used in connection
with the present or future operation and occupancy of the Real Property and the
Improvements (together referred to as the “Fixtures and Personal Property,”
which term expressly excludes any toxic waste or substance deemed hazardous
under federal, regional, state, or local laws).

     

    1.1.7       Insurance
Proceeds.  All proceeds of and any unearned premiums on any
insurance policies covering the Property, including, without limitation, the
right to receive and apply the proceeds of any insurance judgments, or
settlements made in lieu thereof, for damage to the Property.

     

    1.1.8       Agreements. All agreements,
contracts, certificates, instruments, franchises, permits, licenses, plans,
specifications and other documents, now or hereafter entered into, and all
rights therein and thereto, respecting or pertaining to the use, occupation,
construction, management or operation of the Real Property and any part thereof
and any Improvements or respecting any business or activity conducted on the
Real Property and any part thereof and all right, title and interest of Grantor
therein and thereunder, including, without limitation, the right to receive and
collect any sums payable to Grantor thereunder.

     

    1.1.9       Intangibles.  All
trade names, trademarks, service marks, logos, copyrights, goodwill, books and
records and all other general intangibles specific to or used in connection with
the operation of the Property.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    1.2           Assignment of Leases and
Rents.  Grantor absolutely and unconditionally assigns to
Beneficiary all of Grantor’s right, title and interest in and to all current and
future Leases and Rents (the “Assignment of Leases and Rents”); it being
intended by Grantor that this assignment constitutes a present, absolute
assignment and not an assignment for additional security
only.  Nevertheless, subject to the terms of this Deed of Trust,
Beneficiary grants to Grantor a revocable license to collect and receive the
Rents. Grantor shall hold a portion of the Rents sufficient to discharge all
current sums due under the Parent Indemnity and Subsidiary Guarantee Letter
Agreement and the Supply Agreements, for use in the payment of such
sums.

     

    1.3           Security
Agreement.  This Deed of Trust is both a real property deed of
trust and a “security agreement” within the meaning of the Idaho Uniform
Commercial Code.  The Property includes all rights and interests,
whether tangible or intangible in nature, of Grantor in the Property. By
executing and delivering this Deed of Trust, Grantor grants Beneficiary, as
security for the Secured Obligations, a security interest in the Property that
is personal property (the “Personal Property”) to the full extent that the
Personal Property may be subject to the Idaho Uniform Commercial Code. Upon its
recording, this Deed of Trust shall operate as and constitute a financing
statement filed as a fixture filing, covering any of the Property that now is or
later becomes fixtures attached to the Real Property or the Improvements. For
purposes of this filing, Grantor is the debtor and Beneficiary is the secured
party. The City of Pocatello, a municipal corporation of Idaho, is the record
owner of the Real Property. The name and mailing address of the Grantor, as
debtor, and name and the mailing address of the Beneficiary, as secured party,
are as set forth in the initial paragraph of this Deed of Trust. The debtor is
an organization, the type of organization is a corporation; the jurisdiction in
which the debtor is organized is Delaware; the organizational number in such
jurisdiction for the organization is 4300110.

     

    1.4           Secured
Obligations.  This Deed of Trust and the grants, assignments
and transfers made herein are given for the purpose of securing all of the
following, in such order of priority as Beneficiary may determine in its sole
discretion (the “Secured Obligations”):

     

    1.4.1       The
payment of the indemnity obligations of the Parent Indemnitor evidenced by the
Parent Indemnity in lawful money of the United States of America.

     

    1.4.2       The
payment of interest, default interest, late charges and other sums, as provided
in the Parent Indemnity and Subsidiary Guarantee Letter Agreement, this Deed of
Trust or the other Credit Documents (as defined below).

     

    1.4.3       The
payment of all other monies agreed or provided to be paid by Parent Indemnitor
or Grantor in the Parent Indemnity and Subsidiary Guarantee Letter Agreement,
this Deed of Trust or the other Credit Documents.

     

    1.4.4       The
payment of all sums advanced pursuant to this Deed of Trust to protect and
preserve the Property and the lien and the security interest created
hereby.

     

    1.4.5       The
payment of all sums advanced and costs and expenses incurred by Beneficiary in
connection with the Secured Obligations or any part thereof, any renewal,
extension, modification, consolidation, change, substitution, replacement,
restatement or increase of the Secured Obligations or any part thereof, or the
acquisition or perfection of the security therefor, whether made or incurred at
the request of Grantor or Beneficiary.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    1.4.6       The
performance of all other obligations of Grantor herein.

     

    1.4.7       The
performance of each obligation of Grantor in the Credit Documents in addition to
the payment of the indemnity obligations of the Parent Indemnitor.

     

    1.4.8       The
performance of each obligation in the Credit Documents of any person
guaranteeing the payment of the indemnity obligations of the Parent Indemnitor
or any portion thereof or performance by Grantor of any terms of this Deed of
Trust, if any.

     

    1.4.9       The
performance of each obligation of Grantor and any guarantor of the Secured
Obligations (“Guarantor”) in any renewal, extension, modification,
consolidation, change, substitution, replacement for, restatement or increase of
all or any part of the Parent Indemnity and Subsidiary Guarantee Letter
Agreement, this Deed of Trust or the other Credit Documents.

     

    1.4.10     The
payment and performance of each obligation of Grantor under each of the
following:

     

     1.4.10.1  That
certain Ground Lease dated March 22, 2007, between Grantor, as Tenant, and the
City of Pocatello, a municipal corporation of Idaho, as Landlord, and all
modifications, amendment and addendums thereto, regarding the Real Property
including, without limitation, the First Amendment to Lease dated June 6, 2008,
and the Second Amendment to Lease dated June 19, 2008 (the “Ground
Lease”);

     

     1.4.10.2 The Supply
Agreements.

     

    The
obligations secured hereby may provide for the interest rate, payment terms or
balance due to be indexed, adjusted, renewed or renegotiated.

     

    2.           Grantor
Covenants.  Grantor covenants and agrees as
follows:

     

    2.1           Payment of
Obligations.  Grantor shall pay or cause Parent Indemnitor to
pay any amounts due under the Parent Indemnity and Subsidiary Guarantee Letter
Agreement or the Supply Agreements, together with all interest thereon, in
accordance with the terms of the Parent Indemnity and Subsidiary Guarantee
Letter Agreement or the Supply Agreements, as applicable, promptly at the times,
at the place and in the manner that said amounts shall become due, and to
promptly and punctually pay all other sums required to be paid by Grantor or
Parent Indemnitor pursuant to the terms of the Parent Indemnity and Subsidiary
Guarantee Letter Agreement, the Supply Agreements, this Deed of Trust, the
Assignment of Leases and Rents set forth herein (the “Assignment”) and all other
documents and instruments executed as further evidence of, as additional
security for, or executed in connection with, the obligations evidenced by the
Parent Indemnity and Subsidiary Guarantee Letter Agreement or the Supply
Agreements, as applicable, and secured by this Deed of Trust, including the Loan
Implementation Agreement and the Entrustment Loan Contract, are collectively
referred to as the “Credit Documents.”

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    2.2           Performance of Other
Obligations.  Grantor shall perform, comply with, and abide by
each and every one of the covenants, agreements and conditions contained and set
forth in the Parent Indemnity and Subsidiary Guarantee Letter Agreement, this
Deed of Trust, the other Credit Documents, and the Secured Obligations, and
shall comply with all laws, ordinances, rules, regulations and orders of any
governmental authorities having jurisdiction over the Property that now or
hereafter affect the Property or requires any alterations or improvements to be
made thereon, and shall perform all of its obligations under any covenant,
condition, restriction or agreement of record affecting the Property, including,
but not limited to, the Ground Lease, and shall insure that at all times the
Property constitutes one or more legal lots capable of being conveyed without
violation of any subdivision or platting laws, ordinances, rules or regulations,
or other laws relating to the division or separation of real
property.

     

    2.3           Preservation and Maintenance of
Property.  Grantor shall keep all Improvements now existing or
hereafter erected on the Real Property in good order and repair and shall not do
or permit any waste, impairment or deterioration thereof or thereon, nor alter,
remove, or demolish any of the Improvements or any Fixtures and Personal
Property attached or appertaining thereto, without the prior written consent of
Beneficiary.  Grantor shall not initiate, join in, or consent to any
change in any private restrictive covenant, zoning ordinance or other public or
private restrictions limiting or defining the uses that may be made of the
Property or any part thereof, nor do or permit any other act whereby the
Property shall become less valuable, be used for purposes contrary to applicable
law, or be used in any manner that will increase the premium for or result in a
termination or cancellation of the insurance policies hereinafter required to be
kept and maintained on the Property.  Grantor shall effect such
repairs as Beneficiary may reasonably require, and from time to time make all
needful and proper replacements so that the Improvements, Appurtenances,
Fixtures and Personal Property will, at all times, be in good condition, fit and
proper for the respective purposes for which they were originally erected or
installed.

     

    2.4           Hazardous
Waste.

     

    2.4.1       Subject
to the terms and conditions set forth below, Grantor at all times shall keep the
Property and ground water of the Property free of Hazardous Materials (as
defined below).  Grantor shall not and shall not knowingly permit its
tenants or any third party requiring the consent of Grantor to enter the
Property, to use, generate, manufacture, treat, store, release, threaten
release, or dispose of Hazardous Materials in, on, or about the Property or the
ground water of the Property in violation of any federal, regional, state, or
local law, decision, statute, rule, ordinance or regulation currently in
existence or hereinafter enacted or rendered (collectively the “Hazardous Waste
Laws”).  Grantor shall give Beneficiary prompt written notice of any
claim by any person, entity, or governmental agency that a significant release
or disposal of Hazardous Materials has occurred in, on, or under the Property in
excess of legal limits. Grantor, through its professional engineers and at its
cost, shall promptly and thoroughly investigate suspected Hazardous Materials
contamination of the Property.  Grantor shall forthwith remove,
repair, clean up, and/or detoxify any Hazardous Materials found on the Property
or in the ground water of the Property if such actions are required by Hazardous
Waste Laws, and whether or not Grantor was responsible for the existence of the
Hazardous Materials in, on or about the Property or the ground water of the
Property.  “Hazardous Materials” shall include but not be limited to
substances defined as “hazardous substances,” “hazardous materials,” or “toxic
substances” in The Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, by the Superfund Amendments and
Reauthorization Act of 1986, The Hazardous Materials Transportation Act of 1994,
The Resource Conservation and Recovery Act of 1976, as amended by The Used Oils
Recycling Act of 1980, The Solid Waste Disposal Act amendment of 1984, The Toxic
Substances Control Act, The Clean Air Act, The Clean Water Act, Idaho
Environmental Protection and Health Act (Idaho Code §§ 39 101 to 39 130), Idaho
Water Quality Act (Idaho Code §§ 39 3601 to 39 3639), Idaho Hazardous Waste
Management Act (Idaho Code §§ 39 4401 to 39 4432), Idaho Hazardous Substance
Emergency Response Act (Idaho Code §§ 39 7101 to 39 7115), Idaho Petroleum Clean
Water Trust Fund Act (Idaho Code §§ 41 4901 to 41 4946), Idaho Land Reclamation
Act (Idaho Code §§ 39 7201 to 39 7210), Idaho Solid Waste Facilities Act (Idaho
Code §§ 39 7401 to 39 7420), Idaho Sale and Disposal of Batteries Act (Idaho
Code §§ 39 7001 to 39 7004), or in any other Hazardous Waste Laws. Hazardous
materials shall not include small quantities of paints, solvents, lubricants or
cleaning materials used in the maintenance or operation of the
Property.  In addition, Grantor shall not put any underground storage
tanks on the Real Property.

     

    2.4.2       Grantor
shall indemnify Beneficiary and hold Beneficiary harmless from and against any
and all losses, liabilities, damages, injuries, costs, expenses and claims of
any and every kind whatsoever paid, incurred or suffered by, or asserted against
Beneficiary for, with respect to, or as a direct or indirect result of, the
presence in, on, or under, or the escape, seepage, leakage, spillage, discharge,
emission, or release from, the Property of any Hazardous Materials (including,
without limitation, any losses, liabilities, damages, injuries, costs, expenses
or claims asserted or arising under any Hazardous Waste Laws), regardless of the
source of origination and whether or not caused by, or within the control of,
Grantor.

     

    2.4.3       Liability
under this Section 2.4 and similar provisions in this Deed of Trust and the
other Credit Documents concerning Hazardous Materials shall survive repayment of
the obligations under the Parent Indemnity and Subsidiary Guarantee Letter
Agreement and the Supply Agreements and satisfaction of this Deed of Trust;
provided, however, Grantor shall have no liability under this Section 2.4
regarding Hazardous Materials if the Property becomes contaminated subsequent to
Beneficiary’s acquisition of the Property by foreclosure, or acceptance by
Beneficiary of a deed in lieu thereof, or subsequent to any transfer of
ownership of the Property that was approved or authorized by Beneficiary in
writing, pursuant to this Deed of Trust, provided that such transferee assumes
in writing all of the obligations of Grantor under the Credit Documents with
respect to Hazardous Materials. The burden of proof under this section with
regard to establishing the date upon which any Hazardous Material was placed or
appeared in, on, or under the Property shall be upon Grantor.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    2.5           Accessibility.

     

    2.5.1       Grantor
at all times shall maintain the Property in full compliance with all existing
and hereafter enacted federal, state, county, regional or local laws,
ordinances, rules and regulations governing accessibility for the disabled,
including but not limited to The Architectural Barriers Act of 1968, The
Rehabilitation Act of 1973, The Fair Housing Act of 1988, and The Americans with
Disabilities Act (the “Accessibility Laws”).

     

    2.5.2       Grantor
shall indemnify Beneficiary and hold Beneficiary harmless from and against any
and all losses, liabilities, damages, injuries, costs, expenses and claims of
any and every kind whatsoever paid, incurred or suffered by, or asserted against
Beneficiary for, with respect to, or as a direct or indirect result of, the
non-compliance of the Property with the Accessibility Laws whether or not caused
by, or within the control of, Grantor.

     

    2.5.3       Liability
under this Section 2.5 and similar provisions in this Deed of Trust and the
other Credit Documents concerning Accessibility Laws shall survive repayment of
the obligations under the Parent Indemnity and Subsidiary Guarantee Letter
Agreement and the Supply Agreements and satisfaction of this Deed of Trust;
provided, however, Grantor shall not be liable under this Section 2.5 for
compliance with any Accessibility Laws if such Accessibility Laws first become
effective, or such violations result from alterations or improvements to the
Property that are performed subsequent to Beneficiary’s acquisition of the
Property by foreclosure or acceptance of a deed in lieu thereof, or subsequent
to any transfer that was approved or authorized by Beneficiary pursuant to this
Deed of Trust, provided that such transferee assumes in writing all obligations
pertaining to Accessibility Laws pursuant to this Deed of Trust and the other
Credit Documents.

     

    2.6           Use of
Property.  The Property shall be used only for any legal use
including, without limitation, the construction and operation of a polysilicon
manufacturing facility and for no other use without the prior written consent of
Beneficiary, which consent may be withheld in Beneficiary’s
discretion.

     

    2.7           Payment of Taxes, Assessments and
Other Charges.  Except as otherwise provided in the Ground
Lease, Grantor shall pay all taxes, assessments, and other charges that are or
may be hereafter levied or assessed upon or against the Property, when the same
shall become due and payable according to law, before the same become
delinquent, and before any interest or penalty shall attach
thereto.  Grantor shall deliver official receipts evidencing the
payment of the same to Beneficiary not later than thirty (30) days following
payment.  Grantor shall have the right to contest, in good faith, the
proposed assessment of ad valorem taxes or special assessments by governmental
authorities having jurisdiction over the Property; provided, however, Grantor
shall give written notice thereof to Beneficiary and Beneficiary may, in its
sole discretion, require Grantor to post a bond or other collateral satisfactory
to Beneficiary in connection with any such action by Grantor.

