Amended Current Report
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K/A
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of
The
Securities Exchange Act of 1934
Date of
Report (Date of earliest event reported): December 22,
2009
(Exact name of registrant as specified in its charter)
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(State
or other jurisdiction
of
incorporation)
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(Commission
File Number)
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(IRS
Employer Identification No.)
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1288
Ala Moana Blvd, Suite 220
Honolulu,
Hawaii
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code:
(808) 682-7800
(Former name or former address, if changed since last report.)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4(c))
Item 1.01 Entry
into a Material Definitive Agreement.
As
described in our Current Report on Form 8-K filed on December 23, 2009 (the
“Initial 8-K”), we issued 33,379,287 shares (the “Shares”) of our common stock,
par value $0.001 per share (“Common Stock”) (representing 60% of our
fully-diluted outstanding shares) pursuant to a Securities Purchase Agreement
(the “Purchase Agreement”) between us and Tianwei New Energy Holdings Co., Ltd.,
a corporation organized under the laws of the People’s Republic of China
(“Buyer”), and we also issued a warrant to purchase an additional 10,000,000
shares of Common Stock (the “Warrant”) to Buyer (collectively, the
“Transaction”). As part of the Transaction, the following agreements
were executed:
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Investor
Rights Agreement, dated as of December 22, 2009, between Tianwei New
Energy Holdings Co., Ltd. and Hoku Scientific,
Inc.
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Form
of Lock-Up Agreement, dated December 22, 2009, between Tianwei New Energy
Holdings Co., Ltd. and certain officers and directors of Hoku Scientific,
Inc.
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Amended
and Restated Supply Agreement No. 1, dated as of December 22, 2009,
between Tianwei New Energy Holdings Co. Ltd. and Hoku Materials,
Inc.
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Amended
and Restated Supply Agreement No. 2, dated as of December 22, 2009,
between Tianwei New Energy Holdings Co. Ltd. and Hoku Materials,
Inc.
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Form
of Security Agreement (relating to Amended and Restated Supply Agreements
No. 1 and No. 2), dated as of December 22, 2009, between Tianwei New
Energy Holdings Co. Ltd. and Hoku Materials,
Inc.
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Loan
Implementation Agreement, dated December 22, 2009, among Hoku Scientific,
Inc., Hoku Materials, Inc. and Tianwei New Energy Holdings Co.
Ltd.
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Financing
Backstop Agreement, dated December 22, 2009, between Tianwei New Energy
Holdings, Co., Ltd. and Hoku Scientific,
Inc.
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The
foregoing agreements are described in greater detail in the Initial 8-K, which
is hereby amended by this Form 8-K/A to include the exhibits set forth under
Item 9.01.
A copy of
the Purchase Agreement was previously filed as Exhibit 2.1 to our Form 8-K on
September 29, 2009. The description of the Purchase Agreement does
not purport to be complete and is qualified in its entirety by reference to the
full text of the Purchase Agreement.
The
description contained in the Initial 8-K of each of the Warrant, the Investor
Rights Agreement, the Form of Lock-Up Agreement, the Amended and Restated Supply
Agreements, the Form of Security Agreement, the Loan Implementation Agreement
and the Financing Backstop Agreement does not purport to be complete and is
qualified in its entirety by reference to the full text of the Warrant, the
Investor Rights Agreement, the Form of Lock-Up Agreement, the Amended and
Restated Supply Agreements, the Form of Security Agreement, the Loan
Implementation Agreement and the Financing Backstop Agreement, which are
attached as Exhibits 4.4, 4.5, 4.6, 10.110, 10.111, 10.112 10.113, and
10.114 respectively, to this Current Report on Form 8-K/A and are
incorporated in this report by reference.
Item
2.03 Creation of a Direct Financial Obligation or an Obligation under
an Off-Balance Sheet Arrangement of a Registrant.
The disclosure under Item 1.01 of this
Current Report on Form 8-K/A relating to the Loan Implementation Agreement is
incorporated herein by reference.
Item
3.02 Unregistered Sales of Equity Securities.
The disclosure under Item 1.01 of this
Current Report on Form 8-K/A relating to the Purchase Agreement, the Shares and
the Warrant is incorporated herein by reference.
Item
5.01 Changes in Control of Registrant.
The disclosure under Item 1.01 of this
Current Report on Form 8-K/A relating to the Purchase Agreement, the Shares and
the Warrant is incorporated herein by reference.
Item 9.01 Financial
Statements and Exhibits.
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(d)
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Exhibits
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4.4
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Warrant
for the Purchase of Shares of Common Stock of Hoku Scientific, Inc., dated
December 22, 2009, issued to Tianwei New Energy Holdings Co.,
Ltd.
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4.5
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Investor
Rights Agreement, dated as of December 22, 2009, between Tianwei New
Energy Holdings Co., Ltd. and Hoku Scientific, Inc.
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4.6
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Form
of Lock-Up Agreement, dated December 22, 2009, between Tianwei New Energy
Holdings Co., Ltd. and certain officers and directors of Hoku Scientific,
Inc.
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10.110†
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Amended
and Restated Supply Agreement No. 1, dated as of December 22, 2009,
between Tianwei New Energy Holdings Co. Ltd. and Hoku Materials,
Inc.
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10.111†
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Amended
and Restated Supply Agreement No. 2, dated as of December 22, 2009,
between Tianwei New Energy Holdings Co. Ltd. and Hoku Materials,
Inc.
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10.112
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Form
of Security Agreement (relating to Amended and Restated Supply Agreements
No. 1 and No. 2), dated as of December 22, 2009, between Tianwei New
Energy Holdings Co. Ltd. and Hoku Materials, Inc.
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10.113
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Loan
Implementation Agreement, dated December 22, 2009, among Hoku Scientific,
Inc., Hoku Materials, Inc. and Tianwei New Energy Holdings Co.
Ltd.
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10.114
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Financing
Backstop Agreement, dated December 22, 2009, between Tianwei New Energy
Holdings, Co., Ltd. and Hoku Scientific,
Inc.
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†
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Confidential
treatment has been requested for portions of this exhibit. These portions
have been omitted from this Current Report on Form 8-K and have been filed
separately with the Securities and Exchange
Commission.
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
Date:
December 31, 2009
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HOKU
SCIENTIFIC, INC.
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By:
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/s/ Dustin M. Shindo
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Dustin
M. Shindo
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Chairman
of the Board of Directors/Director
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President
and Chief Executive
Officer
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Exhibit
4.4
HOKU
SCIENTIFIC, INC.
WARRANT
FOR THE PURCHASE OF SHARES OF
COMMON
STOCK OF HOKU SCIENTIFIC, INC.
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No.
1
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Warrant
to Purchase
10,000,000
Shares
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THIS
SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED, OR ANY NON-U.S. OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE THEREWITH.
FOR VALUE RECEIVED
, HOKU
SCIENTIFIC, INC., a Delaware corporation (the “
Company
”), hereby certifies
that TIANWEI NEW ENERGY HOLDINGS CO., LTD., its successor or permitted assigns
(the “
Holder
”), is
entitled, subject to the provisions of this Warrant, to purchase from the
Company, at the times specified herein, up to an aggregate of 10,000,000 fully
paid and non-assessable shares of Common Stock, par value $0.001 per share, of
the Company (the “
Common
Stock
”), at a purchase price per share of Common Stock equal to the
Exercise Price (as hereinafter defined). The number of shares of
Common Stock to be received upon the exercise of this Warrant and the Exercise
Price are subject to adjustment from time to time as hereinafter set forth, and
all references to “Common Stock”, “Warrant Shares” and “Exercise Price” herein
shall be deemed to include any such adjustment or series of
adjustments.
1.
Definitions
. (a)
The following terms, as used herein, have the following meanings:
“
Affiliate
” shall have the
meaning ascribed to such term in the Securities Purchase Agreement.
“
Board
” means the Board of
Directors of the Company.
“
Business Day
” means any day
except a Saturday, Sunday or other day on which commercial banks in New York,
New York or the PRC are authorized or obligated to close.
“
Current Market Price Per Common
Share
” as of any date means the average of the Daily Prices per share of
Common Stock for the five consecutive trading days immediately prior to such
date.
“
Daily Price
” means (i) if the
shares of Common Stock then are listed and traded on the New York Stock Exchange
(“
NYSE
”) or The NASDAQ
Stock Market (“
NASDAQ
”),
the closing sale price or, if no closing sale price is reported, the last
reported sale price of the shares of Common Stock on NYSE or NASDAQ on such
date, (ii) if the shares of Common Stock then are not listed and traded on NYSE
or NASDAQ, the closing sale price or, if no closing sale price is reported, the
last reported sale price of the shares of Common Stock on such date by the
principal national securities exchange on which the shares are listed and traded
or (iii) if the shares of Common Stock then are not listed and traded on any
such securities exchange, the last quoted bid price on such date for the shares
of Common Stock in the over-the-counter market as reported by Pink Sheets LLC or
similar organization. If on any determination date the shares of
Common Stock are not quoted by any such organization or such bid price is not
available, the Current Market Price Per Common Share shall be the fair market
value of the shares of Common Stock on such date as determined by a nationally
recognized independent investment banking firm retained mutually agreed upon by
the Company and the Holder.
“
Ex-Dividend Date
” means, with
respect to any issuance or distribution, the first date on which the shares of
Common Stock trade on the applicable exchange or in the applicable market,
regular way, without the right to receive such issuance or
distribution.
“
Exercise Price
” means $2.52
per Warrant Share, as adjusted from time to time as provided
herein.
“
Expiration Date
” means
December 22, 2016 at 5:00 p.m., New York City time, or if such day is not a
Business Day, then on the next succeeding day that shall be a Business
Day.
“
Fair Market Value
” of Common
Stock or any other security or property means the fair market value thereof as
determined in good faith by the Board, which determination must be set forth in
a written resolution of the Board, in accordance with the following rules: (i)
for Common Stock or other security traded or quoted on a securities exchange,
the Fair Market Value will be the average of the closing prices of such security
on such securities exchange over a ten (10) consecutive trading day period,
ending on the trading day immediately prior to the date of determination; (ii)
for any security that is not so traded or quoted, the Fair Market Value shall be
determined: (x) mutually by the Board and the Holder, or (y) by a nationally
recognized investment bank, appraisal or accounting firm (whose fees and
expenses will be paid by the Company) selected by mutual agreement between the
Board and the Holder; and (iii) for any other property, the Fair Market Value
shall be determined by the Board in good faith assuming a willing buyer and a
willing seller in an arms’-length transaction; provided that if the Holder
objects to a determination of the Board made pursuant to this clause (iii), the
Fair Market Value of such property shall be as determined by nationally
recognized investment bank, appraisal or accounting firm (whose fees and
expenses will be paid by the Company) selected by mutual agreement between the
Board and the Holder.
“
Market Disruption Event
” means
the occurrence or existence for more than one half hour period in the aggregate
on any scheduled Trading Day for the Common Stock (or Reference Property, to the
extent applicable) of any suspension or limitation imposed on trading (by reason
of movements in price exceeding limits permitted by the NASDAQ or otherwise) in
the Common Stock (or Reference Property, to the extent applicable) or in any
options, contracts or future contracts relating to the Common Stock (or
Reference Property, to the extent applicable), and such suspension or limitation
occurs or exists at any time before 1:00 p.m. (New York City time) on such
day.
“
Original Issuance Date
” shall
mean December 22, 2009.
“
PRC
” shall have the meaning
assigned to such term in the Securities Purchase Agreement.
“
Securities Purchase Agreement
”
means that certain Securities Purchase Agreement, dated as of September 28,
2009, between the Company and Tianwei New Energy Holdings Co., Ltd.
“
Trading Day
” means any day on
which (i) there is no Market Disruption Event and (ii) NASDAQ or, if the Common
Stock (or Reference Property, to the extent applicable) is not listed on NASDAQ,
the principal national securities exchange on which the Common Stock (or
Reference Property, to the extent applicable) is listed, is open for trading or,
if the Common Stock (or Reference Property, to the extent applicable) is not so
listed, admitted for trading or quoted, Business Day. A Trading Day
only includes those days that have a scheduled closing time of 4:00 p.m. (New
York City time) or the then standard closing time for regular trading on the
relevant exchange or trading system.
“
Warrant
” means this Warrant,
issued pursuant to the Securities Purchase Agreement.
“
Warrant Shares
” means the
shares of Common Stock deliverable upon exercise of this Warrant, as adjusted
from time to time.
(b) Capitalized
terms used but not defined herein shall have the meanings assigned to such terms
in the Securities Purchase Agreement.
2.
Exercise of Warrant;
Term
.
(a) The
Holder is entitled to exercise the right to purchase the Warrant Shares
represented by this Warrant, in whole or in part, but not for less than 100,000
Warrant Shares (or such lesser number of Warrant Shares which may then
constitute the maximum number purchasable pursuant to this Warrant), such number
being subject to adjustment as provided in Section 10, at any time or from time
to time after the Original Issuance Date, until the Expiration
Date. To exercise this Warrant, the Holder shall deliver to the
Company (i) an executed Warrant Exercise Notice substantially in the form
annexed hereto as
Exhibit A
and (ii)
this Warrant. Upon such delivery (the “
Exercise Date
”), the Holder
shall be deemed to be the holder of record of the Warrant Shares subject to such
exercise and shall have all of the rights associated with such Warrant Shares to
which the Holder is entitled pursuant to this Warrant, notwithstanding that the
stock transfer books of the Company shall then be closed or that certificates
representing such Warrant Shares shall not then be actually delivered to the
Holder.
(b) If
the Holder exercises this Warrant in part, this Warrant shall be surrendered by
the Holder to the Company and a new Warrant of the same tenor and for the
unexercised number of Warrant Shares shall be executed by the Company within a
reasonable time, and in any event not exceeding three Business Days after the
Exercise Date. The Company shall register the new Warrant in the name
of the Holder or in such name or names of its transferee pursuant to Section 6
as may be directed in writing by the Holder, and deliver the new Warrant to the
Person or Persons entitled to receive the same.
(c) Upon
surrender of this Warrant and delivery of the Warrant Exercise Notice in
conformity with the foregoing provisions, the Company shall transfer to the
Holder appropriate evidence of ownership of any Warrant Shares and/or other
securities or property (including any money) to which the Holder is entitled,
registered or otherwise placed in, or payable to the order of, the Holder or
such name or names of its transferee pursuant to Section 6 as may be directed in
writing by the Holder, and shall deliver such evidence of ownership and any
other securities or property (including any money) to the Person or Persons
entitled to receive the same, together with an amount in cash in lieu of any
fraction of a share as provided in Section 5, within a reasonable time, not to
exceed three Business Days after the Exercise Date.
(d) Upon
exercise of the Warrant pursuant to Section 2(a), the Holder shall be entitled
to receive Warrant Shares equal to the value (as determined below) of the
Warrant (or the portion thereof being exercised) by surrender of this Warrant
and delivery of the Warrant Exercise Notice, in which event the Company will
promptly issue to the Holder a number of Warrant Shares computed using the
following equation:
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X =
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the
number of Warrant Shares issuable to the Holder upon exercise pursuant to
this Section 2(d).
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A =
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the
Current Market Price Per Common Share (as of the Exercise
Date).
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B =
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the
Exercise Price (as of the Exercise
Date).
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C =
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the
number of Warrant Shares issuable under this Warrant or, if only a portion
of this Warrant is being exercised, the portion of the Warrant being
exercised (as of the Exercise
Date).
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If the
foregoing calculation results in zero or a negative number, then no Warrant
Shares shall be issued upon exercise pursuant to this Section 2(d).
3.
Restrictive
Legend
. Certificates representing shares of Common Stock
issued pursuant to this Warrant shall bear a legend substantially in the form of
the legend set forth on the first page of this Warrant to the extent that and
for so long as such legend is required pursuant to applicable securities
laws.
4.
Reservation of Shares;
Listing
. The Company hereby agrees at all times to keep
reserved for issuance and delivery upon exercise of this Warrant such number of
its authorized but unissued shares of Common Stock or other securities of the
Company from time to time issuable upon exercise of this Warrant as will be
sufficient to permit the exercise in full of this Warrant. The
Company hereby represents that all such shares shall be duly authorized and,
when issued upon such exercise pursuant to the terms of this Warrant, shall be
validly issued, fully paid and non-assessable, free and clear of all liens,
security interests, charges and other encumbrances or restrictions on sale
(other than restrictions on transfer contemplated by Section 6 or those created
by the Holder) and free and clear of all preemptive rights. The
Company will use its reasonable best efforts to ensure that the Common Stock may
be issued without violation of any law or regulation applicable to the Company
or of any requirement of any securities exchange applicable to the Company on
which the shares of Common Stock are listed or traded.
5.
No Fractional Warrant Shares or
Scrip
. No fractional Warrant Shares or scrip representing
fractional Warrant Shares shall be issued upon the exercise of this
Warrant. In lieu of delivery of any such fractional Warrant Share
upon any exercise hereof, the Company shall pay to the Holder an amount in cash
equal to such fraction multiplied by the Current Market Price Per Common Share
at the date of such exercise.
6.
Transfer or Assignment of
Warrant
. The Holder shall be entitled, without obtaining the
consent of the Company, to assign and transfer this Warrant or any rights
hereunder, at any time in whole or from time to time in part, but not for less
than 100,000 Warrant Shares (or such lesser number of Warrant Shares which may
then constitute the maximum number purchasable pursuant to this Warrant), such
number being subject to adjustment as provided in Section 10, to any Person or
Persons. Subject to the preceding sentence, upon surrender of this
Warrant to the Company, together with the Warrant Assignment Form attached as
Exhibit B
hereto duly executed, the Company shall, without charge, execute and deliver a
new Warrant in the name of the assignee or assignees named in such instrument of
assignment and, if the Holder’s entire interest is not being assigned, in the
name of the Holder and this Warrant shall promptly be canceled. All
expenses (other than stock transfer taxes) and other charges payable in
connection with the preparation, execution and delivery of the new Warrants
pursuant to this Section 6 shall be paid by the Company.
7.
Charges, Taxes and
Expenses
. Issuance of certificates for Warrant Shares (or
other securities) to the Holder upon exercise of this Warrant shall be made
without charge to the Holder for any issue or transfer tax or other incidental
expense in respect of the issuance of such certificates, all of which taxes and
expenses shall be paid by the Company.
8.
Exchange and Registry of
Warrant
. The Company shall maintain a registry showing the
name and address of the Holder as the registered holder of this Warrant, and the
Company shall be entitled to rely in all respects, prior to written notice to
the contrary, upon such registry. This Warrant is exchangeable, upon
the surrender hereof by the Holder to the Company, for a new Warrant or Warrants
of like tenor and representing the right to purchase the same aggregate number
of Warrant Shares.
9.
Loss, Theft, Destruction or
Mutilation of Warrant
. Upon receipt by the Company of evidence
satisfactory to it (in the exercise of its reasonable discretion) of the loss,
theft, destruction or mutilation of this Warrant, and in the case of any such
loss, theft or destruction, upon the receipt of a bond, indemnity or security
reasonably satisfactory to the Company, and upon surrender and cancellation of
this Warrant, if mutilated, the Company shall execute and deliver, in lieu of
such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor
and date and representing the right to purchase the same aggregate number of
Warrant Shares as provided for in such lost, stolen, destroyed or mutilated
Warrant.
10.
Anti-dilution
Provisions
.
(a)
Adjustment for Change in
Capital Stock
.
(i) If
the Company shall, at any time or from time to time, while this Warrant is
outstanding, issue a dividend or make a distribution on its Common Stock (or
Reference Property, to the extent applicable) payable in shares of its Common
Stock (or Reference Property, to the extent applicable) to all holders of its
Common Stock (or Reference Property, to the extent applicable), then, at the
opening of business on the Ex-Dividend Date for such dividend or
distribution:
(1) The
Exercise Price will be adjusted by multiplying such Exercise Price by a
fraction: (A) the numerator of which shall be the number of shares of Common
Stock (or Reference Property, to the extent applicable) outstanding at the close
of business on the Business Day immediately preceding such Ex-Dividend Date; and
(B) the denominator of which shall be the sum of the number of shares of Common
Stock (or Reference Property, to the extent applicable) outstanding at the close
of business on the Business Day immediately preceding the Ex-Dividend Date for
such dividend or distribution, plus the total number of shares of Common Stock
(or Reference Property, to the extent applicable) constituting such dividend or
other distribution; and
(2) The
number of Warrant Shares will be adjusted by multiplying such number by a
fraction: (A) the numerator of which shall be the Exercise Price
immediately prior to the adjustment pursuant to Section 10(a)(i)(1) and (B) the
denominator of which shall be the Exercise Price immediately after such
adjustment.
