Document:

ex10-57.htm

    Exhibit
10.57

     

    
      [*]
= CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED FROM PUBLIC FILING PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION.
THE OMITTED INFORMATION, WHICH HAS BEEN IDENTIFIED WITH THE SYMBOL “[*],” HAS
BEEN FILED SEPARATELY WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

      

      SALES
AGREEEMENT

      

      This
Sales Agreement (“Agreement”) is dated as of March 25, 2010, and
is between Evonik Degussa Corporation (“Seller”), with an office at 379
Interpace Parkway, Parsippany, NJ 07054, and Hoku Materials, Inc., a subsidiary
of Hoku Scientific, Inc. (“Buyer”), with an office at One Hoku Way, Pocatello,
Idaho 83204. Seller agrees to sell to Buyer, and Buyer agrees to purchase from
Seller, the following product, upon the following terms:

      

      1.
PRODUCT:  (a) Trichlorosilane (SIRIDION® TCS), having the
specifications, as set forth in attached Exhibit A
(“Product”).  Product to be supplied hereunder may be manufactured by
Seller or another source; provided, however, that Seller must obtain Buyer’s
approval in writing prior to supplying Product that is manufactured by a third
party; and, provided further, that in the event the Product is supplied by a
third party, Seller shall remain jointly and severally liable for the
performance of its obligations under this Agreement.  The Product
shall be used by Buyer at its Pocatello, Idaho, polysilicon product facility,
and may not be resold to a third party.

      

      (b) If a
dispute arises as to whether the Product meets the specifications set forth in
Exhibit A, an independent third party testing laboratory located in the United
States and mutually agreed upon by Buyer and Seller shall determine whether the
Product meets the specifications.  All costs and fees incurred in
settling such a dispute shall be the responsibility of the non-prevailing
party.  If the parties cannot agree on a third party within fifteen
(15) days of written notice by Buyer to Seller of its desire to test the
Product, then the Buyer shall resort to all other remedies available to it under
this Agreement.

      

      2.
TERM:  Unless earlier terminated by Seller or Buyer pursuant to
Section 11 below, this Agreement shall be in effect for a one-year term
commencing on March
25, 2010, and ending on, February 28, 2011
(“Initial Term”).  Thereafter, the Agreement shall automatically renew
for successive two (2) month terms, unless written notice of termination is
given by one party to the other no less than sixty (60) days prior to the end of
such Initial Term, or thirty (30) days prior to the end of any successive two
(2) month term.  All provisions of this Agreement applicable to the
Initial Term shall apply with equal force to all successive terms.

       

      3.
QUANTITY:   Seller shall deliver and sell to Buyer, and
Buyer shall purchase and accept delivery from Seller, a minimum of [*] metric
tons (”Minimum Quantity”) of Product during the Initial Term.  Buyer
acknowledges a take or pay obligation to purchase and accept the Minimum
Quantity by the end of the Initial Term.  Monthly quantities shall be
agreed between the Parties in accordance with Section 7 of this
Agreement.  Only if Seller fails to sell and deliver the Minimum
Quantity of Product by the end of the Initial Term, then Buyer shall not be
obligated to purchase and accept the remaining amount of the Minimum
Quantity.

       

      
        
          
          

        

        
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      4. PRICE AND
PAYMENT:  (a) Price shall be $[*] per kilogram of Product for
the first [*] metric tons of Product supplied in each calendar month, and $[*]
per kilogram of Product for any additional quantity of Product supplied in each
such calendar month; provided, however, that if Buyer, at Buyer’s option,
continues to make payments fourteen (14) days net from the date of delivery for
quantities in excess of [*] metric tons, as referenced in Section 4(b),
thereafter the price for Product supplied in excess of [*] metric tons in each
calendar month shall be $[*] per kilogram of Product.

       

      (b)
Payment terms are fourteen (14) days net from the date of delivery for the first
[*] metric tons and twenty-eight (28) days net for all quantities thereafter;
provided, however, that Buyer may, at Buyer’s option,  provide Seller
with written notice that Buyer will continue to make payments fourteen (14) days
net for all quantities in excess of [*] metric tons in order to receive the $[*]
per kilogram of Product price referenced in Section 4(a).  Late
payments shall bear interest at 1.5% per month, or at the maximum rate permitted
by law.  These pricing and payment terms shall apply for all purchase
orders submitted during the Initial Term and any successive terms regardless of
the date of delivery of the Product or the amount of the Product ordered and
delivered.

      

      (c) Buyer
shall pay all sales, use, excise, or other similar taxes or governmental
charges.  Seller shall pay all import duties and shall pre-pay for
costs to export empty ISO containers.

      

      5.
PACKAGING:  Product will be delivered in full ISO containers of
approximately nineteen (19) metric tons net weight. ISO containers used for
shipping Product are and shall remain the property of Seller. Buyer agrees to
pay Seller a deposit fee equal to One Hundred Thousand U.S. Dollars ($100,000)
(the “ISO Deposit”) prior to April 9,
2010.  Notwithstanding Paragraph 3 of Seller’s Standard Terms
and Conditions of Sale, attached as Exhibit B, the ISO Deposit is intended as
security for the repair and/or replacement thereof, and not as payment for such
container.  Upon the expiration of the Initial Term and the return of
the ISO containers to Seller, the ISO Deposit will be returned.  If
any ISO container is damaged or destroyed upon or after entering Buyer’s
property or facility, the cost to repair or replace such container shall be
deducted from the ISO Deposit. Buyer shall also be responsible for any
additional costs or expenses in connection with such damaged or destroyed
container.  Notwithstanding anything in this Agreement to the
contrary, Buyer may not retain any ISO container, or use any ISO container, for
any purpose other than expeditious unloading of Product.  Buyer shall
have a minimum of seven working days to unload each ISO container.

      

      6.
DELIVERY:  (a) Seller shall deliver Product, freight prepaid by
Seller, to Buyer’s facilities located in Pocatello, Idaho, conditioned after
July 1, 2010
(provided, however, that upon Seller’s receipt of written notice from Buyer of
its request for delivery prior to July 1, 2010, Seller
will use reasonable commercial efforts to deliver Product by the agreed upon
earlier date), on (i), Seller’s acknowledgement and agreement to fulfill Buyer’s
purchase order, and (ii) the return of sufficient ISO containers (from prior
shipments to Buyer) to Seller for Seller to ship the quantity in Buyer’s
corresponding purchase order. Buyer’s purchase order shall specify the calendar
week for delivery, which shall not be less than forty-five (45) days after
Seller receives the purchase order.  Seller shall credit Buyer one
percent (1.0%) of the purchase price for each day that a shipment is delayed, up
to a maximum of ten percent (10%).  No purchase order or other
document shall contain terms that contradict, or that impose any greater or
different obligations on Seller than undertaken by Seller in, this
Agreement.

      

      
        
          
          

        

        
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      (b) Buyer
represents that Buyer’s facilities and personnel are and shall continuously
remain fully qualified and equipped to safely and expeditiously accept delivery
of and unload Product, and promptly to return the ISO containers, and shall do
so.  Shipment of Product shall be DDP (Incoterms 2000), and delivery
of Product shall be deemed to have been made and transfer of title and risk of
loss to Buyer shall occur upon Product entering Buyer’s property or facility
(“Delivery Point”).

      

      7.
FORECASTING:  On or before May 1, 2010 and on or
before the first day of each calendar month thereafter, Buyer shall provide
Seller with its best, good faith rolling forecast (by month) for the following
six month period, setting forth Buyer’s estimated quantity of Product to be
purchased. Such forecasts shall be binding upon Buyer and Seller for forecasts
up to [*] metric tons in each calendar month.  For forecasts beyond
[*] metric tons, the portion over [*] metric tons shall not be binding upon
Buyer or Seller; provided, however, that Seller shall use commercially
reasonable efforts to meet Buyer’s forecasts even if the Minimum Quantity has
already been delivered or whether delivery of shipments has been postponed.
Buyer understands and agrees that Seller shall rely on such forecasts for its
production, allocation and delivery purposes.  Seller shall not be in
breach or default hereunder if it is unable to fulfill, in whole or in part, one
or more of Buyer’s orders with regard to the portion of Product over [*] metric
tons.

      

      8. STANDARD TERMS AND
CONDITIONS OF SALE:  Except as otherwise expressly provided in
this Agreement, this Agreement shall be governed by Seller’s Standard Terms and
Conditions of Sale, attached as Exhibit B.  If any conflict arises
between the terms in the body of this Agreement and the Seller’s Standard Terms
and Conditions of Sale, attached as Exhibit B, the terms in the body of this
Agreement shall take precedence.

