Exhibit 10.34
CONFIDENTIAL
SUPPLY AGREEMENT
This Agreement is made as of the last date set forth on the signature page
hereto (the "EFFECTIVE DATE") between Solarfun Power Hong Kong Limited, a
company registered in Hong Kong (hereinafter "SOLARFUN") and Hoku Scientific,
INC., a Delaware corporation (hereinafter "HOKU"). HOKU and SOLARFUN are
sometimes referred to in the singular as a "PARTY" or in the plural as the
"PARTIES".
RECITALS
Whereas, HOKU desires to supply polysilicon to SOLARFUN for its general use
beginning in calendar year 2009 for a continuous period of eight years from the
date of the first shipment;
Whereas, in exchange for HOKU's agreement to allocate the supply of polysilicon,
SOLARFUN desires to provide HOKU with a firm order for polysilicon upon the
terms and conditions provided herein;
NOW, THEREFORE, in furtherance of the foregoing Recitals and in consideration of
the mutual covenants and obligations set forth in this Agreement, the Parties
hereby agree as follows:
1. 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.
1.2. "AGREEMENT" shall mean this Supply Agreement and all appendices
annexed to this Agreement as the same may be amended from time to time
in accordance with the provisions hereof.
1.3. "ESCROW ACCOUNT" is the bank deposit account created with the Escrow
Agent pursuant to the Escrow Agreement.
1.4. "ESCROW AGENT" shall mean (A) a bank that is domiciled in and
organized under the laws of one of the fifty states of the United
States of America, and which is reasonably acceptable to HOKU, or (B)
a bank located in China whose obligations and responsibilities are
guaranteed by a bank that is domiciled in and organized under the laws
of one of the fifty states of the United States of America, and which
is reasonably acceptable to HOKU, or (C) any other bank that is
acceptable to HOKU in its sole discretion, or (D) any successor escrow
agent appointed pursuant to the Escrow Agreement.
1.5. "ESCROW AGREEMENT" has the meaning set forth in Section 5.4.1 below.
1.6. "FIRST SHIPMENT DATE" shall mean the first day of the calendar month
in which HOKU commences deliveries to SOLARFUN of Products pursuant to
this Agreement.
1.7. "FACILITY" shall mean any facility used by HOKU for the production of
the Product.
1.8. "MINIMUM ANNUAL QUANTITY OF PRODUCT" means two hundred metric tons
(200,000 kilograms) of Product during the first Year and seven hundred
fifty metric tons (750,000 kilograms) during each of the second
through eighth Year, inclusive.
1.9. "PRODUCT" shall mean the raw polysilicon in chunk form manufactured by
HOKU and sold to SOLARFUN pursuant to this Agreement.
SOLARFUN Initials & Date /s/ WS November 15, 2007 HOKU Initials & Date /s/ DS November 19, 2007
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CONFIDENTIAL
1.10. "PRODUCT SPECIFICATIONS" shall mean the quality and other
specifications 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" shall mean all deposits or prepayments made by
SOLARFUN to HOKU hereunder including without limitation the Initial
Deposit and the Main Deposit.
1.13. "YEAR" shall mean each of the eight (8) 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, SOLARFUN agrees to purchase from HOKU, and
HOKU agrees to sell to SOLARFUN, 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 SOLARFUN for 5,450
metric tons of Product that cannot be cancelled during the term of this
Agreement, except as set forth in Section 9 below.
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 thirty (30) days
without breaching this section or incurring any purchase price
adjustment (pursuant to Section 3.3 below). At any time during the
term of this Agreement, HOKU may ship to SOLARFUN 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
SOLARFUN'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 750 metric
tons, and if HOKU delivers 750 metric tons in January, then the next
shipment of 750 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
SOLARFUN Products that are manufactured by a third party other than
HOKU, 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.
