AMENDED & RESTATED SUPPLY AGREEMENT
EXHIBIT
10.103
[*]
= 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
& RESTATED SUPPLY AGREEMENT
This
Amended & Restated Supply Agreement is entered into as of this 2nd day of
April, 2009 (the “Signature
Date”) between WEALTHY RISE INTERNATIONAL, LTD., a Hong Kong company
(hereinafter “CUSTOMER”)
and HOKU MATERIALS,
INC., a Delaware corporation (hereinafter “HOKU”). HOKU
and CUSTOMER are sometimes referred to in the singular as a “Party” or
in the plural as the “Parties”.
Recitals
Whereas,
HOKU and CUSTOMER are parties to that certain Supply Agreement dated as of
September 4, 2008 (the “Prior Supply
Agreement”).
Whereas,
HOKU and CUSTOMER desire to amend and restate the Prior Supply Agreement in its
entirety as set forth herein.
Whereas,
HOKU desires to supply polysilicon to CUSTOMER for its general use beginning in
calendar year 2010 for a continuous period of ten years from the date of the
first shipment.
Whereas,
in exchange for HOKU’s agreement to allocate the supply of polysilicon, CUSTOMER
desires to provide HOKU with a firm order for polysilicon upon the terms and
conditions provided herein.
NOW,
THEREFORE, in furtherance of the foregoing Recitals and in consideration of the
mutual covenants and obligations set forth in this Agreement, the Parties hereby
agree as follows:
1. Effectiveness. This
Agreement shall become effective upon CUSTOMER’s initiation of remittance in
full to HOKU of the Initial Deposit (the “Effective
Date”). Upon the effectiveness of this Agreement, HOKU agrees
irrevocably to waive any remedy that otherwise may have accrued under the Prior
Supply Agreement, including, without limitation, any claim it may have had to
interest.
2. Definitions.
The
following terms used in this Agreement shall have the meanings set forth
below:
2.1. “Affiliate”
shall mean, with respect to either Party to this Agreement, any entity that is
controlled by or under common control with such Party.
2.2. “Agreement”
shall mean this Amended & Restated Supply Agreement and all appendices
annexed to this Agreement as the same may be amended from time to time in
accordance with the provisions hereof.
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2.3. “First Shipment
Date” shall mean the date by which HOKU has delivered to CUSTOMER an
aggregate total of [*] metric tons of Products pursuant to this
Agreement.
2.4. “Facility”
shall mean any facility used by HOKU for the production of the
Product.
2.5. “Independent
Expert” means any Qualified Laboratory that is reasonably acceptable to
each of HOKU and CUSTOMER; provided, however that if such parties cannot agree
on the Independent Expert within ten (10) days, each Party shall select one
independent expert form the list of Qualified Laboratories, and those two
independent experts shall select the Independent Expert.
2.6. “Minimum Annual
Quantity of Product” means [*] metric tons ([*] kilograms).
2.7. “Minimum Quarterly
Quantity of Product” means [*].
2.8.
“Minimum
Monthly Quantity of Product” means [*].
2.9. “Product”
shall mean the raw polysilicon in chunk form manufactured by HOKU and sold to
CUSTOMER pursuant to this Agreement.
2.10. “Product
Specifications” shall mean the quality and other specifications set forth
on Appendix 2 to this Agreement.
2.11. “Qualified
Laboratory” means each qualified laboratory set forth on Appendix
2 to this Agreement.
2.12. “Term”
shall mean the period during which this Agreement is in effect, as more
specifically set forth in Section 10 of this Agreement.
2.13. “Total
Deposit” shall mean all deposits or prepayments made by CUSTOMER to HOKU
hereunder including without limitation the Initial Deposit and the Main
Deposit.
2.14. “Year”
shall mean each of the ten (10) twelve-month periods commencing on the First
Shipment Date.
3. Ordering. Starting
on the First Shipment Date and each Year during the term of this Agreement
thereafter, CUSTOMER agrees to purchase from HOKU, and HOKU agrees to sell to
CUSTOMER, the Minimum Annual Quantity of Product at the prices set forth on
Appendix 1 to this Agreement (the “Pricing
Schedule”). This Agreement constitutes a firm order from
CUSTOMER for [*] metric tons of Product that cannot be cancelled during the term
of this Agreement, except as set forth in Section 10 below.
4. Supply
Obligations.
4.1. HOKU
shall deliver each Year pursuant to this Agreement starting on the First
Shipment Date at least the Minimum Annual Quantity of Product in approximately
equal monthly shipments in amounts not less than the Minimum Monthly Quantity
and the Minimum Quarterly Quantity pursuant to Section 5.1 below; provided
however, that if HOKU fails to deliver a monthly shipment, then HOKU may deliver
any deficiency within [*] days without breaching this section or incurring any
purchase price adjustment (pursuant to Section 4.3 below). At any
time during the term of this Agreement, HOKU may ship to CUSTOMER up to the full
cumulative balance of Minimum Annual Quantity of Product to be shipped through
the end of the current Year (an “Excess
Shipment”) with CUSTOMER’s written consent,
which may be given or withheld in CUSTOMER’s absolute discretion. This shipment
will be credited against each subsequent Minimum Annual Quantity of
Product. For example, if the Minimum Annual Quantity of Product for a
given Year is [*] metric tons, and if HOKU delivers [*] metric tons in January,
then the next shipment of [*] metric tons is not required until the following
Year.
