There is a strong relationship between issues like supply/demand volatility, obsolescence and counterfeits. Today, Supply & Demand Chain Executive magazine will host experts from ERAI, IHS and L-3 Communications who will share best practices, tools, and techniques for mitigating counterfeit electronics and broader issues facing the electronics value chain today.

1. Avoiding Counterfeit Risk Hosted by Supply & Demand Chain Executive and featuring IHS, ERAI Inc, and L-3 Communications February 23, 2011

2. A Global Supply Chain Problem We’ve Entered a Generation of Counterfeiting & Piracy “ We estimate that, based on 2008 data, the total global economic value of counterfeit and pirated products is as much as $650 billion every year … … estimates imply that the global value of counterfeit and pirated products could be up to $1.77 trillion by 2015 .” Frontier Economics, February 2011

4. We want your feedback! Win for completing today’s webcast survey At the end of today’s survey… Everyone who completes the survey at the conclusion of today’s live event will be entered into a drawing for to win an Amazon Kindle .

6. IHS and ERAI Combat Counterfeits Exclusive Partnership Providing Market Intelligence “ ENGLEWOOD, Colo. (January 12, 2010) - IHS Inc. (NYSE:IHS), a leading global source of critical information and insight, today announced an agreement with ERAI, Inc. to be its exclusive worldwide partner for delivering products and services designed to mitigate the risks associated with counterfeit, substandard and high-risk parts found throughout global supply chains…”

8. Why IHS? Opportunity to Help Thousands of IHS Global Customers Avid

9. Problem: How the Market Sees It Proactive Mitigation to Resolution when Counterfeits Detected KPI: EOL / Lifecycle Planning KPI: Shortages KPI: Price/Lead Time KPI: Counterfeit Incidents Qualify + Approve Manage + Avoid Validate + Detect Report + Resolve Redesign + Resupply Establish infrastructure to mitigate risk through qualified and approved designs, suppliers, & parts. Update processes, tools, and information to avoid counterfeit and high risk parts. Validate, sample and test components for authenticity. Quarantine suspected counterfeits. Procedures to notify stakeholders, report occurrences, and resolve incidents. Maintain controlled design/redesign cycles of products. Optimize parts, inventory, and suppliers. Challenge … mission failure! Economic downturn… … shortage… … fake parts… Customer Workflow Needed

10. Solution: IHS-ERAI Market Intelligence Unrivalled Solutions from IHS iSuppli, PLC, and ERAI Qualify + Approve Manage + Avoid Validate + Detect Report + Resolve Redesign + Resupply Establish infrastructure to mitigate risk through qualified and approved designs, suppliers, & parts. Update processes, tools, and information to avoid counterfeit and high risk parts. Validate, sample and test components for authenticity. Quarantine suspected counterfeits. Procedures to notify stakeholders, report occurrences, and resolve incidents. Maintain controlled design/redesign cycles of products. Optimize parts, inventory, and suppliers. Challenge … mission failure! Economic downturn… … shortage… … fake parts… * Our Exclusive Alliance Partnership Customer Workflow Products & Services

16. Counterfeit -Origin

17. Counterfeit --Origin

19. Counterfeit -E-Waste

20. Counterfeit -E-Waste

21. Counterfeit -Portals of Entry

23. All types of components are being counterfeited, even passives. % of reported counterfeits from ERAI database, 2004 to present Counterfeit -What is Being Counterfeited?

24. Counterfeit -Impact

26. Counterfeit -Where the industry has fallen short • Lack of dialogue between all organizations in the U.S. supply chain. • Companies and organizations assume that others in the supply chain are testing parts. • Lack of traceability in the supply chain. • Insufficient chain of accountability within organizations. • Recordkeeping on counterfeit incidents by organizations has been limited. • Stricter testing protocols and quality control practices for inventories are required. • DOD organizations have not had policies in place to prevent counterfeit parts from infiltrating their supply chain. © 2011 ERAI Inc.

27. G-19

28. Formation of G-19 (Sept. 2007) -Industry Working Together To Craft A Solution © 2011 ERAI Inc. Orbital Sciences Arrow Electronics Northrop Grumman Integra Technologies Honeywell Boeing Jabil SMT AERI ERAI IDEA AIA NASA JPL G-19

30. Brokers Independent Franchise Commercial Defense Space Inspection Test G-19 - A Multilayered Counterfeit Risk Mitigation Initiative © 2011 ERAI Inc.

31. AS5553 Rationale

38. Reporting

39. G-19

40. AS5553 Adopted By DoD

44. Counterfeit Parts Program at L-3 Rick Roelecke Director of Quality Assurance L-3 WESCAM Sonoma Operations February 23, 2011

48. The L-3 10 Counterfeit Commandments 1. Implement A Strict DMSMS Program 2. Load Your Obsolescence BOM Into A Counterfeit Hit Database (ERAI) 3. Control Independent Distributor Purchases For Obsolescence Only 5. Control Your Independent Distributors 6. DPA, X-Ray, Permanency Test, At A Minimum, All Lots Purchased from Independent Distributors 7. Track and Document Lessons Learned 4. Screen All P.O. Transactions For Counterfeit Hits 8. Impound and Report All Counterfeit Parts 9. Influence Your Customers To Support Re-Design Efforts 10. Educate Your Workforce And Subcontractors Thou Shall

49. 1. Implement A Strict DMSMS Program 2 . Load Your Obsolescence BOM Into A Counterfeit Hit Database (ERAI) L-3 Companies, IHS Parts Management ERAI BOM Tool Automated Counterfeit Notifications to Each Division One Combined Obsolescence List

52. 6. DPA, X-Ray, Permanency Test, At A Minimum, All Lots Purchased from Independent Distributors

53. 7. Track and Document Lessons Learned 8. Impound and Report All Counterfeit Parts

55. So, Remember!

56. We want your feedback! Win for completing today’s webcast survey At the end of today’s survey… Everyone who completes the survey at the conclusion of today’s live event will be entered into a drawing for to win an Amazon Kindle .

58. Questions? Thank you for attending today’s webcast. All other inquiries, please email: [email_address]