UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
(Rule
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934 (Amendment No. )
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by the Registrant ☒
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by a Party other than the Registrant ☐
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy
Statement
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Definitive Additional
Materials
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Soliciting Material
Pursuant to §240.14a-12
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SunPower
Corporation
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(Name
of Registrant as Specified In Its Charter)
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n/a
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(Name
of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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(4) Date Filed:
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NOTICE OF THE 2017 ANNUAL MEETING OF STOCKHOLDERS
TO ALL SUNPOWER STOCKHOLDERS:
NOTICE
IS HEREBY GIVEN that the 2017 Annual Meeting of Stockholders (the “Annual Meeting”) of SunPower Corporation, a
Delaware corporation (“SunPower”), will be held on:
Date:
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Thursday, April 27, 2017
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Time:
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12:00 p.m. Pacific Time
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Place:
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Online at
www.virtualshareholdermeeting.com/SPWR2017
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Virtual
Meeting
Admission:
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This year’s Annual Meeting will be a virtual meeting of stockholders, conducted via a live webcast. You
will be able to attend the Annual Meeting online, vote your shares electronically and submit questions during the meeting by visiting
www.virtualshareholdermeeting.com/SPWR2017
. Have your Notice of Internet Availability of Proxy Materials or proxy card
in hand when you access the website and then follow the instructions. To participate in the meeting, you will need the 16-digit
control number included on the Notice of Internet Availability of Proxy Materials or proxy card. Online check-in will begin at
11:30 a.m. Pacific Time, and you should allow ample time for the online check-in procedures.
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Items
of
Business:
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1.
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The re-election of three directors to serve as Class III directors on our board of directors (the “Board”);
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2.
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The approval, in an
advisory vote, of our named executive officer compensation;
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3.
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The proposal to approve, in an advisory vote, whether a stockholder
advisory vote on our named executive officer compensation should be held every (a) year,
(b) two years, or (c) three years;
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4.
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The ratification of the appointment of Ernst & Young LLP as
our independent registered public accounting firm for fiscal year 2017; and
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5.
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The transaction of such other business as may properly come before
the Annual Meeting or any adjournment or postponement thereof.
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The
foregoing items of business are more fully described in the proxy statement accompanying this notice of the Annual Meeting. On
or about March 17, 2017 we began mailing to stockholders either a Notice of Internet Availability of Proxy Materials or this notice
of the Annual Meeting, the proxy statement and the form of proxy.
All
stockholders are cordially invited to attend the Annual Meeting. Only stockholders of record at the close of business on February
28, 2017 (the “Record Date”) are entitled to receive notice of, and to vote at, the Annual Meeting or any adjournment
or postponement of the Annual Meeting. Any registered stockholder in attendance at the Annual Meeting and entitled to vote may
do so during the meeting even if such stockholder returned a proxy.
San Jose, California
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FOR
THE BOARD OF DIRECTORS
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March 17, 2017
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Kenneth Mahaffey
Corporate Secretary
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IMPORTANT: WHETHER
OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, DATE AND SIGN THE PROXY CARD AND MAIL IT PROMPTLY, OR YOU MAY
VOTE BY TELEPHONE OR VIA THE INTERNET BY FOLLOWING THE DIRECTIONS ON THE PROXY CARD. ANY ONE OF THESE METHODS WILL ENSURE REPRESENTATION
OF YOUR SHARES AT THE ANNUAL MEETING. NO POSTAGE NEED BE AFFIXED TO THE COMPANY-PROVIDED PROXY CARD ENVELOPE IF MAILED IN THE
UNITED STATES.
PROXY STATEMENT FOR
2017 ANNUAL MEETING
OF STOCKHOLDERS
TABLE OF CONTENTS
SUNPOWER CORPORATION
77 Rio Robles
San
Jose, California 95134
PROXY STATEMENT FOR
2017 ANNUAL MEETING
OF STOCKHOLDERS
INFORMATION CONCERNING
SOLICITATION AND VOTING
General
The Board of Directors (the
“Board”) of SunPower Corporation, a Delaware corporation, is furnishing this proxy statement and proxy card to
you in connection with its solicitation of proxies to be used at SunPower Corporation’s Annual Meeting of Stockholders
to be held on April 27, 2017 at 12:00 p.m. Pacific Time (the “Meeting Date”), or at any adjournment(s),
continuation(s) or postponement(s) of the meeting (the “Annual Meeting”).
This
year’s Annual Meeting will be a virtual meeting of stockholders, conducted via a live webcast. You will be able to attend
the Annual Meeting online, vote your shares electronically and submit your questions during the meeting by visiting
www.virtualshareholdermeeting.com/SPWR2017
.
Have your Notice of Internet Availability of Proxy Materials or proxy card in hand when you access the website and then follow
the instructions. To participate in the meeting, you will need the 16-digit control number included on the Notice of Internet
Availability of Proxy Materials or proxy card.
Online
check-in will begin at 11:30 a.m. Pacific Time on the Meeting Date, and you should allow ample time for the online check-in procedures.
We will have technicians ready to assist you should you have any technical difficulties accessing the virtual meeting.
We
use a number of abbreviations in this proxy statement. We refer to SunPower Corporation as “SunPower,” “the
Company,” or “we,” “us” or “our.” The term “proxy solicitation materials”
includes this proxy statement, the notice of the Annual Meeting, and the proxy card. References to “fiscal 2016” mean
our 2016 fiscal year, which began on January 4, 2016 and ended on January 1, 2017, while references to “fiscal 2015”
mean our 2015 fiscal year, which began on December 29, 2014 and ended on January 3, 2015.
Our
principal executive offices are located at 77 Rio Robles, San Jose, California 95134, and our telephone number is (408)
240-5500.
Important Notice Regarding
the Availability of Proxy Materials
We
have elected to comply with the Securities and Exchange Commission (the “SEC”) “Notice and Access” rules,
which allow us to make our proxy solicitation materials available to our stockholders over the Internet. Under these rules, on
or about March 17, 2017, we started mailing to certain of our stockholders a Notice of Internet Availability of Proxy Materials
(the “Notice of Internet Availability”). The Notice of Internet Availability contains instructions on how our stockholders
can both access the proxy solicitation materials and our 2016 Annual Report on Form 10-K for the fiscal year ended January 1,
2017 (the “2016 Annual Report”) online and vote online. By sending the Notice of Internet Availability instead of
paper copies of the proxy materials, we expect to lower the costs and reduce the environmental impact of our Annual Meeting.
Our proxy solicitation materials and our 2016
Annual Report are available at
www.proxyvote.com
.
Stockholders
receiving the Notice of Internet Availability may request a paper or electronic copy of our proxy solicitation materials by following
the instructions set forth on the Notice of Internet Availability. Stockholders who did not receive the Notice of Internet Availability
will continue to receive a paper or electronic copy of our proxy solicitation materials, which were first mailed to stockholders
and made public on or about March 17, 2017.
Delivery of Voting
Materials
If
you would like to further reduce our environmental impact and costs in mailing proxy materials, you can consent to receiving all
future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery,
please follow the instructions provided for voting via
www.proxyvote.com
and, when prompted, indicate that you agree to
receive or access proxy materials electronically in future years.
To
reduce the environmental waste and expense of delivering duplicate materials to our stockholders, we are taking advantage of householding
rules that permit us to deliver only one set of proxy solicitation materials and our 2016 Annual Report, or one copy of the Notice
of Internet Availability, to stockholders who share the same address, unless otherwise requested. Each stockholder retains a separate
right to vote on all matters presented at the Annual Meeting.
If
you share an address with another stockholder and have received only one set of materials, you may write or call us to
request a separate copy of these materials at no cost to you. For future annual meetings, you may request separate materials
or request that we only send one set of materials to you if you are receiving multiple copies by writing to us at SunPower
Corporation, 77 Rio Robles, San Jose, California 95134, Attention: Corporate Secretary, or calling us at (408) 240-5500.
A
copy of our 2016 Annual Report has been furnished with this proxy statement to each stockholder. A stockholder may also request
a copy of our 2016 Annual Report by writing to our Corporate Secretary at 77 Rio Robles, San Jose, California 95134. Upon receipt
of such request, we will provide a copy of our 2016 Annual Report without charge, including the financial statements required
to be filed with the SEC pursuant to Rule 13a-1 of the Securities Exchange Act of 1934 (“Exchange Act”) for our fiscal
year 2016. Our 2016 Annual Report is also available on our website at
http://investors.sunpower.com/sec.cfm.
Record Date and Shares Outstanding
Stockholders who owned shares of our
common stock, par value $0.001 per share, at the close of business on February 28, 2017, which we refer to as the Record
Date, are entitled to notice of, and to vote at, the Annual Meeting. On the Record Date, we had 138,699,919 shares of common
stock outstanding. For more information about beneficial ownership of our issued and outstanding common stock, please see
“
Security Ownership of Management and Certain Beneficial Owners
.”
Board Recommendations
Our Board recommends that you vote:
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“FOR” Proposal One: re-election of each
of the nominated Class III directors;
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“FOR” Proposal Two: the approval, on an
advisory basis, of the compensation of our named executive officers; and
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For a frequency of “EVERY YEAR” in response
to Proposal Three: the approval, on an advisory basis, of the frequency of future advisory votes on the compensation of our named
executive officers; and
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“FOR” Proposal Four: the ratification of
the appointment of Ernst & Young LLP as our independent registered public accounting firm for fiscal year 2017.
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Voting
Each holder of shares of common stock is entitled
to one vote for each share of common stock held as of the Record Date. Cumulating votes is not permitted under our By-laws.
Many
of our stockholders hold their shares through a stockbroker, bank or other nominee, rather than directly in his or her own name.
As summarized below, there are distinctions between shares held of record and those beneficially owned.
Stockholder
of Record.
If your shares are registered directly in your name with our transfer agent, Computershare Trust Company N.A.,
you are considered, with respect to those shares, the stockholder of record and these proxy solicitation materials are being furnished
to you directly by us.
Beneficial
Owner.
If your shares are held in a stock brokerage account, or by a bank or other nominee (also known as shares registered
in “street name”), you are considered the beneficial owner of such shares held in street name, and these proxy solicitation
materials are being furnished to you by your broker, bank or other nominee, who is considered, with respect to those shares, the
stockholder of record. As the beneficial owner, you have the right to direct your broker, bank or other nominee how to vote your
shares, or to vote your shares during the Annual Meeting.
How to Vote.
If you hold shares
directly as a stockholder of record, you can vote in one of the following four ways:
(1)
Vote via the Internet before the Meeting Date
. Go to
www.proxyvote.com
to transmit your voting instructions and
for electronic delivery of information up until 11:59 p.m. Eastern Time on April 26, 2017. Have your Notice of Internet Availability
or proxy card in hand when you access the website and then follow the instructions.
(2)
Vote by Telephone at 1-800-690-6903 before the Meeting Date
. Use a touch-tone telephone to transmit your voting instructions
up until 11:59 p.m. Eastern Time on April 26, 2017. Have your Notice of Internet Availability or proxy card in hand when you call
and then follow the instructions. This number is toll free in the United States and Canada.
(3)
Vote by Mail before the Meeting Date
. Mark, sign and date your proxy card and return it in the postage- paid envelope we
have provided, or return the proxy card to SunPower Corporation, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
(4)
Vote via the Internet during the Annual Meeting
. You may attend the Annual Meeting on April 27, 2017 at 12:00 p.m. Pacific
Time via the Internet at
www.virtualshareholdermeeting.com/SPWR2017
and vote during the Annual Meeting. Have your Notice
of Internet Availability or proxy card in hand when you access the website and then follow the instructions.
If
you hold shares beneficially in street name, you may submit your voting instructions in the manner prescribed by your broker,
bank or other nominee by following the instructions provided by your broker, bank or other nominee, or you may vote your shares
during the Annual Meeting.
Even if you plan to attend
the Annual Meeting, we recommend that you vote your shares in advance as described in options (1), (2), and (3) above so that
your vote will be counted if you later decide not to attend the Annual Meeting.
Quorum.
A quorum, which is the holders of at least a majority of shares of our stock issued and outstanding and entitled to vote
as of the Record Date, is required to be present in person or by proxy at the Annual Meeting in order to hold the Annual Meeting
and to conduct business. Your shares will be counted as being present at the Annual Meeting if you attend the Annual Meeting (and
are the stockholder of record for your shares), if you vote your shares by telephone or over the Internet, or if you submit a
properly executed proxy card. Abstentions and “broker non-votes” are counted as present and entitled to vote for purposes
of determining a quorum. Votes against a particular proposal will also be counted both to determine the presence or absence of
a quorum and to determine whether the requisite number of voting shares has been obtained.
Explanation
of Broker Non-Votes and Abstentions.
A “broker non-vote” occurs when a nominee holding shares for a beneficial
owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that
item and has not received instructions from the beneficial owner. The rules of The New York Stock Exchange (which also apply to
companies listed on The NASDAQ Global Select Market) prohibit brokers from voting in their discretion on any non-routine proposals
without instructions from the beneficial owners. If you do not instruct your broker how to vote on a non-routine proposal, your
broker will not vote for you. Abstentions are deemed to be entitled to vote for purposes of determining whether stockholder approval
of that matter has been obtained, and they would be included in the tabulation of voting results as votes against the proposal.
Votes
Required/Treatment of Broker Non-Votes and Abstentions.
Proposal
One—Re-election of Class III Directors
. Election of a director requires the affirmative vote of the holders of a plurality
of votes represented by the shares in attendance or represented by proxy at the Annual Meeting and entitled to vote on the election
of directors. The three persons receiving the greatest number of votes at the Annual Meeting shall be elected as Class III directors.
Neither “broker non-votes” nor abstentions will affect the outcome of the voting on Proposal One.
Proposal
Two—Advisory Vote on Named Executive Officer Compensation
. The non-binding advisory vote on named executive officer
compensation requires the affirmative vote of the holders of a majority of our stock having voting power and in attendance or
represented by proxy at the Annual Meeting. “Broker non-votes” have no effect and will not be counted towards the
vote total for this proposal. Abstentions will have the effect of votes against Proposal Two.
Proposal
Three—Advisory Vote on the Frequency of Future Advisory Votes on Named Executive Officer Compensation
. The option of
one year, two years or three years that receives the highest number of votes cast by holders of our stock having voting power
and in attendance or represented by proxy at the Annual Meeting will be the frequency of future advisory votes on executive compensation
that has been recommended by our stockholders. Neither “broker non-votes” nor abstentions will be counted towards
the vote total for this proposal.
Proposal
Four—Ratification of the Appointment of Independent Registered Public Accounting Firm for Fiscal Year 2017
. Ratification
of the appointment of our independent registered public accounting firm requires the affirmative vote of the holders of a majority
of our stock having voting power and in attendance or represented by proxy at the Annual Meeting. “Broker non-votes”
have no effect and will not be counted towards this proposal. We do not expect “broker non-votes” since brokers have
discretionary authority to vote on this proposal. Abstentions will have the effect of votes against Proposal Four.
How Your Proxy Will
Be Voted
If
you complete and submit your proxy card or vote via the Internet or by telephone, the shares represented by your proxy will be
voted at the Annual Meeting in accordance with your instructions. If you submit your proxy card by mail, but do not fill out the
voting instructions on the proxy card, the shares represented by your proxy will be voted in favor of each of Proposals One, Two
and Four and for Proposal Three in favor of holding future stockholder advisory votes annually on named executive officer compensation.
In addition, if any other matters properly come before the Annual Meeting, it is the intention of the persons named in the enclosed
proxy card to vote the shares they represent as directed by the Board. We have not received notice of any other matters that may
properly be presented at the Annual Meeting.
Revoking Your Proxy
You
may revoke your proxy at any time before the Meeting Date by: (1) submitting a later-dated vote by telephone, by mail, or via
the Internet before or at the Annual Meeting; or (2) delivering instructions to us at 77 Rio Robles, San Jose, California 95134
to the attention of our Corporate Secretary. Any notice of revocation sent to us must include the stockholder’s name and
must be actually received by us before the Annual Meeting to be effective. Your attendance at the Annual Meeting after having
executed and delivered a valid proxy card or vote via the Internet or by telephone will not in and of itself constitute a revocation
of your proxy. If you are the stockholder of record or if your shares are held in “street name,” you may revoke your
proxy by voting electronically at the Annual Meeting.
Solicitation of Proxies
We
will pay for the cost of this proxy solicitation. We may reimburse brokerage firms and other persons representing beneficial owners
of shares for their expenses in forwarding or furnishing proxy solicitation materials to such beneficial owners. Proxies may also
be solicited personally or by telephone, telegram or facsimile by certain of our directors, officers, and regular employees, without
additional compensation.
Voting Results
We will announce preliminary voting
results at the Annual Meeting and publish final results on a Current Report on Form 8-K, which we intend to file with the SEC
within four business days after the Meeting Date.
Note Concerning Forward-Looking
Statements
Certain
of the statements contained in this proxy statement are “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements are statements that do not represent historical facts and
the assumptions underlying such statements. We use words such as “anticipate,” “believe,” “continue,”
“could,” “estimate,” “expect,” “intend,” “may,” “potential,”
“should,” “will,” “would” and similar expressions to identify forward-looking statements.
These statements include, but are not limited to, operating results, business strategies, management’s plans and objectives
for future operations, expectations and intentions, actions to be taken by us and other statements that are not historical facts.
These forward- looking statements are based on information available to us as of the date of this proxy statement and our current
expectations, forecasts and assumptions and involve a number of risks and uncertainties that could cause actual results to differ
materially from those anticipated by these forward-looking statements. Such risks and uncertainties include a variety of factors,
some of which are beyond our control. All of the forward-looking statements are qualified in their entirety by reference to the
factors discussed in Part I, Item 1A, “Risk Factors” and elsewhere in our 2016 Annual Report, which accompanies this
proxy statement. There may be other factors of which we are not currently aware that may affect matters discussed in the forward-looking
statements and may cause actual results to differ materially from those discussed. These forward-looking statements should not
be relied upon as representing our views as of any subsequent date, and we are under no obligation to, and expressly disclaim
any responsibility to, update our forward-looking statements, whether as a result of new information, future events or otherwise.
WHETHER
OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO COMPLETE, DATE AND SIGN THE PROXY CARD AND RETURN IT PROMPTLY,
OR VOTE BY TELEPHONE OR VIA THE INTERNET BY FOLLOWING THE DIRECTIONS ON THE PROXY CARD. STOCKHOLDERS WHO ATTEND THE ANNUAL MEETING
MAY REVOKE A PRIOR PROXY VOTE AND VOTE THEIR SHARES AS SET FORTH IN THIS PROXY STATEMENT.
PROPOSAL ONE
RE-ELECTION OF CLASS
III DIRECTORS
Our Board is currently composed of nine
directors and divided into three classes, in accordance with Article IV, Section B of our Certificate of Incorporation. Only
the terms of the three directors serving as Class III directors are scheduled to expire in 2017. The terms of other directors
expire in subsequent years.
On
April 28, 2011, we and Total Energies Nouvelles Activités USA, SAS, formerly known as Total Gas & Power USA, SAS
(“Total”), a subsidiary of Total S.A. (“Total S.A.”), entered into a Tender Offer Agreement (the
“Tender Offer Agreement”). Pursuant to the Tender Offer Agreement, on June 21, 2011, Total purchased in a cash
tender offer approximately 60% of the outstanding shares of our former Class A common stock and 60% of the outstanding shares
of our former Class B common stock (the “Tender Offer”). In connection with the Tender Offer, we and Total
entered into an Affiliation Agreement that governs the relationship between Total and us following the close of the Tender
Offer (the “Affiliation Agreement”). In accordance with the terms of the Affiliation Agreement, our Board has
nine members, composed of our Chief Executive Officer, three non-Total-designated members of the Board, and five directors
designated by Total. If the ownership of our voting power by Total, together with the controlled subsidiaries of Total S.A.,
declines below certain thresholds, the number of members of the Board that Total is entitled to designate will be reduced as
set forth in the Affiliation Agreement. See “
Certain Relationships and Related Persons Transactions—Agreements
with Total Energies Nouvelles Activités USA, SAS and Total S.A.—Affiliation Agreement
.”
The
Board has considered and approved the nomination of Helle Kristoffersen, Thomas McDaniel and Thomas Werner, our current Class
III directors, for re-election as directors at the Annual Meeting. Ms. Kristoffersen is a Total-designated director. Mr. McDaniel
is an independent director. Mr. Werner is our President, CEO and Chairman of the Board. Each nominee has consented to being named
in this proxy statement and to serve if re-elected. Unless otherwise directed, the proxy holders will vote the proxies received
by them for the three nominees named below. If any nominee is unable or declines to serve as a director at the time of the Annual
Meeting, the proxies will be voted for any nominee who is designated by the present Board to fill the vacancy. We do not expect
that any nominee will be unable or will decline to serve as a director. The Class III directors elected will hold office until
the annual meeting of stockholders in 2020 or until their successors are elected.
The
Class I group of directors consists of Daniel Lauré, Laurent Wolffsheim and Pat Wood III, who will hold office until the
annual meeting of stockholders in 2018 or until their successors are elected. Messrs. Lauré and Wolffsheim are Total-designated
directors. Mr. Wood is an independent director. The Class II group of directors consists of Cathie Lesjak, Ladislas Paszkiewicz
and Julien Pouget, who will hold office until the annual meeting of stockholders in 2019 or until their successors are elected.
Ms. Lesjak is an independent director. Messrs. Paszkiewicz and Pouget are Total-designated directors.
Additional
information about the Class III director nominees for re-election and the Class I and Class II directors is set forth below.
Class III Directors Nominated for Re-Election
at the Annual Meeting
Name
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Age
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Position(s)
with
SunPower
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Director
Since
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Helle
Kristoffersen
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53
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Director
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2016
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Thomas
R. McDaniel
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68
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Director
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2009
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Thomas
H. Werner
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57
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President
and CEO, Director and Chairman of the Board
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2003
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Ms.
Helle Kristoffersen has served as Senior Vice President, Strategy and Corporate Affairs, Gas, Renewables & Power segment for
Total S.A. since September 2016. From January 2012 to August 2016, she was Senior Vice President, Strategy & Business Intelligence
at the group level of Total S.A. Prior to that, she served as Deputy Vice President of the same department since January 2011.
In 1994, she joined Alcatel, where she spent 16 years and served in particular as Vice President Corporate Strategy of Alcatel
and subsequently Alcatel-Lucent. She currently serves as a director of Orange and PSA Group (Peugeot). Ms. Kristoffersen served
as a director of Valeo from 2007 to 2013. Ms. Kristoffersen is a graduate of the Ecole Normale Supérieure and the Paris
Graduate School of Economics, Statistics and Finance (ENSAE). Ms. Kristoffersen also holds a master’s degree in econometrics
from Université Paris 1.
Ms.
Kristoffersen brings significant international strategic and business development experience to the Board. Her extensive experience
in the energy and technology industries, including her service on the boards of directors of several international, publicly listed
companies, gives her a valuable perspective on our role in the global marketplace. It is based on the Board’s identification
of these qualifications, skills and experience that the Board has concluded that Ms. Kristoffersen should serve as a director
on our Board.
Mr.
Thomas R. McDaniel was Executive Vice President, Chief Financial Officer and Treasurer of Edison International, a generator and
distributor of electric power and investor in infrastructure and energy assets, before retiring in July 2008 after 37 years of
service. Before January 2005, Mr. McDaniel was Chairman, Chief Executive Officer and President of Edison Mission Energy, a power
generation business specializing in the development, acquisition, construction, management and operation of power production facilities.
Mr. McDaniel was also Chief Executive Officer and a director of Edison Capital, a provider of capital and financial services supporting
the growth of energy and infrastructure projects, products and services, both domestically and internationally. Mr. McDaniel has
served on our Board since February 2009. He is Chairman of the Board of Tendril, a smart-grid, software-as-a-service company.
Mr. McDaniel is chairman of the board of SemGroup, L.P., a midstream energy services company, and is also on the advisory board
of Cypress Envirosystems, which develops and markets energy efficiency products. He also serves on the Advisory Board of On Ramp
Wireless, a communications company serving electrical, gas and water utilities. Mr. McDaniel formerly served on the board of directors
of the Senior Care Action Network (SCAN) from 2000-2013. Through the McDaniel Family Foundation, he is also actively involved
in a variety of charitable activities such as the Boys and Girls Club of Huntington Beach, Heifer International and the Free Wheelchair
Mission.
Mr.
McDaniel brings significant operational and development experience to the Board. Mr. McDaniel’s extensive experience growing
and operating global electric power businesses is directly aligned with our efforts to further develop the utility and power plant
portions of our business. In addition, Mr. McDaniel’s prior experience as a Chief Financial Officer qualifies him as a financial
expert, which is relevant to his duties as an audit committee member. It is based on the Board’s identification of these
qualifications, skills and experience that the Board has concluded that Mr. McDaniel should serve as a director on our Board,
Chairman of the Audit Committee and Chairman of the Finance Committee.
Mr.
Thomas H. Werner has served as our President and Chief Executive Officer since May 2010, as a member of our Board since June 2003,
and Chairman of the Board since May 2011. From June 2003 to April 2010, Mr. Werner served as our Chief Executive Officer. Before
joining SunPower, from 2001 to 2003, he held the position of Chief Executive Officer of Silicon Light Machines, Inc., an optical
solutions subsidiary of Cypress Semiconductor Corporation. From 1998 to 2001, Mr. Werner was Vice President and General Manager
of the Business Connectivity Group of 3Com Corp., a network solutions company. He has also held a number of executive management
positions at Oak Industries, Inc. and General Electric Co. Mr. Werner currently serves as a board member of Cree, Inc., Silver
Spring Networks, and the Silicon Valley Leadership Group. Mr. Werner is on the Board of Trustees of Marquette University. Mr.
Werner holds a bachelor’s degree in industrial engineering from the University of Wisconsin–Madison, a bachelor’s
degree in electrical engineering from Marquette University and a master’s degree in business administration from George
Washington University.
Mr.
Werner brings significant leadership, technical, operational and financial management experience to the Board. Mr. Werner provides
the Board with valuable insight into management’s perspective with respect to our operations. Mr. Werner has demonstrated
strong executive leadership skills through nearly 20 years of executive officer service with various companies and brings the
most comprehensive view of our operational history over the past several years. Mr. Werner also brings to the Board leadership
experience through his service on the board of directors for three other organizations, which gives him the ability to compare
the way in which management and the boards operate within the companies he serves. It is based on the Board’s identification
of these qualifications, skills and experience that the Board has concluded that Mr. Werner should serve as a director on our
Board and Chairman of the Board.
Class I Directors with Terms Expiring in
2018
Name
|
|
Age
|
|
Position(s)
with
SunPower
|
|
Director
Since
|
Daniel
Lauré
|
|
60
|
|
Director
|
|
2016
|
Laurent
Wolffsheim
|
|
45
|
|
Director
|
|
2016
|
Pat
Wood III
|
|
54
|
|
Director
|
|
2005
|
Mr.
Daniel Lauré currently serves as President and CEO of Total New Energies USA Inc. Before taking this position in March
2016, Mr. Lauré served as Senior Vice President Industrial Assets, Finance & Information Technology from 2012 through
2015. Before that, he held other positions within Total Gas & Power beginning in 2004, including Vice President,
Strategy, Markets &
IT, and Deputy Director, Renewable Energy, Strategy, Human Resources & Communication. Prior to those positions, Mr. Lauré
held various other positions within the Total Group, where he has been employed since 1988. Mr. Lauré holds a degree in
civil engineering from l’École Nationale des Ponts et Chaussées and a law degree from Université Panthéon
Assas (Paris II).
Mr.
Lauré brings significant international managerial and operational experience to the Board. His extensive experience in
the energy industry gives him a valuable perspective on our efforts to manage our business and project development activities.
It is based on the Board’s identification of these qualifications, skills and experience that the Board has concluded that
Mr. Lauré should serve as a director on our Board.
Mr.
Laurent Wolffsheim has served as Vice President, Budget & Financial Control for the Total group since February 2014. Before
that, he served as Strategic Planning Manager within the Refining & Chemicals division of Total S.A. and Managing Director
of Total Polska Sp. z o.o. Prior to those positions, Mr. Wolffsheim held various other positions within the Total group, where
he has been employed since 1995. Mr. Wolffsheim holds a degree in engineering from the Ecole Centrale de Lyon and a degree in
business administration from École Supérieure des Sciences Économiques et Commerciales.