      

      9. ENTIRE AGREEMENT AND
CONSTRUCTION:  This Agreement, which includes Exhibits A and B,
is the complete and exclusive statement of the agreement between Seller and
Buyer with respect to the subject matter hereof, and supersedes all other
pre-existing or contemporaneous agreements or understanding between Seller and
Buyer as to the subject matter hereof, and no additional or different term or
condition, whether in any other document or instrument, or whether stated
orally, will be binding or have any effect.  Seller and Buyer have
fully considered and negotiated this Agreement, with the benefit of legal
counsel. This Agreement has been drafted by both Seller and Buyer and shall not
be construed against either.

      

      10. AMENDMENT: No
change, whether by addition, deletion, modification, waiver or otherwise, of any
provision of this Agreement shall be made or shall be effective unless made in
writing, signed by both Seller and Buyer.

      

      11.
TERMINATION:  Each Party may, at its discretion, upon written
notice to the other Party, and in addition to its rights and remedies provided
under this Agreement or any other agreement executed in connection with this
Agreement and at law or in equity, terminate this Agreement in the event of any
of the following:

      

      
        
          
          

        

        
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      (a)  Upon
a material breach of the other Party of any material provision in this
Agreement, and failure of the other Party to cure such material breach within
forty-five (45) days after receiving written notice thereof.  For
purposes of this Section 11(a), a “material breach” means, subject to Section 6,
a monthly shipment which is delayed, Product that does not meet the Product
specifications, a payment default, or any other material breach of this
Agreement which materially and adversely affects a Party or which occurs on
multiple occasions.

       

      (b) Upon
the voluntary or involuntary initiation of bankruptcy or insolvency proceedings
against the other Party; provided, that for an involuntary bankruptcy or
insolvency proceeding, the Party subject to the proceeding shall have sixty (60)
working days within which to dissolve the proceeding or demonstrate to the
terminating Party’s satisfaction the lack of grounds for the initiation of such
proceeding;

      

      (c) If
the other Party (i) becomes unable, or admits in writing its inability, to pay
its debts generally as they mature, (ii) becomes insolvent (as such term may be
defined or interpreted under any applicable statute); or

      

      (d) Buyer
shall have the right to terminate this Agreement prior to April 30, 2010 if
Buyer fails to successfully complete its polysilicon reactor
demonstration.  Notwithstanding Section 5, if Buyer terminates this
Agreement prior to April 30, 2010,
Seller shall be entitled to retain the entire amount of the ISO Deposit, as
liquidated damages.  Buyer and Seller acknowledge that Seller has
incurred substantial costs in preparing and obtaining the ISO containers, as
well as costs to produce Product for Buyer, and the actual damages from any such
failure of acceptance are difficult to ascertain.  Buyer and Seller
acknowledge that the amount of the ISO Deposit represents a good faith and
reasonable estimate of the amount of such damages that Seller would incur from
any such failure, and is not a penalty.

      

      12.
ASSIGNMENT:  Neither Party may assign this Agreement to a third party
without the prior written consent of the other Party.  Notwithstanding
the foregoing, the assignment of this Agreement in connection with the sale of
all or substantially all of the assets of either Party, or the merger,
consolidation, or change of control of either Party, shall not require the
consent of the non-assigning Party.  This Agreement shall be binding
on each Party’s respective successors and assigns.

       

      
        
          	

                  EVONIK
      DEGUSSA CORPORATION

                	

                  HOKU
      Materials, Inc.

                
	 	 
	
                  By:
      /s/ Goswin
      Uehlenbruck

                	
                  By:
      /s/ Scott
      Paul

                
	 
      	 
      
	
                  Name:
      Goswin Uehlenbruck

                	
                  Name:
      Scott Paul

                
	
                  Title:
      VP Advanced Silanes NAFTA

                	
                  Title:
      Chief Operating Officer

                
	 
      	 
      
	
                  By:
      /s/ Jack
      Clem

                	
                  By:
      /s/ Karl
      Taft

                
	 
      	 
      
	
                  Name:
      Jack Clem

                	
                  Name:
      Karl Taft, III

                
	
                  Title:
      Senior VP and General Manager

                	
                  Title:
      Chief Technology Officer

                

        

      

       

      
        
          
          

        

        
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      EXHIBIT
A

      

      Specifications
of Product

      

       

      

      
        	
                Parameter

              	
                limit

              	
                Unit

              	
                Method

              
	
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        Version
December 2007

      

      EXHIBIT
B

      

      STANDARD
TERMS AND CONDITIONS OF SALE

      

      All
orders for product (“Product”) are subject to written acceptance by the company
of the Evonik Degussa group of companies selling the Product (“Seller”) and to
credit approval. The complete agreement between Seller and buyer (“Buyer”) is
contained herein and in such other document(s) agreed to in writing by Seller
and Buyer (collectively, “Contract”).

      

      1. ACCEPTANCE AND PRICE:
Except as stated therein, quotations are held open for thirty (30) days from the
date on the quotation. Prices quoted will be firm for orders scheduled by Seller
to be delivered within sixty (60) days after the quotation date; otherwise,
Seller reserves the right to apply prices in effect at the time of delivery,
including any surcharges applicable to the cost of production, distribution or
storage of Product. Prices do not include sales, use, excise, or other similar
taxes or governmental charges, and all such present and future taxes and charges
will be paid by Buyer. Payment terms are as set forth in the Sale Confirmation /
Acknowledgment. If any government action, order or request prevents Seller from
adjusting or continuing in effect the price stated in this Contract, Seller
shall have the right to cancel this Contract with respect to all or a portion of
Product deliverable thereunder, without any liability whatsoever. Each delivery
of Product is a separate and independent transaction, and payment for each
delivery shall be made accordingly. All payments are to be made in full and are
not subject to set-off, recoupment, abatement, counter-claim or any other
adjustment.

       

      2. DELIVERY: Delivery to Buyer of
Product, and corresponding transfer of title and of all risk of loss, shall
occur upon Product entering Buyer’s property or facility (the “Delivery Point”).
Delivery dates, where stated, are approximate. Buyer grants Seller a purchase
money security interest in all Product delivered hereunder until full payment
therefor has been received by Seller, and shall execute such related documents
as reasonably requested. Seller reserves the right to pack the Product otherwise
than as specified by Buyer but otherwise in a commercially reasonable manner.
Seller’s weights shall govern, absent manifest error.

       

      3. RETURNABLE
CONTAINERS: Except as provided below, returnable containers, if any,
shall remain the property of Seller. Buyer shall pay a deposit fee, per
container, to be determined from time to time by Seller. Upon Buyer returning
such container, freight prepaid by Seller, within ninety (90) days from the date
of invoice, in good and fully reusable condition, without any residue of any
materials other than Product under a nitrogen blanket, such deposit will be
returned. If any returnable container is not so returned, title and all
responsibility with respect to such container shall be deemed to have been
transferred to Buyer at the Delivery Point, and the deposit fee shall be
non-refundable and shall be retained by Seller.

       

      4. EXCUSED
NON-PERFORMANCE: (a) Seller shall not be liable for breach of any
obligation directly or indirectly attributable to circumstances beyond Seller’s
reasonable control. Such circumstances include, but are not limited to, acts of
God, acts of Buyer, war, riots, accident, fires, explosions, floods, sabotage,
terrorism, governmental laws, regulations, orders or action, national defense or
security requirements, acts or failure to act of its suppliers or other third
parties, natural disaster, weather conditions, or shortages of or inability to
obtain (as and when required and upon Seller’s usual terms and from its usual
sources of supply) suitable or sufficient energy, labor, machinery, facilities,
raw materials, transportation, supplies or other resources or services. Labor
difficulties, strike, lockout or injunction shall be conclusively presumed to be
beyond Seller’s reasonable control, and accordingly within the meaning and
intent of this Paragraph 4. All or some of the quantities of Product deliverable
under this Contract, or other performance by, Seller that is affected by this
Paragraph 4 may, in the sole and absolute discretion of Seller, be eliminated
and/or suspended from the operation of this Contract (with the elimination
and/or suspension of Buyer’s corresponding obligations), but such Contract shall
remain otherwise unaffected.

       

      (b) In
the event of inability for any reason to supply the quantity of Product stated
in this Contract, Seller may, without any liability, allocate its available
supply among any or all purchasers, as well as itself and its affiliates, in any
manner it chooses.

       

      (c)
Seller shall have the right, without any liability, to discontinue all or any of
its performance obligations under this Contract if, in its sole and exclusive
good faith opinion, the manufacture, export, import, sale and/or use of the
Product, or of any related component or process, by it or any of its affiliates
may infringe any patent or intellectual property right.

