REAL PROPERTY MORTGAGE; SECURITY AGREEMENT; ASSIGNMENT OF RENTS; FIXTURE FILING AND FINANCING STATEMENT

TMK Nos. (1) 9-1-075:009

THIS REAL PROPERTY MORTGAGE; SECURITY AGREEMENT; ASSIGNMENT OF RENTS; FIXTURE FILING; AND FINANCING STATEMENT (this “ Mortgage ”) is made on July 25 2008, by HOKU SCIENTIFIC, INC. , a Delaware corporation, whose address is 1075 Opakapaka Street, Kapolei, Hawaii 96707 (hereinafter called the “ Mortgagor ”), and BANK OF HAWAII , a Hawaii corporation, with post office address at P.O. Box 2900, Honolulu, Hawaii 96846 (hereinafter called the “ Mortgagee ”),

To secure the repayment by the Mortgagor to the Mortgagee of an indebtedness not to exceed the principal amount of THREE MILLION FOUR HUNDRED EIGHTY THOUSAND AND NO/100 DOLLARS ($3,480,000.00), together with interest thereon, in accordance with the terms and provisions of that that certain Credit Agreement dated as of July 25 , 2008 (the “ Credit Agreement ”), entered into by and between the Mortgagee and the Mortgagor, the terms and provisions of such Credit Agreement being incorporated herein by reference, being secured hereby (said indebtedness and interest due under the Credit Agreement and all other sums due hereunder and under the Security Documents (defined below) being hereinafter collectively referred to as the “ Debt ”);

AND ALSO to secure the observance and performance by the Mortgagor of all covenants, conditions and agreements required to be observed and performed by the Mortgagor under this Mortgage and under any other instruments or agreements executed by the Mortgagor concurrently herewith or otherwise in connection with the Debt, including, but not limited to, the payment by the Mortgagor to the Mortgagee of all sums expended or advanced by the Mortgagee pursuant to any provision of this Mortgage or any such other instrument or agreement (the Credit Agreement, this Mortgage, and all other instruments and agreements executed in connection with the Debt being hereinafter called the “ Security Documents ”);

AND ALSO to secure the full and faithful performance by the Mortgagor of all the terms, covenants and conditions required to be observed and performed by the Mortgagor under the Credit Agreement;

AND ALSO to secure the payment by the Mortgagor to the Mortgagee of all other sums now or hereafter loaned or advanced by the Mortgagee to the Mortgagor, expended by the Mortgagee for the account of the Mortgagor, or otherwise owing by the Mortgagor to the Mortgagee on any and every account whatsoever in connection with the Debt;

THE MORTGAGOR DOES HEREBY grant, bargain, sell, assign and convey unto the Mortgagee, its successors and assigns, all of that certain property described in Exhibit “A” attached hereto and made a part hereof, subject to the encumbrances (the “ Encumbrances ”), if any, set forth in such Exhibit.

TOGETHER WITH all buildings and improvements now located on the real property described above and any and all buildings, improvements and building materials that may be hereafter placed thereon during the existence of this Mortgage and all rents, royalties, profits, revenues, income and other benefits arising from the use or enjoyment of all or any portion of the above-described property or any contract pertaining to the use or enjoyment thereof;

ALSO TOGETHER with all furniture, furnishings, machinery, appliances, apparatus, fittings, fixtures and articles of personal property of every kind and nature whatsoever, other than consumable goods, now or hereafter located in or upon such real property or any part thereof or wherever located that are used in connection with the normal operation of the building (hereinafter called “ Fixtures ”) and now owned or hereafter acquired by the Mortgagor, including all of the right, title and interest of the Mortgagor in and to any Fixtures which may be subject to any retail installment contract, conditional sale contract or security agreement superior in lien to the lien of this Mortgage, it being understood and agreed that all of the Fixtures is part and parcel of the improvements on such real property and appropriated to the use thereof, and whether affixed or annexed or not, shall for the purpose of this Mortgage be deemed conclusively to be conveyed hereby, the Mortgagor agreeing to execute and deliver, from time to time, such further instruments as may be requested by the Mortgagee to confirm the lien of this Mortgage on the Fixtures;