If any
dividend or distribution of the type described in this
Section 10(a)(i)
is declared but not so paid or made, the Exercise Price and the number of
Warrant Shares issuable shall again be adjusted to the Exercise Price and the
number of Warrant Shares issuable, respectively, which would then be in effect
if such dividend or distribution had not been declared. Except as set
forth in the preceding sentence, in no event shall the Exercise Price be
increased or the number of Warrant Shares issuable be decreased pursuant to this
Section 10(a)(i).
(ii) If
the Company shall, at any time or from time to time while this Warrant is
outstanding, subdivide or reclassify its outstanding shares of Common Stock (or
Reference Property, to the extent applicable) into a greater number of shares of
Common Stock (or Reference Property, to the extent applicable), then the
Exercise Price in effect at the opening of business on the day upon which such
subdivision becomes effective shall be proportionately decreased, and
conversely, if the Company shall, at any time or from time to time while this
Warrant is outstanding, combine or reclassify its outstanding shares of Common
Stock (or Reference Property, to the extent applicable) into a smaller number of
shares of Common Stock (or Reference Property, to the extent applicable), then
the Exercise Price in effect at the opening of business on the day upon which
such combination or reclassification becomes effective shall be proportionately
increased. In each such case, effective immediately after the opening
of business on the day upon which such subdivision, combination or
reclassification becomes effective:
(1) The
Exercise Price shall be adjusted by multiplying such Exercise Price by a
fraction, the numerator of which shall be the number of shares of Common Stock
(or Reference Property, to the extent applicable) outstanding immediately prior
to such subdivision or combination and the denominator of which shall be the
number of shares of Common Stock (or Reference Property, to the extent
applicable) outstanding immediately after giving effect to such subdivision,
combination or reclassification; and
(2) The
number of Warrant Shares will be adjusted by multiplying such number by a
fraction: (A) the numerator of which shall be the Exercise Price
immediately prior to the adjustment pursuant to Section 10(a)(ii)(1) and (B) the
denominator of which shall be the Exercise Price immediately after such
adjustment.
(b) [Reserved.]
(c) [Reserved.]
(d) [Reserved.]
(e)
Disposition
Event
. If any of the following events (any such event, a
“
Disposition Event
”)
occurs: (i) any reclassification or exchange of the Common Stock (other than a
change in par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination); or (ii) any merger,
consolidation or other combination to which the Company is a constituent party,
in each case, as a result of which the holders of Common Stock shall be entitled
to receive cash, securities or other property for their shares of Common Stock,
the Company or the surviving entity of the merger, consolidation or other
combination shall provide that this Warrant be exercised following the effective
date of any Disposition Event, shall be calculated based on the kind and amount
of cash, securities or other property (collectively, “
Reference Property
”) received
upon the occurrence of such Disposition Event by a holder of Common Stock
holding, immediately prior to the transaction, a number of shares of Common
Stock equal to the number of Warrant Shares issuable under this Warrant
immediately prior to such Disposition Event; provided that if the Disposition
Event provides the holders of Common Stock with the right to receive more than a
single type of consideration determined based in part upon any form of
stockholder election, the Reference Property shall be comprised of the weighted
average of the types and amounts of consideration received by the holders of the
Common Stock. The Company may not cause, or agree to cause, a
Disposition Event to occur, unless the issuer of any securities or other
property for which this Warrant becomes exercisable agrees, for the express
benefit of the holders of this Warrant (including making them beneficiaries of
such agreement), to issue such securities or property. The provisions
of this
Section 10(e)
shall similarly apply to successive Disposition Events. If this
Section 10(e) applies to any event or occurrence, neither
Section 10(a) nor
Section
10(c) shall apply; provided, however, that this
Section 10(e)
shall not apply to any stock split or combination to which
Section 10(a) is
applicable. To the extent that equity securities of a company are
received by the holders of Common Stock in connection with a Disposition Event,
the portion of this Warrant which will be exercisable for such equity securities
will continue to be subject to the anti-dilution adjustments set forth in
this
Section
10.
(f)
Minimum
Adjustment
. Notwithstanding the foregoing, the Exercise Price
will not be reduced (and the corresponding increase to the number of Warrant
Shares will not occur) if the amount of such reduction would be an amount less
than $0.01, but any such amount will be carried forward and reduction with
respect to the Exercise Price (and increase with respect to the number of
Warrant Shares) will be made at the time that such amount, together with any
subsequent amounts so carried forward, aggregates to $0.01 or more.
(g)
Limitation on Adjustment;
When No Adjustment Required
.
(i) No
adjustment need be made for the issuance of Common Stock (and Reference
Property, to the extent applicable) or any securities convertible into or
exchangeable for Common Stock (and Reference Property, to the extent applicable)
or carrying the right to purchase Common Stock (and Reference Property, to the
extent applicable) or any such security except to the extent explicitly required
herein.
(ii) No
adjustment need be made for rights to purchase Common Stock (or Reference
Property, to the extent applicable) pursuant to a Company plan for reinvestment
of dividends or interest.
(iii) No
adjustment need be made for a change in the par value or no par value of the
Common Stock (or Reference Property, to the extent applicable).
(iv) To
the extent this Warrant becomes exercisable pursuant to
Section 10 into
cash, no adjustment need be made thereafter as to the cash. Interest
will not accrue on the cash.
(h)
Rules of Calculation;
Treasury Stock
. All calculations will be made to the nearest
one-hundredth of a cent or to the nearest one-ten thousandth of a
share. Except as otherwise explicitly provided herein, the number of
shares of Common Stock (or Reference Property, to the extent applicable)
outstanding will be calculated on the basis of the number of issued and
outstanding shares of Common Stock (or Reference Property, to the extent
applicable), not including shares held in the treasury of the
Company. The Company shall not pay any dividend on or make any
distribution to shares of Common Stock (or Reference Property, to the extent
applicable) held in treasury.
(i)
Waiver
. Notwithstanding
the foregoing, the Exercise Price will not be reduced and number of Warrant
Shares issuable will not be increased if the Company receives, prior to the
effective time of the adjustment to the Exercise Price and number of Warrant
Shares issuable, written notice from the Holder that no adjustment is to be made
as the result of a particular issuance of Common Stock (or Reference Property,
to the extent applicable) or other dividend or other distribution on shares of
Common Stock. This waiver will be limited in scope and will not be
valid for any issuance of Common Stock (or Reference Property, to the extent
applicable) or other dividend or other distribution on shares of Common Stock
(or Reference Property, to the extent applicable) not specifically provided for
in such notice.
(j)
Tax
Adjustment
. Anything in this
Section 10
notwithstanding, the Company shall be entitled to make such downward adjustments
in the Exercise Price (and corresponding increases in the number of Warrant
Shares issuable), in addition to those required by this
Section 10, as the
Board in its sole discretion shall determine to be advisable in order that any
event treated for federal income tax purposes as a dividend or stock split will
not be taxable to the holders of Common Stock (or Reference Property, to the
extent applicable).
(k)
Par
Value
. Anything in this Section 10 notwithstanding, no
adjustment to the Exercise Price shall reduce the Exercise Price below the then
par value per share of Common Stock (or Reference Property, to the extent
applicable), and any such purported adjustment shall instead reduce the Exercise
Price to such par value.
(l)
No
Duplication
. If any action would require adjustment of the
Exercise Price and the number of Warrant Shares pursuant to more than one of the
provisions described in this
Section 10 in a
manner such that such adjustments are duplicative, only one adjustment shall be
made.
(m)
Notice of Record
Date
. In the event of:
(i) any
stock split or combination of the outstanding shares of Common Stock (or
Reference Property, to the extent applicable) or any other reclassification or
change to which Section 10(a)(ii) applies;
(ii) any
declaration or making of a dividend or other distribution to holders of Common
Stock (or Reference Property, to the extent applicable);
(iii) the
dissolution, liquidation or winding up of the Company; or
(iv) any
Disposition Event;
then the
Company shall file with its corporate records and mail to the holders of the
Warrants at their last addresses as shown on the records of the Company, at
least 10 days prior to the record date specified in clause (A) below or 10 days
prior to the date specified in clause (B) or (C) below, a notice
stating:
(A) the
record date of such stock split, combination, dividend or other distribution,
or, if a record is not to be taken, the date as of which the holders of Common
Stock (or Reference Property, to the extent applicable) of record to be entitled
to such stock split, combination, dividend or other distribution are to be
determined,
(B) the
date on which such reclassification, change, liquidation, dissolution, winding
up or Disposition Event is estimated to become effective or completed, and the
date as of which it is expected that holders of Common Stock (or Reference
Property, to the extent applicable) of record will be entitled to exchange their
shares of Common Stock (or Reference Property, to the extent applicable) for the
capital stock, other securities or other property (including but not limited to
cash and evidences of indebtedness) deliverable upon such reclassification,
change, liquidation, dissolution, winding up or Disposition Event,
or
(C) the
date on which such tender offer, exchange offer or Below Exercise Price Issuance
is estimated to be completed.
Disclosures
made by the Company in any filings required to be made under the Exchange Act
shall be deemed to satisfy the notice requirements set forth in this Section
10(m).
(n)
Certificate of
Adjustments
. Upon the occurrence of each adjustment or
readjustment of the Exercise Price and the number of Warrant Shares pursuant to
this Section 10, the Company at its expense shall promptly as reasonably
practicable compute such adjustment or readjustment in accordance with the terms
hereof and furnish to each holder of Warrants a certificate, signed by an
officer of the Company, setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based
and shall file a copy of such certificate with its corporate
records. The Company shall, upon the reasonable written request of
any holder of Warrants, furnish to such holder a similar certificate setting
forth (i) the calculation of such adjustments and readjustments in reasonable
detail, (ii) the Exercise Price then in effect, and (iii) the number of shares
of Common Stock and the amount, if any, of capital stock, other securities or
other property (including but not limited to cash and evidences of indebtedness)
which then would be received upon the exercise of the Warrant.
11.
Notices
. Any
notice, demand or delivery authorized by this Warrant shall be in writing and
shall be given to the Holder or the Company, as the case may be, at its address
(or facsimile number) set forth below, or such other address (or facsimile
number) as shall have been furnished to the party giving or making such notice,
demand or delivery:
If to the
Company, to it at the following address:
Hoku
Scientific, Inc.
1288 Ala
Moana Blvd., Suite 220
Honolulu,
Hawaii 96814
Attention:
Chief Executive Officer
Facsimile
No.: + 1 808-682-7807
with a
copy to (which shall not constitute notice):
Stoel
Rives LLP
101 S.
Capitol Blvd., Suite 1900
Boise,
Idaho 83702
Attention:
Paul M. Boyd
Facsimile
No.: + 1 208-389-9040
If to the
Holder:
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
copies (which shall not constitute notice) to:
Davis
Polk & Wardwell LLP
26/F,
Twin Towers West,
B12, Jian
Guo Men Wai Avenue,
Chao Yang
District,
Beijing
100022
Attention:
Howard Zhang
Facsimile
No.: + 86-10-8567-5123
Each such
notice, demand or delivery shall be deemed received on the date of receipt by
the recipient thereof if received prior to 5:00 p.m. in the place of receipt and
such day is a Business Day. Otherwise, any such notice, demand or
delivery shall be deemed not to have been received until the next succeeding
Business Day.
12.
Rights of the Holder; Transfer
Books
. Prior to any exercise of this Warrant, the Holder shall
not, by virtue hereof, be entitled to any rights of a shareholder of the
Company, including, without limitation, the right to vote, to receive dividends
or other distributions, to exercise any preemptive right or to receive any
notice of meetings of Stockholders or any notice of any proceedings of the
Company except as may be specifically provided for herein. The
Company will at no time close its stock transfer books against transfer of this
Warrant in any manner which interferes with the timely exercise of this
Warrant.
13.
GOVERNING
LAW
. THIS WARRANT AND ALL RIGHTS ARISING HEREUNDER SHALL BE
CONSTRUED AND DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
NEW YORK, AND THE PERFORMANCE THEREOF SHALL BE GOVERNED AND ENFORCED IN
ACCORDANCE WITH SUCH LAWS.
14.
Binding
Effect
. This Warrant shall be binding upon any successors or
assigns of the Company.
15.
Amendments;
Waivers
. Any provision of this Warrant may be amended or
waived if, and only if, such amendment or waiver is in writing and signed, in
the case of an amendment, by the Holder and the Company, or in the case of a
waiver, by the party against whom the waiver is to be effective. No
failure or delay by either party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies
herein provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
16.
Entire
Agreement
. This Warrant and the forms attached hereto and the
Securities Purchase Agreement (and the other documents referenced therein)
contain the entire agreement between the parties with respect to the subject
matter hereof and supersede all prior and contemporaneous arrangement or
undertakings with respect thereto.
[
Remainder of Page Intentionally Left
Blank
]
IN
WITNESS WHEREOF, the Company has duly caused this Warrant to be signed by its
duly authorized officer and to be dated as of December 22,
2009.
|
HOKU
SCIENTIFIC, INC.
|
|
|
|
|
By:
|
/s/ Dustin M. Shindo
|
|
|
Title:
President and CEO
|
Acknowledged
and Agreed:
|
TIANWEI
NEW ENERGY HOLDINGS
CO.,
LTD.
|
|
|
|
By:
|
/s/ Qiang Ding
|
|
|
Title:
Legal Representative
|
[
Signature page to
Warrant
]
EXHIBIT
A
FORM
OF WARRANT EXERCISE NOTICE
To: Hoku
Scientific, Inc.
The
undersigned hereby notifies you of its intention to exercise the Warrant to
purchase shares of Common Stock, par value $0.001 per share, of Hoku Scientific,
Inc. The undersigned intends to exercise the Warrant to purchase
___________ shares (the “
Warrant Shares
”) at $______
per Share (the Exercise Price currently in effect pursuant to the
Warrant).
As
indicated below, the undersigned intends to pay the aggregate Exercise Price for
the Warrant Shares [by wire transfer of immediately available funds] [by
certified or official bank or bank cashier’s check] [by reduction in the number
of Warrant Shares that would otherwise be issued upon exercise pursuant to
paragraph 2(d) of the Warrant].
Date: _________________
|
Payment:
|
¨
|
$_______
wire transfer of immediately available
funds
|
|
|
¨
|
$_______
certified or official bank or bank cashier’s
check
|
|
|
¨
|
Reduction
in number of Warrant Shares
|
EXHIBIT
B
WARRANT
ASSIGNMENT FORM
Dated
________________, _____
FOR VALUE
RECEIVED, _______________________ hereby sells,
assigns
and transfers unto________________________________ (the “
Assignee
”),
__________________________________________________
(please
type or print in block
letters)
(insert
address)
its right
to purchase ____________ shares of Common Stock represented by this Warrant and
does hereby irrevocably constitute and appoint _______________________
(attorney), to transfer the same on the books of the Company, with full power of
substitution in the premises.
Signature:
_______________________
Exhibit
4.5
INVESTOR
RIGHTS AGREEMENT
dated as
of
December
22, 2009
between
TIANWEI
NEW ENERGY HOLDINGS CO., LTD.
and
HOKU
SCIENTIFIC, INC.
TABLE
OF CONTENTS
|
|
Page
|
|
ARTICLE 1
Definitions
|
1
|
|
|
|
|
Section 1.01
. Definitions
|
1
|
|
Section 1.02
. Other
Capit
alized
Terms.
|
5
|
|
Section 1.03
. Other
Definitional and Interpretative Provisions
|
5
|
|
Section 1.04
. Effectiveness of
this Agreement
|
5
|
|
|
|
|
ARTICLE 2
Registration Rights
|
6
|
|
|
|
|
Section 2.01.
Shelf Registration
Statement
|
6
|
|
Section 2.02
. Demand
Reistration
|
7
|
|
Secti
on
2.03
. Shelf
Take-Downs
|
9
|
|
Section 2.04
. Selection Of
Underwriters
|
9
|
|
Section 2.05
. Piggyback
Registration
|
10
|
|
Section 2.06.
Registration
Procedures
|
11
|
|
Section 2.07.
Information
Supplied
|
15
|
|
Section 2.08.
Expenses
|
15
|
|
Section 2.09
. Indemnification
|
16
|
|
Section 2.10.
Selection of
Counsel
|
19
|
|
Section 2.11.
No Inconsistent Agreements; No
Free Writing Prospectus
|
19
|
|
Section 2.12.
Termination of Registration
Rights
|
19
|
|
|
|
|
ARTICLE 3
Transfer restrictions; board Representation
|
20
|
|
|
|
|
Section 3.01
. Transfer
R
estrictions
|
20
|
|
Section 3.02
. Board
Representation
|
20
|
|
|
|
|
ARTICLE 4
Miscellaneous
|
20
|
|
|
|
|
Section 4.01
. Notices
|
20
|
|
Section 4.02
. Amendments and
Waivers
|
21
|
|
Section 4.03.
Expenses
|
22
|
|
Section 4.04.
Successors and Assigns;
Assignment
|
22
|
|
Section 4.05.
No Thir
d Party
Beneficiaries
|
22
|
|
Section 4.06
. Governing
Law
|
22
|
|
Section 4.07.
Jurisdiction
|
22
|
|
Section 4.08.
WAIVER OF JURY
TRIAL
|
23
|
|
Section 4.09
. Counterparts;
Effectiveness
|
23
|
|
Section 4.10.
Entire
Agreement
|
23
|
|
Section 4.11
. Severability
|
23
|
|
Section 4.
12
. Specific
Performance
|
24
|
INVESTOR
RIGHTS AGREEMENT
INVESTOR
RIGHTS AGREEMENT (this “
Agreement
”) dated as of
December 22, 2009 between Tianwei New Energy Holdings Co., Ltd., a corporation
organized under the laws of the People’s Republic of China (“
Investor
”) and Hoku
Scientific, Inc., a Delaware corporation (the “
Company
”).
WITNESSETH:
WHEREAS,
the Company and Investor have entered into a Securities Purchase Agreement dated
as of September 28, 2009 (the “
Securities Purchase
Agreement
”), pursuant to which Investor shall have acquired (i)
33,379,287 newly-issued shares of Common Stock, par value $0.001 per share, of
the Company (all such shares purchased by Investor or its permitted assignees,
collectively, the “
Purchased
Shares
”) and (ii) warrants for the purchase of 10,000,000 shares of
Common Stock (all such warrants purchased by Investor or its permitted
assignees, collectively, the “
Purchased
Warrants
”).
WHEREAS,
the parties hereto desire to enter into this Agreement in order to enter into
certain arrangements relating to the Company, the Purchased Shares and the
shares of Common Stock deliverable upon exercise of the Purchased Warrants (the
“
Warrant
Shares
”).
NOW,
THEREFORE, in consideration of the foregoing premises and the representations,
warranties, covenants and agreements set forth herein, as well as other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged and accepted, and intending to be legally bound hereby, Investor
and the Company hereby agree as follows:
ARTICLE
1
Definitions
Section
1.01
. Definitions.
(a)
The following terms, as used herein, have the following meanings:
“
1933 Act
” means the Securities
Act of 1933, as amended, and the rules and regulations promulgated
thereunder.
“
1934 Act
” means the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder.
“
Adverse Disclosure
” means
public disclosure of material non-public information, which disclosure in the
good faith judgment of a majority of the Company Board after consultation with
counsel to the Company would have a material adverse effect on the ability of
the Company to consummate a material acquisition, disposition or other
comparable extraordinary transaction.
“
Affiliate
” means, with respect
to any Person, any other Person directly or indirectly controlling, controlled
by, or under common control with such Person. For purposes of the
immediately preceding sentence, the term “control” (including, with correlative
meanings, the terms “controlling,” “controlled by” and “under common control
with”), as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through ownership of voting securities, by
contract or otherwise.
“
Closing Date
” has the meaning
ascribed to such term in the Securities Purchase Agreement.