Mr.
Wolffsheim brings significant international strategic and financial management experience to the Board. His extensive experience
in the energy industry gives him a valuable perspective on our financial strategy going forward. It is based on the Board’s
identification of these qualifications, skills and experience that the Board has concluded that Mr. Wolffsheim should serve as
a director on our Board.
Mr.
Pat Wood III has served as a Principal of Wood3 Resources, an energy infrastructure developer, since July 2005. He is active in
the development of electric power and natural gas infrastructure assets in North America. From 2001 to 2005 Mr. Wood served as
the Chairman of the Federal Energy Regulatory Commission. From 1995 to 2001, he chaired the Public Utility Commission of Texas.
Mr. Wood has also been an attorney with Baker & Botts, a global law firm, and an associate project engineer with Arco Indonesia,
an oil and gas company, in Jakarta. He currently serves as Chairman of Dynegy, Inc., and is a director of Quanta Services, Inc.
and of Memorial Resource Development Corp. He is a strategic advisor to Hunt Transmission Services/ InfraREIT Capital Partners.
Mr. Wood is a past director of the American Council on Renewable Energy and is a member of the National Petroleum Council.
Mr.
Wood brings significant strategic and operational management experience to the Board. Mr. Wood has demonstrated strong leadership
skills through a decade of regulatory leadership in the energy sector. Mr. Wood brings a unique perspective and extensive knowledge
of energy project development, public policy development, governance and the regulatory process. His legal background also provides
the Board with a perspective on the legal implications of matters affecting our business. It is based on the Board’s identification
of these qualifications, skills and experience that the Board has concluded that Mr. Wood should serve as a director on our Board,
Chairman of the Nominating and Corporate Governance Committee and Chairman of the Compensation Committee.
Class II Directors with Terms Expiring in
2019
Name
|
|
Age
|
|
Position(s)
with
SunPower
|
|
Director
Since
|
Catherine
Lesjak
|
|
58
|
|
Director
|
|
2013
|
Ladislas
Paszkiewicz
|
|
54
|
|
Director
|
|
2016
|
Julien
Pouget
|
|
40
|
|
Director
|
|
2017
|
Ms.
Catherine A. Lesjak has served as Executive Vice President and Chief Financial Officer of HP Inc. (formerly Hewlett- Packard Company)
(HP) since January 1, 2007. Ms. Lesjak served as interim Chief Executive Officer of HP from August 2010 through October 2010.
As a 30-year veteran at HP, Ms. Lesjak held a broad range of financial leadership roles across HP. Before being named as CFO,
Ms. Lesjak served as Senior Vice President and Treasurer, responsible for managing HP’s worldwide cash, debt, foreign exchange,
capital structure, risk management and benefits plan administration. Earlier in her career at HP, she managed financial operations
for Enterprise Marketing and Solutions and the Software Global Business Unit. Before that, she was group controller for HP’s
Software Solutions Organization and managed HP’s global channel credit risk as controller and credit manager for the Commercial
Customer Organization. Ms. Lesjak has a bachelor’s degree in biology from Stanford University and a master of business degree
in finance from the University of California, Berkeley.
Ms.
Lesjak’s extensive experience as the chief financial officer of a major corporation, with significant presence in both the
business-to-consumer and business-to-business markets, allows her to make significant contributions to our strategic business
planning and execution. Her background is also valuable in terms of financial oversight and review of our strategic investments.
It is based on the Board’s identification of these qualifications, skills and experience that the Board has concluded that
Ms. Lesjak should serve as a director on our Board.
Mr. Ladislas Paszkiewicz has served as
Senior Vice President of Mergers and Acquisitions for Total S.A. since 2015. From 2010 to 2014, he was Senior Vice President,
Americas for the Exploration and Production Division of Total S.A. Prior to that, he served as Senior Vice President, Middle
East for the same division from 2007 to 2010. Mr. Paszkiewicz has also served as General Manager of the Total group’s
subsidiary in Argentina, as head of the Investor Relations Department of Total S.A., and in various other positions in the
Total group, which he joined in 1985. Mr. Paszkiewicz holds a master’s degree in business administration from New York
University and a master’s degree in finance from the Insitut d’Etudes Politiques in Paris, France.
Mr.
Paszkiewicz brings significant international strategic and business development experience to the Board. His extensive experience
in the energy industry gives him a valuable perspective on the development of our strategy going forward. It is based on the Board’s
identification of these qualifications, skills and experience that the Board has concluded that Mr. Paszkiewicz should serve as
a director on our Board.
Mr.
Julien Pouget has served as Senior Vice President of the Renewables division of Total S.A. since January 1, 2017. From 2014 to
2016, he served as a senior advisor to the President of France, initially responsible for industry, then industry and digital,
and finally for the economy. His responsibilities during this time included the restructuring of the French nuclear industry.
Prior to his service to the president, Mr. Pouget spent six years in various positions at Alstom Power, including as Vice President
of the heat exchangers product line for France, Switzerland, and China, as Vice President and General Manager of Asian activities
and as project leader and as head of engineering for the heat exchangers on the Flamanville 3 EPR nuclear plant in France. From
2001 to 2008, Mr. Pouget held various positions in the French Ministry of Industry, and at the state shareholding agency at the
French Ministry for Finance and Economy. Mr. Pouget is a chief engineer of the prestigious French Corps de Mines and a graduate
of the École Polytechnique.
Mr.
Pouget brings significant international managerial and operational experience to the Board. His extensive experience in the energy
industry and in government gives him a valuable perspective on policy and the global energy marketplace. It is based on the Board’s
identification of these qualifications, skills and experience that the Board has concluded that Mr. Pouget should serve as a director
on our Board.
Vote Required
Election
of a director requires the affirmative vote of the holders of a plurality of votes represented by the shares in attendance or
represented by proxy at the Annual Meeting and entitled to vote on the election of directors. The three persons receiving the
greatest number of votes at the Annual Meeting shall be elected as Class III directors. Neither “broker non-votes”
nor abstentions will affect the outcome of the voting on this proposal.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION TO THE BOARD OF EACH OF THE CLASS III DIRECTOR NOMINEES.
BOARD STRUCTURE
Determination of Independence
Our
Board has determined that three of our nine directors, namely Ms. Lesjak and Messrs. McDaniel and Wood, each meet the standards
for independence as defined by applicable listing standards of The NASDAQ Stock Market and rules and regulations of the SEC. Our
Board has also determined that Mr. Werner, our President and Chief Executive Officer, and Messrs. Kristoffersen, Lauré,
Paszkiewicz, Pouget and Wolffsheim, as directors designated by our controlling stockholder Total Energies Nouvelles Activités
USA, SAS, formerly known as Total Gas & Power USA, SAS, pursuant to our Affiliation Agreement with Total, are not “independent”
as defined by applicable listing standards of The NASDAQ Stock Market. There are no family relationships among any of our directors
or executive officers.
Leadership Structure and Risk Oversight
The
Board has determined that having a lead independent director assist Mr. Werner, the Chairman of the Board and Chief Executive
Officer, is in the best interest of our stockholders. Mr. Wood has served as the lead independent director of the Board since
June 2012. The Board believes this structure ensures a greater role for the independent directors in the oversight of our company
and encourages active participation of the independent directors in setting agendas and establishing priorities and procedures
for the work of the Board. We believe that this leadership structure also is preferred by a significant number of our stockholders.
The
Board is actively involved in oversight of risks that could affect our company. This oversight is conducted primarily through
committees of the Board, in particular our Audit Committee, as disclosed in the descriptions of each of the committees below and
in the respective charters of each committee. The full Board, however, has retained responsibility for general oversight of risks.
The Board satisfies this responsibility through full reports by each committee chair regarding the committee’s considerations
and actions, as well as through regular reports directly from our officers responsible for oversight of particular risks within
our company.
Board Meetings
Our
Board held four regular, quarterly meetings, one annual meeting and six special meetings during fiscal 2016. During fiscal 2016,
each director attended at least 75% of the aggregate number of meetings of the Board and its committees on which such director
served during his or her term. Our independent directors held four executive sessions during regular, quarterly meetings without
management present during fiscal 2016.
Controlled Company, NASDAQ Listing Standards
Since
the Tender Offer in June 2011 (including as of March 17, 2017) Total has owned greater than 50% of our outstanding voting securities
and we are therefore considered a “controlled company” within the meaning of The NASDAQ Stock Market rules. As long
as we remain a “controlled company,” we are exempt from the rules that would otherwise require that our Board be composed
of a majority of independent directors and that our Compensation Committee and Nominating and Corporate Governance Committee be
composed entirely of independent directors. This “controlled company” exception does not modify the independence requirements
for the Audit Committee, and we comply with the requirements of the Sarbanes-Oxley Act and The NASDAQ Stock Market rules that
require that our Audit Committee be composed exclusively of independent directors.
Board Committees
We believe that good corporate governance
is important to ensure that we are managed for the long-term benefit of our stockholders. Our Board has established committees
to ensure that we maintain strong corporate governance standards. Our Board has standing Audit, Compensation, Finance and Nominating
and Corporate Governance Committees. The charters of our Audit, Compensation, Finance and Nominating and Corporate Governance Committees
are available on our website at
http://investors.sunpower.com
. You may also request copies of our committee charters free
of charge by writing to SunPower Corporation, 77 Rio Robles, San Jose, California 95134, Attention: Corporate Secretary. Below
is a summary of our committee structure and membership information.
Director
|
|
|
Audit
Committee
|
|
Compensation
Committee
|
|
Finance
Committee
|
|
Nominating
and Corporate
Governance
Committee
|
Helle Kristoffersen
|
|
—
|
|
Member
|
|
Member
|
|
—
|
Daniel Lauré
|
|
—
|
|
—
|
|
—
|
|
Member
|
Catherine Lesjak (I)
|
|
Member
|
|
—
|
|
Member
|
|
—
|
Thomas R. McDaniel (I)
|
|
Chair
|
|
Member
|
|
Chair
|
|
Member
|
Ladislas Paszkiewicz
|
|
—
|
|
—
|
|
—
|
|
Member
|
Julien Pouget
|
|
—
|
|
Member
|
|
—
|
|
—
|
Laurent Wolffsheim
|
|
—
|
|
—
|
|
Member
|
|
—
|
Pat Wood III (I)(*)
|
|
Member
|
|
Chair
|
|
—
|
|
Chair
|
(I) Indicates an independent director.
(*) Indicates the lead independent director.
Audit Committee
Mr. McDaniel is the Chairman of the Audit
Committee, appointed in June 2012. Our Audit Committee is a separately-designated standing committee established in accordance
with Section 3(a)(58)(A) of the Exchange Act. The Board has determined that each member of our Audit Committee is “independent”
as that term is defined in Section 10A of the Exchange Act and as defined by applicable listing standards of The NASDAQ Stock Market.
Each member of the Audit Committee is financially literate and has the financial sophistication required by the applicable listing
standards of The NASDAQ Stock Market. The Board has determined that each of Ms. Lesjak and Mr. McDaniel meet the criteria of an
“audit committee financial expert” within the meaning of applicable SEC regulations due to their professional experience.
Mr. McDaniel’s and Ms. Lesjak’s relevant professional experience is described above under “
Proposal One—Re-election
of Class III Directors
.” The Audit Committee held eight meetings during fiscal 2016.
The purpose of the Audit Committee, pursuant to its charter,
is, among other things, to:
|
●
|
provide oversight of our accounting and financial reporting
processes and the audit of our financial statements and internal controls by our independent registered public accounting firm;
|
|
●
|
assist the Board in the oversight of: (1) the integrity
of our financial statements; (2) our compliance with legal and regulatory requirements; (3) the independent registered public
accounting firm’s performance, qualifications and independence; and (4) the performance of our internal audit function;
|
|
●
|
oversee management’s identification, evaluation
and mitigation of major risks to our company;
|
|
●
|
prepare an audit committee report as required by the SEC
to be included in our annual proxy statement;
|
|
●
|
provide to the Board such information and materials as
it may deem necessary to make the Board aware of financial matters requiring the attention of the Board;
|
|
●
|
consider questions of actual and potential conflicts of
interest (including corporate opportunities) of Board members and corporate officers and review and approve proposed related party
transactions that would be required to be disclosed under Item 404 of Regulation S-K, provided that any approval of related party
transactions may be made only by the disinterested members of the Audit Committee; and
|
|
●
|
oversee any waiver of the Code of Business Conduct and
Ethics for directors and executive officers;
|
The Audit Committee also serves as the
representative of the Board with respect to its oversight of the matters described below in the “
Audit Committee Report
.”
The Audit Committee has established procedures for (1) the receipt, retention and treatment of complaints received by us regarding
accounting, internal accounting controls or auditing matters, and (2) the confidential, anonymous submission by our employees of
concerns regarding accounting or auditing matters. The Audit Committee promptly reviews such complaints and concerns.
Compensation Committee
Mr. Wood is the Chairman of the Compensation
Committee, appointed in November 2012. Two of the four members of the Compensation Committee, Messrs. McDaniel and Wood, are “independent”
as defined by applicable listing standards of The NASDAQ Stock Market. Ms. Kristoffersen and Mr. Pouget were designated by Total
to be on the Compensation Committee pursuant to our Affiliation Agreement with Total. The Compensation Committee held five meetings
during fiscal 2015.
The Compensation Committee, pursuant to its charter, assists
the Board in discharging its duties with respect to:
|
●
|
the formulation, implementation, review and modification
of the compensation of our directors and executive officers;
|
|
●
|
the preparation of an annual report of the Compensation
Committee for inclusion in our annual proxy statement or Annual Report on Form 10-K, in accordance with applicable rules of the
SEC and applicable listing standards of The NASDAQ Stock Market;
|
|
●
|
reviewing and discussing with management the Compensation
Discussion and Analysis section of our annual proxy statement or Annual Report on Form 10-K;
|
|
●
|
oversight of our company compensation philosophy, which
may be performance-based, to reward and retain employees based on achievement of goals; and
|
|
●
|
the administration of our equity incentive plans, including
the SunPower Corporation 2015 Omnibus Incentive Plan.
|
We also have a Section 16/162(m) Subcommittee of the Compensation
Committee consisting solely of independent directors available to approve certain compensation matters in accordance with Section
162(m) of the Internal Revenue Code of 1986, as amended (the Code) and Rule 16b-3 of the Exchange Act, each as recommended by the
Compensation Committee.
In certain instances, the Compensation Committee has delegated
limited authority to Mr. Werner, in his capacity as a Board member, with respect to compensation and equity awards for employees
other than our executive officers. For more information on our processes and procedures for the consideration and determination
of executive compensation, see “
Compensation Discussion and Analysis
” below.
Compensation Committee Interlocks and Insider Participation
No member of our Compensation Committee
was at any time during fiscal 2016 one of our officers or employees, or is one of our former officers or employees. No member of
our Compensation Committee had any relationship requiring disclosure under Item 404 and Item 407(e)(4) of Regulation S-K. Additionally,
during fiscal 2016, none of our executive officers or directors was a member of the board of directors, or any committee of the
board of directors, or of any other entity such that the relationship would be construed to constitute a compensation committee
interlock within the meaning of the rules and regulations of the SEC.
Nominating and Corporate Governance Committee
Mr. Wood is the Chairman of our Nominating
and Corporate Governance Committee. Two of the four members of the Nominating and Corporate Governance Committee, Messrs. McDaniel
and Wood, are “independent” as defined by applicable listing standards of The NASDAQ Stock Market. Messrs. Lauré
and Paszkiewicz were designated by Total to be on the Nominating and Corporate Governance Committee pursuant to our Affiliation
Agreement with Total. The Nominating and Corporate Governance Committee held four meetings during fiscal 2016.
The Nominating and Corporate Governance Committee, pursuant
to its charter, assists the Board in discharging its responsibilities with respect to:
|
●
|
the identification of individuals qualified to become
directors and the selection or recommendation of candidates for all directorships to be filled by the Board or by the stockholders;
|
|
●
|
the evaluation of whether an incumbent director should
be nominated for re-election to the Board upon expiration of such director’s term, based upon factors established for new
director candidates as well as the incumbent director’s qualifications, performance as a Board member, and such other factors
as the Nominating and Governance Committee deems appropriate; and
|
|
●
|
the development, maintenance and recommendation of a set
of corporate governance principles applicable to us, and periodically reviewing such principles.
|
The
Nominating and Governance Committee also considers diversity in identifying nominees for directors. In particular, the Nominating
and Governance Committee believes that the members of the Board should reflect a diverse range of talent, skill and expertise
sufficient to provide sound and prudent guidance with respect to our operations and interests. In addition, the Nominating and
Governance Committee has determined that the Board as a whole must have the right diversity, mix of characteristics and skills
for the optimal functioning of the Board in its oversight role.
The Nominating and Governance Committee believes the Board should
be composed of persons with skills in areas such as:
|
●
|
relevant industries, especially solar products and services;
|
|
●
|
technology manufacturing;
|
|
●
|
leadership of large, complex organizations;
|
|
●
|
finance and accounting;
|
|
●
|
corporate governance and compliance;
|
|
●
|
international business activities; and
|
|
●
|
human capital and compensation.
|
Under
our Corporate Governance Principles, during the director nominee evaluation process, the Nominating and Corporate Governance Committee
and the Board take the following into account:
|
●
|
A significant number of directors on the Board should
be independent directors, unless otherwise required by applicable law or The NASDAQ Stock Market rules;
|
|
●
|
Candidates should be capable of working in a collegial
manner with persons of different educational, business and cultural backgrounds and should possess skills and expertise that complement
the attributes of the existing directors;
|
|
●
|
Candidates should represent a diversity of viewpoints,
backgrounds, experiences and other demographics;
|
|
●
|
Candidates should demonstrate notable or significant achievement
and possess senior-level business, management or regulatory experience that would inure to our benefit;
|
|
●
|
Candidates shall be individuals of the highest character
and integrity;
|
|
●
|
Candidates shall be free from any conflict of interest
that would interfere with their ability to properly discharge their duties as a director or would violate any applicable law or
regulation;
|
|
●
|
Candidates for the Audit and Compensation Committees should
have the enhanced independence and financial literacy and expertise that may be required under law or The NASDAQ Stock Market
rules;
|
|
●
|
Candidates shall be capable of devoting the necessary
time to discharge their duties, taking into account memberships on other boards and other responsibilities; and
|
|
●
|
Candidates shall have the desire to represent the interests
of all stockholders.
|
Finance Committee
Mr. McDaniel is the Chairman of the Finance Committee. Two of
the four members of the Finance Committee, Ms. Lesjak and Mr. McDaniel, are “independent” as defined by applicable
listing standards of The NASDAQ Stock Market. Ms. Kristoffersen and Mr. Wolffsheim were designated by Total to be on the Finance
Committee pursuant to our Affiliation Agreement with Total. The Finance Committee held five meetings during fiscal 2016.
The Finance Committee, pursuant to its charter, assists the
Board in discharging its duties with respect to:
|
●
|
The review, evaluation and approval of financing transactions,
including credit facilities, structured finance, issuance of debt and equity securities in private and public transactions, sales
of project assets or ownership therein to publicly traded entities in which we have an equity interest greater than 10% or their
subsidiaries, and the repurchase of debt and equity securities (other than financing activity exceeding $50 million which requires
the review and approval of the Board);
|
|
●
|
The review of our annual operating plan for recommendation
to the Board, and the monitoring of capital spend as compared with the annual operating plan;
|
|
●
|
The review and recommendation to the Board of investments,
acquisitions, divestitures and other corporate transactions; and
|
|
●
|
General oversight of our treasury activities, and the
review, at least annually, of our counterparty credit risk and insurance programs.
|
CORPORATE GOVERNANCE
Stockholder Communications with Board of Directors
We provide a process by which stockholders may send communications
to our Board, any committee of the Board, our non-management directors or any particular director. Stockholders can contact our
non-management directors by sending such communications to the Chairman of the Nominating and Corporate Governance Committee, c/o
Corporate Secretary, SunPower Corporation, 77 Rio Robles, San Jose, California 95134. Stockholders wishing to communicate with
a particular Board member, a particular Board committee or the Board as a whole, may send a written communication to our Corporate
Secretary, SunPower Corporation, 77 Rio Robles, San Jose, California 95134. The Corporate Secretary will forward such communication
to the full Board, to the appropriate committee or to any individual director or directors to whom the communication is addressed,
unless the communication is unduly hostile, threatening, illegal, or harassing, in which case the Corporate Secretary has the authority
to discard the communication or take appropriate legal action regarding the communication.
Directors’ Attendance at Our Annual Meetings
Although we do not have a formal policy that mandates the attendance
of our directors at our annual stockholder meetings, our directors are encouraged to attend. All of our directors are expected
to attend the 2017 Annual Meeting, and eight of our nine directors attended our annual meeting of stockholders held on April 28,
2016 (the “2016 Annual Meeting”).
Submission of Stockholder Proposals for the 2018 Annual Meeting
As a SunPower stockholder, you may submit a proposal, including
director nominations, for consideration at future annual meetings of stockholders.
Stockholder Proposals
.
Only stockholders meeting
certain criteria outlined in our By-laws are eligible to submit nominations for election to the Board or to propose other proper
business for consideration by stockholders at an annual meeting. Under the By-laws, stockholders who wish to nominate persons for
election to the Board or propose other proper business for consideration by stockholders at an annual meeting must give proper
written notice to us not earlier than the 120th day and not later than the 90th day before the first anniversary of the preceding
year’s annual meeting, provided that in the event that an annual meeting is called for a date that is not within 25 days
before or after such anniversary date, notice by the stockholder in order to be timely must be received not later than the close
of business on the 10th day following the day on which we mail or publicly announce our notice of the date of the annual meeting,
whichever occurs first. Therefore, notices regarding nominations of persons for election to the Board and proposals of other proper
business for consideration at the 2018 annual meeting of stockholders must be submitted to us no earlier than December 28, 2017
and no later than January 27, 2018. If the date of the 2018 annual meeting is moved more than 25 days before or after the anniversary
date of the 2017 annual meeting, the deadline will instead be the close of business on the 10th day following notice of the date
of the 2018 annual meeting of stockholders or public disclosure of such date, whichever occurs first. We have discretionary power,
but are not obligated, to consider stockholder proposals submitted after January 27, 2018 for the 2018 annual meeting.
Stockholder
proposals will also need to comply with SEC regulations, such as Rule 14a-8 of the Exchange Act regarding the inclusion of stockholder
proposals in any Company-sponsored proxy material. In order to be included in our proxy materials for the 2017 annual meeting of
stockholders, pursuant to Rule 14a-8 of the Exchange Act the submission deadline for stockholder proposals is November 17, 2017.
All written proposals must be received by our Corporate Secretary, at our corporate offices at 77 Rio Robles, San Jose, California
95134 by the close of business on the required deadline in order to be considered for inclusion in our proxy materials for the
2018 annual meeting of stockholders.
Nomination of Director Candidates.
Our Nominating
and Corporate Governance Committee will consider director candidates recommended by our stockholders. Such nominations should be
directed to the Nominating and Corporate Governance Committee, c/o Corporate Secretary, SunPower Corporation, 77 Rio Robles, San
Jose, California 95134. In addition, the stockholder must give notice of a nomination to our Corporate Secretary, and such notice
must be received within the time period described above under “
Stockholder Proposals
.” Any such proposal must
include the following:
|
●
|
the name, age, business address, residence address and
record address of such nominee;
|
|
●
|
the principal occupation or employment of such nominee;
|
|
●
|
the class or series and number of shares of our stock
owned beneficially or of record by such nominee;
|
|
●
|
any information relating to the nominee that would be
required to be disclosed in our proxy statement;
|
|
●
|
the nominee holder for, and number of, shares owned beneficially
but not of record by such person;
|
|
●
|
whether and the extent to which any hedging or other transaction
or series of transactions has been entered into by or on behalf of, or any other agreement, arrangement or understanding (including
any derivative or short positions, profit interests, options or borrowed or loaned shares) has been made, the effect or intent
of which is to mitigate loss to or manage risk or benefit of share price changes for, or to increase or decrease the voting power
of, such person with respect to any share of our stock;
|
|
●
|
to the extent known by the stockholder giving the notice,
the name and address of any other stockholder supporting the nominee for election or reelection as a director on the date of such
stockholder’s notice;
|
|
●
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a description of all arrangements or understandings between
or among such persons pursuant to which the nomination(s) are to be made by the stockholder and any relationship between or among
the stockholder giving notice and any person acting in concert, directly or indirectly, with such stockholder and any person controlling,
controlled by or under common control with such stockholder, on the one hand, and each proposed nominee, on the other hand; and
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a representation that the stockholder intends to appear
in person or by proxy at the meeting to nominate the persons named in its notice.
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If a director nomination is made pursuant to the process set
forth above, the Nominating and Corporate Governance Committee will apply the same criteria in evaluating the nominee as it would
any other board nominee candidate, and will recommend to the Board whether or not the stockholder nominee should be included as
a candidate for election in our proxy statement. The nominee and nominating stockholder should be willing to provide any information
reasonably requested by the Nominating and Corporate Governance Committee in connection with its evaluation. The Board will make
the final determination whether or not a nominee will be included in the proxy statement and on the proxy card for election.
Once either a search firm selected by the Nominating and Corporate
Governance Committee or a stockholder has provided our Nominating and Corporate Governance Committee with the identity of a prospective
candidate, the Nominating and Corporate Governance Committee communicates the identity and known background and experience of the
candidate to the Board. If warranted by a polling of the Board, members of our Nominating and Corporate Governance Committee and/or
other members of our senior management may interview the candidate. If the Nominating and Governance Committee reacts favorably
to a candidate, the candidate is next invited to interview with the members of the Board who are not on the Nominating and Governance
Committee. The Nominating and Governance Committee then makes a final determination whether to recommend the candidate to the Board
for directorship. The Nominating and Governance Committee currently has not set specific, minimum qualifications or criteria for
nominees that it proposes for Board membership, but evaluates the entirety of each candidate’s credentials. The Nominating
and Governance Committee believes, however, that we will be best served if our directors bring to the Board a variety of diverse
experience and backgrounds and, among other things, demonstrated integrity, executive leadership and financial, marketing or business
knowledge and experience. See “
Board Structure—Nominating and Corporate Governance Committee
” for factors
considered by the Nominating and Corporate Governance Committee and the Board in considering director nominees.
Corporate Governance Principles
We believe that strong corporate governance practices are the
foundation of a successful, well-run company. The Board has adopted Corporate Governance Principles that set forth our core corporate
governance principles, including:
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oversight responsibilities of the Board;
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election and responsibilities of the lead independent
director;
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role of Board committees and assignment and rotation of
members;
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review of the Code of Business Conduct and Ethics and
consideration of related party transactions;
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independent directors meetings without management and
with outside auditors;
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Board’s access to employees;
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annual review of Board member compensation;
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membership criteria and selection of the Board;
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annual review of Board performance;
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director orientation and continuing education;
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stock ownership guidelines for certain of our executive
officers and directors;
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annual review of performance and compensation of executive
officers; and
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succession planning for key executive officers.
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Our Corporate Governance Principles are available on our website
at
http://investors.sunpower.com
.
Code of Business Conduct and Ethics; Related Persons Transactions
Policy and Procedures
It is our general policy to conduct our business activities
and transactions with the highest level of integrity and ethical standards and in accordance with all applicable laws. In addition,
it is our policy to avoid situations that create an actual or potential conflict between our interests and the personal interests
of our officers and directors. Such principles are described in our Code of Business Conduct and Ethics. Our Code of Business Conduct
and Ethics is applicable to our directors, officers, and employees (including our principal executive officer, principal financial
officer and principal accounting officer) and is designed to promote compliance with the laws applicable to our business, accounting
standards, and proper and ethical business methods and practices. Our Code of Business Conduct and Ethics is available on our website
at
http://investors.sunpower.com/corporate-governance.cfm
under the link for “Code of Business Conduct and Ethics.”
