Transactions with Total and Total S.A.

3 Months Ended

Apr. 04, 2021

TRANSACTIONS WITH TOTAL AND TOTAL SEIn June 2011, Total completed a cash tender offer to acquire 60% of our then outstanding shares of common stock at a price of $23.25 per share, for a total cost of approximately $1.4 billion. In December 2011, we entered into a Private Placement Agreement with Total, under which Total purchased, and we issued and sold, 18.6 million shares of our common stock for a purchase price of $8.80 per share, thereby increasing Total's ownership to approximately 66% of our outstanding common stock as of that date. As of April 4, 2021, ownership of our outstanding common stock by Total SE and its affiliates was approximately 51%. Subsequent to the spin-off of Maxeon Solar, Total received a pro rata distribution of ordinary shares of Maxeon Solar, and its percentage ownership of shares in SunPower did not change.

Supply Agreements

In December 2019, we sold our membership interests in certain project companies to Total Strong, LLC., a joint venture between Total and Hannon Armstrong. During the three months ended April 4, 2021, we recognized revenue of $15.1 million for sales to this joint venture, for continued recognition of engineering, procurement and construction ("EPC") revenue during the quarter, which is included within "Solar power systems, components, and other" on our consolidated statements of operations.

Affiliation Agreement

We and Total have entered into an Affiliation Agreement that governs the relationship between Total and us (the "Affiliation Agreement"). Until the expiration of a standstill period specified in the Affiliation Agreement (the "Standstill Period"), and subject to certain exceptions, Total, Total SE, and any of their respective affiliates and certain other related parties (collectively, the "Total Group") may not effect, seek, or enter into discussions with any third party regarding any transaction that would result in the Total Group beneficially owning our shares in excess of certain thresholds, or request us or our independent directors, officers, or employees to amend or waive any of the standstill restrictions applicable to the Total Group. The Standstill Period ends when Total holds less than 15% ownership of us.

The Affiliation Agreement imposes certain limitations on the Total Group's ability to seek to effect a tender offer or merger to acquire 100% of our outstanding voting power and imposes certain limitations on the Total Group's ability to transfer 40% or more of our outstanding shares or voting power to a single person or group that is not a direct or indirect subsidiary of Total SE. During the Standstill Period, no member of the Total Group may, among other things, solicit proxies or become a participant in an election contest relating to the election of directors to our board of directors.

The Affiliation Agreement provides Total with the right to maintain its percentage ownership in connection with any new securities issued by us, and Total may also purchase shares on the open market or in private transactions with disinterested stockholders, subject in each case to certain restrictions.

The Affiliation Agreement also imposes certain restrictions with respect to the ability of us and our board of directors to take certain actions, including specifying certain actions that require approval by the directors other than the directors appointed by Total and other actions that require stockholder approval by Total.

Cooperation Agreement

In December 2020, we entered into a strategic Cooperation Framework Agreement (the "Cooperation Agreement") with Total that governs the ongoing relationship between us and Total with respect to development and sale of certain future commercial solar power projects. The Cooperation Agreement lays the foundation for the potential to jointly develop certain projects and allows us and Total to expand investments in solar power projects to provide for future opportunities and investment volume.

Among other things, the Cooperation Agreement provides for:

•our obligation to offer and ability to sell certain projects to Total at pre-agreed model metrics;

•our ability to obtain non-recourse financing of construction costs;

•our ability to obtain financing of development costs as various milestones in the project development cycle are achieved;

•exclusivity over our offering of various post-sale services for projects sold to Total or its affiliates; and

•our right to offer EPC services on some downstream generation projects being developed by Total.

The Cooperation Agreement will remain in effect until December 31, 2023, unless otherwise terminated.

0.875% Debentures Due 2021

In June 2014, we issued $400.0 million in principal amount of our 0.875% debentures due June 1, 2021. An aggregate principal amount of $250.0 million of the 0.875% debentures due 2021 was initially acquired by Total. Interest is payable semi-annually, beginning on December 1, 2014. The 0.875% debentures due 2021 are convertible into shares of our common stock at any time. When issued, the initial conversion rate in respect of the 0.875% debentures due 2021 was 20.5071 shares of common stock per $1,000 principal amount of 0.875% senior convertible debentures (which was equivalent to an initial conversion price of approximately $48.76 per share). After giving effect to the Spin-Off, effective September 1, 2020, the conversion rate was adjusted to 25.1388 shares of common stock per $1,000 principal amount of debentures (which is equivalent to a conversion price of approximately $39.78 per share). The applicable conversion rate may further adjust in certain circumstances, including a fundamental change, as described in the indenture governing the 0.875% debentures due 2021. If not earlier repurchased or converted, the 0.875% debentures due 2021 mature on June 1, 2021.

