SUNPOWER 2006 KEY EMPLOYEE BONUS PLAN (KEBP)

1.1

The objective of this Key Employee Bonus Plan is to provide incentives to key employees of the Company based on SunPower key milestone achievement, the individual’s performance against set individual Key Initiatives (KIs), and the company’s PBT and sales performance against Annual Operating Plan (AOP).

2.1

This agreement will become effective January 2, 2006 for the plan period of fiscal year 2006. The plan period for fiscal year 2006 covers January 2, 2006 to January 1, 2007.

3.1

Prior to or shortly after the commencement of each Plan Period, members of SunPower Executive Staff will recommend to the President/CEO for approval proposed participants for the plan period and their incentive levels.

3.2

Participants will be notified of their eligibility at the beginning of each plan period or shortly thereafter.

3.3

Newly hired eligible employees may be added as participants during the plan period. Other key employees who are currently not plan participants may be considered for participation at the beginning of the plan period if eligibility requirements are met.

3.4

Changes to the plan participant list and exceptions require the approval of the President/CEO. Changes in incentive levels for current participants require the approval of the President/CEO. Discontinuation of KEPB participation requires the approval of the President/CEO.

4.1

Each plan participant will be given an incentive level expressed as a percent of Base Salary. This represents the target bonus. There are 4 incentive levels in this program; participation begins at 20% for most entrants into KEPB. The incentive levels are 80% Plan, 50% Plan, 30% Plan and 20% Plan.

4.2

The participant’s actual bonus attainment is determined by the participant’s score from the following factors:

4.3

The weight assigned to each of the plan factors depends on the participant’s bonus plan, as listed below:

4.4

PBT Factor: Scoring for the PBT factor will be dependent on SunPower performance against the 2006 plan. The zero point for PBT is determined by the executive staff and approved by the Compensation Committee of the Board at the beginning of the Plan period. The zero point yields no bonus payment. PBT performance at 100% point of the plan yields 100% payment. PBT performance between the zero point and the 100% point of the plan is pro-rated .

4.5

Product Sales Factor: Scoring for the sales factor will be dependent on SunPower’ performance against the 2006 plan. The zero point for Sales is determined by the executive staff and approved by the Compensation Committee of the Board at the beginning of the Plan period. The zero point yields a sales factor of zero. Sales at 100% of plan yields a sales factor of 1.0. Sales performance between the zero point and the 100% point of the plan is ratably scored between 0 and 1.0 . Sales greater than 100% of the 2006 plan yields a sales factor greater than 1.0, equal to actual total sales divided by plan sales, with no maximum. The graph below depicts the sales factor at different sales levels. The 2006 Plan Sales for KEBP-purposes is $207.7M. Sales factor is zero if 2006 sales are lower than $186.9M.

4.6

Milestone Factor: Scoring for the milestone factor will be dependent on SunPower performance on quarterly company milestones, as approved by the Board of Directors. The zero point yields a milestone factor of zero. Milestone points at 80 percent and above, yield a milestone factor equivalent to the percentage of points scored. Milestone performance between the 51 percent and 79 percent of points is calculated by taking the percentage of points achieved divided by 2. The table below depicts the milestone factor at different point levels.

4.7

In the event of an acquisition or major restructuring, the Plan Sales and Milestone figures will be adjusted accordingly. Any change in this measurement is subject to approval by the Board.

4.8

The overall bonus calculation shall be as follows for the different bonus plans, where: