-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TxfOQJo8JBVXnMixwSEs+vJ2fueb9R9NE7OrBTQYoXAss+ERB+s2qMFVJHqzlCM5 /zrB8WMncppdv9UgD0Alqg== 0001005477-99-004915.txt : 19991101 0001005477-99-004915.hdr.sgml : 19991101 ACCESSION NUMBER: 0001005477-99-004915 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19990731 FILED AS OF DATE: 19991029 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMTECH TELECOMMUNICATIONS CORP /DE/ CENTRAL INDEX KEY: 0000023197 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 112139466 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-07928 FILM NUMBER: 99737827 BUSINESS ADDRESS: STREET 1: 105 BAYLIS RD CITY: MELVILLE STATE: NY ZIP: 11747 BUSINESS PHONE: 5167778900 MAIL ADDRESS: STREET 1: 105 BAYLIS ROAD CITY: MELVILLE STATE: NY ZIP: 11747 FORMER COMPANY: FORMER CONFORMED NAME: COMTECH INC DATE OF NAME CHANGE: 19870503 FORMER COMPANY: FORMER CONFORMED NAME: COMTECH TELECOMMUNICATIONS CORP DATE OF NAME CHANGE: 19831215 FORMER COMPANY: FORMER CONFORMED NAME: COMTECH LABORATORIES INC DATE OF NAME CHANGE: 19780425 10-K405 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON , D.C. 20549 FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended July 31, 1999 |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 0-7928 COMTECH TELECOMMUNICATIONS CORP. (Exact Name of Registrant as Specified in its Charter) Delaware 11-2139466 (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 105 Baylis Road Melville, New York (Address of Principal Executive Offices) 11747 (Zip Code) Registrant's telephone number, including area code (516) 777-8900 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $.10 per share Series A Junior Participating Cumulative Preferred Stock par value $.10 per share (Title of Class) Indicate 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 preceding 12 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: |X| NO: |_| Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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. |X| The aggregate market value of the registrant's voting stock held by non-affiliates of the registrant, computed by reference to the closing sales price as quoted on the Nasdaq National Market on October 22, 1999 was approximately $52,208,352. DOCUMENTS INCORPORATED BY REFERENCE. Certain portions of the document listed below have been incorporated by reference into the indicated Part of this Annual Report on Form 10-K: Proxy Statement for Annual Meeting of Shareholders to be held December 14, 1999 Part III INDEX PART I ITEM 1. BUSINESS 1 Overview 1 Telecommunications Transmission Business Segment Overview 2 RF Microwave Amplifier Business Segment Overview 3 Mobile Data Communications Services Business Segment Overview 4 Sales, Marketing and Customer Support 5 Compliance with Federal, State and Local Environment Protection Laws 5 Backlog 5 Manufacturing and Service 6 Patents and Licenses 6 Competition 7 Key Personnel/Employees 7 Disclosure Regarding Forward-Looking Statements 7 ITEM 2. PROPERTIES 8 ITEM 3. LEGAL PROCEEDINGS 8 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 8 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 8 Dividends 9 Approximate Number of Equity Security Holders 9 ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA 9 i ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 11 Overview 12 Results of Operations Comparison of Fiscal 1999 and 1998 12 Comparison of Fiscal 1998 and 1997 13 Liquidity and Capital Resources 14 Year 2000 Compliance 15 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 16 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 16 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT 16 ITEM 11. EXECUTIVE COMPENSATION 16 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 16 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 16 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K 17 SIGNATURE 19 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE F-1 ii Note: As used in this Annual Report on Form 10-K, the terms "Comtech," "we" and "our company" mean Comtech Telecommunications Corp., Comtech's subsidiaries and Comtech's predecessor corporation. All shares and per share information has been adjusted to reflect the three-for-two stock split that occurred in July 1999. See Comtech's Form 8-K dated July 6, 1999. PART I ITEM 1. BUSINESS Overview We design, develop, produce and market sophisticated components and systems that are used by telecommunication and defense systems and telecommunications service providers in a broad range of applications. Revenue growth over the past five years has been driven by the global expansion of telecommunications services such as satellite systems, cable television, cellular telephone systems, PCS telephony and the Internet. We meet the high performance requirements of our telecommunications customers by drawing upon proprietary expertise in key microwave amplification and transmission technologies developed over more than 32 years of operations. A majority of our sales in fiscal 1999 were of products developed by us within the last 5 years, including, for example, linear amplifiers sold to cellular and PCS telephony system manufacturers for testing their systems' amplifiers, and turbo codec modems sold to satellite systems integrators and service providers for use in voice, data, video and fax transmission. Our internally funded and customer funded research and development expenses aggregated $3.8 million, $1.7 million and $1.5 million in fiscal 1999, 1998 and 1997, representing 10.0%, 5.6% and 6.0% of our net sales in those fiscal years. We conduct our business through three decentralized but complementary product and service segments: telecommunications transmission, RF microwave amplifiers, and our development-stage mobile data communication services business that we acquired in 1998. Telecommunications transmission -- modems, frequency up converters and down converters, solid state, high-power amplifiers, satellite very small aperture (VSAT) transceivers and antennas for satellite ground station applications and adaptive modems and microwave radios for over-the-horizon microwave communications systems. Customers include, among others, satellite systems integrators and communication service providers and oil companies. RF microwave amplifiers -- solid state, high-power, broadband amplifier products in the microwave and radio frequency (RF) spectrums for a wide range of applications, including testing amplifiers used in the cellular and wireless industries and amplifiers in jamming and identification, friend or foe (IFF) defense systems. Customers include, among others, communication service providers, cellular and PCS telephony manufacturers and defense contractors. Mobile data communications services -- Secure, real time two-way messaging links between mobile platforms, such as land vehicles, rail and aircraft, remotely placed fixed site sensors and user headquarters through our Germantown, Maryland gateway satellite earth station. The network employs leased satellite capacity and direct line or Internet links between our gateway and user headquarters. Depending upon the end-user's needs, our system can be configured to provide a wide range of non-voice applications, ranging from simple location tracking to messaging, e-mail, broadcasting of information, meter and other sensor reading, and monitor and control of gauges and sensors. In June 1999, the U. S. Army awarded us a contract which, subject to government funding and deployment decisions, provides for the purchase of up to $418.2 million in mobile transceiver units and global data messaging communication services over an eight-year period. We have not yet received significant orders under this contract, which can be terminated by the U.S. Army at any time for its convenience, and we cannot assure you that we will receive any such orders. Sales for use by international customers represented approximately 60.1%, 46.5%, and 57.3% of our net sales in fiscal years 1999, 1998 and 1997, respectively. We believe that the global expansion of 1 telecommunications, particularly in developing countries in Asia, South America, the Middle East and Europe, represents a key opportunity for the continued growth of our telecommunications business. Included as international sales are sales made to domestic companies for inclusion in products which will be sold to international customers. Our product designs are based on both analog and digital microwave technologies. Digital microwave technology can significantly enhance performance of telecommunications systems. We have invested significant resources in developing our technological expertise, and work closely with customers and potential customers to develop product lines in market niches where we believe our expertise can enable us to become a leading supplier. Our three business segments -- telecommunications transmission, RF microwave amplifiers and our development-stage mobile data communications services business -- operate through individual operating units, each of which maintains its own sales, marketing, product development and manufacturing functions. We believe that this organizational structure allows the key personnel of each operating unit to be more responsive to their particular markets and customers. Brief descriptions of our business segments and operating units follow. Telecommunications Transmission Business Segment The demand for telecommunications is increasing worldwide as emerging economies seek to modernize their infrastructure and as increasingly information-intensive markets introduce new telecommunications services. The telecommunications industry has expanded rapidly during the last decade due to technological advances and deregulation. Advances in technology have lowered per-unit communications costs, increased product reliability and encouraged a proliferation of new and enhanced communications products and services. In making procurement decisions, customers for telecommunications equipment must weigh the relative costs and advantages of the six presently available transmission technologies: copper cable, fiber optic cable, high frequency radio systems, wireless microwave systems, over-the-horizon microwave systems and satellite systems. Rarely is a complete communications network or system based solely on one of these technologies. Transmission can be routed through a combination of technologies, each employed where most cost-effective. Our products are used in satellite, over-the-horizon microwave, terrestrial line-of-sight microwave and wireless. Satellite communications systems have grown and diversified in response to demand for efficient and accurate long distance voice and video communication and digital information exchange. In a satellite communications system, information is relayed to and from microwave transmitting and receiving stations on the ground by means of a low earth orbit (LEO), medium earth orbit (MEO), or geostationary earth orbit (GEO) satellites, which are generally placed in an orbit from 600 to 22,300 miles above the earth's equator. Satellite communications systems are particularly useful where long-range, high capacity and high quality point-to-point or point-to-multipoint communication is desirable. As few as three GEO satellites can provide global communications coverage. These systems, which use microwave technology, are well suited for rapid introduction of service in remote areas or where communication alternatives are unavailable, such as mobile, shipboard or defense applications. Over-the-horizon microwave communication systems transmit signals over distances from 30 to 600 miles by reflection of the transmitted signals off the troposphere, an atmospheric layer located approximately seven miles above the earth's surface. The net effect is that the signal is reflected by a large number of scattering particles in the troposphere which, in turn, directs a portion of the transmitted signal energy well beyond line-of-sight. Such systems offer a high level of reliability and security. Wireless and line-of-sight microwave communications systems, generally used for point-to-point communications, employ signals with extremely short wave-lengths which travel only in line-of-sight paths over relatively short distances, generally under 30 miles, can be quickly and easily installed, require relatively low initial capital investment and can be upgraded and expanded over time. 2 High frequency (HF) radio systems employ long wavelengths which are propagated beyond line-of-sight distances either by surface waves traveling along the earth's perimeter or by skywave reflection of the transmitted waves off different layers of the ionosphere. Fiber optic cable is best suited to high-volume, point-to-point, short- or long-distance links where its advantages -- capacity, quality and security -- justify the long lead time and high cost to equip and install a network. Copper cable, the traditional transmission medium most familiar to consumers, is being replaced and supplemented by the other media, particularly for high-volume and long distance transmissions where it has substantial capacity, cost and reliability limitations. Our Comtech Systems, Inc. subsidiary, located in St. Cloud, Florida, designs, markets, manufactures and installs telecommunication products for domestic and international applications. It also supplies telecommunication systems by combining its products with equipment manufactured by our other Comtech operating units and third parties. Comtech Systems Inc.'s product line consists primarily of equipment for over-the-horizon microwave systems and networks. It has a turnkey capability that ranges from system and network planning through equipment and system training and operation and maintenance programs. Comtech Systems Inc.'s markets its products and services to oil and gas companies and other commercial users, foreign defense commands and system prime contractors. We believe that Comtech Systems Inc.'s products, which employ adaptive modem digital transmission technology, offer high-speed data benefits over the traditional analog over-the-horizon microwave products offered by most of its competitors. Our Comtech Communications Corp. subsidiary located in Tempe, Arizona, designs and manufactures equipment used in commercial and defense satellite communications. The equipment includes modems, frequency up converters and down converters, solid state power amplifiers and satellite VSAT transceivers, which combine our frequency converters with solid state, high-power amplifiers. These products comprise a broad range of receiving and transmitting equipment offering a variety of state-of-the-art technical capabilities with respect to performance, complexity and value. Comtech Communications Corp. recently introduced its own turbo codec modem product line. This forward error correction solution offers significantly improved performance, power and bandwidth performance over traditional systems. Our Comtech Antenna Systems, Inc. subsidiary, located in St. Cloud, Florida, designs, manufactures, and markets a wide variety of fiberglass and aluminum antennas for over-the-horizon microwave and satellite communication applications, including distributed network programming, cable and broadcast television and radio as well as other forms of information and entertainment distribution. Comtech Antenna Systems, Inc. designs antennas for specific types of telecommunications systems and, typically, sells standardized products to independent distributors, prime contractors and end user customers. Comtech Antenna Systems Inc.'s antenna product line includes fixed and mobile antenna systems and specialized multi-beam satellite antenna systems that are capable of receiving signals simultaneously from many independent satellites located up to 60 degrees apart. RF Microwave Amplifier Business Segment Amplifiers are a class of electronic apparatus that reproduce signals with greater power, current or voltage amplitude. Indispensable in the world of signal processing, amplifiers can be as tiny as a microchip for a hearing aid or as massive as a multi-story building for transmitting radio signals to submerged submarines or to outer space. Although the majority of amplifier applications are satisfied by solid state transistor and integrated circuit technology, vacuum tubes still play an important role in the very high-power microwave applications. Because of their greater instantaneous bandwidths, greater reliability and generally smaller size, however, solid state amplifiers are constantly being sought as replacements for vacuum tube amplifiers for all applications throughout the useable frequency spectrum. 3 We are one of a small number of companies producing solid state, high-power, broadband RF amplifier products that use the microwave and radio frequency (RF) spectrums in a wide range of applications. Our products amplify energy for applications including wireless, telecommunications, instrumentation, and defense systems. In telecommunications, solid state, high power amplifiers are used to amplify signals for radiation from transmitting antennas in satellite or other wireless telecommunications systems. They are also used to amplify signals in defense and airport radar and electronic jamming systems. In the laboratory, solid state, high-power amplifiers are used to test the performance of high-power microwave and wireless electronic system components by simulating operating environment conditions. Solid state, high-power amplifiers are also used in electromagnetic compatibility and susceptibility testing. The proliferation of electronic systems in products such as automobiles, computers, wireless telephones, radios, televisions, medical equipment, sound amplifiers, aircraft and other products has led to increasingly serious problems with electromagnetic interference. Manufacturers, therefore, test these electronic systems for electromagnetic compatibility and susceptibility using solid state, high-power RF microwave amplifiers such as those we manufacture. For example, such testing may be used to determine whether the various electronic systems in a commercial aircraft are likely to be affected by the use of laptop computers, wireless telephones or video games by passengers in flight. Our Comtech PST Corp. subsidiary, located in Melville, New York, designs, develops, manufactures and markets solid state, high-power large signal amplifiers in the microwave and RF spectrums for communications, defense and instrumentation applications where they are employed to amplify microwave or RF energy for the emission of signal. Comtech PST Corp. sells its products to domestic and foreign commercial users, governmental agencies and prime contractors. We believe it is an innovative supplier of solid state, high-power amplifiers and related power processing equipment, which also replace amplifiers using vacuum tube systems. Mobile Data Communications Services Business Segment The demand for mobile data communications services and products has increased dramatically over the past years for both government and commercial applications. This demand is driven by digital technology advances coupled with the desire to locate, track, manage, monitor and communicate with mobile and fixed assets. The transmission of these services may be done over various systems, i.e., terrestrial, cellular or satellite, depending on the most cost-effective approach to meet the application's requirements. Through our Comtech Mobile Datacom Corp. subsidiary, we have developed and have begun marketing a satellite-based data communications system for the land transportation, remote sensing, utility and aviation markets. Applications include asset tracking (using information obtained from the Global Positioning Satellite system), two-way mobile messaging, e-mail and automated reading of sensors including meters and gauges. Through our satellite earth station gateway in Germantown, Maryland, we can route signals to and from mobile or fixed, remote terminals via leased satellite. Customers can access their message or data through an Internet connection or a direct line to their personal web sites. We developed our system, including our mobile terminals and the software to operate our gateway data processing system, through a combination of internal development and government contract funding. Comtech Mobile Datacom Corp. acquired the assets of its predecessor company, Mobile Datacom Corp., in 1998. Mobile Datacom Corp. was formed in 1993 by its President and CEO, Joel R.Alper, along with a number of senior executive and technical personnel formerly employed by COMSAT Corp., which transferred its mobile data communication technology to Mobile Datacom Corp. and provided a portion of its initial funding for the company. Over the intervening years, Mobile Datacom Corp. made successive improvements in its technology through development contracts with a variety of government agencies, and provided limited commercial services in the land transportation and aviation markets. In early 1999, Comtech Mobile Datacom Corp. lead a multi-company team in competing for the U.S. Army's Movement Tracking System, a system to be deployed by the Army for global use in tracking its assets and communicating by message in real time with these vehicles from fixed and mobile command centers. The contract was awarded to Comtech Mobile Datacom Corp. in June 1999. The contract allows for purchases of up to $418.2 million of equipment and services over an eight-year period, and is also open to other government agencies to procure their tracking and messaging requirements. In September 1999, Comtech Mobile Datacom completed the 4 first major milestone in the contract, a validation demonstration involving communicating between mobile terminals in Germany and Texas, over two satellite links with the respective ground stations interconnected via the Internet. Sales, Marketing and Customer Support Each of our operating units conducts its own sales and marketing efforts. In some instances, our operating units may bundle other units' products. Sales and marketing strategies vary with particular markets served and include direct sales through sales, marketing and engineering personnel, sales through independent representatives, value-added resellers or a combination of the foregoing. Our operating units enter into sales distribution agreements for certain products with distributors. Unlike sales representatives, who merely find customers on a commission basis, some of our distributors purchase products from us for resale. We intend to continue to expand domestic and international marketing efforts through both independent sales representatives, distributors and value-added resellers. Our management, technical and marketing personnel establish and maintain relationships with customers. Our strategy includes a commitment to provide ongoing customer support for our systems and equipment. This support involves providing direct access to engineering staff or trained technical representatives to resolve technical or operational problems. Our international sales from all three business segments represented approximately 60.1%, 46.5% and 57.3% of total net sales in fiscal 1999, 1998 and 1997, respectively. International sales are expected to continue to increase due to the global expansion of telecommunications and microwave instrumentation and we expect that international sales will remain a substantial portion of our total sales for the foreseeable future. Domestic commercial sales represented approximately 24.3%, 34.0% and 25.7% and U.S. government sales represented 15.6%, 19.5% and 17.0% of our net sales in fiscal 1999, 1998 and 1997, respectively. Sales to one customer in fiscal 1999 and to different customers in fiscal 1998 and 1997 represented 27.0%, 12.2% and 10.2% of our consolidated net sales, respectively. Compliance with Federal, State and Local Environment Protection Laws We are subject to a variety of local, state and federal governmental regulations relating to the storage, discharge, handling, emission, generation, manufacture and disposal of toxic or other hazardous substances used to manufacture our products, particularly in connection with the fabrication of fiberglass antennas by Comtech Antenna Systems, Inc. We believe that we are currently in compliance in all material respects with such regulations and that we have obtained all necessary environmental permits to conduct our business. To date, compliance with federal, state or local environment protection laws has not had a material effect on our capital expenditures, earnings or competitive position, and we do not expect that such compliance will have a material effect in the future. Backlog Our backlog as of July 31, 1999 and 1998 was approximately $38.6 million and $15.4 million, respectively. We expect that a substantial majority of the backlog as of July 31, 1999 will be recognized as sales during fiscal 2000. We received payments in respect of progress billings and advance payments aggregating approximately $2.9 million as of July 31, 1999 in connection with orders included in the backlog at that date. Approximately 2.7% of that backlog consisted of U.S. government contracts, subcontracts and government funded programs, approximately 92.1% consisted of orders for use by foreign customers or domestic companies whose products will be sold to foreign customers and approximately 5.2% consisted of orders for use by domestic commercial customers. Our backlog at July 31, 1999 included a $100,000 funded order under the Mobile Datacom Corp.'s contract with the U.S. Army. Our backlog consists solely of orders believed to be firm. In the case of contracts with departments or agencies of the U.S. government, orders are only included in backlog to the extent funding has been obtained for such orders. All of the contracts in our backlog are subject to cancellation at the convenience of the customer or for default in the event that we are unable to perform the contract. 5 Variations in backlog from time to time are attributable, in part, to the timing of our preparation and submission of contract proposals, the timing of contract awards and the delivery schedules on specific contracts. As a result, we believe our backlog at any point in the fiscal year is not necessarily indicative of the total sales anticipated for any particular future period. Our Comtech Antenna and Comtech Communications businesses, as well as a significant portion of Comtech PST's business, operate under short lead times and usually generate sales out of inventory. Manufacturing and Service Our manufacturing operations consist principally of the assembly and testing of electronic products we design and build from purchased fabricated parts, printed circuits and electronic components and, in the case of antennas, the casting of fiberglass antennas. We employ formal quality management programs and other training programs, including International Standards Organization's (ISO 9000) quality procedure registration programs. Our Comtech PST Corp. operating unit has been qualified for ISO 9001 and we are in the process of qualifying our other operating units. Our ability to deliver products to customers on a timely basis is dependent, in part, upon the availability and timely delivery by subcontractors and suppliers of the components and subsystems that are used by us in manufacturing our products. Electronic components and raw materials used in our products are generally obtained from independent suppliers. Some components are standard items and are available from a number of suppliers. Others are manufactured to our specifications by subcontractors. We obtain certain components and subsystems from a single source or a limited number of sources. We believe that most components and equipment are available from existing or alternative suppliers and subcontractors. A significant interruption in the delivery of such items could have a material adverse effect on our business and results of operations. See "Mobile Data Communications Services Business Segment" for a further description of manufacturing operations in that segment. The technology used in our products is subject to rapid development and frequent change. Our business position is in large part contingent upon the continuous refinement of our scientific and engineering expertise and the development, either through internal research and development or acquisitions, of new or enhanced products and technologies. We reported research and development expenses of $2.0 million, $1.3 million and $1.0 million in fiscal 1999, 1998 and 1997, respectively, representing 5.3%, 4.4% and 4.1% of total net sales, respectively, for such years. A portion of our research and development efforts relates to the adaptation of our basic technology to specialized customer requirements and is recoverable under such contracts, and such expenditures are not included in our research and development expenses for financial reporting purposes. During fiscal 1999, 1998 and 1997, we were reimbursed by customers for such activities in the amounts of $1.8 million, $356,000 and $436,000, respectively. Accordingly, our aggregate research and development expenditures (internal and customer funded) were 10.0%, 5.6% and 6.0% of net sales in fiscal 1999, 1998 and 1997, respectively. Patents and Licenses Although we own or hold licenses for a number of patents, patents and licenses have been of substantially less significance in our business than our scientific and engineering know-how, production techniques, the timely application of our technology and the design development and marketing capabilities of our personnel. We rely on the laws of unfair competition, restrictions in licensing agreements and confidentiality agreements to protect such knowledge and techniques. 6 Competition Our businesses are highly competitive and characterized by rapid technological change. In addition, the number of potential customers for our products is limited. Our growth and financial condition depend, among other things, on our ability to keep pace with such changes and developments and to respond to the sophisticated requirements of an increasing variety of electronic equipment users. Many of our competitors are substantially larger, have significantly greater financial, marketing, research and development, technological and operating resources and broader product lines than we do. A significant technological breakthrough by others, including smaller competitors or new companies could have a material adverse effect on our business. In addition, certain of our customers have technological capabilities in our product areas and could choose to replace our products with their own should they decide it would be advantageous for them to do so. In the market for mobile data communications services, there are several much larger competitors with existing systems. The most prominent of these competitors is Qualcomm Incorporated, which has sold over 250,000 mobile units and provides messaging and maintenance services to over 850 transportation companies in the United States alone. Existing competitors are aggressively pricing their products and services and may continue to do so in the future. We anticipate that new competitors will enter the market in the future. Competitors continue to offer new value-added products and services, which we may be unable to match on a timely or cost-effective basis. Increased competition may impact margins throughout the industry. We believe that competition in our telecommunications transmission and RF amplifier business segments' markets is based primarily on price, product performance, reputation, delivery times and customer support. Due to our decentralized organizational structure and proprietary know-how, we believe we have the ability to develop, produce and to deliver equipment on a cost-effective basis faster than many of our competitors. Key Personnel/Employees We believe our success is dependent upon the continued contributions of our key management personnel, including the key management at each of our operating units, and depends to a significant extent upon our President and Chief Executive Officer, Fred Kornberg. Many of our key personnel, particularly the key engineers, would be difficult to replace, and are not subject to employment or non-competition agreements. The development of our mobile data communications services business is particularly dependent upon Joel R. Alper, the President of Comtech Mobile Datacom. Our growth and future success will depend in large part upon our ability to attract and retain highly qualified engineering, sales and marketing personnel. Competition for such personnel from other companies, academic institutions, government entities and other organizations is intense. Although we believe we have been successful to date in recruiting and retaining key personnel, we may not be successful in attracting and retaining the personnel we require in order to continue to grow and operate profitably. The management skills that have been appropriate for our business in the past may not continue to be appropriate if our business continues to grow and diversify. At July 31, 1999, we had 268 employees, 132 of whom were engaged in production and production support, 89 in research and development and other engineering support and 49 in marketing and administrative functions. None of the employees are represented by a labor union. We believe that our employee relations are good. Disclosure Regarding Forward-Looking Statements The Private Securities Litigation Reform Act of 1995 provides for forward-looking statements. Certain information in Items 1,2,3,7 and 8 of this Form 10-K include information that is forward-looking, such as our anticipated sales levels, our anticipated liquidity and capital requirements and the results of legal proceedings. The matters referred to in forward-looking statements could be affected by the risks and uncertainties involved in our business. These risks and uncertainties include, but are not limited to, the effect of economic and market conditions, unpredictable reductions in funding for government defense expenditures, and the risks associated with international sales, including fluctuations in foreign currency exchange rates, political and economic instability, availability of suitable export financing, export license requirements, tariff regulations and other U.S. and foreign regulations that may apply to the export of our products, as well as certain other risks described above in this Item under "Backlog," 7 "Competition" and "Key Personnel/Employees" and below in Item 3 in "Legal Proceedings" and in Item 7 in "Management's Discussion and Analysis of Financial Condition and Results of Operations." Subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements in this paragraph and elsewhere in this Form 10-K. ITEM 2. PROPERTIES Our corporate offices are located in a portion of the 46,000-square foot facility on two acres of land in Melville, New York which also houses Comtech PST. We lease the facility in Melville, New York from a partnership controlled by our Chairman, Chief Executive Officer and President. The lease, as amended, provides for our exclusive use of the premises as they now exist for an initial term of ten years through December 2001. We have the option to extend the term of the lease for an additional ten-year period and a right of first refusal in the event of a sale of the facility. The base annual rental under the lease is subject to adjustments. We believe that the terms of this lease are not less advantageous to us than those that would have been available to us from an unrelated party. We lease the 32,000-square foot facility on eight acres of land used by Comtech Antenna Systems, Inc. and Comtech Systems, Inc. in St. Cloud, Florida from a Florida land trust controlled by our Senior Vice President and Chief Financial Officer. The lease provides for our exclusive use of the premises as they now exist for a term expiring September 2003. We have the option to extend the term of the lease for an additional five-year period. The base annual rental under the lease is subject to adjustments. We believe that the terms of this lease are not less advantageous to us than those that would have been available to us from an unrelated party. We lease a 20,000-square foot building in Tempe, Arizona for our Comtech Communications Corp. operating unit from an unrelated third party. The lease provides for the exclusive use of the premises as they now exist for a term of three years through April 2001. We lease 7,100-square feet of space located in Germantown, Maryland that is used by Comtech Mobile Datacom Corp. from an unrelated third party. This lease provides for the exclusive use of the premises as they now exist through August 2004. We have a one-time option to terminate the lease effective August 31, 2003 by providing at least six months' notice and paying $17,500. The base annual rental under this lease is subject to adjustments. ITEM 3. LEGAL PROCEEDINGS We are subject to certain legal actions which arise out of the normal course of business. We believe that the outcome of these actions will not have a material effect on our consolidated financial position or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to our stockholders during the fourth quarter of the fiscal year ended July 31, 1999. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Our common stock trades on the Nasdaq National Market under the symbol "CMTL." The following table shows the quarterly range of the high and low sale prices for our common stock as reported by the Nasdaq National Market. Such prices do not include retail markups, markdowns, or commissions. 8 Common Stock ------------ High (1) Low (1) -------- ------- Fiscal Year Ended 7-31-98 First Quarter $ 3 5/12 $ 2 1/3 Second Quarter 3 1/16 2 5/6 Third Quarter 6 1/24 4 Fourth Quarter 6 1/2 4 1/6 Fiscal Year Ended 7-31-99 First Quarter 6 1/2 3 1/3 Second Quarter 6 1/2 4 1/3 Third Quarter 5 11/12 3 5/6 Fourth Quarter 18 2/3 5 1/4 (1) Amounts adjusted to reflect a three-for-two stock split effective July 30, 1999. Dividends We have never paid cash dividends on our common stock and we intend to continue this policy for the foreseeable future. We expect to use earnings to finance the development and expansion of our business. Our Board of Directors reviews our dividend policy periodically. The payment of dividends in the future will depend upon our earnings, capital requirements, financial condition and other factors considered relevant by our Board of Directors. Approximate Number of Equity Security Holders As of October 22, 1999, there were approximately 770 holders of the Company's common stock. Such number of record owners was determined from the Company shareholders' records and does not include beneficial owners of the Company's common stock held in the names of various security holders, dealers and clearing agencies. ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA (in thousands except per share amounts) The following table shows selected historical consolidated financial data for Comtech. Detailed historical financial information is included in the audited consolidated financial statements for fiscal years 1999 and 1998.
