Super Micro Computer Annual Report 2017

Plain-text annual report

Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549__________________________________________________________________________Form 10-KxANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended June 30, 2017or¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to Commission File Number 001-33383__________________________________________________________________________Super Micro Computer, Inc.(Exact name of registrant as specified in its charter)Delaware 77-0353939(State or other jurisdiction ofincorporation or organization) (I.R.S. EmployerIdentification No.)980 Rock AvenueSan Jose, CA 95131(Address of principal executive offices, including zip code)(408) 503-8000(Registrant’s telephone number, including area code)__________________________________________________________________________Securities registered pursuant to Section 12(b) of the Act:Title of each classTrading SymbolName of each exchange on which registeredCommon Stock, $0.001 par value per shareSMCIOTCSecurities registered pursuant to section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No xIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes¨ No x Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submittedand posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submitand post such files). Yes ¨ No xIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained,to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growthcompany. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.Large accelerated filer x Accelerated filer ¨Non-accelerated filer ¨ (Do not check if a smaller reporting company) Smaller reporting company ¨Emerging growth company ¨ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financialaccounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b of the Exchange Act) Yes ¨ No xThe aggregate market value of the registrant’s common stock held by non-affiliates, based upon the closing price of the common stock on December 31, 2016, as reported bythe Nasdaq Global Select Market, was $1,110,444,831. Shares of common stock held by each executive officer and director and by each person who owns 5% or more of theoutstanding common stock, based on filings with the Securities Exchange Commission, have been excluded since such persons may be deemed affiliates. This determination ofaffiliate status is not necessarily a conclusive determination for other purposes.Table of ContentsAs of March 31, 2019, there were 49,881,914 shares of the registrant’s common stock, $0.001 par value, outstanding, which is the only class of common stock of theregistrant issued.DOCUMENTS INCORPORATED BY REFERENCENoneTable of ContentsSUPER MICRO COMPUTER, INC.ANNUAL REPORT ON FORM 10-KFOR THE FISCAL YEAR ENDED JUNE 30, 2017TABLE OF CONTENTS Page Explanatory Note2 PART I Item 1.Business3Item 1A.Risk Factors11Item 1B.Unresolved Staff Comments28Item 2.Properties28Item 3.Legal Proceedings29Item 4.Mine Safety Disclosures30 PART II Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities31Item 6.Selected Financial Data33Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations35Item 7A.Quantitative and Qualitative Disclosures About Market Risk50Item 8.Financial Statements and Supplementary Data51Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure100Item 9A.Controls and Procedures100Item 9B.Other Information110 PART III Item 10.Directors, Executive Officers and Corporate Governance110Item 11.Executive Compensation117Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters128Item 13.Certain Relationships and Related Transactions and Director Independence130Item 14.Principal Accountant Fees and Services132 PART IV Item 15.Exhibits and Financial Statement Schedules132 Signatures136Unless the context requires otherwise, the words “Super Micro,” “Supermicro,” “we,” “Company,” “us” and “our” in this document refer to SuperMicro Computer, Inc. and where appropriate, our wholly owned subsidiaries. Supermicro, the Company logo and our other registered or common lawtrademarks, service marks, or trade names appearing in this Annual Report on Form 10-K are the property of Super Micro Computer, Inc. or its affiliates.Other trademarks, service marks, or trade names appearing in this Annual Report on Form 10-K are the property of their respective owners.1Table of ContentsExplanatory NoteThis Annual Report on Form 10-K includes restatement of: (1) our consolidated balance sheet as of June 30, 2016 and the related consolidatedstatements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the fiscal years ended June 30, 2016 and 2015 in Part II,Item 8 of this Annual Report on Form 10-K; (2) our selected financial data as of and for our fiscal years ended June 30, 2016 and 2015 located in Part II,Item 6 of this Annual Report on Form 10-K; (3) our management’s discussion and analysis of financial condition and results of operations as of and for ourfiscal years ended June 30, 2016 and 2015 contained in Part II, Item 7 of this Annual Report on Form 10-K; and (4) our quarterly financial information for thethree months ended June 30, 2016 in Part II, Item 8, Note 17, “Quarterly Financial Information (Unaudited)” of the notes to the consolidated financialstatements in Part II, Item 8 of this Annual Report on Form 10-K. See below and Part II, Item 8, Note 19, “Restatement of Previously Issued ConsolidatedFinancial Statements” of the notes to the consolidated financial statements of this Annual Report on Form 10-K for a detailed discussion of the effect of therestatement.Prior to filing this Annual Report on Form 10-K, we filed Quarterly Reports on Form 10-Q/A for the quarterly periods ended March 31, 2017,December 31, 2016, and September 30, 2016, which included restatement of the condensed consolidated financial statements (and related disclosures) for theperiods described therein, as set forth in those reports.We have not previously issued consolidated financial statements as of and for the year ended June 30, 2017, for the reasons set forth below under“Background of Restatement.” This Annual Report on Form 10-K includes our consolidated balance sheet as of June 30, 2017 and related consolidatedstatements of operations, comprehensive income, stockholders’ equity for the fiscal year then ended, and unaudited quarterly financial information for thequarter ended June 30, 2017.Background of RestatementIn August 2017, prior to the issuance of our consolidated financial statements for the fiscal year ended June 30, 2017, the audit committee (the“Audit Committee”) of our Board of Directors (the “Board”) commenced an investigation (the “Investigation”) into certain accounting and internal controlmatters, principally focused on certain revenue recognition matters. The Investigation was conducted with the assistance of outside counsel, which retainedforensic accountants to assist them in their work. Following the conclusion of the Investigation, the Audit Committee directed its outside counsel and itsforensic accountants to conduct additional procedures on an expanded scope of revenue recognition matters. Concurrent with these additional procedures,new members of our management, under the direction of the Audit Committee, performed a thorough analysis of our historical financial statements,accounting policies and financial reporting, as well as our disclosure controls and procedures and our internal control over financial reporting. During thecourse of the Investigation, the further procedures by outside counsel and the management analysis (collectively, the “Investigation, Procedures andAnalysis”), the Audit Committee and management determined certain employees had violated our Code of Business Conduct and Ethics and discoveredaccounting and financial reporting errors and certain irregularities. On November 14, 2018, the Board, upon the recommendation, and with the concurrenceof the Audit Committee and new members of management, concluded that certain previously filed consolidated financial statements and related financialinformation should no longer be relied upon.The Investigation, Procedures and Analysis identified certain material weaknesses in our internal control over financial reporting. See Part II, Item9A, “Controls and Procedures” of this Annual Report on Form 10-K for the conclusions of our Chief Executive Officer and Chief Financial Officer regardingdisclosure controls and procedures and our internal control over financial reporting.2Table of ContentsSPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 andSection 21E of the Securities Exchange Act of 1934, as amended that involve risks and uncertainties. These statements relate to future events or our futurefinancial performance. In some cases, you can identify forward-looking statements by terminology including “would,” “could,” “may,” “will,” “should,”“expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” the negative of these terms or other comparableterminology. In evaluating these statements, you should specifically consider various factors, including the risks described below, under Part I, Item 1A,“Risk Factors”, and in other parts of this Form 10-K as well as in our other filings with the SEC. Moreover, we operate in a very competitive and rapidlychanging environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of allfactors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained inany forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this AnnualReport on Form 10-K may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-lookingstatements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events orotherwise, except as required by law. We cannot guarantee future results, levels of activity, performance or achievements. Given these risks anduncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.PART IItem 1. BusinessOverviewWe are a Silicon Valley founded, headquartered and operated provider of application optimized high performance and high efficiency server andstorage systems. We develop and provide end-to-end green computing solutions to the cloud computing, data center, enterprise, artificial intelligence andmachine learning, big data, hyper-converged, OEM, high performance computing ("HPC"), and Internet of Things ("IoT")/embedded markets. Our solutionsrange from complete server, storage, blade and workstations to full racks, networking devices, server management software and global support and services.We offer our customers a high degree of flexibility and customization by providing a broad array of server configurations from which they can choose theoptimal solutions to fit their computing needs. Our server systems, subsystems and accessories are architecturally designed to provide high levels ofreliability, quality, configurability and scalability, thereby enabling our customers to benefit from improvements in compute performance, density, thermalmanagement and power efficiency, which lead to lower total cost of ownership.We perform the majority of our research and development efforts in-house, at our San Jose, California headquarters, which we believe increases theefficiency of communication and collaboration between design teams, streamlines the development process and reduces time-to-market. We have developeda set of design principles which allow us to aggregate individual industry standard components and materials to develop optimized products, such asserverboards, chassis, power supplies, and networking and storage devices. This building block approach allows us to provide a broad range of products, andenables us to build and deliver application-optimized solutions based upon customers’ requirements.Core to our business is our focus on green computing. We are committed to leveraging the best new and emerging technologies and designs toreduce the environmental impact of the systems we deliver to market. Building these higher efficiency resource optimized systems brings a dual benefit toour customers of lower acquisition and operating costs while at the same time reducing the energy consumption and eWaste.We conduct our operations principally from our Silicon Valley headquarters in California and subsidiaries in Taiwan and the Netherlands. We sellthrough our direct sales force as well as through distributors, including value added resellers and system integrators, and OEMs who develop their productson our systems. During fiscal year 2017, our products were purchased by over 900 customers in 110 countries. We commenced operations in 1993 and havebeen profitable every year since inception. For fiscal years 2017, 2016 and 2015, our net sales were $2,484.9 million, $2,225.0 million and $1,954.4 million,respectively, and our net income was $66.9 million, $72.1 million and $92.6 million, respectively.The Supermicro Solution3Table of ContentsWe develop and manufacture high performance server solutions based upon an innovative, modular and open architecture. Our primary competitiveadvantages are the breadth of our product portfolio that can better match exact customer requirements and our ability to deliver new technologies to marketfaster. Our competitive advantages arise from how we combine our integrated internal research and development resources with our deep understanding ofcomplex computing requirements to develop the intellectual property used in our server solutions. These competitive advantages have enabled us to developa set of design principles and performance specifications that meet industry standard Server System Infrastructure ("SSI") requirements and also incorporatethe advanced functionality and capabilities required by our customers. We believe that our approach provides us with greater flexibility to quickly andefficiently develop new server solutions that are optimized for our customers' specific application requirements.Flexible and Customizable Server SolutionsWe provide a broad portfolio of flexible and customizable server solutions to better address the specific application needs of our customers. Ourdesign principles allow us to aggregate industry standard components and materials to develop optimized server subsystems and accessories, such asserverboards, mid/backplanes, chassis and power supplies to deliver a broad range of products with superior features. This building block approach allows usto provide a broad range of optimized solution SKUs.Rapid Time-to-MarketWe are able to reduce the design and development time required to incorporate the latest technologies into the next generation of applicationoptimized server solutions. Our in-house design competencies, control of the design of many of the components used within our server systems and ourbuilding block architecture enable us to rapidly develop, build and test server systems, subsystems and accessories with unique configurations. As a result,when new technologies are brought to market, we are generally able to quickly design, integrate and assemble solutions with little need to re-engineer otherportions of our solution. Our efficient design capabilities allow us to offer our customers server solutions incorporating the latest technology with a betterprice-to-performance ratio. We work closely with the leading microprocessor, GPU, memory, disk/flash, and interconnect vendors and other hardware andsoftware suppliers to coordinate the design of our new products with their product release schedules, thereby enhancing our ability to rapidly introduce newproducts incorporating the latest technology.Improved Power Efficiency and Thermal ManagementWe leverage advanced technology and system design expertise to reduce the power consumption of our server, blade, workstation and storagesystems. We believe that we are an industry leader in power saving technology. Our server solutions include many design innovations to optimize powerconsumption and manage heat dissipation. We have designed flexible power management systems which customize or eliminate components in an effort toreduce overall power consumption. We have developed proprietary power supplies that can be integrated across a wide range of server system form factorswhich can significantly enhance power efficiency. We have also developed technologies that are specifically designed to reduce the effects of heatdissipation from our servers. Our thermal management technology allows our products to achieve a better price-to-performance ratio while minimizing energycosts and reducing the risk of server malfunction caused by overheating. We have also developed power management software that controls powerconsumption of server clusters by policy-based administration.High Density ServersOur servers are designed to enable customers to maximize computing power while minimizing the physical space utilized, which allows ourcustomers to efficiently deploy our server systems in scale-out configurations. Through our industry-leading technology, our systems offer significantly morememory, hard drive storage and expansion slots than traditional server systems with a comparable server form factor. For example, our BigTwin solutionscontain two or four full feature dual processor hot-pluggable compute nodes with All-Flash Non-Volatile Memory express (“NVMe”) support in a 2 rack unit(“2U”) server. This high density design is well suited for our customers that require highly space-efficient solutions and delivers higher efficiency throughsharing resources across systems.StrategyOur objective is to be the world’s leading provider of application optimized, high performance server, storage and networking solutions. Achievingthis objective requires continuous development and innovation of our solutions with better price performance and architectural advantages compared withour prior generation of solutions and with solutions offered by our competitors. We believe that many of these product innovations are gaining momentumbased on the strong year-over-year4Table of Contentsrevenue growth across these next-generation products. We believe that our strategy and our ability to innovate and execute will enable us to maintain ourrelative competitive position in many of our product areas and improve our competitive position in others, while providing us with additional long-termgrowth opportunities. Key elements of our strategy include maintaining our time-to-market advantage, enhancing our software management solutions,expand our service and support offerings, further optimize our global operating structure and deepen our relationships with suppliers and manufacturers.Maintain Our Time-to-Market AdvantageWe believe one of our major competitive advantages is our ability to rapidly incorporate the latest computing innovations into our products. Weintend to maintain our time-to-market advantage by continuing our investment in our research and development efforts to rapidly develop new proprietaryserver, storage and networking solutions based on industry standard components. We plan to continue to work closely with technology partners such as IntelCorporation ("Intel"), Nvidia Corporation ("Nvidia") and Advanced Micro Devices, Inc. ("AMD"), to develop products that are compatible with the latestgeneration of industry standard technologies. We believe these efforts will allow us to continue to offer products that lead in price for performance as eachgeneration of computing innovations becomes available.Enhance Our Software Management SolutionsWe have introduced and plan to continue developing additional server, storage and networking management software capabilities and partneringwith certain software suppliers for software solutions that are integrated with our server products. This will enable our customers to simplify and automate thelarge scale deployment, configuration and monitoring of our servers.Expand Our Service & Support OfferingsWe intend to continue to expand our global customer service and support offerings and enable our customers to purchase service and supporttogether with our complete server systems as total solution packages around the world. Our service and support is designed to help our customers improveuptime, reduce costs and enhance the productivity of their investment in our products. We believe that continued enhancement of these offerings will supportthe continued growth of our business and increase our penetration with enterprise customers.Further Optimize Our Global Operating StructureWe plan to continue to increase our worldwide manufacturing capacity and logistics capabilities in the US, Netherlands and Taiwan in order to moreefficiently serve our customers and lower our manufacturing costs. We continue to assess the efficiency of our global tax structure to manage our tax costs.Within our global operating structure, we employ stringent due diligence and qualification processes to select our contract manufacturers, which we regularlyaudit for process, quality and control. Our global manufacturing process is designed to ensure the end-to-end security of our products.Deepen Our Relationships with Suppliers and Manufacturers Our efficient supply chain and combined internal and outsourced manufacturing allow us to build customized systems to order, while minimizingcosts. We plan to continue leveraging our relationships with suppliers and contract manufacturers in order to maintain and improve our cost structure as webenefit from economies of scale. We intend to continue to source non-core products from external suppliers.Products and ServicesWe offer a broad range of application-optimized server solutions, including storage, rackmount and blade server systems and subsystems andaccessories, which can be used to build complete server systems serving a variety of markets including cloud computing, data center, enterprise, big data,HPC, deep learning and IoT embedded. The percentage of our net sales represented by sales of server systems increased to 70.0% in fiscal year 2017 from68.9% in fiscal year 2016 and from 60.7% in fiscal year 2015, and the percentage of our net sales represented by sales of subsystems and accessories was30.0% in fiscal year 2017, 31.1% in fiscal year 2016 and 39.3% in fiscal year 2015. Server SystemsWe sell server systems in rackmount, blade, Twin and multi-node form factors, which support single, dual and multiprocessor architectures. Asummary of our server systems and their markets are listed below.5Table of Contents Our SuperBlade® and MicroBlade™ system families are each designed to share common computing resources, thereby saving space and power overstandard rackmount servers. We believe that our SuperBlade and MicroBlade servers, with our unique disaggregated resource-saving architectures that enablethe independent upgrade of compute modules and other Blade resources, offer a unique value to our customers. They provide industry-leading density, price-to-performance per square foot and energy savings to reduce data center total cost of ownership ("TCO").Our SuperStorage systems in 2U, 3 rack unit (“3U”) and 4 rack unit (“4U”) platforms provide high density storage while leveraging high- efficiencypower to maximize performance-per-watt savings to reduce TCO for Enterprise Data Centers, Big Data and other high performance applications. For example,our All-Flash NVMe systems that deliver better performance and efficiency than traditional storage solutions and our Simply Double SuperStorage systemsthat include twice the number of hot-swap bays as 2U industry standard systems, offer up to twice the storage capacity and input/output operations persecond in the same amount of space.Our Twin family of multi-node server systems including 1U and 2U Twin™, 2U Twin²™, 1U and 2U TwinPro™, 4U FatTwin™, and new 2UBigTwin™ are optimized for density, performance and efficiency for customers' storage, HPC, Hyper-converged infrastructure (HCI) and cloud computingrequirements. The new 2U four node BigTwin delivers double the density of traditional rackmounts while supporting max performance and functionalitywith up to 205 watt Intel Xeon Scalable Processors, 24 DIMMS and All-Flash NVMe. Our Ultra Server systems in 1U and 2U platforms are designed to deliver performance, flexibility, scalability, and serviceability that are ideal fordemanding enterprise workloads. They allow enterprise IT professionals the ability to select a single server platform that can easily be reconfigured for manyapplications, to reduce qualification time and to manage the need for excessive spares inventories.Our GPU or Accelerated Computing server systems in 1U, 2U, 4U, 7U and blade platforms achieve higher parallel processing capability withadvanced GPU designs, and provide high performance in calculation-intensive applications. We have introduced a complete portfolio of Xeon Phi andNvidia Pascal based systems. Our MP product line supports four and eight socket configurations for high performance memory intensive enterprise applications with 96 DIMMSfor up to 12 terabytes memory capacity and 23 PCI-E expansion slots. We recently expanded the offerings to support SAP Hana in-memory databases withoptimal performance.Our Data Center Optimized ("DCO") server systems deliver superior performance-per-watt to optimize data center TCO with an improved thermalarchitecture utilizing power efficient components and offset processors to help eliminate CPU preheating and support a 5+ year product life cycle.Our MicroCloud server systems are high density, multi-node UP servers with up to 24 hot-pluggable nodes in a compact 3U form factor. MicroCloudintegrates advanced technologies within a compact functional design to deliver high performance in environments with space and power constraints. Thesecombined features provide a cost-effective solution for IT professionals implementing new hosting architectures for SMB and Public/Private CloudComputing applications. Our IoT/embedded server systems are compact, smart and secure products that reside on the edge of the network, connecting smart sensors anddevices to the cloud over wireless or local networks (for example, 5G, LAN, WiFi, Zigbee and RF). These server systems are built on open architecture toensure interoperability between systems, for ease of services deployment, and to enable a broad ecosystem of solution providers. The IoT/embedded serversystems empower users to securely aggregate, share, and filter data for analysis. These server systems help ensure that data generated by devices can travelsecurely and safely from the edge to the cloud and back - without replacing existing infrastructure.Our internally developed switch products 1G/10G/40G/100G Ethernet, InfiniBand and Omni Path switches for rack-mount servers help us to offermore complete solutions for our customers.Our SuperRack total server solutions offer a wide range of flexible accessory options including front, rear and side expansion units to providemodular solutions for system configuration. Data center, Cloud, HPC computing and server farm customers can use us as a one-stop shop for all of their IThardware needs. Our SuperRack total solutions offer easy installation and rear access with no obstructions for hot-swap devices, user-friendly cabling andcable identification, and effortless integration of our high density server, storage and blade systems. Server Software Management Solutions6Table of ContentsOur remote system management solutions, such as our Server Management suite ("SSM"), including Supermicro Power Management software("SPM"), Supermicro Update Manager ("SUM") and SuperDoctor 5 ("SD5"), have been designed to manage large-scale heterogeneous hyper scale data centerenvironments. SPM is designed specifically for HPC/Data Center cluster deployment and management. We have also partnered with certain softwaresuppliers for software solutions that are integrated with our server systems.Server Subsystems and AccessoriesWe offer a large array of modular server subsystems and accessories. These components are the foundation of our server solutions and span productofferings from the entry-level single and dual processor server segment to the high-end multi-processor market. The majority of the subsystems andaccessories we sell individually are optimized to work together and are ultimately integrated into complete server systems.ServerboardsWe design our serverboards with the latest hardware technologies and infrastructure software. Each serverboard is designed and optimized to adhereto specific physical, electrical and design requirements in order to work with certain combinations of chassis and power supplies and achieve maximumfunctionality. For our rackmount server systems, we not only adhere to SSI specifications, but our customized specifications provide an advanced set offeatures that increase the functionality and flexibility of our products. Chassis and Power SuppliesOur chassis are designed to efficiently house our servers while maintaining interoperability, adhering to industry standards and increasing outputefficiency through power supply design. We believe that our latest generation of power supplies achieves the maximum power efficiency available in theindustry. Our Battery Backup Power ("BBP") Module provides backup power to systems during an electricity outage and provides flexible backup powercapability and reduces total cost of ownership. Our server chassis come with hot-plug, heavy-duty fans, fan speed control and an advanced air shroud designto maximize airflow redundancy. Our Powerstick design provides the slim form factor of a redundant power supply that increases system computing andstorage density across our multiple product lines.Supermicro Global ServicesOur Supermicro Global Services are comprised of customer support services and hardware enhanced services. Both customer support services andhardware enhanced services develop and implement services solutions for our direct and OEM customers as well as our distributors. Services are provided toour customers directly or through approved distributors and third-party partners.Support Services: Our customer support services offer market competitive warranties, generally from one to three years, and warranty extensionoptions for products sold by our direct sales team and approved distributors. Our customer support team provides ongoing maintenance and technical supportfor our products through our website and 24-hour continuous direct phone based support.Hardware Enhanced Services: Our strategic direct and OEM customers may purchase a variety of on-site support service plans. Our service plansvary depending on specific services, response times, coverage hours and duration, repair priority levels, spare parts requirements, logistics, data privacy andsecurity needs. Our hardware enhanced services team provides help desk services and product on-site support for our server systems.Our services include server system integration, configuration and software upgrades and updates. We also identify service requirements, create andexecute project plans, conduct verification testing and training and provide technical documentation.Research and Development We perform the majority of our research and development activities in-house in San Jose, California, increasing the communication andcollaboration between design teams to streamline the development process and reducing time-to-market. We believe that the combination of our focus oninternal research and development activities, our close working relationships with customers and vendors and our modular design approach allows us tominimize time-to-market. We continue to invest in7Table of Contentsreducing our design and manufacturing costs and improving the performance, cost-effectiveness and thermal and space-efficiency of our solutions.Our research and development teams focus on the development of new and enhanced products that can support emerging innovations while highlyoptimizing the overall system performance. Much of our research and development activity relates to the new product cycles of leading processor vendors.We work closely with Intel, Nvidia, and AMD among others, to develop products that are compatible with the latest generation of industry standardtechnologies under development. Our collaborative approach with these vendors allows us to coordinate the design of our new products with their productrelease schedules, thereby enhancing our ability to rapidly introduce new products incorporating the latest technology. We work closely with their respectivedevelopment teams to optimize system performance and reduce system level issues. Similarly, we work very closely with our customers to identify their needsand develop our new product plans accordingly.As of June 30, 2017, we had 1,254 employees and 14 engineering consultants dedicated to research and development. Our total research anddevelopment expenses were $144.0 million, $124.2 million, and $101.4 million for fiscal years 2017, 2016 and 2015, respectively.CustomersFor fiscal year 2017, our products were purchased by over 900 customers, in 110 countries. These customers represent a diverse set of marketverticals including cloud computing, data center, enterprise, artificial intelligence and machine learning, big data, HPC and IoT/embedded. In fiscal year2017, no customer represented greater than 10% of our total net sales. In fiscal years 2016 and 2015, sales to SoftLayer, a division of IBM Corporation,represented 11.4% and 10.4%, respectively, of our total net sales.Sales and MarketingOur sales and marketing activities are conducted through a combination of our direct sales force and indirect sales channels. As of June 30, 2017, oursales and marketing team consisted of 358 employees and 37 independent sales representatives in 23 locations worldwide.Our direct sales force is focused on selling complete systems and solutions, including management software and global services to large scale cloudservice, enterprise and OEM customers.We work with distributors, resellers, system integrators, and OEMs to market and sell customized solutions to their end customers. We provide salesand marketing assistance and training to our distributors and OEMs, who in turn provide service and support to end customers. We leverage our relationshipswith key distributors and OEMs, to penetrate select industry segments where our products can provide a superior alternative to existing solutions.We maintain close contact with our distributors and end customers. We often collaborate during the sales process with our distributors and thecustomer’s technical point of contact to help determine the optimal system configuration for the customer’s needs. Our interaction with distributors and endcustomers allows us to monitor customer requirements and develop new products to better meet their needs.International SalesOur international sales efforts are supported both by our international offices in the Netherlands, Taiwan, United Kingdom, China and Japan as wellas by our United States sales team. Product fulfillment and first level support for our international customers are provided by Supermicro Global Services andour distributors and OEMs. Sales to customers located outside of the United States represented 42.8%, 36.7% and 41.2% of net sales in fiscal years 2017,2016 and 2015, respectively. Our long-lived assets located outside of the United States represented 22.1%, 24.0% and 23.8% of total long-lived assets infiscal years 2017, 2016 and 2015, respectively. See Part II, Item 8, Note 16, “Segment Reporting” to the consolidated financial statements in this AnnualReport on Form 10-K for a summary of international net sales and long-lived assets by geographic region.MarketingOur marketing programs are designed to create global awareness for our company, understanding of the unique value we bring to customers, andinform existing and potential customers, the trade press, distributors and OEMs about the capabilities and benefits of using our products and solutions. Ourmarketing efforts support the sale and distribution of our8Table of Contentsproducts through direct sales and distribution channels. We rely on a variety of marketing vehicles, including advertising, public relations, web, socialmedia, participation in industry trade shows and conferences to help gain market acceptance. We provide funds for cooperative marketing to our distributorsand partners to scale the reach of our marketing efforts. We also utilize our suppliers’ cooperative marketing programs and jointly benefit from theirmarketing development funds. Intellectual PropertyWe seek to protect our intellectual property rights with a combination of patents, trademarks, copyrights, trade secret laws and disclosurerestrictions. We rely primarily on trade secrets, technical know-how and other unpatented proprietary information relating to our design and productdevelopment activities. We also enter into confidentiality and proprietary rights agreements with our employees, consultants and other third parties andcontrol access to our designs, documentation and other proprietary information.Manufacturing and Quality ControlWe manufacture the majority of our systems at our San Jose, California headquarters. We believe we are the only major Server and Storage vendorthat designs, develops and manufactures the majority of their systems in the United States. Global assembly, test and quality control of our servers areperformed at our manufacturing facilities in San Jose, California, the Netherlands and Taiwan. Each of our facilities has been certified by Quality /Environmental Management System or, Q/EMS, according to ISO 9001, ISO 14001 and ISO 13485 standards. Our suppliers and contract manufacturers arerequired to support the same standards in order to maintain consistent product and service quality and continuous improvement of quality and environmentalperformance. We use several third-party suppliers and contract manufacturers for materials and sub-assemblies, such as serverboards, chassis, disk drives, powersupplies, fans and computer processors. We believe that selectively using outsourced manufacturing services allows us to focus on our core competencies inproduct design and development and increases our operational flexibility. We believe our manufacturing strategy allows us to adjust manufacturing capacityin response to changes in customer demand and to rapidly introduce new products to the market. We use Ablecom Technology, Inc. (“Ablecom”) and itsaffiliate Compuware Technology, Inc. ("Compuware"), both of which are related parties, for contract design and manufacturing coordination support. Wework with Ablecom to optimize modular designs for our chassis and certain of our other components. Ablecom also coordinates the manufacturing of chassisfor us. In addition to providing a large volume of contract manufacturing services for us, Ablecom warehouses for us a number of components andsubassemblies manufactured by multiple suppliers prior to shipment to our facilities in the United States, Europe and Asia. We also have a series ofagreements with Compuware, including multiple product development, production and service agreements, product manufacturing agreements, and leaseagreements for office space.We monitor our inventory on a continuous basis in order to be able to meet customer orders and to avoid inventory obsolescence. Due to ourmodular designs, our inventory can generally be used with multiple different products, further reducing the risk of inventory write-downs.CompetitionThe market for our products is highly competitive, rapidly evolving and subject to new technological developments, changing customer needs andnew product introductions. In particular, in recent years the market has been subject to substantial change. We compete primarily with large vendors of X86general purpose servers and components. In addition, we also compete with a number of smaller vendors that specialize in the sale of server components andsystems. Over the last several years, we have experienced increased competition from Original Design Manufacturers ("ODMs") that benefit from very lowcost manufacturing and are increasingly offering their own branded products. We believe our principal competitors include:•Global technology vendors such as Cisco, Dell, Hewlett-Packard Enterprise, IBM, Inspur, Lenovo, and Huawei; and•ODMs, such as Quanta Computer, Inc. and Asus Tek Computer, Inc.The principal competitive factors in our market include the following:•First to market with new emerging technologies;•High product performance, efficiency and reliability;•Early identification of emerging opportunities;•Cost-effectiveness;9Table of Contents•Interoperability of products;•Scalability; and•Localized and responsive customer support on a worldwide basis.We believe that we compete favorably with respect to most of these factors. However, most of our competitors have longer operating histories,significantly greater resources, greater name recognition and deeper market penetration. They may be able to devote greater resources to the development,promotion and sale of their products than we can, which could allow them to respond more quickly to new technologies and changes in customer needs. Seealso the risk factor in Part I, Item IA, titled “The market in which we participate is highly competitive, and if we do not compete effectively, we may not beable to increase our market penetration, grow our net sales or improve our gross margins.”EmployeesAs of June 30, 2017, we employed 2,996 full time employees, consisting of 1,254 employees in research and development, 358 employees in salesand marketing, 296 employees in general and administrative and 1,088 employees in manufacturing. Of these employees, 1,943 employees are based in ourSilicon Valley facilities. We consider our highly qualified and motivated employees to be a key factor in our business success. Our employees are notrepresented by any collective bargaining organization and we have never experienced a work stoppage. We believe that our relations with our employees aregood.Corporate InformationSupermicro was founded, and maintains our worldwide headquarters and the majority of our employees, at our Green Computing Park facility in SanJose, California. We are one of the largest employers in the City of San Jose and an active member of the San Jose and Silicon Valley community. We were incorporated in California in September 1993. We reincorporated in Delaware in March 2007. Our common stock is quoted on the OTCMarkets under the symbol "SMCI." Our principal executive offices are located at 980 Rock Avenue, San Jose, CA 95131 and our telephone number is (408)503-8000. Our website address is www.supermicro.com.Financial Information about Segments and Geographic AreasPlease see Part II, Item 8, Note 16, “Segment Reporting” to the consolidated financial statements in this Annual Report on Form 10-K for informationregarding our international operations, and see Part II, Item 1A, “Risk Factors” for further information on risks attendant to our international operations.Working CapitalWe focus considerable attention on managing our inventories and other working-capital-related items. We manage inventories by communicatingwith our customers and partners and then using our industry experience to forecast demand. We then place manufacturing orders for our products that arebased on forecasted demand. We generally maintain substantial inventories of our products because the computer server industry is characterized by shortlead time orders and quick delivery schedules.Available InformationOur Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed or furnishedpursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) are available free of charge, on or through ourwebsite at www.supermicro.com, as soon as reasonably practicable after we electronically file such reports with, or furnish those reports to, the SEC.Information contained on our website is not incorporated by reference in, or made part of this Annual Report on Form 10-K or our other filings with or reportsfurnished to the SEC. The SEC also maintains a website that contains our SEC filings. The address of the site is www.sec.gov. Further, a copy of this AnnualReport on Form 10-K is located at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the PublicReference Room can be obtained by calling the SEC at 1-800-SEC-0330. 10Table of ContentsItem 1A. Risk FactorsRisks Related to Our Investigation, Procedures and Analysis, Consolidated Financial Statements, Internal Control Over Financial Reporting andRelated MattersWe face risks related to being delinquent in our SEC reporting obligations if we are unable to resume a timely filing schedule. Due to the circumstances discussed in the Explanatory Note and in Part II, Item 8, Note 19, “Restatement of Previously Issued ConsolidatedFinancial Statements” to the consolidated financial statements in this Annual Report on Form 10-K and “Financial Statements and Supplementary Data”contained elsewhere in this Annual Report on Form 10-K, our SEC filings, including this Annual Report on Form 10-K, our Quarterly Reports on Form 10-Qfor the quarterly periods ended September 30, 2017, December 31, 2017, and March 31, 2018 (the “2018 Form 10-Qs”), our Annual Report on Form 10-K forthe fiscal year ended June 30, 2018 (the “2018 Form 10-K”), and our Quarterly Reports on Form 10-Q for the quarterly periods ended September 30, 2018,December 31, 2018 and March 31, 2019 (the “2019 Form 10-Qs”, and collectively with the 2018 Form 10-Qs and the 2018 Form 10-K, the “DelinquentReports”) are delinquent. We cannot ensure when we will file our Delinquent Reports and resume a timely filing schedule with respect to our future SECreports. We expect to continue to face many of the risks and challenges related to the Investigation, Procedures and Analysis, including the following:•We may fail to remediate material weaknesses in our internal control over financial reporting and other material weaknesses may be identified inthe future, which would adversely affect the accuracy and timing of our financial reporting;•Failure to timely file our SEC reports and make our current financial information available, has placed, and will continue to place, downwardpressure on our stock price and result in the continued inability of our employees to sell the shares of our common stock underlying their awardsgranted pursuant to our equity compensation plans, which has adversely affected, and may continue adversely affect, hiring and employeeretention;•Further delay in filing our SEC reports will delay our ability to seek the relisting of our common stock on a national securities exchange, and asa result, may continue to reduce the liquidity of our common stock;•Litigation and claims as well as regulatory examinations, investigations, proceedings and orders arising out of our failure to file SEC reports ona timely basis, including the reasons and causes for such failure to file, will continue to divert management attention and resources from theoperation of our business;•We may not be able to recapture lost business or business opportunities due to ongoing reputational harm;•Noncompliance with the covenants in our revolving credit facility will prohibit us from borrowing under the facility unless we are able toobtain additional amendments to the facility or waivers of the covenants from the lender; and•Negative reports or actions on our commercial credit ratings would increase our costs of, or reduce our access to, future commercial creditarrangements and limit our ability to refinance existing indebtedness.If one or more of the foregoing risks or challenges persist, our business, operations and financial condition are likely to be materially and adverselyaffected.We have identified material weaknesses in our internal control over financial reporting, which could, if not remediated, adversely affect our ability toreport our financial condition and results of operations in a timely and accurate manner.We have concluded that our internal control over financial reporting was not effective as of June 30, 2017 due to the existence of materialweaknesses in such controls, and we have also concluded that our disclosure controls and procedures were not effective as of June 30, 2017 due to materialweaknesses in our internal control over financial reporting, all as described in Part II, Item 9A, “Controls and Procedures” of this Annual Report on Form 10-K. While having initiated remediation measures to address the identified weaknesses, we cannot provide assurance that our remediation efforts will beadequate to allow us to conclude that such controls will be effective in the future. In addition, because we are a large accelerated filer, we are required to filedisclosure and financial statements sooner than companies that are non-accelerated filers, accelerated filers or smaller reporting companies, which gives usless time to fully remediate our material weaknesses by the filing deadlines. We also cannot assure you that additional material weaknesses in our internalcontrol over financial reporting will not arise or be identified in the future. We intend to continue our control remediation activities and to continue toimprove our overall control environment and our operational, information technology, financial systems, and infrastructure procedures and controls, as wellas to continue to train, retain and manage our personnel who are essential to effective internal controls. In doing so, we will continue to incur expenses andexpend management time on compliance-related issues. In addition, we previously identified a material weakness in our internal control over financialreporting related to the revenue recognition of contracts with extended product warranties that impacted prior periods. If we are unable to successfullycomplete our remediation efforts or favorably11Table of Contentsassess the effectiveness of our internal control over financial reporting, our operating results, financial position, ability to accurately report our financialresults and timely file our SEC reports, and stock price could be adversely affected.Moreover, because of the inherent limitations of any control system, material misstatements due to error or fraud may not be prevented or detectedon a timely basis, or at all. If we are unable to provide reliable and timely financial reports in the future, our business and reputation may be further harmed.Restated financial statements and failures in internal controls may also cause us to fail to meet reporting obligations, negatively affect investor and customerconfidence in our management and the accuracy of our financial statements and disclosures, or result in adverse publicity and concerns from investors andcustomers, any of which could have a negative effect on the price of our common stock, subject us to further regulatory investigations and penalties orstockholder litigation, and have a material adverse impact on our business and financial condition.The subject matters of the Investigation, Procedures and Analysis and the findings thereof have caused substantial delays in filing this Annual Report onForm 10-K and the Delinquent Reports, which may result in future delays in our SEC reporting.Our ability to resume a timely filing schedule with respect to our SEC reporting is subject to a number of contingencies, including whether and howquickly we are able to effectively remediate the identified material weaknesses in our internal control over financial reporting. It is uncertain when we willresume a timely filing schedule with respect to our future SEC reporting requirements, including our Delinquent Reports. It is likely that future reports willbecome delinquent until the Delinquent Reports are filed with the SEC.Investors will need to evaluate certain decisions with respect to our common stock in light of a lack of current financial information. Accordingly,any investment in our common stock involves a greater degree of risk. Our lack of current public information may have an adverse impact on investorconfidence, which could lead to a reduction in our stock price. In addition, for so long as we are not current in our SEC filings, we are precluded fromregistering our securities with the SEC for offer and sale. This precludes us from raising debt or equity financing in the public markets and limits our access tothe private markets and also limits our ability to use stock options and other equity-based awards to attract, retain and provide incentives to our employees.The delisting of our common stock may have a material adverse effect on the trading and price of our common stock, and we cannot assure you thatour common stock will be relisted, or that once relisted, it will remain listed.As a result of the delay in filing our periodic reports with the SEC, we were unable to comply with Nasdaq’s listing standards and our common stockwas suspended from trading on The Nasdaq Global Select Market effective August 23, 2018 and formally delisted effective March 22, 2019.The delisting of our common stock from Nasdaq may have a material adverse effect on us by, among other things, causing investors to dispose ofour shares and limiting:•The liquidity of our common stock;•The market price of our common stock;•The number of institutional and other investors that will consider investing in our common stock;•The availability of information concerning the trading prices and volume of our common stock;•The number of broker-dealers willing to execute trades in shares of our common stock; and•Our ability to obtain equity or debt financing for the continuation of our operations.Following the filing of our Delinquent Reports and compliance with any other prerequisite requirements, we intend to apply to relist our commonstock on a national securities exchange. However, while we are working expeditiously to relist our common stock, no assurances can be provided that we willbe able to do so in a timely manner or at all. If we are unable to relist our common stock, or even if our common stock is relisted, no assurance can beprovided that an active trading market will develop or, if one develops, that it will continue. The lack of an active trading market may limit the liquidity ofan investment in our common stock, meaning you may not be able to sell any shares of common stock you own at times, or at prices, attractive to you. Any ofthese factors may materially adversely affect the price of our common stock.The outcome of litigation and other claims as well as regulatory examinations, investigations, proceedings and orders arising out of the matters thatwere the subject of the Investigation, Procedures and Analysis, and our failure to file SEC reports on a timely basis are unpredictable, and any orders,actions or rulings not in our favor could have a material adverse effect on our business, results of operations and financial condition.12Table of ContentsOur company and certain of our current and former executive officers are defendants in certain legal proceedings and putative class actions. Pleasesee Part I, Item 3, “Legal Proceedings.” These proceedings have resulted in significant expenses and the diversion of management attention from ourbusiness. In addition, the circumstances which gave rise to the Investigation, Procedures and Analysis, and the related SEC filing delays continue to createthe risk of additional litigation and claims by investors and examinations, investigations, proceedings and orders by regulatory authorities. These include abroad range of potential actions that may be taken against us by the SEC or other regulatory agencies, including a cease and desist order, suspension oftrading of our securities, deregistration of our securities and/or the assessment of possible civil monetary penalties. Any such further actions could beexpensive and damaging to our business, results of operations and financial condition.We have incurred and expect to continue to incur significant expenses related to the Investigation, Procedures and Analysis, the remediation ofdeficiencies in our internal control over financial reporting and disclosure controls and procedures, and any resulting litigation.We have devoted and expect to continue to devote substantial internal and external resources towards remediation efforts relating to the results ofthe Investigation, Procedures and Analysis and revision of our previously issued consolidated financial statements, the management review process and otherefforts to regain timely compliance with the filing of our future SEC periodic and other reports. As a result of these efforts, we have incurred and expect thatwe will continue to incur significant incremental fees and expenses for additional accounting, financial and other consulting and professional services, aswell as the implementation and maintenance of systems and processes that will need to be updated, supplemented or replaced. Specifically, in connectionwith the Audit Committee’s Investigation, Procedures and Analysis, audit and compliance efforts and related litigation, we have incurred professional feestotaling $40.6 million in fiscal year 2018 and $50.7 million through the third quarter of fiscal year 2019. As described in this Annual Report on Form 10-K,we have taken a number of steps in order to strengthen our corporate culture, sales processes, and accounting function so as to allow us to be able to providetimely and accurate financial reporting. To the extent these steps are not successful, we could be required to incur significant additional time and expense.The expenses we are incurring in this regard, as well as the substantial time devoted by our management towards identifying and addressing the internalcontrol deficiencies, could have a material adverse effect on our business, results of operations and financial condition.The Investigation, Procedures and Analysis and the findings thereof, have diverted, and continue to divert, management and other human resourcesfrom the operation of our business. The absence of timely and accurate financial information has hindered and may in the future hinder our ability toeffectively manage our business.The Investigation, Procedures and Analysis have diverted, and continue to divert, management and other human resources from the operation of ourbusiness. The Board of Directors, members of management, and our accounting, legal, administrative and other staff have spent significant time on theInvestigation, Procedures and Analysis and will continue to spend significant time on remediation of disclosure controls and procedures and internal controlover our financial reporting. These resources have been, and will likely continue to be, diverted from the strategic and day-to-day management of ourbusiness and may have an adverse effect on our ability to accomplish our strategic objectives.Our failure to file SEC reports timely and the resulting delisting of our common stock could impact our ability to comply with covenants in our debtinstruments, which could adversely affect our access to outside financing.Under the terms of the credit agreement with Bank of America, N.A. (“Bank of America”), dated April 19, 2018, we are required to deliver certainfinancial statements to Bank of America on a periodic basis. The delay in our SEC filings could impact our ability to comply with our financial statementdelivery covenant, which could result in an event of default and eventual termination of the credit agreement. If this were to occur, we may be unable tosecure outside financing, if needed, to fund ongoing operations and for other capital needs. Any sources of financing that may be available to us could alsobe at higher costs and require us to satisfy more restrictive covenants, which could limit or restrict our operations, cash flows and earnings. We cannot ensurethat additional financing would be available to us, or be sufficient or available on satisfactory terms. In addition, unless and until we have filed all requiredreports with the SEC, we will be precluded from registering our securities with the SEC for offer and sale, and the failure to timely file our SEC reports willlimit our ability to use “short-form” Form S-3 registration statements for registering our securities for sale with the SEC until we again meet the timely filingrequirements of Form S-3.Matters relating to or arising from the restatement and the results of the Investigation, Procedures and Analysis of our internal control over financialreporting, including adverse publicity and potential concerns from our customers, have had and could continue to have an adverse effect on ourbusiness and financial condition.13Table of ContentsWe have been and could continue to be the subject of negative publicity focused on the matters underlying the Investigation, Procedures andAnalysis, the lengthy delay in filing our SEC reports, and the resulting restatement of our historical financial statements. We may be adversely impacted bynegative reactions to this publicity from our customers or others with whom we do business. Concerns include the time and effort required to address ouraccounting and control environment and our ability to be a long-term provider to our customers. The continued occurrence of any of the foregoing couldharm our business and have an adverse effect on our financial condition.If we are unable to maintain the effectiveness of our internal control over financial reporting, our operating results, financial position and stock pricecould be adversely affected.Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”), our management is required to report on the effectiveness of our internalcontrol over financial reporting in our annual reports, and annually our independent auditors must attest to and report on the effectiveness of our internalcontrol over financial reporting. It is necessary for us to maintain effective internal control over financial reporting to prevent fraud and errors and to maintaineffective disclosure controls and procedures so that we can provide timely and reliable financial and other information. A failure to maintain adequateinternal controls may adversely affect our ability to provide financial statements that accurately reflect our financial condition and report information on atimely basis.As described in Part II, Item 9A, “Controls and Procedures” of this Annual Report on Form 10-K, we have concluded that there are materialweaknesses in our internal control over financial reporting and that our disclosure controls and procedures were ineffective as of June 30, 2017. We haveconcluded that there are material weaknesses in our internal control over financial reporting, which have adversely affected our ability to timely andaccurately report our results of operations and financial condition. In addition, in November 2015, we reported a material weakness in our internal controlover financial reporting related to the revenue recognition of contracts with extended product warranties. This material weakness has not been fullyremediated as of the filing date of this Annual Report on Form 10-K, and we cannot ensure that other errors or material weaknesses will not be identified inthe future. If we fail to maintain an effective system of internal control over financial reporting, the accuracy and timeliness of our financial reporting may beadversely affected.”Although we are working to remediate the material weaknesses identified in the course of the Investigation, Procedures and Analysis, and arefocused on re-establishing effective internal controls over financial reporting in order to prevent and detect material misstatements in our annual andquarterly financial statements and prevent fraud, we cannot ensure that such efforts will be effective. If we fail to maintain effective internal controls in futureperiods, this could further cause investors to lose confidence in our reported financial and other information, and our operating results, financial position andstock price could be adversely affected.Risks Related to Our Business and IndustryOur quarterly operating results will likely fluctuate in the future, which could cause rapid declines in our stock price.We believe that our quarterly operating results will continue to be subject to fluctuation due to various factors, many of which are beyond ourcontrol. Factors that may affect quarterly operating results include: •Fluctuations based upon seasonality, with the quarters ending March 31 and September 30 typically being weaker;•Fluctuations in the timing and size of large customer orders;•Variability of our margins based on the mix of server systems, subsystems and accessories we sell and the percentage of our sales to internet datacenter cloud customers or certain geographical regions;•Fluctuations in availability and costs associated with key components, particularly storage solutions, and other materials needed to satisfy customerrequirements;•The timing of the introduction of new products by leading microprocessor vendors and other suppliers;•Changes in our product pricing policies, including those made in response to new product announcements;•Mix of whether customer purchases are of full systems or subsystems and accessories and whether made directly or through indirect sales channels;•The effect of mergers and acquisitions among our competitors, suppliers, customers, or partners;•General economic conditions in our geographic markets;•Impact of regulatory changes on our cost of doing business; and•Costs associated with the Investigation, Procedures and Analysis and related legal proceedings.Customers may hesitate to purchase, or continue to purchase, our products based upon our delay in filing our reports with the SEC and/orunwarranted reports about malicious chips being inserted in our products. Accordingly, it is difficult to accurately forecast our growth and results ofoperations on a quarterly basis. If we fail to meet expectations of investors or14Table of Contentsanalysts, our stock price may fall rapidly and without notice. Furthermore, the fluctuation of quarterly operating results may render less meaningful period-to-period comparisons of our operating results, and you should not rely upon them as an indication of future performance.As we increasingly target larger customers and larger sales opportunities, our customer base may become more concentrated, our cost of sales mayincrease, our margins may be lower and our sales may be less predictable.As our business continues to grow, we have become increasingly dependent upon larger sales to maintain our rate of growth. In particular, in recentyears, we have completed larger sales to leading internet data center companies and large enterprise customers. Although no customer represented greaterthan 10% of our total net sales in the fiscal year ended June 30, 2017, one of our customers accounted for 11.4% and 10.4% of our net sales in the fiscal yearsended June 30, 2016 and 2015, respectively. As customers buy our products in greater volumes and their business becomes a larger percentage of our netsales, we may grow increasingly dependent on those customers to maintain our growth. If our largest customers do not purchase our products at the levels,timeframes or geographies that we expect, our ability to maintain or grow our net sales will be adversely affected. Increased sales to larger customers may also cause fluctuations in results of operations. Large orders are generally subject to intense competition andpricing pressure which can have an adverse impact on our margins and results of operations. Likewise, larger customers may seek to fulfill all or substantiallyall of their requirements in a single or a few orders, and not make another significant purchase for a substantial period of time. Accordingly, a significantincrease in revenue during the period in which we recognize the revenue from a large customer may be followed by a period of time during which thecustomer purchases none or few of our products.Additionally, as we and our partners focus increasingly on selling to larger customers and attracting larger orders, we expect greater costs of sales.Our sales cycle may become longer and more expensive, as larger customers typically spend more time negotiating contracts than smaller customers. Largercustomers often seek greater levels of support in the implementation and use of our server solutions.As a result of the above factors, our quarter-to-quarter results of operations may be subject to greater fluctuation and our stock price may beadversely affected.We may fail to meet publicly announced financial guidance or other expectations about our business, which would cause our stock to decline in value.We typically provide forward looking financial guidance when we announce our financial results from the prior quarter. We undertake no obligationto update such guidance at any time. Frequently in the past, our financial results have failed to meet the guidance we provided. There are a number of reasonswhy we have failed to meet guidance in the past and might fail again in the future, including, but not limited to, the factors described in these Risk Factors.Increases in average selling prices for our server solutions have significantly contributed to our increases in net sales. Such prices are subject to declineif customers do not continue to purchase our latest generation products or additional components, which could harm our results of operations.Increases in average selling prices for our server solutions have significantly contributed to our increases in net sales. As with most electronics basedproducts, average selling prices of servers typically are highest at the time of introduction of new products, which utilize the latest technology, and tend todecrease over time as such products become commoditized and are ultimately replaced by even newer generation products. As our business continues togrow, we may increasingly be subject to this industry risk. We cannot predict the timing or amount of any decline in the average selling prices of our serversolutions that we may experience in the future. In some instances, our agreements with our distributors limit our ability to reduce prices unless we make suchprice reductions available to them, or price protect their inventory. If we are unable to decrease per unit manufacturing costs faster than the rate at whichaverage selling prices continue to decline, our business, financial condition and results of operations will be harmed.Our cost structure and ability to deliver server solutions to customers in a timely manner may be adversely affected by volatility of the market for corecomponents and materials for our products.Prices of materials and core components utilized in the manufacture of our server solutions, such as serverboards, chassis, central processing units(“CPUs”), memory and hard drives, represent a significant portion of our cost of sales. We generally do not enter into long-term supply contracts for thesematerials and core components, but instead purchase these15Table of Contentsmaterials and components on a purchase order basis. Prices of these core components and materials are volatile, and, as a result, it is difficult to predictexpense levels and operating results. In addition, if our business growth renders it necessary or appropriate to transition to longer term contracts withmaterials and core component suppliers, our costs may increase and our gross margins could correspondingly decrease.Because we often acquire materials and core components on an as needed basis, we may be limited in our ability to effectively and efficientlyrespond to customer orders because of the then-current availability or the terms and pricing of materials and core components. Our industry has experiencedmaterials shortages and delivery delays in the past, and we may experience shortages or delays of critical materials in the future. From time to time, we havebeen forced to delay the introduction of certain of our products or the fulfillment of customer orders as a result of shortages of materials and core components,which can adversely impact our revenue. For example, our net sales were adversely impacted in fiscal years 2013 and 2012 by disk drive shortages resultingfrom flooding in Thailand. In other periods, our cost of sales as a percentage of revenue has been adversely impacted by higher component prices resultingfrom shortages. For example, our gross margin was adversely impacted in the quarters ended December 31, 2016, March 31, 2017 and June 30, 2017 due tohigher costs related to shortages of memory and solid-state drives ("SSD"). If shortages or delays arise, the prices of these materials and core components mayincrease or the materials and core components may not be available at all. In the event of shortages, some of our larger competitors may have greater abilitiesto obtain materials and core components due to their larger purchasing power. We may not be able to secure enough core components or materials atreasonable prices or of acceptable quality to build new products to meet customer demand, which could adversely affect our business, results of operationsand financial condition. In addition, from time to time, we have accepted customer orders with various types of component pricing protection. Sucharrangements have increased our exposure to component pricing fluctuations and have adversely affected our financial results in certain quarters.If we were to lose any of our current supply or contract manufacturing relationships, the process of identifying and qualifying a new supplier orcontract manufacturer who will meet our quality and delivery requirements, and who will appropriately safeguard our intellectual property, may require asignificant investment of time and resources, adversely affecting our ability to satisfy customer purchase orders and delaying our ability to rapidly introducenew products to market. Similarly, if any of our suppliers were to cancel, materially change contracts or commitments to us or fail to meet the quality ordelivery requirements needed to satisfy customer demand for our products, whether due to shortages or other reasons, our reputation and relationships withcustomers could be damaged. We could lose orders, be unable to develop or sell some products cost-effectively or on a timely basis, if at all, and havesignificantly decreased revenues, margins and earnings, which would have a material adverse effect on our business, results of operations and financialcondition.We may lose sales or incur unexpected expenses relating to insufficient, excess or obsolete inventory.As a result of our strategy to provide greater choice and customization of our products to our customers, we are required to maintain a high level ofinventory. If we fail to maintain sufficient inventory, we may not be able to meet demand for our products on a timely basis, and our sales may suffer. If weoverestimate customer demand for our products, we could experience excess inventory of our products and be unable to sell those products at a reasonableprice, or at all. As a result, we may need to record higher inventory reserves. In addition, from time to time we assume greater inventory risk in connectionwith the purchase or manufacture of more specialized components in connection with higher volume sales opportunities. We have from time to timeexperienced inventory write downs associated with higher volume sales that were not completed as anticipated. We expect that we will experience such writedowns from time to time in the future related to existing and future commitments. Excess or obsolete inventory levels for these or other reasons could result inunexpected expenses or increases in our reserves against potential future charges which would adversely affect our business, results of operations andfinancial condition. We may encounter difficulties with our ERP systems.We commenced using a new enterprise resource planning ("ERP") system in the United States in July 2015 and in Taiwan and the Netherlands inJanuary 2016. We have incurred and expect to continue to incur additional expenses related to our ERP systems, as we continue to further enhance anddevelop them, including by automating certain internal controls. Many companies have experienced delays and difficulties with the implementation of newor changed ERP systems that have had a negative effect on their business. Any future disruptions, delays or deficiencies in the design and furtherenhancement of our ERP system could result in potentially much higher costs than we currently anticipate and could adversely affect our ability to provideservices, fulfill contractual obligations, file reports with the SEC in a timely manner and/or otherwise operate our business, or otherwise impact our controlsenvironment. Any of these consequences could have an adverse effect on our business, results of operations and financial condition.16Table of ContentsSystem security risks, data protection breaches, cyber-attacks and other related cyber-security issues could disrupt our internal operations or interferewith our products, and any such disruption could reduce our expected revenues, increase our expenses, damage our reputation and adversely affect ourstock price. Experienced computer programmers and hackers may be able to penetrate our network and misappropriate or compromise our confidentialinformation or that of third parties, create system disruptions or cause shutdowns. Computer programmers and hackers also may be able to develop anddeploy viruses, worms and other malicious software programs that attack our products or otherwise exploit any security vulnerabilities of our products. Whilewe employ a number of protective measures, including firewalls, anti-virus and endpoint detection and response technologies, these measures may fail toprevent or detect attacks on our systems. We experienced unauthorized intrusions into our network between 2011 and 2018. None of these intrusions,individually or in the aggregate, has had a material adverse effect on our business, operations, or products. We have taken steps to enhance the security of ournetwork and computer systems but, despite these efforts, we may experience future intrusions, which could adversely affect our business, operations, orproducts. In addition, our hardware and software or third party components and software that we utilize in our products may contain defects in design ormanufacture, including “bugs” and other problems that could unexpectedly interfere with the operation or security of the products. The costs to us toeliminate or mitigate cyber or other security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significantand, if our efforts to address these problems are not successful, could result in interruptions, delays, cessation of service and loss of existing or potentialcustomers that may impede our sales, manufacturing, distribution or other critical functions. Any claim that our products or systems are subject to a cyber-security risk, whether valid or not, could damage our reputation and adversely impact our revenues and results of operations.We manage and store various proprietary information and sensitive or confidential data relating to our business as well as information from oursuppliers and customers. Breaches of our or any of our third party suppliers’ security measures or the accidental loss, inadvertent disclosure or unapproveddissemination of proprietary information or sensitive or confidential data about us or our customers or suppliers, including the potential loss or disclosure ofsuch information or data as a result of fraud, trickery or other forms of deception, could expose us or our customers or suppliers to a risk of loss or misuse ofthis information, result in litigation and potential liability for us, damage our brand and reputation or otherwise harm our business.To the extent we experience cyber-security incidents in the future, our relationships with our customers and suppliers may be materially impacted,our brand and reputation may be harmed and we could incur substantial costs in responding to and remediating the incidents and in resolving anyinvestigations or disputes that may arise with respect to them, any of which would cause our business, operations, or products to be adversely affected. Inaddition, the cost and operational consequences of implementing and adding further data protection measures could be significant. Because our products and services may store, process and use data, some of which contains personal information, we are subject to complex andevolving federal, state and foreign laws and regulations regarding privacy, data protection and other matters, which are subject to change. We are subject to a variety of laws and regulations in the United States and other countries that involve matters central to our business, includingwith respect to user privacy, rights of publicity, data protection, content, protection of minors and consumer protection. These laws can be particularlyrestrictive in countries outside the United States. Both in the United States and abroad, these laws and regulations constantly evolve and remain subject tosignificant change. In addition, the application and interpretation of these laws and regulations are often uncertain, particularly in the new and rapidlyevolving industry in which we operate. Because our products and services store, process and use data, some of which contains personal information, we aresubject to complex and evolving federal, state and foreign laws and regulations regarding privacy, data protection and other matters. Many of these laws andregulations are subject to change and uncertain interpretation and even our inadvertent failure to comply with such laws and regulations could result ininvestigations, claims, damages to our reputation, changes to our business practices, increased cost of operations and declines in user growth, retention orengagement, any of which could materially adversely affect our business, results of operations and financial condition. Costs to comply with and implementthese privacy-related and data protection measures could be significant. Global privacy legislation, enforcement, and policy activity for privacy and data protection are rapidly expanding and creating a complexregulatory compliance environment. Costs to comply with and implement these privacy-related and data protection measures could be significant. Forexample, the EU General Data Protection Regulation 2016/679 (“GDPR”), which came into effect on May 25, 2018, imposes stringent EU data protectionrequirements on companies established in the European Union or companies that offer goods or services to, or monitor the behavior of, individuals in theEuropean Union. The GDPR establishes a robust framework of data subjects’ rights and imposes onerous accountability obligations on companies, withpenalties for noncompliance of up to the greater of 20 million euros or four percent of annual global revenue. While we have implemented policies andprocedures to address GDPR requirements, failure to comply or concerns about our17Table of Contentspractices or compliance with GDPR or other privacy-related laws and regulations could materially adversely affect our business, results of operations andfinancial condition.If we do not successfully manage the expansion of our international manufacturing capacity, our business could be harmed.Since inception, we have conducted a substantial majority of our manufacturing operations in San Jose, California. We continue to increase ourmanufacturing capacity in Taiwan and in the Netherlands. If we are unable to successfully ramp up our international manufacturing capacity, we may incurunanticipated costs, difficulties in making timely delivery of products or suffer other business disruptions which could adversely impact our results ofoperations.We may not be able to successfully manage our planned growth and expansion.Over time we expect to continue to make investments to pursue new customers and expand our product offerings to grow our business rapidly. Weexpect that our annual operating expenses will continue to increase as we invest in sales and marketing, research and development, manufacturing andproduction infrastructure, and strengthen customer service and support resources for our customers. Our failure to expand operational and financial or internalcontrol systems timely or efficiently could result in additional operating inefficiencies, which could increase our costs and expenses more than we hadplanned and prevent us from successfully executing our business plan. We may not be able to offset the costs of operation expansion by leveraging theeconomies of scale from our growth in negotiations with our suppliers and contract manufacturers. Additionally, if we increase our operating expenses inanticipation of the growth of our business and this growth does not meet our expectations, our financial results will be negatively impacted.If our business grows, we will have to manage additional product design projects, materials procurement processes and sales efforts and marketingfor an increasing number of SKUs, as well as expand the number and scope of our relationships with suppliers, distributors and end customers. If we fail tomanage these additional responsibilities and relationships successfully, we may incur significant costs, which may negatively impact our operating results.Additionally, in our efforts to be first to market with new products with innovative functionality and features, we may devote significant research anddevelopment resources to products and product features for which a market does not develop quickly, or at all. If we are not able to predict market trendsaccurately, we may not benefit from such research and development activities, and our results of operations may suffer.Managing the growth of our business also requires us to successfully manage a substantial increase in our number of employees. We have grownfrom 1,837 employees on July 1, 2014 to 2,996 employees on June 30, 2017. We must continue to hire, train and manage new employees as needed. Ourfailure to timely file our SEC reports and the delisting of our common stock on Nasdaq has adversely impacted, and will likely continue to adversely impact,our ability to attract new employees and retain existing employees. If our new hires perform poorly, or if we are unsuccessful in hiring, training, managingand integrating these new employees, or fail in establishing and maintaining an effective corporate culture, or if we are not successful in retaining ourexisting employees, our business may be harmed. The additional headcount we have added and may continue to add has increased and will continue toincrease our cost base, which will make it more difficult for us to offset any future revenue shortfalls by offsetting expense reductions in the short term. If wefail to successfully manage our growth, we will be unable to execute our business plan.Our future effective income tax rates could be affected by changes in the relative mix of our operations and income among different geographic regionsand by United States federal income tax legislation, which could affect our future operating results, financial condition and cash flows.We seek to structure our worldwide operations to take advantage of certain international tax planning opportunities and incentives. Our futureeffective income tax rates could be adversely affected if tax authorities challenge our international tax structure or if the relative mix of our United States andinternational income changes for any reason, or due to changes in United States or international tax laws. In particular, a substantial portion of our revenue isgenerated from customers located outside the United States. Foreign withholding taxes and United States income taxes were not provided on undistributedearnings for certain non-United States subsidiaries as of June 30, 2017, because such earnings were intended to be indefinitely reinvested in the operations ofthose subsidiaries. On December 22, 2017, the U.S. federal government enacted the Tax Cuts and Jobs Act (“2017 Tax Reform Act”). The 2017 Tax ReformAct significantly changed the existing U.S. corporate income tax laws by, among other things, lowering the corporate tax rate, implementing a territorial taxsystem, and imposing a one-time deemed repatriation toll tax on cumulative undistributed foreign earnings. We cannot predict the impact of all of thesechanges to our business as we have not yet finalized our fiscal year 2018 financial statements. However, it is possible that these changes18Table of Contentscould adversely affect our business as we are currently evaluating whether to change our indefinite reinvestment assertion in light of the 2017 Tax Act, and,we consider that assessment to be incomplete.The effectiveness of our tax planning activities is based upon certain assumptions that we make regarding our future operating performance. It ispossible that we will seek to revise our tax structure further in the future. We cannot assure you that we will be able to lower our effective tax rate as a resultof our current or future tax planning activities nor that such rate will not increase in the future.If negative publicity arises with respect to us, our employees, our third-party service providers or our partners, our business and operating results couldbe adversely affected, regardless of whether the negative publicity is true.Negative publicity about our company or our products, even if inaccurate, could adversely affect our reputation and the confidence in our products,which could harm our business and operating results. For example, in October 2018, Bloomberg Businessweek published an article alleging that malicioushardware chips were implanted on our motherboards during the manufacturing process at the facilities of a contract manufacturer in China. We undertook athorough investigation of this claim with the assistance of a leading, third-party investigations firm wherein we tested a representative sample of ourmotherboards, including the specific type of motherboard depicted in the Bloomberg Businessweek article and motherboards purchased by companiesreferenced in the article, as well as more recently manufactured motherboards. After completing these examinations as well as a range of functional tests, theinvestigations firm reported that it had found no evidence of malicious hardware on our motherboards. In addition, neither Bloomberg Businessweek nor anyof our customers have ever provided a single example of any such altered motherboard. However, despite repeated denials of any tampering by our customersand us, and the announcement of the results of this independent investigation, the impact of this false allegation continues to have a substantial negativeimpact on the trading price of our common stock as well as our reputation.Harm to our reputation can also arise from many other sources, including employee misconduct, as has been experienced in the past, and misconductby our partners and outsourced service providers. Additionally, negative publicity with respect to our partners or service providers could also affect ourbusiness and operating results to the extent that we rely on these partners or if our customers or prospective customers associate our company with thesepartners.The market in which we participate is highly competitive, and if we do not compete effectively, we may not be able to increase our market penetration,grow our net sales or improve our gross margins.The market for server solutions is intensely competitive and rapidly changing. Barriers to entry in our market are relatively low and we expectincreased challenges from existing as well as new competitors. Some of our principal competitors offer server solutions at a lower price, which has resulted inpricing pressures on sales of our server solutions. We expect further downward pricing pressure from our competitors and expect that we will have to pricesome of our server solutions aggressively to increase our market share with respect to those products or geographies, particularly for internet data centercustomers and other large sale opportunities. If we are unable to maintain the margins on our server solutions, our operating results could be negativelyimpacted. In addition, if we do not develop new innovative server solutions, or enhance the reliability, performance, efficiency and other features of ourexisting server solutions, our customers may turn to our competitors for alternatives. In addition, pricing pressures and increased competition generally mayalso result in reduced sales, less efficient utilization of our manufacturing operations, lower margins or the failure of our products to achieve or maintainwidespread market acceptance, any of which could have a material adverse effect on our business, results of operations and financial condition.Our principal competitors include global technology companies such as Cisco, Dell, Hewlett-Packard Enterprise, IBM, Inspur, Lenovo and Huawei.In addition, we also compete with a number of other vendors who also sell application optimized servers, contract manufacturers and original designmanufacturers (“ODMs”), such as Quanta Computer, Inc. and AsusTek Computer, Inc. ODMs sell server solutions marketed or sold under a third-party brand.Many of our competitors enjoy substantial competitive advantages, such as:•Greater name recognition and deeper market penetration;•Longer operating histories;•Larger sales and marketing organizations and research and development teams and budgets;•More established relationships with customers, contract manufacturers and suppliers and better channels to reach larger customer bases andlarger sales volume allowing for better costs;•Larger customer service and support organizations with greater geographic scope;•A broader and more diversified array of products and services; and19Table of Contents•Substantially greater financial, technical and other resources.Some of our current or potential ODM competitors are also currently or have in the past been suppliers to us. As a result, they may possess sensitiveknowledge or experience which may be used against us competitively and/or which may require us to alter our supply arrangements or sources in a waywhich could adversely impact our cost of sales or results of operations.Our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards orcustomer requirements. Competitors may seek to copy our innovations and use cost advantages from greater size to compete aggressively with us on price.Certain customers are also current or prospective competitors and as a result, assistance that we provide to them as customers may ultimately result inincreased competitive pressure against us. Furthermore, because of these advantages, even if our application optimized server solutions are more effectivethan the products that our competitors offer, potential customers might accept competitive products in lieu of purchasing our products. The challenges weface from larger competitors will become even greater if consolidation or collaboration between or among our competitors occurs in our industry. Also,initiatives like the Open Compute Project (“OCP”), a project to establish more industry standard data center configurations, could have the impact ofsupporting an approach which is less favorable to the flexibility and customization that we offer. These changes could have a significant impact on themarket and impact our results of operations. For all of these reasons, we may not be able to compete successfully against our current or future competitors, andif we do not compete effectively, our ability to increase our net sales may be impaired.Any failure to adequately expand or retain our sales force will impede our growth.We expect that our direct sales force will continue to grow as larger customers increasingly require a direct sales approach. Competition for directsales personnel with the advanced sales skills and technical knowledge we need is intense. Our ability to grow our revenue in the future will depend, in largepart, on our success in recruiting, training, retaining and successfully managing sufficient qualified direct sales personnel. We have traditionally experiencedmuch greater turnover in our sales and marketing personnel as compared to other departments and other companies. New hires require significant training andmay take six months or longer before they reach full productivity. Our recent hires and planned hires may not become as productive as we would like, and wemay be unable to hire sufficient numbers of qualified individuals in the future in the markets where we do business. If we are unable to hire, develop andretain sufficient numbers of productive sales personnel, our customer relationships and resulting sales of our server solutions will suffer.We must work closely with our suppliers to make timely new product introductions.We rely on our close working relationships with our suppliers, including Intel, AMD and Nvidia, to anticipate and deliver new products on a timelybasis when new generation materials and core components are made available. Intel, AMD and Nvidia are the only suppliers of the microprocessors we use inour server systems. If we are not able to maintain our relationships with our suppliers or continue to leverage their research and development capabilities todevelop new technologies desired by our customers, our ability to quickly offer advanced technology and product innovations to our customers would beimpaired. We have no long term agreements that obligate our suppliers to continue to work with us or to supply us with products.Our suppliers’ failure to improve the functionality and performance of materials and core components for our products may impair or delay ourability to deliver innovative products to our customers.We need our material and core component suppliers, such as Intel, AMD and Nvidia, to provide us with core components that are innovative,reliable and attractive to our customers. Due to the pace of innovation in our industry, many of our customers may delay or reduce purchase decisions untilthey believe that they are receiving best of breed products that will not be rendered obsolete by an impending technological development. Accordingly,demand for new server systems that incorporate new products and features is significantly impacted by our suppliers’ new product introduction schedules andthe functionality, performance and reliability of those new products. If our materials and core component suppliers fail to deliver new and improved materialsand core components for our products, we may not be able to satisfy customer demand for our products in a timely manner, or at all. If our suppliers’components do not function properly, we may incur additional costs and our relationships with our customers may be adversely affected.We rely on a limited number of suppliers for certain raw materials used to manufacture our products.Certain raw materials used in the manufacture of our products are available from a limited number of suppliers. Shortages could occur in theseessential materials due to an interruption of supply or increased demand in the industry. One of20Table of Contentsour suppliers accounted for 31.0%, 35.2% and 28.7% of total purchases of raw materials for the fiscal years ended June 30, 2017, 2016 and 2015,respectively. Ablecom and Compuware, related parties, accounted for 11.1%, 12.8% and 13.8% of our total cost of sales for the fiscal years ended June 30,2017, 2016 and 2015, respectively. If any of our largest suppliers discontinue their operations or if our relationships with them are adversely impacted, wecould experience a material adverse effect on our business, results of operations and financial condition.We rely on indirect sales channels for a significant percentage of our revenue and any disruption in these channels could adversely affect our sales.Sales of our products through third-party distributors and resellers accounted for 47.8%, 45.8% and 49.6% of our net sales in fiscal years 2017, 2016and 2015, respectively. We depend on our distributors to assist us in promoting market acceptance of our products and anticipate that a significant portion ofour revenues will continue to result from sales through indirect channels. To maintain and potentially increase our revenue and profitability, we will have tosuccessfully preserve and expand our existing distribution relationships as well as develop new distribution relationships. Our distributors also sell productsoffered by our competitors and may elect to focus their efforts on these sales. If our competitors offer our distributors more favorable terms or have moreproducts available to meet the needs of their customers, or utilize the leverage of broader product lines sold through the distributors, those distributors mayde-emphasize or decline to carry our products. In addition, our distributors’ order decision-making process is complex and involves several factors, includingend customer demand, warehouse allocation and marketing resources, which can make it difficult to accurately predict total sales for the quarter until late inthe quarter. We also do not control the pricing or discounts offered by distributors to end customers. To maintain our participation in distributors’ marketingprograms, in the past we have provided and expect to continue cooperative marketing arrangements or made short-term pricing concessions.The discontinuation of cooperative marketing arrangements or pricing concessions could have a negative effect on our business, results ofoperations and financial condition. Our distributors could also modify their business practices, such as payment terms, inventory levels or order patterns. Ifwe are unable to maintain successful relationships with distributors or expand our distribution channels or we experience unexpected changes in paymentterms, inventory levels or other practices by our distributors, our business will suffer.Our direct sales efforts may create confusion for our end customers and harm our relationships with our distributors and OEMs.We expect our direct sales force to continue to grow as our business grows. As our direct sales force becomes larger, our direct sales efforts may leadto conflicts with our distributors and OEMs, who may view our direct sales efforts as undermining their efforts to sell our products. If a distributor or OEMdeems our direct sales efforts to be inappropriate, the distributor or OEM may not effectively market our products, may emphasize alternative products fromcompetitors, or may seek to terminate our business relationship. Disruptions in our distribution channels could cause our revenues to decrease or fail to growas expected. Our failure to implement an effective direct sales strategy that maintains and expands our relationships with our distributors and OEMs couldlead to a decline in sales, harm relationships and adversely affect our business, results of operations and financial condition.Our research and development expenditures, as a percentage of our net sales, are considerably higher than many of our competitors and our earningswill depend upon maintaining revenues and margins that offset these expenditures.Our strategy is to focus on being consistently rapid-to-market with flexible and customizable server systems that take advantage of our own internaldevelopment and the latest technologies offered by microprocessor manufacturers and other component vendors. Consistent with this strategy, we spendhigher amounts, as a percentage of revenues, on research and development costs than many of our competitors. If we cannot sell our products in sufficientvolume and with adequate gross margins to compensate for such investment in research and development, our earnings may be materially and adverselyaffected.Our failure to deliver high quality server solutions could damage our reputation and diminish demand for our products.Our server solutions are critical to our customers’ business operations. Our customers require our server solutions to perform at a high level, containvaluable features and be extremely reliable. The design of our server solutions is sophisticated and complex, and the process for manufacturing, assemblingand testing our server solutions is challenging. Occasionally, our design or manufacturing processes may fail to deliver products of the quality that ourcustomers require. For example, in the past a vendor provided us with a defective capacitor that failed under certain heavy use applications. As a result, ourproduct21Table of Contentsneeded to be repaired. Though the vendor agreed to pay for a large percentage of the costs of the repairs, we incurred costs in connection with the recall anddiverted resources from other projects.New flaws or limitations in our server solutions may be detected in the future. Part of our strategy is to bring new products to market quickly, andfirst-generation products may have a higher likelihood of containing undetected flaws. If our customers discover defects or other performance problems withour products, our customers’ businesses, and our reputation, may be damaged. Customers may elect to delay or withhold payment for defective orunderperforming server solutions, request remedial action, terminate contracts for untimely delivery, or elect not to order additional server solutions, whichcould result in an increase in our provision for doubtful accounts or in collection cycles for accounts receivable or subject us to the expense and risk oflitigation. We may incur expense in recalling, refurbishing or repairing defective server solutions sold to our customers or remaining in our inventory. If wedo not properly address customer concerns about our products, our reputation and relationships with our customers may be harmed. For all of these reasons,customer dissatisfaction with the quality of our products could substantially impair our ability to grow our business.Conflicts of interest may arise between us and Ablecom and Compuware, and those conflicts may adversely affect our operations. We use Ablecom, a related party, for contract design and manufacturing coordination support and warehousing, and Compuware, also a related partyand an affiliate of Ablecom, for distribution, contract manufacturing and warehousing. We work with Ablecom to optimize modular designs for our chassisand certain of other components. We outsource to Compuware a portion of our design activities and a significant part of our manufacturing of components,particularly power supplies. Our purchases of products from Ablecom and Compuware represented 11.1%, 12.8% and 13.8% of our cost of sales for fiscalyears 2017, 2016 and 2015, respectively. Ablecom and Compuware’s sales to us constitute a substantial majority of Ablecom and Compuware’s net sales.Ablecom and Compuware are both privately-held Taiwan-based companies. In addition, we have entered into a distribution agreement with Compuware,under which we have appointed Compuware as a nonexclusive distributor of our products in Taiwan, China and Australia.Steve Liang, Ablecom’s Chief Executive Officer and largest shareholder, is the brother of Charles Liang, our President, Chief Executive Officer andChairman of the Board. Ablecom owns approximately 0.4% of our common stock. Charles Liang and his spouse, Sara Liu, our Co-Founder, Senior VicePresident and director, jointly own approximately 10.5% of Ablecom’s capital stock, while Mr. Steve Liang and other family members own approximately36.0% of Ablecom’s outstanding common stock. Certain family members of Yih-Shyan (Wally) Liaw, who until January 2018 was our Senior Vice Presidentof International Sales and director, own approximately 11.7% of Ablecom’s capital stock. Bill Liang, a brother of both Charles Liang and Steve Liang, also isa member of the Board of Directors of Ablecom. Bill Liang is also the Chief Executive Officer of Compuware, a member of Compuware’s Board of Directors and a holder of a significant equityinterest in Compuware. Steve Liang is also a member of Compuware’s Board of Directors and is an equity holder of Compuware.Mr. Liang as our Chief Executive Officer and Chairman of the Board and as a significant stockholder of our company, has considerable influenceover the management of our business relationships. Accordingly, we may be disadvantaged by the economic interests of Mr. Liang and Ms. Liu asstockholders of Ablecom and his personal relationship with Ablecom’s Chief Executive Officer. We may not negotiate or enforce contractual terms asaggressively with Ablecom or Compuware as we might with an unrelated party, and the commercial terms of our agreements may be less favorable than wemight obtain in negotiations with third parties. If our business dealings with Ablecom or Compuware are not as favorable to us as arms-length transactions,our results of operations may be harmed.If Ablecom or Compuware are acquired or sold, new ownership could reassess the business and strategy of Ablecom or Compuware, and as a result,our supply chain could be disrupted or the terms and conditions of our agreements with Ablecom or Compuware may change. As a result, our operationscould be negatively impacted or costs could increase, either of which could adversely affect our margins and results of operations.Our reliance on Ablecom could be subject to risks associated with our reliance on a limited source of contract manufacturing services and inventorywarehousing.We plan to continue to maintain our manufacturing relationship with Ablecom in Asia. In order to provide a larger volume of contractmanufacturing services for us, we anticipate that Ablecom will continue to warehouse for us an increasing number of components and subassembliesmanufactured by multiple suppliers prior to shipment to our facilities in the United States and Europe. We also anticipate that we will continue to lease officespace from Ablecom in Taiwan to support our22Table of Contentsresearch and development efforts. We operate a joint management company with Ablecom to manage the common areas shared by us and Ablecom for ourseparately constructed manufacturing facilities in Taiwan.If our commercial relationship with Ablecom deteriorates, we may experience delays in our ability to fulfill customer orders. Similarly, if Ablecom’sfacility in Asia is subject to damage, destruction or other disruptions, our inventory may be damaged or destroyed, and we may be unable to find adequatealternative providers of contract manufacturing services in the time that we or our customers require. We could lose orders and be unable to develop or sellsome products cost-effectively or on a timely basis, if at all.Currently, we purchase contract manufacturing services primarily for our chassis products from Ablecom. If our commercial relationship withAblecom were to deteriorate or terminate, establishing direct relationships with those entities supplying Ablecom with key materials for our products oridentifying and negotiating agreements with alternative providers of warehouse and contract manufacturing services might take a considerable amount oftime and require a significant investment of resources. Pursuant to our agreements with Ablecom and subject to certain exceptions, Ablecom has theexclusive right to be our supplier of the specific products developed under such agreements. As a result, if we are unable to obtain such products fromAblecom on terms acceptable to us, we may need to discontinue a product or develop substitute products, identify a new supplier, change our design andacquire new tooling, all of which could result in delays in our product availability and increased costs. If we need to use other suppliers, we may not be ableto establish business arrangements that are, individually or in the aggregate, as favorable as the terms and conditions we have established with Ablecom. Ifany of these things should occur, our net sales, margins and earnings could significantly decrease, which would have a material adverse effect on ourbusiness, results of operations and financial condition.Our growth into markets outside the United States exposes us to risks inherent in international business operations.We market and sell our systems and components both inside and outside the United States. We intend to expand our international sales efforts,especially into Asia, and we are expanding our business operations in Europe and Asia, particularly in Taiwan, the Netherlands, China and Japan. Inparticular, we have made, and continue to make, substantial investments for the purchase of land and the development of new facilities in Taiwan toaccommodate our expected growth. Our international expansion efforts may not be successful. Our international operations expose us to risks and challengesthat we would otherwise not face if we conducted our business only in the United States, such as:•Heightened price sensitivity from customers in emerging markets;•Our ability to establish local manufacturing, support and service functions, and to form channel relationships with resellers in non-United Statesmarkets;•Localization of our systems and components, including translation into foreign languages and the associated expenses;•Compliance with multiple, conflicting and changing governmental laws and regulations;•Foreign currency fluctuations;•Limited visibility into sales of our products by our distributors;•Laws favoring local competitors;•Weaker legal protections of intellectual property rights and mechanisms for enforcing those rights;•Market disruptions created by public health crises in regions outside the United States, such as Avian flu, SARS and other diseases;•Difficulties in staffing and managing foreign operations, including challenges presented by relationships with workers’ councils and laborunions; and•Changing regional economic and political conditions.These factors could limit our future international sales or otherwise adversely impact our operations or our results of operations.Our results of operations may be subject to fluctuations based upon our investment in corporate ventures.We have a 30% minority interest in a China corporate venture that was established to market and sell corporate venture branded systems in Chinabased upon components and technology we supply. We record earnings and losses from the corporate venture using the equity method of accounting. Ourloss exposure is limited to the remainder of our equity investment in the corporate venture which as of June 30, 2017 was $6.1 million. Although we currentlydo not intend to make any additional investment in the corporate venture, if we were to do so in the future, our exposure to potential losses would increase.We do not control the corporate venture and any fluctuation in the results of operations of the corporate venture or any23Table of Contentsother similar transaction that we may enter into in the future could adversely impact, or result in fluctuations in, our results of operations.The United States could withdraw from or materially modify certain international trade agreements, or change tariff, trade, or tax provisions relatedto the global manufacturing and sales of our products in ways that we currently cannot predict.A portion of our business activities are conducted in foreign countries, including the Netherlands, Taiwan, China, United Kingdom and Japan. Ourbusiness benefits from free trade agreements, and we also rely on various U.S. corporate tax provisions related to international commerce as we manufacture,market and sell our products globally. The U.S. has announced trade policy changes, including an intention to impose new tariffs on imported goods, whichhave created significant uncertainty about the future relationship between the United States and other countries with respect to trade, treaties and tariffs. Forexample, on June 15, 2018, the Office of the United States Trade Representative (the “USTR”) published a list of products covering 818 separate U.S. tarifflines valued at approximately $34 billion in imports from China, imposing an additional duty of 25% on the listed product lines. The list primarily coversproducts from industrial sectors that contribute to or benefit from the Chinese government’s “Made in China 2025” industrial policy, which includeindustries such as aerospace, information and communications technology, robotics, industrial machinery, new materials, and automobiles. The USTR alsoannounced a second set of 284 proposed tariff lines, which cover approximately $16 billion worth of imports from China, which will undergo further reviewin a public notice and comment process, including a public hearing. After completion of this process, USTR stated that it will issue a final determination onthe products from this list that would be subject to the additional duties. We are continuing to evaluate the impact of the announced and other proposedtariffs on products and components that we import from China, and we may experience a material increase in the cost of our products, which may result in ourproducts becoming less attractive relative to products offered by our competitors.These developments, or the perception that any of them could occur, may have a material adverse effect on global economic conditions and thestability of global financial markets, and may significantly reduce global trade and, in particular, trade between the impacted nations and the United States.Any of these factors, or any changes to U.S. corporate tax policies related to international commerce, could depress economic activity and have a materialadverse effect on our business, financial condition and results of operations.Failure to comply with the U.S. Foreign Corrupt Practices Act, other applicable anti-corruption and anti-bribery laws, and applicable trade controllaws could subject us to penalties and other adverse consequences.We manufacture and sell our products in several countries outside of the United States, both to direct and OEM customers as well as to ourdistributors. Our operations are subject to the U.S. Foreign Corrupt Practices Act (the “FCPA”) as well as the anti-corruption and anti-bribery laws in thecountries where we do business. The FCPA prohibits covered parties from offering, promising, authorizing or giving anything of value, directly or indirectly,to a “foreign government official” with the intent of improperly influencing the official’s act or decision, inducing the official to act or refrain from acting inviolation of lawful duty or obtaining or retaining an improper business advantage. The FCPA also requires publicly traded companies to maintain recordsthat accurately and fairly represent their transactions, and to have an adequate system of internal accounting controls. In addition, other applicable anti-corruption laws prohibit bribery of domestic government officials, and some laws that may apply to our operations prohibit commercial bribery, includinggiving or receiving improper payments to or from non-government parties, as well as so-called “facilitation” payments. In addition, we are subject to U.S. andother applicable trade control regulations that restrict with whom we may transact business, including the trade sanctions enforced by the U.S. Treasury,Office of Foreign Assets Control (“OFAC”). If we fail to comply with laws and regulations restricting dealings with sanctioned countries, we may be subjectto civil or criminal penalties. Any future violations could have an adverse impact on our ability to sell our products to United States federal, state and localgovernment and related entities.In addition, while we have implemented policies, internal controls and other measures reasonably designed to promote compliance with applicableanti-corruption and anti-bribery laws and regulations, and certain safeguards designed to ensure compliance with U.S. trade control laws, our employees oragents have in the past engaged and may in the future engage in improper conduct for which we could be held responsible. If we, or our employees or agentsacting on our behalf, are found to have engaged in practices that violate these laws and regulations, we could suffer severe fines and penalties, profitdisgorgement, injunctions on future conduct, securities litigation, bans on transacting government business and other consequences that may have a materialadverse effect on our business, results of operations and financial condition. In addition, our brand and reputation, our sales activities or our stock price couldbe adversely affected if we become the subject of any negative publicity related to actual or potential violations of anti-corruption, anti-bribery or tradecontrol laws and regulations.24Table of ContentsAny failure to protect our intellectual property rights, trade secrets and technical know-how could impair our brand and our competitiveness.Our ability to prevent competitors from gaining access to our technology is essential to our success. If we fail to protect our intellectual propertyrights adequately, we may lose an important advantage in the markets in which we compete. Trademark, patent, copyright and trade secret laws in the UnitedStates and other jurisdictions as well as our internal confidentiality procedures and contractual provisions are the core of our efforts to protect our proprietarytechnology and our brand. Our patents and other intellectual property rights may be challenged by others or invalidated through administrative process orlitigation, and we may initiate claims or litigation against third parties for infringement of our proprietary rights. Such administrative proceedings andlitigation are inherently uncertain and divert resources that could be put towards other business priorities. We may not be able to obtain a favorable outcomeand may spend considerable resources in our efforts to defend and protect our intellectual property.Furthermore, legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain. Effectivepatent, trademark, copyright and trade secret protection may not be available to us in every country in which our products are available. The laws of someforeign countries may not be as protective of intellectual property rights as those in the United States, and mechanisms for enforcement of intellectualproperty rights may be inadequate.Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property andusing our technology for their competitive advantage. Any such infringement or misappropriation could have a material adverse effect on our business,results of operations and financial condition.Resolution of claims that we have violated or may violate the intellectual property rights of others could require us to indemnify our customers,resellers or vendors, redesign our products, or pay significant royalties to third parties, and materially harm our business.Our industry is marked by a large number of patents, copyrights, trade secrets and trademarks and by frequent litigation based on allegations ofinfringement or other violation of intellectual property rights. Our primary competitors have substantially greater numbers of issued patents than we havewhich may position us less favorably in the event of any claims or litigation with them. Other third parties have in the past sent us correspondence regardingtheir intellectual property or filed claims that our products infringe or violate third parties’ intellectual property rights. In addition, increasingly non-operating companies are purchasing patents and bringing claims against technology companies. We have been subject to several such claims and may besubject to such claims in the future.Successful intellectual property claims against us from others could result in significant financial liability or prevent us from operating our businessor portions of our business as we currently conduct it or as we may later conduct it. In addition, resolution of claims may require us to redesign ourtechnology, to obtain licenses to use intellectual property belonging to third parties, which we may not be able to obtain on reasonable terms, to cease usingthe technology covered by those rights, and to indemnify our customers, resellers or vendors. Any claim, regardless of its merits, could be expensive and timeconsuming to defend against, and divert the attention of our technical and management resources.If we lose Charles Liang, our President, Chief Executive Officer and Chairman, or any other current key employee or are unable to attract additionalkey employees, we may not be able to implement our business strategy in a timely manner.Our future success depends in large part upon the continued service of our current executive management team and other current key employees. Inparticular, Charles Liang, our President, Chief Executive Officer and Chairman of the Board, is critical to the overall management of our company as well asto our strategic direction. Mr. Liang co-founded our company and has been our Chief Executive Officer since our inception. His experience in running ourbusiness and his personal involvement in key relationships with suppliers, customers and strategic partners are extremely valuable to our company. Wecurrently do not have a succession plan for the replacement of Mr. Liang if it were to become necessary. Additionally, we are particularly dependent on thecontinued service of our existing research and development personnel because of the complexity of our products and technologies. Our employmentarrangements with our executives and employees do not require them to provide services to us for any specific length of time, and they can terminate theiremployment with us at any time, with or without notice, without penalty. The loss of services of any of these executives or of one or more other key membersof our team could seriously harm our business.25Table of ContentsIf we are unable to attract and integrate additional key employees in a manner that enables us to scale our business and operations effectively, or if wedo not maintain competitive compensation policies to retain our employees, our ability to operate effectively and efficiently could be limited.To execute our growth plan, we must attract additional highly qualified personnel, including additional engineers and executive staff. Competitionfor qualified personnel is intense, especially in Silicon Valley, where we are headquartered. We have experienced in the past and may continue to experiencedifficulty in hiring and retaining highly skilled employees with appropriate qualifications. Our lack of current public information precludes us fromregistering our securities with the SEC for offer and sale and limits our ability to use stock options and other equity-based awards to attract, retain andprovide incentives to employees. Since the initiation of the Investigation, our employees have been unable to sell their holdings of our common stock, whichhas contributed to the loss of experienced engineering and sales personnel. If we are unable to attract and integrate additional key employees in a manner thatenables us to scale our business and operations effectively, or if we do not maintain competitive compensation policies to retain our employees, our ability tooperate effectively and efficiently could be limited.Backlog does not provide a substantial portion of our net sales in any quarter.Our net sales are difficult to forecast because we do not have sufficient backlog of unfilled orders to meet our quarterly net sales targets at thebeginning of a quarter. Rather, a majority of our net sales in any quarter depend upon customer orders that we receive and fulfill in that quarter. Because ourexpense levels are based in part on our expectations as to future net sales and to a large extent are fixed in the short term, we might be unable to adjustspending in time to compensate for any shortfall in net sales. Accordingly, any significant shortfall of revenues in relation to our expectations would harmour operating results.Our business and operations are especially subject to the risks of earthquakes and other natural catastrophic events.Our corporate headquarters, including our most significant research and development and manufacturing operations, are located in the SiliconValley area of Northern California, a region known for seismic activity. We have also established significant manufacturing and research and developmentoperations in Taiwan which is also subject to seismic activity risks. We do not currently have a comprehensive disaster recovery program and as a result, asignificant natural disaster, such as an earthquake, could have a material adverse impact on our business, operating results, and financial condition. Althoughwe are in the process of preparing such a program, there is no assurance that it will be effective in the event of such a disaster.Our operations involve the use of hazardous and toxic materials, and we must comply with environmental laws and regulations, which can beexpensive, and may affect our business, results of operations and financial condition.We are subject to federal, state and local regulations relating to the use, handling, storage, disposal and human exposure to hazardous and toxicmaterials. If we were to violate or become liable under environmental laws in the future as a result of our inability to obtain permits, human error, accident,equipment failure or other causes, we could be subject to fines, costs or civil or criminal sanctions, face third-party property damage or personal injury claimsor be required to incur substantial investigation or remediation costs, which could be material, or experience disruptions in our operations, any of whichcould have a material adverse effect on our business, results of operations and financial condition. In addition, environmental laws could become morestringent over time imposing greater compliance costs and increasing risks and penalties associated with violations, which could harm our business, results ofoperations and financial condition.We also face increasing complexity in our product design as we adjust to new and future requirements relating to the materials composition of ourproducts, including the restrictions on lead and other hazardous substances applicable to specified electronic products placed on the market in the EuropeanUnion (Restriction on the Use of Hazardous Substances Directive 2002/95/EC, also known as the RoHS Directive). We are also subject to laws andregulations such as California’s “Proposition 65” which requires that clear and reasonable warnings be given to consumers who are exposed to certainchemicals deemed by the State of California to be dangerous, such as lead. We expect that our operations will be affected by other new environmental lawsand regulations on an ongoing basis. Although we cannot predict the ultimate impact of any such new laws and regulations, they will likely result inadditional costs, and could require that we change the design and/or manufacturing of our products, any of which could have a material adverse effect on ourbusiness, results of operations and financial condition. We are also subject to the regulations concerning the supply of minerals coming from the conflict zones in and around the Democratic Republic ofCongo. This United States legislation includes disclosure requirements regarding the use of conflict minerals mined from the Democratic Republic of Congoand adjoining countries and procedures regarding a manufacturer’s efforts to prevent the sourcing of such conflict minerals. These requirements could affectthe sourcing and availability of minerals used in the manufacture of semiconductor or other devices. As a result, there may only be a limited pool of suppliers26Table of Contentswho provide conflict-free metals, and we cannot assure you that we will be able to obtain products in sufficient quantities or at competitive prices.Risks Related to Owning Our StockThe trading price of our common stock is likely to be volatile, and you might not be able to sell your shares at or above the price at which youpurchased the shares.The trading prices of technology company securities historically have been highly volatile and the trading price of our common stock has been andis likely to continue to be subject to wide fluctuations. Factors, in addition to those outlined elsewhere in this filing, that may affect the trading price of ourcommon stock include:•The risk that we are not able to relist our common stock on a national securities exchange;•The outcome of litigation and claims as well as regulatory examinations, investigations, proceedings and orders arising out of our failure to fileSEC reports on a timely basis and results of the Investigation, Procedures and Analysis;•Actual or anticipated variations in our operating results, including failure to achieve previously provided guidance;•Announcements of technological innovations, new products or product enhancements, strategic alliances or significant agreements by us or byour competitors;•Changes in recommendations by any securities analysts that elect to follow our common stock;•The financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;•False or misleading press releases or articles regarding our company or our products;•The loss of a key customer;•The loss of key personnel;•Technological advancements rendering our products less valuable;•Lawsuits filed against us, including those described in Part I, Item 3, “Legal Proceedings”;•Changes in operating performance and stock market valuations of other companies that sell similar products;•Price and volume fluctuations in the overall stock market;•Market conditions in our industry, the industries of our customers and the economy as a whole; and•Other events or factors, including those resulting from war, incidents of terrorism or responses to these events.Future sales of shares by existing stockholders could cause our stock price to decline.Attempts by existing stockholders to sell substantial amounts of our common stock in the public market could cause the trading price of ourcommon stock to decline significantly. All of our shares are eligible for sale in the public market, including shares held by directors, executive officers andother affiliates, sales of which are subject to volume limitations and other requirements under Rule 144 under the Securities Act. In addition, shares subject tooutstanding options and reserved for future issuance under our stock option plans are eligible for sale in the public market to the extent permitted by theprovisions of various vesting agreements. If these additional shares are sold, or if it is perceived that they will be sold in the public market, the trading priceof our common stock could decline.If securities analysts do not publish research or reports about our business or if they downgrade our stock, the price of our stock could decline.The research and reports that industry or financial analysts publish about us or our business likely have an effect on the trading price of our commonstock. If an industry analyst decides not to cover our company, or if an industry analyst decides to cease covering our company at some point in the future, wecould lose visibility in the market, which in turn could cause our stock price to decline. If an industry analyst downgrades our stock, our stock price wouldlikely decline rapidly in response.The concentration of our capital stock ownership with insiders will likely limit your ability to influence corporate matters.As of March 31, 2019, our executive officers, directors, current five percent or greater stockholders and affiliated entities together beneficiallyowned 27.8% of our common stock, net of treasury stock. As a result, these stockholders, acting together, have significant influence over all matters thatrequire approval by our stockholders, including the election of directors and approval of significant corporate transactions. Corporate action might be takeneven if other stockholders oppose them.27Table of ContentsThis concentration of ownership might also have the effect of delaying or preventing a change of control of our company that other stockholders may view asbeneficial.Provisions of our certificate of incorporation and bylaws and Delaware law might discourage, delay or prevent a change of control of our company orchanges in our management and, as a result, depress the trading price of our common stock.Our certificate of incorporation and bylaws contain provisions that could discourage, delay or prevent a change in control of our company orchanges in our management that the stockholders of our company may deem advantageous. These provisions:•Establish a classified Board of Directors so that not all members of our Board are elected at one time;•Require super-majority voting to amend some provisions in our certificate of incorporation and bylaws;•Authorize the issuance of “blank check” preferred stock that our Board could issue to increase the number of outstanding shares and todiscourage a takeover attempt;•Limit the ability of our stockholders to call special meetings of stockholders;•Prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;•Provide that the Board of Directors is expressly authorized to adopt, or to alter or repeal our bylaws; and•Establish advance notice requirements for nominations for election to our Board or for proposing matters that can be acted upon bystockholders at stockholder meetings.In addition, we are subject to Section 203 of the Delaware General Corporation Law, which, subject to some exceptions, prohibits “businesscombinations” between a Delaware corporation and an “interested stockholder,” which is generally defined as a stockholder who becomes a beneficial ownerof 15% or more of a Delaware corporation’s voting stock for a three-year period following the date that the stockholder became an interested stockholder.Section 203 could have the effect of delaying, deferring or preventing a change in control that our stockholders might consider to be in their best interests.These anti-takeover defenses could discourage, delay or prevent a transaction involving a change in control of our company. These provisions couldalso discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and cause us to take corporate actions otherthan those stockholders desire.Our common stock is currently quoted on the OTC Market, which may have an unfavorable impact on our stock price and liquidity. Effective at the open of business on August 23, 2018, our common stock was suspended from trading on the Nasdaq Global Select Market, and ourcommon stock was subsequently delisted on March 22, 2019. Since the date our common stock was suspended from trading on the Nasdaq Global SelectMarket, our common stock has been quoted on the OTC Market. The OTC Market is a significantly more limited market than Nasdaq. The quotation of ourshares on the OTC Market may result in a less liquid market available for existing and potential stockholders to trade shares of our common stock, coulddepress the trading price of our common stock and could have a long-term adverse impact on our ability to raise capital in the future.We do not expect to pay any cash dividends for the foreseeable future.We do not anticipate that we will pay any cash dividends to holders of our common stock in the foreseeable future. In addition, under the terms ofthe credit agreement with Bank of America, dated April 19, 2018, we cannot pay any dividends, with limited exceptions. Accordingly, investors must rely onsales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment. Investors seekingcash dividends in the foreseeable future should not purchase our common stock. Item 1B. Unresolved Staff CommentsNone.Item 2. PropertiesAs of June 30, 2017, we owned approximately 1,408,000 square feet and leased approximately 558,000 square feet of office and manufacturingspace.28Table of ContentsOur principal executive offices, research and development center and production operations are located in San Jose, California where we ownapproximately 1,197,000 square feet of office and manufacturing space which is subject to existing term loans and revolving line of credit with $123.2million outstanding as of June 30, 2017. We lease approximately 246,000 square feet of warehouse space in Fremont, California under a lease that expires inJuly 2020, lease approximately 46,000 square feet of office space in San Jose, California under a lease that expires in January 2022, and lease approximately5,000 square feet of office in Jersey City, New Jersey under a lease that expires in July 2020. Our European headquarters for manufacturing and serviceoperations is located in Den Bosch, the Netherlands where we lease approximately 124,000 square feet of office and manufacturing space under two leases,which expire in July 2025 and June 2026. In Asia, our manufacturing facilities are located in Taoyuan County, Taiwan where we own approximately 211,000square feet of office and manufacturing space on 7.0 acres of land. These manufacturing facilities are subject to an existing term loan with $19.7 millionremaining outstanding as of June 30, 2017. Our research and development center and service operations in Asia are located in an approximately 131,000square feet facility in Taipei, Taiwan under eleven leases that expire at various dates ranging from May 2019 through January 2022. We lease approximately3,000 square feet of office space in Shanghai and Beijing, China for sales and service operations under two leases that expire in April 2020 and August 2020,respectively. In addition, we lease approximately 2,000 square feet of office space in Japan under one lease, which expires in January 2020.Additionally, we own 36 acres of land in San Jose, California that would allow us to expand our Green Computing Park. We remodeled onewarehouse with approximately 310,000 square feet of storage space and completed the construction of a new manufacturing and warehouse building withapproximately 182,000 square feet of manufacturing space in August 2015. In fiscal year 2017, we continued to engage several contractors for thedevelopment and construction of improvements on the property. We completed the construction of a second new manufacturing and warehouse building inthe first quarter of fiscal year 2018. We financed this development through our operating cash flows and additional borrowings from banks. See Part II, Item 8,Note 9, “Short-term and Long-term Obligations” to the consolidated financial statements in this Annual Report on Form 10-K for a discussion of ourcompany’s short-term and long-term obligations.We believe that our existing properties, including both owned and leased, are in good condition and are suitable for the conduct of our business.Item 3. Legal ProceedingsFrom time to time, we have been involved in various legal proceedings arising from the normal course of business activities. In management’sopinion, the resolution of any matters will not have a material adverse effect on our consolidated financial condition, results of operations or liquidity.On September 4, 2015, a complaint was filed against us, our CEO, and our former CFO in the U.S. District Court for the Northern District ofCalifornia (Deason v. Super Micro Computer, Inc., et al., No. 15-cv-04049). The complaint claimed that the defendants violated Section 10(b) of theSecurities Exchange Act of 1934 because of alleged misrepresentations and/or omissions in public statements which supposedly were revealed when weannounced on August 31, 2015 that the filing of our Annual Report on Form 10-K for fiscal 2015 would be delayed to allow us to complete an investigationinto certain marketing expenses. On January 12, 2018, after an initial round of successful motion to dismiss briefing leading to Plaintiff filing an amendedcomplaint, we and the named individual defendants filed another motion to dismiss on the grounds that the amended complaint failed to state a claimbecause it did not plead falsity or scienter. On June 27, 2018, the Court granted our motion to dismiss without leave to amend and entered judgment in favorof us and the other defendants. On July 24, 2018, Plaintiff filed a notice of appeal to the 9th Circuit Court of Appeals; however, Plaintiff subsequently filed avoluntary notice dismissing the appeal and, thus, ending the litigation on November 1, 2018.On February 8, 2018, two putative class action complaints were filed against us, our CEO, and our former CFO in the U.S. District Court for theNorthern District of California (Hessefort v. Super Micro Computer, Inc., et al., No. 18-cv-00838 and United Union of Roofers v. Super Micro Computer, Inc.,et al., No. 18-cv-00850). The complaints contain similar allegations, claiming that the defendants violated Section 10(b) of the Securities Exchange Act dueto alleged misrepresentations and/or omissions in public statements regarding recognition of revenue. The court subsequently appointed New York HotelTrades Council & Hotel Association of New York City, Inc. Pension Fund as lead plaintiff and it filed an amended complaint naming our Senior VicePresident of Investor Relations, as an additional defendant. The court approved the parties’ agreement to permit a further amendment of the complaint, whichwas filed on January 22, 2019. We believe the allegations filed are without merit, and intend to vigorously defend against the lawsuit.29Table of ContentsBetween late 2015 and 2017, we cooperated with the SEC in its investigation of marketing expenses that contained certain irregularities discoveredby our management, which irregularities were disclosed on August 31, 2015. In addition, we have received subpoenas from the SEC in connection with thematters underlying our inability to timely file our Form 10-K for the fiscal year ending June 30, 2017. We also received a subpoena from the SEC followingthe false and widely-discredited reporting in October 2018 by Bloomberg Businessweek concerning our products. We are cooperating fully to comply withthese government requests.Due to the inherent uncertainties of legal proceedings, we cannot predict the outcome of these proceedings at this time, and we can give noassurance that they will not have a material adverse effect on our financial position or results of operations.Item 4. Mine Safety Disclosures Not applicable.30Table of ContentsPART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesMarket InformationEffective at the open of business on August 23, 2018, our common stock was suspended from trading on the Nasdaq Global Select Market. EffectiveMarch 22, 2019, our common stock was delisted from the Nasdaq Global Select Market. Since the date our common stock was suspended from trading on theNasdaq Global Select Market, our common stock has been quoted on the OTC Market and is currently traded under the symbol “SMCI.” Prior to thesuspension, we had traded on the Nasdaq Global Select Market since March 29, 2007, and prior to that time there was no public market for our commonstock.The following table sets forth, for the periods indicated, the high and low sales closing prices of our Common Stock as reported by The NasdaqGlobal Select Market. On March 31, 2019, the last reported bid price of our common stock on the OTC Markets was $21.13 per share. The OTC Marketsquotations reflect inter-dealer prices, without retail mark-up, mark down or commission and may not represent actual transactions. High LowFiscal Year 2016: First Quarter$30.25 $24.24Second Quarter$31.82 $22.32Third Quarter$34.08 $21.52Fourth Quarter$34.49 $23.78 High LowFiscal Year 2017: First Quarter$26.34 $19.02Second Quarter$29.00 $21.37Third Quarter$28.85 $24.60Fourth Quarter$25.25 $23.60HoldersAs of March 31, 2019, there were 31 registered stockholders of record of our common stock. Because most of our shares are held by brokers and otherinstitutions on behalf of stockholders, we are unable to estimate the total number of beneficial stockholders represented by these holders of record.Dividend PolicyWe have never declared or paid cash dividends on our capital stock. We intend to retain any future earnings and do not expect to pay any dividendsin the foreseeable future. Under the terms of the credit agreement with Bank of America, dated April 19, 2018, we cannot pay any dividends.Equity Compensation PlanPlease see Part III, Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of this report fordisclosure relating to our equity compensation plans.Stock Performance GraphThis performance graph shall not be deemed “soliciting material” or to be "filed" with the SEC for purposes of Section 18 of the Exchange Act, orotherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of Super Micro Computer,Inc. under the Securities Act of 1933, as amended, or the Exchange Act. 31Table of ContentsThe following graph compares our cumulative five-year total stockholder return on our common stock with the cumulative return of the NasdaqComputer Index and the Nasdaq Composite Index, which both included our common stock, for the comparable period.The graph reflects an investment of $100 (with reinvestment of all dividends, if any) in our common stock, the Nasdaq Computer Index and theNasdaq Composite Index, on June 30, 2012 and our relative performance tracked through June 30, 2017. The stockholder return shown on the graph below isnot necessarily indicative of future performance, and we do not make or endorse any predictions as to future stockholder returns. 6/30/2012 6/30/2013 6/30/2014 6/30/2015 6/30/2016 6/30/2017Super Micro Computer, Inc. 100.00 67.09 159.33 186.51 156.68 155.42Nasdaq Composite Index 100.00 115.95 150.19 169.91 164.99 209.21Nasdaq Computer Index 100.00 102.24 142.18 157.55 159.77 217.77Recent Sales of Unregistered SecuritiesNone.Issuer Purchases of Equity Securities None.32Table of ContentsItem 6. Selected Financial DataThe following selected consolidated financial data is qualified by reference to, and should be read in conjunction with, our consolidated financialstatements and notes thereto in Part II, Item 8, "Financial Statements and Supplementary Data" and “Management’s Discussion and Analysis of FinancialCondition and Results of Operations” in Part II, Item 7, of this Annual Report on Form 10-K. Fiscal Years Ended June 30, Fiscal Years Ended June 30, Fiscal Years Ended June 30, 2017 2016 2015 2014 2013 (As Revised)(1) (As Revised)(1) As ReportedAdjustments(2)As Adjusted As ReportedAdjustments(2)As Adjusted (in thousands, except per share data)Consolidated Statements of OperationsData: Net sales$2,484,929 $2,225,022 $1,954,353 $1,467,202$(17,037)$1,450,165 $1,162,561$(15,332)$1,147,229Cost of sales2,134,971 1,894,521 1,647,769 1,241,657(10,610)1,231,047 1,002,508(12,488)990,020Gross profit349,958 330,501 306,584 225,545(6,427)219,118 160,053(2,844)157,209Operating expenses: Research and development143,992 124,223 101,402 84,25791785,174 75,2086075,268Sales and marketing66,445 58,338 47,496 38,01226438,276 33,78510833,893General and administrative44,646 40,449 25,040 23,017(192)22,825 23,902423,906Total operating expenses255,083 223,010 173,938 145,286989146,275 132,895172133,067Income from operations94,875 107,491 132,646 80,259(7,416)72,843 27,158(3,016)24,142Other income (expense), net(1,287) 1,507 956 92—92 48—48Interest expense(2,300) (1,594) (965) (757)—(757) (610)—(610)Income before income tax provision91,288 107,404 132,637 79,594(7,416)72,178 26,596(3,016)23,580Income tax provision24,434 35,323 40,082 25,437(1,342)24,095 5,317(473)4,844Net income$66,854 $72,081 $92,555 $54,157$(6,074)$48,083 $21,279$(2,543)$18,736Net income per common share: Basic$1.38 $1.50 $1.99 $1.24 $1.10 $0.50 $0.45Diluted$1.29 $1.39 $1.85 $1.16 $1.03 $0.48 $0.43Shares used in per share calculation: Basic48,383 47,917 46,434 43,599 43,599 41,992 41,992Diluted51,679 51,836 50,094 46,512 46,512 43,907 43,907 Stock-based compensation: Cost of sales$1,382 $1,157 $962 $941$(21)$920 $953$(21)$932Research and development12,559 10,651 9,195 6,7831476,930 6,527(144)6,383Sales and marketing2,144 1,934 1,601 1,260(26)1,234 1,541(34)1,507General and administrative3,580 3,188 2,678 2,078(100)1,978 2,340(52)2,288Total stock-based compensation$19,665 $16,930 $14,436 $11,062$—$11,062 $11,361$(251)$11,110__________________________(1) See Part II, Item 8, Note 19, "Restatement of Previously Issued Consolidated Financial Statements", in our notes to the consolidated financial statements.(2) The adjustments are similar in nature to those discussed in Part II, Item 8, Note 19, "Restatement of Previously Issued Consolidated Financial Statements",in our notes to the consolidated financial statements.33Table of Contents As of June 30, 2017 2016 2015 2014 2013 (As Revised)(1) (As Revised)(2) AsReportedAdjustments(2)AsAdjusted AsReportedAdjustments(2)As Adjusted (in thousands)Consolidated Balance Sheet Data: Cash and cash equivalents$110,606 $178,820 $92,920 $96,872$(1,390)$95,482 $93,038$(1,306)$91,732Working capital588,636 544,698 438,144 343,195(14,255)328,940 281,528(9,437)272,091Total assets1,515,130 1,191,483 1,122,031 796,32529,970826,295 632,25738,412670,669Long-term obligations68,754 85,200 26,062 16,2084,71020,918 16,8692,12118,990Total stockholders’ equity773,846 696,653 593,585 469,231(17,072)452,158 373,724(10,999)362,725__________________________(1)See Part II, Item 8, Note 19, "Restatement of Previously Issued Consolidated Financial Statements", in our notes to the consolidated financialstatements.(2)The adjustments are similar in nature to those discussed in Part II, Item 8, Note 19, "Restatement of Previously Issued Consolidated FinancialStatements", in our notes to the consolidated financial statements.34Table of ContentsItem 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe following discussion should be read in conjunction with the consolidated financial statements and related notes which appear elsewhere inthis Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differmaterially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in thisAnnual Report on Form 10-K, particularly under the heading "Risk Factors." The following discussion gives effect to the restatement discussed in Part II,Item 8, Note 19, “Restatement of Previously Issued Consolidated Financial Statements” to the consolidated financial statements of this Annual Report onForm 10-K. See related discussion in the Explanatory Note.Background of Investigation, Procedures and AnalysisSee "Explanatory Note" to this Annual Report on Form-10K.Nasdaq Delisting of our Common StockAs a result of the delay in filing our periodic reports with the SEC and failure to hold an annual meeting, we were unable to comply with the Nasdaqlisting standards and our common stock was suspended from trading on the Nasdaq Global Select Market effective August 23, 2018 and formally delistedeffective March 22, 2019. Following the suspension of trading, our common stock has been quoted on the OTC Market and is currently traded under thesymbol “SMCI.” For further information regarding trading in our common stock, refer to Part II, Item 5, “Market for Registrant's Common Equity, RelatedStockholder Matters and Issuer Purchases of Equity Securities” in this Annual Report on Form 10-K.OverviewWe are a global leader in high performance, high efficiency server technology and innovation. We develop and provide end-to-end green computingsolutions to the cloud computing, data center, enterprise, big data, high performance computing ("HPC" and internet of things ("IoT")/embedded markets. Oursolutions range from complete server, storage, blade and workstations to full racks, networking devices, server management software and technology supportand services.We commenced operations in 1993 and have been profitable every year since inception. For fiscal years 2017, 2016 and 2015, our net income was$66.9 million, $72.1 million and $92.6 million, respectively. In order to increase our sales and profits, we believe that we must continue to develop flexibleand customizable server solutions and be among the first to market with new features and products. We must also continue to expand our software andcustomer service and support offerings, particularly as we increasingly focus on larger enterprise sales. We measure our financial success based on variousindicators, including growth in net sales, gross profit margin and operating margin as key measures of profitability, and cash conversion cycle as a keymeasure of working capital management. Among the key non-financial indicators of our success is our ability to rapidly introduce new products and deliverthe latest application optimized server solutions. In this regard, we work closely with microprocessor and other component vendors to take advantage of newtechnologies as they are introduced. Historically, our ability to introduce new products rapidly has allowed us to benefit from the introduction of newmicroprocessors and as a result we monitor the introduction cycles of Intel Corporation, Advanced Micro Devices, Inc., and Nvidia Corporation carefully.This also impacts our research and development expenditures as we continue to invest more in our current and future product development efforts.Financial HighlightsThe following is a summary of other financial highlights of fiscal year 2017:•Net sales increased by 11.7% as compared to fiscal year 2016 primarily due to increased unit shipments, reflecting the successful execution ofour strategy to ship more complete systems, which increased by 13.5% as compared to fiscal year 2016.•Gross margin declined to 14.1% from 14.9% in fiscal year 2016 primarily due to increased component prices for memory and storage relative toour ability to pass cost increases to our customers as well as increased sales where pricing is typically more competitive and lower total capacityutilization while we ramp up use of our new facilities.35Table of Contents•Operating expenses increased by 14.4% as compared to fiscal year 2016, but remained approximately 10% of sales as we continued to increaseour human talent, primarily with respect to further investments in research and development.•Net income declined to $66.9 million as compared to $72.1 million in fiscal 2016, which was primarily due to a $16.1 million decline inincome before taxes, which was partially offset by a reduction in our effective tax rate to 26.8% as compared to 32.9% in fiscal 2016.•Our cash and cash equivalents were $110.6 million at the end of fiscal year 2017, compared with $178.8 million at the end of fiscal year 2016.The decrease in our cash and cash equivalents at the end of fiscal year 2017 was primarily due to $96.2 million of cash used in our operatingactivities and $29.4 million of purchases of property, plant and equipment, of which $16.1 million was related to property and equipment inconnection with the construction of buildings at our Green Computing Park in San Jose, California, partially offset by $66.6 million ofborrowings, net of repayments.•The cash conversion cycle is the sum of days of sales outstanding (“DSO”) and days of inventory outstanding (“DIO”), less days of purchasesoutstanding (“DPO”). Cash conversion cycle at the end of fiscal year 2017 was 86 days compared with 76 at the end of fiscal year 2016. DSOand DIO at the end of fiscal year 2017 were 3 days higher and 6 days higher, respectively, than at the end of fiscal year 2016. DPO at the end offiscal year 2017 was 1 day lower than at the end of fiscal year 2016.•Our inventory balance was $736.7 million at the end of fiscal year 2017, compared with $516.8 million at the endof fiscal year 2016. The increase in inventory was to meet current demand and expected future sales volume growth.•Our purchase commitments with contract manufacturers and suppliers were $309.1 million at the end of fiscal year 2017 and $334.0 million atthe end of fiscal year 2016.Subsequent EventsFor details, see Part II, Item 8, Note 18, “Subsequent Events” in our notes to the consolidated financial statements in this Annual Report on Form 10-K.Fiscal YearOur fiscal year ends on June 30. References to fiscal year 2017, for example, refer to the fiscal year ended June 30, 2017.Critical Accounting PoliciesGeneralOur discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which havebeen prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us tomake estimates and judgments that affect the reported amount of assets, liabilities, revenues and expenses. We evaluate our estimates on an on-going basis,including those related to allowances for doubtful accounts and sales returns, inventory valuation, useful lives of property, plant and equipment, productwarranty accruals, stock-based compensation, impairment of investments and long-lived assets, and income taxes. We base our estimates on historicalexperience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making thejudgments we make about the carrying values of assets and liabilities that are not readily apparent from other sources. Because these estimates can varydepending on the situation, actual results may differ from the estimates.A summary of significant accounting policies is included in Part II, Item 8, Note 1, “Organization and Summary of Significant Accounting Policies”in our notes to the consolidated financial statements in this Annual Report on Form 10-K. Management believes the following are the most criticalaccounting policies and reflect the significant estimates and assumptions used in the preparation of the consolidated financial statements.36Table of ContentsRevenue RecognitionProduct sales. We recognize revenue from sales of products upon meeting all of the following revenue recognition criteria, which is typically metupon shipment or delivery of our products to customers, unless customer acceptance is uncertain or significant obligations to the customer remain: (i)persuasive evidence of an arrangement exists through customer contracts and orders, (ii) the customer takes title and assumes the risks and rewards ofownership, (iii) the sales price charged is fixed or determinable as evidenced by customer contracts and orders and (iv) collectibility is reasonably assured.We estimate reserves for future sales returns based on a review of our history of actual returns for each major product line. We also reduce revenue forcustomer and distributor programs and incentive offerings such as price protection and rebates as well as cooperative marketing arrangements where the fairvalue of the benefit identified from the costs cannot be reasonably estimated.We may use distributors to sell products to end customers. Revenue from distributors may be recognized on sell-in or sell-through basis dependingon the terms of the arrangement between the distributor and us.Services sales. Our sale of services mainly consists of extended warranty and on-site services. These services are sold at the time of the sale of theunderlying products. Revenue related to extended warranty commences upon the expiration of the standard warranty period and is recognized ratably overthe contractual period. Revenue related to on-site services commences upon recognition of the product sale and is recognized ratably over the contractualperiod. These service contracts are typically one to five years in length. Service revenue has been less than 10% of net sales for all periods presented and isnot separately disclosed. Multiple-element arrangements. Certain of our arrangements contain multiple elements, consisting of both our products and services. Revenueallocated to each element is recognized when all the revenue recognition criteria are met for that element.We allocate arrangement consideration at the inception of an arrangement to all deliverables, if they represent a separate unit of accounting, basedon their relative estimated stand-alone selling prices. A deliverable qualifies as a separate unit of accounting when the delivered element has stand-alonevalue to the customer. The guidance establishes the following hierarchy to determine the relative estimated stand-alone selling price to be used for allocatingarrangement consideration to deliverables: (i) vendor-specific objective evidence of fair value (“VSOE”), (ii) third-party evidence of selling price (“TPE”) ifVSOE is not available, or (iii) the vendor's best estimated selling price (“BESP”) if neither VSOE nor TPE are available. We do not have VSOE fordeliverables in our arrangements, and TPE is generally not available because our products are highly differentiated, and we are unable to obtain reliableinformation on the products and pricing practices of our competitors. BESP reflects our estimate of what the selling price of a deliverable would be if it weresold regularly on a stand-alone basis.As such, BESP is generally used to allocate the total arrangement consideration at the arrangement inception. We determine BESP for a product byconsidering multiple factors including, but not limited to, geographies, customer types, internal costs, gross margin objectives and pricing practices.Product WarrantiesWe offer product warranties ranging from 15 to 39 months against any defective products. We accrue for estimated returns of defective products atthe time revenue is recognized based on historical warranty experience and recent trends. We monitor warranty obligations and may make revisions to ourwarranty reserve if actual costs of product repair and replacement are significantly higher or lower than estimated. Accruals for anticipated future warrantycosts are charged to cost of sales and included in accrued liabilities and other long-term liabilities. We adjust the changes in estimates on an ongoing basis asa result of new product introductions or changes in unit volumes compared with our historical experience, or if the cost of servicing warranty claims is greateror lesser than expected, and we account for the changes in estimates prospectively.InventoriesInventories are stated at weighted average cost, subject to lower of cost or market. Inventories consist of purchased parts and raw materials(principally components), work in process (principally products being assembled) and finished goods. Market value represents net realizable value forfinished goods and work in process and replacement value for purchased parts and raw materials. We evaluate inventory on a quarterly basis for lower of costor market and excess and obsolescence and, as necessary, write down the valuation of units based upon usage and sales, anticipated sales price, productobsolescence and other factors. Once a reserve is established, it is maintained until the product to which it relates is sold or scrapped.37Table of ContentsWe receive various rebate incentives from certain suppliers based on our contractual arrangements, including volume-based rebates. The rebates arerecognized as a reduction of cost of inventories and reduces the cost of sales in the period when the related inventory is sold.Income TaxesWe account for income taxes under an asset and liability approach. Deferred income taxes reflect the impact of temporary differences between assetsand liabilities recognized for financial reporting purposes and such amounts recognized for income tax reporting purposes, net of operating loss carry-forwards and other tax credits measured by applying enacted tax laws related to the financial statement periods. Valuation allowances are provided whennecessary to reduce deferred tax assets to an amount that is more likely than not to be realized.We recognize tax liabilities for uncertain income tax positions on the income tax return based on the two-step process. The first step is to determinewhether it is more likely than not that each income tax position would be sustained upon audit. The second step is to estimate and measure the tax benefit asthe amount that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority. Estimating these amounts requires us todetermine the probability of various possible outcomes. We evaluate these uncertain tax positions on a quarterly basis. This evaluation is based on theconsideration of several factors, including changes in facts or circumstances, changes in applicable tax law, settlement of issues under audit and newexposures. If we later determine that our exposure is lower or that the liability is not sufficient to cover our revised expectations, we adjust the liability andeffect a related charge in our tax provision during the period in which we make such determination.Stock-Based CompensationWe measure and recognize compensation expense for all share-based awards made to employees, consultants and non-employee members of ourBoard of Directors including stock options and restricted stock units ("RSUs"). We are required to estimate the fair value of share-based awards on the date ofgrant. The value of awards that are ultimately expected to vest is recognized as an expense over the requisite service periods. The fair value of RSUs is basedon the closing market price of our common stock on the date of grant. We estimated the fair value of stock options granted using a Black-Scholes option-pricing model and a single option award approach. This model requires us to make estimates and assumptions with respect to the expected term of the optionand the expected volatility of the price of our common stock. The fair value is then amortized on a straight-line basis over the requisite service periods of theawards, which is generally the vesting period.The expected term represents the period that our stock-based awards are expected to be outstanding and was determined based on a combination ofour peer group and our historical experience. The expected volatility is based on a combination of our implied and historical volatility. In addition,forfeitures of share-based awards are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from thoseestimates. We use historical data to estimate pre-vesting option and restricted stock unit forfeitures and record stock-based compensation expense only forthose awards that are expected to vest. Variable Interest EntitiesWe determine at the inception of each arrangement whether an entity in which we hold an investment or in which we have other variable interests inis considered a variable interest entity ("VIE"). We consolidate VIEs when we are the primary beneficiary. The primary beneficiary of a VIE is the party thatmeets both of the following criteria: (1) has the power to make decisions that most significantly affect the economic performance of the VIE; and (2) has theobligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. Periodically, we assess whether anychanges in the interest or relationship with the entity affect the determination of whether the entity is still a VIE and, if so, whether we are the primarybeneficiary. If we are not the primary beneficiary in a VIE, we account for the investment under the equity method or cost method in accordance with theapplicable GAAP.We have concluded that Ablecom Technology, Inc. ("Ablecom") and its affiliate, Compuware Technology, Inc. ("Compuware") are VIEs inaccordance with applicable accounting standards and guidance; however, we are not the primary beneficiary as we do not have the power to direct theactivities that are most significant to the entities and therefore, we do not consolidate these entities. In performing this analysis, our management consideredour explicit arrangements with Ablecom and Compuware, including the supplier arrangements. Also, as a result of the substantial related party relationshipsbetween us and these two companies, management considered whether any implicit arrangements exist that would cause us to protect those related parties’interests from suffering losses. Management determined that no implicit arrangements exist with Ablecom, Compuware, or their shareholders.38Table of ContentsWe and Ablecom jointly established Super Micro Asia Science and Technology Park, Inc. (the “Management Company”) in Taiwan to manage thecommon areas shared by us and Ablecom for our separately constructed manufacturing facilities. In fiscal year 2012, each company contributed $0.2 millionand owns 50% of the Management Company. We have concluded that the Management Company is a VIE, and although the operations of the ManagementCompany are independent, through governance rights we have the power to direct the activities that are most significant to the Management Company.Therefore, we concluded that we are the primary beneficiary of the Management Company. For the fiscal years ended 2017, 2016 and 2015, the accounts ofthe Management Company have been consolidated with our accounts, and a noncontrolling interest has been recorded for Ablecom’s interests in the netassets and operations of the Management Company. In fiscal years 2017, 2016 and 2015, $(14,000), $20,000 and $(11,000) of net income (loss) attributableto Ablecom’s interest was included in our general and administrative expenses in the consolidated statements of operations, respectively.Results of Operations Net SalesNet sales consist of sales of our server solutions, including server systems and related services, subsystems, accessories. The main factors that impactour net sales are the number of compute nodes sold, the average selling prices per node for our server system sales and units shipped and the average sellingprice per unit for our subsystem and accessories. The prices for our server systems range widely depending upon the configuration, including the number ofcompute nodes, and the prices for our subsystems and accessories vary based on the type. A compute node is a hardware configuration having its own CPU,RAM and storage and that is capable of running its own instance of a non-virtualized operating system. Measuring volume using compute nodes enablesmore consistent measurement across different server form factors and across different vendors. As with most electronics-based products, average selling pricestypically are highest at the time of introduction of new products that utilize the latest technology and tend to decrease over time as such products mature inthe market and are replaced by next generation products.The following table presents net sales by product type for fiscal years 2017, 2016 and 2015 (dollars in millions): Fiscal Years Ended June 30, 2017 over 2016 Change 2016 over 2015 Change 2017 2016 2015 $ % $ %Server systems$1,740.6 $1,533.4 $1,186.3 $207.2 13.5% $347.1 29.3 %Percentage of total netsales70.0% 68.9% 60.7% Subsystems andaccessories744.3 691.6 768.1 52.7 7.6% (76.5) (10.0)%Percentage of total netsales30.0% 31.1% 39.3% Total net sales$2,484.9 $2,225.0 $1,954.4 $259.9 11.7% $270.6 13.8 %Fiscal Year 2017 compared with Fiscal Year 2016The year-over-year increase of $259.9 million in our net sales in fiscal year 2017 compared with fiscal year 2016 was primarily due to an increase insales of our server systems.The year-over-year increase in server system sales was primarily due to an increase of average selling price per node from $2,902 in fiscal year 2016to $3,118 in fiscal year 2017. The increase in average selling prices of our server systems was primarily due to higher sales of our complete server systems thatoffer higher density computing and more memory and hard drive capacity. The year-over-year increase in net sales of our subsystems and accessories in fiscalyear 2017 was primarily due to higher sales of server accessories to our distributors.Fiscal Year 2016 compared with Fiscal Year 2015 The year-over-year increase of $270.6 million in our net sales in fiscal year 2016 compared with fiscal year 2015 was due to an increase in sales ofour server systems partially offset by reduced sales of subsystems.The year-over-year increase in server system sales was primarily due to an approximately 15% increase in server system shipping volume and anincrease of average selling price per node from $2,661 in fiscal year 2015 to $2,902 in fiscal year 2016. The increase in average selling prices of our serversystems was primarily due to higher sales of our complete server39Table of Contentssystems that offer higher density computing and more memory and hard drive capacity. The year-over-year decrease in net sales of our subsystems andaccessories in fiscal year 2016 was primarily due lower sales of hard drives and memory bundled with our server solutions to our distributors and systemintegrators as we continued to promote our sales of complete server systems to our OEM and direct customers.The following table presents the percentages of net sales from products sold to distributors and OEMs and direct customers for fiscal years 2017,2016 and 2015: Years Ended June 30, 2017 over 2016 2016 over 2015 2017 2016 2015 % %Distributors47.8% 45.8% 49.6% 2 % (3.8)%OEMs and direct customers52.2% 54.2% 50.4% (2)% 3.8 %Total net sales100.0% 100.0% 100.0% Fiscal Year 2017 compared with Fiscal Year 2016The year-over-year increase in net sales to distributors in fiscal year 2017 as a percentage of total net sales as compared with fiscal year 2016 wasprimarily due to the higher sales to our system integrator customers. The year-over-year decrease in net sales to direct and OEM customers in fiscal year 2017as a percentage of total net sales as compared with fiscal year 2016 was primarily due to lower demand for our complete server systems from cloud computingand internet data center customers. Fiscal Year 2016 compared with Fiscal Year 2015The year-over-year decrease in net sales to distributors in fiscal year 2016 as a percentage of total net sales as compared with fiscal year 2015 wasprimarily due to the lower sales of our subsystem and accessories, which are typically sold through distributors. The year-over-year increase in net sales todirect and OEM customers in fiscal year 2016 as a percentage of total net sales as compared with fiscal year 2015 was primarily due to the higher sales of ourcomplete server systems to our cloud computing and internet data center customers.The following table presents percentages of net sales by geographic region for fiscal years 2017, 2016 and 2015: Years Ended June 30, 2017 over 2016 2016 over 2015 2017 2016 2015 % %United States57.2% 63.3% 58.8% (6.1)% 4.5 %Asia20.2% 14.4% 16.0% 5.8 % (1.6)%Europe18.3% 17.4% 18.8% 0.9 % (1.4)%Others4.3% 4.9% 6.4% (0.6)% (1.5)%Total net sales100.0% 100.0% 100.0% Fiscal Year 2017 compared with Fiscal Year 2016The year-over-year decrease in net sales in the United States in fiscal year 2017 was primarily due to the lower sales of our server systems to ourcloud computing and internet data center customers. As a result, our United States sales as a percentage of total net sales decreased in fiscal year 2017compared with fiscal year 2016. The year-over-year increase in net sales in Asia and Europe in fiscal 2017 as a percentage of total net sales as compared withfiscal year 2016 was due primarily to increased sales to our channel partners in China, Taiwan, Japan and the United Kingdom.Fiscal Year 2016 compared with Fiscal Year 2015The year-over-year increase in net sales in the United States in fiscal year 2016 as a percentage of total net sales as compared with fiscal year 2015was primarily due to the higher sales of our server systems to our cloud computing and internet data center customers, which sales represent a higher portionof sales in the United States than in other regions. The year-over-year decrease in net sales in Asia and Europe in fiscal year 2016 as a percentage of total netsales as compared with fiscal year40Table of Contents2015 was primarily due to lower sales growth of our server systems in China and the United Kingdom as compared to other regions.Cost of Sales and Gross MarginCost of sales primarily consists of the costs to manufacture our products, including the costs of materials, contract manufacturing, shipping,personnel and related expenses including stock-based compensation, equipment and facility expenses, warranty costs and inventory excess and obsolescenceprovisions. The primary factors that impact our cost of sales are the mix of products sold and cost of materials, which include raw material costs, shippingcosts and salary and benefits related to production. Cost of sales as a percentage of net sales may increase over time if decreases in average selling prices arenot offset by corresponding decreases in our costs. Our cost of sales as a percentage of net sales is also impacted by the extent to which we are able toefficiently utilize our expanding manufacturing capacity. Because we generally do not have long-term fixed supply agreements, our cost of sales is subject tochange in the cost of materials based on market conditions. As a result, our cost of sales as a percentage of sales in any period can be negatively impacted bysignificant component price increases resulting from component shortages.We use several suppliers and contract manufacturers to design and manufacture components in accordance with our specifications, with most finalassembly and testing performed at our manufacturing facility in San Jose, California. During fiscal year 2017, we continued to increase manufacturing andservice operations in Taiwan and the Netherlands primarily to support our Asian and European customers and have continued to work on improving ourutilization of our overseas manufacturing capacity. We work with Ablecom, one of our key contract manufacturers and also a related party to optimizemodular designs for our chassis and certain of other components. We also outsource to Compuware, also a related party, a portion of our design activities anda significant part of our manufacturing of components, particularly power supplies. Our purchases of products from Ablecom and Compuware represented11.1%, 12.8% and 13.8% of our cost of sales for fiscal years 2017, 2016 and 2015, respectively. For further details on our dealings with related parties, seePart II, Item 8, Note 11, “Related Party Transactions.”Cost of sales and gross margin for fiscal years 2017, 2016 and 2015, are as follows (dollars in millions): Years Ended June 30, 2017 over 2016 Change 2016 over 2015 Change 2017 2016 2015 $ % $ %Cost of sales$2,135.0 $1,894.5 $1,647.8 $240.5 12.7 % $246.7 15.0 %Gross profit350.0 330.5 306.6 19.5 5.9 % 23.9 7.8 %Gross margin14.1% 14.9% 15.7% (0.8)% (0.8)%Fiscal Year 2017 compared with Fiscal Year 2016The year-over-year increase of $240.5 million in cost of sales in fiscal year 2017 compared with fiscal year 2016 was primarily attributable to anincrease of $225.1 million in product cost as related to the increase in net sales and shortages of memory and SSD components, an increase of $6.3 million ininventory provision primarily due to an increase in aged inventory and an increase in reserves for specific product issues, an increase of $4.4 million inwarranty provision due to higher cost of servicing warranty claims from increased net sales in fiscal year 2017, and an increase of $4.2 million incompensation and benefits including stock-based compensation as a result of an increase in annual salaries and an increase of 81 operations personnel tosupport the growth of our business.The year-over-year decrease in the gross margin percentage in fiscal year 2017 compared with fiscal year 2016 was primarily due to higher costsrelated to shortages of memory and SSD components, as well as a higher percentage of sales of our server systems being comprised of mature, late life cycleprocessors that generally are lower margin sales. In addition, in fiscal year 2017 as compared with fiscal year 2016, we had higher sales in Asia where pricingis typically more competitive, which had a negative impact on our gross margin percentage.Fiscal Year 2016 compared with Fiscal Year 2015The year-over-year increase of $246.7 million in cost of sales in fiscal year 2016 compared with fiscal year 2015 was primarily attributable to anincrease of $222.2 million in product cost as related to the increase in net sales, an increase of $9.1 million in compensation and benefits including stock-based compensation as a result of an increase in annual salaries and an41Table of Contentsincrease of 137 operations personnel to support the growth of our business, an increase of $4.7 million in facility expense, an increase of $3.5 million ininventory provision due to more reserves for specific products, an increase of $1.7 million in warranty provision due to higher cost of servicing warrantyclaims from increased net sales in fiscal year 2016 and an increase of $1.6 million of depreciation expenses.The year-over-year decrease in the gross margin percentage in fiscal year 2016 compared with fiscal year 2015 was primarily due to significantlylower gross margins from sales of our subsystem and accessories and lower utilization of manufacturing capacity partially offset by higher sales of ourcomplete server systems such as storage servers which have a higher gross margin.Operating ExpensesResearch and development expenses consist of the personnel and related expenses including stock-based compensation of our research anddevelopment teams, and materials and supplies, consulting services, third-party testing services and equipment and facility expenses related to our researchand development activities. All research and development costs are expensed as incurred. We occasionally receive non-recurring engineering (“NRE”)funding from certain suppliers and customers for joint development. Under these programs, we are reimbursed for certain research and development costs thatwe incur as part of the joint development of our products and those of our suppliers and customers. These amounts offset a portion of the related research anddevelopment expenses and have the effect of reducing our reported research and development expenses.Sales and marketing expenses consist primarily of salaries, stock-based compensation and incentive bonuses for our sales and marketing personnel,costs for tradeshows, independent sales representative fees and marketing programs. From time to time, we receive cooperative marketing funding fromcertain suppliers. Under these programs, we are reimbursed for certain marketing costs that we incur as part of the joint promotion of our products and those ofour suppliers. These amounts offset a portion of the related expenses and have the effect of reducing our reported sales and marketing expenses. The timing,magnitude and estimated usage of these programs can result in significant variations in reported sales and marketing expenses from period to period.Spending on cooperative marketing, reimbursed by our suppliers, typically increases in connection with significant product releases by our suppliers.General and administrative expenses consist primarily of general corporate costs, including personnel expenses, financial reporting, informationtechnology, corporate governance and compliance and outside legal, audit and tax fees.Operating expenses for fiscal years 2017, 2016 and 2015 are as follows (dollars in millions): Years Ended June 30, 2017 over 2016 Change 2016 over 2015 Change 2017 2016 2015 $ % $ %Research and development$144.0 $124.2 $101.4 $19.8 15.9% $22.8 22.5%Percentage of total net sales5.8% 5.6% 5.2% Sales and marketing$66.4 $58.3 $47.5 $8.1 13.9% $10.8 22.7%Percentage of total net sales2.7% 2.6% 2.4% General and administrative$44.7 $40.5 $25.0 $4.2 10.4% $15.5 62.0%Percentage of total net sales1.8% 1.8% 1.3% Total operating expenses$255.1 $223.0 $173.9 $32.1 14.4% $49.1 28.2%Percentage of total net sales10.3% 10.0% 8.9% Fiscal Year 2017 compared with Fiscal Year 2016 Research and development expenses increased by $19.8 million, or 15.9% in fiscal year 2017 as compared with fiscal year 2016 primarily due to anincrease of $21.0 million in compensation and benefits expense, including stock-based compensation expense and an increase of $1.4 million in productdevelopment expenses for prototype materials. The increase was partially offset by an increase of $3.4 million reimbursement received for certain researchand development costs that we incur as part of the joint development of our and our suppliers’ and customers’ products. Our compensation and benefitexpense increased primarily as a result of an increase in annual salaries and an increase of 168 research and development personnel to support our expandedproduct development initiatives in the United States and in Taiwan and to support the growth of our business.42Table of ContentsSales and marketing expenses increased by $8.1 million, or 13.9%, in fiscal year 2017 as compared with fiscal year 2016 primarily due to an increaseof $4.8 million in compensation and benefits, including stock-based compensation, as a result of an increase in annual salaries and an increase of 47 sales andmarketing personnel, and an increase of $1.5 million in advertising and promotion expenses.General and administrative expenses increased by $4.2 million, or 10.4% in fiscal year 2017 as compared with fiscal year 2016. The increase wasprimarily due to an increase of $7.1 million in compensation and benefits including stock-based compensation expense, partially offset by a $2.4 milliondecrease in legal and professional fees. Our compensation and benefit expense in general and administrative expenses increased primarily as a result of anincrease in annual salaries and an increase of 45 personnel to support our expanded business.Fiscal Year 2016 compared with Fiscal Year 2015 Research and development expenses increased by $22.8 million, or 22.5% in fiscal year 2016 compared with fiscal year 2015 primarily due to anincrease of $18.1 million in compensation and benefits, including stock-based compensation expense and an increase of $3.3 million in developmentexpenses for prototype materials. Our compensation and benefit expense increased primarily as a result of an increase in annual salaries and an increase of146 research and development personnel to support our expanded product development initiatives in the United States and in Taiwan and to support thegrowth of our business in many market verticals. Sales and marketing expenses increased by $10.8 million, or 22.7%, in fiscal year 2016 as compared with fiscal year 2015 primarily due to anincrease of $7.4 million in compensation and benefits, including stock-based compensation as a result of an increase in annual salaries and an increase of 42sales and marketing personnel, and an increase of $2.5 million in advertising and promotion expenses.General and administrative expenses increased by $15.5 million, or 62.0% in fiscal year 2016 as compared with fiscal year 2015. The increase wasprimarily due to an increase of $9.8 million in compensation and benefits including stock-based compensation expense, an increase of $4.8 million increasein legal, audit and accounting fees primarily due to costs incurred in connection with an out of period correction of errors in the first quarter of fiscal year2016 and remediation of internal control deficiencies and an increase of $1.1 million in bad debt expenses. Our compensation and benefit expense in generaland administrative expenses increased primarily as a result of an increase in annual salaries and an increase of 83 personnel to support our expanded business.Interest and Other Income (Expense), NetOther income (expense), net consists primarily of interest earned on our investment and cash balances, share of loss from equity investee and foreignexchange gains and losses.Interest expense represents interest expense on our term loans and lines of credit.Interest and other income (expense), net for fiscal years 2017, 2016 and 2015 are as follows (dollars in millions): Years Ended June 30, 2017 over 2016 Change 2016 over 2015 Change 2017 2016 2015 $ % $ %Other income (expense), net$(1.3) $1.5 $1.0 $(2.8) (186.7)% $0.5 50.0%Interest expense(2.3) (1.6) (1.0) (0.7) 43.8 % (0.6) 60.0%Interest and other income (expense),net$(3.6) $(0.1) $— $(3.5) * $(0.1) ** Not meaningfulInterest and other income (expense), net. Interest and other income (expense), net increased by $3.5 million in fiscal year 2017 compared with fiscalyear 2016. The increase was primarily due to an unrealized foreign currency loss related the remeasurement of our NTD$700.0 million term loan denominatedin NTD. Interest and other expense, net remained consistent in fiscal year 2016 as compared with fiscal year 2015.Provision for Income Taxes43Table of ContentsOur income tax provision is based on our taxable income generated in the jurisdictions in which we operate, primarily the United States, Taiwan andthe Netherlands. Our effective tax rate differs from the statutory rate primarily due to research and development tax credits and the domestic productionactivities deduction which were partially offset by state taxes and unrecognized tax benefits related to permanent establishment exposures. A reconciliationof the federal statutory income tax rate to our effective tax rate is set forth in Part II, Item 8, Note 13, “Income Taxes” to the consolidated financial statementsin this Annual Report on Form 10-K.Provision for income taxes and effective tax rates for fiscal years 2017, 2016 and 2015 are as follows (dollars in millions): Years Ended June 30, 2017 over 2016 Change 2016 over 2015 Change 2017 2016 2015 $ % $ %Income tax provision$24.4 $35.3 $40.1 $(10.9) (30.9)% $(4.8) (12.0)%Percentage of total net sales1.0% 1.6% 2.1% Effective tax rate26.8% 32.9% 30.2% Fiscal Year 2017 compared with Fiscal Year 2016 Provision for income taxes decreased by $10.9 million, or 30.9% in fiscal year 2017 compared with fiscal year 2016. The lower income tax provisionfor fiscal year 2017 was primarily attributable to our lower income from operations as compared with fiscal year 2016. The effective tax rate for fiscal year2017, was lower than in fiscal year 2016 and the statutory tax rate of 35%, primarily due to tax benefits resulting from the completion of U.S. federal incometax audit and an income tax audit in a foreign jurisdiction as well as research and development tax credit and domestic production activities deductions.Fiscal Year 2016 compared with Fiscal Year 2015Provision for income taxes decreased by $4.8 million, or 12.0% in fiscal year 2016 compared with fiscal year 2015. The lower income tax provisionfor fiscal year 2016 was primarily attributable to our lower operating income as compared with fiscal year 2015. The effective tax rate for fiscal year 2016 washigher as compared with fiscal year 2015 primarily due to the lower foreign rate benefits and foreign unrecognized tax benefits offset in part by the increasein federal research and development credit as a result of the enactment of the Protecting Americans from Tax Hikes ("PATH") Act of 2015. Liquidity and Capital ResourcesSince our inception, we have financed our growth primarily with funds generated from operations and from the proceeds of our initial publicoffering. In addition, we have, from time to time, utilized borrowing facilities, particularly in relation to the financing of real property acquisitions. Our cashand cash equivalents were $110.6 million and $178.8 million as of June 30, 2017 and 2016, respectively. Our cash in foreign locations was $50.8 million and$46.5 million as of June 30, 2017 and 2016, respectively. It is management's intention to reinvest the undistributed foreign earnings indefinitely in foreignoperations. We believe that our current cash and cash equivalents are adequate to meet our needs, including any debt balances due at maturity, for the nexttwelve months from the issuance of these consolidated financial statements.Fiscal Year 2017Operating Activities. Net cash used in operating activities was $96.2 million in fiscal year 2017.Net cash used in our operating activities for fiscal year 2017 was primarily due to an increase in inventories of $235.6 million and an increase inaccounts receivable of $149.5 million, which were partially offset by an increase in accounts payable of $135.3 million, our net income of $66.9 million, anincrease in accrued liabilities of $27.6 million, stock-based compensation expense of $19.7 million, an increase in other long term liabilities of $17.9million, provision for excess and obsolete inventories of $15.7 million, and depreciation and amortization expense of $16.4 million. The increase in accountsreceivable was primarily due to higher sales volume in the fourth quarter of fiscal year 2017. The increase in inventories and accounts payable was primarilydue to increased sales as well as increased market prices for inventories related to memory and SSD components. In addition, we staged inventory to supportnew product launches.44Table of ContentsInvesting activities. Net cash used in our investing activities was $29.7 million in fiscal year 2017 due primarily to $29.4 million associated withinvestments in property, plant and equipment, of which $16.1 million was related to the construction of buildings at our Green Computing Park in San Jose,California.Financing activities. Net cash provided by our financing activities was $57.7 million for fiscal year 2017. In fiscal year 2017, we drew down $207.0million on our revolving credit facility with Bank of America and CTBC Bank and repaid $140.5 million in loans. We received $10.9 million in connectionwith the exercise of stock options in fiscal year 2017. Further, we used $18.5 million in the repurchase of our outstanding common stock.Fiscal Year 2016Operating Activities. Net cash provided by operating activities was $108.0 million for fiscal year 2016. Net cash provided by our operatingactivities for fiscal year 2016 was primarily due to our net income of $72.1 million, a decrease in accounts receivable of $53.6 million, an increase in otherlong term liabilities of $20.0 million, stock-based compensation expense of $16.9 million, depreciation and amortization expense of $13.3 million, provisionfor excess and obsolete inventories of $9.4 million and an increase in accrued liabilities of $12.9 million, which were partially offset by a decrease inaccounts payable of $65.8 million and an increase in prepaid expenses and other current assets of $23.5 million. The decrease for fiscal year 2016 ascompared with fiscal year 2015 in accounts receivable was primarily due to lower sales volume in the fourth quarter of fiscal year 2016. The decrease forfiscal year 2016 as compared with fiscal year 2015 in inventories and accounts payable was primarily due to anticipated lower sales volume in the firstquarter of fiscal year 2017.Investing activities. Net cash used in our investing activities was $35.1 million in fiscal year 2016, which was primarily due to $34.1 millionassociated with investments in property, plant and equipment, of which $16.7 million was related to the construction of buildings at our Green ComputingPark in San Jose, California, and of which $3.4 million was related to the implementation of a new ERP system for our United States headquarters and oursubsidiaries.Financing activities. Net cash provided by our financing activities was $13.1 million for fiscal year 2016. In fiscal year 2016, we drew down $34.2million on our revolving lines of credit with Bank of America and CTBC Bank and repaid $34.1 million in loans. Further, we received $12.2 million inconnection with the exercise of stock options in fiscal year 2016.Fiscal Year 2015Operating Activities. Net cash used in operating activities was $46.1 million for fiscal year 2015. Net cash used in our operating activities for fiscalyear 2015 was primarily due to an increase in inventories of $177.6 million and an increase in accounts receivable of $78.2 million, which were partiallyoffset by our net income of $92.6 million, an increase in accounts payable of $81.7 million, stock-based compensation expense of $14.4 million, an increasein net income taxes payable of $9.0 million, an increase in accrued liabilities of $13.9 million, depreciation and amortization expense of $8.1 million,increase in other long-term liabilities of $7.7 million and provision for excess and obsolete inventories of $5.9 million. The increase in accounts receivablewas primarily due to an increase in our sales late in the fourth quarter. The increase in inventories and accounts payable was primarily due to higher purchasesto support the anticipated level of growth in our net sales in fiscal year 2016. Investing activities. Net cash used in our investing activities was $36.2 million in fiscal year 2015, which was primary due to a $35.1 millioninvestment in property, plant and equipment, of which $21.8 million related to the development and construction of our first manufacturing building andwarehouse at our Green Computing Park in San Jose, California, which was completed in August 2015, and of which $4.8 million related to theimplementation of a new ERP system.Financing activities. Net cash provided by our financing activities was $80.0 million for fiscal year 2015. In fiscal year 2015, we drew down $84.9million on our revolving line of credit from Bank of America and CTBC Bank and repaid $36.0 million in loans. Further, we received $23.3 million inconnection with the exercise of stock options in fiscal year 2015.We expect to experience continued growth in our working capital requirements and capital expenditures as we continue to expand our business. Ourlong-term future capital requirements will depend on many factors, including our level of revenues, the timing and extent of spending to support our productdevelopment efforts, the expansion of sales and marketing activities, the timing of our introductions of new products, the costs to ensure access to adequatemanufacturing capacity and the continuing market acceptance of our products. We intend to fund this continued expansion through cash generated byoperations and by drawing on our revolving credit facility or through other debt financing. However, we cannot be certain whether such financing will beavailable on commercially reasonable or otherwise favorable terms or that such financing will45Table of Contentsbe available at all. We anticipate that working capital and capital expenditures will constitute a material use of our cash resources.Other factors affecting liquidity and capital resourcesActivities under Revolving Lines of Credit and Term LoansBank of America2015 Bank of America Credit FacilityIn June 2015, we entered into an amendment to our then existing credit agreement with Bank of America N.A. (“Bank of America”) which providedfor (i) a $65.0 million revolving line of credit facility that would have matured on November 15, 2015 and (ii) a five-year $14.0 million term loan facility(collectively, the “2015 Bank of America Credit Facility”). The term loan was secured by three buildings located in San Jose, California and the principal andinterest was payable monthly through September 30, 2016 with an interest rate at the LIBOR rate plus 1.50% per annum. In May 2016, we extended therevolving line of credit to mature on June 30, 2016.2016 Bank of America Credit FacilityIn June 2016, we entered into a new credit agreement with Bank of America, which provided for (i) a $55.0 million revolving line of credit facilityincluding a $5.0 million letter of credit sublimit that was to mature on June 30, 2017 and (ii) a five-year $50.0 million term loan facility (collectively, the“2016 Bank of America Credit Facility”). The 2016 Bank of America Credit Facility replaced the 2015 Bank of America Credit Facility. The 2016 Bank ofAmerica Credit Facility term loan is secured by seven buildings located in San Jose, California and the property, plant and equipment and the inventory inthose buildings. The principal and interest of the 2016 Bank of America Credit Facility term loan are payable monthly through June 30, 2021 with an interestrate at the LIBOR rate plus 1.25% per annum. The interest rate for the 2016 Bank of America Credit Facility revolving line of credit is at the LIBOR rate plus1.25% per annum. The LIBOR rate was 1.04% at June 30, 2017. The letter of credit bears interest at a rate of 1.25% per annum. In May 2017, we entered intoan amendment to the 2016 Bank of America Credit Facility to increase the revolving line of credit to $85.0 million and extended the maturity date of therevolving lines of credit to October 31, 2018. Prior to the maturity, in April 2018, we repaid and terminated the 2016 Bank of America Credit Facility withproceeds from a new revolving line of credit (the "2018 Bank of America Credit Facility").In June 2016, we also entered into a separate credit agreement as a part of the 2016 Bank of America Credit Facility, which provided for a revolvingline of credit of $10.0 million for our Taiwan and Netherlands subsidiaries that was to mature on June 30, 2017. The interest rate of the revolving line ofcredit is equal to a minimum of 0.9% per annum plus the lender's cost of funds. In December 2016, we entered into an amendment to this separate creditagreement to increase the revolving line of credit from $10.0 million to $20.0 million. We extended the revolving line of credit to mature on October 31,2018. Under the terms of this separate credit agreement, we cannot directly or indirectly pay any dividends, except in limited situations. As of June 30, 2017 and 2016, the total outstanding borrowings under the 2016 Bank of America Credit Facility term loans was $40.0 million and$0.9 million, respectively. The total outstanding borrowings under the 2016 Bank of America Credit Facility revolving lines of credit was $83.2 million and$62.2 million as of June 30, 2017 and 2016, respectively. The interest rates for these loans ranged from 1.61% to 2.46% per annum as of June 30, 2017 andfrom 1.02% to 1.96% per annum as of June 30, 2016, respectively. As of June 30, 2017, the amount of the unused revolving lines of credit with Bank ofAmerica under the credit agreements was $21.8 million. As of June 30, 2017, assets amounting to $1,168.6 million collateralized the line of credit with Bankof America under the credit agreement, which represent our total assets of the United States headquarters, except for seven buildings located in San Jose,California and property, plant and equipment and inventory in those buildings. As of June 30, 2017, total assets collateralizing the term loan with Bank ofAmerica under the credit agreement were $67.9 million. 2018 Bank of America Credit FacilityIn April 2018, we entered into the 2018 Bank of America Credit Facility, which replaced the 2016 Bank of America Credit Facility. The 2018 Bankof America Credit Facility provides for a revolving credit line and other financial accommodations of up to $250.0 million extended by certain lenders. The2018 Bank of America Credit Facility expires after 364 days, or at our option, and if certain conditions are satisfied, including being current on all of ourdelinquent quarterly and annual filings with the SEC, may convert into a 5-year revolving credit facility. If and upon such conversion, the lenders for the46Table of Contents2018 Bank of America Credit Facility shall extend, in aggregate, a principal amount of up to $400.0 million. Prior to the 2018 Bank of America CreditFacility’s conversion to the 5-year revolving credit facility, interest shall be at the LIBOR rate plus 2.75% per annum. Upon the 2018 Bank of America CreditFacility converting to the 5-year revolving credit facility, interest shall accrue at the LIBOR rate plus an amount between 1.50% and 2.00% for loans to bothSuper Micro Computer and Super Micro Computer B.V. Interest accrued on any loans under the 2018 Bank of America Credit Facility is due on the first dayof each month, and the loans are due and payable in full on the termination date of the 2018 Bank of America Credit Facility, unless payment is requiredearlier. Voluntary prepayments are permitted without early repayment fees or penalties. Subject to customary exceptions, the 2018 Bank of America CreditFacility is secured by substantially all of our assets. Upon conversion to the 5-year revolving credit facility both Super Micro Computer’s assets, and at ouroption, Super Micro Computer B.V.'s assets will be used as collateral. Under the terms of the 2018 Bank of America Credit Facility, we cannot pay anydividends.On January 31, 2019, we paid a fee and entered into an amendment of the 2018 Bank of America Credit Facility that resulted in the extension of thematurity date of the 2018 Bank of America Credit Facility from April 19, 2019 to June 30, 2019.CTBC Bank In April 2016, we entered into a credit agreement with CTBC Bank Co., Ltd ("CTBC Bank") that provides for (i) a 12-month NTD$700.0 million or$21.6 million U.S. dollar equivalent term loan facility secured by our land and building located in Bade, Taiwan with an interest rate equal to the lender'sestablished NTD interest rate plus 0.25% per annum which was adjusted monthly, which term loan facility also included a 12-month line of guarantee up toNTD$100.0 million or $3.1 million U.S. dollar equivalent with an annual fee equal to 0.5% per annum, and (ii) a 12-month revolving line of credit up to80.0% of eligible accounts receivable in an aggregate amount of up to $40.0 million with an interest rate equal to the lender's established USD interest rateplus 0.30% per annum which was adjusted monthly (collectively, the “CTBC Credit Facility”). The total borrowings allowed under the CTBC Credit Facilitywas capped at $40.0 million. We extended the CTBC Credit Facility to mature on May 31, 2017.In May 2017, we renewed the credit agreement with respect to the CTBC Credit Facility, such that it provides for (i) a 12-month NTD$700.0 millionor $23.0 million U.S. dollar equivalent term loan facility secured by our land and building located in Bade, Taiwan with an interest rate equal to the lender'sestablished NTD interest rate plus 0.25% per annum which is adjusted monthly, which term loan facility also included a 12-month line of guarantee up toNTD$100.0 million or $3.3 million U.S. dollar equivalent with an annual fee equal to 0.5% per annum, and (ii) a 12-month revolving line of credit up to80.0% of eligible accounts receivable in an aggregate amount of up to $50.0 million with an interest rate equal to the lender's established USD interest rateplus an interest rate ranging from 0.40% to 0.45% per annum which is adjusted monthly. The total borrowings allowed under the CTBC Credit Facility werecapped at $50.0 million.The total outstanding borrowings under the CTBC Credit Facility term loan were denominated in Taiwanese dollars and remeasured into U.S. dollarsof $19.7 million and $20.4 million at June 30, 2017 and 2016, respectively. At June 30, 2017 and 2016, the total outstanding borrowings under the CTBCCredit Facility revolving line of credit was $19.0 million and $10.1 million, respectively, in U.S. dollars. The interest rate for these loans ranged from 0.93%and 2.00% at June 30, 2017 and 0.90% and 1.25% per annum at June 30, 2016. At June 30, 2017, the amount available for future borrowing under the CTBCCredit Facility was $11.3 million. As of June 30, 2017, the net book value of land and building located in Bade, Taiwan collateralizing the CTBC CreditFacility term loan was $26.4 million. Under the terms of the May 2017 renewed credit agreement, the CTBC Credit Facility was to mature on April 30, 2018but prior to the maturity we entered into a new credit agreement with CTBC Bank in January 2018. In January 2018, we entered into a credit agreement with CTBC Bank that provides for (i) a 12-month NTD$700.0 million or $23.6 million U.S.dollar equivalent term loan facility secured by the land and building located in Bade, Taiwan with an interest rate equal to the lender's established NTDinterest rate plus 0.25% per annum which is adjusted monthly, which term loan facility also includes a 12-month line of guarantee up to NTD$100.0 millionor $3.4 million U.S. dollar equivalent with an annual fee equal to 0.5% per annum, and (ii) a 12-month NTD$1,500.0 million or $50.5 million U.S. dollarequivalent term loan facility with an interest rate equal to the lender's established NTD interest rate plus 0.25% per annum which is adjusted monthly,(collectively, the “2018 CTBC Credit Facility”). The 2018 CTBC Credit Facility replaced the CTBC Credit Facility. The total borrowings allowed under the2018 CTBC Credit Facility was initially capped at $50.0 million and in August 2018, was reduced to $40.0 million. In April 2019, we extended the maturityof 2018 CTBC Credit Facility to June 30, 2019.Covenant Compliance2018 Bank of America Credit Facility47Table of ContentsThe credit agreement with Bank of America related to the 2018 Bank of America Credit Facility contains customary representations and warrantiesand customary affirmative and negative covenants applicable to us. The credit agreement contains a financial covenant, which requires that we maintain aFixed Charge Coverage Ratio, as defined in the agreement of at least 1.00 for each twelve-month period while a Trigger Period, as defined in the agreement,is in effect. We have maintained compliance with this covenant.On September 7, 2018, Bank of America issued an extension letter to us in connection with the 2018 Bank of America Credit Facility, whichextended the delivery date of our audited consolidated financial statements, compliance certificates and other material reports for the fiscal year ended June30, 2018 to January 31, 2019. On January 31, 2019, we entered into an amendment of the loan and security agreement with respect to the 2018 Bank ofAmerica Credit Facility to, among other matters, (a) extend the delivery date of our audited consolidated financial statements, compliance certificates andother material reports for the fiscal year ended June 30, 2018 to June 30, 2019, and (b) require the delivery, by no later than March 31, 2019, of our auditedconsolidated financial statements for the fiscal year ended June 30, 2017. In April 2019, we paid a fee to extend the delivery of our audited consolidatedfinancial statements for the fiscal year ended June 30, 2017 to June 30, 2019. We intend to negotiate the further extension for delivery of our auditedconsolidated financial statements, compliance certificates and other material reports for the fiscal year ended June 30, 2018.CTBC BankThere are no financial covenants associated with the CTBC Credit Facility or the 2018 CTBC Credit Facility.Share Repurchase ProgramIn July 2016, our Board of Directors adopted a program to repurchase from time to time at management’s discretion up to $100.0 million of ourcommon stock in the open market or in private transactions during the next twelve months at prevailing market prices. In fiscal year 2017, we purchased888,097 shares of our common stock in the open market at a weighted average price of $20.79 per share for approximately $18.5 million. Repurchases weremade under the program using our cash resources. The repurchase program ended in July 2017.Contractual ObligationsThe following table describes our contractual obligations as of June 30, 2017: Payments Due by Period Less Than 1 Year 1 to 3 Years 3 to 5Years More Than5 Years Total (in thousands)Operating leases$4,844 $8,505 $3,605 $3,951 $20,905Capital leases, including interest309 433 140 — 882Debt, including interest (1)163,823 — — — 163,823Purchase commitments (2)309,120 — — — 309,120Total (3)$478,096 $8,938 $3,745 $3,951 $494,730 __________________________(1)Amount reflects total anticipated cash payments, including anticipated interest payments based on the interest rate at June 30, 2017. In 2018, weamended our existing credit agreement with CTBC Bank, which changed our maximum borrowing capacity to $40.0 million and in January 2019extended the maturity to June 30, 2019. In April 2018, we repaid and terminated the 2016 Bank of America Credit Facility with proceeds from the2018 Bank of America Credit Facility. The 2018 Bank of America Credit Facility increases our borrowing capacity from $155.0 million to $250.0million with Bank of America. In January 2019, we extended the maturity of the 2018 Bank of America Credit Facility from April 19, 2019 to June30, 2019.(2)Amount reflects total gross purchase commitments under our manufacturing arrangements with third-party contract manufacturers or vendors. SeePart II, Item 8, Note 14, “Commitments and Contingencies” to the consolidated financial statements in this Annual Report on Form 10-K for adiscussion of purchase commitments.(3)The table above excludes liabilities for deferred revenue of $80.5 million, $6.3 million of deferred gain related to our remaining performanceobligations in association with the contribution of certain technology rights to a privately-held company located in China, and unrecognized taxbenefits and related interest and penalties accrual of $13.3 million.48Table of ContentsDeferred revenue represents billed services in advance which include extended warranty, on-site technical support, and hardware and softwaremaintenance. We have not provided a detailed estimate of the payment timing of unrecognized tax benefits due to the uncertainty of when therelated tax settlements will become due. See Part II, Item 8, Note 13, “Income Taxes” to the consolidated financial statements in this Annual Reporton Form 10-K for a discussion of income taxes.We expect to fund our remaining contractual obligations from our ongoing operations and existing cash and cash equivalents on hand.Recent Accounting PronouncementsFor a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our consolidatedfinancial statements, see Part II, Item 8, Note 1, “Organization and Summary of Significant Accounting Policies” to the consolidated financial statements inthis Annual Report on Form 10-K.Off-Balance Sheet ArrangementsWe do not have any off-balance sheet arrangements.49Table of ContentsItem 7A. Quantitative and Qualitative Disclosure About Market RiskInterest Rate RiskThe primary objectives of our investment activities are to preserve principal, provide liquidity and maximize income without significantlyincreasing the risk. Some of the securities we invest in are subject to market risk. This means that a change in prevailing interest rates may cause the fair valueof the investment to fluctuate. To minimize this risk, we maintain our portfolio of cash equivalents and short-term investments in money market funds andcertificates of deposit. Our long-term investments include auction rate securities, which have been classified as long-term due to the lack of a liquid marketfor these securities. Since our results of operations are not dependent on investments, the risk associated with fluctuating interest rates is limited to ourinvestment portfolio, and we believe that a 10% change in interest rates would not have a significant impact on our results of operations. As of June 30, 2017,our investments were in money market funds, certificates of deposits and auction rate securities.We are exposed to changes in interest rates as a result of our borrowings under our term loan and revolving lines of credit. The interest rates for theterm loans and the revolving lines of credit ranged from 0.93% to 2.46% at June 30, 2017 and 0.90% to 1.96% at June 30, 2016. Based on the outstandingprincipal indebtedness of $161.4 million under our credit facilities as of June 30, 2017, we believe that a 10% change in interest rates would not have asignificant impact on our results of operations.Foreign Currency RiskTo date, our international customer and supplier agreements have been denominated primarily in U.S. dollars and accordingly, we have limitedexposure to foreign currency exchange rate fluctuations from customer agreements, and do not currently engage in foreign currency hedging transactions.The functional currency of our subsidiaries in the Netherlands and Taiwan is the U.S. dollar. However, certain transactions in these entities are denominatedin a currency other than the U.S. dollar, and thus we are subject to foreign currency exchange rate fluctuations associated with re-measurement to U.S. dollars.Such fluctuations have not been significant historically. Foreign exchange gain (loss) for fiscal years 2017, 2016 and 2015 was $(1.3) million, $1.3 millionand $0.8 million, respectively.50Table of ContentsItem 8. Financial Statements and Supplementary DataINDEX TO CONSOLIDATED FINANCIAL STATEMENTS* PageReport of Independent Registered Public Accounting Firm52Consolidated Balance Sheets53Consolidated Statements of Operations54Consolidated Statements of Comprehensive Income55Consolidated Statements of Stockholders’ Equity56Consolidated Statements of Cash Flows57Notes to Consolidated Financial Statements58*The consolidated financial statements for the fiscal years ended June 30, 2016 and 2015 have been restated as further discussed in Note 19, "Restatement ofPreviously Issued Consolidated Financial Statements."51Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Stockholders ofSuper Micro Computer, Inc.San Jose, CaliforniaWe have audited the accompanying consolidated balance sheets of Super Micro Computer, Inc. and subsidiaries (the “Company”) as of June 30,2017 and 2016, and the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the three yearsin the period ended June 30, 2017. These financial statements are the responsibility of the Company's management. Our responsibility is to express anopinion on these financial statements based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe thatour audits provide a reasonable basis for our opinion.In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Super Micro Computer, Inc.and subsidiaries as of June 30, 2017 and 2016, and the results of their operations and their cash flows for each of the three years in the period ended June 30,2017, in conformity with accounting principles generally accepted in the United States of America.As discussed in Note 19 to the consolidated financial statements, the accompanying 2016 and 2015 consolidated financial statements have beenrestated to correct misstatements.As discussed in Note 11 to the consolidated financial statements, the Company has significant purchases from and sales to two related parties.We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internalcontrol over financial reporting as of June 30, 2017, based on the criteria established in Internal Control -Integrated Framework (2013) issued by theCommittee of Sponsoring Organizations of the Treadway Commission and our report dated May 16, 2019 expressed an adverse opinion on the Company'sinternal control over financial reporting because of material weaknesses./s/ Deloitte & Touche LLPSan Jose, CaliforniaMay 16, 201952Table of ContentsSUPER MICRO COMPUTER, INC.CONSOLIDATED BALANCE SHEETS(in thousands, except share and per share amounts) June 30, June 30, 2017 2016 (As Restated-see Note 19)ASSETS Current assets: Cash and cash equivalents$110,606 $178,820Accounts receivable, net of allowances of $2,699 and $2,413 at June 30, 2017 and 2016, respectively (includingamounts receivable from related parties of $6,877 and $49 at June 30, 2017 and 2016, respectively)324,004 174,933Inventories736,668 516,807Prepaid income taxes675 4,341Prepaid expenses and other current assets (including receivables from related parties of $13,327 and $9,622 at June 30,2017 and 2016, respectively)89,213 79,427Total current assets1,261,166 954,328Investment in equity investee6,067 —Long-term investments2,625 2,643Property, plant and equipment, net195,576 187,949Deferred income taxes, net39,119 33,678Other assets10,577 12,885Total assets$1,515,130 $1,191,483LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable (including amounts due to related parties of $55,928 and $44,941 at June 30, 2017 and 2016,respectively)$396,895 $267,391Accrued liabilities (including amounts due to related parties of $8,450 and $5,354 at June 30, 2017 and 2016,respectively)112,824 83,596Income taxes payable1,364 5,054Short-term debt and current portion of long-term debt, net of debt issuance costs161,447 53,589Total current liabilities672,530 409,630Long-term debt— 40,000Other long-term liabilities (including related party balance of $4,900 and $0 at June 30, 2017 and 2016, respectively)68,754 45,200Total liabilities741,284 494,830Commitments and contingencies (Note 14) Stockholders’ equity: Common stock and additional paid-in capital, $0.001 par value Authorized shares: 100,000,000 Issued shares: 50,273,527 and 48,999,717 at June 30, 2017 and 2016, respectively308,271 279,465Treasury stock (at cost), 1,333,125 and 445,028 shares at June 30, 2017 and 2016, respectively(20,491) (2,030)Accumulated other comprehensive loss(77) (85)Retained earnings485,973 419,119Total Super Micro Computer, Inc. stockholders’ equity773,676 696,469Noncontrolling interest170 184Total stockholders’ equity773,846 696,653Total liabilities and stockholders’ equity$1,515,130 $1,191,483See accompanying notes to consolidated financial statements.53Table of ContentsSUPER MICRO COMPUTER, INC.CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per share amounts) Years Ended June 30, 2017 2016 2015 (As Restated- seeNote 19) (As Restated- seeNote 19)Net sales (including related party sales of $33,821, $29,110 and $47,684 in fiscal years2017, 2016 and 2015, respectively)$2,484,929 $2,225,022 $1,954,353Cost of sales (including related party purchases of $236,062, $242,638 and $227,661 infiscal years 2017, 2016 and 2015, respectively)2,134,971 1,894,521 1,647,769Gross profit349,958 330,501 306,584Operating expenses: Research and development143,992 124,223 101,402Sales and marketing66,445 58,338 47,496General and administrative44,646 40,449 25,040Total operating expenses255,083 223,010 173,938Income from operations94,875 107,491 132,646Other income (expense), net(1,287) 1,507 956Interest expense(2,300) (1,594) (965)Income before income tax provision91,288 107,404 132,637Income tax provision24,434 35,323 40,082Net income$66,854 $72,081 $92,555Net income per common share: Basic$1.38 $1.50 $1.99Diluted$1.29 $1.39 $1.85Weighted-average shares used in calculation of net income per common share: Basic48,383 47,917 46,434Diluted51,679 51,836 50,094See accompanying notes to consolidated financial statements.54Table of ContentsSUPER MICRO COMPUTER, INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(in thousands) Years Ended June 30, 2017 2016 2015 (As Restated- seeNote 19) (As Restated- seeNote 19)Net income$66,854 $72,081 $92,555Other comprehensive income (loss), net of tax: Foreign currency translation gains (losses)19 (10) (9)Unrealized gains (losses) on investments(11) 5 (8)Total other comprehensive income (loss)8 (5) (17)Total comprehensive income$66,862 $72,076 $92,538See accompanying notes to consolidated financial statements.55Table of ContentsSUPER MICRO COMPUTER, INC.CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY(in thousands, except share amounts) Common Stock andAdditional Paid-InCapital Treasury Stock AccumulatedOtherComprehensiveLoss RetainedEarnings Non-controllingInterest TotalStockholders’Equity Shares Amount Shares Amount Balance at June 30, 2014(As previously reported)45,739,936 $199,062 (445,028) $(2,030) $(63) $272,087 $175 $469,231Cumulative restatementadjustments— 531 — — — (17,604) — (17,073)Balance at June 30, 2014(As Restated- see Note 19)45,739,936 199,593 (445,028) (2,030) (63) 254,483 175 452,158Exercise of stock options, net oftaxes2,124,401 23,338 — — — — — 23,338Release of common stock sharesupon vesting of restricted stockunits14,685 — — — — — — —Shares withheld for thewithholding on vesting ofrestricted stock units(5,278) (175) — — — — — (175)Stock-based compensation(As Restated- see Note 19)— 14,436 — — — — — 14,436Tax benefit resulting from stockoption and restricted stock unittransactions(As Restated- see Note 19)— 11,301 — — — — — 11,301Unrealized loss on investments— — — — (8) — — (8)Foreign currency translation loss— — — — (9) — — (9)Net income (loss)(As Restated- see Note 19)— — — — — 92,555 (11) 92,544Balance at June 30, 2015(As Restated- see Note 19)47,873,744 248,493 (445,028) (2,030) (80) 347,038 164 593,585Exercise of stock options, net oftaxes1,013,430 12,186 — — — — — 12,186Release of common stock sharesupon vesting of restricted stockunits177,707 — — — — — — —Shares withheld for thewithholding on vesting ofrestricted stock units(65,164) (1,786) — — — — — (1,786)Stock-based compensation(As Restated- see Note 19)— 16,930 — — — — — 16,930Tax benefit resulting from stockoption and restricted stock unittransactions(As Restated- see Note 19)— 3,642 — — — — — 3,642Unrealized gain on investments— — — — 5 — — 5Foreign currency translation loss— — — — (10) — — (10)Net income(As Restated- see Note 19)— — — — — 72,081 20 72,101Balance at June 30, 2016(As Restated- see Note 19)48,999,717 279,465 (445,028) (2,030) (85) 419,119 184 696,653Exercise of stock options, net oftaxes1,007,065 10,878 — — — — — 10,878Release of common stock sharesupon vesting of restricted stockunits411,739 — — — — — — —Shares withheld for thewithholding on vesting ofrestricted stock units(144,994) (3,554) — — — — — (3,554)Purchase of treasury stock— — (888,097) (18,461) — — — (18,461)Stock-based compensation— 19,665 — — — — — 19,665Tax benefit resulting from stockoption and restricted stock unittransactions— 1,817 — — — — — 1,817Unrealized loss on investments— — — — (11) — — (11)Foreign currency translation gain— — — — 19 — — 19Net income (loss)— — — — — 66,854 (14) 66,840Balance at June 30, 201750,273,527 $308,271 (1,333,125) $(20,491) $(77) $485,973 $170 $773,846See accompanying notes to consolidated financial statements.56Table of ContentsSUPER MICRO COMPUTER, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands) Years Ended June 30, 2017 2016 2015 (As Restated-see Note 19) (As Restated-see Note 19)OPERATING ACTIVITIES: Net income$66,854 $72,081 $92,555Reconciliation of net income to net cash provided by (used in) operating activities: Depreciation and amortization16,357 13,282 8,094Stock-based compensation expense19,665 16,930 14,436Excess tax benefits from stock-based compensation(2,310) (2,812) (8,046)Allowance for doubtful accounts334 1,216 80Provision for excess and obsolete inventories15,729 9,384 5,930Share of loss from equity investee303 — —Foreign currency exchange loss (gain)1,274 (1,339) (830)Deferred income taxes, net(5,434) (5,212) (3,576)Changes in operating assets and liabilities: Accounts receivable, net (including changes in related party balances of $(6,828), $80, and $492 in fiscal years2017, 2016, and 2015, respectively)(149,455) 53,575 (78,186)Inventories(235,590) 7,709 (177,557)Prepaid expenses and other assets (including changes in related party balances of $(3,705), $652, and $(10,274) infiscal years 2017, 2016, and 2015, respectively)(2,856) (23,539) (11,326)Accounts payable (including changes in related party balances of $10,987, $(21,887), and $22,188 in fiscal years2017, 2016, and 2015, respectively)135,320 (65,835) 81,701Income taxes payable(1,873) (386) 8,979Accrued liabilities (including changes in related party balances of $3,096, $(340), and $1,364 in fiscal years 2017,2016, and 2015, respectively)27,555 12,911 13,893Other long-term liabilities (including changes in related party balances of $4,900, $0, and $0 in fiscal years 2017,2016, and 2015, respectively)17,939 20,022 7,728Net cash provided by (used in) operating activities(96,188) 107,987 (46,125)INVESTING ACTIVITIES: Purchases of property, plant and equipment (including payments to related parties of $(4,570), $(4,641), and $(4,070) infiscal years 2017, 2016, and 2015, respectively)(29,365) (34,108) (35,100)Change in restricted cash(340) (1,020) (416)Investment in a privately held company— — (661)Net cash used in investing activities(29,705) (35,128) (36,177)FINANCING ACTIVITIES: Proceeds from debt, net of debt issuance costs207,029 34,200 84,900Repayment of debt(140,452) (34,100) (36,000)Payments to acquire treasury stock(18,461) — —Proceeds from exercise of stock options10,878 12,186 23,338Excess tax benefits from stock-based compensation2,310 2,812 8,046Payments of obligations under capital leases(253) (189) (134)Advances (payments) under receivable financing arrangements227 (21) 33Payment of withholding tax on vesting of restricted stock units(3,554) (1,786) (175)Net cash provided by financing activities57,724 13,102 80,008Effect of exchange rate fluctuations on cash(45) (61) (268)Net increase (decrease) in cash and cash equivalents(68,214) 85,900 (2,562)Cash and cash equivalents at beginning of year178,820 92,920 95,482Cash and cash equivalents at end of year$110,606 $178,820 $92,920Supplemental disclosure of cash flow information: Cash paid for interest$2,082 $1,632 $933Cash paid for taxes, net of refunds$30,809 $36,951 $30,671Non-cash investing and financing activities: Equipment purchased under capital leases$314 $299 $442 Unpaid property, plant and equipment purchases (including due to related parties of $1,168, $2,246 and$724 as ofJune 30, 2017, 2016 and 2015, respectively)$5,056 $10,849 $7,062 Contribution of certain technology rights to equity investee$7,000 $— $—See accompanying notes to consolidated financial statements.57Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Organization and Summary of Significant Accounting PoliciesOrganization Super Micro Computer, Inc. (“Super Micro Computer”) was incorporated in 1993. Super Micro Computer is a global leader in server technology andgreen computing innovation. Super Micro Computer develops and provides high performance server solutions based upon an innovative, modular and open-standard architecture. Super Micro Computer has operations primarily in the United States, the Netherlands, Taiwan, China and Japan.Basis of PresentationThe accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the UnitedStates of America (“U.S. GAAP”). The consolidated financial statements of Super Micro Computer include the accounts of Super Micro Computer and entitiesconsolidated under the variable interest model or the voting interest model. Noncontrolling interests are not presented separately in the consolidatedstatements of operations, and consolidated statements of comprehensive income as the amounts are immaterial. All intercompany accounts and transactionsof Super Micro Computer and its consolidated entities (collectively, the "Company") have been eliminated in consolidation. Equity investments for whichthe Company is able to exercise significant influence over but does not control the investee and is not the primary beneficiary of the investee’s activities areaccounted for using the equity method. Investments for which the Company is not able to exercise significant influence over the investee are accounted forunder the cost method.The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.Periodically, the Company has generated negative cash flows from operations and has financed its operations through working capital debt. Managementbelieves that the Company’s current cash and cash equivalents are adequate to meet its needs, including any debt balances due at maturity, for the nexttwelve months from the issuance of these consolidated financial statements.Use of EstimatesU.