       

      5. PRODUCT SAFETY: BUYER
WARRANTS AND AGREES TO TRANSPORT, STORE, HANDLE, USE, DISPOSE OF AND OTHERWISE
DEAL WITH PRODUCT SAFELY AND IN STRICT COMPLIANCE WITH ALL LAWS AND REGULATIONS
AND ALL APPLICABLE STANDARDS OF CARE, INCLUDING IN A MANNER NO LESS STRINGENT
THAN AS SET FORTH IN SELLER’S LABELS, MATERIAL SAFETY DATA SHEETS AND OTHER
SAFETY AND HEALTH INFORMATION. Seller does not warrant the safety of the Product
or its use, whether alone or in combination with any other substance or in any
process. Buyer assumes all responsibility for warning its employees, customers
and independent contractors of any hazards associated with the Product. Buyer
agrees to indemnify, defend and hold Seller harmless from any liability of
whatever nature caused in whole or in part by Buyer’s failure to comply with
this Contract.

       

      6. WARRANTY: SELLER
MAKES NO WARRANTY OF, AND SHALL HAVE NO LIABILITY FOR, MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE (EVEN IF SELLER IS AWARE OF SUCH PURPOSE) OR OTHERWISE,
WHETHER EXPRESS OR IMPLIED, OTHER THAN THAT THE PRODUCT, UPON DELIVERY TO BUYER
AT THE DELIVERY POINT SHALL MEET THE SPECIFICATIONS UNDER THIS CONTRACT. NO
OTHER WARRANTY OR LIABILITY, EXPRESS OR IMPLIED, AND WHETHER ARISING BY
OPERATION OF LAW OR CUSTOM, SHALL APPLY. Buyer agrees to
inspect the Product as soon as practicable and to give notice in
writing to Seller of any claim within thirty (45) days of such delivery. Failure
to give notice in writing as aforesaid within the specified time constitutes an
unqualified acceptance of the Product and a waiver of all claims with respect
thereto.

       

      7. LIABILITY. Seller's
liability under this Contract shall be limited to the purchase price of the
Product supplied (or to have been supplied) hereunder in respect of which
damages are claimed. All technical or other advice by Seller, whether or not at
Buyer’s request, with respect to the Product, its processing, further
manufacture, other use or resale or otherwise, is given gratis by Seller and Seller
shall not be liable for, and Buyer assumes all risk of, such advice and the
results thereof. OTHER THAN AS SET FORTH IN THIS PARAGRAPH 7, SELLER SHALL IN NO
EVENT BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL, CONSEQUENTIAL, INCIDENTAL OR
OTHER DAMAGES, AND REGARDLESS WHETHER THE CLAIM IS BASED ON WARRANTY, CONTRACT,
TORT, STRICT LIABILITY, NEGLIGENCE OR OTHERWISE. Upon satisfactory proof of
claim by Buyer, and as Buyer’s exclusive remedy, Seller will, within a
reasonable time, supply Buyer with replacement product of the same or equivalent
type, free of charge, freight prepaid or, at Seller's option, refund the
purchase price for the Product upon return of the Product or other delivered
material, or the unused portion thereof. Buyer charges for replacements and
returns for credit will not be allowed unless authorized by Seller in
writing.

       

      8. LIMITATIONS OF
ACTIONS: Except as otherwise provided in Paragraph 6, above, the right to
commence a legal action arising out of or in connection with this Contract or
the Product expires one (1) year after the cause of action has accrued. Failure
by Buyer to give written notice of a cause of action within such time period
shall constitute a complete defense for Seller against all such
actions.

       

      9. MANUFACTURING DEVICES AND
CONFIDENTIAL INFORMATION: All manufacturing devices, designs, formulas,
data, or other technical information of Seller or any of its affiliates relating
to this Contract will remain Seller's or its affiliates’ confidential property,
and Buyer shall not have any rights thereto, nor any rights to disclose such
items or information to any third party. Nothing in this Contract shall be
construed (by implication, estoppel or otherwise) as granting, or as an
undertaking by Seller to subsequently grant, to Buyer any license, right, title
or interest in or to any present or future patent, patent application, know-how,
copyright, trademark, trade secret or other proprietary right.

       

      10. BUYER’S
CREDIT/COLLECTION: Seller reserves the right, among other remedies,
either to terminate this Contract or to suspend further deliveries under it in
the event Buyer fails to pay for any one delivery when payment is due. Should
Buyer's credit standing become unsatisfactory to Seller, in its sole and
exclusive judgment, advanced cash payments or satisfactory security may be
required by Seller for future deliveries and for Product(s) theretofore
delivered. Buyer shall be responsible for the payment of reasonable attorneys’
fees and related costs and expenses incurred by Seller in (a) any claim or
action by Seller to enforce this Contract, and (b) successfully defending any
claim or action by Buyer.

       

      11. EXPORT COMPLIANCE:
Buyer warrants that it will not export or re-export any Product, other material,
or information of Seller or its affiliates, in violation of export-control or
other customs laws or regulations.

       

      12. BINDING
EFFECT/ASSIGNMENT: This Contract shall be binding on the successors and
assigns of Buyer and Seller; provided, however, that Buyer
shall not assign this Contract in whole or in part without the prior written
consent of Seller.

       

      13. WAIVER/SEVERABILITY:
(a) The failure of Seller to insist upon strict performance of any of the
provisions of this Contract will not constitute a waiver of those or any other
provisions. No waiver by Seller shall be deemed to arise from any course of
dealing or trade custom, and will only be effective if set forth in a separate
writing, signed by Seller.

       

      (b)
Should any provision of this Contract be deemed wholly or partly invalid, this
shall have no effect on the validity of the remaining provisions.

       

      (c)
Without limiting the generality of the foregoing, any purchase order or other
document of Buyer containing provisions that are inconsistent with or in
addition to this Contract shall not be binding upon Seller, and Seller hereby
expressly rejects them, regardless of any performance or receipt of payment;
provided, however, that this provision does not apply to the Sales Agreement,
which shall take precedence over this Exhibit B, Standard Terms and Condition of
Sale.

       

      14. GOVERNING LAW/WAIVER OF JURY
TRIAL: This Contract shall be interpreted and enforced in accordance with
the laws of the state of New Jersey, U.S.A., without regard to the United
Nations Convention on the International Sale of Goods or other international
treaty, rule or accord, and without regard to conflicts of law principles.
Seller and Buyer hereby irrevocably submit to the exclusive jurisdiction of the
federal and state courts located in the State of New Jersey for the resolution
of any claim under this Contract, and Buyer agrees not to assert any defense to
any suit, action or proceeding initiated by Seller based upon improper venue or
inconvenient forum. BUYER AGREES THAT ANY SUIT, ACTION OR PROCEEDING, WHETHER
CLAIM OR COUNTERCLAIM, BROUGHT BY IT RELATED TO THIS CONTRACT SHALL BE TRIED
ONLY BY A COURT AND NOT BY A JURY. BUYER HEREBY KNOWINGLY, VOLUNTARILY,
INTENTIONALLY AND INTELLIGENTLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH
SUIT, ACTION OR PROCEEDING.

       

      15. LANGUAGE: Seller and Buyer expressly agree that
this Contract as well as all documents and notices issued hereunder or relating
hereto will be in English. Les parties ont expressément exigé que ce
contrat, ainsi que tous documents et avis émis en vertu de celui-ci ou s’y
rattachant, soient en anglais.

       

      Page
6 of 6ex10-58.htm

Exhibit 10.58

 

CONFIDENTIAL

[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED FROM PUBLIC FILING PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION. THE OMITTED INFORMATION, WHICH HAS BEEN IDENTIFIED WITH THE SYMBOL “[*],” HAS BEEN FILED SEPARATELY WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

SECOND AMENDED & RESTATED SUPPLY AGREEMENT

 

This Second Amended & Restated Supply Agreement is entered into as of this 31st day of March, 2010 (the “Signature Date”) between WEALTHY RISE INTERNATIONAL, LTD., a Hong Kong company (hereinafter “CUSTOMER”) and HOKU MATERIALS, INC., a Delaware corporation (hereinafter “HOKU”).  HOKU and CUSTOMER are sometimes referred to in the singular as a “Party” or in the plural as the “Parties”.

 

Recitals

 

Whereas, HOKU and CUSTOMER are parties to that certain Amended and Restated Supply Agreement dated as of April 2, 2009 (the “Prior Supply Agreement”).

 

Whereas, HOKU and CUSTOMER desire to amend and restate the Prior Supply Agreement in its entirety as set forth herein.

 

Whereas, HOKU desires to supply polysilicon to CUSTOMER for its general use beginning in calendar year 2011 for a continuous period of three years from the date of the first shipment.

 

Whereas, in exchange for HOKU’s agreement to allocate the supply of polysilicon, CUSTOMER desires to provide HOKU with a firm order for polysilicon upon the terms and conditions provided herein.