Year Ended July 31, 1999 1998 1997 1996 1995 -------- -------- -------- -------- -------- Consolidated Statement of Operations Data: Net sales $ 37,886 30,114 24,746 20,916 16,455 Cost of sales 26,405 21,330 17,670 14,819 12,096 Gross profit 11,481 8,784 7,076 6,097 4,359 -------- -------- -------- -------- -------- Expenses: Selling, general and 6,632 6,013 5,415 5,015 4,658 administrative Research and development 2,022 1,319 1,023 741 1,036 -------- -------- -------- -------- -------- 8,654 7,332 6,438 5,756 5,694 -------- -------- -------- -------- -------- Operating earnings (loss) 2,827 1,452 638 341 (1,335) Other expenses (income): Interest expense 204 234 284 302 341 Interest income (65) (36) (33) (60) (171) Other income (39) (30) (151) -- (20) -------- -------- -------- -------- --------
9 Income (loss) from continuing operations before income taxes 2,727 1,284 538 99 (1,485) Income tax (benefit) expense (3,754) 180 54 27 17 -------- -------- -------- -------- -------- Income (loss) from continuing operations 6,481 1,104 484 72 (1,502) Discontinued operations: Loss from operations of discontinued segment (less applicable income tax benefit of $320) (622) -- -- -- -- Loss on disposal of discontinued segment (including provision of $430 for operating losses during phase out period, less (594) -- -- -- -- applicable income tax benefit of $306) -------- -------- -------- -------- -------- Net income (loss) $ 5,265 1,104 484 72 (1,502) ======== ======== ======== ======== ======== Basic income (loss) per share: (1) Income (loss)from continuing $ 1.56 0.28 0.13 0.02 (0.39) operations Loss from discontinued operations (0.29) -- -- -- -- -------- -------- -------- -------- -------- Basic income (loss) per share $ 1.27 0.28 0.13 0.02 (0.39) ======== ======== ======== ======== ======== Diluted income (loss) per share: (1) Income (loss) from continuing $ 1.42 0.27 0.12 0.02 (0.39) operations Loss from discontinued operations (0.27) -- -- -- -- -------- -------- -------- -------- -------- Diluted income (loss) per share $ 1.15 0.27 0.12 0.02 (0.39) ======== ======== ======== ======== ======== (1)Reflects three-for-two stock split effective July 30, 1999 Weighted average number common shares outstanding - Basic computation 4,143 3,902 3,873 3,887 3,885 Potential dilutive common shares 430 264 33 105 -- -------- -------- -------- -------- -------- Weighted average number of common and common equivalent shares outstanding assuming dilution - Diluted computation 4,573 4,166 3,906 3,992 3,885 ======== ======== ======== ======== ========
As of July 31, ----------------------------------------------- Consolidated Balance Sheet Data: 1999 1998 1997 1996 1995 ------- ------- ------- ------- ------- Total assets $29,847 19,710 17,960 16,629 16,783 Working capital 10,192 8,917 7,930 7,797 7,681 Long-term debt, less current installments 959 1,445 1,310 1,875 2,277 Stockholders' equity 18,357 12,093 10,878 10,301 10,081
10 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview We design, develop, produce and market sophisticated components and systems that are used by telecommunication and defense systems and telecommunications service providers in a broad range of applications. A substantial portion of our business is derived from a limited number of relatively large customer contracts, the timing of which cannot be predicted. Accordingly, we experience significant fluctuations in sales and operating results from quarter to quarter. Our business consists of three segments: telecommunications transmission; RF microwave amplifiers; and mobile data communications services, which is a development-stage business. We began reporting financial results on a segment basis in fiscal 1999. Our sales are made to domestic and international customers, both commercial and governmental. International sales are expected to increase in the foreseeable future due to the growing worldwide demand for wireless and satellite telecommunications and our expanded line of product offerings to meet these demands. Sales consist of stand-alone products and systems, although for the past five years we have endeavored to achieve greater product sales as a percentage of total sales, due to generally higher gross profit margins on products rather than systems. We generally recognize income under contracts only when the products are shipped. However, when the performance of a contract will extend beyond a 12-month period, income is recognized on the percentage-of-completion method. Our gross profit is affected by a variety of factors, including the mix of products, systems and equipment sold, production efficiency and price competition. Selling, general and administrative expenses consist primarily of salaries and benefits for marketing, sales and administrative employees, advertising and trade show costs, professional fees and amortization of deferred compensation. Deferred compensation consists of restricted stock awards granted to certain operating management personnel. Under these grants, the employees purchased shares of our common stock at prices representing a discount to the then market value. The stock is subject to certain restrictions which lapse after ten years and which may be removed earlier upon achievement of certain business unit performance goals. Our research and development expenses relate to both existing product enhancement and new product development. A portion of our research and development efforts is related to specific contracts and is recoverable under those contracts because they are funded by the customers. Such customer-funded expenditures are not included in research and development expenses for financial reporting purposes but are reflected in cost of sales. As of the end of fiscal 1998, we had a 100% valuation allowance against our gross deferred tax assets. During fiscal 1999, based on our assessment of the recoverability of the deferred tax assets, we concluded that a full valuation allowance was no longer necessary given our estimates of future earnings and the expected timing of temporary difference reversals. Accordingly, we reduced the valuation allowance to $777,000 and recorded a corresponding one-time $4.6 million benefit for income taxes in fiscal 1999. In the first quarter of fiscal 1999, through newly formed wholly-owned subsidiaries Comtech Mobile Datacom, our Mobile data communications services business, and Comtech Wireless, Inc., our wireless local loop business, we acquired the assets and assumed certain liabilities of two businesses. Both acquisitions were accounted for using the purchase method of accounting. The goodwill resulting from the purchase of the mobile data communications services business (i.e., the excess of the purchase price over the fair value of the net assets acquired and liabilities assumed) is being amortized over a 20-year period. In June 1999, the U.S. Army awarded us a contract which, subject to government funding and deployment decisions, provides for the purchase of up to $418.2 million in mobile terminal units and global data communications services over an eight-year period. Although sales will be dependent upon annual government funding we are anticipating there will be sales under this 11 contract in fiscal 2000. Sales for the mobile data communications segment in fiscal 1999 were approximately $300,000. Comtech Wireless, Inc. designs and manufactures wireless local loop systems for the rural and remote telephony market. Due to disappointing results and uncertain prospects, in September 1999 the Board of Directors approved a plan to liquidate Comtech Wireless, Inc. by January 31, 2000 and the results of operations for the segment have been shown as a discontinued operation in the consolidated financial statements as of and for the year ended July 31, 1999. Comtech Wireless, Inc. did not have any sales in fiscal 1999 and negligible revenues are anticipated in fiscal 2000. Results of Operations The following table sets forth, for the periods indicated, certain income and expense items expressed as a percentage of our net sales: Fiscal Year Ended July 31, ------------------------------- 1999 1998 1997 ------ ------ ------ Net sales 100.0% 100.0% 100.0% Gross margin 30.3 29.2 28.6 Selling, general and administrative expenses 17.5 20.0 21.9 Research and development expenses 5.3 4.4 4.1 Operating income from continuing operations 7.5 4.8 2.6 Interest expense (income) net 0.4 0.8 (1.0) Income before income taxes 7.2 4.3 2.2 Net income 13.9 3.7 2.0 Comparison of Fiscal 1999 and 1998 Net Sales Consolidated net sales were $37.9 million and $30.1 million for fiscal 1999 and 1998, respectively, representing an increase of $7.8 million or 25.8%. This increase was due primarily to increased sales by our telecommunications transmission segment of over-the-horizon microwave equipment, principally to one customer, a major U.S. prime contractor. Total sales to this customer during fiscal 1999 were approximately $10.2 million, representing 27.0% of the total net sales. The total order received from this customer in fiscal 1999 was approximately $42.5 million and the contract balance of approximately $32.3 million is expected to be recognized as revenue in fiscal 2000 and 2001. There were no other customers for which total sales in fiscal 1999 represented 10% or more of net sales. In fiscal 1998, sales to a different customer represented 12.2% of total net sales. Included in the telecommunications transmission segment are sales of our satellite equipment products, which increased in fiscal 1999 by approximately 65.8%, due to additional product offerings. Sales from our RF microwave amplifier segment declined by approximately 14.9% compared to fiscal 1998, due to the timing of receipt of follow-on orders. International sales increased by approximately $8.8 million or 62.7%, representing 60.1% and 46.5% of total net sales for fiscal 1999 and 1998, respectively. Domestic sales decreased by $1.0 million or 9.9%, representing 24.3% and 34.0%, of total net sales for fiscal 1999 and 1998, respectively. U.S. government sales increased by $20,000 or .3%, representing 15.6% and 19.5% of total net sales for fiscal 1999 and 1998, respectively. Gross Profit Gross profit was $11.5 million and $8.8 million for fiscal 1999 and 1998, respectively, representing an increase of $2.7 million or 30.7%. The increase was due primarily to the increase in sales volume in fiscal 1999 compared to fiscal 1998. Gross margin as a percentage of net sales was 30.3% and 29.2% in fiscal 1999 and 1998, respectively, due primarily to increased sales of products coupled with lower per unit costs. Selling, General and Administrative Selling, general and administrative expenses were $6.6 million and $6.0 million in the fiscal 1999 and 1998, respectively, representing an increase of $619,000 or 10.3%. This increase 12 was due primarily to higher sales commissions, marketing personnel expenses, deferred compensation and other administrative expenses. As a percentage of net sales, these expenses were 17.5% and 20.0% in fiscal 1999 and 1998, respectively. Although increased expenses were required to support the higher sales volume in fiscal 1999 compared to fiscal 1998, these expenses increased at a lower rate than the increase in sales. In addition, the increased expenditures reflect those required by our mobile data communications services segment which was formed in fiscal 1999. Research and Development Research and development expenses were $2.0 million and $1.3 million in fiscal 1999 and 1998, respectively, representing an increase of $703,000 or 53.3%. We are continually enhancing and developing new products and technologies. In fiscal 1999, the research and development expenses were primarily for developing additional satellite product offerings and redesigning components of over-the-horizon microwave products. Whenever possible, we seek customer funding for research and development to adapt our products to specialized customer requirements. During fiscal 1999 and 1998, we were reimbursed $1.8 million and $356,000, respectively, which amounts are not reflected in the reported research and development expenses. Operating Income As a result of the foregoing factors, we had operating income, from continuing operations, of $2.8 million and $1.5 million in fiscal 1999 and 1998, respectively, representing an increase of $1.4 million or 94.7%. Interest Expense Interest expense was $204,000 and $234,000 for fiscal 1999 and 1998, respectively, representing a decrease of $30,000 or 12.8%. Interest expense in both years was due primarily to interest associated with our capital lease obligations. Interest Income Interest income was $65,000 and $36,000 for fiscal 1999 and 1998, respectively, representing an increase of $29,000 or 80.6%. The increase was due primarily to the increase in the amount of cash available to invest in fiscal 1999 as compared to fiscal 1998. Interest income was primarily derived from the cash on hand in excess of working capital requirements that is invested in highly liquid, short-term money-market funds consisting primarily of direct obligations of the U.S. government. Income Taxes The benefit for income taxes applicable to continuing operations in fiscal 1999 was $3.8 million compared to the provision for income taxes of $180,000 in fiscal 1998. Due to our net operating loss carryforwards and other temporary differences between recognition of income for financial reporting and income tax purposes, we had deferred tax assets of $5.4 and $5.3 million in fiscal 1999 and 1998, respectively. As of July 31, 1998, we assessed a 100% valuation allowance against this deferred tax asset. During fiscal 1999, we concluded that a full valuation allowance was no longer necessary given our estimates of future earnings based on substantial new contracts entered into and the expected timing of temporary difference reversals. Accordingly, we reduced the valuation allowance to $777,000 during fiscal 1999. The effect of this change resulted in a tax benefit to us in fiscal 1999 of $4.6 million, which was partially offset by the provision for the current year's income tax expense. Discontinued Operations In September 1999, we adopted a plan, effective as of July 31, 1999, to liquidate the wireless local loop business. The loss from operations, net of a tax benefit, for fiscal 1999, was $622,000. The loss on the disposition of the segment, net of a tax benefit, was $594,000, which includes a provision of $430,000 for operating losses expected to be incurred during the phase-out period. The liquidation is expected to be completed by January 31, 2000. Comparison of Fiscal 1998 and 1997 Net Sales Consolidated net sales were $30.1 million and $24.7 million in fiscal 1998 and 1997, respectively, representing an increase of $5.4 million or 21.7%. This increase was due primarily to increased domestic and U.S. government sales of high-power amplifiers and increased international sales of over-the-horizon microwave equipment, partially offset by decreased international sales of satellite communication products. International sales decreased by approximately $184,000 or .6% representing 46.5% and 57.3% of total net sales for fiscal 1998 and 1997, respectively. Domestic sales increased by $2.9 million or 60.9% representing 34.0% and 25.7% of total net sales. U.S. government sales increased by $1.7 million or 39.9% representing 19.5% and 17.0% of total net sales in fiscal 1998 and 1997, respectively. Sales to one customer in fiscal 1998 and sales to different customers in fiscal 1997 represented 12.2% and 10.2% of consolidated net sales for fiscal 1998 and 1997, respectively. 13 Gross Profit Gross profit was $8.8 million and $7.1 million for fiscal 1998 and 1997, respectively, representing an increase of $1.7 million. The primary reason for this increase was a net increase in sales volume in fiscal 1998. Gross profit, as a percentage of net sales, was relatively unchanged. Selling, General and Administrative Selling, general and administrative expenses were $6.0 million and $5.4 million in fiscal 1998 and 1997, respectively, representing an increase of $598,000 or 11%. This increase was due primarily to the increased expenses required to support the higher level of sales in the fiscal 1998 period, including higher bid and proposal expenses, sales commissions, marketing personnel expenses and other administrative expenses. As a percentage of sales, however, these expenses decreased to 20.0% in fiscal 1998, from 21.9% in fiscal 1997. Research and Development Research and development expenses were $1.3 million and $1.0 million in fiscal 1998 and 1997, respectively, representing an increase of $296,000 or 28.9%. Research and development expenses as a percentage of net sales were 4.4% and 4.1%. This increase was primarily due to increased expenses for general product improvements and for the development of a CSAT transceiver and VSAT modem and a complement of additional product offerings to the "fly-away" and "quick deployment" antenna product lines. Whenever possible, we seek customer funding for research and development to adapt our products to specialized customer requirements. During fiscal 1998 and 1997, we were reimbursed $356,000 and $436,000, respectively, which amounts are not reflected in the reported research and development expenses. Operating Income As a result of the foregoing factors, we reported operating income of $1.5 million in fiscal 1998 compared to operating income of $638,000 in fiscal 1997, representing an increase of $814,000 or 127.6%. Interest Expenses Interest expense was $234,000 and $284,000 in the fiscal 1998 and 1997, respectively. Interest expense in both years was due primarily to interest associated with our capital lease obligations. Interest Income Interest income for fiscal 1998 and 1997 was $36,000 and $33,000, respectively. This increase was due primarily to the increase in the amount of cash available to invest in fiscal 1998. Interest income in fiscal 1997 included approximately $14,000 that was received from a customer for extended payment terms. Other Income We reported other income of $30,000 and $151,000 in fiscal 1998 and 1997, respectively. Other income in fiscal 1998 was due primarily to the gain on a foreign currency exchange rate and to the sale of scrap materials. In fiscal 1997, the primary components were the result of a gain on the sale of a storage facility, the sale of fully depreciated equipment and a finder's fee we earned, offset by the write-off of other miscellaneous items. Income Taxes The provision for income taxes was $180,000 and $54,000 in fiscal 1998 and 1997, respectively. This was comprised of $45,000 and $20,000 for federal income tax and $135,000 and $34,000 for state income taxes in fiscal 1998 and 1997, respectively. Net operating loss carryforwards were available to offset corporate federal income tax and we were generally subject only to the alternative minimum tax. At such dates, we believed our tax benefits were subject to a 100% valuation allowance as of July 31, 1998 and 1997 due to earnings fluctuations inherent in our operations and recent operating losses. Liquidity and Capital Resources Our cash and cash equivalents position increased by $3.2 million from $2.7 million at July 31, 1998 to $5.9 million at July 31, 1999. Restricted cash of $22,000, which was securing standby letters of credit at July 31, 1998, was no longer required at the end of fiscal 1999. In fiscal 1999, operating activities provided net cash of $4.9 million, investing activities used net cash of $1.2 million and financing activities used net cash of $598,000. During fiscal 1999, we acquired the assets and assumed certain liabilities of two businesses: a mobile data communications services business and a wireless local loop business. The total consideration for these acquisitions of approximately $978,000 was financed by a cash payment of $200,000, a non-recourse note of $250,000 and the issuance of restricted stock and warrants. As of July 31, 1999, one of these acquisitions, the wireless local loop business, was classified as a discontinued operation and certain adjustments were made and expenses accrued, as a result of this decision. 14 Accounts receivable as of July 31, 1999 decreased by $1.0 million from July 31, 1998 to July 31, 1999 due primarily to the timing of the shipments and subsequent collections. The allowance for doubtful accounts decreased by $25,000. We review our allowance for doubtful accounts periodically and believe it adequately reflects the collectibility of our receivables based on past experience and our credit standards. Generally, foreign customers are required to secure payment by an irrevocable letter of credit before an order is accepted. Inventory increased by $1.3 million from July 31, 1998 to July 31, 1999 due primarily to the higher level of backlog of orders. We generally operate on a job-order cost basis, that is, costs are incurred as work-in-process inventory for specific contracts or jobs. Accordingly, inventory levels will vary as a function of our order backlog. We do have some product lines which require a more rapid delivery response to customers' requirements and require us to provide for a level of "off-the-shelf" equipment inventory availability. The only other general inventory that we maintain is for basic components which are common to many of our products. Inventory reserves increased by $341,000. Inventory reserves are reviewed on an ongoing basis and adjustments are made as needed. Net intangible assets at July 31, 1999 of $1.6 million represent goodwill as a result of our acquisition of a mobile data communications services business and entry into that segment. The amortization period for this asset is 20 years. Accounts payable increased by $372,000 from July 31, 1998 to July 31, 1999, due primarily to the timing of the purchases and to the higher volume of inventory purchased due to the increased level of sales and backlog. Accrued expenses and other current liabilities increased by $2.4 million from July 31,1998 to July 31, 1999. This was due primarily to the increase in customer advances and deposits and, to a lesser extent, to accrued wages and benefits. Whenever possible, we require advance payments, deposits or "milestone" payments on long-term contracts in order to provide working capital while the contract is in process. Accrued wages and benefits are primarily a function of the number of employees. At July 31,1999, we had 268 employees compared to 216 employees at July 31,1998. During fiscal 1999, we made leasehold improvements and purchases of machinery and equipment of $1.1 million, of which $136,000 was financed by capital leases. All of our long-term debt consists of capital lease obligations. Principal payments on long-term debt of $821,000 were made during fiscal 1999, resulting in long-term debt, including the current portion, of $1.6 million. We have an $8.0 million secured credit facility from Republic National Bank of New York. The line of credit, which is to be used for working capital requirements, is for a term of one year and bears interest on borrowing of 90-day LIBOR plus 1.50 % (6.875% at July 31,1999). During fiscal 1999, we drew advances in the aggregate of $850,000 which were totally repaid by July 31, 1999. The credit facility expires December 31, 1999. We have renewed and received increases in this line of credit annually since 1996. We believe that our working capital position and available credit facilities are sufficient to meet our cash requirements during the next year at our current business levels. However, given the potential for receipt of large orders under the U.S. Army contract, or the growth of our business beyond expected levels, we may seek additional external financing. Year 2000 Compliance Management has initiated a company-wide program and has developed a formal plan of implementation to prepare for the Year 2000. This includes taking actions designed to ensure that our information technology systems, products and infrastructure are Year 2000 compliant and that its customers, suppliers and service providers have taken similar action. With respect to Year 2000 internal issues, we have evaluated our information technology systems, products, equipment and other facilities systems, and management believes that all are Year 2000 compliant. With respect to our external Year 2000 issues, we are surveying our customers, suppliers and service providers primarily through written correspondence. Despite the efforts to survey customers, suppliers and service providers, management cannot be certain as to the actual Year 2000 readiness of these third parties. To the extent any of our suppliers or service providers are not Year 2000 ready, we believe that we will be able to obtain other 15 suppliers or service providers without a significant interruption to our business. Based upon responses to our inquiries of third parties, we currently believe we do not have a need for a contingency plan. Certain experts who have studied the issue have published reports indicating that the Year 2000 problem could be substantially more severe in developing economies than in the United States. A significant amount of our sales are for customers in developing countries. Our management currently believes that the costs related to our compliance with the Year 2000 issue will not have a material adverse effect on our consolidated financial position, results of operations or cash flows. ITEM 7A. QUANTATATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's earnings and cash flows are subject to fluctuations due to changes in interest rates primarily from its investment of available cash balances in money market funds. Under its current policies, the Company does not use the interest rate derivative instruments to manage exposure to interest rate changes. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Independent Auditors' Report, Consolidated Financial Statements, Notes to Consolidated Financial Statements and related financial schedule are listed in the index to Consolidated Financial Statements and Schedule annexed hereto. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT Certain information concerning the directors and officers of the Company is incorporated by reference to the Proxy Statement of the Company for the Annual Meeting of Stockholders to be held December 14, 1999 (the "Proxy Statement") which will be filed with the Securities and Exchange Commission no more than 120 days after the close of its fiscal year. ITEM 11. EXECUTIVE COMPENSATION Information regarding executive compensation is incorporated by reference to the Company's Proxy Statement which will be filed with the Securities and Exchange Commission no more than 120 days after the close of its fiscal year. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information regarding security ownership of certain beneficial owners and management is incorporated by reference to the Company's Proxy Statement which will be filed with the Securities and Exchange Commission no later than 120 days after the close of its fiscal year. 16 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information regarding certain relationships and related transactions is incorporated by reference to the Company's Proxy Statement which will be filed with the Securities and Exchange Commission no more than 120 days after the close of its fiscal year. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K (a) Documents filed as part of this report: 1. and 2. Financial Statements and Financial Statement Schedule The Financial Statements filed as part of this report are listed in the accompanying Index to Consolidated Financial Statements and Schedule. (b) In July 1999, the Company filed a report on Form 8-K with respect to the declaration of a three-for-two stock split, in the form of a 50% stock dividend, by the Board of Directors. The additional shares were distributed July 30, 1999 to stockholders of record on the close of business on July 16, 1999. (c) Exhibit index 17 Exhibit Incorporated By Number Description of Exhibit Reference to Exhibit - -------- ------------------------------------------------- -------------------- 3(a) Certificate of Incorporation of the Registrant Exhibit 3(a) of the Registrant's 1987 Form 10-K 3(b) Amendment of the Certificate of Incorporation Exhibit 3(b) to the affecting the 5 to 1 reverse stock split Registrant's 1991 Form 10-K 3(c) Amended and restated By-Laws of the Registrant Exhibit 3(c) of Registrant's 1998 Form 10-K 3(d) Amendment to the Certificate of Incorporation Exhibit 3(d) to the increasing authorized shares to 12 million Registrant's 1994 Form 10-K 3(e) Amendment to the Certificate of Incorporation Exhibit 3(e) to increasing the authorized shares to 15 million Registrant's 1998 Form 10-K 3(f) Form of Certificate of Designation of the Series A Exhibit 4(1) to the Junior Participating Preferred Stock Registrant's Form 8-A/A dated December 23, 1998 4(a) Rights Agreement dated as of December 15, 1998 Exhibit 4(1) to the between the Registrant and American Stock Registrant's Form Transfer and Trust Company, as Rights Agent 8-A/A dated December 23, 1998 10(a) Amended and restated Employment Agreement dated Exhibit 10(a) of January 14, 1998 between the Registrant and Fred the Registrant's Kornberg 1998 Form 10-K 10(b) 1982 Incentive Stock Option and Appreciation Plan Exhibit A to the Registrant's Proxy Statement dated October 29, 1982 10(c) Lease and amendment thereto on the Melville Exhibit 10(k) to Facility the Registrant's 1992 Form 10-K 10(d) Amended and restated 1993 Incentive Stock Option Appendix A to the Plan Registrant's Proxy Statement dated November 3, 1997 10(e) Time Accelerated Restricted Stock Purchase Exhibit 10(j) to Agreements between Registrant and Principals of the Registrant's Comtech Communications Corp. operating unit 1994 Form 10-K 10(f) Time Accelerated Restricted Stock Purchase Agreements between Registrant and Principals of Comtech Mobile Datacom Corp. operating unit 10(g) Movement Tracking System Contract between Comtech Mobile Datacom Corp. and U.S. Army's CECOM Acquisition Center dated June 24, 1999 (certain portions of this agreement have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment) 10(h) License Agreement between Vistar Telecommunications Inc. and Comtech Mobile Datacom Corp. dated August 31, 1999 (certain portions of this agreement have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment) 21 Subsidiaries of the Company 23 Consent of KPMG LLP 27 Financial Data Schedule Exhibits to this Annual Report on Form 10-K are available from the Company upon request and payment to the Company for the cost of reproduction. 18 SIGNATURE Pursuant 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 on its behalf by the undersigned, thereunto duly authorized. COMTECH TELECOMMUNICATIONS CORP. October 19, 1999 By: s/Fred Kornberg - ---------------- ------------------------------------ (Date) Fred Kornberg, Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title --------------------------- ----------------------------- October 19, 1999 s/ Fred Kornberg Chairman of the Board - ------------------ --------------------------- Chief Executive Officer (Date) Fred Kornberg and President (Principal Executive Officer) October 19, 1999 s/ J. Preston Windus Senior Vice President - ------------------ --------------------------- Chief Financial Officer (Date) J. Preston Windus October 19, 1999 s/ George Bugliarello Director - ------------------ --------------------------- (Date) George Bugliarello October 19, 1999 s/ Richard L. Goldberg Director - ------------------ --------------------------- (Date) Richard L. Goldberg October 19, 1999 s/ Gerard R. Nocita Director - ------------------ --------------------------- (Date) Gerard R. Nocita October 19, 1999 s/ John B. Payne III Director - ------------------ --------------------------- (Date) John B. Payne III October 19, 1999 s/ Sol S. Weiner Director - ------------------ --------------------------- (Date) Sol S. Weiner 19 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Index to Consolidated Financial Statements and Schedule Page ---- Independent Auditors' Report F-2 Consolidated Financial Statements: Balance Sheets at July 31, 1999 and 1998 F-3 Statements of Operations for each of the years in the three-year period ended July 31, 1999 F-4 Statements of Stockholders' Equity for each of the years in the three-year period ended July 31, 1999 F-5 Statements of Cash Flows for each of the years in the three-year period ended July 31, 1999 F-6, F-7 Notes to Consolidated Financial Statements F-8 - F-20 Additional Financial Information Pursuant to the Requirements of Form 10-K: Schedule II - Valuation and Qualifying Accounts and Reserves S-1 Schedules not listed above have been omitted because they are either not applicable or the required information has been given elsewhere in the consolidated financial statements or notes thereto. F-1 [LOGO] KPMG Independent Auditors' Report The Board of Directors and Stockholders Comtech Telecommunications Corp.: We have audited the consolidated financial statements of Comtech Telecommunications Corp. and subsidiaries as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule II as listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonably assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Comtech Telecommunications Corp. and subsidiaries as of July 31, 1999 and 1998, and the results of their operations and their cash flows for each of the years in the three-year period ended July 31, 1999 in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule II, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. /s/ KPMG LLP KPMG LLP Melville, New York September 24, 1999 F-2 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Consolidated Balance Sheets July 31, 1999 and 1998
Assets 1999 1998 ------------ ------------ Current assets: Cash and cash equivalents $ 5,896,000 2,724,000 Restricted cash -- 22,000 Accounts receivable, less allowance for doubtful accounts of $145,000 in 1999 and $170,000 in 1998 5,152,000 5,932,000 Inventories, net 7,879,000 6,135,000 Prepaid expenses and other current assets 138,000 276,000 Deferred tax asset - current 1,658,000 -- ------------ ------------ Total current assets 20,723,000 15,089,000 Property, plant and equipment, net 4,310,000 4,314,000 Intangible assets, net of amortization of $78,000 1,623,000 -- Other assets 274,000 307,000 Deferred tax asset - non current 2,917,000 -- ------------ ------------ $ 29,847,000 19,710,000 ============ ============ Liabilities and Stockholders' Equity Current liabilities: Current installments of long-term debt (including payable to related party of $316,000 in 1999 and $309,000 in 1998) $ 605,000 804,000 Accounts payable 3,763,000 2,588,000 Accrued expenses and other current liabilities 6,026,000 2,780,000 Net liabilities of discontinued operation 137,000 -- ------------ ------------ Total current liabilities 10,531,000 6,172,000 Long-term debt, less current installments (including payable to related party of $501,000 in 1999 and $817,000 in 1998) 959,000 1,445,000 ------------ ------------ Total liabilities 11,490,000 7,617,000 ------------ ------------ Stockholders' equity: Preferred stock, par value $.10 per share; shares authorized and unissued 2,000,000 -- -- Common stock, par value $.10 per share; authorized 15,000,000 shares; issued, 4,471,368 shares in 1999 and 4,008,006 shares in 1998 447,000 401,000 Additional paid-in capital 23,801,000 22,055,000 Accumulated deficit (4,746,000) (10,011,000) ------------ ------------ 19,502,000 12,445,000 Less: Treasury stock (82,500 shares in 1999 and 1998) (184,000) (184,000) Deferred compensation (961,000) (168,000) ------------ ------------ 18,357,000 12,093,000 ------------ ------------ Commitments and contingencies $ 29,847,000 19,710,000 ============ ============
See accompanying notes to consolidated financial statements F-3 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Consolidated Statements of Operations Years ended July 31, 1999, 1998 and 1997
1999 1998 1997 ------------ ------------ ------------ Net sales $ 37,886,000 30,114,000 24,746,000 ------------ ------------ ------------ Costs and expenses: Cost of sales 26,405,000 21,330,000 17,670,000 Selling, general and administrative 6,632,000 6,013,000 5,415,000 Research and development 2,022,000 1,319,000 1,023,000 ------------ ------------ ------------ 35,059,000 28,662,000 24,108,000 ------------ ------------ ------------ Operating income from continuing operations 2,827,000 1,452,000 638,000 Other expenses (income): Interest expense 204,000 234,000 284,000 Interest income (65,000) (36,000) (33,000) Other (39,000) (30,000) (151,000) ------------ ------------ ------------ Income from continuing operations before income taxes 2,727,000 1,284,000 538,000 Provision (benefit) for income taxes (3,754,000) 180,000 54,000 ------------ ------------ ------------ Income from continuing operations 6,481,000 1,104,000 484,000 Discontinued operations (Note 13): Loss from operations of discontinued segment (net of applicable income tax benefit of $320,000) (622,000) -- -- Loss on disposal of segment, including provision of $430,000 for operating losses during phase-out period (net of applicable income tax benefit of $306,000) (594,000) -- -- ------------ ------------ ------------ Net income $ 5,265,000 1,104,000 484,000 ============ ============ ============ Basic income (loss) per share: Income from continuing operations $ 1.56 0.28 0.13 Loss from discontinued operations (.29) -- -- ------------ ------------ ------------ Basic income per share $ 1.27 0.28 0.13 ============ ============ ============ Diluted income (loss) per share: Income from continuing operations $ 1.42 0.27 0.12 Loss from discontinued operations (.27) -- -- ------------ ------------ ------------ Diluted income per share $ 1.15 0.27 0.12 ============ ============ ============ Weighted average number of common shares outstanding - Basic computation 4,143,000 3,902,000 3,873,000 Potential dilutive common shares 430,000 264,000 33,000 ------------ ------------ ------------ Weighted average number of common and common equivalent shares outstanding assuming dilution - Diluted computation 4,573,000 4,166,000 3,906,000 ============ ============ ============
See accompanying notes to consolidated financial statements. F-4 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity Years ended July 31, 1999, 1998 and 1997
Common stock Additional Treasury stock --------------------------- paid-in Accumulated --------------------------- Shares Amount capital deficit Shares Amount ------ ------ ------- ------- ------ ------ Balance July 31, 1996 3,911,016 $ 391,000 $ 22,105,000 $(11,599,000) 22,500 $ (180,000) Amortization of deferred compensation -- -- -- -- -- -- Forfeiture of unvested restricted shares issued pursuant to employee stock award agreement -- -- (211,000) -- -- -- Purchase of treasury shares 60,000 (4,000) Stock options exercised 64,590 7,000 100,000 -- -- -- Net income -- -- -- 484,000 -- -- ------------ ------------ ------------ ------------ ------------ ------------ Balance July 31, 1997 3,975,606 398,000 21,994,000 (11,115,000) 82,500 (184,000) Amortization of deferred compensation -- -- -- -- -- -- Stock options exercised 32,400 3,000 61,000 -- -- -- Net income -- -- -- 1,104,000 -- -- ------------ ------------ ------------ ------------ ------------ ------------ Balance July 31, 1998 4,008,006 401,000 22,055,000 (10,011,000) 82,500 (184,000) Amortization of deferred compensation -- -- -- -- -- -- Stock issued in acquisition of Mobile Datacom 150,000 15,000 513,000 -- -- -- Restricted shares issued pursuant to employment stock award agreement 225,000 22,000 1,034,000 -- -- -- Stock options exercised 88,362 9,000 199,000 -- -- -- Net income -- -- 5,265,000 -- -- ------------ ------------ ------------ ------------ ------------ ------------ Balance July 31, 1999 4,471,368 $ 447,000 $ 23,801,000 $ (4,746,000) 82,500 $ (184,000) ============ ============ ============ ============ ============ ============ Deferred Stock- compen- holders' sation equity ------ ------ Balance July 31, 1996 $ (416,000) $ 10,301,000 Amortization of deferred compensation 43,000 43,000 Forfeiture of unvested restricted shares issued pursuant to employee stock award agreement 158,000 (53,000) Purchase of treasury shares -- (4,000) Stock options exercised -- 107,000 Net income -- 484,000 ------------ ------------ Balance July 31, 1997 (215,000) 10,878,000 Amortization of deferred compensation 47,000 47,000 Stock options exercised -- 64,000 Net income -- 1,104,000 ------------ ------------ Balance July 31, 1998 (168,000) 12,093,000 Amortization of deferred compensation 248,000 248,000 Stock issued in acquisition of Mobile Datacom -- 528,000 Restricted shares issued pursuant to employment stock award agreement (1,041,000) 15,000 Stock options exercised -- 208,000 Net income -- 5,265,000 ------------ ------------ Balance July 31, 1999 $ (961,000) $ 18,357,000 ============ ============
See accompanying notes to consolidated financial statements. F-5 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Consolidated Statements of Cash Flows Years ended July 31, 1999, 1998 and 1997
1999 1998 1997 ----------- ----------- ----------- Cash flows from operating activities: Net income $ 5,265,000 1,104,000 484,000 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Loss from discontinued operations 1,216,000 -- -- Gain on sale of property -- -- (72,000) Depreciation and amortization 1,510,000 1,206,000 1,055,000 Increase (decrease) in bad debt allowance (25,000) 68,000 74,000 Provision (reduction of) inventory reserves 341,000 (127,000) 466,000 Deferred income tax provision (benefit) (4,575,000) -- -- Changes in assets and liabilities, net of effects of acquisitions: Restricted cash securing letter of credit obligations 22,000 68,000 130,000 Accounts receivable 1,006,000 (449,000) (2,158,000) Inventories (1,724,000) 548,000 (495,000) Prepaid expenses and other current assets 138,000 (45,000) (35,000) Other assets 9,000 (3,000) (48,000) Accounts payable 372,000 (277,000) 828,000 Accrued expenses and other current liabilities 2,376,000 479,000 527,000 ----------- ----------- ----------- Net cash provided by continuing operations 5,931,000 2,572,000 756,000 Net cash used by discontinued operations (988,000) -- -- ----------- ----------- ----------- Net cash provided by operating activities 4,943,000 2,572,000 756,000 ----------- ----------- ----------- Cash flows from investing activities: Purchases of property, plant and equipment (1,000,000) (312,000) (903,000) Sale of property, plant and equipment -- -- 127,000 Payment for business acquisitions net of cash received (173,000) -- -- ----------- ----------- ----------- Net cash used in investing activities (1,173,000) (312,000) (776,000) ----------- ----------- ----------- Cash flows from financing activities: Borrowings under line of credit facility 850,000 1,900,000 1,150,000 Repayments of borrowings under line of credit facility (850,000) (1,900,000) (1,150,000) Principal payments on long-term debt (821,000) (874,000) (649,000) Proceeds from issuance of common stock: Purchase of treasury stock -- -- (4,000) Stock options 208,000 64,000 107,000 Restricted stock 15,000 -- -- ----------- ----------- ----------- Net cash used in financing activities (598,000) (810,000) (546,000) ----------- ----------- -----------
(Continued) F-6 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Consolidated Statements of Cash Flows, Continued
1999 1998 1997 ----------- ----------- ----------- Net increase (decrease) in cash and cash equivalents $ 3,172,000 1,450,000 (566,000) Cash and cash equivalents at beginning of period 2,724,000 1,274,000 1,840,000 ----------- ----------- ----------- Cash and cash equivalents at end of period $ 5,896,000 2,724,000 1,274,000 =========== =========== =========== Supplemental cash flow disclosure Cash paid during the period for: Interest $ 204,000 234,000 284,000 =========== =========== =========== Income taxes $ 169,000 22,000 38,000 =========== =========== ===========
See accompanying notes to consolidated financial statements. F-7 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements July 31, 1999 and 1998 (1) Summary of Significant Accounting and Reporting Policies (a) Principles of Consolidation The accompanying consolidated financial statements include the accounts of Comtech Telecommunications Corp. and its subsidiaries (the Company), all of which are wholly-owned. All significant intercompany balances and transactions have been eliminated in consolidation. (b) Nature of Business We design, develop, produce and market sophisticated components and systems that are used by telecommunications and defense systems and service providers in a broad range of applications. The Company's business is highly competitive and characterized by rapid technological change. In addition, the number of potential customers for the Company's products is limited. The Company's growth and financial position depends, among other things, on its ability to keep pace with such changes and developments and to respond to the sophisticated requirements of an increasing variety of electronic equipment users. Many of the Company's competitors are substantially larger, have significantly greater financial, marketing and operating resources and broader product lines than does the Company. A significant technological breakthrough by others, including smaller competitors or new companies, could have a material adverse effect on the Company's business. In addition, certain of the Company's customers have technological capabilities in the Company's product areas and could choose to replace the Company's products with their own. International sales expose the Company to certain risks, including barriers to trade, fluctuations in foreign currency exchange rates (which may make the Company's products less price competitive), political and economic instability, availability of suitable export financing, export license requirements, tariff regulations, and other United States and foreign regulations that may apply to the export of the Company's products, as well as the generally greater difficulties of doing business abroad. The Company attempts to reduce the risk of doing business in foreign countries by seeking contracts denominated in U.S. dollars, advance payments and irrevocable letters of credit in its favor. (c) Revenue Recognition Revenues on long-term, fixed price contracts are generally recorded based on the relationship of total costs incurred to date to total projected final costs or, alternatively, as deliveries are made. Revenue under cost reimbursement contracts are recorded as costs are incurred. Revenues on other contract orders are recognized under the units of delivery method. Under this method, revenues are recorded as units are delivered with the related cost of sales recognized on each shipment based upon a percentage of estimated final contract costs. Contract costs include material, direct labor, manufacturing overhead and other direct costs. Retainages and estimated earnings in excess of amounts billed on certain multi-year programs are reported as unbilled receivables. (Continued) F-8 Revenue not associated with long-term contracts are generally recognized when the earnings process is complete, generally upon shipment or customer acceptance. Provision for anticipated losses on uncompleted contracts is made in the period in which such losses are determined. (d) Cash and Cash Equivalents Cash equivalents consist of highly liquid direct obligations of the U.S. government with a maturity at acquisition of three months or less. Cash equivalents of July 31, 1999 and 1998 amounted to $2,258,000 and $1,991,000. These investments are carried at cost plus accrued interest, which approximates market. The Company had $22,000 of restricted cash securing letter of credit obligations with a financial institution at July 31, 1998. (e) Statement of Cash Flows The Company acquired equipment financed by capital leases in the amounts of $136,000, $1,207,000 and $48,000 in 1999, 1998 and 1997, respectively. (f) Inventories Work-in-process inventory reflects all accumulated production costs, which are comprised of direct production costs and overhead, reduced by amounts attributable to units delivered. These inventories are reduced to their estimated net realizable value by a charge to cost of sales in the period such excess costs are determined. Raw materials and components and work-in-process inventory are stated at the lower of cost or market, computed on the first-in, first-out (FIFO) method. (g) Long-Lived Assets The Company's plant and equipment, which are recorded at cost, are depreciated or amortized over their estimated useful lives (building and improvements - 40 years, equipment - three to eight years) under the straight-line method. Capitalized values of properties under leases are amortized over the life of the lease or the estimated life of the asset, whichever is less. Intangible assets, consisting of goodwill resulting from acquisitions, is being amortized over twenty years. The Company reviews its long-lived assets for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the expected cash flows, undiscounted and without interest, is less than the carrying amount of the asset, an impairment loss is recognized as the amount by which the carrying amount of the asset exceeds its fair value. (h) Other Assets Included in other assets at July 31, 1999 and 1998 is approximately $350,000 less accumulated amortization, which relates to an intellectual property rights agreement being amortized over the eight-year term of the agreement. At July 31, 1999 and 1998, accumulated amortization related to this purchased technology was approximately $232,000 and $190,000, respectively. The Company assesses the recoverability of the intangible asset by determining whether the amortization of purchased technology over its remaining life can be recovered through undiscounted future operating cash flows from product sales utilizing the technology. (i) Research and Development Costs The Company charges research and development costs to operations as incurred, except in those cases in which such costs are reimbursable under customer-funded contracts. In fiscal 1999, 1998 and 1997, the Company was reimbursed by customers for such activities in the amount of $1,779,000, $356,000 and $436,000, respectively. (Continued) F-9 (j) Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. (k) Earnings Per Share The Company calculates earnings per share ("EPS") in accordance with the Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share". Basic EPS are computed based on the weighted average number of shares outstanding. Diluted EPS reflects the maximum dilution from potential common stock issuable pursuant to the exercise of stock options and warrants, if dilutive, outstanding during each period. All share and per share amounts have been restated to reflect a three-for-two stock split effective July 30, 1999 (Note 9(e)). (l) Financial Instruments Management of the Company believes that the book value of its monetary assets and liabilities approximates fair value as a result of the short-term nature of such assets and liabilities. Management further believes that the fair market value of long-term debt relating to capital leases does not differ materially from its carrying value. (m) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results may differ from those estimates. (n) Accounting for Stock-Based Compensation The Company records compensation expense for employee stock options only if the current market price of the underlying stock exceeds the exercise price on the date of the grant. The Company has elected not to implement the fair value based accounting method for employee stock options of SFAS No. 123, "Accounting for Stock-Based Compensation", but has elected to disclose the pro forma net income per share for employee stock option grants made beginning in fiscal 1996 as if such method had been used to account for stock-based compensation cost as described in SFAS No. 123. (o) Reporting Comprehensive Income The Company has adopted SFAS No. 130, "Reporting Comprehensive Income," which requires companies to report all changes in equity during a period, except those resulting from investment by owners and distribution to owners, for the period in which they are recognized. Comprehensive income is the total of net income and all other nonowner changes in equity (or other comprehensive income) such as unrealized gains/losses on securities classified as available-for-sale, foreign currency translation adjustments and minimum pension liability adjustments. Comprehensive and other comprehensive income must be reported on the face of annual financial statements or in the case of interim reporting, the footnote approach may be utilized. The Company's operations did not give rise to items includible in comprehensive income which were not already included in net income. Accordingly, the Company's comprehensive income is the same as its net income for all periods presented. F-10 (2) Accounts Receivable Accounts receivable consist of the following at July 31, 1999 and 1998:
1999 1998 ---------- ---------- Accounts receivable from commercial customers $3,924,000 4,302,000 Unbilled receivables (including retainages) on contracts-in-progress 1,154,000 1,531,000 Amounts receivable from the United States government and its agencies 219,000 269,000 ---------- ---------- 5,297,000 6,102,000 Less allowance for doubtful accounts 145,000 170,000 ---------- ---------- Accounts receivable, net $5,152,000 5,932,000 ========== ==========
In the opinion of management, substantially all of the unbilled balances will be billed and collected during fiscal 2000. (3) Inventories Inventories consist of the following at July 31, 1999 and 1998: 1999 1998 ---------- ---------- Raw materials and components $3,553,000 3,365,000 Work-in-process 5,798,000 4,932,000 ---------- ---------- 9,351,000 8,297,000 Less: Progress payments 302,000 1,333,000 Reserve for anticipated losses on contracts and inventory reserves 1,170,000 829,000 ---------- ---------- Inventories, net $7,879,000 6,135,000 ========== ========== (4) Property, Plant and Equipment Property, plant and equipment consists of the following at July 31, 1999 and 1998:
1999 1998 ----------- ----------- Equipment $ 9,574,000 8,918,000 Leasehold improvements 427,000 352,000 Facilities financed by capital lease 3,365,000 3,365,000 Equipment financed by capital lease 4,219,000 3,802,000 ----------- ----------- 17,585,000 16,437,000 Less accumulated depreciation and amortization 13,275,000 12,123,000 ----------- ----------- $ 4,310,000 4,314,000 =========== ===========
Depreciation and amortization expense on property, plant and equipment amounted to approximately $1,152,000, $1,103,000 and $994,000 for the years ended July 31, 1999, 1998 and 1997, respectively. F-11 (5) Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consist of the following at July 31, 1999 and 1998: 1999 1998 ---------- ---------- Customer advances and deposits $2,798,000 652,000 Accrued wages and benefits 1,603,000 1,068,000 Accrued commissions 915,000 452,000 Other 710,000 608,000 ---------- ---------- $6,026,000 2,780,000 ========== ========== (6) Short-Term Borrowings In December 1998, the Company obtained an $8,000,000 secured credit facility from Republic National Bank of New York. The line of credit which is to be used for working capital requirements is for a term of one year and bears interest on borrowings at 90 day LIBOR plus 1.50%. There were no borrowings outstanding at July 31, 1999. (7) Long-Term Debt Long-term debt consists of the following at July 31, 1999 and 1998: 1999 1998 ---------- ---------- Obligations under capital leases $1,564,000 2,249,000 Less current installments 605,000 804,000 ---------- ---------- $ 959,000 1,445,000 ========== ========== The obligations under capital leases relate to the Melville, New York facilities, as well as certain equipment, the net carrying value of which was $2,087,000 and $2,517,000 at July 31, 1999 and 1998, respectively. Future minimum lease payments under capital leases as of July 31, 1999 are: Years ending July 31,: 2000 $ 725,000 2001 563,000 2002 315,000 2003 137,000 2004 51,000 ---------- Total minimum lease payments 1,791,000 Less amounts representing interest (at rates varying from 6.8% to 10.8%) 227,000 ---------- 1,564,000 Less current installments 605,000 ---------- Obligations under capital leases, net of current installments $ 959,000 ========== F-12 In December 1991, the Company and a partnership controlled by the Company's Chairman, Chief Executive Officer and President entered into an agreement in which the Company leases from the partnership its corporate headquarters and Melville production facility. The lease is for a ten-year period and provides for annual rentals of approximately $448,000 for fiscal 1999, subject to annual adjustments equal to the lesser of 5% or the change in the Consumer Price Index. For financial reporting purposes, the Company has capitalized this lease at inception in the amount of $2,450,000, net of deferred interest of $1,345,000. The outstanding balance at July 31, 1999 and 1998 approximated $817,000 and $1,105,000, respectively. (8) Income Taxes The provision (benefit) for income taxes on continuing operations included in the accompanying consolidated statements of operations consists of the following: Year ended July 31, ------------------- 1999 1998 1997 ----------- ----------- ----------- Federal -current $ 60,000 45,000 20,000 Federal -deferred (3,949,000) -- -- State and local - current 135,000 135,000 34,000 ----------- ----------- ----------- $(3,754,000) 180,000 54,000 =========== =========== =========== The provision (benefit) for income taxes on income from continuing operations was ($3,754,000), $180,000 and $54,000 for fiscal 1999, 1998 and 1997, respectively and differed from the amounts computed by applying the U.S. Federal income tax rate of 34% as a result of the following:
1999 1998 1997 ---- ---- ---- Amount Rate Amount Rate Amount Rate ------ ---- ------ ---- ------ ---- Computed "expected" tax expense $ 927,000 34.0% 437,000 34.0% 183,000 34.0% Increase (reduction) in income taxes resulting from: Change in the beginning of the year valuation allowance for deferred tax assets (4,544,000) (166.6) (93,000) (7.2) 264,000 49.6 Utilization of tax benefit carryforward (223,000) (8.2) (299,000) (23.3) (430,000) (79.9) State and local income tax, net of Federal benefit 86,000 3.2 135,000 10.5 34,000 6.3 Other -- -- -- -- 3,000 -- ----------- ------ ------- ---- ------ ---- Effective tax rate $(3,754,000) (137.6)% 180,000 14.0% 54,000 10.0% =========== ====== ======= ==== ====== ====
As of July 31, 1999, the Company has net operating loss carryforwards of approximately $10,260,000 for income tax purposes of which $4,843,000 expires in 2004, $1,473,000 expires in 2005, $415,000 expires in 2009 and $3,529,000 expire in 2010 through 2012. F-13 The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at July 31, 1999 and 1998 are presented below.
1999 1998 ---- ---- Deferred tax assets: Allowance for doubtful accounts receivable $ 60,000 60,000 Inventory reserve 646,000 496,000 Plant and equipment, principally due to capitalized leases and differences in depreciation (16,000) 27,000 Compensated absences, principally due to accrual for financial reporting purposes 395,000 331,000 Deferred compensation 250,000 154,000 Net operating loss carryforwards 3,490,000 3,726,000 Investment tax credit carryforwards 440,000 440,000 Alternative minimum tax credit carryforwards 87,000 87,000 ----------- ----------- Total gross deferred tax assets 5,352,000 5,321,000 Less valuation allowance (777,000) (5,321,000) ----------- ----------- Net deferred tax assets $ 4,575,000 -- =========== ===========
The Company provides for income taxes under the provisions of SFAS No. 109, "Accounting for Income Taxes". SFAS 109 requires an asset and liability based approach in accounting for income taxes. In assessing the realizability of deferred tax assets and liabilities, management considers whether it is more likely than not that some portion or all of them will not be realized. At July 31, 1998 the Company had a 100% valuation allowance against these gross deferred tax assets. During fiscal 1999, the Company concluded that a full valuation allowance was no longer necessary given its estimates of future earnings, which include substantial long-term contracts entered into in the first and fourth quarters of fiscal 1999 and the expected timing of temporary difference reversals. Accordingly, the Company reduced the valuation allowance to $777,000 during fiscal 1999 and recorded deferred tax assets of $4,575,000 of which $3,155,000 was recorded in the fourth quarter. The Company must generate approximately $13,500,000 of taxable income to fully utilize its deferred tax assets. Management believes it is more likely than not that the results of future operations will generate sufficient taxable income to realize the net deferred tax assets. (9) Stockholders' Equity (a) Option and Warrant Plans and Agreements The Company has several option and warrant plans and agreements as follows: 1982 Incentive Stock Option Plan - The 1982 Incentive Stock Option and Appreciation Plan provided for the granting to key employees and officers of incentive stock options to purchase up to 240,000 shares of the Company's common stock through September 29, 1992 at prices not less than the fair market value of such shares on the date the option is granted. The plan expired on September 29, 1992. Options granted to purchase an aggregate of 16,350 shares remain outstanding. 1993 Incentive Stock Option Plan - The 1993 Incentive Stock Option Plan, as amended, provides for the granting to key employees and officers of incentive and non-qualified stock options to purchase up to 1,042,500 shares of the Company's common stock at prices generally not less than the fair market value at the date of grant with the exception of anyone who, prior to the grant, owns more than 10% of the voting power, the exercise price cannot be less than 110% of the fair market value. In addition, it provides formula grants to non-employee members of the Board of Directors. The term of the options may be no more than ten years. However, for incentive stock options granted to any employee who, prior to the granting of the option, owns stock representing more than 10% of the voting power, the option term may be no more than five years. The plan expires in 2002, unless terminated earlier by the Board of Directors under conditions specified in the plan. As of July 31, 1999, the Company had granted incentive stock options representing the right to purchase an aggregate of 1,029,015 shares at prices ranging between $1.50 - $7.50 per share, of which 69,600 options were canceled and 888,045 are outstanding at July 31, 1999. To date, 71,370 shares have been exercised. F-14 Warrant Issued Pursuant to Acquisition of CMDC - As part of the asset purchase agreement for the acquisition of Mobile Datacom Corp. (see Note 12), which was incorporated into the Company as a wholly-owned subsidiary, Comtech Mobile Datacom Corp., the Company issued warrants to the owners and creditors to purchase 150,000 shares of the Company's common stock at an exercise price of $6.57. The warrants, which contain transferability restrictions, are exercisable for a period of five years commencing September 24, 1998, and shares purchased through the exercise of these warrants contain voting restrictions. Due to the transferability and voting restrictions and other conditions, no value was ascribed to these warrants for purposes of determining the cost of the acquisition. (b) Option Activity The following table sets forth summarized information concerning the Company's stock options: Number Weighted of average exercise shares price ------ ----- Outstanding at July 31, 1996 363,870 $ 2.42 Granted 43,500 2.16 Expired/canceled (21,810) 2.85 Exercised (64,590) 1.65 -------- Outstanding at July 31, 1997 320,970 2.55 Granted 583,125 2.99 Expired/canceled (13,500) 2.13 Exercised (32,400) 2.00 -------- Outstanding at July 31, 1998 858,195 2.65 Granted 140,250 6.08 Expired/canceled (5,688) 5.90 Exercised (88,362) 2.43 -------- -------- Outstanding at July 31, 1999 904,395 $ 3.40 ======== ======== Options exercisable at July 31, 1999 367,437 $ 2.93 Options available for grant at July 31, 1999 83,085 The options outstanding as of July 31, 1999 are summarized in ranges as follows: Weighted Number of Weighted Range of average options average exercise price exercise price outstanding remaining life -------------- -------------- ----------- -------------- $ 1.50 - 2.50 $ 2.08 123,870 6 years 2.51 - 4.99 3.09 663,525 8 years 5.00 - 7.50 6.55 117,000 7 years F-15 (c) Stock-Based Compensation Plans The Company has two stock option plans, the 1982 Incentive Stock Option and Appreciation Plan and the 1993 Incentive Stock Option Plan. The Company accounts for these plans under APB Opinion No. 25, under which no compensation cost has been recognized. Had compensation cost for these plans been determined consistent with SFAS No. 123, the Company's net income and income per share would have been reduced to the following pro forma amounts: 1999 1998 1997 ----------- ----------- ----------- Net income As reported $ 5,255,000 1,104,000 484,000 Pro forma $ 4,836,000 817,000 475,000 Net income per share As reported Basic $ 1.27 0.28 0.13 Diluted $ 1.15 0.27 0.12 Pro forma Basic $ 1.17 0.21 0.12 Diluted $ 1.06 0.19 0.12 The full impact of calculating compensation cost for stock options under SFAS No. 123 is not reflected in the pro forma net income and net income per share amounts presented above because compensation cost is reflected over the option's vesting period and compensation cost for options granted prior to August 1, 1995 was not considered. The per share weighted-average fair value of stock options granted during 1999 and 1998 was $3.19 and $2.30, respectively, on the date of grant using the Black Scholes option-pricing model with the following weighted-average assumptions: 1999 - expected dividend yield of 0%, risk-free interest rate of 5.86%, expected volatility of 69.5% and an expected option life of 10 years. 1998 - expected dividend yield of 0%, risk-free interest rate of 6%, expected volatility of 63.32% and an expected option life of 10 years. 1997 - expected dividend yield of 0%, risk-free interest rate of 6%, expected volatility of 64.49% and an expected option life of 10 years. (d) Restricted Common Stock In February 1994, a total of 180,000 (after effect of three-for-two stock split - see Note 9(e)) restricted shares of the Company's common stock were granted by the Board of Directors to the principal officers of one of the Company's operating units, Comtech Communications Corp, ("CCC"), at a cost of $.10 per share. The award relates to services to be provided over future years and, as a result, the stock awards are subject to certain restrictions which may be removed earlier upon CCC attaining certain business plan milestones, as provided in the agreement, but no later than ten years from the date of the award. The excess of market value over cost of the shares awarded of $633,000 was recorded as deferred compensation and is being amortized to expense over a ten-year period subject to the aforementioned accelerated provisions, if appropriate, as evaluated on an annual basis. The deferred compensation is reflected as a reduction of stockholders' equity in the accompanying consolidated balance sheet. During fiscal 1997, 60,000 of such shares were forfeited due to the termination of an officer's employment prior to vesting. In October 1998, a total of 225,000 (after effect of three-for-two stock split - see Note 9(e)) restricted shares of the Companys' common stock were granted by the Board of Directors to the principal officers and employees of the Companys' new subsidiary, Comtech Mobile Datacom Corp.("CMDC"), at a cost of $.10 per share. The award relates to services to be provided over future years and, as a result, the stock awards are subject to certain restrictions which may be removed earlier upon CMDC attaining certain business plan milestones, as provided in the agreement, but no later than ten years from the date of the award. The excess of market value over cost of the F-16 shares awarded of $1,041,000 was recorded as deferred compensation and is being amortized to expense over a ten-year period subject to the aforementioned accelerated provisions, if appropriate, as evaluated on an annual basis. The deferred compensation is reflected as a reduction of stockholders' equity in the accompanying consolidated balance sheet as of July 31,1999. (d) Stock Split On July 6, 1999, the Company's Board of Directors authorized a three-for-two stock split effected in the form of a 50% stock dividend payable July 30, 1999 to stockholders of record on July 16, 1999. All share and per share amounts in the accompanying consolidated financial statements have been restated to reflect the stock split. (10) Segment and Principal Customer Information Effective July 31, 1999, the Company adopted SFAS No. 131,"Disclosures about Segments of an Enterprise and Related Information." Reportable operating segments are determined based on the Company's management approach. The management approach, as defined by SFAS No. 131, is based on the way that the chief operating decision-maker organizes the segments within an enterprise for making operating decisions and assessing performance. While the Company's results of operations are primarily reviewed on a consolidated basis, the chief operating decision-maker also manages the enterprise in four segments: (I)Telecommunications Transmission, (II) RF Microwave Amplifiers, (III) Mobile Data Communications Services and (IV) Wireless Local Loop, which is being discontinued. Telecommunications Transmission products include modems, frequency converters, satellite VSAT transceivers and antennas and over-the-horizon microwave communications products and systems. RF Microwave Amplifier products include high-power amplifier products that use the microwave and radio frequency spectrums. Mobile Data Communications Services include two-way messaging links between mobile platforms or remote sites and user headquarters using satellite, terrestrial microwave or Internet links. Corporate assets consist principally of cash, deferred tax assets and intercompany receivables. Corporate losses result from such corporate expenses as legal, accounting and executive. Sales between segments were negligible. Eliminations consist of intercompany balances. (in thousands)
Mobile Data Corporate Telecommunications RF Microwave Communications and Fiscal 1999 Transmission Amplifiers Services Others Eliminations Total ----------- ------------ ---------- -------- ------ ------------ ----- Net sales $23,045 14,523 318 -- 37,886 Operating income (loss) 2,296 2,503 (309) (1,663) 2,827 Interest income 10 -- 55 65 Interest expense 38 152 11 3 204 Depreciation and amortization 461 714 87 248 1,510 Expenditure for long-lived assets 791 326 1,734 3 2,854 Total assets 16,907 8,409 2,691 15,494 (13,654) 29,847 Mobile Data Corporate Telecommunications RF Microwave Communications and Fiscal 1998 Transmission Amplifiers Services Others Eliminations Total ----------- ------------ ---------- -------- ------ ------------ ----- Net sales $13,047 17,067 -- -- 30,114 Operating income (loss) 123 2,565 -- (1,236) 1,452 Interest income -- -- 36 36 Interest expense 52 160 -- 22 234 Depreciation and amortization 506 653 -- 47 1,206 Expenditure for long-lived assets 669 850 -- -- 1,519 Total assets 4,433 9,207 -- 11,930 (5,860) 19,710
(continued) F-17 Net sales $12,513 12,233 -- -- 24,746 Operating income (loss) 356 1,296 -- (1,014) 638 Interest income -- 14 -- 19 33 Interest expense 58 214 -- 12 284 Depreciation and amortization 515 550 -- (10) 1,055 Expenditure for long-lived assets 440 511 -- -- 951 Total assets 8,116 9,346 -- 12,502 (12,004) 17,960
Sales to one customer in fiscal 1999 and to different customers in fiscal 1998 and 1997 represented 27.0% and 12.2% and 10.2% of the consolidated net sales, respectively. Such sales were made from the Telecommunications Transmission business segment in 1999 and 1997, and from the RF Microwave Amplifier business segment in 1998. During fiscal 1999, 1998 and 1997, approximately 16%, 20% and 17%, respectively, of the Company's net sales resulted from contracts with the United States government and its agencies. Export sales comprised 60%, 46% and 57% of net sales in fiscal 1999, 1998 and 1997, respectively. Export sales include sales to domestic companies for inclusion in products which will be sold to international customers. (11) Commitments and Contingencies (a) Operating Leases The Company is obligated under noncancellable operating lease agreements. At July 31, 1999, the future minimum lease payments under operating leases are as follows: 2000 $ 355,000 2001 355,000 2002 193,000 2003 196,000 ------------- $ 1,099,000 ============= Lease expense charged to operations was $301,000, $140,000 and $123,000 in fiscal 1999, 1998 and 1997, respectively. (b) United States Government Contracts Certain of the Company's contracts are subject to audit by applicable governmental agencies. Until such audits are completed, the ultimate profit on these contracts cannot be determined; however, it is management's belief that the final contract settlements will not have a material adverse effect on the Company's consolidated financial condition. (c) Litigation The Company is subject to certain legal actions which arise out of the normal course of business. It is management's belief that the outcome of these actions will not have a material adverse effect on the Company's consolidated financial position. F-18 (d) Employment Contract Mr. Kornberg, the Company's Chairman of the Board of Directors, Chief Executive Officer and President is employed pursuant to an agreement which was amended and restated in January 1998 which provides, among other things, for his employment until 2003 at a current basic compensation of $295,000 per annum plus such additional amounts, if any, as the Board of Directors may from time to time determine. (12) Acquisitions In the first quarter of fiscal 1999, the Company formed two subsidiaries, Comtech Mobile Datacom Corp. ("CMDC") and Comtech Wireless, Inc. ("CWI") to acquire the assets and assume certain liabilities of two businesses. The purchase price of the business acquired by CMDC amounted to $628,000 consisting of cash of $100,000, 150,000 shares of restricted common stock, valued at $528,000, and warrants to purchase 150,000 shares of common stock at an exercise price of $6.57 per share. The purchase price of the business acquired by CWI amounted to $350,000 consisting of $100,000 of cash and a non-recourse note payable of $250,000. The assets acquired were inventories and equipment. Both acquisitions were accounted for as purchases whereby the assets and liabilities of the businesses acquired were consolidated with those of the Company from their respective acquisition dates. The excess of the purchase price over the fair value of the net assets of the business acquired by CMDC approximated $1,701,000 and is being amortized over a 20-year period. This amount is included in intangible assets in the accompanying consolidated balance sheet. Effective July 31, 1999, the operations of the business acquired by CWI are being discontinued (see Note 13). The pro forma effect of the acquisition of CMDC was not material to the results of operations for the years ended July 31,1999 and 1998. (13) Discontinued Operations Based upon CWI's disappointing fiscal 1999 results of operations and its uncertain future prospects, in September 1999, the Board of Directors approved a plan to liquidate CWI by January 31, 2000. The consolidated financial statements of the Company have been reclassified to reflect the effects of the Company's decision to account for the disposal of CWI as a discontinued operation. Accordingly, costs and expenses, assets and liabilities, and cash flows associated with CWI have been excluded from the respective captions in the accompanying consolidated balance sheet, statements of operations and statements of cash flows. Components of amounts included in the net liabilities of discontinued operations in the accompanying consolidated balance sheet are as follows: July 31, 1999 ------------- Inventory $ 293,000 Provision for operating losses during phase-out period (430,000) ---------- $ (137,000) ========== The Company expects to liquidate the operations of CWI by January 31, 2000 and has estimated a loss of $470,000 on disposal of CWI's assets and $430,000 for operating losses through January 31, 2000. CWI had no revenue in fiscal 1999 and expenses of $942,000. (14) Stockholder Rights Plan On December 15, 1998, the Company's Board of Directors approved the adoption of a stockholder rights plan in which one stock purchase right ("Right") was distributed as a dividend on each outstanding share of the Company's common stock to stockholders of record at the close of business on January 4, 1999. Under the plan, the Rights will be exercisable only if triggered by a person or group's acquisition of 15% or more of the Company's common stock. If triggered, each Right, other than Rights held by the acquiring person or group, would entitle its holder to purchase a specified number of the Company's common shares for 50% of F-19 their market value at that time. Unless a 15% acquisition has occurred, the Rights may be redeemed by the Company at any time prior to the termination date of the plan. This Right to purchase common stock at a discount will not be triggered by a person's or group's acquisition of 15% or more of the common stock pursuant to a tender or exchange offer which is for all outstanding shares at a price and on terms that Comtech's Board of Directors determines (prior to acquisition) to be adequate and in the best interest of the Company and its stockholders. The Rights will expire on December 15, 2008. F-20 Schedule II COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Valuation and Qualifying Accounts and Reserves Years ended July 31, 1999, 1998 and 1997
Column A Column B Column C Column D Column E -------- -------- -------- -------- -------- Additions --------- (1) (2) Charged to Balance at Charged to other Transfers Balance at beginning cost and accounts - (deductions) end of Description of period expenses describe describe period ----------- --------- -------- -------- -------- ------ Allowance for doubtful accounts - accounts receivable: Year ended July 31,: 1999 $ 170,000 -- -- (25,000)(D) 145,000 1998 102,000 96,000 (C) -- (28,000)(D) 170,000 1997 28,000 85,000 (C) -- (11,000)(D) 102,000 Inventory reserves: Year ended July 31,: 1999 $ 829,000 341,000 (A) -- -- 1,170,000 1998 956,000 -- -- (127,000)(B) 829,000 1997 490,000 466,000 (A) -- -- 956,000
