WOLFSPEED INC

Note 13 -Restructuring

During the first quarter of fiscal 2025, the Company initiated a headcount reduction and facility closure and consolidation plan intended to optimize its cost structure as the Company accelerates its transition from 150mm to 200mm silicon carbide devices (the 2025 Restructuring Plan). The actions taken under the 2025 Restructuring Plan will ultimately result in the closure of the Company's 150mm device fabrication facility in Durham, North Carolina as well as a realignment of related activities across the geographic regions in which the Company operates. The Company also recently initiated plans to consolidate its manufacturing footprint for epitaxy products by winding down operations at its facility in Farmer's Branch, Texas during fiscal 2025. Refer to Note 14, "Subsequent Events" for additional discussion of actions related to the consolidation of the Company's manufacturing activities. The Company is also taking steps to optimize the allocation of resources across various functional groups. The Company expects these actions will result in a total headcount reduction of approximately 20% over the nextsix months toone year.

The costs that will be incurred as a result of the 2025 Restructuring Plan include severance and employee benefit costs, voluntary termination benefits, and other exit costs that qualify as exit and disposal costs under U.S. GAAP. The severance costs incurred during the first quarter of fiscal 2025 were provided under an ongoing benefit arrangement and were therefore recorded once they were both probable and reasonably estimable in accordance with the provisions of ASC 712-10, “Nonretirement Postemployment Benefits”. Additionally, the Company has incurred, and over the next 12 months will continue to incur, additional facility closure-related costs related to these activities, including asset-related charges and fixed manufacturing costs that will be eliminated as a result of this plan and other incremental costs to exit facilities.

Including these additional facility closure-related costs, the Company expects to incur approximately $400 million to $450 million of total costs, including approximately $60 million of involuntary and voluntary severance costs, $125 million of other closure-related cash costs, and approximately $250 million of asset-related charges and other non-cash costs. The Company expects to realize approximately $200 million of annualized cost savings upon completion of these initiatives. A summary of the charges recognized in the consolidated statements of operations during the first quarter of fiscal 2025 resulting from these restructuring activities is shown below:

A summary of the balance sheet activity related to these restructuring activities recognized in accounts payable and accrued expenses in the unaudited consolidated balance sheet as of September 29, 2024 follows:

Note 14 -Subsequent Events

Preliminary Memorandum of Terms under the CHIPS and Science Act

On October 11, 2024, the Company signed a non-binding preliminary memorandum of terms (PMT) with the United States Department of Commerce for up to $750.0 million in proposed direct funding under the CHIPS Act. The PMT outlines key terms for the funding including the proposed amount and form of the award. The disbursement of the funds will be conditioned upon the achievement of certain operational and construction milestones and other requirements. Receipt of the proposed direct funding set forth in the PMT is subject to negotiation, completion and execution of the direct funding agreement with the Department of Commerce, and the negotiation and execution of an intercreditor agreement between the Department of Commerce and the Company's lenders, which may contain different or additional conditions not contained in the PMT.

The PMT includes an obligation for the Company to raise an aggregate of $750.0 million in debt financing and revise certain terms under the 2030 Senior Notes, restructure or refinance its outstanding convertible notes at specified intervals and defer a total of $120.0 million in cash interest payments due prior to June 30, 2025 under the CRD Agreement. In addition, the Company has agreed to raise up to $300.0 million of additional capital from non-debt sources over the next 12 months.

2030 Senior Notes Amended and Restated Indenture

Also on October 11, 2024, the Company entered into the Amended and Restated Indenture (the 2030 Senior Notes Indenture), which amends certain terms and conditions of the 2030 Senior Notes and permits the Company to issue and sell $750.0 million of additional notes, subject to the fulfillment of certain conditions precedent.