 

NOW, THEREFORE, in furtherance of the foregoing Recitals and in consideration of the mutual covenants and obligations set forth in this Agreement, the Parties hereby agree as follows:

 

1.           Effectiveness.  This Agreement shall become effective upon CUSTOMER’s initiation of remittance in full to HOKU of the first Monthly Deposit (the “Effective Date”); provided, however, that the price reduction for the Products shall only be effective upon the earlier of HOKU’s first delivery of Products to CUSTOMER or CUSTOMERS’s payment in full to HOKU of the Main Deposit pursuant to Section 6.2 below, it being understood that HOKU has no obligation to deliver Product until CUSTOMER has paid the Main Deposit in full.  Upon the Effective Date of this Agreement, HOKU agrees irrevocably to waive any remedy that otherwise may have accrued under the Prior Supply Agreement, including, without limitation, any claim it may have had to interest.

 

2.           Definitions.

 

The following terms used in this Agreement shall have the meanings set forth below:

 

2.1           “Affiliate” shall mean, with respect to either Party to this Agreement, any entity that is controlled by or under common control with such Party.

 

 

Page 1 of 18

 

2.2           “Agreement” shall mean this Second Amended & Restated Supply Agreement and all appendices annexed to this Agreement as the same may be amended from time to time in accordance with the provisions hereof.

 

2.3           “First Shipment Date” shall mean the date by which HOKU has delivered to CUSTOMER an aggregate total of [*] metric tons of Products pursuant to this Agreement.

 

2.4           “Facility” shall mean any facility used by HOKU for the production of the Product.

 

2.5           “Independent Expert” means any Qualified Laboratory that is reasonably acceptable to each of HOKU and CUSTOMER; provided, however that if such parties cannot agree on the Independent Expert within ten (10) days, each Party shall select one independent expert form the list of Qualified Laboratories, and those two independent experts shall select the Independent Expert.

 

2.6           “Minimum Annual Quantity of Product” means [*] metric tons (* kilograms).

 

2.7           “Minimum Quarterly Quantity of Product” means [*] metric tons (* kilograms).

 

2.8           “Minimum Monthly Quantity of Product” means [*] metric tons (* kilograms).

 

2.9           “Product” shall mean the raw polysilicon in chunk form manufactured by HOKU and sold to CUSTOMER pursuant to this Agreement.

 

2.10           “Product Specifications” shall mean the quality and other specifications set forth on Appendix 2 to this Agreement.

 

2.11           “Qualified Laboratory” means each qualified laboratory set forth on Appendix 2 to this Agreement.

 

2.12           “Term” shall mean the period during which this Agreement is in effect, as more specifically set forth in Section 10 of this Agreement.

 

2.13           “Total Deposit” shall mean all deposits or prepayments made by CUSTOMER to HOKU hereunder including without limitation the Initial Deposit and the Main Deposit.

 

2.14           “Year” shall mean each of the three (3) twelve-month periods commencing on the First Shipment Date.

 

3.           Ordering.  Starting on the First Shipment Date and each Year during the term of this Agreement thereafter, CUSTOMER agrees to purchase from HOKU, and HOKU agrees to sell to CUSTOMER, the Minimum Annual Quantity of Product at the prices set forth on Appendix 1 to this Agreement (the “Pricing Schedule”).  This Agreement constitutes a firm order from CUSTOMER for [*] metric tons of Product that cannot be cancelled during the term of this Agreement, except as set forth in Section 10 below.

 

 

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4.           Supply Obligations.

 

4.1           HOKU shall deliver each Year pursuant to this Agreement starting on the First Shipment Date at least the Minimum Annual Quantity of Product in approximately equal monthly shipments in amounts not less than the Minimum Monthly Quantity and the Minimum Quarterly Quantity pursuant to Section 5.1 below; provided however, that if HOKU fails to deliver a monthly shipment, then HOKU may deliver any deficiency within sixty (60) days without breaching this section or incurring any purchase price adjustment (pursuant to Section 4.3 below).  At any time during the term of this Agreement, HOKU may ship to CUSTOMER up to the full cumulative balance of Minimum Annual Quantity of Product to be shipped through the end of the current Year (an “Excess Shipment”) with CUSTOMER’s written consent, which may be given or withheld in CUSTOMER’s absolute discretion.  This shipment will be credited against each subsequent Minimum Annual Quantity of Product.  For example, if the Minimum Annual Quantity of Product for a given Year is [*] metric tons, and if HOKU delivers [*] metric tons in January, then the next shipment of [*] metric tons is not required until the following Year.

 

4.2           HOKU intends to manufacture the Products at its Facility, however, notwithstanding anything to the contrary herein, HOKU may deliver to CUSTOMER Products that are manufactured by a third party other than HOKU, (the “Alternative Products”).  The Alternative Products shall conform to the warranties of HOKU to CUSTOMER hereunder, and the quality, price, delivery and any other terms and conditions of the Alternative Products shall be no less favorable than the terms and conditions set forth in this Agreement.  Delivery of the Alternative Products shall not release or mitigate HOKU’s liabilities and obligations hereunder except that delivery of the Alternative Products is deemed to be delivery of Products, and CUSTOMER shall have the same rights and HOKU shall have the same obligations as set forth hereunder with respect to any Alternative Products.  HOKU shall notify CUSTOMER in writing prior to the delivery of Alternative Products.

 

4.3           Except in the case of a force majeure pursuant to Section 13 below, if at any time after January 31, 2011, HOKU does not supply any Products pursuant to Section 4.1 or 4.2 within sixty (60) days of the scheduled delivery date, HOKU will provide CUSTOMER with a purchase price adjustment.  (For the avoidance of doubt, this means that no such sixty (60) day period shall begin to run before January 31, 2011.) Such purchase price adjustment shall be the reduction of two and one-half percent (2.5%) of the price of the respective delayed Products for each week or part thereof that the Product shipment (or part thereof) is delayed beyond the sixty (60) day grace period.  Notwithstanding anything to the contrary, the maximum amount of such purchase price reduction is limited to fifty percent (50%) of the price of the respective delayed Products.  Monthly shipments which are delayed beyond one hundred twenty (120) days shall be deemed to constitute a material breach of this Agreement pursuant to Section 10.2.1 below.  Notwithstanding the foregoing, if CUSTOMER fails to make a payment to HOKU within the 60-day period set forth in Section 6.4 below, HOKU shall not be required to supply any Product to CUSTOMER until HOKU has received the past due amount including any interest payable thereon pursuant to this Agreement.  For the avoidance of doubt, CUSTOMER’s right to reduce the purchase price pursuant to this Section 4.3 shall not apply if HOKU is not fulfilling its supply obligations for this reason.

 

 

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5.           Shipping & Delivery.

 

5.1           Except as provided in Section 4.2 above, shipments shall be made from the Facility on a monthly basis in accordance with a shipment schedule that will be provided by HOKU each Year under this Agreement (the “Shipment Schedule”) no later than sixty (60) days prior to the applicable Year.  The Shipment Schedule shall provide for approximately equal monthly shipments in amounts not less than the Minimum Monthly Quantity that add up to the Minimum Annual Quantity of Products in the applicable Year and add up to the Minimum Quarterly Quantity in each of the four quarters of the applicable Year.

 

5.2           HOKU will use commercially reasonable efforts to make available to CUSTOMER its first shipment of Products on or before January 31, 2011.

 

6.           Payments & Advances.

 

6.1           CUSTOMER has paid to HOKU Seven Million U.S. Dollars (US$7,000,000) as an advance payment for Products to be delivered under this Agreement (the “Initial Deposit”).

 

6.2           CUSTOMER shall pay in cash to HOKU the additional sum of Thirteen Million Two Hundred Thousand U.S. Dollars (US$13,200,000) (the “Main Deposit”) as an advance payment for Products to be delivered under this Agreement in equal installments (each, a “Monthly Deposit”) within ten (10) business days from each of the Remittance Dates set forth below:

 

	
Remittance Date

	
Monthly Deposit

	
April 14, 2010

	
$3.3 million

	
June 14, 2010

	
$3.3 million

	
August 14, 2010

	
$3.3 million

	
October 14, 2010

	
$3.3 million

 

6.3           CUSTOMER shall pay in cash to HOKU the additional sum of Two Hundred Thousand U.S. Dollars ($200,000) (the “Final Deposit”) as an advance payment for Products to be delivered under this Agreement.  Initiation of the remittance in the full amount of the Final Deposit shall be made within ten (10) business days of when HOKU completes the shipment to CUSTOMER of a cumulative aggregate of [*] metric tons of Product pursuant to Section 4 of this agreement.

 

6.4           HOKU shall invoice CUSTOMER at or after the time of each shipment of Products to CUSTOMER.  Taxes, customs and duties, if any, will be identified as separate items on HOKU invoices.  All invoices shall be sent to CUSTOMER’s address as provided herein.  Payment terms for all invoiced amounts shall be sixty (60) days from date of shipment.  All payments shall be made in U.S. Dollars.  Unless HOKU is entitled to retain the Total Deposit as liquidated damages pursuant to Section 12 below, shipments to CUSTOMER shall be credited against the Total Deposit according to the schedule of credits in Appendix 1 until there are no Funds Remaining on the Deposit (as defined in Section 10.5).