ALSO TOGETHER with any and all awards or payments, including interest thereon, and the right to receive the same, which may be made with respect to such real property and improvements as a result of (a) the exercise of the right of eminent domain, (b) the alteration of the grade of any street, or (c) any other injury to or decrease in the value of such real property and improvements to the extent of all amounts which may be secured by this Mortgage at the date of receipt of any such award or payment by the Mortgagee, and of the reasonable counsel fees, costs and disbursements incurred by the Mortgagee in connection with the collection of such award or payment, the Mortgagor agreeing to execute and deliver, from time to time, such further instruments as may be required by the Mortgagee to confirm such assignment to the Mortgagee of any such award or payment;

ALSO TOGETHER with all right, title and interest of the Mortgagor in and to (1) all leases, partial assignments, subleases and other contracts of conveyance covering all or any portion of such real property or the Fixtures, and any and all modifications and extensions thereof; (2) all binders or policies of insurance of any kind covering all or any portion of such real property or the Fixtures, and any riders, amendments, extensions, renewals, supplements or revisions thereof; (3) any and all accounts (as defined in Chapter 490, Hawaii Revised Statutes) which may in any way pertain to the business of the Mortgagor; and (4) any and all general intangibles (as defined in Chapter 490, Hawaii Revised Statutes) including contracts, permits, licenses, certificates, authorizations, refunds, rebates, security deposits, trademarks and tradenames, which may in any way pertain to the business of the Mortgagor (the items of collateral described in this paragraph being hereinafter called the “ Collateral ”);

TO HAVE AND TO HOLD the above-described real property, Fixtures, Collateral, awards, payments and other property together with all rights, privileges and appurtenances thereto belonging (all of such property being hereinafter referred to as the “ Mortgaged Property ”) unto the Mortgagee, absolutely and forever; SUBJECT, HOWEVER, to the Encumbrances.

UPON CONDITION that if the Mortgagor shall well and truly pay to the Mortgagee the full amount of the Debt in accordance with the terms and provisions of the Credit Agreement, and if the Mortgagor shall discharge any and all obligations that now or hereafter may be or become owing, directly or contingently, by the Mortgagor to the Mortgagee on any and every account, whether or not the same are mature, of which obligations the books of the Mortgagee shall be prima facie evidence, and if the Mortgagor shall observe and perform all of the covenants, conditions and agreements to be observed and performed by the Mortgagor in this Mortgage and the other Security Documents, and if the Mortgagor shall pay the costs of release, then these presents shall be void, and that, subject to the terms hereof, until the happening of an Event of Default, as hereinafter defined, the Mortgagor shall be permitted to use and possess the Mortgaged Property and to use and receive the rents, issues, profits, revenues and other income thereof;

BUT, if any one or more of the following events (“ Events of Default ”) shall occur:

(a)   Default shall be made by the Mortgagor in the payment of Debt as and when due under the Credit Agreement or any other obligation secured hereby; or

(b)   Default shall be made by the Mortgagor in the due and punctual observance or performance of any other covenant, agreement, obligation or condition required to be observed or performed by the Mortgagor under this Mortgage or the Credit Agreement or any of the other Security Documents within thirty (30) days after the Mortgagee or any other person notifies the Mortgagor, or the Mortgagor acquires knowledge of such default; provided, however , that if such default is susceptible of being cured but such cure cannot be accomplished with reasonable diligence within said period of time, and if the Mortgagor commences to cure such default promptly and thereafter continuously prosecutes the curing of such default with reasonable diligence, such period of time shall be extended for such period of time as may be necessary to cure such default with reasonable diligence, but not to exceed an additional thirty (30) days; or

(c)   The Mortgagor shall become insolvent or shall be voluntarily or involuntarily dissolved or shall admit in writing the Mortgagor’s inability to meet the Mortgagor’s debts as they become due, or the Mortgagor shall file a voluntary petition in bankruptcy, or make an assignment for the benefit of creditors, or consent to the appointment of a receiver or trustee for all or a substantial part of the Mortgagor’s properties, or file a petition, answer or other instrument seeking or acquiescing to the arrangement of the Mortgagor’s debts, or other relief under the federal bankruptcy laws or any other applicable law for the relief of debtors of the United States of America or any state or territory thereof; or

(d)   A decree or order of a court having jurisdiction in the premises shall be entered (i) adjudging the Mortgagor to be bankrupt or insolvent, or (ii) appointing a receiver or trustee or assignee in bankruptcy or insolvency of the Mortgagor or the Mortgagor’s properties, or (iii) directing the winding up or liquidation of the Mortgagor’s affairs; or