(A) Increase in reserves for contract and other adjustments. (B) Reduction of excess reserves for contract and other adjustments. (C) Increase in allowance for doubtful accounts. (D) Write-off of uncollectible receivables. S-1 EX-10.(F) 2 STOCK PURCHASE AGREEMENTS TIME ACCELERATED RESTRICTED STOCK PURCHASE AGREEMENT AGREEMENT dated September 24, 1998 between Comtech Telecommunications Corp., a Delaware corporation ("Comtech"), and Ronald Johnson ("Employee"). WHEREAS, Employee is employed by Comtech's wholly-owned subsidiary, Comtech Mobile Datacom Corporation ("CMDC"), and Comtech and Employee desire to (a) provide additional incentives to Employee in connection with Employee's responsibilities for the management and growth of the business of CMDC, and (b) more closely align Employee's interests with the interests of stockholders of Comtech, through, in relation to both objectives, the sale and issuance to Employee of restricted shares of Common Stock of Comtech. NOW, THEREFORE, Comtech and Employee agree as follows: 1. Definitions (a) "Comtech" means Comtech Telecommunications Corp., a Delaware corporation. (b) "Escrow Agent" means the Escrow Agent as defined in the Escrow Agreement in the form annexed hereto as Exhibit A. (c) "Cumulative CMDC Pre-Tax Profits" means CMDC's aggregate income before income taxes minus CMDC's aggregate losses in the period from inception of operations of CMDC to the end of the relevant fiscal year. Determinations of such amounts shall be made in accordance with generally accepted accounting principles, with the exception that no effect shall be given to (i) interest or like charges or accruals ("Capital Charges") in respect of Comtech cash advances to CMDC that are less than $1.5 million plus the amount of dividends paid by CMDC to Comtech during the relevant fiscal year; (ii) Capital Charges in excess of 1/2% above the average rate of interest then charged to Comtech for all borrowings by Comtech, on Comtech cash advances to CMDC exceeding $1.5 million at any time outstanding plus the amount of dividends paid by CMDC to Comtech during the relevant fiscal year; (iii) general or administrative expenses of Comtech, including charges for management or corporate services provided by Comtech to CMDC; or (iv) the sale of shares of Comtech Common Stock to Employee and other employees of CMDC, or the repurchase of same. 1 (d) "Net Cash Borrowings" means the cumulative amount of cash advances to CMDC by Comtech. (e) "Net Cash Flow" means total cash refunds by CMDC to Comtech, net of cash advances by Comtech to CMDC. (f) "Restricted Shares" means the Shares subject to the restrictions against transfer provided in Section 3 hereof and which are required to be resold to Comtech under certain circumstances as provided in Section 3 hereof. (g) "Unrestricted Shares" means Shares as to which all restrictions against transfer and the obligation to resell to Comtech have lapsed. (h) "Shares" shall have the meaning provided in Section 2 hereof. 2. Sale and Purchase of Shares On the terms, and subject to the conditions hereinafter provided, simultaneously with the execution and delivery of this Agreement, (i) Comtech is selling and issuing to Employee, and Employee is purchasing from Comtech, 20,000 shares of Common Stock, par value $.10 per share, of Comtech (the "Shares"); (ii) Employee is paying to Comtech by certified or bank cashier's check a total purchase price for the Shares of $2,000 (i.e., $.10 per share); and (iii) Employee is depositing the Shares with the Escrow Agent, to be held by the Escrow Agent pursuant and subject to the terms of an Escrow Agreement in the form annexed hereto as Exhibit A. 3. Restrictions (a) The Shares shall not be transferred until such time as they shall become "Unrestricted Shares" pursuant to Section 4 hereof (the Shares subject to such restriction being hereinafter referred to as "Restricted Shares"). As used in this Agreement, "transfer" shall include, without limitation, any sale, assignment, gift, pledge, hypothecation, bequest, devise, encumbrance, or other disposition, whether voluntary or by operation of law. Any attempted transfer of Restricted Shares (other than to Comtech pursuant to the provisions of Section 4 of this Agreement) shall be null and void and Comtech shall not give effect on its records to any such attempted transfer. (b) Employee authorizes Comtech and its transfer agents not to transfer any certificates of Comtech Common Stock on its books and records transferred in violation of this Agreement, and further agrees that any such purported transfer shall be void and of no effect. (c) An original of this Agreement shall be kept in the files of Comtech at its principal office and reference to this Agreement shall be endorsed on all stock certificates subject to this Agreement, now or hereafter issued, by writing or stamping thereon a legend in substantially the following form: 2 "Sale, assignment, gift, bequest, devise, pledge, hypothecation, encumbrance or other disposition of the shares represented by this Certificate is restricted by the terms of a Restricted Stock Agreement, dated September __, 1998, a copy of which, and any amendments thereto, may be examined at the principal office of Comtech Telecommunications Corp." (d) Employee shall possess all rights as a stockholder (including, without limitation, voting rights, rights to dividends, if any, declared and rights on liquidation) except such as are expressly restricted by the provisions of this Agreement. 4. Lapse of Restrictions; Forfeiture of Shares (a) One-sixth of the Shares shall become Unrestricted Shares, subject to satisfying the tax withholding requirements contained in Subsection 4(d) hereof, upon the first anniversary of the date hereof. (b) Subject to satisfying the tax withholding requirements contained in Subsection 4(d) hereof, the remaining five-sixths of the Shares shall become Unrestricted Shares on the tenth anniversary of the date hereof, except that such Shares shall become Unrestricted Shares on an accelerated basis in the one-sixth increments set forth in the following schedule after the Performance Criteria set forth therein are achieved: Number of Shares that become Performance Criteria Unrestricted Shares -------------------- -------------------- o Fiscal year-end cumulative CMDC net sales One-sixth (1/6) of $3,000,000 and Net Cash Borrowings at of Shares purchased that time of less than $1,000,000 o Fiscal year-end Cumulative CMDC Pre-Tax One-sixth (1/6) Profits of $500,000 and Net Cash of Shares purchased Borrowings at such time of less than $500,000 o Fiscal year-end Cumulative CMDC Pre-Tax One-sixth (1/6) Profits of $2,000,000 and Net Cash of Shares purchased Borrowings at such time of less than $100,000 o Fiscal year-end Cumulative CMDC Pre-Tax One-sixth (1/6) Profits of $3,000,000 and fiscal year Net of Shares purchased Cash Flow of $1,500,000 or more 3 Number of Shares that become Performance Criteria Unrestricted Shares -------------------- -------------------- o Fiscal year-end Cumulative CMDC Pre-Tax One-sixth (1/6) Profits of $7,000,000 and fiscal year Net of Shares purchased Cash Flow of $2,500,000 or more (c) Notwithstanding anything to the contrary contained in this Agreement, but subject to satisfying the tax withholding requirements contained in Subsection 4(d) hereof, (i) all Restricted Shares shall become Unrestricted Shares upon termination of Employee's employment with CMDC by reason of his death, total and permanent disability (as determined in accordance with the policies and practices of Comtech), normal retirement (at or after age 70 or, with the consent of Comtech, before age 70), or early retirement at Comtech's request; and (ii) upon discharge of Employee by CMDC other than for cause (which for this purpose shall mean Employee's willful misconduct, dereliction of duty, or conviction for a crime involving moral turpitude). (d) If, at the time any Shares become Unrestricted Shares, Comtech determines that it has withheld an amount which is less than the withholding that may be required pursuant to the Internal Revenue Code or other applicable law, Employee shall forthwith pay to Comtech the amount of monies necessary to satisfy such withholding or equivalent requirements. Until the payment of such monies or, alternatively the execution and delivery by Employee of an agreement satisfactory to Comtech in it sole discretion providing for the payment of such monies, the Unrestricted Shares shall not be released to Employee pursuant to the terms of the Escrow Agreement. If payment of such monies is not made or such agreement is not entered into, such Unrestricted Shares shall, at Comtech's direction, be sold by Employee to Comtech for a purchase price equal to the purchase price per share provided in Section 2 hereof, adjusted, as appropriate for any subsequent stock-split, recapitalization or the like. (e) In the event of Employee's termination of employment with CMDC for any reason other than those specified in Subsection 4(c) hereof (including, without limitation, any voluntary termination of employment) all Restricted Shares shall be sold by Employee to Comtech, for the price and otherwise in the manner provided in Subsection 4(d) hereof. 5. Representations and Warranties of Employee Employee represents and warrants as follows: (a) Assuming that Comtech has transferred to Employee good and marketable title to the Shares, Employee has not taken any action or permitted any action to occur, nor will employee take any action or permit any action to occur, that would result in the Shares becoming subject to any claim, lien, pledge or encumbrance of any nature whatsoever. 4 (b) Employee has full legal power and capacity to execute and deliver this Agreement, and such execution and delivery and Employee's acceptance of employment with CMDC contemporaneously with the execution and delivery of this Agreement are not in violation of any other agreement, instrument or obligation to which Employee is a party, including, without limitation, any employment agreement or non-competition agreement of any kind whatsoever. (c) This Agreement constitutes the legal, valid and binding obligation of Employee. (d) Employee has not employed any broker or finder or incurred any liability for any brokerage fees or commissions or finders' fees in connection with this Agreement. (e) Employee is acquiring the Shares for investment purposes only and not with a view to distribution, and acknowledges that he has been advised by his counsel, and understands, that the Shares have not been registered under the Securities Act of 1933, as amended, and under the securities laws, may not be sold or transferred unless registered under such Act or pursuant to an exemption from such registration and that a restrictive legend to that effect shall be placed on the certificate(s) representing the Shares. Employee has further been advised by his counsel with respect to making an election pursuant to Section 83(b) of the Internal Revenue Code and has chosen, or will choose, whether to make such election as he deems appropriate. 6. Representations and Warranties of Comtech Comtech represents and warrants as follows: (a) Comtech is a corporation duly organized, existing and in good standing under the laws of the State of Delaware with full power and legal right to execute and deliver this Agreement and perform its obligations hereunder. (b) The execution and delivery of this Agreement by Comtech and the performance by it of its obligations hereunder have been duly authorized by all necessary corporate action and do not violate the terms of any outstanding agreements to which it is a party. This Agreement constitutes the legal, valid and binding obligation of Comtech. 7. Certain Employment Matters (a) The purchase of Shares hereunder shall not preclude Employee from being eligible to participate in any other plans, programs or benefits otherwise available to employees of Comtech or its subsidiaries. Nothing in this Agreement shall be construed to constitute or be evidence of an agreement or understanding, express or implied, on the part of Comtech or CMDC to employ Employee for any specific period of time. (b) In consideration of his employment with CMDC and the sale and issuance of the Shares to him pursuant to this Agreement, Employee shall not, during the period he is employed by CMDC and for one year thereafter following Employee's voluntary termination of is employment by CMDC, in any manner, directly or indirectly, engage anywhere in the United States in any 5 business which competes with the business in which CMDC or Comtech or any of its other subsidiaries is engaged at any time during the period in which Employee is employed by CMDC, and he shall not, directly or indirectly, own, manage, operate, join, control or participate in the ownership, management, operation or control of, or be employed by, or connected in any manner with any corporation, firm or business that is so engaged; provided, however, that nothing herein contained shall prohibit Employee from owning not more than 5% of the outstanding stock of any publicly held corporation. If any restriction set forth in this Subsection 7(b) is found by a court of competent jurisdiction or arbitrator to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable. (c) Employee shall hold in a fiduciary capacity for the benefit of CMDC and Comtech all confidential information, knowledge or data relating to CMDC and Comtech or any of its other subsidiaries, and their respective businesses obtained by Employee before or during the period in which he is employed by CMDC. (d) The restrictions contained in Subsections (b) and (c) of this Section 7 are necessary for the protection of the business and goodwill of CMDC and Comtech and are considered by Employee to be reasonable to such purpose. Employee agrees that any breach of such Subsections (b) and (c) will cause CMDC and/or Comtech substantial and irreparable damage and therefore, in the event of any such breach, in addition to such other remedies which may be available, CMDC and/or Comtech shall have the right to seek specific performance and injunctive relief. 8. Liability of Comtech The liability of Comtech under this Agreement is limited to the obligations expressly set forth herein and nothing herein contained shall be construed to impose any liability on Comtech in favor of Employee with respect to any loss, cost or expense which Employee may incur or suffer in connection with or arising out of this Agreement, including, without limitation, Employee's purchase of the Shares. 9. Voting Concerning Certain Corporate Matters (a) Employee agrees to have counted for purposes of a quorum, and to vote, all Restricted Shares (whether such vote shall be by written consent or by vote, in person or, if requested by Comtech, by proxy, at a meeting of shareholders of Comtech) for the election to Comtech's Board of Directors of the nominees from time to time designated by the Board of Directors of Comtech. (b) To facilitate, and not in limitation of, the agreement contained in Subsection 9(a) hereof, Employee irrevocably appoints the Chairman of the Board and the Secretary of Comtech, and their respective successors in office, and each of them, with full power of substitution, as the lawful proxy for Employee as to all Restricted Shares, to vote all Restricted Shares which Employee is entitled to vote, for and in the name, place and stead of Employee, at any annual, special or other meeting of the holders of shares of Comtech Common Stock and at any adjournment thereof, or 6 pursuant to any consent in lieu of a meeting, for the election to Comtech's Board of Directors of the nominees designated by the Board of Directors of Comtech. The foregoing proxy is coupled with an interest and therefore not terminable by Employee without the consent of Comtech. 10. Additional Restricted Shares. Employees agrees that the term "Restricted Shares" shall include any shares or other securities which he may receive or be entitled to receive as a result of the ownership of the original Restricted Shares whether the same are issued as a result of a share split, share dividend, recapitalization, or other subdivision or consolidation of shares effected without receipt of consideration by Comtech or the result of the merger or consolidation of Comtech or sale of assets of Comtech. 11. Binding Agreement This Agreement shall inure to the benefit of, and be binding upon, Comtech and its successors and assigns and Employee and his heirs, personal representatives, successors and assigns. 12. Notices Any notice, request or other communication hereunder shall be in writing and shall be deemed to have been duly given if hand delivered or mailed by registered or certified mail, return receipt requested, addressed as herein set forth, or to such other address as may be designated by a notice given pursuant hereto, which change of address notice shall be effective upon receipt thereof. If to Comtech: Comtech Telecommunications Corp. 105 Baylis Road Melville, New York 11747 Attention: Fred Kornberg, President Copy to: Proskauer Rose LLP 1585 Broadway New York, New York 10036 Attention: Robert A. Cantone, Esq. If to Employee: 9966 Foxbourgh Circle Rockville, MD 20850 7 13. Survival. All of the representations, warranties, agreements and covenants contained herein or made or deemed to have been made pursuant hereto or in connection with the transactions contemplated hereby shall survive the execution and delivery hereof and the consummation of the transactions contemplated hereby. 14. Governing Law This Agreement shall be governed by and construed in accordance with the laws of the State of New York. 15. Counterparts This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which, taken together, shall constitute one instrument. 16. Expenses Employee and Comtech shall each bear all the expenses incurred by them or it in connection with this Agreement and the transactions contemplated hereby. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 8 IN WITNESS WHEREOF, Comtech and Employee have caused this Agreement to be executed as of the date first above written. COMTECH TELECOMMUNICATIONS CORP. By: ---------------------------------- Authorized Signatory By: ---------------------------------- Ronald Johnson 9 TIME ACCELERATED RESTRICTED STOCK PURCHASE AGREEMENT AGREEMENT dated September 24, 1998 between Comtech Telecommunications Corp., a Delaware corporation ("Comtech"), and Leslie Snively ("Employee"). WHEREAS, Employee is employed by Comtech's wholly-owned subsidiary, Comtech Mobile Datacom Corporation ("CMDC"), and Comtech and Employee desire to (a) provide additional incentives to Employee in connection with Employee's responsibilities for the management and growth of the business of CMDC, and (b) more closely align Employee's interests with the interests of stockholders of Comtech, through, in relation to both objectives, the sale and issuance to Employee of restricted shares of Common Stock of Comtech. NOW, THEREFORE, Comtech and Employee agree as follows: 1. Definitions (a) "Comtech" means Comtech Telecommunications Corp., a Delaware corporation. (b) "Escrow Agent" means the Escrow Agent as defined in the Escrow Agreement in the form annexed hereto as Exhibit A. (c) "Cumulative CMDC Pre-Tax Profits" means CMDC's aggregate income before income taxes minus CMDC's aggregate losses in the period from inception of operations of CMDC to the end of the relevant fiscal year. Determinations of such amounts shall be made in accordance with generally accepted accounting principles, with the exception that no effect shall be given to (i) interest or like charges or accruals ("Capital Charges") in respect of Comtech cash advances to CMDC that are less than $1.5 million plus the amount of dividends paid by CMDC to Comtech during the relevant fiscal year; (ii) Capital Charges in excess of 1/2% above the average rate of interest then charged to Comtech for all borrowings by Comtech, on Comtech cash advances to CMDC exceeding $1.5 million at any time outstanding plus the amount of dividends paid by CMDC to Comtech during the relevant fiscal year; (iii) general or administrative expenses of Comtech, including charges for management or corporate services provided by Comtech to CMDC; or (iv) the sale of shares of Comtech Common Stock to Employee and other employees of CMDC, or the repurchase of same. (d) "Net Cash Borrowings" means the cumulative amount of cash advances to CMDC by Comtech. (e) "Net Cash Flow" means total cash refunds by CMDC to Comtech, net of cash advances by Comtech to CMDC. (f) "Restricted Shares" means the Shares subject to the restrictions against transfer provided in Section 3 hereof and which are required to be resold to Comtech under certain circumstances as provided in Section 3 hereof. (g) "Unrestricted Shares" means Shares as to which all restrictions against transfer and the obligation to resell to Comtech have lapsed. (h) "Shares" shall have the meaning provided in Section 2 hereof. 2. Sale and Purchase of Shares On the terms, and subject to the conditions hereinafter provided, simultaneously with the execution and delivery of this Agreement, (i) Comtech is selling and issuing to Employee, and Employee is purchasing from Comtech, 35,000 shares of Common Stock, par value $.10 per share, of Comtech (the "Shares"); (ii) Employee is paying to Comtech by certified or bank cashier's check a total purchase price for the Shares of $3,500 (i.e., $.10 per share); and (iii) Employee is depositing the Shares with the Escrow Agent, to be held by the Escrow Agent pursuant and subject to the terms of an Escrow Agreement in the form annexed hereto as Exhibit A. 3. Restrictions (a) The Shares shall not be transferred until such time as they shall become "Unrestricted Shares" pursuant to Section 4 hereof (the Shares subject to such restriction being hereinafter referred to as "Restricted Shares"). As used in this Agreement, "transfer" shall include, without limitation, any sale, assignment, gift, pledge, hypothecation, bequest, devise, encumbrance, or other disposition, whether voluntary or by operation of law. Any attempted transfer of Restricted Shares (other than to Comtech pursuant to the provisions of Section 4 of this Agreement) shall be null and void and Comtech shall not give effect on its records to any such attempted transfer. (b) Employee authorizes Comtech and its transfer agents not to transfer any certificates of Comtech Common Stock on its books and records transferred in violation of this Agreement, and further agrees that any such purported transfer shall be void and of no effect. (c) An original of this Agreement shall be kept in the files of Comtech at its principal office and reference to this Agreement shall be endorsed on all stock certificates subject to this Agreement, now or hereafter issued, by writing or stamping thereon a legend in substantially the following form: 2 "Sale, assignment, gift, bequest, devise, pledge, hypothecation, encumbrance or other disposition of the shares represented by this Certificate is restricted by the terms of a Restricted Stock Agreement, dated September __, 1998, a copy of which, and any amendments thereto, may be examined at the principal office of Comtech Telecommunications Corp." (d) Employee shall possess all rights as a stockholder (including, without limitation, voting rights, rights to dividends, if any, declared and rights on liquidation) except such as are expressly restricted by the provisions of this Agreement. 4. Lapse of Restrictions; Forfeiture of Shares (a) One-sixth of the Shares shall become Unrestricted Shares, subject to satisfying the tax withholding requirements contained in Subsection 4(d) hereof, upon the first anniversary of the date hereof. (b) Subject to satisfying the tax withholding requirements contained in Subsection 4(d) hereof, the remaining five-sixths of the Shares shall become Unrestricted Shares on the tenth anniversary of the date hereof, except that such Shares shall become Unrestricted Shares on an accelerated basis in the one-sixth increments set forth in the following schedule after the Performance Criteria set forth therein are achieved: Number of Shares that become Performance Criteria Unrestricted Shares -------------------- ------------------- o Fiscal year-end cumulative CMDC net sales of $3,000,000 and Net Cash Borrowings at One-sixth (1/6) that time of less than $1,000,000 of Shares purchased o Fiscal year-end Cumulative CMDC Pre-Tax Profits of $500,000 and Net Cash One-sixth (1/6) Borrowings at such time of less than of Shares purchased $500,000 o Fiscal year-end Cumulative CMDC Pre-Tax Profits of $2,000,000 and Net Cash One-sixth (1/6) Borrowings at such time of less than of Shares purchased $100,000 o Fiscal year-end Cumulative CMDC Pre-Tax Profits of $3,000,000 and fiscal year Net One-sixth (1/6) Cash Flow of $1,500,000 or more of Shares purchased 3 Number of Shares that become Performance Criteria Unrestricted Shares -------------------- ------------------- o Fiscal year-end Cumulative CMDC Pre-Tax Profits of $7,000,000 and fiscal year Net One-sixth (1/6) Cash Flow of $2,500,000 or more of Shares purchased (c) Notwithstanding anything to the contrary contained in this Agreement, but subject to satisfying the tax withholding requirements contained in Subsection 4(d) hereof, (i) all Restricted Shares shall become Unrestricted Shares upon termination of Employee's employment with CMDC by reason of his death, total and permanent disability (as determined in accordance with the policies and practices of Comtech), normal retirement (at or after age 70 or, with the consent of Comtech, before age 70), or early retirement at Comtech's request; and (ii) upon discharge of Employee by CMDC other than for cause (which for this purpose shall mean Employee's willful misconduct, dereliction of duty, or conviction for a crime involving moral turpitude). (d) If, at the time any Shares become Unrestricted Shares, Comtech determines that it has withheld an amount which is less than the withholding that may be required pursuant to the Internal Revenue Code or other applicable law, Employee shall forthwith pay to Comtech the amount of monies necessary to satisfy such withholding or equivalent requirements. Until the payment of such monies or, alternatively the execution and delivery by Employee of an agreement satisfactory to Comtech in it sole discretion providing for the payment of such monies, the Unrestricted Shares shall not be released to Employee pursuant to the terms of the Escrow Agreement. If payment of such monies is not made or such agreement is not entered into, such Unrestricted Shares shall, at Comtech's direction, be sold by Employee to Comtech for a purchase price equal to the purchase price per share provided in Section 2 hereof, adjusted, as appropriate for any subsequent stock-split, recapitalization or the like. (e) In the event of Employee's termination of employment with CMDC for any reason other than those specified in Subsection 4(c) hereof (including, without limitation, any voluntary termination of employment) all Restricted Shares shall be sold by Employee to Comtech, for the price and otherwise in the manner provided in Subsection 4(d) hereof. 