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E
xhibit
10.73
[*] = 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.
SECOND AMENDED & RESTATED SUPPLY
AGREEMENT
This
Second Amended & Restated Supply Agreement (“
Agreement ”)
is made as of the last date set forth on the signature page hereto
(the “
Effective Date ”)
between SOLARFUN
POWER HONG KONG LIMITED ,
a company registered in Hong Kong (hereinafter “
SOLARFUN ”)
and HOKU
MATERIALS, INC., a
Delaware corporation (hereinafter “
HOKU ”).
HOKU and SOLARFUN are sometimes referred to in the singular as a
“
Party ”
or in the plural as the “
Parties ”.
Recitals
Whereas,
Hoku Scientific, Inc. (“
Hoku Scientific ”)
and SOLARFUN are parties that certain First Amended & Restated
Supply Agreement dated as of January 7, 2008 (the “
Supply Agreement ”),
pursuant to which Hoku Scientific agreed to sell to SOLARFUN, and
SOLARFUN agreed to purchase from Hoku Scientific, polysilicon for
SOLARFUN’S general use beginning in calendar year 2009 for a
continuous period of eight years from the date of the first
shipment.
Whereas,
Hoku Scientific has assigned all of its right, title and
interest in the Supply Agreement to HOKU, its wholly-owned
subsidiary, pursuant to that certain Second Assignment and
Assumption Agreement dated as of February 4, 2008, by and
between Hoku Scientific and HOKU.
Whereas,
HOKU and SOLARFUN desire to amend and restate the Supply
Agreement as hereinafter set forth.
Whereas,
HOKU desires to supply polysilicon to SOLARFUN for its general
use beginning in calendar year 2009 for a continuous period of
eight years from the date of the first shipment.
Whereas,
in exchange for HOKU’s agreement to allocate the supply
of polysilicon, SOLARFUN desires to provide HOKU with a firm
order for polysilicon upon the terms and conditions provided
herein.
NOW,
THEREFORE, in furtherance of the foregoing Recitals and in
consideration of the mutual covenants and obligations set
forth in this Agreement, the Parties hereby agree as
follows:
1.
Definitions .
The
following terms used in this Agreement shall have the meanings
set forth below:
1.1.
“
Affiliate ”
shall mean, with respect to either Party to this Agreement, any
entity that is controlled by or under common control with such
Party.
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SOLARFUN Initials & Date
WS May 13, 2008
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HOKU Initials & Date
DS May 13, 2008
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1.2.
“
Agreement ”
shall mean this Second 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.
1.3.
“
Facility ”
shall mean any facility used by HOKU for the production of the
Product.
1.4.
“
Financing ”
shall mean HOKU’s receipt of gross aggregate proceeds of at
least $75 million U.S. Dollars from bank debt, equity financing
(including the $25 million in proceeds from HOKU’s private
placement of common stock on February 29, 2008), customer
prepayments actually received in cash by HOKU for Products (not
including commitments for future prepayments, or amounts placed in
escrow or secured by letters of credit), or any combination of the
foregoing. For purposes of this Agreement, the terms “bank
debt” and “equity financing” shall have the
broadest meaning possible to include, without limitation, bonds,
debentures, credit lines, convertible debt, common and preferred
stock, equity-linked securities, options and warrants; and
HOKU’s “receipt” of such proceeds shall include,
without limitation, the receipt of a binding and legally
enforceable commitment from a lender to provide the Financing (or a
portion thereof).
1.5.
“
First Shipment Date ”
shall mean the first day of the calendar month in which HOKU
commences deliveries to SOLARFUN of Products pursuant to this
Agreement.
1.6.
“
Minimum Annual Quantity of Product
”
means [*] ([*] kilograms) of Product during the first Year and [*]
metric tons ([*] kilograms) during each of the second through tenth
Year, inclusive.
1.7.
“
Product ”
shall mean the raw polysilicon in chunk form manufactured by HOKU
and sold to SOLARFUN 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.
“
Term ”
shall mean the period during which this Agreement is in effect, as
more specifically set forth in Section 9
of
this Agreement.
1.10.
“
Total Deposit ”
shall mean all deposits or prepayments made by SOLARFUN to HOKU
hereunder including without limitation the Initial Deposit and the
Main Deposit.
1.11.