 

 

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6.5           The prices for the Products do not include any excise, sales, use, import, export or other similar taxes, such taxes will not include income taxes or similar taxes, which taxes will be invoiced to and paid by CUSTOMER, provided that CUSTOMER is legally or contractually obliged to pay such taxes.  CUSTOMER shall be responsible for all transportation charges, duties or charges, liabilities and risks for shipping and handling (and hereby indemnifies HOKU for such costs, liabilities and risks); thus, the price for the Products shall not include any such charges.

 

6.6           Late payments and outstanding balances, shall accrue interest at a rate per annum equal to the lesser of 12% per annum or the maximum allowed by law, accruing daily and calculated on the basis of a 365-day year and the actual number of days.

 

7.           Security Interest.

 

7.1           HOKU hereby grants to CUSTOMER a security interest to secure the repayment by HOKU to CUSTOMER of the Total Deposit following any of the events set forth in Section 10.5 below, which shall be subordinated in accordance with Section 7.2 below, in all of the tangible and intangible assets related to HOKU’s polysilicon business (the “Collateral”).

 

7.2           CUSTOMER acknowledges and agrees that the security interests and liens in the Collateral will not be first priority security interests, will be expressly subordinated to HOKU’s third-party lenders (the “Senior Lenders”) that provide debt financing for the construction of any HOKU Facility, and may be subordinated as a matter of law to other security interests, and to security interests that are created and perfected prior to the security interest granted to CUSTOMER hereby.  CUSTOMER shall enter into subordination agreements with the Senior Lenders on terms and conditions reasonably acceptable to the Senior Lenders.

 

7.3           In addition, CUSTOMER shall enter into collateral, intercreditor and other agreements (the “Collateral Agreements”) with HOKU’s Senior Lenders, and with Suntech Power Holding Co., Ltd., Solarfun Power Hong Kong Limited, Jiangxi Jinko Solar Co., Ltd., Tianwei New Energy (Chengdu) Wafer Co., Ltd, Shanghai Alex New Energy Co., Ltd., and 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 granted hereby is pari passu with the security interests that may be granted to HOKU’s Other Customers.  CUSTOMER may not unreasonably refuse to sign any such Collateral Agreement, provided that such Collateral Agreement grants CUSTOMER a pari passu priority with respect to HOKU’s Other Customers, and is expressly subordinated to the Senior Lenders.

 

7.4           The security interest granted hereby shall continue so long as HOKU continues to maintain any amount of the Total Deposit, and only to the extent of such remaining amount of the Total Deposit being held by HOKU, which has not been credited against the shipment of Products pursuant to this Agreement, or otherwise repaid to CUSTOMER.  Notwithstanding anything to the contrary contained in this Agreement, the Collateral consisting of real property shall secure only the obligations of HOKU to refund any portion of the Total Deposit to CUSTOMER in accordance with the terms of this Agreement.  When the Total Deposit is no longer held by HOKU, CUSTOMER will sign such documents as are necessary to release its security interests.

 

 

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7.5           HOKU and CUSTOMER each agree to act in good faith to execute and deliver any additional document or documents that may be required in furtherance of the foregoing provisions of this Section 7, including the Collateral Agreements.  Neither HOKU nor CUSTOMER may unreasonably refuse to sign any such document.

 

8.           Product Quality Guarantee.

 

8.1           HOKU warrants to CUSTOMER that the Products shall meet the Product Specifications.  For each shipment, this warranty shall survive for seventy five (75) days after the applicable shipment date (the “Warranty Period”).  Upon release of the Products to a common carrier or freight forwarder, FOB origin (INCOTERMS 2000), HOKU warrants that the Products shall be free of all liens, mortgages, encumbrances, security interests or other claims or rights.  HOKU will, upon prompt notification and compliance with HOKU’s instructions, refund or replace, at CUSTOMER’s sole option, any Product which does not meet the Product Specifications, and CUSTOMER shall comply with the inspection and return goods policy described in Section 9 below with respect to such Products.  No employee, agent or representative of HOKU has the authority to bind HOKU to any oral representation or warranty concerning the Products.  Any oral representation or warranty made prior to the purchase of any Product and not set forth in writing and signed by a duly authorized officer of HOKU shall not be enforceable by CUSTOMER.  HOKU makes no warranty and shall have no obligation with respect to damage caused by or resulting from accident, misuse, neglect or unauthorized alterations to the Products.

 

8.2           HOKU EXPRESSLY DISCLAIMS ALL OTHER WARRANTIES, WHETHER EXPRESS, IMPLIED OR STATUTORY, INCLUDING THE WARRANTIES OF MERCHANTABILITY, AND FITNESS FOR A PARTICULAR PURPOSE.  Except as otherwise provided in Section 10.2.5 below, HOKU’s sole responsibility and CUSTOMER’s exclusive remedy for any claim arising out of the purchase of any Product is a refund or replacement, as described above.  In no event shall HOKU’s liability exceed the purchase price paid therefore; nor shall HOKU be liable for any claims, losses or damages of any individual or entity or for lost profits or any special, indirect, incidental, consequential, or exemplary damages, howsoever arising, even if HOKU has been advised of the possibility of such damages.

 

8.3           HOKU shall, at its own expense, indemnify and hold CUSTOMER and its Affiliates harmless from and against any expense or loss resulting from any actual or alleged infringement of any patent, trademark, trade secret, copyright, mask work or other intellectual property related to the Products, and shall defend at its own expense, including attorneys fees, any suit brought against CUSTOMER or CUSTOMER’s Affiliates alleging any such infringement.  CUSTOMER agrees that:  (i) CUSTOMER shall give HOKU prompt notice in writing of any such suit; (ii) if HOKU provides evidence reasonably satisfactory to CUSTOMER of HOKU’s financial ability to defend the matter vigorously and pay any reasonably foreseeable damages, CUSTOMER shall permit HOKU, through counsel of HOKU’s choice, to answer the charge of infringement and defend such suit (but CUSTOMER, or CUSTOMER’s Affiliate may be represented by counsel and participate in the defense at its own expense); and (iii) CUSTOMER shall give HOKU all needed information, assistance, and authority, at HOKU’s expense, to enable HOKU to defend such suit In case of a final award of damages in any such suit HOKU shall pay such award, but shall not be responsible for any settlement made without its prior consent Except as otherwise expressly set forth herein, HOKU disclaims any obligation to defend or indemnify CUSTOMER, its officers, agents, or employees, from any losses, damages, liabilities, costs or expenses which may arise out of the acts of omissions of HOKU.

 

 

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9.           Inspection and Return Goods Policy.

 

9.1           An inspection of appearance of each shipment of Product shall be made by CUSTOMER in accordance with sound business practice upon the delivery of the Product, and in no case later than four weeks after delivery at CUSTOMER’s factory.  CUSTOMER shall inform HOKU promptly, and in no case later than six weeks after delivery of Product, in case of any obvious damages or other obvious defects to the Product which CUSTOMER discovers under the inspection of appearance.

 

9.2           CUSTOMER shall perform final inspection of the Product upon introducing the Product into CUSTOMER’s production process.  Such inspection shall take place during the Warranty Period.  If the Product does not meet the Product Specifications, CUSTOMER shall notify HOKU in writing without undue delay after the inspection and in any event prior to expiration of the Warranty Period, and, together with the notification, submit documentary evidence of the result of the final inspection.  HOKU shall then have the right to undertake its own inspection prior to any return of the Products pursuant to Section 9.3 below, and shall notify CUSTOMER in writing within 5 business days whether or not it chooses to do so.

 

9.3           Products may be returned to HOKU by delivering them to a common carrier or freight forwarder within the later of (a) 10 days after HOKU notifies CUSTOMER in writing pursuant to Section 9.2 above that it chooses not to exercise its right to undertake its own inspection prior to return of the Products; and (b) 10 days after HOKU completes its inspection pursuant to Section 9.2 above and confirms the defect by written notice to CUSTOMER, for replacement or a refund including all return shipment expenses.  To assure prompt handling, HOKU shall provide CUSTOMER a return goods authorization number within 48 hours of CUSTOMER’s request.  Provided that HOKU communicates this number to CUSTOMER within such timeframe, CUSTOMER will reference this number on return shipping documents.  Returns made without the authorization number provided by HOKU in accordance with the foregoing may be subject to HOKU’s reasonable charges due to HOKU’s additional handling costs.  If HOKU concludes following its inspection pursuant to Section 9.2 above that the Product meets the Product Specifications, CUSTOMER reserves the right to require that the Product be submitted to an Independent Expert; and if HOKU chooses not to exercise its right to complete its own inspection pursuant to Section 9.2, HOKU reserves the right to require that the Product be submitted to an Independent Expert.  The conclusion of the Independent Expert shall be final, binding and non-appealable in respect of the conformity of the Products to the warranties set forth in Section 8.1 above.  The fees and expenses of the Independent Expert shall be paid solely by the party that does not succeed in the dispute.  HOKU reserves the right to reverse any credit issued to CUSTOMER prior to the determination of the Independent Expert that the Products for which the credit was issued are not defective, and CUSTOMER reserves the right to return the Products to HOKU by delivering them to a common carrier or freight forwarder within 10 days of the determination of the Independent Expert that the Products are defective.