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4.2. HOKU
intends to manufacture the Products at its Facility; however, notwithstanding
anything to the contrary herein, HOKU may deliver to CUSTOMER Products that are
manufactured by a third party other than HOKU, (the “Alternative
Products”). The Alternative Products shall conform to the warranties of
HOKU to CUSTOMER hereunder, and the quality, price, delivery and any other terms
and conditions of the Alternative Products shall be no less favorable than the
terms and conditions set forth in this Agreement. Delivery of the
Alternative Products shall not release or mitigate HOKU’s liabilities and
obligations hereunder except that delivery of the Alternative Products is deemed
to be delivery of Products, and CUSTOMER shall have the same rights and HOKU
shall have the same obligations as set forth hereunder with respect to any
Alternative Products. HOKU shall notify CUSTOMER in writing prior to
the delivery of Alternative Products.
4.3. Except
in the case of a force majeure pursuant to Section 13 below, if at any time
after [*], HOKU does not
supply any Products pursuant to Section 4.1 or 4.2 within [*] days of the
scheduled delivery date, HOKU will provide CUSTOMER with a purchase price
adjustment. (For the avoidance of doubt, this means that no such [*]
day period shall begin to run before August 1, 2010.) Such purchase
price adjustment shall be the reduction of [*] of the price of the respective
delayed Products for each week or part thereof that the Product shipment (or
part thereof) is delayed beyond the [*] day grace
period. Notwithstanding anything to the contrary, the maximum amount
of such purchase price reduction is limited to [*] of the price 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 10.2.1 below. Notwithstanding the
foregoing, if CUSTOMER fails to make a payment to HOKU within the [*]-day period
set forth in Section 6.4 below, HOKU shall not be required to supply any Product
to CUSTOMER until HOKU has received the past due amount including any interest
payable thereon pursuant to this Agreement. For the avoidance of
doubt, CUSTOMER’s right to reduce the purchase price pursuant to this Section
4.3 shall not apply if HOKU is not fulfilling its supply obligations for this
reason.
5. Shipping &
Delivery.
5.1. Except
as provided in Section 4.2 above, shipments shall be made from the Facility on a
monthly basis in accordance with a shipment schedule that will be provided by
HOKU each Year under this Agreement (the “Shipment
Schedule”) no later than [*] days prior to the applicable
Year. The Shipment Schedule shall provide for approximately equal
monthly shipments in amounts not less than the Minimum Monthly Quantity that add
up to the Minimum Annual Quantity of Products in the applicable Year and add up
to the Minimum Quarterly Quantity in each of the four quarters of the applicable
Year.
5.2. HOKU
will use commercially reasonable efforts to make available to CUSTOMER its first
shipment of Products on or before June 30, 2010.
6. Payments &
Advances.
6.1. On
or before April 10, 2009, CUSTOMER shall initiate remittance in full to HOKU of
Seven Million U.S. Dollars (US$7,000,000) as an advance payment for Products to
be delivered under this Agreement, via wire transfer of immediately available
funds (the “Initial
Deposit”).
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6.2. CUSTOMER
shall pay in cash to HOKU the additional sum of Thirteen Million Two Hundred
Thousand U.S. Dollars (US$13,200,000) (the “Main
Deposit”) as an advance payment for Products to be delivered under this
Agreement in equal monthly installments (each, a “Monthly
Deposit”) within ten (10) business days from each of the Remittance Dates
set forth below:
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Remittance
Date
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Monthly
Deposit
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June
10, 2009
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$3.3
million
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August
10, 2009
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$3.3
million
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October
10, 2009
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$3.3
million
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December
10, 2009
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$3.3
million
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6.3. CUSTOMER
shall pay in cash to HOKU the additional sum of Two Hundred Thousand U.S.
Dollars ($200,000) (the “Final
Deposit”) as an advance payment for Products to be delivered under this
Agreement. Initiation of the remittance in the full amount of the Final Deposit
shall be made within ten (10) business days of when HOKU completes the shipment
to CUSTOMER of a cumulative aggregate of seven and one-half (7.5) metric tons of
Product pursuant to Section 4 of this agreement.
6.4. HOKU
shall invoice CUSTOMER at or after the time of each shipment of Products to
CUSTOMER. Taxes, customs and duties, if any, will be identified as separate
items on HOKU invoices. All invoices shall be sent to CUSTOMER’s address as
provided herein. Payment terms for all invoiced amounts shall be [*] days from
date of shipment. All payments shall be made in U.S. Dollars. Unless
HOKU is entitled to retain the Total Deposit as liquidated damages pursuant to
Section 12 below, shipments to CUSTOMER shall be credited against the Total
Deposit according to the schedule of credits in Appendix 1 until
there are no Funds Remaining on the Deposit (as defined in Section
10.5).
6.5. The
prices for the Products do not include any excise, sales, use, import, export or
other similar taxes, such taxes will not include income taxes or similar taxes,
which taxes will be invoiced to and paid by CUSTOMER, provided that CUSTOMER is
legally or contractually obliged to pay such taxes. CUSTOMER shall be
responsible for all transportation charges, duties or charges, liabilities and
risks for shipping and handling (and hereby indemnifies HOKU for such costs,
liabilities and risks); thus, the price for the Products shall not include any
such charges.
