1. J.A. GREEN & COMPANY, LLC Specialty Metals Compliance: What’s the problem? Jeff Green J.A. Green & Company, LLC March 2007

2. J.A. GREEN & COMPANY, LLC 1. Why are specialty metals critical? 2. Supply chain management 3. Concern with DPAP guidance 4. What’s the real problem here? 5. A workable compromise OVERVIEW

3. Why Are Specialty Metals Critical?   Titanium   9 th most abundant element in earth’s crust   High performance specialty metal   Superior physical properties   Rare Earth Magnets   Four primary types used by DOD   Magnequench sold to Chinese in 2000   Many don’t even know they’re covered

4. Fighters & Transports F-18 E/F C-17 Military Transport F-15 F-16

5. J.A. GREEN & COMPANY, LLC

6. Titanium Nickel-based superalloys Steel Rolls-Royce Jet Engine

7. M777 Lightweight Howitzer 7,000 lbs. of titanium per gun 1,000 + anticipated production units

8. High Performance Magnets Aegis Radar - used widely by Army and Navy Aegis Radar - used widely by Army and Navy Valves in nuclear submarines Valves in nuclear submarines Hellfire missile guidance systems Hellfire missile guidance systems Military aircraft, including F-18, F-22, F-35 Military aircraft, including F-18, F-22, F-35 Power klystrons Power klystrons ground-based earth-to-satellite communications amplifiers and troposcatter communication terminals ground-based earth-to-satellite communications amplifiers and troposcatter communication terminals Minuteman IV ICBM Minuteman IV ICBM

9. High Performance Magnets Consider number of US producers: 3 alnico magnet producers 3 alnico magnet producers 1 samarium cobalt magnet producer 1 samarium cobalt magnet producer 0 neodymium iron boron magnet producers 0 neodymium iron boron magnet producers 2 electrical steel producers (mills) 2 electrical steel producers (mills) If domestic magnet industry disappears, China will become a critical US defense supplier.

10. Supply Chain Management   Basic manufacturing ensures components are accountable   Quality assurance   Accounting – how do you pay?   Auditing = accountability   Customer specifications – production changes   Accountability   Defense contractors are sophisticated   This is law

11. Concerns With DPAP Guidance   Dec. 6 th guidance   Applies to all tiers of primes and subs   Lacks transparent waiver process   Adds arbitrary “third-tier” exemption   Jan. 17 th guidance   Expands definition of “required form”   Adds consideration of “end item” price   Joint Aeronautical Logistics Commanders   Corporate-level multi-service waivers

12. What’s The Real Problem?   Compliance with the specialty metals provision has a cost   But isn’t this passed-through?   Leveraging DOD volume against the commercial production line   Outsourcing our strategic materials to the lowest bidder

13. J.A. GREEN & COMPANY, LLC A WORKABLE COMPROMISE 10 U.S.C. 2533a and 2533b Separates specialty metals and textiles Separates specialty metals and textiles Bitter battle between House/Senate and Aerospace/Specialty Metals Bitter battle between House/Senate and Aerospace/Specialty Metals Results- Results- 4 year “get-well” period 4 year “get-well” period Non-availability waiver for “form” Non-availability waiver for “form” Exemption for “commercially available electronic components” Exemption for “commercially available electronic components”

14. J.A. GREEN & COMPANY, LLC 1. Why are specialty metals critical? 2. Supply chain management 3. Concern with DPAP guidance 4. What’s the real problem here? 5. A workable compromise SUMMARY

15. J.A. GREEN & COMPANY, LLC For additional information contact: J.A. Green & Company, LLC Jeff Green – (202) 641-3215 jeff@jagreenandco.com jeff@jagreenandco.com QUESTIONS?