(e)   Any representation or warranty made by the Mortgagor herein or otherwise in connection with the Debt shall be untrue in any material respect;

THEN, AND IN ANY SUCH EVENT :

(A)   The Mortgagee may, without notice, presentment or demand, declare the entire unpaid amount of the Debt and any interest thereon accrued and unpaid to be immediately due and payable, and such amount and interest shall thereupon become and be immediately due and payable, and shall thereafter bear interest until fully paid at the maximum rate provided by law to be paid in the event of such default;

(B)   The Mortgagor, upon demand of the Mortgagee, shall forthwith surrender to the Mortgagee the actual possession of the Mortgaged Property and, to the extent permitted by law, the Mortgagee itself or such officers or agents as it may appoint: (i) may enter and take possession of the Mortgaged Property, together with the books, papers and accounts of the Mortgagor relating thereto; (ii) may exclude the Mortgagor, and the Mortgagor’s agents and servants therefrom; (iii) may hold, operate and manage the same and from time to time make all needful repairs and such alterations, additions, advances and improvements as the Mortgagee shall deem appropriate; and (iv) may receive tolls, rents, revenues, issues, income, product and profits thereof and out of the same may pay all proper costs and expenses of so taking, holding and managing the same, including reasonable compensation to the Mortgagee’s agents, attorneys and counsel, and any taxes and assessments and other prior to the lien and security interest of this Mortgage, which the Mortgagee shall deem necessary or desirable to pay, and all expenses of such repairs, alterations, additions and improvements, and other disbursements made by the Mortgagee pursuant to the terms hereof, and may apply the remainder of the monies so received by the Mortgagee to the payment of any sums secured hereby, including but not limited to, the unpaid amount of, and interest on, the Debt;

(C)   The Mortgagee may, to the extent permitted by law, with or without first taking possession, sell the Mortgaged Property, in whole or, to the extent permitted by law, in part, at public auction in the State of Hawaii, or at such place as may be required by law, having first given notice of such sale by publication as may be required by law, and may adjourn such sale from time to time by announcement at the time and place appointed for such sale or adjourned sale, and upon such sale, the Mortgagee may make and deliver to any purchaser a good and sufficient deed, conveyance, or bill of sale, and good and sufficient receipts for the purchase money, and do and perform all other acts as may be necessary fully to carry into effect this power of sale;

(D)   The Mortgagee may, either with or without first taking possession, proceed by action or actions at law or in equity, or by any other appropriate remedy, to enforce payment of the Debt or performance of any other obligation secured hereby, and to foreclose this Mortgage, and to sell, in whole, or to the extent permitted by law, in part, the Mortgaged Property under the judgment or decree of a court or courts of competent jurisdiction;

(E)   Upon the institution of judicial proceedings to enforce its rights hereunder, the Mortgagee, to the extent permitted by law, shall be entitled as a matter of right to the ex parte appointment (without bond) of a receiver or receivers of the Mortgaged Property, and of the tolls, rents, revenues, issues, income, product and profits thereof, pending such proceedings, with such powers as the court making such appointment shall confer; and

(F)   The Mortgagee shall have the right to enforce one or more remedies hereunder, or any other remedy the Mortgagee may have under the other Security Documents, successively or concurrently, including, but not limited to, the right to foreclose this Mortgage with respect to any portion of the Mortgaged Property, if the operation of the remaining portion thereof is not thereby rendered unlawful under the then applicable laws, rules and regulations of the governmental authorities having jurisdiction in the premises, without thereby impairing the lien of this Mortgage on the remainder of the Mortgaged Property or affecting the remedies of the Mortgagee available with respect thereto.

Upon any sale, either under the power of sale hereby given or under judgment or decree in any judicial proceedings for foreclosure, or otherwise for enforcement of this Mortgage, the unpaid amount of the Debt, the unpaid interest thereon, and all other obligations hereby secured, if not previously due, shall at once become and be immediately due and payable.