6.6. Late
payments and outstanding balances, shall accrue interest at a rate per annum
equal to the lesser of [*] per annum or the maximum allowed by law, accruing
daily and calculated on the basis of a 365-day year and the actual number of
days.
7. Security
Interest.
7.1. Subject
to receipt of the Initial Deposit HOKU hereby grants to CUSTOMER a security
interest to secure the repayment by HOKU to CUSTOMER of the Total Deposit
following any of the events set forth in Section 10.5 below, which shall be
subordinated in accordance with Section 7.2 below, in all of the tangible and
intangible assets related to HOKU’s polysilicon business (the “Collateral”).
7.2. CUSTOMER
acknowledges and agrees that the security interests and liens in the Collateral
will not be first priority security interests, will be expressly subordinated to
HOKU’s third-party lenders (the “Senior
Lenders”) that provide debt financing for the construction of any HOKU
Facility, and may be subordinated as a matter of law to other security
interests, and to security interests that are created and perfected prior to the
security interest granted to CUSTOMER hereby. CUSTOMER shall enter into
subordination agreements with the Senior Lenders on terms and conditions
reasonably acceptable to the Senior Lenders.
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7.3. In
addition, CUSTOMER shall enter into collateral, intercreditor and other
agreements (the “Collateral
Agreements”) with HOKU’s Senior Lenders, and with Suntech Power Holding
Co., Ltd., Solarfun Power Hong Kong Limited, Jiangxi Jinko Solar Co., Ltd.,
Tianwei New Energy (Chengdu) Wafer Co., Ltd, Shanghai Alex New Energy Co., Ltd.,
and HOKU’s other customers who provide prepayments for Products (collectively,
“HOKU’s
Other Customers”), as may be reasonably necessary to ensure that the
security interest granted hereby is pari passu with the security interests that
may be granted to HOKU’s Other Customers. CUSTOMER may not
unreasonably refuse to sign any such Collateral Agreement, provided that such
Collateral Agreement grants CUSTOMER a pari passu priority with respect to
HOKU’s Other Customers, and is expressly subordinated to the Senior
Lenders.
7.4. The
security interest granted hereby shall continue so long as HOKU continues to
maintain any amount of the Total Deposit, and only to the extent of such
remaining amount of the Total Deposit being held by HOKU, which has not been
credited against the shipment of Products pursuant to this Agreement, or
otherwise repaid to CUSTOMER. Notwithstanding anything to the
contrary contained in this Agreement, the Collateral consisting of real property
shall secure only the obligations of HOKU to refund any portion of the Total
Deposit to CUSTOMER in accordance with the terms of this
Agreement. When the Total Deposit is no longer held by HOKU, CUSTOMER
will sign such documents as are necessary to release its security
interests.
7.5. HOKU
and CUSTOMER each agree to act in good faith to execute and deliver any
additional document or documents that may be required in furtherance of the
foregoing provisions of this Section 7, including the Collateral
Agreements. Neither HOKU nor CUSTOMER may unreasonably refuse to sign
any such document.
8. Product Quality
Guarantee.
8.1. HOKU
warrants to CUSTOMER that the Products shall meet the Product Specifications.
For each shipment, this warranty shall survive for [*] days after the applicable
shipment date (the “Warranty
Period”). Upon release of the Products to a common carrier or
freight forwarder, FOB origin (INCOTERMS 2000), HOKU warrants that the Products
shall be free of all liens, mortgages, encumbrances, security interests or other
claims or rights. HOKU will, upon prompt notification and compliance
with HOKU’s instructions, refund or replace, at CUSTOMER’s sole option, any
Product which does not meet the Product Specifications, and CUSTOMER shall
comply with the inspection and return goods policy described in Section 9 below
with respect to such Products. No employee, agent or representative
of HOKU has the authority to bind HOKU to any oral representation or warranty
concerning the Products. Any oral representation or warranty made
prior to the purchase of any Product and not set forth in writing and signed by
a duly authorized officer of HOKU shall not be enforceable by
CUSTOMER. HOKU makes no warranty and shall have no obligation with
respect to damage caused by or resulting from accident, misuse, neglect or
unauthorized alterations to the Products.
8.2. HOKU
EXPRESSLY DISCLAIMS ALL OTHER WARRANTIES, WHETHER EXPRESS, IMPLIED OR STATUTORY,
INCLUDING THE WARRANTIES OF MERCHANTABILITY, AND FITNESS FOR A PARTICULAR
PURPOSE. Except as otherwise provided in Section 10.2.5 below, HOKU’s
sole responsibility and CUSTOMER’s exclusive remedy for any claim arising out of
the purchase of any Product is a refund or replacement, as described
above. In no event shall HOKU’s liability exceed the purchase price
paid therefore; nor shall HOKU be liable for any claims, losses or damages of
any individual or entity or for lost profits or any special, indirect,
incidental, consequential, or exemplary damages, howsoever arising, even if HOKU
has been advised of the possibility of such damages.