“
Common Stock
” means the Common
Stock, par value $0.001 per share, of the Company and any securities issued in
respect thereof, or in substitution therefor, in connection with any stock
split, dividend or combination, or any reclassification, recapitalization,
merger, consolidation, exchange or other similar reorganization.
“
Equity Securities
” means any
and all shares of capital stock or other securities of the Company convertible
into, or exchangeable or exercisable for, such shares, and options, warrants or
other rights to acquire such shares (including the Warrants and the Warrant
Shares).
“
Form S-1
” means a registration
statement on Form S-1 under the 1933 Act, or any successor form
thereto.
“
Form S-3
” means a registration
statement on Form S-3 (other than on Form S-3ASR) under the 1933 Act, or any
successor form thereto.
“
Form S-3ASR
” means an
“automatic shelf” registration statement on Form S-3 filed by a Well-Known
Seasoned Issuer.
“
Form S-4
” means a registration
statement on Form S-4 under the 1933 Act, or any successor form
thereto.
“
Form S-8
” means a registration
statement on Form S-8 under the 1933 Act, or any successor form
thereto.
“
Holder
” means Investor and any
of its transferees, assignees and successors that beneficially owns any
Registrable Securities.
“
incur
” means, directly or
indirectly, to incur, refinance, create, assume, guarantee or otherwise become
liable.
“
Issuer Free Writing
Prospectus
” shall have the meaning set forth in Rule 433 under the 1933
Act.
“
NASD
” means the National
Association of Securities Dealers.
“
NASDAQ
” means The Nasdaq Stock
Market, or any successor thereto.
“
Person
” means an individual,
corporation, partnership, limited liability company, association, trust or other
entity or organization.
“
Prospectus
” means the
prospectus included in any Registration Statement, including any preliminary
prospectus, any final prospectus and any such prospectus as amended or
supplemented by any prospectus supplement, including any such prospectus
supplement with respect to the terms of the offering of any portion of the
Registrable Securities covered by a Registration Statement, and by all other
amendments and supplements to a prospectus, including post-effective amendments,
and in each case including all materials incorporated by reference
therein.
“
Registrable Securities
” means
(i) 30% of the Purchased Shares (which may be held by one or more, or any
Holder(s)), (ii) the Warrant Shares held by any Holder or issuable upon the
exercise of Warrants held by any Holder and (iii) any capital stock or
other securities which may be issued, converted, exchanged or distributed in
respect thereof, or in substitution therefor, in connection with any stock
split, dividend or combination, or any recapitalization, reclassification,
merger, consolidation, exchange or other similar reorganization with respect to
that portion of the Purchased Shares deemed Registrable Securities hereunder or
the Warrant Shares, as the case may be. As to any particular
Registrable Securities, once issued, such Registrable Securities shall cease to
be Registrable Securities when (A) a Registration Statement with respect to
the sale by the Holder of such securities shall have become effective under the
1933 Act and such securities shall have been disposed of in accordance with such
registration statement, (B) such securities shall have been distributed to
the public pursuant to Rule 144, (C) such securities shall have become
eligible for sale by the Holder thereof pursuant to the last sentence of Rule
144(b)(1)(i), or (D)such securities shall have ceased to be
outstanding. For purposes of this Agreement, any required calculation
of the amount of, or percentage of, Registrable Securities shall be based on the
number of shares of Common Stock which are Registrable Securities, including
shares issuable upon the conversion, exchange or exercise of any security
convertible, exchangeable or exercisable into Common Stock (including the
Purchased Warrants).
“
Registration Expenses
” means
any and all expenses incident to performance of or compliance with Article 2,
including (i) all SEC and securities exchange or NASD registration and
filing fees (including, if applicable, the fees and expenses of any “qualified
independent underwriter,” as such term is defined in Section 2720 of the
bylaws of the NASD, and of its counsel), (ii) all fees and expenses of
complying with securities or blue sky laws (including fees and disbursements of
counsel for the underwriters in connection with blue sky qualifications of the
Registrable Securities and any escrow fees), (iii) all printing, messenger
and delivery expenses, (iv) all fees and expenses incurred in connection
with the listing of the Registrable Securities on any securities exchange,
(v) the fees and disbursements of counsel for the Company and of its
independent public accountants, including the expenses of any special audits
and/or “cold comfort” letters required by or incident to such performance and
compliance, (vi) the reasonable fees and disbursements of counsel selected
pursuant to Section 2.10, (vii) any fees and disbursements of underwriters
customarily paid by the issuers, including liability insurance if the Company so
desires, and (viii) the reasonable expenses incurred by the Company or any
underwriters in connection with any “road show” undertaken pursuant to Section
2.06.
“
Registration Statement
” means
the registration statements required to be filed hereunder, including (in each
case) the Prospectus, amendments and supplements to such registration statement
or Prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference or deemed to be incorporated
by reference in such registration statement..
“
Rule 144
” means Rule 144
under the 1933 Act (or any successor rule).
“
Rule 415
” means Rule 415 under
the 1933 Act (or any successor rule).
“
Rule 424
” means Rule 424 under
the 1933 Act (or any successor rule).
“
SEC
” means the U.S. Securities
and Exchange Commission or any successor thereto.
“
Third Party
” means any Person
or “group” (as defined in Section 13(d) of the 1934 Act), other than Investor or
any of its Affiliates.
“
Underwritten Offering
” means
any Marketed Underwritten Offering, Underwritten Shelf Take-Down or other
underwritten offering pursuant to Section 2.02.
“
Warrants
” means the Purchased
Warrants and any securities issued in respect thereof, or in substitution
therefor, in connection with any stock split, dividend or combination, or any
reclassification, recapitalization, merger, consolidation, exchange or other
similar reorganization (other than the Warrant Shares upon exercise
thereof).
“
Well-Known Seasoned Issuer
”
has the meaning set forth in Rule 405 under the 1933 Act.
Section
1.02
. Other
Capitalized Terms.
Capitalized terms used but not defined herein or
in
Section
1.01
shall have the meanings given to them in the Securities Purchase
Agreement.
Section
1.03
. Other
Definitional and Interpretative Provisions.
The words
“hereof”, “herein” and “hereunder” and words of like import used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof. References to Articles, Sections, Exhibits and
Schedules are to Articles, Sections, Exhibits and Schedules of this Agreement
unless otherwise specified. All Exhibits and Schedules annexed hereto
or referred to herein are hereby incorporated in and made a part of this
Agreement as if set forth in full herein. Any capitalized terms used
in any Exhibit or Schedule but not otherwise defined therein, shall have the
meaning as defined in this Agreement. Any singular term in this
Agreement shall be deemed to include the plural, and any plural term the
singular. Whenever the words “include”, “includes” or “including” are
used in this Agreement, they shall be deemed to be followed by the words
“without limitation”, whether or not they are in fact followed by those words or
words of like import. “Writing”, “written” and comparable terms refer
to printing, typing and other means of reproducing words (including electronic
media) in a visible form. References to any agreement or contract are
to that agreement or contract as amended, modified or supplemented from time to
time in accordance with the terms hereof and thereof;
provided
that with respect to
any agreement or contract listed on any schedules hereto, all such amendments,
modifications or supplements must also be listed in the appropriate
schedule. References to any Person include the successors and
permitted assigns of that Person. References from or through any date
mean, unless otherwise specified, from and including or through and including,
respectively. References to “law”, “laws” or to a particular statute
or law shall be deemed also to include an and all Applicable
Law. References to “$” and “dollars” are to the currency of the
United States.
Section
1.04
. Effectiveness
of this Agreement.
This Agreement shall have effect as of the
Closing unless expressly stated otherwise. Notwithstanding any other
provision to the contrary in this Agreement, this Agreement shall not take
effect until the Closing, and in the event the Securities Purchase Agreement is
terminated, this Agreement shall be void
ab initio
.
ARTICLE
2
Registration
Rights
Section
2.01.
Shelf
Registration Statement
. (a) The Company shall:
(i) as
promptly as practicable, but in any event not later than 30 days, after the
Closing Date (the “
Filing
Date
”), prepare and file with the SEC a “Shelf” Registration Statement
(the “
Shelf Registration
Statement
”) covering the resale of the Registrable Securities by the
Holders thereof from time to time in accordance with the methods of distribution
elected by such Holders, to be made on a continuous basis pursuant to Rule
415. The Shelf Registration Statement shall be on Form S-3 (except if
the Company is not then eligible to register for resale the Registrable
Securities on Form S−3, in which case such registration shall be on another
appropriate form in accordance herewith, reasonably acceptable to Holders of a
majority of the Registrable Securities
)
, as modified by the Company
as necessary to conform to comments from the SEC;
(ii) use
its reasonable best efforts to cause the Shelf Registration Statement to be
declared effective under the 1933 Act as promptly as possible after the filing
thereof, but in any event prior to the 90
th
day (or
the 120
th
day in
the case of a “full review” by the SEC) after the Closing Date (the “
Effectiveness
Date
”);
(iii) within
two Business Days after the Shelf Registration Statement is declared effective,
file a final Prospectus with the SEC pursuant to Rule 424 and notify the Holders
via facsimile of effectiveness of the Shelf Registration Statement;
(iv) use
its reasonable best efforts to keep the Shelf Registration Statement
continuously effective under the 1933 Act until such time as all Registrable
Securities covered by such Registration Statement have been sold, or may be sold
without volume restrictions pursuant to Rule 144 under the 1933 Act or any other
rule of similar effect, as determined by the counsel to the Company pursuant to
a written opinion letter to such effect, addressed and acceptable to the
Company’s transfer agent and the affected Holders (the “
Effectiveness
Period
”);
(v) during
the Effectiveness Period, furnish to each Holder with respect to the Registrable
Securities registered under the Shelf Registration Statement (and to each
underwriter, if any, of such Registrable Securities) such number of copies of
Prospectuses and such other documents as such Holder may reasonably request, in
order to facilitate the public sale or other disposition of all or any of the
Registrable Securities by such Holder;
(vi) during
the Effectiveness Period, notify each holder of Registrable Securities covered
by such Registration Statement at any time when a Prospectus relating thereto is
required to be delivered under the 1933 Act of the happening of any event as a
result of which the prospectus included in such Registration Statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
and
(vii) file
documents required of the Company for normal Blue Sky clearance in states
specified in writing by any Holder;
provided
that the Company
shall not be required to qualify to do business or consent to service of process
in any jurisdiction in which it is not now so qualified or has not so
consented.
(b)
From the date hereof until the date the Shelf Registration Statement
is declared effective under the 1933 Act, the Company shall not file, nor permit
the filing of, any Registration Statement other than (i) the Shelf Registration
Statement and (ii) a Registration Statement on Form S-8 with respect to the
Stock Plans.
Section
2.02
. Demand
Registration.
(a) If, on or at any time after the
Effectiveness Date there is no currently effective Shelf Registration Statement,
then at any time thereafter, upon written notice (a “
Demand
”) from a Holder or
Holders holding at least 50% of the Registrable Securities (collectively, the
“
Demand Holder
”)
requesting that the Company effect the registration under the 1933 Act of any or
all of the Registrable Securities held by the Demand Holder, which notice shall
specify the amount and intended method or methods of disposition of such
Registrable Securities, including pursuant to a shelf registration statement
utilizing Rule 415 (a “
Shelf Registration
”), the
Company shall, within five days after receiving the Demand, give written notice
(the “
Request Notice
”)
of such registration request to all other Holders, except if all the Registrable
Securities are held by a single Holder, no Request Notice shall be required, and
thereupon will, subject to the limitations set forth in Section 2.02(c), as
promptly as possible (and in any event no later than 30 days after the date of
the Demand), file and use its reasonable best efforts to cause to be declared
effective under the 1933 Act, a Registration Statement to effect the
registration under the 1933 Act of (i) such Registrable Securities which the
Company has been so requested to register by the Demand Holder under the Demand
and (ii) the Registrable Securities which the Company has been requested to
register by written request to the Company by the Holders within ten days after
the giving of the Request Notice (which request shall specify the amount and
intended method or methods of disposition of such Registrable Securities), all
to the extent necessary to permit the disposition (in accordance with the
intended method(s) thereof as aforesaid) of the Registrable Securities and such
other securities so to be registered.
(b)
A registration requested pursuant to this Section 2.02 will not be
deemed to have been effected unless: (i) it has been declared effective by
the SEC or has otherwise become effective under the 1933 Act and remains
effective for not less than 180 days, or, if such Registration Statement relates
to an underwritten offering, such longer period as, in the opinion of counsel
for the underwriter or underwriters is required by law for the delivery of a
Prospectus in connection with the sale of Registrable Securities by an
underwriter or dealer; or (ii) it has been filed with the SEC but abandoned
or withdrawn at the request of the Demand Holder prior to effectiveness, other
than an abandonment or withdrawal requested because of: (A) the stock price
of the Common Stock falling 15% or more since the delivery of a request for
registration pursuant to this Section 2.02, (B) a material adverse change
in the Company’s and the Subsidiaries’ financial condition, business, assets,
results of operations financial condition, taken as a whole, or (D) the
discovery of materially adverse, non-public information concerning the Company
and the Subsidiaries, taken as a whole.
(c)
Notwithstanding anything in this Agreement to the
contrary:
(i) if
the filing of a Registration Statement in respect of a Demand would require the
Company to make an Adverse Disclosure, the Company may, upon giving prompt
written notice of such action to the Holders, delay the filing of such
Registration Statement for the shortest period of time determined in good faith
by the Company to be necessary for such purpose;
provided
that the Company
shall not be permitted to do so (A) more than two times during any twenty-four
month period, (B) for a period not exceeding 40 days on any one occasion or (C)
for a period exceeding 60 days in any 12 month period. The Company
shall immediately notify the Holders of the expiration of any period during
which it exercised its rights under this Section 2.02(c)(i);
(ii) the
Company shall not be obligated to file a Registration Statement in respect of a
Demand (A) on more than two occasions or (B) within a period of one (1) month
after the effective date of any other Registration Statement of the Company
demanded pursuant to this Section 2.02;
(iii) a
Holder may elect to withdraw its Registrable Securities from a Demand
registration pursuant to this Section 2.02 at any time, and if all such Holders
do so, the Company shall cease its efforts to secure registration;
and
(iv) all
Demand registrations pursuant to this Section 2.02 shall be on Form S−3, except
if the Company is not then eligible to register for resale the Registrable
Securities on Form S-3, in which case such registration shall be on another
appropriate form, reasonably acceptable to the Holders of a majority of the
Registrable Securities, and as shall permit the disposition of the Registrable
Securities in accordance with the intended method of distribution or methods of
distribution specified in the applicable Demand Holder’s requests for such
registration.
(d)
Nothing in this Agreement shall limit the right of any Holder to
request the registration of the Registrable Securities issuable upon exercise of
the Warrants by such Holder (subject to such exercise occurring prior to the
completion of the sale of the underlying Registrable Securities prior to such
registration), notwithstanding the fact that at the time of the request such
Holder Warrants are not Registrable Securities.
Section
2.03
. Shelf
Take-Downs.
Any of the Holders whose Registrable Securities
have been registered pursuant to a Shelf Registration may initiate an offering
or sale of Registrable Securities pursuant to such Shelf Registration (each, a
“
Shelf Take-Down
”) and
such Holder shall not be required to permit the offer and sale of Registrable
Securities by other Holders in connection with such Shelf
Take-Down. If the initiating Holders so elect by written request to
the Company, a Shelf Take-Down may be in the form of an underwritten offering
(an “
Underwritten Shelf
Take-Down
”);
provided
that any underwritten sale pursuant to a Shelf Registration
pursuant to this Section 2.03 must be for a number of Registrable Securities
which, based on the good faith determination of the Holders, will result in
gross proceeds of at least $5 million in the case of any Marketed Underwritten
Offering or $1 million in the case of any other underwritten
offering. The Company shall, if so requested, file and effect an
amendment or supplement of the Shelf Registration for such purpose as soon as
practicable.
Section
2.04
. Selection Of
Underwriters.
If a Shelf Take-Down involves an underwritten
offering, the investment bankers, underwriters and managers for such
registration shall be selected by the Holders of a majority in interest of the
Registrable Securities which the Company has been requested to register;
provided
that such selection
of investment bankers, underwriters and managers shall be subject to the
reasonable approval by the Company.
Section
2.05
. Piggyback
Registration.
(a) If the Company proposes to register Equity
Securities under the 1933 Act (other than (x) a registration under Section 2.01,
2.02 or 2.03, (y) a registration on Form S−4 or S−8 or any successor form to
such forms), involving the offering of such Equity Securities at any time,
whether or not for sale for its own account, in a manner which would permit
registration of Registrable Securities of the same class of such Equity
Securities for sale to the public under the 1933 Act, it will, at each such
time, give prompt written or telephonic notice (a “
Piggyback Offering Notice
”) to
the Holders of: its intention to do so, the form on which the Company expects to
effect such registration (
e.g.
Form S-1, Form S-3, Form
S-3ASR), the anticipated filing date with the SEC of such registration
statement, the anticipated date that the registration statement will be declared
or otherwise become effective, whether the offering is to be underwritten, in
the case of Form S-3 or Form S-3ASR, the anticipated date and time that the
offering will be made, and (unless all of the Holders’ Registrable Securities
are then registered pursuant to Section 2.02 or 2.03 or a Shelf Registration
Statement under Section 2.01 is in effect) such notice shall offer the Holders
the opportunity to register such number of Registrable Securities as each such
Holder may request in writing (a “
Piggyback
Registration
”). The registration rights provided for in this
Section 2.05 are in addition to, and not in lieu of, registrations made pursuant
to Section 2.01, 2.02 or 2.03.
(b) Subject
to Section 2.05(c), the Company shall include in such Registration Statement all
such Registrable Securities which are requested to be included therein within 10
days after the receipt by such Holder of any such notice. If at any
time after giving written notice of its intention to register any securities and
prior to the effective date of the Registration Statement filed in connection
with such registration, the Company shall determine for any reason not to
register or to delay registration of such securities, the Company may, at its
election, give written notice of such determination to each Holder of
Registrable Securities and, (x) in the case of a determination not to register,
shall be relieved of its obligation to register any Registrable Securities in
connection with such registration, and (y) in the case of a determination to
delay registering, shall be permitted to delay registering any Registrable
Securities for the same period as the delay in registering such other
securities. If the offering pursuant to a Piggyback Registration is
to be an underwritten offering, then each Holder making a request for its
Registrable Securities to be included therein must, and the Company shall make
such arrangements with the underwriters so that each such Holder may,
participate in such underwritten offering on the same terms as the Company and
other Persons selling securities in such underwritten offering. If the offering
pursuant to such registration is to be on any other basis, then each Holder
making a request for a Piggyback Registration pursuant to this Section 2.05 must
participate in such offering on such basis. Each Holder shall be
permitted to withdraw all or part of such Holder’s Registrable Securities from a
Piggyback Registration at any time prior to effectiveness of the Registration
Statement.
(c)
If the managing underwriter or underwriters of any proposed
underwritten offering of a class of securities included in a Piggyback
Registration (or in the case of a Piggyback Registration not being underwritten,
the Company) informs the Holders of Registrable Securities sought to be included
in such registration in writing that, in its or their opinion, the total amount
or kind of securities which such Holders and any other Persons intend to include
in such offering exceeds the number which can be sold in such offering without
being likely to have a significant adverse effect on the price, timing or
distribution of the class or classes of the securities offered or the market for
the class or classes of securities offered, then the securities of each class to
be included in such registration shall be allocated as follows:
(i) first,
100% of the securities that the Company proposes to sell;
(ii) second,
and only if all the securities referenced in clause (i) have been included, the
number of Registrable Securities of such class that, in the opinion of such
underwriter or underwriters (or in the case of a Piggyback Registration not
being underwritten, the Company), can be sold without having such adverse effect
shall be included therein, with such number to be allocated pro rata among the
Holders which have requested participation in the Incidental Registration
(based, for each such Holder, on the percentage derived by dividing (x) the
number of Registrable Securities of such class which such Holder has requested
to include in such Incidental Registration by (y) the aggregate number of
Registrable Securities of such class which all such Holders have requested to
include); and
(iii) third,
and only if all of the Registrable Securities referenced in clauses (i) and (ii)
above have been included, any other securities eligible for inclusion in such
registration shall be included therein.
Section
2.06.