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure ofcontingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Suchestimates include, but are not limited to: allowances for doubtful accounts and sales returns, inventory valuation, useful lives of property, plant andequipment, product warranty accruals, stock-based compensation, impairment of investments and long-lived assets, and income taxes. The Company’sestimates are evaluated on an ongoing basis and changes in the estimates are recognized prospectively. Actual results could differ from those estimates.Fair Value of Financial InstrumentsThe Company accounts for certain assets and liabilities at fair value, which is the price that would be received upon the sale of an asset or paid totransfer a liability in an orderly arms-length transaction between market participants. When measuring fair value, the Company takes into account thecharacteristics of the asset or liability that a market participant would consider when pricing the asset or liability at the measurement date. The Companyconsiders one or more techniques for measuring fair value: market approach, income approach, and cost approach. The valuation techniques include inputsthat are based on three different levels of observability to the market. The Company categorizes each of its fair value measurements in one of these threelevels based on the lowest level input that is significant to the fair value measurement in its entirety. These levels are:•Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets orliabilities;•Level 2 - Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directlyor indirectly; and•Level 3 - Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.58Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)Accounts receivable and accounts payable are carried at cost, which approximates fair value due to the short maturity of these instruments. Cashequivalents, certificates of deposits and long-term investments are carried at fair value. Short-term and long-term debt is carried at amortized cost, whichapproximates its fair value based on borrowing rates currently available to the Company for loans with similar terms.Cash and Cash EquivalentsThe Company considers all highly liquid instruments with an original maturity of three months or less from the date of purchase to be cashequivalents. Cash equivalents consist primarily of money market funds and certificates of deposits with original maturities of less than three months.Long-term InvestmentsThe Company classifies its long-term investments in auction rate securities ("auction rate securities") as non-current available-for-sale investments.Auction rate securities consist of municipal securities. The discounted cash flow model is used to estimate the fair value of the auction rate securities. Theseinvestments are recorded in the consolidated balance sheets at fair value. Unrealized gains and losses on these investments are included as a component ofaccumulated other comprehensive loss, net of tax.InventoriesInventories are stated at weighted average cost, subject to lower of cost or market. Inventories consist of purchased parts and raw materials(principally components), work in process (principally products being assembled) and finished goods. Market value represents net realizable value forfinished goods and work in process and replacement value for purchased parts and raw materials. The Company evaluates inventory on a quarterly basis forlower of cost or market and excess and obsolescence and, as necessary, writes down the valuation of units based upon usage and sales, anticipated sales price,product obsolescence and other factors. Once a reserve is established, it is maintained until the product to which it relates is sold or scrapped.The Company receives various rebate incentives from certain suppliers based on its contractual arrangements, including volume-based rebates. Therebates are recognized as a reduction of cost of inventories and reduces the cost of sales in the period when the related inventory is sold.Property, Plant and EquipmentProperty, plant and equipment is recorded at cost and depreciated using the straight-line method over the estimated useful lives of the related assetsas follows: Purchased software3 to 5 yearsMachinery and equipment3 to 7 yearsFurniture and fixtures5 yearsBuildings39 yearsBuilding improvementsUp to 20 yearsLand improvements15 yearsLeasehold improvementsShorter of lease term or estimated useful lifeFor assets acquired and financed under capital leases, the present value of the future minimum lease payments is recorded at the date of acquisitionas property, plant and equipment with the corresponding amount recorded as a capital lease obligation, and the amortization is computed on a straight-linebasis over the shorter of the lease term or estimated useful life.Long-Lived AssetsThe Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of anasset may not be recoverable. When the sum of the undiscounted future net cash flows59Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)expected to result from the use of the asset and its eventual disposition is less than its carrying amount, an impairment loss would be measured based on thefair value of the asset compared to the carrying amount. No impairment charge has been recorded in any of the periods presented.Investments in Equity SecuritiesThe Company has an investment in a privately-held company, which is discussed in Note 7, "Investment in a Corporate Venture." Investments inequity securities that do not have a readily determinable fair value are accounted for under the cost method when the Company does not have significantinfluence over the investee. Adjustments are made to the cost of the investments when performance indicators suggest that the investment is impaired.Dividends received are recorded to other income (expense), net. Investments in equity securities are accounted for using the equity method when theCompany has significant influence over the investee. Adjustments are made to the investment for any earnings or losses incurred and are recorded in otherincome (expense), net. Dividends are considered a return of capital that reduces the cost of the investment.Revenue RecognitionProduct sales. The Company recognizes revenue from sales of products upon meeting all of the following revenue recognition criteria, which istypically met upon shipment or delivery of its products to customers, unless customer acceptance is uncertain or significant obligations to the customerremain: (i) persuasive evidence of an arrangement exists through customer contracts and orders, (ii) the customer takes title and assumes the risks and rewardsof ownership, (iii) the sales price charged is fixed or determinable as evidenced by customer contracts and orders and (iv) collectibility is reasonably assured.The Company estimates and reserves for future sales returns based on a review of its history of actual returns for each major product line. TheCompany also reduces revenue for customer and distributor programs and incentive offerings such as price protection and rebates as well as cooperativemarketing arrangements where the fair value of the benefit identified from the costs cannot be reasonably estimated.The Company may use distributors to sell products to end customers. Revenue from distributors may be recognized on sell-in or sell-through basisdepending on the terms of the arrangement between the Company and distributor.Services sales. The Company’s sale of services mainly consists of extended warranty and on-site services. These services are sold at the time of thesale of the underlying products. Revenue related to extended warranty commences upon the expiration of the standard warranty period and is recognizedratably over the contractual period. Revenue related to on-site services commences upon recognition of the product sale and is recognized ratably over thecontractual period. These service contracts are typically one to five years in length. Service revenue has been less than 10% of net sales for all periodspresented and is not separately disclosed. Multiple-element arrangements. Certain of the Company’s arrangements contain multiple elements, consisting of both the Company’s products andservices. Revenue allocated to each element is recognized when all the revenue recognition criteria are met for that element.The Company allocates arrangement consideration at the inception of an arrangement to all deliverables, if they represent a separate unit ofaccounting, based on their relative estimated stand-alone selling prices. A deliverable qualifies as a separate unit of accounting when the delivered elementhas stand-alone value to the customer. The guidance establishes the following hierarchy to determine the relative estimated stand-alone selling price to beused for allocating arrangement consideration to deliverables: (i) vendor-specific objective evidence of fair value (“VSOE”), (ii) third-party evidence ofselling price (“TPE”) if VSOE is not available, or (iii) the vendor's best estimated selling price (“BESP”) if neither VSOE nor TPE are available.The Company does not have VSOE for deliverables in its arrangements, and TPE is generally not available because its products are highlydifferentiated, and the Company is unable to obtain reliable information on the products and pricing practices of the Company’s competitors. BESP reflectsthe Company’s estimate of what the selling price of a deliverable would be if it were sold regularly on a stand-alone basis.60Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)As such, BESP is generally used to allocate the total arrangement consideration at the arrangement inception. The Company determines BESP for aproduct by considering multiple factors including, but not limited to, geographies, customer types, internal costs, gross margin objectives and pricingpractices.Allowances for Doubtful AccountsCustomers are subjected to a credit review process that evaluates each customer’s financial position and ability to pay. On a quarterly basis, theCompany makes estimates of its uncollectible accounts receivable by analyzing the aging of accounts receivable, history of bad debts, customerconcentrations, customer-credit-worthiness, and current economic trends to evaluate the adequacy of the allowance for doubtful accounts. The Company'sprovision for bad debt was $0.3 million, $1.2 million and $0.1 million in fiscal years 2017, 2016 and 2015, respectively.Cost of SalesCost of sales primarily consists of the costs of materials, contract manufacturing, in-bound shipping, personnel and related expenses including stock-based compensation, equipment and facility expenses, warranty costs and provision for lower of cost or market and excess and obsolete inventory. Product WarrantiesThe Company offers product warranties ranging from 15 to 39 months against any defective products. The Company accrues for estimated returns ofdefective products at the time revenue is recognized based on historical warranty experience and recent trends. The Company monitors warranty obligationsand may make revisions to its warranty reserve if actual costs of product repair and replacement are significantly higher or lower than estimated. Accruals foranticipated future warranty costs are charged to cost of sales and included in accrued liabilities and other long-term liabilities. The Company adjusts itschanges in estimates on an ongoing basis as a result of new product introductions or changes in unit volumes compared with its historical experience, or ifthe cost of servicing warranty claims is greater or lesser than expected, and the Company accounts for the changes in estimates prospectively. The followingtable presents for the fiscal years ended June 30, 2017, 2016 and 2015, the reconciliation of the changes in accrued warranty costs which is included as acomponent of accrued liabilities and other long-term liabilities (in thousands): Years Ended June 30, 2017 2016 2015Balance, beginning of year$7,129 $7,700 $7,083Provision for warranty21,642 19,579 15,975Costs utilized(21,256) (18,041) (15,154)Change in estimated liability for pre-existing warranties206 (2,109) (204)Balance, end of year$7,721 $7,129 $7,700Current portion5,976 5,816 6,015Long-term portion$1,745 $1,313 $1,685Research and DevelopmentResearch and development costs are expensed as incurred and consist primarily of salaries, consulting services, other direct expenses and otherengineering expenses. The Company occasionally receives funding from certain suppliers and customers towards its development efforts. Such amounts arerecorded as a reduction of research and development expenses and were $10.3 million, $6.9 million and $6.3 million for the fiscal years ended June 30, 2017,2016 and 2015, respectively.Cooperative Marketing ArrangementsThe Company has arrangements with resellers of its products to reimburse the resellers for cooperative marketing costs meeting specified criteria.The Company accrues the cooperative marketing costs based on these arrangements and its estimate for resellers’ claims for marketing activities. These costsare recorded as a reduction of revenue in the consolidated statements of operations, as the fair value of the benefit identified from these costs cannot bereasonably estimated. Total61Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)cooperative marketing costs recorded as reductions to revenue for the fiscal years ended June 30, 2017, 2016 and 2015, were $8.1 million, $7.7 million and$7.7 million, respectively.Advertising CostsAdvertising costs are expensed as incurred. Total advertising and promotional expenses were $5.4 million, $4.1 million and $3.0 million for thefiscal years ended June 30, 2017, 2016 and 2015, respectively.Stock-Based CompensationThe Company measures and recognizes compensation expense for all share-based awards made to employees and non-employee members of theBoard of Directors, including stock options and restricted stock units ("RSUs"). The Company is required to estimate the fair value of share-based awards onthe date of grant. The value of awards that are ultimately expected to vest is recognized as an expense over the requisite service periods. The fair value ofRSUs is based on the closing market price of the Company's common stock on the date of grant. The Company estimated the fair value of stock optionsgranted using a Black-Scholes option pricing model and a single option award approach. This model requires the Company to make estimates andassumptions with respect to the expected term of the option and the expected volatility of the price of the Company's common stock. The fair value is thenamortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period.The expected term represents the period that the Company's stock-based awards are expected to be outstanding and was determined based on acombination of the Company's peer group and historical experience. The expected volatility is based on a combination of the Company's implied andhistorical volatility. In addition, forfeitures of share-based awards are estimated at the time of grant and revised, if necessary, in subsequent periods if actualforfeitures differ from those estimates. The Company uses historical data to estimate pre-vesting option and RSU forfeitures and record stock-basedcompensation expense only for those awards that are expected to vest.LeasesLeases are evaluated and recorded as capital leases if one of the following is true at inception: (a) the present value of minimum lease paymentsmeets or exceeds 90% of the fair value of the asset, (b) the lease term is greater than or equal to 75% of the economic life of the asset, (c) the lease arrangementcontains a bargain purchase option, or (d) title to the property transfers to the Company at the end of the lease. The Company records an asset and liability forcapital leases at present value of the minimum lease payments based on the incremental borrowing rate. Assets are depreciated over the useful life inaccordance with the Company’s depreciation policy while rental payments and interest on the liability are accounted for using the effective interest method.Leases that are not classified as capital leases are accounted for as operating leases. Operating lease agreements that have tenant improvementallowances are evaluated for lease incentives. For leases that contain escalating rent payments, the Company recognizes rent expense on a straight-line basisover the lease term, with any lease incentives amortized as a reduction of rent expense over the lease term.Shipping and Handling FeesThe Company records costs related to shipping and handling in sales and marketing expenses. Shipping and handling fees billed to customers areincluded in net sales.Income Taxes The Company accounts for income taxes under an asset and liability approach. Deferred income taxes reflect the impact of temporary differencesbetween assets and liabilities recognized for financial reporting purposes and such amounts recognized for income tax reporting purposes, net operating losscarry-forwards and other tax credits measured by applying enacted tax laws related to the financial statement periods. Valuation allowances are providedwhen necessary to reduce deferred tax assets to an amount that is more likely than not to be realized.The Company recognizes tax liabilities for uncertain income tax positions on the income tax return based on the two-step process. The first step is todetermine whether it is more likely than not that each income tax position would be62Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)sustained upon audit. The second step is to estimate and measure the tax benefit as the amount that has a greater than 50% likelihood of being realized uponultimate settlement with the tax authority. Estimating these amounts requires the Company to determine the probability of various possible outcomes. TheCompany evaluates these uncertain tax positions on a quarterly basis. This evaluation is based on the consideration of several factors, including changes infacts or circumstances, changes in applicable tax law, settlement of issues under audit and new exposures. If the Company later determines that its exposure islower or that the liability is not sufficient to cover its revised expectations, the Company adjusts the liability and effects a related charge in its tax provisionduring the period in which the Company makes such determination.Variable Interest EntitiesThe Company determines at the inception of each arrangement whether an entity in which the Company holds an investment or in which theCompany has other variable interests in is considered a variable interest entity ("VIE"). The Company consolidates VIEs when it is the primary beneficiary.The primary beneficiary of a VIE is the party that meets both of the following criteria: (1) has the power to make decisions that most significantly affect theeconomic performance of the VIE; and (2) has the obligation to absorb losses or the right to receive benefits that in either case could potentially besignificant to the VIE. Periodically, the Company assesses whether any changes in the interest or relationship with the entity affect the determination ofwhether the entity is still a VIE and, if so, whether the Company is the primary beneficiary. If the Company is not the primary beneficiary in a VIE, theCompany accounts for the investment under the equity method or cost method in accordance with the applicable GAAP.The Company has concluded that Ablecom Technology, Inc. (“Ablecom”) and its affiliate, Compuware Technology, Inc. ("Compuware") are VIEs inaccordance with applicable accounting standards and guidance; however, the Company is not the primary beneficiary as it does not have the power to directthe activities that are most significant to the entities and therefore, the Company does not consolidate these entities. In performing its analysis, theCompany’s management considered its explicit arrangements with Ablecom and Compuware, including the supplier arrangements. Also, as a result of thesubstantial related party relationships between the Company and these entities, management considered whether any implicit arrangements exist that wouldcause the Company to protect those related parties’ interests from suffering losses. Management determined that no implicit arrangements exist withAblecom, Compuware or their shareholders.The Company and Ablecom jointly established Super Micro Asia Science and Technology Park, Inc. (the "Management Company") in Taiwan tomanage the common areas shared by the Company and Ablecom for its separately constructed manufacturing facilities. In fiscal year 2012, each companycontributed $0.2 million and owns 50% of the Management Company. The Company has concluded that the Management Company is a VIE, and althoughthe operations of the Management Company are independent of the Company, through governance rights, the Company has the power to direct the activitiesthat are most significant to the Management Company. Therefore, the Company concluded that it is the primary beneficiary of the Management Company.For the fiscal years ended 2017, 2016 and 2015, the accounts of the Management Company have been consolidated with the accounts of Super MicroComputer, and a noncontrolling interest has been recorded for Ablecom's interests in the net assets and operations of the Management Company. In fiscalyears 2017, 2016 and 2015, $(14,000), $20,000 and $(11,000) of net income (loss) attributable to Ablecom's interest was included in the Company’s generaland administrative expenses in the consolidated statements of operations, respectively. Foreign Currency TransactionsThe functional currency of the Company’s international subsidiaries is the U.S. dollar, with the exception of Super Micro Asia and Technology Park,Inc., a consolidated variable interest entity. Monetary assets and liabilities of the Company's international subsidiaries that are denominated in the localcurrency are remeasured into U.S. dollars at period-end exchange rates. Non-monetary assets and liabilities that are denominated in the local currency areremeasured into U.S. dollars at the historical rates. Revenue and expenses that are denominated in the local currency are remeasured into U.S. dollars at theaverage exchange rates during the period. Remeasurement of foreign currency accounts and resulting foreign exchange transaction gains and losses, whichhave not been material, are reflected in the consolidated statements of operations in other income (expense), net.The functional currency of Super Micro Asia and Technology Park, Inc. is New Taiwanese Dollar (“NTD$”). Assets and liabilities are translated toU.S. dollars at the period-end exchange rate. Revenues and expenses are translated using the average exchange rate for the period. The effects of foreigncurrency translation are included in stockholders’ equity as a63Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)component of accumulated other comprehensive loss in the accompanying consolidated balance sheets and periodic movements are summarized as a lineitem in the consolidated statements of comprehensive income.Net Income Per Common ShareBasic net income per common share is computed by dividing net income by the weighted-average number of shares of common stock outstandingduring the period. Diluted net income per common share is computed by dividing net income by the weighted-average number of shares of common stockoutstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the potentiallydilutive securities had been issued. Potentially dilutive securities include outstanding stock options and unvested RSUs. Under the treasury stock method, an increase in the fair market value of the Company's common stock results in a greater dilutive effect fromoutstanding stock options and RSUs. Additionally, the exercise of stock options and the vesting of RSUs results in a further dilutive effect on net income pershare.The computation of basic and diluted net income per common share is as follows (in thousands, except per share amounts): Years Ended June 30, 2017 2016 2015Numerator: Net income$66,854 $72,081 $92,555 Denominator: Weighted-average shares outstanding48,383 47,917 46,434Effect of dilutive securities3,296 3,919 3,660Weighted-average diluted shares51,679 51,836 50,094 Basic net income per common share$1.38 $1.50 $1.99Diluted net income per common share$1.29 $1.39 $1.85For the fiscal years ended June 30, 2017, 2016 and 2015, the Company had stock options and RSUs outstanding that could potentially dilute basicearnings per share in the future, but were excluded from the computation of diluted net income per share in the periods presented, as their effect would havebeen anti-dilutive. The anti-dilutive common share equivalents resulting from outstanding equity awards were 1,620,000, 1,196,000 and 3,805,000 for thefiscal years ended June 30, 2017, 2016 and 2015, respectively.Concentration of Supplier RiskCertain raw materials used by the Company in the manufacture of its products are available from a limited number of suppliers. Shortages couldoccur in these essential materials due to an interruption of supply or increased demand in the industry. One supplier accounted for 31.0%, 35.2%, and 28.7%of total purchases for the fiscal years ended June 30, 2017, 2016 and 2015, respectively. Ablecom and Compuware, related parties of the Company as notedin Note 11, "Related Party Transactions", accounted for 11.1%, 12.8% and 13.8% of total cost of sales for the fiscal years ended June 30, 2017, 2016 and2015, respectively.Concentration of Credit RiskFinancial instruments which potentially subject the Company to concentration of credit risk consist primarily of cash and cash equivalents, long-term investments and accounts receivable. No single customer accounted for 10% or more of net sales in fiscal year 2017. In fiscal years 2016 and 2015, onecustomer accounted for 11.4% and 10.4%, respectively, of net sales. No customer accounted for 10% or more of accounts receivable as of June 30, 2017, andone customer accounted for 10.5% of the Company's accounts receivables as of June 30, 2016.64Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)Recent Accounting PronouncementsIn May 2014, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance, Revenue from Contracts with Customers, thatsupersedes nearly all U.S. GAAP on revenue recognition and eliminates industry-specific guidance. The new guidance provides a unified model indetermining when and how revenue is recognized with the core principle that revenue should be recognized when a customer obtains control of promisedgoods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Since itsissuance, the FASB has issued several amendments to the new revenue standard.The new standard is effective for the Company from July 1, 2018. The Company intends to adopt the new standard using the modified retrospectivemethod. The Company has completed its preliminary accounting assessment of the adoption of the new standard. The Company is in the process of finalizingthe accounting assessment, establishing new accounting policies, implementing systems and processes and internal controls necessary to support therequirements of the new standard. The Company will continue to update its assessment as more information becomes available. The Company cannotreasonably estimate quantitative information related to the impact of the new guidance on its consolidated financial statements at this time but expects theimplementation of the new guidance to impact the recognition of its revenue as follows:•Substantially all of the Company's current revenue is from the sale of hardware products. The Company does not expect any material changes to thetiming or amount of revenue for these types of sales under the new guidance, except for sales to distributors where the Company currently accountsfor such sales on a sell-through basis, in which case the new guidance is expected to accelerate recognition of revenue.•For extended warranty and on-site services and software, the Company is assessing the impact and timing to revenue from the implementation of thenew guidance. However, the Company does not currently expect the new guidance to have a material impact on its revenue for these types ofarrangements.•For costs incurred to fulfill or obtain a customer contract, the Company is assessing the impact from the implementation of the new guidance.However, the Company does not currently expect the new guidance to have a material impact related to these costs.•The Company's revenue disclosures are expected to expand.In April 2015, the FASB issued an amendment to the accounting guidance, Interest-Imputation of Interest: Simplifying the Presentation of DebtIssuance Costs. This amendment requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deductionfrom the carrying amount of that debt liability, consistent with debt discounts. In August 2015, the FASB issued an amendment to the accounting guidance,Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements. This amendment clarifies that an entitymay defer, and present debt issuance costs associated with line-of-credit arrangements as an asset and subsequently amortize the deferred debt issuance costsratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. Theseamendments should be applied retrospectively to all prior periods presented in the consolidated financial statements. The Company adopted theseamendments in the first quarter of fiscal year 2017. There was no material impact on its consolidated financial statement disclosures, results of operations andfinancial position.In July 2015, the FASB issued an amendment to the accounting guidance, Inventory: Simplifying the Measurement of Inventory. The amendmentrequires entities to measure inventory at the lower of cost and net realizable value thereby simplifying the current guidance under which an entity mustmeasure inventory at the lower of cost or market. The amendment is effective for the Company from July 1, 2018. The Company does not expect thisguidance to have a material impact on the consolidated financial statements and related disclosures.In February 2016, the FASB issued an amendment to the accounting guidance, Leases. The amendment will supersede the existing lease guidance,including on-balance sheet recognition of operating leases for lessees. Since its issuance, the FASB has issued several amendments to the new lease standard.The standard is effective for the Company from July 1, 2019 and the Company will apply this standard using the modified retrospective approach. Earlyadoption is65Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)permitted. The Company is currently evaluating the effect the guidance will have on its consolidated financial statement disclosures, results of operationsand financial position.In March 2016, the FASB issued new accounting guidance, Compensation-Stock Compensation: Improvements to Employee Share-Based PaymentAccounting on the accounting for certain aspects of share-based payment to employees, including the accounting for income taxes, forfeitures, and statutorytax withholding requirements as well as classification in the statement of cash flows. Early adoption is permitted for any interim or annual periods. Thisguidance is effective for the Company from July 1, 2017. The adoption of this guidance will result in the recognition of excess tax benefits in the Company'sprovision for income taxes rather than paid-in capital, as well as the adjustment in stock-based compensation expense as a result of its change in forfeiturepolicy. The new guidance eliminates the requirement to delay the recognition of excess tax benefits until it reduces current taxes payable. The new guidancealso requires the Company to record, subsequent to the adoption, excess tax benefits and tax deficiencies in the period these arise. The Company is currentlyevaluating the effect the guidance will have on its consolidated financial statement disclosures, results of operations and financial position.In March 2016, the FASB issued new accounting guidance Investments - Equity Method and Joint Ventures: Simplifying the Transition to EquityMethod of Accounting. The amendments in this update eliminate the requirement that an entity retroactively adopt the equity method of accounting if aninvestment qualifies for use of the equity method as a result of increase in ownership interest or degree of influence. In accordance with the amendments, anequity method investor will begin to apply the equity method when the investor obtains significant influence without having to retroactively adjust theinvestment and record a cumulative catch up for the years when the investment did not qualify for the equity method of accounting. The guidance is effectivefor the Company from July 1, 2017. The Company does not expect this guidance to have a material impact on the consolidated financial statements andrelated disclosures.In June 2016, the FASB issued authoritative guidance, Financial Instruments-Credit Losses: Measurement of Credit Losses on FinancialInstruments, that amends the impairment model for certain financial assets by requiring use of an expected loss methodology, which will result in more timelyrecognition of credit losses. The amendment is effective for the Company from July 1, 2020. Early adoption is permitted. The Company is currentlyevaluating the effect the guidance will have on its consolidated financial statement disclosures, results of operations and financial position.In August 2016, the FASB issued an amendment to the accounting guidance, Statement of Cash Flows: Classification of Certain Cash Receipts andCash Payments. This amendment consists of eight provisions that provide guidance on the classification of certain cash receipts and cash payments. Ifpracticable, this amendment should be applied using a retrospective transition method to each period presented. For the provisions that are impracticable toapply retrospectively, those provisions may be applied prospectively as of the earliest date practicable. This amendment is effective for the Company fromJuly 1, 2018. Early adoption is permitted. The Company is currently evaluating the effect the guidance will have on its consolidated statement of cash flows.In October 2016, the FASB issued an amendment to the accounting guidance, Intra-Entity Transfers of Assets Other Than Inventory. Thisamendment simplifies the accounting for income tax consequences of intra-entity transfers of assets other than inventory by requiring recognition of currentand deferred income tax consequences when such transfers occur. This amendment is effective for the Company from July 1, 2018. The Company is currentlyevaluating the effect the guidance will have on its consolidated financial statement disclosures, results of operations and financial position.In November 2016, the FASB issued an amendment to the accounting guidance, Statement of Cash Flows: Restricted Cash. This amendmentaddresses presentations of total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Amounts generallydescribed as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period andend-of-period total amounts shown on the statement of cash flows. This amendment is effective for the Company from July 1, 2018. Early adoption ispermitted. The Company does not expect this amendment to have a material impact, though it will change the presentation of the consolidated statement ofcash flows.In February 2017, the FASB issued new accounting guidance, Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets:Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. This guidance clarifies the scope andapplication on the sale or transfer of nonfinancial assets and in substance nonfinancial assets to noncustomers, including partial sales. The amendments areeffective at the same time as the new revenue standard. This amendment is effective for the Company from July 1, 2018. The Company is currently66Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)evaluating the effect the guidance will have on its consolidated financial statement disclosure, results of operations and financial position.In February 2018, the FASB issued amended guidance to allow a reclassification from accumulated other comprehensive income to retainedearnings for stranded tax effects resulting from the Tax Cuts and Jobs Act ("2017 Tax Act"). Consequently, the amendments eliminate the stranded tax effectsresulting from the 2017 Tax Act and will improve the usefulness of information reported to financial statement users. However, because the amendments onlyrelate to the reclassification of the income tax effects of the 2017 Tax Act, the underlying guidance that requires that the effect of a change in tax laws or ratesbe included in income from continuing operations is not affected. The amendments also require certain disclosures about stranded tax effects. The newstandard is effective for the Company from July 1, 2019. The Company is currently evaluating the effect the guidance will have on its consolidated financialstatement disclosures, results of operations and financial position.In June 2018, the FASB issued amended guidance to expand the scope of ASC 718 - Compensation-Stock Compensation, to include share-basedpayment transactions for acquiring goods and services from non-employees. The amendments specify that the guidance applies to all share-based paymenttransactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. Thenew amendment is effective for the Company from July 1, 2019. The Company is currently evaluating the effect the guidance will have on its consolidatedfinancial statement disclosures, results of operations and financial position.In August 2018, the FASB issued amended guidance, Fair Value Measurement: Disclosure Framework-Changes to the Disclosure Requirements forFair Value Measurement, to modify the disclosure requirements on fair value measurements based on the concepts in the Concepts Statement, including theconsideration of costs and benefits. The new standard is effective for the Company from July 1, 2020. The Company is currently evaluating the effect theguidance will have on its consolidated financial statement disclosures.In August 2018, the Securities and Exchange Commission (“SEC”) adopted amendments to certain disclosure requirements in Securities Act ReleaseNo. 33-10532, Disclosure Update and Simplification. The amendments became effective on November 5, 2018. The SEC staff subsequently indicated that itwould not object if a filer’s first presentation of changes in shareholders’ equity is included in its Form 10-Q for the quarter that begins after the final rule’seffective date. Among the amendments is the requirement to present the changes in shareholders’ equity in the interim financial statements (either in aseparate statement or footnote) in Quarterly Reports on Form 10-Q. The analysis should present a reconciliation of the beginning balance to the endingbalance of each period for which a consolidated statement of operations is required to be filed. The Company will include the first presentation of changes inconsolidated statement of stockholders’ equity on Form 10-Q in its first quarter of fiscal 2019.In August 2018, the FASB issued amended guidance to align the requirements for capitalizing implementation costs incurred in a hostingarrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (andhosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contractis not affected by the amendments. According to the amendments, the entity shall determine which implementation costs to capitalize as an asset related tothe service contract and which costs to expense. It requires the entity (customer) to expense the capitalized implementation costs of a hosting arrangementthat is a service contract over the term of the hosting arrangement. The new standard is effective for the Company from July 1, 2020. The Company iscurrently evaluating the effect the guidance will have on its consolidated financial statement disclosures, results of operations and financial position.Note 2. Fair Value DisclosureThe financial assets of the Company measured at fair value on a recurring basis are included in cash equivalents, other assets and long-terminvestments. The Company classifies its cash equivalents and other assets within Level 1 or Level 2 in the fair value hierarchy because the Company usesquoted prices in active markets or alternative pricing sources and models using market observable inputs to determine their fair value. The Company’s long-term investments in auction rate securities are classified within Level 3 of the fair value hierarchy as the determination of their fair values was not based onobservable inputs as of June 30, 2017 and 2016. See Note 1, "Organization and Summary of Significant Accounting Policies", for a discussion of theCompany’s policies regarding the fair value hierarchy. The Company has used a discounted cash flow model to estimate the fair value of the auction ratesecurities as of June 30, 2017 and 2016. The material factors used in preparing the discounted cash67Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)flow model are (i) the discount rate utilized to present value the cash flows, (ii) the time period until redemption and (iii) the estimated rate of return.The following table sets forth the Company’s cash equivalents, certificates of deposit, and long-term investments as of June 30, 2017 and 2016which are measured at fair value on a recurring basis by level within the fair value hierarchy. These are classified based on the lowest level of input that issignificant to the fair value measurement (in thousands):June 30, 2017Level 1 Level 2 Level 3 Asset atFair ValueMoney market funds (1)$1,126 $— $— $1,126Certificates of deposit (2)— 1,151 — 1,151Auction rate securities— — 2,625 2,625Total assets measured at fair value$1,126 $1,151 $2,625 $4,902 June 30, 2016Level 1 Level 2 Level 3 Asset atFair ValueMoney market funds (1)$727 $— $— $727Certificates of deposit (2)— 1,316 — 1,316Auction rate securities— — 2,643 2,643Total assets measured at fair value$727 $1,316 $2,643 $4,686(1) $0.3 million and $0.3 million in money market funds are included within cash and cash equivalents and $0.8 million and $0.4 million in money marketfunds are included in restricted cash within other assets on the consolidated balance sheets as of June 30, 2017 and 2016, respectively.(2) $0.2 million and $0.3 million in certificates of deposit are included in cash and cash equivalents and $1.0 million and $1.0 million in certificates ofdeposit are included in restricted cash within other assets on the consolidated balance sheets as of June 30, 2017 and 2016, respectively.The above table excludes $110.1 million and $178.2 million of cash included in cash and cash equivalents on the consolidated balance sheets and$0.4 million and $0.5 million of restricted cash included in other assets on the consolidated balance sheets held by the Company as of June 30, 2017 and2016, respectively. There were no transfers between Level 1, Level 2 or Level 3 securities in fiscal years 2017 and 2016.The following table provides a reconciliation of the Company’s financial assets measured at fair value on a recurring basis, consisting of long-termauction rate securities, using significant unobservable inputs (Level 3) for fiscal years 2017 and 2016 (in thousands): Years Ended June 30, 2017 2016Balance as of the beginning of the fiscal year$2,643 $2,633Total unrealized gains (losses) included in other comprehensive income(18) 10Balance as of the end of the fiscal year$2,625 $2,643The following is a summary of the Company’s long-term investments as of June 30, 2017 and 2016 (in thousands): 68Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) June 30, 2017 AmortizedCost GrossUnrealizedHoldingGains GrossUnrealizedHoldingLosses Fair ValueAuction rate securities$2,750 $— $(125) $2,625 June 30, 2016 AmortizedCost GrossUnrealizedHoldingGains GrossUnrealizedHoldingLosses Fair ValueAuction rate securities$2,750 $— $(107) $2,643 The Company measures the fair value of outstanding debt for disclosure purposes on a recurring basis. As of June 30, 2017 and 2016, total debt of$161.4 million and $93.6 million, respectively, are reported at amortized cost. This outstanding debt is classified as Level 2 as it is not actively traded and isvalued using a discounted cash flow model that uses observable market inputs. Based on the discounted cash flow model, the fair value of the outstandingdebt approximates amortized cost.During fiscal year 2017 and 2016, the Company did not record any other-than-temporary impairments on financial assets required to be measured atfair value on a nonrecurring basis.Note 3. Accounts Receivable AllowancesThe Company has established an allowance for doubtful accounts and an allowance for sales returns. The allowance for doubtful accounts is basedupon the age of outstanding receivables, credit risk of specific customers, historical trends related to past losses and other relevant factors. The Company alsoprovides its customers with product return rights. A provision for such returns is provided for in the same period that the related sales are recorded based uponcontractual return rights and historical trends. Accounts receivable allowances as of June 30, 2017, 2016 and 2015 consisted of the following (in thousands): BeginningBalance Charged toCost andExpenses Additions/(Deductions) EndingBalanceAllowance for doubtful accounts: Year ended June 30, 2017$2,033 $334 $3 $2,370Year ended June 30, 2016952 1,216 (135) 2,033Year ended June 30, 20151,474 80 (602) 952Allowance for sales returns Year ended June 30, 2017$380 $1,745 $(1,796) $329Year ended June 30, 2016430 2,288 (2,338) 380Year ended June 30, 2015448 2,069 (2,087) 43069Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)Note 4. InventoriesInventories as of June 30, 2017 and 2016 consisted of the following (in thousands): June 30, 2017 2016Finished goods$577,345 $399,776Purchased parts and raw materials124,981 95,344Work in process34,342 21,687Total inventories$736,668 $516,807During fiscal years 2017, 2016 and 2015, the Company recorded a provision for excess and obsolete inventory to cost of sales totaling $15.7million, $9.4 million and $5.9 million, respectively.Note 5. Property, Plant, and EquipmentProperty, plant and equipment as of June 30, 2017 and 2016 consisted of the following (in thousands): June 30, 2017 2016Buildings$71,665 $71,665Land70,495 70,454Machinery and equipment60,593 53,282Buildings construction in progress (1)24,039 15,803Buildings and leasehold improvements14,942 10,941Purchased software14,576 14,452Furniture and fixtures13,353 10,364 269,663 246,961Accumulated depreciation and amortization(74,087) (59,012)Property, plant and equipment, net$195,576 $187,949__________________________(1) Primarily relates to the development and construction costs associated with the Company’s Green Computing Park located in San Jose, California.Note 6. Prepaid Expenses and Other AssetsPrepaid expenses and other current assets as of June 30, 2017 and 2016 consisted of the following (in thousands): June 30, 2017 2016Receivables from vendors (1)$78,656 $71,470Prepaid expenses5,736 5,405Deferred service costs2,910 1,451Others1,911 1,101Total prepaid expenses and other current assets$89,213 $79,427__________________________(1) Includes receivables from contract manufacturers based on certain buy-sell arrangements of $73.8 million and $63.6 million as of June 30, 2017 and June30, 2016, respectively.70Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)Other long-term assets as of June 30, 2017 and 2016 consisted of the following (in thousands): June 30, 2017 2016Long-term deferred service costs$3,253 $3,497Prepaid software license2,593 3,870Restricted cash (1)2,191 1,851Cost method investments1,529 1,881Prepaid royalty license499 748Deposits368 909Others144 129Total other assets$10,577 $12,885__________________________(1) As of June 30, 2017 and 2016, restricted cash consisted primarily of certificates of deposits pledged as security for one irrevocable letter of credit relatedto a warehouse lease, three deposits to an escrow account required by the Company's worker's compensation program, one deposit required for the Company'sbonded warehouse in Taiwan, deposits to bank guarantees for import duty required by the customs authority in Taiwan and bank guarantees in connectionwith office leases in the Netherlands.Note 7. Investment in a Corporate VentureIn October 2016, the Company entered into agreements pursuant to which the Company contributed certain technology rights in connection with aninvestment in a privately-held company (the "Corporate Venture") located in China to expand the Company's presence in China. The Corporate Venture is30% owned by the Company and 70% owned by another company in China. The transaction was closed in the third fiscal quarter of 2017 and the investmenthas been accounted for using the equity method. As such, the Corporate Venture is also a related party. As of June 30, 2017, the Company's equity investmentin the Corporate Venture was $6.1 million and was recorded under investment in equity investee on the Company's consolidated balance sheet. TheCompany's share of losses of the Corporate Venture were immaterial for the fiscal year ended June 30, 2017 and were included in other income (expense), netin the Company's consolidated statements of operations. The Company recorded a deferred gain related to the contribution of certain technology rights of$7.0 million in the third fiscal quarter of 2017. The amortization of the deferred gain is being recognized as a credit to research and development expenses inthe Company's consolidated statement of operations over a period of five years which represents the estimated period over which the remaining obligationswill be fulfilled. As of June 30, 2017, the Company had unamortized deferred gain balance of $1.4 million in accrued liabilities and $4.9 million in otherlong-term liabilities in the Company’s consolidated balance sheets. The Company monitors the investment for events or circumstances indicative ofpotential other-than-temporary impairment and makes appropriate reductions in carrying values if determined that an impairment charge is required. Noimpairment charge was recorded for the fiscal year ended June 30, 2017. Additionally, the Company sold products worth $10.9 million to the Corporate Venture in the fiscal year ended June 30, 2017 and the Company'sshare of intra-entity profits on the products which remained unsold by the Corporate Venture as of June 30, 2017 have been eliminated and reduced theCompany's investment in the Corporate Venture. The Company had a $6.7 million accounts receivable due from the Corporate Venture as of June 30, 2017.Note 8. Accrued LiabilitiesAccrued liabilities as of June 30, 2017 and 2016 consisted of the following (in thousands):71Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) June 30, 2017 2016Deferred revenue (1)$32,957 $22,731Accrued payroll and related expenses19,370 15,499Customer deposits14,630 8,781Accrued cooperative marketing expenses7,292 7,308Accrued warranty costs5,976 5,816Others (2)32,599 23,461Total accrued liabilities$112,824 $83,596__________________________(1) Deferred revenue as of June 30, 2017 and 2016, is comprised primarily of a deferred extended warranty revenue of $17.5 million and $15.5 million,respectively, deferred on-site service revenue of $13.7 million and $6.2 million, respectively, and other deferred revenue of $1.8 million and $1.0 million,respectively.(2) Includes payables to contract manufacturers for the Company's buy-back liability of $20.3 million and $16.1 million as of June 30, 2017 and June 30,2016, respectively. Also, included in others as of June 30, 2017 is $1.4 million of deferred gain related to investment in Corporate Venture.Note 9. Short-term and Long-term ObligationsShort-term and long-term obligations as of June 30, 2017 and 2016 consisted of the following (in thousands): June 30, 2017 2016Line of credit: Bank of America (1)$83,199 $62,199CTBC Bank19,000 10,100Total line of credit102,199 72,299Term loans: Bank of America40,000 933CTBC Bank19,721 20,357Total term loans59,721 21,290Total debt161,920 93,589Less: debt issuance costs(473) —Total debt, net of debt issuance costs161,447 93,589Current portion, net of debt issuance costs(161,447) (53,589)Long-term portion, net of debt issuance costs$— $40,000__________________________(1) In July 2016, $50.0 million of the revolving line of credit was refinanced to a five-year term loan under the new credit agreement with Bank of Americaand $40.0 million was reclassified to long-term debt as of June 30, 2016.Activities under Revolving Lines of Credit and Term LoansBank of America2015 Bank of America Credit FacilityIn June 2015, the Company entered into an amendment to the then existing credit agreement with Bank of America N.A. (“Bank of America”) whichprovided for (i) a $65.0 million revolving line of credit facility that would have matured on November 15, 2015 and (ii) a five-year $14.0 million term loanfacility (collectively, the “2015 Bank of America Credit72Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)Facility”). The term loan was secured by three buildings located in San Jose, California and the principal and interest was payable monthly throughSeptember 30, 2016 with an interest rate at the LIBOR rate plus 1.50% per annum. In May 2016, the Company extended the revolving line of credit to matureon June 30, 2016.2016 Bank of America Credit FacilityIn June 2016, the Company entered into a new credit agreement with Bank of America, which provided for (i) a $55.0 million revolving line ofcredit facility including a $5.0 million letter of credit sublimit that was to mature on June 30, 2017 and (ii) a five-year $50.0 million term loan facility(collectively, the “2016 Bank of America Credit Facility”). The 2016 Bank of America Credit Facility replaced the 2015 Bank of America Credit Facility.The 2016 Bank of America Credit Facility term loan is secured by seven buildings located in San Jose, California and the property, plant and equipment andthe inventory in those buildings. The principal and interest of the 2016 Bank of America Credit Facility term loan are payable monthly through June 30,2021 with an interest rate at the LIBOR rate plus 1.25% per annum. The interest rate for the 2016 Bank of America Credit Facility revolving line of credit is atthe LIBOR rate plus 1.25% per annum. The LIBOR rate was 1.04% at June 30, 2017. The letter of credit bears interest at a rate of 1.25% per annum. In May2017, the Company entered into an amendment to the 2016 Bank of America Credit Facility to increase the revolving line of credit to $85.0 million andextended the maturity date of the revolving lines of credit to October 31, 2018. Prior to the maturity, in April 2018, the Company repaid and terminated the2016 Bank of America Credit Facility with proceeds from a new revolving line of credit (the "2018 Bank of America Credit Facility").In June 2016, the Company also entered into a separate credit agreement as a part of the 2016 Bank of America Credit Facility, which provided for arevolving line of credit of $10.0 million for its Taiwan and Netherlands subsidiaries that was to mature on June 30, 2017. The interest rate of the revolvingline of credit is equal to a minimum of 0.9% per annum plus the lender's cost of funds. In December 2016, the Company entered into an amendment to thisseparate credit agreement to increase the revolving line of credit from $10.0 million to $20.0 million. The Company extended the revolving line of credit tomature on October 31, 2018. Under the terms of this separate credit agreement, the Company cannot directly or indirectly pay any dividends, except inlimited situations.As of June 30, 2017 and 2016, the total outstanding borrowings under the 2016 Bank of America Credit Facility term loans was $40.0 million and$0.9 million, respectively. The total outstanding borrowings under the 2016 Bank of America Credit Facility revolving lines of credit was $83.2 million and$62.2 million as of June 30, 2017 and 2016, respectively. The interest rates for these loans ranged from 1.61% to 2.46% per annum as of June 30, 2017 andfrom 1.02% to 1.96% per annum as of June 30, 2016, respectively. As of June 30, 2017, the amount of the unused revolving lines of credit with Bank ofAmerica under the credit agreements was $21.8 million. As of June 30, 2017, assets amounting to $1,168.6 million collateralized the line of credit with Bankof America under the credit agreement, which represent the total assets of the United States headquarters of the Company, except for seven buildings locatedin San Jose, California and property, plant and equipment and inventory in those buildings. As of June 30, 2017, total assets collateralizing the term loanwith Bank of America under the credit agreement were $67.9 million.2018 Bank of America Credit FacilityIn April 2018, the Company entered into the 2018 Bank of America Credit Facility which replaced the 2016 Bank of America Credit Facility. The2018 Bank of America Credit Facility provides for a revolving credit line and other financial accommodations of up to $250.0 million extended by certainlenders. The 2018 Bank of America Credit Facility expires after 364 days, or at the option of the Company, and if certain conditions are satisfied, includingthe Company being current on all of its delinquent quarterly and annual filings with the SEC, may convert into a 5-year revolving credit facility. If and uponsuch conversion, the lenders for the 2018 Bank of America Credit Facility shall extend, in aggregate, a principal amount of up to $400.0 million. Prior to the2018 Bank of America Credit Facility’s conversion to the 5-year revolving credit facility, interest shall be at the LIBOR rate plus 2.75% per annum. Upon the2018 Bank of America Credit Facility converting to the 5-year revolving credit facility, interest shall accrue at the LIBOR rate plus an amount between1.50% and 2.00% for loans to both Super Micro Computer and Super Micro Computer B.V.. Interest accrued on any loans under the 2018 Bank of AmericaCredit Facility is due on the first day of each month, and the loans are due and payable in full on the termination date of the 2018 Bank of America CreditFacility, unless payment is required earlier. Voluntary prepayments are permitted without early repayment fees or penalties. Subject to customary exceptions,the 2018 Bank of America Credit Facility is secured by substantially all of Super Micro Computer’s assets. Upon conversion to the 5-year revolving creditfacility Super Micro Computer’s assets, and at the Company's option, Super Micro Computer B.V.'s assets will be used as collateral. Under the terms of the2018 Bank of America Credit Facility, the Company cannot pay any dividends.73Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)On January 31, 2019, the Company paid a fee and entered into an amendment of the 2018 Bank of America Credit Facility that resulted in theextension of the maturity date of the 2018 Bank of America Credit Facility from April 19, 2019 to June 30, 2019.CTBC BankIn April 2016, the Company entered into a credit agreement with CTBC Bank Co., Ltd ("CTBC Bank") that provides for (i) a 12-month NTD$700.0million or $21.6 million U.S. dollar equivalent term loan facility secured by the land and building located in Bade, Taiwan with an interest rate equal to thelender's established NTD interest rate plus 0.25% per annum which was adjusted monthly, which term loan facility also included a 12-month line ofguarantee up to NTD$100.0 million or $3.1 million U.S. dollar equivalent with an annual fee equal to 0.5% per annum, and (ii) a 12-month revolving line ofcredit up to 80.0% of eligible accounts receivable in an aggregate amount of up to $40.0 million with an interest rate equal to the lender's established USDinterest rate plus 0.30% per annum which was adjusted monthly (collectively, the “CTBC Credit Facility”). The total borrowings allowed under the CTBCCredit Facility was capped at $40.0 million. The Company extended the CTBC Credit Facility to mature on May 31, 2017.In May 2017, the Company renewed the credit agreement with respect to the CTBC Credit Facility, such that it provides for (i) a 12-monthNTD$700.0 million or $23.0 million U.S. dollar equivalent term loan facility secured by the land and building located in Bade, Taiwan with an interest rateequal to the lender's established NTD interest rate plus 0.25% per annum which is adjusted monthly, which term loan facility also included a 12-month lineof guarantee up to NTD$100.0 million or $3.3 million U.S. dollar equivalent with an annual fee equal to 0.5% per annum, and (ii) a 12-month revolving lineof credit up to 80.0% of eligible accounts receivable in an aggregate amount of up to $50.0 million with an interest rate equal to the lender's established USDinterest rate plus an interest rate ranging from 0.40% to 0.45% per annum which is adjusted monthly. The total borrowings allowed under the CTBC CreditFacility were capped at $50.0 million.The total outstanding borrowings under the CTBC Credit Facility term loan were denominated in Taiwanese dollars and remeasured into U.S. dollarsof $19.7 million and $20.4 million at June 30, 2017 and 2016, respectively. At June 30, 2017 and 2016, the total outstanding borrowings under the CTBCCredit Facility revolving line of credit was $19.0 million and $10.1 million, respectively, in U.S. dollars. The interest rate for these loans ranged from 0.93%and 2.00% at June 30, 2017 and 0.90% and 1.25% per annum at June 30, 2016. At June 30, 2017, the amount available for future borrowing under the CTBCCredit Facility was $11.3 million. As of June 30, 2017, the net book value of land and building located in Bade, Taiwan collateralizing the CTBC CreditFacility term loan was $26.4 million. Under the terms of the May 2017 renewed credit agreement, the CTBC Credit Facility was to mature on April 30, 2018but prior to the maturity the Company entered into a new credit agreement with CTBC Bank in January 2018.In January 2018, the Company entered into a credit agreement with CTBC Bank that provides for (i) a 12-month NTD$700.0 million or $23.6million U.S. dollar equivalent term loan facility secured by the land and building located in Bade, Taiwan with an interest rate equal to the lender'sestablished NTD interest rate plus 0.25% per annum which is adjusted monthly, which term loan facility also includes a 12-month line of guarantee up toNTD$100.0 million or $3.4 million U.S. dollar equivalent with an annual fee equal to 0.5% per annum, and (ii) a 12-month NTD$1,500.0 million or $50.5million U.S. dollar equivalent term loan facility with an interest rate equal to the lender's established NTD interest rate plus 0.25% per annum which isadjusted monthly (collectively, the “2018 CTBC Credit Facility”). The 2018 CTBC Credit Facility replaced the CTBC Credit Facility. The total borrowingsallowed under the 2018 CTBC Credit Facility was initially capped at $50.0 million and in August 2018 was reduced to $40.0 million. In April 2019, theCompany extended the maturity of 2018 CTBC Credit Facility to June 30, 2019.Covenant Compliance2016 Bank of America Credit FacilityThe credit agreement with respect to the 2016 Bank of America Credit Facility contained customary representations and warranties and customaryaffirmative and negative covenants applicable to the Company and its subsidiaries. The credit agreement contained certain financial covenants, includingthe following:•Not to incur on a consolidated basis, a net loss before taxes and extraordinary items for any two consecutive fiscal quarters;74Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)•The Consolidated Leverage Ratio, as defined in the agreement, as of the end of any fiscal quarter, measured for the most recently completed twelve(12) months of the Company, shall not be greater than 2.00; and•The domestic unencumbered liquid assets, as defined in the agreement, maintained in accounts within the United States shall have an aggregatemarket value of not less than $40.0 million, measured quarterly as of the last day of each fiscal quarter.As of June 30, 2017, the Company was in compliance with the above stated financial covenants associated with the term loan and lines of creditwith Bank of America under the credit agreement.On October 28, 2017, Bank of America issued an extension letter to the Company that extended the date by which the Company was obligated todeliver its audited consolidated financial statements and compliance certificate for the fiscal year ended June 30, 2017 from October 28, 2017 to January 15,2018. On January 12, 2018, Bank of America issued another extension letter to the Company that extended the date by which the Company was obligated todeliver (i) its audited consolidated financial statements and compliance certificate for the fiscal year ended June 30, 2017 from January 15, 2018 to March 13,2018 and (ii) its unaudited condensed consolidated financial statements and compliance certificate for the fiscal quarters ended September 30, 2017 andDecember 31, 2017 to March 13, 2018.On March 12, 2018, the Company entered into an amendment of the credit agreement with respect to the 2016 Bank of America Credit Facility to,among other matters, add provisions requiring (i) a new financing commitment by March 30, 2018 to repay all obligations under the 2016 Bank of AmericaCredit Agreement, (ii) repayment of the obligations under the 2016 Bank of America Credit Agreement no later than April 20, 2018, and (iii) delivery of cashflow forecasts. In addition, the amendment suspended the requirement that the Company deliver certain financial statements and SEC filings, provided thatno event of default had occurred. In April 2018, the 2016 Bank of America Credit Facility was replaced by the 2018 Bank of America Credit Facility.2018 Bank of America Credit FacilityThe credit agreement with Bank of America related to the 2018 Bank of America Credit Facility contains customary representations and warrantiesand customary affirmative and negative covenants applicable to the Company and its subsidiaries. The credit agreement contains a financial covenant, whichrequires that the Company maintain a Fixed Charge Coverage Ratio, as defined in the agreement of at least 1.00 for each twelve-month period while a TriggerPeriod, as defined in the agreement, is in effect.On September 7, 2018, Bank of America issued an extension letter to the Company in connection with the 2018 Bank of America Credit Facility,which extended the delivery date of the Company’s audited consolidated financial statements, compliance certificates and other material reports for the fiscalyear ended June 30, 2018 to January 31, 2019. On January 31, 2019, the Company entered into an amendment of the loan and security agreement withrespect to the 2018 Bank of America Credit Facility to, among other matters, (a) extend the delivery date of the Company’s audited consolidated financialstatements, compliance certificates and other material reports for the fiscal year ended June 30, 2018 to June 30, 2019, and (b) require the delivery, by no laterthan March 31, 2019 of the Company’s audited consolidated financial statements for the fiscal year ended June 30, 2017. In April 2019, the Company paid afee to extend the delivery of its audited consolidated financial statements for the fiscal year ended June 30, 2017 to June 30, 2019. The Company intends tonegotiate the further extension for delivery of the Company’s audited consolidated financial statements, compliance certificates and other material reports forthe fiscal year ended June 30, 2018.CTBC BankThere are no financial covenants associated with the CTBC Credit Facility or the 2018 CTBC Credit Facility.Note 10. Other Long-term LiabilitiesOther long-term liabilities as of June 30, 2017 and 2016 consisted of the following (in thousands):75Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) June 30, 2017 2016Deferred revenue, non-current (1)$47,548 $26,538Accrued unrecognized tax benefits including related interest and penalties, non-current13,285 16,056Accrued warranty, non-current1,745 1,313Others (2)6,176 1,293Total other long-term liabilities$68,754 $45,200__________________________(1) Deferred revenue, non-current as of June 30, 2017 and 2016 was comprised of deferred extended warranty revenue of $22.3 million and $16.7 million,respectively, deferred on-site service revenue of $23.4 million and $8.6 million, respectively, and other deferred revenue of $1.8 million and $1.2 million,respectively.(2) Included in others as of June 30, 2017 is $4.9 million of deferred gain related to investment in Corporate Venture.Note 11. Related Party TransactionsThe Company has a variety of business relationships with Ablecom and Compuware. Ablecom and Compuware are both Taiwan corporations.Ablecom is one of the Company’s major contract manufacturers; Compuware is both a distributor of the Company’s products and a contract manufacturer forthe Company. Ablecom’s Chief Executive Officer, Steve Liang, is the brother of Charles Liang, the Company’s President, Chief Executive Officer andChairman of the Board of Directors. As of June 30, 2017, Ablecom owned approximately 0.4% of the Company’s common stock. As of June 30, 2017, CharlesLiang and his spouse, Sara Liu, who is also an officer and director of the Company, together owned approximately 10.5% of Ablecom’s capital stock. Certainfamily members of Yih-Shyan (Wally) Liaw, who until January 2018 was the Senior Vice President of International Sales and a director of the Company,owned approximately 11.7% of Ablecom’s capital stock as of June 30, 2017. The Company does not own, nor has it ever owned, any of Ablecom’s capitalstock. Steve Liang and other Liang family members, including other brothers of Charles Liang, own approximately 36.0% of Ablecom’s stock. Bill Liang, abrother of both Charles Liang and Steve Liang, also is a member of the Board of Directors of Ablecom. Bill Liang is also the Chief Executive Officer of Compuware, a member of Compuware’s Board of Directors and a holder of a significant equityinterest in Compuware. Steve Liang is also a member of Compuware’s Board of Directors and is an equity holder of Compuware. None of the Company,Charles Liang or Sara Liu own any capital stock of Compuware.Dealings with AblecomThe Company has entered into a series of agreements with Ablecom, including multiple product development, production and service agreements,product manufacturing agreements, manufacturing services agreements and lease agreements for warehouse space.Under these agreements, the Company outsources to Ablecom a portion of its design activities and a significant part of its manufacturing ofcomponents, particularly server chassis. Ablecom manufactured approximately 95% and 96% of the chassis included in the products sold by the Companyduring fiscal years 2017 and 2016, respectively. With respect to design activities, Ablecom generally agrees to design certain agreed-upon productsaccording to the Company’s specifications, and further agrees to build the tools needed to manufacture the products. The Company pays Ablecom for thedesign and engineering services, and further agrees to pay Ablecom for the tooling. The Company retains full ownership of any intellectual property resultingfrom the design of these products and tooling.With respect to the manufacturing aspects of the relationship, Ablecom purchases most of materials needed to manufacture the chassis from outsidemarkets and the Company provides certain components used in the manufacturing process (such as power supplies) to Ablecom through consignment or salestransactions. Ablecom uses these materials and components to manufacture the completed chassis and then sell them back to the Company. For thecomponents purchased from the Company, Ablecom sells the components back to the Company at a price equal to the price at which the Company sold thecomponents to Ablecom. The Company and Ablecom frequently review and negotiate the prices of the chassis the Company purchases from Ablecom. Inaddition to inventory purchases, the Company also incurs other costs associated with design services, tooling and other miscellaneous costs from Ablecom.76Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)The Company’s exposure to financial loss as a result of its involvement with Ablecom is limited to potential losses on its purchase orders in theevent of an unforeseen decline in the market price and/or demand of the Company’s products such that the Company incurs a loss on the sale or cannot sellthe products. Outstanding purchase orders from the Company to Ablecom were $23.5 million and $22.8 million at June 30, 2017 and 2016, respectively,representing the maximum exposure to financial loss. The Company does not directly or indirectly guarantee any obligations of Ablecom, or any losses thatthe equity holders of Ablecom may suffer. Since Ablecom manufactures substantially all the chassis that the Company incorporates into its products, ifAblecom were to suddenly be unable to manufacture chassis for the Company, the Company’s business could suffer if the Company is unable to quicklyqualify substitute suppliers who can supply high-quality chassis to the Company in volume and at acceptable prices.Dealings with CompuwareThe Company has entered into a distribution agreement with Compuware, under which the Company appointed Compuware as a non-exclusivedistributor of the Company’s products in Taiwan, China and Australia. Compuware assumes the responsibility to install the Company's products at the site ofthe end customer, if required, and administers customer support in exchange for a discount from the Company's standard price for its purchases.The Company also has entered into a series of agreements with Compuware, including a multiple product development, production and serviceagreements, product manufacturing agreements, and lease agreements for office space.Under these agreements, the Company outsources to Compuware a portion of its design activities and a significant part of its manufacturing ofcomponents, particularly power supplies. With respect to design activities, Compuware generally agrees to design certain agreed-upon products according tothe Company’s specifications, and further agrees to build the tools needed to manufacture the products. The Company pays Compuware for the design andengineering services, and further agrees to pay Compuware for the tooling. The Company retains full ownership of any intellectual property resulting fromthe design of these products and tooling. With respect to the manufacturing aspects of the relationship, Compuware purchases most of materials needed tomanufacture the power supplies from outside markets and uses these materials to manufacture the products and then sell those products to the Company. TheCompany and Compuware frequently review and negotiate the prices of the power supplies the Company purchases from Compuware.Compuware also manufactures motherboards, backplanes and other components used on printed circuit boards for the Company. The Company sellsto Compuware most of the components needed to manufacture the above products. Compuware uses the components to manufacture the products and thensells the products back to the Company at a purchase price equal to the price at which the Company sold the components to Compuware, plus a“manufacturing value added” fee and other miscellaneous material charges and costs. The Company and Compuware frequently review and negotiate theamount of the “manufacturing value added” fee that will be included in the price of the products the Company purchases from Compuware. In addition to theinventory purchases, the Company also incurs costs associated with design services, tooling assets, and miscellaneous costs.The Company’s exposure to financial loss as a result of its involvement with Compuware is limited to potential losses on its purchase orders in theevent of an unforeseen decline in the market price and/or demand of the Company’s products such that the Company incurs a loss on the sale or cannot sellthe products. Outstanding purchase orders from the Company to Compuware were $56.4 million and $40.0 million at June 30, 2017 and 2016, respectively,representing the maximum exposure to financial loss. The Company does not directly or indirectly guarantee any obligations of Compuware, or any lossesthat the equity holders of Compuware may suffer.The Company’s results from transactions with Ablecom and Compuware for each of the fiscal years ended June 30, 2017, 2016, and 2015 are asfollows (in thousands):77Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Years Ended June 30, 2017 2016 2015Ablecom Net sales$7 $57 $60Purchases (1)123,734 125,537 127,967 Compuware Net sales22,959 29,053 47,624Purchases (1)118,912 126,051 105,362__________________________(1) Includes principally purchases of inventory and other miscellaneous items.The Company had the following balances related to transactions with Ablecom and Compuware as of June 30, 2017 and 2016 (in thousands): June 30, 2017 2016Ablecom Accounts receivable and other receivables$5,556 $6,017Accounts payable and accrued liabilities30,762 29,788 Compuware Accounts receivable and other receivables7,908 3,654Accounts payable and accrued liabilities32,216 20,507In October 2016, the Company entered into agreements pursuant to which the Company contributed certain technology rights in connection with aninvestment in the Corporate Venture, which is accounted for using the equity method. See Note 7, "Investment in a Corporate Venture" for a discussion of theinvestment and the transactions that took place during the fiscal year 2017.Note 12. Stock-based Compensation and Stockholders’ EquityShare Repurchase ProgramIn July 2016, the Company’s Board of Directors adopted a program to repurchase from time to time at management’s discretion up to $100.0 millionof the Company’s common stock in the open market or in private transactions during the following twelve months at prevailing market prices. In fiscal year2017, the Company purchased 888,097 shares of the Company's common stock in the open market at a weighted average price of $20.79 for $18.5 million.Repurchases were made under the program using the Company’s cash resources. The repurchase program ended in July 2017.Equity Incentive PlanIn January 2016, the Board of Directors approved the 2016 Equity Incentive Plan (the "2016 Plan") and reserved for issuance 4,700,000 shares ofcommon stock for awards of stock options, stock appreciation rights, restricted stock, RSUs and other equity-based awards. The 2016 Plan was approved bythe stockholders of the Company and became effective on March 8, 2016. As of the date the 2016 Plan became effective, 8,696,444 shares of common stockwere reserved for outstanding awards under the Company's 2006 Equity Incentive Plan (the "2006 Plan"). Such awards remained outstanding under the 2006Plan following the adoption of the 2016 Plan, although no further awards will be granted under the 2006 Plan. Up to 2,800,000 shares subject to awards thatremained outstanding under the 2006 Plan but that are forfeited in the future will become available for use under the 2016 Plan. In addition, 1,153,412 sharesof common stock originally reserved for issuance under the 2006 Plan were cancelled upon the adoption of the 2016 Plan. Under the 2016 Plan, the exerciseprice per share for incentive stock options granted to employees owning shares representing more than 10% of the Company at the time of grant cannot beless than 110% of the fair value of the underlying share on grant date. Nonqualified stock options and incentive stock options granted to all other personsshall be granted at a price not less than 100% of the fair value. Options generally expire ten years78Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)after the date of grant. Stock options and RSUs generally vest over four years; 25% at the end of one year and one sixteenth per quarter thereafter. As of June30, 2017, the Company had 2,785,792 authorized shares available for future issuance under the 2016 Plan.Determining Fair ValueThe Company's fair value of RSUs is based on the closing market price of the Company's common stock on the date of grant. The Companyestimates the fair value of stock options granted using the Black-Scholes-option-pricing formula and a single option award approach. This fair value is thenamortized ratably over the requisite service periods of the awards, which is generally the vesting period.Expected Term—The Company’s expected term represents the period that the Company’s stock-based awards are expected to be outstanding andwas determined based on a combination of the Company's peer group and the Company's historical experience.Expected Volatility—Expected volatility is based on a combination of the Company's implied and historical volatility.Expected Dividend—The Black-Scholes valuation model calls for a single expected dividend yield as an input and the Company has no plans topay dividends.Risk-Free Interest Rate—The risk-free interest rate used in the Black-Scholes valuation method is based on the United States Treasury zero couponissues in effect at the time of grant for periods corresponding with the expected term of option.The fair value of stock option grants for the fiscal years ended June 30, 2017, 2016 and 2015 was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions: Years Ended June 30, 2017 2016 2015Risk-free interest rate1.12% - 2.03% 1.37% - 1.57% 1.35% - 1.76%Expected term5.31 - 5.38 years 5.31 - 5.33 years 5.40 - 5.44 yearsDividend yield—% —% —%Volatility43.36% - 49.64% 46.65% - 50.89% 46.93% - 49.31%Weighted-average fair value$10.71 $12.07 $12.72The following table shows total stock-based compensation expense included in the consolidated statements of operations for the fiscal years endedJune 30, 2017, 2016 and 2015 (in thousands): Years Ended June 30, 2017 2016 2015Cost of sales$1,382 $1,157 $962Research and development12,559 10,651 9,195Sales and marketing2,144 1,934 1,601General and administrative3,580 3,188 2,678Stock-based compensation expense before taxes19,665 16,930 14,436Income tax impact(5,946) (4,767) (4,247)Stock-based compensation expense, net$13,719 $12,163 $10,189The cash flows resulting from the tax benefits for tax deductions resulting from the exercise of stock options and vesting of RSUs in excess of thecompensation expense recorded for those options (excess tax benefits) issued or modified since July 1, 2006 are classified as cash from financing activities.Excess tax benefits for stock options issued prior to July 1, 2006 are classified as cash from operating activities. The Company had $1.8 million, $3.6 millionand $11.3 million of excess79Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)tax benefits recorded in additional paid-in capital in the fiscal years ended June 30, 2017, 2016 and 2015, respectively. The Company had excess tax benefitsclassified as cash from financing activities of $2.3 million, $2.8 million and $8.0 million in the fiscal years ended June 30, 2017, 2016 and 2015,respectively, for options issued since July 1, 2006.As of June 30, 2017, $9.8 million of unrecognized compensation cost related to stock options is expected to be recognized over a weighted-averageperiod of 2.21 years and $27.2 million of unrecognized compensation cost related to unvested RSUs is expected to be recognized over a weighted-averageperiod of 2.72 years.Stock Option ActivityThe following table summarizes stock option activity during the fiscal years ended June 30, 2017, 2016 and 2015 under all plans: OptionsOutstanding WeightedAverageExercisePrice perShare WeightedAverageRemainingContractualTerm(in Years) AggregateIntrinsicValue(in thousands)Balance as of June 30, 2014 (7,558,631 shares exercisable at weighted averageexercise price of $11.05 per share) 10,905,602 $12.24 Granted (weighted average fair value of $12.72) 1,093,920 28.28 Exercised (2,124,401) 10.99 Forfeited (172,278) 18.68 Balance as of June 30, 2015 (7,208,475 shares exercisable at weighted averageexercise price of $12.24 per share) 9,702,843 14.21 Granted (weighted average fair value of $12.07) 316,580 26.86 Exercised (1,013,430) 12.03 Forfeited (45,126) 19.45 Balance as of June 30, 2016 (7,495,131 shares exercisable at weighted averageexercise price of $13.35 per share) 8,960,867 14.88 Granted (weighted average fair value of $10.71) 473,000 24.27 Exercised (1,007,065) 10.80 Forfeited (51,143) 17.96 Balance as of June 30, 2017 (7,348,320 shares exercisable at weighted averageexercise price of $14.58 per share) 8,375,659 $15.88 4.37 $78,501Options vested and expected to vest at June 30, 2017 8,298,251 $15.79 4.34 $78,434Options vested and exercisable at June 30, 2017 7,348,320 $14.58 3.99 $76,932The total pretax intrinsic value of options exercised during the fiscal years ended June 30, 2017, 2016 and 2015 was $14.0 million, $18.0 millionand $48.1 million, respectively. Additional information regarding options outstanding as of June 30, 2017, is as follows: 80Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Options Outstanding Options Vested and ExercisableRange ofExercise Prices NumberOutstanding Weighted-AverageRemainingContractualTerm (Years) Weighted-AverageExercisePrice PerShare NumberExercisable Weighted-AverageExercisePrice PerShare$4.63 - 8.36 1,109,538 1.65 $6.92 1,109,538 $6.928.47 - 10.66 1,435,967 2.98 10.18 1,435,967 10.1810.68 - 12.68 837,728 3.95 11.80 837,728 11.8012.92 - 14.23 1,089,103 4.26 13.75 1,058,336 13.7415.22 - 17.29 883,555 4.24 16.34 883,555 16.3417.69 - 18.93 1,055,904 5.15 18.55 947,204 18.5520.54 - 25.44 1,065,708 6.51 23.48 587,336 23.2926.60 - 35.07 827,496 7.20 29.16 441,261 29.3037.06 35,160 5.62 37.06 19,770 37.0639.19 35,500 7.62 39.19 27,625 39.19$4.63 - $39.19 8,375,659 4.37 $15.88 7,348,320 $14.58RSU ActivityIn January 2015, the Company began to grant RSUs to employees. The Company grants RSUs to certain employees as part of its regular employeeequity compensation review program as well as to selected new hires. RSUs are share awards that entitle the holder to receive freely tradable shares of theCompany's common stock upon vesting. The following table summarizes restricted stock unit activity during the fiscal years ended June 30, 2017 and 2016under all plans: RSUsOutstanding WeightedAverageGrant-Date FairValue per Share AggregateIntrinsicValue(in thousands)Balance as of June 30, 2014 — $— Granted 374,720 35.82 Released (14,685) 35.23 Forfeited (56,711) 34.90 Balance as of June 30, 2015 303,324 36.02 Granted 845,870 28.45 Released (177,707) 31.80 Forfeited (44,504) 29.72 Balance as of June 30, 2016 926,983 30.23 Granted 808,020 23.73 Released (411,739) 27.41 Forfeited (96,907) 26.40 Balance as of June 30, 2017 1,226,357 $26.11 $30,230The total pretax intrinsic value of RSUs vested was $11.3 million, $4.9 million and $0.5 million for the fiscal years ended June 30, 2017, 2016 and2015, respectively. In fiscal years 2017, 2016 and 2015, upon vesting, 411,739, 177,707 and 14,685 shares of RSUs were partially net share-settled such thatthe Company withheld 144,994, 65,164 and 5,278 shares, respectively, with value equivalent to the employees' minimum statutory obligation for theapplicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. The total shares withheld were based on the valueof the RSUs on their respective vesting dates as determined by the Company's closing stock price. Total payments for the employees' tax obligations totaxing authorities were $3.6 million, $1.8 million and $0.2 million for the fiscal years ended June 30, 2017, 2016 and 2015, respectively, and are reflected asa financing activity within the consolidated statements of cash81Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)flows. These net-share settlements had the effect of share repurchases by the Company as they reduced and retired the number of shares that would haveotherwise been issued as a result of the vesting and did not represent an expense to the Company. Pursuant to the terms of the 2016 Plan, shares withheld inconnection with net-share settlements are returned to the 2016 Plan and are available for future grants under the 2016 Plan.Note 13. Income TaxesThe components of income before income tax provision for the fiscal years ended June 30, 2017, 2016 and 2015 are as follows (in thousands): Years Ended June 30, 2017 2016 2015United States$82,078 $97,921 $108,437Foreign9,210 9,483 24,200Income before income tax provision$91,288 $107,404 $132,637The income tax provision for the fiscal years ended June 30, 2017, 2016 and 2015, consists of the following (in thousands): Years Ended June 30, 2017 2016 2015Current: Federal$26,033 $29,647 $33,765State695 638 (633)Foreign4,001 10,741 10,953 30,729 41,026 44,085Deferred: Federal(6,782) (5,976) (5,492)State353 12 2,406Foreign134 261 (917) (6,295) (5,703) (4,003)Income tax provision$24,434 $35,323 $40,08282Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The Company’s net deferred tax assets as of June 30, 2017 and 2016 consist of the following (in thousands): June 30, 2017 2016Inventory valuation$15,240 $12,329Stock-based compensation6,277 5,610Deferred revenue6,241 6,802Payables to foreign subsidiaries3,912 1,824R&D credit3,167 10Accrued vacation and bonus2,635 2,616Warranty accrual1,952 2,213Foreign exchange unrealized gains and losses1,884 710Marketing fund accrual1,605 1,791Other2,836 2,821Total deferred income tax assets45,749 36,726Deferred tax liabilities-depreciation and other(3,617) (3,048)Valuation allowance(3,013) —Deferred income tax assets, net$39,119 $33,678The Company assesses its deferred tax assets for recoverability on a regular basis, and where applicable, a valuation allowance is recorded to reducethe total deferred tax asset to an amount that will, more likely than not, be realized in the future. As of June 30, 2017, the Company believes that most of itsdeferred tax assets are “more-likely-than not” to be realized with the exception of California R&D tax credits that have not met the “more-likely than not”realization threshold criteria. Starting from fiscal year 2016 California tax return which was filed in the fourth quarter of fiscal year 2017, on an annual basisand pursuant to current law, the Company generates more California credits than California tax. As a result, at June 30, 2017, the gross excess credits of $4.6million, or net of federal tax benefit of $3.0 million, are subject to a full valuation allowance. The Company will continue to review its deferred tax assets inaccordance with the applicable accounting standards. The net deferred tax assets balance as of June 30, 2017 and 2016 was $39.1 million and $33.7 million,respectively.The cumulative undistributed earnings of the Company's foreign subsidiaries of $40.6 million at June 30, 2017 are considered to be indefinitelyreinvested and accordingly, no provisions for federal and state income taxes have been provided thereon. The Company determined that the calculation ofthe amount of unrecognized deferred tax liability related to these cumulative unremitted earnings was not practicable. Upon distribution of those earnings inthe form of dividends or otherwise, the Company would be subject to both United States income taxes (subject to an adjustment for foreign tax credits) andwithholding taxes payable to various foreign countries.Subsequent to June 30, 2017, but before the issuance of the consolidated financial statements, the 2017 Tax Act was enacted on December 22, 2017.Some of the significant new requirements of the 2017 Tax Act include, but are not limited to, a one-time mandatory deemed repatriation transition tax onpreviously deferred foreign earnings which the Company estimates would not have a material impact to the consolidated financial statements in the year ofenactment, a re-measurement of our deferred taxes due to the change in the corporate tax rate which the Company is estimating could have a $11.0 million to$15.0 million impact to the consolidated financial statements in the year of enactment, taxation of certain global intangible low-taxed income under theinternational tax provisions which the Company estimates would not have a material impact to the consolidated financial statements in the year ofenactment, and limitations on the deductibility of performance-based compensation for officers which the Company estimates would not have a materialimpact to the consolidated financial statements in the year of enactment. The tax impacts of the 2017 Tax Act have not been included in the income taxprovision for fiscal years ended June 30, 2017, 2016 and 2015. The Company will account for the tax effects of the 2017 Tax Act in the period it was enacted,which is in the fiscal year ended June 30, 2018.Prior to the enactment of the 2017 Tax Act, the Company considered earnings from foreign operations to be indefinitely reinvested outside of theUnited States. The Company is currently evaluating whether to change its indefinite83Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)reinvestment assertion in light of the 2017 Tax Act and the Company considers that assessment to be incomplete as the financial statements for fiscal year2018 have not been finalized.The following is a reconciliation for the fiscal years ended June 30, 2017, 2016 and 2015, of the statutory rate to the Company’s effective federal tax rate: Years Ended June 30, 2017 2016 2015Tax at statutory rate 35.0 % 35.0 % 35.0 %State income tax, net of federal tax benefit 4.6 3.2 3.3Stock-based compensation 2.5 2.3 2.6Settlement with tax authority 2.0 — —Foreign withholding tax 1.1 3.2 3.3Foreign tax rate differences 0.8 1.2 (2.7)Subpart F income inclusion — (2.9) (3.2)Qualified production activity deduction (3.0) (2.8) (1.4)Uncertain tax positions (7.6) (1.6) (0.8)Research and development tax credit (9.4) (7.0) (3.8)Other 0.8 2.3 (2.1)Effective tax rate 26.8 % 32.9 % 30.2 %84Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)As of June 30, 2017, the Company had state research and development tax credit carryforwards of $16.6 million. The state research and developmenttax credits will carryforward indefinitely to offset future state income taxes. $6.7 million of the state research and development tax credit carryforwards wereattributable to excess tax deductions from stock option exercises, and were not included in the deferred tax assets shown above. The benefit of thesecarryforwards will be credited to equity when realized. The following table summarizes the activity related to the unrecognized tax benefits (in thousands): Gross*UnrecognizedIncome TaxBenefitsBalance at June 30, 2014$9,615Gross increases: For current year’s tax positions3,855For prior years’ tax positions793Gross decreases: Settlements and releases due to the lapse of statutes of limitations(971)Balance at June 30, 201513,292Gross increases: For current year’s tax positions6,167For prior years’ tax positions2,074Gross decreases: Settlements and releases due to the lapse of statutes of limitations(2,138)Balance at June 30, 201619,395Gross increases: For current year’s tax positions5,732For prior years’ tax positions1,119Gross decreases: Settlements and releases due to the lapse of statutes of limitations(7,029)Balance at June 30, 2017$19,217________________________*excludes interest, penalties, federal benefit of state reserves The total amount of unrecognized tax benefits that would affect the effective tax rate, if recognized, was $15.6 million and $16.7 million as of June30, 2017 and 2016, respectively.The Company’s policy is to include interest and penalties related to unrecognized tax benefits within the provision for taxes in the consolidatedstatements of operations. As of June 30, 2017 and 2016, the Company had accrued $1.0 million and $1.0 million for the payment of interest and penaltiesrelating to unrecognized tax benefits, respectively. During fiscal years 2017, 2016 and 2015, there was no material change in the total amount of the liabilityfor accrued interest and penalties related to the unrecognized tax benefits.The Company is subject to United States federal income tax as well as income taxes in many state and foreign jurisdictions. In the fourth quarter offiscal year 2017, the U.S. Internal Revenue Service (“IRS”) completed its examination procedures including all appeals and administrative review for taxyears ended June 30, 2013 and 2014 U.S. federal income tax returns. The IRS proposed an adjustment on the Company’s research and development creditclaimed which resulted in additional tax liability of $1.9 million. The Company accepted and paid for the amount in June 2017. The impact of this one-timeadjustment on the income statement was mostly offset by the recognition of other previously unrecognized tax benefits related to the years audited.In December 2018, the tax authorities completed their audit in Taiwan for fiscal year 2017, which was related to local income taxes in response tothe Taiwan tax authority’s proposed adjustment on the Company’s transfer pricing that resulted in85Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)additional tax liability of $1.5 million. The Company accepted and paid the $1.5 million in January 2019. The impact of this one-time adjustment on theincome statement was predominantly offset by the recognition of previously unrecognized tax benefits related to the years audited.The Company believes that it has adequately provided reserves for all uncertain tax positions, however, amounts asserted by tax authorities could begreater or less than the Company’s current position. Accordingly, the Company’s provision on federal, state and foreign tax related matters to be recorded inthe future may change as revised estimates are made or the underlying matters are settled or otherwise resolved.The federal statute of limitations remains open in general for tax years ended June 30, 2016 through 2018. The state statute of limitations remainsopen in general for tax years ended June 30, 2015 through 2018. The statutes of limitations in major foreign jurisdictions remain open for examination ingeneral for tax years ended June 30, 2013 through 2018. The Company does not expect its unrecognized tax benefits to change materially over the next 12months. Note 14. Commitments and ContingenciesLitigation and Claims— In February 2018, the Company became a party to legal proceedings whereby complainants have alleged that it hasviolated Section 10(b) of the Securities Exchange Act due to alleged misrepresentations and/or omissions. See Note 18, "Subsequent Events" for furtherdetails. From time to time, the Company has been involved in various legal proceedings arising from the normal course of business activities. Inmanagement’s opinion, the resolution of any matters will not have a material adverse effect on the Company’s consolidated financial condition, results ofoperations or liquidity.The Company has entered into indemnification agreements with its current and former directors and executive officers. Under these agreements, theCompany has agreed to indemnify such individuals to the fullest extent permitted by law against liabilities that arise by reason of their status as directors orofficers and to advance expenses incurred by such individuals in connection with related legal proceedings. It is not possible to determine the maximumpotential amount of payments the Company could be required to make under these agreements due to the limited history of prior indemnification claims andthe unique facts and circumstances involved in each claim. However, the Company maintains directors and officers liability insurance coverage to reduce itsexposure to such obligations.Purchase Commitments— The Company has agreements to purchase certain units of inventory and non-inventory items through the next 12months. As of June 30, 2017, these remaining noncancelable commitments were $309.1 million, including $79.9 million for related parties. Lease Commitments—The Company leases offices and equipment under noncancelable operating leases which expire at various dates through2026. In addition, the Company leases certain of its equipment under capital leases. The future minimum lease commitments under all leases are as follows(in thousands): Year ending:CapitalLeases OperatingLeasesJune 30, 2018$309 $4,844June 30, 2019271 4,399June 30, 2020162 4,106June 30, 2021101 2,033June 30, 202239 1,572Thereafter— 3,951Total minimum lease payments882 $20,905Less: Amounts representing interest70 Present value of minimum lease payments812 Less: Long-term portion539 Current portion$273 Rent expense for the fiscal years ended June 30, 2017, 2016 and 2015, was $5.0 million, $4.6 million and $3.7 million, respectively.86Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)Note 15. Retirement PlansThe Company sponsors a 401(k) savings plan for eligible United States employees and their beneficiaries. Contributions by the Company arediscretionary, and no contributions have been made by the Company for the fiscal years ended June 30, 2017, 2016 and 2015.Beginning in March 2003, employees of Super Micro Computer, B.V. have the option to deduct a portion of their gross wages and invest the amountin a defined contribution plan. The Company has agreed to match 10% of the amount that is deducted monthly from employees’ wages. Similar tocontributions into a 401(k) plan, the Company's obligation is limited to the contributions made to the contribution plan. Investment risk and investmentrewards are assumed by the employees and not by the Company. For the fiscal years ended June 30, 2017, 2016 and 2015, the Company’s matchingcontribution was $0.4 million, $0.3 million and $0.2 million, respectively.The Company contributes to a defined contribution pension plan administered by the government of Taiwan that covers all eligible employeeswithin Taiwan. Pension plan benefits are based primarily on participants’ compensation and years of service credited as specified under the terms of Taiwan’splan. The funding policy is consistent with the local requirements of Taiwan. The Company's obligation is limited to the contributions made to the pensionplan. The Company has no control over the investment strategy of the assets of the government administered pension plan. For the fiscal years ended June 30,2017, 2016 and 2015, the Company’s contribution was $1.9 million, $1.0 million and $0.9 million, respectively.Note 16. Segment ReportingThe Company operates in one operating segment that develops and provides high performance server solutions based upon an innovative, modularand open-standard architecture. The Company’s chief operating decision maker is the Chief Executive Officer.The following is a summary of property, plant and equipment (in thousands): June 30, 2017 2016United States$152,310 $142,764Asia40,854 42,052Europe2,412 3,133 $195,576 $187,949International net sales are based on the country and region to which the products were shipped. The following is a summary for the fiscal years endedJune 30, 2017, 2016 and 2015, of net sales by geographic region (in thousands): Years Ended June 30, 2017 2016 2015 United States$1,422,667 $1,409,601 $1,148,135Asia500,956 319,581 313,550Europe453,798 387,711 367,538Other107,508 108,129 125,130 $2,484,929 $2,225,022 $1,954,353The following is a summary of net sales by product type (in thousands): 87Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Years Ended June 30, 2017 2016 2015 Amount Percent ofNet Sales Amount Percent ofNet Sales Amount Percent ofNet SalesServer systems$1,740,633 70.0% $1,533,382 68.9% $1,186,258 60.7%Subsystems and accessories744,296 30.0% 691,640 31.1% 768,095 39.3%Total$2,484,929 100.0% $2,225,022 100.0% $1,954,353 100.0%Subsystems and accessories are comprised of serverboards, chassis and accessories. Server systems constitute an assembly of subsystems andaccessories, and related services.Note 17. Quarterly Financial Information (Unaudited) The following table presents the Company’s unaudited consolidated quarterly financial data. This information has been prepared on a basisconsistent with that of the audited consolidated financial statements. The Company believes that all necessary adjustments, consisting of normal recurringaccruals and adjustments, have been included to present fairly the quarterly financial data. The Company’s quarterly results of operations for these periodsare not necessarily indicative of future results of operations. Three Months EndedSep. 30, 2015 Dec. 31, 2015 Mar. 31, 2016 Jun. 30, 2016 (1) Sep. 30, 2016 Dec. 31, 2016 Mar. 31, 2017 Jun. 30, 2017 (As Restated) (In thousands, except per share data)Net sales$539,104 $641,235 $513,468 $531,215 $528,763 $663,200 $614,798 $678,168Gross profit$77,475 $103,187 $78,983 $70,856 $82,552 $96,136 $85,337 $85,933Net income$17,351 $33,204 $16,046 $5,480 $15,373 $22,876 $15,350 $13,255Net incomeper commonshare: Basic$0.37 $0.70 $0.33 $0.10 $0.32 $0.48 $0.32 $0.26Diluted$0.34 $0.64 $0.31 $0.10 $0.30 $0.44 $0.30 $0.25__________________________(1) The error corrections made in the three months ended June 30, 2016 are similar in nature to those discussed in Note 19, "Restatement of Previously IssuedConsolidated Financial Statements." The correction of the errors resulted in net sales being increased by $6.9 million, gross profit reduced by $2.9 millionand net income reduced by $1.5 million, respectively, for the three months ended June 30, 2016, from amounts previously reported.Note 18. Subsequent EventsIn December 2017, the 2017 Tax Act was signed into law. The 2017 Tax Act reduces the U.S. federal corporate tax rate from 35% to 21% andimposes a one-time repatriation transition tax among other provisions. For details, see Note 13, "Income Taxes."On February 8, 2018, two putative class action complaints were filed against the Company, its Chief Executive Officer, and former Chief FinancialOfficer in the U.S. District Court for the Northern District of California (Hessefort v. Super Micro Computer, Inc., et al., No. 18-cv-00838 and United Union ofRoofers v. Super Micro Computer, Inc., et al., No. 18-cv-00850). The complaints claim that the defendants violated Section 10(b) of the Securities ExchangeAct due to alleged misrepresentations and/or omissions in public statements regarding recognition of revenue. The court subsequently appointed New YorkHotel Trades Council & Hotel Association of New York City, Inc. Pension Fund as lead plaintiff and it filed an amended complaint naming the Company'sSenior Vice President of Investor Relations, as an additional defendant. The court88Table of Contentsapproved the parties’ agreement to permit a further amendment of the complaint, which was filed on January 22, 2019. The Company believes the allegationsfiled are without merit, and intends to vigorously defend against the lawsuit.In April 2018, the Company repaid and terminated the 2016 Bank of America Credit Facility with proceeds from the 2018 Bank of America CreditFacility. As a result, the Company’s borrowing capacity increased from $155.0 million to $250.0 million. On January 31, 2019, the Company entered into anamendment of the loan and security agreement with respect to the 2018 Bank of America Credit Facility to, among other matters, extend the maturity date ofthis credit facility from April 19, 2019 to June 30, 2019. For details, see Note 9, "Short-term and Long-term Obligations."Effective at the open of business on August 23, 2018, the Company’s common stock was suspended from trading on the Nasdaq Global SelectMarket. Effective March 22, 2019, the Company’s common stock was delisted from the Nasdaq Global Select Market. Since the date the Company’s commonstock was suspended from trading on the Nasdaq Global Select Market, its common stock has been quoted on the OTC Market and is currently traded underthe symbol “SMCI.”Note 19. Restatement of Previously Issued Consolidated Financial StatementsIn August 2017, prior to the issuance of the Company’s consolidated financial statements for the fiscal year ended June 30, 2017, the auditcommittee (the “Audit Committee”) of the Company’s Board of Directors (the “Board”) commenced an investigation (the “Investigation”) into certainaccounting and internal control matters at the Company, principally focused on certain revenue recognition matters. The Investigation was conducted withthe assistance of outside counsel, which retained forensic accountants to assist them in their work. Following the conclusion of the Investigation, the AuditCommittee directed its outside counsel and its forensic accountants to conduct additional procedures on an expanded scope of revenue recognition matters.Concurrent with these additional procedures, new members of the Company’s management, under the direction of the Audit Committee, performed athorough analysis of the Company’s historical financial statements, accounting policies and financial reporting, as well as the Company’s disclosure controlsand procedures and its internal control over financial reporting. During the course of the Investigation, the further procedures by outside counsel and themanagement analysis (collectively, the “Investigation, Procedures and Analysis”), the Audit Committee and management determined certain employees hadviolated the Company’s Code of Business Conduct and Ethics and discovered accounting and financial reporting errors and certain irregularities. OnNovember 14, 2018, the Board, upon the recommendation, and with the concurrence of the Audit Committee and new members of management, concludedthat certain previously filed consolidated financial statements and related financial information should no longer be relied upon.As a result, within these consolidated financial statements, the Company has included the restated consolidated financial statements as of and for theyears ended June 30, 2016 and June 30, 2015, which is referred to as the "Restatement". The Restatement corrects errors and certain irregularities which arediscussed in detail within this footnote.The errors and certain irregularities primarily related to the timing of recognition of (i) revenue, (ii) expenses related to certain inventory used forengineering and marketing purposes and (iii) expenses related to defective products under warranty not returned by customers. Additionally, errors wereidentified whereby the Company had derecognized inventory while control over such inventory was retained because the Company was obligated to buy itback.RestatementThe following is a discussion of the restatement adjustments that were made to the Company’s previously issued consolidated financial statements.