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8.3. HOKU
shall, at its own expense, indemnify and hold CUSTOMER and its Affiliates
harmless from and against any expense or loss resulting from any actual or
alleged infringement of any patent, trademark, trade secret, copyright, mask
work or other intellectual property related to the Products, and shall defend at
its own expense, including attorneys fees, any suit brought against CUSTOMER or
CUSTOMER’s Affiliates alleging any such infringement. CUSTOMER agrees
that: (i) CUSTOMER shall give HOKU prompt notice in writing of any
such suit; (ii) if HOKU provides evidence reasonably satisfactory to CUSTOMER of
HOKU’s financial ability to defend the matter vigorously and pay any reasonably
foreseeable damages, CUSTOMER shall permit HOKU, through counsel of HOKU’s
choice, to answer the charge of infringement and defend such suit (but CUSTOMER,
or CUSTOMER’s Affiliate may be represented by counsel and participate in the
defense at its own expense); and (iii) CUSTOMER shall give HOKU all needed
information, assistance, and authority, at HOKU’s expense, to enable HOKU to
defend such suit. In case of a final award of damages in any such
suit HOKU shall pay such award, but shall not be responsible for any settlement
made without its prior consent. Except as otherwise expressly set
forth herein, HOKU disclaims any obligation to defend or indemnify CUSTOMER, its
officers, agents, or employees, from any losses, damages, liabilities, costs or
expenses which may arise out of the acts of omissions of XXXX.
0. Inspection and Return Goods
Policy.
9.1. An
inspection of appearance of each shipment of Product shall be made by CUSTOMER
in accordance with sound business practice upon the delivery of the Product, and
in no case later than [*] weeks after delivery at CUSTOMER’s factory. CUSTOMER
shall inform HOKU promptly, and in no case later than [*] weeks after delivery
of Product, in case of any obvious damages or other obvious defects to the
Product which CUSTOMER discovers under the inspection of
appearance.
9.2. CUSTOMER
shall perform final inspection of the Product upon introducing the Product into
CUSTOMER’s production process. Such inspection shall take place during the
Warranty Period. If the Product does not meet the Product
Specifications, CUSTOMER shall notify HOKU in writing without undue delay after
the inspection and in any event prior to expiration of the Warranty Period, and,
together with the notification, submit documentary evidence of the result of the
final inspection. HOKU shall then have the right to undertake its own inspection
prior to any return of the Products pursuant to Section 9.3 below, and shall
notify CUSTOMER in writing within 5 business days whether or not it chooses to
do so.
9.3. Products
may be returned to HOKU by delivering them to a common carrier or freight
forwarder within the later of (a) [*] after HOKU notifies CUSTOMER in writing
pursuant to Section 9.2 above that it chooses not to exercise its right to
undertake its own inspection prior to return of the Products; and (b) [*] after
HOKU completes its inspection pursuant to Section 9.2 above and confirms the
defect by written notice to CUSTOMER, for replacement or a refund including all
return shipment expenses. To assure prompt handling, HOKU shall
provide CUSTOMER a return goods authorization number within 48 hours of
CUSTOMER’s request. Provided that HOKU communicates this number to
CUSTOMER within such timeframe, CUSTOMER will reference this number on return
shipping documents. Returns made without the authorization number
provided by HOKU in accordance with the foregoing may be subject to HOKU’s
reasonable charges due to HOKU’s additional handling costs. If HOKU
concludes following its inspection pursuant to Section 9.2 above that the
Product meets the Product Specifications, CUSTOMER reserves the right to require
that the Product be submitted to an Independent Expert; and if HOKU chooses not
to exercise its right to complete its own inspection pursuant to Section 9.2,
HOKU reserves the right to require that the Product be submitted to an
Independent Expert. The conclusion of the Independent Expert shall be
final, binding and non-appealable in respect of the conformity of the Products
to the warranties set forth in Section 8.1 above. The fees and
expenses of the Independent Expert shall be paid solely by the party that does
not succeed in the dispute. HOKU reserves the right to reverse any
credit issued to CUSTOMER prior to the determination of the Independent
Expert that the Products for which the credit was issued are not defective, and
CUSTOMER reserves the right to return the Products to HOKU by delivering them to
a common carrier or freight forwarder within 10 days of the determination of the
Independent Expert that the Products are defective.
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10. Term and
Termination.
10.1. The
term of this Agreement shall begin on the Effective Date and shall remain in
force for a period of ten Years beginning with the First Shipment
Date.