5. Representations and Warranties of Employee Employee represents and warrants as follows: (a) Assuming that Comtech has transferred to Employee good and marketable title to the Shares, Employee has not taken any action or permitted any action to occur, nor will employee take any action or permit any action to occur, that would result in the Shares becoming subject to any claim, lien, pledge or encumbrance of any nature whatsoever. 4 (b) Employee has full legal power and capacity to execute and deliver this Agreement, and such execution and delivery and Employee's acceptance of employment with CMDC contemporaneously with the execution and delivery of this Agreement are not in violation of any other agreement, instrument or obligation to which Employee is a party, including, without limitation, any employment agreement or non-competition agreement of any kind whatsoever. (c) This Agreement constitutes the legal, valid and binding obligation of Employee. (d) Employee has not employed any broker or finder or incurred any liability for any brokerage fees or commissions or finders' fees in connection with this Agreement. (e) Employee is acquiring the Shares for investment purposes only and not with a view to distribution, and acknowledges that he has been advised by his counsel, and understands, that the Shares have not been registered under the Securities Act of 1933, as amended, and under the securities laws, may not be sold or transferred unless registered under such Act or pursuant to an exemption from such registration and that a restrictive legend to that effect shall be placed on the certificate(s) representing the Shares. Employee has further been advised by his counsel with respect to making an election pursuant to Section 83(b) of the Internal Revenue Code and has chosen, or will choose, whether to make such election as he deems appropriate. 6. Representations and Warranties of Comtech Comtech represents and warrants as follows: (a) Comtech is a corporation duly organized, existing and in good standing under the laws of the State of Delaware with full power and legal right to execute and deliver this Agreement and perform its obligations hereunder. (b) The execution and delivery of this Agreement by Comtech and the performance by it of its obligations hereunder have been duly authorized by all necessary corporate action and do not violate the terms of any outstanding agreements to which it is a party. This Agreement constitutes the legal, valid and binding obligation of Comtech. 7. Certain Employment Matters (a) The purchase of Shares hereunder shall not preclude Employee from being eligible to participate in any other plans, programs or benefits otherwise available to employees of Comtech or its subsidiaries. Nothing in this Agreement shall be construed to constitute or be evidence of an agreement or understanding, express or implied, on the part of Comtech or CMDC to employ Employee for any specific period of time. (b) In consideration of his employment with CMDC and the sale and issuance of the Shares to him pursuant to this Agreement, Employee shall not, during the period he is employed by CMDC and for one year thereafter following Employee's voluntary termination of is employment by CMDC, in any manner, directly or indirectly, engage anywhere in the United States in any 5 business which competes with the business in which CMDC or Comtech or any of its other subsidiaries is engaged at any time during the period in which Employee is employed by CMDC, and he shall not, directly or indirectly, own, manage, operate, join, control or participate in the ownership, management, operation or control of, or be employed by, or connected in any manner with any corporation, firm or business that is so engaged; provided, however, that nothing herein contained shall prohibit Employee from owning not more than 5% of the outstanding stock of any publicly held corporation. If any restriction set forth in this Subsection 7(b) is found by a court of competent jurisdiction or arbitrator to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable. (c) Employee shall hold in a fiduciary capacity for the benefit of CMDC and Comtech all confidential information, knowledge or data relating to CMDC and Comtech or any of its other subsidiaries, and their respective businesses obtained by Employee before or during the period in which he is employed by CMDC. (d) The restrictions contained in Subsections (b) and (c) of this Section 7 are necessary for the protection of the business and goodwill of CMDC and Comtech and are considered by Employee to be reasonable to such purpose. Employee agrees that any breach of such Subsections (b) and (c) will cause CMDC and/or Comtech substantial and irreparable damage and therefore, in the event of any such breach, in addition to such other remedies which may be available, CMDC and/or Comtech shall have the right to seek specific performance and injunctive relief. 8. Liability of Comtech The liability of Comtech under this Agreement is limited to the obligations expressly set forth herein and nothing herein contained shall be construed to impose any liability on Comtech in favor of Employee with respect to any loss, cost or expense which Employee may incur or suffer in connection with or arising out of this Agreement, including, without limitation, Employee's purchase of the Shares. 9. Voting Concerning Certain Corporate Matters (a) Employee agrees to have counted for purposes of a quorum, and to vote, all Restricted Shares (whether such vote shall be by written consent or by vote, in person or, if requested by Comtech, by proxy, at a meeting of shareholders of Comtech) for the election to Comtech's Board of Directors of the nominees from time to time designated by the Board of Directors of Comtech. (b) To facilitate, and not in limitation of, the agreement contained in Subsection 9(a) hereof, Employee irrevocably appoints the Chairman of the Board and the Secretary of Comtech, and their respective successors in office, and each of them, with full power of substitution, as the lawful proxy for Employee as to all Restricted Shares, to vote all Restricted Shares which Employee is entitled to vote, for and in the name, place and stead of Employee, at any annual, special or other meeting of the holders of shares of Comtech Common Stock and at any adjournment thereof, or 6 pursuant to any consent in lieu of a meeting, for the election to Comtech's Board of Directors of the nominees designated by the Board of Directors of Comtech. The foregoing proxy is coupled with an interest and therefore not terminable by Employee without the consent of Comtech. 10. Additional Restricted Shares. Employees agrees that the term "Restricted Shares" shall include any shares or other securities which he may receive or be entitled to receive as a result of the ownership of the original Restricted Shares whether the same are issued as a result of a share split, share dividend, recapitalization, or other subdivision or consolidation of shares effected without receipt of consideration by Comtech or the result of the merger or consolidation of Comtech or sale of assets of Comtech. 11. Binding Agreement This Agreement shall inure to the benefit of, and be binding upon, Comtech and its successors and assigns and Employee and his heirs, personal representatives, successors and assigns. 12. Notices Any notice, request or other communication hereunder shall be in writing and shall be deemed to have been duly given if hand delivered or mailed by registered or certified mail, return receipt requested, addressed as herein set forth, or to such other address as may be designated by a notice given pursuant hereto, which change of address notice shall be effective upon receipt thereof. If to Comtech: Comtech Telecommunications Corp. 105 Baylis Road Melville, New York 11747 Attention: Fred Kornberg, President Copy to: Proskauer Rose LLP 1585 Broadway New York, New York 10036 Attention: Robert A. Cantone, Esq. If to Employee: 290 W. Prestwick Way Castle Rock, CO 80104 7 13. Survival. All of the representations, warranties, agreements and covenants contained herein or made or deemed to have been made pursuant hereto or in connection with the transactions contemplated hereby shall survive the execution and delivery hereof and the consummation of the transactions contemplated hereby. 14. Governing Law This Agreement shall be governed by and construed in accordance with the laws of the State of New York. 15. Counterparts This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which, taken together, shall constitute one instrument. 16. Expenses Employee and Comtech shall each bear all the expenses incurred by them or it in connection with this Agreement and the transactions contemplated hereby. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 8 IN WITNESS WHEREOF, Comtech and Employee have caused this Agreement to be executed as of the date first above written. COMTECH TELECOMMUNICATIONS CORP. By: _________________________ Authorized Signatory __________________________ Leslie Snively 9 TIME ACCELERATED RESTRICTED STOCK PURCHASE AGREEMENT AGREEMENT dated September 24, 1998 between Comtech Telecommunications Corp., a Delaware corporation ("Comtech"), and Dan Veeneman ("Employee"). WHEREAS, Employee is employed by Comtech's wholly-owned subsidiary, Comtech Mobile Datacom Corporation ("CMDC"), and Comtech and Employee desire to (a) provide additional incentives to Employee in connection with Employee's responsibilities for the management and growth of the business of CMDC, and (b) more closely align Employee's interests with the interests of stockholders of Comtech, through, in relation to both objectives, the sale and issuance to Employee of restricted shares of Common Stock of Comtech. NOW, THEREFORE, Comtech and Employee agree as follows: 1. Definitions (a) "Comtech" means Comtech Telecommunications Corp., a Delaware corporation. (b) "Escrow Agent" means the Escrow Agent as defined in the Escrow Agreement in the form annexed hereto as Exhibit A. (c) "Cumulative CMDC Pre-Tax Profits" means CMDC's aggregate income before income taxes minus CMDC's aggregate losses in the period from inception of operations of CMDC to the end of the relevant fiscal year. Determinations of such amounts shall be made in accordance with generally accepted accounting principles, with the exception that no effect shall be given to (i) interest or like charges or accruals ("Capital Charges") in respect of Comtech cash advances to CMDC that are less than $1.5 million plus the amount of dividends paid by CMDC to Comtech during the relevant fiscal year; (ii) Capital Charges in excess of 1/2% above the average rate of interest then charged to Comtech for all borrowings by Comtech, on Comtech cash advances to CMDC exceeding $1.5 million at any time outstanding plus the amount of dividends paid by CMDC to Comtech during the relevant fiscal year; (iii) general or administrative expenses of Comtech, including charges for management or corporate services provided by Comtech to CMDC; or (iv) the sale of shares of Comtech Common Stock to Employee and other employees of CMDC, or the repurchase of same. 1 (d) "Net Cash Borrowings" means the cumulative amount of cash advances to CMDC by Comtech. (e) "Net Cash Flow" means total cash refunds by CMDC to Comtech, net of cash advances by Comtech to CMDC. (f) "Restricted Shares" means the Shares subject to the restrictions against transfer provided in Section 3 hereof and which are required to be resold to Comtech under certain circumstances as provided in Section 3 hereof. (g) "Unrestricted Shares" means Shares as to which all restrictions against transfer and the obligation to resell to Comtech have lapsed. (h) "Shares" shall have the meaning provided in Section 2 hereof. 2. Sale and Purchase of Shares On the terms, and subject to the conditions hereinafter provided, simultaneously with the execution and delivery of this Agreement, (i) Comtech is selling and issuing to Employee, and Employee is purchasing from Comtech, 25,000 shares of Common Stock, par value $.10 per share, of Comtech (the "Shares"); (ii) Employee is paying to Comtech by certified or bank cashier's check a total purchase price for the Shares of $2,500 (i.e., $.10 per share); and (iii) Employee is depositing the Shares with the Escrow Agent, to be held by the Escrow Agent pursuant and subject to the terms of an Escrow Agreement in the form annexed hereto as Exhibit A. 3. Restrictions (a) The Shares shall not be transferred until such time as they shall become "Unrestricted Shares" pursuant to Section 4 hereof (the Shares subject to such restriction being hereinafter referred to as "Restricted Shares"). As used in this Agreement, "transfer" shall include, without limitation, any sale, assignment, gift, pledge, hypothecation, bequest, devise, encumbrance, or other disposition, whether voluntary or by operation of law. Any attempted transfer of Restricted Shares (other than to Comtech pursuant to the provisions of Section 4 of this Agreement) shall be null and void and Comtech shall not give effect on its records to any such attempted transfer. (b) Employee authorizes Comtech and its transfer agents not to transfer any certificates of Comtech Common Stock on its books and records transferred in violation of this Agreement, and further agrees that any such purported transfer shall be void and of no effect. (c) An original of this Agreement shall be kept in the files of Comtech at its principal office and reference to this Agreement shall be endorsed on all stock certificates subject to this Agreement, now or hereafter issued, by writing or stamping thereon a legend in substantially the following form: 2 "Sale, assignment, gift, bequest, devise, pledge, hypothecation, encumbrance or other disposition of the shares represented by this Certificate is restricted by the terms of a Restricted Stock Agreement, dated September __, 1998, a copy of which, and any amendments thereto, may be examined at the principal office of Comtech Telecommunications Corp." (d) Employee shall possess all rights as a stockholder (including, without limitation, voting rights, rights to dividends, if any, declared and rights on liquidation) except such as are expressly restricted by the provisions of this Agreement. 4. Lapse of Restrictions; Forfeiture of Shares (a) One-sixth of the Shares shall become Unrestricted Shares, subject to satisfying the tax withholding requirements contained in Subsection 4(d) hereof, upon the first anniversary of the date hereof. (b) Subject to satisfying the tax withholding requirements contained in Subsection 4(d) hereof, the remaining five-sixths of the Shares shall become Unrestricted Shares on the tenth anniversary of the date hereof, except that such Shares shall become Unrestricted Shares on an accelerated basis in the one-sixth increments set forth in the following schedule after the Performance Criteria set forth therein are achieved: Number of Shares that become Performance Criteria Unrestricted Shares -------------------- ------------------- o Fiscal year-end cumulative CMDC net sales One-sixth (1/6) of $3,000,000 and Net Cash Borrowings at of Shares purchased that time of less than $1,000,000 o Fiscal year-end Cumulative CMDC Pre-Tax One-sixth (1/6) Profits of $500,000 and Net Cash of Shares purchased Borrowings at such time of less than $500,000 o Fiscal year-end Cumulative CMDC Pre-Tax One-sixth (1/6) Profits of $2,000,000 and Net Cash of Shares purchased Borrowings at such time of less than $100,000 o Fiscal year-end Cumulative CMDC Pre-Tax One-sixth (1/6) Profits of $3,000,000 and fiscal year Net of Shares purchased Cash Flow of $1,500,000 or more 3 Number of Shares that become Performance Criteria Unrestricted Shares -------------------- ------------------- o Fiscal year-end Cumulative CMDC Pre-Tax One-sixth (1/6) Profits of $7,000,000 and fiscal year Net of Shares purchased Cash Flow of $2,500,000 or more (c) Notwithstanding anything to the contrary contained in this Agreement, but subject to satisfying the tax withholding requirements contained in Subsection 4(d) hereof, (i) all Restricted Shares shall become Unrestricted Shares upon termination of Employee's employment with CMDC by reason of his death, total and permanent disability (as determined in accordance with the policies and practices of Comtech), normal retirement (at or after age 70 or, with the consent of Comtech, before age 70), or early retirement at Comtech's request; and (ii) upon discharge of Employee by CMDC other than for cause (which for this purpose shall mean Employee's willful misconduct, dereliction of duty, or conviction for a crime involving moral turpitude). (d) If, at the time any Shares become Unrestricted Shares, Comtech determines that it has withheld an amount which is less than the withholding that may be required pursuant to the Internal Revenue Code or other applicable law, Employee shall forthwith pay to Comtech the amount of monies necessary to satisfy such withholding or equivalent requirements. Until the payment of such monies or, alternatively the execution and delivery by Employee of an agreement satisfactory to Comtech in it sole discretion providing for the payment of such monies, the Unrestricted Shares shall not be released to Employee pursuant to the terms of the Escrow Agreement. If payment of such monies is not made or such agreement is not entered into, such Unrestricted Shares shall, at Comtech's direction, be sold by Employee to Comtech for a purchase price equal to the purchase price per share provided in Section 2 hereof, adjusted, as appropriate for any subsequent stock-split, recapitalization or the like. (e) In the event of Employee's termination of employment with CMDC for any reason other than those specified in Subsection 4(c) hereof (including, without limitation, any voluntary termination of employment) all Restricted Shares shall be sold by Employee to Comtech, for the price and otherwise in the manner provided in Subsection 4(d) hereof. 5. Representations and Warranties of Employee Employee represents and warrants as follows: (a) Assuming that Comtech has transferred to Employee good and marketable title to the Shares, Employee has not taken any action or permitted any action to occur, nor will employee take any action or permit any action to occur, that would result in the Shares becoming subject to any claim, lien, pledge or encumbrance of any nature whatsoever. 4 (b) Employee has full legal power and capacity to execute and deliver this Agreement, and such execution and delivery and Employee's acceptance of employment with CMDC contemporaneously with the execution and delivery of this Agreement are not in violation of any other agreement, instrument or obligation to which Employee is a party, including, without limitation, any employment agreement or non-competition agreement of any kind whatsoever. (c) This Agreement constitutes the legal, valid and binding obligation of Employee. (d) Employee has not employed any broker or finder or incurred any liability for any brokerage fees or commissions or finders' fees in connection with this Agreement. (e) Employee is acquiring the Shares for investment purposes only and not with a view to distribution, and acknowledges that he has been advised by his counsel, and understands, that the Shares have not been registered under the Securities Act of 1933, as amended, and under the securities laws, may not be sold or transferred unless registered under such Act or pursuant to an exemption from such registration and that a restrictive legend to that effect shall be placed on the certificate(s) representing the Shares. Employee has further been advised by his counsel with respect to making an election pursuant to Section 83(b) of the Internal Revenue Code and has chosen, or will choose, whether to make such election as he deems appropriate. 6. Representations and Warranties of Comtech Comtech represents and warrants as follows: (a) Comtech is a corporation duly organized, existing and in good standing under the laws of the State of Delaware with full power and legal right to execute and deliver this Agreement and perform its obligations hereunder. (b) The execution and delivery of this Agreement by Comtech and the performance by it of its obligations hereunder have been duly authorized by all necessary corporate action and do not violate the terms of any outstanding agreements to which it is a party. This Agreement constitutes the legal, valid and binding obligation of Comtech. 7. Certain Employment Matters (a) The purchase of Shares hereunder shall not preclude Employee from being eligible to participate in any other plans, programs or benefits otherwise available to employees of Comtech or its subsidiaries. Nothing in this Agreement shall be construed to constitute or be evidence of an agreement or understanding, express or implied, on the part of Comtech or CMDC to employ Employee for any specific period of time. (b) In consideration of his employment with CMDC and the sale and issuance of the Shares to him pursuant to this Agreement, Employee shall not, during the period he is employed by CMDC and for one year thereafter following Employee's voluntary termination of is employment by CMDC, in any manner, directly or indirectly, engage anywhere in the United States in any 5 business which competes with the business in which CMDC or Comtech or any of its other subsidiaries is engaged at any time during the period in which Employee is employed by CMDC, and he shall not, directly or indirectly, own, manage, operate, join, control or participate in the ownership, management, operation or control of, or be employed by, or connected in any manner with any corporation, firm or business that is so engaged; provided, however, that nothing herein contained shall prohibit Employee from owning not more than 5% of the outstanding stock of any publicly held corporation. If any restriction set forth in this Subsection 7(b) is found by a court of competent jurisdiction or arbitrator to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable. (c) Employee shall hold in a fiduciary capacity for the benefit of CMDC and Comtech all confidential information, knowledge or data relating to CMDC and Comtech or any of its other subsidiaries, and their respective businesses obtained by Employee before or during the period in which he is employed by CMDC. (d) The restrictions contained in Subsections (b) and (c) of this Section 7 are necessary for the protection of the business and goodwill of CMDC and Comtech and are considered by Employee to be reasonable to such purpose. Employee agrees that any breach of such Subsections (b) and (c) will cause CMDC and/or Comtech substantial and irreparable damage and therefore, in the event of any such breach, in addition to such other remedies which may be available, CMDC and/or Comtech shall have the right to seek specific performance and injunctive relief. 8. Liability of Comtech The liability of Comtech under this Agreement is limited to the obligations expressly set forth herein and nothing herein contained shall be construed to impose any liability on Comtech in favor of Employee with respect to any loss, cost or expense which Employee may incur or suffer in connection with or arising out of this Agreement, including, without limitation, Employee's purchase of the Shares. 9. Voting Concerning Certain Corporate Matters (a) Employee agrees to have counted for purposes of a quorum, and to vote, all Restricted Shares (whether such vote shall be by written consent or by vote, in person or, if requested by Comtech, by proxy, at a meeting of shareholders of Comtech) for the election to Comtech's Board of Directors of the nominees from time to time designated by the Board of Directors of Comtech. (b) To facilitate, and not in limitation of, the agreement contained in Subsection 9(a) hereof, Employee irrevocably appoints the Chairman of the Board and the Secretary of Comtech, and their respective successors in office, and each of them, with full power of substitution, as the lawful proxy for Employee as to all Restricted Shares, to vote all Restricted Shares which Employee is entitled to vote, for and in the name, place and stead of Employee, at any annual, special or other meeting of the holders of shares of Comtech Common Stock and at any adjournment thereof, or 6 pursuant to any consent in lieu of a meeting, for the election to Comtech's Board of Directors of the nominees designated by the Board of Directors of Comtech. The foregoing proxy is coupled with an interest and therefore not terminable by Employee without the consent of Comtech. 10. Additional Restricted Shares. Employees agrees that the term "Restricted Shares" shall include any shares or other securities which he may receive or be entitled to receive as a result of the ownership of the original Restricted Shares whether the same are issued as a result of a share split, share dividend, recapitalization, or other subdivision or consolidation of shares effected without receipt of consideration by Comtech or the result of the merger or consolidation of Comtech or sale of assets of Comtech. 11. Binding Agreement This Agreement shall inure to the benefit of, and be binding upon, Comtech and its successors and assigns and Employee and his heirs, personal representatives, successors and assigns. 