3.3. Except in the case of a force majeure pursuant to Section 12 below, if
at any time after September 30, 2009, HOKU does not supply any
Products pursuant to Section 3.1 or 3.2 within thirty (30) days of the
scheduled delivery date, HOKU will provide SOLARFUN with a purchase
price adjustment. Such purchase price adjustment shall be two and
one-half percent (2.5%) 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 thirty (30) day grace period. Any
purchase price adjustment as a result of this Section 3.3 will be paid
by HOKU at the end of the term of the applicable calendar quarter. In
lieu of making a cash payment to SOLARFUN 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 fifty percent (50%) of the
value of the respective delayed Products. Monthly shipments which are
delayed beyond one hundred fifty (150) days shall be deemed to
constitute a material breach of this Agreement pursuant to Section
9.2.1 below.
SOLARFUN Initials & Date /s/ WS November 15, 2007 HOKU Initials & Date /s/ DS November 19, 2007
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CONFIDENTIAL
3.4. If HOKU delivers any Products to SOLARFUN prior to October 1, 2009,
then SOLARFUN shall pay HOKU a premium equal to 20% of the applicable
purchase price for the Products shipped.
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 sixty (60) 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 agrees that it will not enter into any additional supply contract
with, or make any supply commitment to, any third party (not including
the long term supply contracts that have been signed prior to the
Effective Date (the "PRE-EXISTING COMMITMENTS")) if the aggregate of
HOKU's delivery obligations under all of its supply contracts
(including those with SOLARFUN and its Pre-existing Commitments) and
such additional supply contract/commitment during any month would
exceed the rated monthly production capacity of all polysilicon
reactors at all HOKU Facilities, as certified by the manufacturer
thereof. Subject to the foregoing, this Section 4.2 shall not preclude
HOKU from (A) entering into supply contracts for additional capacity
from Facility expansion, including pre-sales of potential Facility
expansions, or from increased productivity of the Reactors, or (B)
selling on the spot market or entering into long-term contracts for
the sale of polysilicon that does not meet the Product Specifications
at any time during the term of this Agreement, provided that HOKU uses
commercially reasonable efforts to meet the Product Specifications
with respect to such polysilicon and that HOKU does not manufacture
polysilicon for the purpose of making such spot market sales or
fulfilling such long term contracts
4.3. HOKU will use commercially reasonable efforts to make its first
shipment of Products to SOLARFUN on or before July 1, 2009.
5. Payments & Advances.
5.1. Immediately upon signing this Agreement, SOLARFUN shall provide HOKU
with a deposit of One Million U.S. Dollars (US$1,000,000) via wire
transfer of immediately available funds (the "FIRST DEPOSIT") as
advance payment for Products to be delivered under this Agreement.
5.2. On or before December 28, 2007, SOLARFUN shall provide HOKU a second
cash deposit of Nine Million U.S. Dollars (US$9,000,000.00) (the
"SECOND DEPOSIT, and together with the First Deposit, the "INITIAL
DEPOSIT") as advance payment for Products to be delivered under this
Agreement.
5.3. SOLARFUN shall pay in cash to HOKU the additional sum of Forty-Five
Million U.S. Dollars (USD $45,000,000.00) (the "MAIN DEPOSIT") as an
advance payment for Products to be delivered under this Agreement in
accordance with the payment schedule set forth below.
5.3.1. Forty-Four and one-half percent (44.5%) of the Main Deposit
(USD $20,000,000.00) (the "THIRD DEPOSIT") shall be paid to HOKU
on September 30, 2008 (the "THIRD DEPOSIT DATE").
5.3.2. Forty-Four and one-half percent (44.5%) of the Main Deposit
(USD $20,000,000) (the "FOURTH Deposit") shall be paid to HOKU on
March 31, 2009 (the "FOURTH DEPOSIT DATE").
SOLARFUN Initials & Date /s/ WS November 15, 2007 HOKU Initials & Date /s/ DS November 19, 2007
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CONFIDENTIAL
5.3.3. Eleven percent (11%) of the Main Deposit (USD $5,000,000.00)
(the "FIFTH DEPOSIT") shall be paid to HOKU on March 31, 2010
(the "FIFTH DEPOSIT DATE").