(a) Product revenueDuring the fiscal years ended June 30, 2016 and 2015, product revenue was recognized prematurely. As a result of the information gathered in theInvestigation, Procedures and Analysis, it was determined that there was an aggressive focus on quarterly revenue without sufficient focus on compliance byan appropriate number of competent resources, and all relevant information was not communicated among the Company’s internal functions as well as themanagement to both the Audit Committee and the independent auditors that resulted in the inappropriate recording of revenue with insufficientdocumentation or rigorous assessment of revenue transactions. The Company found instances where (i) title and risk of loss had not transferred to thecustomer, (ii) persuasive evidence of an arrangement with the customer consistent with the Company’s customary business practices was not present, (iii) thedistributor’s price was not fixed or determinable, or (iv) collectibility was not reasonably assured, all of which resulted in premature recognition of revenue.89Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)Also, during the fiscal years ended June 30, 2016 and 2015, revenue was misstated as it was determined from the information gathered in theInvestigation, Procedures and Analysis there was a misapplication of accounting principles related to the classification of consideration paid to customersunder the Company’s cooperative marketing arrangements for which the Company did not receive an identifiable benefit.To correct the errors and certain irregularities related to premature revenue recognition, the related revenue and cost of sales were reversed in theperiod in which the accounting errors took place and have been recognized in subsequent periods when all of the revenue recognition criteria were met. Thecorrection of these errors resulted in net sales for 2016 being increased by $8.8 million, and net sales for 2015 being decreased by $21.5 million, and cost ofsales for 2016 increased by $11.1 million, and for 2015 decreased by $21.7 million from amounts previously reported. Additionally, certain relatedadjustments to reverse accounts receivable, net, of $60.6 million and to recognize inventories of $48.7 million were made to amounts previously reported asof June 30, 2016. Additionally, certain related adjustments to accounts payable and accrued liabilities, which also impacted cost of sales and sales andmarketing expense, were made to the consolidated financial statements in which the accounting errors and certain irregularities occurred.The Company corrected errors related to consideration paid to customers under the Company’s cooperative marketing arrangements for which theCompany did not receive an identifiable benefit, as well as the value of free samples provided to customers. These transactions were incorrectly recorded assales and marketing expense and have now been corrected and recorded as a reduction of revenue. The correction of these errors resulted in net sales and salesand marketing expense for 2016 and 2015 being reduced by $3.6 million and $2.5 million, respectively, from amounts previously reported.(b) Services revenueDuring the fiscal years ended June 30, 2016 and 2015, services revenue was misstated as it was determined that as a result of the informationgathered in the Investigation, Procedures and Analysis there were errors related to inaccurate allocation of contract consideration for multiple elementarrangements resulting from (a) lack of proper identification or accounting for contractual service obligations, (b) incorrect allocation of discounts to servicerelated deliverables, and (c) lack of a robust process resulting in inaccurate determination of BESP. Additionally, there were misalignments of the revenuerecognition period and the contractual requisite service period. Consequently, certain contracts for extended warranties on products or on-site services inmultiple element arrangements were incorrectly recorded as revenue at the time of sale of the product instead of being deferred and amortized over thecontractual warranty or service period. The Company had previously identified a portion of these errors in the amount of $9.0 million related to extendedwarranty in a prior period and had adjusted the consolidated financial statements for the fiscal year ended June 30, 2016 for their cumulative effect with anout-of-period correction to revenues. To correct these errors, the Company reversed the revenue and the out-of-period correction to revenues in the period in which the accounting errorsor out-of-period adjustment took place, quantified an amount for these services by determining a best estimated selling price for these services based on apercentage of the separately priced product deliverables in the arrangement, and deferred and amortized the quantified amount of revenue over thecontractual warranty or service period. Additionally, certain related adjustments to deferred revenues, which are included in accrued liabilities and otherlong-term liabilities, were made to the consolidated balance sheet at the end of the period in which the errors occurred. The correction of these errors resultedin net sales for 2016 being increased by $3.9 million and net sales for 2015 being reduced by $11.3 million, accrued liabilities being increased by $9.3million and other long-term liabilities being increased by $4.6 million as of June 30, 2016 from amounts previously reported.(c) InventoryAs of June 30, 2016 and 2015, inventories were overstated due to misapplication of accounting principles, whereby materials issued from inventoryto research and development projects and marketing with no alternative use were included as inventory and expensed upon completion of a project ratherthan being expensed upon consumption.Also as of June 30, 2016 and 2015, inventories were understated due to misapplication of accounting principles, whereby (i) inventory of materialstransferred to certain contract manufacturers was improperly derecognized upon transfer that the Company retained control over the materials because it wasobligated to buy them back; and (ii) in-transit inventory was not being recorded in the appropriate period due to improper cut-off procedures. To correct the errors related to inventory overstatement, the Company has recorded the materials as a research and development expense, or amarketing expense, in the period that inventory was consumed. The correction of the overstatement errors resulted in a $2.1 million decrease in inventories asof June 30, 2016 from amounts previously reported.90Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)To correct the errors related to inventory understatement, the Company has adjusted the carrying value of inventory in the periods in which theerrors took place. The correction of these understatement errors resulted in a $20.8 million increase in inventories, as well as $16.1 million increase in accruedliabilities as of June 30, 2016 from amounts previously reported. Additionally, certain related adjustments to cost of sales, inventories, accounts payable andaccrued liabilities were made to the consolidated financial statements in the period in which the errors occurred.(d) OtherThe Company corrected the following errors impacting the consolidated financial statements:•The Company did not correctly record receivables from suppliers as prepaid expenses and other current assets. The correction of this errorresulted in a $56.3 million decrease in accounts receivable, net, a $63.6 million increase in prepaid expenses and other current assets, and anincrease to accounts payable of $7.3 million as of June 30, 2016 from amounts previously reported.•The Company did not record the payments for certain payroll tax related liabilities, as well as did not accrue certain withholding taxliabilities, in the appropriate periods. The correction of the error resulted in a $2.1 million decrease in cash and cash equivalents, and acorresponding decrease in accrued liabilities as of June 30, 2016 from amounts previously reported.The Company corrected other immaterial misstatements relating to (i) sales taxes, (ii) stock-based compensation expense, (iii) accounts receivableand related allowances, (iv) other assets, (v) accounts payable, and (vi) prepaid expenses and other current assets.Additionally, the Company changed the presentation of foreign exchange gains and losses of $1.5 million and $0.7 million for 2016 and 2015,respectively, from general and administrative expenses, as previously reported, to other income (expense), net in the consolidated statement of operations.(e) Income taxesThe Company has recorded tax adjustments to reflect the impacts of the Restatement and other income tax related error corrections.Impact on Consolidated Statements of OperationsThe effect of the Restatement described above on the accompanying consolidated statements of operations for the fiscal years ended June 30, 2016and 2015 is as follows (in thousands, except per share amounts):91Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) For the Year Ended June 30, 2016 As PreviouslyReported ProductRevenue ServicesRevenue Inventories Other Income Taxes As RestatedNet sales (1)$2,215,573 $5,582 $3,867 $— $— $— $2,225,022Cost of sales (1)1,884,048 11,410 — (926) (11) — 1,894,521Gross profit331,525 (5,828) 3,867 926 11 — 330,501Operating expenses: Research and development123,994 — — (367) 596 — 124,223 Sales and marketing62,841 (4,255) — (364) 116 — 58,338 General and administrative37,840 — — — 2,609 — 40,449Total operating expenses224,675 (4,255) — (731) 3,321 — 223,010Income from operations106,850 (1,573) 3,867 1,657 (3,310) — 107,491Other income (expense), net171 — — — 1,336 — 1,507Interest expense(1,594) — — — — — (1,594)Income before income tax provision105,427 (1,573) 3,867 1,657 (1,974) — 107,404Income tax provision33,406 — — — — 1,917 35,323Net income$72,021 $(1,573) $3,867 $1,657 $(1,974) $(1,917) $72,081Net income per common share: Basic$1.50 $1.50Diluted$1.39 $1.39Weighted-average shares used incalculation of net income per commonshare: Basic47,917 47,917Diluted51,836 51,836__________________________(1) Transactions with related parties are included in the line items above as follows: Year Ended June 30, 2016 2016 As PreviouslyReported Adjustments As RestatedNet sales$19,453 $9,657 $29,110Cost of sales*241,836 802 242,638* Represents purchases from related parties.92Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) For the Year Ended June 30, 2015 As PreviouslyReported ProductRevenue ServicesRevenue Inventories Other Income Taxes As RestatedNet sales (1)$1,991,155 $(25,542) $(11,260) $— $— $— $1,954,353Cost of sales (1)1,670,924 (23,229) — (13) 87 — 1,647,769Gross profit320,231 (2,313) (11,260) 13 (87) — 306,584Operating expenses: Research and development100,257 — — 501 644 — 101,402 Sales and marketing48,851 (1,814) — 386 73 — 47,496 General and administrative24,377 — — — 663 — 25,040Total operating expenses173,485 (1,814) — 887 1,380 — 173,938Income from operations146,746 (499) (11,260) (874) (1,467) — 132,646Other income (expense), net115 — — — 841 — 956Interest expense(965) — — — — — (965)Income before income tax provision145,896 (499) (11,260) (874) (626) — 132,637Income tax provision44,033 — — — — (3,951) 40,082Net income$101,863 $(499) $(11,260) $(874) $(626) $3,951 $92,555Net income per common share: Basic$2.19 $1.99Diluted$2.03 $1.85Weighted-average shares used incalculation of net income per commonshare: Basic46,434 46,434Diluted50,094 50,094__________________________(1) Transactions with related parties are included in the line items above as follows: Year Ended June 30, 2015 2015 As PreviouslyReported Adjustments As RestatedNet sales$58,013 $(10,329) $47,684Cost of sales*227,562 99 227,661* Represents purchases from related parties.93Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)Impact on Consolidated Balance SheetThe effect of the Restatement described above on the accompanying consolidated balance sheet as of June 30, 2016 is as follows (in thousands): As of June 30, 2016 As PreviouslyReported ProductRevenue ServicesRevenue Inventories Other Income Taxes As RestatedASSETS Current assets: Cash and cash equivalents$180,964 $— $— $— $(2,144) $— $178,820 Accounts receivable, net (1)*288,941 (60,590) — — (53,418) — 174,933 Inventories448,980 48,714 — 18,205 908 — 516,807 Prepaid income taxes5,682 — — — — (1,341) 4,341 Prepaid expenses and other current assets (1)13,435 — — — 65,992 — 79,427 Total current assets938,002 (11,876) — 18,205 11,338 (1,341) 954,328Long-term investments2,643 — — — — — 2,643Property, plant, and equipment, net187,949 — — — — — 187,949Deferred income taxes, net28,460 — — — — 5,218 33,678Other assets8,546 — — — 4,339 — 12,885Total assets$1,165,600 $(11,876) $— $18,205 $15,677 $3,877 $1,191,483Liabilities and Stockholders' Equity Current liabilities: Accounts payable (1)$249,239 $5 $— $2,981 $15,166 $— $267,391 Accrued liabilities (1)55,618 (128) 9,313 16,251 2,542 — 83,596 Income taxes payable5,172 — — — — (118) 5,054 Short-term debt and current portion of long-term debt53,589 — — — — — 53,589 Total current liabilities363,618 (123) 9,313 19,232 17,708 (118) 409,630Long-term debt40,000 — — — — — 40,000Other long-term liabilities40,603 — 4,597 — — — 45,200 Total liabilities444,221 (123) 13,910 19,232 17,708 (118) 494,830Stockholders' equity: — Common stock and additional paid-in capital277,339 — — — 2,067 59 279,465Treasury stock(2,030) — — — — — (2,030)Accumulated other comprehensive loss(85) — — — — — (85)Retained earnings445,971 (11,753) (13,910) (1,027) (4,098) 3,936 419,119 Total Super Micro Computer, Inc. stockholders' equity721,195 (11,753) (13,910) (1,027) (2,031) 3,995 696,469Noncontrolling interest184 — — — — — 184Total stockholders’ equity721,379 (11,753) (13,910) (1,027) (2,031) 3,995 696,653Total liabilities and stockholders'equity$1,165,600 $(11,876) $— $18,205 $15,677 $3,877 $1,191,483__________________________* Previously reported allowances for accounts receivable as of June 30, 2016 were $2,721, now corrected and restated to $2,413.(1) Transactions with related parties are included in the line items above as follows:94Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) As of June 30, 2016 As Reported Adjustments As Restated Accounts receivable, net$4,678 $(4,629) $49 Prepaid expenses and other current assets— 9,622 9,622 Accounts payable39,152 5,789 44,941 Accrued liabilities— 5,354 5,354Cumulative Effect of Prior Period AdjustmentsThe following table presents the impact of the Restatement on the beginning stockholders’ equity as of June 30, 2014 (in thousands): CommonStock andAdditionalPaid-in Capital TreasuryStock Accumulated OtherComprehensive Loss RetainedEarnings Total SuperMicro ComputerStockholders’Equity Non-controllinginterest TotalStockholders’EquityBalance, June 30, 2014 (Aspreviously reported)$199,062 $(2,030) $(63) $272,087 $469,056 $175 $469,231Adjustments: Product revenue recognition— — — (9,681) (9,681) — (9,681)Service revenue— — — (6,518) (6,518) — (6,518)Inventory— — — (1,809) (1,809) — (1,809)Other531 — — (1,498) (967) — (967)Restatement tax impacts— — — 1,902 1,902 — 1,902Cumulative restatementadjustments531 — — (17,604) (17,073) — (17,073)Balance, June 30, 2014 (AsRestated)$199,593 $(2,030) $(63) $254,483 $451,983 $175 $452,158Other changes to the consolidated statements of stockholders’ equity for the years ended June 30, 2016 and 2015 as a result of the Restatement aredue to the changes in net income and changes to additional paid in capital related to the impact of the correction of errors to stock-based compensationexpense.Impact on Consolidated Statements of Comprehensive LossThe only change to the consolidated statements of comprehensive loss for the years ended June 30, 2016 and 2015 as a result of the Restatement isdue to the changes in net income.Impact on Consolidated Statements of Cash FlowsThe effect of the Restatement described above on the accompanying consolidated statements of cash flows for the years ended June 30, 2016 and 2015 is asfollows (in thousands):95Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Year Ended June 30, 2016 As PreviouslyReported RestatementAdjustments As RestatedOPERATING ACTIVITIES: Net income$72,021 $60 $72,081Reconciliation of net income to net cash provided by operating activities: Depreciation and amortization13,282 — 13,282Stock-based compensation expense16,131 799 16,930Excess tax benefits from stock-based compensation(2,855) 43 (2,812)Allowance for doubtful accounts1,278 (62) 1,216Provision for excess and obsolete inventories9,313 71 9,384Foreign currency exchange gain(1,233) (106) (1,339)Deferred income taxes, net(6,133) 921 (5,212)Changes in operating assets and liabilities: Accounts receivable, net (1)32,375 21,200 53,575Inventories5,200 2,509 7,709Prepaid expenses and other assets (1)(8,210) (15,329) (23,539)Accounts payable (1)(54,301) (11,534) (65,835)Income taxes payable(3,260) 2,874 (386)Accrued liabilities (1)9,027 3,884 12,911Other long-term liabilities24,874 (4,852) 20,022Net cash provided by operating activities107,509 478 107,987INVESTING ACTIVITIES: Purchases of property, plant and equipment (1)(34,108) — (34,108)Change in restricted cash(1,020) — (1,020)Net cash used in investing activities(35,128) — (35,128)FINANCING ACTIVITIES: Proceeds from debt, net of issuance costs34,200 — 34,200Repayment of debt(34,100) — (34,100)Proceeds from exercise of stock options12,186 — 12,186Excess tax benefits from stock-based compensation2,855 (43) 2,812Payments of obligations under capital leases(189) — (189)Payments under receivable financing arrangements(21) — (21)Payment of withholding tax on vesting of restricted stock units(1,786) — (1,786)Net cash provided by financing activities13,145 (43) 13,102Effect of exchange rate fluctuations on cash(4) (57) (61)Net increase in cash and cash equivalents85,522 378 85,900Cash and cash equivalents at beginning of year95,442 (2,522) 92,920Cash and cash equivalents at end of year$180,964 $(2,144) $178,820Supplemental disclosure of cash flow information: Cash paid for interest$1,632 $— $1,632Cash paid for taxes, net of refunds$36,951 $— $36,951Non-cash investing and financing activities: Equipment purchased under capital leases$299 $— $299Unpaid property, plant and equipment purchases (1)$10,888 $(39) $10,849__________________________(1) Transactions with related parties are included in the line items above as follows:96Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Years Ended June 30, 2016 2016 As Reported Adjustments As RestatedOPERATING ACTIVITIES: Changes in operating assets and liabilities: Accounts receivable, net$8,508 $(8,428) $80 Prepaid expenses and other assets— 652 652 Accounts payable(19,863) (2,024) (21,887) Accrued liabilities— (340) (340)INVESTING ACTIVITIES: Purchases of property, plant and equipment— (4,641) (4,641)NON-CASH INVESTING AND FINANCING ACTIVITIES: Unpaid property, plant and equipment purchases— 2,246 2,24697Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Year Ended June 30, 2015 As PreviouslyReported RestatementAdjustments As RestatedOPERATING ACTIVITIES: Net income$101,863 $(9,308) $92,555Reconciliation of net income to net cash used in operating activities: Depreciation and amortization8,133 (39) 8,094Stock-based compensation expense13,699 737 14,436Excess tax benefits from stock-based compensation(8,089) 43 (8,046)Allowance for doubtful accounts326 (246) 80Provision for excess and obsolete inventories5,928 2 5,930Foreign currency exchange gain(675) (155) (830)Deferred income taxes, net632 (4,208) (3,576)Changes in operating assets and liabilities: Accounts receivable, net (1)(110,182) 31,996 (78,186)Inventories(153,584) (23,973) (177,557)Prepaid expenses and other assets (1)(2,741) (8,585) (11,326)Accounts payable (1)75,520 6,181 81,701Income taxes payable11,951 (2,972) 8,979Accrued liabilities (1)9,551 4,342 13,893Other long-term liabilities3,032 4,696 7,728Net cash used in operating activities(44,636) (1,489) (46,125)INVESTING ACTIVITIES: Purchases of property, plant and equipment (1)(35,100) — (35,100)Change in restricted cash(416) — (416)Investment in a privately held company(661) — (661)Net cash used in investing activities(36,177) — (36,177)FINANCING ACTIVITIES: Proceeds from debt, net of issuance costs84,900 — 84,900Repayments of debt(36,000) — (36,000)Proceeds from exercise of stock options23,338 — 23,338Excess tax benefits from stock-based compensation8,089 (43) 8,046Payment of obligations under capital leases(134) — (134)Advances under receivable financing arrangements33 — 33Payment of withholding tax on vesting of restricted stock units(175) — (175)Net cash provided by financing activities80,051 (43) 80,008Effect of exchange rate fluctuations on cash(668) 400 (268)Net decrease in cash and cash equivalents(1,430) (1,132) (2,562)Cash and cash equivalents at beginning of year96,872 (1,390) 95,482Cash and cash equivalents at end of year$95,442 $(2,522) $92,920Supplemental disclosure of cash flow information: Cash paid for interest$933 $— $933Cash paid for taxes, net of refunds$30,671 $— $30,671Non-cash investing and financing activities: Equipment purchased under capital leases$442 $— $442Unpaid property, plant and equipment purchases (1)$6,826 $236 $7,062__________________________(1) Transactions with related parties are included in the line items above as follows:98Table of ContentsSUPER MICRO COMPUTER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Years Ended June 30, 2015 2015 As Reported Adjustments As RestatedOPERATING ACTIVITIES: Changes in operating assets and liabilities: Accounts receivable, net$(12,565) $13,057 $492 Prepaid expenses and other assets— (10,274) (10,274) Accounts payable10,046 12,142 22,188 Accrued liabilities— 1,364 1,364INVESTING ACTIVITIES: Purchases of property, plant and equipment— (4,070) (4,070)NON-CASH INVESTING AND FINANCING ACTIVITIES: Unpaid property, plant and equipment purchases— 724 72499Table of ContentsItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNone. Item 9A. Controls and ProceduresBackgroundIn August 2017, prior to the issuance of the Company’s consolidated financial statements for the fiscal year ended June 30, 2017, the auditcommittee (the “Audit Committee”) of the Company’s Board of Directors (the “Board”) commenced an investigation (the “Investigation”) into certainaccounting and internal control matters at the Company, principally focused on certain revenue recognition matters. The Investigation was conducted withthe assistance of outside counsel, which retained forensic accountants to assist them in their work. Following the conclusion of the Investigation, the AuditCommittee directed its outside counsel and its forensic accountants to conduct additional procedures on an expanded scope of revenue recognition matters.Concurrently with these additional procedures, new members of the Company’s management, under the direction of the Audit Committee, performed athorough analysis of the Company’s historical financial statements, accounting policies and financial reporting, as well as the Company’s disclosure controlsand procedures and its internal control over financial reporting. During the course of the Investigation, the further procedures by outside counsel and themanagement analysis (collectively, the “Investigation, Procedures and Analysis”), the Audit Committee and management discovered accounting andfinancial reporting errors and certain irregularities.The Audit Committee and management also discovered internal control deficiencies and determined that certain employees had violated theCompany’s Code of Business Conduct and Ethics (“Code of Conduct”). In connection with the preparation and filing of this Annual Report on Form 10-K,we have conducted the requisite evaluations of the effectiveness of our disclosure controls and procedures and of our internal control over financial reportingboth as of June 30, 2017. These conclusions are explained below.Evaluation of Disclosure Controls and ProceduresUnder the supervision, and with the participation, of our current management, including our CEO and CFO, we evaluated the effectiveness of ourdisclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “ExchangeAct”), as of June 30, 2017. Based on this evaluation of our disclosure controls and procedures, our CEO and CFO have concluded that our disclosure controlsand procedures were not effective as of June 30, 2017 because of certain material weaknesses in our internal control over financial reporting, as furtherdescribed below.Notwithstanding the conclusion by our CEO and CFO that our disclosure controls and procedures as of June 30, 2017 were not effective, andnotwithstanding the material weaknesses in our internal control over financial reporting described below, management believes that the consolidatedfinancial statements and related financial information included in this Annual Report on Form 10-K fairly present in all material respects our financialcondition, results of operations and cash flows as of the dates presented, and for the periods ended on such dates, in conformity with accounting principlesgenerally accepted in the United States of America (“U.S. GAAP”).Management’s Report on Internal Control Over Financial ReportingManagement is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in ExchangeAct Rules 13a-15(f) and 15d-15(f).Internal control over financial reporting is a process designed by, or under the supervision of, our CEO and CFO to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of our consolidated financial statements for external purposes in accordance with U.S.GAAP. Management’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, inreasonable detail, accurately and fairly reflect the transactions and dispositions of our assets, (ii) provide reasonable assurance that transactions areappropriately recorded to permit preparation of financial statements in accordance with U.S. GAAP and that our receipts and expenditures are made only inaccordance with authorizations of management, acting under authority delegated to them by the Board, and (iii) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.100Table of ContentsManagement, including our CEO and CFO, assessed our internal control over financial reporting as of June 30, 2017. In making this assessment,management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control - IntegratedFramework (2013) (the “COSO Framework”). Based on this assessment, management has determined that we did not maintain effective internal control overfinancial reporting as of June 30, 2017 because of the material weaknesses described below.A material weakness in internal controls is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that thereis a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.Because of its inherent limitations, even appropriate internal control over financial reporting may not prevent or detect misstatements.In connection with management’s assessment of the Company’s internal control over financial reporting described above, management hasidentified the deficiencies described below that constituted material weaknesses in our internal control over financial reporting as of June 30, 2017. Thesedeficiencies led to material errors in our previously issued financial statements, which in turn led to the restatement of those previously issued financialstatements, as described in Note 19 to our consolidated financial statements included in this Annual Report on Form 10-K.Control EnvironmentWe have identified deficiencies in the control environment component of the COSO Framework that constitute material weaknesses, eitherindividually or in the aggregate. These deficiencies related to all the principles associated with the control environment component of the COSO Framework.Contributing factors include:•We had a culture of aggressively focusing on quarterly revenue without sufficient focus on compliance. Senior management did not establish andpromote a control environment with an appropriate tone of compliance and control consciousness throughout the entire Company. The Companydid not sufficiently promote, monitor or enforce adherence to the Code of Conduct. In the pursuit of quarterly revenue, certain of our sales, financeand operations personnel, including officers and managers, were aware of, condoned or were involved in actions that reflected an inappropriate toneat the top, that violated our Code of Conduct and our accounting policies and procedures, and that were inconsistent with a commitment to integrityand ethical values. These actions included (i) shipping products in advance of customer requested delivery dates, (ii) shipping products to storagefacilities at the end of a quarter for later delivery to customers, (iii) in certain cases entering into side agreements with customers, (iv) in certain cases,shipping products before manufacturing was completed, (v) altering source documents related to some sales transactions and (vi) failing to discloseor obscuring material facts about sales transactions. As a result of those actions, we recognized revenue from numerous sales transactions in theincorrect period, although these valid sales transactions were recognized in one or more subsequent quarters in the aforementioned restatement.Some employees, including officers and managers, also failed to raise issues with material accounting consequences to the Audit Committee and ourexternal auditors, and with respect to one transaction, appear to have attempted to minimize material facts about a sales transaction to, or obscurethose facts from, the Audit Committee and our external auditors. Finally, we did not, on a consistent basis, (i) timely and thoroughly detect andaddress failures to comply with the Code of Conduct and (ii) train employees adequately to identify and report issues to management and the AuditCommittee.•The Company did not maintain a sufficient complement of management, accounting, financial reporting, sales, operations, engineering andinformation technology personnel who had appropriate levels of knowledge, experience, and training in accounting and internal control matterscommensurate with the nature, growth and complexity of our business. The lack of sufficient appropriately skilled and trained personnel contributedto our failure to (i) adequately identify potential risks, (ii) include in the scope of our internal controls framework certain systems relevant tofinancial reporting and the preparation of our consolidated financial statements, (iii) design and implement certain risk-mitigating internal controlsand (iv) consistently operate certain of our internal controls. The lack of sufficient appropriately skilled and trained personnel also contributed todeficiencies in establishing and maintaining policies and procedures, establishing and enforcing standards for maintaining documents for revenuerecognition purposes and establishing accountability for internal controls across the entire Company.Due to the interdependencies between the COSO Framework components, the weaknesses in our control environment contributed to other materialweaknesses within our system of internal control over financial reporting.Risk Assessment101Table of ContentsWe have identified deficiencies in the risk assessment component of the COSO Framework that aggregate to a material weakness. These deficienciesrelated to the principles associated with the risk assessment component of the COSO Framework, specifically principles within the component related to: (i)identifying, assessing, and communicating appropriate control objectives, (ii) identifying and analyzing risks to achieve these objectives, (iii) contemplatingfraud risks, and (iv) identifying and assessing changes in the business that could impact our system of internal controls.Control ActivitiesWe have identified deficiencies in the control activities component of the COSO Framework that aggregate to a material weakness. Thesedeficiencies related to principles associated with the control activities component of the COSO Framework, specifically principles within the componentrelated to (i) selecting and developing control activities that mitigate risks (ii) selecting and developing general controls over technology and (iii) deployingcontrol activities through policies that establish what is expected and procedures that put policies into action. We did not design or operate certain controlactivities to sufficiently respond to potential risks of material misstatement in the area of revenue recognition. We did not effectively select and developcertain information technology (“IT”) general controls and we also had control deficiencies at both the IT administrator and end-user levels across multipleapplications relevant to financial reporting. We also had deficiencies related to segregation of duties. Deficiencies in control activities contributed tomaterial accounting errors, and the potential for there to have been material accounting errors, in substantially all financial statements account balances anddisclosures.Information and CommunicationWe have identified deficiencies in the information and communication component of the COSO Framework that aggregate to a material weakness.These deficiencies related to principles associated with the information and communications component of the COSO Framework, specifically principleswithin the component related to (i) generating and using relevant quality information, (ii) internally communicating information, including objectives andresponsibilities for internal control, necessary to support the functioning of internal control and (iii) communicating with external parties regarding mattersaffecting the functioning of internal control. We rely on manual business processes to compensate for a lack of extensive integration in our informationsystems. We also rely heavily on each of our various functions, such as sales, operations, accounting, legal and management, to communicate to the otherfunctions information that the entire organization needs to operate an effective internal control environment. In certain areas, our control activity deficienciesresulted from insufficient communication of information among our internal functions as well as from officers and managers to both the Audit Committee andour external auditors.Monitoring of ControlsWe have identified deficiencies in the monitoring of controls component of the COSO Framework that aggregate to a material weakness. There weredeficiencies related to principles associated with the monitoring of controls component of the COSO Framework, specifically principles within thecomponent related to (i) selecting, developing and performing ongoing and/or separate evaluations and (ii) evaluating and communicating deficiencies in atimely manner. We lacked controls (i) to determine whether components of internal control were present and functioning, (ii) to mitigate the risk ofmanagement overriding internal controls and (iii) to detect incorrect accounting practices. Consequently, we did not identify internal control deficiencies, ordid not raise such deficiencies in a timely manner to those parties responsible for internal controls. In addition, we did not always ensure that thesedeficiencies were remediated thoroughly and timely.The material weaknesses noted above contributed to the following additional material weaknesses:Revenue Recognition AccountingWe have identified deficiencies in revenue recognition accounting controls that resulted in material errors constituting material weaknesses, eitherindividually or in the aggregate, as we did not appropriately design, or effectively operate, internal controls over certain aspects of accurate recording,presentation, and disclosure of revenue and related costs. The following were contributing factors to the material weaknesses in revenue recognitionaccounting:102Table of Contents•The Company’s internal controls did not consistently identify and properly account for key non-standard contract or arrangement terms for salestransactions that involved multiple elements (such as when the price of a system includes an extended warranty period and/or our agreement to provideservices to our customer). Specifically, the Company’s internal controls failed to identify, accumulate and assess the accounting impact of situations inwhich we recognized revenue before all the elements necessary to establish “delivery” had occurred.•With respect to sales transactions near quarter-end, our internal controls failed to consistently identify transactions where the terms of the salesarrangements with our customers were not properly documented in a form that fully reflected the final understanding between the parties as to thespecific nature and terms of the agreed-upon transaction.•Our internal controls failed to consistently identify, resolve, document in our accounting system and allow for proper accounting where there wereinconsistencies among the various documents underlying our sales transactions, and we did not always communicate the existence or resolution of thoseinconsistencies to our accounting organization to enable the proper recognition of revenue.•We lacked a control to ensure a consistent approach for reviewing our pricing and establishing supportable estimates of best estimated selling prices inallocating revenue between multiple elements. Consequently, we did not always correctly calculate the portions of the total revenue recognized fromsales transactions allocated among the various elements.Information Technology General ControlsWe have identified deficiencies related to IT general controls that represent a material weakness, either individually or in the aggregate. Thefollowing were contributing factors:•We have a decentralized approach to developing IT policies and practices and to monitoring our IT controls. As a result, our internal procedures forgranting and monitoring employee access, and managing changes to various applications and infrastructure layers relevant to our financial reporting arenot consistent across those applications and infrastructure layers. In addition, some of our internally-developed applications relevant to financialreporting lack logging capabilities to monitor access changes or application changes. We have also authorized certain users with broad access, both as auser and as an administrator, to all parts of our primary accounting system without adequate monitoring or recording of how they used that access. As aresult of these factors, we have material weaknesses related to access controls and change management. The fact that we had material weaknesses relatedto access controls and change management means that it is possible that our business process controls that depend on the affected information systems,or that depend on data or financial reports generated from affected information systems, could be adversely affected due to the access control and changemanagement issues, although we have identified no instances of any adverse effect due to these deficiencies.The effectiveness of our internal control over financial reporting as of June 30, 2017 has been audited by Deloitte & Touche LLP, our independentregistered public accounting firm, as stated in its report that is included herein.Remediation Plan and StatusOur management is committed to remediating identified control deficiencies (including both those that rise to the level of a material weakness andthose that do not), fostering continuous improvement in our internal controls and enhancing our overall internal controls environment. Our managementbelieves that these remediation actions, along with additional actions, when fully implemented, will remediate the material weaknesses we have identifiedand strengthen our internal control over financial reporting. We are committed to improving our internal control processes and intend to continue to reviewand improve our financial reporting controls and procedures. As we continue to evaluate and work to improve our internal control over financial reporting,we may take additional measures to address control deficiencies with the overall objective to design and operate internal controls that mitigate identifiedrisks and enable an effective system of internal control over external financial reporting.To date, we have taken the following remediation actions:•Restructured our sales organization, which resulted in the resignations of the Senior Vice President of International Sales, the Senior Vice President ofWorldwide Sales, the Vice President, Strategic Accounts, the Vice President, Strategic Sales, the Vice President, Business Development and certain othersales personnel.103Table of Contents•Appointed experienced professionals to key accounting and finance and compliance leadership positions, including the appointments of a new ChiefFinancial Officer and a new Corporate Controller in January 2018, and the creation of, and appointments to, two newly established roles of ChiefCompliance Officer and Vice President of Internal Audit in May 2018 and August 2018, respectively.•Reviewed and amended our Code of Conduct to align with the organizational changes described above and to strengthen certain provisions regardingcompliance and reporting.•Adopted an Internal Audit Charter setting forth the responsibilities of the internal audit function and establishing that the Vice President of InternalAudit reports directly to the Audit Committee and that the Audit Committee has authority to provide adequate funding for this function.•Changed our organizational structure to narrow the scope of responsibilities of certain of our senior executives and to revise various reportingrelationships, which included the appointment of a new Senior Vice President of Worldwide Sales, and a new Senior Vice President of Operations.•Conducted training in the following areas:−Revenue recognition training for our global sales force, various operations personnel, and certain senior executives, including our CEO, whichincluded detailed examples of acceptable and unacceptable sales practices,−Reviewing with our senior management team our amended Code of Conduct,− Reviewing with our CEO enhanced processes for periodic evaluations by the CEO and the CFO of the effectiveness of our disclosure controls andprocedures, and the periodic assessments by the CEO and the CFO of the effectiveness of our internal control over financial reporting, and othercompliance matters, and− Shipping and cut-off training for accounting and operations personnel that included new requirements for quarter-end procedures.•Upgraded our accounting department to include the new roles of Senior Director of Tax, Financial Audit Director and Information Technology AuditDirector, as well as replaced certain of our accounting personnel with more experienced individuals, including rebuilding and expanding our revenuerecognition team.•Enhanced the sales sub-certification document that supports our CEO’s and CFO’s financial statement certifications and expanded the sub-certificationparticipation population to the global sales force.Our management believes that meaningful progress has been made on the remaining remediation efforts. Although timetables vary, managementregards successful completion of our remaining remediation actions as an important priority. Some of the more significant remaining remediation activitiesinclude:•Developing and implementing an ongoing compliance training program regarding significant accounting and financial reporting matters, as well asbroad compliance matters, for accounting, financial reporting, sales and operations personnel, as well as for our CEO, our other corporate executives andthe Board.•Integrating the responsibility for internal controls across business functions to ensure accountability for internal controls beyond the accounting andfinance team.•Continuing to assess current staffing levels and competencies to ensure the optimal complement of personnel with appropriate qualifications and skillsets.•Reevaluating and revising our Sarbanes-Oxley compliance program (our “SOX Program”), and making improvements to our SOX Program governance,risk assessment processes, testing methodologies and corrective action mechanisms.•Redesigning and implementing necessary changes to the existing system of internal controls in the context of the revised and more comprehensive riskassessment.104Table of Contents•Assigning accountability for certain internal controls to our Compliance Department, such as our organizational-wide quarterly sales certificationprocess.•Reevaluating the boundary applications that interface with our primary accounting and reporting application and redesigning logical access andprogram change controls to enhance the reliability of information used to conduct other internal controls.•Continuing to re-assess risks and controls related to the accurate recording, presentation, and disclosure of revenue and related costsChanges in Internal Control Over Financial ReportingThere were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and15d-15(d) of the Exchange Act that occurred during the three months ended June 30, 2017 that have materially affected, or are reasonably likely to materiallyaffect, our internal control over financial reporting.105Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Stockholders ofSuper Micro Computer, Inc.San Jose, CaliforniaWe have audited the internal control over financial reporting of Super Micro Computer, Inc. and subsidiaries (the “Company”) as of June 30, 2017,based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the TreadwayCommission (“COSO”). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessmentof the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over FinancialReporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained inall material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weaknessexists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures aswe considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive andprincipal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertainto the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2)provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally acceptedaccounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management anddirectors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition ofthe company’s assets that could have a material effect on the financial statements.Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper managementoverride of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation ofthe effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because ofchanges in conditions, or that the degree of compliance with the policies or procedures may deteriorate.A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonablepossibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Thefollowing material weaknesses have been identified and included in management's assessment:Control Environment - The Company identified deficiencies in the control environment component of the COSO framework that constitute materialweaknesses, either individually or in the aggregate. These deficiencies related to all the principles associated with the control environment component of theCOSO framework, and contributing factors include:106Table of Contents•The Company had a culture of aggressively focusing on quarterly revenue without sufficient focus on compliance. Senior management, did notestablish and promote a control environment with an appropriate tone of compliance and control consciousness throughout the entire Company.The Company did not sufficiently promote, monitor or enforce adherence to the Code of Business Conduct and Ethics (“Code of Conduct”). In thepursuit of quarterly revenue, certain sales, finance and operations personnel, including officers and managers, were aware of, condoned or wereinvolved in actions that reflected an inappropriate tone at the top, that violated the Code of Conduct and accounting policies and procedures, andthat were inconsistent with a commitment to integrity and ethical values. As a result of those actions, the Company recognized revenue fromnumerous sales transactions in the incorrect period. Some Company employees, including officers and managers, also failed to raise issues withmaterial accounting consequences to the Audit Committee and to us, as its external auditors, and with respect to one transaction, appear to haveattempted to minimize material facts about a sales transaction to, or obscure those facts from, the Audit Committee and us, as its external auditors.Finally, the Company did not, on a consistent basis, (i) timely and thoroughly detect and address failures to comply with the Code of Conduct and(ii) train employees adequately to identify and report issues to management and the Audit Committee.•The Company did not maintain a sufficient complement of management, accounting, financial reporting, sales, operations, engineering andinformation technology personnel who had appropriate levels of knowledge, experience, and training in accounting and internal control matters.The lack of sufficient appropriately skilled and trained personnel also contributed to deficiencies in establishing and maintaining policies andprocedures, establishing and enforcing standards for maintaining documents for revenue recognition purposes and establishing accountability forinternal controls across the entire Company.Due to the interdependencies between the COSO framework components, the material weaknesses in the control environment contributed to othermaterial weaknesses within the Company’s system of internal control over financial reporting.Risk Assessment - The Company identified deficiencies in the risk assessment component of the COSO framework that aggregate to a materialweakness. These deficiencies related to the principles associated with the risk assessment component of the COSO framework, specifically principles withinthe component related to: (i) identifying, assessing, and communicating appropriate control objectives, (ii) identifying and analyzing risks to achieve theseobjectives, (iii) contemplating fraud risks, and (iv) identifying and assessing changes in the business that could impact the system of internal controls.Control Activities - The Company identified deficiencies in the control activities component of the COSO framework that aggregate to a materialweakness. These deficiencies related to principles associated with the control activities component of the COSO framework, specifically principles within thecomponent related to (i) selecting and developing control activities that mitigate risks (ii) selecting and developing general controls over technology and(iii) deploying control activities through policies that establish what is expected and procedures that put policies into action. The Company did not design oroperate certain control activities to sufficiently respond to potential risks of material misstatement in the area of revenue recognition. The Company haddeficiencies related to segregation of duties. Deficiencies in control activities contributed to material accounting errors, and the potential for there to havebeen material accounting errors, in substantially all financial statements account balances and disclosures.Information and Communication - The Company identified deficiencies in the information and communication component of the COSO frameworkthat aggregate to a material weakness. These deficiencies related to principles associated with the information and communications component of the COSOframework, specifically principles within the component related to (i) generating and using relevant quality information and (ii) internally communicatinginformation, including objectives and responsibilities for internal control, necessary to support the functioning of internal control and (iii) communicatingwith external parties regarding matters affecting the functioning of internal control. In certain areas, the Company’s control activity deficiencies resulted frominsufficient communication of information among its internal functions as well as from officers and managers to both the Audit Committee and to us, as itsexternal auditors.Monitoring of Controls - The Company identified deficiencies in the monitoring of controls component of the COSO framework that aggregate to amaterial weakness. There were deficiencies related to principles associated with the monitoring of controls component of the COSO framework, specificallyprinciples within the component related to (i) selecting, developing and performing ongoing and/or separate evaluations and (ii) evaluating andcommunicating deficiencies in a timely manner. The Company lacked controls (i) to determine whether components of internal control were present andfunctioning, (ii) to mitigate the risk of management overriding internal controls and (iii) to detect incorrect accounting practices. Consequently, theCompany did not identify internal control deficiencies, or did not raise such deficiencies in a timely manner to those parties responsible for internal controls.In addition, the Company did not always ensure that these deficiencies were remediated thoroughly and timely.107Table of ContentsThe material weaknesses noted above contributed to the following additional material weaknesses:Revenue Recognition Accounting - The Company identified deficiencies in revenue recognition accounting controls that resulted in material errorsconstituting material weaknesses, either individually or in the aggregate, as the Company did not appropriately design, or effectively operate, internalcontrols over certain aspects of accurate recording, presentation, and disclosure of revenue and related costs. The following were contributing factors to thematerial weaknesses in revenue recognition accounting:•The Company’s internal controls did not consistently identify and properly account for key non-standard contract or arrangement terms for salestransactions that involved multiple elements (such as when the price of a system includes an extended warranty period and/or the Company’sagreement to provide services to its customer). Specifically, the Company’s internal controls failed to identify, accumulate and assess the accountingimpact of situations in which they recognized revenue before all the elements necessary to establish “delivery” had occurred.•With respect to sales transactions near quarter-end, the Company’s internal controls failed to consistently identify transactions where the terms of thesales arrangements with its customers were not properly documented in a form that fully reflected the final understanding between the parties as tothe specific nature and terms of the agreed-upon transaction.•The Company’s internal controls failed to consistently identify, resolve, document in its accounting system and allow for proper accounting wherethere were inconsistencies among the various documents underlying its sales transactions, and the Company did not always communicate theexistence or resolution of those inconsistencies to its accounting organization to enable the proper recognition of revenue.•The Company lacked a control to ensure a consistent approach for reviewing its pricing and establishing supportable estimates of best estimatedselling prices in allocating revenue between multiple elements. Consequently, the Company did not always correctly calculate the portions of thetotal revenue recognized from sales transactions allocated among the various elements.Information Technology General Controls - The Company identified deficiencies related to information technology (“IT”) general controls thatrepresent a material weakness, either individually or in the aggregate. The following were contributing factors:•Procedures for granting and monitoring employee access to, and managing changes to, various applications and infrastructure layers relevant tofinancial reporting were not consistent across those applications and infrastructure layers. In addition, some internally-developed applicationsrelevant to financial reporting lacked logging capabilities to monitor access changes or application changes. Also, certain users were authorized tohave broad access, both as a user and as an administrator, to all parts of primary accounting system without adequate monitoring or recording of howthey used that access. As a result of these factors, the Company has material weaknesses related to access controls and change management. The factthat the Company had material weaknesses related to access controls and change management means that it is possible that its business processcontrols that depend on the affected information systems, or that depend on data or financial reports generated from affected information systems,could be adversely affected due to the access control and change management issues.These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidatedfinancial statements as of and for the year ended June 30, 2017, of the Company and this report does not affect our report on such financial statements.In our opinion, because of the effect of the material weaknesses identified above on the achievement of the objectives of the control criteria, theCompany has not maintained effective internal control over financial reporting as of June 30, 2017, based on the criteria established in Internal Control -Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidatedfinancial statements as of and for the year ended June 30, 2017, of the Company and our report dated May 16, 2019 expressed an unqualified opinion onthose financial statements and included explanatory paragraphs regarding108Table of Contentsthe accompanying 2016 and 2015 consolidated financial statements, which have been restated to correct misstatements, and significant purchases from andsales to two related parties./s/ Deloitte & Touche LLPSan Jose, CaliforniaMay 16, 2019109Table of ContentsItem 9B. Other InformationNone.PART III Item 10. Directors, Executive Officers, and Corporate GovernanceExecutive Officers and DirectorsThe following table sets forth information regarding our current directors and executive officers and their ages as of March 31, 2019: Name Age Position(s)Charles Liang 61 President, Chief Executive Officer and Chairman of the BoardKevin Bauer 59 Senior Vice President, Chief Financial OfficerDon Clegg 60 Senior Vice President of Worldwide SalesGeorge Kao 58 Senior Vice President of OperationsDavid Weigand 60 Senior Vice President, Chief Compliance OfficerSara Liu 57 Co-Founder, Senior Vice President and DirectorLaura Black(1)(4) 57 DirectorMichael S. McAndrews(1)(4) 66 DirectorHwei-Ming (Fred) Tsai(1)(2)(3)(4) 63 DirectorSaria Tseng(2)(3)(4) 48 DirectorSherman Tuan(2)(3)(4) 65 DirectorTally Liu(1)(4) 68 Director__________________________(1)Member of the Audit Committee(2)Member of the Compensation Committee(3)Member of the Nominating and Corporate Governance Committee(4)Determined by the Board of Directors to be “independent”Executive Officers and Management DirectorsCharles Liang founded Super Micro and has served as our President, Chief Executive Officer and Chairman of the Board since our inception inSeptember 1993. Mr. Liang has been developing server system architectures and technologies for the past two decades. From July 1991 to August 1993,Mr. Liang was President and Chief Design Engineer of Micro Center Computer Inc., a high-end motherboard design and manufacturing company. FromJanuary 1988 to April 1991, Mr. Liang was Senior Design Engineer and Project Leader for Chips & Technologies, Inc., a chipset technology company, andSuntek Information International Group, a system and software development company. Mr. Liang has been granted many server technology patents.Mr. Liang holds an M.S. in Electrical Engineering from the University of Texas at Arlington and a B.S. in Electrical Engineering from National TaiwanUniversity of Science & Technology in Taiwan. Our Nominating and Corporate Governance Committee (“Governance Committee”) concluded thatMr. Liang should serve on the Board based on his skills, experience and qualifications in managing technology businesses, his technical expertise, and hislong familiarity with our company’s business.Kevin Bauer has served as our Senior Vice President, Chief Financial Officer since January 2018 and previously served as our Senior Vice President,Corporate Development and Strategy beginning January 2017. Prior to his employment with our company, Mr. Bauer was the Senior Vice President andChief Financial Officer of Pericom Semiconductor Corporation, a semiconductor company, from February 2014 until its sale to Diodes, Incorporated inNovember 2015 and, thereafter, assisted Diodes with the integration of Pericom until November 2016. Prior to that he was Chief Financial Officer of ExarCorporation, a semiconductor manufacturer, from June 2009 through December 2012, Corporate Controller from August 2004 to June 2009 and OperationsController from February 2001 to August 2004. Previously, Mr. Bauer was Operations Controller at WaferTech LLC (a subsidiary of Taiwan SemiconductorManufacturing Company Limited) from July 1997 to February 2001. Prior to WaferTech, he was at VLSI Technology for ten years where he held a variety ofincreasingly more110Table of Contentssenior finance roles culminating in his position as Director and Group Controller. Mr. Bauer received an M.B.A. from Santa Clara University and a B.S. inBusiness Administration from California Lutheran University.Don Clegg serves as our Senior Vice President of Worldwide Sales. He previously served as our Vice President of Marketing and WorldwideBusiness Development. Mr. Clegg has been an employee since April 2006 and has held various senior sales and marketing roles with the Company duringthat time. Mr. Clegg started his career as a Design Engineer and evolved from Engineer to Vice President of Sales and Marketing working at severalestablished and startup Silicon Valley system and semiconductor companies. Mr. Clegg graduated with high honors from Brigham Young University, wherehe earned a B.S. in Electrical Engineering.George Kao serves as our Senior Vice President of Operations and previously served as our Vice President of Operations. Mr. Kao joined theCompany in October 2016. Mr. Kao was Vice President of Operations of Pericom Semiconductor Corp. from October 2006 to September 2016. Mr. Kaoserved as a Chief Operating Officer of Orient Semiconductor Electronics Philippines, Inc., a subsidiary of Orient Semiconductor Electronics Ltd., fromSeptember 2003 to March 2006. Mr. Kao joined Orient Semiconductor Electronics Philippines, Inc. from Santa Clara-based Foveon after a 20-year career intechnology in the United States that began at National Semiconductor. Mr. Kao holds a B.S. in Electrical Engineering from California State PolytechnicUniversity.David Weigand has served as our Senior Vice President, Chief Compliance Officer since May 2018. Prior to his employment with our company, Mr.Weigand was a Vice President at Hewlett Packard Enterprise (HPE) from November 2016 until April 2018 and served as Vice President, Tax at SiliconGraphics International, Inc., from September 2013 until its acquisition by HPE in November 2016. Prior to that he was Vice President, Chief Financial Officerof Renesas Electronics America, a semiconductor company formed by the merger of the semiconductor businesses of NEC Corporation, Hitachi andMitsubishi Electric from October 2010 until April 2013, and Vice President, Controller of NEC Electronics America from October 2004 until September2010. Mr. Weigand holds a M.S. degree in Taxation from the University of Hartford and a B.S. degree in Accounting from San Jose State University and is aCertified Public Accountant in California (Inactive).Sara Liu co-founded Super Micro in September 1993, has been a member of our Board of Directors since March 2007 and currently serves as our Co-Founder, Senior Vice President, and a director. She has held a variety of positions with the Company, including Treasurer from inception to May 2019, SeniorVice President of Operations from May 2014 to February 2018, and Chief Administrative Officer from October 1993 to May 2019. From 1985 to 1993,Ms. Liu held accounting and operational positions for several companies, including Micro Center Computer Inc. Ms. Liu holds a B.S. in Accounting fromProvidence University in Taiwan. Ms. Liu is married to Mr. Charles Liang, our Chairman, President and Chief Executive Officer. Our Governance Committeeconcluded that Ms. Liu should serve on the Board based on her skills, experience, her general expertise in business and operations and her long familiaritywith our company’s business.Non-Management DirectorsLaura Black has been a member of our Board of Directors since April 2012. Since March 1999, she has served as a Managing Director of Needham &Company, LLC, a full-service investment banking firm. At Needham, she has raised public and private equity capital for numerous technology companiesand served as strategic financial advisor on multiple M&A transactions. From July 1995 to February 1999, she served as a Managing Director and CorporateFinance at Black & Company, a regional investment bank subsequently acquired by Wells Fargo Van Kasper. From July 1993 to June 1995, Ms. Blackserved as a Director for TRW Avionics & Surveillance Group where she evaluated acquisition candidates, managed direct investments and raised venturecapital to back spin-off companies. From August 1983 to August 1992, she worked at TRW as an electrical engineer designing spread spectrumcommunication systems. Ms. Black holds a BSEE from University of California at Davis, a MSEE from Santa Clara University and a MS Management fromStanford. Our Governance Committee concluded that Ms. Black should serve on the Board based on her skills, experience and qualifications in capitalfinance, her financial literacy and her familiarity with technology businesses. Michael S. McAndrews has been a member of our Board of Directors since February 2015. Mr. McAndrews has served as a Principal of Abbott,Stringham & Lynch, an accounting firm serving the Silicon Valley, since September 2013. From June 2002 to June 2013, he served as a Partner atPricewaterhouseCoopers LLP, a multinational professional services network, where he provided tax planning and consulting services to multinational publiccompanies, private companies and their owners and emerging businesses in a variety of industries including high-technology, manufacturing, foodprocessing and wholesale/retail distribution. From November 1979 to June 2002, he worked for Arthur Andersen and Company, a global professional servicesfirm. He served as Partner from 1993 to 2002 where he focused primarily on providing tax planning and compliance services to high technology companiesranging in size from start-ups to large multinational public companies. Mr. McAndrews is a certified public accountant with an active license in Californiaand holds a Bachelor of Science in Commerce, Accounting111Table of Contentsdegree from Santa Clara University. Our Governance Committee concluded that Mr. McAndrews should serve on the Board based on his skills, experience,his financial literacy and his familiarity with technology businesses.Hwei-Ming (Fred) Tsai has been a member of our Board of Directors since August 2006. Mr. Tsai served as an independent director of ANZ Bank(Taiwan) Limited, a wholly owned subsidiary of Australia and New Zealand Banking Group Limited from September 2013 to April 2019. Mr. Tsai has alsoserved as an independent director of Dynapack International Technology Corporation, a public company in Taiwan, since June 2017. Mr. Tsai has been anindependent business consultant since January 2010. Mr. Tsai served as Executive Vice President and Chief Financial Officer of SinoPac Bancorp, a financialholding company based in Los Angeles, California from February 2001 and August 2005, respectively, to December 2009. He also served as SeniorExecutive Vice President of Far East National Bank, a commercial bank that is held by SinoPac Bancorp from December 2002 to December 2009. Mr. Tsaiholds a Master in Professional Accounting from the University of Texas at Austin and a B.A. in Accounting from National Taiwan University in Taiwan. OurGovernance Committee concluded that Mr. Tsai should serve on the Board based on his skills, experience and qualifications in capital finance, his financialliteracy and his familiarity with our company’s business.Saria Tseng has been a member of our Board of Directors since November 2016. Ms. Tseng has served as Vice President of Strategic CorporateDevelopment, General Counsel and Secretary of Monolithic Power Systems, Inc. a fabless manufacturer of high-performance analog and mixed-signalsemiconductors since 2004. From 2001 to 2004, Ms. Tseng served as Vice President, General Counsel and Corporate Secretary of MaXXan Systems, anenterprise class storage network system. Previously, Ms. Tseng was an attorney at Gray Cary (now DLA Piper) and Jones Day. Ms. Tseng is a member of thestate bar in both California and New York and is a member of the bar association of the Republic of China, Taiwan. She holds Master of Law degrees from theUniversity of California at Berkeley and the Chinese Culture University in Taipei. Our Governance Committee concluded that Ms. Tseng should serve on theBoard based on her skills, experience and qualifications in business and corporate law, her legal expertise and her familiarity with technology business.Sherman Tuan has been a member of our Board of Directors since February 2007. Mr. Tuan is founder of PurpleComm, Inc. (doing business as9x9.tv), a platform for connected TV, where he has served as Chief Executive Officer since January 2005 and Chairman of the Board since June 2003. FromSeptember 1999 to May 2002, he was director of Metromedia Fiber Network, Inc., a fiber optical networking infrastructure provider. Mr. Tuan was co-founderof AboveNet Communications, Inc., an internet connectivity solutions provider, where he served as President from March 1996 to January 1998, ChiefExecutive Officer from March 1996 to May 2002 and director from March 1996 to September 1999. Mr. Tuan holds a degree in Electrical Engineering fromFeng-Chia University in Taiwan. Our Governance Committee concluded that Mr. Tuan should serve on the Board based on his skills, experience andqualifications in managing technology businesses, his technical expertise, and his familiarity with our company’s business.Tally Liu was appointed to our Board of Directors and our Audit Committee on January 30, 2019. Mr. Liu has been retired since 2015. Prior to hisretirement, Mr. Liu was Chief Executive Officer of Wintec Industries, a supply chain solutions company for high-tech manufacturers, from 2012 to 2015. Priorto Wintec, Mr. Liu served as Chairman of the Board and Chief Executive Officer of Newegg, Inc., an internet consumer technology retailer, from 2008 to2010, and as President of Newegg in 2008. Prior to Newegg, Mr. Liu held various positions with Knight Ridder Inc., including Vice President, Finance &Advance Technology and Vice President of Internal Audit. Mr. Liu served as President of the International Newspapers Financial Executives (INFE) for oneyear before it merged with other media associations. A Certified Public Accountant from 1982-2007, Mr. Liu is a member of the American Institute ofCertified Public Accountants (AICPA) with retired status, and was previously a member of the Florida Institute of Certified Public Accountants (FICPA). Mr.Liu is also a Certified Information System Auditor (CISA) and Certified Information Security Manager (CISM), with non-practice status, with the InformationSystems Audit and Control Association (ISACA) and has also been certified in Control Self-assessment (CCSA) by the Institute of Internal Auditors (IIA).After earning his BA of Commerce from National Chengchi University, Taipei, Taiwan, and MBA from Florida Atlantic University, Mr. Liu receivedexecutive leadership training at the Stanford Advanced Finance Program in 1986 and at Harvard Business School in the Advanced Management Program(AMP) in 1998. Mr. Liu is not related to any member of our Board of Directors or any of our officers.Except for Mr. Charles Liang and Ms. Sara Liu who are married, there are no other family relationships among any of our directors or executiveofficers.Composition of the BoardOur authorized number of directors is eight. There are currently eight directors. Our amended and restated certificate of incorporation provides for aclassified Board of Directors divided into three classes. The members of each class are elected112Table of Contentsto serve a term expiring at the third succeeding annual meeting of stockholders after such election. Vacancies may be filled by a majority of the directors thenin office, although less than a quorum, or by a sole remaining director. Alternatively, the Board of Directors, at its option, may reduce the number of directors,provided that no decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.The current composition of the Board of Directors is: Class I Directors (terms expiring at the 2019 annual meeting)Charles LiangSherman TuanTally LiuClass II Directors (1)Laura BlackMichael S. McAndrewsClass III Directors (1)Sara Liu Hwei-Ming (Fred) TsaiSaria Tseng(1) Because we did not, prior to the filing of this Annual Report on Form 10-K, file our Annual Reports on Form 10-K for fiscal years 2017 and 2018, we wereunable to hold our 2017 and 2018 annual meetings. We are not able to hold an annual meeting until such time as we have filed all delinquent AnnualReports on Form 10-K and our Annual Report on Form 10-K for the most recently completed fiscal year. As such, while the Class II Directors’ terms wereoriginally to expire at the 2017 annual meeting and the Class III Directors’ terms were originally to expire at the 2018 annual meeting, we expect that theClass II Directors and Class III Directors will not come up for election until the 2019 annual meeting.CORPORATE GOVERNANCECorporate Governance GuidelinesWe have adopted “Corporate Governance Guidelines” to help ensure that the Board of Directors is independent from management, appropriatelyperforms its function as the overseer of management, and that the interests of the Board of Directors and management align with the interests of thestockholders. The “Corporate Governance Guidelines” are available at www.Supermicro.com by first clicking on “About Us” and then “Investor Relations”and then “Corporate Governance.”Code of EthicsWe have adopted a “Code of Business Conduct and Ethics” that is applicable to all directors, executive officers and employees and embodies ourprinciples and practices relating to the ethical conduct of our business and our long-standing commitment to honesty, fair dealing and full compliance withall laws affecting our business. The “Code of Business Conduct and Ethics” is available at www.Supermicro.com by first clicking on “About Us” and then“Investor Relations” and then “Corporate Governance.” Any substantive amendment or waiver of the Code relating to executive officers or directors will bemade only after approval by our Board of Directors and will be promptly disclosed on our website within four business days.Director IndependenceAlthough our common stock is not currently listed on Nasdaq, we have endeavored to continue to operate in accordance with Nasdaq listingstandards with respect to director independence requirements. The rules of Nasdaq generally require that a majority of the members of a listed company'sboard of directors be independent. In addition, the listing rules generally require that, subject to specified exceptions, each member of a listed company'saudit committee, compensation committee, and nominating and corporate governance committees be independent. Audit Committee members must alsosatisfy the independence criteria set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the listingrequirements of The Nasdaq Stock Market. In addition, compensation committee members must satisfy the independence criteria set forth in Rule 10C-1under the Exchange Act and the listing requirements of The Nasdaq Stock Market. The Board affirmatively determines the independence of each director and nominee for election as a director in accordance with Nasdaq listingstandards.113Table of ContentsBased on these standards, our Board of Directors has determined that five of its current eight members, Laura Black, Michael S. McAndrews, Hwei-Ming (Fred) Tsai, Saria Tseng, Sherman Tuan and Tally Liu, are "independent directors" under the applicable rules and regulations of the SEC and the listingrequirements and rules of The Nasdaq Stock Market.Executive SessionsNon-management directors meet in executive session without management present each time the Board holds its regularly scheduled meetings.Communications with the Board of DirectorsThe Board of Directors welcomes the submission of any comments or concerns from stockholders or other interested parties. If you wish to send anycommunications to the Board of Directors, you may use one of the following methods:•Write to the Board at the following address:Board of DirectorsSuper Micro Computer, Inc.c/o General Counsel980 Rock AvenueSan Jose, California 95131•E-mail the Board of Directors at BODInquiries@supermicro.comCommunications that are intended specifically for the independent directors or non-management directors should be sent to the e-mail address or streetaddress noted above, to the attention of the "Independent Directors."MEETINGS AND COMMITTEES OF THE BOARDBoard MeetingsEach director is expected to devote sufficient time, energy and attention to ensure diligent performance of his or her duties and to attend all Boardand committee meetings. We encourage, but do not require, each Board member to attend our annual meeting of stockholders. Four of our directors attendedour annual meeting of stockholders held during fiscal 2017. The Board of Directors held four meetings during fiscal year 2017, each of which were regularlyscheduled meetings. The Board of Directors also acted by written consent one time during fiscal year 2017. All directors attended at least 75% of themeetings of the Board of Directors and of the committees on which they served during the time they served as a director in fiscal year 2017.Board Leadership StructureOur Chairman, Charles Liang, is also our Chief Executive Officer. The Board and our Nominating and Corporate Governance Committee (the"Governance Committee") believe that it is appropriate for Mr. Liang to serve as both the Chief Executive Officer and Chairman due to the relatively smallsize of our Board, and the fact that Mr. Liang is the founder of our company with extensive experience in our industry. We do not currently have a leadindependent director.Board Role in the Oversight of RiskOur Board exercises oversight over our risk management activities, requesting and receiving reports from management. The Board of Directorsexercises this oversight responsibility directly and through its committees. Our Board has delegated primary responsibility for oversight of risks relating tofinancial controls and reporting to our Audit Committee, which in turn reports to the full Board on such matters as appropriate. The Audit Committee alsoassists the Board in oversight of certain risks, particularly in the areas of internal controls over financial reporting, financial reporting and review of relatedparty transactions.Our management with oversight from our Compensation Committee has reviewed its compensation policies and practices with respect to risk-takingincentives and risk management and does not believe that potential risks arising from its compensation polices or practices are reasonably likely to have amaterial adverse effect on our company.Committees of the Board of Directors114Table of ContentsThe Board has three standing committees to facilitate and assist the Board of Directors in discharging its responsibilities: the Audit Committee, theCompensation Committee and the Governance Committee. In accordance with applicable Nasdaq listing standards, each of these committees is comprisedsolely of non-employee, independent directors. The charter for each committee is available at www.Supermicro.com by first clicking on “About Us” and then“Investor Relations” and then “Corporate Governance.” In January 2019, the Board of Directors approved amendments to the charters for each of the AuditCommittee, the Compensation Committee and the Governance Committee, which amendments are reflected in the descriptions contained herein. The charterof each committee also is available in print to any stockholder who requests it. The following table sets forth the current members of each of the standingBoard committees: Audit Committee Compensation Committee Nominating andCorporate Governance CommitteeLaura Black (1) Sherman Tuan (1) Sherman TuanMichael S. McAndrews Hwei-Ming (Fred) Tsai Hwei-Ming (Fred) Tsai (1)Hwei-Ming (Fred) Tsai Saria Tseng Saria TsengTally Liu __________________________(1)Committee ChairpersonAudit CommitteeThe Audit Committee has four members. The Audit Committee met nine times in fiscal year 2017, four of which were regularly scheduled meetingsand five of which were special meetings. Our Board has determined that each member of our Audit Committee meets the requirements for independence underthe applicable listing standards of Nasdaq and the rules of the SEC. Our Board of Directors has also determined that each member of our Audit Committee isan “audit committee financial expert” as defined under applicable SEC rules.As outlined more specifically in the Audit Committee charter, the Audit Committee has, among other duties, the following responsibilities:•The appointment, compensation and retention of our independent auditors, and the review and evaluation of the auditors’ qualifications,independence and performance;•Oversees the auditors’ audit work and reviews and pre-approves all audit and non-audit services that may be performed by them;•Discusses with the independent auditor any audit problems or difficulties and management’s response;•Reviews and discusses with management press releases regarding our financial results, as well as financial information and earnings guidanceprovided to securities analysts and rating agencies;•Reviews and approves the planned scope of our annual audit;•Monitors the rotation of partners of the independent auditors on our engagement team as required by law;•Reviews our financial statements and discusses with management and the independent auditors the results of the annual audit and the review ofour quarterly financial statements;•Reviews our critical accounting policies and estimates;•Oversees the adequacy of our financial controls;•Periodically reviews with management our disclosure controls and procedures and internal control over financial reporting;•Reviews and approves the internal audit function’s (i) audit plan, (ii) all major changes to the audit plan, (iii) the scope, progress and results ofexecuting the internal audit plan, and (iv) the annual performance of the internal audit function•Reviews and approves all related party transactions;•Establishes and oversees procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls or auditingmatters and oversees enforcement, compliance and remedial measures under our Code of Business Conduct and Ethics;•Initiate investigations and hire legal, accounting and other outside advisors or experts to assist the Audit Committee, as it deems necessary tofulfill its duties;•Periodically discusses with management our major financial risk exposures and steps management has taken to monitor and control theexposures, including our risk assessment and risk management guidelines and policies; and115Table of Contents•Reviews and evaluates, at least annually, the adequacy of the Audit Committee charter and recommends any proposed changes to the Board ofDirectors for approval.Compensation CommitteeThe Compensation Committee has three members and met four times in fiscal year 2017. The Compensation Committee is comprised solely of non-employee directors. Our Board has determined that each member of our Compensation Committee meets the requirements for independence under theapplicable Nasdaq listing standards.As outlined more specifically in the Compensation Committee charter, the Compensation Committee has, among other duties, the followingresponsibilities:•Periodically reviews and advises our Board concerning our overall compensation philosophy, policies and plans, including a review andapproval of a group of companies for executive compensation competitive comparisons, approval of target pay and performance objectivesagainst this group, and monitoring of our executive compensation levels and their performance relative to this group;•Reviews and approves corporate goals and objectives relevant to compensation of the Chief Executive Officer and other executive officers;•Evaluates the performance of the Chief Executive Officer and other executive officers in light of those goals and objectives, including againstthe performance of executive officers at comparable companies, all while taking into account our risk management policies and practices;•Reviews and approves the compensation of the Chief Executive Officer and other executive officers;•Oversees the evaluation of our executive officers other than the Chief Executive Officer;•Reviews and approves the establishment and terms of our incentive compensation plans and equity compensation plans;•Monitors and assesses risks associated with our compensation policies, including whether such policies could lead to unnecessary risk-takingbehavior, and consults with management regarding such risks;•Administers the issuance of restricted stock grants, stock options and other awards to executive officers, directors and other eligible individualsunder our stock plans; and•Reviews and evaluates, at least annually, the performance of the compensation committee and its members, including compliance of thecompensation committee with its charter and the adequacy of the compensation committee charter.Nominating and Corporate Governance CommitteeThe Governance Committee has three members and met four times in fiscal year 2017. The Governance Committee is comprised solely of non-employee directors. Our Board has determined that each member of our Governance Committee meets the requirements for independence under theapplicable Nasdaq listing standards.As outlined more specifically in the Governance Committee charter, the Governance Committee has, among other duties, the followingresponsibilities:•Identifies individuals qualified to become directors;•Evaluates and selects, or recommends to our Board of Directors, director nominees for each election of directors;•Develops and recommends to our Board of Directors criteria for selecting qualified director candidates in the context of the current make-up ofthe Board of Directors;•Considers any nominations of director candidates validly made by our stockholders;•Reviews committees’ structures and compositions and recommends to our Board of Directors concerning qualifications, appointment andremoval of committee members;•Develops, recommends for approval by the Board of Directors and reviews on an ongoing basis the adequacy of the corporate governanceprinciples applicable us;•Develops and recommends to our Board of Directors our Corporate Governance Guidelines;•Reviews, on a periodic basis, the adequacy of our Corporate Governance Guidelines and recommends any proposed changes to our Board ofDirectors;•Oversees compliance with our Corporate Governance Guidelines and reports on such compliance to our Board of Directors;•Assists the Board of Directors in the evaluation of our Board of Directors and each committee;and116Table of Contents•Periodically reviews the scope of responsibilities of the Governance Committee and the committee's performance of its duties.Section 16(a) Beneficial Ownership Reporting ComplianceThe members of our Board of Directors, our executive officers and persons who hold more than 10% of our outstanding common stock are subject tothe reporting requirements of Section 16(a) of the Exchange Act, which require them to file reports with respect to their ownership of our common stock andtheir transactions in our common stock. Based upon (i) the copies of Section 16(a) reports that we received from such persons for their fiscal year 2017transactions in our common stock and their common stock holdings and (ii) the written representations received from one or more of such persons that noannual Form 5 reports were required to be filed by them for fiscal year 2017, we believe that all reporting requirements under Section 16(a) were met in atimely manner by the persons who were executive officers, members of the Board of Directors or greater than 10% stockholders during such fiscal year, otherthan one late report made by each of Howard Hideshima, Phidias Chou, Sherman Tuan and Yih-Shyan (Wally) Liaw in each case with respect to onetransaction except for Phidias Chou who had two transactions, and two late reports made by Charles Liang and Sara Liu, in each case with respect to onetransaction.Item 11. Executive CompensationEXECUTIVE COMPENSATIONCompensation Discussion and AnalysisIn this section we provide an explanation and analysis of the material elements of the compensation provided to our Chief Executive Officer,Chief Financial Officer and other three most highly compensated executive officers who were serving as executive officers at the end of our fiscal year2017 (collectively referred to as our “named executive officers”). Those named executive officers and their positions during the fiscal year 2017 were:Charles LiangPresident, Chief Executive Officer and Chairman of the BoardHoward HideshimaFormer Senior Vice President, Chief Financial OfficerPhidias ChouFormer Senior Vice President, Worldwide SalesYih-Shyan (Wally) LiawFormer Senior Vice President of International Sales, Corporate Secretary and DirectorSara LiuSenior Vice President of Operations, Chief Administrative Officer, Treasurer andDirectorMessrs. Hideshima, Chou and Liaw resigned effective January 30, 2018. They did not receive any severance or other enhanced benefits inconnection with their terminations of employment.Process OverviewThe Compensation Committee of the Board of Directors discharges the Board of Directors’ responsibilities relating to compensation of all of ourexecutive officers. The Compensation Committee is comprised of three non-employee directors, all of whom are independent pursuant to the applicablelisting rules of NASDAQ, Rule 16b-3 under the Exchange Act, and Section 162(m) of the Internal Revenue Code (“Code”).The agenda for meetings is determined by the Chair of the Compensation Committee with the assistance of our Chief Financial Officer. Committeemeetings are regularly attended by our Chief Financial Officer and our General Counsel. However, our Chief Financial Officer does not attend the portion ofmeetings during which his own performance or compensation is being discussed. Our Chief Financial Officer and General Counsel support the CompensationCommittee in its work by providing information relating to our financial plans, performance assessments of our executive officers and other personnel-relateddata. In addition, the Compensation Committee has the authority under its charter to hire, terminate and approve fees for advisors, consultants and agents as itdeems necessary to assist in the fulfillment of its responsibilities. In August 2016, as part of making an overall assessment of each individual’s role andperformance, and structuring our compensation programs for fiscal year 2017, the Compensation Committee reviewed recommendations of management aswell as publicly available peer group compensation data.Compensation Philosophy and Objectives117Table of Contents It is the Compensation Committee’s philosophy to link the named executive officers’ compensation to corporate performance. The base salary,quarterly bonuses and equity award grants of the named executive officers are determined in part by the Compensation Committee reviewing data onprevailing compensation practices of comparable technology companies with whom we compete for executive talent, and evaluating such information inconnection with our corporate goals and compensation practices. Our compensation philosophy has been unchanged over the last several years. The Compensation Committee considers various sources of competitive data when determining executive compensation levels, includingcompensation data from a sampling of public companies and public compensation surveys obtained from Radford, an Aon Hewitt company. For fiscal year2017 compensation decisions, the sample of companies consisted of the following, which were the same companies in our peer group for fiscal year 2016compensation decisions:Brocade Communications Systems, Inc.Infinera CorporationCray, Inc.NetApp, Inc.Extreme Networks, Inc.Netgear, Inc.In selecting the companies for inclusion in the sample, the following factors were considered: industry, net revenues, operating income and whetherthe company may compete against us for executive talent. These companies ranged in annual revenue from approximately $528.4 million to $5.5 billion. Forfiscal years 2017 and 2016, our net sales were $2.5 billion and $2.2 billion, respectively.The Compensation Committee does not seek to specifically benchmark compensation based upon the sample companies reviewed nor does theCompensation Committee employ any other formulaic process in making compensation decisions. Rather, the Compensation Committee uses its subjectivejudgment based upon a review of all information, including an annual review for each officer of his or her level of responsibility, contributions to ourfinancial results and our overall performance. The Compensation Committee makes a generalized assessment of these factors and this information is notweighted in any specific manner.The compensation arrangements for several of our named executive officers, including our Chief Executive Officer, were significantly below mediancompensation levels for similar positions at comparable companies. This is principally due to the high level of stock ownership held by such persons. In thefuture, we may need to increase our recruiting of new executives from outside of our company. This in turn may require us to pay higher compensation closerto or in excess of that typically paid by comparable companies.Finally, we believe that creating stockholder value requires not only managerial talent but active participation by all employees. In recognition ofthis, we try to minimize the number of compensation arrangements that are distinct or exclusive to our named executive officers. We currently provide basesalary, quarterly bonuses and long-term equity incentive compensation to a considerable number of our domestic employees and international employees, inaddition to our executive officers.The Role of Stockholder Say-on-Pay VotesOur Board of Directors, the Compensation Committee and our management value the opinions of our stockholders. At our annual meeting ofstockholders held on March 1, 2017 (the "2016 Annual Meeting"), we provided our stockholders the opportunity to vote to approve, on an advisory basis,the compensation of our named executive officers as disclosed in the proxy statement for our 2016 Annual Meeting. At the meeting, 40,503,998 shares orapproximately 99.2% of the stockholders who were present and entitled to vote on this “say-on-pay” proposal approved the compensation of our namedexecutive officers, while only 41,966 or approximately 0.1% voted against (with approximately 280,370 shares or approximately 0.7% abstaining).5,961,842 shares held by brokers were not entitled to vote with respect to this proposal. Although the advisory stockholder vote on named executive officercompensation is non-binding, the Compensation Committee has considered and expects to continue to consider the outcome of the vote when making futurecompensation decisions for named executive officers. In determining executive compensation for fiscal year 2017, our Compensation Committee took intoaccount the results of the 2016 Annual Meeting stockholder advisory vote to approve executive compensation, particularly the strong support expressed byour stockholders, as one of the many factors considered in deciding that our compensation policies and procedures for 2017 should largely remain consistentwith our policies and procedures in prior years. 40.5 million shares for 0.3 million abstention 6.0 million non-votes.Role of Executive Officers in the Compensation Process118Table of ContentsManagement provides recommendations to the Compensation Committee on issues such as compensation program design, and evaluations ofexecutive and our performance. In fiscal year 2017, the Compensation Committee also had access to competitive data collected by management. While theCompensation Committee carefully considers all recommendations made by members of management, ultimate authority for all compensation decisionsregarding our executive officers rests with the Compensation Committee and the Board.Fiscal Year 2017 Named Executive Officer Compensation ComponentsFor fiscal year 2017, the principal components of compensation for our executive officers were:•Base salary;•Quarterly bonus; and•Equity-based incentive compensation.Base Salary. Base salaries for our executive officers other than the Chief Executive Officer are determined annually by the CompensationCommittee based upon recommendations by our Chief Executive Officer, taking into account such factors as salary norms in comparable companies andpublicly available data regarding compensation increases in the industry, a subjective assessment of the nature of the position and an annual review of thecontribution and experience of each executive officer. For the Chief Executive Officer, the Compensation Committee considers substantially the same type ofinformation, as well as our size and the Chief Executive Officer’s overall stock ownership.In August 2016, the Compensation Committee met to review the base salaries of our named executive officers for fiscal year 2017. In determiningbase salaries for fiscal year 2017, the Compensation Committee decided to provide no base salary adjustments for our named executive officers. Principal Position During Fiscal Year 2017 Fiscal 2016Base SalaryRate Fiscal 2017Base SalaryRate Base Salary% ChangeCharles LiangPresident, Chief Executive Officer and Chairman of the Board $365,160 $365,160 —%Howard HideshimaFormer Senior Vice President and Chief Financial Officer $322,023 $322,023 —%Phidias ChouFormer Senior Vice President, Worldwide Sales $287,317 $287,317 —%Yih-Shyan (Wally) LiawFormer Senior Vice President, International Sales, CorporateSecretary and Director $233,327 $233,327 —%Sara LiuSenior Vice President of Operations, Chief Administrative Officer,Treasurer and Director $238,156 $238,156 —%Quarterly Bonus. Our quarterly cash bonus program seeks to motivate executive officers to work effectively to achieve our financial performanceobjectives and to reward them when such objectives are met. Quarterly bonuses for executive officers are subject to approval by the CompensationCommittee. Bonuses are not awarded based upon any specific plan or formula, but are subjectively determined based upon our performance during thequarter and the individual’s contributions. Historically these bonuses have ranged from zero to an amount equal to two weeks of base salary. For fiscal year2017, approximately two weeks of base salary ($10,000) was granted to Mr. Chou in the aggregate as a one-time bonus in recognition of him reaching hisfirst quarter 2017 sales target. None of the other named executive officers received any quarterly bonuses for fiscal 2017. Other Bonus. Year-end gifting bonuses of $650 were granted to each named executive officer under a company-wide program that all employeesparticipated in. Equity-Based Incentive Compensation. Stock options and other equity-based awards are an important component of the total compensation ofexecutive officers. We believe that equity-based awards align the interests of each executive with those of our stockholders. They also provide executiveofficers a significant, long-term interest in our success and help retain key executive officers in a competitive market for executive talent. Our 2016 EquityIncentive Plan authorizes the Compensation Committee to grant stock options and other equity-based awards to executive officers. The number of sharesowned by, or subject to equity-based awards held by, each executive officer is periodically reviewed and additional awards are considered based upon ageneralized assessment of past performance of the executive and the relative holdings of other executive officers. The stock options and restricted stock unitawards granted to executive officers by the Compensation Committee generally vest over periods of four years subject to continued service with ourcompany, and stock options expire no later than ten years from the date of119Table of Contentsgrant. The stock options and restricted stock unit awards vest as to 25% of the shares on the first anniversary of the vesting commencement date and as to1/16th of the shares per quarter thereafter.The Compensation Committee has historically granted equity awards to employees on a two-year cycle. In August 2016, the CompensationCommittee approved a grant of 12,500 stock options and 5,630 RSUs to Mr. Hideshima, based on the Compensation Committee’s review of all employeegrant levels and on the recommendation of the Chief Executive Officer. No equity grants were made to any other named executive officer in fiscal year 2017as none of the other named executive officers were eligible for a two-year refresh grant in fiscal year 2017. Stock Ownership GuidelinesOther than as discussed below under “Stock Retention Policy,” we currently do not require our directors or executive officers to own a particularamount of our common stock. The Compensation Committee is satisfied that stock and option holdings among our directors and executive officers aresufficient at this time to provide motivation and to align this group’s interests with those of our stockholders. Our insider trading policy prohibits any of ourdirectors, executive officers, employees or contractors from engaging in any transactions in publicly-traded options, such as puts and calls, and otherderivative securities, including any hedging or similar transaction, with respect to our common stock.Stock Retention PolicyWe have adopted a stock retention policy which requires that our Chief Executive Officer hold a significant portion of the shares of our commonstock acquired under our equity incentive plan for at least 36 months. Under the policy, the Chief Executive Officer must retain at least 50% of all “net”shares received (“net” shares mean those shares remaining after the sale or withholding of shares in payment of the exercise price, if applicable, andwithholding taxes) for at least 36 months following the date on which an equity award is vested, settled or exercised.Recoupment PolicyWe established a Recoupment Policy that is applicable to our executive officers. Under the policy, if we are required to prepare an accountingrestatement due to material noncompliance with the financial reporting requirements under United States securities laws, the Compensation Committee shallbe entitled to recover from any current or former executive officer any excess incentive-based compensation received by such person during the three-yearperiod prior to the date on which we are required to prepare the restatement. This policy applies to both equity-based and cash-based incentive compensationawards. The “excess incentive-based compensation” is the difference between the actual amount that was paid, and the amount that would have been paidunder the restated financial results.As indicated in the Explanatory Note, the consolidated financial statements included in this Annual Report on Form 10-K have been restated. TheBoard of Directors intends to undertake an analysis of whether any excess incentive-based compensation was paid to any of our executive officers or formerexecutive officers. If the Board of Directors determine that any excess incentive-based compensation was paid to executives, the recoupment of the incentive-based compensation would be immaterial.Other BenefitsHealth and Welfare BenefitsOur executive officers receive the same health and welfare benefits as are offered to our other employees, including medical, dental, vision, life,accidental death and dismemberment, disability, flexible spending accounts and holiday pay. The same contribution amounts, percentages and plan designprovisions are applicable to all employees.Retirement ProgramOur executive officers may participate in the same tax-qualified, employee-funded 401(k) plan that is offered to all our other employees. We do notmaintain a supplemental executive retirement plan, nor do we offer any defined benefit retirement plans to our executive officers.PerquisitesWe do not provide special benefits or other perquisites to any of our named executive officers.120Table of ContentsEmployment Arrangements, Severance and Change of Control Benefits We have not entered into employment agreements with any of our named executive officers. Messrs. Hideshima, Chou and Liaw had, and Ms. Liucurrently has, a signed offer letter which provides for at-will employment. The offer letter provides for salary, stock options and right to participate in ouremployee benefit plans. We do not have any written employment arrangements with Mr. Liang. We do not have any arrangements with any of our executiveofficers that provide for any severance or other benefits in the event of termination or change of control of our company.Tax and Accounting Treatment of CompensationIn our review and establishment of compensation programs and payments, we consider, but do not place great emphasis on, the anticipatedaccounting and tax treatment of our compensation programs to us and our executive officers. While we may consider accounting and tax treatment, thesefactors alone are not dispositive. Among other factors that receive greater consideration are the net costs to us and our ability to effectively administerexecutive compensation in the short and long-term interests of stockholders.Section 162(m) of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), generally limits a company’s ability to deduct for tax purposescompensation in excess of $1.0 million paid in any single tax year to certain executive officers (and, beginning in 2018, certain former executive officers).Prior to what is referred to as the 2017 Tax Reform Act, compensation deemed to be performance-based in accordance with Section 162(m) could be exemptfrom this $1.0 million limitation, and compensation paid to the chief financial officer was not subject to the deductibility limitation of Section 162(m). Wecontinue to evaluate the impact of the 2017 Tax Reform Act for its potential impact on our company. Regardless of that impact, however, we will continue todesign and maintain executive compensation arrangements that we believe will attract and retain the executive talent that we need to compete successfully,even if in certain cases such compensation is not deductible for federal income tax purposes. In addition, because of the uncertainties associated with theapplication and interpretation of Section 162(m) and the regulations issued thereunder, there can be no assurance that compensation intended to satisfy therequirements for deductibility under Section 162(m), as in effect prior to 2018, will in fact be deductible.We account for equity compensation paid to our employees in accordance with Financial Accounting Standards Board Accounting StandardsCodification Topic 718, Stock-Compensation (“ASC Topic 718”), which requires us to estimate and record expenses for each award of equity compensationover the service period of the award.We intend that our plans, arrangements and agreements will be structured and administered in a manner that complies with (or is exempt from) therequirements of Section 409A of the Code. Participation in, and compensation paid under, our plans, arrangements and agreements may, in certain instances,result in the deferral of compensation that is subject to the requirements of Section 409A. If our plans, arrangements and agreements as administered fail tomeet certain requirements under or exemptions from Section 409A, compensation earned thereunder may be subject to immediate taxation and tax penalties.SummaryThe Committee believes that our compensation philosophy and programs are designed to foster a performance-oriented culture that aligns ourexecutive officers’ interests with those of our stockholders. The Committee also believes that the compensation of our executive officers is both appropriateand responsive to the goal of building stockholder value.Compensation Committee ReportThe Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis (“CD&A”) with our management. Based onthis review and these discussions, the Compensation Committee recommended to the Board of Directors that the CD&A be included in this Annual Report onForm 10-K.This report has been furnished by the Compensation Committee.Sherman Tuan, ChairHwei-Ming (Fred) TsaiSaria Tseng121Table of ContentsFiscal Year 2017 Summary Compensation TableThe following table sets forth information concerning the compensation earned during the fiscal years ended 2017, 2016 and 2015 of each personwho was a named executive officer during fiscal year 2017.FISCAL YEAR 2017 SUMMARY COMPENSATION TABLE Name and PrincipalPosition DuringFiscal Year 2017 Year Salary($)(1) Bonus($)(2) StockAwards($)(3) OptionAwards($)(4) Non-EquityIncentive PlanCompensation($) Change inPension ValueandNonqualifiedDeferredCompensationEarnings($) All OtherCompensation($)(5) Total($)Charles Liang 2017 386,212 $650 $— $— $— $— $— $386,862President, ChiefExecutive Officerand Chairman ofthe Board 2016 363,776 — — — — — — 363,776 2015 367,528 7,607 — 2,607,616 — — — 2,982,751 HowardHideshima 2017 330,681 650 115,640 116,092 — — 1,500 564,563Senior VicePresident andChief FinancialOfficer 2016 322,646 ——— — — — — 322,646 2015 315,816 6,990 — 403,580 — — — 726,386 Phidias Chou 2017 299,461 10,650 — — — — — 310,111 Senior VicePresident,Worldwide Sales 2016 286,747 3,416 137,160 138,000 — — — 565,323 2015 300,278 6,446 — — — — — 306,724 Yih-Shyan(Wally) Liaw 2017 246,105 650 — — — — — 246,755Senior VicePresident,InternationalSales,CorporateSecretary andDirector 2016 232,864 — 109,959 105,089 — — — 447,912 2015 247,271 5,422 — — — — — 252,693 Sara Liu 2017 244,558 650 — — — — — 245,208Senior VicePresident andChiefAdministrativeOfficer,Treasurer andDirector 2016 237,253 — 110,484 113,961 — — — 461,698 2015 230,546 5,309 — — — — — 235,855 ________________(1)Amounts disclosed under "Salary" includes leave pay earned by the named executive officers.(2)Amounts disclosed under “Bonus” reflect the discretionary cash bonuses earned by the named executive officers.(3)Amounts represent the grant date fair value of restricted stock unit awards calculated in accordance with ASC Topic 718, and are based on the closing market price of ourcommon stock on the date of grant.(4)Amounts represent the grant date fair value of each stock option award calculated in accordance with ASC Topic 718, using the Black Scholes option-pricing model.Assumptions used in the calculation of these amounts are included in Part II, Item 8, "Financial Statements and Supplementary Data", and Part II, Item 8, Note 12 “Stock-based Compensation and Stockholders’ Equity” to our consolidated financial statements for the fiscal year 2017 included in this Annual Report on Form 10-K.(5)Amounts disclosed under “All Other Compensation” reflect payments made by our company in connection with medical and dental benefit waivers.122Table of ContentsFiscal Year 2017 Grants of Plan-Based AwardsThe following table provides information concerning all plan-based awards granted during fiscal year 2017 to each person who was a namedexecutive officer during fiscal year 2017. Except for Mr. Hideshima, no other named executive officer received a plan-based award during fiscal year 2017.FISCAL YEAR 2017 GRANTS OF PLAN-BASED AWARDS NameGrant Date All OtherStockAwards:Number ofShares ofStock orUnits(#) All OtherOptionAwards:Number ofSecuritiesUnderlyingOptions(#) Exerciseor BasePrice ofOptionAwards($/Sh) GrantDate FairValue ofStock andOptionAwards($)(1) Charles Liang— — — $— $—Howard Hideshima8/3/2016 5,630(2)— $— $115,6408/3/2016 — 12,500(3)20.54 116,092Phidias Chou— — — $— —Yih-Shyan (Wally) Liaw— — — $— —Sara Liu— — — $— — __________________________(1)Represents the fair value of each stock option and restricted stock unit awards as of the date of grant, computed in accordance with ASC Topic 718.(2)These time-based restricted stock units generally vest at the rate of 25% on May 22, 2017 and 1/16th per quarter thereafter, such that the underlyingshares are expected to be fully vested on May 22, 2020. Any unvested equity awards were forfeited upon termination of employment on January 30,2018.