12. Notices Any notice, request or other communication hereunder shall be in writing and shall be deemed to have been duly given if hand delivered or mailed by registered or certified mail, return receipt requested, addressed as herein set forth, or to such other address as may be designated by a notice given pursuant hereto, which change of address notice shall be effective upon receipt thereof. If to Comtech: Comtech Telecommunications Corp. 105 Baylis Road Melville, New York 11747 Attention: Fred Kornberg, President Copy to: Proskauer Rose LLP 1585 Broadway New York, New York 10036 Attention: Robert A. Cantone, Esq. If to Employee: 11754 Lone Tree Columbia, MD 20144 7 13. Survival. All of the representations, warranties, agreements and covenants contained herein or made or deemed to have been made pursuant hereto or in connection with the transactions contemplated hereby shall survive the execution and delivery hereof and the consummation of the transactions contemplated hereby. 14. Governing Law This Agreement shall be governed by and construed in accordance with the laws of the State of New York. 15. Counterparts This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which, taken together, shall constitute one instrument. 16. Expenses Employee and Comtech shall each bear all the expenses incurred by them or it in connection with this Agreement and the transactions contemplated hereby. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 8 IN WITNESS WHEREOF, Comtech and Employee have caused this Agreement to be executed as of the date first above written. COMTECH TELECOMMUNICATIONS CORP. By:_______________________________________ Authorized Signatory _______________________________________ Dan Veeneman 9 TIME ACCELERATED RESTRICTED STOCK PURCHASE AGREEMENT AGREEMENT dated September 24, 1998 between Comtech Telecommunications Corp., a Delaware corporation ("Comtech"), and Brent Taylor ("Employee"). WHEREAS, Employee is employed by Comtech's wholly-owned subsidiary, Comtech Mobile Datacom Corporation ("CMDC"), and Comtech and Employee desire to (a) provide additional incentives to Employee in connection with Employee's responsibilities for the management and growth of the business of CMDC, and (b) more closely align Employee's interests with the interests of stockholders of Comtech, through, in relation to both objectives, the sale and issuance to Employee of restricted shares of Common Stock of Comtech. NOW, THEREFORE, Comtech and Employee agree as follows: 1. Definitions (a) "Comtech" means Comtech Telecommunications Corp., a Delaware corporation. (b) "Escrow Agent" means the Escrow Agent as defined in the Escrow Agreement in the form annexed hereto as Exhibit A. (c) "Cumulative CMDC Pre-Tax Profits" means CMDC's aggregate income before income taxes minus CMDC's aggregate losses in the period from inception of operations of CMDC to the end of the relevant fiscal year. Determinations of such amounts shall be made in accordance with generally accepted accounting principles, with the exception that no effect shall be given to (i) interest or like charges or accruals ("Capital Charges") in respect of Comtech cash advances to CMDC that are less than $1.5 million plus the amount of dividends paid by CMDC to Comtech during the relevant fiscal year; (ii) Capital Charges in excess of 1/2% above the average rate of interest then charged to Comtech for all borrowings by Comtech, on Comtech cash advances to CMDC exceeding $1.5 million at any time outstanding plus the amount of dividends paid by CMDC to Comtech during the relevant fiscal year; (iii) general or administrative expenses of Comtech, including charges for management or corporate services provided by Comtech to CMDC; or (iv) the sale of shares of Comtech Common Stock to Employee and other employees of CMDC, or the repurchase of same. (d) "Net Cash Borrowings" means the cumulative amount of cash advances to CMDC by Comtech. (e) "Net Cash Flow" means total cash refunds by CMDC to Comtech, net of cash advances by Comtech to CMDC. (f) "Restricted Shares" means the Shares subject to the restrictions against transfer provided in Section 3 hereof and which are required to be resold to Comtech under certain circumstances as provided in Section 3 hereof. (g) "Unrestricted Shares" means Shares as to which all restrictions against transfer and the obligation to resell to Comtech have lapsed. (h) "Shares" shall have the meaning provided in Section 2 hereof. 2. Sale and Purchase of Shares On the terms, and subject to the conditions hereinafter provided, simultaneously with the execution and delivery of this Agreement, (i) Comtech is selling and issuing to Employee, and Employee is purchasing from Comtech, 35,000 shares of Common Stock, par value $.10 per share, of Comtech (the "Shares"); (ii) Employee is paying to Comtech by certified or bank cashier's check a total purchase price for the Shares of $3,500 (i.e., $.10 per share); and (iii) Employee is depositing the Shares with the Escrow Agent, to be held by the Escrow Agent pursuant and subject to the terms of an Escrow Agreement in the form annexed hereto as Exhibit A. 3. Restrictions (a) The Shares shall not be transferred until such time as they shall become "Unrestricted Shares" pursuant to Section 4 hereof (the Shares subject to such restriction being hereinafter referred to as "Restricted Shares"). As used in this Agreement, "transfer" shall include, without limitation, any sale, assignment, gift, pledge, hypothecation, bequest, devise, encumbrance, or other disposition, whether voluntary or by operation of law. Any attempted transfer of Restricted Shares (other than to Comtech pursuant to the provisions of Section 4 of this Agreement) shall be null and void and Comtech shall not give effect on its records to any such attempted transfer. (b) Employee authorizes Comtech and its transfer agents not to transfer any certificates of Comtech Common Stock on its books and records transferred in violation of this Agreement, and further agrees that any such purported transfer shall be void and of no effect. (c) An original of this Agreement shall be kept in the files of Comtech at its principal office and reference to this Agreement shall be endorsed on all stock certificates subject to this Agreement, now or hereafter issued, by writing or stamping thereon a legend in substantially the following form: 2 "Sale, assignment, gift, bequest, devise, pledge, hypothecation, encumbrance or other disposition of the shares represented by this Certificate is restricted by the terms of a Restricted Stock Agreement, dated September __, 1998, a copy of which, and any amendments thereto, may be examined at the principal office of Comtech Telecommunications Corp." (d) Employee shall possess all rights as a stockholder (including, without limitation, voting rights, rights to dividends, if any, declared and rights on liquidation) except such as are expressly restricted by the provisions of this Agreement. 4. Lapse of Restrictions; Forfeiture of Shares (a) One-sixth of the Shares shall become Unrestricted Shares, subject to satisfying the tax withholding requirements contained in Subsection 4(d) hereof, upon the first anniversary of the date hereof. (b) Subject to satisfying the tax withholding requirements contained in Subsection 4(d) hereof, the remaining five-sixths of the Shares shall become Unrestricted Shares on the tenth anniversary of the date hereof, except that such Shares shall become Unrestricted Shares on an accelerated basis in the one-sixth increments set forth in the following schedule after the Performance Criteria set forth therein are achieved: Number of Shares that become Performance Criteria Unrestricted Shares -------------------- ------------------- o Fiscal year-end cumulative CMDC net sales One-sixth (1/6) of $3,000,000 and Net Cash Borrowings at of Shares purchased that time of less than $1,000,000 o Fiscal year-end Cumulative CMDC Pre-Tax One-sixth (1/6) Profits of $500,000 and Net Cash of Shares purchased Borrowings at such time of less than $500,000 o Fiscal year-end Cumulative CMDC Pre-Tax One-sixth (1/6) Profits of $2,000,000 and Net Cash of Shares purchased Borrowings at such time of less than $100,000 o Fiscal year-end Cumulative CMDC Pre-Tax One-sixth (1/6) Profits of $3,000,000 and fiscal year Net of Shares purchased Cash Flow of $1,500,000 or more 3 Number of Shares that become Performance Criteria Unrestricted Shares -------------------- ------------------- o Fiscal year-end Cumulative CMDC Pre-Tax One-sixth (1/6) Profits of $7,000,000 and fiscal year Net of Shares purchased Cash Flow of $2,500,000 or more (c) Notwithstanding anything to the contrary contained in this Agreement, but subject to satisfying the tax withholding requirements contained in Subsection 4(d) hereof, (i) all Restricted Shares shall become Unrestricted Shares upon termination of Employee's employment with CMDC by reason of his death, total and permanent disability (as determined in accordance with the policies and practices of Comtech), normal retirement (at or after age 70 or, with the consent of Comtech, before age 70), or early retirement at Comtech's request; and (ii) upon discharge of Employee by CMDC other than for cause (which for this purpose shall mean Employee's willful misconduct, dereliction of duty, or conviction for a crime involving moral turpitude). (d) If, at the time any Shares become Unrestricted Shares, Comtech determines that it has withheld an amount which is less than the withholding that may be required pursuant to the Internal Revenue Code or other applicable law, Employee shall forthwith pay to Comtech the amount of monies necessary to satisfy such withholding or equivalent requirements. Until the payment of such monies or, alternatively the execution and delivery by Employee of an agreement satisfactory to Comtech in it sole discretion providing for the payment of such monies, the Unrestricted Shares shall not be released to Employee pursuant to the terms of the Escrow Agreement. If payment of such monies is not made or such agreement is not entered into, such Unrestricted Shares shall, at Comtech's direction, be sold by Employee to Comtech for a purchase price equal to the purchase price per share provided in Section 2 hereof, adjusted, as appropriate for any subsequent stock-split, recapitalization or the like. (e) In the event of Employee's termination of employment with CMDC for any reason other than those specified in Subsection 4(c) hereof (including, without limitation, any voluntary termination of employment) all Restricted Shares shall be sold by Employee to Comtech, for the price and otherwise in the manner provided in Subsection 4(d) hereof. 5. Representations and Warranties of Employee Employee represents and warrants as follows: (a) Assuming that Comtech has transferred to Employee good and marketable title to the Shares, Employee has not taken any action or permitted any action to occur, nor will employee take any action or permit any action to occur, that would result in the Shares becoming subject to any claim, lien, pledge or encumbrance of any nature whatsoever. 4 (b) Employee has full legal power and capacity to execute and deliver this Agreement, and such execution and delivery and Employee's acceptance of employment with CMDC contemporaneously with the execution and delivery of this Agreement are not in violation of any other agreement, instrument or obligation to which Employee is a party, including, without limitation, any employment agreement or non-competition agreement of any kind whatsoever. (c) This Agreement constitutes the legal, valid and binding obligation of Employee. (d) Employee has not employed any broker or finder or incurred any liability for any brokerage fees or commissions or finders' fees in connection with this Agreement. (e) Employee is acquiring the Shares for investment purposes only and not with a view to distribution, and acknowledges that he has been advised by his counsel, and understands, that the Shares have not been registered under the Securities Act of 1933, as amended, and under the securities laws, may not be sold or transferred unless registered under such Act or pursuant to an exemption from such registration and that a restrictive legend to that effect shall be placed on the certificate(s) representing the Shares. Employee has further been advised by his counsel with respect to making an election pursuant to Section 83(b) of the Internal Revenue Code and has chosen, or will choose, whether to make such election as he deems appropriate. 6. Representations and Warranties of Comtech Comtech represents and warrants as follows: (a) Comtech is a corporation duly organized, existing and in good standing under the laws of the State of Delaware with full power and legal right to execute and deliver this Agreement and perform its obligations hereunder. (b) The execution and delivery of this Agreement by Comtech and the performance by it of its obligations hereunder have been duly authorized by all necessary corporate action and do not violate the terms of any outstanding agreements to which it is a party. This Agreement constitutes the legal, valid and binding obligation of Comtech. 7. Certain Employment Matters (a) The purchase of Shares hereunder shall not preclude Employee from being eligible to participate in any other plans, programs or benefits otherwise available to employees of Comtech or its subsidiaries. Nothing in this Agreement shall be construed to constitute or be evidence of an agreement or understanding, express or implied, on the part of Comtech or CMDC to employ Employee for any specific period of time. (b) In consideration of his employment with CMDC and the sale and issuance of the Shares to him pursuant to this Agreement, Employee shall not, during the period he is employed by CMDC and for one year thereafter following Employee's voluntary termination of is employment by CMDC, in any manner, directly or indirectly, engage anywhere in the United States in any 5 business which competes with the business in which CMDC or Comtech or any of its other subsidiaries is engaged at any time during the period in which Employee is employed by CMDC, and he shall not, directly or indirectly, own, manage, operate, join, control or participate in the ownership, management, operation or control of, or be employed by, or connected in any manner with any corporation, firm or business that is so engaged; provided, however, that nothing herein contained shall prohibit Employee from owning not more than 5% of the outstanding stock of any publicly held corporation. If any restriction set forth in this Subsection 7(b) is found by a court of competent jurisdiction or arbitrator to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable. (c) Employee shall hold in a fiduciary capacity for the benefit of CMDC and Comtech all confidential information, knowledge or data relating to CMDC and Comtech or any of its other subsidiaries, and their respective businesses obtained by Employee before or during the period in which he is employed by CMDC. (d) The restrictions contained in Subsections (b) and (c) of this Section 7 are necessary for the protection of the business and goodwill of CMDC and Comtech and are considered by Employee to be reasonable to such purpose. Employee agrees that any breach of such Subsections (b) and (c) will cause CMDC and/or Comtech substantial and irreparable damage and therefore, in the event of any such breach, in addition to such other remedies which may be available, CMDC and/or Comtech shall have the right to seek specific performance and injunctive relief. 8. Liability of Comtech The liability of Comtech under this Agreement is limited to the obligations expressly set forth herein and nothing herein contained shall be construed to impose any liability on Comtech in favor of Employee with respect to any loss, cost or expense which Employee may incur or suffer in connection with or arising out of this Agreement, including, without limitation, Employee's purchase of the Shares. 9. Voting Concerning Certain Corporate Matters (a) Employee agrees to have counted for purposes of a quorum, and to vote, all Restricted Shares (whether such vote shall be by written consent or by vote, in person or, if requested by Comtech, by proxy, at a meeting of shareholders of Comtech) for the election to Comtech's Board of Directors of the nominees from time to time designated by the Board of Directors of Comtech. (b) To facilitate, and not in limitation of, the agreement contained in Subsection 9(a) hereof, Employee irrevocably appoints the Chairman of the Board and the Secretary of Comtech, and their respective successors in office, and each of them, with full power of substitution, as the lawful proxy for Employee as to all Restricted Shares, to vote all Restricted Shares which Employee is entitled to vote, for and in the name, place and stead of Employee, at any annual, special or other meeting of the holders of shares of Comtech Common Stock and at any adjournment thereof, or 6 pursuant to any consent in lieu of a meeting, for the election to Comtech's Board of Directors of the nominees designated by the Board of Directors of Comtech. The foregoing proxy is coupled with an interest and therefore not terminable by Employee without the consent of Comtech. 10. Additional Restricted Shares. Employees agrees that the term "Restricted Shares" shall include any shares or other securities which he may receive or be entitled to receive as a result of the ownership of the original Restricted Shares whether the same are issued as a result of a share split, share dividend, recapitalization, or other subdivision or consolidation of shares effected without receipt of consideration by Comtech or the result of the merger or consolidation of Comtech or sale of assets of Comtech. 11. Binding Agreement This Agreement shall inure to the benefit of, and be binding upon, Comtech and its successors and assigns and Employee and his heirs, personal representatives, successors and assigns. 12. Notices Any notice, request or other communication hereunder shall be in writing and shall be deemed to have been duly given if hand delivered or mailed by registered or certified mail, return receipt requested, addressed as herein set forth, or to such other address as may be designated by a notice given pursuant hereto, which change of address notice shall be effective upon receipt thereof. If to Comtech: Comtech Telecommunications Corp. 105 Baylis Road Melville, New York 11747 Attention: Fred Kornberg, President Copy to: Proskauer Rose LLP 1585 Broadway New York, New York 10036 Attention: Robert A. Cantone, Esq. If to Employee: 21312 Glendevon Ct. Germantown, MD 20876 7 13. Survival. All of the representations, warranties, agreements and covenants contained herein or made or deemed to have been made pursuant hereto or in connection with the transactions contemplated hereby shall survive the execution and delivery hereof and the consummation of the transactions contemplated hereby. 14. Governing Law This Agreement shall be governed by and construed in accordance with the laws of the State of New York. 15. Counterparts This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which, taken together, shall constitute one instrument. 16. Expenses Employee and Comtech shall each bear all the expenses incurred by them or it in connection with this Agreement and the transactions contemplated hereby. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 8 IN WITNESS WHEREOF, Comtech and Employee have caused this Agreement to be executed as of the date first above written. COMTECH TELECOMMUNICATIONS CORP. By: --------------------------------------- Authorized Signatory By: --------------------------------------- Brent Taylor 9 TIME ACCELERATED RESTRICTED STOCK PURCHASE AGREEMENT AGREEMENT dated September 24, 1998 between Comtech Telecommunications Corp., a Delaware corporation ("Comtech"), and Joel Alper ("Employee"). WHEREAS, Employee is employed by Comtech's wholly-owned subsidiary, Comtech Mobile Datacom Corporation ("CMDC"), and Comtech and Employee desire to (a) provide additional incentives to Employee in connection with Employee's responsibilities for the management and growth of the business of CMDC, and (b) more closely align Employee's interests with the interests of stockholders of Comtech, through, in relation to both objectives, the sale and issuance to Employee of restricted shares of Common Stock of Comtech. NOW, THEREFORE, Comtech and Employee agree as follows: 1. Definitions (a) "Comtech" means Comtech Telecommunications Corp., a Delaware corporation. (b) "Escrow Agent" means the Escrow Agent as defined in the Escrow Agreement in the form annexed hereto as Exhibit A. (c) "Cumulative CMDC Pre-Tax Profits" means CMDC's aggregate income before income taxes minus CMDC's aggregate losses in the period from inception of operations of CMDC to the end of the relevant fiscal year. Determinations of such amounts shall be made in accordance with generally accepted accounting principles, with the exception that no effect shall be given to (i) interest or like charges or accruals ("Capital Charges") in respect of Comtech cash advances to CMDC that are less than $1.5 million plus the amount of dividends paid by CMDC to Comtech during the relevant fiscal year; (ii) Capital Charges in excess of 1/2% above the average rate of interest then charged to Comtech for all borrowings by Comtech, on Comtech cash advances to CMDC exceeding $1.5 million at any time outstanding plus the amount of dividends paid by CMDC to Comtech during the relevant fiscal year; (iii)general or administrative expenses of Comtech, including charges for management or corporate services provided by Comtech to CMDC; or (iv) the sale of shares of Comtech Common Stock to Employee and other employees of CMDC, or the repurchase of same. (d) "Net Cash Borrowings" means the cumulative amount of cash advances to CMDC by Comtech. (e) "Net Cash Flow" means total cash refunds by CMDC to Comtech, net of cash advances by Comtech to CMDC. (f) "Restricted Shares" means the Shares subject to the restrictions against transfer provided in Section 3 hereof and which are required to be resold to Comtech under certain circumstances as provided in Section 3 hereof. (g) "Unrestricted Shares" means Shares as to which all restrictions against transfer and the obligation to resell to Comtech have lapsed. (h) "Shares" shall have the meaning provided in Section 2 hereof. 2. Sale and Purchase of Shares On the terms, and subject to the conditions hereinafter provided, simultaneously with the execution and delivery of this Agreement, (i) Comtech is selling and issuing to Employee, and Employee is purchasing from Comtech, 35,000 shares of Common Stock, par value $.10 per share, of Comtech (the "Shares"); (ii) Employee is paying to Comtech by certified or bank cashier's check a total purchase price for the Shares of $3,500 (i.e., $.10 per share); and (iii) Employee is depositing the Shares with the Escrow Agent, to be held by the Escrow Agent pursuant and subject to the terms of an Escrow Agreement in the form annexed hereto as Exhibit A. 3. Restrictions (a) The Shares shall not be transferred until such time as they shall become "Unrestricted Shares" pursuant to Section 4 hereof (the Shares subject to such restriction being hereinafter referred to as "Restricted Shares"). As used in this Agreement, "transfer" shall include, without limitation, any sale, assignment, gift, pledge, hypothecation, bequest, devise, encumbrance, or other disposition, whether voluntary or by operation of law. Any attempted transfer of Restricted Shares (other than to Comtech pursuant to the provisions of Section 4 of this Agreement) shall be null and void and Comtech shall not give effect on its records to any such attempted transfer. (b) Employee authorizes Comtech and its transfer agents not to transfer any certificates of Comtech Common Stock on its books and records transferred in violation of this Agreement, and further agrees that any such purported transfer shall be void and of no effect. (c) An original of this Agreement shall be kept in the files of Comtech at its principal office and reference to this Agreement shall be endorsed on all stock certificates subject to this 2 Agreement, now or hereafter issued, by writing or stamping thereon a legend in substantially the following form: "Sale, assignment, gift, bequest, devise, pledge, hypothecation, encumbrance or other disposition of the shares represented by this Certificate is restricted by the terms of a Restricted Stock Agreement, dated September __, 1998, a copy of which, and any amendments thereto, may be examined at the principal office of Comtech Telecommunications Corp." (d) Employee shall possess all rights as a stockholder (including, without limitation, voting rights, rights to dividends, if any, declared and rights on liquidation) except such as are expressly restricted by the provisions of this Agreement. 