     

    2.8           Payment of Liens, Charges and
Encumbrances.  Grantor shall immediately pay and discharge from
time to time when the same shall become due all lawful claims and demands of
mechanics, materialmen, laborers and others that, if unpaid, might result in, or
permit the creation of, a lien, charge or encumbrance upon the Property or any
part thereof, or on the rents, issues, income, revenues, profits and proceeds
arising therefrom and, in general, to do or cause to be done everything
necessary so that the lien of this Deed of Trust shall be fully preserved, at
the cost of Grantor, without expense to Beneficiary.  Grantor shall
have the right to contest, in good faith and in accordance with applicable laws
and procedures, mechanics’ and materialmens’ liens filed against the Property;
provided however, that Grantor shall give written notice thereof to Beneficiary,
and Beneficiary may, in its sole discretion, require Grantor to post a bond or
other collateral satisfactory to Beneficiary (and acceptable to the title
insurance company insuring this Deed of Trust) in connection with any such
action by Grantor.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    2.9           Payment of Junior
Encumbrances.  Grantor shall not permit default or delinquency
under any lien, imposition, charge or encumbrance against the Property, even
though junior and inferior to the lien of this Deed of Trust; provided however,
the foregoing shall not be construed to permit any other lien or encumbrance
against the Property.

     

    2.10        Payment of Mortgage
Taxes.  Grantor shall pay any and all taxes that may be levied
or assessed under the laws of the United States of America or the political
subdivisions thereunder directly or indirectly upon the Parent Indemnity and
Subsidiary Guarantee Letter Agreement and/or this Deed of Trust (except for
income taxes payable by Beneficiary) or the obligations secured hereby, without
regard to any law that may be hereafter enacted imposing payment of the whole or
any part thereof upon Beneficiary, its successors or assigns.

     

    2.11        Insurance.

     

    2.11.1     Grantor
shall obtain and maintain, or cause to be maintained, insurance for Grantor and
the Property providing at least the following coverages:

     

    (a)           Property
Insurance.  Insurance with respect to the Improvements and
building equipment insuring against any peril as set forth under the Causes of
Loss-Special Form in an amount equal to amounts at all times sufficient to
prevent Beneficiary from becoming a co-insurer within the terms of the
applicable policies and under applicable law, but in any event such insurance
shall be maintained in an amount equal to the full insurable value of the
Improvements and building equipment on the Property.  The term “full
insurable value” means the actual replacement cost of the Improvements and
building equipment (without taking into account any depreciation, and exclusive
of excavations, footings and foundations, landscaping, and paving).

     

    (b)           Liability
Insurance.  Commercial general liability insurance, including
bodily injury, death and property damage liability insurance, against any and
all claims, including all legal liability to the extent insurable and imposed
upon Beneficiary and all court costs and attorneys’ fees and expenses, arising
out of or connected with the possession, use, leasing, operation, maintenance or
condition of the Property in such amounts as are generally available at
commercially reasonable premiums and are generally required by institutional
lenders for properties comparable to the Property but in no event for a combined
single limit of less than $3,000,000.00.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (c)           Business
Interruption.  Business interruption and/or loss of “rental
income” insurance in an amount sufficient to avoid any co-insurance penalty and
to provide proceeds that will cover a period of not less than one (1) year from
the date of casualty or loss, the term “rental income” to mean the sum of (A)
the total then ascertainable Rents payable under the Leases and (B) the total
ascertainable amount of all other amounts to be received by Grantor from third
parties that are the legal obligation of the tenants, reduced to the extent such
amounts would not be received because of operating expenses not incurred during
a period of non-occupancy of that portion of the Property then not being
occupied.

     

    (d)           Flood
Insurance.  Flood insurance in an amount at least equal to the
lesser of (A) the principal balance of the Entrustment Loan Contract, or (B) the
maximum limit of coverage available for the Property under the National Flood
Insurance Act of 1968, The Flood Disaster Protection Act of 1973 or the National
Flood Insurance Reform Act of 1994, as each may be amended, or any successor law
(the “Flood Acts”), if any portion of the Improvements is now or at any time in
the future located within an area identified by the Secretary of Housing and
Urban Development or any successor thereto as an area having special flood
hazards pursuant to the Flood Acts.

     

    (e)           Other
Insurance.  Such other insurance with respect to the Property
against loss or damage of the kinds from time to time customarily insured
against and in such amounts as are generally available at commercially
reasonable premiums and are generally required by institutional lenders for
properties comparable to the Property.

     

    2.11.2    
All insurance provided for in Subsection 2.11.1 shall be obtained under valid
and enforceable policies (the “Policies” or in the singular, the “Policy”), and
shall be issued by one or more domestic primary insurer(s) having (i) an
investment grade rating or claims paying ability assigned by one or more credit
rating agencies approved by Beneficiary (a “Rating Agency”) and (ii) a general
policy rating of A or better and a financial class of VI or better by A.M. Best
Company, Inc. (each such insurer shall be referred to below as a “Qualified
Insurer”).  All insurers providing insurance required by this Deed of
Trust shall be authorized to issue insurance in the state in which the Property
is located.  The Policy referred to in Paragraph (b) above shall name
Beneficiary as an additional named insured and the Policy referred to in
Paragraphs (a), (c), (d), and (e) above shall provide that all proceeds be
payable to Beneficiary as set forth in this Deed of Trust.  The
Policies referred to in Paragraphs (a), (d), and (e) shall also
contain:  (i) a standard “non-contributory mortgagee” endorsement or
its equivalent (such as the Beneficiary’s Loss Payable endorsement 438 BFU, in
long form) relating, inter alia, to recovery by Beneficiary notwithstanding the
negligent or willful acts or omission of Grantor; (ii) to the extent available
at commercially reasonable rates, a waiver of subrogation endorsement as to
Beneficiary; and (iii) an endorsement providing for a deductible per loss of an
amount not more than that which is customarily maintained by prudent owners of
similar properties in the general vicinity of the Property, but in no event in
excess of an amount approved by Beneficiary.  All Policies described
in Subsection 2.11.1 shall contain (i) a provision that such policies shall not
be canceled or terminated, nor shall they expire, without at least thirty (30)
days’ prior written notice to Beneficiary in each instance; and (ii) include
effective waivers by the insurer of all claims for Insurance Premiums (defined
below) against any loss payees, additional insureds and named insureds (other
than Grantor).  Certificates of insurance with respect to all renewal
and replacement Policies shall be delivered to Beneficiary not less than thirty
(30) days prior to the expiration date of any of the Policies required to be
maintained hereunder which certificates shall bear notations evidencing payment
of applicable premiums (the “Insurance Premiums”).  Originals or
certificates of such replacement Policies shall be delivered to Beneficiary
promptly after Grantor’s receipt thereof but in any case within thirty (30) days
after the effective date thereof.  If Grantor fails to maintain and
deliver to Beneficiary the original Policies or certificates of insurance
required by this Deed of Trust, Beneficiary may procure such insurance at
Grantor’s sole cost and expense.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    2.11.3     Grantor
shall comply with all insurance requirements and shall not bring or keep or
permit to be brought or kept any article upon any of the Property or cause or
permit any condition to exist thereon that would be prohibited by an insurance
requirement, or would invalidate the insurance coverage required hereunder to be
maintained by Grantor on or with respect to any part of the Property pursuant to
this Section.

     

    2.11.4     If
the Property shall be damaged or destroyed, in whole or in part, by fire or
other casualty, Grantor shall give prompt notice of such damage to Beneficiary
and provided that Grantor shall have received the Net Proceeds (defined below), Grantor shall promptly
commence and diligently prosecute the completion of the repair and restoration
of the property as nearly as possible to the condition the Property was in
immediately prior to such fire or other casualty, with such alterations as may
be approved by Beneficiary (the “Restoration”) and otherwise in accordance with
Section 2.13 of this Deed of Trust.

     

    2.11.5     The
insurance coverage required under Subsection 2.11.1 may be effected under a
blanket policy or policies covering the Property and other properties and assets
not constituting a part of the security hereunder; provided that any such
blanket policy shall specify, except in the case of public liability insurance,
the portion of the total coverage of such policy that is allocated to the
Property, and any sublimit in such blanket policy applicable to the Property,
and shall in any case comply in all other respects with the requirements of this
Section.

     

    2.11.6     Grantor
waives any and all right to claim or recover against Beneficiary, its officers,
employees, agents and representatives, by way of subrogation or otherwise, for
any loss sustained by Grantor, or any loss or damage to the Property, Grantor’s
property or the property of others under Grantor’s control from any cause
insured against or required to be insured against by the provisions of this Deed
of Trust.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    2.12        Condemnation.  Grantor
shall promptly give Beneficiary notice of the actual or threatened commencement
of any condemnation or eminent domain proceeding and shall deliver to
Beneficiary copies of any and all papers served in connection with such
proceedings.  Beneficiary may participate in any such proceedings to
the extent permitted by law.  Upon an Event of Default, Grantor shall
deliver to Beneficiary all instruments requested by it to permit such
participation.  Grantor shall, at its expense, diligently prosecute
any such proceedings, and shall consult with Beneficiary, its attorneys and
experts, and cooperate with them in the carrying on or defense of any such
proceedings.  Notwithstanding any taking by any public or quasi-public
authority through eminent domain or otherwise (including, but not limited to any
transfer made in lieu of or in anticipation of the exercise of such taking),
Grantor shall continue to pay the Secured Obligations at the time and in the
manner provided for its payment in the Parent Indemnity and Subsidiary Guarantee
Letter Agreement, the Supply Agreements and in this Deed of Trust and the
Secured Obligations shall not be reduced until any award or payment therefor
shall have been actually received and applied by Beneficiary, after the
deduction of expenses of collection, to the reduction or discharge of such
obligations.  Beneficiary shall not be limited to the interest paid on
the award by the condemning authority but shall be entitled to receive out of
the award interest at the rate or rates provided herein or in the Parent
Indemnity and Subsidiary Guarantee Letter Agreement.  If the property
or any portion thereof is taken by the power of eminent domain, Grantor shall
promptly commence and diligently prosecute the Restoration of the Property in
accordance with this Deed of Trust.  If the Property is sold, through
foreclosure or otherwise, prior to the receipt by Beneficiary of the award or
payment, Beneficiary shall have the right, whether or not a deficiency judgment
on the Parent Indemnity and Subsidiary Guarantee Letter Agreement shall have
been sought, recovered or denied, to receive the award or payment, or a portion
thereof sufficient to pay the Secured Obligations.

     

    2.13        Restoration
After Casualty or Condemnation.

     

     In
the event of a casualty or a taking by eminent domain, the following provisions
shall apply in connection with the Restoration of the Property:

     

    2.13.1     If
(i) the Net Proceeds (defined below) do not exceed Fifty Thousand Dollars
($50,000.00) (“Casualty Amount”); (ii) the costs of completing the Restoration
as reasonably estimated by Grantor shall be less than or equal to the Casualty
Amount; (iii) no Event of Default shall have occurred and be continuing under
the Parent Indemnity and Subsidiary Guarantee Letter Agreement, this Deed of
Trust, the other Credit Documents, or any of the Secured Obligations; (iv) the
Property and the use thereof after the Restoration will be in compliance with,
and permitted under, all applicable zoning laws, ordinances, rules and
regulations; and (v) such fire or other casualty or taking, as applicable, does
not materially impair access to the Property or the Improvements, then the Net
Proceeds will be disbursed directly to Grantor and Grantor shall commence and
diligently prosecute to completion, the Restoration of the Property to as nearly
as possible the condition it was in immediately prior to such fire or other
casualty or such taking.  Except upon the occurrence and continuance
of an Event of Default, Grantor shall settle any insurance claims with respect
to the Net Proceeds which in the aggregate are less than or equal to the
Casualty Amount.  Beneficiary shall have the right to participate in
and reasonably approve any settlement for insurance claims with respect to the
Net Proceeds that in the aggregate are equal to or greater than the Casualty
Amount.  If an Event of Default shall have occurred and be continuing,
Grantor irrevocably empowers Beneficiary, in the name of Grantor as its true and
lawful attorney-in-fact, to file and prosecute such claim and to collect and to
make receipt for any such payment.  If the Net Proceeds are received
by Grantor, such Net Proceeds shall, until the completion of the related work,
be held in trust for Beneficiary and shall be segregated from other funds of
Grantor to be used to pay for the cost of the Restoration in accordance with the
terms hereof.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    2.13.2    If
the Net Proceeds are greater than the Casualty Amount, such Net Proceeds shall
be paid to Beneficiary to be held by Beneficiary to be made available to Grantor
for the Restoration in accordance with the provisions of this
Subsection.  Grantor shall commence and diligently prosecute to
completion the Restoration (in the case of a taking, to the extent the Property
is capable of being restored).  The term “Net Proceeds” for purposes
of this Section shall mean:  (i) the net amount of all insurance
proceeds under the Policies carried pursuant to Paragraphs 2.11.1(a), (d), (e),
and (f) of this Deed of Trust as a result of such damage or destruction, after
deduction of its reasonable costs and expenses (including, but not limited to
reasonable counsel fees), if any, in collecting the same, or (ii) the net amount
of all awards and payments received by Beneficiary with respect to a taking
referenced in Section 2.12 of this Deed of Trust, after deduction of its
reasonable costs and expenses (including, but not limited to reasonable counsel
fees), if any, in collecting the same, whichever the case may be.

     

    (a)           The
Net Proceeds shall be made available to Grantor for payment of, or reimbursement
of Grantor’s expenses in connection with, the Restoration, subject to the
following conditions:

     

    (i)           No
Event of Default shall have occurred and be continuing under the Parent
Indemnity and Subsidiary Guarantee Letter Agreement, this Deed of Trust,
the  other Credit Documents, or any of the Secured
Obligations;

     

    (ii)          Beneficiary
shall, within a reasonable period of time prior to request for initial
disbursement, be furnished with an estimate of the cost of the Restoration
accompanied by an architect’s certification as to such costs and appropriate
plans and specifications for the Restoration;

     

    (iii)         The
Net Proceeds, together with any cash or cash equivalent deposited by Grantor
with Beneficiary, are sufficient to cover the cost of the Restoration as such
costs are certified by the architect;

     

    (iv)  
      Beneficiary shall be satisfied that any
operating deficits, including all scheduled payments under the Entrustment Loan
Contract and the Supply Agreements which will be incurred with respect to the
Property as a result of the occurrence of any such fire or other casualty or
taking, whichever the case may be, will be covered out of (1) the Net Proceeds,
or (2) other funds of Grantor;

     

    (v)         [reserved];

     

    (vi)        The
Property and the use thereof after the Restoration will be in compliance with,
and permitted under, all applicable zoning laws, ordinances, rules and
regulations; and

     

    (vii)       Such
fire or other casualty or taking, as applicable, does not materially impair
access to the Property or the Improvements.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b)           The
Net Proceeds shall be held by Beneficiary and, until disbursed in accordance
with the provisions of this Subsection, shall constitute additional security for
the Secured Obligations.  The Net Proceeds other than the Net Proceeds
paid under the Policy described in Paragraph 2.11.1(c) shall be disbursed by
Beneficiary to, or as directed by, Grantor from time to time during the course
of the Restoration, upon receipt of evidence satisfactory to Beneficiary that
(A) all materials installed and work and labor performed (except to the extent
that they are to be directly paid for out of the requested disbursement) in
connection with the Restoration have been paid for in full, and (B) there exist
no notices of pendency, stop orders, mechanic’s or materialman’s liens or
notices of intention to file same, or any other liens or encumbrances of any
nature whatsoever on the Property arising out of the Restoration which have not
either been fully bonded and discharged of record or in the alternative fully
insured to the satisfaction of Beneficiary by the title insurance company
insuring the lien of this Deed of Trust.