Pursuant to the 2030 Senior Notes Indenture, the 2030 Senior Notes bear interest (a) for the period from the effectiveness of the Existing Indenture to October 11, 2024 at a rate of 9.875% per annum; (b) for the period from October 11, 2024 through and including June 22, 2025 at a rate of 9.875% per annum (payable in cash), plus 2% per annum (payable at the Company's option, in cash or in-kind); (c) for the period commencing on June 23, 2025 through June 22, 2026 (i) if the Interest Rate Step-Down Condition (as defined below) is satisfied as of June 23, 2025, at a rate of 10.875% per annum (payable in cash) plus 2% per annum (payable at the Company's option in cash or in-kind) and (ii) if the Interest Rate Step-Down Condition is not satisfied as of June 23, 2025 at a rate of 11.875% per annum (payable in cash), plus 2% per annum (payable at the Company's option, in cash or in-kind); and (d) for the period commencing on June 23, 2026 and at all times thereafter, (i) if the Interest Rate Step-Down Condition is satisfied as of June 23 of the most recent year, at a rate of 13.875% per annum (payable in cash) and (ii) if the Interest Rate Step-Down Condition is not satisfied, at a rate of 15.875% per annum (payable in cash). The Interest Rate Step-Down Condition is met if (a)(i) the Company redeems or repurchases (other than redemptions or repurchases with the proceeds of dispositions) the 2030 Senior Notes, resulting in the aggregate principal amount of 2030 Senior Notes outstanding being less than $1.0 billion and (ii) the Company receives at least $450.0 million of awards under the CHIPS Act or (b) as of the most recent June 23rd, the ratio of outstanding principal amount of the 2030 Senior Notes to EBITDA (as defined in the 2030 Senior Notes Indenture) for the most recently ended four fiscal quarter period for which financial statements have been or are required to have been delivered under the 2030 Senior Notes Indenture is less than or equal to 2:1. The 2030 Senior Notes will mature on the earlier of (x) June 23, 2030 and (y) September 1, 2029, if more than $175 million in aggregate principal amount of the Company's 1.875% convertible senior notes due December 1, 2029 remains outstanding on such date.

The 2030 Senior Notes Indenture contains certain customary affirmative covenants, negative covenants and events of default, including a liquidity maintenance financial covenant requiring the Company to have an aggregate amount of unrestricted cash and cash equivalents maintained in accounts over which the trustee and collateral agent has been granted a perfect first lien security interest of at least (a) $630.0 million as of the last day of any calendar month ending on or prior to March 31, 2025 and (b) $750.0 million as of April 1, 2025 and as of the last day of any calendar month ending thereafter. Upon the Company having received at least $450.0 million of award disbursements pursuant to governmental grants under the CHIPS Act, the level of minimum liquidity shall be permanently reduced to $250.0 million.

On October 22, 2024, the Company issued $250.0 million in aggregate principal amount of 2030 Senior Notes pursuant to the 2030 Senior Notes Indenture. The Company may issue up to an additional $500.0 million in aggregate principal amount of 2030 Senior Notes, subject to certain conditions.

2033 CRD Notes Amendment

On October 15, 2024, the Company entered into Amendment No. 1 to the CRD Agreement, which amends the existing agreement to, among other things, permit the Company to pay the accrued interest on the outstanding loans payable under the existing agreement on the last business day of each of December 2024 and June 2025 (together, the PIK Amounts) by adding the PIK Amounts to the then outstanding principal amount of the loans rather than in cash. The interest rate on the PIK Amounts will accrue at a rate of 15.0% per annum. The amendment also permits the Company to grant liens on additional assets in Siler City, North Carolina in connection with disbursements pursuant to governmental grants or awards under the CHIPS Act, and permits the Company to pay a portion of interest on the 2030 Senior Notes in-kind subject to the limitations set forth in the amendment to the CRD Agreement.

Saarland Project

During October 2024, the Company notified the relevant governmental authorities that it has indefinitely suspended its plans to construct a silicon carbide fabrication facility in Saarland, Germany. The estimated financial impact of this action is included in the total estimated costs of the 2025 Restructuring Plan discussed in Note 13, "Restructuring".