 

 

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10.           Term and Termination.

 

10.1           The term of this Agreement shall begin on the Effective Date and shall remain in force for a period of three Years beginning with the First Shipment Date.

 

10.2           Each Party may, at its discretion, upon written notice to the other Party, and in addition to its rights and remedies provided under this Agreement or any other agreement executed in connection with this Agreement and at law or in equity, terminate this Agreement in the event of any of the following:

 

10.2.1           Upon a material breach of the other Party of any material provision in this Agreement, and failure of the other Party to cure such material breach within sixty (60) days after written notice thereof; provided, however, that such cure period shall not modify or extend the 120-day cure period for HOKU’s delivery obligations pursuant to Section 4.3 above; and provided, further that each sixty (60) day cure period shall not apply to CUSTOMER’s failure to make pre-payments to HOKU pursuant to Sections 6.1 through 6.3 to this Agreement.  For purposes of this Section 10.2.1, a “material breach” means a monthly shipment which is delayed beyond one hundred twenty (120) days, a payment default or any other material breach of this Agreement which materially and adversely affects a Party or which occurs on multiple occasions;

 

10.2.2           Upon the voluntary or involuntary initiation of bankruptcy or insolvency proceedings against the other Party; provided, that for an involuntary bankruptcy or insolvency proceeding, the Party subject to the proceeding shall have sixty (60) working days within which to dissolve the proceeding or demonstrate to the terminating Party’s satisfaction the lack of grounds for the initiation of such proceeding;

 

10.2.3           If the other Party (i) becomes unable, or admits in writing its inability, to pay its debts generally as they mature, (ii) becomes insolvent (as such term may be defined or interpreted under any applicable statute);

 

10.2.4           In accordance with the provisions of Section 13 (Force Majeure) below; provided, however, that CUSTOMER may not terminate this Agreement pursuant to Section 13 if HOKU is supplying Products to CUSTOMER pursuant to Section 4.2 of this Agreement;

 

10.2.5           HOKU’s repetitive failure to deliver Products conforming to the warranties set forth in Section 8 above, subject to applicable cure periods; or

 

10.2.6           Without limiting the foregoing, CUSTOMER shall have the right to terminate this Agreement if the First Shipment Date does not occur on or before May 31, 2011.

 

10.3           HOKU shall have the right to terminate this Agreement if CUSTOMER has failed to initiate remittance in full of any Monthly Deposit on or before the applicable date set forth in Section 6.2, in which case, HOKU shall be entitled to retain the Initial Deposit and all prior Monthly Deposits that have been paid to HOKU as of such termination date as liquidated damages; or CUSTOMER has failed to initiate payment in full of the Final Deposit pursuant to Section 6.3 above, in which case, HOKU shall be entitled to retain the Initial Deposit, and the Main Deposit as liquidated damages.  UPON FORFEITURE OF SUCH DEPOSITS AS LIQUIDATED DAMAGES PURSUANT TO THIS SECTION 10.3, ALL CLAIMS, OBLIGATIONS AND LIABILITIES OF CUSTOMER DERIVING FROM OR RELATING TO THIS AGREEMENT AND ITS TERMINATION SHALL BE DEEMED TO BE DISCHARGED AND FINALLY SETTLED.

 

 

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10.4           Upon the expiration or termination of this Agreement howsoever arising (except for a nullification pursuant to Section 1), the following Sections shall survive such expiration or termination:  Sections 2 (Definitions); Section 8 (Product Quality Guarantee), Section 9 (Inspection and Return Goods Policy); Section 10 (Term and Termination); Section 11 (Liability); Section 12 (Liquidated Damages); and Section 14 (General Provisions).

 

10.5           If CUSTOMER terminates this Agreement pursuant to Section 10.2.1, 10.2.2, 10.2.3, 10.2.4, 10.2.5, 10.2.6, or 13, then, in addition to CUSTOMER’s other remedies pursuant to this Agreement, and all available remedies at law and in equity, 100% of the Funds Remaining on the Total Deposit on such date of termination shall be returned to CUSTOMER within thirty (30) calendar days, with any late payment accruing interest pursuant to Section 6.6 above; provided however that if CUSTOMER is in material breach of this Agreement at the time it terminates this Agreement, then HOKU shall not be required to repay any of the Funds Remaining on the Total Deposit up to the amounts of HOKU’s direct loss from such material breach (unless CUSTOMER cures such breach within the applicable cure period) or CUSTOMER’s other outstanding and unpaid obligations hereunder (including, without limitation, obligations under Section 12).  If HOKU terminates this Agreement pursuant to Section 10.2.1, 10.2.2 10.2.3, 10.2.4, or 13 then, in addition to HOKU’s other remedies pursuant to this Agreement, and all available remedies at law and in equity, HOKU shall be entitled to retain any Funds Remaining on the Total Deposit on such date of termination in accordance with Section 12; provided however that if HOKU is in material breach of this Agreement at the time it terminates this Agreement, then HOKU shall not be entitled to retain any of the Funds Remaining on the Total Deposit up to the amounts of CUSTOMER’S direct loss from such material breach (unless HOKU cures such breach within the applicable cure period) or HOKU’s other outstanding and unpaid obligations hereunder (including, without limitation, obligations under Section 8.).  “Funds Remaining” on the Total Deposit are funds not applied against CUSTOMER’s purchase of Product, pursuant to Section 6.4 above, for Product actually shipped to CUSTOMER hereunder.

 

11.           Liability.

 

11.1           IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OR FOR EXEMPLARY OR PUNITIVE DAMAGES, EVEN IF CUSTOMER OR HOKU HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

 

11.2           HOKU’S TOTAL LIABILITY TO CUSTOMER FOR ANY KIND OF LOSS, DAMAGE OR LIABILITY ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT, UNDER ANY THEORY OF LIABILITY, SHALL NOT EXCEED THE GREATER OF THE FUNDS REMAINING ON THE TOTAL DEPOSIT OR ANY AMOUNTS OWED BY HOKU PURSUANT TO SECTION 8 HEREOF.

 

 

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11.3           CUSTOMER’S TOTAL LIABILITY TO HOKU FOR ANY KIND OF LOSS, DAMAGE OR LIABILITY ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT, UNDER ANY THEORY OF LIABILITY, SHALL NOT EXCEED THE GREATER OF THE FUNDS REMAINING ON THE TOTAL DEPOSIT OR THE PRICE AS SET FORTH ON APPENDIX 1 TO THIS AGREEMENT FOR SUCH PRODUCT OF WHICH CUSTOMER HAS TAKEN DELIVERY.  For the avoidance of doubt under this Section and other Sections hereof (including, without limitation, Sections 10.3 and 12), upon the Effective Date, CUSTOMER shall never be liable to pay anything except to the extent CUSTOMER actually takes delivery of Product, CUSTOMER must pay for the Product at the prices set forth on Appendix 1 to this Agreement (subject to CUSTOMER’S warranty and other rights under this Agreement).  Otherwise, HOKU’s sole remedies in the event CUSTOMER fails to pay any amounts due pursuant to this Agreement are to terminate the Agreement and/or retain amounts CUSTOMER has already paid.  The following examples illustrate these points.  (In each of the examples, it is assumed HOKU has fulfilled its obligations under the Agreement and CUSTOMER is not entitled to any remedy against HOKU.) Example 1:  Assume CUSTOMER fails to make the third monthly pre-payment of $3.3 million, having previously paid the Initial Deposit and the first two monthly payments of $3.3 million.  Then HOKU would be entitled to terminate the Agreement and to retain the $13.6 million already paid by CUSTOMER, but CUSTOMER would have no further liability.  Example 2:  Assume there are $13.4 million in Funds Remaining from amounts previously deposited by CUSTOMER at the end of “Year 1” (see Appendix 1), that CUSTOMER takes delivery of [*] metric tons of Product, and that CUSTOMER fails to pay for the Product on time.  HOKU would then have two options.  HOKU could give 60 days’ written notice of default pursuant to Section 10.2.1.  Alternatively, HOKU could off-set the amount due by applying [*] ([*] kilograms) plus interest at 12% from the due date out of the Funds Remaining pursuant to Section 12.2.  If CUSTOMER were then to fail to pay within the grace period (Section 10.2.1) or to replenish the amounts applied from the Funds Remaining (Section 12.2), HOKU would be entitled to terminate the Agreement and to retain the Funds Remaining, but CUSTOMER would have no further liability.  Example 3:  Assume there are $6.6 million in Funds Remaining from amounts previously deposited by CUSTOMER at the end of “Year 2” (see Appendix 1), that CUSTOMER takes delivery of [*] metric tons of Product, and that CUSTOMER fails to pay the [*] due ([*] kilograms) for the Product.  Then HOKU would be entitled to retain the $6.6 million in Funds Remaining and CUSTOMER would still be liable to pay HOKU $3.4 million.  Example 4:  CUSTOMER fails to take delivery of any Product or, having previously taken delivery of one or more shipments of Product and paid for such Product, CUSTOMER fails to take delivery of any additional Product.  Then HOKU would be entitled to retain the Funds Remaining but CUSTOMER would have no further liability.