     

    (c)           Beneficiary
shall have the use of the plans and specifications and all permits, licenses and
approvals required or obtained in connection with the
Restoration.  The identity of the contractors, subcontractors and
materialmen engaged in the Restoration, as well as the contracts under which
they have been engaged, shall be subject to prior review and acceptance by
Beneficiary and an independent consulting engineer selected by Beneficiary (the
“Casualty Consultant”), such acceptance not to be unreasonably withheld or
delayed.  All costs and expenses incurred by Beneficiary in connection
with making the Net Proceeds available for the Restoration including, without
limitation, reasonable counsel fees and disbursements and the Casualty
Consultant’s fees, shall be paid by Grantor.

     

    (d)           Beneficiary
shall not be obligated to make disbursements of the Net Proceeds in excess of an
amount equal to the costs actually incurred from time to time for work in place
as part of the Restoration, as certified by the Casualty
Consultant.

     

    (e)           Beneficiary
shall not be obligated to make disbursements of the Net Proceeds more frequently
than once every calendar month.

     

    (f)        
   If at any time the Net Proceeds or the undisbursed balance
thereof shall not, in the opinion of Beneficiary, be sufficient to pay in full
the balance of the costs which are estimated by the Casualty Consultant to be
incurred in connection with the completion of the Restoration, Grantor shall
deposit the deficiency (the “Net Proceeds Deficiency”) with Beneficiary before
any further disbursement of the Net Proceeds shall be made.  The Net
Proceeds Deficiency deposited with Beneficiary shall be held by Beneficiary and
shall be disbursed for costs actually incurred in connection with the
Restoration on the same conditions applicable to the disbursement of the Net
Proceeds, and until so disbursed pursuant to this Paragraph shall constitute
additional security for the Secured Obligations.

     

    (g)           The
excess, if any, of the Net Proceeds and the remaining balance, if any, of the
Net Proceeds Deficiency deposited with Beneficiary after the Casualty Consultant
certifies to Beneficiary that the Restoration has been completed in accordance
with the provisions of this Section, and the receipt by Beneficiary of evidence
satisfactory to Beneficiary that all costs incurred in connection with the
Restoration have been paid in full, shall be remitted by Beneficiary to Grantor,
provided no Event of Default shall have occurred and shall be continuing under
the Parent Indemnity and Subsidiary Guarantee Letter Agreement, this Deed of
Trust, the other Credit Documents or any of the Secured
Obligations.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    2.14        Compliance with
Laws.  Grantor shall observe, abide by, and comply with all
statutes, ordinances, laws, orders, requirements or decrees relating to the
Property enacted, promulgated or issued by any federal, state, county or local
governmental authority or any agency or subdivision thereof having jurisdiction
over Grantor or the Property.  Grantor shall observe and comply with
all conditions and requirements necessary to preserve and extend any and all
rights, licenses, permits (including, but not limited to, zoning, variances,
special exceptions and nonconforming uses), privileges, franchises and
concessions that are applicable to the Property or that have been granted to or
contracted for by Grantor in connection with any existing, presently
contemplated or future use of the Property.

     

    2.15        Maintenance of
Permits.  Grantor shall obtain, keep, and constantly maintain
in full force and effect during the entire term of this Deed of Trust all
certificates, licenses and permits necessary to keep the Property operating as a
polysilicon manufacturing facility.  Except as specifically provided
for in this Deed of Trust, Grantor shall not assign, transfer or in any manner
change such certificates, licenses or permits without first receiving the
written consent of Beneficiary.

     

    2.16        Obligations of Grantor as
Lessor.  Grantor shall perform every obligation of Grantor (as
the lessor) and enforce every obligation of the lessee in each lease or other
occupancy agreement of the Property or any part thereof under which Grantor is
the lessor or the grantor of occupancy rights (the “Occupancy Leases”), if
any.  Grantor shall not modify, alter, waive, or cancel any Occupancy
Lease or any part thereof, without the prior written consent of Beneficiary,
which consent shall not be unreasonably withheld (but such consent shall not be
required for such action as to Occupancy Leases if such action is in the
ordinary course of business of owning and operating the Property in a prudent
manner).  Grantor, except as provided for in this Deed of Trust, shall
not assign any Occupancy Lease or any rents to any party other than Beneficiary,
without the prior written consent of Beneficiary, which consent shall not be
unreasonably withheld.  In the event of default under any Occupancy
Lease by reason of failure of the Grantor to keep or perform one or more of the
covenants, agreements or conditions thereof, Beneficiary is authorized and
empowered, and may, at its sole option, remedy, remove or cure any such default,
and further, Beneficiary may, at its sole option and in its sole discretion, but
without obligation to do so, pay any sum of money deemed necessary by it for the
performance of said covenants, agreements and conditions, or for the curing or
removal of any such default, and incur all expenses and obligations which it may
consider necessary or reasonable in connection therewith, and Grantor shall
repay on demand all such sums so paid or advanced by Beneficiary together with
interest thereon until paid at the then applicable interest rate of the
Entrustment Loan Contract plus ten (10) basis points.  All such sums,
if unpaid, shall be added to and become part of the indebtedness secured
hereby.  All Occupancy Leases hereafter made shall be subject to the
approval of Beneficiary and (a) shall be at competitive market rental rates then
prevailing in the geographic area for property comparable to the Property, and
(b) at Beneficiary’s option, shall be superior or subordinate in all respects to
the lien of this Deed of Trust.  Beneficiary shall not require
approval in advance of any Occupancy Leases that conform to the Grantor’s Form
Lease (as defined below) as previously approved by Beneficiary, except as set
forth below.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    2.16.1     Grantor
shall not, without the prior written consent of Beneficiary, surrender or
terminate, either orally or in writing, any Occupancy Lease now existing or
hereafter made with any Major Tenant (as defined below) for all or part of the
Property, permit an assignment or sublease of any such Occupancy Lease, except
as set forth in the Occupancy Lease, or request or consent to the subordination
of any Occupancy Lease to any lien subordinate to this Deed of Trust. If
requested, Grantor shall furnish Beneficiary with copies of all executed
Occupancy Leases of all or any part of the Property now existing or hereafter
made, and Grantor shall assign to Beneficiary (which assignment shall be in form
and content acceptable to Beneficiary), as additional security for the Parent
Indemnity and Subsidiary Guarantee Letter Agreement and the Supply Agreements,
all Occupancy Leases now existing or hereafter made for all or any part of the
Property. Additionally, if any tenant lease contains a provision allowing the
tenant to terminate their lease upon payment of a lease termination fee, Grantor
agrees that all such sums shall be paid to Beneficiary so long as this Deed of
Trust is in effect and held by Beneficiary to be applied to the obligations
secured by this Deed of Trust until a new tenant is secured for the space at the
same or higher rent. All funds held by Beneficiary shall be applied to regular
payments due under the Parent Indemnity and Subsidiary Guarantee Letter
Agreement and the Supply Agreements and not for prepayment unless there is a
default hereunder.

     

    2.16.2     Beneficiary
hereby specifically reserves the right to approve all prospective tenants under
all Occupancy Leases hereafter proposed to be made if:  (i) the term
thereof, excluding options to renew the same, exceeds five (5) years; or (ii)
the net rentable area to be occupied thereunder, including expansion options,
exceeds ten percent (10%) of the net leasable area of the Improvements (the
tenants under such leases are referred to as “Major
Tenants”).  Grantor shall notify Beneficiary in writing of all
prospective Major Tenants and shall deliver to Beneficiary, at Grantor’s sole
cost and expense, information about the prospective Major Tenant reasonably
requested by Beneficiary.

     

    2.17        Funds Held by Beneficiary for Taxes,
Insurance Premiums, and Other Charges.  In order to more fully
protect the security of this Deed of Trust, Grantor shall, upon the request of
Beneficiary at any time following the occurrence of an Event of Default, deposit
with Beneficiary, together with and in addition to each monthly payment due on
account of the indebtedness evidenced by the Entrustment Loan Contract, an
amount equal to one twelfth (1/12) of the annual total of such taxes,
assessments, insurance premiums, and other charges (all as estimated by
Beneficiary in its sole discretion) so that, at least thirty (30) days prior to
the due date thereof, Beneficiary shall be able to pay in full all such taxes,
assessments, insurance premiums, and other charges as the same shall become due,
and Beneficiary may hold without paying interest and commingle with its general
funds the sums so deposited and apply the same to the payment of such taxes,
assessments, insurance premiums, or other charges as they become due and
payable.  If at any time the funds so held by Beneficiary are
insufficient to pay such taxes, assessments, insurance premiums, or other
charges as they become due and payable, Grantor shall immediately, upon notice
and demand by Beneficiary, deposit with Beneficiary the amount of such
deficiency, and the failure on the part of Grantor to do so shall entitle
Beneficiary, at its sole option, to make such payments in accordance with its
right and pursuant to the conditions elsewhere provided in this Deed of
Trust.  Whenever any default exists under this Deed of Trust,
Beneficiary may, at its sole option but without an obligation so to do, apply
any funds so held by it pursuant to this Section toward the payment of the
indebtedness secured hereby, notwithstanding the fact that the amount owing
thereon may not then be due and payable or that said indebtedness may otherwise
be adequately secured in such order and manner of application as Beneficiary may
elect.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    2.18        Examination of Grantor’s
Records.  Grantor shall maintain complete and accurate books
and records showing in detail the income and expenses of the Property, and shall
permit Beneficiary and its representatives to examine such books and records and
all supporting vouchers and data during normal business hours and from time to
time upon request by Beneficiary, in such place as such books and records are
customarily kept, and shall furnish to Beneficiary, within sixty (60) days after
the close of each fiscal year of Grantor, annual statements (income statements
and a balance sheet) for the Grantor and the Property in a form acceptable to
Beneficiary and shall be prepared in accordance with generally accepted
accounting principles, and shall include a rent roll, certified as true and
correct by Grantor and showing in detail all income derived from and expenses
incurred in connection with the ownership of the Property.  Upon the
occurrence of an Event of Default, Beneficiary shall have the right to require
that the financial statements be audited and certified by a certified public
accountant acceptable to Beneficiary, at the sole cost and expense of
Grantor.

     

    3.           Representations and
Warranties.  Grantor represents and warrants to Beneficiary
that:

     

    3.1          Warranty of
Title.  Grantor has good right, title and interest in and to
the Property, subject to the Ground Lease; Grantor has the right to mortgage,
grant, bargain, sell, pledge, assign, warrant, transfer and convey the same;
Grantor possesses a leasehold interest in the Real Property pursuant to the
Ground Lease; and, subject to the Ground Lease, Grantor owns the Improvements
and the Property free and clear of all liens, encumbrances and charges
whatsoever except for the Ground Lease and other matters currently of
record.  Subject to the Ground Lease and other matters currently of
record, Grantor shall forever warrant, defend and preserve the title and the
validity and priority of the lien of this Deed of Trust and shall forever
warrant and defend the same to Beneficiary against the claims of all persons
whomsoever.

     

    3.2          Status
of Property.

     

    3.2.1       Grantor
has obtained all necessary certificates, licenses and other approvals,
governmental and otherwise, necessary for the operation of the Property and the
conduct of its business and all required zoning, building code, land use,
environmental and other similar permits or approvals, all of which are in full
force and effect as of the date hereof and not subject to revocation,
suspension, forfeiture or modification.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    3.2.2       All
public roads and streets necessary for service of and access to the Property for
the current or contemplated use thereof have been completed, are serviceable and
all-weather and are physically and legally open for use by the
public.

     

    3.2.3       The
Property complies with the Americans With Disabilities Act and any regulations
promulgated thereunder.

     

    3.2.4       No
part of the Real Property consists of or is classified as wetlands, tidelands,
or swamp and overflow lands.

     

    3.3          Leases.  With regard
to Occupancy Leases, if any, except as disclosed in the rent roll for the
Property delivered to and approved by Beneficiary, (a) Grantor is the sole owner
of the entire lessor’s interest in the Occupancy Leases; (b) the terms of all
alterations, modifications and amendments to the Occupancy Leases are reflected
in the certified rent roll delivered to and approved by Beneficiary; (c) none of
the Rents reserved in the Occupancy Leases have been assigned or otherwise
pledged or hypothecated (except to Beneficiary); (d) the premises demised under
the Occupancy Leases have been completed and the tenants under the Occupancy
Leases have accepted the same and have taken possession of the same on a
rent-paying basis; (e) the Occupancy Leases are valid and enforceable against
Grantor and the tenants set forth therein; (f) no person or entity has any
possessory interest in, or right to occupy, the Property except under and
pursuant to an Occupancy Lease; and (g) each Occupancy Lease is subordinate to
this Deed of Trust, either pursuant to its terms or a recorded subordination
agreement.

     

    3.4          Taxes.  Grantor has
filed all federal, state, county, municipal, and city income and other tax
returns required to have been filed by it and have paid all taxes and related
liabilities which have become due pursuant to such returns or pursuant to any
assessments received by it.  Grantor does not know of any basis for
any additional assessment in respect of any such taxes and related liabilities
for prior years.

     

    4.           Further
Assurances.

     

    4.1          Inspection by
Beneficiary.  Beneficiary, and/or its agents, shall have the
right and shall be permitted, but shall not be required, at all reasonable
times, to enter upon and inspect the Property to insure compliance with the
covenants, agreements, and conditions set forth in this Deed of
Trust.