“
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, SOLARFUN agrees to purchase from HOKU, and
HOKU agrees to sell to SOLARFUN, the Minimum Annual Quantity of
Product at the prices set forth on Appendix 1 to this Agreement
(the “
Pricing Schedule ”).
This
Agreement constitutes a firm order from SOLARFUN for [*] 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).
At any time during the term of this Agreement, HOKU may ship
to SOLARFUN any additional amount up to the full cumulative
balance of Minimum Annual Quantity of Product to be shipped
through the end of this Contract (an “
Excess Shipment ”
)
subject to SOLARFUN’s written consent. This shipment will be
credited against each subsequent Minimum Annual Quantity of
Product. For example, if the Minimum Annual Quantity of Product for
a given Year is [*] 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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SOLARFUN Initials & Date
WS May 13, 2008
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HOKU Initials & Date
DS May 13, 2008
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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 SOLARFUN Products that are manufactured by a third
party other than HOKU, where HOKU is acting only as a reseller
or distributor of such Products; and provided that the
Products meet the Product Specifications and price set forth
in this Agreement.
3.3.
Except
in the case of a force majeure pursuant to Section
12
below,
if at any time after [*], HOKU does not supply any Products
pursuant to Section 3.1
or
3.2
within
[*] days of the scheduled delivery date, HOKU will provide
SOLARFUN 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 SOLARFUN pursuant to this
Section 3.3
,
HOKU
may, at its option, pay for such purchase price adjustment in
the form of a credit issued for future shipments of
Products. Notwithstanding
anything to the contrary, the maximum amount of such purchase
price adjustment shall not exceed [*] 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 SOLARFUN fails to make a payment to HOKU for
Products actually shipped by HOKU within the 30-day period set
forth in Section 5.4
below,
HOKU shall not be required to supply any additional Product to
SOLARFUN until HOKU has received the past due amount including
any interest payable thereon pursuant to this Agreement. For
the avoidance of doubt, SOLARFUN’s right to reduce the
purchase price pursuant to this Section 3.3
shall
not apply if HOKU is not fulfilling its supply obligations for
this reason.
3.4.
If
HOKU delivers any Products to SOLARFUN prior to [*], then
SOLARFUN shall pay HOKU a premium equal to [*]% of the
applicable purchase price for the Products shipped prior to
October 1, 2009.
4.
Shipping & Delivery .
4.1.
Except
as provided in Section 3.2
above,
shipments shall be made from the Facility on a monthly basis
in accordance with a shipment schedule that will be provided
by HOKU each Year under this Agreement (the “
Shipment Schedule ”)
no later than sixty (60) days prior to the applicable year. The
Shipment Schedule shall provide for approximately equal monthly
shipments that add up to the Minimum Annual Quantity of
Products.
4.2.
HOKU
agrees that it will not enter into any additional supply
contract with, or make any supply commitment to, any third
party (not including the long term supply contracts that have
been signed prior to the Effective Date (the “
Pre-existing Commitments ”))
if the aggregate of HOKU’s delivery obligations under all of
its supply contracts (including those with SOLARFUN and its
Pre-existing Commitments) and such additional supply
contract/commitment during any month would exceed the rated monthly
production capacity of all polysilicon reactors at all HOKU
Facilities, as certified by the manufacturer thereof. Subject to
the foregoing, this Section 4.2
shall
not preclude HOKU from (A) entering into supply contracts for
additional capacity from Facility expansion, including pre-sales of
potential Facility expansions, or from increased productivity of
the Reactors, or (B) selling on the spot market or entering into
long-term contracts for the sale of polysilicon that does not meet
the Product Specifications at any time during the term of this
Agreement, provided that HOKU uses commercially reasonable efforts
to meet the Product Specifications with respect to such polysilicon
and that HOKU does not manufacture polysilicon for the purpose of
making such spot market sales or fulfilling such long term
contracts
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SOLARFUN Initials & Date
WS May 13, 2008
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HOKU Initials & Date
DS May 13, 2008
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4.3.
HOKU
will use commercially reasonable efforts to make its first
shipment of Products to SOLARFUN on or before July 1,
2009.
5.
Payments & Advances .
5.1.
HOKU
acknowledges that as of the date of this Agreement, SOLARFUN
has provided HOKU with a deposit of Eleven Million U.S.
Dollars (US$11,000,000) via wire transfer of immediately
available funds (the “
First Deposit ”)
as advance payment for Products to be delivered under this
Agreement.
