Material Transfer And Collaborative Testing Agreement

Exhibit 10.32


[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

Confidential & Proprietary


MATERIAL TRANSFER & COLLABORATIVE TESTING AGREEMENT


This Material Transfer & Collaborative Testing Agreement (" Agreement" ) is effective this 5th day of December, 2005, by and between: HOKU SCIENTIFIC, INC., a Delaware corporation (" HOKU" ), and SANYO ELECTRIC CO., LTD., a Japanese corporation (" SANYO" and, together with HOKU, the " Parties" ).

BACKGROUND & PURPOSE


HOKU is developing a proprietary membrane (" HOKU Membrane" ) and proprietary membrane electrode assembly (" HOKU MEA" ) that incorporates HOKU Membrane for use in proton exchange membrane fuel cell (" PEMFC" ). HOKU is actively seeking development partners and customers for HOKU Membrane and HOKU MEA.

SANYO develops and manufactures PEMFC components, stacks, and integrated systems for residential applications (the " SANYO Products" ).


HOKU and SANYO desire HOKU to (i) engineer, test, manufacture and ship HOKU Samples (as defined in Section 3 below) to SANYO at the address set forth on the signature page to this Agreement (the " SANYO Facility" ) to allow SANYO to verify the performance and durability of the HOKU Samples, as set forth in this Agreement; and (ii) conduct collaborative tests on HOKU Samples (as defined in Section 4 below), each as set forth in this Agreement.


For good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the Parties agree as follows:


AGREEMENT


1. Confidentiality . Without limiting the confidentiality terms set forth in Sections 7 and 8 of the Amended Agreement (the " Hoku/Sanyo Agreement" ) dated September 30, 2004, by and between the Parties, the terms of this Agreement, the HOKU Samples (as defined below), and the results of any testing performed pursuant to this Agreement, shall be deemed Confidential Information as defined in the Hoku/Sanyo Agreement.

2. SANYO Specifications . Exhibit A attached to this Agreement is a drawing of SANYO' s dimensional requirements for HOKU MEA to be tested by SANYO pursuant to this Agreement (the " SANYO Test Cell Geometry" ).


3. HOKU Samples . HOKU shall (i) engineer HOKU MEA to meet the SANYO Test Cell Geometry requirements; (ii) produce HOKU MEA in the quantities described on Exhibit B (the " HOKU Samples" ); and (iii) deliver the HOKU Samples to the [ * ]. HOKU and SANYO shall mutually agree to the delivery date of the HOKU Samples. In providing the HOKU Samples to SANYO, this transfer of materials constitutes a limited non-exclusive license to SANYO to test and evaluate the HOKU Samples as set forth in this Agreement.

4. Collaborative Testing . HOKU and SANYO shall conduct the tests of the HOKU Samples as described on Exhibit C attached hereto using [ * ] test equipment at the SANYO Facility (" Collaborative Testing" ). SANYO shall maintain custody and control of the HOKU Samples inside the SANYO Facility at all times, and shall not send the HOKU Samples to any other facility for testing or invite any third party to the SANYO Facility to witness the Collaborative Testing without the prior written approval of HOKU. HOKU shall have the right to send up to two (2) representatives to SANYO at the start and at the end of the Collaborative Testing.

SANYO Initials & Date /s/ YI 12/16/05 HOKU Initials & Date /s/ DS 12/18/05


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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

Confidential & Proprietary


5. Collaborative Testing Results . Upon completion of the Collaborative Testing, SANYO shall provide HOKU with a written summary of the results of the Collaborative Testing (the " Collaborative Testing Report" ), comparing actual results to SANYO' s target values. Such results shall be considered the Confidential Information of both Parties pursuant to the Confidentiality Agreement.


6. Costs . Each Party shall bear its own costs and expenses incurred in connection with the Collaborative Testing; provided, however, that SANYO shall pay HOKU the amount set forth on Exhibit B for the HOKU Samples ordered pursuant to Section 3 above. SANYO may order additional HOKU Samples by submitting a purchase order to HOKU. The price for each additional HOKU Sample shall be the same as the price on Exhibit B. In addition, SANYO shall pay HOKU a total flat fee of $250,000 for the Collaborative Testing described in Section 4 above. SANYO shall also pay all applicable sales taxes, excise taxes ($10,415.00), duties, shipping and insurance charges. Hoku shall provide an invoice to Sanyo upon execution of this Agreement for $260,415.00 (Collaborative Testing fee and excise tax), and Sanyo shall pay that amount by February 28, 2006. All purchases of HOKU Samples shall be separately invoiced, and all payments shall be due and payable [ * ] after shipment of the HOKU Samples by HOKU.


7. No Rights . SANYO, as recipient of the HOKU Samples, does not acquire any right, title or interest in the HOKU Samples extending beyond the limited grant in Section 3 above. No rights are granted to SANYO to use the HOKU Samples for purposes of sale, consultation, provision of services or any ot ...