5.4. Escrow Agreement; Letter of Credit.
5.4.1. On or before January 10, 2008, either (A) SOLARFUN shall
provide to HOKU an irrevocable stand-by letter of credit in
substantially the form of APPENDIX 3 attached hereto (the "LETTER
OF CREDIT") in the amount of the Main Deposit, or (B) SOLARFUN,
HOKU and the Escrow Agent shall sign an escrow agreement in
substantially the form of APPENDIX 4 (the "ESCROW AGREEMENT"),
and SOLARFUN shall deposit into the Escrow Account the amount of
the Main Deposit.
5.4.1(a) If the Letter of Credit is provided pursuant to Section
5.4.1(A) above, then such Letter of Credit shall be issued
to HOKU by a bank domiciled in and organized under the laws
of one of the fifty states of the United States of America,
and which is reasonably acceptable to HOKU (the "ISSUING
BANK"). The Letter of Credit shall be issued in US Dollars
for the full amount of the Main Deposit, and shall be freely
assignable by HOKU in connection with any assignment of this
Agreement by HOKU pursuant to Section 13.3 below. Payment to
HOKU of the Third Deposit, Fourth Deposit and Fifth Deposit
shall be made by the Issuing Bank upon its receipt of
written notice that SOLARFUN has failed to make such payment
on the Third Deposit Date, the Fourth Deposit Date or the
Fifth Deposit Date, as applicable. The Letter of Credit
shall expire on the later of the date when (A) the Main
Deposit has been paid in full to HOKU by SOLARFUN, or (B)
the Main Deposit has been paid in full to HOKU by the
Issuing Bank.
5.4.1(b) If the Escrow Agreement is entered into pursuant to
Section 5.4.1(B) above, then the Main Deposit may be
deposited into the Escrow Account in US Dollars or Chinese
RMB; provided, however, that all payments to HOKU pursuant
to this Agreement shall be in US Dollars. Payment of the
Third Deposit, Fourth Deposit and Fifth Deposit shall
automatically be made to HOKU from the Escrow Account
pursuant to the Escrow Agreement on the Third Deposit Date,
Fourth Deposit Date and Fifth Deposit Date, as applicable.
Notwithstanding anything to the contrary, all payments from
the Escrow Account to HOKU shall be made in US Dollars,
unless HOKU and SOLARFUN otherwise agree in writing. In the
event that the amount of any payment from the Escrow Account
to HOKU in US Dollars is less than the Third Deposit, Fourth
Deposit, or Fifth Deposit, as applicable, due to currency
exchange rates from Chinese RMB to US Dollars, then SOLARFUN
shall be obligated to immediately pay HOKU in US Dollars the
difference between the actual payment from the Escrow
Account and the Third Deposit, Fourth Deposit or Fifth
Deposit, as applicable. The final form of the Escrow
Agreement may be different from the form attached as
Appendix 4, acceptance of which by the Parties shall be
evidenced by HOKU and SOLARFUN's execution thereof.
5.5. HOKU shall invoice SOLARFUN at or after the time of each shipment of
Products to SOLARFUN. Taxes, customs and duties, if any, will be
identified as separate items on HOKU invoices. All invoices shall be
sent to SOLARFUN's address as provided herein. Payment terms for all
invoiced amounts shall be thirty (30) 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 SOLARFUN shall be credited against the Total
Deposit beginning in the second Year, as set forth in APPENDIX 1
(Pricing Schedule).
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 SOLARFUN, provided that SOLARFUN is legally or contractually
obliged to pay such taxes. SOLARFUN shall be responsible for all
transportation charges, duties or charges for shipping and handling;
thus, the price for the Products shall not include any such charges.
SOLARFUN Initials & Date /s/ WS November 15, 2007 HOKU Initials & Date /s/ DS November 19, 2007
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5.7. Late payments and outstanding balances shall accrue interest at the
lesser of 10% per annum or the maximum allowed by law.
6. Security Interest.
6.1. Subject to receipt of the Initial Deposit and or payment of any
portion of the Main Deposit HOKU hereby grants to SOLARFUN a security
interest to secure the repayment by HOKU to SOLARFUN of the Total
Deposit following any of the events set forth in Section 9.6 below,
which shall be subordinated in accordance with Section 6.2 below, in
all of the tangible and intangible assets related to HOKU's
polysilicon business (the "COLLATERAL").
6.2. SOLARFUN acknowledges and agrees that the security interests and liens
in the Collateral will not be first priority security interests, will
be expressly subordinated to HOKU's third-party lenders (the "SENIOR
LENDERS") that provide debt financing for the construction of any HOKU
Facility, and may be subordinated as a matter of law to other security
interests, and to security interests that are created and perfected
prior to the security interest granted to SOLARFUN hereby. SOLARFUN
shall enter into subordination agreements with the Senior Lenders on
terms and conditions reasonably acceptable to the Senior Lenders.
6.3. In addition, SOLARFUN shall enter into collateral, intercreditor and
other agreements (the "COLLATERAL AGREEMENTS") with HOKU's Senior
Lenders, and with SANYO Electric Co., Ltd., Suntech Power Holding Co.,
Ltd., Global Expertise Wafer Division, Ltd., and HOKU's other
customers who provide prepayments for Products (collectively, "HOKU'S
OTHER CUSTOMERS"), as may be reasonably necessary to ensure that the
security interest granted hereby is pari passu with the security
interests that may be granted to HOKU's Other Customers. SOLARFUN may
not unreasonably refuse to sign any such Collateral Agreement,
provided that such Collateral Agreement grants SOLARFUN a pari passu
priority with respect to HOKU's Other Customers, and is expressly
subordinated to the Senior Lenders.
6.4. The security interest granted hereby shall continue so long as HOKU
continues to maintain any amount of the Total Deposit, and only to the
extent of such remaining amount of the Total Deposit being held by
HOKU, which has not been credited against the shipment of Products
pursuant to this Agreement, or otherwise repaid to SOLARFUN.
Notwithstanding anything to the contrary contained in this Agreement,
the Collateral consisting of real property shall secure only the
obligations of HOKU to refund any portion of the Total Deposit to
SOLARFUN in accordance with the terms of this Agreement.
6.5. HOKU and SOLARFUN each agree to act in good faith to execute and
deliver any additional document or documents that may be required in
furtherance of the foregoing provisions of this Section 6, including
the Collateral Agreements. Neither HOKU nor SOLARFUN may unreasonably
refuse to sign any such document.
7. Product Quality Guarantee.
7.1. HOKU warrants to SOLARFUN that the Products shall meet the Product
Specifications. For each shipment, this warranty shall survive for
sixty (60) days after the applicable shipment date (the "WARRANTY
PERIOD"). Upon release of the Products to a common carrier or freight
forwarder, FOB origin, HOKU warrants that the Products shall be free
of all liens, mortgages, encumbrances, security interests or other
claims or rights. HOKU will, upon prompt notification and compliance
with HOKU's instructions, refund or replace, at SOLARFUN's sole
option, any Product which does not meet the Product Specifications,
and SOLARFUN shall comply with the inspection and return goods policy
described in Section 8 below with respect to such Products. No
employee, agent or
SOLARFUN Initials & Date /s/ WS November 15, 2007 HOKU Initials & Date /s/ DS November 19, 2007
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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 SOLARFUN. 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
SOLARFUN's exclusive remedy for any claim arising out of the purchase
of any Product is a refund or replacement, as described above. In no
event shall HOKU's liability exceed the purchase price paid therefore;
nor shall HOKU be liable for any claims, losses or damages of any
individual or entity or for lost profits or any special, indirect,
incidental, consequential, or exemplary damages, howsoever arising,
even if HOKU has been advised of the possibility of such damages.
7.3. HOKU shall, at its own expense, indemnify and hold SOLARFUN 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 SOLARFUN or
SOLARFUN's Affiliates alleging any such infringement. SOLARFUN agrees
that: (i) SOLARFUN shall give HOKU prompt notice in writing of any
such suit; (ii) if HOKU provides evidence reasonably satisfactory to
SOLARFUN of HOKU's financial ability to defend the matter vigorously
and pay any reasonably foreseeable damages, SOLARFUN shall permit
HOKU, through counsel of HOKU's choice, to answer the charge of
infringement and defend such suit (but SOLARFUN, or SOLARFUN's
Affiliate may be represented by counsel and participate in the defense
at its own expense); and (iii) SOLARFUN 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 SOLARFUN, its officers, agents, or employees, from any
losses, damages, liabilities, costs or expenses which may arise out of
the acts of omissions of XXXX.