5.2.
SOLARFUN
shall pay in cash to HOKU the additional sum of Forty-Four
Million U.S. Dollars (USD $44,000,000.00) (the “
Main Deposit”) as
an advance payment for Products to be delivered under this
Agreement in accordance with the payment schedule set forth
below.
5.2.1.
Nineteen
Million U.S. Dollars ($19,000,000) of the Main Deposit (the
“
Second Deposit ”)
shall be paid to HOKU on September 30, 2008 (the “
Second Deposit Date ”);
provided, however, that the Second Deposit Date shall be extended
until such time as HOKU has completed the Financing.
5.2.2.
Provided
that this Agreement has not been terminated pursuant to
Section 9.3
,
Twenty Million U.S. Dollars (USD $20,000,000) of the Main
Deposit (the “
Third Deposit ”)
shall be paid to HOKU on March 31, 2009 (the “
Third Deposit Date ”);
provided, however, that the Third Deposit Date shall be extended
until such time as HOKU has completed the Financing (unless this
Agreement has been terminated pursuant to Section
9.3
).
5.2.3.
Provided
that this Agreement has not been terminated pursuant to
Section 9.3, Five Million U.S. Dollars (USD $5,000,000.00) of
the Main Deposit (the “
Fourth Deposit ”)
shall be paid to HOKU on March 31, 2010 (the “
Fourth Deposit Date ”);
provided, however, that the Fourth Deposit Date shall be extended
until such time as HOKU has completed the Financing (unless this
Agreement has been terminated pursuant to Section
9.3
).
5.3.
Letter of Credit .
5.3.1.
HOKU
acknowledges receipt of the irrevocable stand-by letter of
credit attached hereto as
Appendix 3 (the
“
Citibank Letter of Credit ”)
in the amount of the Main Deposit. Within
ten (10) days after the Effective Date, SOLARFUN shall provide an
amended Citibank Letter of Credit in substantially the form
of
Appendix 4 attached
hereto (the “
Amended Letter of Credit ”).
Payment to HOKU of the Second Deposit, Third Deposit and Fourth
Deposit shall be made under the Amended Letter of Credit upon its
receipt of (A) written notice from HOKU that SOLARFUN has failed to
make such payment on the Second Deposit Date, the Third Deposit
Date or the Fourth Deposit Date, as applicable; and (B) written
confirmation from HOKU that HOKU has completed its Financing. The
Amended Letter of Credit shall expire on the later of the date when
(i) the Main Deposit has been paid in full to HOKU by SOLARFUN, or
(ii) the Main Deposit has been paid in full to HOKU from the
Amended Letter of Credit.
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SOLARFUN Initials & Date
WS May 13, 2008
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HOKU Initials & Date
DS May 13, 2008
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5.4.
HOKU
shall invoice SOLARFUN at or after the time of each shipment
of Products to SOLARFUN. Taxes, customs and duties, if any,
will be identified as separate items on HOKU invoices. All
invoices shall be sent to SOLARFUN’s address as provided
herein. Payment terms for all invoiced amounts shall be [*]
days from date of shipment. All payments shall be made in U.S.
Dollars. Unless HOKU is entitled to retain the Total Deposit
as liquidated damages pursuant to Section 11
below,
shipments
to SOLARFUN shall be credited against the Total Deposit
beginning
in the second Year, as set forth in
Appendix 1 (Pricing
Schedule).
5.5.
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 SOLARFUN, provided that SOLARFUN is
legally or contractually obliged to pay such taxes. SOLARFUN
shall be responsible for all transportation charges, duties or
charges, liabilities and risks for shipping and handling (and
hereby indemnifies HOKU for such costs, liabilities and
risks); thus, the price for the Products shall not include any
such charges.
5.6.
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 and or payment of any
portion of the Main Deposit HOKU hereby grants to SOLARFUN a
security interest to secure the repayment by HOKU to SOLARFUN
of the Total Deposit following any of the events set forth in
Section 9.6
below,
which shall be subordinated in accordance with Section
6.2
below,
in all of the tangible and intangible assets related to
HOKU’s polysilicon business (the “
Collateral ”).
6.2.