 

12.           Liquidated Damages; Off-Set.

 

12.1           THE PARTIES ACKNOWLEDGE AND AGREE THAT ANY BREACH OF SECTION 6 OF THIS AGREEMENT BY CUSTOMER MAY CAUSE IRREPARABLE AND IMMEASURABLE DAMAGE TO HOKU.  BECAUSE IT IS DIFFICULT TO MEASURE THESE DAMAGES, IN THE EVENT THAT THIS AGREEMENT IS TERMINATED BY HOKU PURSUANT TO SECTION 10.3, THEN HOKU SHALL BE ENTITLED TO RETAIN AS LIQUIDATED DAMAGES, ANY FUNDS REMAINING ON THE TOTAL DEPOSIT THEREOF NOT CREDITED AGAINST PRODUCT SHIPMENTS.

 

 

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12.2           THE PARTIES ACKNOWLEDGE AND AGREE THAT, IN THE EVENT THAT CUSTOMER IS LATE IN MAKING ANY PAYMENTS TO HOKU FOR PRODUCTS THAT HAVE BEEN SHIPPED BY HOKU, HOKU RESERVES THE RIGHT TO OFF-SET THE AMOUNT OF THE TOTAL DEPOSIT BY CREDITING TO HOKU’S ACCOUNT THE AMOUNT OF THE TOTAL DEPOSIT THAT IS EQUAL TO THE PAST DUE AMOUNT, INCLUDING ANY INTEREST PAYABLE THEREON PURSUANT TO THIS AGREEMENT; PROVIDED, HOWEVER, THAT HOKU SHALL NOTIFY CUSTOMER IN WRITING PRIOR TO SUCH OFF-SET.  FOR THE AVOIDANCE OF DOUBT, THE INTEREST PAYABLE SET FORTH ABOVE SHALL ACCRUE FROM THE DUE DATE TO THE DATE WHEN HOKU EXERCISES THE RIGHT TO OFF-SET.  IN CASE OF SUCH OFF-SET BY HOKU, CUSTOMER SHALL BE REQUIRED TO REPLENISH THE DEPOSIT BY THE SET-OFF AMOUNT WITHIN THIRTY (30) BUSINESS DAYS AFTER CUSTOMER’S RECEIPT OF SUCH NOTIFICATION.

 

13.           Force Majeure.  Neither Party shall be liable to the other Party for failure of or delay in performance of any obligation under this Agreement, directly, or indirectly, owing to acts of God, war, war-like condition, embargoes, riots, strike, lock-outs and other events beyond its reasonable control, provided, however, that the non-performing Party shall not be so excused to the extent such default or delay is attributable to such non-performing Party failing to use reasonable efforts to prevent or such non-performing Party causing such default or delay, and such default or delay could not reasonably be circumvented by the non-performing Party through the use of alternate sources, workaround plans or other means.  Notwithstanding the foregoing, a strike, lock-out or other labor dispute involving a Party (or, in the case of Supplier, a subcontractor or supplier) and its own personnel will not excuse such Party from performing its obligations hereunder.  In such event, the non-performing Party will be excused from further performance or observance of the obligation(s) so affected for as long as such circumstances prevail and such Party continues to use commercially reasonable efforts to recommence performance or observance whenever and to whatever extent without delay.  If such failure or delay occurs, the affected Party (i.e. the Party that is unable to perform) shall notify the other Party of the occurrence thereof as soon as possible, and the Parties shall discuss the best way to resolve the event of force majeure.  If the conditions of Force Majeure apply for a period of more than two (2) consecutive calendar months, the non-affected Party shall be entitled to terminate this Agreement upon written notice to the other Party.

 

14.           General Provisions.

 

14.1           CUSTOMER acknowledges that it is the policy of HOKU to scrupulously comply with the Foreign Corrupt Practices Act of 1977 (as amended, the “FCPA”) and to adopt appropriate and reasonable practices and procedures that are undertaken in such a manner as to substantially eliminate the potential for violation of the FCPA.  CUSTOMER further acknowledges that it shall be bound by any law, regulation or other legal enactment, that prohibits corrupt practices of the type or nature described in the FCPA and that is applicable to CUSTOMER, and CUSTOMER hereby represents and warrants that neither HOKU, nor to CUSTOMER’s knowledge, any other authorized person or entity associated with or acting for or on behalf of HOKU, has knowingly directly or indirectly made any contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other payment to CUSTOMER, whether in money, property, or services (i) to obtain favorable treatment in securing business from CUSTOMER, (ii) to pay for favorable treatment for business secured from CUSTOMER, or (iii) to obtain special concessions or for special concessions already obtained from CUSTOMER, for or in respect of HOKU, in violation of any legal requirement or applicable law.  HOKU acknowledges that it is the policy of CUSTOMER to scrupulously comply with the FCPA and to adopt appropriate and reasonable practices and procedures that are undertaken in such a manner as to substantially eliminate the potential for violation of the FCPA.  HOKU further acknowledges that it shall be bound by any law, regulation or other legal enactment, that prohibits corrupt practices of the type or nature described in the FCPA and that is applicable to HOKU, and HOKU hereby represents and warrants that neither CUSTOMER, nor to HOKU’s knowledge, any other authorized person or entity associated with or acting for or on behalf of CUSTOMER, has knowingly directly or indirectly made any contribution, gift, bribe, rebate, payoff influence payment, kickback, or other payment to HOKU, whether in money, property, or services (i) to obtain favorable treatment in securing business from HOKU, (ii) to pay for favorable treatment for business secured from HOKU, or (iii) to obtain special concessions or for special concessions already obtained from HOKU, for or in respect of CUSTOMER, in violation of any legal requirement or applicable law.

 

 

Page 11 of 18

 

14.2           This Agreement shall be construed under and governed by the laws of the State of California, U.S.A.

 

14.3           Upon notice from one Party to the other of a dispute hereunder, the Parties agree to hold a meeting within thirty (30) days of receipt of such notice with at least one (1) representative from each Party who has decision-making authority for such company.  At this meeting, the Parties will attempt to resolve the dispute in good faith.  If, after the meeting, the dispute has not been resolved, only then may a Party resort to litigation.  Any proceeding to enforce or to resolve disputes relating to this Agreement shall be brought in California, USA.  In any such proceeding, neither Party shall assert that such a court lacks jurisdiction over it or the subject matter of the proceeding.

 

14.4           HOKU may assign its rights under this agreement to any collateral agent as collateral security for HOKU’s secured obligations in connection with the financing a HOKU Facility, without the consent of CUSTOMER.  Except as stated in the previous sentence, neither HOKU nor CUSTOMER may assign this Agreement to a third party without the prior written consent of the other Party, which consent shall not be unreasonably withheld.  Notwithstanding the foregoing, an assignment of this Agreement by either Party in connection with a merger, acquisition, or sale of all or substantially all of the assets or capital stock of such Party shall not require the consent of the other Party.  If this Agreement is assigned effectively to a third party, this Agreement shall bind upon successors and assigns of the Parties hereto.

 

14.5           All notices delivered pursuant to this Agreement shall be in writing and in the English language.  Except as provided elsewhere in this Agreement, a notice is effective only if the Party giving or making the notice has complied with this Section 14.5 and if the addressee has received the notice.  A notice is deemed to have been received as follows:

 

	
  

	
(a)

	
If a notice is delivered in person, or sent by registered or certified mail, or nationally or internationally recognized overnight courier, upon receipt as indicated by the date on the signed receipt; or

 

	
  

	
(b)

	
If a notice is sent by facsimile, upon receipt by the Party giving the notice of an acknowledgment or transmission report generated by the machine from which the facsimile was sent indicating that the facsimile was sent in its entirety to the addressee’s facsimile number.