(3)This stock option generally vests at the rate of 25% on May 8, 2017 and 1/16th per quarter thereafter, such that the awards are expected to be fullyvested on May 8, 2020. Any unvested equity awards were forfeited upon termination of employment on January 30, 2018.Outstanding Equity Awards at Fiscal Year-End 2017The following table provides information concerning the outstanding equity-based awards as of June 30, 2017, held by each person who was anamed executive officer for fiscal year 2017, including with respect to stock options, the option exercise price and expiration dates for each award. 123Table of Contents Option Awards Stock AwardsNameNumber ofSecuritiesUnderlyingUnexercisedOptions (#)Exercisable Number ofSecuritiesUnderlyingUnexercisedOptions (#)Unexercisable OptionExercisePrice($) OptionExpirationDate Number ofShares or Unitsof Stock ThatHaveNot Vested(#) Market Valueof Shares orUnits of StockThat Have NotVested($)(1)Charles Liang720,000— $10.66 3/4/2019 132,000— $18.59 4/25/2021 231,260— $20.70 1/21/2023 104,218(2)62,532(2)$35.07 1/19/2025 Howard Hideshima10,886— $13.61 8/2/2020 56,614— $13.61 8/2/2020 8,690— $12.50 8/6/2022 37,810— $12.50 8/6/2022 5,445(3)1,815(3)$26.75 8/4/2024 20,055(4)6,685(4)$26.75 8/4/2024 1,669(5)5,010(5)$20.54 8/3/2026 1,455(6)4,366(6)$20.54 8/3/2026 4,223(7)104,097Phidias Chou6,500— $5.53 4/29/2019 18,970— $8.36 10/26/2019 31,030— $8.36 10/26/2019 6,150— $15.22 10/24/2021 32,850— $15.22 10/24/2021 16,150(8)1,077(8)$14.23 10/21/2023 15,724(9)1,049(9)$14.23 10/21/2023 2,129(10)2,741(10)$25.40 10/21/2025 3,118(11)4,012(11)$25.40 10/21/2025 3,375(12)83,194Yih-Shyan (Wally) Liaw10,635— $7.46 4/28/2018 10,275— $7.46 4/28/2018 10,079— $13.61 8/2/2020 7,671— $13.61 8/2/2020 8,687— $17.29 4/23/2022 18,313— $17.29 4/23/2022 6,127(13)1,415(13)$18.93 4/21/2024 12,559(14)2,899(14)$18.93 4/21/2024 1,596(15)3,514(15)$28.71 4/27/2026 1,058(16)2,332(16)$28.71 4/27/2026 2,873(17)70,819Sara Liu19,615— $11.81 1/25/2020 16,285— $11.81 1/25/2020 29,000— $17.09 1/23/2022 20,125(18)2,875(18)$17.96 1/20/2024 3,375(19)5,625(19)$27.28 1/27/2026 2,785(20)68,650 __________________________124Table of Contents(1)Represents the closing stock price per share of our common stock as of June 30, 2017 ($24.65) multiplied by the number of shares underlying RSUsthat had not vested as of June 30, 2017.(2)Option generally vested at the rate of 25% on November 1, 2015 and 1/16th per quarter thereafter, such that the award is expected to be fully vestedon November 1, 2018.(3)Option (ISO) generally vested at the rate of 25% on May 8, 2015 and 1/16th per quarter thereafter, such that the award is expected to be fully vestedon May 8, 2018. Any unvested equity awards were forfeited upon termination of employment on January 30, 2018.(4)Option (NQ) generally vested at the rate of 25% on May 8, 2015 and 1/16th per quarter thereafter, such that the award is expected to be fully vestedon May 8, 2018. Any unvested equity awards were forfeited upon termination of employment on January 30, 2018.(5)Option (ISO) generally vested at the rate of 25% on May 8, 2017 and 1/16th per quarter thereafter, such that the award is expected to be fully vestedon May 8, 2020. Any unvested equity awards were forfeited upon termination of employment on January 30, 2018.(6)Option (NQ) generally vested at the rate of 25% on May 8, 2017 and 1/16th per quarter thereafter, such that the award is expected to be fully vestedon May 8, 2020. Any unvested equity awards were forfeited upon termination of employment on January 30, 2018.(7)RSUs generally vested at the rate of 25% on May 22, 2017 and 1/16th per quarter thereafter, such that the underlying shares are expected to be fullyvested on May 22, 2020.(8)Option (ISO) generally vested at the rate of 25% on September 13, 2014 and 1/16th per quarter thereafter, such that the award is expected to be fullyvested on September 13, 2017.(9)Option (NQ) generally vested at the rate of 25% on September 13, 2014 and 1/16th per quarter thereafter, such that the award is expected to be fullyvested on September 13, 2017.(10)Option (ISO) generally vested at the rate of 25% on September 13, 2016 and 1/16th per quarter thereafter, such that the award is expected to be fullyvested on September 13, 2019. Any unvested equity awards were forfeited upon termination of employment on January 30, 2018.(11)Option (NQ) generally vested at the rate of 25% on September 13, 2016 and 1/16th per quarter thereafter, such that the award is expected to be fullyvested on September 13, 2019. Any unvested equity awards were forfeited upon termination of employment on January 30, 2018.(12)RSUs generally vested at the rate of 25% on November 10, 2016 and 1/16th per quarter thereafter, such that the underlying shares are expected to befully vested on November 10, 2019.(13)Option (ISO) generally vested at the rate of 25% on March 30, 2015 and 1/16th per quarter thereafter, such that the award is expected to be fullyvested on March 30, 2018. Any unvested equity awards were forfeited upon termination of employment on January 30, 2018.(14)Option (NQ) generally vested at the rate of 25% on March 30, 2015 and 1/16th per quarter thereafter, such that the award is expected to be fullyvested on March 30, 2018. Any unvested equity awards were forfeited upon termination of employment on January 30, 2018.(15)Option (ISO) generally vested at the rate of 25% on March 29, 2017 and 1/16th per quarter thereafter, such that the award is expected to be fullyvested on March 29, 2020. Any unvested equity awards were forfeited upon termination of employment on January 30, 2018.(16)Option (NQ) generally vested at the rate of 25% on March 29, 2017 and 1/16th per quarter thereafter, such that the award is expected to be fullyvested on March 29, 2020. Any unvested equity awards were forfeited upon termination of employment on January 30, 2018.(17)RSUs generally vested at the rate of 25% on May 10, 2017 and 1/16th per quarter thereafter, such that the underlying award is expected to be fullyvested on May 10, 2020.(18)Option generally vested at the rate of 25% on December 12, 2014 and 1/16th per quarter thereafter, such that the award is expected to be fully vestedon December 12, 2017.(19)Option generally vested at the rate of 25% on December 12, 2016 and 1/16th per quarter thereafter, such that the award is expected to be fully vestedon December 12, 2019.(20)RSUs generally vested at the rate of 25% on February 10, 2017 and 1/16th per quarter thereafter, such that the award is expected to be fully vestedon February 10, 2020.125Table of ContentsOption Exercises and Stock Vested During Fiscal Year 2017The following table sets forth the dollar amounts realized by each person who was a named executive officer during fiscal year 2017 pursuant to theexercise or vesting of equity-based awards during fiscal year 2017. Option Awards Stock AwardsNameNumber of SharesAcquired on Exercise (#) Value Realized onExercise ($)(1) Number of SharesAcquired on Vesting (#) Value Realized onVesting ($)(2)Charles Liang— $— — $—Howard Hideshima63,126 $749,544 1,407 $34,260Phidias Chou11,000 $212,554 2,025 $49,392Sara Liu25,000 $500,871 1,265 $33,029Yih-Shyan (Wally) Liaw20,000 $281,000 957 $23,112 __________________________(1)Based on the difference between the sales price of our common stock at the time of exercise and the exercise price.(2)The value is the closing price of our common stock on the date of vesting, multiplied by the number of shares vested.Pension and Nonqualified Deferred CompensationWe do not provide any nonqualified deferred compensation arrangements or pension plans. As such, the Pension Benefits disclosure andNonqualified Deferred Compensation disclosure are omitted from this Annual Report on Form 10-K.Potential Payments Upon Termination or Change of ControlWe do not currently and did not during fiscal year 2017 have any arrangements with any of our executive officers that provide for any severance orother benefits in the event of termination or change of control of our company.Director CompensationUnder our director compensation policy in effect for fiscal year 2017, we reimburse non-employee directors for reasonable expenses in connectionwith attendance at Board and committee meetings. Our non-employee directors receive an annual retainer of $40,000, payable quarterly. In addition, theChairperson of our Audit Committee receives an additional annual retainer of $25,000, the Chairperson of each of our Compensation Committee andNominating and Corporate Governance Committee receives an additional annual retainer of $5,000 and each director serving in a non-chairperson capacityon our standing Board committees receives an additional annual retainer of $2,500 per committee, payable quarterly.Non-employee directors also are eligible to receive stock options under our 2016 Equity Incentive Plan. Under the policy, non-employee directorsare granted an initial option to purchase 18,000 shares upon first becoming a member of our Board of Directors. A non-employee director serving asChairperson of the Audit Committee receives an additional initial grant of an option to purchase 12,000 shares. Non-employee directors serving asChairperson of the Compensation or Nominating and Corporate Governance Committees receive an additional initial grant of an option to purchase 2,000shares. Each of these initial options generally vests and becomes exercisable over four years, with the first 25% of the shares subject to each initial optiongenerally vesting on the first anniversary of the date of grant and the remainder generally vesting quarterly thereafter. Immediately after each of our annualmeetings of stockholders, each non-employee director is granted an option to purchase 4,500 shares of our common stock, the Audit Committee Chairpersonis granted an additional annual option to purchase 3,000 shares of our common stock and the Chairperson of each of the Compensation and Nominating andCorporate Governance Committees is granted an additional annual option to purchase 500 shares of our common stock. These options will vest and becomeexercisable generally on the first anniversary of the date of grant or immediately prior to our annual meeting of stockholders, if earlier.The options granted to non-employee directors have a per share exercise price equal to 100% of the fair market value of the underlying shares on thedate of grant, and will become fully vested if we undergo a change of control. Annual grants will be reduced proportionally if the person does not serve forthe full year after the annual grant.The following table shows for the fiscal year ended June 30, 2017 certain information with respect to the compensation of all of our non-employeedirectors who served in such capacity during the fiscal year ended June 30, 2017:126Table of ContentsFISCAL YEAR 2017 DIRECTOR COMPENSATION NameFeesEarnedor Paid inCash($)(1) StockAwards($) OptionAwards($)(2) Total($)Laura Black$65,000 — $83,700 $148,700Michael McAndrews$42,500 — $50,220 $92,720Hwei-Ming (Fred) Tsai$50,000 — $55,800 $105,800Saria Tseng$33,750 — $229,049 $262,799Sherman Tuan$47,500 — $55,800 $103,300 __________________________(1)This column represents annual director fees, non-employee committee chairman fees and other committee member fees earned in fiscal year 2017.(2)The dollar amount in this column represents the aggregate grant date fair value of the awards calculated in accordance with FASB ASC Topic 718,using the Black Scholes option-pricing model. On March 1, 2017 each of Ms. Black and Messrs. McAndrews, Tsai and Tuan were granted options topurchase 7,500, 4,500, 5,000 and 5,000 shares, respectively, with the grant date fair values set forth in the table above. In connection with her initialappointment to the Board, on November 4, 2016, Ms. Tseng received an initial option to purchase 18,000 shares with a grant date fair value of $9.93and on March 1, 2017 she received an additional option to purchase 4,500 shares with a grant date fair value of $11.16. Assumptions used in thecalculation of the grant date fair value amounts are included in Part II, Item 8, "Financial Statements and Supplementary Data", and Item II, Part 8,Note 12, “Stock-based Compensation and Stockholders’ Equity” to our consolidated financial statements for the fiscal year 2017 included in thisAnnual Report on Form 10-K.The table below sets forth the aggregate number of shares underlying option awards held by our non-employee directors as of June 30,2017. None of the non-employee directors held any unvested stock awards as of June 30, 2017.NameOption AwardsLaura Black31,500Michael McAndrews27,000Hwei-Ming (Fred) Tsai50,000Saria Tseng22,500Sherman Tuan51,500 Compensation Committee Interlocks and Insider ParticipationNone of the members of the Compensation Committee is a current or former officer or employee of our company or had any relationship with ourcompany requiring disclosure. In addition, during fiscal year 2017, none of our executive officers served as a member of the Board of Directors orCompensation Committee of any other entity that has one or more executive officers who served on our Board of Directors or Compensation Committee.Saria Tseng, Hwei-Ming (Fred) Tsai and Sherman Tuan served on the Compensation Committee in fiscal year 2017.Compensation Program Risk AssessmentWe have assessed our compensation programs and have concluded that risks arising from our compensation policies and practices are not reasonablylikely to have a material adverse effect on us. We concluded that our compensation policies and practices do not encourage excessive or inappropriate risk-taking. We believe our programs are appropriately designed to encourage our employees to make decisions that result in positive short-term and long-termresults for our business and our shareholders.127Table of ContentsItem 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersSecurity Ownership of Certain Beneficial Owners and ManagementThe following table sets forth certain information known to us regarding beneficial ownership of our common stock as of March 31, 2019 by:•Each of the named executive officers during Fiscal Year 2017;•Each of our directors;•All directors and executive officers as a group; and•All person known to us beneficially own 5% or more of our outstanding common stock.Name and Address of Beneficial Owner(1)Amount andNature ofBeneficialOwnership(2) Percent ofCommon StockOutstanding(3)Executive Officers and Directors: Charles Liang(4)8,330,684 16.5%Howard Hideshima(5)149,655 *Phidias Chou(6)136,247 *Sara Liu(7)8,330,684 16.5%Yih-Shyan (Wally) Liaw(8)1,721,895 3.4%Laura Black(9)31,500 *Michael S. McAndrews(10)27,000 *Hwei-Ming (Fred) Tsai(11)290,000 *Saria Tseng(12)15,750 *Sherman Tuan(13)47,650 *All directors and executive officers as a group (13 persons)(14)10,802,799 21.1%5% Holders Not Listed Above: Dimensional Fund Advisors (15)3,355,723 6.7%__________________________*Represents beneficial ownership of less than one percent of the outstanding shares of common stock(1)Except as otherwise indicated, to our knowledge the persons named in this table have sole voting and investment power with respect to all shares ofCommon Stock shown as beneficially owned by them, subject to community property laws applicable and to the information contained in thefootnotes to this table.(2)Under the SEC rules, a person is deemed to be the beneficial owner of shares that can be acquired by such person within 60 days upon the exercise ofoptions or RSUs subject to vesting.(3)Calculated on the basis of 49,881,914 shares of common stock outstanding as of March 31, 2019, provided that any additional shares of CommonStock that a stockholder has the right to acquire within 60 days after March 31, 2019 are deemed to be outstanding for the purposes of calculatingthat stockholder’s percentage of beneficial ownership.(4)Includes 612,614 options exercisable within 60 days after March 31, 2019. Also includes 3,175,002 shares jointly held by Mr. Liang and Sara Liu,his spouse, 472,425 shares held directly by Ms. Liu and 95,465 options exercisable or restricted stock units subject to vesting, both within 60 daysafter March 31, 2019. See footnote 8.(5)Includes 148,435 shares issuable upon the exercise of options exercisable within 60 days after March 31, 2019.(6)Includes 136,427 shares issuable upon the exercise of options exercisable within 60 days after March 31, 2019.(7)Includes 95,465 options exercisable or restricted stock units subject to vesting, both within 60 days after March 31, 2019. Also includes 3,175,002shares jointly held by Ms. Liu and Mr. Liang, her spouse, 3,969,793 shares held by Charles Liang, Ms. Liu’s spouse and 612,614 shares issuableupon the exercise of options held by Mr. Liang and exercisable within 60 days after March 31, 2019. See footnote 4.(8)Includes 70,027 shares issuable upon the exercise of options exercisable within 60 days after March 31, 2019. 1,582,597 shares held by Liaw FamilyTrust, for which Mr. Liaw and his spouse serve as trustees, 24,256 shares held by Mr. Liaw’s daughters and 44,177 shares held by Mrs. Liaw.(9)Includes 31,500 shares issuable upon the exercise of options exercisable within 60 days after March 31, 2019.(10)Includes 27,000 shares issuable upon the exercise of options exercisable within 60 days after March 31, 2019.(11)Includes 40,000 shares issuable upon the exercise of options exercisable within 60 days after March 31, 2019.128Table of Contents(12)Includes 15,750 shares issuable upon the exercise of options exercisable within 60 days after March 31, 2019.(13)Includes 40,000 shares issuable upon the exercise of options exercisable within 60 days after March 31, 2019.(14)Includes 10,795,299 options exercisable or restricted stock units subject to vesting, both within 60 days after March 31, 2019.(15)The information with respect to the holdings of Dimensional Fund Advisors LP ("Dimensional Fund Advisors") isbased solely on Schedule 13G filed on February 8, 2019 by Dimensional Fund Advisors. Dimensional Fund Advisorshas the sole power to dispose or to direct the disposition of all of such shares. Dimensional Fund Advisors has the solepower to direct the vote of 3,355,723 of such shares. The address for Dimensional Fund Advisors is Building One,6300 Bee Cave Road, Austin, Texas 78746.Equity Compensation Plan InformationWe currently maintain two compensation plans that provide for the issuance of our Common Stock to officers and other employees, directors andconsultants. These consist of the 2006 Equity Incentive Plan and the 2016 Equity Incentive Plan, both of which have been approved by our stockholders. Weno longer grant any equity-based awards under the 2006 Equity Incentive Plan. The following table sets forth information regarding outstanding options andRSUs and shares reserved and remaining available for future issuance under the foregoing plans as of June 30, 2017: Plan CategoryNumber of securities to beissued uponexercise ofoutstanding options,warrants and rights(a)(1) Weighted-averageexercise price ofoutstanding options,warrants and rights(b)(2)(3) Number of securitiesremaining availablefor future issuanceunder equitycompensation plans(excluding securitiesreflected incolumn (a))(c)Equity compensation plans approved by security holders9,602,016 $17.19 2,785,792Equity compensation plans not approved by security holders— — —Total9,602,016 $17.19 2,785,792__________________________(1)This number includes 8,375,659 shares subject to outstanding options and 1,226,357 shares subject to outstanding RSU awards.(2)The weighted average exercise price is calculated based solely on the exercise prices of the outstanding options and does not reflect the shares thatwill be issued upon the vesting of outstanding awards of RSUs, which have no exercise price.(3)The weighted-average remaining contractual term of our outstanding options as of June 30, 2017 was 4.37 years.129Table of ContentsItem 13. Certain Relationships and Related Transactions and Director Independence CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCEProcedures for Approval of Related Person TransactionsPursuant to our Audit Committee charter, the Audit Committee has the responsibility for the review and approval of any related person transactions;provided that if the matter or transaction involves employment or compensation terms for services to our company, including retention or paymentprovisions relating to expert services, then it is presented to the Compensation Committee. In approving or rejecting a proposed transaction, or a relationshipthat encompasses many similar transactions, our Audit Committee will consider the relevant facts and circumstances available and deemed relevant,including but not limited to the risks, costs and benefits to us, the terms of the transaction, the availability of other sources for comparable services orproducts, and, if applicable, the impact on a director’s independence. Our Audit Committee approves only those transactions that, in light of knowncircumstances are not inconsistent with our best interests, as the Audit Committee determines in the good faith exercise of its discretion. In addition, weannually require each of our directors and executive officers to complete a directors’ and officers’ questionnaire that elicits information about related partytransactions as such term is defined by SEC rules and regulations. These procedures are intended to determine whether any such related party transactionimpairs the independence of a director or presents a conflict of interest on the part of a director, employee or officer.Transactions with Related Parties, Promoters and Certain Control PersonsDirector and Officer IndemnificationWe have entered into agreements to indemnify our directors and executive officers to the fullest extent permitted under Delaware law. In addition,our certificate of incorporation contains provisions limiting the liability of our directors and our bylaws contain provisions requiring us to indemnify ourofficers and directors.Equity-Based AwardsPlease see the “Grants of Plan-Based Awards” table and the “Director Compensation” table above for information on stock option and restrictedstock unit grants to our directors and named executive officers in fiscal year 2017.Employment RelationshipsHung-Fan (Albert) Liu, who is a brother of Sara Liu, our Co-Founder and Senior Vice President and a director, was employed in our operationsorganization in San Jose, California. Mr. Liu received a total compensation of approximately $262,000 in fiscal year 2017. The total compensation includessalary, bonus and equity awards.Shao Fen (Carly) Kao, who is a sister-in-law of Sara Liu, our Co-Founder and Senior Vice President and a director, was employed in our finance andaccounting organization in San Jose, California. Ms. Kao received total compensation of approximately $122,000 in fiscal year 2017. The totalcompensation includes salary, bonus and equity awards.Transactions with Ablecom and CompuwareWe have entered into a series of agreements with Ablecom Technology Inc. ("Ablecom"), a Taiwan corporation, and one of its affiliates, CompuwareTechnology, Inc ("Compuware"). Ablecom’s ownership of Compuware is below 50% but Compuware remains a related party as Ablecom still has significantinfluence over the operations. Ablecom’s Chief Executive Officer, Steve Liang, is the brother of Charles Liang, our President, Chief Executive Officer andChairman of the Board of Directors, and owns approximately 0.4% of our common stock. Charles Liang served as a Director of Ablecom during our fiscal2006, but is no longer serving in such capacity. In addition, Charles Liang and Sara Liu, his spouse, who is also an officer and director of ours, collectivelyown approximately 10.5% of Ablecom’s capital stock, while Steve Liang and other family members owned approximately 36.0% and 36.0% of Ablecom atJune 30, 2017 and 2016, respectively. Bill Liang, a brother of both Charles Liang and Steve Liang, also is a member of the Board of Directors of Ablecom.Bill Liang is also the Chief Executive Officer of Compuware, a member of Compuware’s Board of Directors and a holder of a significant equity interest inCompuware. Steve Liang is also a member of Compuware’s Board of Directors and is an equity holder of Compuware. None of the Company, Charles Liangor Sara Liu own any capital stock of Compuware.130Table of ContentsWe have a series of agreements with Ablecom, including multiple product development, production and service agreements, product manufacturingagreements, manufacturing services agreements and lease agreements for warehouse space.Under these agreements, we outsource a portion of our design activities and a significant part of our manufacturing of components such as serverchassis to Ablecom. Ablecom agrees to design products according to our specifications. Additionally, Ablecom agrees to build the tools needed tomanufacture the products. We have agreed to pay for the cost of chassis and related product tooling and engineering services and will pay for those itemswhen the work has been completed.We entered into a distribution agreement with Compuware, under which we appointed Compuware as a non-exclusive distributor of our products inTaiwan, China and Australia. We believe that the pricing and terms under the distribution agreement are similar to the pricing and terms of distributionarrangements we have with similar third-party distributors.We have also entered into a series of agreements with Compuware, including a multiple product development, production and service agreements,product manufacturing agreements, and lease agreements for office space. Under these agreements, we outsource to Compuware a portion of our designactivities and a significant part of our manufacturing of components, particularly power supplies. With respect to design activities, Compuware generallyagrees to design certain agreed-upon products according to our specifications, and further agrees to build the tools needed to manufacture the products. Wepay Compuware for the design and engineering services, and further agree to pay Compuware for the tooling.We retain full ownership of any intellectual property resulting from the design of these products and tooling. With respect to the manufacturingaspects of the relationship, Compuware purchases most of materials needed to manufacture the power supplies from outside markets and uses these materialsto manufacture the products and then sell to us. We review and frequently negotiate with Compuware the prices of the power supplies the we purchase fromCompuware. Compuware also manufactures motherboards, backplanes and other components used on our printed circuit boards. We sell to Compuware mostof the components needed to manufacture the above products. Compuware uses these components to manufacture and then sells back the products to us at apurchase price equal to the price at which we sold the components to Compuware, plus a “manufacturing value added” fee and other miscellaneous materialcharges and costs. We frequently review and negotiate with Compuware the amount of the “manufacturing value added” fee that will be included in the priceof the products we purchase from Compuware.Ablecom’s sales to us comprise a substantial majority of Ablecom’s net sales. For fiscal years ended June 30, 2017, 2016 and 2015, we purchasedproducts from Ablecom totaling $118.5 million, $117.6 million and $123.1 million, respectively. Amounts owed to Ablecom by us as of June 30, 2017 and2016, were $30.8 million and $29.8 million, respectively. For the fiscal years ended June 30, 2017, 2016 and 2015, we paid Ablecom $5.2 million, $7.8million and $4.9 million, respectively, for design services, tooling assets and miscellaneous costs.Compuware’s sales of our products to others comprise a majority of Compuware’s net sales. For fiscal years ended June 30, 2017, 2016 and 2015, wesold products to Compuware totaling $23.0 million, $29.1 million and $47.6 million, respectively. Amounts owed to us by Compuware as of June 30, 2017and 2016, were $7.9 million and $3.7 million, respectively. The price at which Compuware purchases the products from us is at a discount from our standardprice for purchasers who purchase specified volumes from us. In exchange for this discount, Compuware assumes the responsibility to install our products atthe site of the end customer and administers first-level customer support. For the fiscal years ended June 30, 2017, 2016 and 2015, we purchased productsfrom Compuware totaling $117.5 million, $125.0 million and $104.6 million, respectively. Amounts we owed to Compuware as of June 30, 2017 and 2016,were $32.2 million and $20.5 million, respectively. For the fiscal years ended June 30, 2017, 2016 and 2015, we paid Compuware $1.4 million, $1.1 millionand $0.8 million, respectively, for design services, tooling assets and miscellaneous costs.Our exposure to financial loss as a result of our involvement with Ablecom is limited to potential losses on our purchase orders in the event of anunforeseen decline in the market price and/or demand for our products such that we incur a loss on the sale or cannot sell the products. Our outstandingpurchase orders to Ablecom were $23.5 million and $22.8 million at June 30, 2017 and 2016, respectively, representing the maximum exposure to financialloss. We do not directly or indirectly guarantee any obligations of Ablecom, or any losses that the equity holders of Ablecom may suffer.Our exposure to financial loss as a result of our involvement with Compuware is limited to potential losses on our purchase orders in the event of anunforeseen decline in the market price and/or demand for our products such that we incur a loss on the sale or cannot sell the products. Our outstandingpurchase orders to Compuware were $56.4 million and $40.0 million at June 30, 2017 and 2016, respectively, representing the maximum exposure tofinancial loss. We do not directly or indirectly guarantee any obligations of Compuware, or any losses that the equity holders of Compuware may suffer.131Table of ContentsItem 14. Principal Accounting Fees and ServicesThe Audit Committee appointed Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year 2017.Independent Registered Public Accounting Firm Fees and ServicesThe following table sets forth the aggregate audit fees billed to us by our independent registered public accounting firm, Deloitte & Touche LLP, themember firms of Deloitte Touche Tohmatsu, and their respective affiliates (collectively, “Deloitte”), and fees paid to Deloitte for services in the fee categoriesindicated below for the fiscal years 2017 and 2016. The Audit Committee has considered the scope and fee arrangements for all services provided byDeloitte, taking into account whether the provision of non-audit services is compatible with maintaining Deloitte’s independence, and has pre-approved theservices described below. Fiscal Year Ended June 30, 2017 June 30, 2016Audit Fees(1)$22,259,000 $2,427,000Audit-Related Fees— —Tax Fees— —All Other Fees2,000 —Total$22,261,000 $2,427,000 __________________________(1)Audit fees consist of the aggregate fees for professional services rendered for the audit of our consolidated financial statements, review of interimcondensed consolidated financial statements and certain statutory audits.Audit Committee Pre-Approval Policies and ProceduresThe Audit Committee has determined that all services performed by Deloitte & Touche LLP are compatible with maintaining the independence ofDeloitte & Touche LLP. The Audit Committee’s policy on approval of services performed by the independent registered public accounting firm is to pre-approve all audit and permissible non-audit services to be provided by the independent registered public accounting firm during the fiscal year. The AuditCommittee reviews each non-audit service to be provided and assesses the impact of the service on the firm’s independence.PART IV Item 15. Exhibits and Financial Statement Schedules(a) 1. Financial StatementsSee Index to consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K, which is incorporated herein by reference.2. Financial Statement SchedulesAll financial statement schedules have been omitted because they are either not applicable or the required information is shown in the consolidatedfinancial statements or notes thereto.3. ExhibitsSee the Exhibit Index which precedes the signature page of this Annual Report on Form 10-K, which is incorporated herein by reference.(b) Exhibits132Table of ContentsSee Item 15(a)(3) above.(c) Financial Statement SchedulesSee Item 15(a)(2) above.EXHIBIT INDEX ExhibitNumber Description3.3 Amended and Restated Certificate of Incorporation of Super Micro Computer, Inc.(1)3.4 Amended and Restated Bylaws of Super Micro Computer, Inc.(1)4.1 Specimen Stock Certificate for Shares of Common Stock of Super Micro Computer, Inc.(1)10.1* Amended 1998 Stock Option Plan(1)10.2* Form of Incentive Stock Option Agreement under 1998 Stock Option Plan(1)10.3* Form of Nonstatutory Stock Option Agreement under 1998 Stock Option Plan(1)10.4* Form of Nonstatutory Stock Option Agreement outside the 1998 Stock Option Plan(1)10.5* 2006 Equity Incentive Plan(1)10.6* Form of Option Agreement under Super Micro Computer, Inc. 2006 Equity Incentive Plan(1)10.7* Form of Restricted Stock Agreement under Super Micro Computer, Inc. 2006 Equity Incentive Plan(1)10.8* Form of Restricted Stock Unit Agreement under Super Micro Computer, Inc. 2006 Equity Incentive Plan(1)10.9* Form of Directors’ and Officers’ Indemnity Agreement(1)10.10* Offer Letter for Sara Liu(1)10.11* Offer Letter for Alex Hsu(1)10.12* Offer Letter for Howard Hideshima(1)10.13* Director Compensation Policy(1)10.14 Product Manufacturing Agreement dated January 8, 2007 between Super Micro Computer, Inc. and Ablecom Technology Inc.(1)10.15* Form of Notice of Grant of Stock Option under 2006 Equity Incentive Plan(2)10.16* Form of Notice of Grant of Restricted Stock under 2006 Equity Incentive Plan(2)10.17* Form of Notice of Grant of Restricted Stock Unit under 2006 Equity Incentive Plan(2)10.18 Agreement of Purchase and Sale(3)10.19* Stock Option Exercise Notice and Restricted Stock Purchase Agreement—Charles Liang(4)10.20* Stock Option Exercise Notice and Restricted Stock Purchase Agreement—Sara Liu (5)10.21* Stock Option Exercise Notice and Restricted Stock Purchase Agreement—Shiow-Meei Liaw(5)10.22 Agreement of Purchase and Sale of Properties on Fox Lane and Fox Drive, San Jose, California(6)10.23 Business Loan Agreement dated as of June 17, 2010, by and between Super Micro Computer, Inc. and Bank of America(7)10.24 Amendment No.1 to Loan Agreement, dated August 15, 2011 between Super Micro Computer, Inc. and Bank of America (9)10.25 Amendment No. 2 to Loan Agreement, dated October 4, 2011 between Super Micro Computer, Inc. and Bank of America (9)10.26* 2006 Equity Incentive Plan, as amended(8)10.27 Purchase and Sale Agreement on Ridder Park Drive, San Jose, California(10)10.28 Addendum 1 to Purchase and Sale Agreement on Ridder Park Drive, San Jose, California(10)10.29 Amendment No. 3 to Loan Agreement, dated September 30, 2013 between Super Micro Computer, Inc. and Bank of America(11)10.30 Summary of Credit Facility, dated November 5, 2013 between Super Micro Computer, Inc. and CTBC Bank (11)133Table of Contents10.31 Extension of Loan Agreement with Bank of America, N.A., dated November 13, 2014(12)10.32 Summary of Credit Facility, dated December 1, 2014 between Super Micro Computer, Inc. and CTBC Bank (12)10.33 Amendment No. 4 to Loan Agreement, dated June 19, 2015 between Super Micro Computer, Inc. and Bank of America(13)10.34 Extension of Loan Agreement with Bank of America, N.A., dated November 13, 2015(14)10.35 Extension of Credit Agreement with CTBC Bank dated January 29, 2016(15)10.36* 2016 Equity Incentive Plan(16)10.37* Form of Notice of Grant of Stock Option under 2016 Equity Incentive Plan(17)10.38* Form of Stock Option Agreement Under 2016 Equity Incentive Plan(17)10.39* Form of Notice of Grant of Restricted Stock Units under 2016 Equity Incentive Plan(17)10.40* Form of Restricted Stock Units Agreement under 2016 Equity Incentive Plan(17)10.41 Extension of Loan Agreement with Bank of America, N.A., dated March 14, 2016(18)10.42 Extension of Loan Agreement with Bank of America, N.A., dated April 26, 2016(18)10.43 Summary of Credit Facility, dated April 1, 2016 between Super Micro Computer, Inc. and CTBC Bank(18)10.44 Extension of Loan Agreement with Bank of America, N.A., dated May 27, 2016(19)10.45 Credit Agreement dated as of June 30, 2016 between Super Micro Computer, Inc. and Bank of America(19)10.46 Second Amendment to Credit Agreement with Bank of America, N.A. dated May 5, 2017(20)10.47+ Summary of Credit Facilities with CTBC Bank dated May 8, 201710.48 Extension of Credit Agreement with Bank of America, N.A., dated October 28, 2017(21)10.49 Extension of Credit Agreement with Bank of America, N.A., dated January 12, 2018(22)10.50 Third Amendment to Credit Agreement with Bank of America, N.A., dated March 12, 2018(23)10.51+ Loan and Security Agreement with Bank of America, N.A., dated April 19, 201810.52 Extension of Loan and Security Agreement with Bank of America, N.A., dated September 7, 2018(24)10.53+ Summary of Credit Facilities with CTBC Bank dated January 17, 2018 and Extension letters dated on April 29, 201814.1 Code of Business Conduct and Ethics (25)21.1 Subsidiaries of Super Micro Computer, Inc.(15)24.1+ Power of Attorney (included in signature pages)31.1+ Certification of Charles Liang, President and CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2+ Certification of Kevin Bauer, CFO and Secretary Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1+ Certification of Charles Liang, President and CEO Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(26)32.2+ Certification of Kevin Bauer, CFO and Secretary Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(26)101.INS+ XBRL Instance Document101.SCH+ XBRL Taxonomy Extension Schema Document101.CAL+ XBRL Taxonomy Extension Calculation Linkbase Document101.DEF+ XBRL Taxonomy Extension Definition Linkbase Document101.LAB+ XBRL Taxonomy Extension Label Linkbase Document101.PRE+ XBRL Taxonomy Extension Presentation Linkbase Document__________________________+Filed herewith(1)Incorporated by reference to the same number exhibit filed with the Registrant’s Registration Statement on Form S-1 (Registration No. 333-138370),declared effective by the Securities and Exchange Commission on March 28, 2007.(2)Incorporated by reference to the Company’s Registration Statement on Form S-8 (Commission File No. 333-142404) filed with the Securities andExchange Commission on April 27, 2007.(3)Incorporated by reference to Exhibit 10.1 from the Company’s Current Report on Form 8-K (Commission File No. 001-33383) filed with theSecurities and Exchange Commission on June 29, 2007.Table of Contents(4)Incorporated by reference to the Company’s Annual Report on Form 10-K (Commission File No. 001-33383) filed with the Securities and ExchangeCommission on September 2, 2008.(5)Incorporated by reference to the Company’s Current Report on Form 8-K (Commission File No. 001-33383) filed with the Securities and ExchangeCommission on December 2, 2008.(6)Incorporated by reference to the Company’s Quarterly Report on Form 10-Q (Commission File No. 001-33383) filed with the Securities andExchange Commission on May 7, 2010.(7)Incorporated by reference to Exhibit 10.34 from the Company’s Annual Report on Form 10-K (Commission File No. 001-33383) filed with theSecurities and Exchange Commission on September 7, 2010.(8)Incorporated by reference to Appendix A from the Company’s Definitive Proxy Statement on Schedule 14A (Commission File No. 001-33383) filedwith the Securities and Exchange Commission on January 18, 2011.(9)Incorporated by reference to the Company's Quarterly Report on Form 10-Q (Commission File No. 001-33383) filed with the Securities andExchange Commission on November 7, 2011.(10)Incorporated by reference to the Company's Current Report on Form 8-K (Commission File No. 001-33383) filed with the Securities and ExchangeCommission on September 24, 2013.(11)Incorporated by reference to the Company’s Quarterly Report on Form 10-Q (Commission File No. 001-33383) filed with the Securities andExchange Commission on November 7, 2013.(12)Incorporated by reference to the Company’s Quarterly Report on Form 10-Q (Commission File No. 001-33383) filed with the Securities andExchange Commission on February 9, 2015.(13)Incorporated by reference to the Company’s Annual Report on Form 10-K (Commission File No. 001-33383) filed with the Securities and ExchangeCommission on September 10, 2015.(14)Incorporated by reference to the Company’s Quarterly Report on Form 10-Q (Commission File No. 001-33383) filed with the Securities andExchange Commission on November 16, 2015.(15)Incorporated by reference to the Company’s Quarterly Report on Form 10-Q (Commission File No. 001-33383) filed with the Securities andExchange Commission on February 4, 2016.(16)Incorporated by reference to the Company's Current Report on Form 8-K (Commission File No. 001-33383) filed with the Securities and ExchangeCommission on March 14, 2016.(17)Incorporated by reference to the Company's Form S-8 (Commission File No.333-210881) filed with the Securities and Exchange Commission onApril 22, 2016.(18)Incorporated by reference to the Company’s Quarterly Report on Form 10-Q (Commission File No. 001-33383) filed with the Securities andExchange Commission on May 6, 2016.(19)Incorporated by reference to the Company’s Annual Report on Form 10-K (Commission File No. 001-33383) filed with the Securities and ExchangeCommission on August 26, 2016.(20)Incorporated by reference to the Company’s Quarterly Report on Form 10-Q (Commission File No. 001-33383) filed with the Securities andExchange Commission on May 10, 2017.(21)Incorporated by reference to Exhibit 10.1 from the Company’s Current Report on 8-K (Commission File No. 001-33383) filed with the Securities andExchange Commission on October 31, 2017.(22)Incorporated by reference to Exhibit 10.1 from the Company’s Current Report on 8-K (Commission File No. 001-33383) filed with the Securities andExchange Commission on January 17, 2018.(23)Incorporated by reference to Exhibit 10.1 from the Company’s Current Report on 8-K (Commission File No. 001-33383) filed with the Securities andExchange Commission on March 13, 2018.(24)Incorporated by reference to Exhibit 10.1 from the Company’s Current Report on 8-K (Commission File No. 001-33383) filed with the Securities andExchange Commission on September 12, 2018.(25)Incorporated by reference to Exhibit 10.1 from the Company’s Current Report on 8-K (Commission File No. 001-33383) filed with the Securities andExchange Commission on February 5, 2019.(26)The certifications attached as Exhibit 32.1 and 32.2 accompany the Annual Report on Form 10-K pursuant to Section 906 of the Sarbanes-Oxley Actof 2002 and shall not be deemed “filed” by Super Micro Computer, Inc. for purposes of Section 18 of the Securities Exchange Act of 1934, asamended.*Management contract, or compensatory plan or arrangementItem 16. Form 10-K SummaryNone.Table of ContentsSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed onits behalf by the undersigned, thereunto duly authorized.SUPER MICRO COMPUTER, INC. Date:May 16, 2019 /s/ CHARLES LIANG Charles LiangPresident, Chief Executive Officer and Chairman of theBoard(Principal Executive Officer)Table of ContentsPOWER OF ATTORNEYKNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Charles Liang and KevinBauer, jointly and severally, his attorney-in-fact, each with the full power of substitution, for such person, in any and all capacities, to sign any and allamendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with theSecurities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thingrequisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might do or could do in person hereby ratifying andconfirming all that each of said attorneys-in-fact and agents, or his substitute, may do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities indicated and on the dates indicated. Signature Title Date/s/ CHARLES LIANG President, Chief Executive Officer and Chairman of the Board(Principal Executive Officer) May 16, 2019Charles Liang /s/ KEVIN BAUER Senior Vice President, Chief Financial Officer (PrincipalFinancial and Accounting Officer) May 16, 2019Kevin Bauer /s/ SARA LIU Director May 16, 2019Sara Liu /s/ LAURA BLACK Director May 16, 2019Laura Black /s/ MICHAEL S. MCANDREWS Director May 16, 2019Michael S. McAndrews /s/ HWEI-MING (FRED) TSAI Director May 16, 2019Hwei-Ming (Fred) Tsai /s/ SARIA TSENG Director May 16, 2019Saria Tseng /s/ SHERMAN TUAN Director May 16, 2019Sherman Tuan /s/ TALLY LIU Director May 16, 2019Tally Liu 137Exhibit 10.47PRIVATE & CONFIDENTIAL8 May 2017ATTENTION: SUPER MICRO COMPUTER TAIWAN, INC.RE: The Summary of Credit FacilitiesAccording to Super Micro's needs of debt finance, CTBC Bank CO., LTD. would like to propose the indicative bank facilities and terms belowProduct TypeProposed LineAmountTenorProposed RateNotesShort Term Loan IGuaranteeNTD700M/NTD100M1 Yearl1+0.25%/5‰ annually1. Collateral: Bade factory2. Guarantee line is included in Short TermLoan.ExportO/A loanUSD50M1 Year Bargaining Rate1. Clean loan2. Drawdown Tenor: 120 Days3. O/A list is required upon drawdown.4. 80% of invoice amount can be financed.Total CapUSD50MBargaining Rate:l 1M COF+0.40%: repay by the end of each quarter (Mar 31, Jun 30, Sep 30, Dec 31)l 1M COF+0.45%: Drawdown cross quarterCOF: CTBC Bank's cost of USD fundl1: CTBC Bank's cost of NTD fund Collateral:l Bade factory: Mortgaged amount increased from NTD840M to NTD1,160M.Terms:l Shared revolving line of credit facility of USD50M for SUPER MICRO COMPUTER TAIWAN, INC. and SUPER MICRO COMPUTER, B.V.l Tenor: From 8 May 2017 to 30 April 2018Yours Faithfully,For and on behalf ofCTBC BANK CO., LTD.中國信託商業銀行(股)公司 CTBC Bank Co., Ltd.11568 臺北市南港區經貿二路168號 No.168, Jingmao 2nd Rd., Nangang Dist., Taipei City 11568, Taiwan, R.O.C.Tel: 886-2-3327-7777PRIVATE & CONFIDENTIAL8 May 2017ATTENTION: SUPER MICRO COMPUTER, B.V.RE: The Summary of Credit FacilityAccording to Super Micro's needs of debt finance, CTBC Bank CO., LTD. would like to propose the indicative bank facility and terms belowProduct TypeProposed LineamountTenorProposed RateNotesExportO/A loanUSD50M1 YearBargaining Rate1. Clean loan2. Drawdown Tenor: 120 Days3. O/A list is required upon drawdown.4. 80% of invoice amount can be financed.Bargaining Rate:l 1M COF+0.40%: repay by the end of each quarter (Mar 31, Jun 30, Sep 30, Dec 31)l 1M COF+0.45%: Drawdown cross quarterCOF: CTBC BANK's cost of USD fund.Guarantor:l SUPER MICRO COMPUTER TAIWAN, INC.Terms:l Shared revolving line of credit facility of USD50M for SUPER MICRO COMPUTER TAIWAN, INC. and SUPER MICRO COMPUTER, B.V.l Tenor: from 8 May 2017 to 30 April 2018Yours faithfully,For and on behalf ofCTBC BANK CO ., LTD.中國信託商業銀行(股)公司 CTBC Bank Co., Ltd.11568 臺北市南港區經貿二路168號 No.168, Jingmao 2nd Rd., Nangang Dist., Taipei City 11568, Taiwan, R.O.C.Tel: 886-2-3327-7777Exhibit 10.51EXECUTION VERSION______________________________________________________________________________LOAN AND SECURITY AGREEMENTDated as of April 19, 2018______________________________________________________________________________SUPER MICRO COMPUTER, INC., as U.S. Borrower,SUPER MICRO COMPUTER B.V.,as Dutch Borrower______________________________________________________________________________BANK OF AMERICA, N.A.,as Agent______________________________________________________________________________BANK OF AMERICA, N.A.,as Sole Lead Arranger, Sole Bookrunner______________________________________________________________________________ING CAPITAL LLC,as Syndication Agent,EAST WEST BANK,as Documentation Agent______________________________________________________________________________99881535_9TABLE OF CONTENTSPageSECTION 1. DEFINITIONS; RULES OF CONSTRUCTION 11.1 Definitions 11.2 Accounting Terms 351.3 Uniform Commercial Code 351.4 Certain Matters of Construction 351.5 Currency Equivalents. 36 1.6 Dutch Terms 37SECTION 2. CREDIT FACILITIES 382.1 Revolver Commitment. 382.2 Reallocation of Revolver Commitments. 412.3 Letter of Credit Facility. 42SECTION 3. INTEREST, FEES AND CHARGES 453.1 Interest. 453.2 Fees. 463.3 Computation of Interest, Fees, Yield Protection 473.4 Reimbursement Obligations 473.5 Illegality 483.6 Inability to Determine Rates 483.7 Increased Costs; Capital Adequacy. 483.8 Mitigation 503.9 Funding Losses 503.10 Maximum Interest 50SECTION 4. LOAN ADMINISTRATION 514.1 Manner of Borrowing and Funding Revolver Loans. 514.2 Defaulting Lender 534.3 Reserved 534.4 Borrower Agent 534.5 One Obligation 544.6 Effect of Termination 54SECTION 5. PAYMENTS 54 i 99881535_9TABLE OF CONTENTS(continued)5.1 General Payment Provisions 545.2 Repayment of Revolver Loans 555.3 Reserved. 555.4 Payment of Other Obligations 555.5 Marshaling; Payments Set Aside 555.6 Application and Allocation of Payments. 555.7 Dominion Account 585.8 Account Stated 585.9 Taxes. 585.10 Lender Tax Information. 615.11 Nature and Extent of Each Borrower’s Liability. 625.12 Currency Matters 66SECTION 6. CONDITIONS PRECEDENT 676.1 Conditions Precedent to Initial U.S. Revolver Loans 676.2 Conditions Precedent to Initial Dutch Revolver Loans 686.3 Conditions Precedent to All Credit Extensions 706.4 Post-Closing Requirements 71SECTION 7. COLLATERAL 717.1 Grant of Security Interest 717.2 Lien on Deposit Accounts; Cash Collateral. 747.3 Real Estate Collateral. 747.4 Other Collateral. 747.5 Limitations 757.6 Further Assurances 75SECTION 8. COLLATERAL ADMINISTRATION 758.1 Borrowing Base Reports 758.2 Accounts. 768.3 Inventory. 778.4 Equipment. 788.5 Deposit Accounts 788.6 General Provisions. 79 ii 99881535_9TABLE OF CONTENTS(continued)8.7 Power of Attorney 80SECTION 9. REPRESENTATIONS AND WARRANTIES 819.1 General Representations and Warranties 819.2 Complete Disclosure 87SECTION 10. COVENANTS AND CONTINUING AGREEMENTS 8710.1 Affirmative Covenants 8710.2 Negative Covenants 9110.3 Financial Covenants 95SECTION 11. EVENTS OF DEFAULT; REMEDIES ON DEFAULT 9511.1 Events of Default 9511.2 Remedies upon Default 9711.3 License 9811.4 Setoff 9811.5 Remedies Cumulative; No Waiver. 98SECTION 12. AGENT 9912.1 Appointment, Authority and Duties of Agent. 9912.2 Agreements Regarding Collateral and Borrower Materials. 10012.3 Reliance By Agent 10112.4 Action Upon Default 10112.5 Ratable Sharing 10112.6 Indemnification 10112.7 Limitation on Responsibilities of Agent 10212.8 Successor Agent and Co-Agents. 10212.9 Due Diligence and Non-Reliance 10312.10 Remittance of Payments and Collections. 10312.11 Individual Capacities 10412.12 Titles 10412.13 Bank Product Providers 10412.14 No Third Party Beneficiaries 10412.15 Appointment of Agent as security trustee for U.K. Security Documents 10412.16 Parallel Debt Undertaking. 108 iii 99881535_9TABLE OF CONTENTS(continued)SECTION 13. BENEFIT OF AGREEMENT; ASSIGNMENTS 10913.1 Successors and Assigns 10913.2 Participations. 11013.3 Assignments. 11113.4 Replacement of Certain Lenders 11213.5 Disqualified Institutions. 112SECTION 14. MISCELLANEOUS 11314.1 Consents, Amendments and Waivers. 11314.2 Indemnity 11514.3 Notices and Communications. 11514.4 Performance of Borrowers’ Obligations 11614.5 Credit Inquiries 11614.6 Severability 11614.7 Cumulative Effect; Conflict of Terms 11714.8 Counterparts; Execution 11714.9 Entire Agreement 11714.10 Relationship with Lenders 11714.11 No Advisory or Fiduciary Responsibility 11714.12 Confidentiality 11814.13 Reserved. 11814.14 Reserved. 11814.15 GOVERNING LAW 11814.16 Consent to Forum; Bail-In of EEA Financial Institutions. 11814.17 Waivers by Borrowers 11914.18 Patriot Act Notice 12014.19 NO ORAL AGREEMENT 120LIST OF EXHIBITS AND SCHEDULESExhibit A AssignmentExhibit B Assignment NoticeSchedule 1.1 Revolver Commitments of LendersSchedule 7.3 Real Estate iv 99881535_9Schedule 8.5 Deposit AccountsSchedule 8.6.1 Business LocationsSchedule 9.1.4 Names and Capital StructureSchedule 9.1.5 Real Property in a Special Flood Hazard ZoneSchedule 9.1.11 Patents, Trademarks, Copyrights and LicensesSchedule 9.1.14 Environmental MattersSchedule 9.1.15 Restrictive AgreementsSchedule 9.1.16 LitigationSchedule 9.1.20 Labor ContractsSchedule 10.2.2 Existing LiensSchedule 10.2.17 Existing Affiliate Transactions v 99881535_9LOAN AND SECURITY AGREEMENTTHIS LOAN AND SECURITY AGREEMENT is dated as of April 19, 2018, among SUPER MICRO COMPUTER,INC., a Delaware corporation (“SMCI”, together with any other party joined hereto after the U.S. Closing Date as a “U.S. Borrower”,individually, each a “U.S. Borrower” and collectively, the “U.S. Borrowers”), upon the Dutch Closing Date (as defined below),SUPER MICRO COMPUTER B.V., a private limited liability company formed under the laws of the Netherlands and registeredwith the Trade Register of the Dutch Chamber of Commerce under number 17102792 (“SMCI BV”, together with any other partyjoined hereto after the Dutch Closing Date as a “Dutch Borrower”, individually, each a “Dutch Borrower” and collectively, the “DutchBorrowers”, and together with U.S. Borrowers, individually, a “Borrower” and, collectively, the “Borrowers”), the financialinstitutions party to this Agreement from time to time as Lenders, and BANK OF AMERICA, N.A., a national banking association(“Bank of America”), as administrative agent for the Lenders (in such capacity, “Agent”).R E C I T A L S:WHEREAS, Dutch Borrowers have requested that Dutch Lenders provide a credit facility to Dutch Borrowers to finance theirmutual and collective business enterprise. Dutch Lenders are willing to provide the credit facility on the terms and conditions set forthin this Agreement.WHEREAS, U.S. Borrowers have requested that U.S. Lenders provide a credit facility to U.S. Borrowers to finance theirmutual and collective business enterprise. U.S. Lenders are willing to provide the credit facility on the terms and conditions set forth inthis Agreement.NOW, THEREFORE, for valuable consideration hereby acknowledged, the parties agree as follows:SECTION 1.DEFINITIONS; RULES OF CONSTRUCTION1.1 Definitions. As used herein, the following terms have the meanings set forth below:Account Debtor Approved Countries: shall mean the United States, Canada, the Netherlands, Germany, France, the UnitedKingdom, Spain, Italy, Portugal, Australia, Hong Kong, New Zealand, Finland, Sweden, Norway, Belgium, Luxemburg, Ireland,Singapore, Switzerland, in each case together with any state or province or territory thereof (as applicable); provided, that, the Agentmay, in its Permitted Discretion and as a condition to such jurisdiction remaining an Account Debtor Approved Country, require thatBorrowers provide local law security documentation in respect of Accounts of Account Debtors organized outside of the jurisdiction oforganization of such Borrowers to ensure that the Agent has a duly perfected and enforceable Lien under the applicable law of suchjurisdiction; further provided, that Agent may add to or remove from the above list any countries in its Permitted Discretion.1Acquisition: a transaction or series of transactions resulting in (a) acquisition of a business, division or substantially all assets ofa Person; (b) record or beneficial ownership of 50% or more of the Equity Interests of a Person; or (c) merger, consolidation orcombination of a Borrower or Subsidiary with another Person.Affiliate: with respect to a specified Person, any other Person that directly, or indirectly through intermediaries, Controls, isControlled by or is under common Control with the specified Person.Agent Indemnitees: Agent and its officers, directors, employees, Affiliates, agents and attorneys.Agent Professionals: attorneys, accountants, appraisers, auditors, business valuation experts, environmental engineers orconsultants, turnaround consultants, and other professionals and experts retained by Agent.Agreement Currency: as defined in Section 1.5. Allocable Amount: as defined in Section 5.11.3.Alternative Currency: Euros, Sterling or any other currency acceptable to the Agent, and the Issuing Bank.Anti-Terrorism Law: any law relating to terrorism or money laundering, including the Patriot Act and the DMLTFPA.Applicable Law: all laws, rules, regulations and governmental guidelines applicable to the Person or matter in question,including statutory law, common law and equitable principles, as well as provisions of constitutions, treaties, statutes, rules, regulations,orders and decrees of Governmental Authorities.Applicable Margin: the margin set forth below:(i) at any time prior to the Conversion Date, 2.75% with respect to U.S. Revolver Loans, and(ii) upon and after the Conversion Date, as determined by the average daily Global Availability for the last Fiscal Quarter:2LevelGlobal Availability(as % of RevolverCommitments)U.S. RevolverLoansDutchRevolver LoansI<25%2.00%2.00%II>25% and < 50%1.75%1.75%III>50%1.50%1.50%Until the last day of the Fiscal Quarter after the completion of the first full Fiscal Quarter after the Conversion Date, margins shall bedetermined as if Level II were applicable. Thereafter, margins shall be subject to increase or decrease by Agent on the first day of thecalendar month following each Fiscal Quarter end. If Agent is unable to calculate average daily Global Availability for a Fiscal Quarterdue to Borrowers’ failure to deliver any Borrowing Base Report when required hereunder, then, at the option of Agent or RequiredLenders, margins shall be determined as if Level III were applicable until the first day of the calendar month following its receipt ofsuch Borrowing Base Report.Applicable Time Zone: for borrowings under, and payments due by Borrower or Lenders on (a) with respect to U.S. RevolverLoans, time of the day in Los Angeles, California, and (b) with respect to Dutch Revolver Loans, time of day in London, EnglandApproved Fund: any entity that is owned or Controlled by a Lender or Affiliate of a Lender, and is engaged in making orinvesting in commercial loans in its ordinary course of activities.Asset Disposition: a sale, lease, license, consignment, transfer or other disposition of Property of an Obligor, including anydisposition in connection with a sale-leaseback transaction or synthetic lease.Assignment: an assignment agreement between a Lender and Eligible Assignee, in the form of Exhibit A or otherwisesatisfactory to Agent.Availability Reserve: the Dutch Availability Reserve or the U.S. Availability Reserve, as the context requires.Bail-In Action: the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority inrespect of any liability of an EEA Financial Institution.Bail-In Legislation: with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of theEuropean Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time totime which is described in the EU Bail-In Legislation Schedule.3Bank of America Indemnitees: Bank of America and its officers, directors, employees, Affiliates, agents and attorneys.Bank Products: Dutch Bank Products and/or U.S. Bank Products, as the context so requires.Bank Product Reserve: the Dutch Bank Product Reserve and/or U.S. Bank Product Reserve, as the context so requires.Bankruptcy Code: Title 11 of the United States Code.Board of Governors: the Board of Governors of the Federal Reserve System.Borrowed Money: with respect to any Obligor, without duplication, its (a) Debt that (i) arises from the lending of money byany Person to such Obligor, (ii) is evidenced by notes, drafts, bonds, debentures, credit documents or similar instruments, (iii) accruesinterest or is a type upon which interest charges are customarily paid (excluding trade payables owing in the Ordinary Course ofBusiness), or (iv) was issued or assumed as full or partial payment for Property; (b) Capital Leases; (c) letter of credit reimbursementobligations; and (d) guaranties of any of the foregoing owing by another Person.Borrower Agent: as defined in Section 4.4.Borrower Materials: Dutch Borrowing Base Reports, U.S. Borrowing Base Reports, Compliance Certificates and otherinformation, reports, financial statements and other materials delivered by any Borrower hereunder, as well as other Reports andinformation provided by Agent to Lenders.Borrowing: a group of Dutch Revolver Loans or U.S. Revolver Loans (as applicable) that are made on the same day.Borrowing Base Report: the Dutch Borrowing Base Report and/or U.S. Borrowing Base Report, as the context so requires.Business Day: any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close underthe laws of, or are in fact closed in, California or Texas , and if such day relates to a LIBOR, any such day on which dealings in Dollardeposits are conducted in the London interbank market and if such day relates to a Dutch Revolver Loan or Dutch Letter of Credit,any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the laws of, or are in factclosed in, London, England or Amsterdam, the Netherlands.Capital Expenditures: all liabilities incurred or expenditures made by a Borrower or Subsidiary for the acquisition of fixedassets, or any improvements, replacements, substitutions or additions thereto with a useful life of more than one year.4Capital Lease: any lease required to be capitalized for financial reporting purposes in accordance with GAAP.Cash Collateral: cash delivered to Agent to Cash Collateralize any Obligations, and all interest, dividends, earnings and otherproceeds relating thereto.Cash Collateralize: the delivery of cash to Agent, as security for the payment of (a) Dutch Obligations, in an amount equal to (i)with respect to Dutch LC Obligations, 105% of the aggregate Dutch LC Obligations, and (ii) with respect to any inchoate, contingentor other Dutch Obligations (including Dutch Secured Bank Product Obligations), Agent’s good faith estimate of the amount due or tobecome due, including fees, expenses and indemnification hereunder and (b) U.S. Obligations, in an amount equal to (i) with respect toU.S. LC Obligations, 105% of the aggregate U.S. LC Obligations, and (ii) with respect to any inchoate, contingent or other U.S.Obligations (including U.S. Secured Bank Product Obligations), Agent’s good faith estimate of the amount due or to become due,including fees, expenses and indemnification hereunder. “Cash Collateralization” has a correlative meaning.Cash Equivalents: (a) marketable obligations issued or unconditionally guaranteed by, and backed by the full faith and creditof, the U.S. government, maturing within 12 months of the date of acquisition; (b) certificates of deposit, time deposits and bankers’acceptances maturing within 12 months of the date of acquisition, and overnight bank deposits, in each case which are issued by Bankof America or a commercial bank organized under the laws of the United States or any state or district thereof, rated A-1 (or better) byS&P or P-1 (or better) by Moody’s at the time of acquisition, and (unless issued by a Lender) not subject to offset rights; (c) repurchaseobligations with a term of not more than 30 days for underlying investments of the types described in clauses (a) and (b) entered intowith any bank described in clause (b); (d) commercial paper issued by Bank of America or rated A-1 (or better) by S&P or P-1 (orbetter) by Moody’s, and maturing within nine months of the date of acquisition; and (e) shares of any money market fund that hassubstantially all of its assets invested continuously in the types of investments referred to above, has net assets of at least $500,000,000and has the highest rating obtainable from either Moody’s or S&P.Cash Management Services: services relating to operating, collections, payroll, trust, or other depository or disbursementaccounts, including automated clearinghouse, e-payable, electronic funds transfer, wire transfer, controlled disbursement, overdraft,depository, information reporting, lockbox and stop payment services.CERCLA: the Comprehensive Environmental Response Compensation and Liability Act (42 U.S.C. § 9601 et seq.).Change in Law: the occurrence, after the date hereof, of (a) the adoption, taking effect or phasing in of any law, rule, regulationor treaty; (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof; or (c) themaking, issuance or application of any request, guideline, requirement or directive (whether or not having the force of5law) by any Governmental Authority; provided, that “Change in Law” shall include, regardless of the date enacted, adopted or issued,all requests, rules, guidelines, requirements or directives (i) under or relating to the Dodd-Frank Wall Street Reform and ConsumerProtection Act, or (ii) promulgated pursuant to Basel III by the Bank for International Settlements, the Basel Committee on BankingSupervision (or any similar authority) or any other Governmental Authority.Change of Control: the occurrence of any of the following in any transaction or series of related transactions or events:(a) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities ExchangeAct of 1934, but excluding any employee benefit plan of such person or its subsidiaries, and any person or entity actingin its capacity as trustee, agent or other fiduciary or administrator of any such plan) becomes the “beneficial owner” (asdefined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a person or group shall bedeemed to have “beneficial ownership” of all securities that such person or group has the right to acquire, whether suchright is exercisable immediately or only after the passage of time (such right, an “option right”)), directly or indirectly, ofthirty five percent (35)% or more of the Equity Interests of SMCI entitled to vote for members of the board of directorsor equivalent governing body of the SMCI on a fully-diluted basis (and taking into account all such securities that such“person” or “group” has the right to acquire pursuant to any option right);(b) SMCI fails to own and control 100% of the Equity Interests of its Subsidiaries except as a disposition ofsuch Equity Interests is subject to a Permitted Asset Disposition; or(c) during any period of twelve (12) consecutive months, a majority of the members of the board of directors orother equivalent governing body of SMCI cease to be composed of individuals (i) who were members of that board orequivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalentgoverning body was approved by individuals referred to in clause (i) above constituting at the time of such election ornomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to thatboard or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) aboveconstituting at the time of such election or nomination at least a majority of that board or equivalent governing body.Claims: all claims, liabilities, obligations, losses, damages, penalties, judgments, proceedings, interest, costs and expenses ofany kind (including remedial response costs, reasonable attorneys’ fees and Extraordinary Expenses) at any time (including after FullPayment of the Obligations or replacement of Agent or any Lender) incurred by any Indemnitee or asserted against any Indemnitee byany Obligor or other Person, in any way relating to (a) any Revolver Loans,6Letters of Credit, Loan Documents, Borrower Materials, or the use thereof or transactions relating thereto, (b) any action taken oromitted in connection with any Loan Documents, (c) the existence or perfection of any Liens, or realization upon any Collateral, (d)exercise of any rights or remedies under any Loan Documents or Applicable Law, or (e) failure by any Obligor to perform or observeany terms of any Loan Document, in each case including all costs and expenses relating to any investigation, litigation, arbitration orother proceeding (including an Insolvency Proceeding or appellate proceedings), whether or not the applicable Indemnitee is a partythereto.Code: the Internal Revenue Code of 1986.Collateral: the Dutch Collateral and/or U.S. Collateral, as the context so requires.Commitment Termination Date: the earliest to occur of (a) the Revolver Termination Date; (b) the date on which Borrowersterminate the Revolver Commitments pursuant to Section 2.1.5; or (c) the date on which the Revolver Commitments are terminatedpursuant to Section 11.2.Commodity Exchange Act: the Commodity Exchange Act (7 U.S.C. § 1 et seq.).Competitor: the following listed Persons: Huawei, Inspur, Sogun, Lenova, Quanta, Winstron, Asus, Foxcon, Flextronics, Dell,HPE, IBM, Cisco, Fujitsu, NEC, Samsung, Intel, Seagate and Western Digital.Compliance Certificate: a certificate, in form and substance satisfactory to Agent, by which Borrowers certify compliance withSection 10.3 (and provide the calculation of the financial covenants set forth in Section 10.3 whether or not a Trigger Period exists).Connection Income Taxes: Other Connection Taxes that are imposed on or measured by net income (however denominated),or are franchise or branch profits Taxes.Consolidated EBITDA: for any fiscal period, without duplication, the total of the following for SMCI and its Subsidiaries on aconsolidated basis each calculated for such period in accordance with GAAP, (a) Consolidated Net Income plus (b) to the extentdeducted in calculating such Consolidated Net Income (without duplication): the sum of (i) Consolidated Interest Charges, (ii) theprovision for federal, state, local and foreign income taxes payable, (iii) depreciation and amortization expense (iv) fees and expensesincurred in connection with the negotiation, execution and delivery on the U.S. Closing Date of the Loan Documents, (v) non-cashcharges and losses (excluding any such non-cash charges or losses to the extent (A) relating to any non-cash expenditure, charge orloss relating to write-offs, write-downs or reserves with respect to Accounts and Inventory, (B) any such non-cash item to the extent itrepresents an accrual of, or reserve for, such expenditures in any future period), (vi) non-cash expenses in connection with the issuanceof Equity Interests (other than Disqualified Stock) to the extent permitted by this Agreement to the employees, officers or directors ofSMCI or any of its Subsidiaries,(vii) non-recurring expenses in connection with any Permitted Acquisitions or other Investmentpermitted under this Agreement or a Permitted Asset7Disposition which is not in the Ordinary Course of Business, (viii) charges or expenses incurred and paid during the Fiscal Yearending June 30, 2018 in the aggregate amount not to exceed $20,000,000, in connection with the preparation of the audited financialstatements of SMCI for the Fiscal Year ending June 30, 2017 and the preparation and filing of Borrower’s Form 10-K with theSecurities and Exchange Commission for its Fiscal Year ending June 30, 2017, and (ix) any other item approved by Agent in itsPermitted Discretion, plus (c) to the extent not included in determining Consolidated Net Income, business interruption insuranceproceeds received in cash in such period less, (d) without duplication and to the extent reflected as a gain or otherwise included in thecalculation of Consolidated Net Income for such period (i) any credit for federal, state, local or foreign income taxes payable, (ii) non-cash gains (excluding any such non-cash gains to the extent (A) there were cash gains with respect to such gains in past accountingperiods or (B) there is a reasonable expectation that there will be cash gains with respect to such gains in future accounting periods),(iii) any aggregate net gain from any Permitted Asset Disposition (excluding the disposition of any Accounts or Inventory) made not inthe Ordinary Course of Business and (iv) any other item required by Agent in its Permitted Discretion.Consolidated Interest Charges: for any period of measurement, the sum of (a) all interest, premium payments, debt discount,fees, charges and related expenses in connection with Borrowed Money (including capitalized interest) or in connection with thedeferred purchase price of assets, in each case to the extent treated as interest in accordance with GAAP, (b) all interest paid or payablewith respect to discontinued operations and (c) the portion of rent expense under capitalized Leases that is treated as interest inaccordance with GAAP, in each case, of or by SMCI and its Subsidiaries on a consolidated basis.Consolidated Net Income: at any date of determination, the net income (or loss) of SMCI and its Subsidiaries on a consolidatedbasis for the applicable period of measurement; provided that Consolidated Net Income shall exclude (a) extraordinary gains andextraordinary losses for such period, (b) the net income of any Subsidiary during such period to the extent that the declaration orpayment of Distributions by such Subsidiary of such income is not permitted by operation of the terms of its Organic Documents orany agreement, instrument or law applicable to such Subsidiary during such period, and (c) any income (or loss) for such period of anyPerson if such Person is not a Subsidiary, except that the Equity Interests of SMCI or any of its Subsidiaries in the net income of anysuch Person for such period shall be included in Consolidated Net Income up to the aggregate amount of cash actually distributed bysuch Person during such period to SMCI or a Subsidiary as a Distribution (and in the case of a Distribution to a Subsidiary, suchSubsidiary is not precluded from further distributing such amount to SMCI as described in clause (b) of this proviso).Contingent Obligation: any obligation of a Person arising from a guaranty, indemnity or other assurance of payment orperformance of any Debt, lease, dividend or other obligation (“primary obligations”) of another obligor (“primary obligor”) in anymanner, whether directly or indirectly, including any obligation of such Person under any (a) guaranty, endorsement, co-making or salewith recourse of an obligation of a primary obligor; (b) obligation to make take-or-pay or similar8payments regardless of nonperformance by any other party to an agreement; and (c) arrangement (i) to purchase any primary obligationor security therefor, (ii) to supply funds for the purchase or payment of any primary obligation, (iii) to maintain or assure workingcapital, equity capital, net worth or solvency of the primary obligor, (iv) to purchase Property or services for the purpose of assuring theability of the primary obligor to perform a primary obligation, or (v) otherwise to assure or hold harmless the holder of any primaryobligation against loss in respect thereof. The amount of any Contingent Obligation shall be deemed to be the stated or determinableamount of the primary obligation (or, if less, the maximum amount for which such Person may be liable under the instrumentevidencing the Contingent Obligation) or, if not stated or determinable, the maximum reasonably anticipated liability with respectthereto.Control: possession, directly or indirectly, of the power to direct or cause direction of a Person’s management or policies,whether through the ability to exercise voting power, by contract or otherwise.Conversion Date: the date on which the Agent provides to Borrower Agent written notice (together with an updated Schedule1.1 reflecting the Revolver Commitments upon the occurrence of the Conversion Date) that each of the following conditions have beensatisfied:(a) Borrower Agent has requested, in a writing delivered to Agent, that the Agent pursue the actions necessary tocause the Conversion Date to occur;(b) SMCI has filed all of its unfiled 10Q and 10K filings with the SEC and Agent and Supermajority Lenders havereviewed and approved all such filings;(c) SMCI has delivered to Agent and Lenders its Fiscal Year ending June 30, 2017 unqualified audited financialstatements together with a management letter from its certified public accountants (who are acceptable to Agent), indicating thatany issues resulting in the late filing of its 10Q and 10K filings with the SEC have been resolved;(d) confirmation by Agent that SMCI is in good standing with the NASDAQ Stock Market;(e) Agent has received satisfactory confirmation that upon the satisfaction of all of the conditions set forth in thisdefinition, the Revolver Commitments shall be in an amount agreed upon by Agent and Borrower Agent;(f) Agent and Supermajority Lenders have completed their business and legal due diligence, including collateralreviews, field examinations, audits, appraisals, assessments and other reviews by Agent and Supermajority Lenders;(g) Global Availability after giving effect to the Conversion Date is in an amount greater than $100,000,000;9(h) Agent has received such additional Revolver Commitments from the Lenders or Eligible Assignees as aredeemed necessary by Agent and Borrower Agent;(i) Each Lender providing a Revolver Commitment after the Conversion Date has obtained internal credit approval;(j) All of the matters set forth in Section 6.4.1 have been completed; and(j) Agent has received all such documents executed by any Obligor, Lender or Eligible Assignee as deemednecessary by Agent in its Permitted Discretion, including any amendments to the Loan Documents.CRR: means Regulation (EU) no. 575/2013 of 26 June 2013 on prudential requirements for credit institutions and investmentfirms and amending regulation (EU) No. 648/2012.CWA: the Clean Water Act (33 U.S.C. §§1251 et seq.).Debt: as applied to any Person, without duplication, (a) all items that would be included as liabilities on a balance sheet inaccordance with GAAP, including Capital Leases, but excluding trade payables incurred and being paid in the Ordinary Course ofBusiness; (b) all Contingent Obligations; (c) all reimbursement obligations in connection with letters of credit issued for the account ofsuch Person; and (d) in the case of a Borrower, the Obligations. The Debt of a Person shall include any recourse Debt of anypartnership in which such Person is a general partner or joint venturer.Default: an event or condition that, with the lapse of time or giving of notice, would constitute an Event of Default.Default Rate: for any Obligation (including, to the extent permitted by law, interest not paid when due), 2% plus the interestrate otherwise applicable thereto.Defaulting Lender: any Lender that (a) has failed to comply with its funding obligations hereunder, and such failure is notcured within two Business Days of the date required hereunder; (b) has notified Agent or any Borrower that such Lender does notintend to comply with its funding obligations hereunder or under any other credit facility, or has made a public statement to that effect;(c) has failed, within three Business Days following request by Agent or any Borrower, to confirm in a manner satisfactory to Agentand Borrowers that such Lender will comply with its funding obligations hereunder; or (d) other than an Undisclosed Administration,has, or has a direct or indirect parent company that has, become the subject of an Insolvency Proceeding (including reorganization,liquidation, or appointment of a receiver, custodian, administrator or similar Person by the Federal Deposit Insurance Corporation orany other regulatory authority) or Bail-In Action; provided, that a Lender shall not be a Defaulting Lender solely by virtue of aGovernmental Authority’s ownership of an equity interest in such Lender or parent company unless the ownership10provides immunity for such Lender from jurisdiction of courts within the United States or from enforcement of judgments or writs ofattachment on its assets, or permits such Lender or Governmental Authority to repudiate or otherwise to reject such Lender’sagreements.Deposit Account Control Agreement: control agreement satisfactory to Agent executed by an institution maintaining a DepositAccount for an Obligor, to perfect Agent’s Lien on such account.Designated Jurisdiction: a country or territory that is the target of a Sanction.Dilution Percent: the percent, determined for Borrowers’ most recent Fiscal Quarter or trailing twelve month period (asdetermined by Agent), equal to (a) bad debt write-downs or write-offs, discounts, returns, promotions, credits, credit memos and otherdilutive items with respect to Accounts, divided by (b) gross sales.Dilution Reserve: with respect to Dutch Borrowers or U.S. Borrowers, an amount equal to 1.0% of the sum of Eligible CreditInsured Accounts and Eligible Non-Credit Insured Accounts for each percentage point (or portion thereof) that the Dilution Percentexceeds 5%.Disqualified Institution: on any date, (a) any Person designated by Borrower Agent as a “Disqualified Institution” by writtennotice delivered to Agent on or prior to the date hereof and (b) any other Person that is a Competitor of a Borrower or any of itsSubsidiaries, which Person has been designated by Borrower Agent as a “Disqualified Institution” by written notice to Agent and theLenders (including by posting such notice to the Platform) not less than 15 Business Days prior to such date; provided that“Disqualified Institutions” shall exclude any Person that the Borrower Agent has designated as no longer being a “DisqualifiedInstitution” by written notice delivered to the Agent from time to time.Disqualified Stock: with respect to any Person, any Equity Interest issued by that Person, that, by its terms (or by the terms ofany security into which it is convertible or for which it is exchangeable), or upon the happening of any event (other than a Change inControl or similar event), (a) matures (excluding any maturity as the result of an optional redemption by the issuer thereof) or ismandatorily redeemable (other than solely for Equity Interests which are not otherwise Disqualified Stock), pursuant to a sinking fundobligation or otherwise or (b) is convertible into or exchangeable (unless at the sole option of the issuer thereof) for (i) debt securities or(ii) any Equity Interest referred to in clause (a) above, in each case at any time prior to the date that is ninety-one (91) days after theRevolver Termination Date.Distribution: any declaration or payment of a distribution, interest or dividend on any Equity Interest (other than payment-in-kind); distribution, advance or repayment of Debt to a holder of Equity Interests; or purchase, redemption, or other acquisition orretirement for value of any Equity Interest.DMLTFPA: the Dutch Money Laundering and Terrorism Finance Prevention Act (Wet ter voorkoming van witwassen enfinancieren van terrorisme)11Dollars: lawful money of the United States.Dominion Account: a special account established by Borrowers at Bank of America or another bank acceptable to Agent, overwhich Agent has exclusive control for withdrawal purposes; provided, that the Dominion Account into which proceeds of DutchCollateral are deposited shall be in a country acceptable to Agent other than the Netherlands.DQ List: as defined in Section 13.5.4.Due Diligence Trigger Period: the period (a) Global Availability is less than the greater of (i) the $50,000,000, and (ii) 17.5%of the Global Borrowing Base; and (b) continuing until, during each of the preceding 60 consecutive days, no Event of Default hasexisted and Global Availability has been more than the greater of (i) $50,000,000 and (y) 17.5% of the Global Borrowing Base.Dutch Accounts Formula Amount: the sum of 85% of the Value of Eligible Non-Credit Insured Accounts of Dutch Borrowers.Dutch Availability: the Dutch Borrowing Base minus Dutch Revolver Usage.Dutch Availability Reserve: the sum (without duplication) of (a) the Dutch Inventory Reserve; (b) the Rent and ChargesReserve with respect to any Dutch Borrower; (c) the Dutch Bank Product Reserve; (d) the aggregate amount of liabilities secured byLiens upon Dutch Collateral that are or may be senior to Agent’s Liens (but imposition of any such reserve shall not waive an Event ofDefault arising therefrom); (e) the Dilution Reserve with respect to Dutch Borrowers; and (f) such additional reserves, in such amountsand with respect to such matters, as Agent in its Permitted Discretion may elect to impose from time to time.Dutch Bank Account Pledge: the bank account pledge governed by Dutch law dated as of the Dutch Closing Date by andamong the Dutch Borrowers and Agent.Dutch Bank Product: any of the following products or services extended to a Dutch Borrower or Affiliate of a Dutch Borrower(other than U.S. Borrowers) by a Lender or any of its Affiliates: (a) Cash Management Services; (b) products under HedgingAgreements; (c) commercial credit card and merchant card services; and (d) leases, supply chain financing and other banking productsor services, other than Dutch Letters of Credit.Dutch Bank Product Reserve: the aggregate amount of reserves established by Agent from time to time in its discretion withrespect to Dutch Secured Bank Product Obligations.Dutch Borrowing Base: on any date of determination, an amount equal to the lesser of (a) the aggregate Dutch RevolverCommitments; or (b) the sum of the Dutch Accounts Formula Amount, plus the Dutch Inventory Formula Amount, minus the DutchAvailability Reserve; provided, that at no time shall the amount calculated hereunder exceed 30% of the Global Borrowing Base(calculated after giving effect to such limitation).12Dutch Borrowing Base Report: a report of the Dutch Borrowing Base, in form and substance satisfactory to Agent.Dutch Closing Date: as defined in Section 6.2.Dutch Collateral: all Property described in any Security Documents as security for any Dutch Obligations, and all otherProperty of a Dutch Obligor that now or hereafter secures (or is intended to secure) any Dutch Obligations.Dutch Inventory Formula Amount: the lesser of (i) 70% of the Value of Eligible Inventory of Dutch Borrowers; or (ii) 85% ofthe NOLV Percentage of the Value of Eligible Inventory of Dutch Borrowers.Dutch Inventory Reserve: reserves established by Agent to reflect factors that may negatively impact the Value of Inventory ofDutch Borrowers, including change in salability, obsolescence, seasonality, theft, shrinkage, imbalance, change in composition or mix,markdowns and vendor chargebacks.Dutch LC Obligations: the sum of (a) all amounts owing by Dutch Borrowers for drawings under Dutch Letters of Credit; and(b) the Stated Amount of all outstanding Dutch Letters of Credit.Dutch Lenders: lenders party to this Agreement (including Agent in its capacity as provider of Dutch Swingline Loans) andany Person who hereafter becomes a “Dutch Lender” pursuant to an Assignment, including any Lending Office of the foregoing.Dutch Letter of Credit: any standby or documentary letter of credit, foreign guaranty, documentary bankers acceptance,indemnity, reimbursement agreement or similar instrument issued by Issuing Bank for the account or benefit of a Dutch Borrower orAffiliate of a Dutch Borrower (other than a U.S. Borrower).Dutch Moveable Assets Pledge: the moveable assets pledge governed by Dutch law dated as of the Dutch Closing Date by andamong the Dutch Borrower and the Agent.Dutch Obligations: all (a) principal of and premium, if any, on the Dutch Revolver Loans, (b) Dutch LC Obligations and otherobligations of Dutch Obligors with respect to Dutch Letters of Credit, (c) interest, expenses, fees, indemnification obligations,Extraordinary Expenses and other amounts payable by Dutch Obligors under Loan Documents, (d) Dutch Secured Bank ProductObligations, and (e) other Debts, obligations and liabilities of any kind owing by Dutch Obligors pursuant to the Loan Documents, ineach case whether now existing or hereafter arising, whether evidenced by a note or other writing, whether allowed in any InsolvencyProceeding, whether arising from an extension of credit, issuance of a letter of credit, acceptance, loan, guaranty, indemnification orotherwise, and whether direct or indirect, absolute or contingent, due or to become due, primary13or secondary, or joint or several; provided, that Dutch Obligations of a Dutch Obligor shall not include its Excluded Swap Obligations.Dutch Obligor: each Dutch Borrower, Guarantor or other Person that is liable for payment of any Dutch Obligations or that hasgranted a Lien on its assets in favor of Agent to secure any Dutch Obligations and is organized under the laws of any Jurisdiction otherthan the U.S.Dutch Protective Advances: as defined in Section 2.1.7.Dutch Receivables Pledge: the receivables pledge governed by Dutch law dated as of the Dutch Closing Date by and amongthe Dutch Borrower and the Agent.Dutch Revolver Commitment: for any Dutch Lender, its obligation to make Dutch Revolver Loans and to participate in DutchLC Obligations up to the maximum principal amount shown on Schedule 1.1, as hereafter modified pursuant to Sections 2.1.8 or2.2.2 or an Assignment to which it is a party. “Dutch Revolver Commitments” means the aggregate amount of such commitments ofall Dutch Lenders.Dutch Revolver Loan: any loan made pursuant to Section 2.1 or as a Dutch Swingline Loan.Dutch Revolver Usage: (a) the aggregate amount of outstanding Dutch Revolver Loans; plus (b) the aggregate Stated Amountof outstanding Dutch Letters of Credit, except to the extent Cash Collateralized by Dutch Borrowers.Dutch Secured Bank Product Obligations: Debt, obligations and other liabilities with respect to Dutch Bank Products owing bya Dutch Borrower or Affiliate of a Dutch Borrower (other than a U.S. Borrower) to a Dutch Secured Bank Product Provider;provided, that Dutch Secured Bank Product Obligations of a Dutch Obligor shall not include its Excluded Swap Obligations.Dutch Secured Bank Product Provider: (a) Bank of America (and any of its Lending Offices) or any of its Affiliates; and (b)any other Dutch Lender or Affiliate of a Dutch Lender or a counterparty approved by Agent in its sole discretion, that is providing aDutch Bank Product, provided such provider delivers written notice to Agent, in form and substance satisfactory to Agent, within 10days following the later of the Dutch Closing Date or creation of the Dutch Bank Product, (i) describing the Dutch Bank Product andsetting forth the maximum amount to be secured by the Dutch Collateral and the methodology to be used in calculating such amount,and (ii) agreeing to be bound by Section 12.13.Dutch Secured Parties: Agent, Issuing Bank (with respect to Dutch Letters of Credit), Dutch Lenders and Dutch Secured BankProduct Providers.Dutch Security Documents: the Dutch Moveable Assets Pledge, the Dutch Receivables Pledge, the Dutch Bank AccountPledge, the Dutch U.K. Security Agreement and the Dutch Share Pledge.14Dutch Share Pledge: the share pledge governed by Dutch law dated as of the Dutch Closing Date by and among direct ownerof Dutch Borrower Equity Interests, the Dutch Borrower and Agent.Dutch Swingline Loan: any Borrowing of Dutch Revolver Loans funded with Agent’s funds, until such Borrowing is settledamong Dutch Lenders or repaid by Dutch Borrowers.Dutch U.K. Security Agreement: the security agreement governed by English law dated as of the Dutch Closing Date inrelation to the Dominion Accounts of the Dutch Borrower in the United Kingdom by and among the Dutch Borrower and the Agent.Dutch Works Councils Act: the Netherlands Works Councils Act (Wet op de ondernemingsraden).EEA Financial Institution: (a) any credit institution or investment firm established in an EEA Member Country that is subject tothe supervision of an EEA Resolution Authority; (b) any entity established in an EEA Member Country that is a parent of an institutiondescribed in clause (a) above; or (c) any financial institution established in an EEA Member Country that is a subsidiary of aninstitution described in the foregoing clauses and is subject to consolidated supervision with its parent.EEA Member Country: any of the member states of the European Union, Iceland, Liechtenstein and Norway.EEA Resolution Authority: any public administrative authority or any Person entrusted with public administrative authority ofan EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.Eligible Account: an Account owing to a Borrower that arises in the Ordinary Course of Business from the sale of goods orrendition of services, is payable in Dollars or an Alternative Currency and is deemed by Agent, in its Permitted Discretion, to be anEligible Account. Without limiting the foregoing, no Account shall be an Eligible Account if (a) once billed, it is unpaid for more than60 days after the original due date, or more than 90 days after the original invoice date; (b) 50% or more of the Accounts owing by theAccount Debtor are not Eligible Accounts under the foregoing clause; (c) when aggregated with other Accounts owing by theAccount Debtor, it exceeds 20% of the aggregate Eligible Accounts (or such higher percentage as Agent may establish for the AccountDebtor from time to time); (d) it does not conform with a covenant or representation herein; (e) it is owing by a creditor or supplier, oris otherwise subject to a potential offset, counterclaim, dispute, deduction, discount, recoupment, reserve, defense, chargeback, creditor allowance (but ineligibility shall be limited to the amount thereof); (f) an Insolvency Proceeding has been commenced by or againstthe Account Debtor; or the Account Debtor has failed, has suspended or ceased doing business, is liquidating, dissolving or windingup its affairs, is not Solvent, or is the target of any Sanction or on any specially designated nationals list maintained by OFAC; or the15Borrower is not able to bring suit or enforce remedies against the Account Debtor through judicial process; (g) it is owing by aGovernmental Authority, unless the Account Debtor is the United States or any department, agency or instrumentality thereof and theAccount has been assigned to Agent in compliance with the federal Assignment of Claims Act; (h) it is not subject to a duly perfected,first priority Lien in favor of Agent, or is subject to any other Lien; (i) the goods giving rise to it have not been delivered to theAccount Debtor, the services giving rise to it have not been accepted by the Account Debtor, or it otherwise does not represent a finalsale; (j) it is evidenced by Chattel Paper or an Instrument of any kind, or has been reduced to judgment; (k) its payment has beenextended or the Account Debtor has made a partial payment; (l) it arises from a sale to an Affiliate, from a sale on a cash-on-delivery,bill-and-hold, sale‑or‑return, sale‑on‑approval, consignment, or other repurchase or return basis, or from a sale for personal, family orhousehold purposes; (m) it represents a progress billing or retainage, or relates to services for which a performance, surety orcompletion bond or similar assurance has been issued; or (n) it includes a billing for interest, fees or late charges, but ineligibility shallbe limited to the extent thereof. In calculating delinquent portions of Accounts under clauses (a) and (b), credit balances more than 90days old will be excluded.Eligible Assignee: (a) a Lender, Affiliate of a Lender or Approved Fund; (b) an assignee approved by Borrower Agent (whichapproval shall not be unreasonably withheld or delayed, and shall be deemed given if no objection is made within two Business Daysafter notice of the proposed assignment) and Agent; or (c) during an Event of Default, any Person acceptable to Agent in its discretion.Eligible Credit Insured Accounts: Eligible Accounts with respect to which the applicable Account Debtor is organized or hasits principal offices or assets outside the United States, Canada or other Account Debtor Approved Country but which is supported bya letter of credit (delivered to and directly drawable by Agent) or credit insurance satisfactory in all respects to Agent and is subject tosuch assignments and endorsements issues for the benefit of Agent, which are in form and substance satisfactory to Agent.Eligible Inventory: Inventory owned by a Borrower that Agent, in its Permitted Discretion, deems to be Eligible Inventory.Without limiting the foregoing, no Inventory shall be Eligible Inventory unless it (a) is finished goods or raw materials, and not work-in-process, packaging or shipping materials, labels, samples, display items, bags, replacement parts or manufacturing supplies; (b) is notheld on consignment, nor subject to any deposit or down payment; (c) is in new and saleable condition and is not damaged, defective,shopworn or otherwise unfit for sale; (d) is not slow-moving, perishable, obsolete or unmerchantable, and does not constitute returnedor repossessed goods; (e) meets all standards imposed by any Governmental Authority, has not been acquired from a Person that is thetarget of any Sanction or on any specially designated nationals list maintained by OFAC, and does not constitute hazardous materialsunder any Environmental Law; (f) conforms with the covenants and representations herein; (g) is subject to Agent’s duly perfected,first priority Lien, and no other Lien; (h) is within the continental United States or Canada16with respect to U.S. Borrowers and the Netherlands with respect to Dutch Borrower, is not in transit except between locations ofBorrowers, and is not consigned to any Person; (i) is not subject to any warehouse receipt or negotiable Document; (j) is not subject toany License or other arrangement that restricts such Borrower’s or Agent’s right to dispose of such Inventory, unless Agent hasreceived an appropriate Lien Waiver; and (k) is not located on leased premises or in the possession of a warehouseman, processor,repairman, mechanic, shipper, freight forwarder or other Person, unless the lessor or such Person has delivered a Lien Waiver or anappropriate Rent and Charges Reserve has been established; and (l) is reflected in the details of a current perpetual inventory report.Eligible Non-Credit Insured Accounts: Eligible Accounts with respect to which the applicable Account Debtor is organized orhas its principal offices or assets within the United States, Canada or other Account Debtor Approved Country.Enforcement Action: any action to enforce any Obligations (other than Secured Bank Product Obligations) or Loan Documentsor to exercise any rights or remedies relating to any Collateral, whether by judicial action, self-help, notification of Account Debtors,setoff or recoupment, credit bid, deed in lieu of foreclosure, action in an Insolvency Proceeding or otherwise.Environmental Laws: Applicable Laws (including programs, permits and guidance promulgated by regulators) relating topublic health (other than occupational safety and health regulated by OSHA) or the protection or pollution of the environment,including CERCLA, RCRA and CWA.Environmental Notice: a notice (whether written or oral) from any Governmental Authority or other Person of any possiblenoncompliance with, investigation of a possible violation of, litigation relating to, or potential fine or liability under any EnvironmentalLaw, or with respect to any Environmental Release, environmental pollution or hazardous materials, including any complaint,summons, citation, order, claim, demand or request for correction, remediation or otherwise.Environmental Release: a release as defined in CERCLA or under any other Environmental Law.Equity Interest: the interest of any (a) shareholder in a corporation; (b) partner in a partnership (whether general, limited, limitedliability or joint venture); (c) member in a limited liability company; or (d) other Person having any other form of equity security orownership interest.ERISA: the Employee Retirement Income Security Act of 1974.ERISA Affiliate: any trade or business (whether or not incorporated) under common control with an Obligor within themeaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section412 of the Code).17ERISA Event: (a) a Reportable Event with respect to a Pension Plan; (b) withdrawal of an Obligor or ERISA Affiliate from aPension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) completeor partial withdrawal of an Obligor or ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is ininsolvency pursuant to Section 4245 of ERISA; (d) filing of a notice of intent to terminate, treatment of a Pension Plan amendment as atermination under Section 4041 or 4041A of ERISA, or institution of proceedings by the PBGC to terminate a Pension Plan; (e)determination that a Pension Plan is considered an at-risk plan or a plan in critical or endangered status under the Code or ERISA; (f)an event or condition that constitutes grounds under Section 4042 of ERISA for termination of, or appointment of a trustee toadminister, any Pension Plan; (g) imposition of any liability on an Obligor or ERISA Affiliate under Title IV of ERISA, other than forPBGC premiums due but not delinquent under Section 4007 of ERISA; or (h) failure by an Obligor or ERISA Affiliate to meet allapplicable requirements under the Pension Funding Rules in respect of a Pension Plan, whether or not waived, or to make a requiredcontribution to a Multiemployer Plan.EU Bail-In Legislation Schedule: the EU Bail-In Legislation Schedule published by the Loan Market Association, as in effectfrom time to time.Event of Default: as defined in Section 11.Excluded Accounts: all Deposit Accounts (a) maintained solely as payroll, healthcare or other employee wage and benefitaccounts (including withholding tax payments related thereto), (b) that are “zero balance” accounts or maintained solely as escrowaccounts or fiduciary or trust accounts for the benefit of third parties who are not any Obligor or its Subsidiaries and (c) other DepositAccounts individually containing not more than $500,000 at any time and collectively containing not more than $2,000,000 at anytime.Excluded Swap Obligation: with respect to an Obligor, each Swap Obligation as to which, and only to the extent that, suchObligor’s guaranty of or grant of a Lien as security for such Swap Obligation is or becomes illegal under the Commodity ExchangeAct because the Obligor does not constitute an “eligible contract participant” as defined in the act (determined after giving effect to anykeepwell, support or other agreement for the benefit of such Obligor and all guarantees of Swap Obligations by other Obligors) whensuch guaranty or grant of Lien becomes effective with respect to the Swap Obligation. If a Hedging Agreement governs more than oneSwap Obligation, only the Swap Obligation(s) or portions thereof described in the foregoing sentence shall be Excluded SwapObligation(s) for the applicable Obligor.Excluded Taxes: any of the following Taxes imposed on or with respect to any Recipient or required to be withheld ordeducted from a payment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxesand branch profits Taxes, in each case (i) as a result of such Recipient being organized under the laws of, or having its principal officeor, in18the case of any Lender, applicable Lending Office located in, the jurisdiction imposing such Tax (or any political subdivision thereof),or (ii) constituting Other Connection Taxes; (b) U.S. federal withholding Taxes imposed on amounts payable to or for the account of aLender or Issuing Bank with respect to its interest in a Revolver Loan, Revolver Commitment, or Letter of Credit pursuant to a law ineffect when the Lender or Issuing Bank acquires such interest (except pursuant to an assignment request by Borrower Agent underSection 13.4) or changes its Lending Office, unless the Taxes were payable to its assignor immediately prior to such assignment or tothe Lender or Issuing Bank immediately prior to its change in Lending Office; (c) Taxes attributable to a Recipient’s failure to complywith Section 5.10; (d) U.S. federal withholding Taxes imposed pursuant to FATCA and (e) any U.S. backup withholding Taxes.Extraordinary Expenses: all costs, expenses or advances that Agent may incur during a Default or Event of Default, or duringthe pendency of an Insolvency Proceeding of an Obligor, including those relating to (a) any audit, inspection, repossession, storage,repair, appraisal, insurance, manufacture, preparation or advertising for sale, sale, collection, or other preservation of or realizationupon any Collateral; (b) any action, arbitration or other proceeding (whether instituted by or against Agent, any Lender, any Obligor,any representative of creditors of an Obligor or any other Person) in any way relating to any Collateral (including the validity,perfection, priority or avoidability of Agent’s Liens with respect to any Collateral), Loan Documents, Letters of Credit or Obligations,including any lender liability or other Claims; (c) the exercise of any rights or remedies of Agent in, or the monitoring of, anyInsolvency Proceeding; (d) settlement or satisfaction of taxes, charges or Liens with respect to any Collateral; (e) any EnforcementAction; and (f) negotiation and documentation of any modification, waiver, workout, restructuring or forbearance with respect to anyLoan Documents or Obligations. Such costs, expenses and advances include transfer fees, Other Taxes, storage fees, insurance costs,permit fees, utility reservation and standby fees, legal fees, appraisal fees, brokers’ and auctioneers’ fees and commissions, accountants’fees, environmental study fees, wages and salaries paid to employees of any Obligor or independent contractors in liquidating anyCollateral, and travel expenses.FATCA: Sections 1471 through 1474 of the Code (including any amended or successor version if substantively comparableand not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreementsentered into pursuant to Section 1471(b)(1) of the Code and any fiscal or regulatory legislation, rules or practices adopted pursuant toany intergovernmental agreement, treaty or convention among Governmental Authorities and implementing such Sections of the Code.Federal Funds Rate: (a) the weighted average per annum interest rate on overnight federal funds transactions with members ofthe Federal Reserve System on the applicable day (or the preceding Business Day, if the applicable day is not a Business Day), aspublished by the Federal Reserve Bank of New York on the next Business Day; or (b) if the rate is not so published, the average rateper annum (rounded up to the nearest 1/8 of 1%) charged to Bank of America on the19applicable day on such transactions, as determined by Agent; provided, that in no event shall the Federal Funds Rate be less than zero.Fiscal Quarter: each period of three months, commencing on the first day of a Fiscal Year.Fiscal Year: the fiscal year of Borrowers and Subsidiaries for accounting and tax purposes, ending on June 30 of each year.Fixed Charge Coverage Ratio: the ratio, determined on a consolidated basis for Borrowers and Subsidiaries for the most recent12 months, of (a) Consolidated EBITDA minus Capital Expenditures (except those financed with Borrowed Money other thanRevolver Loans) and cash taxes paid, to (b) Fixed Charges.Fixed Charges: the sum of interest expense (other than payment-in-kind), principal payments made on Borrowed Money, andDistributions made; provided, however, that, “interest expense” shall not include interest expense in connection with intercompanyDebt solely among Obligors.FLSA: the Fair Labor Standards Act of 1938.Flood Laws: the National Flood Insurance Act of 1968, Flood Disaster Protection Act of 1973 and related laws.Foreign Base Rate: with respect to Loans denominated in Euros, Sterling and Dollars that are funded outside the U.S., LIBORas in effect on the first day of the current calendar month; provided, that in no event shall the Foreign Base Rate be less than zero.Foreign Lender: any Lender that is not a U.S. Person.Foreign Plan: any employee benefit plan or arrangement (a) maintained or contributed to by any Obligor or Subsidiary that isnot subject to the laws of the United States; or (b) mandated by a government other than the United States for employees of anyObligor or Subsidiary.Foreign Subsidiary: a Subsidiary that is a “controlled foreign corporation” under Section 957 of the Code or a Subsidiary that isclassified as “disregarded as an entity separate from its owner” within the meaning of Section 301.7701-3(a) of the U.S. TreasuryRegulations that is treated as owning such controlled foreign corporation, such that a guaranty by such Subsidiary of the Obligations ora Lien on the assets of such Subsidiary to secure the Obligations would result in Tax liability to one or more Borrower.Fronting Exposure: a Defaulting Lender’s interest in LC Obligations, Swingline Loans and Protective Advances, except to theextent Cash Collateralized by the Defaulting Lender or allocated to other Lenders hereunder.20Full Payment: with respect to any Obligations, (a) the full and indefeasible cash payment thereof, including any interest, feesand other charges accruing during an Insolvency Proceeding (whether or not allowed in the proceeding); and (b) if such Obligationsare LC Obligations or inchoate or contingent in nature, Cash Collateralization thereof (or delivery of a standby letter of creditacceptable to Agent in its discretion, in the amount of required Cash Collateral). No Revolver Loans shall be deemed to have been paidin full unless all Revolver Commitments related to such Revolver Loans are terminated.GAAP: (a) in respect of U.S. Obligors and any financial statements or other financial information delivered to any SecuredParty which is to be prepared for Borrower and its Subsidiaries on a consolidated basis, generally accepted accounting principles ineffect in the United States from time to time and (b) in respect of Dutch Obligors, IFRS as in effect from time to time.Global Availability: the sum of the Dutch Availability and U.S. Availability.Global Borrowing Base: the sum of the Dutch Borrowing Base and U.S. Borrowing Base.Global Revolver Usage: the sum of the Dutch Revolver Usage and U.S. Revolver Usage.Governmental Approvals: all authorizations, consents, approvals, licenses and exemptions of, registrations and filings with, andrequired reports to, all Governmental Authorities.Governmental Authority: any federal, state, local, foreign or other agency, authority, body, commission, court, instrumentality,political subdivision, central bank, or other entity or officer exercising executive, legislative, judicial, taxing, regulatory oradministrative powers or functions for any governmental, judicial, investigative, regulatory or self-regulatory authority (including theFinancial Conduct Authority, the Prudential Regulation Authority and any supra-national bodies such as the European Union orEuropean Central Bank).Guarantor Payment: as defined in Section 5.11.3.Guarantors: each Person that guarantees payment or performance of any of the Obligations, including a guaranty of the DutchObligations by U.S. Obligors. With respect to any Obligations of a U.S. Obligor, “Guarantor” shall exclude any Foreign Subsidiary.Guaranty: each guaranty agreement executed by a Guarantor in favor of Agent.Hedging Agreement: a “swap agreement” as defined in Bankruptcy Code Section 101(53B)(A).IFRS: the International Financial Reporting Standards issued by the International Accounting Standards Board, as in effectfrom time to time.21Indemnified Taxes: (a) Taxes, other than Excluded Taxes, imposed on or relating to any payment of an Obligation; and (b) tothe extent not otherwise described in clause (a), Other Taxes.Indemnitees: Agent Indemnitees, Lender Indemnitees, Issuing Bank Indemnitees and Bank of America Indemnitees.Insolvency Proceeding: any case or proceeding commenced by or against a Person under any state, federal or foreign law for,or any agreement of such Person to, (a) the entry of an order for relief under the Bankruptcy Code, or any other insolvency, debtorrelief or debt adjustment law; (b) the appointment of a receiver, trustee, liquidator, administrator, conservator or other custodian forsuch Person or any part of its Property; or (c) an assignment or trust mortgage for the benefit of creditors.Insolvency Regulation: Regulation (EU) 2015/848 of 20 May 2015 on insolvency proceedings (recast).Insured Accounts Sublimit: $10,000,000.Intellectual Property: all intellectual and similar Property of a Person, including inventions, designs, patents, copyrights,trademarks, service marks, trade names, trade secrets, confidential or proprietary information, customer lists, know-how, software anddatabases; all embodiments or fixations thereof and all related documentation, applications, registrations and franchises; all licenses orother rights to use any of the foregoing; and all books and records relating to the foregoing.Intellectual Property Claim: any claim or assertion (whether in writing, by suit or otherwise) that a Borrower’s or Subsidiary’sownership, use, marketing, sale or distribution of any Inventory, Equipment, Intellectual Property or other Property violates anotherPerson’s Intellectual Property.Inventory: as defined in the UCC, including all goods intended for sale, lease, display or demonstration; all work in process;and all raw materials, and other materials and supplies of any kind that are or could be used in connection with the manufacture,printing, packing, shipping, advertising, sale, lease or furnishing of such goods, or otherwise used or consumed in a Borrower’sbusiness (but excluding Equipment).Inventory Sublimit: $100,000,000.Investment: an Acquisition, an acquisition of record or beneficial ownership of any Equity Interests of a Person, or an advanceor capital contribution to or other investment in a Person.IRS: the United States Internal Revenue Service.Issuing Bank: Bank of America (including any Lending Office of Bank of America), or any replacement issuer appointedpursuant to Section 2.3.4.22Issuing Bank Indemnitees: Issuing Bank and its officers, directors, employees, Affiliates, agents and attorneys.Judgment Currency: as defined in Section 1.5.LC Application: an application by Borrower Agent to Issuing Bank for issuance of a Letter of Credit, in form and substancesatisfactory to Issuing Bank and Agent.LC Conditions: upon giving effect to issuance of a Letter of Credit, (a) the conditions in Section 6 are satisfied; (b) with respectto Dutch Letters of Credit, the total sum of Dutch LC Obligations and U.S. LC Obligations do not exceed the Letter of Credit Sublineand Dutch Revolver Usage does not exceed the Dutch Borrowing Base; (c) with respect to U.S. Letters of Credit, the total sum ofDutch LC Obligations and U.S. LC Obligations do not exceed the Letter of Credit Subline and U.S. Revolver Usage does not exceedthe U.S. Borrowing Base; (d) with respect to any Letters of Credit, the total LC Obligations do not exceed the Letter of Credit Sublineand Global Revolver Usage does not exceed the Global Borrowing Base; (e) the Letter of Credit and payments thereunder