Upon any such sale, the Mortgagee may bid for and purchase the Mortgaged Property or any part thereof, and, upon compliance with the terms of sale, may hold, retain and possess and dispose of such property in its absolute right without further accountability, and the Mortgagee, at any such sale may, if permitted by law, after allowing for the proportion of the total purchase price required to be paid in cash for the costs and expenses of the sale, commissioner’s compensation and other charges, in paying purchase money, turn in any document or instrument evidencing the Debt, including interest thereon, in lieu of cash, up to the amount which shall, upon distribution of the net proceeds of such sale, be payable thereon. The Mortgagee shall be permitted to bid at any public auction held to sell the Mortgaged Property without payment of a deposit or down payment of any kind. The Mortgagee shall not be required at confirmation of any public auction sale to extend credit or financing of any kind to the Mortgagor or any other party that may acquire the Mortgaged Property.

The Mortgagee may apply the proceeds of any such sale, first, to the costs and expenses of such sale and all proceedings in connection therewith, including, but not limited to, counsel fees; next, to the payment of amounts due and owing under any mortgage or other security agreement with a lien which has priority over this Mortgage; next, to the payment of any unreimbursed disbursements made by the Mortgagee for taxes or assessments or other charges prior to the lien of this Mortgage; next, to the payment of all other unreimbursed disbursements and expenses and unpaid charges and fees due and owing to the Mortgagee under the provisions of this Mortgage or any of the other Security Documents; and next, to the payment of the unpaid amount of the Debt and all other obligations of the Mortgagor to the Mortgagee, in such order as the Mortgagee shall determine; and the remainder, if any, shall be paid over to the Mortgagor. If such proceeds shall be insufficient to discharge the entire indebtedness under the Security Documents, the Mortgagee may have any other legal recourse against the Mortgagor for the deficiency.

Subject to the rights of the mortgagee or the secured party under any mortgage or security agreement with a lien which has priority over this Mortgage, any such sale shall, to the extent permitted by law, be a perpetual bar, both at law and in equity, against the Mortgagor and all persons and corporations lawfully claiming by or through or under the Mortgagor; and the Mortgagee is hereby irrevocably appointed the true and lawful attorney of the Mortgagor, in the Mortgagor’s name and stead, for the purpose of effectuating any such sale, to execute and deliver all necessary deeds, conveyances, assignments, bills of sale and other instruments with power to substitute one or more persons or corporations with like power; provided, that the Mortgagor shall ratify and confirm any such sale or transfer if required by the Mortgagee by delivering all proper conveyances or other instruments to such persons or corporations as may be designated in any such request.

In case of any Event of Default, neither the Mortgagor nor anyone claiming by, through or under the Mortgagor, to the extent the Mortgagor may lawfully so agree, shall or will set up, claim or seek to take advantage of any appraisement, valuation, stay, extension or redemption laws now or hereafter in force in any locality where any of the Mortgaged Property is situated, in order to prevent or hinder the enforcement or foreclosure of this Mortgage, or the absolute sale of the Mortgaged Property, or the final and absolute putting into possession thereof, immediately after such sale, of the purchasers thereat; and the Mortgagor, for the Mortgagor and all who may claim under the Mortgagor, hereby waives, to the full extent that the Mortgagor may lawfully so do, the benefit of all such laws, and any and all right to have the estate comprised in the security intended to be created hereby marshalled upon any foreclosure of the lien hereof and agrees that the Mortgagee or any court having jurisdiction to foreclose such lien may sell the Mortgaged Property as an entirety.

In case the Mortgagee shall have proceeded to enforce any right hereunder and such proceedings shall have been discontinued or abandoned for any reason, then in every such case, the Mortgagor and the Mortgagee shall be restored to their former positions and rights hereunder with respect to the Mortgaged Property, and all rights, remedies and powers of the Mortgagee shall continue as if no such proceedings had been taken. No remedy herein reserved to the Mortgagee is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to any other remedy given hereunder or now or hereafter existing at law or in equity, or by statute.

Nothing in this Mortgage, the Credit Agreement or any of the other Security Documents shall affect or impair the right, which is unconditional and absolute, of the Mortgagee to enforce payment of the Debt at or after the date set forth in the Credit Agreement as the date when the same shall become due, or the obligations of the Mortgagor, which are likewise unconditional and absolute, to pay such amounts at the respective dates and places set forth in the Credit Agreement.

