SUPPLY AGREEMENT
Exhibit
10.77
|
CONFIDENTIAL
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[*]
=
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.
This
Supply Agreement is made as of the last date set forth on the signature page
hereto (the “Effective
Date”)
between JIANGXI KINKO ENERGY CO., LTD., a People’s Republic of China (Jiangxi)
company (hereinafter “KINKO”)
and
HOKU
MATERIALS, INC., a
Delaware corporation (hereinafter “HOKU”).
HOKU
and KINKO 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 KINKO for its general use beginning in
calendar year 2009 for a continuous period of ten years from the date of the
first shipment.
Whereas,
HOKU is a wholly owned subsidiary of Hoku Scientific, Inc. (“Hoku
Scientific”),
which
is listed on the Nasdaq Global Market, and HOKU is the operating company that
owns all of the assets for Hoku Scientific’s polysilicon business.
Whereas,
KINKO is a high-tech overseas funded enterprise and a subsidiary of Hong Kong
Paker Technology Co., Ltd, which manufactures monocrystalline and
multicrystalline ingots for photovoltaic applications.
Whereas,
in exchange for HOKU’s agreement to allocate the supply of polysilicon, KINKO
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.“First
Shipment Date”
shall
mean the first day after November 30, 2009, when HOKU commences deliveries
to
KINKO of Products pursuant to this Agreement.
1.4.“Facility”
shall
mean any facility used by HOKU for the production of the Product.
1.5.“Independent
Expert”
means
any Qualified Laboratory that is reasonably acceptable to each of HOKU and
KINKO; 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.
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KINKO
Initials & Date __XDL
July 25, 2008________
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HOKU
Initials & Date __DS_________________________
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CONFIDENTIAL
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1.6.“Minimum
Annual Quantity of Product”
means
[*]
metric
tons ([*]
kilograms).
1.7.“Product”
shall
mean the raw polysilicon in chunk form manufactured by HOKU and sold to KINKO
pursuant to this Agreement.
1.8.“Product
Specifications”
shall
mean the quality and other specifications set forth on Appendix 2 to this
Agreement.
1.9.“Qualified
Laboratory”
means
each qualified laboratory set forth on Appendix
2
to this
Agreement.
1.10.“Term”
shall
mean the period during which this Agreement is in effect, as more specifically
set forth in Section 9
of this
Agreement.
1.11.“Total
Deposit”
shall
mean all deposits or prepayments actually made by KINKO to HOKU hereunder,
including, the Initial Deposit, the Second Deposit and the Third Deposit, each
as defined in Section 5
below.
1.12.“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, KINKO agrees to purchase from HOKU, and HOKU agrees to sell to
KINKO, 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 KINKO for [*]
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 [*]
days
without breaching this section or incurring any purchase price adjustment
(pursuant to Section 3.3
below,
which provides that 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 KINKO with a purchase price
adjustment equal to [*]
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.). At any time during the term of this Agreement, HOKU may ship to KINKO
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
KINKO’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.
HOKU
shall deliver any deficiency in the Minimum Annual Quantity of Product within
the first quarter in the next Year. Any deficient shipments of the Minimum
Annual Quantity of Product which are delayed beyond the first quarter of the
next Year shall be deemed to constitute a material breach of this Agreement
pursuant to section 9.2.1.
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KINKO
Initials & Date __XDL
July 25, 2008________
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HOKU
Initials & Date __DS_________________________
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3.2.HOKU
intends to manufacture the Products at its Facility; however, notwithstanding
anything to the contrary herein, HOKU may deliver to KINKO 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 [*],
HOKU
does not supply any Products pursuant to Section 3.1
or 3.2
within
[*]
days of
the scheduled delivery date, HOKU will provide KINKO 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
paid by HOKU at the end of the term of the applicable calendar quarter.
In lieu of making a cash payment to KINKO 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 one hundred fifty (150) days shall be deemed to constitute a material
breach of this Agreement pursuant to Section 9.2.1
below.
Notwithstanding the foregoing, if KINKO fails to make a payment to HOKU within
the 30-day period set forth in Section 5.6
below,
HOKU shall not be required to supply any Product to KINKO until HOKU has
received the past due amount including any interest payable thereon pursuant
to
this Agreement. For the avoidance of doubt, KINKO’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.
Monthly
shipments which are delayed more than [*]
days in
a calendar year AND are less than [*]
of the
Minimum Annual Quantity of Product shall be deemed to constitute a material
breach of this Agreement pursuant to Section 9.2.1.
3.4.If
HOKU
delivers any Products to KINKO prior to [*],
then
KINKO shall pay HOKU a premium equal to [*]%
of the
applicable purchase price for the Products shipped prior to [*].
3.5.HOKU
hereby covenants and agrees that during the term of this Agreement, and provided
that KINKO 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 KINKO
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
and reviewed and approved by KINKO (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, but not less than [*]
of the
Minimum Annual Quantity of Products. HOKU will use commercially reasonable
efforts to make monthly shipments available on or about the fifteenth
(15th)
day of
each month, and will advise KINKO approximately seven (7) days prior to the
expected ship date; provided, however, that KINKO may request an alternate
shipping date that is within fourteen (14) days after the advised schedule.
Product shall be ready to ship FOB the HOKU Facility (INCOTERMS
2000).
4.2.HOKU
will
use commercially reasonable efforts to make available to KINKO its first
shipment of Products on or before December 1, 2009. Any delay (but no later
than
December 31, 2009) shall be given by written notice to KINKO not later than
[*].
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KINKO
Initials & Date __XDL
July 25, 2008________
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HOKU
Initials & Date __DS_________________________
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5. Payments
& Advances.
The
Total Deposit shall be used only by HOKU for polysilicon facilities
construction, operation, administration, and other expenses and investments
related to HOKU’s polysilicon business.
0.0.Xx
soon
as possible after signing this Agreement, and no later than August 20, 2008,
KINKO shall provide HOKU with a deposit of Ten Million U.S. Dollars
(US$10,000,000) via wire transfer of immediately available funds (the
“Initial
Deposit”)
as
advance payment for Products to be delivered under this Agreement.
5.2.On
or
before December 20, 2008, KINKO shall provide HOKU with a deposit of Twenty
Million U.S. Dollars (US$20,000,000) via wire transfer of immediately available
funds (the “Second
Deposit”)
as
advance payment for Products to be delivered under this Agreement.
5.3.On
or
before March 31, 2009, KINKO shall provide HOKU with a deposit of Twenty-five
Million U.S. Dollars ($25,000,000) via wire transfer of immediately available
funds (the “Third
Deposit”
and
together with the Initial Deposit and the Second Deposit, the “Total
Deposit”)
as
advance payment for Products to be delivered under this Agreement.
5.4.On
or
before August 31, 2008, KINKO shall provide to HOKU an irrevocable stand-by
letter of credit in substantially the form of Appendix
3
attached
hereto (the “First Letter
of Credit”)
in the
amount of the Second Deposit. The First 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 has a credit rating that is
acceptable to HOKU in its sole discretion (the “Issuing
Bank”).
The
First Letter of Credit shall be issued in US Dollars for the full amount of
the
Second Deposit, and 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 Second Deposit shall be made by the Issuing Bank upon
its
receipt of written notice that KINKO has failed to make such payment on the
applicable date. The First Letter of Credit shall expire after payment of the
Second Deposit.
5.5.On
or
before December 31, 2008, KINKO shall provide to HOKU an irrevocable stand-by
letter of credit in substantially the form of Appendix
3
attached
hereto (the “Second
Letter of Credit”)
in the
amount of the Third Deposit. The Second Letter of Credit shall be issued to
HOKU
by the Issuing Bank. The Second Letter of Credit shall be issued in US Dollars
for the full amount of the Third Deposit, and 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 Third Deposit shall be made by the Issuing Bank upon
its
receipt of written notice that KINKO has failed to make such payment on the
applicable date. The Second Letter of Credit shall expire after payment of
the
Third Deposit.
5.6.HOKU
shall invoice KINKO at or after the time of each shipment of Products to KINKO.
Taxes, customs and duties, if any, will be identified as separate items on
HOKU
invoices. All invoices shall be sent to KINKO’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 KINKO shall be credited against the Total Deposit on
a
straight-line basis during the second through tenth Year.
5.7.The
prices are FOB prices (INCOTERMS 2000). 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 KINKO, provided that KINKO is legally or contractually
obliged to pay such taxes. KINKO 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.
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KINKO
Initials & Date __XDL
July 25, 2008________
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HOKU
Initials & Date __DS_________________________
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5.8.Late
payments and outstanding balances shall accrue interest at the lesser of
[*]
per
annum or the maximum allowed by law.
6. Security
Interest.