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10.2. Each
Party may, at its discretion, upon written notice to the other Party, and in
addition to its rights and remedies provided under this Agreement or any other
agreement executed in connection with this Agreement and at law or in equity,
terminate this Agreement in the event of any of the following:
10.2.1. Upon
a material breach of the other Party of any material provision in this
Agreement, and failure of the other Party to cure such material breach within
[*] days after written notice thereof; provided, however, that such cure period
shall not modify or extend the [*]-day cure period for HOKU’s delivery
obligations pursuant to Section 4.3 above; and provided, further that each [*]
day cure period shall not apply to CUSTOMER’s failure to make pre-payments to
HOKU pursuant to Sections 6.1 through 6.3 to this Agreement. For
purposes of this Section 10.2.1, a “material breach” means a monthly shipment
which is delayed beyond [*] days, a payment default or any other material breach
of this Agreement which materially and adversely affects a Party or which occurs
on multiple occasions;
10.2.2. Upon
the voluntary or involuntary initiation of bankruptcy or insolvency proceedings
against the other Party; provided, that for an involuntary bankruptcy or
insolvency proceeding, the Party subject to the proceeding shall have sixty (60)
working days within which to dissolve the proceeding or demonstrate to the
terminating Party’s satisfaction the lack of grounds for the initiation of such
proceeding;
10.2.3. If
the other Party (i) becomes unable, or admits in writing its inability, to pay
its debts generally as they mature, (ii) becomes insolvent (as such term
may be defined or interpreted under any applicable statute);
10.2.4. In
accordance with the provisions of Section 13 (Force Majeure) below; provided,
however, that CUSTOMER may not terminate this Agreement pursuant to Section 13
if HOKU is supplying Products to CUSTOMER pursuant to Section 4.2 of this
Agreement;
10.2.5. HOKU’s
repetitive failure to deliver Products conforming to the warranties set forth in
Section 8 above, subject to applicable cure periods; or
10.2.6. Without
limiting the foregoing, CUSTOMER shall have the right to terminate this
Agreement if the First Shipment Date does not occur on or before October 31,
2010.
10.3. HOKU
shall have the right to terminate this Agreement if (A) on or before April 10,
2009, CUSTOMER has failed to initiate remittance in full to HOKU of the Initial
Deposit; (B) CUSTOMER has failed to initiate remittance in full of any Monthly
Deposit on or before the applicable date set forth in Section 6.2, in which
case, HOKU shall be entitled to retain the Initial Deposit and all prior Monthly
Deposits that have been paid to HOKU as of such termination date as liquidated
damages; or (C) CUSTOMER has failed to initiate payment in full of the Final
Deposit pursuant to Section 6.3 above, in which case, HOKU shall be entitled to
retain the Initial Deposit, and the Main Deposit as liquidated
damages. UPON FORFEITURE OF SUCH DEPOSITS AS LIQUIDATED DAMAGES
PURSUANT TO THIS SECTION 10.3, ALL CLAIMS, OBLIGATIONS AND LIABILITIES OF
CUSTOMER DERIVING FROM OR RELATING TO THIS AGREEMENT AND ITS TERMINATION SHALL
BE DEEMED TO BE DISCHARGED AND FINALLY SETTLED.
10.4. Upon
the expiration or termination of this Agreement howsoever arising (except for a
nullification pursuant to Section 1), the following Sections shall survive such
expiration or termination: Sections 2 (Definitions); Section 8 (Product Quality
Guarantee), Section 9 (Inspection and Return Goods Policy); Section 10 (Term and
Termination); Section 11 (Liability); Section 12 (Liquidated Damages); and
Section 14 (General Provisions).
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10.5. If
CUSTOMER terminates this Agreement pursuant to Section 10.2.1, 10.2.2, 10.2.3,
10.2.4, 10.2.5, 10.2.6, or 13, then, in addition to CUSTOMER’s other remedies
pursuant to this Agreement, and all available remedies at law and in equity,
100% of the Funds Remaining on the Total Deposit on such date of termination
shall be returned to CUSTOMER within thirty (30) calendar days, with any late
payment accruing interest pursuant to Section 6.6 above; provided however that
if CUSTOMER is in material breach of this Agreement at the time it terminates
this Agreement, then HOKU shall not be required to repay any of the Funds
Remaining on the Total Deposit up to the amounts of HOKU’s direct
loss from such material breach (unless CUSTOMER cures such breach within the
applicable cure period) or CUSTOMER’s other outstanding and unpaid obligations
hereunder (including, without limitation, obligations under Section 12). If HOKU
terminates this Agreement pursuant to Section 10.2.1, 10.2.2 10.2.3,
10.2.4, or 13 then, in addition to HOKU’s other remedies pursuant to this
Agreement, and all available remedies at law and in equity, HOKU
shall be entitled to retain any Funds Remaining on the Total Deposit on such
date of termination in accordance with Section 12. “Funds
Remaining” on the Total Deposit are funds not applied against CUSTOMER’s
purchase of Product, pursuant to Section 6.4 above, for Product actually shipped
to CUSTOMER hereunder.
11. Liability.
11.1. IN
NO EVENT SHALL EITHER PARTY BE LIABLE FOR INDIRECT, SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES OR FOR EXEMPLARY OR PUNITIVE DAMAGES, EVEN IF CUSTOMER OR
HOKU HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
11.2. HOKU’S
TOTAL LIABILITY TO CUSTOMER FOR ANY KIND OF LOSS, DAMAGE OR LIABILITY ARISING
UNDER OR IN CONNECTION WITH THIS AGREEMENT, UNDER ANY THEORY OF LIABILITY, SHALL
NOT EXCEED THE GREATER OF THE FUNDS REMAINING ON THE TOTAL DEPOSIT OR ANY
AMOUNTS OWED BY HOKU PURSUANT TO SECTION 8 HEREOF.
11.3. CUSTOMER’S
TOTAL LIABILITY TO HOKU FOR ANY KIND OF LOSS, DAMAGE OR LIABILITY ARISING UNDER
OR IN CONNECTION WITH THIS AGREEMENT, UNDER ANY THEORY OF LIABILITY, SHALL NOT
EXCEED THE GREATER OF THE FUNDS REMAINING ON THE TOTAL DEPOSIT OR THE PRICE AS
SET FORTH ON APPENDIX 1 TO THIS AGREEMENT FOR SUCH PRODUCT OF WHICH CUSTOMER HAS
TAKEN DELIVERY. For the avoidance of doubt under this Section and
other Sections hereof (including, without limitation, Sections 10.3 and 12),
upon the Effective Date, CUSTOMER shall never be liable to pay anything except
to the extent CUSTOMER actually takes delivery of Product, CUSTOMER must pay for
the Product at the prices set forth on Appendix 1 to this Agreement (subject to
CUSTOMER’S warranty and other rights under this
Agreement). Otherwise, HOKU’s sole remedies in the event CUSTOMER
fails to pay any amounts due pursuant to this Agreement are to terminate the
Agreement and/or retain amounts CUSTOMER has already paid. The
following examples illustrate these points. (In each of the examples,
it is assumed HOKU has fulfilled its obligations under the Agreement and
CUSTOMER is not entitled to any remedy against HOKU.) Example 1:
Assume CUSTOMER fails to make the third monthly pre-payment of $3.3 million,
having previously paid the Initial Deposit and the first two monthly payments of
$3.3 million. Then HOKU would be entitled to terminate the Agreement
and to retain the $13.6 million already paid by CUSTOMER, but CUSTOMER would
have no further liability. Example 2: Assume there are $4.2 million
in Funds Remaining from amounts previously deposited by CUSTOMER at the end of
“Year 4” (see Appendix 1), that CUSTOMER takes delivery of 10 metric tons of
Product, and that CUSTOMER fails to pay for the Product on time. HOKU
would then have two options. HOKU could give [*] written notice of
default pursuant to Section 10.2.1. Alternatively, HOKU could off-set
the amount due by applying [*] from the due date out of the Funds Remaining
pursuant to Section 12.2. If CUSTOMER
were then to fail to pay within the grace period (Section 10.2.1) or to
replenish the amounts applied from the Funds Remaining (Section 12.2), HOKU
would be entitled to terminate the Agreement and to retain the Funds Remaining,
but CUSTOMER would have no further liability. Example 3: Assume there
are [*] in Funds Remaining from amounts previously deposited by CUSTOMER at the
end of “Year 8” (see Appendix 1), that CUSTOMER takes delivery of [*] metric
tons of Product, and that CUSTOMER fails to pay the [*] for the
Product. Then HOKU would be entitled to retain the [*] in Funds
Remaining and CUSTOMER would still be liable to pay HOKU
[*]. Example 4: CUSTOMER fails to take delivery of any Product
or, having previously taken delivery of one or more shipments of Product and
paid for such Product, CUSTOMER fails to take delivery of any additional
Product. Then HOKU would be entitled to retain the Funds Remaining
but CUSTOMER would have no further liability.
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12. Liquidated Damages;
Off-Set.
12.1. THE
PARTIES ACKNOWLEDGE AND AGREE THAT ANY BREACH OF SECTION 6 OF THIS AGREEMENT BY
CUSTOMER MAY CAUSE IRREPARABLE AND IMMEASURABLE DAMAGE TO
HOKU. BECAUSE IT IS DIFFICULT TO MEASURE THESE DAMAGES, IN THE EVENT
THAT THIS AGREEMENT IS TERMINATED BY HOKU PURSUANT TO SECTION 10.3, THEN HOKU
SHALL BE ENTITLED TO RETAIN AS LIQUIDATED DAMAGES, ANY FUNDS REMAINING ON THE
TOTAL DEPOSIT THEREOF NOT CREDITED AGAINST PRODUCT
SHIPMENTS.
12.2. THE
PARTIES ACKNOWLEDGE AND AGREE THAT, IN THE EVENT THAT CUSTOMER IS LATE IN MAKING
ANY PAYMENTS TO HOKU FOR PRODUCTS THAT HAVE BEEN SHIPPED BY HOKU, HOKU RESERVES
THE RIGHT TO OFF-SET THE AMOUNT OF THE TOTAL DEPOSIT BY CREDITING TO HOKU’S
ACCOUNT THE AMOUNT OF THE TOTAL DEPOSIT THAT IS EQUAL TO THE PAST DUE AMOUNT,
INCLUDING ANY INTEREST PAYABLE THEREON PURSUANT TO THIS AGREEMENT; PROVIDED,
HOWEVER, THAT HOKU SHALL NOTIFY CUSTOMER IN WRITING PRIOR TO SUCH
OFF-SET. FOR THE AVOIDANCE OF DOUBT, THE INTEREST PAYABLE SET FORTH
ABOVE SHALL ACCRUE FROM THE DUE DATE TO THE DATE WHEN HOKU EXERCISES THE RIGHT
TO OFF-SET. IN CASE OF SUCH OFF-SET BY HOKU, CUSTOMER SHALL BE
REQUIRED TO REPLENISH THE DEPOSIT BY THE SET-OFF AMOUNT WITHIN THIRTY (30)
BUSINESS DAYS AFTER CUSTOMER’S RECEIPT OF SUCH NOTIFICATION.