0. Inspection and Return Goods Policy.
8.1. An inspection of appearance of each shipment of Product shall be made
by SOLARFUN in accordance with sound business practice upon the
delivery of the Product, and in no case later than four weeks after
delivery at SOLARFUN's factory. SOLARFUN 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
SOLARFUN discovers under the inspection of appearance.
8.2. SOLARFUN shall perform final inspection of the Product upon
introducing the Product into SOLARFUN's production process. Such
inspection shall take place during the Warranty Period. If the Product
does not meet the Product Specifications, SOLARFUN 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.
8.3. Products may be returned to HOKU within the later of (a) 10 days after
discovery of a defect consistent with Sections 8.1 and 8.2 above; and
(b) 10 days after HOKU completes its inspection and confirms the
defect pursuant to Section 8.2 above, for replacement or a refund
including all return shipment expenses. To assure prompt handling,
HOKU shall provide SOLARFUN a return goods
SOLARFUN Initials & Date /s/ WS November 15, 2007 HOKU Initials & Date /s/ DS November 19, 2007
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authorization number within 48 hours of SOLARFUN's request. Provided
that HOKU communicates this number to SOLARFUN within such timeframe,
SOLARFUN 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. HOKU reserves the
right to reverse any credit issued to SOLARFUN if, upon return, such
Product is determined by a predetermined third party not to be
defective.
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 in 2009 or earlier, and unless previously terminated as
hereinafter set forth, shall remain in force for a period of eight
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 150-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
SOLARFUN's failure to make any payment to HOKU pursuant to this
Agreement. In the event of SOLARFUN's failure to make payment on
the 30-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.
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.
9.2.5. Without limiting the foregoing, SOLARFUN shall have the right
to terminate this Agreement if the First Shipment Date does not
occur on or before December 31, 2009.
9.3. HOKU shall have the right to terminate this Agreement if SOLARFUN
fails to pay HOKU the Second Deposit on or before December 28, 2007,
in which case HOKU shall be entitled to retain the First Deposit as
liquidated damages.
9.4. HOKU shall have the right to terminate this Agreement if on or before
January 10, 2008 SOLARFUN has failed to either (A) enter into the
Escrow Agreement with HOKU and the Escrow Agent and deposit the Main
Deposit into the Escrow Account pursuant to Section 5.4.1 above, or
(B)
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deliver the Letter of Credit pursuant to Section 5.4.1 above, in which
case, HOKU shall be entitled to retain the Initial Deposit as
liquidated damages.
9.5. 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).
9.6. If SOLARFUN 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 SOLARFUN;
provided however that if SOLARFUN 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
SOLARFUN cures such breach within the applicable cure period) or
SOLARFUN's other outstanding and unpaid obligations hereunder
(including, without limitation, obligations under Section 11). "FUNDS
REMAINING" on the Total Deposit are funds not applied against
SOLARFUN's purchase of Product, pursuant to Section 5.5 above, for
Product actually shipped to SOLARFUN hereunder.
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 SOLARFUN 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 WITH RESPECT TO SOLARFUN'S
CONTINUING OBLIGATION TO PURCHASE THE PRODUCTS AS SET FORTH HEREIN.
11. Liquidated Damages. THE PARTIES ACKNOWLEDGE AND AGREE THAT ANY BREACH OF
THIS AGREEMENT BY SOLARFUN 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, or 9.4, THEN HOKU SHALL BE ENTITLED TO RETAIN AS LIQUIDATED
DAMAGES, THE TOTAL DEPOSIT (OR 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.
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
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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.
13. General Provisions.
13.1. This Agreement shall be construed under and governed by the laws of
the State of California, U.S.A.
13.2. 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.