You may also request a copy by writing to us at SunPower Corporation, 77 Rio Robles, San Jose, California 95134, Attention: Corporate
Secretary. If we amend our Code of Business Conduct and Ethics or grant a waiver applicable to our principal executive officer,
principal financial officer or principal accounting officer, we will post a copy of such amendment or waiver on our website. Under
our Corporate Governance Principles, the Audit Committee is responsible for reviewing and recommending changes to our Code of Business
Conduct and Ethics.
Pursuant to our Corporate Governance Principles and our Audit Committee Charter, our Audit Committee will consider
questions of actual and potential conflicts of interest (including corporate opportunities) of directors and officers, and approve
or prohibit such transactions. The Audit Committee will review and approve in advance all proposed related-party transactions that
would be required to be disclosed under Item 404 of Regulation S-K, in compliance with the applicable NASDAQ Stock Market rules.
A related-party transaction will only be approved if the Audit Committee determines that it is in our best interests. If a director
is involved in the transaction, he or she will be recused from all voting and approval processes in connection with the transaction.
Certain Relationships and Related Persons Transactions
Other than the compensation agreements and other arrangements
described herein, and the transactions described below, since the start of our last fiscal year on January 4, 2016, there has not
been, nor is there currently proposed, any transaction or series of similar transactions to which we have been or will be a party:
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in which the amount involved exceeded or will exceed $120,000;
and
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in which any director, director nominee, executive officer,
beneficial owner of more than 5% of any class of our common stock, or any immediate family member of such persons had or will
have a direct or indirect material interest.
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Agreements with Total Energies Nouvelles Activités
USA, SAS and Total S.A.
Credit Support Agreement
In connection with the Tender Offer, on April 28, 2011, we entered
into a Credit Support Agreement with Total S.A. Pursuant to the Credit Support Agreement, subject to the terms and conditions described
below, Total S.A., as “Guarantor” agreed to enter into one or more guarantee agreements (each a “Guaranty”)
with banks providing letter of credit facilities to us or our subsidiaries in support of our utility and power plant (“UPP”)
and large commercial portion of the residential and commercial segment (“LComm”) businesses and certain other permitted
purposes. Pursuant to such Guarantees, Guarantor would guarantee the payment to the applicable bank of our obligation to reimburse
a draw on a letter of credit and pay interest thereon in accordance with the letter of credit facility between such bank and us.
The Credit Support Agreement became effective on June 28, 2011 (the “CSA Effective Date”), was amended on June 7, 2011,
December 12, 2011 and December 14, 2012, and was amended and restated on June 29, 2016.
Under the Credit Support Agreement, at any time from the CSA
Effective Date until the fifth anniversary thereof, we could request that Guarantor provide a Guaranty with respect to a letter
of credit facility. Guarantor was required to issue and enter into the Guaranty requested by us subject to certain terms and conditions,
any of which could be waived by Total S.A. The aggregate
letter of credit amount could not exceed $1 billion for the period from
January 1, 2016 through the termination of the Credit Support Agreement (the “Maximum L/C Amount”), subject to certain
adjustments.
Payments to be Paid by us to the Guarantor
. In consideration
for the commitments of Guarantor, we were required to pay Guarantor a guarantee fee, repay any payments made under any Guaranty
plus interest, and pay certain expenses of Guarantor and interest on overdue amounts owed to Guarantor. The guarantee fee for each
letter of credit that was the subject of a Guaranty and was outstanding for all or part of the preceding calendar quarter was equal
to: (w) the average daily amount of the undrawn amount of such letter of credit plus the amount drawn on such letter of credit
that had not yet been reimbursed by us or Guarantor, (x) multiplied by 2.35% for letters of credit issued or extended from the
fourth anniversary of the CSA Effective Date until the fifth anniversary of the CSA Effective Date, (y) multiplied by the number
of days that such letter of credit was outstanding, (z) divided by 365. We were required to reimburse payments made by Guarantor
under any Guaranty within 30 days plus interest at a rate equal to LIBOR (as in effect as of the date of Guarantor’s payment)
plus 3.00%. The expenses of Guarantor to be reimbursed by us included reasonable out-of-pocket expenses incurred after the CSA
Effective Date in the performance of its services under the Credit Support Agreement and reasonable out-of-pocket attorneys’
fees and expenses incurred in connection with payments to a bank under a Guaranty or enforcement of any of our obligations. Overdue
payment obligations accrued interest at a rate per annum equal to LIBOR as in effect at such time such payment was due plus 5.00%.
Finally, we were solely responsible for any bank fees incurred in connection with securing any letter of credit facilities
Benchmark Credit Terms
. Annually not later than every
June 30, and also at any time we desired to obtain a letter of credit facility that would be the subject of a Guaranty, we were
required to solicit benchmark credit terms for a letter of credit facility without a Guaranty from Guarantor and without collateral
and report those benchmark terms to Guarantor. If (a) the annual fees payable by us on the issued amount of a letter of credit
under a proposed letter of credit facility that was not guaranteed by Guarantor were equal to or less than 110% of the annual fees
plus any applicable guarantee fee payable to Guarantor pursuant to a guaranteed letter of credit facility under the Credit Support
Agreement, (b) the other fees payable under such non-guaranteed letter of credit facility were reasonable in light of the fees
payable under a guaranteed letter of credit facility and the anticipated uses of such non-guaranteed letter of credit facility
and (c) the other terms and conditions of such non-guaranteed letter of credit facility (including restrictive covenants) were
reasonable in light of the anticipated use of such non-guaranteed letter of credit facility, then (i) we were required to enter
into such non-guaranteed letter of credit facility as soon as commercially reasonable, (ii) we were required to reduce the commitments
under guaranteed letter of credit facilities in an amount equal to such non-guaranteed letter of credit facility and (iii) so long
as such non-guaranteed letter of credit facility remained in effect, the Maximum L/C Amount during such period was reduced by the
maximum aggregate amount of the letters of credit that could be issued pursuant to such non-guaranteed letter of credit facility.
Covenants of SunPower
. Under the Credit Support Agreement,
we agreed to undertake certain actions, including, but not limited to, ensuring that our payment obligations to Guarantor ranked
at least equal in right of payment with all of our other present and future indebtedness, other than certain permitted secured
indebtedness. We agreed to refrain from taking certain actions as detailed in the Credit Support Agreement, including (1) amending
any agreements related to any guaranteed letter of credit facility, (2) granting any lien to secure indebtedness unless (a) an
identical lien was granted to Guarantor and (b) such other lien was at all times equal or subordinate to the priority of the lien
granted to Guarantor under (a), and (3) making any equity distributions.
Trigger Events
. Under the Credit Support Agreement, following
a Trigger Event (as defined in the agreement and described below), and during its continuation, Guarantor could elect not to enter
into any additional Guarantees; declare all or any portion of the outstanding amounts owed by us to Guarantor to be due and payable;
direct banks that had provided guaranteed letter of credit facilities to stop all issuances of any additional letters of credit
under such facilities; access and inspect our relevant financial records and other documents upon reasonable notice to us; and
exercise all other rights it may have had under applicable law, provided that at its discretion Guarantor could also rescind such
actions.
Each of the following events constituted a “Trigger Event”:
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we defaulted with respect to our reimbursement obligations
to Guarantor described above or any other payment obligation under the Credit Support Agreement that was 30 days overdue for which
Guarantor had demanded payment in writing;
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any representation or warranty made by us in the Credit
Support Agreement was false, incorrect, incomplete or misleading in any material respect when made and had not been cured within
15 days after notice thereof by Guarantor;
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we failed, and continued to fail for 15 days, to observe
or perform any material covenant, obligation, condition or agreement in the Credit Support Agreement;
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we defaulted in the observance or performance of any agreement,
term or condition contained in a guaranteed letter of credit facility that would constitute an event of default or similar event
thereunder (other than an obligation to pay any amount, the payment of which was guaranteed by Guarantor), up to or beyond any
grace period provided in such facility, unless waived by the applicable bank and Guarantor;
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we or any of our subsidiaries defaulted in the observance
or performance of any agreement, term or condition contained in any bond, debenture, note or other indebtedness such that the
holders of such indebtedness could accelerate the payment of $25 million or more of such indebtedness; and
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certain bankruptcy or insolvency events.
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Termination
. The Credit Support Agreement was scheduled
to terminate following the fifth anniversary of the CSA Effective Date, after the later of the payment in full of all obligations
thereunder and the termination or expiration of each Guaranty provided thereunder. The Credit Support Agreement was amended and
restated on June 29, 2016.
Amended and Restated Credit Support Agreement
On June 29, 2016, we and Total S.A. entered into an Amended
and Restated Credit Support Agreement (the “A&R Credit Support Agreement”), which amended and restated the Credit
Support Agreement.
Under the A&R Credit Support Agreement, Total S.A. has agreed
to enter into one or more Guaranties with banks providing letter of credit facilities to us in support of certain of our businesses
and for other permitted purposes. Total S.A. will guarantee the payment to the applicable issuing bank of our obligation to reimburse
a draw on a letter of credit and pay interest thereon in accordance with the letter of credit facility between such bank and us.
The A&R Credit Support Agreement became effective on June 29, 2016 (the “A&R CSA Effective Date”). Under the
Credit Support Agreement, at any time from the A&R CSA Effective Date until December 31, 2018, we may request that Total S.A.
provide a Guaranty in support of our payment obligations with respect to a letter of credit facility. Such letters of credit must
be issued no later than December 31, 2018 and expire no later than March 31, 2020. Total S.A. is required to issue and enter into
the Guaranty requested by us, subject to certain terms and conditions. In addition, Total S.A. will not be required to enter into
the Guaranty if, after giving effect to our request for a Guaranty, the sum of (a) the aggregate amount available to be drawn under
all guaranteed letter of credit facilities, (b) the amount of letters of credit available to be issued under any guaranteed facility,
and (c) the aggregate amount of draws (including accrued but unpaid interest) on any letters of credit issued under any guaranteed
facility that have not yet been reimbursed by us, would exceed $500 million in the aggregate. Such maximum amounts of credit support
available to us can be reduced upon the occurrence of specified events.
In consideration for the commitments of Total S.A. pursuant
to the A&R Credit Support Agreement, we are required to pay Total S.A. a guaranty fee for each letter of credit that is the
subject of a Guaranty and was outstanding for all or part of the preceding calendar quarter, which fee (applied on a tiered basis)
will be equal to: (x) the average daily amount of the undrawn amount outstanding on each guaranteed letter of credit plus any drawn
amounts that have not been reimbursed by us or Total S.A., (y) multiplied by (1) 2.35% for letters of credit issued or extended
if our leverage ratio (subject to reduction or increase consistent with the minimum leverage covenant set forth in the Revolving
Credit Agreement among us, Crédit Agricole Corporate and Investment Bank (“Crédit Agricole”), as agent,
and the lenders party thereto, as amended from time to time) (the “Leverage Ratio”) is less than or equal to 4.5 to
1.0; or (2) if the Leverage Ratio is greater than 4.5 to 1.0, 2.35% for letters of credit issued or extended for amounts less than
$200 million; 4.50% for amounts greater than or equal to $200 million and less than $300 million; 6.50% for amounts greater than
or equal to $300 million and less than $400 million; and 8.00% for amounts greater than or equal to $400 million and less than
or equal to $500 million (z) multiplied by the number of days during such calendar quarter that such letter of credit was outstanding,
divided by 365. As an example, if at the end of a fiscal quarter our leverage ratio is greater than 4.5 to 1.0 and we had $250
million in letters of credit outstanding during 50 days of the preceding calendar quarter, the guarantee fee would be equal to
$0.95 million (($200 million * 2.35% + $50 million * 4.5%) * 50/365). In addition, we are required to pay Total S.A. a commitment
fee equal to 0.50% times the average daily available facility amount for the preceding calendar quarter. We are also required to
reimburse Total S.A. for payments made under any Guaranty and certain expenses of Total S.A., plus interest on both. In fiscal
2016, we incurred guaranty fees of approximately $7.1 million to Total S.A. under the Credit Support Agreement and the A&R
Credit Support Agreement.
We have agreed to undertake certain actions, including, but
not limited to, ensuring that our payment obligations to Total S.A. rank at least equal in right of payment with all of our other
present and future indebtedness, other than certain permitted secured indebtedness. We have also agreed to refrain from taking
certain actions, including refraining from making any dividend distributions so long as it has any outstanding repayment obligation
to Total S.A. resulting from a draw on a guaranteed letter of credit.
The A&R Credit Support Agreement will terminate following
December 31, 2018, after the later of the satisfaction of all obligations thereunder and the termination or expiration of each
Guaranty provided thereunder.
The A&R Credit Support Agreement may not be assigned by
us without the prior written consent of Total S.A. Total S.A., as the initial guarantor (but not any assignee of Total S.A.), may
assign its rights and obligations under the A&R Credit Support Agreement without our consent to an entity that is a Total S.A.
subsidiary and which satisfies certain credit requirements. In connection with an assignment to an assignee that is rated lower
than A/A2, Total S.A. would be required to either (a) pay to us an assignment fee equal to $10 million as of June 29, 2016 and
reduced by $1 million at the beginning of each calendar quarter thereafter until reduced to zero (for example, the fee payable
for an assignment on March 17, 2017 would be $7 million) or (b) agree to pay us a make-whole amount based on a calculation of the
amount actually paid by us to banks that are party to letter of credit facilities (both guaranteed and non-guaranteed) and to lenders
in revolving credit facilities permitted under the A&R Credit Support Agreement in increased costs as a result of Total S.A.’s
assignment of its rights and obligations under the A&R Credit Support Agreement. Such make-whole amount would be payable on
a quarterly basis from the assignment date through the termination date of the A&R Credit Support Agreement.
Under the A&R Credit Support Agreement, we have agreed to
undertake certain actions, including, but not limited to, ensuring that our payment obligations to Total S.A. rank at least equal
in right of payment with all of our other present and future indebtedness, other than certain permitted secured indebtedness. We
also agreed to refrain from taking certain actions as detailed in the A&R Credit Support Agreement, including (1) amending
any agreements related to any guaranteed letter of credit facility, (2) granting any lien to secure indebtedness unless (a) an
identical lien was granted to Total S.A. and (b) such other lien was at all times equal or subordinate to the priority of the lien
granted to Total S.A. under (a), and (3) making any equity distributions.
Under the A&R Credit Support Agreement, following a Trigger
Event (as defined in the agreement and described below), and during its continuation, Total S.A. could elect not to enter into
any additional Guarantees; declare all or any portion of the outstanding amounts owed by us to Total S.A. to be due and payable;
direct banks that had provided guaranteed letter of credit facilities to stop all issuances of any additional letters of credit
under such facilities; access and inspect our relevant financial records and other documents upon reasonable notice to us; and
exercise all other rights it may have had under applicable law, provided that at its discretion Total S.A. could also rescind such
actions.
Each of the following events constitute a “Trigger Event”:
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we default with respect to our reimbursement obligations
to Total S.A. described above or any other payment obligation under the A&R Credit Support Agreement that is 30 days overdue
for which Total S.A. demands payment in writing;
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any representation or warranty made by us in the A&R
Credit Support Agreement was false, incorrect, incomplete or misleading in any material respect when made and is not cured within
15 days after notice thereof by Total S.A.;
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we fail, and continued to fail for 15 days, to observe
or perform any material covenant, obligation, condition or agreement in the A&R Credit Support Agreement;
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we default in the observance or performance of any agreement,
term or condition contained in a guaranteed letter of credit facility that would constitute an event of default or similar event
thereunder (other than an obligation to pay any amount, the payment of which was guaranteed by Total S.A.), up to or beyond any
grace period provided in such facility, unless waived by the applicable bank and Total S.A.;
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we or any of our subsidiaries default in the observance
or performance of any agreement, term or condition contained in any bond, debenture, note or other indebtedness such that the
holders of such indebtedness could accelerate the payment of $25 million or more of such indebtedness; and
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certain bankruptcy or insolvency events.
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Affiliation Agreement
In connection with the Tender Offer, we and Total entered into
an affiliation agreement (the “Affiliation Agreement”). The Affiliation Agreement was amended on June 7, 2011, December
12, 2011, February 28, 2012 and August 10, 2012. The Affiliation Agreement governs the relationship following the closing of the
Tender Offer between SunPower, on the one hand, and Total S.A., Total, any other affiliate of Total S.A. and any member of a group
of persons formed for the purpose of acquiring, holding, voting, disposing of or beneficially owning our voting stock of which
Total S.A. or any of its affiliates is a member (the “Total Group”), on the other hand.
Standstill
. Following the closing of the Tender Offer
and during the Standstill Period (as defined below), Total, Total S.A., and the Total Group may not:
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effect or seek, or announce any intention to effect or
seek, any transaction that would result in the Total Group beneficially owning shares in excess of the Applicable Standstill Limit
(as defined below), or take any action that would require us to make a public announcement regarding the foregoing;
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request that (i) we, (ii) our Board members that are independent
directors and not appointed to the Board by Total (the “Disinterested Directors”), or (iii) our officers or employees,
amend or waive any of the standstill restrictions applicable to the Total Group described above; or
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enter into any discussions with any third party regarding
any of the foregoing.
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In addition, no member of the Total Group may, among other things,
solicit proxies relating to the election of directors to our Board without the prior approval of the Disinterested Directors.
The Total Group is, however, permitted to either (i) make and
consummate a Total Tender Offer or (ii) propose and effect a Total Merger so long as, in each case, Total complies with certain
advance notice and prior negotiation obligations, including providing written notice to us at least 120 days before commencing
or proposing such Total Tender Offer or Total Merger and making its designees reasonably available for the purpose of negotiation
with the Disinterested Directors concerning such Total Tender Offer or Total Merger.
The “Standstill Period” is the period beginning
on the date of the Affiliation Agreement and ending on the earlier to occur of:
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a change of control of our company;
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the first time that the Total Group beneficially owns
less than 15% of outstanding voting power of our company;
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we or our Board take or fail to take certain of the actions
described below under
“—Events Requiring Stockholder Approval by Total
” or fail to comply with certain
of the covenants described below under
“—Covenants of Total and SunPower
” during the time when Total,
together with the controlled subsidiaries of Total S.A., owns 50% or less of the outstanding voting power of our company or 40%
or less of the outstanding voting power of our company when at least $100 million in Guarantees are outstanding under the Credit
Support Agreement;
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a tender offer for at least 50% of the outstanding voting
power of our company is commenced by a third party after the time when Total, together with the controlled subsidiaries of Total
S.A. owns 50% or less of the outstanding voting power of our company or 40% or less of the outstanding voting power of our company
when at least $100 million in Guarantees are outstanding under the Credit Support Agreement; and
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the termination of the Affiliation Agreement.
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The “Applicable Standstill Limit” is 70% of the
lower of (i) the then outstanding shares of our common stock or (ii) the then outstanding voting power of our company.
During the Standstill Period, the Total Group will not be in
breach of its standstill obligations described above if any member of the Total Group holds beneficial ownership of shares of our
common stock in excess of the Applicable Standstill Limit solely as a result of:
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recapitalizations, repurchases or other actions taken
by us or our controlled subsidiaries that have the effect of reducing the number of shares of our common stock then outstanding;
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the issuance of shares of our common stock to Total in
connection with the acquisition of Tenesol SA; or
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the rights specified in any “poison pill”
share purchase rights plan having separated from the shares of our common stock and a member of the Total Group having exercised
such rights.
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Transfer of Control
. If any member or members of the
Total Group seek to transfer, in one or a series of transactions, either (i) 40% or more of the outstanding shares of our common
stock or (ii) 40% or more of the outstanding voting power of our company to a single person or group, then such transfer must be
conditioned on, and may not be effected, unless the transferee either:
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makes a tender offer to acquire 100% of the voting power
of our company, at the same price per share of voting stock and using the same form of consideration to be paid by the transferee
to the Total Group; or
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proposes a merger providing for the acquisition of 100%
of the voting power of our company, at the same price per share of voting stock and using the same form of consideration to be
paid by the transferee to the Total Group.
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Total’s Rights to Maintain
. The Total Group has
the following rights to maintain its ownership in us until (i) the first time that the Total Group owns less than 40% of the outstanding
voting power of our company, or (ii) until the first time that Total transfers shares of our common stock to a person other than
Total S.A. or a controlled subsidiary of Total S.A. and as a result of such transfer Total S.A. and its subsidiaries own less than
50% of the outstanding voting power of our company.
If we propose to issue new securities primarily for cash in
a financing transaction, then Total has the right to purchase a portion of such new securities equal to its percentage ownership
in us. Total can also elect to purchase our securities in open market transactions or through privately-negotiated transactions
in an amount equal to its percentage ownership in connection with such issuance of new securities. If we propose to issue new securities
in consideration for our purchase of a business or assets of a business, then Total has the right to purchase additional securities
in the open market or through privately-negotiated transactions equal to its percentage ownership in us. Total has similar rights
in the event that we issue or propose to issue (including pursuant to our equity plans or as the result of the conversion of our
convertible securities) securities that, together with all other issuances of securities by us since the end of the preceding fiscal
quarter aggregate to more than 1% of our fully diluted equity. Total has a nine-month grace period, subject to certain extensions
to satisfy regulatory conditions, to acquire securities in the open market or through privately-negotiated transactions in connection
with any of the securities issuances described above.
SunPower Board
. The Affiliation Agreement provides that
Total is entitled to designate nominees to our Board, subject to the maintenance of certain ownership thresholds described below.
See “
Proposal One”
above for more details on our current Board membership.
So long as Total, together with the controlled subsidiaries
of Total S.A., owns at least 10% of the outstanding voting power of our company, then our Board must use its reasonable best efforts
to elect the directors designated by Total as follows:
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until the first time that Total, together with the controlled
subsidiaries of Total S.A., owns less than 50% of the voting power of our company, Total will be entitled to designate five nominees
to serve on our Board;
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until the first time that Total, together with the controlled
subsidiaries of Total S.A., owns less than 50% but not less than 40% of the voting power of our company, Total will be entitled
to designate four nominees to serve on our Board;
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until the first time that Total, together with the controlled
subsidiaries of Total S.A., owns less than 40% but not less than 30% of the voting power of our company, Total will be entitled
to designate three nominees to serve on our Board;
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until the first time that Total, together with the controlled
subsidiaries of Total S.A., owns less than 30% but not less than 20% of the voting power of our company, Total will be entitled
to designate two nominees to serve on our Board; and
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until the first time that Total, together with the controlled
subsidiaries of Total S.A., owns less than 20% but not less than 10% of the voting power of our company, Total will be entitled
to designate one nominee to serve on our Board.
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For as long as they are serving on our Board, the directors
designated by Total will be allocated across the three classes that comprise our Board in a manner as equal as practicable.
Subject to the listing standards of The NASDAQ Stock Market,
until the first time that Total, together with the controlled subsidiaries of Total S.A., owns less than 30% of the outstanding
voting power of our company:
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the Audit Committee will be composed of three Disinterested
Directors;
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the Compensation Committee and the Nominating and Governance
Committee will each be composed of two Disinterested Directors and two directors designated by Total; and
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any other standing committee will be composed of two Disinterested
Directors and two directors designated by Total.
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Until the first time that Total, together with the controlled
subsidiaries of Total S.A., own less than 10% of the outstanding voting power of our company, a representative of Total will, subject
to certain exceptions, be permitted to attend all meetings of our Board or any committee thereof in a non-voting, observer capacity
(other than any committee whose sole purpose is to consider a transaction for which there exists an actual conflict of interest
between the Total Group, on the one hand, and us and any of our affiliates, on the other hand).
Events Requiring Specific Board Approval
. At any time
when Total, together with the controlled subsidiaries of Total S.A., owns at least 30% of the outstanding voting power of our company,
neither the Total Group nor we (or any of our affiliates) may effect any of the following without first obtaining the approval
of a majority of the Disinterested Directors:
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any amendment to our Certificate of Incorporation or By-laws;
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any transaction that, in the reasonable judgment of the
Disinterested Directors, involves an actual conflict of interest between the Total Group, on the one hand, and us and any of our
affiliates, on the other hand;
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the adoption of any shareholder rights plan or the amendment
or failure to renew our existing shareholder rights plan;
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except as provided above, the commencement of any tender
offer or exchange offer by the Total Group for shares of our common stock or securities convertible into shares of our common
stock, or the approval of a merger of us or any company that we control with a member of the Total Group;
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any voluntary dissolution or liquidation of our company
or any company that we control;
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any voluntary bankruptcy filing by us or any company that
we control or the failure to oppose any other person’s bankruptcy filing or action to appoint a receiver of our company
or any company that we control;
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any delegation of all or a portion of the authority of
our Board to any committee thereof;
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any amendment, modification or waiver of any provision
of the Affiliation Agreement;
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any modification of, or action with respect to, director’s
and officer’s insurance coverage; or
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any reduction in the compensation of the Disinterested
Directors.
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Events Requiring Supermajority Board Approval
. At any
time when Total, together with the controlled subsidiaries of Total S.A., owns at least 30% of the outstanding voting power of
our company, neither Total nor we (nor any of Total’s or our affiliates, respectively) may, without first obtaining the approval
of two-thirds of our directors (including at least one Disinterested Director), effect any approval or adoption of our annual operating
plan or budget that has the effect of reducing the planned letter of credit utilization in any given year by more than 10% below
the applicable maximum letter of credit amount in the Credit Support Agreement.
Events Requiring Stockholder Approval by Total
. Until
the first time that Total, together with the controlled subsidiaries of Total S.A., owns 50% or less of the outstanding voting
power of our company or 40% or less of the outstanding voting power of our company when at least $100 million in Guarantees are
outstanding pursuant to the Credit Support Agreement and, thereafter, for so long as (1) any loans by Total S.A. to us remain outstanding,
(2) any guarantees by Total S.A. of any of our indebtedness remain outstanding, or (3) any other continuing obligation of Total
S.A. to or for the benefit of us remain outstanding (“Total Stockholder Approval Period”), neither we (including any
of our controlled subsidiaries) nor our Board may effect any of the following without first obtaining the approval of Total:
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any amendment to our Certificate of Incorporation or By-laws;
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any transaction pursuant to which we or any company that
we control acquires or otherwise obtains the ownership or exclusive use of any business, property or assets of a third party if
as of the date of the consummation of such transaction the aggregate net present value of the consideration paid or to be paid
exceeds the lower of (i) 15% of our then-consolidated total assets or (ii) 15% of our market capitalization;
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any transaction pursuant to which a third party obtains
ownership or exclusive use of any of our business, property or assets or those of any company that we control if as of the date
of the consummation of such transaction the aggregate net present value of the consideration received or to be received exceeds
the lower of (i) 10% of our then-consolidated total assets or (ii) 10% of our market capitalization;
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the adoption of any shareholder rights plan or certain
changes to our existing shareholder rights plan;
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except for the incurrence of certain permitted indebtedness,
the incurrence of additional indebtedness in excess of the difference, if any, of 3.5 times our LTM EBITDA (as defined in the
Affiliation Agreement) less our Outstanding Gross Debt (as defined in the Affiliation Agreement);
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subject to certain exceptions, any voluntary dissolution
or liquidation of our company or any company that we control;
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any voluntary bankruptcy filing by us or any company that
we control or the failure to oppose any other person’s bankruptcy filing or action to appoint a receiver of our company
or any company that we control; or
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any repurchase of our common stock.
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Certain Matters Related to SunPower’s Shareholder Rights
Plan
. Until the Total Group beneficially owns less than 15% of the outstanding voting power of our company, neither we nor
our Board is permitted to adopt any shareholder rights plan or make certain changes to our existing shareholder rights plan without
the approval of Total.
Covenants of Total and SunPower.
In order to effect the
transactions contemplated by the Affiliation Agreement, each of Total and we have committed to taking certain actions. With respect
to us, such actions include:
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amending our By-laws to provide that the Total Group may
call a special meeting of stockholders in certain circumstances;
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taking certain actions to exculpate Total S.A., Total,
any controlled subsidiary of Total S.A. and those of our directors designated by Total from corporate opportunities, to the fullest
extent permitted by applicable law;
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taking certain actions to render Delaware’s business
combination statute inapplicable to the Total Group and certain future transferees of the Total Group;
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making certain amendments to our shareholder rights plan,
including excluding the Total Group from the definition of “Acquiring Person” under such plan;
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renewing our existing shareholder rights plan so long
as the Total Group beneficially owns at least 15% of our outstanding voting power; and
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providing Total with certain of our financial information
from time to time.