     

    4.2          Execution of Additional
Documents.  Grantor shall, at the cost of Grantor, execute,
acknowledge and deliver all and every such further acts, deeds, conveyances,
mortgages, assignments, notices of assignments, transfers, assurances and other
instruments, including security agreements and financing statements, as
Beneficiary shall from time to time require for the purpose of better assuring,
conveying, assigning, transferring and confirming unto Beneficiary the Property
and rights hereby encumbered, created, conveyed, assigned or intended now or
hereafter so to be encumbered, created, conveyed or assigned or that Grantor may
now be or may hereafter become bound to encumber, create, convey, or assign to
Beneficiary, or for the purpose of carrying out the intention or facilitating
the performance of the terms of this Deed of Trust, or for filing, registering,
or recording this Deed of Trust, and to pay all filing, registration, or
recording fees and all taxes, costs and other expenses, including Reasonable
Attorneys’ Fees, incident to the preparation, execution, acknowledgment,
delivery, and recordation of any of the same.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    5.           Further Encumbrance
Prohibited.  Grantor shall not, without the prior written
consent of Beneficiary, sell, convey, mortgage, grant, bargain, encumber,
pledge, assign, or otherwise transfer the Property or any part thereof or permit
the Property or any part thereof to be sold, conveyed, mortgaged, granted,
bargained, encumbered, pledged, assigned, or otherwise transferred.  A
sale, conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment, or
transfer within the meaning of this Section shall be deemed to include, but not
limited to (a) an installment sales agreement wherein Grantor agrees to sell the
Property or any part thereof for a price to be paid in installments; (b) an
agreement by Grantor leasing all or a substantial part of the Property for other
than actual occupancy by a space tenant thereunder or a sale, assignment or
other transfer of, or the grant of a security interest in, Grantor’s right,
title and interest in and to any Leases or any Rents; (c) if Grantor or any
general partner or managing member (or if no managing member, any member) of
Grantor is a corporation, the voluntary or involuntary sale, conveyance,
transfer or pledge of such corporation’s stock (or the stock of any corporation
directly or indirectly controlling such corporation by operation of law or
otherwise) or the creation or issuance of new stock by which an aggregate of
more than 49% of such corporation’s stock shall be vested in a party or parties
who are not now owners of more than 49% of such corporation’s stock; and (d) if
Grantor or any general partner or managing member (or if no managing member, any
member) of Grantor is a limited or general partnership or joint venture, the
change, removal or resignation of a general partner or the transfer or pledge of
the partnership interest of any general partner or any profits or proceeds
relating to such partnership interest, and (e) if Grantor or any general partner
or member of Grantor is a limited liability company, the change, removal or
resignation of a managing member (or if no managing member, any member) or the
transfer of the membership interest of a managing member (or if no managing
member, any member) or any profits or proceeds relating to such membership
interest.  Notwithstanding the foregoing, the following transfers
shall not be deemed to be a sale, conveyance, mortgage, grant, bargain,
encumbrance, pledge, assignment or transfer within the meaning of this
Section:  (a) transfer by devise or descent or by operation of law
upon the death of a member, general partner or stockholder of Grantor or any
member or general partner thereof, and (b) a sale, transfer or hypothecation of
a membership, partnership or shareholder interest in Grantor, whichever the case
may be, by a current member, general partner or shareholder, as applicable, to
an immediate family member (i.e., parents, spouses, siblings, children or
grandchildren) of such member, general partner or shareholder, or to a trust for
the benefit of an immediate family member of such member, general partner or
shareholder.

     

    6.           Default.  The
occurrence of any one or more of the following events shall constitute an “Event
of Default”:

     

    6.1           The
occurrence of any “Event of Default” under, and as defined in the Entrstument
Loan Contract.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    6.2          A
failure by Grantor or any Guarantor to observe or perform any covenant or
agreement contained in any Credit Document, and such failure shall continue
unremedied for a period of 15 days after notice thereof from
Beneficiary.

     

    6.3          Any
real property deed of trust or security interest created under this Deed of
Trust shall cease to be, or shall be asserted by Grantor not to be, a valid and
perfected real property deed of trust and security interest in favor of
Beneficiary on the Property, with the priority required by this Deed of
Trust.

     

    6.4          Any
representation or warranty made or deemed made by or on behalf of Grantor or any
Guarantor under or in connection with any Credit Document shall prove to have
been incoorrect in any material respect on the date made or deemed
made.

     

    6.5          [Reserved]

     

    6.6          [Reserved]

     

    7.           Rights
and Remedies.

     

    7.1          Remedies.  Upon the
occurrence of any Event of Default, Beneficiary may take such action, without
notice or demand, as it deems advisable to protect and enforce its rights
against Grantor and in and to the Property, including, but not limited to the
following actions, each of which may, to the extent permitted by applicable law,
be pursued concurrently or otherwise, at such time and in such order as
Beneficiary may determine, in its sole discretion, without impairing or
otherwise affecting the other rights and remedies of Beneficiary:

     

    7.1.1       Declare
the entire unpaid Secured Obligations to be immediately due and
payable.

     

    7.1.2       Institute
proceedings, judicial or otherwise, for the complete foreclosure of this Deed of
Trust under any applicable provision of law in which case the Property or any
interest therein may be sold for cash or upon credit in one or more parcels or
in several interests or portions and in any order or manner.

     

    7.1.3       Sell
for cash or upon credit the Property or any part thereof and all estate, claim,
demand, right, title and interest of Grantor therein and rights of redemption
thereof, pursuant to power of sale or otherwise, as an entirety or in parcels,
at such time and place, upon such terms and after such notice thereof as may be
required or permitted by law.

     

    7.1.4       Institute
an action, suit or proceeding in equity for the specific performance of any
covenant, condition or agreement contained herein, in the Parent Indemnity and
Subsidiary Guarantee Letter Agreement or in the other Credit
Documents.

     

    7.1.5       Apply
for the appointment of a receiver, trustee, liquidator or conservator of the
Property, without notice and without regard for the adequacy of the security for
the Secured Obligations and without regard for the solvency of Grantor or of any
person, firm or other entity liable for the payment of the Secured
Obligations.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    7.1.6       Subject
to any applicable law, the license granted to Grantor under Subsection 1.2 shall
automatically be revoked and Beneficiary may enter into or upon the Property,
either personally or by its agents, nominees or attorneys and dispossess Grantor
and its agents and servants therefrom, without liability for trespass, damages
or otherwise and exclude Grantor and its agents or servants wholly therefrom,
and take possession of all books, records and accounts relating thereto and
Grantor agrees to surrender possession of the Property and of such books,
records and accounts to Beneficiary upon demand, and thereupon Beneficiary may
(i) use, operate, manage, control, insure, maintain, repair, restore and
otherwise deal with all and every part of the Property and conduct the business
thereat; (ii) complete any construction on the Property in such manner and form
as Beneficiary deems advisable; (iii) make alterations, additions, renewals,
replacements and improvements to or on the Property; (iv) exercise all rights
and powers of Grantor with respect to the Property, whether in the name of
Grantor or otherwise, including without limitation, the right to make, cancel,
enforce or modify Leases, obtain and evict tenants, and demand, sue for,
collect, and receive all Rents of the Property and every part thereof; (v)
require Grantor to pay monthly in advance to Beneficiary, or any receiver
appointed to collect the Rents, the fair and reasonable rental value for the use
and occupation of such part of the Property as may be occupied by Grantor; (vi)
require Grantor to vacate and surrender possession of the Property to
Beneficiary or to such receiver and, in default thereof, Grantor may be evicted
by summary proceedings or otherwise; and (vii) apply the receipts from the
Property to the payment of the Secured Obligations, in such order, priority and
proportions as Beneficiary shall deem appropriate in its sole discretion after
deducting therefrom all expenses (including reasonable attorneys’ fees) incurred
in connection with the aforesaid operations and all amounts necessary to pay the
taxes, insurance and other expenses in connection with the Property, as well as
just and reasonable compensation for the services of Beneficiary, its counsel,
agents and employees.

     

    7.1.7       Exercise
any and all rights and remedies granted to a secured party upon default under
the Uniform Commercial Code, including, without limiting the generality of the
foregoing:  (i) the right to take possession of the Personal Property
or any part thereof, and to take such other measures as Beneficiary may deem
necessary for the care, protection and preservation of the Personal Property,
and (ii) request Grantor at its expense to assemble the Personal Property and
make it available to Beneficiary at a convenient place acceptable to
Beneficiary.  Any notice of sale, disposition or other intended action
by Beneficiary with respect to the Personal Property sent to Grantor in
accordance with the provisions hereof at least ten days prior to such action,
shall constitute commercially reasonable notice to Grantor.

     

    7.1.8       Apply
the undisbursed balance of any Net Proceeds or any Net Proceeds Deficiency
deposit, together with interest thereon, to the payment of the Secured
Obligations in such order, priority and proportions as Beneficiary shall deem to
be appropriate in its discretion.

     

    7.1.9       Pursue
such other remedies as Beneficiary may have under applicable
law.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Notwithstanding
the provisions of this Section to the contrary, if any Event of Default as
described in Subsection 6.4 (i) or (ii) shall occur, the entire unpaid Secured
Obligations shall be automatically due and payable, without any further notice,
demand or other action by Beneficiary.

     

    7.2           Foreclosure by Power of
Sale.  If Beneficiary elects to foreclose by exercise of the
power of sale herein contained, Beneficiary shall notify Trustee and shall
deposit with the Trustee this Deed of Trust, the Parent Indemnity and Subsidiary
Guarantee Letter Agreement and such receipts and evidence of expenditures made
and secured hereby as Trustee may require.  Upon receipt of such
notice from Beneficiary, Trustee shall cause to be recorded and given all
notices required by law.  Trustee shall, without demand on Grantor,
after lapse of such time as may then be required by law and after recordation of
such Notice of Default and after Notice of Sale having been given as required by
law, sell the Property at the time and place of sale fixed by it in said Notice
of Sale either as a whole, or in separate lots or parcels as Trustee shall deem
expedient, unless Beneficiary specifies certain terms and conditions that are
permitted by applicable law, and in such order as it may determine, at public
auction to the highest bidder for cash in lawful money of the United States
payable at the time of sale.  The Trustee may postpone any sale by
public announcement at the time and place noticed for the
sale.  Trustee shall deliver to such purchaser or purchasers thereof
its good and sufficient deed or deeds conveying the property so sold, but
without any covenant or warranty, express or implied.  The recitals in
such deed of any matters or facts shall be conclusive proof of the truthfulness
thereof.  Any person, including without limitation, Grantor, Trustee
or Beneficiary, may purchase at such sale.  At any judicial or trustee
sale of the Property, Beneficiary may credit bid (as determined by Beneficiary
in its sole and absolute discretion) all or any portion of the Secured
Obligations.

     

    7.3           Application of
Proceeds.  The purchase money, proceeds and avails of any
disposition of the Property, or any part thereof, or any other sums collected by
Beneficiary pursuant to the Parent Indemnity and Subsidiary Guarantee Letter
Agreement, this Deed of Trust or the other Credit Documents, may be applied by
Beneficiary to the payment of the Secured Obligations in such priority and
proportions as Beneficiary in its discretion shall deem proper, subject to any
applicable law.

     

    7.4           Right to Cure
Defaults.  Upon the occurrence of any Event of Default,
Beneficiary may, but without any obligation to do so and without notice to or
demand on Grantor and without releasing Grantor from any obligation hereunder,
cure the same in such manner and to such extent as Beneficiary may deem
necessary to protect the security hereof.  Beneficiary is authorized
to enter upon the Property for such purposes, or appear in, defend, or bring any
action or proceeding to protect its interest in the Property or to foreclose
this Deed of Trust or collect the Secured Obligations, and the cost and expense
thereof (including reasonable attorneys’ fees to the extent permitted by law),
with interest as provided in this Section, shall constitute a portion of the
Secured Obligations and shall be due and payable to Beneficiary upon
demand.  All such costs and expenses incurred by Beneficiary in
remedying such Event of Default or in appearing in, defending, or bringing any
such action or proceeding shall bear interest at the default rate specified in
the Entrustment Loan Contract (the “Default Rate”), for the period after notice
from Beneficiary that such cost or expense was incurred to the date of payment
to Beneficiary.  All such costs and expenses incurred by Beneficiary
together with interest thereon calculated at the Default Rate shall be deemed to
constitute a portion of the Secured Obligations and be secured by this Deed of
Trust and the other Credit Documents and shall be immediately due and payable
upon demand by Beneficiary therefor.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    7.5         Examination of Books and
Records.  Beneficiary, its agents, accountants and attorneys
shall have the right upon prior written notice to examine the records, books,
management and other papers of Grantor and its affiliates that reflect upon
their financial condition, at the Property or at any office regularly maintained
by Grantor, its affiliates or any Guarantor where the books and records are
located.  Beneficiary and its agents shall have the right upon notice
to make copies and extracts from the foregoing records and other
papers.  In addition, Beneficiary, its agents, accountants and
attorneys shall have the right to examine and audit the books and records of
Grantor and its affiliates or of any Guarantor pertaining to the income,
expenses and operation of the Property during reasonable business hours at any
office of Grantor, its affiliates or any Guarantor where the books and records
are located.

     

    7.6         Other
Rights.

     

    7.6.1       The
failure of Beneficiary to insist upon strict performance of any term hereof
shall not be deemed to be a waiver of any term of this Deed of
Trust.  Grantor shall not be relieved of Grantor’s obligations
hereunder by reason of (i) the failure of Beneficiary to comply with any request
of Grantor to take any action to foreclose this Deed of Trust or otherwise
enforce any of the provisions hereof or of the Parent Indemnity and Subsidiary
Guarantee Letter Agreement, the other Credit Documents or the Secured
Obligations, (ii) the release, regardless of consideration, of the whole or any
part of the Property, or of any person liable for the Secured Obligations or any
portion thereof, or (iii) any agreement or stipulation by Beneficiary extending
the time of payment or otherwise modifying or supplementing the terms of the
Parent Indemnity and Subsidiary Guarantee Letter Agreement, this Deed of Trust,
the other Credit Documents or the Secured Obligations.

     

    7.6.2       The
risk of loss or damage to the Property is on Grantor, and Beneficiary shall have
no liability whatsoever for decline in value of the Property, for failure to
maintain the Policies, or for failure to determine whether insurance in force is
adequate as to the amount of risks insured. Possession by Beneficiary shall not
be deemed an election of judicial relief, if any such possession is requested or
obtained, with respect to any Property or collateral not in Beneficiary’s
possession.

     

    7.6.3       Beneficiary
may resort for the payment and/or performance of the Secured Obligations to any
other security held by Beneficiary in such order and manner as Beneficiary, in
its discretion, may elect.  Beneficiary may take action to recover the
Secured Obligations, or any portion thereof, or to enforce any covenant hereof
without prejudice to the right of Beneficiary thereafter to foreclose this Deed
of Trust.  The rights of Beneficiary under this Deed of Trust shall be
separate, distinct and cumulative and none shall be given effect to the
exclusion of the others.  No act of Beneficiary shall be construed as
an election to proceed under any one provision herein to the exclusion of any
other provision.  Beneficiary shall not be limited exclusively to the
rights and remedies herein stated but shall be entitled to every right and
remedy now or hereafter afforded at law or in equity.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    7.7           Beneficiary’s
Power.  Beneficiary may release or reconvey any portion of the
Property for such consideration as Beneficiary may require without, as to the
remainder of the Property, in any way impairing or affecting the lien or
priority of this Deed of Trust, or improving the position of any subordinate
lienholder with respect thereto, except to the extent that the obligations
hereunder shall have been reduced by the actual monetary consideration, if any,
received by Beneficiary for such release or reconveyance, and may accept by
assignment, pledge or otherwise any other property in place thereof as
Beneficiary may require without being accountable for so doing to any other
lienholder.  This Deed of Trust shall continue as a lien and security
interest in the remaining portion of the Property. Without affecting the
liability of any other person liable for the payment and/or performance of the
Obligations and without in any way impairing or affecting the lien or priority
of this Deed of Trust, Beneficiary may, from time to time and without notice (i)
release any person so liable; (ii) extend the maturity or alter any of the terms
of any Secured Obligation; (iii) grant other indulgences; or (iv) make
compositions or other arrangements with debtors in relation
thereto.

     

    7.8           Right of
Entry.  Beneficiary and its agents shall have the right upon
prior written notice to enter and inspect the Property at all reasonable times
upon notice to Grantor.

     

    7.9           Acceptance of Trust; Powers and
Duties of Trustee.  Trustee accepts this trust when this Deed
of Trust is recorded.  From time to time upon written request of
Beneficiary and presentation of this Deed of Trust, or a certified copy thereof,
for endorsement, and without affecting the personal liability of any person for
payment of any indebtedness or performance of any other Obligation, Trustee may,
without liability therefor and without notice:  (a) reconvey all or
any part of the Property; (b) consent to the making of any map or plat of the
Property; (c) join in granting any easement on the Property; (d) join in any
declaration of covenants and restrictions; or (e) join in any extension
agreement or any agreement subordinating the lien or charge of this Deed of
Trust.  Nothing contained in the immediately preceding sentence shall
be construed to limit, impair or otherwise affect the rights of Trustee in any
respect.  Trustee is not obligated to notify any party hereto of
pending sale under any other deed of trust or of any action or proceeding in
which Grantor, Beneficiary, or Trustee shall be a party unless brought by
Trustee.