6.1.Subject
to receipt of the Initial Deposit or payment of any portion of the Total Deposit
HOKU hereby grants to KINKO a security interest to secure the repayment by
HOKU
to KINKO of amounts of the Total Deposit actually paid to HOKU, following any
of
the events set forth in Section 9.5
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.KINKO
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 KINKO hereby. KINKO shall enter into subordination agreements with the Senior
Lenders on terms and conditions reasonably acceptable to the Senior
Lenders.
0.0.Xx
addition, KINKO 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., Solarfun Power Hong Kong
Limited, 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. KINKO may not unreasonably refuse to sign any such Collateral
Agreement, provided that such Collateral Agreement grants KINKO 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 KINKO. 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 KINKO in
accordance with the terms of this Agreement. When the Total Deposit is no longer
held by HOKU, KINKO will sign such documents as are necessary to release its
security interests.
6.5.HOKU
and
KINKO 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, and in any event, HOKU and KINKO shall
enter into the Collateral Agreements prior to HOKU granting any senior security
interest to the Senior Lenders. Neither HOKU nor KINKO may unreasonably refuse
to sign any such document.
7. Product
Quality Guarantee.
7.1.HOKU
warrants to KINKO that the Products shall meet the Product Specifications.
For
each shipment, this warranty shall survive for the lesser of (a) [*]
days
after KINKO receives the Products; or (b) [*]
days
after the release of the Products by HOKU at FOB origin (INCOTERMS 2000) (the
“Warranty
Period”).
Upon
release of the Products to a common carrier or freight forwarder, FOB origin
(INCOTERMS 2000), HOKU warrants that the Products shall be free of all liens,
mortgages, encumbrances, security interests or other claims or rights. HOKU
will, upon prompt notification and compliance with HOKU’s instructions, refund
or replace, at KINKO’s sole option, any Product which does not meet the Product
Specifications, and KINKO shall comply with the inspection and return goods
policy described in Section 8
below
with respect to such Products. HOKU shall be responsible for all replacement
costs, including but not limited to transportation, taxes and customs charges,
and, in the case of a replacement, shall use commercially reasonable efforts
to
replace such non-confirming Products within [*]
days
after expiration of the [*]
day
period described in Section 8.3
below.
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 KINKO. 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.
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KINKO
Initials & Date __XDL
July 25, 2008________
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HOKU
Initials & Date __DS_________________________
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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 KINKO’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 KINKO 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 KINKO or KINKO’s
Affiliates alleging any such infringement. KINKO agrees that: (i) KINKO shall
give HOKU prompt notice in writing of any such suit; (ii) if HOKU provides
evidence reasonably satisfactory to KINKO of HOKU’s financial ability to defend
the matter vigorously and pay any reasonably foreseeable damages, KINKO shall
permit HOKU, through counsel of HOKU’s choice, to answer the charge of
infringement and defend such suit (but KINKO, or KINKO’s Affiliate may be
represented by counsel and participate in the defense at its own expense);
and
(iii) KINKO 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 KINKO, 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 KINKO
in
accordance with sound business practice upon the delivery of the Product, and
in
no case later than [*]
after
delivery at KINKO’s factory. KINKO shall inform HOKU promptly, and in no case
later than [*]
after
delivery of Product, in case of any obvious damages or other obvious defects
to
the Product which KINKO discovers under the inspection of
appearance.
8.2.KINKO
shall perform final inspection of the Product upon introducing the Product
into
KINKO’s production process. Such inspection shall take place during the Warranty
Period. If the Product does not meet the Product Specifications, KINKO 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.
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KINKO
Initials & Date __XDL
July 25, 2008________
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HOKU
Initials & Date __DS_________________________
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8.3.Products
may be returned to HOKU within the later of (a) [*]
after
discovery of a defect consistent with Sections 8.1
and 8.2
above;
and (b) [*]
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 KINKO a return goods authorization number
within 48 hours of KINKO’s request. Provided that HOKU communicates this number
to KINKO within such timeframe, KINKO 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 KINKO 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.
8.4.The
following shall be deemed to constitute a material breach of this Agreement
by
HOKU pursuant to Section 9.2.1:
(A) if
HOKU delivers [*]
consecutive monthly shipments where more than [*]
percent
([*]%)
of the
Products in each such shipment do not meet the Product Specifications, or (B)
HOKU delivers [*]
or more
monthly shipments during any Year where [*]
percent
([*]%)
of the
Products in each such shipment do not meet the Product Specifications.