Registration
Procedures
. If and whenever the Company is required to effect
a registration of any Registrable Securities as provided in this Agreement, the
Company will:
(a) promptly
prepare and file with the SEC a registration statement with respect to such
Registrable Securities and use best efforts to cause a registration statement
with respect to a demand registration pursuant to Section 2.02 to be filed (in
the case of a registration pursuant to Form S-3ASR), or become effective (in the
case of any registration other than pursuant to Form S-3ASR) as promptly as
practicable;
(b)
prepare and file with the SEC such amendments and supplements
to such registration statement (including 1934 Act documents incorporated by
reference into the registration statement) and the Prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
a period not in excess of 90 days (or such longer period as may be requested by
the Holders in the event of a shelf registration statement) other than the Shelf
Registration Statement which shall remain effective for the Effectiveness Period
and to comply with the provisions of the 1933 Act and the 1934 Act with respect
to the disposition of all securities covered by such registration statement
during such period in accordance with the intended methods of disposition by the
seller or sellers thereof set forth in such registration statement;
provided
that before filing a
registration statement or Prospectus or any amendments or supplements thereto in
accordance with Section 2.06(a) or this Section 2.06(b) to the extent that doing
so will not materially interfere with the timing of the offering (i) the Company
will furnish to counsel selected pursuant to Section 2.10 copies of all
documents proposed to be filed and (ii) such documents will be subject to the
review of such counsel reasonably in advance of any filing to permit a
reasonable opportunity to review and comment in light of the
circumstances;
(c)
use reasonable best efforts to comply with all applicable
securities laws in the United States and register or qualify such Registrable
Securities covered by such registration in such jurisdictions in the United
States as each seller shall reasonably request, and do any and all other acts
and things which may be reasonably necessary to enable such seller to consummate
the disposition in such jurisdictions of the Registrable Securities owned by
such seller, except that the Company shall not for any such purpose be required
to qualify generally to do business as a foreign corporation in any jurisdiction
where, but for the requirements of this Section 2.06(c), it would not be
obligated to, subject itself to taxation in any such jurisdiction or to consent
to general service of process in any such jurisdiction;
(d)
promptly furnish to each seller of such Registrable Securities such
number of copies of such registration statement and of each amendment and
supplement thereto (in each case including all exhibits filed therewith,
including any documents incorporated by reference), such number of copies of the
Prospectus included in such registration statement (including each preliminary
prospectus and summary prospectus), in conformity with the requirements of the
1933 Act, and such other similar documents as such seller may reasonably request
necessary to facilitate the disposition of the Registrable Securities by such
seller;
(e)
notify each seller of any such Registrable Securities covered
by such registration statement promptly if the Company becomes aware that the
Prospectus included in such registration statement, as then in effect, or the
registration statement includes an untrue statement of a material fact or omits
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing and, prepare and furnish to such seller a reasonable number of copies
of an amended or supplemental prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
Prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing;
(f) otherwise
use reasonable best efforts to comply with all applicable rules and regulations
of the SEC, and make available to its security holders, as soon as reasonably
practicable (but not more than 18 months) after the effective date of the
registration statement, an earnings statement which shall satisfy the provisions
of Section 11(a) of the 1933 Act;
(g) (i) use
reasonable best efforts to list such Registrable Securities on NASDAQ to the
extent required and (ii) use reasonable best efforts to provide for a
transfer agent and registrar for such Registrable Securities covered by such
registration statement not later than the effective date of such registration
statement;
(h) in
connection with an Underwritten Shelf Take-Down, promptly enter into an
underwriting agreement in customary form, which may include indemnification
provisions in favor of underwriters and other Persons in addition to, or in
substitution for, the provisions of Section 2.09, and take such other actions as
the managing underwriters reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities;
(i) in
connection with an Underwritten Shelf Take-Down, promptly obtain a “cold
comfort” letter or letters from the Company’s independent public accounts in
customary form and covering matters of the type customarily covered by “cold
comfort” letters provided to sellers of securities as the seller or sellers of a
majority of shares of such Registrable Securities shall reasonably
request;
(j) promptly
make available for inspection by any seller of such Registrable Securities
covered by such registration statement, by any underwriter participating in any
disposition to be effected pursuant to such registration statement and by any
attorney, accountant or other agent retained by any such seller or any such
underwriter, all pertinent financial and other records, pertinent corporate
documents and properties of the Company, and cause all of the Company’s
officers, directors and employees to supply all information reasonably requested
by any such seller, underwriter, attorney, accountant or agent in connection
with the “due diligence” of such seller or such underwriter with respect to such
registration statement, subject to the execution of a mutually acceptable
confidentiality agreement;
(k) promptly
notify counsel (selected pursuant to Section 2.10) for the Holders of
Registrable Securities included in such registration statement and the managing
underwriter or agent and confirm such notice in writing (i) when the
registration statement, or any post-effective amendment to the registration
statement, shall have become effective, or any supplement to the Prospectus and
any amendments to the Prospectus shall have been filed (other than in the case
of a registration pursuant to Form S-3ASR), (ii) of the receipt of any
comments from the SEC, (iii) of any request by the SEC to amend the
registration statement or amend or supplement the Prospectus or for additional
information and (iv) of the issuance by the SEC of any stop order
suspending the effectiveness of the registration statement or of any order
preventing or suspending the use of any Prospectus, or of the suspension of the
qualification of the registration statement for offering or sale in any
jurisdiction, or of the institution or threatening of any proceedings for any of
such purposes;
(l) use
reasonable best efforts to prevent the issuance of any stop order suspending the
effectiveness of the registration statement or of any order preventing or
suspending the use of any Prospectus and, if any such order is issued, to obtain
the withdrawal of any such order as soon as practicable;
(m) (i) if
requested by the managing underwriter or agent or any Holder of Registrable
Securities covered by the registration statement, promptly incorporate in a
prospectus supplement or post-effective amendment such information as the
managing underwriter or agent or such Holder reasonably requests to be included
therein, including, with respect to the number of Registrable Securities being
sold by such Holder to such underwriter or agent, the purchase price being paid
therefor by such underwriter or agent; and (ii) make all required filings
of such prospectus supplement or post-effective amendment as soon as practicable
after being notified of the matters incorporated in such prospectus supplement
or post-effective amendment;
(n) cooperate
with the Holders of Registrable Securities covered by the registration statement
and the managing underwriter or agent, if any, to facilitate the timely
preparation and delivery of certificates (not bearing any restrictive legends)
representing securities to be sold under the registration statement, and enable
such securities to be in such denominations and registered in such names as the
managing underwriter or agent, if any, or such Holders may reasonably
request;
(o) in
connection with an Underwritten Shelf Take-Down, promptly obtain for delivery to
the Holders of Registrable Securities being registered and to the underwriter or
agent an opinion or opinions from counsel for the Company in customary form and
scope for sellers of securities;
(p) cooperate
with each seller of Registrable Securities and each underwriter or agent
participating in the disposition of such Registrable Securities and their
respective counsel in connection with any filings required to be made with the
NASD;
(q) use
reasonable best efforts to make available certain of the executive officers of
the Company (which in any event shall include the Company’s chief executive
officer) for a ten Business Day period to participate and to cooperate with the
Holders of Registrable Securities and any underwriters in any “road shows” or
other selling efforts, in each case in the United States, that may be reasonably
be requested upon reasonable notice thereof by the Holders in connection with an
Underwritten Shelf Take-Down.
Section
2.07.
Information
Supplied
. It shall be a condition precedent to the obligations
of the Company to take any action to register the Registrable Securities held by
any Holder as to which any registration is being effected that such Holder shall
furnish the Company with such information regarding such Holder that is
pertinent to the disclosure requirements relating to the registration and the
distribution of such securities as the Company may from time to time reasonably
request. Each Holder agrees to promptly furnish to the Company all
information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not misleading.
Section
2.08.
Expenses.
Except
as provided herein, the Company will pay all Registration Expenses in connection
with registrations of Registrable Securities requested pursuant to Sections
2.01, 2.02, 2.03 or 2.05;
provided
that the Company
shall not be obligated to pay the Registration Expenses in more than three
Underwritten Offerings (which shall in no event include more than two Marketed
Underwritten Offerings). To the extent the Holders engage in more
than three Underwritten Offerings, the Holders shall pay all Registration
Expenses with respect to such Underwritten Offerings and the Company will have
no obligation to pay any such Registration Expenses. Each Holder
shall pay all underwriting discounts and commissions, broker fees and
commissions, and transfer taxes, if any, relating to the sale or disposition of
such Holder’s Registrable Securities pursuant to any registration
statement.
Section
2.09
. Indemnification.
(a)
In the event of any registration of any securities of the Company under the 1933
Act pursuant to Sections 2.01, 2.02, 2.03 or 2.05, to the fullest extent
permitted by law, the Company will indemnify and hold harmless each Holder, each
Affiliate of such Holder and their respective directors and officers, members or
general and limited partners (and the directors, officers, employees, affiliates
and each Person who controls such Holder (within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act) (hereinafter referred to as a “
Controlling Person
”) of any of
the foregoing), and each underwriter, if any, and each person who controls
within the meaning of Section 15 of the 1933 Act any underwriter (collectively,
the “
Seller Indemnified
Parties
”), against all claims, losses, damages and liabilities, joint or
several, actions or proceedings (whether commenced or threatened in writing) in
respect thereof (“
Claims
”) and expenses arising
out of or based on: (i) any untrue statement or alleged untrue statement
of a material fact contained in a registration statement (or any amendment or
supplement thereto), including all documents incorporated therein by reference,
or any omission or alleged omission therefrom of a material fact, in each case,
necessary in order to make the statements therein not misleading, in light of
the circumstances under which they were made, (ii) any untrue statement or
alleged untrue statement of a material fact contained in a Prospectus (or any
amendment or supplement thereto), including all documents incorporated therein
by reference, or any omission or alleged omission therefrom of a material fact,
in each case, necessary in order to make the statements therein not misleading,
in light of the circumstances under which they were made, or (iii)
any untrue statement or alleged untrue statement of a material fact contained in
any Issuer Free Writing Prospectus prepared by it or authorized by it in writing
for use by such Holder (or any amendment or supplement thereto), including all
documents incorporated therein by reference, or any omission or alleged omission
therefrom of a material fact, in each case, necessary in order to make the
statements therein not misleading, in light of the circumstances under which
they were made, and the Company will reimburse each such Seller Indemnified
Party for any reasonable fees and disbursements of counsel and any other
reasonable out-of-pocket expenses incurred in connection with investigating and
defending or settling any such Claim;
provided
that the Company
will not be liable in any such case to the extent that any such claim, loss,
damage, liability, or action arises out of or is based on any untrue statement
or alleged untrue statement or omission or alleged omission by such Holder or
underwriter but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission is made in such registration
statement, Prospectus, or Issuer Free Writing Prospectus in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such Holder and stated to be specifically for use therein; and
provided
that, the indemnity
agreement contained in this Section 2.09(a) shall not apply to amounts paid in
settlement of any such Claim if such settlement is effected without the consent
of the Company (which consent shall not be unreasonably withheld or
delayed).
(b) To
the fullest extent permitted by law, each Holder will, if Registrable Securities
held by such Holder are included in the registration statement or Prospectus,
indemnify and hold harmless the Company, all other Holders or any prospective
underwriter, as the case may be, and any of their respective Affiliates,
directors, officers and Controlling Persons (collectively, the “
Company Indemnified Parties
”),
against all Claims and expenses arising out of or based on: (i) any
untrue statement or alleged untrue statement of a material fact contained in a
registration statement (or any amendment or supplement thereto), including all
documents incorporated therein by reference, or any omission or alleged omission
therefrom of a material fact, in each case, necessary in order to make the
statements therein not misleading, in light of the circumstances under which
they were made, (ii) any untrue statement or alleged untrue statement
of a material fact contained in a Prospectus (or any amendment or supplement
thereto), including all documents incorporated therein by reference, or any
omission or alleged omission therefrom of a material fact, in each case,
necessary in order to make the statements therein not misleading, in light of
the circumstances under which they were made or (iii) any untrue statement or
alleged untrue statement of a material fact contained in any Issuer Free Writing
Prospectus (or any amendment or supplement thereto), including all documents
incorporated therein by reference, or any omission or alleged omission therefrom
of a material fact, in each case, necessary in order to make the statements
therein not misleading, in light of the circumstances under which they were
made, and the Holder will reimburse each such Company Indemnified Party for any
reasonable fees and disbursements of counsel and any other reasonable expenses
incurred in connection with investigating and defending or settling any such
Claim, in each case to the extent, but only to the extent that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, Prospectus, or Issuer Free Writing
Prospectus in reliance upon and in conformity with written information furnished
to the Company by or on behalf of such Holder and stated to be specifically for
use therein;
provided
that the indemnity agreement contained in this Section 2.09(b) shall not apply
to amounts paid in settlement of any such Claim if such settlement is effected
without the consent of the Company (which consent shall not be unreasonably
withheld or delayed);
provided
further
that in the absence of fraud by such Holder, the liability of
each selling Holder of Registrable Securities hereunder shall be limited to the
net proceeds received by such selling Holder from the sale of Registrable
Securities covered by such registration statement.
(c) Promptly
after receipt by a Person entitled to indemnification pursuant to this Section
2.09 (an “
Indemnified
Party
”) hereunder of written notice of the commencement of any action or
proceeding with respect to which a claim for indemnification may be made
pursuant to this Section 2.09, such Indemnified Party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to the latter of the commencement of such action or proceeding;
provided
that the failure of
the Indemnified Party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under this Section 2.09, except to the
extent that the indemnifying party is prejudiced in any material respect by such
failure to give notice. In case any such action or proceeding is
brought against an Indemnified Party, unless in such Indemnified Party’s
reasonable judgment, based upon advice of counsel, a conflict of interest
between such indemnified and indemnifying parties may exist in respect of such
action or proceeding (in which case the Indemnified Party shall have the right
to assume or continue its own defense and the indemnifying party shall be liable
for any reasonable expenses therefor (but in no event will bear the expenses for
more than one firm of counsel for all Indemnified Parties in each jurisdiction
who shall, with respect to Seller Indemnified Parties, be approved by the
majority of the participating Holders in the registration in respect of which
such indemnification is sought), the indemnifying party will be entitled to
participate in and to assume the defense thereof (at its expense), jointly with
any other indemnifying party similarly notified to the extent that it may wish,
with counsel reasonably satisfactory to such Indemnified Party, and after notice
from the indemnifying party to such Indemnified Party of its election so to
assume the defense thereof, the indemnifying party will not be liable to such
Indemnified Party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation and shall have no liability for any settlement made by the
Indemnified Party without the consent of the indemnifying party, such consent
not to be unreasonably withheld. No indemnifying party will settle
any action or proceeding or consent to the entry of any judgment without the
prior written consent of the Indemnified Party, unless such settlement or
judgment (i) includes as an unconditional term thereof the giving by the
claimant or plaintiff of a release to such Indemnified Party from all liability
in respect of such action or proceeding and (ii) does not involve the
imposition of equitable remedies or the imposition of any obligations on such
Indemnified Party and does not otherwise adversely affect such Indemnified
Party, other than as a result of the imposition of financial obligations for
which such Indemnified Party will be indemnified hereunder. An
Indemnified Party may not settle any action or proceeding or the entry of any
judgment without the prior written consent of the indemnifying
party.
(d) (i) If
the indemnification provided for in this Section 2.09 from the indemnifying
party is unavailable to an Indemnified Party hereunder in respect of any Claim
or expenses referred to herein, then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Claim or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and Indemnified Party in connection with the actions which resulted in
such Claim or expenses, as well as any other relevant equitable
considerations. The relative fault of such indemnifying party and
Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
Indemnified Party, and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The
amount paid or payable by a party under this Section 2.09(d) as a result of the
Claim and expenses referred to above shall be deemed to include any legal or
other fees or expenses reasonably incurred by such party in connection with any
action or proceeding; and (ii) the parties hereto agree that it would not
be just and equitable if contribution pursuant to this Section 2.09(d) were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in clause (i)
above. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any Person who was not guilty of such fraudulent
misrepresentation.
(e) The
obligations of the parties under this Section 2.09 shall be in addition to any
liability which any party may otherwise have to any other party.
Section
2.10.
Selection of
Counsel
. In connection with any registration of Registrable
Securities pursuant to Section 2.01, 2.02, 2.03 or 2.05, the Holders of a
majority of the Registrable Securities covered by any such registration may
select one counsel to represent all Holders of Registrable Securities covered by
such registration;
provided
that in the event that the counsel selected as provided above is also
acting as counsel to the Company in connection with such registration, a
majority of the remaining Holders shall be entitled to select one additional
counsel to represent all such remaining Holders.
Section
2.11.
No Inconsistent
Agreements; No Free Writing Prospectus.
The Company represents
and warrants that it is not a party to a Contract which conflicts with or limits
or prohibits the exercise of the rights granted to the Holders of Registrable
Securities in this Article 2. Each Holder agrees that, unless it
obtains the prior consent of the Company and any such underwriter, it will not
make any offer relating to the Securities that would constitute an Issuer Free
Writing Prospectus, or that would otherwise constitute a “free writing
prospectus,” as defined in Rule 405, required to be filed with the
SEC.
Section
2.12.
Termination
of Registration Rights.
The rights of any Holder under this
Article 2 shall terminate (other than Section 2.07, 2.09 and 2.12) at such time
as (a) such Holder ceases to hold any Registrable Securities or (b) either (i)
the Company is no longer required to file reports pursuant to Section 13(a) or
15(d) of the 1934 Act and has ceased to file reports under the 1934 Act, or (ii)
a Form 15 (or any successor form) has been filed under the 1934 Act with respect
to the Common Stock, unless, in the case of clause (b), such situation or filing
is due to the occurrence of any merger, consolidation or other transaction upon
consummation of which the issuer of the Common Stock is an entity other than the
Company, in which event such rights of the Holders shall not terminate at such
time pursuant to such clause (b) and this Agreement shall be assumed by the
Survivor as provided in Section 3.04.
ARTICLE
3
Transfer
Restrictions; Board Representation
Section
3.01
. Transfer
Restrictions.
Investor shall not sell or transfer, directly or
indirectly, any Purchased Shares which are not Registrable Securities except
pursuant to and in compliance with the 1933 Act. In addition,
notwithstanding any other provisions of this Agreement, Investor shall not sell
or transfer, directly or indirectly, any Purchased Shares which are not
Registrable Securities to any Third Party until the first anniversary of the
Closing Date.
Section
3.02
. Board
Representation.
It is acknowledged by the parties that
effective as of the Closing Date, Investor shall be entitled to designate four
members (the “
Investor
Nominees
”) of the Company’s Board of Directors (the “
Company
Board
”). The Company and the Company Board will use their best
efforts to cause any Investor Nominees to be elected to the Company Board,
including promptly calling a special meeting of the stockholders of the Company
at the request of Investor and recommending to the stockholders of the Company
that they vote for the election of any Investor Nominees to the Company
Board. Investor and the Company agree that Investor’s right to
designate four Investor Nominees will terminate upon the earlier of (i) Investor
(together with its Affiliates) ceasing to be the largest individual stockholder
of the Company or (ii) Investor (together with its Affiliates) owning less than
25% of the outstanding shares of Common Stock.
ARTICLE
4
Miscellaneous
Section
4.01
. Notices.
All
notices, requests and other communications to any party hereunder shall be in
writing (including facsimile transmission) and shall be given,
if to
Investor, to:
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
100022BG
Attention:
Howard Zhang
Facsimile
No.: + 86-10-8567-5123
if to the
Company, to:
Hoku
Scientific, 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
or such
other address or facsimile number as such party may hereafter specify for the
purpose by notice to the other parties hereto. All such notices,
requests and other communications shall be deemed received on the date of
receipt by the recipient thereof if received prior to 5:00 p.m. in the place of
receipt and such day is a Business Day in the place of
receipt. Otherwise, any such notice, request or communication shall
be deemed not to have been received until the next succeeding Business Day in
the place of receipt.
Section
4.02
. Amendments and
Waivers
. (a) Any provision of this Agreement may be amended or
waived if, but only if, such amendment or waiver is in writing and is signed, in
the case of an amendment, by each party to this Agreement, or in the case of a
waiver, by the party against whom the waiver is to be effective.
(b) No
failure or delay by any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by
law.