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Termination
. The Affiliation Agreement generally terminates
upon the earlier to occur of (i) Total, together with the controlled subsidiaries of Total S.A., owning less than 10% of the outstanding
voting power of our company or (ii) Total, together with the controlled subsidiaries of Total S.A., owning 100% of the outstanding
voting power of our company.
Affiliation Agreement Guaranty
Total S.A. entered into a guaranty (the “Affiliation Agreement
Guaranty”) in connection with the Tender Offer and entry into the Affiliation Agreement, pursuant to which Total S.A. unconditionally
guarantees the full and prompt payment of Total S.A.’s, Total’s and each Total S.A. controlled company’s payment
obligations under the Affiliation Agreement and the full and prompt performance of their respective representations, warranties,
covenants, duties and agreements contained in the Affiliation Agreement.
Research & Collaboration Agreement
In connection with the Tender Offer, we and Total entered into
a Research & Collaboration Agreement (the “R&D Agreement”) that established a framework under which the parties
could engage in long-term research and development collaboration (the “R&D Collaboration”). The R&D Collaboration
encompassed a number of different projects (“R&D Projects”), with a focus on advancing technology in the area of
photovoltaics. The primary purpose of the R&D Collaboration was to: (i) maintain and expand our technology position in the
crystalline silicon domain; (ii) ensure our industrial competitiveness; and (iii) guarantee a sustainable position for both us
and Total to be best-in-class industry players.
The R&D Agreement contemplated a joint committee (the “R&D
Strategic Committee”) that identified, planned and managed the R&D Collaboration. Due to the impracticability of anticipating
and establishing all of the legal and business terms that would be applicable to the R&D Collaboration or to each R&D Project,
the R&D Agreement set forth broad principles applicable to the parties’ potential R&D Collaboration, and the R&D
Collaboration Committee established the particular terms governing each particular R&D Project consistent with the terms set
forth in the R&D Agreement. In fiscal 2016, Total contributed $0.6 million to us under the R&D Agreement.
Registration Rights Agreement
In connection with the Tender Offer, we and Total entered into
a customary registration rights agreement (the “Registration Rights Agreement”) related to Total’s ownership
of shares of our common stock. The Registration Rights Agreement provides Total with shelf registration rights, subject to certain
customary exceptions, and up to two demand registration rights in any 12-month
period, also subject to certain customary exceptions.
Total also has certain rights to participate in any registrations of securities that we initiate. We will generally pay all costs
and expenses we incur and that Total incurs in connection with any shelf or demand registration (other than selling expenses incurred
by Total). We and Total have also agreed to certain indemnification rights under the agreement. The Registration Rights Agreement
terminates on the first date on which: (i) the shares held by Total constitute less than 5% of our then-outstanding common stock;
(ii) all of our securities held by Total may be immediately resold pursuant to Rule 144 promulgated under the Exchange Act during
any 90-day period without any volume limitation or other restriction; or (iii) we cease to be subject to the reporting requirements
of the Exchange Act.
The Registration Rights Agreement was amended on May 29, 2013,
in connection with the issuance of our 0.75% Senior Convertible Debentures due 2018, to provide that convertible debentures and
our common stock underlying such debentures are “registrable securities” within the meaning of the Registration Rights
Agreement.
Stockholder Rights Plan
On April 28, 2011, before the execution of the Tender Offer
Agreement, we entered into an amendment (the “Rights Agreement Amendment”) to the Rights Agreement, dated August 12,
2008, by and between us and Computershare Trust Company, N.A., as Rights Agent (the “Rights Agreement”), in order to,
among other things, render the rights therein inapplicable to each of: (i) the approval, execution or delivery of the Tender Offer
Agreement; (ii) the commencement or consummation of the Tender Offer; (iii) the consummation of the other transactions contemplated
by the Tender Offer Agreement and the related agreements; and (iv) the public or other announcement of any of the foregoing.
On June 14, 2011, we entered into a second amendment to the
Rights Agreement (the “Second Rights Agreement Amendment”), in order to, among other things, exempt Total, Total S.A.
and certain of their affiliates and certain members of a group of which they may become members from the definition of “Acquiring
Person” thereunder, such that the rights issuable pursuant to the Rights Agreement will not become issuable in connection
with the completion of the Tender Offer.
By-laws Amendment
On June 14, 2011, our Board approved amendments of our By-laws
as required under the Affiliation Agreement. The amendments: (i) allow any member of the Total Group to call a meeting of stockholders
for the sole purpose of considering and voting on a proposal to effect a Total Merger or a Transferee Merger (as defined in the
Affiliation Agreement); (ii) provide that the number of directors of our Board shall be determined from time to time by resolution
adopted by the affirmative vote of a majority of our entire Board at any regular or special meeting; and (iii) require, before
the termination of the Affiliation Agreement, the approval of a majority of our independent directors to amend our By-laws so long
as Total, together with the controlled subsidiaries of Total S.A., owns at least 30% of our voting securities as well as require,
before the termination of the Affiliation Agreement, Total’s written consent during the Total Stockholder Approval Period
to amend the By-laws. In addition, in November 2011, our By-laws were amended to remove restrictions prohibiting stockholder consents
in writing.
The Credit Support Agreement, Amended and Restated Credit Support
Agreement, Affiliation Agreement, Affiliation Agreement Guaranty, Research and Collaboration Agreement, Registration Rights Agreement,
Rights Agreement Amendment, Second Rights Agreement Amendment and By-Law amendments, and amendments thereto, as described above
are attached to, and more fully described in, our Form 8-Ks as filed with the SEC on May 2, 2011, June 7, 2011, June 15, 2011 and
December 23, 2011, our Solicitation/Recommendation Statement on Form 14D-9 filed with the SEC on May 3, 2011, and our Form 10-Q
as filed with the SEC on November 2, 2012.
Upfront Warrant
On February 28, 2012, in consideration for Total S.A.’s
agreement to enter into a Liquidity Support Agreement and for Total S.A.’s commitments set forth in such agreement, we issued
to Total a warrant (the “Upfront Warrant”) that is exercisable to purchase 9,531,677 shares of our common stock at
an exercise price of $7.8685 per share, subject to adjustment for customary anti-dilution and other events. The Upfront Warrant
is exercisable at any time for seven years after its issuance, provided that, so long as at least $25 million of our existing convertible
debt remains outstanding, such exercise will not cause “any person,” including Total S.A., to, directly or indirectly,
including through one or more wholly-owned subsidiaries, become the “beneficial owner” (as such terms are defined in
Rule 13d-3 and Rule 13d-5 under the Securities and Exchange Act of 1934, as amended), of more than 74.99% of the voting power of
our common stock at such time, because “any person” becoming such “beneficial owner” would trigger the
repurchase or conversion of our existing convertible debt.
Sale of 0.75% Debentures Due 2018
In May 2013, we issued $300 million in aggregate principal amount
of our 0.75% Senior Convertible Debentures due 2018 (the “2018 Debentures”) in a private offering. $200 million in
aggregate principal amount of the 2018 Debentures were sold to Total by the initial purchasers of the 2018 Debentures. The 2018
Debentures are convertible into shares of our common stock at any time based on an initial conversion rate of 40.0871 shares of
common stock per $1,000 principal amount of 2018 Debentures (which is equivalent to an initial conversion price of approximately
$24.95 per share of our common stock), subject to adjustment under certain circumstances. The holders of the 2018 Debentures may
require us to repurchase their 2018 Debentures under certain circumstances. The 2018 Debentures are subject to redemption at our
option under certain circumstances.
Sale of 0.875% Debentures Due 2021
In June 2014, we issued $400 million in aggregate principal
amount of our 0.875% Senior Convertible Debentures due 2021 (the “2021 Debentures”) in a private offering. $250 million
in aggregate principal amount of the 2021 Debentures were sold to Total by the initial purchasers of the 2021 Debentures. The 2021
Debentures are convertible into shares of our common stock at any time based on an initial conversion rate of 20.5071 shares of
common stock per $1,000 principal amount of 2021 Debentures (which is equivalent to an initial conversion price of approximately
$48.76 per share of our common stock), subject to adjustment under certain circumstances. The holders of the 2021 Debentures may
require us to repurchase their 2021 Debentures under certain circumstances. The 2021 Debentures are subject to redemption at our
option under certain circumstances.
Sale of 4.00% Debentures Due 2023
In December 2015, we issued $425 million in aggregate principal
amount of our 4.00% Senior Convertible Debentures due 2023 (the “2023 Debentures”) in a private offering. $100 million
in aggregate principal amount of the 2023 Debentures were sold to Total by the initial purchasers of the 2023 Debentures. The 2023
Debentures are convertible into shares of our common stock at any time based on an initial conversion rate of 32.7568 shares of
common stock per $1,000 principal amount of 2023 Debentures (which is equivalent to an initial conversion price of approximately
$30.53 per share of our common stock), subject to adjustment under certain circumstances. The holders of the 2023 Debentures may
require us to repurchase their 2023 Debentures under certain circumstances. The 2023 Debentures are subject to redemption at our
option under certain circumstances.
Project Co-Development
In the ordinary course of our business, from time to time we
enter into agreements with Total or its affiliates in connection with certain of our international project co-development initiatives,
whereby SunPower and Total split the associated costs evenly. In fiscal 2016, such total project co-development costs were approximately
$3.4 million.
During fiscal 2016, in connection with a co-development project
between us and Total, we made a $7.0 million payment to Total in exchange for Total’s ownership interest in the co-development
project.
We have entered into an agreement to sell to Total one of our
international power plant assets, with such sale expected to close in Q1 2017. We expect to receive from Total approximately $0.4
million for our 50% equity stake in the asset. In addition, in connection with the project, we anticipate receiving from the project
company to be wholly-owned by Total (i) a development fee of approximately $1.8 million and (ii) a purchase price of approximately
$24.0 million for solar modules being sold for use on the project.
EPC, O&M Services and Components Agreements
In the ordinary course of our business, from time to time we
enter into various engineering, procurement and construction (“EPC”) services, operations and maintenance services
(“O&M services”) and component sales agreements relating to solar projects, including EPC services, O&M services
and component sales agreements relating to projects owned or partially owned by Total or its affiliates. On November 9, 2016, we
and Total executed a four-year, up to 200-MW supply agreement to support the solarization of Total facilities around the world.
This agreement, which was amended and restated in March 2017 with changes not material to the Company, covers the supply of 150
MW of E-series panels with an option to purchase up to another 50 MW of P-Series panels, and includes a Q1 2017 pre-payment in
the amount of approximately $90 million. In fiscal 2016, we received an aggregate of approximately $64.7 million from Total and
its affiliates under EPC services, O&M services and component sales agreements in respect of projects in which Total has a
direct or indirect material interest.
AUDIT COMMITTEE REPORT
The Audit Committee of our Board
of Directors serves as the representative of the Board of Directors with respect to its oversight of:
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our accounting and financial reporting processes and the audit of our financial statements;
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the integrity of our financial statements;
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our compliance with legal and regulatory requirements and efficacy of and compliance with our corporate
policies;
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the independent registered public accounting firm’s appointment, qualifications and independence;
and
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the performance of our internal audit function.
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The Audit Committee also reviews
the performance of our independent registered public accounting firm, Ernst & Young LLP, in the annual audit of financial statements
and in assignments unrelated to the audit, and reviews the independent registered public accounting firm’s fees.
The Audit Committee provides the
Board such information and materials as it may deem necessary to make the Board aware of financial matters requiring the attention
of the Board. The Audit Committee reviews our financial disclosures, and meets privately, outside the presence of our management,
with our independent registered public accounting firm. In fulfilling its oversight responsibilities, the Audit Committee reviewed
and discussed the audited financial statements in our Annual Report on Form 10-K for our fiscal year ended January 1, 2017 with
management, including a discussion of the quality and substance of the accounting principles, the reasonableness of significant
judgments made in connection with the audited financial statements, and the clarity of disclosures in the financial statements.
The Audit Committee reports on these meetings to our Board of Directors.
Our management has primary responsibility
for preparing our financial statements and for our financial reporting process. In addition, our management is responsible for
establishing and maintaining adequate internal control over financial reporting. Our independent registered public accounting firm,
Ernst & Young LLP, is responsible for expressing an opinion on the conformity of our financial statements to generally accepted
accounting principles, and on the effectiveness of our internal control over financial reporting.
The Audit Committee reports as follows:
(1) The Audit Committee
has reviewed and discussed the audited financial statements for fiscal year 2016 with our management.
(2) The Audit Committee
has discussed with Ernst & Young LLP, our independent registered public accounting firm, the matters required to be discussed
by Auditing Standard No. 1301, “Communications with Audit Committees” issued by the Public Company Accounting Oversight
Board.
(3) The Audit Committee
has received the written disclosures and the letter from Ernst & Young LLP required by the applicable requirements of the Public
Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee regarding
independence, and has discussed with Ernst & Young LLP its independence, including whether Ernst & Young LLP’s provision
of non-audit services to us is compatible with its independence.
The Audit Committee has adopted a
policy that requires advance approval of all audit, audit-related, tax services, and other services performed by the independent
registered public accounting firm. The policy provides for pre-approval by the Audit Committee (or its Chair pursuant to delegated
authority) of specifically defined audit and non-audit services. Unless the specific service has been previously pre-approved with
respect to that fiscal year, the Audit Committee (or its Chair pursuant to delegated authority) must approve the specific service
before the independent registered public accounting firm is engaged to perform such services for us.
Based on the review and discussion
referred to in items (1) through (3) above, the Audit Committee recommended to our Board of Directors, and the Board approved,
the inclusion of our audited financial statements in our Annual Report on Form 10-K for the fiscal year ended January 1, 2017,
as filed with the SEC.
The foregoing report was submitted
by the Audit Committee of the Board and shall not be deemed to be “soliciting material” or to be “filed”
with the SEC or subject to Regulation 14A promulgated by the SEC or Section 18 of the Exchange Act, and shall not be deemed incorporated
by reference into any prior or subsequent filing by us under the Securities Act of 1933 or the Exchange Act.
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AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
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Thomas R. McDaniel, Chair
Catherine A. Lesjak
Pat Wood III
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DIRECTOR COMPENSATION
The following table sets forth a
summary of the compensation we paid to our non-employee directors for fiscal 2016. The table does not include Mr. Werner, who did
not receive separate compensation for his service on the Board.
2016 Director Compensation Table
Name
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Fees Earned or
Paid in Cash
($)(1)
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Stock Awards
($)(2)(4)
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Total
($)
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Total-designated members of the Board(3)
|
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—
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—
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—
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Catherine Lesjak
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100,000
|
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300,032
|
|
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400,032
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Thomas R. McDaniel
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100,000
|
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300,032
|
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400,032
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Pat Wood III(4)
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125,000
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300,032
|
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425,032
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(1)
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The amounts reported in this column represent the aggregate cash retainers received by the non-employee
directors for fiscal 2016, but do not include amounts reimbursed to the non-employee directors for expenses incurred in connection
with attending Board and committee meetings.
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(2)
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The amounts reported in this column represent the aggregate grant date fair value computed in
accordance with Financial Accounting Standards Board (or FASB) ASC Topic 718 for restricted stock units granted to our
non-employee directors in fiscal 2016, as further described below. Each non-employee director received the following grants
of restricted stock units on the following dates with the following grant date fair values (please note that some amounts
reported may not add up exactly due to rounding on an award-by-award basis):
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Non-Employee Director
|
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Grant Date
|
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Restricted Stock
Units (#)
|
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Grant Date Fair
Value ($)
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Catherine Lesjak
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2/11/2016
|
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3,681
|
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$75,019
|
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5/11/2016
|
|
4,323
|
|
$75,004
|
|
|
8/11/2016
|
|
7,056
|
|
$75,005
|
|
|
11/11/2016
|
|
11,539
|
|
$75,004
|
|
|
|
|
|
|
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Thomas R. McDaniel
|
|
2/11/2016
|
|
3,681
|
|
$75,019
|
|
|
5/11/2016
|
|
4,323
|
|
$75,004
|
|
|
8/11/2016
|
|
7,056
|
|
$75,005
|
|
|
11/11/2016
|
|
11,539
|
|
$75,004
|
|
|
|
|
|
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Pat Wood III
|
|
2/11/2016
|
|
3,681
|
|
$75,019
|
|
|
5/11/2016
|
|
4,323
|
|
$75,004
|
|
|
8/11/2016
|
|
7,056
|
|
$75,005
|
|
|
11/11/2016
|
|
11,539
|
|
$75,004
|
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(3)
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Ms. Kristoffersen and Messrs. Lauré, Paszkiewicz and Wolffsheim, joined our Board on September
15, 2016, March 9, 2016, June 22, 2016 and September 15, 2016, respectively. Messrs. Arnaud Chaperon, Jean Marc Otero del Val,
Bernard Clément, Denis Giorno and Humbert de Wendel resigned from our Board on September 15, 2016, March 8, 2016, January
19, 2017, June 21, 2016 and September 15, 2016, respectively.
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(4)
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As of January 1, 2017, Mr. Wood held options for 6,000 shares. No other non-employee directors
held stock awards or stock options as of January 1, 2017.
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2016 Director Compensation Program
Our outside director compensation policy provides for
the compensation set forth below for our non-employee directors, other than the Total-nominated directors:
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an annual fee of $400,000 ($100,000 quarterly) for our
non-employee directors (other than the Chairman of the Board) for service on our Board and on Board committees;
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●
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if our Chairman is an independent director, an annual
fee of $450,000 ($112,500 quarterly) to our Chairman of the Board for service on our Board and on Board committees; and
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an additional annual fee of $25,000 ($6,250 quarterly)
to the lead independent director.
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Our policy provides that these annual
fees are prorated on a quarterly basis for any director that joins the Board during the year. The $25,000 additional fee payable
to the lead independent director is paid in cash. Any fees payable to the Chairman of the Board are paid in the form of restricted
stock units. The other fees are paid on a quarterly basis, 25% in cash on or about the date of the quarterly Board meeting and
75% in the form of fully-vested restricted stock units on the 11th day in the second month of each quarter (or on the next trading
day if such day is not a trading day). Any fractional shares resulting from this calculation are rounded up to a full share. The
restricted stock units are settled in shares of our common stock within seven days of the date of grant. Because Mr. Werner is
our President and Chief Executive Officer, he is not separately compensated for his service as Chairman of the Board. Similarly,
because each of our Total-nominated directors do not qualify as independent directors under our director compensation policy, such
individuals receive no director compensation.
Stock Ownership Guidelines
In 2015, we adopted stock ownership
guidelines for our Chief Executive Officer, certain executive officers, and non-employee directors. Under the guidelines and subject
to certain exceptions, non-employee directors are expected to own shares of our common stock that have a value equal to five times
the annual cash retainer they receive for serving on our Board, with ownership measured at the end of each calendar year. Shares
may be owned directly by the individual, owned by the individual’s spouse, or held in trust for the benefit of the individual’s
family. Each non-employee director is expected to maintain ownership at or above the threshold applicable to them beginning the
later of December 31, 2020 or five years after first becoming subject to the guidelines.
PROPOSAL TWO
ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION
As required under the Dodd-Frank
Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, and Section 14A of the Exchange Act, we are asking our stockholders
to again vote to approve, on an advisory (non-binding) basis, the compensation of our named executive officers as disclosed in
this proxy statement in accordance with the SEC’s rules.
As described in detail under the
headings “
Compensation Discussion and Analysis
” and “
Executive Compensation
,” we have adopted
an executive compensation philosophy designed to deliver competitive total compensation to our executive officers upon the achievement
of financial and strategic performance objectives. In order to implement that philosophy, the Compensation Committee has established
a disciplined process for adopting executive compensation programs and individual executive officer pay actions that includes the
analysis of competitive market data, a review of each executive officer’s role, performance assessments and consultation
with the Compensation Committee’s independent compensation consultant. Please read the “
Compensation Discussion
and Analysis
” and “
Executive Compensation
” sections for additional details about our executive compensation
programs, including information about the fiscal 2016 compensation of our named executive officers.
2016 Compensation Features
.
Our compensation programs are intended to align our executive officers’ interests with those of our stockholders by rewarding
performance that meets or exceeds the goals that the Compensation Committee establishes with the objective of increasing stockholder
value. The Compensation Committee annually reviews the compensation programs for our named executive officers to ensure they achieve
the desired goals of aligning our executive compensation structure with our stockholders’ interests and current market practices.
Among the program features incorporated by the Compensation Committee in fiscal 2016 to implement the executive compensation philosophy
stated above are the following:
|
●
|
Revenue, EBITDA
1
, and cash metrics and corresponding performance targets, along with
corporate milestone performance targets and individual modifiers assigned based on individual performance, determined the actual
payouts under our performance-based cash bonus programs (specifically, the 2016 Annual Bonus Program and the Executive Semi-Annual
Incentive Bonus Plan) for our named executive officers.
|
|
●
|
Long-term incentives in the form of time- and performance-based restricted stock units comprised
a large portion of each named executive officer’s compensation and are linked to the long-term performance of our stock.
Restricted stock units generally vest over four years, and performance-based restricted stock units are earned only after the achievement
of corporate performance targets and also generally vest over a four-year period.
|
|
●
|
Earning performance-based restricted stock units depends on the achievement of performance targets
corresponding to our revenue and EBITDA metrics, as well as other individualized metrics (in the case of certain of our executive
officers).
|
|
●
|
Individual performance was also measured for each half of the fiscal year based on each named executive
officer’s achievement of his or her personal Key Initiatives, which support our corporate, strategic, and operational milestones,
as well as other individual performance factors, as evaluated by our Chief Executive Officer (or, in the case of our Chief Executive
Officer, by the Board) in connection with the assignment of an individual modifier to each named executive officer.
|
|
●
|
Our change of control severance agreements do not entitle our named executive officers to payment
without termination of employment following a change of control (a “double trigger”).
|
Our financial and operational performance
was the key factor in the compensation decisions and outcomes for fiscal 2016, as further described in “
Compensation Discussion
and Analysis
” and “
Executive Compensation
.” One of the core tenets of our executive compensation philosophy
is our emphasis on performance pay. As highlighted in the Compensation Components chart in “
Compensation Discussion and
Analysis
,” in fiscal 2016, a large portion of our named executive officers’ target compensation (93% for our Chief
Executive Officer and averaging 78% for our other named executive officers) consisted of annual and semi-annual incentive bonus
programs and long-term equity incentives.
The Compensation Committee believes
that our executive compensation programs, executive officer pay levels, and individual pay actions approved for our executive officers,
including our named executive officers, are directly aligned with our executive compensation philosophy and fully support its goals.
Performance with respect to our revenue metric target exceeded
|
1
|
EBITDA is a non-GAAP financial measure defined as net income before income taxes, interest income, depreciation and
amortization. See
“Use of Non-GAAP Financial Measures”
below.
|
the
minimum trigger but fell short of target performance levels in fiscal 2016, and performance with respect to our EBITDA metric
target fell short of the minimum trigger, which, combined, resulted in performance-based restricted stock awards being earned
at approximately 28% of the target level. Our corporate performance in fiscal 2016 also resulted in aggregate cash bonus awards
under our performance-based cash bonus programs below the target level. We are asking our stockholders to indicate their support
for our named executive officer compensation as described in this proxy statement. This proposal, commonly known as a “say-on-pay”
proposal, gives our stockholders the opportunity to express their views on our named executive officers’ compensation. This
vote is not intended to address any specific compensation item, but rather the overall compensation of our named executive officers
and the philosophy, policies and practices described in this proxy statement. Accordingly, the Board recommends that our stockholders
vote “FOR” the following resolution at the Annual Meeting:
“RESOLVED, that, on an advisory basis,
the compensation of SunPower’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the
Compensation Discussion and Analysis, compensation tables and related narratives and descriptions in SunPower’s proxy statement
for the Annual Meeting, is hereby APPROVED.”
Vote Required
The non-binding advisory vote on
named executive officer compensation requires the affirmative vote of the holders of a majority of our stock having voting power
and in attendance or represented by proxy at the Annual Meeting. “Broker non-votes” have no effect and will not be
counted towards the vote total for this proposal. Abstentions will have the effect of votes against this proposal.
Although the say-on-pay vote is advisory,
and therefore not binding on us, the Compensation Committee or our Board, our Board and our Compensation Committee value the opinions
of our stockholders. To the extent there is any significant vote against our named executive officers’ compensation as disclosed
in this proxy statement, we expect to consider our stockholders’ concerns and the Compensation Committee expects to evaluate
whether any actions are necessary to address those concerns.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS, AS DISCLOSED
IN THIS PROXY STATEMENT PURSUANT TO THE COMPENSATION DISCLOSURE RULES OF THE SEC ON A NON-BINDING, ADVISORY BASIS.
PROPOSAL THREE
ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY
VOTES ON NAMED EXECUTIVE OFFICER COMPENSATION
The Dodd-Frank Act and Section 14A
of the Exchange Act also requires us to ask our stockholders to vote, on an advisory (non-binding) basis, at the Annual Meeting
on how frequently we should seek future advisory votes on the compensation of our named executive officers. In voting on this proposal,
stockholders may indicate whether they would prefer an advisory vote on named executive officer compensation every one, two, or
three years.
While we will continue to monitor
developments in this area, our Board believes that an advisory vote to approve executive compensation every year is appropriate.
This will enable our stockholders to vote, on an advisory basis, on the most recent executive compensation information that is
presented in our proxy statement, leading to a more meaningful and coherent communication between us and our stockholders on the
executive compensation of our named executive officers.
Based on the factors discussed, our
Board recommends that future advisory votes to approve executive compensation occur every year until the next advisory vote on
the frequency of advisory votes to approve executive compensation. Stockholders are not being asked to approve or disapprove our
Board’s recommendation, but rather to indicate their choice among the following frequency options: one year, two years or
three years, or to abstain from voting.
Vote Required
The option of one year, two years
or three years that receives the highest number of votes cast by holders of our stock having voting power and in attendance or
represented by proxy at the Annual Meeting will be the frequency of future advisory votes on executive compensation that has been
recommended by our stockholders. Neither “broker non-votes” nor abstentions will be counted towards the vote total
for this proposal.
Although the frequency of say-on-pay
vote is advisory, and therefore not binding on us, the Compensation Committee or our Board, our Board and our Compensation Committee
value the opinions of our stockholders. To the extent there is any significant vote against our proposed frequency, we expect to
consider our stockholders’ concerns and the Compensation Committee expects to evaluate whether any actions are necessary
to address those concerns.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR EVERY YEAR AS THE FREQUENCY WITH WHICH OUR STOCKHOLDERS WILL BE PROVIDED FUTURE ADVISORY VOTES ON NAMED EXECUTIVE OFFICER
COMPENSATION PURSUANT TO THE COMPENSATION DISCLOSURE RULES OF THE SEC ON A NON-BINDING, ADVISORY BASIS.
EXECUTIVE OFFICERS
Biographical
information for our executive officers, other than Mr. Werner, is listed below. Biographical information for Mr. Werner, who is
both a director and an executive officer of the Company, can be found in the section entitled “
Proposal One—Re-election
of Class III Directors
”.
Name
|
|
|
Age
|
|
Position
|
|
Charles
D. Boynton
|
|
49
|
|
Executive
Vice President and Chief Financial Officer, and Principal Accounting Officer
|
Kenneth
J. Mahaffey
|
|
48
|
|
Executive
Vice President, General Counsel and Corporate Secretary
|
Bill
Mulligan
|
|
56
|
|
Executive
Vice President, Global Operations
|
Douglas
J. Richards
|
|
58
|
|
Executive
Vice President, Administration
|
Mr.
Charles D. Boynton has served as our Executive Vice President, Chief Financial Officer, and Principal Accounting Officer since
October 2016. From March 2012 to October 2016, Mr. Boynton served as our Executive Vice President and Chief Financial Officer.