13. Force
Majeure. Neither Party shall be liable to the other Party for
failure of or delay in performance of any obligation under this Agreement,
directly, or indirectly, owing to acts of God, war, war-like condition,
embargoes, riots, strike, lock-outs and other events beyond its reasonable
control, provided, however, that the non-performing Party shall not be so
excused to the extent such default or delay is attributable to such
non-performing Party failing to use reasonable efforts to prevent or such
non-performing Party causing such default or delay, and such default or delay
could not reasonably be circumvented by the non-performing Party through the use
of alternate sources, workaround plans or other
means. Notwithstanding the foregoing, a strike, lock-out or other
labor dispute involving a Party (or, in the case of Supplier, a subcontractor or
supplier) and its own personnel will not excuse such Party from performing its
obligations hereunder. In such event, the non-performing Party will be excused
from further performance or observance of the obligation(s) so affected for as
long as such circumstances prevail and such Party continues to use commercially
reasonable efforts to recommence performance or observance whenever and to
whatever extent without delay. If such failure or delay occurs, the affected
Party (i.e. the Party that is unable to perform) shall notify the other Party of
the occurrence thereof as soon as possible, and the Parties shall discuss the
best way to resolve the event of force majeure. If the conditions
of Force Majeure apply for a period of more than two (2) consecutive calendar
months, the non-affected Party shall be entitled to terminate this Agreement
upon written notice to the other Party.
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14. General
Provisions.
14.1. CUSTOMER
acknowledges that it is the policy of HOKU to scrupulously comply with the
Foreign Corrupt Practices Act of 1977 (as amended, the “FCPA”) and
to adopt appropriate and reasonable practices and procedures that are undertaken
in such a manner as to substantially eliminate the potential for violation of
the FCPA. CUSTOMER further acknowledges that it shall be bound by any
law, regulation or other legal enactment, that prohibits corrupt practices of
the type or nature described in the FCPA and that is applicable to CUSTOMER, and
CUSTOMER hereby represents and warrants that neither HOKU, nor to CUSTOMER’s
knowledge, any other authorized person or entity associated with or acting for
or on behalf of HOKU, has knowingly directly or indirectly made any
contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other
payment to CUSTOMER, whether in money, property, or services (i) to obtain
favorable treatment in securing business from CUSTOMER, (ii) to pay for
favorable treatment for business secured from CUSTOMER, or (iii) to obtain
special concessions or for special concessions already obtained from CUSTOMER,
for or in respect of HOKU, in violation of any legal requirement or applicable
law. HOKU acknowledges that it is the policy of CUSTOMER to
scrupulously comply with the FCPA and to adopt appropriate and reasonable
practices and procedures that are undertaken in such a manner as to
substantially eliminate the potential for violation of the FCPA. HOKU
further acknowledges that it shall be bound by any law, regulation or other
legal enactment, that prohibits corrupt practices of the type or nature
described in the FCPA and that is applicable to HOKU, and HOKU hereby represents
and warrants that neither CUSTOMER, nor to HOKU’s knowledge, any other
authorized person or entity associated with or acting for or on behalf of
CUSTOMER, has knowingly directly or indirectly made any contribution, gift,
bribe, rebate, payoff, influence payment, kickback, or other payment to HOKU,
whether in money, property, or services (i) to obtain favorable treatment in
securing business from HOKU, (ii) to pay for favorable treatment for business
secured from HOKU, or (iii) to obtain special concessions or for special
concessions already obtained from HOKU, for or in respect of CUSTOMER, in
violation of any legal requirement or applicable law.
14.2. This
Agreement shall be construed under and governed by the laws of the State of
California, U.S.A.
14.3. Upon
notice from one Party to the other of a dispute hereunder, the Parties agree to
hold a meeting within thirty (30) days of receipt of such notice with at least
one (1) representative from each Party who has decision-making authority for
such company. At this meeting, the Parties will attempt to resolve the dispute
in good faith. If, after the meeting, the dispute has not been resolved, only
then may a Party resort to litigation. Any proceeding to enforce or to resolve
disputes relating to this Agreement shall be brought in California, USA. In any
such proceeding, neither Party shall assert that such a court lacks jurisdiction
over it or the subject matter of the proceeding.
14.4. HOKU
may assign its rights under this Agreement to any collateral agent as collateral
security for HOKU’s secured obligations in connection with the financing a HOKU
Facility, without the consent of CUSTOMER. Except as stated in the previous
sentence, neither HOKU nor CUSTOMER may assign this Agreement to a third party
without the prior written consent of the other Party, which consent shall not be
unreasonably withheld. Notwithstanding the foregoing, an assignment
of this Agreement by either Party in connection with a merger, acquisition, or
sale of all or substantially all of the assets or capital stock of such Party
shall not require the consent of the other Party. If this Agreement
is assigned effectively to a third party, this Agreement shall bind upon
successors and assigns of the Parties hereto.
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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:
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(a)
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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
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(b)
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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.
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Each
Party giving a notice shall address the notice to the appropriate person at the
receiving Party at the address listed below or to a changed address as the Party
shall have specified by prior written notice:
CUSTOMER:
WEALTHY
RISE INTERNATIONAL, LTD.
Xxxx
0000, Xxxxxxx Xxxxxx
00
Xxxxxxx Xxxx, Xxxxxxx, Xxxx Xxxx
Attn: X.X.
Xxx, CEO
HOKU:
HOKU
MATERIALS, INC.
