Hoku Corp. (HOKUQ)

[cta751]

Entry into a Material Definitive Agreement

10-Jan-2008

Item 1.01. Entry into a Material Definitive Agreement.
First Amended and Restated Supply Agreement with Solarfun Power Hong Kong Limited

On November 19, 2007, Hoku Scientific, Inc., or Hoku Scientific, entered into a supply agreement with Solarfun Power Hong Kong Limited, or Solarfun, a subsidiary of Solarfun Power Holdings Co., Ltd., for the sale and delivery of polysilicon to Solarfun over an eight-year period beginning in July 2009, or the Supply Agreement. Pursuant to the Supply Agreement, Solarfun provided Hoku Scientific with an immediate cash deposit of $1 million, and was required to pay an additional cash deposit of $9 million on or before December 28, 2007, as a prepayment for future product deliveries. In addition, Solarfun is required to pay Hoku Scientific an additional $45 million, as a prepayment for future product deliveries, in increments of $20 million, $20 million, and $5 million on or before September 30, 2008, March 31, 2009, and March 31, 2010, respectively. As security for Solarfun's $45 million prepayment obligation, Solarfun is required to deliver to Hoku Scientific a $45 million stand-by letter of credit, or deposit the $45 million into an escrow account, on or before January 10, 2008.

On January 7, 2008, Hoku Scientific and Solarfun entered into an amended and restated Supply Agreement, or the Amended Supply Agreement, to allow Solarfun until February 15, 2008 to process the required statutory approval for the issuance of a $44 million standby letter of credit. In exchange for the extension of time, Solarfun has provided Hoku with a $1 million prepayment, in addition to the $10 million cash payment that was made in December 2007. The additional $1 million payment reduces Solarfun's future $45 million prepayment obligation to $44 million, but increases amounts that have been paid to Hoku Scientific to a total of $11 million since the contract was signed in November 2007. Under the Amended Supply Agreement, Solarfun is required to pay Hoku Scientific the additional $44 million, as a prepayment for future product deliveries, in increments of $19 million, $20 million, and $5 million on or before September 30, 2008, March 31, 2009, and March 31, 2010, respectively.

Under the Amended Supply Agreement, if Solarfun does not deliver the $44 million stand-by letter of credit or deposit the $44 million into an escrow account, then Hoku Scientific may immediately terminate the agreement and retain the $11 million initial cash deposit as liquidated damages.

The Amended Supply Agreement will be filed with Hoku Scientific's Quarterly Report on Form 10-Q for the fiscal quarter ending December 31, 2007.