In March 2012, Mr. Boynton also served as our Acting Financial Officer. From June 2010 to March 2012, he served as our Vice President,
Finance and Corporate Development, where he drove strategic investments, joint ventures, mergers and acquisitions, field finance
and finance, planning and analysis. Before joining SunPower in June 2010, Mr. Boynton was the Chief Financial Officer for ServiceSource,
LLC from April 2008 to June 2010. From March 2004 to April 2008 he served as the Chief Financial Officer at Intelliden. Earlier
in his career, Mr. Boynton held key financial positions at Commerce One, Inc., Kraft Foods, Inc. and Grant Thornton, LLP. He is
a member of the board of trustees of the San Jose Technology Museum of Innovation and has served as Chairman and Chief Executive
Officer of 8Point3 Energy Partners LP since June 2015. Mr. Boynton was a certified public accountant, State of Illinois, and a
Member FEI, Silicon Valley Chapter. Mr. Boynton earned his master’s degree in business administration at Northwestern University
and his Bachelor of Science degree in business from Indiana University.
Mr.
Kenneth J. Mahaffey has served as our Executive Vice President, General Counsel and Corporate Secretary since November 2016. Mr.
Mahaffey previously served as our Vice President, General Counsel, Global Business Units from January 2007 to October 2016. From
September 2006 to January 2007, he served as Associate General Counsel of PowerLight Corporation, a solar system integration company
that we acquired in January 2007 and subsequently renamed SunPower Corporation, Systems. Before PowerLight, Mr. Mahaffey was in
private practice from 1995 to 2006. Mr. Mahaffey has a Bachelor of Arts degree from University of California, San Diego, and a
Juris Doctor degree from McGeorge School of Law, University of the Pacific.
Dr.
Bill Mulligan has served as our Executive Vice President, Global Operations since February 2017, responsible for leading our global
operations and worldwide materials sourcing. Dr. Mulligan originally joined SunPower in 1998 and worked for more than 12 years
as Vice President of research and development, where he led the development of our PV cell technology and the world’s highest
efficiency commercial solar panel. He left SunPower in 2010, but returned four years later with our acquisition of SolarBridge,
where he was serving as President and CEO. Most recently he was SunPower’s Vice President Upstream Strategy. Dr. Mulligan
has more than 30 years of solar and microelectronics industry experience, and prior to SunPower served in various engineering
and management positions at JX Crystals, Inc., the National Renewable Energy Laboratory, AstroPower, and Fairchild/ National Semiconductor.
Dr. Mulligan received dual undergraduate degrees in chemistry and history from the University of Washington, a master’s
of science in chemical engineering from the University of Michigan and his doctorate in materials science from the Colorado School
of Mines. He holds 10 patents and is the author of more than 30 publications related to solar energy.
Mr.
Douglas J. Richards has served as our Executive Vice President, Administration since November 2011. From April 2010 to October
2011, Mr. Richards served as our Executive Vice President, Human Resources and Corporate Services. From September 2007 to March
2010, Mr. Richards served as our Vice President, Human Resources and Corporate Services. From 2006 to 2007, Mr. Richards was Vice
President of Human Resources and Administration for SelectBuild, a construction services company and a wholly-owned subsidiary
of BMHC, and from 2000 to 2006, Mr. Richards was Senior Vice President of Human Resources and Administration for BlueArc, a provider
of high performance unified network storage systems to enterprise markets. Before BlueArc, Mr. Richards spent 10 years at Compaq
Computer Corporation and five years at Apple Computer, Inc. in various management positions. Mr. Richards graduated from California
State University, Chico, with a Bachelor of Arts degree in public administration.
COMPENSATION DISCUSSION AND ANALYSIS
This
Compensation Discussion and Analysis provides a detailed review and analysis of our compensation policies and programs that applied
to our named executive officers during the fiscal year ended January 1, 2017. Our named executive officers, as set forth in the
following table, were our Chief Executive Officer, our Chief Financial Officer, and the next three most highly- compensated executive
officers serving as of January 1, 2017.
Name
|
|
|
Title
|
|
Thomas
H. Werner
|
|
President
and Chief Executive Officer
|
Charles
D. Boynton
|
|
Executive
Vice President and Chief Financial Officer
|
Howard
J. Wenger (1)
|
|
President,
Business Units
|
Marty
T. Neese (2)
|
|
Chief
Operating Officer
|
Douglas
J. Richards
|
|
Executive
Vice President, Administration
|
(1) Mr. Wenger’s employment terminated
on March 3, 2017.
(2) Mr. Neese’s employment terminated on February 10, 2017.
Executive Summary
Our
compensation programs are intended to align our named executive officers’ interests with those of our stockholders by rewarding
performance that meets or exceeds the goals that the Compensation Committee establishes with the ultimate objective of increasing
stockholder value. We have adopted an executive compensation philosophy designed to deliver competitive total compensation upon
the achievement of financial and strategic performance objectives. The total compensation received by our named executive officers
varies based on corporate and individual performance, as measured against performance goals. Therefore, a significant portion
of each named executive officer’s total pay is tied to Company performance (see the “
2016 Compensation Components
”
chart below).
In
fiscal 2016 we faced significant market challenges, which impacted our margins and prompted us to implement changes to our business
in order to realign our downstream investments, optimize our supply chain, and reduce operating expenses. This impacted our financial
and operational results for fiscal 2016:
|
●
|
We achieved
$2.7 billion in annual revenue and adjusted EBITDA
2
of $163.6 million (a GAAP
net loss of $3.41 per diluted share) in fiscal 2016, lower than our targets for each
measure.
|
|
●
|
We undertook a major restructuring in order to reduce
our costs and rationalize our manufacturing capacity, which included a reduction in our workforce and closure of Fab 2, and scaled
back our power plants approach and realigned our development business to focus on core markets.
|
|
●
|
We completed construction of our 128 MW Henrietta project
in California, the 125 MW Boulder Solar project in Nevada, and our 27 MW Nanao project in Japan, and ended the year with a more
than 2.5 GW pipeline in Latin America.
|
|
2
|
To supplement its consolidated financial results presented
in accordance with U.S. generally accepted accounting principles (GAAP), the Company uses non-GAAP measures that are adjusted
for certain items from the most directly comparable GAAP measures, as described below in the section entitled
“Use of
Non-GAAP Financial Measures”
. The specific non-GAAP measures used are revenue and adjusted earnings before interest,
taxes, depreciation and amortization (Adjusted EBITDA). These non- GAAP measures are not prepared in accordance with GAAP or intended
to be a replacement for GAAP financial data; the non-GAAP measures should be reviewed together with the GAAP measures and are
not intended to serve as a substitute for results under GAAP, and may be different from non-GAAP measures used by other companies.
Non-GAAP revenue includes adjustments relating to 8point3, utility and power plant projects, the sale of operating lease assets,
and sale-leaseback transactions, each as described below in
“Use of Non-GAAP Financial Measures”
. In addition
to the same adjustments as non-GAAP revenue, Adjusted EBITDA includes adjustments relating to stock-based compensation expense,
amortization of intangible assets, non- cash interest expense, goodwill impairment, restructuring expense, arbitration ruling,
IPO-related costs, cash interest expense (net of interest income), provision for (benefit from) income taxes, depreciation, and
other items, each as described below in
“Use of Non-GAAP Financial Measures”
.
|
|
●
|
We achieved record performance in our existing manufacturing
facilities, ramped up our new Performance Series (P-Series) panel manufacturing facility in Mexicali, and taking a long view on
capacity, acquired AUO’s portion of our Malaysia joint venture.
|
|
●
|
We saw continuing growth in our North American residential
business, and we signed an exclusive arrangement with AT&T to co-market our high efficiency solar solutions to their customers
and expanded our partnership with Consolidated Edison in New York to include storage solutions.
|
|
●
|
We successfully
launched our SunPower Equinox™ platform, a complete residential equipment solution,
and our SunPower
®
Oasis
®
3.0 platform for utility scale
solar.
|
|
●
|
8point3 Energy Partners, our joint YieldCo with First
Solar, marked its first full year of operations, as it acquired more than 400 MW of projects, increased its annual distribution
by 15 percent and successfully raised more than $100 million from investors.
|
For
fiscal 2016, our financial performance and the difficult market environment we faced were the key factors in the compensation
decisions and outcomes for the year. In fiscal 2016, the highlights of our named executive officer compensation program were as
follows:
|
●
|
Our annual bonus program incorporated financial metrics
that we believe align our compensation practices with our business goals and, correspondingly, align executives’ interests
with stockholders’ interests. Achievement of performance targets related to our revenue and EBITDA, along with achievement
of our corporate milestone performance targets and individual modifiers assigned based on individual performance determined the
actual payouts under our performance-based cash bonus programs (specifically, the 2016 Annual Bonus Program and the Amended and
Restated Executive Semi-Annual Incentive Bonus Plan, which we refer to as our Executive Semi-Annual Plan) for our named executive
officers. Our corporate performance in fiscal 2016 resulted in aggregate cash bonus awards under these programs below the target
level. Performance metrics, thresholds, and targets are further described below in “
Executive Compensation—Non-Equity
Incentive Plan Compensation
.”
|
|
●
|
During fiscal 2016, in response to difficult market
conditions and out of a desire to focus our executives on cash preservation, we replaced the metrics and goals previously approved
in respect of the Executive Semi-Annual Plan with a cash trigger tied to fiscal 2016 ending cash. We did not make payments to
our executive officers under the Executive Semi-Annual Plan after we failed to achieve this target. Performance metrics, thresholds,
and targets are further described below in “
Executive Compensation—Non-Equity Incentive Plan Compensation
.”
|
|
●
|
Long-term incentives in the form of time- and performance-based
restricted stock units comprised more than 50% of each named executive
officer’s compensation and were linked to the long-term performance of our stock. Restricted stock units generally vest
over three or four years. Performance-based restricted stock units were earned only after the achievement of corporate performance
targets and, to the extent earned, generally vest over a three- or four-year period.
|
|
●
|
Certain performance-based restricted stock units granted
in 2016 to each of our named executive officers were only earned if we achieved performance targets set in respect of our revenue
and EBITDA metrics. Performance with respect to the revenue target exceeded the minimum performance level but fell short of the
target performance level, and performance with respect to the profitability metric target fell short of the minimum performance
level, which resulted in 28.7% of these equity awards being earned. Performance metrics, thresholds, and targets are further described
below in “
Executive Compensation—Equity Incentive Plan Compensation
.”
|
|
●
|
Additional performance-based restricted stock units
granted in 2016 to Mr. Werner were only earned if we achieved performance targets set in respect of other specified metrics relating
to other strategic goals. Those awards, as well as performance metrics, and achievement levels with respect to all such awards,
are further described below in “
Executive Compensation—Equity Incentive Plan Compensation
.”
|
|
●
|
In fiscal 2016, we raised the salary of Mr. Boynton,
our Executive Vice President and Chief Financial officer, by 4%. We did not raise the salary of any of our other named executive
officers, including Mr. Werner, our Chief Executive Officer.
|
|
●
|
Effective August 1, 2016, at Mr. Werner’s request
in light of difficult market conditions and to set an example for cost reduction across the organization, Mr. Werner’s salary
was reduced to $1, net of benefit costs, for the remainder
|
of fiscal 2016. Mr. Werner
also communicated his intention to decline any bonus earned for fiscal 2016 pursuant to our performance-based cash bonus programs
(specifically, the 2016 Annual Bonus Program and the Executive Semi- Annual Plan).
|
●
|
Our change of control severance agreements entitle
our named executive officers to severance benefits only in connection with termination of employment following a change of control.
|
In
fiscal 2016, a significant majority of our named executive officers’ target compensation (93% for our Chief Executive Officer,
before taking into account his salary reduction and decline of bonus payout, and averaging 78% for our other named executive officers)
consisted of semi-annual and annual bonus programs and long-term equity incentives.
At
our 2016 Annual Meeting of Stockholders, our stockholders voted to approve, on an advisory basis, the compensation of our named
executive officers, as disclosed in the proxy statement for that meeting. We refer to this vote as our Say-on-Pay vote. Our Compensation
Committee considered the results of the Say-on-Pay vote (which received 98% approval of the votes cast) at its meetings after
the Say-on-Pay vote when it set annual executive compensation. After our Compensation Committee reviewed the stockholders’
approval of the Say-on-Pay vote in 2016, our Compensation Committee decided to maintain the general framework of our fiscal 2015
compensation policies and programs for our named executive officers in fiscal 2016, with certain modifications, as it believed
such programs continued to be in the best interest of our stockholders.
The
following discussion should be read together with the information we present in the compensation tables, the footnotes and narratives
to those tables and the related disclosure appearing in “
Executive Compensation
” below.
General Philosophy and Objectives
In
fiscal 2016, we continued to operate a compensation program designed primarily to reward our named executive officers based on
our financial performance and the achievement of corporate objectives consistent with increasing long-term stockholder value.
Our compensation program continued to be based on the following principal goals:
|
●
|
aligning executive compensation with business objectives
and performance;
|
|
●
|
enabling us to attract, retain, and reward executive
officers who contribute to our long-term success; and
|
|
●
|
providing long-term incentives to executives to work
to maximize stockholder value.
|
In
order to implement our philosophy, the Compensation Committee has a disciplined process for adopting executive compensation programs
and individual executive officer pay actions that includes the analysis of competitive market data, a review of each executive
officer’s role, performance assessments, and consultation with the Compensation Committee’s independent compensation
consultant, as described below.
The
Compensation Committee believes that the most effective executive compensation program is one that rewards the achievement of
specific corporate and financial goals, with the ultimate objective of increasing stockholder value. In addition, we believe the
mix of base salary, performance-based cash awards, and time-based and performance-based equity awards provides proper incentives
without encouraging excessive risk taking. We believe that the risks arising from our compensation policies and practices for
our employees are not reasonably likely to have a material adverse effect on our company.
Compensation Setting Process
The
Compensation Committee is responsible for managing the compensation of our executive officers, including our named executive officers,
in a manner consistent with our compensation philosophy. In accordance with the “controlled company” exception under
the applicable listing standards of The NASDAQ Stock Market, our Compensation Committee is composed of two independent directors
and two directors designated by our controlling stockholder, Total. We also have a Section 16/162(m) Subcommittee of the Compensation
Committee consisting solely of independent directors available to approve certain compensation matters in accordance with Section
162(m) of the Code and Rule 16b-3 of the Exchange Act. The Compensation Committee establishes our compensation philosophy and
objectives and annually reviews and, as necessary and appropriate, adjusts each named executive officer’s compensation.
Consistent with its philosophy, the Compensation Committee offered our named executive officers total target compensation opportunities
ranging from the 50th percentile to the 75th percentile of our peer group of companies (as further described below) during fiscal
2016. When determining appropriate compensation for the named executive officers, the Compensation Committee considered the advice
of an independent compensation consultant, recommendations from management and internal compensation specialists, practices of
companies within our peer group, our performance, our business plan and individual performance. As part of this process, the compensation
consultant prepared a competitive analysis of our compensation program, and management presented
its recommendations regarding
base salary, time- and performance-based equity awards and performance targets under our 2016 Annual Bonus Program and Executive
Semi-Annual Bonus Plan to the Compensation Committee for its review and consideration. The Compensation Committee accepts, rejects,
or accepts as modified, management’s various recommendations regarding compensation for the named executive officers other
than our Chief Executive Officer. The Compensation Committee also approves, after modification, management’s recommendations
on various performance targets and milestones. The Compensation Committee met without our Chief Executive Officer when reviewing
and establishing his compensation.
Compensation Consultant
and Peer Group
In
fiscal 2016, the Compensation Committee again directly engaged and retained Radford, a compensation consulting firm and a business
unit of Aon Hewitt, to identify and maintain a list of our peer group of companies. The Compensation Committee selected Radford
on the basis of its experience and familiarity with the technology industry. The Compensation Committee established the peer group
used in connection with fiscal 2016 compensation decisions consistent with the Compensation Committee’s belief that the
peer group should closely match our business, and be based on our historical and anticipated growth. In comparison to our peer
group used for purposes of setting fiscal 2015 compensation, our peer group in fiscal 2016 was updated to remove three companies,
Energizer Holdings, Inc., International Rectifier and Roper Industries, Inc. and to add seven companies, Advanced Micro Devices,
Inc., ARRIS Group, Inc., Belden Inc., Lam Research Corporation, Marvell Technology Group Ltd., NVIDIA Corporation and SolarCity
Corporation. The peer group was selected using a mix of the following factors:
|
●
|
Publicly-traded North American semiconductor, semiconductor
equipment, communications equipment and clean technology companies; and
|
|
●
|
Companies with between 50% and 250% of each of our
annual revenues, market value and employee headcount.
|
The
Compensation Committee believes the characteristics of our fiscal 2016 peer group closely match those of our core business. The
companies included in our peer group for purposes of establishing fiscal 2016 compensation are listed below:
●
|
Advanced Micro Devices, Inc.
|
●
|
KLA-Tencor Corporation
|
●
|
Altera Corporation
|
●
|
Lam Research Corporation
|
●
|
Analog Devices, Inc.
|
●
|
Linear Technology Corporation
|
●
|
ARRIS Group, Inc.
|
●
|
Marvell Technology Group Ltd.
|
●
|
AVX Corporation
|
●
|
NVIDIA Corporation
|
●
|
Belden Inc.
|
●
|
ON Semiconductor Corporation
|
●
|
Fairchild Semiconductor International, Inc.
|
●
|
Quanta Services, Inc.
|
●
|
First Solar, Inc.
|
●
|
SolarCity Corporation
|
●
|
FLIR Systems, Inc.
|
●
|
SunEdison, Inc.
|
●
|
Hexcel Corporation
|
●
|
Trimble Navigation Limited
|
●
|
Itron, Inc.
|
●
|
Waters Corporation
|
●
|
JDS Uniphase Corporation
|
●
|
Xilinx, Inc.
|
●
|
Juniper Networks, Inc.
|
|
|
Radford
provided the Compensation Committee with market information on the peer companies, as well as aggregated data on the broader technology
market with respect to base salaries, cash bonus awards as a percentage of base salaries, total cash compensation, equity awards,
and total direct compensation. In fiscal 2016, Radford also advised the Compensation Committee in connection with evaluating our
compensation practices, developing and implementing our executive compensation program and philosophy, establishing total compensation
targets, and setting specific compensation components to reach the determined total compensation targets. We also participated
in the Radford Global Technology Survey. Radford did not provide any services to us other than advising the Compensation Committee
and us, at the direction of the Compensation Committee, on executive compensation issues. The Compensation Committee has considered
and assessed all relevant factors, including, but not limited to, those set forth in Rule 10C-1(b)(4)(i) through (vi) under the
Exchange Act, that could give rise to a potential conflict of interest with respect to the compensation consultant described above.
Based on this review, the Compensation Committee determined that no material conflict of interest has been raised by the work
performed by Radford.
Benchmarking
In
making its compensation decisions for our named executive officers for fiscal 2016, the Compensation Committee benchmarked each
named executive officer’s total compensation to the compensation of individuals in comparative positions at companies in
the peer group based on information that management obtained from public filings, supplemented by data Radford provided from surveys.
In general, the Compensation Committee initially established base salaries at the 50
th
percentile of the peer group
and both performance-based cash bonus awards and long-term time- and performance-based equity awards generally above the 50
th
percentile of the peer group. In establishing incentive opportunities, the Compensation Committee focused on corporate performance
so that if our corporate performance was achieved at target levels, the Compensation Committee expected that our named executive
officers’ total pay would be between the 50
th
percentile of the peer group and the 75
th
percentile
of the peer group. The Compensation Committee viewed benchmarking as just the beginning, and not the end, of its discussion regarding
our named executive officers’ pay opportunities for fiscal 2016, and looked to individual performance, the named executive
officer’s experience in the executive role, and the executive’s scope of responsibility being narrower or broader
than that of comparable positions at our peer group companies to establish final pay opportunities either above or below the initial
benchmarks.
2016 Compensation Components
For
fiscal 2016, the Compensation Committee allocated total compensation among various pay elements consisting of base salary, performance-based
cash bonus awards, time-based equity awards, performance-based equity awards, and perquisites and other compensation. The table
below provides an overview of each element of compensation and is followed by a further discussion and analysis of the specific
decisions that we made for each element for fiscal 2016:
Compensation
Component
|
|
Objective
and Basis
|
|
Form
|
|
Practice
|
Base salary
|
|
Fixed
compensation that is set at a competitive level for each position to reward demonstrated experience and skills.
|
|
Cash
|
|
Competitive
market ranges are generally established at the 50
th
percentile, with consideration for experience and scope
of role relative to comparable positions in one peer group.
|
Performance-based cash bonus
awards
|
|
Semi-annual and annual incentives
that drive our performance and align executives’ interests with stockholders’ interests.
|
|
Cash
|
|
Target
incentives are set as a percentage of base salary and are based on benchmarking from the 50
th
to the 75
th
percentile. Actual payment is calculated based on achievement of corporate and individual goals.
|
Time-based equity awards
|
|
Long-term incentive that aligns
executives’ interests with stockholders’ interests and helps retain executives through long-term vesting periods.
|
|
Restricted stock units
|
|
Target equity awards (time-based
plus performance-based) generally set between the 50
th
percentile and the 75
th
percentile.
|
Performance-based equity awards
|
|
Long-term
incentive that focuses and rewards our performance and aligns executives’ interests with stockholders’ interests
and helps retain executives through long-term vesting periods.
|
|
Performance stock units
|
|
Target
equity awards (time-based plus performance-based) generally set between the 50
th
percentile and the 75
th
percentile. Actual payment is calculated based on achievement of corporate goals.
|
Perquisites and other compensation
|
|
Offered to attract and retain
talent and to maintain competitive compensation packages.
|
|
Various
|
|
Named
executive officers are eligible for certain severance benefits pursuant to their employment agreements and our 2014 Management
Career Transition Plan. We do not provide any special perquisites to our named executive officers. Named executive officers
are eligible to participate in health and welfare benefits and 401(k) matching available to all employees.
|
The
relative proportion of each element for fiscal 2016, as set forth below, was based generally on the Compensation Committee’s
comparison of compensation that we offered our named executive officers against compensation offered by peer group companies to
their named executive officers, the tax and accounting consequences of certain types of equity compensation, and a desire to allocate
a higher proportion of total compensation to performance-based and equity incentive awards.
2016
Compensation Components
Analysis of Fiscal 2016 Compensation Decisions
Base
Salary.
For fiscal 2016, only Mr. Boynton received an increase in base salary to bring his base salary closer to the compensation
paid by companies in our competitive peer group for similar positions. The Compensation Committee chose not to adjust the base
salaries of our other named executive officers after determining the levels were consistent with market practices and reflective
of their roles, skill sets, and performance. In August 2016, we reduced our Chief Executive Officer’s base salary to $1,
net of benefit costs, at his request, in recognition of the difficulties faced by our company in the remainder of 2016 and as
part of our cost cutting measures implemented in our third quarter.
The
table below sets forth the salaries in effect in fiscal 2016 compared with the salaries in effect in fiscal 2015 for each of our
named executive officers:
Name
|
|
2015
Base Salary(1)
|
|
2016
Base Salary(2)
|
|
%
Increase
|
Thomas
H. Werner
|
|
$ 600,000
|
|
$ 347,959(3)
|
|
—
|
Charles
D. Boynton
|
|
$
450,000
|
|
$
470,000
|
|
4.4%
|
Howard
J. Wenger (4)
|
|
$
460,000
|
|
$
460,000
|
|
—
|
Marty
T. Neese (5)
|
|
$
450,000
|
|
$
450,000
|
|
—
|
Douglas
J. Richards
|
|
$
370,000
|
|
$
370,000
|
|
—
|
|
(1)
|
These amounts represent 2015 base salaries after April
1, 2015.
|
|
(2)
|
These amounts represent 2016 base salaries after April
1, 2016.
|
|
(3)
|
Reflects an annualized salary of $600,000, which was reduced
at Mr. Werner’s request as of August 1, 2016 to $1, net of benefit costs, for the remainder of fiscal 2016.
|
|
(4)
|
Mr. Wenger’s employment terminated on March 3, 2017.
|
|
(5)
|
Mr. Neese’s employment terminated on February 10,
2017.
|
Performance-Based
Cash Bonus Awards.
As in the prior fiscal year, we maintained two performance-based cash bonus programs during fiscal
2016 in order to link bonus payments both to corporate financial goals and operational objectives and to individual performance.
The first program was our Annual Executive Bonus Plan, under which we adopted the 2016 Annual Bonus Program. The second program
was our Executive Semi-Annual Incentive Bonus Plan (referenced as our Semi-Annual Bonus Plan).
Because we generally
set base salaries for our executive officers at the 50
th
percentile of the range of salaries for executive officers
in similar positions and with similar responsibilities at comparable companies, we rely on performance-based cash bonus awards
to elevate target total cash compensation to between the 50
th
percentile and the 75
th
percentile. In fiscal
2016, target cash compensation (base salary plus target bonus opportunity) was set between the 50
th
and 75
th
percentile for each named executive officer, except for Mr. Neese, whose target bonus opportunity was set above the 75
th
percentile to achieve the desired total target cash compensation.
In
fiscal 2016, we allocated 75% of each named executive officer’s aggregate annual target cash bonus awards under the 2016
Annual Bonus Program and 25% under the Executive Semi-Annual Bonus Plan, to tie a significant proportion of our named executive
officers’ incentive compensation to our full fiscal year operating and financial results. The table below summarizes the
total target payout levels for each named executive officer in each of fiscal 2015 and fiscal 2016, as well as the target payout
levels under the 2016 Annual Bonus Program and the Executive Semi-Annual Bonus Plan (for fiscal 2016), expressed as a percentage
of annual base salary. For 2016, the Compensation Committee maintained target payout levels under these programs at the same percentage
of annual salary for each of our named executive officers, after it evaluated the market data, individual performance, and the
scope of the named executive officer roles.
Name
|
|
2015
Total Target Payout (including Annual and Quarterly Programs) as Percentage of Annual Salary
|
|
2016
Total Target Payout (including Annual and Semi-Annual Programs) as Percentage of Annual Salary
|
|
2016
Semi-Annual
Bonus Plan Target Payout
as
Percentage of
Annual
Salary
|
|
2016
Annual Bonus Program Target Payout
as
Percentage of
Annual
Salary
|
Thomas H. Werner
|
|
200
|
%
|
|
200
|
%(3)
|
|
50
|
%(3)
|
|
150
|
%(3)
|
Charles D. Boynton
|
|
90
|
%
|
|
90
|
%
|
|
22.5
|
%
|
|
67.5
|
%
|
Howard J. Wenger (1)
|
|
100
|
%
|
|
100
|
%
|
|
25
|
%
|
|
75
|
%
|
Marty T. Neese (2)
|
|
90
|
%
|
|
90
|
%
|
|
22.5
|
%
|
|
67.5
|
%
|
Douglas J. Richards
|
|
80
|
%
|
|
80
|
%
|
|
20
|
%
|
|
60
|
%
|
|
(1)
|
Mr. Wenger’s employment terminated on March 3, 2017.
|
|
(2)
|
Mr. Neese’s employment terminated on February 10,
2017.
|
|
(3)
|
Target percentages are based on Mr. Werner’s salary
as of April 1, 2016, prior to reduction. Mr. Werner informed the Compensation Committee of his intent to decline any bonus otherwise
earned for fiscal 2016, and the Compensation Committee thus used its negative discretion not to award a bonus to Mr. Werner under
the 2016 Annual Bonus Program.
|
Actual
bonus payments for each named executive officer under both the 2016 Annual Bonus Program and the Semi-Annual Bonus Plan are formula-driven,
and the formulas are used to calculate actual bonus payments. See “
Executive Compensation—Non- Equity Incentive
Plan Compensation
” below for more information about these formulas.
In fiscal 2016, we
replaced the pre-tax net income metric (previously used under our 2015 Annual Bonus Program) with an adjusted EBITDA metric, which
we believed to be more reflective of the results of our operations, removed the cash flow metric to simplify and avoid unintended
results, and lowered the minimum payout to 50% (from 80% in fiscal 2015). Our 2016 Annual Bonus Program required the achievement
of corporate targets established in respect of our: annual revenue metric (50% of payment) and EBITDA metric (50% of payment).