     

    7.10        Substitution of
Trustee.  Beneficiary may at any time, and from time to time,
and without notice, replace and substitute a new trustee in place of the
existing Trustee under this Deed of Trust, in the manner provided for under, and
as allowed by, current Idaho law.

     

    7.11        Reconveyance by
Trustee.  Upon written request of Beneficiary stating that all
sums secured hereby have been paid and upon surrender of this Deed of Trust to
Trustee for cancellation and retention and upon payment by Grantor of Trustee’s
fees, Trustee shall reconvey to Grantor, or the person or persons legally
entitled thereto, without warranty, any portion of the Property then held
hereunder.  The recitals in such reconveyance of any matters or facts
shall be conclusive proof of the truthfulness thereof.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    8.           
Indemnification.  If
Beneficiary shall become a party either as plaintiff or as defendant, in any
action, suit, appeal or legal proceeding (including, without limitation,
foreclosure, condemnation, bankruptcy, administrative proceedings or any
proceeding wherein proof of claim is by law required to be filed), hearing,
motion or application before any court or administrative body in relation to the
Property or the lien and security interest granted or created hereby or herein,
or for the recovery or protection of said indebtedness or the Property, or for
the foreclosure of this Deed of Trust, Grantor shall save and hold Beneficiary
harmless from and against any and all costs and expenses incurred by Beneficiary
on account thereof, including, but not limited to, Reasonable Attorneys’ Fees,
title searches and abstract and survey charges, at all trial and appellate
levels, and Grantor shall repay, on demand, all such costs and expenses,
together with interest thereon until paid at the then applicable rate of
interest of the Entrustment Loan Contract plus ten (10) basis points; all of
which sums, if unpaid, shall be added to and become a part of the indebtedness
secured hereby.

     

    9.           
Usury Savings
Clause.   Notwithstanding any provisions in the Parent
Indemnity and Subsidiary Guarantee Letter Agreement or in this Deed of Trust to
the contrary, the total liability for payments in the nature of interest
including but not limited to default interest and late payment charges shall not
exceed the limits imposed by the laws of the State of Idaho or, if controlling,
the United States relating to maximum allowable charges of
interest.  Beneficiary shall not be entitled to receive, collect or
apply, as interest on the obligations evidenced by the Parent Indemnity and
Subsidiary Guarantee Letter Agreement or the Supply Agreements, any amount in
excess of the maximum lawful rate of interest permitted to be charged by
applicable law.  If Beneficiary ever receives, collects or applies as
interest any such excess, such amount that would be excessive interest shall be
applied to reduce the unpaid principal balance of the obligations evidenced by
the Parent Indemnity and Subsidiary Guarantee Letter Agreement and the Supply
Agreements.  If the unpaid principal balance of such obligations has
been paid in full, any remaining excess shall be paid to Grantor.

     

    10.          Notices.  All
notices or other written communications hereunder shall be deemed to have been
properly given (a) upon delivery, if delivered in person or by facsimile
transmission with receipt acknowledged by the recipient thereof, (b) one (1)
business day after having been deposited for overnight delivery with any
reputable overnight courier service, or (c) three (3) business days after having
been deposited in any post office or mail depository regularly maintained by the
U.S. Postal Service and sent by registered or certified mail, postage prepaid,
return receipt requested, addressed as follows:

     

    
      
        
          
            	
                     If to
      Grantor:

                  	
                    HOKU
      MATERIALS, INC.

                  
	 
      	
                    1288
      Ala Moana Blvd., Suite 220

                  
	 
      	
                    Honolulu,
      Hawaii 96814

                  
	 
      	
                    Attention:
      Chief Executive Officer

                  
	 
      	
                    Facsimile
      No.: + 1 808-682-7807

                  
	 	 
	
                     With
      a copy to:

                  	
                    STOEL
      RIVES LLP

                  
	 
      	
                    101
      S. Capitol Blvd., Suite 1900

                  
	 
      	
                    Boise,
      Idaho 83702

                  
	 	
                    Attention:
      Paul M. Boyd

                  
	 	
                    Facsimile
      No.: +1
208-389-9040

                  

          

        

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      
        
          
            
              
                	
                         If
      to Beneficiary:

                      	
                        TIANWEI
      NEW ENERGY HOLDINGS CO., LTD

                      
	 
      	
                        No
      1, Tianwei Road

                      
	 
      	
                        Southwest
      Airport Economic Development Zone

                      
	 
      	
                        Chengdu,
      China 610200

                      
	 
      	
                        Attention:
      Wei Xia

                      
	 
      	
                        Facsimile
      No.: +86-28-6705-0035

                      
	 	 
	
                         With
      a copy to:

                      	
                        Davis
      Polk & Wardwell LLP

                      
	 
      	
                        26/F,
      Twin Towers West,

                      
	 
      	
                        B12,
      Jian Guo Men Wai Avenue,

                      
	 
      	
                        Chao
      Yang District, Beijing, P.R.C. 100022

                      
	 
      	
                        Attention:
      Howard Zhang

                      
	 
      	
                        Facsimile
      No.: +
86-10-8567-5123

                      

              

            

          

        

      

    

     

    or
addressed as such party may from time to time designate by written notice to the
other parties. Either party by notice to the other may designate additional or
different addresses for subsequent notices or communications.

     

    11.          Governing Law.  This
Deed of Trust is to be governed by and construed in accordance with the laws of
the state of Idaho where the Property is located and, if controlling, by the
laws of the United States and shall be binding upon Grantor, its heirs, personal
representatives, successors and assigns and shall inure to the benefit of
Beneficiary, its successors and assigns.

     

    12.          Miscellaneous.

     

    12.1        Successors and Assigns:
Terminology.  The provisions hereof shall be binding upon
Grantor and the heirs, personal representatives, successors and assigns of
Grantor, and shall inure to the benefit of Beneficiary, its successors and
assigns.  Where more than one Grantor is named herein, the obligations
and liabilities of said Grantor shall be joint and several.  Wherever
used in this Deed of Trust, unless the context clearly indicates a contrary
intent or unless otherwise specifically provided herein, the word “Grantor”
shall mean Grantor and/or any subsequent owner or owners of the Property, the
word “Beneficiary” shall mean Beneficiary or any subsequent holder or holders of
this Deed of Trust, and the word “person” shall mean an individual, trustee,
trust, corporation, partnership or unincorporated association.  As
used herein, the phrase “Reasonable Attorneys’ Fees” shall mean fees charged by
attorneys selected by Beneficiary based upon such attorneys’ then prevailing
hourly rates as opposed to any statutory presumption specified by any statute
then in effect in the State of Idaho.

     

    12.2        Provisions Subject to Applicable
Law.  All rights, powers and remedies provided in this Security
Instrument may be exercised only to the extent that the exercise thereof does
not violate any applicable provisions of law and are intended to be limited to
the extent necessary so that they will not render this Security Instrument
invalid, unenforceable or not entitled to be recorded, registered or filed under
the provisions of any Applicable Law.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    12.3        Inapplicable
Provision.  If any term of this Security Instrument or any
application thereof shall be invalid or unenforceable, the remainder of this
Security Instrument and any other application of the term shall not be affected
thereby.

     

    12.4        Attorney’s Fees for
Enforcement.  Grantor shall pay to Beneficiary on demand any
and all expenses, including legal expenses and attorney’s fees, incurred or paid
by Beneficiary in protecting its interest in the Property or Personal Property
or in collecting any amount payable hereunder or in enforcing its rights
hereunder with respect to the Property or Personal Property, whether or not any
legal proceeding is commenced hereunder or thereunder and whether or not any
default or Event of Default shall have occurred and is continuing, together with
interest thereon at the Default Rate from the date paid or incurred by
Beneficiary until such expenses are paid by Grantor.

     

    12.5        Modifications.  This
Deed of Trust cannot be changed, altered, amended or modified except by an
agreement in writing and in recordable form, executed by both Grantor and
Beneficiary.

     

    12.6        Captions.  The
captions set forth at the beginning of the various sections of this Deed of
Trust are for convenience only and shall not be used to interpret or construe
the provisions of this Deed of Trust.

     

    12.7        Liability.  If
Grantor consists of more than one person, the obligations and liabilities of
each such person hereunder shall be joint and several.

     

    12.8        Duplicate Originals;
Counterparts.  This Deed of Trust may be executed in any number
of duplicate originals and each duplicate original shall be deemed to be an
original.  This Deed of Trust may be executed in several counterparts,
each of which counterparts shall be deemed an original instrument and all of
which together shall constitute a single Deed of Trust.  The failure
of any party hereto to execute this Deed of Trust, or any counterpart hereof,
shall not relieve the other signatories from their obligations
hereunder.

     

    12.9        Entire
Agreement.  The Parent Indemnity and Subsidiary Guarantee
Letter Agreement, this Deed of Trust and the other Credit Documents constitute
the entire understanding and agreement between Grantor and Beneficiary with
respect to the transactions arising in connection with the Secured Obligations
and supersede all prior written or oral understandings and agreements between
Grantor and Beneficiary with respect thereto.

     

    [Signature
pages follow]

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      
        
          	
                  GRANTOR

                
	 
	
                  HOKU
      MATERIALS, INC., a Delaware

                  corporation

                
	 
      	 
      
	
                  By

                	
                    

                
	 
      	
                  Name:

                	
                    

                
	 
      	
                  Title:

                	
                    

                

        

      

    

     

     [Guarantor’s signature page to
Mortgage]

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	
              STATE OF ________

            	
              )

            
	  	
              )  ss.

            
	
              County of _________

            	
              )

            

    

     

    On this
_____ day of __________, 20___, before me __________________________, personally
appeared ________________________, known or identified to me (or proved to me on
the oath of ______________________________) to be the president, or
vice-president, or secretary or assistant secretary, of HOKU MATERIALS, INC., a Delaware
corporation, the corporation that executed the instrument or the person
who executed the instrument on behalf of said corporation, and acknowledged to
me that such corporation executed the same.

     

    IN
WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the
day and year in this certificate first above written.

     

    
      
        
          	
                    

                
	 
      
	
                  Type
      or print name:

                
	 
	
                  Notary
      Public, State of Hawaii

                
	 
      
	
                  My
      Commission Expires
______________________

                

        

      

    

     

    [Notary page to
Mortgage]

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, Trustee has executed this Deed of Trust as of the day and year
first written above.

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    	
                                            TRUSTEE

                                          
	 
	
                                            ALLIANCE
      TITLE & ESCROW CORP.

                                          
	 
      
	
                                            By

                                          	
                                             

                                          
	 
      	 
      
	
                                            Name:

                                          	
                                             

                                          
	 
      	 
      
	
                                            Title:

                                          	
                                             

                                          

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    

    [Trustee’s signature page to
Mortgage]

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, Beneficiary has executed this Deed of Trust as of the day and
year first written above.

    

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                	
                                        BENEFICIARY

                                      
	 
	
                                        TIANWEI NEW ENERGY HOLDINGS
      CO., LTD., a

                                        People’s
      Republic of China company

                                      
	 	 
	
                                        By

                                      	 
      
	 
      	 
      
	
                                        Name:

                                      	 
      
	 
      	 
      
	
                                        Title:

                                      	
                                         

                                      

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    

    [Beneficiary’s signature page to
Mortgage]

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT D
TO

    LOAN IMPLEMENTATION
AGREEMENT

     

    __________
__, 2009

     

    Tianwei
New Energy Holdings Co., Ltd.

    No 1,
Tianwei Road,

    Southwest
Airport Economic Development Zone,

    Chengdu,
China 610200

    Attention:
Wei Xia

     

    Re:           Parent
Indemnity and Subsidiary Guarantee

     

    Ladies
and Gentlemen:

     

    Reference
is made to the letter agreement (the “Loan Implementation
Agreement”) dated as of December 22, 2009 among Tianwei New Energy
Holdings Co., Ltd., a corporation organized under the laws of the People’s
Republic of China (“Tianwei”), Hoku Scientific,
Inc., a Delaware corporation (the “Company”) and Hoku Materials,
Inc., a Delaware corporation and a wholly-owned subsidiary of the Company
(“Hoku
Materials”).  Capitalized terms used but not otherwise defined
herein shall have the meanings ascribed to them in the Loan Implementation
Agreement.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    1.           The
Company shall indemnify and hold harmless Tianwei, its Affiliates (as defined
below), and their respective directors, officers, employees, counsel, agents and
attorneys-in-fact (collectively the “Indemnitees”) from and against
any and all liabilities, obligations, losses, damages, penalties, claims,
demands, actions, judgments, suits, costs, expenses and disbursements of any
kind or nature whatsoever which may at any time be imposed on, incurred by or
asserted against any such Indemnitee in any way relating to or arising out of or
in connection with (a) the execution, delivery, enforcement, performance or
administration of the Loan Contracts or any other agreement, letter or
instrument delivered in connection with the transactions contemplated thereby or
the consummation of the transactions contemplated thereby, (b) the Tranche 1
Loan or the Tranche 2 Loan or the use or proposed use of the proceeds therefrom
or (c) any actual or prospective claim, litigation, investigation or proceeding
relating to any of the foregoing, whether based on contract, tort or any other
theory (including any investigation of, preparation for, or defense of any
pending or threatened claim, investigation, litigation or proceeding) and
regardless of whether any Indemnitee is a party thereto (all the foregoing,
collectively, the “Indemnified
Liabilities”), in all cases, whether or not caused by or arising, in
whole or in part, out of the negligence of the Indemnitee; provided that such
indemnity shall not, as to any Indemnitee, be available to the extent that such
liabilities, obligations, losses, damages, penalties, claims, demands, actions,
judgments, suits, costs, expenses or disbursements are determined by a court of
competent jurisdiction by final and nonappealable judgment to have resulted from
the bad faith, gross negligence or willful misconduct of such Indemnitee (the
“Indemnity”).  Notwithstanding
the foregoing, the Company shall have no obligation to pay under the Indemnity
(i) the amount of any portion of the Tranche 1 Loan or the Tranche 2 Loan to the
extent not released by China Construction Bank Corporation Shuangliu Sub-Branch
(the “Bank”) to the
Company or (ii) the amount of any portion of the Tranche 1 Loan or the Tranche 2
Loan repaid by the Company to the Bank or any other amount payable to Tianwei
under the Loan Implementation Agreement paid by the Company to the Bank that the
Bank shall have failed to pay over Tianwei; provided that the exclusion from the
Indemnity set forth in this sentence shall be limited precisely as written and
shall not relieve the Company from its obligations under the Indemnity in
respect of any amount other than the amounts expressly set forth in clauses (i)
and (ii) hereof.  No Indemnitee shall have any liability for any
indirect or consequential damages relating to this letter agreement or the Loan
Contracts or arising out of its activities in connection herewith or
therewith.  All amounts due under this letter agreement shall be
payable within ten Business Days after demand therefor.  The
agreements in this paragraph 1 shall survive the termination of the Loan
Contracts and the repayment, satisfaction or discharge of all the other
obligations thereunder.  “Affiliate” means, with respect
to any person, another person that directly, or indirectly through one or more
intermediaries, Controls or is Controlled by or is under common Control with the
person specified.  “Control” means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of a person, whether through the ability to exercise
voting power, by contract or otherwise.  “Controlling” and “Controlled” have meanings
correlative thereto.

