White Paper

7 an environment where there is strong competition but a recognition that participants up and down the supply chain need to be incented to innovate. And within the commercial sector that incentive to innovate means an accompanying requirement to make a reasonable profit. We are entering an era where there is very little room for parochial behavior or holding on to long-standing habits that in some cases need to be broken. Each participant is a small cog in a very large machine. Government and the DoD, both government sponsored and private non- profit research labs, and the defense industrial base, including both commercial and traditional defense companies, need to band together to meet the increasing demands being placed on the United States and our allies. Conclusion Thesis: To ensure our national defense, we urgently need to leverage the best and brightest within the government and the Pentagon, our vast research capabilities, and the best of what commercial technology companies have to offer Our Next Generation Business Model continues to evolve to support the dramatically changed landscape we and our allies now face: • Emerging threats and potential higher capability adver- saries are growing in size and number • The Government and the DoD are responding by re-think- ing how they do business, increasingly reaching out to the commercial technology world • The DoD needs to better partner with commercial enter- prises within defense who can act as a bridge between the rapid evolution of commercial technologies and the unique defense requirements this technology can be used to support • Defense reforms such as an overhaul of Goldwater- Nichols makes sense given our country's and our allies' urgent challenges • The need to provide secure, affordable technologies to meet these challenges has never been greater • A business model that leverages open and secure in- novations, is an important step toward effectively coping with a potentially more dangerous and unpredictable world • We believe our role within defense, while modest, can help make a difference Mercury Systems Represents A Pure Play Commercial Model in Support of the DoD Thesis: The DoD wants and needs Prime contractors to be the end platform integrators. However, they shouldn't have to integrate all the elements of the program them- selves. We believe by leveraging mid-tier commercial suppliers, the primes, and by extension the DoD, can meet mission and program requirements in a more affordable and timely manner- by leveraging a tiered approach to integration. We believe Mercury Systems, with our evolving Next Generation Busi- ness Model, has a unique role within the defense industry. During our 35 year history, Mercury Systems has worked on hundreds of different programs with multiple prime contractors. We have an overall company mission to become the leading provider of secure processing subsys- tems designed and made in the USA. We believe we are well on our way to achieving this goal. Our business model is built on three foundational elements as dis- cussed in this whitepaper. First, quickly and affordably adopting the lat- est commercially available technology in support of defense programs and missions; Second, invest our own funds in R&D that complement the valuable R&D being done by the Pentagon, defense labs, non-profit labs and defense prime contractors; Third, create secure pre-integrated subsystem building-blocks that can be rapidly integrated into critical defense programs. This model, in our view, complements the DoD drive to modernize and streamline defense procurement, and the Primes' increasing need to be efficient and affordable platform integrators. This model has allowed us to meet the needs of our customers, primarily large prime contractors and at times the DoD directly, through innovative, affordable, secure, modular solutions. We do this by using our own double-digit investment in internal R&D initiatives in the de- velopment of modular, reusable open innovations. We pre-integrate our solutions to drive down overall platform integration costs. We can then rapidly customize to multiple platforms, leveraging scalable manufac- turing to both lower cost and reduce risk. We develop and manufacture entirely in the US to provide supply chain integrity. This model hasn't happened over night. The end result, while not perfect, represents a template for how commercial enterprises can affordably support the unique needs of the vast defense industry. We have routinely driven the creation of and leveraged the use of Open Systems Architectures, ushering in the adoption and ratification of OpenVPX in 2010 and launching an emerging MOSA standard, Open- RFM in 2014. We strove for modularity and reusability in everything we do, and now have a full portfolio of solutions including embedded Servers for Tactical Platforms, RF & Microwave Building Blocks, Pre- integrated Modular Subsystems, new 2U Secure Servers as well as affordable, secure ATCA Blade Servers.

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