Hoku: Material Definitive Agreement
On October 12, 2011 Hoku Corporation ("Hoku") and Hoku's subsidiary, Hoku Materials, Inc. ("Hoku Materials", together with Hoku, the "Borrowers"), entered into a Credit Agreement (the "Credit Agreement") with Bank of China, New York Branch (the "Lender"). The Credit Agreement provides for one or more revolving loans (the "Loans") in an aggregate principal amount not to exceed the lesser of $22.11 million or the aggregate amount of the standby letters of credit procured on behalf of the Borrowers as described below (the "Maximum Loan Amount"). The principal amount of the Loans and any unpaid interest thereon must be paid in full by October 12, 2016 or the fifteenth business day prior to the date on which the letters of credit expire or otherwise terminate, whichever is earlier. The Borrowers are jointly and severally liable for the Loans. The Borrowers may prepay the Loans, in whole or in part, at any time without penalty, provided that any such prepayment must be for a minimum of $100,000 and in multiples of $100,000 in excess thereof. Funds provided pursuant to the Credit Agreement are for the completion of the construction of the polysilicon production plant currently being constructed by Hoku Materials in Pocatello, Idaho.
The Loans will bear interest at a per annum rate equal to the LIBOR Rate (as set forth in the Credit Agreement) for the applicable interest period plus 3.0%. Hoku has also agreed to pay the Lender's reasonable costs and expenses in connection with the preparation, negotiation and delivery of the Credit Agreement.
The Credit Agreement includes customary representations, warranties, covenants, acceleration, indemnity, and events of default provisions which may accelerate Hoku's payment obligations under the Credit Agreement.
The Loans are secured by a standby letter of credit issued by China Bohai Bank Co., Limited which was procured by Tianwei New Energy Holdings Co., Ltd., Hoku's parent company ("Tianwei"), in favor of the Lender and which has an aggregate drawable amount of not less than $22.11 million.
The foregoing description of the Credit Agreement does not purport to be complete and is qualified in its entirety by reference to the Credit Agreement, a copy of which is attached as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.
Related Arrangements between Hoku and Tianwei
As previously disclosed in Hoku's periodic reports filed with the Securities and Exchange Commission, Tianwei and Hoku have been discussing what would constitute fair compensation for Tianwei for the financial services it is providing Hoku. Tianwei has and will provide standby letters of credit to secure the Loans in reliance on an understanding with Hoku that Tianwei will receive fair compensation for providing the letters of credit. Hoku and Tianwei are still discussing the amount and type of compensation; however Hoku believes the compensation will be in the form of a common stock warrant.
In addition, on October 12, 2011, in consideration of Tianwei's procurement of the initial standby letter of credit and its efforts to obtain additional standby letters of credit to secure Loans under the Credit Agreement, Hoku entered into a Reimbursement Agreement with Tianwei obligating it to repay Tianwei for all interest, fees and expenses incurred by Tianwei in connection with the negotiation, execution and performance of the standby letter of credit contemplated by the Credit Agreement.
The foregoing description of the Reimbursement Agreement does not purport to be complete and is qualified in its entirety by reference to the Reimbursement Agreement, a copy of which is attached as Exhibit 10.2 to this Current Report on Form 8-K and incorporated herein by reference.