During the fiscal year ended January 3, 2021, we purchased $337.4 million of aggregate principal amount of the 0.875% debentures due 2021, including $250.0 million of principal amount representing the entire amount held by Total, for cash proceeds of approximately $334.7 million, net.

As of April 4, 2021, the outstanding principal amount of the 0.875% debentures due 2021 was $62.5 million, none of which was held by Total.

4.00% Debentures Due 2023

In December 2015, we issued $425.0 million in principal amount of our 4.00% debentures due 2023. An aggregate principal amount of $100.0 million of the 4.00% debentures due 2023 was acquired by Total. Interest is payable semi-annually, beginning on July 15, 2016. The 4.00% debentures due 2023 are convertible into shares of our common stock at any time. When issued, the initial conversion rate in respect of the 4.00% debentures due 2023 was 32.7568 shares of common stock per $1,000 principal amount of debentures (which was equivalent to an initial conversion price of approximately $30.53 per share). After giving effect to the Spin-Off, effective September 1, 2020, the conversion rate adjusted to 40.1552 shares of common stock per $1,000 principal amount of debentures (which is equivalent to a conversion price of approximately $24.90 per share), which provides Total the right to acquire up to 4,015,515 shares of our common stock. Notice of the conversion rate adjustment was delivered to Wells Fargo Bank, National Association, the trustee, in accordance with the terms of the indenture governing the 4.00% debentures due 2023. The applicable conversion rate may further adjust in certain circumstances, including a fundamental change, as described in the indenture governing the 4.00% debentures due 2023. If not earlier repurchased or converted, the 4.00% debentures due 2023 mature on January 15, 2023.

Joint Solar Projects with Total and its Affiliates

We enter into various EPC and operations and maintenance ("O&M") agreements relating to solar projects, including EPC and O&M services agreements relating to projects owned or partially owned by Total and its affiliates. As of April 4, 2021, we had $48.4 million of "Contract assets", $1.1 million of "Contract liabilities" and $0.2 million of "Accounts receivable, net" on our condensed consolidated balance sheets related to projects in which Total and its affiliates have a direct or indirect material interest.

Related-Party Transactions with Total and its Affiliates:

The following related-party balances and amounts are associated with transactions entered into with Total and its Affiliates. Refer to Note 9. Equity Investments for related-party transactions with unconsolidated entities in which we have a direct equity investment.


	As of
(In thousands)	April 4, 2021		January 3, 2021
Accounts receivable	$	226	$	76


	Three Months Ended
(In thousands)	April 4, 2021		March 29, 2020
Revenue:
Solar power systems, components, and other	$	15,105	$	29,246
Cost of revenue:
Solar power systems, components, and other	12,361		27,849




Other income
Gain (loss) on early retirement of convertible debt	—		1,850
Interest expense:
Guarantee fees incurred under the Credit Support Agreement	—		13
Interest expense incurred on the 0.875% debentures due 2021	—		404
Interest expense incurred on the 4.00% debentures due 2023	1,000		1,000

RELATED-PARTY TRANSACTIONS

In connection with the Spin-Off, the Company entered into certain agreements with Maxeon Solar, including a transition services agreement, supply agreement, and product collaboration agreement.

The below table summarizes the Company’s transactions with Maxeon Solar for the three months ended April 4, 2021:


	Three Months Ended
(In thousands)	April 4, 2021
Purchases of photovoltaic modules (recorded in cost of revenue)	$	58,154
Research and development expenses reimbursement received	9,373
Income from transition services agreement, net	3,087

The Company had the following balances related to transactions with Maxeon Solar as of April 4, 2021:



(In thousands)	April 4, 2021
Prepaid and other current assets	$	3,838
Accrued liabilities	7,527
Accounts payable	29,611