(a)   MORTGAGOR’S WARRANTIES . The Mortgagor hereby warrants and represents that: (1) the Mortgagor is the owner in fee simple of the Mortgaged Property and has good right to grant and convey the same as aforesaid; (2) such property is free from all encumbrances and liens, except for the Encumbrances, if any; (3) the Mortgagor will WARRANT AND DEFEND the same unto the Mortgagee forever against the lawful claims and demands of all persons, except for the Encumbrances, if any; (4) the Mortgaged Property is free of any flammable explosives, radioactive materials, asbestos, organic compounds known as polychlorinated biphenyls, chemicals known to cause cancer or reproductive toxicity, pollutants, contaminants, hazardous wastes, toxic substances or related materials, including, without limitation, any substances defined as or included in the definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,” or “toxic substances” (collectively, “ Hazardous Materials ”) under any federal, state or local laws, ordinances or regulations, now or hereafter in effect, relating to environmental conditions, industrial hygiene or Hazardous Materials on, under or about the Mortgaged Property, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq. , the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq. , the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq. , the Clean Water Act, 33 U.S.C. Section 1251, et seq. , the Clean Air Act, 42 U.S.C. Section 7401, et seq. , the Toxic Substances Control Act, 15 U.S.C. Sections 2601 through 2629, the Safe Drinking Water Act, 42 U.S.C. Sections 300f through 300j, and any similar state and local laws and ordinances and the regulations now or hereafter adopted, published and/or promulgated pursuant thereto (collectively, the “ Hazardous Materials Laws ”); and (5) to the best knowledge of the Mortgagor, no portion of the Mortgaged Property and no other assets of the Mortgagor are now or may with the passage of time become subject to forfeiture under any federal, state or other law for which forfeiture of assets is a potential penalty or liability. The Mortgaged Property is not currently used in a manner, and no prior use (by Mortgagor, prior owners or any tenant) has occurred, which violates any Hazardous Materials Laws. Neither the Mortgagor nor any tenant has received any notice from a governmental agency for violation of Hazardous Materials Laws.

(b)   MORTGAGOR’S COVENANTS . The Mortgagor hereby covenants and agrees with the Mortgagee as follows:

(A)   Payment of Secured Obligations . The Mortgagor will pay to the Mortgagee the Debt and all fees, charges and other sums payable under the Security Documents, all according to the provisions thereof, and will pay and discharge any and all obligations that are now or hereafter may be or become owing to the Mortgagee under the Security Documents and on any and every other account, together with interest, fees, charges and other sums payable thereon as may be specified with respect thereto.

(B)   Prior Mortgages and Liens . The Mortgagor will perform all of the Mortgagor’s obligations under any mortgage or other security agreement with a lien which has priority over this Mortgage, including the Mortgagor’s covenants to make payments when due.

(C)   Payment of Real Property Taxes, Assessments, etc. The Mortgagor will punctually pay and discharge, or cause to be paid and discharged, from time to time as the same shall become due, all real property taxes, rates, assessments, impositions, duties, water rates, sewer rates and other charges of every description to which the Mortgaged Property, or any part thereof, or any improvements thereon, may during the term of this Mortgage become liable by authority of law, the payment of which shall be secured by this Mortgage; PROVIDED, HOWEVER, that real property taxes may be paid in semiannual installments and improvement or betterment assessments may be paid in annual installments, upon condition that, in each case, the same are not allowed to become delinquent, and that the Mortgagor will, upon request, deposit a copy of the receipts therefor with the Mortgagee not later than the final date such taxes, assessments and charges may be paid without penalty.

(D)   Observance of Laws . The Mortgagor will duly observe and conform to all laws, rules and regulations made by any governmental authority, and all valid requirements of any regulatory body which may acquire jurisdiction, which apply or relate to any of the Mortgaged Property, including, but not limited to the construction and maintenance of such facilities for parking of vehicles as may from time to time be required in order to comply with any applicable ordinance with respect thereto.

(E)   Maintenance and Inspection . The Mortgagor will keep and maintain all buildings, structures and improvements now located or hereafter constructed on the Mortgaged Property in good repair, working order and condition, and will permit the Mortgagee and any persons authorized by the Mortgagee to enter and inspect the Mortgaged Property at all reasonable times.

(F)   Waste, Unlawful Use, etc. The Mortgagor will not commit or suffer any strip or waste, or unlawful, improper or offensive use of the Mortgaged Property, or any act or negligence whereby such property or any interest therein shall become liable to seizure or attachment or mesne or final process of law or whereby the lien provided hereby shall be impaired.

(G)   Sale, Transfer, Lease, etc. The Mortgagor will not sell (including by agreement of sale), convey, assign, transfer or lease