aredenominated in Dollars or an Alternative Currency; and (f) the purpose and form of the Letter of Credit are satisfactory to Agent andIssuing Bank in their discretion.LC Documents: all documents, instruments and agreements (including LC Requests and LC Applications) delivered byBorrowers or any other Person to Issuing Bank or Agent in connection with any Letter of Credit.LC Obligations: the sum of Dutch LC Obligations and U.S. LC Obligations.LC Request: a request for issuance of a Letter of Credit, to be provided by Borrower Agent to Issuing Bank, in formsatisfactory to Agent and Issuing Bank.Lender Indemnitees: Lenders and Secured Bank Product Providers, and their officers, directors, employees, Affiliates, agentsand attorneys.Lenders: the Dutch Lenders and/or U.S. Lenders, as the context so requires.Lending Office: the office (including any domestic or foreign Affiliate or branch) designated as such by Agent, a Lender orIssuing Bank by notice to Borrower Agent and, if applicable, Agent.Letter of Credit: Dutch Letters of Credit and/or U.S. Letters of Credit, as the context so requires.Letter of Credit Subline: $5,000,000.LIBOR: with respect to Revolver Loans, the per annum rate of interest (rounded up to the nearest 1/8th of 1%) determined bythe Agent on the first day of each month for a one-month interest period, equal to the London Interbank Offered Rate, or comparableor successor rate approved by23the Agent, as published on the applicable Reuters screen page (or other commercially available source designated by the Agent fromtime to time); provided, that any comparable or successor rate shall be applied by Agent, if administratively feasible, in a mannerconsistent with market practice; and provided further, that in no event shall LIBOR be less than zero.License: any license or agreement under which an Obligor is authorized to use Intellectual Property in connection with anymanufacture, marketing, distribution or disposition of Collateral, any use of Property or any other conduct of its business.Licensor: any Person from whom an Obligor obtains the right to use any Intellectual Property.Lien: a Person’s interest in Property securing an obligation owed to, or a claim by, such Person, including any lien, securityinterest, pledge, hypothecation, assignment, trust, reservation, encroachment, easement, right-of-way, covenant, condition, restriction,lease, or other title exception or encumbrance.Lien Waiver: an agreement, in form and substance satisfactory to Agent, by which (a) for any material Collateral located onleased premises, the lessor waives or subordinates any Lien it may have on the Collateral, and agrees to permit Agent to enter upon thepremises and remove the Collateral or to use the premises to store or dispose of the Collateral; (b) for any Collateral held by awarehouseman, processor, shipper, customs broker or freight forwarder, such Person waives or subordinates any Lien it may have onthe Collateral, agrees to hold any Documents in its possession relating to the Collateral as agent for Agent, and agrees to deliver theCollateral to Agent upon request; (c) for any Collateral held by a repairman, mechanic or bailee, such Person acknowledges Agent’sLien, waives or subordinates any Lien it may have on the Collateral, and agrees to deliver the Collateral to Agent upon request; and (d)for any Collateral subject to a Licensor’s Intellectual Property rights, the Licensor grants to Agent the right, vis-à-vis such Licensor, toenforce Agent’s Liens with respect to the Collateral, including the right to dispose of it with the benefit of the Intellectual Property,whether or not a default exists under any applicable License.Loan Documents: this Agreement, Other Agreements and Security Documents.Loan Year: each 12 month period commencing on the U.S. Closing Date or an anniversary thereof.Margin Stock: as defined in Regulation U of the Board of Governors.Material Adverse Effect: the effect of any event or circumstance that, taken alone or in conjunction with other events orcircumstances, (a) has or could be reasonably expected to have a material adverse effect on the business, operations, Properties, orcondition (financial or otherwise) of the Obligors (taken as a whole), on the value of any material Collateral, on the enforceability ofany Loan Document, or on the validity or priority of Agent’s Liens on any Collateral; (b) impairs the ability of the Obligors (taken as awhole) to perform their payment obligations under the Loan24Documents; or (c) otherwise materially impairs the ability of Agent or any Lender to enforce or collect any Obligations or to realizeupon any Collateral.Material Contract: any agreement or arrangement to which a Borrower or Subsidiary is party (other than the Loan Documents)(a) that is deemed to be a material contract under any securities law applicable to such Person, including the Securities Act of 1933; (b)for which breach, termination, nonperformance or failure to renew could reasonably be expected to have a Material Adverse Effect; or(c) that relates to Subordinated Debt, or to Debt in an aggregate amount of $10,000,000 or more.Moody’s: Moody’s Investors Service, Inc. or any successor acceptable to Agent.Mortgage: a mortgage or deed of trust in which an Obligor grants a Lien on its Real Estate to Agent, as security for itsObligations.Multiemployer Plan: any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which an Obligor orERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated tomake contributions.Net Proceeds: with respect to an Asset Disposition, proceeds (including, when received, any deferred or escrowed payments)received by a Borrower or Subsidiary in cash from such disposition, net of (a) reasonable and customary costs and expenses actuallyincurred in connection therewith, including legal fees and sales commissions; (b) amounts applied to repayment of Debt secured by aPermitted Lien senior to Agent’s Liens on Collateral sold; (c) transfer or similar taxes; and (d) reserves for indemnities, until suchreserves are no longer needed.NOLV Percentage: the net orderly liquidation value of Inventory, expressed as a percentage, expected to be realized at anorderly, negotiated sale held within a reasonable period of time, net of all liquidation expenses, as determined from the most recentappraisal of Borrowers’ Inventory performed by an appraiser and on terms satisfactory to Agent.Non-Public Lender means: (i) until interpretation of “public” as referred to in the CRR by the relevant authority/ies: an entitythat provides repayable funds to a Dutch Obligor for a minimum initial amount of EUR 100,000 (or its equivalent in another currency)or an entity otherwise qualifying as not forming part of the public; and (ii) following the publication of an interpretation of “public” asreferred to in the CRR by the relevant authority/ies: such amount or such criterion as a result of which such entity shall qualify as notforming part of the public.Notice of Borrowing: a request by Borrower Agent for a Borrowing of Revolver Loans, in form satisfactory to Agent.Obligations: the sum of the Dutch Obligations and U.S. Obligations.Obligor: the Dutch Obligors and U.S. Obligors.25OFAC: Office of Foreign Assets Control of the U.S. Treasury Department.Ordinary Course of Business: the ordinary course of business of any Borrower or Subsidiary, undertaken in good faith andconsistent with Applicable Law and past practices.Organic Documents: with respect to any Person, its charter, certificate or articles of incorporation, bylaws, articles oforganization, limited liability agreement, operating agreement, members agreement, shareholders agreement, partnership agreement,certificate of partnership, certificate of formation, voting trust agreement, or similar agreement or instrument governing the formation oroperation of such Person.OSHA: the Occupational Safety and Hazard Act of 1970.Other Agreement: each LC Document, fee letter, Lien Waiver, Real Estate Related Document, Dutch Borrowing Base Report,U.S. Borrowing Base Report, Compliance Certificate, Borrower Materials, or other note, document, instrument or agreement (otherthan this Agreement or a Security Document) now or hereafter delivered by an Obligor or other Person to Agent or a Lender inconnection with any transactions relating hereto.Other Connection Taxes: Taxes imposed on a Recipient due to a present or former connection between it and the jurisdictionimposing such Tax (other than connections arising from the Recipient having executed, delivered, become party to, performedobligations or received payments under, received or perfected a Lien or engaged in any other transaction pursuant to, enforced, or soldor assigned an interest in, any Revolver Loan or Loan Document).Other Taxes: all present or future stamp, court, documentary, intangible, recording, filing or similar Taxes that arise from anypayment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a Lienunder, or otherwise with respect to, any Loan Document, except Other Connection Taxes imposed with respect to an assignment(other than an assignment made pursuant to Section 13.4(c)).Overadvance: the sum of the Dutch Overadvances and U.S. Overadvances.Parallel Obligations: as defined in Section 12.16.Participant: as defined in Section 13.2.Patriot Act: the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and ObstructTerrorism Act of 2001, Pub. L. No. 107-56, 115 Stat. 272 (2001).Payment Conditions: both before and after giving effect to any such payment (whether as a Distribution, Investment orprepayment of Debt) and giving pro forma effect to the applicable payment:26(i) no Default or Event of Default has occurred and is continuing or would arise as a result of the applicable payment, and(ii) either(a) (x) Global Availability upon the making of the payment and for each of the 30 consecutive dates immediately priorthereto shall be greater than the greater of (1) $75,000,000 and (2) 17.5% of the Global Borrowing Base then in effect(provided, that at least 50% of the Global Borrowing Base for the purpose of this sub-clause (x) shall consist of the U.S.Borrowing Base), and (y) Fixed Charge Coverage Ratio is equal to or greater than 1.00 to 1.00, or(b) Global Availability upon the making of the payment and for each of the 30 consecutive dates immediately priorthereto shall be greater than the greater of (1) $100,000,000 and (2) 22.5% of the Global Borrowing Base then in effect(provided, that at least 50% of the Global Borrowing Base for the purpose of this clause (b) shall consist of the U.S. BorrowingBase).Payment Item: each check, draft or other item of payment payable to a Borrower, including those constituting proceeds of anyCollateral.PBGC: the Pension Benefit Guaranty Corporation.Pension Funding Rules: Code and ERISA rules regarding minimum required contributions (including installment payments) toPension Plans set forth in, for plan years ending prior to the Pension Protection Act of 2006 effective date, Section 412 of the Codeand Section 302 of ERISA, both as in effect prior to such act, and thereafter, Sections 412, 430, 431, 432 and 436 of the Code andSections 302, 303, 304 and 305 of ERISA.Pension Plan: any employee pension benefit plan (as defined in Section 3(2) of ERISA), other than a Multiemployer Plan, thatis subject to Title IV of ERISA and is sponsored or maintained by any Obligor or ERISA Affiliate or to which the Obligor or ERISAAffiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a)of ERISA, has made contributions at any time during the preceding five plan years.Permitted Acquisition: any Acquisition consummated after the occurrence of the events set forth in clauses (b), (c) and (d) ofthe definition of “Conversion Date”, as long as (a) no Default or Event of Default exists and is continuing or is caused thereby; (b) theAcquisition is consensual; (c) the assets, business or Person being acquired is useful or engaged in the business of Borrowers andSubsidiaries, is located or organized within the United States, and had positive Consolidated EBITDA for the 12 month period mostrecently ended; (d) no Debt or Liens are assumed or incurred, except as permitted by Sections 10.2.1(f), 10.2.1(i) and 10.2.2(j); and(e) Borrowers deliver to Agent, at least 10 Business Days prior to the Acquisition, copies of all material agreements relating27thereto and a certificate, in form and substance reasonably satisfactory to Agent, stating that the Acquisition is a “PermittedAcquisition” and demonstrating compliance with the foregoing requirements.Permitted Asset Disposition: as long as no Default or Event of Default exists and is continuing and all Net Proceeds areremitted to Agent, an Asset Disposition that is (a) a sale of Inventory in the Ordinary Course of Business; (b) a disposition ofEquipment that, in the aggregate during any 12 month period, has a fair market or book value (whichever is more) of $1,000,000 orless; (c) a disposition of Inventory that is obsolete, unmerchantable or otherwise unsalable in the Ordinary Course of Business; (d)termination of a lease of real or personal Property, leasing of real Property, subleasing of leased real Property, or assigning a lease ofreal Property; provided that, any such Property that is not necessary for the Ordinary Course of Business, could not reasonably beexpected to have a Material Adverse Effect and does not result from an Obligor’s default; or (e) approved in writing by Agent andRequired Lenders.Permitted Contingent Obligations: Contingent Obligations (a) arising from endorsements of Payment Items for collection ordeposit in the Ordinary Course of Business; (b) arising from Hedging Agreements permitted hereunder; (c) existing on the U.S.Closing Date with respect to U.S. Borrowers and on the Dutch Closing Date with respect to Dutch Borrowers, and any extension orrenewal thereof that does not increase the amount of such Contingent Obligation when extended or renewed; (d) incurred in theOrdinary Course of Business with respect to surety, appeal or performance bonds, or other similar obligations; (e) arising fromcustomary indemnification obligations in favor of purchasers in connection with dispositions of Equipment permitted hereunder; (f)arising under the Loan Documents; or (g) in an aggregate amount of $5,000,000 or less at any time.Permitted Discretion: a determination made in the exercise, in good faith, of reasonable business judgment (from theperspective of a secured, asset-based lender).Permitted Intercompany Loans: loans made by an Obligor to a non-Obligor Subsidiary of Borrower so long as (i) no Default orEvent of Default exists immediately before and after giving effect thereto and (ii) the aggregate outstanding amount thereof at no timeexceeds $20,000,000.Permitted Lien: as defined in Section 10.2.2.Permitted Purchase Money Debt: Purchase Money Debt of Borrowers and Subsidiaries that is unsecured or secured only by aPurchase Money Lien, as long as the aggregate amount incurred after the U.S. Closing Date does not exceed $20,000,000 at any time.Person: any individual, corporation, limited liability company, partnership, joint venture, association, trust, unincorporatedorganization, Governmental Authority or other entity.28Plan: an employee benefit plan (as defined in Section 3(3) of ERISA) maintained for employees of an Obligor or ERISAAffiliate, or to which an Obligor or ERISA Affiliate is required to contribute on behalf of its employees.Platform: as defined in Section 14.3.3.Prime Rate: the rate of interest announced by Bank of America from time to time as its prime rate. Such rate is set by Bank ofAmerica on the basis of various factors, including its costs and desired return, general economic conditions and other factors, and isused as a reference point for pricing some loans, which may be priced at, above or below such rate. Any change in such rate publiclyannounced by Bank of America shall take effect at the opening of business on the day specified in the announcement.Pro Rata: shall mean:(a) with respect to any Dutch Lender, a percentage (rounded to the ninth decimal place) determined (a) by dividing the amountof such Dutch Lender’s Dutch Revolver Commitment by the aggregate outstanding Dutch Revolver Commitments; or (b) followingtermination of the Dutch Revolver Commitments, by dividing the amount of such Dutch Lender’s Dutch Revolver Loans and DutchLC Obligations by the aggregate outstanding Dutch Revolver Loans and Dutch LC Obligations or, if all Dutch Revolver Loans andDutch LC Obligations have been paid in full and/or Cash Collateralized, by dividing such Dutch Lender’s and its Affiliates’ remainingDutch Obligations by the aggregate remaining Dutch Obligations;(b) with respect to any U.S. Lender, a percentage (rounded to the ninth decimal place) determined (a) by dividing the amountof such U.S. Lender’s U.S. Revolver Commitment by the aggregate outstanding U.S. Revolver Commitments; or (b) followingtermination of the U.S. Revolver Commitments, by dividing the amount of such U.S. Lender’s U.S. Revolver Loans and U.S. LCObligations by the aggregate outstanding U.S. Revolver Loans and U.S. LC Obligations or, if all U.S. Revolver Loans and U.S. LCObligations have been paid in full and/or Cash Collateralized, by dividing such U.S. Lender’s and its Affiliates’ remaining U.S.Obligations by the aggregate remaining U.S. Obligations; and(c) with respect to any Lender, a percentage (rounded to the ninth decimal place) determined (a) by dividing the amount of suchLender’s Revolver Commitment by the aggregate outstanding Revolver Commitments; or (b) following termination of the RevolverCommitments, by dividing the amount of such Lender’s Revolver Loans and LC Obligations by the aggregate outstanding RevolverLoans and LC Obligations or, if all Revolver Loans and LC Obligations have been paid in full and/or Cash Collateralized, by dividingsuch Lender’s and its Affiliates’ remaining Obligations by the aggregate remaining Obligations.Properly Contested: with respect to any obligation of an Obligor, (a) the obligation is subject to a bona fide dispute regardingamount or the Obligor’s liability to pay; (b) the obligation is being29properly contested in good faith by appropriate proceedings promptly instituted and diligently pursued; (c) appropriate reserves havebeen established in accordance with GAAP; (d) non-payment could not have a Material Adverse Effect, nor result in forfeiture or saleof any assets of the Obligor; (e) no Lien is imposed on assets of the Obligor, unless bonded and stayed to the satisfaction of Agent; and(f) if the obligation results from entry of a judgment or other order, such judgment or order is stayed pending appeal or other judicialreview.Property: any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible.Protective Advances: the sum of the Dutch Protective Advances and U.S. Protective Advances.Purchase Money Debt: (a) Debt (other than the Obligations) for payment of any of the purchase price of fixed assets; (b) Debt(other than the Obligations) incurred within 10 days before or after acquisition of any fixed assets, for the purpose of financing any ofthe purchase price thereof; and (c) any renewals, extensions or refinancings (but not increases) thereof.Purchase Money Lien: a Lien that secures Purchase Money Debt, encumbering only the fixed assets acquired with such Debtand constituting a Capital Lease or a purchase money security interest under the UCC.Qualified ECP: an Obligor with total assets exceeding $10,000,000, or that constitutes an “eligible contract participant” underthe Commodity Exchange Act and can cause another Person to qualify as an “eligible contract participant” under Section 1a(18)(A)(v)(II) of such act.RCRA: the Resource Conservation and Recovery Act (42 U.S.C. §§ 6991-6991i).Real Estate: all right, title and interest (whether as owner, lessor or lessee) in any real Property or any buildings, structures,parking areas or other improvements thereon.Reallocation: as defined in Section 2.2.2.Reallocation Date: as defined in Section 2.2.2.Recipient: Agent, Issuing Bank, any Lender or any other recipient of a payment to be made by an Obligor under a LoanDocument or on account of an Obligation.Refinancing Conditions: (a) the Refinancing Debt is in an aggregate principal amount that does not exceed the principalamount of the Debt being extended, renewed or refinanced; (b) it has a final maturity no sooner than, a weighted average life no lessthan, and an interest rate no greater than, the Debt being extended, renewed or refinanced; (c) it is subordinated to the Obligations atleast to the same extent as the Debt being extended, renewed or refinanced; (d) the representations, covenants and defaults applicableto it are no less favorable to Borrowers than those applicable to30the Debt being extended, renewed or refinanced; (e) no additional Lien is granted to secure it; (f) no additional Person is obligated onsuch Debt; and (g) upon giving effect to it, no Default or Event of Default exists and is continuing.Refinancing Debt: Borrowed Money that is the result of an extension, renewal or refinancing of Debt permitted under Section10.2.1(b), (d), (f) or (i).Reimbursement Date: as defined in Section 2.3.2.Related Real Estate Documents: with respect to any Real Estate subject to a Mortgage, the following, in form and substancesatisfactory to Agent and received by Agent for review: (a) at least 45 days prior to the effective date of the Mortgage, all informationrequested by Agent or any Lender for due diligence pursuant to Flood Laws; and (b) at least 15 days prior to the effective date of theMortgage, (i) a mortgagee title policy (or binder therefor) covering Agent’s interest under the Mortgage, by an insurer acceptable toAgent, which must be fully paid on such effective date; (ii) such assignments of leases, estoppel letters, attornment agreements,consents, waivers and releases as Agent may require with respect to other Persons having an interest in the Real Estate; (iii) a current,as-built survey of the Real Estate, containing a metes-and-bounds property description and certified by a licensed surveyor acceptableto Agent; (iv) a life-of-loan flood hazard determination and, if any Real Estate is located in a special flood hazard zone, flood insurancedocumentation and coverage as required by Flood Laws or otherwise satisfactory to each Lender; (v) a current appraisal of the RealEstate, prepared by an appraiser acceptable to Agent, and in form and substance satisfactory to Required Lenders; (vi) anenvironmental assessment, prepared by environmental engineers acceptable to Agent, an environmental indemnity agreement ifappropriate, and such other reports, certificates, studies or data as Agent may reasonably require, all in form and substance satisfactoryto Required Lenders; and (vii) such other documents, instruments or agreements as Agent may reasonably require with respect to theReal Estate and Mortgage.Rent and Charges Reserve: the aggregate of (a) all past due rent and other amounts owing by an Obligor to any landlord,warehouseman, processor, repairman, mechanic, shipper, freight forwarder, broker or other Person who possesses any Collateral orcould assert a Lien on any Collateral; and (b) a reserve at least equal to three months’ rent and other charges that could be payable toany such Person, unless it has executed a Lien Waiver.Report: as defined in Section 12.2.3.Reportable Event: any event set forth in Section 4043(c) of ERISA, other than an event for which the 30 day notice period hasbeen waived.Requesting Borrower: with respect to any Letter of Credit, the Borrower who requested the issuance of such Letter of Credit.31Required Lenders: two or more unaffiliated Lenders holding more than 50% of (a) the aggregate outstanding RevolverCommitments; or (b) after termination of the Revolver Commitments, the aggregate outstanding Revolver Loans and LC Obligationsor, upon Full Payment of all Revolver Loans and LC Obligations, the aggregate remaining Obligations; provided, that RevolverCommitments, Revolver Loans and other Obligations held by a Defaulting Lender and its Affiliates shall be disregarded in makingsuch calculation, but any related Fronting Exposure shall be deemed held as a Revolver Loan or LC Obligation by the Lender thatfunded the applicable Revolver Loan or issued the applicable Letter of Credit.Restricted Investment: any Investment by a Borrower or Subsidiary, other than (a) Investments in Subsidiaries to the extentexisting on the U.S. Closing Date with respect to U.S. Borrowers and the Dutch Closing Date with respect to Dutch Borrower; (b)Cash Equivalents that are subject to Agent’s Lien and control, pursuant to documentation in form and substance satisfactory to Agent;(c) loans and advances permitted under Section 10.2.7; and (d) after the Conversion Date, other Investments (including PermittedAcquisitions) so long as the Payment Conditions are satisfied with respect to each such Investment.Restrictive Agreement: an agreement (other than a Loan Document) that conditions or restricts the right of any Borrower,Subsidiary or other Obligor to incur or repay Borrowed Money, to grant Liens on any assets, to declare or make Distributions, tomodify, extend or renew any agreement evidencing Borrowed Money, or to repay any intercompany Debt.Revolver Commitments: the sum of the Dutch Revolver Commitments and U.S. Revolver Commitments.Revolver Loan: a Dutch Revolver Loan and/or U.S. Revolver Loan, as the context so requires.Revolver Termination Date: if the Conversion Date occurs, the date which is 5 years from the Conversion Date as set forth inthe written notice from Agent to Borrower agent confirming that the Conversion Date has occurred and if the Conversion Date doesnot occur, April 19, 2019.S&P: Standard & Poor’s Financial Services LLC, a subsidiary of The McGraw-Hill Companies, Inc., or any successoracceptable to Agent.Sanction: any sanction administered or enforced by the U.S. government (including OFAC), United Nations Security Council,European Union, U.K. government or other sanctions authority.Secured Bank Product Obligations: the Dutch Secured Bank Product Obligations and/or U.S. Secured Bank ProductObligations, as the context so requires.Secured Bank Product Provider: a Dutch Secured Bank Product Provider and/or U.S. Secured Bank Product Provider, as thecontext so requires.32Secured Parties: Dutch Secured Parties and U.S. Secured Parties.Security Documents: the Guaranties, Mortgages, Deposit Account Control Agreements, Dutch Security Documents, and allother documents, instruments and agreements now or hereafter securing (or given with the intent to secure) any Obligations.Senior Officer: the chairman of the board, president, chief executive officer or chief financial officer of a Borrower or, if thecontext requires, an Obligor.Settlement Report: a report summarizing Revolver Loans and participations in LC Obligations outstanding as of a givensettlement date, allocated to Lenders on a Pro Rata basis in accordance with their Revolver Commitments.Solvent: as to any Person, such Person (a) owns Property whose fair salable value is greater than the amount required to pay allof its debts (including contingent, subordinated, unmatured and unliquidated liabilities); (b) owns Property whose present fair salablevalue (as defined below) is greater than the probable total liabilities (including contingent, subordinated, unmatured and unliquidatedliabilities) of such Person as they become absolute and matured; (c) is able to pay all of its debts as they mature; (d) has capital that isnot unreasonably small for its business and is sufficient to carry on its business and transactions and all business and transactions inwhich it is about to engage; (e) is not “insolvent” within the meaning of Section 101(32) of the Bankruptcy Code; and (f) has notincurred (by way of assumption or otherwise) any obligations or liabilities (contingent or otherwise) under any Loan Documents, ormade any conveyance in connection therewith, with actual intent to hinder, delay or defraud either present or future creditors of suchPerson or any of its Affiliates. “Fair salable value” means the amount that could be obtained for assets within a reasonable time, eitherthrough collection or through sale under ordinary selling conditions by a capable and diligent seller to an interested buyer who iswilling (but under no compulsion) to purchase.Specified Obligor: an Obligor that is not then an “eligible contract participant” under the Commodity Exchange Act(determined prior to giving effect to Section 5.11).Spot Rate: the exchange rate, as determined by Agent, that is applicable to conversion of one currency into another currency,which is (a) the exchange rate reported by Bloomberg (or other commercially available source designated by Agent) as of the end ofthe preceding business day in the financial market for the first currency; or (b) if such report is unavailable for any reason, the spot ratefor the purchase of the first currency with the second currency as in effect during the preceding business day in Agent’s principalforeign exchange trading office for the first currency.Stated Amount: the outstanding amount of a Letter of Credit, including any automatic increase or tolerance (whether or notthen in effect) provided by the Letter of Credit or related LC Documents.33Subordinated Debt: Debt incurred by a Borrower that is expressly subordinate and junior in right of payment to Full Paymentof all Obligations, and is on terms (including maturity, interest, fees, repayment, covenants and subordination) satisfactory to Agent.Subsidiary: any entity at least 50% of whose voting securities or Equity Interests is owned by a Borrower or combination ofBorrowers (including indirect ownership through other entities in which a Borrower directly or indirectly owns 50% of the votingsecurities or Equity Interests).Supermajority Lenders: three or more unaffiliated Lenders holding more than 66 2/3% of (a) the aggregate outstandingRevolver Commitments; or (b) after termination of the Revolver Commitments, the aggregate outstanding Revolver Loans and LCObligations or, upon Full Payment of all Revolver Loans and LC Obligations, the aggregate remaining Obligations; provided, thatRevolver Commitments, Revolver Loans and other Obligations held by a Defaulting Lender and its Affiliates shall be disregarded inmaking such calculation, but any related Fronting Exposure shall be deemed held as a Revolver Loan or LC Obligation by the Lenderthat funded the applicable Revolver Loan or issued the applicable Letter of Credit.Swap Obligations: with respect to an Obligor, its obligations under a Hedging Agreement that constitutes a “swap” within themeaning of Section 1a(47) of the Commodity Exchange Act.Swingline Loan: a Dutch Swingline Loan and/or a U.S. Swingline Loan, as the context so requires.Taiwan Debt: Debt for Borrowed Money (a) incurred by SMCI BV prior to the U.S. Closing Date pursuant to that certainGeneral Agreement for Omnibus Credit Lines dated January 17, 2018, by and among SMCI BV and Super Micro Computer, Inc.Taiwan, as co-borrowers, and CTBC Bank Co., Ltd., as lender, in an aggregate amount not exceeding $70,000,000, and (b) to beincurred after the U.S. Closing Date by SMCI BV and Super Micro Computer, Inc. Taiwan, as co-borrowers, in an aggregate amountnot exceeding $50,000,000 extended by a lender or other financial institution, so long as, in each case, no Obligor’s assets secure therepayment of such Debt and no Obligor other than SMCI BV and Super Micro Computer, Inc. Taiwan has guaranteed or is otherwiseobligated on such Debt and so long as the conversion to any borrowing by the Dutch borrowing has not occurred.Taxes: all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding),assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penaltiesapplicable thereto.Trade Date: as defined in Section 135.Transferee: any actual or potential Eligible Assignee, Participant or other Person acquiring an interest in any Obligations.34Trigger Period: the period (a) commencing on any day that (i) an Event of Default occurs, or (ii) Global Availability is less thanthe greater of (x) the Trigger Threshold Amount, and (y) 15% of the Global Borrowing Base; and (b) continuing until, during each ofthe preceding 60 consecutive days, no Event of Default has existed and Global Availability has been more than the greater of (x)Trigger Threshold Amount and (y) 15% of the Global Borrowing Base.Trigger Threshold Amount: at any time prior to the Conversion Date, $30,000,000 and upon and at any time after theConversion Date, $50,000,000.UCC: the Uniform Commercial Code as in effect in the State of New York or, when the laws of any other jurisdiction governthe perfection or enforcement of any Lien, the Uniform Commercial Code of such jurisdiction.Undisclosed Administration: means in relation to a Dutch Lender or its direct or indirect parent company the appointment of anadministrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official by a supervisory authority orregulator under or based on the law in the country where such Dutch Lender or such parent company is subject to home jurisdictionsupervision if applicable law requires that such appointment is not to be publicly disclosed.Unfunded Pension Liability: the excess of a Pension Plan’s benefit liabilities under Section 4001(a)(16) of ERISA, over thecurrent value of that Pension Plan’s assets, determined in accordance with the assumptions used for funding the Pension Plan pursuantto the Code, ERISA or the Pension Protection Act of 2006 for the applicable plan year.Unused Line Fee Rate: a per annum rate equal to (a) 0.375%, if average daily Global Revolver Usage was 50% or less of theRevolver Commitments during the preceding calendar month, or (b) 0.25%, if average daily Global Revolver Usage was more than50% of the Revolver Commitments during such month.Upstream Payment: a Distribution by a Subsidiary of a Borrower to such Borrower.U.S. Accounts Formula Amount: the sum of (a) 85% of the Value of Eligible Non-Credit Insured Accounts of U.S. Borrowers,plus (b) the lesser of (i) 85% of the Value of Eligible Credit Insured Accounts of U.S. Borrowers and (ii) Insured Accounts Sublimit.U.S. Availability: the U.S. Borrowing Base minus U.S. Revolver Usage.U.S. Availability Reserve: the sum (without duplication) of (a) the U.S. Inventory Reserve; (b) the Rent and Charges Reservewith respect to a U.S. Borrower; (c) the U.S. Bank Product Reserve; (d) the aggregate amount of liabilities secured by Liens upon U.S.Collateral that are or may be senior to Agent’s Liens (but imposition of any such reserve shall not waive an Event of Default arisingtherefrom); (e) and the Dilution Reserve with respect to U.S. Borrowers; and (f)35such additional reserves, in such amounts and with respect to such matters, as Agent in its Permitted Discretion may elect to imposefrom time to time.U.S. Bank Product: any of the following products or services extended to a U.S. Borrower or Affiliate of a U.S. Borrower(other than Dutch Borrowers) by a Lender or any of its Affiliates: (a) Cash Management Services; (b) products under HedgingAgreements; (c) commercial credit card and merchant card services; and (d) leases, supply chain financing and other banking productsor services, other than U.S. Letters of Credit.U.S. Bank Product Reserve: the aggregate amount of reserves established by Agent from time to time in its discretion withrespect to U.S. Secured Bank Product Obligations.U.S. Base Rate: for any day, a per annum rate equal to the greater of (a) the Prime Rate for such day; (b) the Federal FundsRate for such day, plus 0.50%; or (c) LIBOR, plus 1.0%; provided, that in no event shall the U.S. Base Rate be less than zero.U.S. Borrowing Base: on any date of determination, an amount equal to the lesser of (a) the aggregate U.S. RevolverCommitments; or (b) the sum of the U.S. Accounts Formula Amount, plus the U.S. Inventory Formula Amount, minus the U.S.Availability Reserve.U.S. Borrowing Base Report: a report of the U.S. Borrowing Base, in form and substance satisfactory to Agent.U.S. Closing Date: as defined in Section 6.1.U.S. Collateral: all Property described in Section 7.1, all Property described in any Security Documents as security for anyU.S. Obligations, and all other Property that now or hereafter secures (or is intended to secure) any U.S. Obligations; provided,however, that U.S. Collateral shall not include any assets of any Foreign Subsidiaries.U.S. Inventory Formula Amount: the lesser of (a) 70% of the Value of Eligible Inventory of U.S. Borrowers; or (b) 85% of theNOLV Percentage of the Value of Eligible Inventory of U.S. Borrowers; provided, that at any time prior to the Conversion Date, theamount calculated under this definition shall not exceed the Inventory Sublimit.U.S. Inventory Reserve: reserves established by Agent to reflect factors that may negatively impact the Value of Inventory ofU.S. Borrowers, including change in salability, obsolescence, seasonality, theft, shrinkage, imbalance, change in composition or mix,markdowns and vendor chargebacks.U.S. LC Obligations: the sum of (a) all amounts owing by U.S. Borrowers for drawings under U.S. Letters of Credit; and (b)the Stated Amount of all outstanding U.S. Letters of Credit.36U.S. Lenders: lenders party to this Agreement (including Agent in its capacity as provider of U.S. Swingline Loans) and anyPerson who hereafter becomes a “U.S. Lender” pursuant to an Assignment, including any Lending Office of the foregoing.U.S. Letter of Credit: any standby or documentary letter of credit, foreign guaranty, documentary bankers acceptance,indemnity, reimbursement agreement or similar instrument issued by Issuing Bank for the account or benefit of a U.S. Borrower orAffiliate of a U.S. Borrower (other than a Dutch Borrower if issued after the Dutch Closing Date).U.S. Obligations: all (a) principal of and premium, if any, on the U.S. Revolver Loans, (b) U.S.LC Obligations and otherobligations of U.S. Obligors with respect to U.S. Letters of Credit, (c) interest, expenses, fees, indemnification obligations,Extraordinary Expenses and other amounts payable by U.S. Obligors under Loan Documents, (d) U.S. Secured Bank ProductObligations, (e) the obligations of U.S. Obligors under any Guaranty, and (f) other Debts, obligations and liabilities of any kind owingby U.S. Obligors pursuant to the Loan Documents, in each case whether now existing or hereafter arising, whether evidenced by anote or other writing, whether allowed in any Insolvency Proceeding, whether arising from an extension of credit, issuance of a letterof credit, acceptance, loan, guaranty, indemnification or otherwise, and whether direct or indirect, absolute or contingent, due or tobecome due, primary or secondary, or joint or several; provided, that U.S. Obligations of a U.S. Obligor shall not include its ExcludedSwap Obligations.U.S. Obligor: each U.S. Borrower, Guarantor or other Person that is liable for payment of any U.S. Obligations or that hasgranted a Lien on its assets in favor of Agent to secure any U.S. Obligations.U.S. Overadvance: as defined in Section 2.1.6.U.S. Person: “United States Person” as defined in Section 7701(a)(30) of the Code.U.S. Protective Advances: as defined in Section 2.1.7.U.S. Revolver Commitment: for any U.S. Lender, its obligation to make U.S. Revolver Loans and to participate in U.S. LCObligations up to the maximum principal amount shown on Schedule 1.1, as hereafter modified pursuant to Sections 2.1.8 or 2.2.2 oran Assignment to which it is a party. “U.S. Revolver Commitments” means the aggregate amount of such commitments of all U.S.Lenders.U.S. Revolver Loan: any loan made pursuant to Section 2.1 or as a U.S. Swingline Loan.U.S. Revolver Usage: (a) the aggregate amount of outstanding U.S. Revolver Loans; plus (b) the aggregate Stated Amount ofoutstanding U.S. Letters of Credit, except to the extent Cash Collateralized by U.S. Borrowers.37U.S. Secured Bank Product Obligations: Debt, obligations and other liabilities with respect to U.S. Bank Products owing by aU.S. Borrower or Affiliate of a U.S. Borrower (other than a Dutch Borrower if arising after the Dutch Closing Date) to a U.S. SecuredBank Product Provider; provided, that U.S. Secured Bank Product Obligations of a U.S. Obligor shall not include its Excluded SwapObligations.U.S. Secured Bank Product Provider: (a) Bank of America or any of its Affiliates; and (b) any other U.S. Lender, Affiliate of aU.S. Lender or a counterparty approved by Agent in its sole discretion, that is providing a U.S. Bank Product, provided such providerdelivers written notice to Agent, in form and substance satisfactory to Agent, within 10 days following the later of the U.S. ClosingDate or creation of the U.S. Bank Product, (i) describing the U.S. Bank Product and setting forth the maximum amount to be securedby the U.S. Collateral and the methodology to be used in calculating such amount, and (ii) agreeing to be bound by Section 12.13.U.S. Secured Parties: Agent, Issuing Bank (with respect to U.S. Letters of Credit), U.S. Lenders and U.S. Secured BankProduct Providers.U.S. Swingline Loan: any Borrowing of U.S. Revolver Loans funded with Agent’s funds, until such Borrowing is settledamong U.S. Lenders or repaid by U.S. Borrowers.U.S. Tax Compliance Certificate: as defined in Section 5.10.2(b)(iii).Value: (a) for Inventory, its value determined on the basis of the lower of cost or market, calculated on a first-in, first‑out basis,and excluding any portion of cost attributable to intercompany profit among Borrowers and their Affiliates; and (b) for an Account, itsface amount, net of any returns, rebates, discounts (calculated on the shortest terms), credits, allowances or Taxes (including sales,excise or other taxes) that have been or could be claimed by the Account Debtor or any other Person.Write-Down and Conversion Powers: the write-down and conversion powers of the applicable EEA Resolution Authorityfrom time to time under the Bail-In Legislation for the applicable EEA Member Country, which powers are described in the EU Bail-In Legislation Schedule.1.2 Accounting Terms. Under the Loan Documents (except as otherwise specified therein), all accounting terms shall beinterpreted, all accounting determinations shall be made, and all financial statements shall be prepared, in accordance with GAAPapplied on a basis consistent with the most recent audited financial statements of Borrowers delivered to Agent before the U.S. ClosingDate and using the same inventory valuation method as used in such financial statements, except for any change required or permittedby GAAP if Borrowers’ certified public accountants concur in such change, the change is disclosed to Agent, and all relevantprovisions of the Loan Documents are amended in a manner satisfactory to Required Lenders to take into account the effects of thechange.381.3 Uniform Commercial Code. As used herein, the following terms are defined in accordance with the UCC in effect in theState of New York from time to time (as the same may be modified by Section 1.6): “Account,” “Account Debtor,” “Chattel Paper,”“Commercial Tort Claim,” “Deposit Account,” “Document,” “Equipment,” “General Intangibles,” “Goods,” “Instrument,”“Investment Property,” “Letter-of-Credit Right” and “Supporting Obligation.”1.4 Certain Matters of Construction. The terms “herein,” “hereof,” “hereunder” and other words of similar import refer tothis Agreement as a whole and not to any particular section, paragraph or subdivision. Any pronoun used shall be deemed to cover allgenders. In the computation of periods of time from a specified date to a later specified date, “from” means “from and including,” and“to” and “until” each mean “to but excluding.” The terms “including” and “include” shall mean “including, without limitation” and, forpurposes of each Loan Document, the parties agree that the rule of ejusdem generis shall not be applicable to limit any provision.Section titles appear as a matter of convenience only and shall not affect the interpretation of any Loan Document. All references to (a)laws include all related regulations, interpretations, supplements, amendments and successor provisions; (b) any document, instrumentor agreement include any amendments, waivers and other modifications, extensions or renewals (to the extent permitted by the LoanDocuments); (c) any section mean, unless the context otherwise requires, a section of this Agreement; (d) any exhibits or schedulesmean, unless the context otherwise requires, exhibits and schedules attached hereto, which are hereby incorporated by reference; (e)any Person include successors and assigns; (f) time of day means time of day in the Applicable Time Zone; or (g) discretion of Agent,Issuing Bank or any Lender mean the sole and absolute discretion of such Person exercised at any time. All determinations (includingcalculations of Dutch Borrowing Base, U.S. Borrowing Base and financial covenants) made from time to time under the LoanDocuments shall be made in light of the circumstances existing at such time. Dutch Borrowing Base and U.S. Borrowing Basecalculations shall be consistent with historical methods of valuation and calculation, and otherwise satisfactory to Agent (and notnecessarily calculated in accordance with GAAP). Borrowers shall have the burden of establishing any alleged negligence, misconductor lack of good faith by Agent, Issuing Bank or any Lender under any Loan Documents. No provision of any Loan Documents shallbe construed against any party by reason of such party having, or being deemed to have, drafted the provision. Reference to aBorrower’s “knowledge” or similar concept means actual knowledge of a Senior Officer, or knowledge that a Senior Officer wouldhave obtained if39he or she had engaged in good faith and diligent performance of his or her duties, including reasonably specific inquiries of employeesor agents and a good faith attempt to ascertain the matter.1.5 Currency Equivalents.1.5.1 Calculations. All references in the Loan Documents to Revolver Loans, Letters of Credit, Obligations, DutchBorrowing Base, U.S. Borrowing Base components and other amounts shall be denominated in Dollars, unless expresslyprovided otherwise. The Dollar equivalent of any amounts denominated or reported under a Loan Document in a currencyother than Dollars shall be determined by Agent on a daily basis, based on the current Spot Rate. Borrowers shall report Valueand other Dutch Borrowing Base and U.S. Borrowing Base components to Agent in the currency invoiced by Borrowers (forAccounts) or shown in Borrowers’ financial records (for all other assets), and unless expressly provided otherwise, shall deliverfinancial statements and calculate financial covenants in Dollars. Notwithstanding anything herein to the contrary, if anObligation is funded or expressly denominated in a currency other than Dollars, Borrowers shall repay such Obligation in suchother currency.1.5.2 Judgments. If, in connection with obtaining judgment in any court, it is necessary to convert a sum from thecurrency provided under a Loan Document (“Agreement Currency”) into another currency, the Spot Rate shall be used as therate of exchange. Notwithstanding any judgment in a currency (“Judgment Currency”) other than the Agreement Currency, aBorrower shall discharge its obligation in respect of any sum due under a Loan Document only if, on the Business Dayfollowing receipt by Agent of payment in the Judgment Currency, Agent can use the amount paid to purchase the sumoriginally due in the Agreement Currency. If the purchased amount is less than the sum originally due, such Borrower agrees,as a separate obligation and notwithstanding any such judgment, to indemnify Agent and Lenders against such loss. If thepurchased amount is greater than the sum originally due, Agent shall return the excess amount to such Borrower (or to thePerson legally entitled thereto).1.6 Dutch Terms. In this Agreement, where it relates to a Dutch person, a reference to:1.6.1 a necessary action to authorise, where applicable, includes without limitation:(a) any action required to comply with the Dutch Works Councils Act; and(b) obtaining a positive advice (positief advies) from the competent works council(s);1.6.2 Accounts includes all vorderingen (as used in the Dutch Civil Code);1.6.3 a Lien includes any mortgage (hypotheek), pledge (pandrecht), retention of title arrangement(eigendomsvoorbehoud), privilege (voorrecht), right of retention (recht van retentie), right to reclaim goods (recht vanreclame), and, in general, any right in rem40(beperkt recht), created for the purpose of granting security (goederenrechtelijk zekerheidsrecht);1.6.4 a winding up or dissolution includes a Dutch person being declared bankrupt (failliet verklaard) or dissolved(ontbonden);1.6.5 any step or procedure taken in connection with insolvency proceedings includes a Dutch person having filed anotice under section 36 of the Tax Collection Act of the Netherlands (Invorderingswet 1990);1.6.6 a trustee, receiver or administrator includes a curator;1.6.7 an administrator includes a bewindvoerder;1.6.8 a liquidator includes a vereffenaar;1.6.9 a group includes a groep;1.6.10 a subsidiary includes a dochtermaatschappij;1.6.11 an affiliate includes a groepsmaatschappij;1.6.12 a merger includes a juridische fusie, aandelenfusie and bedrijfsfusie;(a)a charter document includes an akte van oprichting and statuten; and(b)a director includes a bestuurder.SECTION 2. CREDIT FACILITIES2.1 Revolver Commitment.2.1.1 Dutch Revolver Loans. Each Dutch Lender agrees, severally on a Pro Rata basis up to its Dutch RevolverCommitment, on the terms set forth herein, to make Dutch Revolver Loans to Dutch Borrowers from time to time through theCommitment Termination Date. The Dutch Revolver Loans may be repaid and reborrowed as provided herein. In no eventshall Dutch Lenders have any obligation to honor a request for a Dutch Revolver Loan if Dutch Revolver Usage at such timeplus the requested Dutch Revolver Loan would exceed the Dutch Borrowing Base.2.1.2 U.S. Revolver Loans. Each U.S. Lender agrees, severally on a Pro Rata basis up to its U.S. RevolverCommitment, on the terms set forth herein, to make U.S. Revolver Loans to U.S. Borrowers from time to time through theCommitment Termination Date. The U.S. Revolver Loans may be repaid and reborrowed as provided herein. In no event shallU.S. Lenders have any obligation to honor a request for a U.S. Revolver Loan if U.S. Revolver Usage at such time plus therequested U.S. Revolver Loan would exceed the U.S. Borrowing Base. Each U.S. Lender agrees and acknowledges that it ismaking U.S. Revolver Loans to U.S. Borrowers based primarily on the U.S. Borrowers’ ability to repay the U.S. RevolverLoans, and not based on the assets, liabilities, financial condition, results of operations, business, creditworthiness or legal statusof any Dutch Borrower.2.1.3 Notes. Revolver Loans and interest accruing thereon shall be evidenced by the records of Agent and theapplicable Lender. At the request of a Lender, the applicable Borrower shall deliver promissory note(s) to such Lender,evidencing its Revolver Loans.2.1.4 Use of Proceeds. The proceeds of Revolver Loans shall be used by Borrowers solely (a) to satisfy existing Debt;(b) to pay fees and transaction expenses associated with the closing of this credit facility; (c) to pay Obligations in accordancewith this Agreement; and (d) for lawful corporate purposes of Borrowers, including working capital. Borrowers shall not,directly or indirectly, use any Letter of Credit or Revolver Loan proceeds, nor use, lend, contribute or otherwise make availableany Letter of Credit or Revolver Loan proceeds to any Subsidiary, joint venture partner or other Person, (i) to fund anyactivities of or business with any Person, or in any Designated Jurisdiction, that, at the time of issuance of the Letter of Creditor funding of the Revolver Loan, is the target of any Sanction; or (ii) in any manner that would result in a violation of aSanction by any Person (including any Secured Party or other individual or entity participating in any transaction); or (iii) forany purpose that would breach the U.S. Foreign Corrupt Practices Act of 1977, UK Bribery Act 2010 or similar law in anyjurisdiction.2.1.5 Voluntary Reduction or Termination of Revolver Commitments.(a) The Revolver Commitments shall terminate on the Revolver Termination Date, unless sooner terminated inaccordance with this Agreement. Upon at least 30 days’ prior written notice to Agent, Dutch Borrowers may, at theiroption, terminate the Dutch Revolver Commitments and U.S. Borrowers may, at their option, terminate the U.S.Revolver Commitments; provided, that if the U.S. Revolver Commitments are terminated, all Revolver Commitmentsand this credit facility shall be contemporaneously terminated. Any notice of termination given by Borrowers shall beirrevocable. On the termination date, Borrowers shall make Full Payment of all Obligations.(b) Dutch Borrowers may permanently reduce the Dutch Revolver Commitments, on a ratable basis for allDutch Lenders, and U.S. Borrowers may permanently reduce the U.S. Revolver Commitments, on a ratable basis forall U.S. Lenders, in each case, upon at least 30 days’ prior written notice to Agent, which notice shall specify theamount of the reduction and shall be irrevocable once given. Each reduction shall be in a minimum amount of$5,000,000, or an increment of $1,000,000 in excess thereof. The Dutch Revolver Commitments shall at no time bereduced by Dutch Borrowers to an amount less than $10,000,000 and the U.S. Revolver Commitments shall at no timebe reduced by U.S. Borrowers to an amount less than $50,000,000.2.1.6 Overadvances.(a) Dutch Overadvances. If Dutch Revolver Usage exceeds the Dutch Borrowing Base (“DutchOveradvance”) at any time, the excess shall be payable by Dutch Borrowers on demand by Agent and shall constitutea Dutch Obligation secured by the Dutch Collateral, entitled to all benefits of the Loan Documents. Agent may requireDutch Lenders to fund Dutch Revolver Loans that cause or constitute a Dutch Overadvance and to forbear fromrequiring Dutch Borrowers to cure a Dutch Overadvance, as long as the total Dutch Overadvance does not exceed 10%of the Dutch Borrowing Base and does not continue for more than 30 consecutive days without the consent ofRequired Lenders. In no event shall Dutch Revolver Loans be required that would cause Dutch Revolver Usage toexceed the aggregate Dutch Revolver Commitments or that would cause Global Revolver Usage to exceed theaggregate Revolver Commitments. No funding or sufferance of a Dutch Overadvance shall constitute a waiver byAgent or Lenders of the Event of Default caused thereby. No Dutch Obligor shall be a beneficiary of this Section norauthorized to enforce any of its terms.(b) U.S. Overadvances. If U.S. Revolver Usage exceeds the U.S. Borrowing Base (“U.S. Overadvance”) atany time, the excess shall be payable by U.S. Borrowers on demand by Agent and shall constitute a U.S. Obligationsecured by the U.S. Collateral, entitled to all benefits of the Loan Documents. Agent may require U.S. Lenders to fundU.S. Revolver Loans that cause or constitute a U.S. Overadvance and to forbear from requiring U.S. Borrowers to curea U.S. Overadvance, as long as the total U.S. Overadvance does not exceed 10% of the U.S. Borrowing Base and doesnot continue for more than 30 consecutive days without the consent of Required Lenders. In no event shall U.S.Revolver Loans be required that would cause U.S. Revolver Usage to exceed the aggregate U.S. RevolverCommitments or that would cause Global Revolver Usage to exceed the aggregate Revolver Commitments. Nofunding or sufferance of a U.S. Overadvance shall constitute a waiver by Agent or Lenders of the Event of Defaultcaused thereby. No U.S. Obligor shall be a beneficiary of this Section nor authorized to enforce any of its terms.2.1.7 Protective Advances.(a) Dutch Protective Advances. Agent shall be authorized, in its discretion, at any time after the Dutch ClosingDate that any conditions in Section 6 are not satisfied, to make Dutch Revolver Loans (“Dutch Protective Advances”)(a) up to an aggregate amount equal to 10% of the Dutch Borrowing Base outstanding at any time, if Agent deems suchDutch Revolver Loans necessary or desirable to preserve or protect Dutch Collateral, or to enhance the collectability orrepayment of Dutch Obligations, as long as such Dutch Revolver Loans do not cause Dutch Revolver Usage to exceedthe aggregate Dutch Revolver Commitments; or (b) to pay any other amounts chargeable to Dutch Obligors under anyLoan Documents, including interest, costs, fees and expenses. Lenders shall participate on a Pro Rata basis in DutchProtective Advances outstanding from time to time. Required Lenders may at any time revoke Agent’s authority tomake further Dutch Protective Advances under clause (a) by written notice to Agent. Absent such revocation, Agent’sdetermination that funding of a Dutch Protective Advance is appropriate shall be conclusive.(b) U.S. Protective Advances. Agent shall be authorized, in its discretion, at any time that any conditions inSection 6 are not satisfied, to make U.S. Revolver Loans (“U.S. Protective Advances”) (a) up to an aggregate amountequal to 10% of the U.S. Borrowing Base outstanding at any time, if Agent deems such U.S. Revolver Loans necessaryor desirable to preserve or protect Collateral, or to enhance the collectability or repayment of Obligations, as long assuch U.S. Revolver Loans do not cause U.S. Revolver Usage to exceed the aggregate U.S. Revolver Commitments; or(b) to pay any other amounts chargeable to U.S. Obligors under any Loan Documents, including interest, costs, feesand expenses. U.S. Lenders shall participate on a Pro Rata basis in U.S. Protective Advances outstanding from time totime. Required Lenders may at any time revoke Agent’s authority to make further U.S. Protective Advances underclause (a) by written notice to Agent. Absent such revocation, Agent’s determination that funding of a U.S. ProtectiveAdvance is appropriate shall be conclusive.2.1.8 Increase in Revolver Commitments. At any time after the Conversion Date, U.S. Borrowers may request anincrease in U.S. Revolver Commitments from time to time upon not less than 45 days’ notice to Agent, as long as (a) therequested increase is in a minimum amount of $10,000,000 and is offered on the same terms as existing U.S. RevolverCommitments, except for a closing fee specified by U.S. Borrowers and Agent, and (b) total increases under this Section do notexceed $100,000,000 and no more than 3 increases are made. Agent shall promptly notify U.S. Lenders of the requestedincrease and, within 10 Business Days thereafter, each U.S. Lender shall notify Agent if and to what extent such U.S. Lendercommits to increase its U.S. Revolver Commitment. Any U.S. Lender not responding within such period shall be deemed tohave declined an increase. If U.S. Lenders fail to commit to the full requested increase, Eligible Assignees may issue additionalU.S. Revolver Commitments and become U.S. Lenders hereunder. Agent may allocate, in its discretion, the increased U.S.Revolver Commitments among committing U.S. Lenders and, if necessary, Eligible Assignees. Total U.S. RevolverCommitments shall be increased by the requested amount (or such lesser amount committed by U.S. Lenders and EligibleAssignees) on a date agreed upon by Agent and Borrower Agent, provided (i) the conditions set forth in Section 6.3 aresatisfied at such time; and (ii) flood insurance diligence and documentation have been completed as required by all Flood Lawsor otherwise in a manner satisfactory to all Lenders. Agent, U.S. Borrowers, and the new and existing U.S. Lenders shallexecute and deliver such documents and agreements as Agent deems appropriate to evidence the increase in and allocations ofU.S. Revolver Commitments. On the effective date of an increase, the U.S. Revolver Usage and other exposures under theU.S. Revolver Commitments shall be reallocated among U.S. Lenders, and settled by Agent as necessary, in accordance withLenders’ adjusted shares of such commitments.2.2 Reallocation of Revolver Commitments.2.2.1 Reserved.2.2.2 Commitment Reallocation.(a) Reallocation Mechanism. At any time after the Dutch Closing Date, Borrower Agent may request thatDutch Lenders and U.S. Lenders change the then current allocation of their respective Revolver Commitments in orderto effect an increase or decrease of such respective Revolver Commitments, with any such increase or decrease in theirDutch Revolver Commitments to Dutch Borrowers to be accompanied by a concurrent and equal decrease or increase,as applicable, in their U.S. Revolver Commitments (each, a “Reallocation”). Any such Reallocation shall be subject tothe following conditions: (i) Borrower Agent shall have provided to Agent a written notice (in reasonable detail) at leastthirty (30) Business Days prior to the requested effective date (which effective date shall be the first day of thesubsequent Fiscal Quarter) of such Reallocation (the “Reallocation Date”) setting forth the proposed Reallocation Dateand the amounts of the proposed Revolver Commitments reallocations to be effected, (ii) any such Reallocation shallincrease or decrease the applicable Revolver Commitments in increments of $5,000,000, and, after giving effect to anysuch Reallocation, the aggregate Dutch Revolver Commitments shall not exceed 30% of the aggregate RevolverCommitments, (iii) after giving effect to the Reallocation, each Lender shall hold the same Pro Rata share of all of theRevolver Commitments as it did prior to such Reallocation, (iv) no Default or Event of Default shall have occurred andbe continuing either as of the date of such request or on the Reallocation Date (both immediately before and after givingeffect to such Reallocation), (v) any increase or decrease in a Revolver Commitment of a Lender in its respective DutchRevolver Commitment or U.S. Revolver Commitment shall result in a concurrent decrease or increase in in itsrespective Dutch Revolver Commitment or U.S. Revolver Commitment such that the sum of all the RevolverCommitments of such Lender after giving effect to such Reallocation shall equal the aggregate amount of the RevolverCommitments of such Lender in effect immediately prior to such Reallocation, (vi) after giving effect to suchReallocation, no Overadvance, Dutch Overadvance or U.S. Overadvance would exist or would result therefrom, (vii) atleast three (3) Business Days prior to the proposed Reallocation Date, a Senior Officer of Borrower Agent shall havedelivered to Agent a certificate certifying as to compliance with preceding clauses (i) through (vi) and demonstrating (inreasonable detail) the calculations required in connection therewith, (viii) Agent consents to such Reallocation in itsPermitted Discretion; and (ix) no more than one Reallocation is requested in any 3-month period and no more than twoReallocations are requested in any 12-month period.(b) Reallocations Generally. Agent shall promptly notify such Lenders of the Reallocation Date and theamount of the affected Revolver Commitment of such Lenders as a result thereof. The respective Pro Rata shares ofLenders shall thereafter, to the extent applicable, be determined based on such reallocated amounts (subject to anysubsequent changes thereto).2.3 Letter of Credit Facility.2.3.1 Issuance of Letters of Credit. Issuing Bank shall issue Letters of Credit from time to time until the CommitmentTermination Date, on the terms set forth herein, including the following:(a) Each Borrower acknowledges that Issuing Bank’s issuance of any Letter of Credit is conditioned uponIssuing Bank’s receipt of a LC Application with respect to the requested Letter of Credit, as well as such otherinstruments and agreements as Issuing Bank may customarily require for issuance of a letter of credit of similar type andamount. Issuing Bank shall have no obligation to issue any Letter of Credit unless (i) Issuing Bank receives a LCRequest and LC Application at least three Business Days prior to the requested date of issuance; (ii) each LC Conditionis satisfied; and (iii) if a Defaulting Lender exists, such Lender or Borrowers have entered into arrangements satisfactoryto Agent and Issuing Bank to eliminate any Fronting Exposure associated with such Lender. If, in sufficient time to act,Issuing Bank receives written notice from Agent or Required Lenders that a LC Condition has not been satisfied,Issuing Bank shall not issue the requested Letter of Credit. Prior to receipt of any such notice, Issuing Bank shall not bedeemed to have knowledge of any failure of LC Conditions.(b) Letters of Credit may be requested by any (i) U.S. Borrower to support obligations incurred in the OrdinaryCourse of Business, (ii) Dutch Borrower to support obligations incurred in the Ordinary Course of Business, or (iii) asotherwise approved by Agent. Increase, renewal or extension of a Letter of Credit shall be treated as issuance of a newLetter of Credit, except that Issuing Bank may require a new LC Application in its discretion.(c) Each Borrower assumes all risks of the acts, omissions or misuses of any Letter of Credit by the beneficiarywith respect to any Letter of Credit issued at its request. In connection with any Letter of Credit, none of Agent, IssuingBank or any Lender shall be responsible for the existence, character, quality, quantity, condition, packing, value ordelivery of any goods purported to be represented by any Documents; any differences or variation in the character,quality, quantity, condition, packing, value or delivery of any goods from that expressed in any Documents; the form,validity, sufficiency, accuracy, genuineness or legal effect of any Documents or of any endorsements thereon; the time,place, manner or order in which shipment of goods is made; partial or incomplete shipment of, or failure to ship, anygoods referred to in a Letter of Credit or Documents; any deviation from instructions, delay, default or fraud by anyshipper or other Person in connection with any goods, shipment or delivery; any breach of contract between a shipperor vendor and a Borrower; errors, omissions, interruptions or delays in transmission or delivery of any messages, bymail, cable, telegraph, telex, telecopy, e-mail, telephone or otherwise; errors in interpretation of technical terms; themisapplication by a beneficiary of any Letter of Credit or the proceeds thereof; or any consequences arising from causesbeyond the control of Issuing Bank, Agent or any Lender, including any act or omission of a Governmental Authority.Borrowers shall take all action to avoid and mitigate any damages relating to any Letter of Credit or claimed againstIssuing Bank, Agent or any Lender, including through enforcement of any available rights against a beneficiary. IssuingBank shall be fully subrogated to the rights and remedies of any beneficiary whose claims against any Borrower aredischarged with proceeds of a Letter of Credit. The rights and remedies of Issuing Bank under the Loan Documentsshall be cumulative.(d) In connection with its administration of and enforcement of rights or remedies under any Letters of Creditor LC Documents, Issuing Bank shall be entitled to act, and shall be fully protected in acting, upon any certification,documentation or communication in whatever form believed by Issuing Bank, in good faith, to be genuine and correctand to have been signed, sent or made by a proper Person. Issuing Bank may use legal counsel, accountants and otherexperts to advise it concerning its obligations, rights and remedies, and shall be entitled to act upon, and shall be fullyprotected in any action taken in good faith reliance upon, any advice given by such experts. Issuing Bank may employagents and attorneys-in-fact in connection with any matter relating to Letters of Credit or LC Documents, and shall notbe liable for the negligence or misconduct of agents and attorneys-in-fact selected with reasonable care.2.3.2 Reimbursement; Participations.(a) If Issuing Bank honors any request for payment under a Letter of Credit, the Requesting Borrower shallpay to Issuing Bank, on the same day (“Reimbursement Date”), the amount paid by Issuing Bank under such Letter ofCredit, together with interest at the interest rate for Revolver Loans related to the currency denominating such Letter ofCredit from the Reimbursement Date until payment by Requesting Borrower. The obligation of Dutch Borrowers toreimburse Issuing Bank for any payment made under a Dutch Letter of Credit shall be absolute, unconditional,irrevocable, and joint and several, and shall be paid without regard to any lack of validity or enforceability of any DutchLetter of Credit or the existence of any claim, setoff, defense or other right that any Dutch Obligor may have at any timeagainst the beneficiary. The obligation of U.S. Borrowers to reimburse Issuing Bank for any payment made under aU.S. Letter of Credit shall be absolute, unconditional, irrevocable, and joint and several, and shall be paid withoutregard to any lack of validity or enforceability of any U.S. Letter of Credit or the existence of any claim, setoff, defenseor other right that any U.S. Obligor may have at any time against the beneficiary. Whether or not Borrower Agentsubmits a Notice of Borrowing, Requesting Borrower shall be deemed to have requested a Borrowing of RevolverLoans in an amount necessary to pay all amounts due Issuing Bank on any Reimbursement Date and each DutchLender and U.S. Lender, as applicable, shall fund its Pro Rata share of such Borrowing whether or not the applicableRevolver Commitments have terminated, an applicable Overadvance exists or is created thereby, or the conditions inSection 6 are satisfied.(b) Each Lender providing a Revolver Commitment to the Requesting Borrower, hereby irrevocably andunconditionally purchases from Issuing Bank, without recourse or warranty, an undivided Pro Rata participation in allLC Obligations of the Requesting Borrower relating to such Letter of Credit outstanding from time to time. IssuingBank is issuing Letters of Credit in reliance upon this participation. If Requesting Borrowers do not make a payment toIssuing Bank when due hereunder, Agent shall promptly notify Lenders providing a Revolver Commitment to theRequesting Borrower and each such Lender shall within one Business Day after such notice pay to Agent, for thebenefit of Issuing Bank, the Lender’s Pro Rata share of such payment. Upon request by a Lender, Issuing Bank shallprovide copies of Letters of Credit and LC Documents in its possession at such time.(c) The obligation of each applicable Lender to make payments to Agent for the account of Issuing Bank inconnection with Issuing Bank’s payment under a Letter of Credit shall be absolute, unconditional and irrevocable, notsubject to any counterclaim, setoff, qualification or exception whatsoever, and shall be made in accordance with thisAgreement under all circumstances, irrespective of any lack of validity or unenforceability of any Loan Documents; anydraft, certificate or other document presented under a Letter of Credit having been determined to be forged, fraudulent,noncompliant, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect;any waiver by Issuing Bank of a requirement that exists for its protection (and not a Requesting Borrower’s protection)or that does not materially prejudice a Requesting Borrower; any honor of an electronic demand for payment even if adraft is required; any payment of an item presented after a Letter of Credit’s expiration date if authorized by the UCC orapplicable customs or practices; or any setoff or defense that an Obligor may have with respect to any Obligations.Issuing Bank does not assume any responsibility for any failure or delay in performance or any breach by any Borroweror other Person of any obligations under any LC Documents. Issuing Bank does not make to Lenders any express orimplied warranty, representation or guaranty with respect to any Letter of Credit, Collateral, LC Document or Obligor.Issuing Bank shall not be responsible to any Lender for any recitals, statements, information, representations orwarranties contained in, or for the execution, validity, genuineness, effectiveness or enforceability of any LCDocuments; the validity, genuineness, enforceability, collectability, value or sufficiency of any Collateral or theperfection of any Lien therein; or the assets, liabilities, financial condition, results of operations, business,creditworthiness or legal status of any Obligor.(d) No Issuing Bank Indemnitee shall be liable to any Lender or other Person for any action taken or omitted tobe taken in connection with any Letter of Credit or LC Document except as a result of its gross negligence or willfulmisconduct. Issuing Bank may refrain from taking any action with respect to a Letter of Credit until it receives writteninstructions (and in its discretion, appropriate assurances) from the Lenders.2.3.3 Cash Collateral. At Agent’s or Issuing Bank’s request, Requesting Borrower shall Cash Collateralize (a) theFronting Exposure of any applicable Defaulting Lender, and (b) all outstanding Letters of Credit issues at its request if an Eventof Default exists, the Commitment Termination Date occurs or the Revolver Termination Date is scheduled to occur within 20Business Days. If Requesting Borrower fails to provide any Cash Collateral as required hereunder, the applicable Lenders may(and shall upon direction of Agent) advance, as Revolver Loans of the Requesting Borrower, the amount of Cash Collateralrequired (whether or not the Revolver Commitments have terminated, an Overadvance exists or the conditions in Section 6 aresatisfied).2.3.4 Resignation of Issuing Bank. Issuing Bank may resign at any time upon notice to Agent and Borrowers, and anyresignation of Agent hereunder shall automatically constitute its concurrent resignation as Issuing Bank. From the effective dateof its resignation, Issuing Bank shall have no obligation to issue, amend, renew, extend or otherwise modify any Letter ofCredit, but shall otherwise have all rights and obligations of an Issuing Bank hereunder relating to any Letter of Credit issuedby it prior to such date. A replacement Issuing Bank may be appointed by written agreement among Agent, Borrower Agentand the new Issuing Bank.SECTION 3. INTEREST, FEES AND CHARGES3.1 Interest.3.1.1 Rates and Payment of Interest.(a) The Obligations shall bear interest (i) if a Dutch Revolver Loan, at LIBOR, plus the Applicable Margin;provided that if LIBOR is unavailable for any reason, Dutch Revolver Loans shall bear interest at the Foreign BaseRate, plus 1.50%; (ii) if a U.S. Revolver Loan, at LIBOR, plus the Applicable Margin; provided that if LIBOR isunavailable for any reason, U.S. Revolver Loans shall bear interest at the U.S. Base Rate, plus 0.50%, (iii) if any otherDutch Obligation (including, to the extent permitted by law, interest not paid when due), at LIBOR in effect from timeto time, plus the Applicable Margin for Dutch Revolver Loans; provided that if LIBOR is unavailable for any reason,such Dutch Obligations shall bear interest at the Foreign Base Rate, plus 1.50%, and (vi) if any other U.S. Obligation(including, to the extent permitted by law, interest not paid when due), at LIBOR in effect from time to time, plus theApplicable Margin for U.S. Revolver Loans; provided that if LIBOR is unavailable for any reason, such U.S.Obligations shall bear interest at the U.S. Base Rate, plus 0.50%.(b) During an Insolvency Proceeding with respect to any Borrower, or during any other Event of Default ifAgent or Required Lenders in their discretion so elect and notify the Borrower Agent in writing, Obligations shall bearinterest at the Default Rate (whether before or after any judgment), payable on demand.(c) Interest shall accrue from the date a Revolver Loan is advanced or Obligation is incurred or payable, untilpaid in full by Borrowers, and shall in no event be less than zero at any time. Interest accrued on the Revolver Loansshall be due and payable in arrears, (i) on the first day of each month; (ii) on any date of prepayment, with respect to theprincipal amount being prepaid; and (iii) on the Commitment Termination Date. Interest accrued on any otherObligations shall be due and payable as provided in the applicable agreements or, if no payment date is specified, ondemand.3.1.2 Reserved.3.1.3 Reserved.3.1.4 Interest Rate Not Ascertainable. If, due to any circumstance affecting the London interbank market, Agentdetermines that adequate and fair means do not exist for ascertaining LIBOR on any applicable date, then Agent shallimmediately notify Borrowers of such determination. Until Agent notifies Borrowers that such circumstance no longer exists,the obligation of Lenders to make affected LIBOR Loans shall be suspended.3.2 Fees.3.2.1 Unused Line Fee. U.S. Borrowers shall pay to Agent, for the Pro Rata benefit of Lenders, a fee equal to theUnused Line Fee Rate times the amount by which the Revolver Commitments exceed the average daily Global RevolverUsage during any month. Such fee shall be payable in arrears, on the first day of each month and on the CommitmentTermination Date.3.2.2 LC Facility Fees.(a) Dutch Borrowers shall pay (i) to Agent, for the Pro Rata benefit of applicable Dutch Lenders, a fee equal tothe Applicable Margin in effect for Dutch Revolver Loans times the average daily Stated Amount of Dutch Letters ofCredit, which fee shall be payable monthly in arrears, on the first day of each month; (ii) to Agent, for its own account,a fronting fee equal to 0.125% per annum on the Stated Amount of each applicable Dutch Letter of Credit, which feeshall be payable monthly in arrears, on the first day of each month; and (iii) to Issuing Bank, for its own account, allcustomary charges associated with the issuance, amending, negotiating, payment, processing, transfer andadministration of Dutch Letters of Credit, which charges shall be paid as and when incurred. During an Event ofDefault, the fee payable under clause (i) shall be increased by 2% per annum.(b) U.S. Borrowers shall pay (i) to Agent, for the Pro Rata benefit of applicable U.S. Lenders, a fee equal tothe Applicable Margin in effect for U.S. Revolver Loans times the average daily Stated Amount of U.S. Letters ofCredit, which fee shall be payable monthly in arrears, on the first day of each month; (ii) to Agent, for its own account,a fronting fee equal to 0.125% per annum on the Stated Amount of each applicable U.S. Letter of Credit, which feeshall be payable monthly in arrears, on the first day of each month; and (iii) to Issuing Bank, for its own account, allcustomary charges associated with the issuance, amending, negotiating, payment, processing, transfer andadministration of U.S. Letters of Credit, which charges shall be paid as and when incurred. During an Event of Default,the fee payable under clause (i) shall be increased by 2% per annum.3.2.3 Fee Letters. Borrowers shall pay all fees set forth in any fee letter executed in connection with this Agreement.3.3 Computation of Interest, Fees, Yield Protection. All interest, as well as fees and other charges calculated on a perannum basis, shall be computed for the actual days elapsed, based on a year of 360 days; provided that interest, fees and charges inSterling calculated on a per annum basis, shall be computed for the actual days elapsed, based on a year of 365 days. Eachdetermination by Agent of any interest, fees or interest rate hereunder shall be final, conclusive and binding for all purposes, absentmanifest error. All fees shall be fully earned when due and shall not be subject to rebate, refund or proration. All fees payable underSection 3.2 are compensation for services and are not, and shall not be deemed to be, interest or any other charge for the use,forbearance or detention of money. A certificate as to amounts payable by Borrowers under Section 3.4, 3.6, 3.7, 3.9 or 5.9, submittedto Borrower Agent by Agent or the affected Lender shall be final, conclusive and binding for all purposes, absent manifest error, andBorrowers shall pay such amounts to the appropriate party within 10 days following receipt of the certificate.3.4 Reimbursement Obligations. Borrowers shall pay all Extraordinary Expenses promptly upon request. Borrowers shallalso reimburse Agent for all legal, accounting, appraisal, consulting, and other fees and expenses incurred by it in connection with (a)negotiation and preparation of any Loan Documents, including any modification thereof; (b) administration of and actions relating toany Collateral, Loan Documents and transactions contemplated thereby, including any actions taken to perfect or maintain priority ofAgent’s Liens on any Collateral, to maintain any insurance required hereunder or to verify Collateral; and (c) subject to the limits ofSection 10.1.1(b), any examination or appraisal with respect to any Obligor or Collateral by Agent’s personnel or a third party. Alllegal, accounting and consulting fees shall be charged to Borrowers by Agent’s professionals at their full hourly rates, regardless of anyalternative fee arrangements that Agent, any Lender or any of their Affiliates may have with such professionals that otherwise mightapply to this or any other transaction. Borrowers acknowledge that counsel may provide Agent with a benefit (such as a discount,credit or accommodation for other matters) based on counsel’s overall relationship with Agent, including fees paid hereunder. If, forany reason (including inaccurate reporting in any Borrower Materials), it is determined that a higher Applicable Margin should haveapplied to a period than was actually applied, then the proper margin shall be applied retroactively and Borrowers shall immediatelypay to Agent, for the ratable benefit of Lenders, an amount equal to the difference between the amount of interest and fees that wouldhave accrued using the proper margin and the amount actually paid. All amounts payable by Borrowers under this Section shall be dueon demand.3.5 Illegality. If any Lender determines that any Applicable Law has made it unlawful, or that any Governmental Authorityhas asserted that it is unlawful, for any Lender to perform any of its obligations hereunder, to make, maintain, fund, participate in, orcharge applicable interest or fees with respect to, any Revolver Loan or Letter of Credit, or to determine or charge interest based onLIBOR, or any Governmental Authority has imposed material restrictions on the authority of such Lender to purchase or sell, or totake deposits of, the applicable Available Currency in the London interbank market, then, on notice thereof by such Lender to Agent,any obligation of such Lender to perform such obligations, to make, maintain, fund or participate in the Revolver Loan or Letter ofCredit (or to charge interest or fees otherwise applicable thereto), or to maintain Revolver Loans bearing interest based on LIBOR,shall be suspended until such Lender notifies Agent that the circumstances giving rise to such determination no longer exist. Upondelivery of such notice, Borrowers shall prepay the applicable Revolver Loan, Cash Collateralize the applicable LC Obligations or, ifapplicable, convert such Revolver Loan(s) of such Lender to Revolver Loan(s) bearing interest at the U.S. Base Rate or Foreign BaseRate, as applicable. Upon any such prepayment or conversion, applicable Borrowers shall also pay accrued interest on the amount soprepaid or converted.3.6 Inability to Determine Rates. Agent will promptly notify Borrower Agent and Lenders if, in connection with anyRevolver Loan or request for a Revolver Loan, (a) Agent determines that (i) the applicable Available Currency deposits are not beingoffered to banks in the London interbank Eurodollar market for the applicable Revolver Loan amount, or (ii) adequate and reasonablemeans do not exist for determining LIBOR; or (b) Agent or Required Lenders determine for any reason that LIBOR does notadequately and fairly reflect the cost to Lenders of funding the Revolver Loan. Thereafter, Lenders’ obligations to make or maintainaffected Revolver Loans bearing interest based on LIBOR and utilization of the LIBOR component (if affected) in determining U.S.Base Rate or Foreign Base Rate shall be suspended until Agent (upon instruction by Required Lenders) withdraws the notice. Uponreceipt of such notice, Borrower Agent may revoke any pending request for a Revolver Loan bearing interest based on LIBOR or,failing that, will be deemed to have requested a Revolver Loan bearing interest at the U.S. Base Rate or Foreign Base Rate, asapplicable.3.7 Increased Costs; Capital Adequacy.3.7.1 Increased Costs Generally. If any Change in Law shall:(a) impose, modify or deem applicable any reserve, liquidity, special deposit, compulsory loan, insurancecharge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated inby, any Lender (except any reserve requirement reflected in calculating LIBOR) or Issuing Bank;(b) subject any Recipient to Taxes (other than (i) Indemnified Taxes, (ii) Taxes described in clauses (b)through (e) of the definition of Excluded Taxes, and (iii) Connection Income Taxes) with respect to any RevolverLoan, Letter of Credit, Revolver Commitment or other obligations, or its deposits, reserves, other liabilities or capitalattributable thereto; or(c) impose on any Lender, Issuing Bank or interbank market any other condition, cost or expense (other thanTaxes) affecting any Revolver Loan, Letter of Credit, participation in LC Obligations, Revolver Commitment or LoanDocument;and the result thereof shall be to increase the cost to a Lender of making or maintaining any Revolver Loan or Revolver Commitment,or maintaining any Revolver Loan bearing interest based on LIBOR, or to increase the cost to a Lender or Issuing Bank ofparticipating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter ofCredit), or to reduce the amount of any sum received or receivable by a Lender or Issuing Bank hereunder (whether of principal,interest or any other amount) then, upon request of such Lender or Issuing Bank, Borrowers will pay to it such additional amount(s), aswill compensate it for the additional costs incurred or reduction suffered.3.7.2 Capital Requirements. If a Lender or Issuing Bank determines that a Change in Law affecting such Lender orIssuing Bank or its holding company, if any, regarding capital or liquidity requirements has or would have the effect ofreducing the rate of return on such Lender’s, Issuing Bank’s or holding company’s capital as a consequence of this Agreement,or such Lender’s or Issuing Bank’s Revolver Commitments, Revolver Loans, Letters of Credit or participations in LCObligations or Revolver Loans, to a level below that which such Lender, Issuing Bank or holding company could haveachieved but for such Change in Law (taking into consideration its policies with respect to capital adequacy), then from time totime Borrowers will pay to such Lender or Issuing Bank, as the case may be, such additional amounts, if such amounts arereasonably similar to the amounts assessed to similar obligors of similar loans or financial accommodations provided by aLender or the LC Issuer, as will compensate it or its holding company for the reduction suffered.3.7.3 LIBOR Reserves. If any Lender is required to maintain reserves with respect to liabilities or assets consisting ofor including Eurocurrency funds or deposits, Borrowers shall pay additional interest to such Lender on each Revolver Loanbearing interest based on LIBOR equal to the costs of such reserves allocated to the Revolver Loan by the applicable Lender(as determined by it in good faith, which determination shall be conclusive). The additional interest shall be due and payable oneach interest payment date for the Revolver Loan; provided, that if the Lender notifies Borrowers (with a copy to Agent) of theadditional interest less than 10 days prior to the interest payment date, then such interest shall be payable 10 days afterBorrowers’ receipt of the notice.3.7.4 Compensation. Failure or delay on the part of any Lender or Issuing Bank to demand compensation pursuant tothis Section shall not constitute a waiver of its right to demand such compensation, but Borrowers shall not be required tocompensate a Lender or Issuing Bank for any increased costs or reductions suffered more than nine months (plus any period ofretroactivity of the Change in Law giving rise to the demand) prior to the date that the Lender or Issuing Bank notifiesBorrower Agent of the applicable Change in Law and of such Lender’s or Issuing Bank’s intention to claim compensationtherefor.3.8 Mitigation. If any Lender or Issuing Bank gives a notice under Section 3.5 or requests compensation under Section 3.7,or if Borrowers are required to pay any Indemnified Taxes or additional amounts with respect to a Lender, Issuing Bank or anyGovernmental Authority for the account of any Lender or Issuing Bank under Section 5.9, then at the request of Borrower Agent,such Lender or Issuing Bank, as applicable, shall use reasonable efforts to file any certificate or document reasonably requested by theBorrower Agent or designate a different Lending Office or to assign its rights and obligations hereunder to another of its offices,branches or Affiliates, if, in the judgment of such Lender or Issuing Bank, such designation or assignment (a) would eliminate the needfor such notice or reduce amounts payable or to be withheld in the future, as applicable; and (b) would not subject such Lender orIssuing Bank, as the case may be, to any unreimbursed cost or expense and would not otherwise be disadvantageous to it or unlawful.Borrowers shall pay all reasonable costs and expenses incurred by any Lender or Issuing Bank in connection with any suchdesignation or assignment.3.9 Funding Losses. If for any reason (a) any Borrowing or maintaining of a Revolver Loan bearing interest based onLIBOR does not occur on the date specified therefor in a Notice of Borrowing (whether or not withdrawn), (b) any repayment orcontinuation of a Revolver Loan bearing interest based on LIBOR, (c) Borrowers fail to repay a Revolver Loan bearing interest basedon LIBOR when required hereunder, or (d) a Lender (other than a Defaulting Lender) is required to assign a Revolver Loan bearinginterest based on LIBOR pursuant to Section 13.4, then Borrowers shall pay to Agent its customary administrative charge and to eachLender all losses, expenses and fees arising from redeployment of funds or termination of match funding. For purposes of calculatingamounts payable under this Section, a Lender shall be deemed to have funded a Revolver Loan bearing interest based on LIBOR by amatching deposit or other borrowing in the London interbank market for a comparable amount and period, whether or not the RevolverLoan was in fact so funded.3.10 Maximum Interest. Notwithstanding anything to the contrary contained in any Loan Document, the interest paid oragreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by Applicable Law(“maximum rate”). If Agent or any Lender shall receive interest in an amount that exceeds the maximum rate, the excess interest shallbe applied to the principal of the Obligations or, if it exceeds such unpaid principal, refunded to Borrowers. In determining whether theinterest contracted for, charged or received by Agent or a Lender exceeds the maximum rate, such Person may, to the extent permittedby Applicable Law, (a) characterize any payment that is not principal as an expense, fee or premium rather than interest; (b) excludevoluntary prepayments and the effects thereof; and (c) amortize, prorate, allocate and spread in equal or unequal parts the total amountof interest throughout the contemplated term of the Obligations hereunder.SECTION 4. LOAN ADMINISTRATION4.1 Manner of Borrowing and Funding Revolver Loans.4.1.1 Notice of Borrowing.(a) To request Revolver Loans, Borrower Agent shall give Agent a Notice of Borrowing by 11:00 a.m. on therequested funding date. Notices received by Agent after such time shall be deemed received on the next Business Day.Each Notice of Borrowing shall be irrevocable and shall specify (A) the Borrowing amount, (B) the requested fundingdate (which must be a Business Day), and (C) whether such request is for a Dutch Revolver Loan or U.S. RevolverLoan.(b) Unless payment is otherwise made by the applicable Borrowers, the becoming due of any Obligation(whether principal, interest, fees or other charges, including Extraordinary Expenses, LC Obligations, Cash Collateraland Secured Bank Product Obligations) shall be deemed to be a request for a Revolver Loan on the due date in theamount due and the Revolver Loan proceeds shall be disbursed as direct payment of such Obligation. In addition,Agent may, at its option, charge such amount against any operating, investment or other account of the applicableBorrower maintained with Agent or any of its Affiliates or branches.(c) If a Borrower maintains a disbursement account with Agent or any of its Affiliates or branches, thenpresentation for payment in the account of a Payment Item when there are insufficient funds to cover it shall be deemedto be a request for a Revolver Loan by such Borrower on the presentation date, in the amount of the Payment Item.Proceeds of the Revolver Loan may be disbursed directly to the account.4.1.2 Fundings by Lenders. Except for Swingline Loans, Agent shall endeavor to notify Lenders of each Notice ofBorrowing (or deemed request for a Borrowing) by 2:00 p.m. on the day of a proposed funding of a Revolver Loan. EachLender shall fund its Pro Rata share of a Borrowing in immediately available funds not later than 3:00 p.m. on the requestedfunding date, unless Agent’s notice is received after the times provided above, in which case Lender shall fund by 11:00 a.m.on the next Business Day. Subject to its receipt of such amounts from Lenders, Agent shall disburse the Borrowing proceeds ina manner directed by Borrower Agent and acceptable to Agent. Unless Agent receives (in sufficient time to act) written noticefrom a Lender that it will not fund its share of a Borrowing, Agent may assume that such Lender has deposited or promptly willdeposit its share with Agent, and Agent may disburse a corresponding amount to Borrowers. If a Lender’s share of aBorrowing or of a settlement under Section 4.1.3(b) is not received by Agent, then the applicable Borrowers agree to repay toAgent on demand the amount of such share, together with interest thereon from the date disbursed until repaid, at the rateapplicable to the Borrowing. Agent, a Lender or Issuing Bank may fulfill its obligations under Loan Documents through one ormore Lending Offices, and this shall not affect any obligation of Obligors under the Loan Documents or with respect to anyObligations.4.1.3 Swingline Loans; Settlement.(a) To fulfill any request for a Dutch Revolver Loan hereunder, Agent may in its discretion advance DutchSwingline Loans to Dutch Borrowers, up to an aggregate outstanding amount equal to 15% of the Dutch RevolverCommitments. Dutch Swingline Loans shall constitute Dutch Revolver Loans for all purposes, except that paymentsthereon shall be made to Agent for its own account until settled with or funded by Dutch Lenders hereunder.(b) To fulfill any request for a U.S. Revolver Loan hereunder, Agent may in its discretion advance U.S.Swingline Loans to U.S. Borrowers, up to an aggregate outstanding amount equal to 15% of the U.S. RevolverCommitments. U.S. Swingline Loans shall constitute U.S. Revolver Loans for all purposes, except that paymentsthereon shall be made to Agent for its own account until settled with or funded by U.S. Lenders hereunder.(c) Settlement of Dutch Revolver Loans, including Dutch Swingline Loans, among Dutch Lenders and Agentand settlement of U.S. Revolver Loans, including U.S. Swingline Loans, among U.S. Lenders and Agent, shall, ineach case, take place on a date determined from time to time by Agent (but at least weekly, unless the settlementamount is de minimis), on a Pro Rata basis in accordance with the Settlement Report delivered by Agent to Lenders.Between settlement dates, Agent may in its discretion apply payments on applicable Revolver Loans to applicableSwingline Loans, regardless of any designation by Borrowers or anything herein to the contrary. Each Dutch Lenderhereby purchases, without recourse or warranty, an undivided Pro Rata participation in all Dutch Swingline Loansoutstanding from time to time until settled and each U.S. Lender hereby purchases, without recourse or warranty, anundivided Pro Rata participation in all U.S. Swingline Loans outstanding from time to time until settled. If a SwinglineLoan cannot be settled among Lenders, whether due to an Obligor’s Insolvency Proceeding or for any other reason,each Lender shall pay the amount of its participation in the Revolver Loan to Agent, in immediately available funds,within one Business Day after Agent’s request therefor. Lenders’ obligations to make settlements and to fundparticipations are absolute, irrevocable and unconditional, without offset, counterclaim or other defense, and whether ornot the Revolver Commitments have terminated, a Dutch Overadvance, a U.S. Overadvance or an Overadvance existsor the conditions in Section 6 are satisfied.4.1.4 Notices. If Borrowers request Revolver Loans, select interest rates or transfer funds based on telephonic orelectronic instructions to Agent, Borrowers shall confirm the request by prompt delivery to Agent of a Notice of Borrowing.Agent and Lenders are not liable for any loss suffered by a Borrower as a result of Agent acting on its understanding oftelephonic or electronic instructions from a person believed in good faith to be authorized to give instructions on a Borrower’sbehalf.4.2 Defaulting Lender. Notwithstanding anything herein to the contrary:4.2.1 Reallocation of Pro Rata Share; Amendments. For purposes of determining Lenders’ obligations or rights tofund, participate in or receive collections with respect to Revolver Loans and Letters of Credit (including existing SwinglineLoans, Protective Advances and LC Obligations), Agent may in its discretion reallocate Pro Rata shares by excluding aDefaulting Lender’s Revolver Commitments and Revolver Loans from the calculation of shares; provided that in no event shallsuch reallocation among non-Defaulting Lenders result in any Lender exceeding its respective Revolver Commitment. ADefaulting Lender shall have no right to vote on any amendment, waiver or other modification of a Loan Document, except asprovided in Section 14.1.1(c).4.2.2 Payments; Fees. Agent may, in its discretion, receive and retain any amounts payable to a Defaulting Lenderunder the Loan Documents, and a Defaulting Lender shall be deemed to have assigned to Agent such amounts until allObligations owing to Agent, non-Defaulting Lenders and other Secured Parties have been paid in full. Agent may use suchamounts to cover the Defaulting Lender’s defaulted obligations, to Cash Collateralize such Lender’s Fronting Exposure, toreadvance the amounts to Borrowers or to repay Obligations. A Lender shall not be entitled to receive any fees accruinghereunder while it is a Defaulting Lender and its unfunded Revolver Commitment shall be disregarded for purposes ofcalculating the unused line fee under Section 3.2.1. If any LC Obligations owing to a Defaulted Lender are reallocated to otherLenders, fees attributable to such LC Obligations under Section 3.2.2 shall be paid to such Lenders. Agent shall be paid allfees attributable to LC Obligations that are not reallocated.4.2.3 Status; Cure. Agent may determine in its discretion that a Lender constitutes a Defaulting Lender and theeffective date of such status shall be conclusive and binding on all parties, absent manifest error. Borrowers, Agent and IssuingBank may agree in writing that a Lender has ceased to be a Defaulting Lender, whereupon Pro Rata shares shall be reallocatedwithout exclusion of the reinstated Lender’s Revolver Commitments and Revolver Loans, and the Global Revolver Usage andother exposures under the Revolver Commitments shall be reallocated among Lenders and settled by Agent (with appropriatepayments by the reinstated Lender, including its payment of breakage costs for reallocated Revolver Loans bearing interestbased on LIBOR) in accordance with the readjusted Pro Rata shares. Unless expressly agreed by Borrowers, Agent andIssuing Bank, or as expressly provided herein with respect to Bail-In Actions and related matters, no reallocation of RevolverCommitments and Revolver Loans to non-Defaulting Lenders or reinstatement of a Defaulting Lender shall constitute a waiveror release of claims against such Lender. The failure of any Lender to fund a Revolver Loan, to make a payment in respect ofLC Obligations or otherwise to perform obligations hereunder shall not relieve any other Lender of its obligations under anyLoan Document. No Lender shall be responsible for default by another Lender.4.3 Reserved.4.4 Borrower Agent. Each Borrower hereby designates SMCI (“Borrower Agent”) as its representative and agent for allpurposes under the Loan Documents, including requests for and receipt of Revolver Loans and Letters of Credit, designation ofinterest rates, delivery or receipt of communications, delivery of Borrower Materials, payment of Obligations, requests for waivers,amendments or other accommodations, actions under the Loan Documents (including in respect of compliance with covenants), and allother dealings with Agent, Issuing Bank or any Lender. Borrower Agent hereby accepts such appointment. Agent and Lenders shallbe entitled to rely upon, and shall be fully protected in relying upon, any notice or communication (including any notice of borrowing)delivered by Borrower Agent on behalf of any Borrower. Agent and Lenders may give any notice or communication with a Borrowerhereunder to Borrower Agent on behalf of such Borrower. Each of Agent, Issuing Bank and Lenders shall have the right, in itsdiscretion, to deal exclusively with Borrower Agent for all purposes under the Loan Documents. Each Borrower agrees that anynotice, election, communication, delivery, representation, agreement, action, omission or undertaking by Borrower Agent shall bebinding upon and enforceable against such Borrower.4.5 One Obligation.4.5.1 Dutch Obligations. The Dutch Revolver Loans, Dutch LC Obligations and other Dutch Obligations constituteone general obligation of Dutch Borrowers and are secured by Agent’s Lien on all Dutch Collateral; provided, that Agent andeach Lender shall be deemed to be a creditor of, and the holder of a separate claim against, each Dutch Borrower to the extentof any Dutch Obligations jointly or severally owed by such Dutch Borrower.4.5.2 U.S. Obligations. The U.S. Revolver Loans, U.S. LC Obligations and other U.S. Obligations constitute onegeneral obligation of U.S. Borrowers and are secured by Agent’s Lien on all U.S. Collateral; provided, that Agent and eachLender shall be deemed to be a creditor of, and the holder of a separate claim against, each U.S. Borrower to the extent of anyU.S. Obligations jointly or severally owed by such U.S. Borrower.4.6 Effect of Termination. On the effective date of the termination of all Revolver Commitments, the Obligations shall beimmediately due and payable, and each Secured Bank Product Provider may terminate its Bank Products. Until Full Payment of theObligations, all undertakings of Borrowers contained in the Loan Documents shall continue, and Agent shall retain its Liens in theCollateral and all of its rights and remedies under the Loan Documents. Agent shall not be required to terminate its Liens unless itreceives Cash Collateral or a written agreement, in each case satisfactory to it, protecting Agent and Lenders from dishonor or return ofany Payment Item previously applied to the Obligations. Sections 2.3, 3.4, 3.6, 3.7, 3.9, 5.5, 5.9, 5.10, 12, 14.2, this Section, and eachindemnity or waiver given by an Obligor or Lender in any Loan Document, shall survive Full Payment of the Obligations.SECTION 5. PAYMENTS5.1 General Payment Provisions. All payments of U.S. Obligations shall be made in Dollars and all payments of DutchObligations shall be made in Alternative Currency as set forth in Section 5.12.1, in each case, without offset, counterclaim or defenseof any kind, free and clear of (and without deduction for) any Taxes, and in immediately available funds, not later than 12:00 noon onthe due date. Any payment after such time shall be deemed made on the next Business Day. Any payment of a Revolver Loan bearinginterest based on LIBOR shall be accompanied by all amounts which may be due under Section 3.9. Borrowers agree that Agent shallhave the continuing, exclusive right to apply and reapply payments and proceeds of Collateral against the Obligations secured by suchCollateral, in such manner as Agent deems advisable.5.2 Repayment of Revolver Loans. Revolver Loans shall be due and payable in full on the Revolver Termination Date,unless payment is sooner required hereunder. Revolver Loans may be prepaid from time to time, without penalty or premium. Subjectto Section 2.1.5, (i) if an Overadvance exists at any time, Borrowers shall, on the sooner of Agent’s demand or the first Business Dayafter any Borrower has knowledge thereof, repay Revolver Loans in an amount sufficient to reduce Global Revolver Usage to theGlobal Borrowing Base, (ii) if a Dutch Overadvance exists at any time, Dutch Borrowers shall, on the sooner of Agent’s demand orthe first Business Day after any Dutch Borrower has knowledge thereof, repay Dutch Revolver Loans in an amount sufficient toreduce Dutch Revolver Usage to the Dutch Borrowing Base and (iii) if a U.S. Overadvance exists at any time, U.S. Borrowers shall,on the sooner of Agent’s demand or the first Business Day after any U.S. Borrower has knowledge thereof, repay U.S. RevolverLoans in an amount sufficient to reduce U.S. Revolver Usage to the U.S. Borrowing Base. If any Asset Disposition includes thedisposition of Accounts or Inventory, the applicable Borrowers shall apply Net Proceeds to repay their Revolver Loans equal to thegreater of (a) the net book value of such Accounts and Inventory, or (b) the reduction in the applicable Dutch Borrowing Base or U.S.Borrowing Base resulting from the disposition.5.3 Reserved.5.4 Payment of Other Obligations. Obligations other than Revolver Loans, including LC Obligations and ExtraordinaryExpenses, shall be paid by Borrowers as provided in the Loan Documents or, if no payment date is specified, on demand.5.5 Marshaling; Payments Set Aside. None of Agent or Lenders shall be under any obligation to marshal any assets in favorof any Obligor or against any Obligations. If any payment by or on behalf of Borrowers is made to Agent, Issuing Bank or anyLender, or if Agent, Issuing Bank or any Lender exercises a right of setoff, and any of such payment or setoff is subsequentlyinvalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by Agent,Issuing Bank or a Lender in its discretion) to be repaid to a trustee, receiver or any other Person, then the Obligation originally intendedto be satisfied, and all Liens, rights and remedies relating thereto, shall be revived and continued in full force and effect as if suchpayment or setoff had not occurred.5.6 Application and Allocation of Payments.5.6.1 Application.(a) Payments made by Dutch Borrowers hereunder shall be applied (i) first, as specifically required hereby; (ii)second, to Dutch Obligations then due and owing; (iii) third, to other Dutch Obligations specified by Dutch Borrowers;and (iv) fourth, as determined by Agent in its discretion.(b) Payments made by U.S. Borrowers hereunder shall be applied (i) first, as specifically required hereby; (ii)second, to U.S. Obligations then due and owing; (iii) third, to other Obligations specified by Borrowers; and (iv) fourth,as determined by Agent in its discretion.5.6.2 U.S. Post-Default Allocation. Notwithstanding anything in any Loan Document to the contrary, during an Eventof Default under Section 11.1(j), or during any other Event of Default at the discretion of Agent or Required Lenders, moniesto be applied to the U.S. Obligations, whether arising from payments by U.S. Obligors, realization on U.S. Collateral, setoff orotherwise, shall be allocated as follows:(a) FIRST, to all fees, indemnification, costs and expenses, including Extraordinary Expenses, owing toAgent by U.S. Obligors;(b) SECOND, to all other amounts owing to Agent, including U.S. Swingline Loans, U.S. ProtectiveAdvances, and U.S. Revolver Loans and participations that a Defaulting Lender has failed to settle or fund;(c) THIRD, to all amounts owing to Issuing Bank by a U.S. Obligor;(d) FOURTH, to all U.S. Obligations (other than U.S. Secured Bank Product Obligations) constituting fees,indemnification, costs or expenses owing to Lenders;(e) FIFTH, to all U.S. Obligations (other than U.S. Secured Bank Product Obligations) constituting interest;(f) SIXTH, to Cash Collateralize all U.S. LC Obligations;(g) SEVENTH, to all U.S. Revolver Loans, and to U.S. Secured Bank Product Obligations arising underHedge Agreements (including Cash Collateralization thereof) which are provided by Bank of America (or any of itsLending Offices) or any of its Affiliates or any other U.S. Lender or Affiliate of a U.S. Lender, up to the amount ofReserves existing therefor;(h) EIGHTH, to all other U.S. Secured Bank Product Obligations which are provided by Bank of America (orany of its Lending Offices) or any of its Affiliates or any other U.S. Lender or Affiliate of a U.S. Lender;(i) NINTH, to all other U.S. Secured Bank Product Obligations which are provided by a counterparty otherthan Bank of America (and any of its Lending Offices) or any of its Affiliates or any other U.S. Lender or Affiliate of aU.S. Lender; and(j) LAST, to all remaining U.S. Obligations (including each U.S. Obligor’s obligations under its guaranty ofthe Dutch Obligations).5.6.3 Dutch Post-Default Allocation. Notwithstanding anything in any Loan Document to the contrary, during anEvent of Default under Section 11.1(j), or during any other Event of Default at the discretion of Agent or Required Lenders,monies to be applied to the Dutch Obligations, whether arising from payments by Dutch Obligors, realization on DutchCollateral, setoff or otherwise, shall be allocated as follows:(a) FIRST, to all fees, indemnification, costs and expenses, including Extraordinary Expenses, owing toAgent by a Dutch Obligor;(b) SECOND, to all other amounts owing to Agent, including Dutch Swingline Loans, Dutch ProtectiveAdvances, and Dutch Revolver Loans and participations that a Defaulting Lender has failed to settle or fund;(c) THIRD, to all amounts owing to Issuing Bank by Dutch Obligors;(d) FOURTH, to all Dutch Obligations (other than Dutch Secured Bank Product Obligations) constitutingfees, indemnification, costs or expenses owing to Lenders;(e) FIFTH, to all Dutch Obligations (other than Dutch Secured Bank Product Obligations) constitutinginterest;(f) SIXTH, to Cash Collateralize all Dutch LC Obligations;(g) SEVENTH, to all Dutch Revolver Loans, and to Dutch Secured Bank Product Obligations arising underHedge Agreements (including Cash Collateralization thereof) which are provided by Bank of America (and any of itsLending Offices) or any of its Affiliates or any other Dutch Lender or Affiliate of a Dutch Lender, up to the amount ofReserves existing therefor;(h) EIGHTH, to all other Dutch Secured Bank Product Obligations which are provided by Bank of America(or any of its Lending Offices) or any of its Affiliates or any other Dutch Lender or Affiliate of a Dutch Lender;(i) NINTH, to all other Dutch Secured Bank Product Obligations which are provided by a counterparty otherthan Bank of America (and any of its Lending Offices) or any of its Affiliates or any other Dutch Lender or Affiliate ofa Dutch Lender; and(j) LAST, to all remaining Dutch Obligations.With respect to the application of payments under Section 5.6.2 and 5.6.3, amounts shall be applied to payment of each category ofObligations only after Full Payment of amounts payable from time to time under all preceding categories. If amounts are insufficient tosatisfy a category, they shall be paid ratably among outstanding Obligations in the category. Monies and proceeds obtained from anObligor shall not be applied to its Excluded Swap Obligations, but appropriate adjustments shall be made with respect to amountsobtained from other Obligors to preserve the allocations in each category. Agent shall have no obligation to calculate the amount ofany Secured Bank Product Obligation and may request a reasonably detailed calculation thereof from a Secured Bank ProductProvider. If the provider fails to deliver the calculation within five days following request, Agent may assume the amount is zero. Theallocations in this Section are solely to determine the priorities among Secured Parties and may be changed by agreement of affectedSecured Parties without the consent of any Obligor. This Section is not for the benefit of or enforceable by any Obligor, and noObligor has any right to direct the application of payments or Collateral proceeds subject to this Section.5.6.4 Erroneous Application. Agent shall not be liable for any application of amounts made by it in good faith and, ifany such application is subsequently determined to have been made in error, the sole recourse of any Lender or other Person towhich such amount should have been paid shall be to recover the amount from the Person that actually received it (and, if suchamount was received by a Secured Party, the Secured Party agrees to return it).5.7 Dominion Account. Prior to the Conversion Date, the ledger balance in the main Dominion Account of each Borroweras of the end of a Business Day shall be applied to the applicable Obligations at the beginning of the next Business Day. Upon andafter the Conversion Date, the ledger balance in the main Dominion Account of each Borrower as of the end of a Business Day shallbe applied to the applicable Obligations at the beginning of the next Business Day, during any Trigger Period. Any resulting creditbalance shall not accrue interest in favor of Borrowers and shall be made available to the applicable Borrowers as long as no Default orEvent of Default exists.5.8 Account Stated. Agent shall maintain, in accordance with its customary practices, loan account(s) evidencing the Debt ofBorrowers hereunder. Any failure of Agent to record anything in a loan account, or any error in doing so, shall not limit or otherwiseaffect the obligation of Borrowers to pay any amount owing hereunder. Entries made in a loan account shall constitute presumptiveevidence of the information contained therein. If any information contained in a loan account is provided to or inspected by anyPerson, the information shall be conclusive and binding on such Person for all purposes absent manifest error, except to the extent suchPerson notifies Agent in writing within 30 days after receipt or inspection that specific information is subject to dispute.5.9 Taxes.5.9.1 Defined Terms. For purposes of this Section and Section 5.10, the term “Lender” includes any Issuing Bank andthe term “Applicable Law” includes FATCA.5.9.2 Payments Free of Taxes; Obligation to Withhold; Tax Payment(a) Any and all payments of Obligations by Obligors under any Loan Document shall be made withoutdeduction or withholding for any Taxes, except as required by Applicable Law. If Applicable Law (as determined byObligors and Agent in their discretion) requires the deduction or withholding of any Tax from any such payment byAgent or an Obligor, then Agent or such Obligor shall be entitled to make such deduction or withholding based oninformation and documentation provided pursuant to Section 5.10.