13.3. 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 a HOKU Facility, without the consent of SOLARFUN. Except
as stated in the previous sentence, neither HOKU nor SOLARFUN 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.
13.4. 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 13.4 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:
SOLARFUN:
SOLARFUN POWER HONG KONG LIMITED
In care of: JIANGSU LINYANG SOLARFUN CO., LTD.
Xx. 000 Xxxxxxx Xx.,
Xxxxxx Xxxxxxx Xxxxxxxx 000000
People's Republic of China
Tel: x00-00-0000-0000
Fax: x00-00-0000-0000
Attn: Xxxxxxx Xxxx, VP of Business Development
SOLARFUN Initials & Date /s/ WS November 15, 2007 HOKU Initials & Date /s/ DS November 19, 2007
------------------------ ------------------------
PAGE 9 OF 11
CONFIDENTIAL
E-Mail: xxxxxxx.xxxx@xxxxxxxx.xxx.xx
HOKU:
HOKU SCIENTIFIC, INC.
0000 Xxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attn: Xx. Xxxxxx Xxxxxx, CEO
E-mail: xxxxxxx@xxxxxxx.xxx
Facsimile: x0 (000) 000-0000
13.5. 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.
13.6. 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.
13.7. 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.
13.8. 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.
13.9. 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.
13.10. 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.
13.11. The headings are inserted for convenience of reference and shall not
affect the interpretation and or construction of this Agreement.
13.12. Words expressed in the singular include the plural and vice-versa.
SOLARFUN Initials & Date /s/ WS November 15, 2007 HOKU Initials & Date /s/ DS November 19, 2007
------------------------ ------------------------
PAGE 10 OF 11
CONFIDENTIAL
IN WITNESS WHEREOF, the Parties have executed this Supply Agreement as of the
date first set forth above.
SOLARFUN: HOKU:
-------- ----
SOLARFUN POWER HONG KONG HOKU SCIENTIFIC, INC.
LIMITED
By: /s/ Xxxxxxx Xxxx By: /s/ Xxxxxx Xxxxxx
-------------------------- ---------------------------
Name: Xxxxxxx Xxxx Name: Xxxxxx Xxxxxx
------------------------ -------------
Title: VP of Business Division Title: Chairman & CEO
--------------
Authorized Signatory Authorized Signatory
Date: November 15, 2007 Date: November 19, 2007
------------------------ -------------------------
CORPORATE GUARANTY
As an inducement for HOKU to enter into this Agreement with SOLARFUN, it is
hereby agreed that the undersigned does hereby guaranty to HOKU the prompt,
punctual and full payment of all monies now or hereinafter due HOKU from
SOLARFUN, and agrees to the following:
a) Until termination, this guaranty is unlimited as to amount or duration
and shall remain in full force and effect notwithstanding any
extension, compromise, adjustment, forbearance, waiver, release or
discharge of any party obligor or guarantor.
b) The obligations of the undersigned shall be at the election of HOKU,
shall be primary and not necessarily secondary, and HOKU shall not be
required to exhaust its remedies as against SOLARFUN prior to
enforcing its rights under this guaranty against the undersigned.
c) The guaranty hereunder shall be unconditional and absolute and the
undersigned waives all rights of subrogation and set-off until all
sums under this guaranty are fully paid. The undersigned further
waives all suretyship defenses or defenses in the nature thereof,
generally.
d) The guaranty shall be valid and continuing during the term of this
Agreement.
e) The undersigned warrants and represents it has full authority to enter
into this guaranty.
f) This guaranty shall be binding upon and inure to the benefit of the
parties, their successors, assigns and personal representatives.
g) This guaranty shall be construed and enforced under the laws of the
State of California, USA
JIANGSU LINYANG SOLARFUN CO., LTD.
By: /s/ Xxxxxxx Xxxx Date: November 15, 2007
----------------------------------- -------------------------------
Name: Xxxxxxx Xxxx
---------------------------------
Title: VP of Business Division
--------------------------------
Authorized Signatory
SIGNATURE PAGE TO SUPPLY AGREEMENT
PAGE 11 OF 11