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 December 31, 2009
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 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
KINKO’s failure to make any payment to HOKU pursuant to this Agreement. In the
event of KINKO’s failure to make payment on the 30-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
fifty (150) 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.
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;
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KINKO
Initials & Date __XDL
July 25, 2008________
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HOKU
Initials & Date __DS_________________________
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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 KINKO may not terminate this Agreement
pursuant to Section 12
if HOKU
is supplying Products to KINKO pursuant to Section 3.2
of this
Agreement.
9.2.5. Without
limiting the foregoing, KINKO 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 (A) on or before August
20,
2008, KINKO has failed to pay the Initial Deposit;
(B) on
or before August 31, 2008, KINKO has failed to deliver the First Letter of
Credit, in which case HOKU may immediately terminate this Agreement and retain
the Initial Deposit as liquidated damages; or (C) on or before December 31,
2008, KINKO has failed to deliver the Second Letter of Credit, in which case
HOKU may immediately terminate this Agreement and retain the Initial Deposit
and
the Second 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).
9.5.If
KINKO
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 KINKO, plus interest equal to the amount set forth in
Section 5.8
for each
year since such funds were paid to HOKU by KINKO; provided however that if
KINKO
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 KINKO cures such breach within the applicable cure period) or KINKO’s
other outstanding and unpaid obligations hereunder (including, without
limitation, obligations under Section 11).
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 KINKO’s purchase of Product,
pursuant to Section 5.6
above,
for Product actually shipped to KINKO hereunder.
If KINKO
terminates this Agreement pursuant to Section 9.2.1
or 9.2.5
due to
HOKU’s failure to deliver Products pursuant to this Agreement, then one hundred
fifty percent (150%) of the funds remaining on the Total Deposit on such date
of
termination shall be returned to KINKO.
10. Liability.
00.0.XX
NO
EVENT SHALL EITHER PARTY BE LIABLE FOR INDIRECT, SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES OR FOR EXEMPLARY OR PUNITIVE DAMAGES, EVEN IF KINKO 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 KINKO’S CONTINUING OBLIGATION TO PURCHASE THE PRODUCTS AS SET FORTH HEREIN.
|
KINKO
Initials & Date __XDL
July 25, 2008________
|
HOKU
Initials & Date __DS_________________________
|
Page 8
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18
Exhibit
10.77
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CONFIDENTIAL
|
11. Liquidated
Damages.
THE
PARTIES ACKNOWLEDGE AND AGREE THAT ANY BREACH OF THIS AGREEMENT BY KINKO 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.
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 KINKO 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. Visitation
Rights; Project Updates.
13.1.Beginning
on the Effective Date, and until the First Shipment Date or the earlier
termination of this Agreement pursuant to Section 9
above,
KINKO 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. KINKO shall provide
HOKU
with at least five (5) business days’ prior notice of any such visit, and may
not visit more than two times each calendar quarter. HOKU reserves the right
to
refuse access to any individual who is not subject to HOKU’s non-disclosure
agreement. KINKO shall agree to abide by all of HOKU’s safety and security
requirements and instructions for the HOKU Facility.
13.2.Beginning
on the Effective Date, and until the First Shipment Date or the earlier
termination of this Agreement pursuant to Section 9
above,
HOKU shall provide KINKO 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 KINKO.
14. General
Provisions.
14.1.KINKO
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. KINKO 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 KINKO, and KINKO hereby
represents and warrants that neither HOKU, nor to KINKO’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 KINKO, whether in
money, property, or services (i) to obtain favorable treatment in securing
business from KINKO, (ii) to pay for favorable treatment for business secured
from KINKO, or (iii) to obtain special concessions or for special concessions
already obtained from KINKO, for or in respect of HOKU, in violation of any
legal requirement or applicable law.
|
KINKO
Initials & Date __XDL
July 25, 2008________
|
HOKU
Initials & Date __DS_________________________
|
Page 9
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10.77
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CONFIDENTIAL
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14.2.This
Agreement shall be construed under and governed by the laws of the State of
California, U.S.A.
14.3.Upon
notice from one Party to the other of a dispute hereunder, the Parties agree
to
hold a meeting within thirty (30) days of receipt of such notice with at least
one (1) representative from each Party who has decision-making authority for
such company. At this meeting, the Parties will attempt to resolve the dispute
in good faith. If, after the meeting, the dispute has not been resolved, only
then may a Party resort to litigation. Any proceeding to enforce or to resolve
disputes relating to this Agreement shall be brought in California, USA. In
any
such proceeding, neither Party shall assert that such a court lacks jurisdiction
over it or the subject matter of the proceeding.