(b) If Agent or any Obligor is required by the Code to withhold or deduct Taxes, including backupwithholding and withholding taxes, from any payment, then (i) Agent shall pay the full amount that it determines is tobe withheld or deducted to the relevant Governmental Authority pursuant to the Code, and (ii) to the extent thewithholding or deduction is made on account of Indemnified Taxes, the sum payable by the applicable Obligor shall beincreased as necessary so that the Recipient receives an amount equal to the sum it would have received had no suchwithholding or deduction been made.(c) If Agent or any Obligor is required by any Applicable Law other than the Code to withhold or deductTaxes from any payment, then (i) Agent or such Obligor, to the extent required by Applicable Law, shall timely pay thefull amount to be withheld or deducted to the relevant Governmental Authority, and (ii) to the extent the withholding ordeduction is made on account of Indemnified Taxes, the sum payable by the applicable Obligor shall be increased asnecessary so that the Recipient receives an amount equal to the sum it would have received had no such withholding ordeduction been made.5.9.3 Payment of Other Taxes. Without limiting the foregoing, Borrowers shall timely pay to the relevantGovernmental Authority in accordance with Applicable Law, or at Agent’s option, timely reimburse Agent for payment of, anyOther Taxes.5.9.4 Tax Indemnification.(a) Each Borrower shall indemnify and hold harmless, on a joint and several basis, each Recipient against anyIndemnified Taxes (including those imposed or asserted on or attributable to amounts payable under this Section)payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient, and anyreasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly orlegally imposed or asserted by the relevant Governmental Authority. Each Borrower shall indemnify and hold harmlessAgent against any amount that a Lender or Issuing Bank fails for any reason to pay indefeasibly to Agent as requiredpursuant to this Section. Each Borrower shall make payment within 10 days after demand for any amount or liabilitypayable under this Section. A certificate as to the amount of such payment or liability delivered to Borrowers by aLender or Issuing Bank (with a copy to Agent), or by Agent on its own behalf or on behalf of any Recipient, shall beconclusive absent manifest error; provided, that no Borrower shall be required to indemnify the Agent for any amountattributable to the Agent’s gross negligence or willful misconduct that is determined in a final, non-appealable judgmentby a court of competent jurisdiction to result from the gross negligence or willful misconduct. Upon receipt of suchindemnity payment and upon the request of a Borrower, the Agent hereby agrees to assign to the requesting Borrowerany rights for compensation against such Lender or issuer of a Letter of Credit (other than the right of set off pursuant tothe last sentence of Section 5.9.4(b) below) to the extent the Agent has been indemnified by a Borrower.(b) Each Lender and Issuing Bank shall indemnify and hold harmless, on a several basis, (i) Agent against anyIndemnified Taxes attributable to such Lender or Issuing Bank (but only to the extent Borrowers have not already paidor reimbursed Agent therefor and without limiting Borrowers’ obligation to do so), (ii) Agent and Obligors, asapplicable, against any Taxes attributable to such Lender’s failure to maintain a Participant register as requiredhereunder, and (iii) Agent and Obligors, as applicable, against any Excluded Taxes attributable to such Lender orIssuing Bank, in each case, that are payable or paid by Agent or an Obligor in connection with any Obligations, andany reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legallyimposed or asserted by the relevant Governmental Authority. Each Lender and Issuing Bank shall make paymentwithin 10 days after demand for any amount or liability payable under this Section. A certificate as to the amount ofsuch payment or liability delivered to any Lender or Issuing Bank by Agent shall be conclusive absent manifest error.5.9.5 Evidence of Payments. As soon as practicable after payment by an Obligor of any Taxes pursuant to thisSection, Borrower Agent shall deliver to Agent the original or a certified copy of a receipt issued by the appropriateGovernmental Authority evidencing the payment, a copy of any return required by Applicable Law to report the payment orother evidence of payment reasonably satisfactory to Agent.5.9.6 Treatment of Certain Refunds. Unless required by Applicable Law, at no time shall Agent have any obligationto file for or otherwise pursue on behalf of a Lender or Issuing Bank, nor have any obligation to pay to any Lender or IssuingBank, any refund of Taxes withheld or deducted from funds paid for the account of a Lender or Issuing Bank. If a Recipientdetermines in its discretion exercised in good faith that it has received a refund of any Taxes (including any Tax credit in lieu ofa refund) that were indemnified by Borrowers or with respect to which a Borrower paid additional amounts pursuant to thisSection, it shall pay the amount equal to such refund to Borrowers (but only to the extent of indemnity payments or additionalamounts actually paid by Borrowers with respect to the Taxes giving rise to the refund), net of all out-of-pocket expenses(including Taxes) incurred by such Recipient and without interest (other than interest paid by the relevant GovernmentalAuthority with respect to such refund). Borrowers shall, upon request by the Recipient, repay to the Recipient such amountpaid over to Borrowers (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) if theRecipient is required to repay such refund to the Governmental Authority. Notwithstanding anything herein to the contrary, noRecipient shall be required to pay any amount to Borrowers if such payment would place it in a less favorable net after-Taxposition than it would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted,withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had neverbeen paid. In no event shall Agent or any Recipient be required to make its Tax returns (or any other information relating to itsTaxes that it deems confidential) available to any Obligor or other Person.5.9.7 Survival. Each party’s obligations under Sections 5.9 and 5.10 shall survive the resignation or replacement ofAgent or any assignment of rights by or replacement of a Lender or Issuing Bank, the termination of the RevolverCommitments, and the repayment, satisfaction, discharge or Full Payment of any Obligations.5.10 Lender Tax Information.5.10.1 Status of Lenders. Any Lender that is entitled to an exemption from or reduction of withholding Tax withrespect to payments of Obligations shall deliver to Borrowers and Agent, at the time or times reasonably requested byBorrower or Agent, properly completed and executed documentation reasonably requested by Borrowers or Agent as willpermit such payments to be made without or at a reduced rate of withholding. In addition, any Lender, if reasonably requestedby Borrowers or Agent, shall deliver such other documentation prescribed by Applicable Law or reasonably requested byBorrowers or Agent to enable them to determine whether such Lender is subject to backup withholding or informationreporting requirements. Notwithstanding the foregoing, the completion, execution and submission of such documentation (otherthan documentation described in Sections 5.10.2(a), (b) and (d)) shall not be required if a Lender reasonably believes deliveryof the documentation would subject it to any material unreimbursed cost or expense or would materially prejudice its legal orcommercial position.5.10.2 Documentation. Without limiting the foregoing, if any Borrower is a U.S. Person,(a) Any Lender that is a U.S. Person shall deliver to Borrowers and Agent on or prior to the date on whichsuch Lender becomes a Lender hereunder (and from time to time thereafter upon reasonable request of Borrowers orAgent), executed copies of IRS Form W-9, certifying that such Lender is exempt from U.S. federal backup withholdingTax;(b) Any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to Borrowers and Agent (insuch number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lenderbecomes a Lender hereunder (and from time to time thereafter upon reasonable request of Borrowers or Agent),whichever of the following is applicable:(i) in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the UnitedStates is a party, (x) with respect to payments of interest under any Loan Document, executed copies of IRS Form W-8BEN or IRSForm W-8BEN-E establishing an exemption from or reduction of U.S. federal withholding Tax pursuant to the “interest” article ofsuch tax treaty, and (y) with respect to other payments under the Loan Documents, IRS Form W-8BEN or IRS Form W-8BEN-Eestablishing an exemption from or reduction of U.S. federal withholding Tax pursuant to the “business profits” or “other income”article of such tax treaty;(ii) executed copies of IRS Form W-8ECI;(iii) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interestunder Section 881(c) of the Code, (x) a certificate in form satisfactory to Agent to the effect that such Foreign Lender is not a “bank”within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of a Borrower within the meaning of Section871(h)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (“U.S. Tax ComplianceCertificate”), and (y) executed copies of IRS Form W-8BEN or IRS Form W-8BEN-E; or(iv) to the extent a Foreign Lender is not the beneficial owner, executed copies of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN or IRS Form W-8BEN-E, a U.S. Tax Compliance Certificate inform satisfactory to Agent, IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided,that if the Foreign Lender is a partnership and one or more of its direct or indirect partners is claiming the portfolio interest exemption,such Foreign Lender may provide a U.S. Tax Compliance Certificate on behalf of each such direct and indirect partner;(c) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to Borrowers and Agent (insuch number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lenderbecomes a Lender hereunder (and from time to time thereafter upon reasonable request of Borrowers or Agent),executed copies of any other form prescribed by Applicable Law as a basis for claiming exemption from or a reductionin U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may beprescribed by Applicable Law to permit Borrowers or Agent to determine the withholding or deduction required to bemade; and(d) if payment of an Obligation to a Lender would be subject to U.S. federal withholding Tax imposed byFATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including thosecontained in Section 1471(b) or 1472(b) of the Code), such Lender shall deliver to Borrowers and Agent, at the time(s)prescribed by law and otherwise upon reasonable request of Borrowers or Agent, such documentation prescribed byApplicable Law (including Section 1471(b)(3)(C)(i) of the Code) and such additional documentation as may beappropriate for Borrowers or Agent to comply with their obligations under FATCA and to determine that such Lenderhas complied with its obligations under FATCA or to determine the amount to deduct and withhold from suchpayment. Solely for purposes of this clause (d), “FATCA” shall include any amendments made to FATCA after thedate hereof.5.10.3 Redelivery of Documentation. If any form or certification previously delivered by a Lender pursuant to thisSection expires or becomes obsolete or inaccurate in any respect, such Lender shall promptly update the form or certification ornotify Borrowers and Agent in writing of its legal inability to do so.5.11 Nature and Extent of Each Borrower’s Liability.5.11.1 Joint and Several Liability.(a) Each U.S. Borrower agrees that it is jointly and severally liable for, and absolutely and unconditionallyguarantees to Agent and U.S. Lenders the prompt payment and performance of, all U.S. Obligations, except itsExcluded Swap Obligations. Each U.S. Borrower agrees that its guaranty obligations hereunder constitute a continuingguaranty of payment and not of collection, that such obligations shall not be discharged until Full Payment of the U.S.Obligations, and that such obligations are absolute and unconditional, irrespective of (a) the genuineness, validity,regularity, enforceability, subordination or any future modification of, or change in, any U.S. Obligations or LoanDocument, or any other document, instrument or agreement to which any U.S. Obligor is or may become a party or bebound; (b) the absence of any action to enforce this Agreement (including this Section) or any other Loan Document, orany waiver, consent or indulgence of any kind by Agent or any U.S. Lender with respect thereto; (c) the existence,value or condition of, or failure to perfect a Lien or to preserve rights against, any security or guaranty for any U.S.Obligations or any action, or the absence of any action, by Agent or any U.S. Lender in respect thereof (including therelease of any security or guaranty); (d) the insolvency of any U.S. Obligor; (e) any election by Agent or any U.S.Lender in an Insolvency Proceeding for the application of Section 1111(b)(2) of the Bankruptcy Code; (f) anyborrowing or grant of a Lien by any other U.S. Borrower, as debtor-in-possession under Section 364 of the BankruptcyCode or otherwise; (g) the disallowance of any claims of Agent or any U.S. Lender against any U.S. Obligor for therepayment of any U.S. Obligations under Section 502 of the Bankruptcy Code or otherwise; or (h) any other action orcircumstances that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, exceptFull Payment of the U.S. Obligations.(b) Joint and Several Liability. Each Dutch Borrower agrees that it is jointly and severally liable for, andabsolutely and unconditionally guarantees to Agent and Dutch Lenders the prompt payment and performance of, allDutch Obligations, except its Excluded Swap Obligations. Each Dutch Borrower agrees that its guaranty obligationshereunder constitute a continuing guaranty of payment and not of collection, that such obligations shall not bedischarged until Full Payment of the Dutch Obligations, and that such obligations are absolute and unconditional,irrespective of (a) the genuineness, validity, regularity, enforceability, subordination or any future modification of, orchange in, any Dutch Obligations or Loan Document, or any other document, instrument or agreement to which anyDutch Obligor is or may become a party or be bound; (b) the absence of any action to enforce this Agreement(including this Section) or any other Loan Document, or any waiver, consent or indulgence of any kind by Agent orany Dutch Lender with respect thereto; (c) the existence, value or condition of, or failure to perfect a Lien or to preserverights against, any security or guaranty for any Dutch Obligations or any action, or the absence of any action, by Agentor any Dutch Lender in respect thereof (including the release of any security or guaranty); (d) the insolvency of anyDutch Obligor; (e) any election by Agent or any Dutch Lender in an Insolvency Proceeding for the application ofSection 1111(b)(2) of the Bankruptcy Code; (f) any borrowing or grant of a Lien by any other Dutch Borrower, asdebtor-in-possession under Section 364 of the Bankruptcy Code or otherwise; (g) the disallowance of any claims ofAgent or any Dutch Lender against any Dutch Obligor for the repayment of any Dutch Obligations under Section 502of the Bankruptcy Code or otherwise; or (h) any other action or circumstances that might otherwise constitute a legal orequitable discharge or defense of a surety or guarantor, except Full Payment of the Dutch Obligations.5.11.2 Waivers.(a) Each Borrower expressly waives all rights that it may have now or in the future under any statute, atcommon law, in equity or otherwise, to compel Agent or Lenders to marshal assets or to proceed against any Obligor,other Person or security for the payment or performance of any Obligations before, or as a condition to, proceedingagainst such Borrower. Each Borrower waives all defenses available to a surety, guarantor or accommodation co-obligor other than Full Payment of Obligations and waives, to the maximum extent permitted by law, any right torevoke any guaranty of Obligations as long as it is a Borrower. It is agreed among each Borrower, Agent and Lendersthat the provisions of this Section 5.11 are of the essence of the transaction contemplated by the Loan Documents andthat, but for such provisions, Agent and Lenders would decline to make Revolver Loans and issue Letters of Credit.Each Borrower acknowledges that its guaranty pursuant to this Section is necessary to the conduct and promotion of itsbusiness, and can be expected to benefit such business.(b) Agent and Lenders may, in their discretion, pursue such rights and remedies as they deem appropriate,including realization upon Collateral or any Real Estate by judicial foreclosure or nonjudicial sale or enforcement,without affecting any rights and remedies under this Section 5.11. If, in taking any action in connection with theexercise of any rights or remedies, Agent or any Lender shall forfeit any other rights or remedies, including the right toenter a deficiency judgment against any Borrower or other Person, whether because of any Applicable Laws pertainingto “election of remedies” or otherwise, each Borrower consents to such action and waives any claim based upon it,even if the action may result in loss of any rights of subrogation that any Borrower might otherwise have had. Anyelection of remedies that results in denial or impairment of the right of Agent or any Lender to seek a deficiencyjudgment against any Borrower shall not impair any other Borrower’s obligation to pay the full amount of theObligations. Each Borrower waives all rights and defenses arising out of an election of remedies, such as nonjudicialforeclosure with respect to any security for Obligations, even though that election of remedies destroys such Borrower’srights of subrogation against any other Person. Agent may bid Obligations, in whole or part, at any foreclosure, trusteeor other sale, including any private sale, and the amount of such bid need not be paid by Agent but shall be creditedagainst the Obligations. The amount of the successful bid at any such sale, whether Agent or any other Person is thesuccessful bidder, shall be conclusively deemed to be the fair market value of the Collateral, and the difference betweensuch bid amount and the remaining balance of the Obligations shall be conclusively deemed to be the amount of theObligations guaranteed under this Section 5.11, notwithstanding that any present or future law or court decision mayhave the effect of reducing the amount of any deficiency claim to which Agent or any Lender might otherwise beentitled but for such bidding at any such sale.5.11.3 Extent of Liability; Contribution.(a) Notwithstanding anything herein to the contrary, each Borrower’s liability under this Section 5.11 shall notexceed the greater of (i) all amounts for which such Borrower is primarily liable, as described in clause (c) below, and(ii) such Borrower’s Allocable Amount.(b) If any Borrower makes a payment under this Section 5.11 of any Obligations (other than amounts forwhich such Borrower is primarily liable) (a “Guarantor Payment”) that, taking into account all other GuarantorPayments previously or concurrently made by any other Borrower, exceeds the amount that such Borrower wouldotherwise have paid if each Borrower had paid the aggregate Obligations satisfied by such Guarantor Payments in thesame proportion that such Borrower’s Allocable Amount bore to the total Allocable Amounts of all Borrowers, thensuch Borrower shall be entitled to receive contribution and indemnification payments from, and to be reimbursed by,each other Borrower for the amount of such excess, ratably based on their respective Allocable Amounts in effectimmediately prior to such Guarantor Payment. The “Allocable Amount” for any Borrower shall be the maximumamount that could then be recovered from such Borrower under this Section 5.11 without rendering such paymentvoidable under Section 548 of the Bankruptcy Code or under any applicable state fraudulent transfer or conveyance act,or similar statute or common law.(c) Section 5.11.3(a) shall not limit the liability of any Borrower to pay or guarantee Revolver Loans madedirectly or indirectly to it (including Revolver Loans advanced hereunder to any other Person and then re-loaned orotherwise transferred to, or for the benefit of, such Borrower), LC Obligations relating to Letters of Credit issued tosupport its business, Secured Bank Product Obligations incurred to support its business, and all accrued interest, fees,expenses and other related Obligations with respect thereto, for which such Borrower shall be primarily liable for allpurposes hereunder. Agent and Lenders shall have the right, at any time in their discretion, to condition Revolver Loansand Letters of Credit upon a separate calculation of borrowing availability for each Borrower and to restrict thedisbursement and use of Revolver Loans and Letters of Credit to a Borrower based on that calculation.(d) Each Obligor that is a Qualified ECP when its guaranty of or grant of Lien as security for a SwapObligation becomes effective hereby jointly and severally, absolutely, unconditionally and irrevocably undertakes toprovide funds or other support to each Specified Obligor with respect to such Swap Obligation as may be needed bysuch Specified Obligor from time to time to honor all of its obligations under the Loan Documents in respect of suchSwap Obligation (but, in each case, only up to the maximum amount of such liability that can be hereby incurredwithout rendering such Qualified ECP’s obligations and undertakings under this Section 5.11 voidable under anyapplicable fraudulent transfer or conveyance act). The obligations and undertakings of each Qualified ECP under thisSection shall remain in full force and effect until Full Payment of all Obligations. Each Obligor intends this Section toconstitute, and this Section shall be deemed to constitute, a guarantee of the obligations of, and a “keepwell, support orother agreement” for the benefit of, each Obligor for all purposes of the Commodity Exchange Act.5.11.4 Joint Enterprise. Each Borrower has requested that Agent and Lenders make this credit facility available toBorrowers on a combined basis, in order to finance Borrowers’ business most efficiently and economically. Borrowers’business is a mutual and collective enterprise, and the successful operation of each Borrower is dependent upon the successfulperformance of the integrated group. Borrowers believe that consolidation of their credit facility will enhance the borrowingpower of each Borrower and ease administration of the facility, all to their mutual advantage. Borrowers acknowledge thatAgent’s and Lenders’ willingness to extend credit and to administer the Collateral on a combined basis hereunder is done solelyas an accommodation to Borrowers and at Borrowers’ request.5.11.5 Subordination. Each Borrower hereby subordinates any claims, including any rights at law or in equity topayment, subrogation, reimbursement, exoneration, contribution, indemnification or set off, that it may have at any time againstany other Obligor, howsoever arising, to the Full Payment of its Obligations.5.12 Currency Matters. Dollars are the currency of account and payment for each and every sum at any time due from theBorrowers hereunder; provided that:5.12.1 except as expressly provided in this Agreement, each repayment of a Revolver Loan or a part thereof shall bemade in the currency in which such Revolver Loan is denominated at the time of that repayment;5.12.2 cash payment of interest shall be made in the currency in which such principal or other sum in respect of whichsuch interest is payable, is denominated;5.12.3 each payment of any Letter of Credit Fees (and any other fees payable by the Borrowers under Section 3.2)and all other amounts due hereunder (unless the provisions of the Loan Agreement require otherwise) shall be in Dollars (if theLetter of Credit is denominated in Dollars) or Alternative Currency (if the Letter of Credit is denominated in AlternativeCurrency), as applicable;5.12.4 each payment in respect of costs, expenses and indemnities shall be made in the currency in which the samewere incurred; and5.12.5 any amount expressed to be payable in Euro or Sterling shall be paid in Euro or Sterling, as applicable.No payment to Agent or any Lender (whether under any judgment or court order or otherwise) shall discharge the obligation orliability in respect of which it was made unless and until Agent or such Lender shall have received payment in full in the currency inwhich such obligation or liability was incurred, and to the extent that the amount of any such payment shall, on actual conversion intosuch currency, fall short of such obligation or liability actual or contingent expressed in that currency, each borrower, severally and notjointly, agrees to indemnify and hold harmless Agent or such Lender, as the case may be, with respect to the amount of the shortfallwith respect to amounts payable by such Borrower hereunder, with such indemnity surviving the termination of this agreement and anylegal proceeding, judgment or court order pursuant to which the original payment was made which resulted in the shortfall.SECTION 6. CONDITIONS PRECEDENT6.1 Conditions Precedent to Initial U.S. Revolver Loans. In addition to the conditions set forth in Section 6.3, U.S.Lenders shall not be required to fund any requested U.S. Revolver Loan, issue any U.S. Letter of Credit, or otherwise extend credit toU.S. Borrowers hereunder, until the date (“U.S. Closing Date”) that each of the following conditions has been satisfied or waived byLenders:(a) Each Loan Document shall have been duly executed and delivered to Agent by each of the signatoriesthereto, and each U.S. Obligor shall be in compliance with all terms thereof.(b) Agent shall have received acknowledgments of all filings or recordations necessary to perfect its Liens inthe U.S. Collateral, as well as UCC and Lien searches and other evidence satisfactory to Agent that such Liens are theonly Liens upon the U.S. Collateral, except Permitted Liens.(c) Agent shall have received duly executed agreements establishing each Dominion Account of U.S.Borrowers and related lockbox, in form and substance, and with financial institutions, satisfactory to Agent.(d) Agent shall have received certificates, in form and substance satisfactory to it, from a knowledgeableSenior Officer of each U.S. Borrower certifying that, after giving effect to the initial U.S. Revolver Loans andtransactions hereunder, (i) such U.S. Borrower is Solvent; (ii) no Default or Event of Default exists; (iii) therepresentations and warranties set forth in Section 9 are true and correct; and (iv) such U.S. Borrower has compliedwith all agreements and conditions to be satisfied by it under the Loan Documents.(e) Agent shall have received a certificate of a duly authorized officer of each U.S. Obligor, certifying (i) thatattached copies of such U.S. Obligor’s Organic Documents are true and complete, and in full force and effect, withoutamendment except as shown; (ii) that an attached copy of resolutions authorizing execution and delivery of the LoanDocuments is true and complete, and that such resolutions are in full force and effect, were duly adopted, have not beenamended, modified or revoked, and constitute all resolutions adopted with respect to this credit facility; and (iii) to thetitle, name and signature of each Person authorized to sign the Loan Documents. Agent may conclusively rely on thiscertificate until it is otherwise notified by the applicable U.S. Obligor in writing.(f) Agent shall have received a written opinion of DLA Piper, as well as any local counsel to U.S. Borrowersor Agent, in form and substance satisfactory to Agent.(g) Agent shall have received copies of the charter documents of each U.S. Obligor, certified by the Secretaryof State or other appropriate official of such U.S. Obligor’s jurisdiction of organization. Agent shall have received goodstanding certificates for each U.S. Obligor, issued by the Secretary of State or other appropriate official of such U.S.Obligor’s jurisdiction of organization and each jurisdiction where such U.S. Obligor’s conduct of business orownership of Property necessitates qualification.(h) Agent shall have received copies of policies or certificates of insurance for the insurance policies carried byU.S. Borrowers, all in compliance with the Loan Documents.(i) Agent shall have completed its business, financial and legal due diligence of U.S. Obligors, including a roll-forward of its previous field examination, with results satisfactory to Agent. No material adverse change in the financialcondition of any U.S. Obligor or in the quality, quantity or value of any U.S. Collateral shall have occurred sinceDecember 31, 2017.(j) U.S. Borrowers shall have paid all fees and expenses to be paid to Agent and U.S. Lenders on the U.S.Closing Date.(k) Agent shall have received a U.S. Borrowing Base Report as of March 31, 2018. Upon giving effect to theinitial funding of U.S. Revolver Loans and issuance of Letters of Credit, and the payment by U.S. Borrowers of all feesand expenses incurred in connection herewith as well as any payables stretched beyond their customary paymentpractices, U.S. Availability shall be at least $60,000,000.6.2 Conditions Precedent to Initial Dutch Revolver Loans. In addition to the conditions set forth in Section 6.3, DutchLenders shall not be required to fund any requested Dutch Revolver Loan, issue any Dutch Letter of Credit, or otherwise extend creditto Dutch Borrowers hereunder, until the date (“Dutch Closing Date”) that each of the following conditions has been satisfied orwaived by Lenders:(a) Borrower has requested in writing that Agent proceed with the closing of the credit facility and financialaccommodations provided to Dutch Borrowers hereunder.(b) Each Loan Document shall have been duly executed and delivered to Agent by each of the signatoriesthereto and all schedules thereto shall be acceptable to Agent, and each Dutch Obligor shall be in compliance with allterms thereof.(c) Agent shall have received acknowledgments of all filings or recordations necessary to perfect its Liens inthe Dutch Collateral, as well as written confirmation of the Dutch Obligors that such Liens are the only Liens upon theDutch Collateral, except Permitted Liens.(d) Agent shall have received duly executed agreements establishing each Dominion Account of DutchBorrowers and related lockbox, in form and substance, and with financial institutions, satisfactory to Agent.(e) Agent shall have received certificates, in form and substance satisfactory to it, from a knowledgeable SeniorOfficer of each Dutch Borrower certifying that, after giving effect to the initial Dutch Revolver Loans and transactionshereunder, (i) such Dutch Borrower is Solvent; (ii) no Default or Event of Default exists; (iii) the representations andwarranties set forth in Section 9 are true and correct; and (iv) such Dutch Borrower has complied with all agreementsand conditions to be satisfied by it under the Loan Documents.(f) Agent shall have received a certificate of a duly authorized officer of each Dutch Obligor, certifying (i) thatattached copies of such Dutch Obligor’s Organic Documents are true and complete, and in full force and effect, withoutamendment except as shown; (ii) that an attached copy of resolutions authorizing execution and delivery of the LoanDocuments is true and complete, and that such resolutions are in full force and effect, were duly adopted, have not beenamended, modified or revoked, and constitute all resolutions adopted with respect to this credit facility; and (iii) to thetitle, name and signature of each Person authorized to sign the Loan Documents. Agent may conclusively rely on thiscertificate until it is otherwise notified by the applicable Dutch Obligor in writing.(g) Agent shall have received a written opinion of counsel, as well as any local counsel to Dutch Borrowers orAgent, in form and substance satisfactory to Agent.(h) Agent shall have received copies of the charter documents of each Dutch Obligor, including a deed ofincorporation (akte van oprichting), articles of association (statuten) and an up-to-date excerpt (uittreksel) from the Dutch Chamber ofCommerce.(i) Agent shall have received copies of policies or certificates of insurance for the insurance policies carried byDutch Borrowers, all in compliance with the Loan Documents.(j) Agent shall have completed its business, financial and legal due diligence of Dutch Obligors, including aroll-forward of its previous field examination, with results satisfactory to Agent. No material adverse change in thefinancial condition of any Dutch Obligor or in the quality, quantity or value of any Dutch Collateral shall have occurredsince December 31, 2017.(k) Dutch Borrowers shall have paid all fees and expenses to be paid to Agent and Dutch Lenders on theDutch Closing Date.(l) Agent shall have received all of the quarterly and annual filings required to be filed with the SEC prior tothe Dutch Closing Date.(m) Agent shall have received such additional documents deemed necessary by Agent, including but notlimited to any amendments to the Loan Documents, and joinders adding Dutch Lenders to the Loan Documents, asnecessary.(n) Agent shall have received a Dutch Borrowing Base Report as of the end of the prior month. Upon givingeffect to the initial funding of Dutch Revolver Loans and issuance of Letters of Credit, and the payment by DutchBorrowers of all fees and expenses incurred in connection herewith as well as any payables stretched beyond theircustomary payment practices, Dutch Availability shall be at least $10,000,000 and Global Availability shall be at least$100,000,000.(o) The Conversion Date shall have occurred.(p) Each Lender has executed and delivered to Agent a loss sharing agreement, in form and substancesatisfactory to Agent.For the avoidance of doubt, no Dutch Borrower shall be a Borrower or an Obligor hereunder until the Dutch Closing Date hasoccurred.6.3 Conditions Precedent to All Credit Extensions. Agent, Issuing Bank and Lenders shall in no event be required to makeany credit extension hereunder (including funding any Revolver Loan, arranging any Letter of Credit, or granting any otheraccommodation to or for the benefit of any Borrower), if the following conditions are not satisfied on such date and upon giving effectthereto:(a) No Default or Event of Default exists;(b) The representations and warranties of each Obligor in the Loan Documents are true and correct (except forrepresentations and warranties that relate solely to an earlier date);(c) All conditions precedent in any Loan Document are satisfied;(d) No event has occurred or circumstance exists that has or could reasonably be expected to have a MaterialAdverse Effect; and(e) With respect to a Letter of Credit issuance, all LC Conditions are satisfied.Each request (or deemed request) by a Borrower for any credit extension shall constitute a representation by Borrowers that theforegoing conditions are satisfied on the date of such request and on the date of the credit extension. As an additional condition to acredit extension, Agent may request any other information, certification, document, instrument or agreement as it deems appropriate.6.4 Post-Closing Requirements. Borrowers shall deliver to Agent each of the following items in form and substancesatisfactory to Agent within the time periods set forth below (or such later date as determined by Agent in its discretion):6.4.1 Within 45 days after the U.S. Closing Date, Agent shall have received the Related Real Estate Documents for allReal Estate subject to a Mortgage.6.4.2 Within 45 days after the U.S. Closing Date, Agent shall have received evidence that Borrower has separated itscollections and disbursement accounts into separate Deposit Accounts.SECTION 7. COLLATERAL7.1 Grant of Security Interest. To secure the prompt payment and performance of its Obligations, each U.S. Obligor herebygrants to Agent, for the benefit of Secured Parties, a continuing security interest in and Lien upon all Property of such U.S. Obligor,including all of the following Property, whether now owned or hereafter acquired, and wherever located:(a) all Accounts;(b) all Chattel Paper, including electronic chattel paper;(c) all Commercial Tort Claims, including those shown on Schedule 9.1.16;(d) all Deposit Accounts;(e) all Documents;(f) all General Intangibles, including Intellectual Property;(g) all Goods, including Inventory, Equipment and fixtures;(h) all Instruments;(i) all Investment Property;(j) all Letter-of-Credit Rights;(k) all Supporting Obligations;(l) all monies, whether or not in the possession or under the control of Agent, a Lender, or a bailee or Affiliateof Agent or a Lender, including any Cash Collateral;(m) all accessions to, substitutions for, and all replacements, products, and cash and non-cash proceeds of theforegoing, including proceeds of and unearned premiums with respect to insurance policies, and claims against anyPerson for loss, damage or destruction of any Collateral; and(n) all books and records (including customer lists, files, correspondence, tapes, computer programs, print-outsand computer records) pertaining to the foregoing.Notwithstanding anything herein to the contrary, in no event shall the Collateral include (nor shall any defined term used hereininclude), and no Obligor shall be deemed to have granted a Lien in, any of such Obligor’s right, title or interest in any of the followingproperty (collectively, the “Excluded Collateral”):(a) solely as it relates to U.S. Collateral (x) any of the outstanding voting equity interests or other ownership interests of aForeign Subsidiary in excess of 65% of the voting power of all classes of equity interests or other ownership interests of suchForeign Subsidiary entitled to vote, (y) any of the outstanding equity interests or other ownership interests of a Subsidiary of aForeign Subsidiary and (z) any assets of a Foreign Subsidiary or any subsidiary thereof;(b) (x) any lease, license, contract, agreement, legal requirement or other third party arrangement, as such, or the assetssubject thereto, if under the terms of such lease, license, contract, agreement, legal requirement or other third party arrangement,or Applicable Law with respect thereto, the valid grant of a Lien therein or in such assets to Agent is prohibited, prevented orconditioned and such prohibition, prevention or condition has not been or is not waived or the consent of the other party tosuch lease, license, contract, agreement, legal requirement or other third party arrangement has not been or is not otherwiseobtained or under Applicable Law such prohibition, prevention or condition cannot be waived and (y) any assets which, ifsubject to this Agreement, would give a third party the right to terminate or otherwise amend any rights, benefits and/orobligations with respect to such Obligor in respect of those assets; provided, that the foregoing exclusion shall in no way be (1)construed to apply if any such prohibition would be rendered ineffective under the Uniform Commercial Code other applicablelaw or principles of equity, (2) construed so as to limit, impair or otherwise affect Agent’s unconditional continuing Lien uponany rights or interests of such Obligor in or to the proceeds thereof, including monies due or to become due under any suchlease, license, contract, or agreement (including any Accounts), in each case, that are not subject to such prohibitions to theextent that such proceeds are not themselves Excluded Collateral, or (3) construed to apply at such time as the conditioncausing such prohibition shall be remedied and, to the extent severable, “Collateral” shall include any portion of such lease,license, contract, agreement or assets subject thereto that does not result in such prohibition (it being understood and agreed thatsuch Obligor shall have no obligations to obtain any consent or otherwise cause the Excluded Collateral described in this clause(ii) to constitute Collateral);(c) any property or property right of such Obligor to the extent and for so long as the grant of a security interest pursuant tothis Agreement in such Obligor’s right, title or interest therein is prohibited by applicable law or regulation;(d) any leasehold Real Estate that has 30 years or less to run on the lease or a rent-rack payable in respect thereof or any fee-owned Real Estate with a fair market value less than $2,000,000 (other than fee-owned Real Estate in existence on the U.S.Closing Date which is to be subject to Agent’s Lien pursuant to Section 6.4.1);(e) any “intent to use” trademark applications for which a statement of use has not been filed and accepted with the U.S.Patent and Trademark Office (but only until such statement has been filed and accepted with the U.S. Patent and TrademarkOffice);(f) any assets to the extent that a security interest in such assets would reasonably be expected to result in materially adversetax consequences as reasonably determined by the Borrowers and Agent;(g) other than with respect to Dutch Collateral and as necessary with respect to Account Debtor Approved Countries, anyassets that require action under the law of any non-U.S. jurisdiction to create or perfect a security interest in such assets;(h) any Intellectual Property owned by Super Micro Computer Holdings CV;(i) those assets as to which Agent and Borrowers reasonably agree that the cost of obtaining such a Lien or perfection thereofare excessive in relation to the practical benefit to Lenders of the security to be afforded thereby;(j) property (and the proceeds thereof) subject to a purchase money security interest or capitalized leases only to the extentand for so long as the contract or other agreement pursuant to which such Lien is granted prohibits the creation of any otherLien on such property (other than to the extent any such prohibition would be rendered ineffective under the UniformCommercial Code or other applicable law or principles of equity); and(k) the Excluded Accounts and the funds and other property held in, credited thereto or maintained in any such ExcludedAccount;; provided that (i) “Excluded Collateral” shall not include any proceeds, products, substitutions or replacements of any ExcludedCollateral (unless such proceeds, products, substitutions or replacements constitute Excluded Collateral) and (ii) none of therepresentations and warranties herein or in any other Loan Document shall be deemed to apply to property constituting ExcludedCollateral.7.2 Lien on Deposit Accounts; Cash Collateral.7.2.1 Deposit Accounts. To further secure the prompt payment and performance of its Obligations, each Obligorhereby grants to Agent a continuing security interest in and Lien upon all amounts credited to any Deposit Account of suchObligor, including sums in any blocked, lockbox, sweep or collection account. Each Obligor hereby authorizes and directseach bank or other depository to deliver to Agent, upon request, all balances in any Deposit Account maintained for suchObligor, without inquiry into the authority or right of Agent to make such request.7.2.2 Cash Collateral. Cash Collateral may be invested, at Agent’s discretion (with the consent of Obligors, providedno Event of Default exists), but Agent shall have no duty to do so, regardless of any agreement or course of dealing with anyObligor, and shall have no responsibility for any investment or loss. As security for its Obligations, each Obligor hereby grantsto Agent a security interest in and Lien upon all Cash Collateral delivered hereunder from time to time, whether held in asegregated cash collateral account or otherwise. Agent may apply Cash Collateral to payment of such Obligations as theybecome due, in such order as Agent may elect. All Cash Collateral and related deposit accounts shall be under the soledominion and control of Agent, and no Obligor or other Person shall have any right to any Cash Collateral until Full Paymentof the Obligations.7.3 Real Estate Collateral.7.3.1 Lien on Real Estate. The Obligations shall be secured by Mortgages upon all Real Estate owned by Borrowers,including the Real Estate set forth on Schedule 7.3. The Mortgages shall be duly recorded, at Borrowers’ expense, in eachoffice where such recording is required to constitute a fully perfected Lien on the Real Estate covered thereby. If any Borroweracquires Real Estate hereafter, Borrowers shall promptly notify Agent and, within 60 days, execute, deliver and record a first-priority Mortgage, in form and substance satisfactory to Agent, together with all Related Real Estate Documents.7.3.2 Collateral Assignment of Leases. To further secure the prompt payment and performance of its Obligations, eachBorrower hereby transfers and assigns to Agent all of such Borrower’s right, title and interest in, to and under all now orhereafter existing leases of Real Estate to which such Borrower is a party, whether as lessor or lessee, and all extensions,renewals, modifications and proceeds thereof; provided that, Borrower shall not be obligated under this Section to transfer orassign to Agent any leases of Real Estate that are included in the definition of Excluded Collateral.7.4 Other Collateral.7.4.1 Commercial Tort Claims. Obligor shall promptly notify Agent in writing if any Obligor has a Commercial TortClaim (other than, as long as no Default or Event of Default exists, a Commercial Tort Claim for less than $100,000), shallpromptly amend Schedule 9.1.16 to include such claim, and shall take such actions as Agent deems appropriate to subject suchclaim to a duly perfected, first priority Lien in favor of Agent.7.4.2 Certain After-Acquired Collateral. Obligor shall promptly (a) notify Agent if a Obligor obtains an interest in anyDeposit Account, Chattel Paper, Document, Instrument, Intellectual Property, Investment Property or Letter-of-Credit Rights,and (b) upon request, take such actions as Agent deems appropriate to effect its perfected, first priority Lien on such Collateral,including obtaining any appropriate possession, control agreement or Lien Waiver. If Collateral is in the possession of a thirdparty, at Agent’s request, Obligor shall obtain an acknowledgment that such third party holds the Collateral for the benefit ofAgent.7.4.3 Equity Interests. Each Obligor shall, and will cause each of its Subsidiaries to, take such action from time to timeas shall be necessary to ensure that each of its Subsidiaries is a wholly-owned Subsidiary and that Agent shall have, (i) for thebenefit of Agent and U.S. Lenders, a first priority Lien (subject to Permitted Liens) on all Equity Interests of each Subsidiary ofa U.S. Obligor, provided that no U.S. Obligor shall be required to pledge more than 65% of the voting Equity Interests (withinthe meaning of Section 1.956-2(c)(2) of the U.S. Treasury Regulations) of any first-tier Foreign Subsidiary as U.S. Collateralfor the U.S. Obligations and (ii) for the benefit of Agent and Dutch Lenders, with respect to a Dutch Obligor, a first-priorityLien (subject to Permitted Liens) on all Equity Interests of each Subsidiary of a Dutch Obligor and Guarantor of the DutchObligations. In the event that any additional Equity Interests shall be issued by any Subsidiary, the applicable Dutch Obligorshall or shall cause each of its Subsidiaries to, concurrently with such issuance, deliver to Agent to the extent required by theapplicable Loan Documents the certificates evidencing such Equity Interests, accompanied by undated powers executed inblank and to take such other action as Agent shall reasonably request to perfect the security interest created therein pursuant tosuch Loan Documents.7.5 Limitations. The Lien on Collateral granted hereunder is given as security only and shall not subject Agent or any Lenderto, or in any way modify, any obligation or liability of Borrowers relating to any Collateral. In no event shall the grant of any Lienunder any Loan Document secure an Excluded Swap Obligation of the granting Obligor.7.6 Further Assurances. All Liens granted to Agent under the Loan Documents are for the benefit of Secured Parties.Promptly upon request, Borrowers shall deliver such instruments and agreements, and shall take such actions, as Agent deemsappropriate under Applicable Law to evidence or perfect its Lien on any Collateral, or otherwise to give effect to the intent of thisAgreement. Each Borrower authorizes Agent to file any financing statement that describes the Collateral as “all assets” or “all personalproperty” of such Borrower, or words to similar effect, and ratifies any action taken by Agent before the U.S. Closing Date to effect orperfect its Lien on any U.S. Collateral and the Dutch Closing Date to effect or perfects its Lien on the Dutch Collateral.SECTION 8. COLLATERAL ADMINISTRATION8.1 Borrowing Base Reports.8.1.1 Dutch Borrowing Base Reports. (i) so long as no Trigger Period exists, by the 20th day of each month, DutchBorrowers shall deliver to Agent (and Agent shall promptly deliver same to Dutch Lenders) a Dutch Borrowing Base Reportas of the close of business of the previous month, (ii) during the existence of a Trigger Period, by the second Business Day ofeach week, Dutch Borrowers shall deliver to Agent (and Agent shall promptly deliver same to Dutch Lenders) a DutchBorrowing Base Report as of the close of business of the previous week, and (iii) at such other times as Agent may request. Allinformation (including calculation of Dutch Availability) in a Dutch Borrowing Base Report shall be certified by DutchBorrowers. Agent may from time to time adjust such report (a) to reflect Agent’s reasonable estimate of declines in value ofDutch Collateral, due to collections received in the applicable Dominion Account or otherwise; (b) to adjust advance rates toreflect changes in dilution, quality, mix and other factors affecting Dutch Collateral; and (c) to the extent any information orcalculation does not comply with this Agreement.8.1.2 U.S. Borrowing Base Reports. (i) so long as no Trigger Period exists, by the 20th day of each month, U.S.Borrowers shall deliver to Agent (and Agent shall promptly deliver same to U.S. Lenders) a U.S. Borrowing Base Report as ofthe close of business of the previous month, (ii) during the existence of a Trigger Period, by the second Business Day of eachweek, U.S. Borrowers shall deliver to Agent (and Agent shall promptly deliver same to U.S. Lenders) a U.S. Borrowing BaseReport as of the close of business of the previous week, and (iii) at such other times as Agent may request. All information(including calculation of U.S. Availability and Global Availability) in a U.S. Borrowing Base Report shall be certified by U.S.Borrowers. Agent may from time to time adjust such report (a) to reflect Agent’s reasonable estimate of declines in value ofU.S. Collateral, due to collections received in the applicable Dominion Account or otherwise; (b) to adjust advance rates toreflect changes in dilution, quality, mix and other factors affecting U.S. Collateral; and (c) to the extent any information orcalculation does not comply with this Agreement.8.2 Accounts.8.2.1 Records and Schedules of Accounts. Each Borrower shall keep accurate and complete records of its Accounts,including all payments and collections thereon, and shall submit to Agent sales, collection, reconciliation and other reports inform satisfactory to Agent, on such periodic basis as Agent may request. Each Borrower shall also provide to Agent, on orbefore the 15th day of each month, a detailed aged trial balance of all Accounts as of the end of the preceding month,specifying each Account’s Account Debtor name and address, amount, invoice date and due date, showing any discount,allowance, credit, authorized return or dispute, and including such proof of delivery, copies of invoices and invoice registers,copies of related documents, repayment histories, status reports and other information as Agent may reasonably request. IfAccounts in an aggregate face amount of $1,000,000 or more cease to be Eligible Credit Insured Accounts or Eligible Non-Credit Insured Accounts, Borrowers shall notify Agent of such occurrence promptly (and in any event within one BusinessDay) after any Borrower has knowledge thereof.8.2.2 Taxes. If an Account of any Borrower includes a charge for any Taxes, Agent is authorized, in its discretion, topay the amount thereof to the proper taxing authority for the account of such Borrower and to charge Borrowers therefor;provided, that neither Agent nor Lenders shall be liable for any Taxes that may be due from Borrowers or with respect to anyCollateral.8.2.3 Account Verification. Whether or not a Default or Event of Default exists, Agent shall have the right at any time,in the name of Agent, any designee of Agent or any Borrower, to verify the validity, amount or any other matter relating to anyAccounts of Borrowers by mail, telephone or otherwise. Borrowers shall cooperate fully with Agent in an effort to facilitateand promptly conclude any such verification process.8.2.4 Maintenance of Dominion Account. Borrowers shall maintain Dominion Accounts pursuant to lockbox or otherarrangements acceptable to Agent. Borrowers shall obtain an agreement (in form and substance satisfactory to Agent) fromeach lockbox servicer and Dominion Account bank, establishing Agent’s control over and Lien in the lockbox or DominionAccount, which prior to the Conversion Date shall be exercised at all times and after the Conversion Date may only beexercised by Agent during any Trigger Period, requiring immediate deposit of all remittances received in the lockbox to aDominion Account, and waiving offset rights of such servicer or bank, except for customary administrative charges. Prior tothe Conversion Date and during a Trigger Period upon and after the Conversion Date, if a Dominion Account is notmaintained with Bank of America, Agent may require immediate transfer of all funds in such account to a Dominion Accountmaintained with Bank of America. Agent and Lenders assume no responsibility to Borrowers for any lockbox arrangement orDominion Account, including any claim of accord and satisfaction or release with respect to any Payment Items accepted byany bank.8.2.5 Proceeds of Collateral. Borrowers shall request in writing and otherwise take all necessary steps to ensure that allpayments on Accounts or otherwise relating to Collateral are made directly to a Dominion Account (or a lockbox relating to aDominion Account). If any Borrower or Subsidiary receives cash or Payment Items with respect to any Collateral, it shall holdsame in trust for Agent and promptly (not later than the next Business Day) deposit same into a Dominion Account.8.3 Inventory.8.3.1 Records and Reports of Inventory. Each Borrower shall keep accurate and complete records of its Inventory,including costs and daily withdrawals and additions, and shall submit to Agent inventory and reconciliation reports in formsatisfactory to Agent, on such periodic basis as Agent may request. Each Borrower shall conduct a physical inventory at leastonce per calendar year (and on a more frequent basis if requested by Agent when an Event of Default exists) and periodic cyclecounts consistent with historical practices, and shall provide to Agent a report based on each such inventory and countpromptly upon completion thereof, together with such supporting information as Agent may request. Agent may participate inand observe each physical count.8.3.2 Returns of Inventory. No Borrower shall return any Inventory to a supplier, vendor or other Person, whether forcash, credit or otherwise, unless (a) such return is in the Ordinary Course of Business; (b) no Default, Event of Default, DutchOveradvance, U.S. Overadvance or Overadvance exists or would result therefrom; (c) Agent is promptly notified if theaggregate Value of all Inventory returned in any month exceeds $1,000,000; and (d) any payment received by a Borrower for areturn is promptly remitted to Agent for application to the Obligations.8.3.3 Acquisition, Sale and Maintenance. No Borrower shall acquire or accept any Inventory on consignment orapproval, and shall take all steps to assure that all Inventory is produced in accordance with Applicable Law, including theFLSA. No Borrower shall sell any Inventory on consignment or approval or any other basis under which the customer mayreturn or require a Borrower to repurchase such Inventory. Borrowers shall use, store and maintain all Inventory withreasonable care and caution, in accordance with applicable standards of any insurance and in conformity with all ApplicableLaw, and shall make current rent payments (within applicable grace periods provided for in leases) at all locations where anyCollateral is located.8.4 Equipment.8.4.1 Records and Schedules of Equipment. Each Borrower shall keep accurate and complete records of itsEquipment, including kind, quality, quantity, cost, acquisitions and dispositions thereof, and shall submit to Agent, on suchperiodic basis as Agent may request, a current schedule thereof, in form satisfactory to Agent. Promptly upon request,Borrowers shall deliver to Agent evidence of their ownership or interests in any Equipment.8.4.2 Dispositions of Equipment. No Borrower shall sell, lease or otherwise dispose of any Equipment, without theprior written consent of Agent, other than (a) a Permitted Asset Disposition; and (b) replacement of Equipment that is worn,damaged or obsolete with Equipment of like function and value, if the replacement Equipment is acquired substantiallycontemporaneously with such disposition and is free of Liens.8.4.3 Condition of Equipment. The Equipment is in good operating condition and repair, and all necessaryreplacements and repairs have been made so that its value and operating efficiency are preserved at all times, reasonable wearand tear excepted. Each Borrower shall ensure that the Equipment is mechanically and structurally sound, and capable ofperforming the functions for which it was designed, in accordance with manufacturer specifications. No Borrower shall permitany Equipment to become affixed to Real Estate unless any landlord or mortgagee delivers a Lien Waiver.8.5 Deposit Accounts. Schedule 8.5 lists all Deposit Accounts maintained by Borrowers, including Dominion Accounts.Each Borrower shall take all actions necessary to establish Agent’s first priority Lien on each Deposit Account other than ExcludedAccounts. Borrowers shall be the sole account holders of each Deposit Account and shall not allow any Person (other than Agent andthe depository bank) to have control over their Deposit Accounts or any Property deposited therein. Borrowers shall promptly notifyAgent of any opening or closing of a Deposit Account and, with the consent of Agent, will amend Schedule 8.5 to reflect same.8.6 General Provisions.8.6.1 Location of Collateral. All tangible items of Collateral, other than Inventory in transit, shall at all times be keptby Borrowers at the business locations set forth in Schedule 8.6.1, except that Borrowers may (a) make sales or otherdispositions of Collateral in accordance with Section 10.2.6; and (b) move Collateral to another location in the United States,upon 30 Business Days prior written notice to Agent.8.6.2 Insurance of Collateral; Condemnation Proceeds.(a) Each Borrower shall maintain insurance with respect to the Collateral, covering casualty, hazard, theft,malicious mischief, flood and other risks, in amounts, with endorsements and with insurers (with a Best rating of at leastA+, unless otherwise approved by Agent in its discretion) satisfactory to Agent; provided, that if Real Estate securesany Obligations, flood hazard diligence, documentation and insurance for such Real Estate shall comply with all FloodLaws or shall otherwise be satisfactory to all Lenders. All proceeds under each policy shall be payable to Agent. Fromtime to time upon request, Borrowers shall deliver to Agent the originals or certified copies of its insurance policies andupdated flood plain searches. Unless Agent shall agree otherwise, each policy shall include satisfactory endorsements(i) showing Agent as loss payee; (ii) requiring 30 days prior written notice to Agent in the event of cancellation of thepolicy for any reason whatsoever; and (iii) specifying that the interest of Agent shall not be impaired or invalidated byany act or neglect of any Borrower or the owner of the Property, nor by the occupation of the premises for purposesmore hazardous than are permitted by the policy. If any Borrower fails to provide and pay for any insurance, Agentmay, at its option, but shall not be required to, procure the insurance and charge Borrowers therefor. Each Borroweragrees to deliver to Agent, promptly as rendered, copies of all reports made to insurance companies. While no Event ofDefault exists, Borrowers may (i) settle, adjust or compromise any insurance claim, as long as the proceeds aredelivered to Agent and (ii) later cancel any insurance purchased by Agent, but only after providing Agent withevidence reasonably satisfactory to Agent that Borrowers have obtained insurance as required by this Agreement. If anEvent of Default exists, only Agent shall be authorized to settle, adjust and compromise such claims.(b) Any proceeds of insurance (other than proceeds from workers’ compensation or D&O insurance) and anyawards arising from condemnation of any Collateral shall be paid to Agent. Any such proceeds or awards that relate toInventory shall be applied to payment of the Revolver Loans, and then to other Obligations.(c) If requested by Borrowers in writing within 15 days after Agent’s receipt of any insurance proceeds orcondemnation awards relating to any loss or destruction of Equipment or Real Estate, Borrowers may use suchproceeds or awards to repair or replace such Equipment or Real Estate (and until so used, the proceeds shall be held byAgent as Cash Collateral) as long as (i) no Default or Event of Default exists; (ii) such repair or replacement is promptlyundertaken and concluded, in accordance with plans satisfactory to Agent; (iii) replacement buildings are constructedon the sites of the original casualties and are of comparable size, quality and utility to the destroyed buildings; (iv) therepaired or replaced Property is free of Liens, other than Permitted Liens that are not Purchase Money Liens; (v)Borrowers comply with disbursement procedures for such repair or replacement as Agent may reasonably require; and(vi) the aggregate amount of such proceeds or awards from any single casualty or condemnation does not exceed$1,000,000.8.6.3 Protection of Collateral. All expenses of protecting, storing, warehousing, insuring, handling, maintaining andshipping any Collateral, all Taxes payable with respect to any Collateral (including any sale thereof), and all other paymentsrequired to be made by Agent to any Person to realize upon any Collateral, shall be borne and paid by Borrowers. Agent shallnot be liable or responsible in any way for the safekeeping of any Collateral, for any loss or damage thereto (except forreasonable care in its custody while Collateral is in Agent’s actual possession), for any diminution in the value thereof, or forany act or default of any warehouseman, carrier, forwarding agency or other Person whatsoever, but the same shall be atBorrowers’ sole risk.8.6.4 Defense of Title. Each Borrower shall defend its title to Collateral and Agent’s Liens therein against all Persons,claims and demands, except Permitted Liens.8.7 Power of Attorney. Each Borrower hereby irrevocably constitutes and appoints Agent (and all Persons designated byAgent) as such Borrower’s true and lawful attorney (and agent-in-fact) for the purposes provided in this Section. Agent, or Agent’sdesignee, may (but shall have no obligation to), without notice and in either its or a Borrower’s name, but at the cost and expense ofBorrowers:(a) Endorse a Borrower’s name on any Payment Item or other proceeds of Collateral (including proceeds ofinsurance) that come into Agent’s possession or control; and(b) During an Event of Default, (i) notify any Account Debtors of the assignment of their Accounts, demandand enforce payment of Accounts by legal proceedings or otherwise, and generally exercise any rights and remedieswith respect to Accounts; (ii) settle, adjust, modify, compromise, discharge or release any Accounts or other Collateral,or any legal proceedings brought to collect Accounts or Collateral; (iii) sell or assign any Accounts and other Collateralupon such terms, for such amounts and at such times as Agent deems advisable; (iv) collect, liquidate and receivebalances in Deposit Accounts or investment accounts, and take control, in any manner, of proceeds of Collateral; (v)prepare, file and sign a Borrower’s name to a proof of claim or other document in a bankruptcy of an Account Debtor,or to any notice, assignment or satisfaction of Lien or similar document; (vi) receive, open and dispose of mailaddressed to a Borrower, and notify postal authorities to deliver any such mail to an address designated by Agent; (vii)endorse any Chattel Paper, Document, Instrument, bill of lading, or other document or agreement relating to anyAccounts, Inventory or other Collateral; (viii) use a Borrower’s stationery and sign its name to verifications of Accountsand notices to Account Debtors; (ix) use information contained in any data processing, electronic or informationsystems relating to Collateral; (x) make and adjust claims under insurance policies; (xi) take any action as may benecessary or appropriate to obtain payment under any letter of credit, banker’s acceptance or other instrument for whicha Borrower is a beneficiary; (xii) exercise any voting or other rights under or with respect to any Investment Property;and (xiii) take all other actions as Agent deems appropriate to fulfill any Borrower’s obligations under the LoanDocuments.SECTION 9. REPRESENTATIONS AND WARRANTIES9.1 General Representations and Warranties. To induce Agent and Lenders to enter into this Agreement and to makeavailable the Revolver Commitments, Revolver Loans and Letters of Credit, each Borrower represents and warrants that:9.1.1 Organization and Qualification. Each Borrower and Subsidiary is duly organized, validly existing and in goodstanding under the laws of the jurisdiction of its organization. Each Borrower and Subsidiary is duly qualified, authorized to dobusiness and in good standing as a foreign corporation in each jurisdiction where failure to be so qualified could reasonably beexpected to have a Material Adverse Effect. No Obligor is an EEA Financial Institution.9.1.2 Power and Authority. Each Obligor is duly authorized to execute, deliver and perform its Loan Documents. Theexecution, delivery and performance of the Loan Documents have been duly authorized by all necessary action, and do not (a)require any consent or approval of any holders of Equity Interests of any Obligor, except those already obtained; (b) contravenethe Organic Documents of any Obligor; (c) violate or cause a default under any Applicable Law or Material Contract; or (d)result in or require imposition of a Lien (other than Permitted Liens) on any Obligor’s Property.9.1.3 Enforceability. Each Loan Document is a legal, valid and binding obligation of each Obligor party thereto,enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency or similar lawsaffecting the enforcement of creditors’ rights generally.9.1.4 Capital Structure. Schedule 9.1.4 shows, for each Borrower and Subsidiary, its name, jurisdiction oforganization, authorized and issued Equity Interests, holders of its Equity Interests, and agreements binding on such holderswith respect to such Equity Interests. Except as disclosed on Schedule 9.1.4, in the five years preceding the U.S. Closing Date,no Borrower or Subsidiary has acquired any substantial assets from any other Person nor been the surviving entity in a mergeror combination. Each Borrower has good title to its Equity Interests in its Subsidiaries, subject only to Agent’s Lien, and allsuch Equity Interests are duly issued, fully paid and non-assessable. There are no outstanding purchase options, warrants,subscription rights, agreements to issue or sell, convertible interests, phantom rights or powers of attorney relating to EquityInterests of any Borrower or Subsidiary.9.1.5 Title to Properties; Priority of Liens. Each Borrower and Subsidiary has good and marketable title to (or validleasehold interests in) all of its Real Estate, and good title to all of its personal Property, including all Property reflected in anyfinancial statements delivered to Agent or Lenders, in each case free of Liens except Permitted Liens. No Real Estate is locatedin a special flood hazard zone, except as disclosed on Schedule 9.1.5. Each Borrower and Subsidiary has paid and dischargedall lawful claims that, if unpaid, could become a Lien on its Properties, other than Permitted Liens. All Liens of Agent in theCollateral are duly perfected, first priority Liens, subject only to Permitted Liens that are expressly allowed to have priority overAgent’s Liens.9.1.6 Accounts. Agent may rely, in determining which Accounts are Eligible Accounts, Eligible Credit InsuredAccounts or Eligible Non-Credit Insured Accounts, on all statements and representations made by Borrowers with respectthereto. Borrowers warrant, with respect to each Account shown as an Eligible Credit Insured Accounts or Eligible Non-CreditInsured Accounts in any Borrowing Base Report, that:(a) it is genuine and in all respects what it purports to be;(b) it arises out of a completed, bona fide sale and delivery of goods or rendition of services in the OrdinaryCourse of Business, and substantially in accordance with any purchase order, contract or other document relatingthereto;(c) it is for a sum certain, maturing as stated in the applicable invoice, a copy of which has been furnished or isavailable to Agent on request;(d) it is not subject to any offset, Lien (other than Agent’s Lien), deduction, defense, dispute, counterclaim orother adverse condition except as arising in the Ordinary Course of Business and disclosed to Agent; and it is absolutelyowing by the Account Debtor, without contingency of any kind;(e) no purchase order, agreement, document or Applicable Law restricts assignment of the Account to Agent(regardless of whether, under the UCC, the restriction is ineffective), and the applicable Borrower is the sole payee orremittance party shown on the invoice;(f) no extension, compromise, settlement, modification, credit, deduction or return has been authorized or is inprocess with respect to the Account, except discounts or allowances granted in the Ordinary Course of Business forprompt payment that are reflected on the face of the invoice related thereto and in the reports submitted to Agenthereunder; and(g) to the best of Borrowers’ knowledge, (i) there are no facts or circumstances that are reasonably likely toimpair the enforceability or collectability of such Account; (ii) the Account Debtor had the capacity to contract whenthe Account arose, continues to meet the applicable Borrower’s customary credit standards, is Solvent, is notcontemplating or subject to an Insolvency Proceeding, and has not failed, or suspended or ceased doing business; and(iii) there are no proceedings or actions threatened or pending against any Account Debtor that could reasonably beexpected to have a material adverse effect on the Account Debtor’s financial condition.9.1.7 Financial Statements. The consolidated and consolidating balance sheets, and related statements of income, cashflow and shareholders equity, of Borrowers and Subsidiaries that have been and are hereafter delivered to Agent and Lenders,are prepared in accordance with GAAP, and fairly present the financial positions and results of operations of Borrowers andSubsidiaries at the dates and for the periods indicated. All projections delivered from time to time to Agent and Lenders havebeen prepared in good faith, based on reasonable assumptions in light of the circumstances at such time. Since December 31,2017, there has been no change in the condition, financial or otherwise, of any Borrower or Subsidiary that could reasonablybe expected to have a Material Adverse Effect. No financial statement delivered to Agent or Lenders at any time contains anyuntrue statement of a material fact, nor fails to disclose any material fact necessary to make such statement not materiallymisleading. Each Borrower and Subsidiary is Solvent.9.1.8 Surety Obligations. No Borrower or Subsidiary is obligated as surety or indemnitor under any bond or othercontract that assures payment or performance of any obligation of any Person, except as permitted hereunder.9.1.9 Taxes. Each Borrower and Subsidiary has filed all federal, state and local income tax returns and other materialtax returns or other reports that it is required by law to file, and has paid, or made provision for the payment of, all materialTaxes upon it, its income and its Properties that are due and payable, except to the extent being Properly Contested.9.1.10 Brokers. There are no brokerage commissions, finder’s fees or investment banking fees payable in connectionwith any transactions contemplated by the Loan Documents.9.1.11 Intellectual Property. Each Borrower and Subsidiary owns or has the lawful right to use all Intellectual Propertynecessary for the conduct of its business, without conflict with any rights of others. There is no pending or, to any Borrower’sknowledge, threatened Intellectual Property Claim with respect to any Borrower, any Subsidiary or any of their Property(including any Intellectual Property). Except as disclosed on Schedule 9.1.11, no Borrower or Subsidiary pays or owes anyroyalty or other compensation to any Person with respect to any Intellectual Property. All Intellectual Property owned, used orlicensed by, or otherwise subject to any interests of, any Borrower or Subsidiary is shown on Schedule 9.1.11.9.1.12 Governmental Approvals. Each Borrower and Subsidiary has, is in compliance with, and is in good standingwith respect to, all Governmental Approvals necessary to conduct its business and to own, lease and operate its Properties. Allnecessary import, export or other licenses, permits or certificates for the import or handling of any goods or other Collateralhave been procured and are in effect, and Borrowers and Subsidiaries have complied with all foreign and domestic laws withrespect to the shipment and importation of any goods or Collateral, except where noncompliance could not reasonably beexpected to have a Material Adverse Effect.9.1.13 Compliance with Laws. Each Borrower and Subsidiary has duly complied, and its Properties and businessoperations are in compliance, in all material respects with all Applicable Law, except where noncompliance could notreasonably be expected to have a Material Adverse Effect. There have been no citations, notices or orders of materialnoncompliance issued to any Borrower or Subsidiary under any Applicable Law. No Inventory has been produced in violationof the FLSA.9.1.14 Compliance with Environmental Laws. Except as disclosed on Schedule 9.1.14, no Borrower’s orSubsidiary’s past or present operations, Real Estate or other Properties are subject to any federal, state or local investigation todetermine whether any remedial action is needed to address any environmental pollution, hazardous material or environmentalclean-up. No Borrower or Subsidiary has received any Environmental Notice. No Borrower or Subsidiary has any contingentliability with respect to any Environmental Release, environmental pollution or hazardous material on any Real Estate now orpreviously owned, leased or operated by it.9.1.15 Burdensome Contracts. No Borrower or Subsidiary is a party or subject to any contract, agreement or charterrestriction that could reasonably be expected to have a Material Adverse Effect. No Borrower or Subsidiary is party or subjectto any Restrictive Agreement, except as shown on Schedule 9.1.15. No such Restrictive Agreement prohibits the execution,delivery or performance of any Loan Document by an Obligor.9.1.16 Litigation. Except as shown on Schedule 9.1.16, there are no proceedings or investigations pending or, to anyBorrower’s knowledge, threatened against any Borrower or Subsidiary, or any of their businesses, operations, Properties,prospects or conditions, that (a) relate to any Loan Documents or transactions contemplated thereby; or (b) could reasonably beexpected to have a Material Adverse Effect if determined adversely to any Borrower or Subsidiary. Except as shown on suchSchedule, no Obligor has a Commercial Tort Claim (other than, as long as no Default or Event of Default exists, a CommercialTort Claim for less than $100,000). No Borrower or Subsidiary is in default with respect to any order, injunction or judgmentof any Governmental Authority.9.1.17 No Defaults. No event or circumstance has occurred or exists that constitutes a Default or Event of Default. NoBorrower or Subsidiary is in default, and no event or circumstance has occurred or exists that with the passage of time or givingof notice would constitute a default, under any Material Contract or in the payment of any Borrowed Money. There is no basisupon which any party (other than a Borrower or Subsidiary) could terminate a Material Contract prior to its scheduledtermination date.9.1.18 ERISA. Except as could not reasonably be expected, whether individually or in the aggregate, to have aMaterial Adverse Effect:(a) (i) Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code,and other federal and state laws, (ii) each Plan that is intended to qualify under Section 401(a) of the Code has receiveda favorable determination letter from the IRS or an application for such a letter is currently being processed by the IRSwith respect thereto and, to the knowledge of Borrowers, nothing has occurred which would prevent, or cause the lossof, such qualification and (iii) each Obligor and ERISA Affiliate has met all applicable requirements under the Code,ERISA and the Pension Protection Act of 2006, and no application for a waiver of the minimum funding standards oran extension of any amortization period has been made with respect to any Plan.(b) (i) There are no pending or, to the knowledge of Borrowers, threatened claims, actions or lawsuits, oraction by any Governmental Authority, with respect to any Plan, and (ii) there has been no prohibited transaction orviolation of the fiduciary responsibility rules with respect to any Plan.(c) (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) as of the most recent valuationdate for any Pension Plan, the funding target attainment percentage (as defined in Section 430(d)(2) of the Code) is atleast 60%; and no Obligor or ERISA Affiliate knows of any reason that such percentage could reasonably be expectedto drop below 60%; (iii) no Obligor or ERISA Affiliate has incurred any liability to the PBGC except for the paymentof premiums, and no premium payments are due and unpaid; (iv) no Obligor or ERISA Affiliate has engaged in atransaction that could be subject to Section 4069 or 4212(c) of ERISA; and (v) no Pension Plan has been terminated byits plan administrator or the PBGC, and no fact or circumstance exists that could reasonably be expected to cause thePBGC to institute proceedings to terminate a Pension Plan.(d) With respect to any Foreign Plan, (i) all employer and employee contributions required by law or by theterms of the Foreign Plan have been made, or, if applicable, accrued, in accordance with normal accounting practices;(ii) the fair market value of the assets of each funded Foreign Plan, the liability of each insurer for any Foreign Planfunded through insurance, or the book reserve established for any Foreign Plan, together with any accruedcontributions, is sufficient to procure or provide for the accrued benefit obligations with respect to all current and formerparticipants in such Foreign Plan according to the actuarial assumptions and valuations most recently used to accountfor such obligations in accordance with applicable generally accepted accounting principles; and (iii) it has beenregistered as required and has been maintained in good standing with applicable regulatory authorities.9.1.19 Trade Relations. There exists no actual or threatened termination, limitation or modification of any businessrelationship between any Borrower or Subsidiary and any customer or supplier, or any group of customers or suppliers, whoindividually or in the aggregate are material to the business of such Borrower or Subsidiary. There exists no condition orcircumstance that could reasonably be expected to impair the ability of any Borrower or Subsidiary to conduct its business atany time hereafter in substantially the same manner as conducted on the U.S. Closing Date.9.1.20 Labor Relations. Except as described on Schedule 9.1.20, no Borrower or Subsidiary is party to or bound byany collective bargaining agreement, management agreement or consulting agreement. There are no material grievances,disputes or controversies with any union or other organization of any Borrower’s or Subsidiary’s employees, or, to anyBorrower’s knowledge, any asserted or threatened strikes, work stoppages or demands for collective bargaining.9.1.21 Payable Practices. No Borrower or Subsidiary has made any material change in its historical accounts payablepractices from those in effect on the U.S. Closing Date.9.1.22 Not a Regulated Entity. No Obligor is (a) an “investment company” or a “person directly or indirectlycontrolled by or acting on behalf of an investment company” within the meaning of the Investment Company Act of 1940; or(b) subject to regulation under the Federal Power Act, the Interstate Commerce Act, any public utilities code or any otherApplicable Law regarding its authority to incur Debt.9.1.23 Margin Stock. No Borrower or Subsidiary is engaged, principally or as one of its important activities, in thebusiness of extending credit for the purpose of purchasing or carrying any Margin Stock. No Revolver Loan proceeds orLetters of Credit will be used by Borrowers to purchase or carry, or to reduce or refinance any Debt incurred to purchase orcarry, any Margin Stock or for any related purpose governed by Regulations T, U or X of the Board of Governors.9.1.24 OFAC. No Borrower, Subsidiary, or any director, officer, employee, agent, affiliate or representative thereof, isor is owned or controlled by any individual or entity that is currently the target of any Sanction or is located, organized orresident in a Designated Jurisdiction.9.1.25 Anti-Corruption Laws. Each Borrower and Subsidiary has conducted its business in accordance withapplicable anti-corruption laws and has instituted and maintained policies and procedures designed to promote and achievecompliance with such laws.9.1.26 Dutch Works Councils Act. At the Dutch Closing Date and at the time of delivery of each Borrowing BaseCertificate, all requirements under the Dutch Works Councils Act have been complied with by each Dutch Obligor in respectof the execution, delivery and performance of the terms and provisions of each of the Loan Documents to which it is party andno advice is required to be sought from any works council of a Dutch Obligor in respect of the execution, delivery andperformance of the terms and provisions of each of the Loan Documents to which it is party and the transactions contemplatedthereby since no works council has been established or is in the process of being established for the Dutch Obligors’ business.9.1.27 Centre of Main Interests. For the purposes of the Insolvency Regulation, each Dutch Obligor’s centre of maininterest (as that term is used in Article 3(1) of the Insolvency Regulation) is situated in its jurisdiction of incorporation and it hasno “establishment” (as that term is used in Article 2(10) of the Insolvency Regulation) in any other jurisdiction.9.1.28 Advanced Business Computer, Inc. Advanced Business Computer, Inc. has no material assets nor materialliabilities and is a Dormant subsidiary of Borrower.9.2 Complete Disclosure. No Loan Document contains any untrue statement of a material fact, nor fails to disclose anymaterial fact necessary to make the statements contained therein not materially misleading. There is no fact or circumstance that anyObligor has failed to disclose to Agent in writing that could reasonably be expected to have a Material Adverse Effect.SECTION 10. COVENANTS AND CONTINUING AGREEMENTS10.1 Affirmative Covenants. As long as any Revolver Commitments or Obligations are outstanding, each Borrower shall,and shall cause each Subsidiary to:10.1.1 Inspections; Appraisals.(a) Permit Agent from time to time, subject (unless a Default or Event of Default exists) to reasonable noticeand normal business hours, to visit and inspect the Properties of any Borrower or Subsidiary, inspect, audit and makeextracts from any Borrower’s or Subsidiary’s books and records, and discuss with its officers, employees, agents,advisors and independent accountants such Borrower’s or Subsidiary’s business, financial condition, assets, prospectsand results of operations. Lenders may participate in any such visit or inspection, at their own expense. Secured Partiesshall have no duty to any Obligor to make any inspection, nor to share any results of any inspection, appraisal or reportwith any Obligor. Borrowers acknowledge that all inspections, appraisals and reports are prepared by Agent andLenders for their purposes, and Borrowers shall not be entitled to rely upon them.(b) Reimburse Agent for all its charges, costs and expenses in connection with (i) examinations of Obligors’books and records or any other financial or Collateral matters as it deems appropriate, (x) prior to the Conversion Date,up to two times per Loan Year and (y) after the Conversion Date, up to one time per Loan Year; and (ii) (x) prior to theConversion Date, up to two appraisals of Inventory per Loan Year and (y) after the Conversion Date, up to oneappraisal of Inventory per Loan Year; provided, that if an examination or appraisal is initiated during a Default or Eventof Default or during a Loan Year in which a Due Diligence Trigger Period exists or existed, all charges, costs andexpenses relating thereto shall be reimbursed by Borrowers without regard to such limits. Borrowers shall pay Agent’sthen standard charges for examination activities, including charges for its internal examination and appraisal groups, aswell as the charges of any third party used for such purposes. No Dutch Borrowing Base or U.S. Borrowing Basecalculation shall include Collateral acquired in a Permitted Acquisition or otherwise outside the Ordinary Course ofBusiness until completion of applicable field examinations and appraisals (which shall not be included in the limitsprovided above) satisfactory to Agent.10.1.2 Financial and Other Information. Keep adequate records and books of account with respect to its businessactivities, in which proper entries are made in accordance with GAAP reflecting all financial transactions; and furnish to Agentand Lenders:(a) as soon as available, and in any event within 90 days after the close of each Fiscal Year, balance sheets asof the end of such Fiscal Year and the related statements of income, cash flow and shareholders equity for such FiscalYear, on consolidated and consolidating bases for Borrowers and Subsidiaries, which consolidated statements shall beaudited and certified (without qualification) by a firm of independent certified public accountants of recognized standingselected by Borrowers and acceptable to Agent, and shall set forth in comparative form corresponding figures for thepreceding Fiscal Year and other information acceptable to Agent;(b) as soon as available, and in any event within 30 days after the end of each month, unaudited balance sheetsas of the end of such month and the related statements of income and cash flow for such month and for the portion ofthe Fiscal Year then elapsed, on consolidated and consolidating bases for Borrowers and Subsidiaries, setting forth incomparative form corresponding figures for the preceding Fiscal Year and certified by the chief financial officer ofBorrower Agent as prepared in accordance with GAAP and fairly presenting the financial position and results ofoperations for such month and period, subject to normal year‑end adjustments and the absence of footnotes(c) as soon as available, and in any event within 45 days after the end of each Fiscal Quarter (but within 60days after the last Fiscal Quarter in a Fiscal Year), unaudited balance sheets as of the end of such Fiscal Quarter and therelated statements of income and cash flow for such Fiscal Quarter and for the portion of the Fiscal Year then elapsed,on consolidated and consolidating bases for Borrowers and Subsidiaries, setting forth in comparative formcorresponding figures for the preceding Fiscal Year and certified by the chief financial officer of Borrower Agent asprepared in accordance with GAAP and fairly presenting the financial position and results of operations for such FiscalQuarter and period, subject to normal year‑end adjustments and the absence of footnotes;(d) concurrently with delivery of financial statements under clauses (a) and (b) above, or more frequently ifrequested by Agent while a Default or Event of Default exists, a Compliance Certificate executed by the chief financialofficer of Borrower Agent;(e) concurrently with delivery of financial statements under clause (a) above, copies of all management lettersand other material reports submitted to Borrowers by their accountants in connection with such financial statements;(f) not later than 30 days prior to the end of each Fiscal Year, projections of Borrowers’ consolidated balancesheets, results of operations, cash flow, Global Availability, Dutch Availability and U.S. Availability for the next FiscalYear, month by month;(g) at Agent’s request, a listing of each Borrower’s trade payables, specifying the trade creditor and balancedue, and a detailed trade payable aging, all in form satisfactory to Agent;(h) promptly after the sending or filing thereof, copies of any proxy statements, financial statements or reportsthat any Borrower has made generally available to its shareholders; copies of any regular, periodic and special reports orregistration statements or prospectuses that any Borrower files with the Securities and Exchange Commission or anyother Governmental Authority, or any securities exchange; and copies of any press releases or other statements madeavailable by a Borrower to the public concerning material changes to or developments in the business of suchBorrower;(i) promptly after the filing thereof, copies each Schedule SB (Actuarial Information) to the annual report(Form 5500 Series) filed by an Obligor or ERISA Affiliate with the Internal Revenue Service with respect to a PensionPlan; and, upon the reasonable request of any Lender, any other annual governmental report filed in connection withany Plan or Foreign Plan;(j) such other reports and information (financial or otherwise) as Agent may request from time to time inconnection with any Collateral or any Borrower’s, Subsidiary’s or other Obligor’s financial condition or business; and(k) as soon as available, and in any event within 120 days after the close of each Fiscal Year, financialstatements for each Guarantor, in form and substance satisfactory to Agent.10.1.3 Notices. Notify Agent and Lenders in writing, promptly after a Borrower’s obtaining knowledge thereof, ofany of the following that affects an Obligor: (a) the threat or commencement of any proceeding or investigation, whether or notcovered by insurance, if an adverse determination could have a Material Adverse Effect; (b) any pending or threatened labordispute, strike or walkout, or the expiration of any material labor contract; (c) any default under or termination of a MaterialContract; (d) the existence of any Default or Event of Default; (e) any judgment in an amount exceeding $1,000,000; (f) theassertion of any Intellectual Property Claim, if an adverse resolution could have a Material Adverse Effect; (g) any violation orasserted violation of any Applicable Law (including ERISA, OSHA, FLSA, or any Environmental Laws), if an adverseresolution could have a Material Adverse Effect; (h) any Environmental Release by an Obligor or on any Property owned,leased or occupied by an Obligor; or receipt of any Environmental Notice; (i) the occurrence of any ERISA Event; (j) thedischarge of or any withdrawal or resignation by Borrowers’ independent accountants; or (k) any opening of a new office orplace of business, at least 30 days prior to such opening.10.1.4 Landlord and Storage Agreements. Upon request, provide Agent with copies of all existing agreements, andpromptly after execution thereof provide Agent with copies of all future agreements, between an Obligor and any landlord,warehouseman, processor, shipper, bailee or other Person that owns any premises at which any Collateral may be kept or thatotherwise may possess or handle any Collateral.10.1.5 Compliance with Laws. Comply with all Applicable Laws, including ERISA, Environmental Laws, FLSA,OSHA, Anti-Terrorism Laws, and laws regarding collection and payment of Taxes, and maintain all Governmental Approvalsnecessary to the ownership of its Properties or conduct of its business, unless failure to comply (other than failure to complywith Anti-Terrorism Laws) or maintain could not reasonably be expected to have a Material Adverse Effect. Without limitingthe generality of the foregoing, if any Environmental Release occurs at or on any Properties of any Borrower or Subsidiary, itshall act promptly and diligently to investigate and report to Agent and all appropriate Governmental Authorities the extent of,and to make appropriate remedial action to eliminate, such Environmental Release, whether or not directed to do so by anyGovernmental Authority.10.1.6 Taxes. Pay and discharge all Taxes prior to the date on which they become delinquent or penalties attach,unless such Taxes are being Properly Contested.10.1.7 Insurance. In addition to the insurance required hereunder with respect to Collateral, maintain insurance withinsurers (with a Best rating of at least A+, unless otherwise approved by Agent in its discretion) satisfactory to Agent, (a) withrespect to the Properties and business of Borrowers and Subsidiaries of such type (including product liability, workers’compensation, larceny, embezzlement, errors and omissions, or other criminal misappropriation insurance), in such amounts,and with such coverages and deductibles as are customary for companies similarly situated; and (b) business interruptioninsurance in an amount not less than $50,000,000, with deductibles and subject to an endorsement or assignment satisfactory toAgent.10.1.8 Licenses. Keep each License affecting any Collateral (including the manufacture, distribution or disposition ofInventory) or any other material Property of Borrowers and Subsidiaries in full force and effect; promptly notify Agent of anyproposed modification to any such License, or entry into any new License, in each case at least 30 days prior to its effectivedate; pay all royalties and other amounts when due under any License; and notify Agent of any default or breach asserted byany Person to have occurred under any License.10.1.9 Future Subsidiaries. Promptly notify Agent upon any Person becoming a Subsidiary and, if such Person is not aForeign Subsidiary, cause it to guaranty the Obligations in a manner satisfactory to Agent, and to execute and deliver suchdocuments, instruments and agreements and to take such other actions as Agent shall require to evidence and perfect a Lien infavor of Agent on all assets of such Person, including delivery of such legal opinions, in form and substance satisfactory toAgent, as it shall deem appropriate.10.1.10 Anti-Corruption Laws. Conduct its business in compliance with applicable anti-corruption laws and maintainpolicies and procedures designed to promote and achieve compliance with such laws.10.1.11 Dutch Works Councils Act. Each Dutch Obligor shall comply with the requirements of the Dutch WorksCouncils Act in respect of its execution, delivery and performance of the terms and provisions of each of the Loan Documentsto which it is party and the transactions contemplated thereby.10.1.12 Centre of Main Interests. Each Dutch Obligor shall maintain its “centre of main interests” in the Netherlandsfor the purposes of the Insolvency Regulation.10.2 Negative Covenants. As long as any Revolver Commitments or Obligations are outstanding, each Borrower shall not,and shall cause each Subsidiary not to:10.2.1 Permitted Debt. Create, incur, guarantee or suffer to exist any Debt, except:(a) the Obligations;(b) Subordinated Debt;(c) Permitted Purchase Money Debt;(d) Borrowed Money (other than the Obligations, Subordinated Debt and Permitted Purchase Money Debt),but only to the extent outstanding on the U.S. Closing Date with respect to U.S. Borrower and Dutch Closing Datewith respect to Dutch Borrower and not satisfied with proceeds of the applicable initial Revolver Loans;(e) Debt with respect to Bank Products incurred in the Ordinary Course of Business;(f) Debt that is in existence when a Person becomes a Subsidiary or that is secured by an asset when acquiredby a Borrower or Subsidiary, as long as such Debt was not incurred in contemplation of such Person becoming aSubsidiary or such acquisition, and does not exceed $2,000,000 in the aggregate at any time;(g) Permitted Contingent Obligations;(h) Refinancing Debt as long as each Refinancing Condition is satisfied;(i) the Taiwan Debt;(j) The Debt on account of Permitted Intercompany Loans; and(k) Debt that is not included in any of the preceding clauses of this Section, is not secured by a Lien and doesnot exceed $5,000,000 in the aggregate at any time.10.2.2 Permitted Liens. Create or suffer to exist any Lien upon any of its Property, except the following (collectively,“Permitted Liens”):(a) Liens in favor of Agent;(b) Purchase Money Liens securing Permitted Purchase Money Debt;(c) Liens for Taxes not yet due or being Properly Contested;(d) statutory Liens (other than Liens for Taxes or imposed under ERISA or the Code with respect to anyPension Plan or Multiemployer Plan) arising in the Ordinary Course of Business, but only if (i) payment of theobligations secured thereby is not yet due or is being Properly Contested, and (ii) such Liens do not materially impairthe value or use of the Property or materially impair operation of the business of any Borrower or Subsidiary;(e) Liens incurred or deposits made in the Ordinary Course of Business to secure the performance ofgovernment tenders, bids, contracts, statutory obligations and other similar obligations, as long as such Liens are at alltimes junior to Agent’s Liens and are required or provided by law;(f) Liens arising in the Ordinary Course of Business that are subject to Lien Waivers;(g) Liens arising by virtue of a judgment or judicial order against any Borrower or Subsidiary, or any Propertyof a Borrower or Subsidiary, as long as such Liens are (i) in existence for less than 20 consecutive days or beingProperly Contested, and (ii) at all times junior to Agent’s Liens;(h) easements, rights-of-way, restrictions, covenants or other agreements of record, and other similar charges orencumbrances on Real Estate, that do not secure any monetary obligation and do not interfere with the Ordinary Courseof Business;(i) normal and customary rights of setoff upon deposits in favor of depository institutions, and Liens of acollecting bank on Payment Items in the course of collection;(j) Liens on assets (other than Accounts and Inventory) acquired in a Permitted Acquisition, securing Debtpermitted by Section 10.2.1(f);(k) All exceptions to title to the Real Estate contained in the title policies issued and approved in writing byAgent covering the Mortgages; and(l) existing Liens shown on Schedule 10.2.2.10.2.3 Reserved.10.2.4 Distributions; Upstream Payments. Declare or make any Distributions, except (i) Upstream Payments and (ii)after the Conversion Date, any Distribution so long as the Payment Conditions are satisfied with respect to such Distribution; orcreate or suffer to exist any encumbrance or restriction on the ability of a Subsidiary to make any Upstream Payment, except forrestrictions under the Loan Documents, under Applicable Law or in effect on the U.S. Closing Date as shown on Schedule9.1.15.10.2.5 Restricted Investments. Make any Restricted Investment.10.2.6 Disposition of Assets. Make any Asset Disposition, except a Permitted Asset Disposition, a disposition ofEquipment under Section 8.4.2, or a transfer of Property by a Subsidiary or Obligor to a Borrower.10.2.7 Loans. Make any loans or other advances of money to any Person, except (a) advances to an officer oremployee for salary, travel expenses, commissions and similar items in the Ordinary Course of Business; (b) prepaid expensesand extensions of trade credit made in the Ordinary Course of Business; (c) deposits with financial institutions permittedhereunder; (d) as long as no Default or Event of Default exists, intercompany loans by a U.S. Borrower to another U.S.Borrower and by a Dutch Borrower to another Dutch Borrower and (e) Permitted Intercompany Loans.10.2.8 Restrictions on Payment of Certain Debt. Make any payments (whether voluntary or mandatory, or aprepayment, redemption, retirement, defeasance or acquisition) with respect to any (a) Subordinated Debt, except regularlyscheduled payments of principal, interest and fees, but only to the extent permitted under any subordination agreement relatingto such Debt (and a Senior Officer of Borrower Agent shall certify to Agent, not less than five Business Days prior to the dateof payment, that all conditions under such agreement have been satisfied); or (b) Borrowed Money (other than the Obligations)prior to its due date under the agreements evidencing such Debt as in effect on the U.S. Closing Date with respect to the U.S.Borrower and the Dutch Closing Date with respect to the Dutch Borrower (or, in each case, as amended thereafter with theconsent of Agent); provided that at any time after the Conversion Date, Borrowers may make payments of principal, interestand fees otherwise prohibited above so long as the Payment Conditions are satisfied with respect to such payment.10.2.9 Fundamental Changes. Change its name or conduct business under any fictitious name; change its tax, charteror other organizational identification number; change its form or state of organization; liquidate, wind up its affairs or dissolveitself; or merge, combine or consolidate with any Person, whether in a single transaction or in a series of related transactions,except for (a) mergers or consolidations of a wholly-owned Subsidiary with another wholly-owned Subsidiary or into aBorrower; or (b) Permitted Acquisitions.10.2.10 Subsidiaries. Form or acquire any Subsidiary after the U.S. Closing Date, except in accordance with Sections10.1.9, 10.2.5 and 10.2.9; or permit any existing Subsidiary to issue any additional Equity Interests except directors’ qualifyingshares.10.2.11 Organic Documents. Amend, modify or otherwise change any of its Organic Documents, except inconnection with a transaction permitted under Section 10.2.9.10.2.12 Tax Consolidation. File or consent to the filing of any consolidated income tax return with any Person otherthan Borrowers and Subsidiaries.10.2.13 Accounting Changes. Make any material change in accounting treatment or reporting practices, except asrequired by GAAP and in accordance with Section 1.2; or change its Fiscal Year.10.2.14 Restrictive Agreements. Become a party to any Restrictive Agreement, except a Restrictive Agreement (a) ineffect on the U.S. Closing Date with respect to U.S. Borrower and the Dutch Closing Date with respect to Dutch Borrower; (b)relating to secured Debt permitted hereunder, as long as the restrictions apply only to collateral for such Debt; or (c) constitutingcustomary restrictions on assignment in leases and other contracts.10.2.15 Hedging Agreements. Enter into any Hedging Agreement, except to hedge risks arising in the OrdinaryCourse of Business and not for speculative purposes.10.2.16 Conduct of Business. Engage in any business, other than its business as conducted on the U.S. Closing Dateand any activities incidental thereto.10.2.17 Affiliate Transactions. Enter into or be party to any transaction with an Affiliate, except (a) transactionsexpressly permitted by the Loan Documents; (b) payment of reasonable compensation to officers and employees for servicesactually rendered, and payment of customary directors’ fees and indemnities; (c) transactions solely among Borrowers; (d)transactions with Affiliates consummated prior to the U.S. Closing Date with respect to U.S. Borrower and the Dutch ClosingDate with respect to Dutch Borrower, in each case, as shown on Schedule 10.2.17; (e) transactions with Affiliates in theOrdinary Course of Business, upon fair and reasonable terms fully disclosed to Agent and no less favorable than would beobtained in a comparable arm’s-length transaction with a non-Affiliate; and (f) Permitted Intercompany Loans.10.2.18 Plans. Become party to any Multiemployer Plan or any Foreign Plan that is substantially similar to aMultiemployer Plan, other than any in existence on the U.S. Closing Date.10.2.19 Amendments to Subordinated Debt. Amend, supplement or otherwise modify any document, instrument oragreement relating to any Subordinated Debt, if such modification (a) increases the principal balance of such Debt, or increasesany required payment of principal or interest; (b) accelerates the date on which any installment of principal or any interest isdue, or adds any additional redemption, put or prepayment provisions; (c) shortens the final maturity date or otherwiseaccelerates amortization; (d) increases the interest rate; (e) increases or adds any fees or charges; (f) modifies any covenant in amanner or adds any representation, covenant or default that is more onerous or restrictive in any material respect for anyBorrower or Subsidiary, or that is otherwise materially adverse to any Borrower, any Subsidiary or Lenders; or (g) results in theObligations not being fully benefited by the subordination provisions thereof.10.2.20 Advanced Business Computer, Inc. Advanced Business Computer, Inc. shall have no material assets normaterial liabilities and shall continue to be a Dormant subsidiary of Borrower.10.3 Financial Covenants. As long as any Revolver Commitments or Obligations are outstanding, Borrowers shall:10.3.1 Fixed Charge Coverage Ratio. Maintain a Fixed Charge Coverage Ratio for each 12-month period of at least1.00 to 1.00 while a Trigger Period is in effect, measured for the most recent period for which financial statements weredelivered hereunder prior to the Trigger Period and each period ending thereafter until the Trigger Period is no longer in effect.SECTION 11. EVENTS OF DEFAULT; REMEDIES ON DEFAULT11.1 Events of Default. Each of the following shall be an “Event of Default” if it occurs for any reason whatsoever, whethervoluntary or involuntary, by operation of law or otherwise:(a) Any Borrower fails to pay its Obligations when due (whether at stated maturity, on demand, uponacceleration or otherwise);(b) Any representation, warranty or other written statement of an Obligor made in connection with any LoanDocuments or transactions contemplated thereby is incorrect or misleading in any material respect when given;(c) A Borrower breaches or fail to perform any covenant contained in Section 6.4, 7.2, 7.3, 7.4, 7.6, 8.1, 8.2.4,8.2.5, 8.6.2, 10.1.1, 10.1.2, 10.2 or 10.3;(d) An Obligor breaches or fails to perform any other covenant contained in any Loan Documents, and suchbreach or failure is not cured within 15 days after a Senior Officer of such Obligor has knowledge thereof or receivesnotice thereof from Agent, whichever is sooner; provided, that such notice and opportunity to cure shall not apply if thebreach or failure to perform is not capable of being cured within such period or is a willful breach by an Obligor;(e) A Guarantor repudiates, revokes or attempts to revoke its Guaranty; an Obligor or third party denies orcontests the validity or enforceability of any Loan Documents or Obligations, or the perfection or priority of any Liengranted to Agent; or any Loan Document ceases to be in full force or effect for any reason (other than a waiver orrelease by Agent and Lenders);(f) Any breach or default of an Obligor occurs under (i) any Hedging Agreement; or (ii) any instrument oragreement to which it is a party or by which it or any of its Properties is bound, relating to any Debt (other than theObligations) in excess of $1,000,000, if the maturity of or any payment with respect to such Debt may be accelerated ordemanded due to such breach;(g) Any judgment or order for the payment of money is entered against an Obligor in an amount that exceeds,individually or cumulatively with all unsatisfied judgments or orders against all Obligors, $1,000,000 (net of insurancecoverage therefor that has not been denied by the insurer), unless a stay of enforcement of such judgment or order is ineffect;(h) A loss, theft, damage or destruction occurs with respect to any Collateral if the amount not covered byinsurance exceeds $1,000,000;(i) An Obligor is enjoined, restrained or in any way prevented by any Governmental Authority fromconducting any material part of its business; an Obligor suffers the loss, revocation or termination of any materiallicense, permit, lease or agreement necessary to its business; there is a cessation of any material part of an Obligor’sbusiness for a material period of time; any material Collateral or Property of an Obligor is taken or impaired throughcondemnation; an Obligor agrees to or commences any liquidation, dissolution or winding up of its affairs; or anObligor is not Solvent;(j) An Insolvency Proceeding is commenced by an Obligor; an Obligor makes an offer of settlement, extensionor composition to its unsecured creditors generally; a trustee is appointed to take possession of any substantial Propertyof or to operate any of the business of an Obligor; or an Insolvency Proceeding is commenced against an Obligor and:the Obligor consents to institution of the proceeding, the petition commencing the proceeding is not timely contested bythe Obligor, the petition is not dismissed within 30 days after filing, or an order for relief is entered in the proceeding;(k) The occurrence of (i), (ii), or (iii), which, whether individually or in the aggregate, results in liability inexcess of $10,000,000 imposed on an Obligor (including liabilities imposed on an ERISA Affiliate that are not paid bythe ERISA Affiliates), (i) an ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan that hasresulted or could reasonably be expected to result in liability of an Obligor to a Pension Plan, Multiemployer Plan orPBGC, or that constitutes grounds for appointment of a trustee for or termination by the PBGC of any Pension Plan orMultiemployer Plan; (ii) an Obligor or ERISA Affiliate fails to pay when due any installment payment with respect toits withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan; or (iii) any event similar to theforegoing occurs or exists with respect to a Foreign Plan;(l) A Dutch Works Councils Act Event occurs;(m) An Obligor or any of its Senior Officers is criminally indicted or convicted for (i) a felony committed inthe conduct of the Obligor’s business, or (ii) violating any state or federal law (including the Controlled Substances Act,Money Laundering Control Act of 1986 and Illegal Exportation of War Materials Act) that could lead to forfeiture ofany material Property or any Collateral; or(n) A Change of Control occurs; or any event occurs or condition exists that has a Material Adverse Effect.11.2 Remedies upon Default. If an Event of Default described in Section 11.1(j) occurs with respect to any Borrower, thento the extent permitted by Applicable Law, all Obligations (other than Secured Bank Product Obligations) shall become automaticallydue and payable and all Revolver Commitments shall terminate, without any action by Agent or notice of any kind. In addition, or ifany other Event of Default exists, Agent may in its discretion (and shall upon written direction of Required Lenders) do any one ormore of the following from time to time:(a) declare any Obligations (other than Secured Bank Product Obligations) immediately due and payable,whereupon they shall be due and payable without diligence, presentment, demand, protest or notice of any kind, all ofwhich are hereby waived by Borrowers to the fullest extent permitted by law;(b) terminate, reduce