     

    2.           As
a condition of and inducement to the willingness of Tianwei and the Bank to
enter into the Loan Contracts, Hoku Materials hereby irrevocably and
unconditionally, as primary obligor, undertakes and guarantees the full, prompt
and complete performance by the Company of all its obligations under the
Indemnity, and the due and punctual payment of all sums then or subsequently
payable by the Company to Tianwei or the Bank under the Indemnity (including any
interest that accrues after the commencement of any case, proceeding or other
action relating to the bankruptcy, insolvency or reorganization of the Company
(or would accrue but for the operation of applicable bankruptcy or insolvency
laws)) when the same shall become due (whether at stated maturity, upon
acceleration or otherwise) (the “Subsidiary
Guarantee”).  The Subsidiary Guarantee is a guaranty of payment
and not of collection.

     

    3.           The
obligations of Hoku Materials under the Indemnity shall be unconditional and
absolute and, without limiting the generality of the foregoing, shall not be
released, discharged or otherwise affected by:

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    (i)           any
extension, renewal, settlement, compromise, waiver or release in respect of any
obligation of the Company or any other guarantor or any other person or entity
under the Indemnity or the Loan Contracts or any other agreement or instrument
entered into or delivered in connection therewith, by operation of law or
otherwise;

     

    (ii)          any
modification or amendment of or supplement to the Indemnity or the Loan
Contracts or any other agreement or instrument entered into or delivered in
connection therewith;

     

    (iii)         any
release, impairment, non-perfection or invalidity of any direct or indirect
security for any obligation of the Company or any other guarantor or any other
person or entity under the Indemnity or the Loan Contracts or any other
agreement or instrument entered into or delivered in connection
therewith;

     

    (iv)         any
change in the corporate or other existence, structure or ownership of the
Company or any other guarantor or any other person or entity, or any insolvency,
bankruptcy, suspension of payments, reorganization or other similar proceeding
affecting the Company or any other guarantor or any other person or entity or
any of their assets or any resulting release or discharge of any obligation of
the Company or any other guarantor or any other person or entity contained in
the Indemnity or the Loan Contracts or any other agreement or instrument entered
into or delivered in connection therewith;

     

    (v)          the
existence of any claim, set-off or other rights that Hoku Materials may have at
any time against the Company or any other guarantor, Tianwei, the Bank or any
other person or entity, whether in connection with the Indemnity or the Loan
Contracts or any other agreement or instrument entered into or delivered in
connection therewith or any unrelated transactions, provided that nothing
contained in this letter agreement shall prevent the assertion of any such claim
by separate suit or compulsory counterclaim;

     

    (vi)         any
invalidity or unenforceability relating to or against Hoku Scientific or any
other guarantor or any other person or entity for any reason of the Indemnity or
the Loan Contracts or any other agreement or instrument entered into or
delivered in connection therewith, or any provision of applicable law or
regulation purporting to prohibit the payment of any amount payable pursuant to
the Indemnity or the Loan Contracts or any other agreement or instrument entered
into or delivered in connection therewith by Hoku Scientific or any other
guarantor or any other person or entity; or

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    (vii)        any
other act or omission to act or delay of any kind by Hoku Scientific or any
other guarantor, any other party to the Indemnity or the Loan Contracts or any
other agreement or instrument entered into or delivered in connection therewith,
Tianwei or the Bank or any other person or entity, or any other circumstance
whatsoever which might, but for the provisions of this clause (vii), constitute
a legal or equitable discharge of or defense to any obligation of Hoku Materials
hereunder.

     

    4.           Hoku
Materials shall be liable under the Indemnity and the Subsidiary Guarantee only
for amounts aggregating up to the largest amount that would not render its
obligations hereunder subject to avoidance under Section 548 of the United
States Bankruptcy Code or any comparable provision of any other applicable
law.

     

    5.           The
obligations of Hoku Materials hereunder shall remain in full force and effect
until all amounts payable by the Company under the Indemnity shall have been
paid in full.  If at any time any payment of any obligation hereunder
is rescinded or must be otherwise restored or returned upon the insolvency,
bankruptcy or reorganization of the Company or otherwise, Hoku Materials’
obligations hereunder with respect to such payment shall be reinstated as though
such payment had been due but not made at such time.

     

    6.           Hoku
Materials irrevocably waives:

     

    (i)           acceptance
hereof, presentment, demand, protest and any notice not provided for hereunder,
as well as any requirement that at any time any action be taken by any person or
entity against the Company or any other guarantor or any other person or
entity;

     

    (ii)          any
right to which it may be entitled in connection with any obligation of Tianwei
or the Bank to sue or initiate any action and/or complete an action against the
Company or any other guarantor or any other person or entity prior to a claim
being made against Hoku Materials pursuant hereto;

     

    (iii)         any
right to which it may be entitled to have the assets of the Company or any other
guarantor or any other person or entity first be used and/or applied in full
and/or depleted as payment of the Company’s or any such other guarantor’s
obligations hereunder, prior to any amounts being claimed from or paid by Hoku
Materials pursuant hereto; and

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    (iv)         any
right to which it may be entitled to have its obligations hereunder divided
among itself and one or more other guarantors.

     

    7.           If
Hoku Materials makes a payment with respect to any obligation hereunder, it
shall be subrogated to the rights of the payee against the Company with respect
to such payment; provided that Hoku Materials shall not enforce any payment by
way of subrogation against the Company, or by reason of contribution against any
other guarantor of such obligation, until the principal of and interest on the
Tranche 1 Loan and the Tranche 2 Loan and all fees payable thereunder have been
paid in full.

     

    8.           If
any provision contained in this letter agreement shall for any reason be held
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this letter agreement,
but this letter agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.

     

    9.           This
letter agreement shall be binding upon and shall inure to the benefit of and be
enforceable by each of the parties hereto and their respective successors and
permitted assigns (but no other persons).  Any assignment by Hoku
Materials of any of its rights or obligations under this letter agreement shall
be subject to the prior written consent of Tianwei.

     

    10.         No
amendment or waiver of any provision of this letter agreement shall be binding
unless executed in writing by each of the parties hereto.  No oral
amendments or modifications of this letter agreement shall be binding between
the parties.

     

    11.         This
letter agreement will become effective upon the execution and delivery
hereof.  This letter agreement constitutes the entire agreement
between the parties with respect to the subject matter of hereof and supersedes
the Original Parent Guarantee.

     

    12.         This
letter agreement shall be governed by and construed in accordance with the law
of the State of New York, without regard to the conflicts of law rules of such
state.

     

    [Remainder of page is intentionally
blank]

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    

    
      
        
          
            
              
                	Very
      truly yours,
	 
	
                        HOKU
      MATERIALS, INC.

                      
	 	 
	
                        By:

                      	 
      
	 
      	
                        Name:

                      	 
      
	 
      	
                        Title:

                      	 
      

              

            

          

        

      

    

    

    
      
        
          
            	
                    HOKU
      SCIENTIFIC, INC.

                  
	 	 
	
                    By:

                  	 
      
	 
      	
                    Name:

                  	 
      
	 
      	
                    Title:

                  	 
      

          

        

      

    

     

    Agreed
and accepted:

     

    
      
        
          
            	
                    TIANWEI
      NEW ENERGY

                    HOLDINGS
      CO., LTD

                  
	 	 
	
                    By:

                  	 
      
	 
      	
                    Name:

                  	 
      
	 
      	
                    Title:

                  	 
      

          

        

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    [English
Translation of Tranche 2 Entrustment Loan Contract]

    

    EXHIBIT E
TO

    LOAN IMPLEMENTATION
AGREEMENT

    

    among

    

    HOKU
SCIENTIFIC, INC.

    

    as
Borrower

    

    TIANWEI
NEW ENERGY HOLDINGS CO., LTD.

    

    as
Entrusting Lender

    

    and

    

    CHINA
CONSTRUCTION BANK CORPORATION SHUANGLIU SUB-BRANCH

    

    as
Agent

     

      
        

      

    

    

    ENTRUSTMENT
LOAN CONTRACT

     

      
        

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    This
Entrustment Loan
Contract (this “Contract”) is entered
into

    

    BY
AND BETWEEN

    

    HOKU SCIENTIFIC, INC. as
borrower, a corporation formed under the laws of the State of Delaware and
located at 1288 Ala Moana Blvd., Suite 220, Honolulu, Hawaii 96814, the United
States of America, its fax number being + 1 808-682-7807 and its telephone
number being + 1 808-682-7800 (“Party A”);

    

    TIANWEI NEW ENERGY HOLDINGS CO.,
LTD. as entrusting lender, located at No 1, Tianwei Road, Southwest
Airport Economic Development Zone, Chengdu, China 610200 with Qiang Ding as its
legal representative (or principal officer), its fax number being
+86-28-6705-0035 and its telephone number being +86-28-6705-0002 (“Party B”); and

    

    CHINA CONSTRUCTION BANK CORPORATION
SHUANGLIU SUB-BRANCH as agent, located at [address, post code] with [•]
as its principal officer, its fax number being [•] and its telephone number
being [•] (“Party
C”);

    

    Party A,
Party B and Party C hereinafter are collectively referred to as the “Parties” and individually as a
“Party”.

    

    WHEREAS

    

    Upon the
request of Party A, Party B hereby entrusts Party C to release an entrustment
loan to Party A.

    

    NOW,
THEREFORE upon consultation, the Parties hereto agree as follows:

    

    1.           LOAN
AMOUNT

    

    The
amount of the loan that Party B entrusts Party C to release to Party A hereunder
shall be U.S. Dollar THIRTY MILLION (the “Loan”).

    

    2.           PURPOSE
OF THE LOAN

    

    Party A
shall utilize the Loan for the purpose of satisfying vendor payables outstanding
as of the date hereof, payables relating to pilot testing and achieving at least
40 metric tons of solar-grade polysilicon that meet customer specifications at
the polysilicon plant currently being constructed by Hoku Materials, Inc., a
wholly-owned subsidiary of Party A (“Hoku Materials”), in
Pocatello, Idaho, and other uses approved by the board of directors of Party
A.  Party A hereby guarantees that such purpose shall comply with
applicable laws, regulations, rules, and policies of PRC and of the country
where Party A is located.  Party A may not utilize any part of the
Loan for any other purpose without consent of  Party B and a written
notice of such consent to Party C.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    3.           TERM
OF THE LOAN

    The term
of the Loan shall be two years, commencing from the effective date hereof and
expiring on the second anniversary of the effective date hereof (the “Term”).

    

    Where the
above commencement date is inconsistent with the date set forth on the Loan-to
Deposit Certificate (“LDC”, or Loan Receipt), the
date set forth on the LDC for the first advance of the Loan shall be the
commencement date of the Term and the expiry date of the Term shall be adjusted
accordingly.  The LDC shall constitute an integral part of this
Contract and have the equal legal force as this Contract.

    

    
      	
              4.

            	
              INTEREST
      RATE ON THE LOAN, INTEREST CALCULATION AND
  SETTLEMENT

            

    

    

    The
interest rate on the Loan shall be 5.94% per annum (such interest shall be
calculated on a daily basis and the daily interest rate shall equal to the
annual interest rate divided by 360 days).

    

    The
interest on the Loan shall be calculated and settled by the following
methods:

    

    The
interest on the Loan shall be calculated on the basis of the actual number of
days elapsed in a year of 365 days and settled quarterly in arrears at the end
of each quarter of the bank (each, an “interest settlement
date”).

    

    
      	
              5.

            	
              DELIVERY
      OF THE ENTRUSTMENT FUNDS AND RELEASE OF THE
LOAN

            

    

    

    
      	
               
      

            	
              5.1

            	
              Party
      B shall deliver a sufficient amount of the entrustment funds to Party C
      prior to the release date set forth on the Notification to Release
      Entrustment Loan.

            

    

    

    
      	
               
      

            	
              The
      entrustment loan fund account hereunder is not and shall not be construed
      as Party B’s deposit account with Party C and the balance therein is not
      and shall not be construed as Party B’s deposit balance with Party
      C.  Such account is established only for the purpose of Party
      C’s internal account treatment and no interest shall accrue on the balance
      in such account.

            

    

    

     5.2         Conditions
precedent to advance the Loan:

    

    
      	
               
      

            	
              (1)

            	
              Party
      C has received the entrustment funds, and such funds are free of seizure,
      freezing or mandatory transfer by any competent
  authority;

            

    

    

    
      	
               
      

            	
              (2)

            	
              Party
      C has received the Notification to Release Entrustment Loan from Party
      B;

            

    

    

    
      	
               
      

            	
              (3)

            	
              Party
      A has opened a special foreign exchange deposit account, where the Loan is
      in a foreign currency;

            

    

    

    
      	
               
      

            	
              (4)

            	
              neither
      Party A nor Party B has breached any provision
  herein.

            

    

    

    
      	
               
      

            	
              5.3

            	
              Where
      the amount of the entrustment funds actually delivered by Party B to Party
      C is less than the amount of the advance agreed to be released, Party C
      may refuse the release.  If Party B has expressly instructed
      Party C in the Notification to Release Entrustment Loan to release the
      loan in the amount of the entrustment funds actually delivered, Party C
      may release the loan to Party A in such  amount as actually
      delivered, and Party A shall not raise any objection
    thereto.

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      	
               
      

            	
              5.4

            	
              The
      Loan shall be advanced in accordance with the schedule specified
      below:

            

    

    

    The
advance schedule shall be as follows:

    

    
      
        
          	 
      	 
      	
                  Advance
      Date(d/m/y)

                	 
      	
                  Amount

                
	 	 	 	 	 
	
                  1

                	
                    

                	
                  effective
      date of this Contract

                	
                    

                	
                  US$30
      million

                

        

      

    

    

    
      	
               
      

            	
              5.5

            	
              Where
      Party C fails to release the Loan in accordance with this Contract due to
      any reason attributable to Party B, Party B shall be solely liable to
      Party A for such failure and Party C shall not be liable in any
      way.

            

    

    

    6.          SECURITY
FOR THE LOAN

    

    
      	
               
      

            	
              6.1

            	
              The
      Loan shall be secured in the form of items (1) and (2)
    below

            

    

    

    
      	
               
      

            	
              (1)

            	
              a
      security agreement to be executed by Party A, Party B and Hoku Materials;
      and

            

    

    

    
      	
               
      

            	
              (2)

            	
              a
      mortgage to be executed by Party B, Hoku Materials and Alliance Title
      & Escrow Corp.

            

    

    

    
      	
               
      

            	
              6.2

            	
              Where
      registration is required for the security to be effective or enforceable,
      Party B shall be solely responsible for such
  registration.

            

    

    

    
      	
               
      

            	
              6.3

            	
              Both
      the security provider and the security shall be supervised by Party B
      alone, unless otherwise agreed between Party B and Party C in
      writing.

            

    

    

    7.           REPAYMENT

    

    
      	
               
      

            	
              7.1

            	
              General
      Principles of Repayment

            

    

    

    
      	
               
      

            	
              Unless
      Party A and Party B have agreed otherwise in writing and notified Party C
      of such agreement in writing, Party A’s repayment hereunder shall be in
      the order of interest first and principal second adhering to the principle
      that the interest shall be fully repaid concurrently with the repayment in
      full of all the principal amounts.

            

    

    

    
      	
               
      

            	
              7.2

            	
              Interest
      Payment

            

    

    

    
      	
               
      

            	
              Party
      A shall pay Party B through Party C any due interest on each interest
      settlement date.  The first interest payment date shall be the
      first interest settlement date after advance of the Loan.  All
      the interest and principal amounts outstanding shall be paid in full on
      the date the Term expires.