SOLARFUN
acknowledges and agrees that the security interests and liens
in the Collateral will not be first priority security
interests, will only be subordinated to HOKU’s
third-party lenders (the “
Senior Lenders ”)
that provide debt financing for the construction of any HOKU
Facility, and may be subordinated as a matter of law to other
security interests, and to security interests that are created and
perfected prior to the security interest granted to SOLARFUN
hereby. SOLARFUN shall enter into subordination agreements with the
Senior Lenders on terms and conditions reasonably acceptable to the
Senior Lenders.
6.3.
In
addition, SOLARFUN shall enter into collateral, intercreditor
and other agreements (the “
Collateral Agreements ”)
with HOKU’s Senior Lenders, and with SANYO Electric Co.,
Ltd., Suntech Power Holding Co., Ltd., Global Expertise Wafer
Division, Ltd., and HOKU’s other customers who provide
prepayments for Products (collectively, “
HOKU’s Other Customers ”),
as may be reasonably necessary to ensure that the security interest
granted hereby is pari passu with the security interests that may
be granted to HOKU’s Other Customers. SOLARFUN may not
unreasonably refuse to sign any such Collateral Agreement, provided
that such Collateral Agreement grants SOLARFUN a pari passu
priority with respect to HOKU’s Other Customers, and is
expressly subordinated to the Senior Lenders.
6.4.
The
security interest granted hereby shall continue so long as
HOKU continues to maintain any amount of the Total Deposit,
and only to the extent of such remaining amount of the Total
Deposit being held by HOKU, which has not been credited
against the shipment of Products pursuant to this Agreement,
or otherwise repaid to SOLARFUN. Notwithstanding anything to
the contrary contained in this Agreement, the Collateral
consisting of real property shall secure only the obligations
of HOKU to refund any portion of the Total Deposit to SOLARFUN
in accordance with the terms of this Agreement. When the Total
Deposit is no longer held by HOKU, SOLARFUN will sign such
documents as are necessary to release its security
interests.
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SOLARFUN Initials & Date
WS May 13, 2008
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HOKU Initials & Date
DS May 13, 2008
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6.5.
HOKU
and SOLARFUN each agree to act in good faith to execute and
deliver any additional document or documents that may be
required in furtherance of the foregoing provisions of this
Section 6
,
including the Collateral Agreements. Neither HOKU nor SOLARFUN
may unreasonably refuse to sign any such
document.
7.
Product Quality Guarantee .
7.1.
HOKU
warrants to SOLARFUN that the Products shall meet the Product
Specifications. For each shipment, this warranty shall survive
for [*] days after the applicable shipment date (the
“
Warranty Period ”).
Upon release of the Products to a common carrier or freight
forwarder, FOB origin, HOKU warrants that the Products shall be
free of all liens, mortgages, encumbrances, security interests or
other claims or rights. HOKU will, upon prompt notification and
compliance with HOKU’s instructions, refund or replace, at
SOLARFUN’s sole option, any Product which does not meet the
Product Specifications, and SOLARFUN shall comply with the
inspection and return goods policy described in Section
8
below
with respect to such Products. No employee, agent or representative
of HOKU has the authority to bind HOKU to any oral representation
or warranty concerning the Products. Any oral representation or
warranty made prior to the purchase of any Product and not set
forth in writing and signed by a duly authorized officer of HOKU
shall not be enforceable by SOLARFUN. HOKU makes no warranty and
shall have no obligation with respect to damage caused by or
resulting from accident, misuse, neglect or unauthorized
alterations to the Products.
7.2.
HOKU
EXPRESSLY DISCLAIMS ALL OTHER WARRANTIES, WHETHER EXPRESS,
IMPLIED OR STATUTORY, INCLUDING THE WARRANTIES OF
MERCHANTABILITY, AND FITNESS FOR A PARTICULAR PURPOSE.
HOKU’s sole responsibility and SOLARFUN’s
exclusive remedy for any claim arising out of the purchase of
any Product is a refund or replacement, as described above. In
no event shall HOKU’s liability exceed the purchase
price paid therefore; nor shall HOKU be liable for any claims,
losses or damages of any individual or entity or for lost
profits or any special, indirect, incidental, consequential,
or exemplary damages, howsoever arising, even if HOKU has been
advised of the possibility of such damages.
7.3.
HOKU
shall, at its own expense, indemnify and hold SOLARFUN and its
Affiliates harmless from and against any expense or loss
resulting from any actual or alleged infringement of any
patent, trademark, trade secret, copyright, mask work
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