or condition any Revolver Commitment or adjust the Dutch Borrowing Base or U.S.Borrowing Base;(c) require Obligors to Cash Collateralize their LC Obligations, Secured Bank Product Obligations and otherObligations that are contingent or not yet due and payable, and if Obligors fail to deposit such Cash Collateral, Agentmay (and shall upon the direction of Required Lenders) advance the required Cash Collateral as Revolver Loans(whether or not an Overadvance exists or is created thereby, or the conditions in Section 6 are satisfied); and(d) exercise any other rights or remedies afforded under any agreement, by law, at equity or otherwise,including the rights and remedies of a secured party under the UCC. Such rights and remedies include the rights to (i)take possession of any Collateral; (ii) require Borrowers to assemble Collateral, at Borrowers’ expense, and make itavailable to Agent at a place designated by Agent; (iii) enter any premises where Collateral is located and storeCollateral on such premises until sold (and if the premises are owned or leased by a Borrower, Borrowers agree not tocharge for such storage); and (iv) sell or otherwise dispose of any Collateral in its then condition, or after any furthermanufacturing or processing thereof, at public or private sale, with such notice as may be required by Applicable Law,in lots or in bulk, at such locations, all as Agent, in its discretion, deems advisable. Each Borrower agrees that 10 days’notice of any proposed sale or other disposition of Collateral by Agent shall be reasonable, and that any sale conductedon the internet or to a licensor of Intellectual Property shall be commercially reasonable. Agent may conduct sales onany Obligor’s premises, without charge, and any sale may be adjourned from time to time in accordance withApplicable Law. Agent shall have the right to sell, lease or otherwise dispose of any Collateral for cash, credit or anycombination thereof, and Agent may purchase any Collateral at public or, if permitted by law, private sale and, in lieuof actual payment of the purchase price, may credit bid and set off the amount of such price against the Obligations.11.3 License. Agent is hereby granted an irrevocable, non-exclusive license or other right to use, license or sub-license(without payment of royalty or other compensation to any Person) any or all Intellectual Property of Borrowers, computer hardwareand software, trade secrets, brochures, customer lists, promotional and advertising materials, labels, packaging materials and otherProperty, in advertising for sale, marketing, selling, collecting, completing manufacture of, or otherwise exercising any rights orremedies with respect to, any Collateral. Each Borrower’s rights and interests under Intellectual Property shall inure to Agent’s benefit.11.4 Setoff. At any time during an Event of Default, Agent, Issuing Bank, Lenders, and any of their Affiliates are authorized,to the fullest extent permitted by Applicable Law, to set off and apply any and all deposits (general or special, time or demand,provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by Agent,Issuing Bank, such Lender or such Affiliate to or for the credit or the account of an Obligor against its Obligations, whether or notAgent, Issuing Bank, such Lender or such Affiliate shall have made any demand under this Agreement or any other Loan Documentand although such Obligations may be contingent or unmatured or are owed to a branch or office of Agent, Issuing Bank, such Lenderor such Affiliate different from the branch or office holding such deposit or obligated on such indebtedness. The rights of Agent,Issuing Bank, each Lender and each such Affiliate under this Section are in addition to other rights and remedies (including other rightsof setoff) that such Person may have.11.5 Remedies Cumulative; No Waiver.11.5.1 Cumulative Rights. All agreements, warranties, guaranties, indemnities and other undertakings of Obligorsunder the Loan Documents are cumulative and not in derogation of each other. The rights and remedies of Agent and Lendersunder the Loan Documents are cumulative, may be exercised at any time and from time to time, concurrently or in any order,and are not exclusive of any other rights or remedies available by agreement, by law, at equity or otherwise. All such rights andremedies shall continue in full force and effect until Full Payment of all Obligations.11.5.2 Waivers. No waiver or course of dealing shall be established by (a) the failure or delay of Agent or any Lenderto require strict performance by any Obligor under any Loan Document, or to exercise any rights or remedies with respect toCollateral or otherwise; (b) the making of any Revolver Loan or issuance of any Letter of Credit during a Default, Event ofDefault or other failure to satisfy any conditions precedent; or (c) acceptance by Agent or any Lender of any payment orperformance by an Obligor under any Loan Documents in a manner other than that specified therein. Any failure to satisfy afinancial covenant on a measurement date shall not be cured or remedied by satisfaction of such covenant on a subsequent date.SECTION 12. AGENT12.1 Appointment, Authority and Duties of Agent.12.1.1 Appointment and Authority. Each Secured Party appoints and designates Bank of America as Agent under allLoan Documents. Agent may, and each Secured Party authorizes Agent to, enter into all Loan Documents to which Agent isintended to be a party and accept all Security Documents. Any action taken by Agent in accordance with the provisions of theLoan Documents, and the exercise by Agent of any rights or remedies set forth therein, together with all other powersreasonably incidental thereto, shall be authorized by and binding upon all Secured Parties. Without limiting the generality of theforegoing, Agent shall have the sole and exclusive authority to (a) act as the disbursing and collecting agent for Lenders withrespect to all payments and collections arising in connection with the Loan Documents; (b) execute and deliver as Agent eachLoan Document, including any intercreditor or subordination agreement, and accept delivery of each Loan Document; (c) actas collateral agent for Secured Parties for purposes of perfecting and administering Liens under the Loan Documents, and forall other purposes stated therein; (d) manage, supervise or otherwise deal with Collateral; and (e) take any Enforcement Actionor otherwise exercise any rights or remedies with respect to any Collateral or under any Loan Documents, Applicable Law orotherwise. Agent alone is authorized to determine eligibility and applicable advance rates under the Dutch Borrowing Base orU.S. Borrowing Base, whether to impose or release any reserve, or whether any conditions to funding or issuance of a Letter ofCredit have been satisfied, which determinations and judgments, if exercised in good faith, shall exonerate Agent from liabilityto any Secured Party or other Person for any error in judgment.12.1.2 Duties. The title of “Agent” is used solely as a matter of market custom and the duties of Agent areadministrative in nature only. Agent has no duties except those expressly set forth in the Loan Documents, and in no event doesAgent have any agency, fiduciary or implied duty to or relationship with any Secured Party or other Person by reason of anyLoan Document or related transaction. The conferral upon Agent of any right shall not imply a duty to exercise such right,unless instructed to do so by Lenders in accordance with this Agreement.12.1.3 Agent Professionals. Agent may perform its duties through agents and employees. Agent may consult with andemploy Agent Professionals, and shall be entitled to act upon, and shall be fully protected in any action taken in good faithreliance upon, any advice given by an Agent Professional. Agent shall not be responsible for the negligence or misconduct ofany agents, employees or Agent Professionals selected by it with reasonable care.12.1.4 Instructions of Required Lenders. The rights and remedies conferred upon Agent under the Loan Documentsmay be exercised without the necessity of joining any other party, unless required by Applicable Law. In determiningcompliance with a condition for any action hereunder, including satisfaction of any condition in Section 6, Agent may presumethat the condition is satisfactory to a Secured Party unless Agent has received notice to the contrary from such Secured Partybefore Agent takes the action. Agent may request instructions from Required Lenders or other Secured Parties with respect toany act (including the failure to act) in connection with any Loan Documents or Collateral, and may seek assurances to itssatisfaction from Secured Parties of their indemnification obligations against Claims that could be incurred by Agent. Agentmay refrain from any act until it has received such instructions or assurances, and shall not incur liability to any Person byreason of so refraining. Instructions of Required Lenders shall be binding upon all Secured Parties, and no Secured Party shallhave any right of action whatsoever against Agent as a result of Agent acting or refraining from acting pursuant to instructionsof Required Lenders. Notwithstanding the foregoing, instructions by and consent of specific parties shall be required to theextent provided in Section 14.1.1. In no event shall Agent be required to take any action that it determines in its discretion iscontrary to Applicable Law or any Loan Documents or could subject any Agent Indemnitee to liability.12.2 Agreements Regarding Collateral and Borrower Materials.12.2.1 Lien Releases; Care of Collateral. Secured Parties authorize Agent to release any Lien on any Collateral (a)upon Full Payment of the Obligations; (b) that is the subject of a disposition or Lien that Borrowers certify in writing is aPermitted Asset Disposition or a Permitted Lien entitled to priority over Agent’s Liens (and Agent may rely conclusively onsuch certificate without further inquiry); (c) that does not constitute a material part of the Collateral; or (d) subject to Section14.1, with the consent of Required Lenders. Secured Parties authorize Agent to subordinate its Liens to any Purchase MoneyLien or other Lien entitled to priority hereunder. Agent has no obligation to assure that any Collateral exists or is owned by anObligor, or is cared for, protected or insured, nor to assure that Agent’s Liens have been properly created, perfected orenforced, or are entitled to any particular priority, nor to exercise any duty of care with respect to any Collateral.12.2.2 Possession of Collateral. Agent and Secured Parties appoint each Secured Party as agent (for the benefit ofSecured Parties) for the purpose of perfecting Liens in Collateral held or controlled by it, to the extent such Liens are perfectedby possession or control. If a Secured Party obtains possession or control of any Collateral, it shall notify Agent thereof and,promptly upon Agent’s request, deliver such Collateral to Agent or otherwise deal with it in accordance with Agent’sinstructions.12.2.3 Reports. Agent shall promptly provide to Lenders, when complete, any field examination, audit or appraisalreport prepared for Agent with respect to any Obligor or Collateral (“Report”). Reports and other Borrower Materials may bemade available to Lenders by providing access to them on the Platform, but Agent shall not be responsible for system failuresor access issues that may occur from time to time. Each Lender agrees (a) that Reports are not intended to be comprehensiveaudits or examinations, and that Agent or any other Person performing an audit or examination will inspect only limitedinformation and will rely significantly upon Borrowers’ books, records and representations; (b) that Agent makes norepresentation or warranty as to the accuracy or completeness of any Borrower Materials and shall not be liable for anyinformation contained in or omitted from any Borrower Materials, including any Report; and (c) to keep all Borrower Materialsconfidential and strictly for such Lender’s internal use, not to distribute any Report or other Borrower Materials (or the contentsthereof) to any Person (except to such Lender’s Participants, attorneys and accountants), and to use all Borrower Materialssolely for administration of the Obligations. Each Lender shall indemnify and hold harmless Agent and any other Personpreparing a Report from any action such Lender may take as a result of or any conclusion it may draw from any BorrowerMaterials, as well as from any Claims arising as a direct or indirect result of Agent furnishing same to such Lender, via thePlatform or otherwise.12.3 Reliance By Agent. Agent shall be entitled to rely, and shall be fully protected in relying, upon any certification, noticeor other communication (including those by telephone, telex, telegram, telecopy, e-mail or other electronic means) believed by it to begenuine and correct and to have been signed, sent or made by the proper Person. Agent shall have a reasonable and practicable amountof time to act upon any instruction, notice or other communication under any Loan Document, and shall not be liable for any delay inacting.12.4 Action Upon Default. Agent shall not be deemed to have knowledge of any Default or Event of Default, or of anyfailure to satisfy any conditions in Section 6, unless it has received written notice from a Borrower or Required Lenders specifying theoccurrence and nature thereof. If a Lender acquires knowledge of a Default, Event of Default or failure of such conditions, it shallpromptly notify Agent and the other Lenders thereof in writing. Each Secured Party agrees that, except as otherwise provided in anyLoan Documents or with the written consent of Agent and Required Lenders, it will not take any Enforcement Action, accelerateObligations (other than Secured Bank Product Obligations) or assert any rights relating to any Collateral.12.5 Ratable Sharing. If any Lender obtains any payment or reduction of any Obligation, whether through set-off orotherwise, in excess of its ratable share of such Obligation, such Lender shall forthwith purchase from Secured Parties participations inthe affected Obligation as are necessary to share the excess payment or reduction on a Pro Rata basis or in accordance with Section5.6.2, as applicable. If any of such payment or reduction is thereafter recovered from the purchasing Lender, the purchase shall berescinded and the purchase price restored to the extent of such recovery, but without interest. Notwithstanding the foregoing, if aDefaulting Lender obtains a payment or reduction of any Obligation, it shall immediately turn over the full amount thereof to Agent forapplication under Section 4.2.2 and it shall provide a written statement to Agent describing the Obligation affected by such payment orreduction. No Lender shall set off against a Dominion Account without Agent’s prior consent.12.6 Indemnification. EXCEPT FOR LOSSES DIRECTLY AND SOLELY CAUSED BY AGENT INDEMNITEES’AND ISSUING BANK INDEMNITEES’ GROSS NEGLIGENCE OR WILLFUL MISCONDUCT THAT IS DETERMINED INA FINAL, NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO RESULT FROM THEGROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE, EACH SECURED PARTY SHALLINDEMNIFY AND HOLD HARMLESS AGENT INDEMNITEES AND ISSUING BANK INDEMNITEES, TO THEEXTENT NOT REIMBURSED BY OBLIGORS, ON A PRO RATA BASIS, AGAINST ALL CLAIMS THAT MAY BEINCURRED BY OR ASSERTED AGAINST ANY SUCH INDEMNITEE, PROVIDED THAT ANY CLAIM AGAINST ANAGENT INDEMNITEE RELATES TO OR ARISES FROM ITS ACTING AS OR FOR AGENT (IN THE CAPACITY OFAGENT). In Agent’s discretion, it may reserve for any Claims made against an Agent Indemnitee or Issuing Bank Indemnitee, andmay satisfy any judgment, order or settlement relating thereto, from proceeds of Collateral prior to making any distribution of Collateralproceeds to Secured Parties. If Agent is sued by any receiver, trustee or other Person for any alleged preference or fraudulent transfer,then any monies paid by Agent in settlement or satisfaction of such proceeding, together with all interest, costs and expenses (includingattorneys’ fees) incurred in the defense of same, shall be promptly reimbursed to Agent by each Secured Party to the extent of its ProRata share.12.7 Limitation on Responsibilities of Agent. Agent shall not be liable to any Secured Party for any action taken or omittedto be taken under the Loan Documents, except for losses directly and solely caused by Agent’s gross negligence or willful misconduct.Agent does not assume any responsibility for any failure or delay in performance or any breach by any Obligor, Lender or otherSecured Party of any obligations under the Loan Documents. Agent does not make any express or implied representation, warranty orguarantee to Secured Parties with respect to any Obligations, Collateral, Liens, Loan Documents or Obligor. No Agent Indemniteeshall be responsible to Secured Parties for any recitals, statements, information, representations or warranties contained in any LoanDocuments or Borrower Materials; the execution, validity, genuineness, effectiveness or enforceability of any Loan Documents; thegenuineness, enforceability, collectability, value, sufficiency, location or existence of any Collateral, or the validity, extent, perfectionor priority of any Lien therein; the validity, enforceability or collectability of any Obligations; or the assets, liabilities, financialcondition, results of operations, business, creditworthiness or legal status of any Obligor or Account Debtor. No Agent Indemniteeshall have any obligation to any Secured Party to ascertain or inquire into the existence of any Default or Event of Default, theobservance by any Obligor of any terms of the Loan Documents, or the satisfaction of any conditions precedent contained in any LoanDocuments.12.8 Successor Agent and Co-Agents.12.8.1 Resignation; Successor Agent. Agent may resign at any time by giving at least 30 days written notice thereof toLenders and Borrowers. Required Lenders may appoint a successor that is (a) a Lender or Affiliate of a Lender; or (b) afinancial institution reasonably acceptable to Required Lenders and (provided no Default or Event of Default exists)Borrowers. If no successor is appointed by the effective date of Agent’s resignation, then on such date, Agent may appoint asuccessor acceptable to it in its discretion (which shall be a Lender unless no Lender accepts the role) or, in the absence of suchappointment, Required Lenders shall automatically assume all rights and duties of Agent. The successor Agent shall thereuponsucceed to and become vested with all the powers and duties of the retiring Agent without further act. The retiring Agent shallbe discharged from its duties hereunder on the effective date of its resignation but shall continue to have all rights andprotections available to Agent under the Loan Documents with respect to actions, omissions, circumstances or Claims relatingto or arising while it was acting or transferring responsibilities as Agent or holding any Collateral on behalf of Secured Parties,including the indemnification set forth in Sections 12.6 and 14.2, and all rights and protections under this Section 12. Anysuccessor to Bank of America by merger or acquisition of stock or this loan shall continue to be Agent hereunder withoutfurther act on the part of any Secured Party or Obligor.12.8.2 Co-Collateral Agent. If appropriate under Applicable Law, Agent may appoint a Person to serve as a co-collateral agent or separate collateral agent under any Loan Document. Each right, remedy and protection intended to beavailable to Agent under the Loan Documents shall also be vested in such agent. Secured Parties shall execute and deliver anyinstrument or agreement that Agent may request to effect such appointment. If any such agent shall die, dissolve, becomeincapable of acting, resign or be removed, then all the rights and remedies of the agent, to the extent permitted by ApplicableLaw, shall vest in and be exercised by Agent until appointment of a new agent.12.9 Due Diligence and Non-Reliance. Each Lender acknowledges and agrees that it has, independently and withoutreliance upon Agent or any other Lenders, and based upon such documents, information and analyses as it has deemed appropriate,made its own credit analysis of each Obligor and its own decision to enter into this Agreement and to fund Revolver Loans andparticipate in LC Obligations hereunder. Each Secured Party has made such inquiries as it feels necessary concerning the LoanDocuments, Collateral and Obligors. Each Secured Party acknowledges and agrees that the other Secured Parties have made norepresentations or warranties concerning any Obligor, any Collateral or the legality, validity, sufficiency or enforceability of any LoanDocuments or Obligations. Each Secured Party will, independently and without reliance upon any other Secured Party, and basedupon such financial statements, documents and information as it deems appropriate at the time, continue to make and rely upon its owncredit decisions in making Revolver Loans and participating in LC Obligations, and in taking or refraining from any action under anyLoan Documents. Except for notices, reports and other information expressly requested by a Lender, Agent shall have no duty orresponsibility to provide any Secured Party with any notices, reports or certificates furnished to Agent by any Obligor or any credit orother information concerning the affairs, financial condition, business or Properties of any Obligor (or any of its Affiliates) which maycome into possession of Agent or its Affiliates.12.10 Remittance of Payments and Collections.12.10.1 Remittances Generally. Payments by any Secured Party to Agent shall be made by the time and date providedherein, in immediately available funds. If no time for payment is specified or if payment is due on demand and request forpayment is made by Agent by 1:00 p.m. on a Business Day, then payment shall be made by the Secured Party by 3:00 p.m. onsuch day, and if request is made after 1:00 p.m., then payment shall be made by 11:00 a.m. on the next Business Day. Paymentby Agent to any Secured Party shall be made by wire transfer, in the type of funds received by Agent. Any such payment shallbe subject to Agent’s right of offset for any amounts due from such payee under the Loan Documents.12.10.2 Failure to Pay. If any Secured Party fails to deliver when due any amount payable by it to Agent hereunder,such amount shall bear interest, from the due date until paid in full, at the greater of the Federal Funds Rate or the ratedetermined by Agent as customary for interbank compensation for two Business Days and thereafter at the Default Rate. In noevent shall Borrowers be entitled to credit for any interest paid by a Secured Party to Agent, nor shall a Defaulting Lender beentitled to interest on amounts held by Agent pursuant to Section 4.2.12.10.3 Recovery of Payments. If Agent pays an amount to a Secured Party in the expectation that a related paymentwill be received by Agent from an Obligor and such related payment is not received, then Agent may recover such amountfrom the Secured Party. If Agent determines that an amount received by it must be returned or paid to an Obligor or otherPerson pursuant to Applicable Law or otherwise, then Agent shall not be required to distribute such amount to any SecuredParty. If Agent is required to return any amounts applied by it to Obligations held by a Secured Party, such Secured Party shallpay to Agent, on demand, its share of the amounts required to be returned.12.11 Individual Capacities. As a Lender, Bank of America shall have the same rights and remedies under the LoanDocuments as any other Lender, and the terms “Lenders,” “Required Lenders” or any similar term shall include Bank of America in itscapacity as a Lender. Agent, Lenders and their Affiliates may accept deposits from, lend money to, provide Bank Products to, act asfinancial or other advisor to, and generally engage in any kind of business with, Obligors and their Affiliates, as if they were not Agentor Lenders hereunder, without any duty to account therefor to any Secured Party. In their individual capacities, Agent, Lenders andtheir Affiliates may receive information regarding Obligors, their Affiliates and their Account Debtors (including information subject toconfidentiality obligations), and shall have no obligation to provide such information to any Secured Party.12.12 Titles. Each Lender, other than Bank of America, that is designated in connection with this credit facility as an“Arranger,” “Bookrunner” or “Agent” of any kind shall have no right or duty under any Loan Documents other than those applicableto all Lenders, and shall in no event have any fiduciary duty to any Secured Party.12.13 Bank Product Providers. Each Secured Bank Product Provider, by delivery of a notice to Agent of a Bank Product,agrees to be bound by the Loan Documents, including Sections 5.6, 12, 14.3.3 and 14.16, and agrees to hold harmless AgentIndemnitees, to the extent not reimbursed by Obligors, against all Claims that may be incurred by or asserted against any AgentIndemnitee in connection with such provider’s Secured Bank Product Obligations.12.14 No Third Party Beneficiaries. This Section 12 is an agreement solely among Secured Parties and Agent, and shallsurvive Full Payment of the Obligations. This Section 12 does not confer any rights or benefits upon Borrowers or any other Person.As between Borrowers and Agent, any action that Agent may take under any Loan Documents or with respect to any Obligations shallbe conclusively presumed to have been authorized and directed by Secured Parties.12.15 Appointment of Agent as security trustee for U.K. Security Documents. For the purposes of any Liens orCollateral created under each security document executed by any Credit Party and governed by English law in favor of the Agent (the“U.K. Security Documents”), the following additional provisions shall apply, in addition to the provisions set out in Section 12 orotherwise hereunder.12.15.1 In this Section 12.15, the following expressions shall have the following meanings:(a) “Appointee” shall mean any receiver, administrator or other insolvency officer appointed in respect of anyObligor or its assets.(b) “Charged Property” shall mean the assets of the Obligors subject to a security interest under the DutchU.K. Security Documents.(c) “Delegate” shall mean any delegate, agent, attorney or co-trustee appointed by the Agent (in its capacity assecurity trustee).12.15.2 The Secured Parties appoint the Agent to hold the security interests constituted by the U.K. SecurityDocuments on trust for the Secured Parties on the terms of the Loan Documents and the Agent accepts that appointment.12.15.3 The Agent, its subsidiaries and associated companies may each retain for its own account and benefit any fee,remuneration and profits paid to it in connection with (i) its activities under the Loan Documents; and (ii) its engagement in anykind of banking or other business with any Obligor.12.15.4 Nothing in this Agreement constitutes the Agent as a trustee or fiduciary of, nor shall the Agent have anyduty or responsibility to, any Obligor.12.15.5 The Agent shall have no duties or obligations to any other person except for those which are expresslyspecified in the Loan Documents or mandatorily required by applicable law.12.15.6 The Agent may appoint one or more Delegates on such terms (which may include the power to sub-delegate)and subject to such conditions as it thinks fit, to exercise and perform all or any of the duties, rights, powers and discretionsvested in it by the U.K. Security Documents and shall not be obliged to supervise any Delegate or be responsible to any personfor any loss incurred by reason of any act, omission, misconduct or default on the part of any Delegate.12.15.7 The Agent may (whether for the purpose of complying with any law or regulation of any overseasjurisdiction, or for any other reason) appoint (and subsequently remove) any person to act jointly with the Agent either as aseparate trustee or as a co-trustee on such terms and subject to such conditions as the Agent thinks fit and with such of theduties, rights, powers and discretions vested in the Agent by the U.K. Security Documents as may be conferred by theinstrument of appointment of that person.12.15.8 The Agent shall notify the Lenders of the appointment of each Appointee (other than a Delegate).12.15.9 The Agent may pay reasonable remuneration to any Delegate or Appointee, together with any costs andexpenses (including legal fees) reasonably incurred by the Delegate or Appointee in connection with its appointment. All suchremuneration, costs and expenses shall be treated, for the purposes of this Agreement, as paid or incurred by the Agent.12.15.10 Each Delegate and each Appointee shall have every benefit, right, power and discretion and the benefit ofevery exculpation (together “Rights”) of the Agent (in its capacity as security trustee) under the U.K. Security Documents, andeach reference to the Agent (where the context requires that such reference is to the Agent in its capacity as security trustee) inthe provisions of the U.K. Security Documents which confer Rights shall be deemed to include a reference to each Delegateand each Appointee.12.15.11 Each Secured Party confirms its approval of the U.K. Security Documents and authorizes and instructs theAgent: (i) to execute and deliver the U.K. Security Documents; (ii) to exercise the rights, powers and discretions given to theAgent (in its capacity as security trustee) under or in connection with the U.K. Security Documents together with any otherincidental rights, powers and discretions; and (iii) to give any authorizations and confirmations to be given by the Agent (in itscapacity as security trustee) on behalf of the Secured Parties under the U.K. Security Documents.12.15.12 The Agent may accept without inquiry the title (if any) which any person may have to the Charged Property.12.15.13 Each other Secured Party confirms that it does not wish to be registered as a joint proprietor of any securityinterest constituted by a U.K. Security Document and accordingly authorizes: (a) the Agent to hold such security interest in itssole name (or in the name of any Delegate) as trustee for the Secured Parties; and (b) the Land Registry (or other relevantregistry) to register the Agent (or any Delegate or Appointee) as a sole proprietor of such security interest.12.15.14 Except to the extent that a U.K. Security Document otherwise requires, any moneys which the Agentreceives under or pursuant to a U.K. Security Document may be: (a) invested in any investments which the Agent selects andwhich are authorized by applicable law; or (b) placed on deposit at any bank or institution (including the Agent) on terms thatthe Agent thinks fit, in each case in the name or under the control of the Agent, and the Agent shall hold those moneys,together with any accrued income (net of any applicable Tax) to the order of the Lenders, and shall pay them to the Lenders ondemand.12.15.15 On a disposal of any of the Charged Property which is permitted under the Loan Documents, the Agent shall(at the reasonable cost of the Obligors) execute any release of the U.K. Security Documents or other claim over that ChargedProperty and issue any certificates of non-crystallisation of floating charges that may be required or take any other action thatthe Agent (acting reasonably) considers desirable.12.15.16 The Agent shall not be liable for:(a) any defect in or failure of the title (if any) which any person may have to any assets over which security isintended to be created by a U.K. Security Document;(b) any loss resulting from the investment or deposit at any bank of moneys which it invests or deposits in amanner permitted by a U.K. Security Document;(c) the exercise of, or the failure to exercise, any right, power or discretion given to it by or in connection withany Loan Document or any other agreement, arrangement or document entered into, or executed in anticipation of,under or in connection with, any Loan Document; or(d) any shortfall which arises on enforcing a U.K. Security Document.12.15.17 The Agent shall not be obligated to:(a) obtain any authorization or environmental permit in respect of any of the Charged Property or a U.K.Security Document;(b) hold in its own possession a U.K. Security Document, title deed or other document relating to the ChargedProperty or a U.K. Security Document;(c) perfect, protect, register, make any filing or give any notice in respect of a U.K. Security Document (or theorder of ranking of a U.K. Security Document), unless that failure arises directly from its own gross negligence orwillful misconduct; or(d) require any further assurances in relation to a U.K. Security Document.12.15.18 In respect of any U.K. Security Document, the Agent shall not be obligated to: (i) insure, or require anyother person to insure, the Charged Property; or (ii) make any enquiry or conduct any investigation into the legality, validity,effectiveness, adequacy or enforceability of any insurance existing over such Charged Property.12.15.19 In respect of any U.K. Security Document, the Agent shall not have any obligation or duty to any person forany loss suffered as a result of: (i) the lack or inadequacy of any insurance; or (ii) the failure of the Agent to notify the insurersof any material fact relating to the risk assumed by them, or of any other information of any kind, unless Required Lendershave requested it to do so in writing and the Agent has failed to do so within fourteen (14) days after receipt of that request.12.15.20 Every appointment of a successor Agent under a U.K. Security Document shall be by deed.12.15.21 Section 1 of the Trustee Act 2000 (UK) shall not apply to the duty of the Agent in relation to the trustsconstituted by this Agreement.12.15.22 In the case of any conflict between the provisions of this Agreement and those of the Trustee Act 1925 (UK)or the Trustee Act 2000 (UK), the provisions of this Agreement shall prevail to the extent allowed by law, and shall constitute arestriction or exclusion for the purposes of the Trustee Act 2000 (UK).12.15.23 The perpetuity period under the rule against perpetuities if applicable to this Agreement and any U.K.Security Document shall be 80 years from the date of this Agreement.12.16 Parallel Debt Undertaking.12.16.1 The parallel debt undertaking created hereunder (“Parallel Debt Undertaking”) is constituted in order tosecure the prompt and complete satisfaction of any Dutch Obligations. The Parallel Debt Undertaking shall also cover anyfuture extension, prolongation, increase or novation of the Dutch Obligations.12.16.2 For the purposes of taking and ensuring the continuing validity of Liens under those Security Documentssubject to the laws of the Netherlands (the “Parallel Obligations Security Documents”) and such other jurisdictions as theSecured Parties and the Obligors (each acting reasonably) agree, notwithstanding any contrary provision in this Agreement:(a) each Obligor irrevocably and unconditionally agrees and undertakes with the Agent and each SecuredParty (other than the Agent) acknowledges that, for the purpose of the granting the Collateral under the ParallelObligations Security Documents (the “Parallel Obligations Collateral”) that each Obligor shall pay to the Agentamounts equal to, and in the currency of, all present and future amounts owing by it to the Secured Parties under theLoan Documents (“Original Obligations”) as and when the same fall due for payment under the relevant LoanDocuments and in respect of any Obligations (together with the obligation described in paragraph (e) below, the“Parallel Obligations”);(b) each of the Obligors and each Secured Party (other than the Agent) acknowledges that, under the ParallelObligations Security Documents, the rights of the Agent to demand payment of the Parallel Obligations shall beindependent and several from the rights of the other Secured Parties to demand payment of the Original Obligations,provided that the payment by an Obligor of its Parallel Obligations to the Agent in accordance with this Section 12.16shall also discharge (in the amount and in the currency of the relevant payment) the corresponding Original Obligationsand vice versa the payment by an Obligor of all or part of its Original Obligations in accordance with the provisions ofthe Loan Documents and in respect of the Dutch Obligations shall also discharge (in the amount of the payment) thecorresponding Parallel Obligations. The amount of the Parallel Obligations of an Obligor shall at all times be equal tothe amount of its Original Obligations;(c) despite the foregoing, any payment under the Parallel Obligations Security Documents shall be made to theAgent unless expressly stated otherwise in any Parallel Obligations Security Document or unless the Agent directs suchpayment to be made to a person other than the Agent;(d) the Agent, the Obligors and each of the other Secured Parties agree that, under the Parallel ObligationsSecurity Documents, the Agent shall be the joint and several creditor (together with the relevant other Secured Party) ofeach and every obligation of the Obligors towards that other Secured Party under the Loan Documents and in respect ofthe Dutch Obligations, and that accordingly the Agent will have its own and independent right to demand performanceby the Obligors of those obligations in full;(e) the Parallel Obligations are owed to the Agent in its own name on behalf of itself and not as agent orrepresentative of any other person nor as trustee and the Parallel Debt Security shall secure the Parallel Obligations soowing and its claims in respect of the Parallel Obligations shall not be held on trust. The Parallel Obligations Collateralgranted under the Parallel Obligation Security Documents to the Agent to secure the Parallel Obligations is granted tothe Agent in its capacity as creditor of the Parallel Obligations and shall not be held on trust;(f) without limiting or affecting the Agent’s right to protect, preserve or enforce its rights under any ParallelObligations Collateral, the Agent undertakes to each Secured Party not to exercise its rights in respect of the ParallelObligations without the consent of the relevant Secured Parties. However, for the avoidance of doubt, nothing in theprevious sentence shall in any way limit the Agent’s right to act in the protection or preservation of rights under anyParallel Obligations Security Documents or to enforce any Parallel Obligations Collateral as contemplated by thisAgreement, the relevant Parallel Obligations Security Document or any other Loan Document or in respect of anyDutch Obligations (or to do any act reasonably incidental to the foregoing); and(g) the Agent shall distribute any amount so received to the Secured Parties in accordance with the terms ofthis Agreement as if such amounts had been received in respect of the Original Obligations.12.16.3 Upon complete and irrevocable satisfaction of the Dutch Obligations, the Agent shall as soon as reasonablypractical at the cost and expense of the Obligors release the Parallel Debt Undertaking.SECTION 13. BENEFIT OF AGREEMENT; ASSIGNMENTS13.1 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of Borrowers, Agent, Lenders,Secured Parties, and their respective successors and assigns, except that (a) no Borrower shall have the right to assign its rights ordelegate its obligations under any Loan Documents; and (b) any assignment by a Lender must be made in compliance with Section13.3. Agent may treat the Person which made any Revolver Loan as the owner thereof for all purposes until such Person makes anassignment in accordance with Section 13.3. Any authorization or consent of a Lender shall be conclusive and binding on anysubsequent transferee or assignee of such Lender.13.2 Participations.13.2.1 Permitted Participants; Effect. Subject to Section 13.3.3, any Lender may sell to a financial institution(“Participant”) a participating interest in the rights and obligations of such Lender under any Loan Documents. Despite any saleby a Lender of participating interests to a Participant, such Lender’s obligations under the Loan Documents shall remainunchanged, it shall remain solely responsible to the other parties hereto for performance of such obligations, it shall remain theholder of its Revolver Loans and Revolver Commitments for all purposes, all amounts payable by Borrowers shall bedetermined as if it had not sold such participating interests, and Borrowers and Agent shall continue to deal solely and directlywith such Lender in connection with the Loan Documents. Each Lender shall be solely responsible for notifying its Participantsof any matters under the Loan Documents, and Agent and the other Lenders shall not have any obligation or liability to anysuch Participant. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section5.9 unless Borrowers agree otherwise in writing.13.2.2 Voting Rights. Each Lender shall retain the sole right to approve, without the consent of any Participant, anyamendment, waiver or other modification of a Loan Document other than that which forgives principal, interest or fees, reducesthe stated interest rate or fees payable with respect to any Revolver Loan or Revolver Commitment in which such Participanthas an interest, postpones the Commitment Termination Date or any date fixed for any regularly scheduled payment ofprincipal, interest or fees on such Revolver Loan or Revolver Commitment, or releases any Borrower, Guarantor orsubstantially all Collateral.13.2.3 Participant Register. Each Lender that sells a participation shall, acting as a non-fiduciary agent of Borrowers(solely for tax purposes), maintain a register in which it enters the Participant’s name, address and interest in RevolverCommitments, Revolver Loans (and stated interest) and LC Obligations. Entries in the register shall be conclusive, absentmanifest error, and such Lender shall treat each Person recorded in the register as the owner of the participation for allpurposes, notwithstanding any notice to the contrary. No Lender shall have an obligation to disclose any information in suchregister except to the extent necessary to establish that a Participant’s interest is in registered form under the Code or U.S.Treasury Regulations, including under Section 5f.103-1(c) of the U.S. Treasury Regulations.13.2.4 Benefit of Setoff. Each Participant shall have a right of set-off in respect of its participating interest to the sameextent as if such interest were owing directly to a Lender, and each Lender shall also retain the right of set-off with respect toany participating interests sold by it. By exercising any right of set-off, a Participant agrees to share with Lenders all amountsreceived through its set-off, in accordance with Section 12.5 as if such Participant were a Lender.13.3 Assignments.13.3.1 Permitted Assignments. A Lender may assign to an Eligible Assignee any of its rights and obligations under theLoan Documents, as long as (a) each assignment is of a constant, and not a varying, percentage of the transferor Lender’s rightsand obligations under the Loan Documents and, in the case of a partial assignment, is in a minimum principal amount of$10,000,000 (unless otherwise agreed by Agent in its discretion) and integral multiples of $5,000,000 in excess of that amount;(b) except in the case of an assignment in whole of a Lender’s rights and obligations, the aggregate amount of the RevolverCommitments retained by the transferor Lender is at least $10,000,000 (unless otherwise agreed by Agent in its discretion); (c)the parties to each such assignment shall execute and deliver an Assignment to Agent for acceptance and recording; and (d) theEligible Assignee is a Non-Public Lender. Nothing herein shall limit the right of a Lender to pledge or assign any rights underthe Loan Documents to secure obligations of such Lender, including a pledge or assignment to a Federal Reserve Bank or anycentral bank; provided, that no such pledge or assignment shall release the Lender from its obligations hereunder nor substitutethe pledge or assignee for such Lender as a party hereto.13.3.2 Effect; Effective Date. Upon delivery to Agent of an assignment notice in the form of Exhibit B and aprocessing fee of $3,500 (unless otherwise agreed by Agent in its discretion), the assignment shall become effective asspecified in the notice, if it complies with this Section 13.3. From such effective date, the Eligible Assignee shall for allpurposes be a Lender under the Loan Documents, and shall have all rights and obligations of a Lender thereunder. Uponconsummation of an assignment, the transferor Lender, Agent and Borrowers shall make appropriate arrangements for issuanceof replacement and/or new notes, if applicable. The transferee Lender shall comply with Section 5.10 and deliver, uponrequest, an administrative questionnaire satisfactory to Agent.13.3.3 Certain Assignees. No assignment or participation may be made to a Borrower, Affiliate of a Borrower,Defaulting Lender or natural person. Agent shall have no obligation to determine whether any assignment is permitted underthe Loan Documents. Any assignment by a Defaulting Lender must be accompanied by satisfaction of its outstandingobligations under the Loan Documents in a manner satisfactory to Agent, including payment by the Defaulting Lender orEligible Assignee of an amount sufficient upon distribution (through direct payment, purchases of participations or othermethods acceptable to Agent in its discretion) to satisfy all funding and payment liabilities of the Defaulting Lender. If anyassignment by a Defaulting Lender (by operation of law or otherwise) does not comply with the foregoing, the assignee shallbe deemed a Defaulting Lender for all purposes until compliance occurs.13.3.4 Register. Agent, acting as a non-fiduciary agent of Borrowers (solely for tax purposes), shall maintain (a) acopy (or electronic equivalent) of each Assignment and Acceptance delivered to it, and (b) a register for recordation of thenames, addresses and Revolver Commitments of, and the Revolver Loans, interest and LC Obligations owing to, each Lenderor Issuing Bank, as the case may be. Entries in the register shall be conclusive, absent manifest error, and Borrowers, Agent,Lenders and Issuing Bank shall treat each Person recorded in such register as a Lender or Issuing Bank, as the case may be, forall purposes under the Loan Documents, notwithstanding any notice to the contrary. Agent may choose to show only oneBorrower as the borrower in the register, without any effect on the liability of any Obligor with respect to the Obligations. Theregister shall be available for inspection by Borrowers or any Lender, from time to time upon reasonable notice.13.4 Replacement of Certain Lenders. If a Lender (a) within the last 120 days failed to give its consent to any amendment,waiver or action for which consent of all Lenders was required and Required Lenders consented, (b) is a Defaulting Lender, or (c)within the last 120 days gave a notice under Section 3.5 or requested payment or compensation under Section 3.7 or 5.9 (and has notdesignated a different Lending Office pursuant to Section 3.8), then Agent or Borrower Agent may, upon 10 days’ notice to suchLender, require it to assign its rights and obligations under the Loan Documents to Eligible Assignee(s), pursuant to appropriateAssignment(s), within 20 days after the notice. Agent is irrevocably appointed as attorney-in-fact to execute any such Assignment ifthe Lender fails to execute it. Such Lender shall be entitled to receive, in cash, concurrently with such assignment, all amounts owed toit under the Loan Documents through the date of assignment.13.5 Disqualified Institutions.13.5.1 So long as no Event of Default exists under Section 11.1(a) or 11.1(j), no assignment or participation shall bemade to any Person that was a Disqualified Institution as of the date (the “Trade Date”) on which the assigning Lender enteredinto a binding agreement to sell and assign all or a portion of its rights and obligations under this Agreement to such Person(unless Borrowers have consented to such assignment in writing in its sole and absolute discretion, in which case such Personwill not be considered a Disqualified Institution for the purpose of such assignment or participation). For the avoidance ofdoubt, with respect to any assignee that becomes a Disqualified Institution after the applicable Trade Date (including as a resultof the delivery of a notice pursuant to, and/or the expiration of the notice period referred to in, the definition of “DisqualifiedInstitution”), (x) such assignee shall not retroactively be disqualified from becoming a Lender and (y) the execution byBorrowers of an Assignment with respect to such assignee will not by itself result in such assignee no longer being considereda Disqualified Institution. Any assignment in violation of this Section 13.5.1 shall not be void, but the other provisions of thisSection 13.5 shall apply.13.5.2 If any assignment or participation is made to any Disqualified Institution without Borrowers’ prior writtenconsent in violation of Section 13.5.1 above, Borrowers may, at their sole expense and effort, upon notice to the applicableDisqualified Institution and Agent, (A) terminate the Revolver Commitments of such Disqualified Institution and repay allobligations of Borrower owing to such Disqualified Institution in connection with such Revolver Commitments and/or (B)require such Disqualified Institution to assign, without recourse (in accordance with and subject to the restrictions contained inthis Section 13), all of its interest, rights and obligations under this Agreement to one or more Eligible Assignees at the lowestof (x) the principal amount thereof and (y) the amount that such Disqualified Institution paid to acquire such interests, rights andobligations, in each case plus accrued interest, accrued fees and all other amounts (other than principal amounts) payable to ithereunder.13.5.3 Notwithstanding anything to the contrary contained in this Agreement, Disqualified Institutions (A) will not (x)have the right to receive information, reports or other materials provided to Lenders by Borrowers, Agent or any other Lender,(y) attend or participate in meetings attended by Lenders and Agent, or (z) access any electronic site established for Lenders orconfidential communications from counsel to or financial advisors of Agent or Lenders and (B) (x) for purposes of any consentto any amendment, waiver or modification of, or any action under, and for the purpose of any direction to Agent or any Lenderto undertake any action (or refrain from taking any action) under this Agreement or any other Loan Document, eachDisqualified Institution will be deemed to have consented in the same proportion as Lenders that are not DisqualifiedInstitutions consented to such matter, and (y) for purposes of voting in any Insolvency Proceeding, each Disqualified Institutionparty hereto hereby agrees (1) not to vote in any such Insolvency Proceeding, (2) if such Disqualified Institution does vote insuch Insolvency Proceeding notwithstanding the restriction in the foregoing clause (c), such vote will be deemed not to be ingood faith and shall be “designated” pursuant to Section 1126(e) of the Bankruptcy Code (or any similar provision in any otherdebtor relief laws), and such vote shall not be counted in determining whether the applicable class has accepted or rejected adebtor relief plan in accordance with Section 1126(c) of the Bankruptcy Code (or any similar provision in any other debtorrelief laws) and (3) not to contest any request by any party for a determination by the Bankruptcy Court (or other applicablecourt of competent jurisdiction) effectuating the foregoing clause (2).13.5.4 Agent shall have the right, and Borrowers hereby expressly authorizes Agent, to (A) post the list ofDisqualified Institutions provided by Borrowers and any updates thereto from time to time (collectively, the “DQ List”) on thePlatform, including that portion of the Platform that is designated for “public side” Lenders and/or (B) provide the DQ List toeach Lender requesting the same.SECTION 14. MISCELLANEOUS14.1 Consents, Amendments and Waivers.14.1.1 Amendment. No modification of any Loan Document, including any extension or amendment of a LoanDocument or any waiver of a Default or Event of Default, shall be effective without the prior written agreement of Agent (withthe consent of Required Lenders) and each Obligor party to such Loan Document; provided, that(a) without the prior written consent of Agent, no modification shall alter any provision in a Loan Documentthat relates to any rights, duties or discretion of Agent;(b) without the prior written consent of Issuing Bank, no modification shall alter Section 2.3 or any otherprovision in a Loan Document that relates to Letters of Credit or any rights, duties or discretion of Issuing Bank;(c) without the prior written consent of each affected Lender, including a Defaulting Lender, no modificationshall (i) increase the Revolver Commitment of such Lender; (ii) reduce the amount of, or waive or delay payment of,any principal, interest or fees payable to such Lender (except as provided in Section 4.2); (iii) extend the RevolverTermination Date applicable to such Lender’s Obligations; or (iv) amend this clause (c);(d) without the prior written consent of each Lender (except any Defaulting Lender), no modification shall (i)alter Section 5.6.2, 5.6.3, 7.1 (except to add Collateral) or 14.1.1; (ii) amend the definition of Pro Rata or RequiredLenders; (iii) release all or substantially all of the Collateral; or (iv) except in connection with a merger, disposition orsimilar transaction expressly permitted hereby, release any Obligor from liability for any Obligations;(e) without the prior written consent of Supermajority Lenders (except any Defaulting Lender), nomodification shall amend the definition of Dutch Borrowing Base, U.S. Borrowing Base, Global Borrowing Base,Dutch Accounts Formula Amount, U.S. Accounts Formula Amount, Dutch Inventory Formula Amount or U.S.Inventory Formula Amount (or any defined term used in such definitions) if the effect of such amendment is to increaseborrowing availability;(f) without the prior written consent of a Secured Bank Product Provider, no modification shall affect itsrelative payment priority under Section 5.6.2; and(g) if Real Estate secures any Obligations, no modification of a Loan Document shall add, increase, renew orextend any credit line hereunder until the completion of flood diligence and documentation as required by all FloodLaws or as otherwise satisfactory to all Lenders.14.1.2 Limitations. The agreement of Borrowers shall not be required for any modification of a Loan Document thatdeals solely with the rights and duties of Lenders, Agent and/or Issuing Bank as among themselves. Only the consent of theparties to any agreement relating to fees or a Bank Product shall be required for modification of such agreement, and no BankProduct provider (in such capacity) shall have any right to consent to modification of any Loan Document other than its BankProduct agreement. Any waiver or consent granted by Agent or Lenders hereunder shall be effective only if in writing and onlyfor the matter specified.14.1.3 Payment for Consents. No Borrower will, directly or indirectly, pay any remuneration or other thing of value,whether by way of additional interest, fee or otherwise, to any Lender (in its capacity as a Lender hereunder) as considerationfor agreement by such Lender with any modification of any Loan Documents, unless such remuneration or value isconcurrently paid, on the same terms, on a Pro Rata basis to all Lenders providing their consent.14.2 Indemnity. EACH BORROWER SHALL INDEMNIFY AND HOLD HARMLESS THE INDEMNITEESAGAINST ANY CLAIMS THAT MAY BE INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE, INCLUDINGCLAIMS ASSERTED BY ANY OBLIGOR OR OTHER PERSON OR ARISING FROM THE NEGLIGENCE OF ANINDEMNITEE. In no event shall any party to a Loan Document have any obligation thereunder to indemnify or hold harmless anIndemnitee with respect to a Claim that is determined in a final, non-appealable judgment by a court of competent jurisdiction to resultfrom the gross negligence or willful misconduct of such Indemnitee.14.3 Notices and Communications.14.3.1 Notice Address. Subject to Section 14.3.2, all notices and other communications by or to a party hereto shall bein writing and shall be given to any Borrower, at Borrower Agent’s address shown on the signature pages hereof, and to anyother Person at its address shown on the signature pages hereof (or, in the case of a Person who becomes a U.S. Lender afterthe U.S. Closing Date or a Dutch Lender after the Dutch Closing Date, at the address shown on its Assignment), or at suchother address as a party may hereafter specify by notice in accordance with this Section 14.3. Each communication shall beeffective only (a) if given by facsimile transmission, when transmitted to the applicable facsimile number, if confirmation ofreceipt is received; (b) if given by mail, three Business Days after deposit in the U.S. mail, with first-class postage pre-paid,addressed to the applicable address; or (c) if given by personal delivery, when duly delivered to the notice address with receiptacknowledged. Notwithstanding the foregoing, no notice to Agent pursuant to Section 2.1.5, 2.3, 3.1.2, 4.1.1 or 5.3.3 shall beeffective until actually received by the individual to whose attention at Agent such notice is required to be sent. Any writtencommunication that is not sent in conformity with the foregoing provisions shall nevertheless be effective on the date actuallyreceived by the noticed party. Any notice received by Borrower Agent shall be deemed received by all Borrowers.14.3.2 Communications. Electronic and telephonic communications (including e-mail, messaging, voice mail andwebsites) may be used only in a manner acceptable to Agent. Secured Parties make no assurance as to the privacy or securityof electronic or telephonic communications. E-mail and voice mail shall not be effective notices under the Loan Documents.14.3.3 Platform. Borrower Materials shall be delivered pursuant to procedures approved by Agent, includingelectronic delivery (if possible) upon request by Agent to an electronic system maintained by Agent (“Platform”). Borrowersshall notify Agent of each posting of Borrower Materials on the Platform and the materials shall be deemed received by Agentonly upon its receipt of such notice. Borrower Materials and other information relating to this credit facility may be madeavailable to Secured Parties on the Platform. The Platform is provided “as is” and “as available.” Agent does not warrant theaccuracy or completeness of any information on the Platform nor the adequacy or functioning of the Platform, and expresslydisclaims liability for any errors or omissions in the Borrower Materials or any issues involving the Platform. NOWARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OFMERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTYRIGHTS, OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY AGENT WITH RESPECTTO BORROWER MATERIALS OR THE PLATFORM. No Agent Indemnitee shall have any liability to Borrowers,Secured Parties or any other Person for losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract orotherwise) relating to use by any Person of the Platform, including any unintended recipient, nor for delivery of BorrowerMaterials and other information via the Platform, internet, e-mail, or any other electronic platform or messaging system.14.3.4 Public Information. Obligors and Secured Parties acknowledge that “public” information may not besegregated from material non-public information on the Platform. Secured Parties acknowledge that Borrower Materials mayinclude Obligors’ material non-public information, and should not be made available to personnel who do not wish to receivesuch information or may be engaged in investment or other market-related activities with respect to an Obligor’s securities.Borrowers and Secured Parties acknowledge and agree that the DQ List shall be deemed suitable for posting and may beposted by Agent on the Platform.14.3.5 Non-Conforming Communications. Agent and Lenders may rely upon any communications purportedly givenby or on behalf of any Borrower even if they were not made in a manner specified herein, were incomplete or were notconfirmed, or if the terms thereof, as understood by the recipient, varied from a later confirmation. Each Borrower shallindemnify and hold harmless each Indemnitee from any liabilities, losses, costs and expenses arising from any electronic ortelephonic communication purportedly given by or on behalf of a Borrower.14.4 Performance of Borrowers’ Obligations. Agent may, in its discretion at any time and from time to time, at Borrowers’expense, pay any amount or do any act required of a Borrower under any Loan Documents or otherwise lawfully requested by Agentto (a) enforce any Loan Documents or collect any Obligations; (b) protect, insure, maintain or realize upon any Collateral; or (c) defendor maintain the validity or priority of Agent’s Liens in any Collateral, including any payment of a judgment, insurance premium,warehouse charge, finishing or processing charge, or landlord claim, or any discharge of a Lien. All payments, costs and expenses(including Extraordinary Expenses) of Agent under this Section shall be reimbursed to Agent by Borrowers, on demand, with interestfrom the date incurred until paid in full, at the Default Rate. Any payment made or action taken by Agent under this Section shall bewithout prejudice to any right to assert an Event of Default or to exercise any other rights or remedies under the Loan Documents.14.5 Credit Inquiries. Agent and Lenders may (but shall have no obligation) to respond to usual and customary creditinquiries from third parties concerning any Obligor or Subsidiary.14.6 Severability. Wherever possible, each provision of the Loan Documents shall be interpreted in such manner as to bevalid under Applicable Law. If any provision is found to be invalid under Applicable Law, it shall be ineffective only to the extent ofsuch invalidity and the remaining provisions of the Loan Documents shall remain in full force and effect.14.7 Cumulative Effect; Conflict of Terms. The provisions of the Loan Documents are cumulative. The partiesacknowledge that the Loan Documents may use several limitations or measurements to regulate similar matters, and they agree thatthese are cumulative and that each must be performed as provided. Except as otherwise provided in another Loan Document (byspecific reference to the applicable provision of this Agreement), if any provision contained herein is in direct conflict with anyprovision in another Loan Document, the provision herein shall govern and control.14.8 Counterparts; Execution. Any Loan Document may be executed in counterparts, each of which shall constitute anoriginal, but all of which when taken together shall constitute a single contract. This Agreement shall become effective when Agenthas received counterparts bearing the signatures of all parties hereto. Agent may (but shall have no obligation to) accept any signature,contract formation or record-keeping through electronic means, which shall have the same legal validity and enforceability as manualor paper-based methods, to the fullest extent permitted by Applicable Law, including the Federal Electronic Signatures in Global andNational Commerce Act, the New York State Electronic Signatures and Records Act, or any similar state law based on the UniformElectronic Transactions Act. Upon request by Agent, any electronic signature or delivery shall be promptly followed by a manuallyexecuted or paper document.14.9 Entire Agreement. Time is of the essence with respect to all Loan Documents and Obligations. The Loan Documentsconstitute the entire agreement, and supersede all prior understandings and agreements, among the parties relating to the subject matterthereof.14.10 Relationship with Lenders. The obligations of each Lender hereunder are several, and no Lender shall be responsiblefor the obligations or Revolver Commitments of any other Lender. Amounts payable hereunder to each Lender shall be a separate andindependent debt. It shall not be necessary for Agent or any other Lender to be joined as an additional party in any proceeding for suchpurposes. Nothing in this Agreement and no action of Agent, Lenders or any other Secured Party pursuant to the Loan Documents orotherwise shall be deemed to constitute Agent and any Secured Party to be a partnership, joint venture or similar arrangement, nor toconstitute control of any Obligor.14.11 No Advisory or Fiduciary Responsibility. In connection with all aspects of each transaction contemplated by anyLoan Document, Borrowers acknowledge and agree that (a)(i) this credit facility and any arranging or other services by Agent, anyLender, any of their Affiliates or any arranger are arm’s-length commercial transactions between Borrowers and their Affiliates, on onehand, and Agent, any Lender, any of their Affiliates or any arranger, on the other hand; (ii) Borrowers have consulted their own legal,accounting, regulatory and tax advisors to the extent they have deemed appropriate; and (iii) Borrowers are capable of evaluating, andunderstand and accept, the terms, risks and conditions of the transactions contemplated by the Loan Documents; (b) each of Agent,Lenders, their Affiliates and any arranger is and has been acting solely as a principal and, except as expressly agreed in writing by therelevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for Borrowers, their Affiliates or any otherPerson, and has no obligation with respect to the transactions contemplated by the Loan Documents except as expressly set forththerein; and (c) Agent, Lenders, their Affiliates and any arranger may be engaged in a broad range of transactions that involve intereststhat differ from those of Borrowers and their Affiliates, and have no obligation to disclose any of such interests to Borrowers or theirAffiliates. To the fullest extent permitted by Applicable Law, each Borrower hereby waives and releases any claims that it may haveagainst Agent, Lenders, their Affiliates and any arranger with respect to any breach of agency or fiduciary duty in connection with anytransaction contemplated by a Loan Document.14.12 Confidentiality. Each of Agent, Lenders and Issuing Bank shall maintain the confidentiality of all Information (asdefined below), except that Information may be disclosed (a) to its Affiliates, and to its and their partners, directors, officers,employees, agents, auditors, advisors and representatives (provided they are informed of the confidential nature of the Information andinstructed to keep it confidential); (b) to the extent requested by any governmental, regulatory or self-regulatory authority purporting tohave jurisdiction over it or its Affiliates; (c) to the extent required by Applicable Law or by any subpoena or other legal process; (d) toany other party hereto; (e) in connection with any action or proceeding relating to any Loan Documents or Obligations; (f) subject toan agreement containing provisions substantially the same as this Section, to any Transferee or any actual or prospective party (or itsadvisors) to any Bank Product or to any swap, derivative or other transaction under which payments are to be made by reference to anObligor or Obligor’s obligations (it being understood that the DQ List may be disclosed to any assignee or Participant, or prospectiveassignee or Participant, in reliance on this clause (f)); (g) to the extent such Information (i) becomes publicly available other than as aresult of a breach of this Section or (ii) is available to Agent, any Lender, Issuing Bank or any of their Affiliates on a nonconfidentialbasis from a source other than Borrowers; (h) on a confidential basis to a provider of a Platform; or (i) with the consent of BorrowerAgent. Notwithstanding the foregoing, Agent and Lenders may publish or disseminate general information concerning this creditfacility for league table, tombstone and advertising purposes, and may use Borrowers’ logos, trademarks or product photographs inadvertising materials. As used herein, “Information” means information received from an Obligor or Subsidiary relating to it or itsbusiness that is identified as confidential when delivered. A Person required to maintain the confidentiality of Information pursuant tothis Section shall be deemed to have complied if it exercises a degree of care similar to that accorded its own confidential information.Each of Agent, Lenders and Issuing Bank acknowledges that (i) Information may include material non-public information; (ii) it hasdeveloped compliance procedures regarding the use of such information; and (iii) it will handle the material non-public information inaccordance with Applicable Law.14.13 Reserved.14.14 Reserved.14.15 GOVERNING LAW. UNLESS EXPRESSLY PROVIDED IN ANY LOAN DOCUMENT, THISAGREEMENT, THE OTHER LOAN DOCUMENTS AND ALL CLAIMS SHALL BE GOVERNED BY THE LAWS OF THESTATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAW PRINCIPLES EXCEPT FEDERALLAWS RELATING TO NATIONAL BANKS.14.16 Consent to Forum; Bail-In of EEA Financial Institutions.14.16.1 Forum. EACH BORROWER HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANYSTATE COURT SITTING IN THE BORROUGH OF MANHATTAN OR THE UNITED STATES DISTRICT COURTOF THE SOUTHERN DISTRICT OF NEW YORK, IN ANY DISPUTE, ACTION, LITIGATION OR OTHERPROCEEDING RELATING IN ANY WAY TO ANY LOAN DOCUMENTS, AND AGREES THAT ANY DISPUTE,ACTION, LITIGATION OR OTHER PROCEEDING SHALL BE BROUGHT BY IT SOLELY IN ANY SUCHCOURT. EACH BORROWER IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL CLAIMS,OBJECTIONS AND DEFENSES THAT IT MAY HAVE REGARDING ANY SUCH COURT’S PERSONAL ORSUBJECT MATTER JURISDICTION, VENUE OR INCONVENIENT FORUM. EACH PARTY HERETOIRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE JURISDICTION OF SUCH COURTS ANDCONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 14.3.1. A finaljudgment in any proceeding of any such court shall be conclusive and may be enforced in other jurisdictions by suit on thejudgment or any other manner provided by Applicable Law.14.16.2 Other Jurisdictions. Nothing herein shall limit the right of Agent or any Lender to bring proceedings againstany Obligor in any other court, nor limit the right of any party to serve process in any other manner permitted by ApplicableLaw. Nothing in this Agreement shall be deemed to preclude enforcement by Agent of any judgment or order obtained in anyforum or jurisdiction.14.16.3 Acknowledgement and Consent to Bail-In of EEA Financial Institutions. Notwithstanding anything to thecontrary in any Loan Document or in any other agreement, arrangement or understanding among the parties, each party hereto(including each Secured Party) acknowledges that, with respect to any Secured Party that is an EEA Financial Institution, anyunsecured liability of such Secured Party arising under a Loan Document may be subject to the write-down and conversionpowers of an EEA Resolution Authority, and each party hereto agrees and consents to, and acknowledges and agrees to bebound by, (a) the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any suchliability which may be payable to it by such Secured Party; and (b) the effects of any Bail-in Action on any such liability,including (i) a reduction in full or in part or cancellation of any such liability; (ii) a conversion of all, or a portion of, suchliability into shares or other instruments of ownership in such EEA Financial Institution, its parent, or a bridge institution thatmay be issued to the party or otherwise conferred on it, and that such shares or other instruments of ownership will be acceptedby it in lieu of any rights with respect to any such liability under any Loan Document; or (iii) the variation of the terms of suchliability in connection with the exercise of any Write-Down and Conversion Powers.14.17 Waivers by Borrowers. To the fullest extent permitted by Applicable Law, each Borrower waives (a) the right to trialby jury (which Agent, Issuing Bank, Lenders and all other Secured Parties hereby also waive) in any proceeding or dispute of anykind relating in any way to any Loan Documents, Obligations or Collateral; (b) presentment, demand, protest, notice of presentment,default, non-payment, maturity, release, compromise, settlement, extension or renewal of any commercial paper, accounts, documents,instruments, chattel paper and guaranties at any time held by Agent on which a Borrower may in any way be liable, and hereby ratifiesanything Agent may do in this regard; (c) notice prior to taking possession or control of any Collateral; (d) any bond or security thatmight be required by a court prior to allowing Agent to exercise any rights or remedies; (e) the benefit of all valuation, appraisementand exemption laws; (f) any claim against an Indemnitee, on any theory of liability, for special, indirect, consequential, exemplary orpunitive damages (as opposed to direct or actual damages) in any way relating to any Enforcement Action, Obligations, LoanDocuments or transactions relating thereto; and (g) notice of acceptance hereof. Each Borrower acknowledges that the foregoingwaivers are a material inducement to Agent, Issuing Bank and Lenders entering into this Agreement and that they are relying upon theforegoing in their dealings with Borrowers. Each Borrower has reviewed the foregoing waivers with its legal counsel and hasknowingly and voluntarily waived its jury trial and other rights following consultation with legal counsel. In the event of litigation, thisAgreement may be filed as a written consent to a trial by the court.14.18 Patriot Act Notice. Agent and Lenders hereby notify Borrowers that pursuant to the Patriot Act, Agent and Lendersare required to obtain, verify and record information that identifies each Borrower, including its legal name, address, tax ID numberand other information that will allow Agent and Lenders to identify it in accordance with the Patriot Act. Agent and Lenders will alsorequire information regarding any personal guarantor and may require information regarding Borrowers’ management and owners,such as legal name, address, social security number and date of birth. Borrowers shall, promptly upon request, provide alldocumentation and other information as Agent, Issuing Bank or any Lender may request from time to time in order to comply with anyobligations under any “know your customer,” anti-money laundering or other requirements of Applicable Law.14.19 NO ORAL AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENTTHE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NOUNWRITTEN AGREEMENTS BETWEEN THE PARTIES.[Remainder of page intentionally left blank; signatures begin on following page]IN WITNESS WHEREOF, this Agreement has been executed and delivered as of the date set forth above.41 U.S. BORROWERS:SUPER MICRO COMPUTER, INC., a Delaware corporationBy : /s/CHARLES LIANG Name: Charles LiangTitle: President and CEOAddress: 980 Rock AvenueSan Jose, CA 95131Attn: Kevin BauerTelecopy: (408) 503-80221 AGENT AND LENDERS:BANK OF AMERICA, N.A.,as Agent and LenderBy: /s/CATHERINE T. NGO Name: Catherine T. NgoTitle: Senior Vice PresidentAddress: Bank of America, N.A.333 S. Hope StreetSuite 1900Los Angeles, CA 90071Attn: Portfolio Manager - SMCI LOAN AND SECURITY AGREEMENT(SMCI)SIGNATURE PAGEING CAPITAL LLC,as a LenderBy /s/STEVEN G. FLEENORName: Steven G. FleenorTitle: Managing DirectorBy: /s/JEFFREY CHU Name: Jeffrey ChuTitle: Vice PresidentAddress:ING Capital LLC333 South Grand Avenue, Suite 1600Los Angeles, CA 90071Attn: Jeffrey Chu LOAN AND SECURITY AGREEMENT(SMCI)SIGNATURE PAGEEAST WEST BANK,as a LenderBy: /s/NIMA RASSOULName: Nima RassouliTitle: Vice PresidentAddress: 135 N. Los Robles Ave. 6th Fl.Pasadena, CA 91101Attn: Maurice YuTelecopy: 626-817-8863 LOAN AND SECURITY AGREEMENT(SMCI)SIGNATURE PAGEMB FINANCIAL BANK, N.A.,as a LenderBy: /s/TERESA B GERLACH Name: Teresa B GerlachTitle: Senior Vice PresidentAddress:MB Financial Bank, N.A.6111 N. River Road, 3rd FloorRosemont IL 60018Attn: Brian Roman LOAN AND SECURITY AGREEMENT(SMCI)SIGNATURE PAGECTBC BANK CORP. (USA),as a LenderBy: /s/MINGDAO LI Name: Mingdao LiTitle: SVP & Regional HeadAddress:19620 Stevens Creek Blvd.,Suite 160Cupertino, CA 95014Attn: Michael LeeTelecopy: Michael.lee@ctbcbankusa.com LOAN AND SECURITY AGREEMENT(SMCI)SIGNATURE PAGEEXHIBIT AtoLoan and Security AgreementASSIGNMENT AND ACCEPTANCEReference is made to the Loan and Security Agreement dated as of April 19, 2018, as amended (“Loan Agreement”), amongSUPER MICRO COMPUTER, INC., a Delaware corporation (“SMCI”, together with any other party joined hereto after the U.S.Closing Date as a “U.S. Borrower”, individually, each a “U.S. Borrower” and collectively, the “U.S. Borrowers”), upon the DutchClosing Date, SUPER MICRO COMPUTER B.V., a private limited liability company formed under the laws of the Netherlandsand registered with the Trade Register of the Dutch Chamber of Commerce under number 17102792 (“SMCI BV”, together with anyother party joined hereto after the Dutch Closing Date as a “Dutch Borrower”, individually, each a “Dutch Borrower” and collectively,the “Dutch Borrowers”, and together with U.S. Borrowers, individually, a “Borrower” and, collectively, the “Borrowers”), BANKOF AMERICA, N.A., as agent (“Agent”) for the financial institutions from time to time party to the Loan Agreement (“Lenders”),and such Lenders. Terms are used herein as defined in the Loan Agreement.______________________________________ (“Assignor”) and _________________________ _____________(“Assignee”) agree as follows:1. Assignor hereby assigns to Assignee and Assignee hereby purchases and assumes from Assignor (a) a principal amount of$________ of Assignor’s outstanding Revolver Loans and $___________ of Assignor’s participations in LC Obligations, and (b) theamount of $__________ of Assignor’s Revolver Commitment (which represents ____% of the total Revolver Commitments) (theforegoing items being, collectively, “Assigned Interest”), together with an interest in the Loan Documents corresponding to theAssigned Interest. This Agreement shall be effective as of the date (“Effective Date”) indicated in the corresponding AssignmentNotice delivered to Agent, provided such Assignment Notice is executed by Assignor, Assignee, Agent and Borrower Agent, ifapplicable. From and after the Effective Date, Assignee hereby expressly assumes, and undertakes to perform, all of Assignor’sobligations in respect of the Assigned Interest, and all principal, interest, fees and other amounts which would otherwise be payable toor for Assignor’s account in respect of the Assigned Interest shall be payable to or for Assignee’s account, to the extent such amountsaccrue on or after the Effective Date.2. Assignor (a) represents that as of the date hereof, prior to giving effect to this assignment, its Revolver Commitment is$__________, and the outstanding balance of its Revolver Loans and participations in LC Obligations is $__________; (b) makes norepresentation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or inconnection with the Loan Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the LoanAgreement or any other instrument or documentfurnished pursuant thereto, other than that Assignor is the legal and beneficial owner of the interest being assigned by it hereunder andthat such interest is free and clear of any adverse claim; and (c) makes no representation or warranty and assumes no responsibility withrespect to the financial condition of Borrowers or the performance by Borrowers of their obligations under the Loan Documents.[Assignor is attaching the promissory note[s] held by it and requests that Agent exchange such note[s] for new promissory notespayable to Assignee [and Assignor].]3. Assignee (a) represents and warrants that it is legally authorized to enter into this Assignment; (b) confirms that it hasreceived copies of the Loan Agreement and such other Loan Documents and information as it has deemed appropriate to make its owncredit analysis and decision to enter into this Assignment; (c) agrees that it shall, independently and without reliance upon Assignor andbased on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in takingor not taking action under the Loan Documents; (d) confirms that it is an Eligible Assignee; (e) appoints and authorizes Agent to takesuch action as agent on its behalf and to exercise such powers under the Loan Agreement as are delegated to Agent by the termsthereof, together with such powers as are incidental thereto; (f) agrees that it will observe and perform all obligations that are requiredto be performed by it as a “Lender” under the Loan Documents; and (g) represents and warrants that the assignment evidenced herebywill not result in a non-exempt “prohibited transaction” under Section 406 of ERISA.4. This Agreement shall be governed by the laws of the State of ______________.If any provision is found to be invalidunder Applicable Law, it shall be ineffective only to the extent of such invalidity and the remaining provisions of this Agreement shallremain in full force and effect.5. Each notice or other communication hereunder shall be in writing, shall be sent by messenger, by telecopy or facsimiletransmission, or by first-class mail, shall be deemed given when sent and shall be sent as follows:(a)If to Assignee, to the following address (or to such other address as Assignee may designate from time to time):______________________________________________________________________________(b)If to Assignor, to the following address (or to such other address as Assignor may designate from time to time):________________________________________________________________________________________________________2Payments hereunder shall be made by wire transfer of immediately available Dollars as follows:If to Assignee, to the following account (or to such other account as Assignee may designate from time to time):____________________________________________________________ABA No._____________________________________________________Account No.____________________Reference: _____________________If to Assignor, to the following account (or to such other account as Assignor may designate from time to time):____________________________________________________________ABA No._____________________________________________________Account No.____________________Reference: _____________________IN WITNESS WHEREOF, this Assignment and Acceptance is executed as of _____________._____________________________________(“Assignee”)By___________________________________Title:_____________________________________(“Assignor”)By___________________________________Title:3EXHIBIT BtoLoan and Security AgreementASSIGNMENT NOTICEReference is made to (1) the Loan and Security Agreement dated as of April 19, 2018, as amended (“Loan Agreement”),among SUPER MICRO COMPUTER, INC., a Delaware corporation (“SMCI”, together with any other party joined hereto afterthe U.S. Closing Date as a “U.S. Borrower”, individually, each a “U.S. Borrower” and collectively, the “U.S. Borrowers”), upon theDutch Closing Date, SUPER MICRO COMPUTER B.V., a private limited liability company formed under the laws of theNetherlands and registered with the Trade Register of the Dutch Chamber of Commerce under number 17102792 (“SMCI BV”,together with any other party joined hereto after the Dutch Closing Date as a “Dutch Borrower”, individually, each a “DutchBorrower” and collectively, the “Dutch Borrowers”, and together with U.S. Borrowers, individually, a “Borrower” and, collectively,the “Borrowers”), BANK OF AMERICA, N.A., as agent (“Agent”) for the financial institutions from time to time party to the LoanAgreement (“Lenders”), and such Lenders. Terms are used herein as defined in the Loan Agreement.Assignor hereby notifies Borrowers and Agent of Assignor’s intent to assign to Assignee pursuant to the Assignment (a) aprincipal amount of $________ of Assignor’s outstanding Revolver Loans and $___________ of Assignor’s participations in LCObligations, and (b) the amount of $__________ of Assignor’s Revolver Commitment (which represents ____% of the total RevolverCommitments) (the foregoing items being, collectively, the “Assigned Interest”), together with an interest in the Loan Documentscorresponding to the Assigned Interest. This Agreement shall be effective as of the date (“Effective Date”) indicated below, providedthis Assignment Notice is executed by Assignor, Assignee, Agent and Borrower Agent, if applicable. Pursuant to the Assignment,Assignee has expressly assumed all of Assignor’s obligations under the Loan Agreement to the extent of the Assigned Interest, as ofthe Effective Date.For purposes of the Loan Agreement, Agent shall deem Assignor’s Revolver Commitment to be reduced by $_________, andAssignee’s Revolver Commitment to be increased by $_________.The address of Assignee to which notices and information are to be sent under the terms of the Loan Agreement is:________________________________________________________________________________________________The address of Assignee to which payments are to be sent under the terms of the Loan Agreement is shown in the Assignment.This Notice is being delivered to Borrowers and Agent pursuant to Section 13.3 of the Loan Agreement. Please acknowledgeyour acceptance of this Notice by executing and returning to Assignee and Assignor a copy of this Notice.IN WITNESS WHEREOF, this Assignment Notice is executed as of _____________._____________________________________(“Assignee”)By___________________________________Title:_____________________________________(“Assignor”)By___________________________________Title:ACKNOWLEDGED AND AGREED,AS OF THE DATE SET FORTH ABOVE:BORROWER AGENT:*_________________________________By_______________________________Title:* No signature required if Assignee is a Lender, Affiliate of a Lender or Approved Fund, or if an Event of Default exists.BANK OF AMERICA, N.A.,as AgentBy_______________________________Title:23SCHEDULE 1.1toLoan and Security AgreementREVOLVER COMMITMENTS OF LENDERSPrior to the Conversion Date:LenderU.S. RevolverCommitmentTotal RevolverCommitmentsBank of America, N.A.$100,000,000$100,000,000ING Capital LLC$60,000,000$60,000,000East West Bank$35,000,000$35,000,000MB Financial Bank, N.A.$30,000,000$30,000,000CTBC Bank Corp. (USA)$25,000,000$25,000,000TOTAL:$250,000,000$250,000,000Upon the occurrence of the Conversion Date, as set forth in a written notification delivered by Agent to Borrower AgentSCHEDULE 7.3toLoan and Security AgreementREAL ESTATE1) 980 Rock Avenue, San Jose, CA, 951312) 988 and 998 Rock Avenue, San Jose, CA, 951313) 871 Fox Lane, San Jose, CA, 951314) 880 Fox Lane, San Jose, CA, 951315) 801 and 821 Fox Lane, San Jose, 951316) 1797, 1781 and 1785 Fox Drive, San Jose, CA, 951318) 750 Ridder Park Drive, San Jose, CA, 951319) 782 Ridder Park Dr. San Jose, CA, 9513110) 708 Ridder Park, San Jose, CA 95190SCHEDULE 8.5toLoan and Security AgreementDEPOSIT ACCOUNTSDepository BankType of AccountAccount NumberBank of AmericaChecking118631-9219Bank of AmericaCafeteria118670-8068Bank of AmericaPayroll118600-3088Bank of AmericaOperating118655-1898Bank of AmericaLA Lockbox118697-3218Bank of AmericaMoney Market118632-8266Bank of AmericaControlled Disbursement Account335988-2027Cathay BankChecking1200-1086Cathay BankMoney Market1200-4820CTBC BankChecking1660-3818Morgan Stanley/CitigroupBasic Securities Account164-153797-684Merrill LynchPortfolio Account74A-07P17Merrill LynchOption Exercised233-07148UBS Financial ServicesBasic Securities AccountCP14601Restricted Cash-BOACustodian-Worker Comp602792.1Restricted Cash-BOACustodian-Worker Comp8R9-02919Restricted Cash-CTBCStandby LC 3246300000-CD5680075731ABN AMRO Bank-USDUSDNL69ABNA0412381044ABN AMRO Bank-EUREURNL84ABNA0412313456ABN AMRO Bank-GBPGBPNL36ABNA0418926034CTBC BankOBU Account901141015299ING BankUSDNL14INGB0021096880ING BankEURNL67INGB0673778371Bank of America-USDOBU Account609103951043Bank of America-JPYOBU Account609103951051ING BankBusiness Savings Account (depositaccount for bank guarantee)NL89INGB6037278709SCHEDULE 8.6.1toLoan and Security AgreementBUSINESS LOCATIONS1.Each Borrower currently has the following business locations:Chief Executive Office of SMCI: 980 Rock Ave.,San Jose, CA 95131Chief Executive Office of SMCI BV: Het Sterrenbeeld 28, 5215 ML,‘s-Hertogenbosch, The NetherlandsOther Locations of SMCI: 525 Washington Blvd, 20th FloorJersey City, NJ 07310Other Locations of SMCI BV: 195 Wardour StreetLondon, W1F 8ZG2.Each Subsidiary currently has the following business locations:Chief Executive Office of 3F., No. 150, Jian 1st Rd., Zhonghe Dist.Super Micro Computer Taiwan: New Taipei City 235, Taiwan (R.O.C.)Chief Executive Office of No. 1899, Xingfeng Rd., Bade Dist.,Super Micro Asia Science & Taoyuan City 334, Taiwan (R.O.C.)Technology Park, Inc.: Chief Executive Office of S-7F N.E.S Buldg., 22-14,Supermicro KK: Sakuragaoka-cho, Shibuya-Ku,Tokyo, 150-0031 Japan Chief Executive Office of Suite 1208 JiaHua Building DSupermicro Technology Shangdi, Haidian District,(Beijing) Co., LTD: Beijing, China 100085 Other Location of Room 1604, No. 398, North Caoxi Rd.,Supermicro Technology HuiZhi Building(Beijing) Co., LTD: Xuhui District, Shanghai China 200030Location of Super Micro 195 Wardour StreetComputer Limited (UK) and London, W1F 8ZGSuper Micro Limited (UK): 3.In the five years preceding the U.S. Closing Date, Borrowers and Subsidiaries have had the following business locations inaddition to those set forth above:None.4.The following bailees, warehouseman, similar parties and consignees hold inventory of a Borrower or Subsidiary:None.SCHEDULE 9.1.4toLoan and Security AgreementNAMES AND CAPITAL STRUCTURE1.The corporate names, jurisdictions of incorporation, authorized and issued Equity Interests, and holders of Equity Interests ofeach Borrower and Subsidiary are as follows:NameJurisdictionOwnershipTotal AuthorizedSharesTotal Issued SharesSuper Micro Computer, Inc.Delaware (U.S.)Publically owned100,000,00053,107,000Super Micro Computer B.V.The NetherlandsWholly owned by Super MicroComputer Holdings C.V.1,840,0001,840,000Super Micro Computer, LLCDelaware (U.S.)Wholly Owned by Super MicroComputer, Inc.N/AN/ASuper Micro Computer, Inc.TaiwanTaiwanWholly Owned by Super MicroComputer, Inc.30,000,00030,000,000Super Micro Asia Scienceand Technology Park, Inc.Taiwan50% owned by Super MicroComputer, Inc. Taiwan and50% owned by Ablecom1,000,0001,000,000Super Micro ComputerHoldings C.V.The Netherlands99% owned by Super MicroComputer, Inc. and 1% owned bySuper Micro Computer, LLCN/AN/ASuper Micro ComputerInternational, Inc.Cayman IslandsWholly owned by Super MicroComputer Holdings C.V.1,0001,000Supermicro Technology(Beijing) Co., Ltd.ChinaWholly owned by Super MicroComputer International, Inc.N/AN/ASupermicro KKJapanWholly owned by Super MicroComputer International, Inc.9,5009,500Super Micro ComputerLimited (UK)England and WalesWholly owned Super MicroComputer B.V.11Super Micro Limited (UK)England and WalesWholly owned Super MicroComputer B.V.112.All agreements binding on holders of Equity Interests of Borrowers and Subsidiaries with respect to such interests are asfollows:None.3.In the five years preceding the U.S. Closing Date, no Borrower or Subsidiary has acquired any substantial assets from anyother Person nor been the surviving entity in a merger or combination, except:None.SCHEDULE 9.1.15toLoan and Security AgreementREAL PROPERTY IN A SPECIAL FLOOD HAZARD ZONENone.SCHEDULE 9.1.11toLoan and Security AgreementPATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES1.Borrowers’ and Subsidiaries’ patents:Patent TitleOwnerStatus inPatent OfficeFederalRegistration No.GrantDateHandle structure and server usingthe sameSuper Micro Computer,Inc.ActiveUS9,725,933B28/8/2017Server ChassisSuper Micro Computer,Inc.ActiveUS9,699,931B17/4/2017ConverterSuper Micro Computer,Inc.ActiveUS9,652,000B15/16/2017Tool-less storage device adaptortray with spring mechanismSuper Micro Computer,Inc.ActiveUS9,648,7755/9/2017Data storage expanding apparatusSuper Micro Computer,Inc.ActiveUS9,626,326B24/18/2017Top-load HDD serverSuper Micro Computer,Inc.ActiveUS9,625,959B14/18/2017Method and system for poweringmultiple computer platforms insymmetric configurationSuper Micro Computer,Inc.ActiveUS9,583,9182/28/2017Expandable server caseSuper Micro Computer,Inc.ActiveUS9,572,275B22/14/2017Surrounding-buckle type mobilehard drive rackSuper Micro Computer,Inc.ActiveUS9,497,879B211/15/2016Server chassis capable of accessingand rotating storage devicesaccommodated thereinSuper Micro Computer,Inc.ActiveUS9,468,127B210/11/2016Surrounding-buckle type mobilehard drive rackSuper Micro Computer,Inc.ActiveUS9,392,719B17/12/2016Fixing member of rack serverSuper Micro Computer,Inc.ActiveUS9,363,921B16/7/2016Loading mechanism of storagedeviceSuper Micro Computer,Inc.ActiveUS9,360,902B16/7/2016Storage device backplane withpenetrating convection andcomputer frameworkSuper Micro Computer,Inc.ActiveUS9,317,078B24/19/2016Patent TitleOwnerStatus inPatent OfficeFederalRegistration No.GrantDateServer device and data storagedevice replacement mechanismthereofSuper Micro Computer,Inc.ActiveUS9,245,587B21/26/2016Backplane structure and serversystem utilizing the sameSuper Micro Computer,Inc.ActiveUS9,167,725B210/20/2015Data storage connecting deviceSuper Micro Computer,Inc.ActiveUS9,166,316B210/20/2015Server with openings on twolateral sidesSuper Micro Computer,Inc.ActiveUS9,119,315B28/25/2015Server structure with swappabletraySuper Micro Computer,Inc.ActiveUS8,922,987B212/30/2014Two-layer wind-guiding shroudSuper Micro Computer,Inc.ActiveUS8,747,064B26/10/2014Screw less fixing assembly forinterface cardSuper Micro Computer,Inc.ActiveUS8,315,059B211/20/2012Heat-dissipating assembly forserverSuper Micro Computer,Inc.ActiveUS8,089,763B21/3/2012Server moduleSuper Micro Computer,Inc.ActiveUS7,894,208B12/22/2011Disposing structure for hotswappable motherboard inindustrial computer chassisSuper Micro Computer,Inc.ActiveUS7,894,195B22/22/2011Industrial computer chassisstructure with power sourcedisposed centrallySuper Micro Computer,Inc.ActiveUS7,839,624B211/23/2010Modular case assembly deviceSuper Micro Computer,Inc.ActiveUS7,735,669B26/15/2010Assembly device for a computercase and outer coverSuper Micro Computer,Inc.ActiveUS7,706,145B24/27/2010Control device of connection studsof a computerSuper Micro Computer,Inc.ActiveUS7,643,273B21/5/2010Control device used for a computercasing on which a plurality ofexpansion cards is insertedSuper Micro Computer,Inc.ActiveUS7,639,507B212/29/2009Fan device for a computer hostSuper Micro Computer,Inc.ActiveUS7,618,309B211/17/2009Patent TitleOwnerStatus inPatent OfficeFederalRegistration No.GrantDateSynchronized rectifier filter controldevice for protecting a powersupply from reverse currentSuper Micro Computer,Inc.ActiveUS7,586,764B29/8/2009Clasp device for a handle of apower supplySuper Micro Computer,Inc.ActiveUS7,586,748B29/8/2009Assembly device for powersuppliesSuper Micro Computer,Inc.ActiveUS7,567,437B27/28/2009Partitioning device for holdingslots of a host computer caseSuper Micro Computer,Inc.ActiveUS7,558,074B27/7/2009Anomaly control device for a dualfan of computerSuper Micro Computer,Inc.ActiveUS7,558,035B27/7/2009Computer housing shock absorberdevice for a vibration source frameSuper Micro Computer,Inc.ActiveUS7,545,641B26/9/2009Device for assemblying transversalPCI expansion cards and acomputer housingSuper Micro Computer,Inc.ActiveUS7,525,815B24/28/2009Server wherein an interior ofwhich is connected with fiveexpansion boardsSuper Micro Computer,Inc.ActiveUS7,499,289B23/3/2009Control device used for a computermotherboard on which a pluralityof interface cards is insertedSuper Micro Computer,Inc.ActiveUS7,499,285B23/3/2009Vibration absorption device for afanSuper Micro Computer,Inc.ActiveUS7,488,152B22/10/2009Handle device for a modularizedcasingSuper Micro Computer,Inc.ActiveUS7,480,963B21/27/2009Block-shape container which canbe assembled into anddisassembled from a computercasingSuper Micro Computer,Inc.ActiveUS7,469,978B212/30/2008Assembly of modularized housingand door coverSuper Micro Computer,Inc.ActiveUS7,432,44110/7/2008Air shroud installed on a circuitboardSuper Micro Computer,Inc.ActiveUS7,423,872B29/9/2008Power supply early warning devicefor pulling out a power plugSuper Micro Computer,Inc.ActiveUS7,414,860B18/19/2008Patent TitleOwnerStatus inPatent OfficeFederalRegistration No.GrantDateCooling fan device for a computerSuper Micro Computer,Inc.ActiveUS7,411,788B28/12/2008Positioning device for fixing aninterface card on a computer casingwithout using screwsSuper Micro Computer,Inc.ActiveUS7,402,072B17/22/2008Computer casing baffle platedeviceSuper Micro Computer,Inc.ActiveUS7,355,115B24/8/2008Fastening positioning device for ahandle of a power supplySuper Micro Computer,Inc.ActiveUS7,354,293B28/4/2008Circuit card locking device at arear cover of a computerSuper Micro Computer,Inc.ActiveUS7,335,045B12/26/2008Air shroud for dissipating heatfrom an electronic componentSuper Micro Computer,Inc.ActiveUS7,310,228B212/18/2007Modularized redundant heat sinkfor dissipating heat generated fromchipsSuper Micro Computer,Inc.ActiveUS7,310,226B212/18/2007Displacement control device for anextractable power supplySuper Micro Computer,Inc.ActiveUS7,278,867B110/9/2007Removable computer host housingassemblySuper Micro Computer,Inc.ActiveUS7,214,088B15/8/2007Retention device used in a circuitcard of a computerSuper Micro Computer,Inc.ActiveUS7,203,076B14/10/2007Engaging device of a handle for amodularized casingSuper Micro Computer,Inc.ActiveUS7,168,772B11/30/2007Modular case handle positioningdeviceSuper Micro Computer,Inc.ActiveUS7,125,272B110/24/2006Circuit board securing device forcomputer caseSuper Micro Computer,Inc.ActiveUS7,102,894B19/5/2006Method and architecture formonitoring the health of serversacross data networksSuper Micro Computer,Inc.ActiveUS6,738,811B15/18/20042.Borrowers’ and Subsidiaries’ trademarks:TrademarkOwnerStatus inTrademark OfficeFederalRegistration No.RegistrationDateSuper Micro Computer, Inc.Active1,998,2139/3/1996Super Micro Computer, Inc.Active2,073,1346/24/1997BUILDING BLOCKSOLUTIONSSuper Micro Computer, Inc.Active2,300,79712/14/1999SERVER BUILDING BLOCKSOLUTIONSuper Micro Computer, Inc.Active2,391,92310/3/2000Super Micro Computer, Inc.Active2,742,8487/29/2003SUPERBOARDSuper Micro Computer, Inc.Active2,891,87210/5/2004SUPERDOCTORSuper Micro Computer, Inc.Active3,098,8435/30/2006A+ MOTHERBOARDSuper Micro Computer, Inc.Active3,184,75712/12/2006SUPERBLADESuper Micro Computer, Inc.Active3,327,28710/30/2007SUPERMICROSuper Micro Computer, Inc.Active3,384,8392/19/2008SUPEROSuper Micro Computer, Inc.Active3,384,8412/19/2008PERSONALBLADESuper Micro Computer, Inc.Active3,581,0312/24/2009OFFICEBLADESuper Micro Computer, Inc.Active3,581,0322/24/2009DATACENTERBLADESuper Micro Computer, Inc.Active3,600,5313/31/2009WE KEEP IT GREENSuper Micro Computer, Inc.Active3,750,4332/16/20102U TWIN2Super Micro Computer, Inc.Active3,788,2395/11/2010TWINBLADESuper Micro Computer, Inc.Active3,862,73310/19/2010SUPERSERVERSuper Micro Computer, Inc.Active3,902,5741/11/2011DOUBLE-SIDED STORAGESuper Micro Computer, Inc.Active3,912,5141/25/2011SUPERRACKSuper Micro Computer, Inc.Active3,921,2902/15/2011X-BLADESuper Micro Computer, Inc.Active4,206,1799/11/2012TrademarkOwnerStatus inTrademark OfficeFederalRegistration No.RegistrationDateBBPSuper Micro Computer, Inc.Active4,306,6293/19/2013FATTWIN(block letters)Super Micro Computer, Inc.Active4,310,2643/26/2013TWINPRO2Super Micro Computer, Inc.Active4,720,9734/14/2015TWINPROSuper Micro Computer, Inc.Active4,720,9744/14/2015(New 2013 Logo)Super Micro Computer, Inc.Active4,840,53510/27/2015SUPERSTORAGESuper Micro Computer, Inc.Active4,943,4684/19/2016SMCISuper Micro Computer, Inc.Active4,983,3756/21/2016FAT TWIN (block letters)Super Micro Computer, Inc.Active4,993,6417/5/2016MICROBLADESuper Micro Computer, Inc.Active5,191,2904/25/2017BIGTWINSuper Micro Computer, Inc.Active5,200,1885/9/20173.Borrowers’ and Subsidiaries’ copyrights:None.4.Borrowers’ and Subsidiaries’ licenses (other than routine business licenses, authorizing them to transact business in localjurisdictions):Initial Platform Contribution Transaction Agreement dated as of May 1, 2016 (copy already provided to Agent)Technology License Agreement dated as of October 27, 2016 by and between Super Micro Computer, B.V. and FiberHomeTelecommunication Technologies Co., Ltd. (copy already provided to Agent)SCHEDULE 9.1.14toLoan and Security AgreementENVIRONMENTAL MATTERSNone, other than matters previously disclosed to Agent in writing prior to the U.S. Closing Date and Dutch Closing Date concerning750 Ridder Park, San Jose, CA 95131 and in connection with that certain Credit Agreement dated as of June 30, 2016 by and amongSuper Micro Computer, Inc., Super Micro Computer B.V., and Bank of America, N.A., among others.SCHEDULE 9.1.15toLoan and Security AgreementRESTRICTIVE AGREEMENTSNone.SCHEDULE 9.1.16toLoan and Security AgreementLITIGATION1.Proceedings and investigations pending against Borrowers or Subsidiaries:Shareholder LawsuitsOn September 4, 2015, Deason v. Super Micro Computer, Inc., No. 5:15-cv-04049 EJD, a securities class action, was filedagainst the Company, its Chief Executive Officer, Charles Liang, and its former Chief Financial Officer, Howard Hideshima in theU.S. District Court for the Northern District of California. The court dismissed an earlier version of the operative complaint with leaveto amend. The operative Second Amended Complaint alleges that defendants violated the securities laws by issuing false certificationsof internal controls over financial reporting, and false financial statements for the Company’s fiscal First Quarter 2016. Plaintiff seeksdamages on behalf of an alleged class of investors who purchased the Company’s common stock between September 15, 2014 andNovember 16, 2015. Defendants filed a motion to dismiss the Second Amended Complaint, which is pending.On December 18, 2015, City Of Pontiac General Employees’ Retirement System v. Liu, No. 5:15-cv-04049 EJD, a purportedshareholder derivative action, was filed in the U.S. District Court for the Northern District of California. The complaint sues currentand former officers and current and former members of the Board of Directors, and seeks damages purportedly on behalf of theCompany based on allegations similar to those alleged in the Deason securities class action litigation described above. The partieshave agreed to stay the case pending certain further developments in the Deason securities class action.On February 8, 2018, two complaints were filed against the Company, its Chief Executive Officer, Charles Liang, and itsformer Chief Financial Officer, Howard Hideshima, in the U.S. District Court for the Northern District of California. The lawsuits arecaptioned Hessefort v. Super Micro Computer, Inc., et al., No. 18-cv-00838, and United Union of Roofers v. Super Micro Computer,Inc., et al., No. 18-cv-00850. The complaints contain similar allegations, claiming that the defendants violated Section 10(b) of theSecurities Exchange Act due to alleged material misstatements and/or omissions in the Company’s public statements regardingrecognition of revenue. No defendants have appeared in either lawsuit to date.SEC InvestigationOn August 31, 2015, the Company filed a Form 12b-25 relating to the filing of its Annual Report on Form 10-K for the fiscalyear ended June 30, 2015. The Form 12b-25 disclosed that the Company’s Form 10-K filing was delayed as the Companyinvestigated irregularities regarding certain cooperative marketing expenses (the “Marketing Expense Matter”). The Companycompleted the investigation, and the Company timely filed its Form 10-K within the extension period. No changes to the Company’spreviously announced financial results were required in that filing. The Securities and Exchange Commission (“SEC”) commenced aninvestigation of the Marketing Expense Matter, and a formal order of investigation issued on October 25, 2016 pursuant to which theSEC has obtained documents and taken testimony of a number of individuals. The Company has cooperated with the investigation,which is ongoing.As disclosed in the Company’s Form 12b-25 filed on August 29, 2017 and its Form 8-K filed on September 14, 2017, theCompany was unable to file its 2017 Form 10-K within the prescribed time period because the Company had not yet completed itsfinancial statements. As the Company has previously publicly announced, in connection with the in-process audit of the Company’sfinancial results for the year ended June 30, 2017, a sales transaction was subject to additional inquiry and review (the “RevenueRecognition Matter”). The transaction in question, representing approximately $8.8 million in revenue, was originally recorded asrevenue during the quarter ended December 31, 2016. However, prior to review by the Company’s independent registered publicaccounting firm and prior to the Company’s public announcement of its results for the quarter, the Company reversed this recognitionand the revenue was recognized in the following quarter ended March 31, 2017. Acting under the authority of its investigation of theMarketing Expense Matter, the SEC has expanded its investigation to include the Revenue Recognition Matter. The Company hasproduced documents relating to the Revenue Recognition Matter and is continuing to cooperate with the SEC investigation. 2.Threatened proceedings or investigations of which any Borrower or Subsidiary is aware:None.3.Pending Commercial Tort Claim(s) of any Obligor:None.SCHEDULE 9.1.20toLoan and Security AgreementLABOR CONTRACTSBorrowers and Subsidiaries are party to the following collective bargaining agreements, management agreements and consultingagreements:None.SCHEDULE 10.2.2toLoan and Security AgreementEXISTING LIENSDebtor: SUPER MICRO COMPUTER, INC. Jurisdiction: DELAWARE SECRETARY OF STATeSecured Party:File Number:Date Filed:Lapse Date:Subsequent Filings:Collateral:Status:Bank of America, N.A.2010 213146806/18/201006/18/2020Amendment filed10/03/11; Continuation filed01/13/15BlanketActiveDell FinancialServices L.L.C.2011 348668809/12/201109/12/2021Continuation filed08/15/16Leased equipmentActiveWells Fargo Bank,N.A.2013 296694407/31/201307/31/2018 Specific equipmentActiveWells Fargo Bank,N.A.2013 447690011/13/201311/13/2018 Specific equipmentActiveWells Fargo Bank,N.A.2014 096605103/12/201403/12/2019 Specific equipmentActiveWells Fargo Bank,N.A.2014 172523305/02/201405/02/2019 Specific equipmentActiveNissan MotorAcceptanceCorporation2014 182746805/08/201405/08/2019 Specific equipmentActiveWells Fargo Bank,N.A.2014 185639205/12/201405/12/2019 Specific equipmentActiveWells Fargo Bank,N.A.2014 215913506/03/201406/03/2019 Specific equipment(filed as fixturefiling with realestate legaldescription of realproperty onExhibit A)ActiveWells Fargo Bank,N.A.2014 298711307/28/201407/28/2019 Specific equipmentActiveWells Fargo Bank,N.A.2014 308764008/01/201408/01/2019 Specific equipmentActiveWells Fargo Bank,N.A.2014 333865408/20/201408/20/2019 Specific equipmentActiveWells Fargo Bank,N.A.2014 341011508/25/201408/25/2019 Specific equipmentActiveWells Fargo Bank,N.A.2014 414116410/15/201410/15/2019 Specific equipmentActiveWells Fargo Bank,N.A.2014 486246212/03/201412/03/2019 Specific equipmentActiveWells Fargo Bank,N.A.2015 176857004/24/201504/24/2020 Specific equipmentActiveCrown EquipmentCorporation2016 218009704/13/201604/13/2021 Leased equipmentActiveBank of America,N.A., as Agent2016 400078007/01/201607/01/2021 Blanket lienActiveWells Fargo Bank,N.A.2016 737753211/29/201611/29/2021 Specific equipmentActiveWells Fargo Bank,N.A.2016 758886412/07/201612/07/2021 Specific equipmentActiveRaymond LeasingCorporation2017 164834103/13/201703/13/2022 Leased equipmentActiveBank of the West2017 497923007/27/201707/27/2022 Leased equipmentActiveTechnology FinanceCorporation2018 008268101/04/201801/04/2023 Leased equipmentActiveDEBTOR: SUPER MICRO COMPUTER, INC.JURISDICTION: SANTA CLARA COUNTY, CALIFORNIASecured Party:File Number:Date Filed:Collateral:Status:Trustee: PRLAP, Inc. Beneficiary: Bank of America, N.A.2335428407/01/2016Fixture filingDeed of Trust, Security Agreement, Assignmentof Leases and Rents and Fixture Filing filed on07/01/2016; Document Number: 23354284First Modification of Deed of Trust, SecurityAgreement, Assignment of Leases and Rentsand Fixture Filing filed 05/18/2017; DocumentNumber 23653149ActiveExhibit 10.53PRIVATE & CONFIDENTIAL17 Jan 2018ATTENTION: SUPER MICRO COMPUTER, INC. TAIWANRE: The Summary of Credit FacilitiesAccording to Super Micro's needs of bank facilities, CTBC Bank CO., LTD. has approved bank facilities and terms below:Product TypeCredit LineAmountTenorInterest RateNotesShort Term Loan IGuaranteeNTD700M/NTD100M1 Yearl1(M)+0.25%/5‰ p.a.1. Collateral: Bade factory2. Guarantee line is included in Short TermLoan.Short Term LoanNTD 1,500M1 Yearl1(M)+0.25%1. Clean loanExport O/A loanUSD70M1 Year Bargaining Rate1. Clean loan2. Drawdown Tenor: 120 Days3. O/A list is required upon drawdown.4. 100% of invoice amount can be financed.Total CapUSD70MBargaining Rate:l 1M COF+0.30%: repay by the end of each quarter (Mar 31, Jun 30, Sep 30, Dec 31)l 1M COF+0.50%: Drawdown cross quarterCOF: CTBC Bank's cost of USD fundl1: CTBC Bank's cost of NTD fund Collateral:l Bade factory: Mortgaged amount NTD1,160M.Terms:l Shared revolving line of credit facility of USD70M for SUPER MICRO COMPUTER, INC. TAIWAN and SUPER MICRO COMPUTER, B.V.l Tenor: From 17 Jan 2018 to 31 Jan 2019Yours Faithfully,For and on behalf ofCTBC BANK CO., LTD.中國信託商業銀行(股)公司 CTBC Bank Co., Ltd.11568 臺北市南港區經貿二路168號 No.168, Jingmao 2nd Rd., Nangang Dist., Taipei City 11568, Taiwan, R.O.C.Tel: 886-2-3327-7777Short-Term Extension Acknowledgment LetterAPR 29, 2019Super Micro Computer Inc. (Taiwan)Re: Extension of Revolving Line of Credit-LoanDear Kevin,This Letter will confirm that the expiration date of the credit facilities (the “Credit. Agreements”) is extended to JUN 30 2019. Allother terms and conditions of the Credit Agreement(s) and its related amendments will remain unchanged.Neither this extension or any subsequent discussions or negotiations between the Bank and you shall be construed as anycommitment by the Bank to further extend the maturity date provided for herein. PRIVATE & CONFIDENTIAL17 Jan 2018ATTENTION: SUPER MICRO COMPUTER B.V.RE: The Summary of Credit FacilityAccording to Super Micro's needs of bank facilities, CTBC Bank CO., LTD. has approved bank facility and terms belowProduct TypeCredit LineamountTenorInterest RateNotesExportO/A loanUSD70M1 YearBargaining Rate1. Clean loan2. Drawdown Tenor: 120 Days3. O/A list is required upon drawdown.4. 100% of invoice amount can be financed.Bargaining Rate:l 1M COF+0.30%: repay by the end of each quarter (Mar 31, Jun 30, Sep 30, Dec 31)l 1M COF+0.50%: Drawdown cross quarterCOF: CTBC BANK's cost of USD fund.Guarantor:l SUPER MICRO COMPUTER, INC. TAIWANTerms:l Shared revolving line of credit facility of USD70M for SUPER MICRO COMPUTER, INC. TAIWAN and SUPER MICRO COMPUTER, B.V.l Tenor: from 17 Jan 2018 to 31 Jan 2019Yours faithfully,For and on behalf ofCTBC BANK CO ., LTD.中國信託商業銀行(股)公司 CTBC Bank Co., Ltd.11568 臺北市南港區經貿二路168號 No.168, Jingmao 2nd Rd., Nangang Dist., Taipei City 11568, Taiwan, R.O.C.Tel: 886-2-3327-7777Short-Term Extension Acknowledgment LetterAPR 29, 2019Super Micro Computer, B.V.Re: Extension of Revolving Line of Credit-LoanDear Kevin,This Letter will confirm that the expiration date of the credit facilities (the “Credit. Agreements”) is extended to JUN 30 2019. Allother terms and conditions of the Credit Agreement(s) and its related amendments will remain unchanged.Neither this extension or any subsequent discussions or negotiations between the Bank and you shall be construed as anycommitment by the Bank to further extend the maturity date provided for herein. EXHIBIT 31.1CERTIFICATIONSI, Charles Liang, certify that:1.I have reviewed this annual report on Form 10-K of Super Micro Computer, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's mostrecent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internalcontrol over financial reporting. Date:May 16, 2019/s/ CHARLES LIANG Charles LiangPresident, Chief Executive Officer andChairman of the Board(Principal Executive Officer)EXHIBIT 31.2CERTIFICATIONSI, Kevin Bauer, certify that:1.I have reviewed this annual report on Form 10-K of Super Micro Computer, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's mostrecent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internalcontrol over financial reporting.Date:May 16, 2019/s/ KEVIN BAUER Kevin BauerSenior Vice President, Chief Financial Officer(Principal Financial and Accounting Officer)EXHIBIT 32.1CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350In connection with the Annual Report of Super Micro Computer, Inc. (the “Company”) on Form 10-K for the fiscal year ended June 30, 2017 as filedwith the Securities and Exchange Commission (the “SEC”) on or about the date hereof (the “Report”), I, Charles Liang, President, Chief Executive Officerand Chairman of the Board of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of2002, that, to the best of my knowledge:(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff uponrequest. Date:May 16, 2019/s/ CHARLES LIANG Charles LiangPresident, Chief Executive Officer and Chairman of the Board(Principal Executive Officer)EXHIBIT 32.2CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350In connection with the Annual Report of Super Micro Computer, Inc. (the “Company”) on Form 10-K for the fiscal year ended June 30, 2017 as filedwith the Securities and Exchange Commission (the “SEC”) on or about the date hereof (the “Report”), I, Kevin Bauer, Senior Vice President, Chief FinancialOfficer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the bestof my knowledge:(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff uponrequest.Date:May 16, 2019/s/ KEVIN BAUER Kevin BauerSenior Vice President, Chief Financial Officer(Principal Financial and Accounting Officer)

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