Section
4.03.
Expenses.
Except
as otherwise provided herein (and except as provided in the Securities Purchase
Agreement), all expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses.
Section
4.04.
Successors and Assigns;
Assignment.
Except as otherwise expressly provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, permitted assigns, heirs, executors and administrators of the
parties hereto. This Agreement may not be assigned without the prior
written consent of the other parties, except that this Agreement (i) may be
assigned by a Holder so long as the Person to whom it is being assigned agrees
to be bound under this Agreement as a Holder hereunder and delivers a
counterpart signature page to this Agreement to the Company and (ii) shall be
assigned by the Company in the event of any merger, consolidation or other
transaction upon consummation of which the issuer of the Common Stock is an
entity other than the Company (such entity, the “
Survivor
”) to such Survivor,
and the Company shall not enter into any such transaction unless and until the
Survivor assumes all rights and obligations of the Company hereunder pursuant to
a written agreement for the benefit of the Holders (it being understood that if
the Survivor is the issuer of the Common Stock and such assumption of the rights
and obligations of the Company hereunder occurs by operation of law, that such
Survivor shall not be required to execute a written agreement for the benefit of
the Holders).
Section
4.05.
No Third
Party Beneficiaries.
Except as specifically provided in Section
2.09 (with respect to which the Indemnified Parties named therein shall be
express, intended third party beneficiaries of such provision), this Agreement
is not intended, and shall not be deemed, to confer any rights or remedies upon
any Person other than the parties hereto or otherwise create any third-party
beneficiary hereto.
Section
4.06
. Governing
Law
. This 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.
Section
4.07.
Jurisdiction
. The
parties hereto agree that any suit, action or proceeding seeking to enforce any
provision of, or based on any matter arising out of or in connection with, this
Agreement or the transactions contemplated hereby shall be brought in the United
States District Court for the Southern District of New York or any New York
State court sitting in New York City, so long as one of such courts shall have
subject matter jurisdiction over such suit, action or proceeding, and that any
cause of action arising out of this Agreement shall be deemed to have arisen
from a transaction of business in the State of New York, and each of the parties
hereby irrevocably consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any objection
that it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient
forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees
that service of process on such party as provided in
Section
4.01
shall be deemed effective service of process on such
party.
Section
4.08.
WAIVER OF
JURY TRIAL
. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
Section
4.09
. Counterparts;
Effectiveness
. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. This
Agreement shall become effective when each party hereto shall have received a
counterpart hereof signed by all of the other parties hereto. Until
and unless each party has received a counterpart hereof signed by the other
party hereto, this Agreement shall have no effect and no party shall have any
right or obligation hereunder (whether by virtue of any other oral or written
agreement or other communication).
Section
4.10.
Entire
Agreement
. This Agreement and the other agreements or documents
referred to herein, constitutes the entire agreement between the parties with
respect to the subject matter of this Agreement and supersedes all prior
agreements and understandings, both oral and written, between the parties with
respect to the subject matter of this Agreement.
Section
4.11
. Severability.
If
any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction or other Governmental Authority to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such a determination, the
parties shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner in order that the transactions contemplated hereby be consummated as
originally contemplated to the fullest extent possible.
Section
4.12
. Specific
Performance.
The parties hereto agree that irreparable damage
would occur if any provision of this Agreement were not performed in accordance
with the terms hereof and that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement or to enforce specifically the
performance of the terms and provisions hereof in the United States District
Court for the Southern District of New York or any New York State court sitting
in New York City, in addition to any other remedy to which they are entitled at
law or in equity.
[Remainder
of Page Intentionally Left Blank.]
IN
WITNESS WHEREOF, the parties hereto have executed this Investor Rights Agreement
as of the date first set forth above.
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HOKU
SCIENTIFIC, INC.
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By:
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/s/
Dustin M. Shindo
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Title:
President and CEO
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TIANWEI
NEW ENERGY HOLDINGS
CO.,
LTD.
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By:
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/s/
Qiang Ding
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Title:
Legal Representative
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[Signature
page to Investor Rights Agreement]
By
executing this Investor Rights Agreement, the undersigned is agreeing to the
rights and obligations of a “Holder” hereunder.
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HOLDER
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Name
of Holder:
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By:
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Name:
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Title:
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Date:
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Address:
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[Signature page to Investor Rights
Agreement]
Exhibit
4.6
Form of Lock-up
Agreement
December
22, 2009
Tianwei
New Energy Holdings Co., Ltd.
No 1,
Tianwei Road,
Southwest Airport Economic Development Zone,
Chengdu, China 610200
Attention:
Wei Xia
Re: Hoku Scientific, Inc. –
Lock-up Agreement/(Name of Officer)
Ladies
and Gentlemen:
The
undersigned understands that Tianwei New Energy Holdings Co., Ltd. (“
Buyer
”) has entered into a
Securities Purchase Agreement (the “
SPA
”) with Hoku Scientific,
Inc., a Delaware corporation (the “
Company
”), pursuant to which
the Company will issue and sell to Buyer (i) 33,379,287 newly-issued shares of
Common Stock, par value $0.001 per share, of the Company (the “
Common Stock
”) and (ii)
warrants for the purchase of 10,000,000 shares of Common Stock.
As a
condition and inducement to Buyer’s willingness to consummate the transactions
contemplated by the SPA, the undersigned hereby agrees that, without the prior
written consent of Buyer, it will not, during the period commencing on the
Closing Date (as defined in the SPA) and ending on the first anniversary of the
Closing Date (the “
Lock-up
Period
”), (1) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any shares of the Common Stock or any securities
convertible into or exercisable or exchangeable for the Common Stock or any
interest in the foregoing or (2) enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of
ownership of any share of the Common Stock, whether now owned or hereinafter
acquired, owned directly by the undersigned (including holding as a custodian)
or with respect to which the undersigned has beneficial ownership within the
rules and regulations of the U.S. Securities and Exchange Commission, and
whether any such transaction described in clause (1) or (2) above is to be
settled by delivery of the Common Stock or other securities, in cash or
otherwise. The foregoing sentence shall not apply to (i) sales of shares of
Common Stock on a systematic basis pursuant to the stock sale plan adopted,
implemented and effected on [date] in accordance with the requirements of Rule
10b5-1(c)(1) of the Securities Exchange Act of 1934, as amended, a copy of which
is attached hereto as
Exhibit A
(the “
10b5-1 Plan
”) or (ii)
transfers of Common Stock to a trust for the direct or indirect benefit of the
undersigned or his or her immediate family,
provided
that prior to such
transfer, the trustee of such trust agrees in writing to be bound by the
restrictions set forth herein. For the avoidance of doubt, the
undersigned shall not enter into any new stock sale plan or amend the 10b5-1
Plan during the Lock-up Period other than to terminate all sales under the
10b5-1 Plan.
The
undersigned understands that Buyer is relying upon this Lock-up Agreement in
proceeding toward consummation of the transactions contemplated by the
SPA. The undersigned further understands that this Lock-up Agreement
is irrevocable and shall be binding upon the undersigned’s heirs, legal
representatives, successors and assigns.
This
Lock-up Agreement shall terminate upon the expiration of the Lock-up Period, or,
if for any reason the SPA shall be terminated prior to the Closing Date, this
Lock-up Agreement shall likewise be terminated.
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Very
truly yours,
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Name:
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Title:
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EXHIBIT
A
STOCK
SALE PLAN
(NAME
OF OFFICER)
CONFIDENTIAL
Exhibit
10.110
[*]
= 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.
AMENDED
AND RESTATED SUPPLY AGREEMENT NO. 1
This
Amended and Restated Supply Agreement No. 1 (this “
Agreement
”)
is made as of the last date set forth on the signature page hereto (the “
Effective
Date
”) between TIANWEI NEW ENERGY (CHENGDU) WAFER CO., LTD., a People’s
Republic of China company (hereinafter “
TIANWEI
”)
and
HOKU MATERIALS,
INC.,
a Delaware corporation (hereinafter “
HOKU
”). HOKU
and TIANWEI are sometimes referred to in the singular as a “
Party
” or
in the plural as the “
Parties
”.
Recitals
WHEREAS,
HOKU and TIANWEI are parties to that certain Supply Agreement dated as of August
4, 2008, as amended by that Amendment to Supply Agreement dated as of August 14,
2008, Amendment No. 2 to Supply Agreement dated as of October 24, 2008, and
Amendment No. 3 to Supply Agreement No. 1 dated as of May 2, 2009 (as amended,
“
Supply
Agreement No. 1
”), 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,
TIANWEI has paid to HOKU a total of US$44,000,000 as of the date hereof in
product prepayments and advances (the “
Prepayments
”),
in fulfillment of TIANWEI’s obligations under Sections 5.1, 5.2, and 5.3 of
Supply Agreement No. 1, and in partial fulfillment of TIANWEI’s obligation under
Section 5.4 of Supply Agreement No. 1.
WHEREAS,
TIANWEI is still obligated to pay HOKU US$1,000,000 of the Fourth Deposit upon
HOKU’s first shipment of Products pursuant to Section 5.4 of Supply Agreement
No. 1.
WHEREAS,
HOKU and TIANWEI NEW ENERGY HOLDINGS CO., LTD. (“
TIANWEI
PARENT
”) are parties to that certain Securities Purchase
Agreement dated as of September 28, 2009, pursuant to which TIANWEI PARENT has
agreed to cause TIANWEI to convert US$27,777,777.78 of the Prepayments into
shares of common stock of HOKU’s parent company, Hoku Scientific, Inc., subject
to the execution of this Agreement.
WHEREAS,
the Parties have agreed to amend and restate the Supply Agreement No. 1 in its
entirety to read as set forth in this Agreement.
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.
Definitions
.
The
following terms used in this Agreement shall have the meanings set forth
below:
1.1. “
Affiliate
”
shall mean, with respect to either Party to this Agreement, any entity that is
controlled by or under common control with such Party.
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TIANWEI
Initials & Date ___________________________
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HOKU
Initials & Date
___________________________
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CONFIDENTIAL
Exhibit
10.110
1.2. “
Agreement
”
shall mean this Amended and Restated Supply Agreement No. 1 and all appendices
annexed to this Agreement as the same may be amended from time to time in
accordance with the provisions hereof.
1.3. “
Effective
Date
” has the meaning set forth in the first paragraph of this
Agreement.
1.4. “
First Shipment
Date
” shall mean the first day after March 1, 2010, when HOKU commences
deliveries to TIANWEI of Products pursuant to this Agreement.
1.5. “
Facility
”
shall mean any facility used by HOKU for the production of the
Product.
1.6. “
Independent
Expert
” means any Qualified Laboratory that is reasonably acceptable to
each of HOKU and TIANWEI; 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.
1.7. “
Minimum Annual
Quantity of Product
” means
[*]
metric tons (
[*]
kilograms).
1.8. “
Product
”
shall mean the raw polysilicon in chunk form manufactured by HOKU and sold to
TIANWEI pursuant to this Agreement.
1.9. “
Product
Specifications
” shall mean the quality and other specifications set forth
on Appendix 2 to this Agreement.
1.10. “
Qualified
Laboratory
” means each qualified laboratory set forth on
Appendix
2
to this Agreement.
1.11. “
Term
”
shall mean the period during which this Agreement is in effect, as more
specifically set forth in Section 9 of this Agreement.
1.12. “
Total
Deposit
” means US$17,222,222.23.
1.13. “
Year
”
shall mean each of the ten (10) twelve-month periods commencing on the First
Shipment Date.
2.
Ordering
. Starting
on the First Shipment Date and each Year during the term of this Agreement
thereafter, TIANWEI agrees to purchase from HOKU, and HOKU agrees to sell to
TIANWEI, 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
TIANWEI for
[*]
metric
tons of Product that cannot be cancelled during the term of this Agreement,
except as set forth in Section 9 below.
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TIANWEI
Initials & Date ___________________________
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HOKU
Initials & Date
___________________________
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CONFIDENTIAL
Exhibit
10.110
3.
Supply
Obligations
.
3.1. 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 pursuant to Section 4.1 below; provided however, that if
HOKU fails to deliver a monthly shipment, then HOKU may deliver any deficiency
within
[*]
days without
breaching this section or incurring any purchase price adjustment (pursuant to
Section 3.3 below). The foregoing
[*]
day grace period shall not
apply to the first shipment that is scheduled for March 31,
2010. Only shipments in excess of each scheduled monthly shipment
pursuant to the Shipment Schedule (as defined in Section 4.1 below) will be
considered as making up a quantity deficiency as stated above. Notwithstanding
the preceding sentence, HOKU shall promptly inform TIANWEI of any occurrence
which will, or may be expected to, result in material delay of the shipment date
or quantity of any scheduled monthly shipment set forth in the Shipment
Schedule, or any other material deviations from the Shipment
Schedule. HOKU shall use all commercially reasonable efforts to make
complete delivery of Products scheduled for monthly shipment pursuant to the
Shipment Schedule or, if later, as soon as commercially practicable. In the
event that HOKU fails to deliver Products in accordance with the Shipment
Schedule, TIANWEI may cause HOKU at HOKU’s own shipping responsibility, cost and
expense to deliver Products to the locations designated by TIANWEI by rail or
ocean cargo vessel. At any time during the term of this Agreement, HOKU may ship
to TIANWEI up to the full cumulative balance of Minimum Annual Quantity of
Product to be shipped through the end of this Contract (an “
Excess
Shipment
”) with TIANWEI’s written consent. 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.
3.2. HOKU
intends to manufacture the Products at its Facility; however, notwithstanding
anything to the contrary herein, HOKU may deliver to TIANWEI Products that are
manufactured by a third party other than HOKU (“
Third Party
Products
”), where HOKU is acting only as a reseller or distributor of
such Products; and provided that the Products meet the Product Specifications
and price set forth in this Agreement; and, provided further, that HOKU shall
clearly label all Third Party Products and shall remain primarily liable for the
acts and omissions of such third party producer in failing to meet the Quality
Specifications. HOKU shall notify TIANWEI in writing prior to the
delivery of Third Party Products.
3.3. Except
in the case of a force majeure pursuant to Section 12 below, if HOKU does not
supply any Products pursuant to Section 3.1 or 3.2 within
[*]
days of the scheduled
delivery date, HOKU will provide TIANWEI with a purchase price adjustment. Such
purchase price adjustment shall be
[*]
percent (
[*]
%) of the value of the
respective delayed Products for each week or part thereof that the Product
shipment (or part thereof) is delayed beyond the
[*]
day grace
period. Any purchase price adjustment as a result of this Section 3.3
will be immediately creditable by HOKU to the future invoiced price of the
Products to be paid by TIANWEI commencing upon the date on which the purchase
price reduction becomes due. In lieu of making a cash payment to
TIANWEI pursuant to this Section 3.3, HOKU may, at its option, pay for such
purchase price adjustment in the form of a credit issued for future shipments of
Products. Notwithstanding anything to the contrary, the maximum amount of such
purchase price adjustment shall not exceed
[*]
percent (
[*]
%) of the value of the
respective delayed Products. Monthly shipments which are delayed
beyond
[*]
(
[*]
) days shall be deemed to
constitute a material breach of this Agreement pursuant to Section 9.2.1
below. Notwithstanding the foregoing, if TIANWEI fails to make a
payment to HOKU within the
[*]-
day period set forth in
Section 5.6 below, HOKU shall not be required to supply any Product to TIANWEI
until HOKU has received the past due amount including any interest payable
thereon pursuant to this Agreement. For the avoidance of doubt,
TIANWEI’s right to reduce the purchase price pursuant to this Section 3.3 shall
not apply if HOKU is not fulfilling its supply obligations for this
reason.
3.4. HOKU
hereby covenants and agrees that during the term of this Agreement, and provided
that TIANWEI is not in breach of any material term of this Agreement, including,
without limitation, its payment obligations hereunder, HOKU shall not ship any
Products to any third party that is not one of HOKU’s Other Customers (as
defined below) (e.g., spot market sales), until HOKU has satisfied its delivery
obligations to TIANWEI pursuant to Section 3.1 of this Agreement.
|
TIANWEI
Initials & Date ___________________________
|
HOKU
Initials & Date
___________________________
|
CONFIDENTIAL
Exhibit
10.110
4.
Shipping &
Delivery
.
4.1. Except
as provided in Section 3.2 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
[*]
days prior to the applicable
Year. The Shipment Schedule shall provide for approximately equal
monthly shipments that add up to the Minimum Annual Quantity of
Products.
4.2. HOKU
will use commercially reasonable efforts to make available to TIANWEI its first
shipment of Products on or before March 31, 2010.
4.3. [Reserved].
4.4. In
addition to the Minimum Annual Quantity of Product to be delivered to TIANWEI
each Year beginning on the First Shipment Date pursuant to this Agreement, prior
to the First Shipment Date, HOKU shall provide TIANWEI with a right of first
refusal (the “
ROFR
”) on
up to an aggregate of
[*]
metric tons of Spot Market Products (as defined in the final sentence of this
paragraph). TIANWEI’s ROFR on Spot Market Products shall be subject
to the conditions and procedures set forth in the next sentences of this Section
4.4. Prior to any sale of Spot Market Products to a third party, HOKU
shall offer such Spot Market Products to TIANWEI in writing via facsimile or
email (the “
Offer
”). The
Offer shall include the material terms of the offer, including price, volume and
shipping terms. TIANWEI shall provide HOKU with a written notice of
acceptance of the Offer (the “
Acceptance
”)
within 72 hours after receipt of the Offer. The Acceptance, together
with the Offer, shall be a firm order which cannot be cancelled by either
Party. The Acceptance may not change or add to the terms of the
Offer, and any such changes shall be construed as a rejection of the
Offer. If TIANWEI does not provide the Acceptance within 72 hours
after receipt of the Offer, or if TIANWEI rejects the Offer, then HOKU may sell
such Spot Market Products to any third party. If TIANWEI rejects the
Offer, or fails to respond as provided herein within 72 hours, HOKU shall have
thirty (30) calendar days to exercise its right to sell Spot Market Products to
another customer on terms that are no more favorable to the other customer than
those presented to TIANWEI in the Offer. If HOKU does not so sell
Spot Market Products pursuant to the Offer within said thirty (30) day period,
HOKU must repeat this process. The foregoing ROFR shall expire on the earliest
to occur of (A) HOKU’s shipment of an aggregate of
[*]
metric tons of Spot Market
Products to TIANWEI prior to March 31, 2010; or (B) March 31,
2010. Notwithstanding the foregoing, HOKU shall have no obligation to
ship to TIANWEI any Products that do not meet (or exceed) the Product
Specifications. “
Spot Market
Products
” means Products that are not required to be shipped pursuant to
any of HOKU’s existing commitments to Shanghai Alex New Energy Co., Ltd., Wuxi
Suntech Power Co., Ltd., Solarfun Power Hong Kong Limited, Jiangxi Jinko Solar
Co., Ltd. and Wealthy Rise International, Ltd. (the “
Other
Customers
”), and which would otherwise be sold to other new customers or
on the spot market. For the avoidance of doubt, the foregoing
existing commitments do not include commitments to sell unallocated products to
Shanghai Alex New Energy Co., Ltd., or Wealthy Rise International,
Ltd.
4.5. Notwithstanding
anything to the contrary in herein, HOKU shall have no obligation to ship any
Products to TIANWEI until after HOKU has fulfilled its existing shipment
obligations to each of HOKU’s Other Customers as of the date hereof, and no
price adjustments or penalties shall accrue on any resulting late shipments of
Products to TIANWEI.
5.
Payments &
Advances
.
5.1. HOKU
acknowledges receipt from TIANWEI of the prepayment of Fifteen Million U.S.
Dollars (US$15,000,000) via wire transfer of immediately available funds (the
“
Initial
Deposit
”).
|
TIANWEI
Initials & Date ___________________________
|
HOKU
Initials & Date
___________________________
|
CONFIDENTIAL
Exhibit
10.110
5.2. HOKU
acknowledges receipt from TIANWEI of an additional sum of Fifteen Million U.S.
Dollars (US$15,000,000) (the “
Second
Deposit
”) as an advance payment for Products to be delivered under this
Agreement.
5.3. HOKU
acknowledges receipt from TIANWEI of an additional sum of Ten Million U.S.