14.4.HOKU
may
assign 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 KINKO. Except as stated in the previous sentence, neither HOKU nor
KINKO 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 addresses listed below or to a changed address as the
Party shall have specified by prior written notice:
KINKO:
JIANGXI
KINKO ENERGY CO., LTD.
Kinko
Road, Xuri District, Economic Development Xxxx, Xxxxxxxx, Xxxxx
Tel:
x00-000-0000000
Fax:
x00-000-0000000
Attn:
Xx.
Xxxx Xx Xx
|
KINKO
Initials & Date __XDL
July 25, 2008________
|
HOKU
Initials & Date __DS_________________________
|
Page
10
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With
a
copy to:
SHANGHAI
GUANGWEI ELECTRONICS MATERIALS Co., Ltd.
Xx.
000,
Xxxxx Xxxx,Xxxxxxxxx Xxxxxxxx, Xxxxxxxx, Xxxxx 000000
Tel:
x00-00-00000000
Fax:
x00-00-00000000
Attn:
Mr.
Xxx Xx
HOKU:
HOKU
MATERIALS, INC.
0000
Xxxxxxxxx Xxxxxx
Xxxxxxx,
XX 00000
Attn:
Xx.
Xxxxxx Xxxxxx, CEO
Facsimile:
x0 (000) 000-0000
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.
00.0.Xx
changes, modifications or alterations to this Agreement shall be valid unless
reduced to writing and duly signed by respective authorized representatives
of
the Parties.
00.0.Xx
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 fourteen (14) 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.
|
KINKO
Initials & Date __XDL
July 25, 2008________
|
HOKU
Initials & Date __DS_________________________
|
Page
11
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10.77
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14.13.Words
expressed in the singular include the plural and vice-versa.
|
KINKO
Initials & Date __XDL
July 25, 2008________
|
HOKU
Initials & Date __DS_________________________
|
Page
12
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Exhibit
10.77
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IN
WITNESS WHEREOF, the Parties have executed this Supply Agreement as of the
date
first set forth above.
|
KINKO:
|
HOKU:
|
|||
|
JIANGXI
KINKO ENERGY CO., LTD.
|
HOKU
MATERIALS, INC.
|
|||
|
By:
|
/s/
X.D. LI
|
By:
|
/s/
XXXXXX X. XXXXXX
|
|
|
Name:
|
X.D.
Li
|
Name:
|
Xxxxxx
X. Xxxxxx
|
|
|
Title:
|
Chairman
|
Title:
|
Chairman
and CEO
|
|
| Authorized Signatory | Authorized Signatory | |||
|
Date:
|
July
25, 2008
|
Date:
|
July
24, 2008
|
|
Signature
Page to Supply Agreement
Page
13
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Exhibit
10.77
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|
Appendix
1
Pricing
Schedule
[*]
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 [*]
shall
be
invoiced at [*].
|
KINKO
Initials & Date __XDL
July 25, 2008________
|
HOKU
Initials & Date __DS_________________________
|
Appendix
1 to Supply Agreement
Page
14
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Appendix
2 — Product
Specifications
[*]
1.
Description
[*]
2.
Bulk & Surface Impurity Specifications
[*]
3.
Size Specifications
[*]
4.
Certification & Elemental Analysis
[*]
5.
Packaging
[*]
6. Qualified
Laboratories:
[*]
|
KINKO
Initials & Date __XDL
July 25, 2008________
|
HOKU
Initials & Date __DS_________________________
|
Appendix
2 to Supply Agreement
Page
15
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10.77
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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]
|
|
XXXXXXXXX, XXXXX 00000
|
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 ___________
U.S. Dollars (US$__________).
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.
|
KINKO
Initials & Date __XDL
July 25, 2008________
|
HOKU
Initials & Date __DS_________________________
|
Appendix
2 to Supply Agreement
Page
16
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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 [*],
the
expiration date, or any extended date as provided above, at (ISSUING BANK’S NAME
AND ADDRESS).
|
KINKO
Initials & Date __XDL
July 25, 2008________
|
HOKU
Initials & Date __DS_________________________
|
Appendix
2 to Supply Agreement
Page
17
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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]
|
KINKO
Initials & Date __XDL
July 25, 2008________
|
HOKU
Initials & Date __DS_________________________
|
Appendix
2 to Supply Agreement
Page
18
of
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