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              7.3

            	
              Principal
      Repayment

            

    

    

    
      	
               
      

            	
              Party
      A shall repay the principal of the Loan in accordance with the following
      schedule:

            

    

    

    
      
        
          
            
              
                
                  	 
      	
                          Repayment
      Date(d/m/y)

                        	 	Amount
	 
      	 
      	 	 	 
      
	
                          1     

                        	
                          second
      anniversary of the effective date of this Contract

                        	 	US$	
                          30
      million

                        

                

              

            

          

        

      

    

    

    In case
of any adjustment to the above schedule, Party A and Party B shall enter into a
written agreement and notify Party C in writing of such agreement.

    

    7.4         Repayment
Method

    

    Party A
shall deposit a sufficient amount into its bank account at Party C before the
repayment date and each interest settlement date and transfer such amount to
repay the Loan (Party C may also debit such amount from such account to repay
the Loan), or transfer such amount from another bank account of Party A to repay
the Loan.

    

    7.5         Prepayment

    

    Subject
to the consent between Party A and Party B and a written notice of such consent
being sent to Party C, Party A may prepay all or any part of the principal of
and the interest on the Loan.

    

    The
interest on any principal so prepaid shall be calculated on the basis
of  the number of days actually lapsed and the interest rate specified
herein.

    

    If Party
A is required to repay the Loan in installments and prepays part of the
principal, the prepaid amount shall be applied in the reverse order of the
repayment schedule.  After partial prepayment, the outstanding Loan
shall still be subject to the interest rate provided herein.

    

    With
respect to any prepaid loan, Party C is not obligated to return any handling
charges that it has previously received.

    

    7.6         Repayment
through Party C

    

    
      	
               
      

            	
              (1)

            	
              Party
      A shall make all repayments  through Party C and may not make
      any repayment directly to Party B.  Party C shall promptly
      notify Party B upon its receipt of any repayment from Party
    A.

            

    

    

    
      	
               
      

            	
              Upon
      its receipt of any repayment directly from Party A, Party B shall promptly
      notify Party C thereof and deliver such repayment to Party C for Party C
      to complete appropriate account treatment in accordance with the normal
      repayment procedures.

            

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              (2)

            	
              In
      case of any breach of this Contract by Party A or Party B that renders
      Party C unable to complete appropriate account treatment in a timely and
      accurate manner or unable to perform its tax withholding obligations,
      Party A and Party B shall be jointly and severally liable for any and all
      consequences arising therefrom and for any and all losses suffered by
      Party C.

            

    

    

    7.7         Principles
of Repayment upon Multiple Loans Due Simultaneously

    

    Where any
proprietary loan provided by Party C to Party A matures concurrently with any
entrustment loan provided by Party C to Party A at the request of Party B, Party
C may apply Party A's repayment to first repay such proprietary loan if
Party A does not designate the order of such repayment, Party C may also debit
any of Party A's accounts with Party C for the purpose of repaying first such
proprietary loan.

     

    Where
there are multiple entrustment loans by Party C to Party A at the request of
Party B and such loans mature concurrently, Party A shall designate the order of
such repayment, failing which Party C may at its sole discretion determine the
order of the repayment.

    

    8.           WITHHOLDING
OF BUSINESS TAX AND OTHER TAXES

    

    
      	
               
      

            	
              8.1

            	
              Party
      C may withhold in accordance with applicable laws any business tax and
      other taxes payable by Party B in connection with the entrustment loan
      hereunder.

            

    

    

    
      	
               
      

            	
              8.2

            	
              Party
      A and Party B shall not agree between them that Party A pays the interest
      on the Loan directly to Party B.  In case Party A pays any
      interest directly to Party B, Party C may debit any of Party A’s or Party
      B’s accounts in any currency with Party C for a corresponding amount to
      fully satisfy its tax withholding
obligations.

            

    

    

    
      	
               
      

            	
              8.3

            	
              Where
      Party C fails to perform its withholding obligations due to any reason
      attributable to Party A or Party B, which results in Party C suffering
      penalties by the tax authority, or advancing any tax payment, or incurring
      any other liabilities, Party A and Party B shall be jointly and severally
      liable for full compensation.

            

    

    

    9.           HANDLING
CHARGES AND OTHER FEES AND EXPENSES

    

    
      	
               
      

            	
              9.1

            	
              The
      handling charges under this Contract shall be paid in accordance with Item
      (3) below:

            

    

    

    (1)           by
Party A.

    

    (2)           by
Party B.

    

    (3)           50%
by Party A and 50% by Party B.

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              9.2

            	
              The
      party obligated to pay the handling charges (the “Payer”) shall punctually
      and fully pay to Party C the handling charges in connection with the Loan
      in accordance with this Section 9, regardless of whether or not Party A
      has repaid the principal, or interest or has committed any other breach
      hereunder.  In case the lender-borrower relationship between
      Party A and Party B or the entrustment relationship between Party B and
      Party C is void, any handling charges received by Party C will not be
      returned. The Payer shall remain obligated to pay any payable and
      outstanding handling charges.

            

    

    

    
      	
               
      

            	
              9.3

            	
              The
      rate, schedule and methods of payment of the handling charges shall be as
      follows:

            

    

    

    
      	
               
      

            	
              The
      handling charges for the Loan shall be 0.2% of the entrusting amount
      (which means the amount released under this Contract) per annum and shall
      be payable in advance in U.S. dollars for the full Term (two years) upon
      the advance of the Loan.  If the Loan is overdue or the Term is
      extended, additional handling charges shall be payable pursuant to the
      then applicable standard rate for handling charges for entrustment
      loan.  The handling charges for the Loan shall be payable
      regardless of whether the principal and interest of the Loan are repaid or
      paid on time.

            

    

    

    
      	
               
      

            	
              9.4

            	
              In
      case the Payer defaults on payment of any handling charges in accordance
      with the above provisions, Party C is entitled to charge a default fee on
      such unpaid handling charges at a rate of 0.1% per day commencing from the
      date of such default, and may also debit any of such Payer’s accounts with
      Party C in any currency for payment of such charges and
    fees.

            

    

    

    
      	
               
      

            	
              9.5

            	
              The
      costs and expenses in association with the legal service, insurance,
      valuation/appraisal, registration, custody, authentication and
      notarization arising in connection with this Contract or the security
      related thereto shall be borne by Party A and Party B in equal
      portions.

            

    

    

    
      	
               
      

            	
              Party
      C shall not bear any costs and expenses hereunder.  Where Party
      C advances any costs and expenses, including without limitation, any
      legal, attorney fees, registration fees, notarization fees and public
      announcement fees, Party A and Party B shall each reimburse Party C half
      of such advances within 10 working days after the issuance by Party C of a
      written notice, or Party C may debit any of Party A’s or Party B’s
      accounts with Party C for such
reimbursement.

            

    

    

    
      	
               
      

            	
              9.6

            	
              Party
      A and Party B shall be jointly and severally liable to Party C in
      connection with obligations as specified in this Section
  9.

            

    

    

    10.           PARTY
A’S RIGHTS AND OBLIGATIONS

    

    10.1       Party
A’s Rights

    

    Party A
has the right to:

    
    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

            

    

    
      	
               
      

            	
              (1)

            	
              request
      Party B to notify Party C to release the Loan in accordance with this
      Contract;

            

    
   

    
      	
               
      

            	
              (2)

            	
              utilize
      the Loan for the purpose agreed
herein;

            

    

    

    
      	
               
      

            	
              (3)

            	
              subject
      to the requirements of Party B, apply to Party B for an extension of the
      Term and execute an extension agreement with Party B and Party C after its
      application is accepted by both Party B and Party
  C;

            

    

    

    
      	
               
      

            	
              (4)

            	
              require
      both Party B and Party C to keep confidential the relevant information
      furnished by Party A except provided otherwise by law, regulations, rules
      or this Contract; and

            

    

    

    
      	
               
      

            	
              (5)

            	
              reject
      Party B or Party C or any of their employees asking for bribe, and lodge a
      complaint with the competent authority about such misconduct and any other
      act of Party B or Party C that may violate any PRC laws and
      regulations.

            

    

    

    10.2       Party
A’s Obligations

    

    
      	
               
      

            	
              (1)

            	
              Party
      A shall utilize the Loan in accordance with the purpose as provided
      herein, and shall not misappropriate any Loan proceeds.  Party A
      shall support and cooperate with Party B in its inspection of Party A’s
      utilization of the Loan proceeds hereunder.  Party A shall
      furnish Party B with its financial and accounting information as well as
      manufacturing and operating information as requested by Party B and shall
      ensure the accuracy, completeness and validity of any information it
      provides.

            

    

    

    
      	
               
      

            	
              (2)

            	
              Party
      A shall promptly notify Party B upon the occurrence of any of the
      following events to Party A:

            

    

    

    
      	
               
      

            	
              (i)

            	
              contracting,
      trustee (receiver) being appointed, lease, shareholding restructuring,
      investment, joint operation, mergers and acquisitions, acquisition and
      restructuring, division, joint venture, applying for temporary cessation
      of operation or dissolution, revocation, applying for
      (or  subject to an application for) bankruptcy, change of
      controlling shareholders/actual controllers, transfer of material assets,
      suspension of production or operation, significant penalty imposed by
      regulatory authorities, cancellation of registration, revocation of
      business license, involvement in material legal proceedings, severe
      deterioration in operation and financial condition, legal
      representative/principal officer being unable to perform their duties;
      or

            

    

     

    
      	
               
      

            	
              (ii)

            	
              any
      change to Party A’s name, legal representative (or principal officer),
      registered address, business scope, registered capital, or articles of
      association or any other registration with industrial and commercial
      authority;

            

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              (3)

            	
              Party
      A shall perform any other obligation of Party A as provided
      herein.

            

    

    

    11.         PARTY
B’S RIGHTS AND OBLIGATIONS

    

    
      	
               
      

            	
              11.1

            	
              As
      the lender hereunder, Party B shall enjoy all the rights and interests as
      a lender and assume all the obligations, responsibilities and risks as a
      lender.

            

    

    

    
      	
               
      

            	
              11.2

            	
              Party
      B shall conduct an independent review of the feasibility and legality of
      the project related to the Loan hereunder, and of the creditworthiness,
      repayment ability, and performance ability of Party A and/or the security
      provider, and shall make an independent judgment and assume any risks that
      may arise from the failure of the recovery of the Loan on time and in
      full.

            

    

    

    
      	
               
      

            	
              11.3

            	
              After
      the release of the Loan, Party B shall continuously supervise Party A’s
      utilization of the Loan and pay close attention to Party A’s operating and
      financial condition and repayment ability, and shall promptly take
      appropriate measures upon the occurrence of any event to Party A that may
      adversely affect the realization of Party B’s creditor’s
      rights.  Party B understands and agrees that Party C has no
      obligation in this respect.

            

    

    

    
      	
               
      

            	
              11.4

            	
              Party
      B’s obligations to Party C hereunder shall not be affected by the failure
      of Party A to repay the principal or interest, nor by any breach of this
      Contract or any violation of law, nor by the invalidity of the
      lender-borrower relationship
hereunder.

            

    

    

    
      	
               
      

            	
              11.5

            	
              Party
      B has the right to inspect and supervise Party A’s utilization of the Loan
      and to request Party A to provide Party A’s financial and accounting
      information as well as manufacturing and operating information and shall
      keep the above information confidential, unless otherwise provided by
      applicable laws, regulations or rules or otherwise required by competent
      authorities.

            

    

    

    
      	
               
      

            	
              11.6

            	
              Upon
      the maturity of the Loan, Party B shall promptly demand payment, bring
      lawsuits against Party A and/or the security provider, apply for
      enforcement, declare creditor’s rights in bankruptcy proceedings, and/or
      take any other remedies permitted by law, as the case may
      be.  Party C shall not be held liable in any way even though it
      is obligated to assist Party B in the recovery of the
  Loan.

            

    

    

    
      	
               
      

            	
              11.7

            	
              Any
      instruction issued by Party B to Party C shall be timely, clear, complete,
      consistent and in compliance with laws and this Contract, otherwise, Party
      C may refuse to follow such instruction.  In the case of such
      refusal, Party B shall be liable for any and all consequences arising
      therefrom.  Party B shall be liable for any and all legal
      consequences arising from any act by Party C pursuant to instructions of
      Party B.

            

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              11.8

            	
              Party
      B shall  not request Party C to issue any deposit certificate
      with respect to any entrustment funds.  Even if Party C issues a
      deposit certificate in any form with respect to any entrustment funds,
      Party B shall  not transfer, pledge or otherwise dispose of such
      deposit certificate and shall return it to Party C prior to Party C’s
      release to Party A of  the Loan.  Party B shall not
      request Party C to make any payment or hold Party C liable by invoking
      such deposit certificate.

            

    

    

    
      	
               
      

            	
              11.9

            	
              Other
      rights and obligations of Party B agreed
herein.

            

    

    

    12.         PARTY
C’S RIGHTS AND OBLIGATIONS

    

    
      	
               
      

            	
              12.1

            	
              Party
      C shall assist Party B in the supervision of the use by Party A
      of  the Loan  for the agreed
  purposes.

            

    

    

    
      	
               
      

            	
              “Party
      C shall assist Party B in the  supervision” shall mean that, in
      respect of each loan advance, Party C shall provide to Party B with the
      statements of Party A’s deposit account with Party C to which such advance
      has been  credited  for the
      period  commencing from the date of such  advance
      being credited to the date that falls twenty-four months
      thereafter.

            

    

    

    
      	
               
      

            	
              12.2

            	
              Party
      C has the right to provide to Party B any information about Party A
      relating  to the Loan or  to  Party A’s
      deposits, loans and settlement practices with Party
  C.

            

    

    

    
      	
               
      

            	
              12.3

            	
              Party
      C shall not be liable for any dispute between Party B and Party A or for
      any act of Party A or Party B that violates law or
      regulations.

            

    

    

    
      	
               
      

            	
              12.4

            	
              Where
      Party A fails to punctually repay the Loan in full and Party
      C  compensates Party B in accordance with a court judgment or
      arbitral award, any and all the rights of Party B against Party A and/or
      the security provider shall be promptly assigned to Party C.  In
      such case, Party A shall not raise any objection to such assignment and
      shall perform the obligations and liabilities to Party C immediately after
      receipt of a written notice from Party
B.

            

    

    

    
      	
               
      

            	
              12.5

            	
              Party
      C shall assist Party B in the recovery of the Loan in accordance with the
      following provisions:

            

    

    

    
      	
               
      

            	
              (1)

            	
              prior
      to the maturity of the principal of the Loan (including the principal
      payable in installments)

            

    

    

    Party C
shall calculate and settle the interest on the Loan in accordance with the
relevant provisions herein.  After each installment
repayment  by Party A, Party C shall complete appropriate account
treatment and report to Party B about the amount and time of such repayment and
the amount of the outstanding principal and interest.  Following its
receipt of the above financial information reported by Party C, Party B shall
promptly check such information and raise any question about or disagreement to
such information, if any, to Party C within 5 working days.  Party C
shall not be liable for any loss suffered by Party A or Party B arising from the
failure of Party B to raise such question or disagreement as required
above.  If on any interest settlement date Party A fails to pay the
relevant interest on the Loan, Party C shall notify Party B thereof in
writing.