Dollars (US$10,000,000) (the “
Third
Deposit
”) as an advance payment for Products to be delivered under this
Agreement.
5.4. HOKU
acknowledges receipt from TIANWEI of an additional sum of Four Million U.S.
Dollars (US$4,000,000), and TIANWEI agrees that it shall pay in cash to HOKU the
additional sum of One Million U.S. Dollars (US$1,000,000) (collectively, the
“
Fourth
Deposit
” and together with the Second Deposit and the Third Deposit, the
“
Main
Deposit
”) as an advance payment for Products to be delivered
under this Agreement. Payment of the Fourth Deposit shall be made
when HOKU completes the shipment to TIANWEI of a cumulative aggregate of
[*]
metric tons of Products
pursuant to Section 4 of this Agreement (including Products shipped in calendar
year 2009).
5.5. HOKU
acknowledges receipt from TIANWEI of an irrevocable stand-by letter of credit in
substantially the form of
Appendix
3
attached hereto (the “
Letter of
Credit
”) by the issuing bank (the “
Issuing
Bank
”) in the amount of the Main Deposit. The Letter of Credit
shall be freely assignable by HOKU in connection with any assignment of this
Agreement by HOKU pursuant to Section 14.4 below. Payment
to HOKU of the Fourth Deposit shall be made by the Issuing Bank upon its receipt
of written notice that TIANWEI has failed to make the payment of the Fourth
Deposit. The Letter of Credit shall expire after the Main Deposit has
been paid in full.
5.6. HOKU
shall invoice TIANWEI at or after the time of each shipment of Products to
TIANWEI. Taxes, customs and duties, if any, will be identified as separate items
on HOKU invoices. All invoices shall be sent to TIANWEI’s address as provided
herein. Payment terms for all invoiced amounts shall be
[*]
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 11 below, shipments
to TIANWEI shall be credited against the Total Deposit on a pro rata basis
during the first through tenth Year from the First Shipment Date. Unless HOKU is
entitled to retain the Total Deposit as liquidated damages pursuant to Section
11, shipments to TIANWEI shall be credited against the Total Deposit in
accordance with the Credit Schedule on Appendix 1.
5.7. 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 TIANWEI, provided that TIANWEI is
legally or contractually obliged to pay such taxes. HOKU and TIANWEI shall work
together to eliminate the possibility of taxes, but if there are any assessed,
HOKU shall promptly remit to TIANWEI in full any such taxes paid by TIANWEI
which are refunded to HOKU in whole or in part. TIANWEI 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.
5.8. Late
payments and outstanding balances shall accrue interest at the lesser of 18% per
annum or the maximum allowed by law.
6.
Security
Interest
. HOKU hereby grants to TIANWEI a continuing security
interest in all of the tangible and intangible assets related to HOKU’s
polysilicon business pursuant to the terms of the Security Interest Agreement
dated the date hereof, a copy of which is attached hereto as Appendix 5 (the
“
Security
Interest Agreement
”).
|
TIANWEI
Initials & Date ___________________________
|
HOKU
Initials & Date
___________________________
|
CONFIDENTIAL
Exhibit
10.110
7.
Product Quality
Guarantee
.
7.1. HOKU
warrants to TIANWEI that the Products shall meet the Product Specifications. For
each shipment, this warranty shall survive for
[*]
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 from TIANWEI,
and TIANWEI’s compliance with HOKU’s instructions, refund in full, including all
direct costs, or replace, at TIANWEI’s sole option and at HOKU’s expense, any
Product which does not meet the Product Specifications, and TIANWEI shall comply
with the inspection and return goods policy described in Section 8 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
TIANWEI. 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.
7.2. HOKU
EXPRESSLY DISCLAIMS ALL OTHER WARRANTIES, WHETHER EXPRESS, IMPLIED OR STATUTORY,
INCLUDING THE WARRANTIES OF MERCHANTABILITY, AND FITNESS FOR A PARTICULAR
PURPOSE. HOKU’s sole responsibility and TIANWEI’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 therefor plus the direct expenses associated with
the refund or replacement; 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.
7.3. HOKU
shall, at its own expense, indemnify and hold TIANWEI 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 TIANWEI or
TIANWEI’s Affiliates alleging any such infringement. TIANWEI agrees
that: (i) TIANWEI shall give HOKU prompt notice in writing of any
such suit; (ii) if HOKU provides evidence reasonably satisfactory to TIANWEI of
HOKU’s financial ability to defend the matter vigorously and pay any reasonably
foreseeable damages, TIANWEI shall permit HOKU, through counsel of HOKU’s
choice, to answer the charge of infringement and defend such suit (but TIANWEI,
or TIANWEI’s Affiliate may be represented by counsel and participate in the
defense at its own expense); and (iii) TIANWEI 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 TIANWEI, its
officers, agents, or employees, from any losses, damages, liabilities, costs or
expenses which may arise out of the acts of omissions of HOKU.
8.
Inspection and Return Goods
Policy
.
8.1. An
inspection of appearance of each shipment of Product shall be made by TIANWEI in
accordance with sound business practice upon the delivery of the Product, and in
no case later than
[*]
weeks after delivery at TIANWEI’s factory. TIANWEI 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 TIANWEI
discovers under the inspection of appearance. All Products shall be
double-packaged in polyethylene bags suitable for maintaining the quality of the
Products and for long-distance overseas shipping, which will be weighed and
bar-coded for tracking purposes prior to shipment.
|
TIANWEI
Initials & Date ___________________________
|
HOKU
Initials & Date
___________________________
|
CONFIDENTIAL
Exhibit
10.110
8.2. TIANWEI
shall perform final inspection of the Product upon introducing the Product into
TIANWEI’s production process. Such inspection shall take place during the
Warranty Period. If the Product does not meet the Product
Specifications, TIANWEI shall notify HOKU in writing without undue delay after
the inspection and, together with the notification, submit documentary evidence
of the result of the final inspection whereupon HOKU shall have the right to
undertake its own inspection prior to any return of the Products pursuant to
Section 8.3 below. HOKU is required to acknowledge TIANWEI’s
notification within two (2) business days and provide an action plan within ten
(10) business days thereafter to solve the issue. If no such action
plan is received by TIANWEI within six (6) weeks, it shall be deemed that HOKU
has accepted the returned Products. HOKU reserves the right to
reverse any credit issued to TIANWEI if, upon return, such Product is determined
by an Independent Expert not to be defective. 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 7.1 above. The
fees and expenses of the Independent Expert shall be paid solely by the party
that does not succeed in the dispute.
8.3. Products
may be returned to HOKU within the later of (a)
[*]
days after discovery of a
defect consistent with Sections 8.1 and 8.2 above; and (b)
[*]
days after HOKU completes
its inspection and confirms the defect pursuant to Section 8.2 above, for
replacement or a refund including all other direct expenses. To
assure prompt handling, HOKU shall provide TIANWEI a return goods authorization
number within 48 hours of TIANWEI’s request. Provided that HOKU
communicates this number to TIANWEI within such timeframe, TIANWEI 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.
9.
Term and
Termination
.
9.1. The
term of this Agreement shall begin on the Effective Date and provided that the
first delivery of the Product under this Agreement shall occur on March 31,
2010, or earlier, and unless previously terminated as hereinafter set forth,
shall remain in force for a period of ten Years beginning with the First
Shipment Date.
9.2. 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:
9.2.1. 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 3.3 above; and provided, further that such sixty
(60) day cure period shall not apply to TIANWEI’s failure to make any payment to
HOKU pursuant to this Agreement. In the event of TIANWEI’s failure to
make payment on the 60-day payment terms set forth in Section 5.6 hereof,
termination by HOKU shall require the issuance of a written notice of default
containing the threat of immediate termination if payment is not made within an
additional grace period of not less than ten (10) business days. For
purposes of this Section 9.2.1, 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. In addition, TIANWEI
shall have the right to terminate this Agreement if HOKU breaches in any
material respect any of its material obligations under the Security Interest
Agreement.
|
TIANWEI
Initials & Date ___________________________
|
HOKU
Initials & Date
___________________________
|
CONFIDENTIAL
Exhibit
10.110
9.2.2. 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;
9.2.3. If
the other Party (i) becomes unable, or admits in writing its inability, to pay
its debts generally as they mature, (ii) becomes insolvent (as such term
may be defined or interpreted under any applicable statute); or
9.2.4. In
accordance with the provisions of Section 12 (Force Majeure) below; provided,
however, that TIANWEI may not terminate this Agreement pursuant to Section 12 if
HOKU is supplying Products to TIANWEI pursuant to Section 3.2 of this
Agreement.
9.2.5. Without
limiting the foregoing, TIANWEI shall have the right to terminate this Agreement
if (A) HOKU does not deliver the Officer’s Certificate pursuant to Section 13.3
below by the date specified therein, or (B) the First Shipment Date does not
occur on or before March 31, 2010.
9.3. HOKU
shall have the right to terminate this Agreement if TIANWEI and the Issuing Bank
have failed to pay the Fourth Deposit in accordance with Section 5.4 of this
Agreement, in which case HOKU shall retain the Initial Deposit, the Second
Deposit and the Third Deposit as liquidated damages.
9.4. Upon
the expiration or termination of this Agreement howsoever arising, the following
Sections shall survive such expiration or termination: Sections 1 (Definitions);
Section 7 (Product Quality Guarantee), Section 8 (Inspection and Return Goods
Policy); Section 9 (Term and Termination); Section 10 (Liability); Section 11
(Liquidated Damages); and Section 14 (General Provisions).
9.5. If
TIANWEI terminates this Agreement pursuant to Section 9.2.1, 9.2.2, 9.2.3,
9.2.4, 9.2.5 or 12 then any funds remaining on the Total Deposit on such date of
termination shall be returned to TIANWEI; provided however that if TIANWEI is in
material breach of this Agreement at the time it terminates this Agreement, then
HOKU shall not be required to repay any remaining amount of the Total Deposit up
to the amounts of HOKU’s direct loss from such material breach (unless TIANWEI
cures such breach within the applicable cure period) or TIANWEI’s other
outstanding and unpaid obligations hereunder (including, without limitation,
obligations under Section 11).
9.6. If
HOKU terminates this Agreement pursuant to Section 9.2.1, 9.2.2, 9.2.3, 9.2.4,
or 12 then HOKU shall be entitled to retain the Total Deposit including any
funds remaining on the Total Deposit on such date of termination in accordance
with Section 11. “
Funds
remaining
” on the Total Deposit are funds not applied against TIANWEI’s
purchase of Product, pursuant to Section 5.6 above, for Product actually shipped
to TIANWEI hereunder.
|
TIANWEI
Initials & Date ___________________________
|
HOKU
Initials & Date
___________________________
|
CONFIDENTIAL
Exhibit
10.110
9.7. If
TIANWEI terminates this Agreement pursuant to Section 9.2.1 due to HOKU’s breach
of Section 3.4, then 150% of the funds remaining on the Total Deposit on such
date of termination shall be returned to TIANWEI within fourteen (14) calendar
days, with any late payment accruing interest pursuant to Section 5.8 above;
provided however that if TIANWEI is in material breach of this Agreement at the
time it terminates this Agreement, then HOKU shall not be required to repay any
portion of the Total Deposit up to the amounts of HOKU’s direct loss from such
material breach (unless TIANWEI cures such breach within the applicable cure
period) or TIANWEI’s other outstanding and unpaid obligations hereunder
(including, without limitation, obligations under Section 11).
10.
Liability
.
10.1. IN
NO EVENT SHALL EITHER PARTY BE LIABLE FOR INDIRECT, SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES OR FOR EXEMPLARY OR PUNITIVE DAMAGES, EVEN IF TIANWEI OR
HOKU HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
10.2. NEITHER
PARTY’S TOTAL LIABILITY TO THE OTHER FOR ANY KIND OF LOSS, DAMAGE OR LIABILITY
ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT, UNDER ANY THEORY OF
LIABILITY, SHALL EXCEED IN THE AGGREGATE THE TOTAL DEPOSIT, EXCEPT (A) WITH
RESPECT TO TIANWEI’S CONTINUING OBLIGATION TO PURCHASE THE PRODUCTS AS SET FORTH
HEREIN, AND (B) HOKU’S OBLIGATION TO PAY 150% OF THE FUNDS REMAINING ON THE
TOTAL DEPOSIT PURSUANT TO SECTION 9.7 ABOVE.
11.
Liquidated
Damages
.
11.1. THE
PARTIES ACKNOWLEDGE AND AGREE THAT ANY BREACH OF THIS AGREEMENT BY TIANWEI 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 9.2.1, 9.2.2, 9.2.3, 9.2.4,
9.3 or 12, THEN HOKU SHALL BE ENTITLED TO RETAIN AS LIQUIDATED DAMAGES, THE
TOTAL DEPOSIT (INCLUDING ANY REMAINING PORTION THEREOF NOT CREDITED AGAINST
PRODUCT SHIPMENTS). ANY AMOUNTS DUE FOR UNDELIVERED PRODUCT UNDER
THIS AGREEMENT ARE STILL DUE, UNLESS OTHERWISE AGREED BY BOTH PARTIES IN
WRITING.
11.2. THE
PARTIES ACKNOWLEDGE AND AGREE THAT ANY BREACH OF SECTION 3.4 OF THIS AGREEMENT
BY HOKU MAY CAUSE IRREPERABLE AND IMMEASURABLE DAMAGE TO
TIANWEI. BECAUSE IT IS DIFFICULT TO MEASURE THESE DAMAGES, IN THE
EVENT THAT THIS AGREEMENT IS TERMINATED BY TIANWEI PURSUANT TO SECTION 9.2.1 DUE
TO HOKU’S BREACH OF SECTION 3.4, THEN HOKU SHALL BE OBLIGATED TO PAY AS
LIQUIDATED DAMAGES, 150% OF THE FUNDS REMAINING ON THE TOTAL
DEPOSIT.
12.
Force
Majeure
. Neither Party shall be liable to the other Party for
failure of or delay in performance of any obligation under this Agreement,
directly, or indirectly, owing to acts of God, war, war-like condition,
embargoes, riots, strike, lock-out and other events beyond its reasonable
control which were not reasonably foreseeable and whose effects are not capable
of being overcome without unreasonable expense and/or loss of time to the
affected Party (i.e., the Party that is unable to perform). If such failure or
delay occurs, the affected Party shall notify the other Party of the occurrence
thereof as soon as possible, and the Parties shall discuss the best way to
resolve the event of force majeure. If the conditions of Force Majeure continue
to materially impede performance of any material obligation under this Agreement
for a period of more than three (3) consecutive calendar months, then the
non-affected Party shall be entitled to terminate this Agreement by 30 days’
prior written notice to the other Party. For the purposes of this
Section 12, the inability of TIANWEI to receive, accept or take delivery of
Products that have been made available by HOKU pursuant to this Agreement shall
not constitute an event of force majeure.
|
TIANWEI
Initials & Date ___________________________
|
HOKU
Initials & Date
___________________________
|
CONFIDENTIAL
Exhibit
10.110
13.
Visitation Rights;
Certifications
.
13.1. Until
the First Shipment Date or the earlier termination of this Agreement pursuant to
Section 9 above, TIANWEI 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. TIANWEI shall provide HOKU with at least fifteen (15)
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 HOKU’s non-disclosure
agreement. TIANWEI shall agree to abide by all of HOKU’s safety and
security requirements and instructions for the HOKU Facility.
13.2. Until
the First Shipment Date or the earlier termination of this Agreement pursuant to
Section 9 above, HOKU shall provide TIANWEI with monthly updates on the progress
of the construction of the HOKU polysilicon production facilities, including,
without limitation, an explanation of any potential delays in meeting its
shipment obligations to TIANWEI.
13.3. At
any time prior to November 1, 2008, HOKU shall deliver to TIANWEI a signed
officer’s certificate in substantially the form of
Appendix
4
attached to this Agreement (the “
Officer’s
Certificate
”).
14.
General
Provisions
.
14.1. TIANWEI
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. TIANWEI 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 TIANWEI, and
TIANWEI hereby represents and warrants that neither HOKU, nor to TIANWEI’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 TIANWEI, whether in money, property, or services (i) to obtain
favorable treatment in securing business from TIANWEI, (ii) to pay for favorable
treatment for business secured from TIANWEI, or (iii) to obtain special
concessions or for special concessions already obtained from TIANWEI, for or in
respect of HOKU, in violation of any legal requirement or applicable
law.
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.
|
TIANWEI
Initials & Date ___________________________
|
HOKU
Initials & Date
___________________________
|
CONFIDENTIAL
Exhibit
10.110
14.4. HOKU
may assign this Agreement to any of its Affiliates, and may assign its rights
under this Agreement to any collateral agent as collateral security for HOKU’s
secured obligations in connection with the financing of a HOKU Facility, without
the consent of TIANWEI. When HOKU assigns this agreement to any of
its Affiliates, such Affiliate receiving the assignment must have the capacity
to fulfill the remaining contract obligations and under the circumstance that
such Affiliate is unable to fulfill the obligations, HOKU shall be held jointly
and severally liable. Except as stated in the previous sentences, neither HOKU
nor TIANWEI 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.
|
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:
TIANWEI:
TIANWEI
NEW ENERGY (CHENGDU) WAFER CO., LTD.
Road 8,
Southwest Airport Economical Development Zone Chengdu, China (Postal
610200)
Tel: +86
(28) 67055001
Fax: +86
(28) 67055000
Attn: Mr.
Guo Aihua, General Manager
With a copy to:
SINOTRANSPACIFIC
POLY LLC
19800
MacArthur Blvd. Suite 300
Irvine,
CA 92620
Tel: +1
(949) 757-4190
Fax: +1
(949) 242-2757
Attn: Jeremy
Yin, Managing Director
|
TIANWEI
Initials & Date ___________________________
|
HOKU
Initials & Date
___________________________
|
CONFIDENTIAL
Exhibit
10.110
HOKU:
HOKU
MATERIALS, INC.
1288 Ala
Moana Blvd., Ste. 220
Honolulu,
HI 96814
Attn: Mr.
Dustin Shindo, 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. 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.
14.8. 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.
14.9. 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.
14.10. 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; provided, however, that the Party
being required to disclose the material terms of this Agreement shall provide
reasonable advance notice to the other Party, and shall use commercially
reasonable efforts to obtain confidential treatment from the applicable
governing entity for all pricing and technical information set forth in this
Agreement.
14.11. 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.
14.12. The
headings are inserted for convenience of reference and shall not affect the
interpretation and or construction of this Agreement.
14.13. Words
expressed in the singular include the plural and vice-versa.
[
Remainder of page is intentionally
blank
]
|
TIANWEI
Initials & Date ___________________________
|
HOKU
Initials & Date
___________________________
|
CONFIDENTIAL
Exhibit
10.110
IN
WITNESS WHEREOF, the Parties have executed this Supply Agreement as of the date
last set forth below.
|
TIANWEI
:
|
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HOKU
:
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TIANWEI
NEW ENERGY (CHENGDU) WAFER CO., LTD.
|
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HOKU
MATERIALS, INC.
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By:
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/s/
Qiang Ding
|
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By:
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/s/
Dustin M. Shindo
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|
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Title:
|
Legal
Representative
|
|
Title:
|
President
and CEO
|
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Authorized
Signatory
|
|
|
Authorized
Signatory
|
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|
|
Date:
|
December
22, 2009
|
|
Date:
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December
22,
2009
|
|
TIANWEI
Initials & Date ___________________________
|
HOKU
Initials & Date
___________________________
|
CONFIDENTIAL
Exhibit
10.110
Appendix
1
Pricing
Schedule
|
|
|
Yr 1
|
|
Yr 2
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Yr 3
|
|
Yr 4
|
|
Yr 5
|
|
Yr 6
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Y
r
7
|
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Yr 8
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Yr 9
|
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Yr 10
|
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Total
|
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|
Tons
per Year
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
|
Price
per kg*
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
If there
is uncertainty in price between the delivery period and the total quantity for
that period based on the table above, the price assigned to the quantity shall
prevail. For example, the first
[*]
MT shall be invoiced at
$
[*]
per
kilogram.