 

 

Page 12 of 18

 

Each Party giving a notice shall address the notice to the appropriate person at the receiving Party at the address listed below or to a changed address as the Party shall have specified by prior written notice:

 

CUSTOMER:

 

WEALTHY RISE INTERNATIONAL, LTD.

Room 1402, Harbour Centre

25 Harbour Road, Wanchai, Hong Kong

Attn:  Y.I. Hsu, CEO

 

HOKU:

 

HOKU MATERIALS, INC.

One Hoku Way

Pocatello, Idaho  83204

Attn:  Mr. Scott Paul, CEO

Facsimile:  +1 (808) 440-0357

 

14.6           The waiver by either Party of the remedy for the other Party’s breach of or its right under this Agreement will not constitute a waiver of the remedy for any other similar or subsequent breach or right.

 

14.7           Beginning on the Effective Date, and until the earlier of (A) HOKU’s shipment of the Minimum Annual Quantity of Product manufactured at the HOKU Facility in Pocatello, Idaho, USA, or (B) the termination of this Agreement by either Party pursuant to Section 10 of this Agreement (the “Inspection Termination Date”), CUSTOMER shall have the right to visit the HOKU Facility in Pocatello, Idaho, USA, for the limited purpose of evaluating HOKU’s progress towards completing the construction of its polysilicon production facilities.  CUSTOMER shall provide HOKU with at least three (3) business days’ prior notice of any such visit, and may not visit more than two times each calendar quarter.  HOKU reserves the right to refuse access to any individual who is not subject to the parties’ non-disclosure agreement dated August 7, 2008.  CUSTOMER shall agree to abide by all of HOKU’s safety and security requirements and instructions for the HOKU Facility.  Beginning on the Effective Date, and until the Inspection Termination Date, HOKU shall provide CUSTOMER with monthly updates on the progress of the construction of the HOKU polysilicon production facilities.

 

14.8           If any provision of this Agreement is or becomes, at any time or for any reason, unenforceable or invalid, no other provision of this Agreement shall be affected thereby, and the remaining provisions of this Agreement shall continue with the same force and effect as if such unenforceable or invalid provisions had not been inserted in this Agreement.

 

 

Page 13 of 18

 

14.9           No changes, modifications or alterations to this Agreement shall be valid unless reduced to writing and duly signed by respective authorized representatives of the Parties.

 

14.10           No employment, agency, trust, partnership or joint venture is created by, or shall be founded upon, this Agreement.  Each Party further acknowledges that neither it nor any Party acting on its behalf shall have any right, power or authority, implied or express, to obligate the other Party in any way.

 

14.11           Neither Party shall make any announcement or press release regarding this Agreement or any terms thereof without the other Party’s prior written consent; provided, however, that the Parties will work together to issue a joint press release within two (2) days after execution of this Agreement.  Notwithstanding the foregoing, either Party may publicly disclose the material terms of this Agreement pursuant to the United States Securities Act of 1933, as amended, the United States Securities Exchange Act of 1934, as amended, or other applicable law and Solargiga Energy Holdings Limited, being the ultimate holding company of CUSTOMER, may publicly disclose the material terms of this agreement pursuant to Hong Kong law and the Rules Governing the Listing of securities on The stock Exchange of Hong Kong Limited, as amended; provided, however, that the Party being required to disclose the material terms of this Agreement shall provide reasonable advance notice to the other Party.

 

14.12           This Agreement constitutes the entire agreement between the Parties and supersedes all prior proposal(s) and discussions, relative to the subject matter of this Agreement and neither of the Parties shall be bound by any conditions, definitions, warranties, understandings or representations with respect to such subject matter other than as expressly provided herein.  No oral explanation or oral information by either Party hereto shall alter the meaning or interpretation of this Agreement.  Notwithstanding the foregoing, the Prior Supply Agreement shall continue in full force and effect until CUSTOMER initiates the remittance of the first Monthly Deposit to HOKU.  Should CUSTOMER fail to initiate the remittance in the full amount of the first Monthly Deposit on or before ten business days from April 14, 2010, then this Agreement shall be null and void, and the Prior Supply Agreement shall continue in full force and effect.  Upon initiation of remittance in the full amount of the first Monthly Deposit on or before ten business days from April 14, 2010, and provided that HOKU actually receives the first Monthly Deposit within a reasonable period of time after the remittance date, the Prior Supply Agreement shall be superseded in all respects by the terms of this Agreement, and all obligations and liabilities of the Parties under the Prior Supply Agreement shall be extinguished); provided, however, that the price reduction for the Products shall only be:  effective upon the earlier of HOKU’s first delivery of Products to CUSTOMER or CUSTOMERS’s payment in full to HOKU of the Main Deposit pursuant to Section 6.2 above, it being understood that HOKU has no obligation to deliver Product until CUSTOMER has paid the Main Deposit in full.  Assuming HOKU receives and retains any Monthly Deposit, it shall be deemed to have waived any argument that it did not receive such Monthly Deposit within a reasonable period of time.

 

14.13           The headings are inserted for convenience of reference and shall not affect the interpretation and or construction of this Agreement.

 

14.14           Words expressed in the singular include the plural and vice-versa.

 

 

Page 14 of 18

 

IN WITNESS WHEREOF, the Parties have executed this Second Amended & Restated Supply Agreement as of the date last set forth below.

 

	
CUSTOMER:

	
HOKU:

	  	  
	
WEALTHY RISE INTERNATIONAL, LTD.

	
HOKU MATERIALS, INC.

	  	  
	
By:  /s/ Y.I. Hsu                                                                    

	
By:  /s/ Dustin Shindo                                                                    

	  	  
	
Name:  Y.I. Hsu                                                                    

	
Name:  Dustin Shindo                                                                    

	  	  
	
Title:  CEO                                                                    

	
Title:  President & CEO                                                                    

	
Authorized Signatory

	
Authorized Signatory

	  	  
	
Date:  Mar. 31. 2010                                                                    

	
Date:  March 31, 2010                                                                    

	  	  

 

 

 

Page 15 of 18

 

Appendix 1

Pricing Schedule

 

	  	
Year 1

	
Year 2

	
Year 3

	
Total

	
Volume (MT)

	
[*]

	
[*]

	
[*]

	
[*]

	
Price/kg

	
[*]

	
[*]

	
[*]

	
[*]

 

If there is uncertainty in price between the delivery period and the total quantity for that period based on the table above, the assigned to the quantity shall prevail.  For example, the [*] shall be invoiced at [*] per kilogram.

 

The effectiveness of the foregoing pricing schedule subject to the provisions of Sections 1 and 14.12 of the Agreement, including the provisos set forth therein.

 

Credit Schedule

 

	
Credit

	
Year 1

	
Year 2

	
Year 3

	
Total

	
Total credit

per Year

($ million)

	
7.0

	
6.8

	
6.6

	
20.4

 

HOKU will credit CUSTOMER against the Total Deposit according to the above schedule.

 

Credits will be reflected on shipping invoices and shall be applied in full for each shipment until the amount specified above for each year is fully exhausted.   In the event that any credit is not applied due to HOKU’s failure to ship Products, then such credit shall be carried forward to the next Year.

 

 

Page 16 of 18

 

Appendix 2 -- Product Specifications

 

PRODUCT CODE:  CAS # 7440-21-3

 

1.           Description

 

Solar grade polycrystalline silicon used for applications in the photovoltaic industry meeting specifications below.

 

	
2. 

	
[*]

 

[*]

 

3.           Size Specifications

 

[*]

 

[*]           [*]

[*]           [*]

[*]           [*]

 

4.           Certification & Elemental Analysis

 

Certification purified to the following analysis:

 

[*]

[*]

[*]

 

5.           Packaging

 

Double-packaged in polyethylene bags, weighed, and bar-coded for tracking purposes.

 

6.           Qualified Laboratories:

 

Semiconductor Analytical Services, Inc.

1765 Landess Ave., #20

Milpitas, CA  95035 U.S.A.

 

Balazs Analytical Services, (a division of Air Liquide Electronics)

Air Liquide America LP

46409 Landing Parkway

Fremont, California  94538

 

Evans Analytical Group

810 Kifer Road

Sunnyvale, CA  94086

http://www.eaglabs.com/

 

 

Page 17 of 18

 

SAFC Hitech - Silicon Semiconductor (a division of Sigma -Aldrich)

E-Mail:  safcglobal@sial.com

http://www.sigmaaldrich.com/SAFC/Global.html

 

RTI International

3040 Cornwallis Road

Post Office Box 12194

Research Triangle Park, NC  27709-2194

http://www.rti.org/page.cfm?nav=330

 

Oneida Research Services

Oneida Research Services, Inc.

8282 Halsey Rd.

Whitesboro NY  13492 USA

 

NSL Analytical Services Inc.

4450 Cranwood Parkway

Cleveland, Ohio  44128

Page 18 of 18

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