Please see “
Executive Compensation—Non-Equity Incentive Plan Compensation
” for information on how we
calculated revenue and EBITDA. The targets were set by the Compensation Committee based on the operating plan approved by our
Board at the beginning of fiscal 2016. The operating plan was based on our history of growth and expectations regarding our future
growth, as well as potential challenges in achieving such growth. The performance targets were established at a level that the
Compensation Committee determined to be challenging for our named executive officers to achieve. In fiscal 2016, we achieved a
57.4% payout factor in respect of the annual revenue target and a 0% payout factor in respect of the annual EBITDA target. Earned
bonus amounts are reflected in the “
2016 Total Non-Equity Incentive Plan Compensation” table below.
Payments
to our named executive officers under our Semi-Annual Bonus Plan required the achievement of corporate targets set in respect
of our semi-annual profitability metric and quarterly corporate milestones, as modified by an individual modifier assigned by
the Chief Executive Officer (or, in the case of our Chief Executive Officer, by the Board of Directors) based on his or her individual
performance. Such individual modifiers are expressed as a percentage, capped at 125%, and are combined with a Company milestone
factor and the level of achievement of our corporate targets, to calculate bonus payments under the plan.
Example
Calculation:
We
incorporate a “management by objective” system throughout our organization to establish performance goals that supplement
our financial goals. Management establishes five-year corporate milestones, and then derives from them annual and quarterly corporate
milestones. Each milestone is reviewed, revised and approved by our Board of Directors, and subsequently the scores are reviewed
and approved by our Compensation Committee. In addition, for fiscal 2016, each named executive officer, other than our Chief Executive
Officer, established quarterly personal Key Initiatives which were approved by the Chief Executive Officer and were in line with
each quarter’s corporate milestones. Quarterly corporate milestones in fiscal 2016 included sensitive business objectives
applicable to our entire company, focusing on confidential cost targets, major customer transactions, new product development,
manufacturing plans, process enhancements, and inventory turns. For fiscal 2016, personal Key Initiative objectives included executing
on confidential cost and revenue targets, achieving liquidity objectives, product development, market expansion, manufacturing
and process efficiencies, among others. The Board determined the Chief Executive Officer’s Key Initiatives, which consisted
solely of the quarterly corporate milestones selected after discussion with the Chief Executive Officer. These corporate milestones
and personal objectives are typically challenging in nature and designed to encourage the individual to achieve success in his
position during the performance period. At the end of the year, the Compensation Committee determines the Chief Executive Officer’s
individual modifier, and the Chief Executive Officer determines the individual modifier for each other named executive officer,
based on achievement of their respective Key Initiatives. As reference points, in fiscal 2014, we achieved an average of 83% of
our corporate milestones and an average of 80% of the personal Key Initiatives; in fiscal 2015, we achieved an average of 74%
of our corporate milestones, and the average individual modifier assigned to our named executive officers was 92%. In fiscal 2016,
we achieved an average of 70.4% of our corporate milestones, and the average individual modifier assigned to our named executive
officers was 80%.
However,
in August 2016, management recommended, in light of our financial situation and to promote management’s focus on cost reduction
and cash preservation, that the Compensation Committee adopt an additional “cash trigger”, based on our ending cash
for fiscal 2016, equal to the amount reported in our consolidated balance sheet as of the fiscal year end for the line item “Cash
and cash equivalents”.
Example
Calculation (With Cash Trigger):
In fiscal 2016, we did not meet the cash trigger, and therefore
no amounts were paid to our executive officers under the Semi-Annual Bonus Plan.
Equity Awards.
Our Compensation Committee believes that long-term company performance is best achieved by an ownership culture that encourages
long-term performance by our executive officers through the use of equity-based awards. Our SunPower Corporation 2015 Omnibus
Incentive Plan, or 2015 Equity Plan, permits the grant of stock options, stock appreciation rights, restricted shares, restricted
stock units, performance shares, and other stock-based awards. Consistent with our goal to attract, retain and reward the best
available talent, and in light of our setting our total direct compensation above the 50
th
percentile of our peer group,
we targeted long-term equity awards generally approximating the 75
th
percentile of our peer group. In fiscal 2016,
our long-term equity awards ranged from below the 50
th
percentile to the 75
th
percentile of our peer group.
Our Chief Executive Officer’s long-term equity awards were between the 50
th
and 75
th
percentile in
order to align more of his at-risk compensation with stockholder returns and to promote long-term retention. Our other named executive
officers’ long-term equity awards were above the 50th percentile if the scope of their responsibilities was significantly
broader than that of executives in similar positions at peer companies.
The
Compensation Committee then allocated long-term equity awards between time-based and performance-based restricted stock units.
We believe that time-based restricted stock units provide a more effective retention tool while performance- based restricted
stock units provide a stronger performance driver. To balance the advantages of both time-based and performance-based awards,
the Compensation Committee decided that annual long-term equity incentive awards granted to our named executive officers other
than the Chief Executive Officer in fiscal 2016 would be made half in the form of performance-based restricted stock units (which
could be earned in amounts between 0% and 150% of the target amount) and half in the form of time-based restricted stock units,
all of which would vest over four years.
The Compensation
Committee decided to grant an additional restricted stock unit award to Mr. Neese in fiscal 2016 in recognition of record fab
performance during the previous fiscal year, to vest annually over two years (subject to Mr. Neese’s continued
employment. The Compensation Committee decided that annual long-term equity incentive awards granted to Mr. Werner in fiscal
2016 would be made 50% in the form of time-based restricted stock units, all of which would vest over three years, and 50% in
the form of performance-based restricted stock units (which could be earned in amounts between 0% and 150% of the target
amount), all of which would vest over three years. In addition to these annual awards, the Compensation Committee decided to
grant an additional 40,000 performance-based restricted stock units (which could be earned in amounts between 0% and 150% of
the target amount) to Mr. Werner, to be earned based on the achievement of performance goals tied to our 2016 Annual Bonus
Program and our Semi-Annual Bonus Plan, all of which would vest on March 31, 2020, as additional incentive for performance,
and as a long-term retention measure. The Compensation Committee also approved a one-time grant to Mr. Werner of an
additional 120,000 restricted stock units, all of which would vest on March 31, 2020, also as a long-term retention
measure.
Awards granted and earned in fiscal 2016 were
as follows:
Name
|
|
Time-Based
Restricted Stock Units
|
|
Performance-Based Restricted Stock Units (Target)
|
|
Performance-Based Restricted Stock Units Earned
|
Thomas H. Werner
|
|
191,600
|
|
|
111,600
|
|
|
29,159
|
|
Charles D. Boynton
|
|
21,700
|
|
|
21,700
|
|
|
6,228
|
|
Howard J. Wenger
|
|
26,700
|
|
|
26,700
|
|
|
7,663
|
|
Marty T. Neese
|
|
31,700
|
|
|
16,700
|
|
|
—(1
|
)
|
Douglas J. Richards
|
|
15,000
|
|
|
15,000
|
|
|
4,305
|
|
|
(1)
|
Mr. Neese’s employment terminated on February 10,
2017, prior to the March 1, 2017 vesting date, and thus no 2016 performance-based RSUs were earned.
|
Performance-based
restricted stock units were used as incentive compensation during fiscal 2016 to align our named executive officers’ compensation
with corporate performance. In connection with our annual review of executive officer compensation, the Compensation Committee
approved performance targets in respect of our: annual revenue metric (50% of the award) and annual EBITDA metric (50% of the
award), and a formula under which actual awards would be calculated after completion of the 2016 fiscal year. See “
Executive
Compensation—Equity Incentive Plan Compensation
” below for more information about these metrics, targets, and
formulas.
These
performance metrics were selected on the basis of the operating plan approved by our Board after considering our history of growth
and expectations regarding our future growth, as well as potential challenges in achieving such growth. The performance targets
were established at a level that the Compensation Committee determined to be challenging for our named executive officers to achieve.
In fiscal 2016, our named executive officers achieved a 57.4% payout factor in respect of the annual
revenue metric target
and a 0% payout factor in respect of the annual EBITDA metric target. The performance-based restricted stock units earned by our
named executive officers began vesting in four equal annual installments, subject to continued service, starting March 1, 2017.
For
fiscal 2016, our Compensation Committee continued to grant time-based restricted stock units that vest in four equal annual installments,
subject to continued service, starting March 1, 2017.
Perquisites
and Other Compensation.
As in prior years, we did not provide any special perquisites to our named executive officers
in fiscal 2016. We provided certain perquisites and other health and welfare and retirement benefits, such as health, vision,
and life insurance coverage and participation in and matching contributions under our 401(k) defined contribution plan, which
benefits are generally available to all employees. For more information about these arrangements and benefits, see footnote four
to the “
2016 Summary Compensation Table
” below.
Pension
Benefits.
None of our named executive officers participate in or have account balances in qualified or non- qualified
defined benefit plans sponsored by us.
Nonqualified
Deferred Compensation.
None of our named executive officers participate in or have account balances in non-qualified defined
contribution plans or other deferred compensation plans maintained by us.
Employment and Severance
Arrangements
Change
in Control Arrangements
. We are party to employment agreements with certain of our executive officers, including our named
executive officers, which provide severance benefits for employment terminations in connection with a change of control. The change
of control severance arrangements generally entitle each named executive officer to certain calculated payments tied to base salary
and bonus targets and accelerated vesting of his outstanding equity awards, but only upon termination by the us without cause
or by the executive for good reason (as those terms are defined in the agreements) in connection with a change of control of the
company (a “double trigger” arrangement). The Compensation Committee believes that these reinforce and encourage the
continued attention and dedication of our named executive officers to their assigned duties without the distraction arising from
the possibility of a change of control, and to enable and encourage our named executive officers to focus their attention on obtaining
the best possible outcome for our stockholders without being influenced by personal concerns regarding the possible impact of
a change of control on their job security and benefits. For more information, see “
Executive Compensation—Employment
Agreements
” and “
Executive Compensation—Potential Payments Upon Termination or Change of Control
.”
Severance
Arrangements
. We also maintain our 2016 Management Career Transition Plan, adopted in August 2015, which generally entitles
each named executive officer to certain calculated payments tied to salary and bonus targets, healthcare benefits, and outplacement
assistance if the individual is terminated without cause. Under his employment agreement, our Chief Executive Officer also receives
limited accelerated vesting of outstanding equity awards if terminated without cause or if he resigns for good reason.
The
Compensation Committee believes that the 2016 Management Career Transition Plan provides benefits that are consistent with industry
practice. We believe that entering into change of control and severance arrangements with certain of our executives has helped
us attract and retain excellent executive talent and that offering standard packages avoids case-by-case negotiations. Without
these provisions, our named executive officers may not have chosen to accept employment with us or remain employed by us. The
severance arrangements also promote stability and continuity in our senior management team. For more information, please see “
Executive
Compensation―Employment Agreements,
” “
Executive Compensation—2016 Management Career Transition
Plan
” and “
Executive Compensation―Potential Payments Upon Termination or Change of Control
”
below.
Section 162(m) Considerations
Section
162(m) of the Code limits the deductions companies may take for compensation paid to a chief executive officer and the next three
most highly compensated executive officers (other than the chief financial officer) to the extent the compensation for any such
individual exceeds $1 million for the taxable year, unless the compensation qualifies as “qualified performance-based compensation”
under Section 162(m) of the Code. Our Compensation Committee considers deductibility as one of a number of factors considered
in determining appropriate levels or methods of compensation. Accordingly, we may award compensation that is not deductible for
federal income tax purposes.
Stock Ownership Guidelines
In
2015, our Board adopted Stock Ownership Guidelines for Executives and Directors. Under these guidelines and subject to certain
exceptions, our Chief Executive Officer is expected to own shares of our stock that have a value equal to five times his annual
salary, with ownership measured at the end of each calendar year. Although Mr. Werner was required to satisfy the stock ownership
guidelines beginning five years after their implementation in 2015, he already owns shares with a value in excess of the guidelines.
Other named executive officers are expected to own shares that have a value equal to their annual salary beginning five years
after such officer first becomes subject to the guidelines. None of our executive officers other than Mr. Werner are currently
subject to the guidelines. Shares may be owned directly by the individual, or owned by the individual’s spouse, or held
in trust for the benefit of the individual’s spouse family.
Other Disclosures
Under
our insider trading policy, our executive officers, directors and employees are prohibited from engaging in short sales of our
securities, establishing margin accounts or otherwise pledging our securities, hedging our securities or buying or selling options,
puts or calls on our securities.
We
do not have a policy regarding adjustment or recovery of awards or payments if the relevant performance goals or measures upon
which they are based are restated or otherwise adjusted so that awards or payments are reduced.
Use of Non-GAAP Financial Measures
Adjustments Based on International Financial
Reporting Standards (IFRS)
Our
non-GAAP results include adjustments to recognize revenue and profit under International Financial Reporting Standards (IFRS)
that are consistent with the adjustments made in connection with our reporting process as part of our status as a consolidated
subsidiary of Total S.A., a foreign public registrant which reports under IFRS. Differences between GAAP and IFRS reflected in
our non-GAAP results are further described below. In these situations, we believe that IFRS enables us to better evaluate our
revenue and profit generation performance, and assists in aligning the perspectives of our management and noncontrolling shareholders
with those of Total S.A., our controlling shareholder.
|
●
|
8point3
. We include adjustments
related to the sales of projects contributed to 8point3 Energy Partners LP (8point3),
a joint YieldCo vehicle we formed with First Solar, Inc. to own, operate and acquire
solar energy generation assets, based on the difference between the fair market value
of the consideration received and the net carrying value of the projects contributed,
of which a portion is deferred in proportion to our retained equity stake in 8point3
and its subsidiaries.
|
|
●
|
Utility and power plant projects
.
We include adjustments related to the revenue recognition of certain utility and power
plant projects based on percentage-of-completion accounting and, when relevant, the allocation
of revenue and margin to our project development efforts at the time of initial project
sale.
|
|
●
|
Sale of operating lease assets
.
We include adjustments related to the revenue recognition on the sale of certain solar
assets subject to an operating lease (or of solar assets that are leased by or intended
to be leased by the third-party purchaser to another party) based on the net proceeds
received from the purchaser.
|
|
●
|
Sale-leaseback transactions
.
We include adjustments related to the revenue recognition on certain sale-leaseback transactions
based on the net proceeds received from the buyer-lessor. Under GAAP, these transactions
are accounted for under the financing method in accordance with real estate accounting
guidance.
|
Other
Non-GAAP Adjustments
|
●
|
Stock-based compensation
.
Stock-based compensation relates primarily to our equity incentive awards, and is a non-
cash expense that is dependent on market forces that are difficult to predict. We believe
that this adjustment for stock-based compensation provides a basis to measure our core
performance, including compared with the performance of other companies, without the
period-to-period variability created by stock-based compensation.
|
|
●
|
Amortization of intangible
assets
. We incur amortization of intangible assets as a result of acquisitions, which
includes patents, purchased technology, project pipeline assets, and in-process research
and development. We believe that it is appropriate to exclude these amortization charges
as they arise from prior acquisitions, are not reflective of ongoing operating results,
and do not contribute to a meaningful evaluation of our past operating performance.
|
|
●
|
Non-cash interest expense
.
We incur non-cash interest expense related to the amortization of items such as original
issuance discounts on our debt. We exclude non-cash interest expense because the expense
does not reflect our financial results in the period incurred.
|
|
●
|
Goodwill impairment
. No
adjustment to non-GAAP financial measures was made for the portion of our goodwill impairment
charge in the third quarter of 2016 derived from our acquisition of our partner’s
interest in our joint venture AUO SunPower Sdn. Bhd. We believe that it is appropriate
to exclude this impairment charge as it arises from prior acquisitions, is not reflective
of ongoing operating results, and does not contribute to a meaningful evaluation of a
company’s past operating performance.
|
|
●
|
Restructuring expense
.
We incur restructuring expenses related to reorganization plans aimed towards realigning
resources consistent with our global strategy and improving our overall operating efficiency
and cost structure. We excluded restructuring charges from non-GAAP financial measures
because they are not considered core operating activities and such costs have historically
occurred infrequently.
|
|
●
|
Arbitration ruling
. We
recorded our best estimate of probable loss related to this case at the time of the initial
ruling and updated the estimate as circumstances warranted in connection with tribunal
rulings and the ultimate settlement of an arbitration between First Philippine Electric
Corporation and First Philippine Solar Corporation against SunPower Philippines Manufacturing,
Ltd. (SPML), our wholly-owned subsidiary. On July 22, 2016, SPML entered into a settlement
with the counterparties and paid a total of $50.5 million in settlement of all claims
between the parties. As this loss is nonrecurring in nature, excluding this data provides
us with a basis to evaluate the Company’s performance, including compared with
the performance of other companies, without similar impacts.
|
|
●
|
IPO-related costs
. Costs
incurred related to the initial public offering of 8point3 included legal, accounting,
advisory, valuation, and other expenses, as well as modifications to or terminations
of certain existing financing structures in preparation for sale to 8point3. As these
costs are non-recurring in nature, excluding this data provides us with a basis to evaluate
the Company’s performance, including compared with the performance of other companies,
without similar impacts.
|
|
●
|
Other
. We combine amounts
previously disclosed under separate captions into “Other” when amounts do
not have a significant impact on the presented fiscal periods. We believe that these
adjustments provide us with a basis to evaluate the Company’s performance, including
compared with the performance of other companies, without similar impacts.
|
|
●
|
Tax effect
. This amount
is used to present each of the adjustments described above on an after-tax basis in connection
with the presentation of non-GAAP net income and non-GAAP net income per diluted share.
The Company’s non- GAAP tax amount is based on estimated cash tax expense and reserves.
We forecast our annual cash tax liability and allocate the tax to each quarter in a manner
generally consistent with its GAAP methodology. This approach is designed to enhance
our ability to understand the impact of the Company’s tax expense on its current
operations, provide improved modeling accuracy, and substantially reduce fluctuations
caused by GAAP to non-GAAP adjustments, which may not reflect actual cash tax expense.
|
|
●
|
Adjusted EBITDA adjustments
.
When calculating Adjusted EBITDA, in addition to adjustments described above, we exclude
the impact during the period of the following items:
|
|
○
|
Cash interest expense, net of interest income
|
|
○
|
Provision for (benefit from) income taxes
|
We use this non-GAAP financial
measure to enable us to evaluate the Company’s performance, including compared with the performance of other companies.
EXECUTIVE COMPENSATION
Compensation
of Named Executive Officers
The
2016 Summary Compensation Table below quantifies the compensation for each of our named executive officers for services rendered
during fiscal 2016 and, as applicable, fiscal 2015 and fiscal 2014. The primary elements of each named executive officer’s
total compensation during fiscal 2016 are reported in the table below and include, among others, base salary, performance-based
cash bonuses under our 2016 Annual Bonus Program and Semi-Annual Bonus Plan, awards of restricted stock units subject to time-based
vesting, and awards of performance-based restricted stock units subject to achievement of financial targets and subsequent time-based
vesting.
2016 Summary Compensation
Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
|
Year
|
|
Salary
($)(3)
|
|
Bonus
($)
|
|
Stock
Awards
($)(4)
|
|
Non-Equity
Incentive Plan
Compensation
($)(5)
|
|
All
Other
Compensation
($)(6)
|
|
Total
($)
|
Thomas H. Werner,
|
|
2016
|
|
347,959
|
(7)
|
|
—
|
|
6,773,488
|
|
—
|
|
24,436
|
|
7,145,883
|
President, Chief
|
|
2015
|
|
600,000
|
|
|
—
|
|
6,751,062
|
|
1,265,722
|
|
28,181
|
|
8,644,966
|
Executive Officer and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chairman of the Board
|
|
2014
|
|
600,000
|
|
|
—
|
|
2,985,000
|
|
1,375,948
|
|
25,666
|
|
4,986,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles D. Boynton
|
|
2016
|
|
465,077
|
|
|
|
|
949,592
|
|
90,097
|
|
30,949
|
|
1,535,715
|
Executive Vice President
|
|
2015
|
|
443,077
|
|
|
—
|
|
1,125,309
|
|
435,231
|
|
30,949
|
|
2,034,566
|
and Chief Financial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officer
|
|
2014
|
|
425,000
|
|
|
—
|
|
1,014,900
|
|
445,951
|
|
29,139
|
|
1,914,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Howard J. Wenger,(1)
|
|
2016
|
|
460,000
|
|
|
|
|
1,168,392
|
|
99,015
|
|
9,493
|
|
1,736,900
|
President, Business Units
|
|
2015
|
|
457,231
|
|
|
—
|
|
1,486,660
|
|
513,147
|
|
9,498
|
|
2,466,536
|
|
|
2014
|
|
450,000
|
|
|
—
|
|
1,014,900
|
|
522,141
|
|
9,348
|
|
1,996,389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marty T. Neese,(2)
|
|
2016
|
|
450,000
|
|
|
—
|
|
1,058,992
|
|
|
|
24,214
|
|
1,533,206
|
Chief Operating Officer
|
|
2015
|
|
450,000
|
|
|
—
|
|
925,160
|
|
434,776
|
|
24,219
|
|
1,834,156
|
|
|
2014
|
|
450,000
|
|
|
—
|
|
1,014,900
|
|
461,665
|
|
22,929
|
|
1,949,464
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Douglas J. Richards,
|
|
2016
|
|
370,000
|
|
|
—
|
|
656,400
|
|
63,714
|
|
22,088
|
|
1,112,202
|
Executive Vice President,
|
|
2015
|
|
367,231
|
|
|
—
|
|
835,605
|
|
328,522
|
|
28,032
|
|
1,559,390
|
Administration
|
|
2014
|
|
357,269
|
|
|
—
|
|
799,980
|
|
335,520
|
|
26,583
|
|
1,183,832
|
|
(1)
|
Mr. Wenger’s employment terminated on March 3,
2017.
|
|
(2)
|
Mr. Neese’s employment terminated on February 10,
2017.
|
|
(3)
|
The amounts reported in this column for fiscal 2016 reflect
each named executive officer’s salary for fiscal 2016 plus payments for paid and unpaid time off, and holidays.
|
|
(4)
|
The amounts reported in the “Stock Awards”
column for fiscal 2016 represent the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 of stock awards
granted during the year (time-based and performance-based restricted stock units), excluding the effect of certain forfeiture
assumptions. For the performance-based restricted stock units reported in this column for fiscal 2016, such amounts are based
on the probable outcome of the relevant performance conditions as of the grant date. Assuming that the highest level of performance
is achieved for these awards, the grant date fair value of the performance-based restricted stock unit awards would be: Mr. Werner,
$3,683,866; Mr. Boynton, $712,194; Mr. Wenger, $876,294; Mr. Neese, $548,094; and Mr. Richards, $492,300. See Note 16 to our consolidated
financial statements in our 2016 Annual Report for details as to the assumptions used to determine the aggregate grant date fair
value of these awards. See also our discussion of stock-based compensation under “
Management’s Discussion and Analysis
of Financial Condition and Results of Operations—Critical Accounting Estimates
” in our 2016 Annual Report.
|
|
(5)
|
The amounts reported in this column for fiscal 2016 reflect
the amounts earned under our 2016 Annual Bonus Program; no amounts were paid under our Semi-Annual Bonus Plan for fiscal 2016
to our named executive officers. Additional information about non-equity incentive plan compensation earned during fiscal 2016
is set forth above in the supplemental “
2016 Total Non- Equity Incentive Plan Compensation
” table in our “
Compensation
Discussion and Analysis
” and in “
Executive Compensation— Non-Equity Incentive Plan Compensation
”
below.
|
|
(6)
|
The amounts reported in this column for fiscal 2016 as
“All Other Compensation” consist of the elements summarized in the table below.
|
Name
|
|
Health
Benefits
($)
|
|
Group
Life Insurance ($)
|
|
401(k)
Match ($)
|
|
Total
($)
|
Thomas H. Werner
|
|
15,654
|
|
832
|
|
7,950
|
|
24,436
|
Charles D. Boynton
|
|
22,167
|
|
832
|
|
7,950
|
|
30,949
|
Howard J. Wenger (1)
|
|
711
|
|
832
|
|
7,950
|
|
9,493
|
Marty T. Neese (2)
|
|
15,433
|
|
832
|
|
7,950
|
|
24,214
|
Douglas J. Richards
|
|
13,454
|
|
684
|
|
7,950
|
|
22,088
|
|
(1)
|
Mr. Wenger’s employment terminated on March 3,
2017.
|
|
(2)
|
Mr. Neese’s employment terminated on February 10,
2017.
|
|
(7)
|
Reflects an annualized salary of $600,000, which was
reduced at Mr. Werner’s request as of August 1, 2016 to $1, net of benefit costs, for the remainder of fiscal 2016.
|
Grants
of Plan-Based Awards
During
fiscal 2016, our named executive officers were granted plan-based restricted stock units and performance stock units under our
SunPower Corporation 2015 Omnibus Incentive Plan, which we refer to as our 2015 Equity Plan. They were also granted cash bonus
awards under our 2016 Annual Bonus Program, but no awards were earned or paid to our named executive officers under the Semi-Annual
Bonus Plan due to non-achievement of the cash trigger for fiscal 2016. The following table sets forth information regarding the
stock awards and cash bonus awards granted to each named executive officer during fiscal 2016.
2016
Grants of Plan-Based Awards Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Possible Payouts
|
|
Estimated Possible Payouts
|
|
All Other Stock
|
|
Grant Date
|
|
|
|
|
|
Under Non-Equity Incentive Plan
|
|
Under Equity Incentive Plan
|
|
Awards:
|
|
Fair Value of
|
|
|
|
|
|
Awards(1)
|
|
Awards(2)
|
|
Number of
|
|
Stock and
|
|
|
|
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Shares of Stock
|
|
Option
|
|
Name
|
|
Grant Date
|
|
($)
|
|
($)
|
|
($)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
or Units (#)
|
|
Awards ($)
|
|
Thomas H. Werner
|
|
—
|
(3)
|
|
450,000
|
|
900,000
|
|
1,350,000
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
—
|
(4)
|
|
300,000
|
|
300,000
|
|
468,750
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
3/31/2016
|
(5)
|
|
—
|
|
—
|
|
—
|
|
35,800
|
|
71,600
|
|
107,400
|
|
—
|
|
1,599,544
|
|
|
|
3/31/2016
|
(6)
|
|
—
|
|
—
|
|
—
|
|
15,000
|
|
30,000
|
|
45,000
|
|
—
|
|
670,200
|
|
|
|
3/31/2016
|
(7)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
10,000
|
|
12,500
|
|
—
|
|
223,400
|
|
|
|
3/31/2016
|
(8)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
71,600
|
|
1,599,544
|
|
|
|
3/31/2016
|
(9)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
120,000
|
|
2,680,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles D. Boynton
|
|
—
|
(3)
|
|
158,625
|
|
317,250
|
|
475,875
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
—
|
(4)
|
|
105,750
|
|
105,750
|
|
165,234
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
2/22/2016
|
(8)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
21,700
|
|
474,796
|
|
|
|
2/22/2016
|
(5)
|
|
—
|
|
—
|
|
—
|
|
10,850
|
|
21,700
|
|
32,550
|
|
—
|
|
474,796
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Howard J. Wenger (11)
|
|
—
|
(3)
|
|
172,500
|
|
345,000
|
|
517,500
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
—
|
(4)
|
|
115,000
|
|
115,000
|
|
179,688
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
2/22/2016
|
(8)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
26,700
|
|
584,196
|
|
|
|
2/22/2016
|
(5)
|
|
—
|
|
—
|
|
—
|
|
13,350
|
|
26,700
|
|
40,050
|
|
—
|
|
584,196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marty T. Neese (12)
|
|
—
|
(3)
|
|
151,875
|
|
303,750
|
|
455,625
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
—
|
(4)
|
|
101,250
|
|
101,250
|
|
158,203
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
2/22/2016
|
(8)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
16,700
|
|
365,396
|
|
|
|
2/22/2016
|
(10)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
15,000
|
|
328,200
|
|
|
|
2/22/2016
|
(5)
|
|
—
|
|
—
|
|
—
|
|
8,350
|
|
16,700
|
|
25,050
|
|
—
|
|
365,396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Possible Payouts
|
|
Estimated Possible Payouts
|
|
All Other Stock
|
|
Grant Date
|
|
|
|
|
|
Under Non-Equity Incentive Plan
|
|
Under Equity Incentive Plan
|
|
Awards:
|
|
Fair Value of
|
|
|
|
|
|
Awards(1)
|
|
Awards(2)
|
|
Number of
|
|
Stock and
|
|
|
|
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Shares of Stock
|
|
Option
|
|
Name
|
|
Grant Date
|
|
($)
|
|
($)
|
|
($)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
or Units (#)
|
|
Awards ($)
|
|
Douglas J. Richards
|
|
—
|
(3)
|
|
111,000
|
|
222,000
|
|
333,000
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
—
|
(4)
|
|
74,000
|
|
74,000
|
|
115,625
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
2/22/2016
|
(8)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
15,000
|
|
328,200
|
|
|
|
2/22/2016
|
(5)
|
|
—
|
|
—
|
|
—
|
|
7,500
|
|
15,000
|
|
22,500
|
|
—
|
|
328,200
|
|
|
(1)
|
Additional information about estimated possible payouts
under non-equity incentive plan awards is set forth below in the “
Estimated Possible Payouts Under Non-Equity Incentive
Plan Awards Table
.”
|
|
(2)
|
The amounts reported in these columns represent performance-based
restricted stock unit opportunities. The Compensation Committee approved the awards on February 22, 2016 and March 31, 2016. The
grant date fair value of these awards is reported based on the probable outcome of the applicable performance conditions and is
consistent with the estimate of aggregate compensation cost, if any, expected to be recognized over the service period determined
as of the grant date under FASB ASC Topic 718, excluding the effect of estimated forfeitures. See Note 16 to our consolidated
financial statements in our 2016 Annual Report for details as to the assumptions used to determine the aggregate grant date fair
value of these awards. See also our discussion of stock-based compensation under “Management’s Discussion and Analysis
of Financial Condition and Results of Operations—Critical Accounting Estimates” in our 2016 Annual Report.
|
|
(3)
|
Consists of an award under our 2016 Annual Bonus Program.