Credit
Schedule
Pursuant
to Section 5.6, the Total Deposit shall be credited each Year according to the
following schedule:
|
|
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Yr 1
|
|
Yr 2
|
|
Yr 3
|
|
Yr 4
|
|
Yr 5
|
|
Yr 6
|
|
Yr 7
|
|
Yr 8
|
|
Yr 9
|
|
Yr 10
|
|
Total
|
|
|
Total
Credit Per Year
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
|
Net
Cash Price per kg
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
|
TIANWEI
Initials & Date ___________________________
|
HOKU
Initials & Date
___________________________
|
Appendix
1 to Supply Agreement
CONFIDENTIAL
Exhibit
10.110
Appendix
2 — Product Specifications
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
[*]
Qualified
Laboratories:
[*]
|
TIANWEI
Initials & Date ___________________________
|
HOKU
Initials & Date
___________________________
|
Appendix
2 to Supply Agreement
CONFIDENTIAL
Exhibit
10.110
APPENDIX
3
Form of
Letter of Credit
IRREVOCABLE
STANDBY LETTER OF CREDIT
|
BENEFICIARY:
|
ADVISING
BANK:
|
|
|
|
|
HOKU
MATERIALS, INC.
|
[INSERT
ADVISING BANK NAME]
|
|
ONE
HOKU WAY
|
[INSERT
BANK ADDRESS]
|
|
POCATELLO,
IDAHO 83204
|
|
Gentlemen:
We hereby establish in your favor our
Irrevocable Standby Letter of Credit No.______________, available by your drafts
at sight
on (ISSUING
BANK’S
NAME) )
for the account of _______________, up to an aggregate amount of Thirty Million
U.S. Dollars (US$30,000,000).
Alternatively, electronic drawings may
be made by authenticated Swift indicating the amount drawn and stating “Drawn
under Credit No. ___________ of (ISSUING BANK’S NAME AND ADDRESS) dated _______,
2008.
Multiple
presentations permitted.
All drafts must bear or be electronic
drawings with the clause "Drawn under Credit No. ___________ of (ISSUING BANK’S
NAME) dated __________, 2008."
This Letter of Credit is subject to an
automatic extension, without a written amendment, to extend the expiration date
for an additional period of one year from the present or each future expiration
date unless at least thirty (30) days prior to any expiration date we notify you
in writing by certified or registered mail or other similarly expeditious
receipted service at the above address that this Letter of Credit will not be
extended for any such additional period. Upon receipt by you of such
notice, you may draw hereunder on or before the then relevant expiration date by
means of your draft on us at sight or alternatively, by electronic drawings as
mentioned above.
Any and all banking charges are for the
account of the applicant.
Pursuant to U.S. Law, we are prohibited
from issuing, transferring, accepting or paying letters of credit to any party
or entity identified on the Office of Foreign Asset Control, U.S. Department of
Treasury list or subject to the denial of export privileges by the U.S.
Department of Commerce.
This Credit is issued subject to the
International Standby Practices 1998 (ISP98), International Chamber of Commerce
Publication No. 590.
It is a
condition of this letter of credit that it is transferable and may be
transferred in its entirety, but not in part, and may be successively
transferred by you or any transferee hereunder to a successor transferee(s).
Transfer under this letter of credit to such transferee must be jointly signed
by Beneficiary and shall be effected upon presentation to us of the original of
this letter of credit and any amendments hereto accompanied by a request
designating the transferee in the form of Annex A, attached hereto,
appropriately completed.
|
TIANWEI
Initials & Date ___________________________
|
HOKU
Initials & Date
___________________________
|
Appendix
3 to Supply Agreement
CONFIDENTIAL
Exhibit
10.110
We hereby
engage with you that all drawings under and in compliance with the terms and
conditions of this Credit shall be duly honored if drawn and presented on or
before June 30, 2010, the expiration date, or any extended date as provided
above, at (ISSUING BANK’S NAME AND ADDRESS).
|
|
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Sincerely,
|
|
|
|
|
|
|
|
|
|
Authorized
Signature
|
|
Authorized
Signature
|
|
TIANWEI
Initials & Date ___________________________
|
HOKU
Initials & Date
___________________________
|
Appendix
3 to Supply Agreement
CONFIDENTIAL
Exhibit
10.110
ANNEX
A
Transfer
of Letter of Credit
[Date]
Delivered
under [insert Bank name],
Irrevocable
Standby Letter of Credit No. [_____],
dated
[__________].
[_______________]
[_______________]
[_______________]
Attention:
[_______________]
Ladies
and Gentlemen:
Reference
is made to [insert Bank name], Irrevocable Standby Letter of Credit No. [_____]
dated [_______] (the “Letter of Credit”), issued by you in favor of us. Any
capitalized terms used, but not defined, herein shall have its respective
meaning as set forth in the Letter of Credit.
For value
received, the undersigned, as Beneficiary under the Letter of Credit, hereby
irrevocably assigns and transfers to [__________] (the “Transferee”) all rights
of the undersigned to draw under the Letter of Credit in their
entirety.
By this
transfer, all rights of the undersigned, as Beneficiary under the Letter of
Credit, are transferred to the Transferee, and the Transferee shall have the
sole rights with respect to the Letter of Credit relating to any amendments
thereof and any notices thereunder. All amendments to the Letter of
Credit are to be consented to by the Transferee without necessity of any consent
of or notice to the undersigned.
Simultaneously
with the delivery of this notice to you, copies of this notice are being
transmitted to the Transferee.
The
Letter of Credit is returned herewith, and we ask you to either issue a
substitute letter of credit for the benefit of the Transferee or endorse the
transfer on the reverse thereof, and forward it directly to the Transferee with
your customary notice of transfer.
Yours
faithfully
(Authorized
Signatory)
For
[BENEFICIARY]
ACKNOWLEDGED:
(Authorized
Signatory)
For
[SUCCESSOR
BENEFICIARY]
|
TIANWEI
Initials & Date ___________________________
|
HOKU
Initials & Date
___________________________
|
Appendix
3 to Supply Agreement
CONFIDENTIAL
Exhibit
10.110
APPENDIX
4
Officer’s
Certificate
TO: TIANWEI
NEW ENERGY (CHENGDU) WAFER CO., LTD.
This
officer’s certificate (this “
Certificate
”)
is being delivered by Hoku Materials, Inc. (“
HOKU
”), to
Tianwei New Energy (Chengdu) Wafer Co., Ltd. (“
TIANWEI
”),
pursuant to Section 13.3 of that certain Supply Agreement dated as of August __,
2008, by and between HOKU and TIANWEI (the “
Supply
Agreement
”). Capitalized terms not otherwise defined in this
Certificate are defined in the Supply Agreement.
On behalf
of HOKU, the undersigned hereby certifies that as of the date hereof, the
aggregate of all of HOKU’s binding polysilicon sales commitments (including the
Supply Agreement) do not exceed the rated monthly production capacity of all
polysilicon reactors ordered for, or installed at, HOKU Facilities, as certified
by the manufacturer thereof. Subject to the foregoing, this certification shall
not apply to (A) supply contracts for additional capacity from Facility
expansion, including pre-sales of potential Facility expansions, or from
increased productivity of the Reactors, or (B) entering into long-term contracts
for the sale of polysilicon that does not meet the Product
Specifications.
|
By:
|
|
|
|
Dustin
Shindo, Chief Executive Officer
|
|
|
|
|
Date:
|
|
|
TIANWEI
Initials & Date ___________________________
|
HOKU
Initials & Date
___________________________
|
Appendix
3 to Supply Agreement
CONFIDENTIAL
Exhibit
10.110
APPENDIX
5
Security
interest agreement
|
TIANWEI
Initials & Date ___________________________
|
HOKU
Initials & Date
___________________________
|
Appendix
3 to Supply Agreement
Exhibit 10.111
[*]
= 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.
AMENDED
AND RESTATED SUPPLY AGREEMENT NO. 2
This
Amended and Restated Supply Agreement No. 2 (this “
Agreement
”)
is made as of the last date set forth on the signature page hereto (the “
Effective
Date
”) between TIANWEI NEW ENERGY (CHENGDU) WAFER CO., LTD., a People’s
Republic of China company (hereinafter “
TIANWEI
”)
and
HOKU MATERIALS,
INC.,
a Delaware corporation (hereinafter “
HOKU
”). HOKU
and TIANWEI are sometimes referred to in the singular as a “
Party
” or
in the plural as the “
Parties
”.
Recitals
WHEREAS,
HOKU and TIANWEI are parties to that certain Supply Agreement No. 2 dated as of
September 14, 2008, as amended by that Amendment to Supply Agreement No. 2 dated
as of October 24, 2008, and that certain Amendment No. 2 to Supply Agreement No.
2 dated as of May 2, 2009 (as amended, “
Supply Agreement
No. 2
”), pursuant to which, in addition to the
[*]
metric
tons of product to be sold pursuant to Supply Agreement No. 1 (as defined
below), 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,
TIANWEI has paid to HOKU a total of Thirty-five Million US Dollars
(US$35,000,000) as of the date hereof, in product prepayments and advances (the
“
Prepayments
”),
in fulfillment of TIANWEI’s obligations under Sections 5.1, 5.2, and 5.3 of
Supply Agreement No. 2, and in partial fulfillment of TIANWEI’s obligation under
Section 5.4 of Supply Agreement No. 2.
WHEREAS,
TIANWEI is obligated to pay HOKU an additional One Million U.S. Dollars
(US$1,000,000) of the Fourth Deposit upon HOKU’s first shipment of Products
pursuant to Section 5.4 of Supply Agreement No. 2.
WHEREAS,
HOKU and TIANWEI NEW ENERGY HOLDINGS CO., LTD. (“
TIANWEI
PARENT
”) are parties to that certain Securities Purchase Agreement dated
as of September 28, 2009, pursuant to which TIANWEI PARENT has agreed to cause
TIANWEI to convert US$22,222,222.22 of the Prepayments into shares of
common stock of HOKU’s parent company, Hoku Scientific, Inc., subject to the
execution of this Agreement.
WHEREAS,
the Parties have agreed to amend and restate the Supply Agreement No. 2 in its
entirety to read as set forth in this Agreement.
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.
Definitions
.
The
following terms used in this Agreement shall have the meanings set forth
below:
|
TIANWEI
Initials & Date ___________________________
|
HOKU
Initials & Date
___________________________
|
1.1. “
Affiliate
”
shall mean, with respect to either Party to this Agreement, any entity that is
controlled by or under common control with such Party.
1.2. “
Agreement
”
shall mean this Amended and Restated Supply Agreement No. 2 and all appendices
annexed to this Agreement as the same may be amended from time to time in
accordance with the provisions hereof.
1.3. “
Effective
Date
” has the meaning set forth in the first paragraph of this
Agreement.
1.4. “
First Shipment
Date
” shall mean the first day after April 1, 2010, when HOKU commences
deliveries to TIANWEI of Products pursuant to this Agreement.
1.5. “
Facility
”
shall mean any facility used by HOKU for the production of the
Product.
1.6. “
Independent
Expert
” means any Qualified Laboratory that is reasonably acceptable to
each of HOKU and TIANWEI; 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.
1.7. “
Minimum Annual
Quantity of Product
” means
[*]
metric
tons (
[*]
kilograms).
1.8. “
Product
”
shall mean the raw polysilicon in chunk form manufactured by HOKU and sold to
TIANWEI pursuant to this Agreement.
1.9. “
Product
Specifications
” shall mean the quality and other specifications set forth
on Appendix 2 to this Agreement.
1.10. “
Qualified
Laboratory
” means each qualified laboratory set forth on
Appendix
2
to this Agreement.
1.11. “
Supply Agreement
No. 1
” means that certain Amended and Restated Supply Agreement No. 1,
between TIANWEI and
HOKU,
dated as of December
22
,
2009
.
1.12. “
Term
”
shall mean the period during which this Agreement is in effect, as more
specifically set forth in Section 9 of this Agreement.
1.13. “
Total
Deposit
” means US$13,777,777.78.
1.14. “
Year
”
shall mean each of the ten (10) twelve-month periods commencing on the First
Shipment Date.
2.
Ordering
. Starting
on the First Shipment Date and each Year during the term of this Agreement
thereafter, TIANWEI agrees to purchase from HOKU, and HOKU agrees to sell to
TIANWEI, 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
TIANWEI for
[*]
metric
tons of Product that cannot be cancelled during the term of this Agreement,
except as set forth in Section 9 below.
|
TIANWEI
Initials & Date ___________________________
|
HOKU
Initials & Date
___________________________
|
3.
Supply
Obligations
.
3.1. 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 pursuant to Section 4.1 below; provided however, that if
HOKU fails to deliver a monthly shipment, then HOKU may deliver any deficiency
within
[*]
days
without breaching this section or incurring any purchase price adjustment
(pursuant to Section 3.3 below). The foregoing
[*]
day grace
period shall not apply to the first shipment that is scheduled for April 30,
2010. Only shipments in excess of each scheduled monthly shipment
pursuant to the Shipment Schedule (as defined in Section 4.1 below) will be
considered as making up a quantity deficiency as stated above. Notwithstanding
the preceding sentence, HOKU shall promptly inform TIANWEI of any occurrence
which will, or may be expected to, result in material delay of the shipment date
or quantity of any scheduled monthly shipment set forth in the Shipment
Schedule, or any other material deviations from the Shipment
Schedule. HOKU shall use all commercially reasonable efforts to make
complete delivery of Products scheduled for monthly shipment pursuant to the
Shipment Schedule or, if later, as soon as commercially practicable. In the
event that HOKU fails to deliver Products in accordance with the Shipment
Schedule, TIANWEI may cause HOKU at HOKU’s own shipping responsibility, cost and
expense to deliver Products to the locations designated by TIANWEI by rail or
ocean cargo vessel. At any time during the term of this Agreement, HOKU may ship
to TIANWEI up to the full cumulative balance of Minimum Annual Quantity of
Product to be shipped through the end of this Contract (an “
Excess
Shipment
”) with TIANWEI’s written consent. 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.
3.2. HOKU
intends to manufacture the Products at its Facility; however, notwithstanding
anything to the contrary herein, HOKU may deliver to TIANWEI Products that are
manufactured by a third party other than HOKU (“
Third Party
Products
”), where HOKU is acting only as a reseller or distributor of
such Products; and provided that the Products meet the Product Specifications
and price set forth in this Agreement; and, provided further, that HOKU shall
clearly label all Third Party Products and shall remain primarily liable for the
acts and omissions of such third party producer in failing to meet the Quality
Specifications. HOKU shall notify TIANWEI in writing prior to the
delivery of Third Party Products.
3.3. Except
in the case of a force majeure pursuant to Section 12 below, if HOKU does not
supply any Products pursuant to Section 3.1 or 3.2 within
[*]
days of
the scheduled delivery date, HOKU will provide TIANWEI with a purchase price
adjustment. Such purchase price adjustment shall be
[*]
percent
(
[*]
%)
of the value of the respective delayed Products for each week or part thereof
that the Product shipment (or part thereof) is delayed beyond the
[*]
day grace
period. Any purchase price adjustment as a result of this Section 3.3
will be immediately creditable by HOKU to the future invoiced price of the
Products to be paid by TIANWEI commencing upon the date on which the purchase
price reduction becomes due. In lieu of making a cash payment to
TIANWEI pursuant to this Section 3.3, HOKU may, at its option, pay for such
purchase price adjustment in the form of a credit issued for future shipments of
Products. Notwithstanding anything to the contrary, the maximum amount of such
purchase price adjustment shall not exceed
[*]
percent
(
[*]
%)
of the value of the respective delayed Products. Monthly shipments
which are delayed beyond
[*]
days
shall be deemed to constitute a material breach of this Agreement pursuant to
Section 9.2.1 below. Notwithstanding the foregoing, if TIANWEI fails
to make a payment to HOKU within the
[*]
-day
period set forth in Section 5.5 below, HOKU shall not be required to supply any
Product to TIANWEI until HOKU has received the past due amount including any
interest payable thereon pursuant to this Agreement. For the
avoidance of doubt, TIANWEI’s right to reduce the purchase price pursuant to
this Section 3.3 shall not apply if HOKU is not fulfilling its supply
obligations for this reason.
|
TIANWEI
Initials & Date ___________________________
|
HOKU
Initials & Date
___________________________
|
3.4. HOKU
hereby covenants and agrees that during the term of this Agreement, and provided
that TIANWEI is not in breach of any material term of this Agreement, including,
without limitation, its payment obligations hereunder, HOKU shall not ship any
Products to any third party that is not one of HOKU’s Other Customers (e.g.,
spot market sales), until HOKU has satisfied its delivery obligations to TIANWEI
pursuant to Section 3.1 of this Agreement.
4.
Shipping &
Delivery
.
4.1. Except
as provided in Section 3.2 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
[*]
days
prior to the applicable Year. The Shipment Schedule shall provide for
approximately equal monthly shipments that add up to the Minimum Annual Quantity
of Products.
4.2. HOKU
will use commercially reasonable efforts to make available to TIANWEI its first
shipment of Products on or before April 1, 2010.
4.3. Notwithstanding
anything to the contrary in herein, HOKU shall have no obligation to ship any
Products to TIANWEI until after HOKU has fulfilled its existing shipment
obligations to Shanghai Alex New Energy Co., Ltd., Wuxi Suntech Power Co., Ltd.,
Solarfun Power Hong Kong Limited, Jiangxi Jinko Solar Co., Ltd. and Wealthy Rise
International, Ltd. (the “
Other
Customers
”) as of the date hereof, and no price adjustments or penalties
shall accrue on any resulting late shipments of Products to
TIANWEI.
5. Payments
& Advances.
5.1. HOKU
acknowledges receipt from TIANWEI of the prepayment of Ten Million U.S. Dollars
(US$10,000,000) via wire transfer of immediately available funds (the “
Initial
Deposit
”).
5.2. HOKU
acknowledges receipt from TIANWEI of an additional sum of Twelve Million U.S.
Dollars (US$12,000,000) (the “
Second
Deposit
”) as an advance payment for Products to be delivered under this
Agreement.
5.3. HOKU
acknowledges receipt from TIANWEI of an additional sum of Twelve Million U.S.
Dollars (US$12,000,000) (the “
Third
Deposit
”) as an advance payment for Products to be delivered under this
Agreement.
5.4. HOKU
acknowledges receipt from TIANWEI of an additional sum of One Million U.S.
Dollars (US$1,000,000), and TIANWEI agrees that it shall pay in cash to HOKU the
additional sum of One Million U.S. Dollars (US$1,000,000) (collectively, the
“
Fourth
Deposit
” and together with the Second Deposit and the Third Deposit, the
“
Main
Deposit
”) as an advance payment for Products to be delivered under this
Agreement. Payment of the Fourth Deposit shall be made when HOKU
completes the shipment to TIANWEI of a cumulative aggregate of
[*]
metric
tons of Products pursuant to Section 4 of this Agreement (including Products
shipped in calendar year 2009).
5.5. HOKU
shall invoice TIANWEI at or after the time of each shipment of Products to
TIANWEI. Taxes, customs and duties, if any, will be identified as separate items
on HOKU invoices. All invoices shall be sent to TIANWEI’s address as provided
herein. Payment terms for all invoiced amounts shall be
[*]
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
11 below, shipments to TIANWEI shall be credited against the Total Deposit on a
pro rata
basis
during the first through tenth Year from the First Shipment Date. Unless HOKU is
entitled to retain the Total Deposit as liquidated damages pursuant to Section
11, shipments to TIANWEI shall be credited against the Total Deposit in
accordance with the Credit Schedule on Appendix 1.
|
TIANWEI
Initials & Date ___________________________
|
HOKU
Initials & Date
___________________________
|
5.6. 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 TIANWEI, provided that TIANWEI is
legally or contractually obliged to pay such taxes. HOKU and TIANWEI shall work
together to eliminate the possibility of taxes, but if there are any assessed,
HOKU shall promptly remit to TIANWEI in full any such taxes paid by TIANWEI
which are refunded to HOKU in whole or in part. TIANWEI 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.
5.7. Late
payments and outstanding balances shall accrue interest at the lesser of 18% per
annum or the maximum allowed by law.
6.
Security Interest
.
HOKU hereby grants to TIANWEI a continuing security interest in all of the
tangible and intangible assets related to HOKU’s polysilicon business pursuant
to the terms of the Security Interest Agreement dated the date hereof, a copy of
which is attached hereto as Appendix 3 (the “
Security Interest
Agreement
”).
7.
Product Quality
Guarantee
.