Xxx Xxxx
Xxx
Xxxxxxxxx,
Xxxxx, 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. Beginning
on the Effective Date, and until the earlier of (A) HOKU’s shipment of the
Minimum Annual Quantity of Product manufactured at the HOKU Facility in
Pocatello, Idaho, USA, or (B) the termination of this Agreement by either Party
pursuant to Section 10 of this Agreement (the “Inspection
Termination Date”), CUSTOMER shall have the right to visit the HOKU
Facility in Pocatello, Idaho, USA, for the limited purpose of evaluating HOKU’s
progress towards completing the construction of its polysilicon production
facilities. CUSTOMER shall provide HOKU with at least three (3) business days’
prior notice of any such visit, and may not visit more than two times each
calendar quarter. HOKU reserves the right to refuse access to any
individual who is not subject to the parties’ non-disclosure agreement dated
August 7, 2008. CUSTOMER shall agree to abide by all of HOKU’s safety
and security requirements and instructions for the HOKU
Facility. Beginning on the Effective Date, and until the Inspection
Termination Date, HOKU shall provide CUSTOMER with monthly updates on the
progress of the construction of the HOKU polysilicon production
facilities.
14.8. If
any provision of this Agreement is or becomes, at any time or for any reason,
unenforceable or invalid, no other provision of this Agreement shall be affected
thereby, and the remaining
provisions of this Agreement shall continue with the same force and effect as if
such unenforceable or invalid provisions had not been inserted in this
Agreement.
14.9. No
changes, modifications or alterations to this Agreement shall be valid unless
reduced to writing and duly signed by respective authorized representatives of
the Parties.
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14.10. No
employment, agency, trust, partnership or joint venture is created by, or shall
be founded upon, this Agreement. Each Party further acknowledges that neither it
nor any Party acting on its behalf shall have any right, power or authority,
implied or express, to obligate the other Party in any way.
14.11. Neither
Party shall make any announcement or press release regarding this Agreement or
any terms thereof without the other Party’s prior written consent; provided,
however, that the Parties will work together to issue a joint press release
within two (2) days after execution of this
Agreement. Notwithstanding the foregoing, either Party may publicly
disclose the material terms of this Agreement pursuant to the United States
Securities Act of 1933, as amended, the United States Securities Exchange Act of
1934, as amended, or other applicable law and Solargiga Energy Holdings Limited,
being the ultimate holding company of CUSTOMER, may publicly disclose the
material terms of this agreement pursuant to Hong Kong law and the Rules
Governing the Listing of securities on The stock Exchange of Hong Kong Limited,
as amended; provided, however, that the Party being required to disclose the
material terms of this Agreement shall provide reasonable advance notice to the
other Party.
14.12. This
Agreement constitutes the entire agreement between the Parties and supersedes
all prior proposal(s) and discussions, relative to the subject matter of this
Agreement and neither of the Parties shall be bound by any conditions,
definitions, warranties, understandings or representations with respect to such
subject matter other than as expressly provided herein. No oral explanation or
oral information by either Party hereto shall alter the meaning or
interpretation of this Agreement. Notwithstanding the foregoing, the
Prior Supply Agreement shall continue in full force and effect until CUSTOMER
initiates the remittance of the Initial Deposit to HOKU. Should
CUSTOMER fail to initiate the remittance in the full amount of the Initial
Deposit on or before April 10, 2009, then this Agreement shall be null and void,
and the Prior Supply Agreement shall continue in full force and
effect. Upon initiation of remittance in the full amount
of the Initial Deposit on or before April 10, 2009, and provided that HOKU
actually receives the Initial Deposit within a reasonable period of time after
the remittance date, the Prior Supply Agreement shall be superseded in all
respects by the terms of this Agreement, and all obligations and liabilities of
the Parties under the Prior Supply Agreement shall be
extinguished. Assuming HOKU receives and retains the Initial Deposit,
it shall be deemed to have waived any argument that it did not receive the
Initial Deposit within a reasonable period of time.
14.13. The
headings are inserted for convenience of reference and shall not affect the
interpretation and or construction of this Agreement.
14.14. Words
expressed in the singular include the plural and vice-versa.
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IN
WITNESS WHEREOF, the Parties have executed this Amended & Restated Supply
Agreement as of the date last set forth below.
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CUSTOMER:
WEALTHY
RISE INTERNATIONAL, LTD.
By:
/s/ X.X. Xxx
Name:
X.X. Xxx
Title:
CEO
Authorized
Signatory
Date:
2/4/2009
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HOKU:
HOKU
MATERIALS, INC.
By:
/s/ Xxxxxx Xxxxxx
Name:
Xxxxxx Xxxxxx
Title:
Chairman & CEO
Authorized
Signatory
Date:
2 April
2009
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Signature
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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 [*] MT shall be invoiced at [*]
per kilogram.
Credit
Schedule
[*]
HOKU will
credit CUSTOMER against the Total Deposit according to the above
schedule.
Credits
will be reflected on shipping invoices and shall be applied in full for each
shipment of Products until the amount specified above for each year is fully
exhausted. In the event that any credit is not applied due to HOKU’s
failure to ship Products, then such credit shall be carried forward to the next
Year.
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Appendix
1 to Amended & Restated Supply Agreement
Page
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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:
[*]
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Appendix
1 to Amended & Restated Supply Agreement
Page
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