Achievement levels for certain performance targets could reduce payouts to zero when the applicable formula is applied, as further
described below.
|
|
(4)
|
Consists of an award under our Semi-Annual Bonus Plan.
Achievement levels for certain performance targets could reduce payouts to zero when the applicable formula is applied, as further
described below.
|
|
(5)
|
Consists of an award of restricted stock units, subject
to achievement of specific performance metrics in addition to time-based vesting requirements, under the 2015 Equity Plan. Failure
to achieve certain performance metrics could result in zero restricted stock units being awarded. The maximum attainable award
is 150% of target. The closing price of our common stock was $21.88 on February 22, 2016, and $22.34 on March 31, 2016. Actual
awards were determined in the first quarter of 2017 and are described in “
Equity Incentive Plan Compensation
”
below. The earned award vests ratably on March 1, 2017, March 1, 2018, March 1, 2019, and March 1, 2020.
|
|
(6)
|
Consists of an award of restricted stock units, subject
to achievement of specific performance metrics in addition to time-based vesting requirements, under the 2015 Equity Plan. Failure
to achieve certain performance metrics could result in zero restricted stock units being awarded. The maximum attainable award
is 150% of target. The earned award vests in full on March 31, 2020.
|
|
(7)
|
Consists of an award of restricted stock units, subject
to achievement of specific performance metrics in addition to time-based vesting requirements, under the 2015 Equity Plan. Failure
to achieve certain performance metrics could result in zero restricted stock units being awarded. The maximum attainable award
is 125% of target. The earned award vests in full on March 31, 2020.
|
|
(8)
|
Consists of an award of restricted stock units, subject
to time-based vesting requirements, under the 2015 Equity Plan. The award vests ratably on March 1, 2017, March 1, 2018, March
1, 2019, and March 1, 2020. The closing price of our common stock was $21.88 on February 22, 2016, and $22.34 on March 31, 2016.
|
|
(9)
|
Consists of an award of restricted stock units, subject
to time-based vesting requirements, under the 2015 Equity Plan. The award vests in full on March 31, 2020.
|
|
(10)
|
Consists of an award of restricted stock units, subject
to time-based vesting requirements, under the 2015 Equity Plan. The award vests ratably on March 1, 2017, and March 1, 2018.
|
Non-Equity
Incentive Plan Compensation
During
fiscal 2016, our named executive officers were eligible for cash bonus payments under our Annual Executive Bonus Plan, under which
we adopted our 2016 Annual Bonus Program and our Semi-Annual Bonus Plan. The supplemental table below entitled “
Estimated
Possible Payouts Under Non-Equity Incentive Plan Awards Table
” sets forth each named executive officer’s target
and maximum payout opportunities under both the 2016 Annual Bonus Program and the Semi-Annual Bonus Plan. Under the terms of both
bonus plans, failure to achieve certain corporate or individual metrics could have resulted in zero payouts to an individual for
a given period. The table entitled “
2016 Total Non-Equity Incentive Plan Compensation
” above in “
Compensation
Discussion and Analysis
” details the actual payouts awarded under the two bonus plans to each named executive officer
for fiscal 2016.
Estimated Possible Payouts Under Non-Equity
Incentive Plan Awards Table
Name
|
|
2016
Semi-Annual Bonus Plan Target (Aggregate)
($)
|
|
2016
Semi-Annual Bonus Plan Maximum (Aggregate)
($)
|
|
2016
Annual Bonus Program Target
($)
|
|
2016
Annual Bonus Program Maximum
($)
|
Thomas H. Werner
|
300,000
|
|
468,750
|
|
900,000
|
|
1,350,000
|
Charles D. Boynton
|
105,750
|
|
165,234
|
|
317,250
|
|
475,875
|
Howard J. Wenger (1)
|
115,000
|
|
179,688
|
|
345,000
|
|
517,500
|
Marty T. Neese (2)
|
101,250
|
|
158,203
|
|
303,750
|
|
455,625
|
Douglas J. Richards
|
74,000
|
|
115,625
|
|
222,000
|
|
333,000
|
|
(1)
|
Mr. Wenger’s employment terminated on March 3, 2017.
|
|
(2)
|
Mr. Neese’s employment terminated on February 10,
2017.
|
2016 Annual
Bonus Program.
Awards under the 2016 Annual Bonus Program were formula-driven. At the beginning of fiscal 2016, the Compensation
Committee established and approved minimum, target, and maximum levels in respect of two performance criteria: (1) an annual revenue
metric, and (2) an annual EBITDA metric. Our annual revenue metric is based on our annual revenue, with certain adjustments such
as amounts related to utility and power plant projects. Our annual EBITDA metric is based on our annual earnings before interest,
taxes, depreciation, and amortization, with certain adjustments such as amounts related to utility and power plant projects
3
.
Each named executive officer would earn 50% of his target bonus under the 2016 Annual Bonus Program upon the achievement of the
revenue target, and the remaining 50% of his target bonus upon the achievement of the EBITDA target. In order to encourage our
named executive officers to exceed the performance targets, our Compensation Committee set the maximum payment under the program
at 150% of target. Payment for each target is determined based on performance achievement relative to minimum, target, and maximum
levels, as follows:
Performance
Level Achieved
|
|
|
Bonus Payment as Percentage of Bonus Target
|
|
Below minimum
|
|
No
bonus paid
|
At
minimum
|
|
50%
of target bonus (minimum award for minimum achievement)
|
Between
minimum and target
|
|
Prorated
on a straight-line basis, between 50% and 100%
|
At
target
|
|
100%
of target
|
Between
target and maximum
|
|
Prorated
on a straight-line basis, between 100% and 150%
|
At
or above maximum
|
|
150%
of target
|
The annual performance
targets, set at the beginning of fiscal 2016, were assessed at the end of the year. Based on our actual results in fiscal 2016,
bonuses were earned and paid to our named executive officers for the annual revenue target, but not the EBITDA target, as presented
below in the aggregate.
|
|
|
|
|
|
|
|
|
|
|
|
Performance
Criterion
|
|
|
Minimum
|
|
Target
|
|
Achievement
|
|
Payment
as % of Target
Payment
|
Annual revenue metric
|
|
$
|
2,600 million
|
|
$
|
3,300 million
|
|
$2,703 million
|
|
57.4%
|
EBITDA
metric
|
|
$
|
300
million
|
|
$
|
500
million
|
|
$164
million
|
|
0%
|
Semi-Annual
Bonus Plan.
Awards under the Semi-Annual Bonus Plan were also formula-driven, with targets in respect of a semi-annual
profitability metric and corporate performance metrics, consisting of a set of corporate milestones representing key initiatives
that would support our corporate business plan. The semi-annual profitability metric is based on our quarterly EBITDA, adjusted
for amounts related to utility and power plant projects, non-cash interest expense, stock-based compensation expense and other
items. Each named executive officer is further assigned an individual modifier by his or her manager, or, in the case of our Chief
Executive Officer, by the Board of Directors, meant to take into account individual performance and accomplishments. These three
metrics were then incorporated into the plan’s formula. Each named executive officer’s individual modifier could result
in no award being payable even if we achieved our quarterly profitability metric and corporate milestones targets in the event
that the individual modifier was determined to be zero. If threshold corporate milestones were achieved and we exceeded our semi-annual
profitability metric target, bonus payments could exceed 100% of target, up to a maximum payment of 156% (based on the semi- annual
EBITDA metric), depending on the individual modifier.
|
3
|
Includes adjustments relating to 8point3, utility and
power plant projects, the sale of operating lease assets, sale-leaseback transactions, cash interest expense (net of interest
income), provision for (benefit from) income taxes, and depreciation, as described in footnote 1.
|
Subject to the imposition
of an additional “cash trigger” by the Compensation Committee in August 2016 (which was not achieved), payments under
the Semi-Annual Bonus Plan were to have been made as follows:
Achievement
of Semi-Annual
Profitability Metric
Target
|
|
Achievement of Corporate
Milestones
|
|
Payment
|
|
Under target
|
|
Under 60%
|
|
No payment
|
|
|
|
|
|
Between target and maximum
|
|
Over 60% but equal to or under 80%
|
|
50% payment
Payment = 2016 semi-annual salary multiplied by Semi-Annual Bonus Plan target bonus (%) multiplied by semi-annual profitability metric achievement (up to a maximum of 125%) multiplied by individual modifier (up to a maximum of 125%) multiplied by 50%
|
|
|
|
|
|
At target
|
|
80% or over
|
|
100% payment
|
|
|
|
|
|
|
|
|
|
Payment = 2016 semi-annual salary multiplied by Semi-Annual Bonus Plan target bonus (%) multiplied by semi-annual profitability metric achievement (up to a maximum of 125%) multiplied by individual modifier (up to a maximum of 125%)
|
|
|
|
|
|
Between target and maximum
|
|
80% or over
|
|
Greater than 100% payment
|
|
|
|
|
|
|
|
|
|
Payment = 2016 semi-annual salary multiplied by Semi-Annual Bonus Plan target bonus (%) multiplied by semi-annual profitability metric achievement (up to a maximum of 125%) multiplied by individual modifier (up to a maximum of 125%)
|
|
|
|
|
|
Under target
|
|
80% or over
|
|
No payment
|
Our 2016 corporate milestones are confidential because disclosure of these milestones would result in
competitive harm, but they generally consisted of milestones relating to cost targets, major customer transactions, new product
development, manufacturing plans, process enhancements, and inventory turns. The quarterly corporate milestone scores were 87%,
75%, 67%, and 53% for each quarter in fiscal 2016, respectively. Individual modifiers for the named executive officers ranged from
50% to 100%, and averaged 80% for the first half of fiscal 2016. We did not assign individual modifiers for the second half of
fiscal 2016, due to projected non-achievement of the cash trigger.
Equity Incentive Plan Compensation
In
addition to time-based restricted stock unit awards, to further align executive compensation with maximizing stockholder value,
our Compensation Committee granted to our named executive officers certain performance-based equity awards, consisting of restricted
stock units, or RSUs, that would be released and begin time-based vesting only upon achievement of certain corporate or individual
performance objectives.
Our
Compensation Committee met at the beginning of 2016 and established and approved target levels in respect of two performance criteria
for our traditional performance-based equity awards: (1) an annual revenue metric, and (2) an annual EBITDA metric. Each eligible
named executive officer would earn 50% of his target performance-based RSUs upon the achievement of the annual revenue metric
target, and the remaining 50% of his target performance-based RSUs upon the achievement of the EBITDA metric target. The two metrics
and their corresponding targets are the same as those for our 2016 Annual Bonus Program, described above in “
Executive
Compensation—Non-Equity Incentive Plan Compensation
.” Payment for each target was determined based on the performance
metric achieved relative to minimum, target, and maximum performance levels, as follows:
Percentage
of Performance Target Achieved
|
|
|
Grant of RSUs as Percentage
of Target RSUs
|
|
Below minimum
|
|
No
RSUs earned
|
At
minimum
|
|
50%
of target RSUs (minimum award for minimum achievement)
|
Between
minimum and target
|
|
Prorated
on a straight-line basis, between 50% and 100%
|
At
target
|
|
100%
of target
|
Between
target and maximum
|
|
Prorated
on a straight-line basis, between 100% and 150%
|
At
or above maximum
|
|
150%
of target
|
Performance-based
restricted stock units vest, if at all, in four equal annual installments, subject to continued service after achievement of the
performance measures, starting March 1, 2017. In connection with our 2016 traditional performance- based equity awards, we achieved
57.4% of our annual revenue metric target, and 0% of our EBITDA metric target. Based on our actual results in fiscal 2016, traditional
performance-based RSUs were earned by our named executive officers for achievement of the annual revenue metric target only. See
“
Compensation Discussion and Analysis
—
Equity Awards
,” which details the actual performance-based
restricted stock units earned in fiscal 2016.
The named executive
officers’ targets and earned performance-based RSUs are described above in “
Compensation Discussion and Analysis—Analysis
of Fiscal 2016 Compensation Decisions—Equity Awards.”
Employment and Severance Agreements
We have entered into
employment agreements with certain of our executive officers, including our named executive officers. In August 2015, we adopted
a severance policy entitled the 2016 Management Career Transition Plan, which replaced our 2014 Management Career Transition Plan.
Additionally, our named executive officers are entitled to receive certain payments from us or our affiliates in the event of
certain termination events in connection with a change of control.
Employment
Agreements.
We are party to employment agreements with several executive officers, including the named executive officers.
Each employment agreement provides that the executive’s employment is “at-will” and may be terminated at any
time by either party. Each employment agreement generally provides for a three-year term that will automatically renew unless
we provide notice of our intent not to renew at least 120 days before the renewal date. The agreements do not specify salary,
bonus or other basic compensation terms, but instead provide that each executive’s base salary, annual bonus and equity
compensation will be determined in accordance with our normal practices. The primary purpose of the agreements is to provide certain
severance benefits for employment terminations in connection with a change of control (as defined in the agreement). In the event
an executive’s employment is terminated by us without cause (as defined in the agreement), or if the executive resigns for
good reason (as defined in the agreement), and if such termination or resignation occurs during the period three months prior
to, and ending 36 months following, a change of control, then the agreements also provide that the executive is entitled to the
following benefits:
|
●
|
a lump-sum payment equivalent to 24 months of such executive’s
base salary;
|
|
●
|
a lump-sum payment equal to any earned but unpaid annual
bonus for a completed fiscal year;
|
|
●
|
a lump-sum payment equal to the product of (a) such executive’s
target bonus for the then current fiscal year, multiplied by (b) two;
|
|
●
|
continuation of such executive’s and such executive’s
eligible dependents’ coverage under our benefit plans for up to 24 months, at our expense;
|
|
●
|
a lump-sum payment equal to such executive’s accrued
and unpaid base salary and paid time off;
|
|
●
|
reimbursement of up to $15,000 for services of an outplacement
firm mutually acceptable to us and the executive;
|
|
●
|
annual make-up payments for taxes incurred by the executive
in connection with benefit plans’ coverage; and
|
|
●
|
all of such executive’s
unvested options, shares of restricted stock and restricted stock units (including performance-
based restricted stock units) will become fully vested and (as applicable) exercisable
as of the termination date and remain exercisable for the time period otherwise applicable
to such equity awards following such termination date. In addition, Mr. Werner’s
agreement provides for full accelerated vesting upon termination of employment without
cause or resignation for good reason, regardless of whether such termination is in connection
with a change of control; provided, however, that absent a change of control, no such
accelerated vesting or lapsing shall apply to Mr. Werner’s performance-based equity
awards.
|
Under
the employment agreements, “cause” means the occurrence of any of the following, as determined by us in good faith:
|
●
|
acts or omissions constituting
gross negligence or willful misconduct on the part of the executive with respect to the
executive’s obligations or otherwise relating to our business,
|
|
●
|
the executive’s conviction
of, or plea of guilty or nolo contendere to, crimes involving fraud, misappropriation
or embezzlement, or a felony crime of moral turpitude,
|
|
●
|
the executive’s violation
or breach of any fiduciary duty (whether or not involving personal profit) to us, except
to the extent that his violation or breach was reasonably based on the advice of our
outside counsel, or willful violation of any of our published policies governing the
conduct of it executives or other employees, or
|
|
●
|
the executive’s violation
or breach of any contractual duty to us which duty is material to the performance of
the executive’s duties or results in material damage to us or our business;
|
provided that if any of the foregoing events
is capable of being cured, we will provide notice to the executive describing the nature of such event and the executive will
thereafter have 30 days to cure such event.
In
addition, under the employment agreements, “good reason” means the occurrence of any of the following without the
executive’s express prior written consent:
|
●
|
a material reduction in the executive’s position
or duties,
|
|
●
|
a material breach of the employment agreement,
|
|
●
|
a material reduction in the executive’s
aggregate target compensation, including the executive’s base salary and target
bonus on a combined basis, excluding a reduction that is applied to substantially all
of our other senior executives; provided, however, that for purposes of this clause,
whether a reduction in target bonus has occurred shall be determined without any regard
to any actual bonus payments made to the executive, or
|
|
●
|
a relocation of the executive’s
primary place of business for the performance of his duties to us to a location that
is more than 45 miles from our current business location.
|
The
executive shall be considered to have “good reason” under the employment agreement only if, no later than 90 days
following an event otherwise constituting “good reason” under the employment agreement, the executive gives notice
to us of the occurrence of such event and we fail to cure the event within 30 days following its receipt of such notice from the
executive, and the executive terminates service within 36 months following a change of control.
If
any of the severance payments, accelerated vesting and lapsing of restrictions would constitute a “parachute payment”
within the meaning of Section 280G of the Code and be subject to excise tax or any interest or penalties payable with respect
to such excise tax, then the executive’s benefits will be either delivered in full or delivered as to such lesser extent
which would result in no portion of such benefits being subject to such taxes, interest or penalties, whichever results in the
executive receiving, on an after-tax basis, the greatest amount of benefits.
Before
receiving the benefits described in the employment agreements, the executive will be required to sign a separation agreement and
release of claims. In addition, the benefits will be conditioned upon the executive not soliciting our or our affiliates’
(as defined in the employment agreement) employees, consultants, customers or users for one year following the termination date.
Mr. Werner’s agreement also provides that, if his termination without cause or resignation for good reason is not in connection
with a change of control, his severance benefits will be conditioned upon a non-competition arrangement lasting one year following
employment termination.
2016
Management Career Transition Plan.
In August 2015, we adopted the 2016 Management Career Transition Plan, (the “Severance
Plan”), which replaced our 2014 Management Career Transition Plan. The Severance Plan generally terminates on the third
anniversary of the effective date. The Severance Plan addresses severance for certain employment terminations, and payments are
only made if the executive or employee is not already entitled to severance benefits under a separate employment agreement. Participants
in the Severance Plan include our Chief Executive Officer, Thomas H. Werner, and those employees who have been employed by the
Company for at least six months and report directly to him (including our other named executive officers), as well as other key
employees of the Company who are provided with written notice from the Chief Executive Officer that they are Severance Plan participants.
Under the terms of the Severance Plan, Mr. Werner and the other named executive officers will be eligible for benefits following
a termination of employment by us without cause (as defined in the Severance Plan). Such benefits include:
|
●
|
a lump-sum payment equivalent to 12 months (or 24 months
in Mr. Werner’s case) of such executive’s base salary;
|
|
●
|
a lump-sum payment equal to any earned but unpaid annual
bonus for a completed fiscal year;
|
|
●
|
a lump-sum payment equal to the pro rata portion of such executive’s
actual bonus for the then current fiscal year, based on the number of whole calendar
months between the start of the fiscal year and the termination date;
|
|
●
|
continuation of such executive’s and such executive’s
eligible dependents’ coverage under the Company’s health benefit plans for
up to 12 months (or 24 months in Mr. Werner’s case), at the Company’s expense;
|
|
●
|
a lump-sum payment equal to such executive’s accrued
and unpaid base salary and paid time off;
|
|
●
|
annual make-up payments for taxes incurred by the executive
in connection with such health benefit plans’ coverage; and
|
|
●
|
reimbursement of up to $15,000 for services of an outplacement
firm mutually acceptable to the Company and the executive.
|
Outstanding Equity Awards
The
following table sets forth information regarding the outstanding equity awards held by our named executive officers as of January
1, 2017.
Outstanding Equity
Awards At 2016 Fiscal Year-End Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
Awards
|
|
Stock
Awards
|
Name
|
|
|
Grant
Date
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
Number
of Shares
or Units
of Stock
That Have
Not Vested
(#)
|
|
Market
Value of
Shares
or Units
of Stock
That Have
Not Vested
($)(1)
|
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
(#)
|
|
Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
($)
|
Thomas H.
|
|
02/05/2014(2)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
16,666
|
|
110,162
|
|
—
|
|
—
|
Werner
|
|
02/05/2014(3)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
20,724
|
|
136,986
|
|
—
|
|
—
|
|
|
02/23/2015(4)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
27,800
|
|
183,758
|
|
—
|
|
—
|
|
|
02/23/2015(5)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
29,388
|
|
194,255
|
|
—
|
|
—
|
|
|
03/20/2015(6)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2,800
|
|
18,508
|
|
—
|
|
—
|
|
|
03/31/2016(7)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
71,600
|
|
473,276
|
|
—
|
|
—
|
|
|
03/31/2016(8)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
120,000
|
|
793,200
|
|
—
|
|
—
|
|
|
03/31/2016(9)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
20,549
|
|
135,829
|
|
—
|
|
—
|
|
|
03/31/2016(10)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
8,610
|
|
56,912
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
Name
|
|
|
Grant Date
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
Number
of Shares
or Units
of Stock
That Have
Not Vested
(#)
|
|
Market
Value of
Shares
or Units
of Stock
That Have
Not Vested
($)(1)
|
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
(#)
|
|
Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
($)
|
Charles D.
|
|
02/05/2014(2)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
5,666
|
|
37,452
|
|
—
|
|
—
|
Boynton
|
|
02/05/2014(3)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
7,046
|
|
46,574
|
|
—
|
|
—
|
|
|
02/03/2015(4)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
11,134
|
|
73,596
|
|
—
|
|
—
|
|
|
02/23/2015(5)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
11,756
|
|
77,707
|
|
—
|
|
—
|
|
|
03/20/2015(6)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,134
|
|
7,496
|
|
—
|
|
—
|
|
|
07/21/2015(11)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
5,000
|
|
33,050
|
|
—
|
|
—
|
|
|
02/22/2016(7)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
21,700
|
|
143,437
|
|
—
|
|
—
|
|
|
02/22/2016(12)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
6,228
|
|
41,167
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Howard J.
|
|
02/05/2014(2)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
5,666
|
|
37,452
|
|
—
|
|
—
|
Wenger (15)
|
|
02/05/2014(3)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
7,046
|
|
46,574
|
|
—
|
|
—
|
|
|
02/03/2015(4)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
13,334
|
|
88,138
|
|
—
|
|
—
|
|
|
02/23/2015(5)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
14,106
|
|
93,241
|
|
—
|
|
—
|
|
|
02/23/2015(5)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
8,934
|
|
59,054
|
|
—
|
|
—
|
|
|
03/20/2015(6)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,334
|
|
8,818
|
|
—
|
|
—
|
|
|
02/22/2016(7)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
26,700
|
|
176,487
|
|
—
|
|
—
|
|
|
02/22/2016(12)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
7,663
|
|
50,652
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marty T.
|
|
07/02/2008(13)
|
|
100,000
|
|
—
|
|
62.82
|
|
07/02/2018
|
|
—
|
|
—
|
|
—
|
|
—
|
Neese (16)
|
|
02/05/2014(2)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
5,666
|
|
37,452
|
|
—
|
|
—
|
|
|
02/05/2014(3)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
7,046
|
|
46,574
|
|
—
|
|
—
|
|
|
02/03/2015(4)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
5,600
|
|
37,016
|
|
—
|
|
—
|
|
|
02/22/2016(7)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
16,700
|
|
110,387
|
|
—
|
|
—
|
|
|
02/22/2016(14)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
15,000
|
|
99,150
|
|
—
|
|
—
|
|
|
02/22/2016(12)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
4,793
|
|
31,682
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Douglas J.
|
|
02/05/2014(2)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
4,466
|
|
29,520
|
|
—
|
|
—
|
Richards
|
|
02/05/2014(3)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
5,554
|
|
36,712
|
|
—
|
|
—
|
|
|
02/03/2015(4)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
10,000
|
|
66,100
|
|
—
|
|
—
|
|
|
02/23/2015(5)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
10,580
|
|
69,934
|
|
—
|
|
—
|
|
|
03/20/2015(6)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,000
|
|
6,610
|
|
—
|
|
—
|
|
|
02/22/2016(7)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
15,000
|
|
99,150
|
|
—
|
|
—
|
|
|
02/22/2016(12)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
4,305
|
|
28,456
|
|
—
|
|
—
|
|
(1)
|
The closing price of our common stock on December 30,
2016 (the last trading day of fiscal 2016) was $6.61.
|
|
(2)
|
Each of these awards of restricted stock units provided
for vesting in three equal annual installments on each of March 1, 2015, March 1, 2016, and March 1, 2017 subject to the recipient’s
continued employment with us.
|
|
(3)
|
On February 5, 2014, the named executive officer was
awarded a number of performance-based restricted stock units within a pre-set range, with the actual number earned contingent
on the achievement of certain performance criteria. The actual earned award wa
s
determined in the first quarter of fiscal
2015. The earned award vests in three equal annual installments on March 1, 2015, March 1, 2016, and March 1, 2017, subject to
the recipient’s continued employment with us.
|
|
(4)
|
Each of these awards of restricted stock units provided
for vesting in three equal annual installments on each of March 1, 2016, March 1, 2017, and March 1, 2018, subject to the recipient’s
continued employment with us.
|
|
(5)
|
On February 23, 2015, the named executive officer was
awarded a number of performance-based restricted stock units within a pre-set range, with the actual number contingent on the
achievement of certain performance criteria. The actual earned award wa
s
determined in the first quarter of fiscal 2016.
The earned award vests in three equal annual installments on March 1, 2016, March 1, 2017, and March 1, 2018, subject to the recipient’s
continued employment with us.
|
|
(6)
|
On March 20, 2015, the named executive officer was awarded
a number of performance-based restricted stock units within a pre-set range, with the actual number contingent on the achievement
of certain performance criteria. The actual earned award was determined in the first quarter of fiscal 2016. The earned award
vests in three equal annual installments on March 1, 2016, March 1, 2017, and March 1, 2018, subject to the recipient’s
continued employment with us.
|
|
(7)
|
Each of these awards of restricted stock units provided
for vesting in four equal annual installments on each of March 1, 2017, March 1, 2018, March 1, 2019, and March 1, 2020, subject
to the recipient’s continued employment with us.
|
|
(8)
|
Each of these awards of restricted stock units provided
for one-time vesting on March 31, 2020 subject to the recipient’s continued employment with us.
|
|
(9)
|
On March 31, 2016, the named executive officer was awarded
a number of performance-based restricted stock units within a pre-set range, with the actual number contingent on the achievement
of certain performance criteria. The actual award was determined in the first quarter of 2017 and is described in “
Equity
Incentive Plan Compensation
” above. The earned award vests in four equal annual installments on March 1, 2017, March
1, 2018, March 1, 2019, and March 1, 2020, subject to the recipient’s continued employment with us.
|
|
(10)
|
On March 31, 2016, the named executive officer was awarded
a number of performance-based restricted stock units within a pre-set range, with the actual number contingent on the achievement
of certain performance criteria. The actual award was determined in the first quarter of 2017 and is described in “
Equity
Incentive Plan Compensation
” above. The earned award vests in full on March 1, 2020, subject to the recipient’s
continued employment with us.
|
|
(11)
|
Each of these awards of restricted stock units provided
for vesting in three equal annual installments on each of August 1, 2016, August 1, 2017, and August 1, 2018, subject to the recipient’s
continued employment with us.
|
|
(12)
|
On February 22, 2016, the named executive officer was
awarded a number of performance-based restricted stock units within a pre-set range, with the actual number contingent on the
achievement of certain performance criteria. The actual award was determined in the first quarter of 2017 and is described in
“
Equity Incentive Plan Compensation
” above. The earned award vests in four equal annual installments on March
1, 2017, March 1, 2018, March 1, 2019, and March 1, 2020, subject to the recipient’s continued employment with us.
|
|
(13)
|
This option has a 10-year term and vests in equal annual
installments over a four-year period starting on July 2, 2009.
|
|
(14)
|
Each of these awards of restricted stock units provided
for vesting in two equal annual installments on each of March 1, 2017, and March 1, 2018, subject to the recipient’s continued
employment with us.
|
|
(15)
|
Mr. Wenger’s last day of employment was March 3,
2017.
|
|
(16)
|
Mr. Neese’s last day of employment was February
10, 2017.
|
The
following table sets forth the number of shares acquired pursuant to the vesting of stock awards held by our named executive officers
during fiscal 2016 and the aggregate dollar amount realized by our named executive officers upon such events. Because there were
no shares acquired by our named executive officers pursuant to the exercise of options during fiscal 2016, we have not included
columns pertaining to option awards in the table below.