7.1. HOKU
warrants to TIANWEI that the Products shall meet the Product Specifications. For
each shipment, this warranty shall survive for
[*]
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 from TIANWEI,
and TIANWEI’s compliance with HOKU’s instructions, refund in full, including all
direct costs, or replace, at TIANWEI’s sole option and at HOKU’s expense, any
Product which does not meet the Product Specifications, and TIANWEI shall comply
with the inspection and return goods policy described in Section 8 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
TIANWEI. 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.
7.2. HOKU
EXPRESSLY DISCLAIMS ALL OTHER WARRANTIES, WHETHER EXPRESS, IMPLIED OR STATUTORY,
INCLUDING THE WARRANTIES OF MERCHANTABILITY, AND FITNESS FOR A PARTICULAR
PURPOSE. HOKU’s sole responsibility and TIANWEI’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 therefor plus the direct expenses associated with
the refund or replacement; 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.
|
TIANWEI
Initials & Date ___________________________
|
HOKU
Initials & Date
___________________________
|
7.3. HOKU
shall, at its own expense, indemnify and hold TIANWEI 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 TIANWEI or
TIANWEI’s Affiliates alleging any such infringement. TIANWEI agrees
that: (i) TIANWEI shall give HOKU prompt notice in writing of any
such suit; (ii) if HOKU provides evidence reasonably satisfactory to TIANWEI of
HOKU’s financial ability to defend the matter vigorously and pay any reasonably
foreseeable damages, TIANWEI shall permit HOKU, through counsel of HOKU’s
choice, to answer the charge of infringement and defend such suit (but TIANWEI,
or TIANWEI’s Affiliate may be represented by counsel and participate in the
defense at its own expense); and (iii) TIANWEI 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 TIANWEI, its
officers, agents, or employees, from any losses, damages, liabilities, costs or
expenses which may arise out of the acts of omissions of HOKU.
8.
Inspection and Return Goods
Policy
.
8.1. An
inspection of appearance of each shipment of Product shall be made by TIANWEI in
accordance with sound business practice upon the delivery of the Product, and in
no case later than
[*]
weeks
after delivery at TIANWEI’s factory. TIANWEI 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 TIANWEI discovers under
the inspection of appearance. All Products shall be double-packaged
in polyethylene bags suitable for maintaining the quality of the Products and
for long-distance overseas shipping, which will be weighed and bar-coded for
tracking purposes prior to shipment.
8.2. TIANWEI
shall perform final inspection of the Product upon introducing the Product into
TIANWEI’s production process. Such inspection shall take place during the
Warranty Period. If the Product does not meet the Product
Specifications, TIANWEI shall notify HOKU in writing without undue delay after
the inspection and, together with the notification, submit documentary evidence
of the result of the final inspection whereupon HOKU shall have the right to
undertake its own inspection prior to any return of the Products pursuant to
Section 8.3 below. HOKU is required to acknowledge TIANWEI’s
notification within two (2) business days and provide an action plan within ten
(10) business days thereafter to solve the issue. If no such action
plan is received by TIANWEI within six (6) weeks, it shall be deemed that HOKU
has accepted the returned Products. HOKU reserves the right to
reverse any credit issued to TIANWEI if, upon return, such Product is determined
by an Independent Expert not to be defective. 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 7.1 above. The
fees and expenses of the Independent Expert shall be paid solely by the party
that does not succeed in the dispute.
8.3. Products
may be returned to HOKU within the later of (a)
[*]
days
after discovery of a defect consistent with Sections 8.1 and 8.2 above; and (b)
[*]
days after HOKU completes its inspection and confirms the defect pursuant to
Section 8.2 above, for replacement or a refund including all other direct
expenses. To assure prompt handling, HOKU shall provide TIANWEI a
return goods authorization number within 48 hours of TIANWEI’s
request. Provided that HOKU communicates this number to TIANWEI
within such timeframe, TIANWEI 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.
|
TIANWEI
Initials & Date ___________________________
|
HOKU
Initials & Date
___________________________
|
9.
Term and
Termination
.
9.1. The
term of this Agreement shall begin on the Effective Date and provided that the
first delivery of the Product under this Agreement shall occur on June 30, 2010,
or earlier, and unless previously terminated as hereinafter set forth, shall
remain in force for a period of ten Years beginning with the First Shipment
Date.
9.2. 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:
9.2.1. 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 3.3 above; and provided, further that such sixty
(60) day cure period shall not apply to TIANWEI’s failure to make any payment to
HOKU pursuant to this Agreement. In the event of TIANWEI’s failure to
make payment on the 60-day payment terms set forth in Section 5.5 hereof,
termination by HOKU shall require the issuance of a written notice of default
containing the threat of immediate termination if payment is not made within an
additional grace period of not less than ten (10) business days. For
purposes of this Section 9.2.1, 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. In addition, TIANWEI
shall have the right to terminate this Agreement if HOKU breaches in any
material respect any of its material obligations under the Security Interest
Agreement.
9.2.2. 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;
9.2.3. If
the other Party (i) becomes unable, or admits in writing its inability, to pay
its debts generally as they mature, (ii) becomes insolvent (as such term
may be defined or interpreted under any applicable statute); or
9.2.4. In
accordance with the provisions of Section 12 (Force Majeure) below; provided,
however, that TIANWEI may not terminate this Agreement pursuant to Section 12 if
HOKU is supplying Products to TIANWEI pursuant to Section 3.2 of this
Agreement.
9.2.5. Without
limiting the foregoing, TIANWEI shall have the right to terminate this Agreement
if the First Shipment Date does not occur on or before June 30,
2010.
9.3. HOKU
shall have the right to terminate this Agreement if TIANWEI has failed to pay
the Fourth Deposit in accordance with Section 5.4 of this Agreement, in which
case HOKU shall retain the Initial Deposit, the Second Deposit and the Third
Deposit as liquidated damages.
9.4. Upon
the expiration or termination of this Agreement howsoever arising, the following
Sections shall survive such expiration or termination: Sections 1 (Definitions);
Section 7 (Product Quality Guarantee), Section 8 (Inspection and Return Goods
Policy); Section 9 (Term and Termination); Section 10 (Liability); Section 11
(Liquidated Damages); and Section 13 (General Provisions).
|
TIANWEI
Initials & Date ___________________________
|
HOKU
Initials & Date
___________________________
|
9.5. If
TIANWEI terminates this Agreement pursuant to Section 9.2.1, 9.2.2, 9.2.3,
9.2.4, 9.2.5 or 12 then any funds remaining on the Total Deposit on such date of
termination shall be returned to TIANWEI; provided however that if TIANWEI is in
material breach of this Agreement at the time it terminates this Agreement, then
HOKU shall not be required to repay any remaining amount of the Total Deposit up
to the amounts of HOKU’s direct loss from such material breach (unless TIANWEI
cures such breach within the applicable cure period) or TIANWEI’s other
outstanding and unpaid obligations hereunder (including, without limitation,
obligations under Section 11).
9.6. If
HOKU terminates this Agreement pursuant to Section 9.2.1, 9.2.2, 9.2.3, 9.2.4,
or 12 then HOKU shall be entitled to retain the Total Deposit including any
funds remaining on the Total Deposit on such date of termination in accordance
with Section 11. “
Funds
remaining
” on the Total Deposit are funds not applied against TIANWEI’s
purchase of Product, pursuant to Section 5.5 above, for Product actually shipped
to TIANWEI hereunder.
9.7. If
TIANWEI terminates this Agreement pursuant to Section 9.2.1 due to HOKU’s breach
of Section 3.4, then 150% of the funds remaining on the Total Deposit on such
date of termination shall be returned to TIANWEI within fourteen (14) calendar
days, with any late payment accruing interest pursuant to Section 5.7 above;
provided however that if TIANWEI is in material breach of this Agreement at the
time it terminates this Agreement, then HOKU shall not be required to repay any
portion of the Total Deposit up to the amounts of HOKU’s direct loss from such
material breach (unless TIANWEI cures such breach within the applicable cure
period) or TIANWEI’s other outstanding and unpaid obligations hereunder
(including, without limitation, obligations under Section 11).
10.
Liability
.
10.1. IN
NO EVENT SHALL EITHER PARTY BE LIABLE FOR INDIRECT, SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES OR FOR EXEMPLARY OR PUNITIVE DAMAGES, EVEN IF TIANWEI OR
HOKU HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
10.2. NEITHER
PARTY’S TOTAL LIABILITY TO THE OTHER FOR ANY KIND OF LOSS, DAMAGE OR LIABILITY
ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT, UNDER ANY THEORY OF
LIABILITY, SHALL EXCEED IN THE AGGREGATE THE TOTAL DEPOSIT, EXCEPT (A) WITH
RESPECT TO TIANWEI’S CONTINUING OBLIGATION TO PURCHASE THE PRODUCTS AS SET FORTH
HEREIN, AND (B) HOKU’S OBLIGATION TO PAY 150% OF THE FUNDS REMAINING ON THE
TOTAL DEPOSIT PURSUANT TO SECTION 9.7 ABOVE.
11.
Liquidated
Damages
.
11.1. THE
PARTIES ACKNOWLEDGE AND AGREE THAT ANY BREACH OF THIS AGREEMENT BY TIANWEI 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 9.2.1, 9.2.2, 9.2.3, 9.2.4,
9.3 or 12, THEN HOKU SHALL BE ENTITLED TO RETAIN AS LIQUIDATED DAMAGES, THE
TOTAL DEPOSIT (INCLUDING ANY REMAINING PORTION THEREOF NOT CREDITED AGAINST
PRODUCT SHIPMENTS). ANY AMOUNTS DUE FOR UNDELIVERED PRODUCT UNDER
THIS AGREEMENT ARE STILL DUE, UNLESS OTHERWISE AGREED BY BOTH PARTIES IN
WRITING.
|
TIANWEI
Initials & Date ___________________________
|
HOKU
Initials & Date
___________________________
|
11.2. THE
PARTIES ACKNOWLEDGE AND AGREE THAT ANY BREACH OF SECTION 3.4 OF THIS AGREEMENT
BY HOKU MAY CAUSE IRREPERABLE AND IMMEASURABLE DAMAGE TO
TIANWEI. BECAUSE IT IS DIFFICULT TO MEASURE THESE DAMAGES, IN THE
EVENT THAT THIS AGREEMENT IS TERMINATED BY TIANWEI PURSUANT TO SECTION 9.2.1 DUE
TO HOKU’S BREACH OF SECTION 3.4, THEN HOKU SHALL BE OBLIGATED TO PAY AS
LIQUIDATED DAMAGES, 150% OF THE FUNDS REMAINING ON THE TOTAL
DEPOSIT.
12.
Force
Majeure
. Neither Party shall be liable to the other Party for
failure of or delay in performance of any obligation under this Agreement,
directly, or indirectly, owing to acts of God, war, war-like condition,
embargoes, riots, strike, lock-out and other events beyond its reasonable
control which were not reasonably foreseeable and whose effects are not capable
of being overcome without unreasonable expense and/or loss of time to the
affected Party (i.e., the Party that is unable to perform). If such failure or
delay occurs, the affected Party shall notify the other Party of the occurrence
thereof as soon as possible, and the Parties shall discuss the best way to
resolve the event of force majeure. If the conditions of Force Majeure continue
to materially impede performance of any material obligation under this Agreement
for a period of more than three (3) consecutive calendar months, then the
non-affected Party shall be entitled to terminate this Agreement by 30 days’
prior written notice to the other Party. For the purposes of this
Section 12, the inability of TIANWEI to receive, accept or take delivery of
Products that have been made available by HOKU pursuant to this Agreement shall
not constitute an event of force majeure.
13.
General
Provisions
.
13.1. HOKU
hereby represents and warrants to TIANWEI that as of the Effective Date of this
Agreement: (i) the anticipated production output for its planned polysilicon
production Facility in Pocatello, Idaho, is not less than 4,000 metric tons per
year (the “
Rated
Capacity
”); and (ii) the aggregate of HOKU’s firm sales commitments for
the first Year under this Agreement, including all firm commitments to TIANWEI
under this Agreement and Supply Agreement No. 1, and firm commitments to HOKU’s
Other Customers, does not exceed the Rated Capacity.
13.2. TIANWEI
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. TIANWEI 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 TIANWEI, and
TIANWEI hereby represents and warrants that neither HOKU, nor to TIANWEI’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 TIANWEI, whether in money, property, or services (i) to obtain
favorable treatment in securing business from TIANWEI, (ii) to pay for favorable
treatment for business secured from TIANWEI, or (iii) to obtain special
concessions or for special concessions already obtained from TIANWEI, for or in
respect of HOKU, in violation of any legal requirement or applicable
law.
13.3. This
Agreement shall be construed under and governed by the laws of the State of
California, U.S.A.
|
TIANWEI
Initials & Date ___________________________
|
HOKU
Initials & Date
___________________________
|
13.4.
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.
13.5.
HOKU may assign this Agreement to any of its
Affiliates, and may assign its rights under this Agreement to any collateral
agent as collateral security for HOKU’s secured obligations in connection with
the financing of a HOKU Facility, without the consent of
TIANWEI. When HOKU assigns this agreement to any of its Affiliates,
such Affiliate receiving the assignment must have the capacity to fulfill the
remaining contract obligations and under the circumstance that such Affiliate is
unable to fulfill the obligations, HOKU shall be held jointly and severally
liable. Except as stated in the previous sentences, neither HOKU nor
TIANWEI 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.
13.6.
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 13.6 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.
|
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:
TIANWEI:
TIANWEI
NEW ENERGY (CHENGDU) WAFER CO., LTD.
Road 8,
Southwest Airport Economical Development Zone Chengdu, China (Postal
610200)
Tel: +86
(28) 67055001
Fax: +86
(28) 67055000
Attn: Mr.
Guo Aihua, General Manager
With a copy to:
SINOTRANSPACIFIC
POLY LLC
19800
MacArthur Blvd. Suite 300
Irvine,
CA 92620
Tel: +1
(949) 757-4190
Fax: +1
(949) 242-2757
Attn: Jeremy
Yin, Managing Director
|
TIANWEI
Initials & Date ___________________________
|
HOKU
Initials & Date
___________________________
|
HOKU:
HOKU
MATERIALS, INC.
1288 Ala
Moana Blvd., Ste. 220
Honolulu,
HI 96814
Attn: Mr.
Dustin Shindo, CEO
Facsimile: +1
(808) 440-0357
13.7. 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.
13.8. 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.
13.9. 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.
13.10. 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.
13.11. 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; provided, however, that the Party
being required to disclose the material terms of this Agreement shall provide
reasonable advance notice to the other Party, and shall use commercially
reasonable efforts to obtain confidential treatment from the applicable
governing entity for all pricing and technical information set forth in this
Agreement.
13.12. 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. Except where Supply Agreement No. 1
is specifically amended by this Agreement, Supply Agreement No. 1 shall continue
to be in full force and effect without modification after the execution of this
Agreement.
13.13. The
headings are inserted for convenience of reference and shall not affect the
interpretation and or construction of this Agreement.
13.14. Words
expressed in the singular include the plural and vice-versa.
|
TIANWEI
Initials & Date ___________________________
|
HOKU
Initials & Date
___________________________
|
13.15. This
Agreement may be executed in one or more counterparts, including counterparts
transmitted by telecopier, telefax, or e-mail PDF. All such
counterparts, when taken together, shall constitute one and the same binding
Agreement on the Parties hereto.
[
Remainder of page is intentionally
blank
]
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TIANWEI
Initials & Date ___________________________
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HOKU
Initials & Date
___________________________
|
Exhibit 10.111
IN
WITNESS WHEREOF, the Parties have executed this Supply Agreement No. 2 as of the
date last set forth below.
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TIANWEI
:
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HOKU
:
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TIANWEI
NEW ENERGY (CHENGDU) WAFER CO., LTD.
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HOKU
MATERIALS, INC.
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By:
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/s/ Qiang Ding
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By:
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/s/ Dustin M. Shindo
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Title:
|
Legal Representative
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|
Title:
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President and CEO
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Authorized
Signatory
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Authorized
Signatory
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Date:
|
December 22, 2009
|
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Date:
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December 22,
2009
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Signature
Page to Supply Agreement No
. 2
Appendix
1
Pricing
Schedule
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Yr 1
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Yr 2
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Yr 3
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Yr 4
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Yr 5
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Yr 6
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Y
r
7
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Yr 8
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Yr 9
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Yr 10
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Total
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Tons
per Year
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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Price
per kg*
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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If there
is uncertainty in price between the delivery period and the total quantity for
that period based on the table above, the price assigned to the quantity shall
prevail. For example, the first
[*]
MT shall
be invoiced at $
[*]
per
kilogram.
Credit
Schedule
Pursuant
to Section 5.6, the Total Deposit shall be credited each Year according to the
following schedule:
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Yr 1
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Yr 2
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Yr 3
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Yr 4
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Yr 5
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Yr 6
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Yr 7
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Yr 8
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Yr 9
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Yr 10
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Total
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Total
Credit Per Year
|
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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Net
Cash Price per kg
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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TIANWEI
Initials & Date ___________________________
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HOKU
Initials & Date
___________________________
|
Appendix
1 to Supply Agreement No. 2
Exhibit 10.111
Appendix
2 — Product Specifications
|
[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
Qualified
Laboratories:
[*]
|
TIANWEI
Initials & Date ___________________________
|
HOKU
Initials & Date
___________________________
|
Appendix
2 to Supply Agreement No. 2
Exhibit 10.111
Appendix
3
Security
Interest Agreement
|
TIANWEI
Initials & Date ___________________________
|
HOKU
Initials & Date
___________________________
|
Appendix
2 to Supply Agreement No. 2
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.
“
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.
“
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.
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.
(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.
(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.
(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);
(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.
(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
(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.
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.
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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.
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TIANWEI
NEW ENERGY (CHENGDU) WAFER CO., LTD.
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HOKU
MATERIALS, INC.
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By:
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By:
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Name:
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Name:
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Title:
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Title:
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Exhibit
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
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Re:
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Loan
Implementation Agreement
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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:
“
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.”
(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
unen
forceable
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.
(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.
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Very
truly yours,
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TIANWEI
NEW ENERGY
HOLDINGS
CO., LTD
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By:
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/s/
Qiang Ding
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Title:
Legal
Representative
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Agreed
and accepted:
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HOKU
SCIENTIFIC, INC.
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By:
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/s/
Dustin M. Shindo
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Title:
President and CEO
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HOKU
MATERIALS, INC.
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By:
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/s/
Dustin M. Shindo
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Title:
President and CEO
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[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:
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
”).
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.
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.
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4.
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INTEREST
RATE ON THE LOAN, INTEREST CALCULATION AND
SETTLEMENT
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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
”).
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5.
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DELIVERY
OF THE ENTRUSTMENT FUNDS AND RELEASE OF THE
LOAN
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5.1
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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.
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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.
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5.2
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Conditions
precedent to advance the Loan:
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(1)
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Party
C has received the entrustment funds, and such funds are free of seizure,
freezing or mandatory transfer by any competent
authority;
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(2)
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Party
C has received the Notification to Release Entrustment Loan from Party
B;
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(3)
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Party
A has opened a special foreign exchange deposit account, where the Loan is
in a foreign currency;
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(4)
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neither
Party A nor Party B has breached any provision
herein.
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5.3
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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.
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5.4
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The
Loan shall be advanced in accordance with the schedule specified
below:
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The
advance schedule shall be as follows:
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Advance
Date(d/m/y)
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Amount
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1
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effective
date of this Contract
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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.
|
|
|
6.1
|
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.
|
|
|
7.1
|
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.
|
|
|
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.
|
|
|
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.
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.
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:
|
|
|
(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
|
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.
|
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,
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(i)
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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
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(ii)
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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.
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(3)
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If
both the entrustment relationship and the lender-borrower relationship
are invalid or
rescinded,
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(i)
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where
Party C has not delivered the entrustment funds to Party A, it shall
return the entrustment funds to Party B without any
interest;
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(ii)
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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
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(iii)
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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.
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15.5
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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.
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15.6
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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.
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15.7
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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.
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15.8
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Notification
to Release Entrustment Loan, conformations, acknowledgements, certificates
and other documents relating to this Contract shall constitute integral
parts of this Contract.
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15.9
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This
Contract shall be executed in six (6)
counterparts.
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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).