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    (2)          after
the maturity of the principal of the Loan

    

    
      	
               
      

            	
              (i)

            	
              If
      Party A repays punctually and in full upon the maturity of the principal
      of the Loan, Party C shall credit  the appropriate account
      following normal procedures and notify Party B thereof in a timely
      manner.  If Party A fails to repay punctually and in full, Party
      C shall notify Party B in writing of such failure and shall, within one
      month thereafter, make demand, once and only once, for repayment by Party
      A .  Party C shall be deemed to have fulfilled its obligation of
      assistance in the recovery of the Loan as long as Party C has issued a
      written demand in accordance with the name, address and telephone fax)
      number provided by Party A or Party B, or there is proof that Party C has
      demanded Party A for repayment  by any other
    means.

            

    

    

    
      	
               
      

            	
              (ii)

            	
              If
      Party B  desires to entrust Party C to continue the
      assistance  in the Loan recovery after all the principal
      matures, it shall execute a separate written entrustment agreement with
      Party C in respect thereof.  Where Party B and Party C fail to
      reach such  agreement within one month after
      such  maturity date, all the obligations of Party C hereunder
      shall automatically terminate forthwith and Party C has the right to write
      off the accounts relating to the
Loan.

            

    

    

    
      	
               
      

            	
              (3)

            	
              Party
      C’s obligations to assist Party B in the recovery of the Loan shall be
      limited to those specified in this
Section.

            

    

    

    
      	
               
      

            	
              12.6

            	
              Party
      C shall have no obligation to participate in any litigation, arbitration,
      bankruptcy proceedings relating to the Loan and the security related
      thereto, nor shall it have any obligation towards Party B to dispose of
      any debt-offsetting assets.

            

    

    

    13.       EVENT
OF DEFAULT AND LIABILITIES

    

    
      	
               
      

            	
              13.1

            	
              Party
      A’s Events of Default and
Liabilities

            

    

    

    
      	
               
      

            	
              (1)

            	
               
      Any of the following events shall constitute an event of default of Party
      A:

            

    

    

    
      	
               
      

            	
              (i)

            	
              any
      breach by Party A of any provision of this Contract, and in the case of
      any breach other than breach of any of Sections 2, 4, 7.2 and 7.3, Party A
      fails to cure such breach within fifteen (15) working days of receipt of
      written notice from Party B or Party C;
and

            

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              (ii)

            	
              any
      event that in the reasonable opinion of Party B may adversely affect the
      realization of its creditor’s rights
hereunder.

            

    

    

    
      
        	
              	
                (2)

              	
                Party
      A’s liabilities for default:

              

      

    

    

    Upon the
occurrence of any of the above events, Party B may adopt any one or more of the
following remedial measures:

    

    
      	
               
      

            	
              (i)

            	
              request
      Party A to remedy its default within a specified time
    limit;

            

    

    

    
      	
               
      

            	
              (ii)

            	
              notify
      Party C to suspend  the part of the Loan yet to be
      released;

            

    

    

    
      	
               
      

            	
              (iii)

            	
              charge
      default interest (if any) as provided
herein;

            

    

    

    
      	
               
      

            	
              (iv)

            	
              accelerate
      the maturity of all principal and interests and demand immediate payment
      by Party A; and

            

    

    

    
      	
               
      

            	
              (v)

            	
              any
      other remedial measures permitted by
law.

            

    

    

    13.2       Party
B’s Events of Default and Liabilities for Default

    

    
      	
               
      

            	
              (1)

            	
              Any
      of the following events shall constitute an event of default of Party
      B:

            

    

    

    
      	
               
      

            	
              (i)

            	
              failure
      of Party B to deliver sufficient entrustment funds to Party C in a timely
      manner, or failure of release of the Loan as provided
      herein  for any other reason attributable to Party
      B;

            

    

    

    
      	
               
      

            	
              (ii)

            	
              the
      source of entrustment funds being in violation of law or regulations, or
      any representation or warranty of Party B being false, inaccurate or
      incomplete;

            

    

    

    
      	
               
      

            	
              (iii)

            	
              failure
      of Party B to pay Party C punctually and fully any Loan handling charges;
      and

            

    

    

    
      	
               
      

            	
              (iv)

            	
              any
      breach by Party B of any other provision
herein.

            

    

    

    
      	
               
      

            	
              (2)

            	
              Party
      B’s liabilities for default:

            

    

    

    
      	
               
      

            	
              (i)

            	
              Upon
      the occurrence of an event of default of Party B, Party A has the right to
      request Party B to remedy such default within a specified time limit and
      to compensate losses and/or take any other remedial
    measures.

            

    

    

    
      	
               
      

            	
              (ii)

            	
              Party
      C has the right to adopt any one or more of the following remedial
      measures upon the occurrence of any event of default of Party
      B:

            

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              (A)

            	
              request
      Party B to remedy its default within a specified time
    limit;

            

    

    

    
      	
               
      

            	
              (B)

            	
              refuse
      to provide  entrustment loan  services for Party
      B;

            

    

    

    
      	
               
      

            	
              (C)

            	
              directly
      debit any account of Party B for handling
  charges;

            

    

    

    
      	
               
      

            	
              (D)

            	
              request
      Party B to compensate losses;

            

    

    

    
      	
               
      

            	
              (E)

            	
              terminate
      the entrustment relationship between Party B and Party C;
    and

            

    

    

    
      	
               
      

            	
              (F)

            	
              any
      other measures permitted by law.

            

    

    

    13.3       Party
C’s Events of Default and Liabilities for Default:

    

    
      	
               
      

            	
              (1)

            	
              If
      Party C delays without any justifiable reason in releasing the Loan to
      Party A after Party B delivers sufficient entrustment funds to Party C in
      accordance with this Contract, Party B has the right to request Party C to
      release the Loan immediately.

            

    

    

    
      	
               
      

            	
              (2)

            	
              If
      Party C fails to perform its obligations to assist Party B in the recovery
      of the Loan in accordance with this Contract, which results in Party B
      being unable to punctually recover the principal and the interest on the
      Loan, and Party B is not at fault, Party C shall to the extent of and in
      proportion to Party C’s fault be liable for direct losses suffered by
      Party B.

            

    

    

    14.         REPRESENTATIONS
AND WARRANTIES

    

    14.1       Party
A hereby represents and warrants as follows:

    

    
      	
               
      

            	
              (1)

            	
              it
      has read all the provisions in this Contract and fully knows and
      understands the meaning and legal consequences
  thereof;

            

    

    

    
      	
               
      

            	
              (2)

            	
              the
      execution and performance of this Contract by Party A is in compliance
      with laws of the country in which Party A is located, administrative
      regulations, rules and Party A’s certificate of incorporation and bylaws
      and has been approved by its board of directors and, if necessary, the
      competent government authorities of the country where Party A is located;
      and

            

    

    

    
      	
               
      

            	
              (3)

            	
              the
      purpose of the Loan is in compliance with laws and regulations, and the
      project relating to which the Loan is to be used has been approved by the
      competent authorities if
necessary.

            

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    14.2       Party
B hereby represents and warrants as follows:

    

    
      	
               
      

            	
              (1)

            	
              it
      has the legal qualification to entrust any other person to release the
      Loan;

            

    

    

    
      	
               
      

            	
              (2)

            	
              the
      entrustment fund comes from legal sources and not from bank financing, nor
      from corporate or public funds deposited in the name of an individual, nor
      from any fund that is prohibited from being used for entrustment loan
      purposes under applicable laws, regulations or
  rules;

            

    

    

    
      	
               
      

            	
              (3)

            	
              it
      has the lawful right and has been approved by competent authorities to
      dispose of the entrustment funds;
and

            

    

    

    
      	
               
      

            	
              (4)

            	
              grant
      of the Loan is not for the purpose of violation or evasion of any PRC
      laws, regulations, rules or regulatory measures, and does not cause any
      damage to any lawful interests of the State, any collective organization
      or any third party.

            

    

    

    
      	
              15.

            	
              MISCELLANEOUS

            

    

    

    15.1       Direct
Debit Right

    

    Party C
is entitled to debit, without prior notice to either Party A or Party B, any
account of Party A or Party B at China Construction Bank in RMB or other
currencies to pay all amounts payable to Party C by Party A or Party B under
this Contract.  Party A or Party B shall assist Party C to complete
any procedures for foreign exchange settlement or sale, and Party A or Party B
shall bear the risk of exchange rate fluctuation.

     

    
      	
               
      

            	
              15.2

            	
              Party
      C’s Records as Evidence

            

    

    

    Unless
there is any reliable and definitive evidence to the contrary, Party C’s
internal records of principal, interest, expenses and repayment, receipts,
vouchers made or retained by Party C during the course of drawdown, repayment,
interest payment, and records and vouchers relating to collections by Party C
shall constitute valid evidence of the creditor-debtor relationship between
Party A and Party B and the performance of obligations by Party C. Party A and
Party B hereby agree that they shall not raise any objection
thereto.

     

    
      	
               
      

            	
              15.3

            	
              Assignment
      and Succession

            

    

    

    
      	
               
      

            	
              (1)

            	
              Any
      assignment by Party A of any of its rights or obligations hereunder shall
      be subject to the written consent of both Party B and Party
    C.

            

    

    

    
      	
               
      

            	
              (2)

            	
              Any
      assignment by Party B of any of its rights or obligations hereunder shall
      be subject to the written consent of Party
C.

            

    

    

    
      	
               
      

            	
              (3)

            	
              Any
      assignment by Party C of any of its rights or obligations hereunder shall
      be subject to the written consent of Party B; provided however that, in
      case of any merger, division, setting up subsidiaries or organizational or
      business function restructuring of China Construction Bank, Party C’s
      rights and obligations hereunder may be assigned to or succeeded by a
      third party with  legal qualification to operate entrustment
      loan business as long as Party C issues a notice to Party A and Party B
      through correspondence, telephone or press
  release.

            

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    15.4       Consequences
of Invalidity or Rescission

    

    In case
the entrustment relationship and/or lender-borrower relationship hereunder
are/or is invalid or rescinded pursuant to any law,

    

    
      	
               
      

            	
              (1)

            	
              If
      the entrustment relationship between Party B and Party C is valid while
      the lender-borrower relationship between Party A and Party B is invalid or
      rescinded, Party C shall not be held liable,
and

            

    

    

    
      	
               
      

            	
              (i)

            	
              where
      Party C has not delivered the entrustment funds to Party A, it shall
      return the entrustment funds to Party B without any
    interest;

            

    

    

    
      	
               
      

            	
              (ii)

            	
              where
      Party C has delivered the entrustment funds to Party A, Party B shall
      directly request Party A to return the entrustment funds and Party C shall
      not be liable for any losses suffered by Party B arising therefrom;
      and

            

    

    

    
      	
               
      

            	
              (iii)

            	
              where
      any third party has suffered losses as a result of such invalidity or
      rescission, Party A and Party B shall be liable in proportion
      to  their respective fault and Party C shall not
      be  liable.

            

    

    

    
      	
               
      

            	
              (2)

            	
              If
      the entrustment relationship is held invalid or rescinded while the
      lender-borrower relationship is
valid,

            

    

    

    
      	
               
      

            	
              (i)

            	
              where
      Party C has not delivered the entrustment funds to Party A, it shall
      return the entrustment funds to Party B without any interest;
      and

            

    

    

    
      	
               
      

            	
              (ii)

            	
              where
      Party C has delivered the entrustment funds to Party A, Party A and Party
      B shall resolve the issues relating to the entrustment funds through
      consultations in accordance with applicable laws and Party C shall not be
      liable in  any way.

            

    

    

    
      	
               
      

            	
              (3)

            	
              If
      both the entrustment relationship and the lender-borrower relationship
      are  invalid or
rescinded,

            

    

    

    
      	
               
      

            	
              (i)

            	
              where
      Party C has not delivered the entrustment funds to Party A, it shall
      return the entrustment funds to Party B without any
    interest;

            

    

    

    
      	
               
      

            	
              (ii)

            	
              where
      Party C has delivered the entrustment funds to Party A, Party B shall
      directly request Party A to return the entrustment funds and Party C shall
      not be liable for any losses suffered by Party B;
  and

            

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              (iii)

            	
              where
      any third party has suffered losses as a result of such invalidity or
      rescission, Party A and Party B shall be liable in proportion
      to  their respective fault and Party C shall not
      be  liable.

            

    

    
      	
               
      

            	
              .

            

    

    
      	
               
      

            	
              15.5

            	
              Party
      B shall supervise and inspect Party A, and obtain information about Party
      A through other channels and shall not rely on Party C in
      this  respect.  Party C may at its sole discretion,
      report to Party B the information it possesses; provided however that,
      Party C shall not be liable for the promptness, truthfulness,
      completeness, accuracy and validity of any such
    information.

            

    

    

    
      	
               
      

            	
              15.6

            	
              In
      the event of any change to the address or other contact information of any
      Party set forth herein, such Party shall promptly notify the other Parties
      of such change in writing.  Such Party shall be liable for any
      loss caused by its failure of giving prompt notice of such
      change.

            

    

    

    
      	
               
      

            	
              15.7

            	
              Any
      rights that Party C has under law or this Contract shall not be
      interpreted as the obligations of Party C.  In case Party C
      fails to exercise or waives  any of such rights, neither Party A
      nor Party B may hold Party C legally liable on this
  ground.

            

    

    

    
      	
               
      

            	
              15.8

            	
              Notification
      to Release Entrustment Loan, conformations, acknowledgements, certificates
      and other documents relating to this Contract shall constitute integral
      parts of this Contract.

            

    

    

    
      	
               
      

            	
              15.9

            	
              This
      Contract shall be executed in six (6)
  counterparts.

            

    

    

    
      	
            	
              15.10

            	
              Governing
      Law

            

    

    

    This
Contract shall be governed by the laws of the People’s Republic of China
(excluding the Hong Kong Special Administrative Region, the Macau Special
Administrative Region and Taiwan for the purposes of this Contract
only).

     

    
      	
               
      

            	
              15.11

            	
              Dispute
      Resolution

            

    

    

    Any
dispute arising from the performance of this Contract may be settled by
consultation.  If the dispute cannot be resolved through consultation,
such dispute shall be resolved pursuant to clause (ii) below:

     

    
      	
            	
              (i) 

            	
              the
      People’s court within the jurisdiction where Party C is located;
      or

            

    

     

    
      	
               
      

            	
              (ii)

            	
              arbitration
      at the local branch of the China International Economic and Trade
      Arbitration Commission in the principal place of business of Party
      B.  The arbitration award shall be final and binding on the
      Parties hereto.

            

    

     

    The
provisions hereunder not subject to the dispute shall remain enforceable during
the process of litigation or arbitration.

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    15.12     Effectiveness
of This Contract

    

    This
Contract shall become effective upon:

     

    
      	
               
      

            	
              (i)

            	
              signing
      by the legal representative/(principal officer) or authorized
      representative of Party A and Party B and being affixed with the company
      chop of Party B; and

            

    

     

    
      	
               
      

            	
              (ii)

            	
              signing
      by the principal officer or authorized representative of Party C and being
      affixed with the company chop of Party
C.

            

    

     

    [Signature
Page Follows]

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    Party
A

    

    HOKU
SCIENTIFIC, INC.

    

    By the
legal representative (principal officer) or authorized
representative:

    

    Signature:
__________________________

    

    Date:
_____________________

    

    Party B (company
chop)

    

    TIANWEI
NEW ENERGY HOLDINGS CO., LTD.

    

    By the
legal representative (principal officer) or authorized
representative:

    

    Signature:
________________________

    

    Date:
_____________________

    

    Party C (company
chop)

    

    CHINA
CONSTRUCTION BANK CORPORATION SHUANGLIU SUB-BRANCH

    

    By the
principal officer or authorized representative:

    

    Signature:
________________________

    

    Date:
_____________________

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00167-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00167-of-00352.parquet"}]]