2016 Option Exercises and Stock Vested Table
|
|
|
|
|
|
|
Stock Awards
|
Name
|
|
Number of Shares
Acquired on Vesting
(#)
|
|
Value Realized on
Vesting
($)(1)
|
Thomas H. Werner
|
275,810
|
|
4,829,906
|
Charles D. Boynton
|
82,592
|
|
1,932,879
|
Howard J. Wenger (2)
|
86,934
|
|
2,058,597
|
Marty T. Neese (3)
|
70,883
|
|
1,678,509
|
Douglas J. Richards
|
64,316
|
|
1,523,003
|
|
(1)
|
The aggregate dollar value realized upon the vesting of
a stock award represents the fair market value of the underlying shares on the vesting date multiplied by the number of shares
vested.
|
|
(2)
|
Mr. Wenger’s employment terminated on March 3, 2017.
|
|
(3)
|
Mr. Neese’s employment terminated on February 10,
2017.
|
Potential Payments
Upon Termination or Change of Control
Tabular
Disclosure of Termination Payments.
Our employment agreements with our named executive officers contain provisions that
provide for payments upon certain events of termination and change of control. See “
Employment and Severance Agreements
”
above for a detailed description of these agreements. The following tables summarize the estimated payments that would have been
made on December 31, 2016 which our named executive officers would be eligible to receive upon the following termination events,
assuming each such event had occurred on December 31, 2016, the last business day of our fiscal year ended January 1, 2017:
|
●
|
termination with cause or voluntary resignation without
good reason;
|
|
●
|
involuntary termination without cause or voluntary
resignation for good reason in connection with a change of control;
|
|
●
|
involuntary termination without cause or voluntarily
resignation for good reason
not
in connection with a change of control;
|
|
●
|
discontinued service due to death or disability.
|
The dollar value identified
with respect to each type of equity award is based on each named executive officer’s accelerated restricted stock units
as of December 31, 2016 is based on the $6.61 per share closing price for our common stock on December 31, 2016, the last trading
day of our fiscal year ended January 1, 2017. No named executive officers held unvested stock options as of December 31, 2016.
For more information on each officer’s outstanding equity awards as of January 1, 2017, please see the “
Outstanding
Equity Awards At 2016 Fiscal-Year End Table
” above. The tables do not include unpaid regular salary, nor the impact
of certain “best net” provisions of each named executive officer’s employment agreement that provides that,
in the event any payments under such employment agreement would constitute parachute payments under Section 280G of the Code or
be subject to the excise tax of Section 4999 of the Code, then such payments should be either delivered in full or reduced to
result in no portion being subject to such tax provisions and still yield the greatest payment to the individual on an after tax
basis.
Termination Payments
Table
Name
|
|
|
Termination
Scenario
|
|
Base
Salary ($)
|
|
Bonus
and
Accelerated
Non-Equity Incentive Plan Awards ($)
|
|
Accelerated
Restricted Stock Units ($)(1)(2)
|
|
Continued
Medical Benefits and Gross Up ($)
|
|
Outplace-
ment Services ($)
|
|
Accrued
Paid Time Off and Sabbatical ($)
|
|
Total
($)
|
Thomas
H. Werner
|
|
Termination with
cause or voluntary resignation without good reason
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
492
|
|
492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary termination
without cause or voluntary resignation for good reason in connection with change of control
|
|
1,200,000
|
|
2,400,000
|
|
2,102,886
|
|
67,420
|
|
15,000
|
|
492
|
|
5,785,798
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary termination
without cause or voluntary resignation for good reason not in connection with change of control
|
|
1,200,000
|
|
1,200,000
|
|
1,560,396
|
|
67,420
|
|
15,000
|
|
492
|
|
4,048,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
492
|
|
492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death or disability
|
|
—
|
|
—
|
|
2,621,447
|
|
—
|
|
—
|
|
492
|
|
2,621,939
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles
D. Boynton
|
|
Termination with
cause or voluntary resignation without good reason
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary termination
without cause or voluntary resignation for good reason in connection with change of control
|
|
940,000
|
|
846,000
|
|
460,479
|
|
99,388
|
|
15,000
|
|
—
|
|
2,360,867
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary termination
without cause or voluntary resignation for good reason not in connection with change of control
|
|
470,000
|
|
423,000
|
|
—
|
|
49,694
|
|
15,000
|
|
—
|
|
957,694
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death or disability
|
|
—
|
|
—
|
|
478,723
|
|
—
|
|
—
|
|
—
|
|
478,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Howard
J. Wenger
|
|
Termination with
cause or voluntary resignation without good reason
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary termination
without cause or voluntary resignation for good reason in connection with change of control
|
|
920,000
|
|
920,000
|
|
560,416
|
|
85
|
|
15,000
|
|
—
|
|
2,415,501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary termination
without cause or voluntary resignation for good reason not in connection with change of control
|
|
460,000
|
|
460,000
|
|
—
|
|
42
|
|
15,000
|
|
—
|
|
935,042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death or disability
|
|
—
|
|
—
|
|
602,225
|
|
—
|
|
—
|
|
—
|
|
602,225
|
Name
|
|
|
Termination
Scenario
|
|
Continued
Base Salary ($)
|
|
Bonus
and Accelerated Non-Equity Incentive Plan
Awards
($)
|
|
Accelerated
Restricted Stock Units ($)(1)(2)
|
|
Continued
Medical Benefits and Gross Up ($)
|
|
Outplace-
ment Services ($)
|
|
Accrued
Paid Time Off and Sabbatical ($)
|
|
Total
($)
|
Marty
T. Neese
|
|
Termination with cause
or voluntary resignation without good reason
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary termination
without cause or voluntary resignation for good reason in connection with change of control
|
|
900,000
|
|
810,000
|
|
362,261
|
|
68,440
|
|
15,000
|
|
—
|
|
2,155,701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary termination
without cause or voluntary resignation for good reason not in connection with change of control
|
|
450,000
|
|
405,000
|
|
—
|
|
34,220
|
|
15,000
|
|
—
|
|
904,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death or disability
|
|
—
|
|
—
|
|
356,940
|
|
—
|
|
—
|
|
—
|
|
356,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Douglas
J. Richards
|
|
Termination with
cause or voluntary resignation without good reason
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary termination
without cause or voluntary resignation for good reason in connection with change of control
|
|
740,000
|
|
592,000
|
|
336,482
|
|
52,717
|
|
15,000
|
|
—
|
|
1,736,199
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary termination
without cause or voluntary resignation for good reason not in connection with change of control
|
|
370,000
|
|
296,000
|
|
—
|
|
26,359
|
|
15,000
|
|
—
|
|
707,359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death or disability
|
|
—
|
|
—
|
|
340,944
|
|
—
|
|
—
|
|
—
|
|
340,944
|
|
(1)
|
In connection with a change of control, accelerated restricted
stock units’ calculation assumes that the change of control does not involve Total or one of its affiliates.
|
|
(2)
|
Awards under the SunPower Corporation 2015 Omnibus Incentive
Plan provide for accelerated vesting upon death or disability.
|
COMPENSATION COMMITTEE REPORT
The following report has been submitted by
the Compensation Committee of the Board of Directors:
The
Compensation Committee of the Board of Directors has reviewed and discussed our Compensation Discussion and Analysis with management.
Based on this review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion
and Analysis be included in our Annual Report on Form 10-K for the fiscal year ended January 1, 2017 and definitive proxy statement
on Schedule 14A for our 2017 Annual Meeting, each as filed with the SEC. The foregoing report was submitted by the Compensation
Committee of the Board and shall not be deemed to be “soliciting material” or to be “filed” with the SEC
or subject to Regulation 14A promulgated by the SEC or Section 18 of the Exchange Act, and shall not be deemed incorporated by
reference into any prior or subsequent filing by us under the Securities Act of 1933 or the Exchange Act.
|
COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS
|
|
|
|
Helle Kristoffersen
Thomas R. McDaniel
Julien
Pouget
Pat Wood III,
Chair
March 17, 2017
|
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN
BENEFICIAL OWNERS
The
following table sets forth certain information regarding beneficial ownership of our common stock as of February 28, 2017 (except
as described below) by:
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our Chief Executive Officer, Chief Financial Officer,
and each of the three other most highly compensated individuals who served as our executive officers at the end of our fiscal
year 2016, whom we collectively refer to as our “named executive officers”;
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our directors, director nominees and executive officers
as a group; and
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each person (including any “group” as that
term is used in Section 13(d)(3) of the Exchange Act) who is known by us to beneficially own more than 5% of any class of our
common stock.
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Applicable
beneficial ownership percentages listed below are based on 138,699,919 shares of common stock outstanding as of February 28, 2017.
The business address for each of our directors and executive officers is our corporate headquarters at 77 Rio Robles, San Jose,
California 95134.
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Common Stock Beneficially Owned (1)
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Directors and Named Executive
Officers
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Number of Shares
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%
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Charles D. Boynton (2)
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74,919
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*
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Helle Kristoffersen (3)
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—
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—
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Daniel Lauré (4)
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—
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—
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Catherine Lesjak
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52,732
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*
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Thomas R. McDaniel (5)
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138,858
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*
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Marty T. Neese (6)
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225,879
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*
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Ladislas Paszkiewicz (7)
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—
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—
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Julien Pouget (8)
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—
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—
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Douglas J. Richards (9)
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72,924
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*
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Howard J. Wenger (10)
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255,234
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*
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Thomas H. Werner (11)
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487,864
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*
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Laurent Wolffsheim
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—
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—
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Pat Wood III (12)
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77,476
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*
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All Directors and Executive Officers as a Group (14 persons) (13)
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1,276,157
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*
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Other Persons
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Total S.A.
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Total Energies Nouvelles Activités USA, SAS (14)
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2 place Jean Millier
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La Défense 6
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92400 Courbevoie
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France
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104,528,234
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63.48
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%
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Wellington Management Group LLP
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Wellington Group Holdings LLP
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Wellington Investment Advisors Holdings LLP
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Wellington Management Company LLP (15)
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c/o Wellington Management Group LLP
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280 Congress Street
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Boston, MA 02210
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8,600,048
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6.2
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%
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* Less than 1%.
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(1)
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Beneficial ownership is determined in accordance with
the rules of the SEC and generally includes voting or investment power with respect to the securities. In computing the number
of shares beneficially owned by a person and the percentage ownership of that person, shares underlying restricted stock units
and options held by that person that will vest or be exercisable within 60 days of February 28, 2017 are deemed to be outstanding.
Such shares, however, are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person.
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(2)
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Includes 16,658 RSUs and 15,048 PSUs vesting within 60
days of February 28, 2017.
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(3)
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Ms. Kristoffersen joined our Board on September 15, 2016.
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(4)
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Mr. Lauré joined our Board on March 9, 2016.
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(5)
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Includes 138,742 shares of common stock held indirectly
in the McDaniel Trust dtd 7/26/2000 of which Mr. McDaniel and his spouse are co-trustees.
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(6)
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Includes 100,000 shares of common stock issuable upon
exercise of options exercisable within 60 days of February 28, 2017. Mr. Neese’s last day of employment was February 10,
2017.
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(7)
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Mr. Paszkiewicz joined our Board on June 22, 2016.
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(8)
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Mr. Pouget joined our Board on September 15, 2016.
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(9)
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Includes 13,216 RSUs and 12,420 PSUs vesting within 60
days of February 28, 2017.
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(10)
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Includes 19,008 RSUs and 21,148 PSUs vesting within 60
days of February 28, 2017. Mr. Wenger’s last day of employment was March 3, 2017.
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(11)
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Includes 1,218 shares of common stock held by The Werner
Family Trust (“WF Trust”), of which Mr. Werner and his wife are co-trustees and the beneficiaries are the surviving
spouse between Thomas Werner and Suzanne Werner, to be followed by Jessica Werner and Katheryn Werner. Thomas and Suzanne Werner
have been delegated joint control and voting power over the WF Trust. Includes 48,466 RSUs and 41,955 PSUs vesting within 60 days
of February 28, 2017.
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(12)
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Includes 6,000 shares of common stock issuable upon exercise
of options exercisable within 60 days of February 28, 2017.
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(13)
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Includes the shares described in footnotes 2-5 and 7-12
plus 104,865 shares of common stock held by additional executive officers and 11,285 RSUs vesting within 60 days of February
28, 2017 held by additional executive officers.
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(14)
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The ownership information set forth in the table is based
on information contained in a statement on Schedule 13D/A, filed with the SEC on December 10, 2015 by Total Energies Nouvelles
Activités USA, SAS (formerly known as Total Gas & Power USA, SAS) and its parent Total S.A., which indicated that the
parties have shared voting and shared dispositive power with respect to said shares. Includes 9,531,677 shares of common stock
issuable pursuant to a warrant issued by us to Total Gas & Power USA, SAS on February 28, 2012, 8,017,420 shares of common
stock issuable upon conversion of the convertible debentures issued by us to Total Gas & Power USA, SAS on May 29, 2013, 5,126,775
shares of common stock issuable upon conversion of the convertible debentures issued by us to Total Energies Nouvelles Activités
USA, SAS on June 11, 2014 and 3,275,680 shares of common stock issuable upon conversion of the convertible debentures issued by
us to Total Energies Nouvelles Activités USA, SAS on December 15, 2015.
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(15)
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The ownership information set forth in the table is based
on information contained in a statement on Schedule 13G/A, filed with the SEC on February 9, 2017 by Wellington Management Group
LLP, Wellington Group Holdings LLP, Wellington Investment Advisors Holdings LLP and Wellington Management Company LLP. Such statement
disclosed that Wellington Management Group LLP, Wellington Group Holdings LLP, Wellington Investment Advisors Holdings LLP have
shared dispositive power with respect to 8,600,048 shares (or 6.2% of the shares of common stock outstanding as of February 28,
2017) and shared voting power with respect to 6,760,524 shares (or 4.87% of the shares of common stock outstanding as of February
28, 2017) and that Wellington Management Company LLP has shared dispositive power with respect to 8,389,041 shares and shared
voting power with respect to 6,631,269 shares.
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Section 16(a) Beneficial Ownership Reporting
Compliance
Section
16(a) of the Securities Exchange Act of 1934 requires certain of our executive officers and our directors, and persons who own
more than 10% of a registered class of our equity securities, to file an initial report of ownership on Form 3 and reports of
changes in ownership on Forms 4 or 5 with the SEC and The NASDAQ Global Select Market. Such executive officers, directors and
greater than 10% stockholders are also required by SEC regulations to furnish us with copies of all Section 16 forms that they
file. We periodically remind our directors and executive officers of their reporting obligations and assist in making the required
disclosures once we have been notified that a reportable event has occurred. We are required to report in this proxy statement
any failure by any of the above-mentioned persons to make timely Section 16 reports.
Based
solely on our review of the copies of such forms received by us, and written representations from our directors and executive
officers, we are unaware of any instances of noncompliance, or late compliance, with Section 16(a) filing requirements by our
directors, executive officers or greater than 10% stockholders during fiscal 2016, except for Form 3 filings by Ms. Kristoffersen
and Mr. Wolffsheim which were four and five days late, respectively.
COMPANY STOCK PRICE PERFORMANCE
The
following graph compares the performance of an investment in our common stock from December 30, 2011 through January 1, 2017,
with the NASDAQ Composite index and with the Guggenheim Solar ETF. The graph assumes $100 was invested on December 30, 2011 in
our common stock at the closing price of $6.23 per share, at the closing price for the NASDAQ Composite and at the closing price
for the Guggenheim Solar ETF. In addition, the graph assumes that any dividends were reinvested on the date of payment without
payment of any commissions. The performance shown in the graph represents past performance and should not be considered an indication
of future performance. The following graph is not, and shall not be deemed to be, filed as part of our Annual Report on Form 10-K.
Such graph should not be deemed filed or incorporated by reference into any of our filings under the Securities Act of 1933, or
the Securities Exchange Act of 1934, except to the extent specifically incorporated by reference therein by us.
ASSUMES $100 INVESTED
ON DECEMBER 30, 2011
(ASSUMES DIVIDEND REINVESTED)
UNTIL FISCAL YEAR ENDED JANUARY 1, 2017
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December
28, 2012
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December
27, 2013
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December
26, 2014
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December
31, 2015
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December
30, 2016
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SunPower
Corporation
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$88.12
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$464.04
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$422.47
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$481.70
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$106.10
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NASDAQ
Composite
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$113.63
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$159.55
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$184.51
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$192.21
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$206.63
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Guggenheim
Solar ETF
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$67.30
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$156.15
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$157.64
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$142.15
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$80.69
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EQUITY COMPENSATION PLAN INFORMATION
The following table provides
certain information as of January 1, 2017 with respect to our equity compensation plans under which our equity securities are
authorized for issuance (in thousands, except dollar figures).
Plan
Category
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Number
of
securities
to be issued
upon
exercise of
outstanding
options,
warrants
and rights
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Weighted
average
exercise
price of
outstanding
options,
warrants
and rights
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Number
of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in the
first
column)
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Equity compensation plans approved by security holders
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126
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$57.77
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7,018
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Total(1)
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126
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—
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7,018
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(1)
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This table excludes options to purchase an aggregate
of approximately 7,503 shares of common stock, at a weighted average exercise price of $30.04 per share, that we assumed in connection
with the acquisition of PowerLight Corporation, now known as SunPower Corporation, Systems, in January 2007. Under the terms of
our three equity incentive plans, we may issue incentive or non-statutory stock options, restricted stock awards, restricted stock
units, or stock purchase rights to directors, employees and consultants to purchase common stock. The SunPower Corporation 2015
Omnibus Incentive Plan includes an automatic share reserve increase feature effective for fiscal 2016 through fiscal 2025. This
share reserve increase feature will cause an annual and automatic increase in the number of shares of our common stock reserved
for issuance under the Stock Incentive Plan in an amount each year equal to the least of: 3% of the outstanding shares of our
common stock measured on the last day of the immediately preceding fiscal year; 6,000,000 shares; and such other number of shares
as determined by our Board. On January 2, 2017, the share reserve increase feature caused an automatic increase of 4,155,310 (3%)
shares for fiscal 2017.
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PROPOSAL FOUR
RATIFICATION OF THE
APPOINTMENT OF
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2017
The
Board of Directors, upon recommendation of the Audit Committee, has reappointed the firm of Ernst & Young LLP as our independent
registered public accounting firm for the fiscal year ending December 31, 2017, subject to ratification by our stockholders.
Ernst
& Young LLP has served as our auditor since May 3, 2012. A representative of Ernst & Young LLP is expected to be present
at the Annual Meeting and will have an opportunity to make a statement if he or she desires to do so, and is expected to be available
to respond to appropriate questions.
Stockholder
ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm is not required by
our By-Laws or other applicable legal requirements. However, the Board is submitting the selection of Ernst & Young LLP to
the stockholders for ratification as a matter of good corporate governance.
If
the stockholders fail to ratify the selection of our independent registered accounting firm, the Audit Committee and the Board
will reconsider whether or not to retain that firm. Even if the selection is ratified, the Board, at its discretion, may direct
the appointment of a different independent registered public accounting firm at any time during the year if it determines that
such a change would be in our and our stockholders’ best interests.
Ernst & Young LLP
Ernst & Young LLP fees incurred by us for
fiscal years 2015 and 2016 were as follows:
Services
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2015
($)
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2016
($)
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Audit Fees
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2,871,088
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4,641,049
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Audit-Related Fees
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1,440,551
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73,720
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Tax Fees
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983,365
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838,785
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All Other Fees
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19,000
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306,444
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Total
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5,314,005
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5,859,998
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Audit Fees:
Audit fees for 2015 and 2016 were
for professional services rendered in connection with audits of our consolidated financial statements, statutory audits of our
subsidiary companies, quarterly reviews and assistance with documents that we filed with the SEC (including our Forms 10-Q and
8-K) for periods covering fiscal 2015 and 2016.
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Audit-Related Fees:
Audit-related fees for 2015
and 2016 were for professional services rendered in connection with debt offerings and consultations with management on various
accounting matters.
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Tax Fees:
Tax fees for 2015 and 2016 were for
tax consulting services.
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All Other Fees:
Other fees in 2015 and 2016
were for access to technical accounting services.
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Audit Committee Pre-Approval
As
required by Section 10A(i)(1) of the Exchange Act, our Audit Committee has adopted a pre-approval policy requiring that the Audit
Committee pre-approve all audit and permissible non-audit services to be performed by our independent registered public accounting
firm. Any proposed service that has received pre-approval but which will exceed pre-approved cost limits will require additional
pre-approval by the Audit Committee. In addition, pursuant to Section 10A(i)(3) of the Exchange Act, the Audit Committee has established
procedures by which the Audit Committee may from time to time delegate pre-approval authority to the Chairman of the Audit Committee.
If the Chairman exercises this authority, he must report any pre-approval decisions to the full Audit Committee at its next meeting.
The independent registered public accounting firm and our management are required to periodically report to the Audit Committee
regarding the extent of services provided by the independent registered public accounting firm in accordance with the committee’s
pre-approval, and the fees for the services performed to date.
During
fiscal years 2015 and 2016 all services provided to us by Ernst & Young LLP were pre-approved by the Audit Committee in accordance
with the pre-approval policy described above. The scope and services was reviewed and approved by the Audit Committee after the
services were rendered. Ernst & Young LLP and our Audit Committee have each concluded that Ernst & Young LLP’s objectivity
and ability to exercise impartial judgment on all issues encompassed with the audit engagement has not been impaired because (i)
the services did not include prohibited non-audit related services and (ii) the fees we paid were insignificant both to Ernst
& Young LLP and to SunPower.
Vote Required
The
ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for fiscal year
2017 requires the affirmative vote of the holders of a majority of our stock having voting power and in attendance or represented
by proxy at the Annual Meeting. We do not expect “broker non-votes” on this proposal since brokers have discretionary
authority to vote on this proposal. Abstentions will have the effect of votes against this proposal.
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SUNPOWER CORPORATION
77 RIO ROBLES
SAN JOSE, CA 95134
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VOTE
BY INTERNET
Before
The Annual Meeting
- Go to
www.proxyvote.com
Use
the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time
the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions
to obtain your records and to create an electronic voting instruction form.
During
The Annual Meeting
- Go to
www.virtualshareholdermeeting.com/SPWR2017
You
may attend the Annual Meeting via the Internet and vote during the Annual Meeting. Have the information that is printed in the
box marked by the arrow available and follow the instructions.
VOTE
BY PHONE - 1-800-690-6903
Use
any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date
or meeting date. Have your proxy card in hand when you call and then follow the instructions.
VOTE
BY MAIL
Mark, sign and date your proxy card
and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way,
Edgewood, NY 11717.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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E20758-P88578
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KEEP
THIS PORTION FOR YOUR RECORDS
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THIS
PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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DETACH
AND RETURN THIS PORTION ONLY
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SUNPOWER CORPORATION
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For
All
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Withhold
All
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For All
Except
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To withhold
authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s)
on the line below.
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The Board of Directors recommends you vote FOR the following:
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1.
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The re-election
of three directors to serve as Class III directors on our board of directors (the “Board”);
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☐
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☐
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☐
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Nominees:
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01) Helle Kristoffersen
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02) Thomas R. McDaniel
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03) Thomas H. Werner
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The Board of Directors recommends you vote FOR the following proposal:
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For
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Against
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Abstain
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2.
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The approval, in an advisory vote, of our named executive officer compensation;
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☐
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☐
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☐
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The Board of Directors recommends
you vote 1 YEAR on the following proposal:
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1 Year
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2 Years
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3 Years
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Abstain
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3.
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The proposal to approve, in an advisory vote, whether a stockholder advisory vote on our named executive officer compensation
should be held every (a) one year, (b) two years, or (c) three years; and
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☐
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☐
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☐
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☐
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The Board of Directors recommends
you vote FOR the following proposal:
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For
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Against
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Abstain
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4.
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The ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for fiscal
year 2017.
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☐
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☐
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☐
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NOTE:
In their discretion, Thomas H. Werner, Charles D. Boynton, Ken Mahaffey or any of them, each with the power of substitution,
are authorized to vote upon such other matter or matters as may properly come before the Annual Meeting or any adjournment
or postponement thereof.
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For address changes and/or comments, please check this box and write them on the back where indicated.
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☐
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This Proxy
should be marked, dated and signed by stockholder(s) exactly as his or her name(s) appear(s) hereon, and returned promptly
in the enclosed envelope. Persons signing in a fiduciary capacity should so indicate. If shares are held by joint tenants
or as a community property, both should sign.
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Signature [PLEASE SIGN WITHIN BOX]
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Date
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Signature (Joint Owners)
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Date
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V.1.2
Important
Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Combined Document is available at www.proxyvote.com.
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SUNPOWER CORPORATION
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PROXY FOR 2017 ANNUAL MEETING OF STOCKHOLDERS
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
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The
undersigned stockholder of SUNPOWER CORPORATION, a Delaware corporation, hereby acknowledges the Notice of the 2017 Annual
Meeting of Stockholders and Proxy Statement, and hereby appoints Thomas H. Werner, Charles D. Boynton and Ken Mahaffey, and
each of them, as proxies and attorneys-in-fact with full power to each of substitution, on behalf and in the name of the undersigned,
to represent, vote and act on behalf of the undersigned at the 2017 Annual Meeting of Stockholders of SunPower Corporation
to be held on April 27, 2017, at 12:00 p.m. Pacific Time, at
www.virtualshareholdermeeting.com/SPWR2017
and
at any adjournment or postponement thereof, and to vote all shares of Common Stock that the undersigned would be entitled
to vote, if then and there personally present, on all matters coming before the meeting. A majority of such attorneys-in-fact
or substitutes as shall be present and shall act at said meeting or any adjournment or postponement thereof (or if only one
shall represent and act, then that one) shall have and may exercise all the powers of said attorneys-in-fact hereunder.
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THIS
PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN, OR IF NO CONTRARY DIRECTION IS INDICATED, WILL BE VOTED FOR
(1) THE ELECTION OF EACH OF THE DIRECTOR NOMINEES; FOR (2) THE APPROVAL, IN AN ADVISORY VOTE, OF OUR NAMED EXECUTIVE OFFICER
COMPENSATION; 1 YEAR ON (3) THE PROPOSAL TO APPROVE, IN AN ADVISORY VOTE, WHETHER A STOCKHOLDER ADVISORY VOTE ON OUR NAMED
EXECUTIVE OFFICER COMPENSATION SHOULD BE HELD EVERY (A) ONE YEAR, (B) TWO YEARS, OR (C) THREE YEARS; AND FOR (4) THE RATIFICATION
OF THE APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2017; AND
WILL BE VOTED AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY
ADJOURNMENT OR POSTPONEMENT THEREOF.
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Address
Changes/Comments:
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(If you
noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)
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Continued and to be signed on reverse side
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