4. Lapse of Restrictions; Forfeiture of Shares (a) One-sixth of the Shares shall become Unrestricted Shares, subject to satisfying the tax withholding requirements contained in Subsection 4(d) hereof, upon the first anniversary of the date hereof. (b) Subject to satisfying the tax withholding requirements contained in Subsection 4(d) hereof, the remaining five-sixths of the Shares shall become Unrestricted Shares on the tenth anniversary of the date hereof, except that such Shares shall become Unrestricted Shares on an accelerated basis in the one-sixth increments set forth in the following schedule after the Performance Criteria set forth therein are achieved: Number of Shares that become Performance Criteria Unrestricted Shares -------------------- -------------------- o Fiscal year-end cumulative CMDC net sales One-sixth (1/6) of $3,000,000 and Net Cash Borrowings at of Shares purchased that time of less than $1,000,000 o Fiscal year-end Cumulative CMDC Pre-Tax One-sixth (1/6) Profits of $500,000 and Net Cash of Shares purchased Borrowings at such time of less than $500,000 o Fiscal year-end Cumulative CMDC Pre-Tax One-sixth (1/6) Profits of $2,000,000 and Net Cash of Shares purchased Borrowings at such time of less than $100,000 3 Number of Shares that become Performance Criteria Unrestricted Shares -------------------- -------------------- o Fiscal year-end Cumulative CMDC Pre-Tax One-sixth (1/6) Profits of $3,000,000 and fiscal year Net of Shares purchased Cash Flow of $1,500,000 or more o Fiscal year-end Cumulative CMDC Pre-Tax One-sixth (1/6) Profits of $7,000,000 and fiscal year Net of Shares purchased Cash Flow of $2,500,000 or more (c) Notwithstanding anything to the contrary contained in this Agreement, but subject to satisfying the tax withholding requirements contained in Subsection 4(d) hereof, (i) all Restricted Shares shall become Unrestricted Shares upon termination of Employee's employment with CMDC by reason of his death, total and permanent disability (as determined in accordance with the policies and practices of Comtech), normal retirement (at or after age 65 or, with the consent of Comtech, before age 65), or early retirement at Comtech's request; and (ii) upon discharge of Employee by CMDC other than for cause (which for this purpose shall mean Employee's willful misconduct, dereliction of duty, or conviction for a crime involving moral turpitude). (d) If, at the time any Shares become Unrestricted Shares, Comtech determines that it has withheld an amount which is less than the withholding that may be required pursuant to the Internal Revenue Code or other applicable law, Employee shall forthwith pay to Comtech the amount of monies necessary to satisfy such withholding or equivalent requirements. Until the payment of such monies or, alternatively the execution and delivery by Employee of an agreement satisfactory to Comtech in its sole discretion providing for the payment of such monies, the Unrestricted Shares shall not be released to Employee pursuant to the terms of the Escrow Agreement. If payment of such monies is not made or such agreement is not entered into, such Unrestricted Shares shall, at Comtech's direction, be sold by Employee to Comtech for a purchase price equal to the purchase price per share provided in Section 2 hereof, adjusted, as appropriate for any subsequent stock-split, recapitalization or the like. (e) In the event of Employee's termination of employment with CMDC for any reason other than those specified in Subsection 4(c) hereof (including, without limitation, any voluntary termination of employment) all Restricted Shares shall be sold by Employee to Comtech, for the price and otherwise in the manner provided in Subsection 4(d) hereof. 5. Representations and Warranties of Employee Employee represents and warrants as follows: (a) Assuming that Comtech has transferred to Employee good and marketable title to the Shares, Employee has not taken any action or permitted any action to occur, nor will employee 4 take any action or permit any action to occur, that would result in the Shares becoming subject to any claim, lien, pledge or encumbrance of any nature whatsoever. (b) Employee has full legal power and capacity to execute and deliver this Agreement, and such execution and delivery and Employee's acceptance of employment with CMDC contemporaneously with the execution and delivery of this Agreement are not in violation of any other agreement, instrument or obligation to which Employee is a party, including, without limitation, any employment agreement or non-competition agreement of any kind whatsoever. (c) This Agreement constitutes the legal, valid and binding obligation of Employee. (d) Employee has not employed any broker or finder or incurred any liability for any brokerage fees or commissions or finders' fees in connection with this Agreement. (e) Employee is acquiring the Shares for investment purposes only and not with a view to distribution, and acknowledges that he has been advised by his counsel, and understands, that the Shares have not been registered under the Securities Act of 1933, as amended, and under the securities laws, may not be sold or transferred unless registered under such Act or pursuant to an exemption from such registration and that a restrictive legend to that effect shall be placed on the certificate(s) representing the Shares. Employee has further been advised by his counsel with respect to making an election pursuant to Section 83(b) of the Internal Revenue Code and has chosen, or will choose, whether to make such election as he deems appropriate. 6. Representations and Warranties of Comtech Comtech represents and warrants as follows: (a) Comtech is a corporation duly organized, existing and in good standing under the laws of the State of Delaware with full power and legal right to execute and deliver this Agreement and perform its obligations hereunder. (b) The execution and delivery of this Agreement by Comtech and the performance by it of its obligations hereunder have been duly authorized by all necessary corporate action and do not violate the terms of any outstanding agreements to which it is a party. This Agreement constitutes the legal, valid and binding obligation of Comtech. 7. Certain Employment Matters (a) The purchase of Shares hereunder shall not preclude Employee from being eligible to participate in any other plans, programs or benefits otherwise available to employees of Comtech or its subsidiaries. Nothing in this Agreement shall be construed to constitute or be evidence of an agreement or understanding, express or implied, on the part of Comtech or CMDC to employ Employee for any specific period of time. 5 (b) In consideration of his employment with CMDC and the sale and issuance of the Shares to him pursuant to this Agreement, Employee shall not, during the period he is employed by CMDC and for one year thereafter following Employee's voluntary termination of his employment by CMDC, in any manner, directly or indirectly, engage anywhere in the United States in any business which competes with the business in which CMDC or Comtech or any of its other subsidiaries is engaged at any time during the period in which Employee is employed by CMDC, and he shall not, directly or indirectly, own, manage, operate, join, control or participate in the ownership, management, operation or control of, or be employed by, or connected in any manner with any corporation, firm or business that is so engaged; provided, however, that nothing herein contained shall prohibit Employee from owning not more than 5% of the outstanding stock of any publicly held corporation. If any restriction set forth in this Subsection 7(b) is found by a court of competent jurisdiction or arbitrator to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable. (c) Employee shall hold in a fiduciary capacity for the benefit of CMDC and Comtech all confidential information, knowledge or data relating to CMDC and Comtech or any of its other subsidiaries, and their respective businesses obtained by Employee before or during the period in which he is employed by CMDC. (d) The restrictions contained in Subsections (b) and (c) of this Section 7 are necessary for the protection of the business and goodwill of CMDC and Comtech and are considered by Employee to be reasonable to such purpose. Employee agrees that any breach of such Subsections (b) and (c) will cause CMDC and/or Comtech substantial and irreparable damage and therefore, in the event of any such breach, in addition to such other remedies which may be available, CMDC and/or Comtech shall have the right to seek specific performance and injunctive relief. 8. Liability of Comtech The liability of Comtech under this Agreement is limited to the obligations expressly set forth herein and nothing herein contained shall be construed to impose any liability on Comtech in favor of Employee with respect to any loss, cost or expense which Employee may incur or suffer in connection with or arising out of this Agreement, including, without limitation, Employee's purchase of the Shares. 9. Voting Concerning Certain Corporate Matters (a) Employee agrees to have counted for purposes of a quorum, and to vote, all Restricted Shares (whether such vote shall be by written consent or by vote, in person or, if requested by Comtech, by proxy, at a meeting of shareholders of Comtech) for the election to Comtech's Board of Directors of the nominees from time to time designated by the Board of Directors of Comtech. (b) To facilitate, and not in limitation of, the agreement contained in Subsection 9(a) hereof, Employee irrevocably appoints the Chairman of the Board and the Secretary of Comtech, and 6 their respective successors in office, and each of them, with full power of substitution, as the lawful proxy for Employee as to all Restricted Shares, to vote all Restricted Shares which Employee is entitled to vote, for and in the name, place and stead of Employee, at any annual, special or other meeting of the holders of shares of Comtech Common Stock and at any adjournment thereof, or pursuant to any consent in lieu of a meeting, for the election to Comtech's Board of Directors of the nominees designated by the Board of Directors of Comtech. The foregoing proxy is coupled with an interest and therefore not terminable by Employee without the consent of Comtech. 10. Additional Restricted Shares. Employees agrees that the term "Restricted Shares" shall include any shares or other securities which he may receive or be entitled to receive as a result of the ownership of the original Restricted Shares whether the same are issued as a result of a share split, share dividend, recapitalization, or other subdivision or consolidation of shares effected without receipt of consideration by Comtech or the result of the merger or consolidation of Comtech or sale of assets of Comtech. 11. Binding Agreement This Agreement shall inure to the benefit of, and be binding upon, Comtech and its successors and assigns and Employee and his heirs, personal representatives, successors and assigns. 12. Notices Any notice, request or other communication hereunder shall be in writing and shall be deemed to have been duly given if hand delivered or mailed by registered or certified mail, return receipt requested, addressed as herein set forth, or to such other address as may be designated by a notice given pursuant hereto, which change of address notice shall be effective upon receipt thereof. If to Comtech: Comtech Telecommunications Corp. 105 Baylis Road Melville, New York 11747 Attention: Fred Kornberg, President Copy to: Proskauer Rose LLP 1585 Broadway New York, New York 10036 Attention: Robert A. Cantone, Esq. 7 If to Employee: 22 Sandalfoot Court Potomac, MD 20854 13. Survival. All of the representations, warranties, agreements and covenants contained herein or made or deemed to have been made pursuant hereto or in connection with the transactions contemplated hereby shall survive the execution and delivery hereof and the consummation of the transactions contemplated hereby. 14. Governing Law This Agreement shall be governed by and construed in accordance with the laws of the State of New York. 15. Counterparts This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which, taken together, shall constitute one instrument. 16. Expenses Employee and Comtech shall each bear all the expenses incurred by them or it in connection with this Agreement and the transactions contemplated hereby. REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 8 IN WITNESS WHEREOF, Comtech and Employee have caused this Agreement to be executed as of the date first above written. COMTECH TELECOMMUNICATIONS CORP. By: ----------------------------------- Authorized Signatory ----------------------------------- Joel Alper 9 EX-10.(G) 3 MOVEMENT TRACKING SYSTEM CONTRACT SOLICITATION/CONTRACT/ORDER FOR COMMERCIAL ITEMS OFFEROR TO COMPLETE BLOCKS 12, 17, 23, 24, & 30 - -------------------------------------------------------------------------------- 1. REQUISITION NUMBER MPR PAHTV98023 - -------------------------------------------------------------------------------- 2. CONTRACT NO. DAAB15-99-D-0014 - -------------------------------------------------------------------------------- 3. AWARD/EFFECTIVE DATE 99/06/24 - -------------------------------------------------------------------------------- 4. ORDER NUMBER - -------------------------------------------------------------------------------- 5. SOLICITATION NUMBER DAAB15-99-R-0004 - -------------------------------------------------------------------------------- 6. SOLICITATION ISSUE DATE - -------------------------------------------------------------------------------- 7. FOR SOLICITATION INFORMATION CALL: a. NAME Daniel Keyes b. TELEPHONE NUMBER (No collect calls) (703) 325-8718 - -------------------------------------------------------------------------------- 8. OFFER DUE DATE/LOCAL TIME - -------------------------------------------------------------------------------- 9. ISSUED BY CODE W73QLH CECOM Acquisition Center - Washington 2461 Eisenhower Ave., Hoffman I, Room 284 Alexandria, Virginia 22331-0700 - -------------------------------------------------------------------------------- 10. THIS ACQUISITION IS [X] UNRESTRICTED [ ] SET ASIDE: % FOR [ ] SMALL BUSINESS [ ] SMALL DISADV. BUSINESS [ ] 8(A) SIC: SIZE STANDARD: - -------------------------------------------------------------------------------- 11. DELIVERY FOR FOB DESTINATION UNLESS BLOCK IS MARKED [ ] SEE SCHEDULE - -------------------------------------------------------------------------------- 12. DISCOUNT TERMS - -------------------------------------------------------------------------------- 13a. [ ] THIS CONTRACT IS A RATED ORDER UNDER DPAS (15 CFR 700) - -------------------------------------------------------------------------------- 13b. RATING - -------------------------------------------------------------------------------- 14. METHOD OF SOLICITATION [ ] RFQ. [ ] IFB [X] RFP - -------------------------------------------------------------------------------- 15. DELIVER TO CODE To be identified on each delivery oder - -------------------------------------------------------------------------------- 16. ADMINISTERED BY CODE Same as Block 9 - -------------------------------------------------------------------------------- 17a. CONTRACTOR/OFFEROR CODE 04NA3 Comtech Mobile Datacom Corp. 19540 Amaranth Drive FACILITY Germantown, MD 20874 CODE TELEPHONE NO. (301) 428-2101 - -------------------------------------------------------------------------------- 17b. [ ] CHECK IF REMITTANCE IS DIFFERENT AND PUT SUCH ADDRESS IN OFFER - -------------------------------------------------------------------------------- 18a. PAYMENT WILL BE MADE BY CODE To be identified on each delivery order - -------------------------------------------------------------------------------- 18B. SUBMIT INVOICES TO ADDRESS SHOWN IN BLOCK 18a UNLESS BLOCK BELOW IS CHECKED [X] SEE ADDENDUM - -------------------------------------------------------------------------------- 19. ITEM NO. - -------------------------------------------------------------------------------- 20. SCHEDULE OF SUPPLIES/SERVICES See 1449, Part I.b (Attach Additional Sheets as Necessary) - -------------------------------------------------------------------------------- 21. QUANTITY - -------------------------------------------------------------------------------- 22. UNIT - -------------------------------------------------------------------------------- 23. UNIT PRICE - -------------------------------------------------------------------------------- 24. AMOUNT - -------------------------------------------------------------------------------- 25. ACCOUNTING AND APPROPRIATION DATA See Continuation of 1449, Part I.a - -------------------------------------------------------------------------------- 26. TOTAL AWARD AMOUNT (For Govt. Use Only) $100,000.00 - -------------------------------------------------------------------------------- 27a. [X] SOLICITATION INCORPORATES BY REFERENCE FAR 52.212-1, 52.212-4, FAR 52.212-3 AND 52.212-5 ARE ATTACHED.ADDENDA [X]ARE [ ]ARE NOT ATTACHED. - -------------------------------------------------------------------------------- 27b. [X] CONTRACT/PURCHASE ORDER INCORPORATES BY REFERENCE FAR 52.212-4, 52.212-5 IS ATTACHED. ADDENDA [X] ARE [ ] ARE NOT ATTACHED. - -------------------------------------------------------------------------------- 28. [X] CONTRACTOR IS REQUIRED TO SIGN THIS DOCUMENT AND RETURN _2_ COPIES TO ISSUING OFFICE, CONTRACTOR AGREES TO FURNISH AND DELIVER ALL ITEMS SET FORTH OR OTHERWISE IDENTIFIED ABOVE AND ON ANY ADDITIONAL SHEETS SUBJECT TO THE TERMS AND CONDITIONS SPECIFIED HEREIN. - -------------------------------------------------------------------------------- 29. [X] AWARD OF CONTRACT: REFERENCE See Part I.a. OFFER DATED _________________, YOUR OFFER ON SOLICITATION (BLOCK 5) INCLUDING ANY ADDITIONS OR CHANGES WHICH ARE SET FORTH HEREIN, IS ACCEPTED AS TO ITEMS. - -------------------------------------------------------------------------------- 30a. SIGNATURE OF OFFEROR/CONTRACTOR _____________________________________ - -------------------------------------------------------------------------------- 30b. NAME AND TITLE OF SIGNER (TYPE OR PRINT) Joel R. Alper President - -------------------------------------------------------------------------------- 30c. DATE SIGNED June 24, 1999 - -------------------------------------------------------------------------------- 31a. UNITED STATES OF AMERICA (SIGNATURE OF CONTRACTING OFFICER) - -------------------------------------------------------------------------------- 31b. NAME OF CONTRACTING OFFICER (TYPE OR PRINT) Kevin S. Sommer - -------------------------------------------------------------------------------- 31c. DATE SIGNED 6/24/99 - -------------------------------------------------------------------------------- 32a. QUANTITY IN COLUMN 21 HAS BEEN [ ] RECEIVED [ ] INSPECTED [ ] ACCEPTED, AND CONFORMS TO THE CONTRACT, EXCEPT AS NOTED - -------------------------------------------------------------------------------- 32b. SIGNATURE OF AUTHORIZED GOVT. REPRESENTATIVE - -------------------------------------------------------------------------------- 32c. DATE - -------------------------------------------------------------------------------- 33. SHIP NUMBER [ ] PARTIAL [ ] FINAL - -------------------------------------------------------------------------------- 34. VOUCHER NUMBER - -------------------------------------------------------------------------------- 35. AMOUNT VERIFIED CORRECT FOR - -------------------------------------------------------------------------------- 36. PAYMENT [ ] COMPLETE [ ] PARTIAL [ ] FINAL - -------------------------------------------------------------------------------- 37. CHECK NUMBER - -------------------------------------------------------------------------------- 38. S/R ACCOUNT NUMBER - -------------------------------------------------------------------------------- 39. S/R VOUCHER NUMBER - -------------------------------------------------------------------------------- 40. PAID BY - -------------------------------------------------------------------------------- 41a. I CERTIFY THIS ACCOUNT IS CORRECT AND PROPER FOR PAYMENT - -------------------------------------------------------------------------------- 41b. SIGNATURE AND TITLE OF CERTIFYING OFFICER - -------------------------------------------------------------------------------- 41c. DATE - -------------------------------------------------------------------------------- 42a. RECEIVED BY (Print) - -------------------------------------------------------------------------------- 42b. RECEIVED AT (Location) - -------------------------------------------------------------------------------- 42c. DATE REC'D (YY/MM/DD) - -------------------------------------------------------------------------------- 42d. TOTAL CONTAINERS - -------------------------------------------------------------------------------- AUTHOIRZED FOR LOCAL REPRODUCTION SEE PAGE 2 FOR QMB CONTROL NUMBER AND PAPERWORK STANDARD FORM 1449 (10-95) Prescribed by GSA-FAR (48 CFR) 53.212 BURDEN STATEMENT DAAB15-99-D-0014 PART 1.a: CONTINUATION OF SF FORM 1449 BLOCKS 27.a AND 29: The contractor's proposal for the "Movement Tracking System" (MTS), Volume I - Technical, dated 17 March, 1999 updated through 9 June, 1999, attached hereto as Attachment III.e, is hereby incorporated into the contract. In addition to the contractor's proposal and the identified FAR provisions and clauses which have been incorporated by reference into the contract, the following documents comprise this solicitation/contract: PART DESCRIPTION FILE PART I: SF 1449 SF1449 Solicitation/Contract Order for Commercial Items Cover Sheet 1449.doc I.a Continuation of SF 1449 1a.doc I.b Contract Line Item Number (CLIN) List: 1b.xls PART II: CLAUSES II.a FAR Clause 52.212-4 and Addenda, Contract Terms 2.a-b-c.doc and Conditions - Commercial Items II.b FAR Clause 52.212-5, Contract Terms and Conditions 2.a-b-c.doc Required to Implement Statues or Executive Orders - Commercial Items II.c DFARS Clause 252.212-7001, Contract Terms and 2.a-b-c.doc Conditions Required to Implement Statutes or Executive Orders Applicable to Defense Acquisitions of Commercial Items and DFARS Clause 252.227-7013, Rights in Technical Data - Non-Commercial Items PART III: ATTACHMENTS III.a MTS Statement of Objectives 3-a.doc III.b MTS Statement of Work and Specification 3-b.doc Appendix I: Applicable Documents Appendix II: Definitions Appendix III: Equipment Specification III.c DD Form 254, DoD Contract Security Classification Specification III.d Offeror's Certification of Requirements III.e Proposal Part I.a: CONTINUATION OF SF 1449 File Name: 1-a 1 DAAB15-99-D-0014 BLOCK 6, SOLICITATION ISSUE DATE: 5 February, 1999. BLOCK 8, OFFEROR DUE DATE/LOCAL TIME: N/A BLOCK 9: This is an indefinite-delivery/indefinite-quantity (ID/IQ) contract with centralized ordering. The ordering office is identified at Block 9 on the face of the SF 1449. BLOCK 10, SIC: 3812, SIZE STANDARD: 750 BLOCK 11: Delivery of the supplies shall be in accordance with FAR Clause 52.247-35, FOB Destination, Within Consignee's Premises, and FAR Clause 52.247-48, FOB Destination-Evidence of Shipment. BLOCK 15, DELIVERY REQUIREMENTS: Supplies/services shall be delivered within the timeframes set forth in the respective delivery orders. Orders shall be considered received as follows: (a) If express mailed, no later than two days from the date of the express mailing; (b) If sent via regular mail, no later than five days from the date of mailing; or (c) If faxed or electronically transmitted, on the date of the transmission. BLOCK 17b - REMITTANCE ADDRESS: Comtech Mobile Datacom, 19540 Amaranth Drive, Germantown, MD 20874 BLOCK 18.a - INVOICES: Invoices, prepared in accordance with Part II.a, paragraph (g) of this contract, shall be submitted to the address identified in each delivery order. BLOCKS 19 THROUGH 24 - SCHEDULE OF SUPPLIES/SERVICES: (a) This is an ID/IQ contract with firm-fixed price (FFP) contract line item numbers (CLINs). The purpose of the acquisition is to acquire commercially available equipment and services to provide a worldwide two-way data communication and Global Positioning Satellite (GPS) based geo-location capability between handheld units, mobile units mounted in vehicles, and computer based control stations which send and receive data as well as display other users' GPS location. (b) The Government guarantees to place as a minimum, orders with an aggregate total of at least $100,000. The aggregate total of delivery orders issued under this contract shall not exceed $418.2 million; i.e., the contract ceiling. (c) The total contract life, subject to exercise of FAR Clause 52.217-9, Option to Extend the Term of the Contract, is 96 months from receipt of the notice to proceed (issued pursuant to Part II.a, paragraph (u) of this contract). The ordering period for hardware (units and sub-units) is 60 months and the ordering period for all other CLINs is 96 months. The Government is in no way bound to extend the ordering period beyond the base contract period of 12 months. Part I.a: CONTINUATION OF SF 1449 File Name: 1-a 2 DAAB15-99-D-0014 (d) The Master CLIN List is at Part I.b of this contract. The CLINs are divided into eight series: SERIES DESCRIPTION ------ ----------- 0xxx Series Base Year CLINs lxxx Series Second Year CLINs 2xxx Series Third Year CLINs 3xxx Series Fourth Year CLINs 4xxx Series Fifth Year CLINs 5xxx Series Sixth Year CLINs 6xxx Series Seventh Year CLINs 7xxx Series Eighth Year CLINs The lxxx through 7xxx series CLINs are subject to "Option to Extend the Term of the Contract". (e) The following is a summary of the CLINs contained in each year. (Note: The 'x' in each CLIN represents the applicable series; i.e., year, identified in the preceding paragraph.): CLIN DESCRIPTION ---- ----------- x001 Mobile Unit VI x002 Mobile Unit VI Sub-Units x003 Mobile Unit VI Replaceable Items x004 Mobile Unit VI, Commercial Manual x005 Mobile Unit VI, MTS Manual and Training Materials x006 Mobile Unit V2 x007 Mobile Unit V2 Sub-Unit x008 Mobile Unit V2 Replaceable Units X009 Mobile Unit V2, Commercial Manual X010 Mobile Unit V2, MTS Manual and Training Materials X011 Control Station x012 Control Station Sub-Units x013 Control Station Replaceable Items x014 Control Station, Commercial Manual X015 Control Station, MTS Manual and Training Materials x016 Monthly Project Status Report x017 Quarterly Logistics and Maintenance Report x018 Worldwide Web Site X019 Technical Support Services x020 Air Time Per Unit x021 Maintenance Part I.a: CONTINUATION OF SF 1449 File Name: 1-a 3 DAAB15-99-D-0014 BLOCK 25 - ACCOUNTING AND APPROPRIATION DATA: (a) The Accounting and Appropriation Data for this contract is as follows: 2182035 86D 6D12 P5110 25CZ S20113 $100,000.00 PROM J6-8-2M241-J6-EH ACRN: AA (b) The aforementioned funds are obligated to cover the minimum guaranteed quantity (as set forth in paragraph b of Blocks 19 through 24). The contractor is not authorized to submit an invoice for this amount at this time. These funds, or any portion of these funds, may either be used to fund a future delivery order(s), or shall be de-obligated once the minimum guaranteed quantity is ordered under the contract. (c) Accounting and Appropriation Data for each delivery order shall be identified on the respective delivery order. END OF PART I.A Part I.a: CONTINUATION OF SF 1449 File Name: 1-a 4 DAAB15-99-D-0014
SECTION I.b - CLIN LIST (BASE YEAR THROUGH OPTION YEAR 3) BASE OPTION YR OPTION YR OPTION YR YEAR ONE TWO THREE UNIT 0xxx 1xxx 2xxx 3xxx OEM/ OF UNIT UNIT UNIT UNIT CLIN DESCRIPTION REFERENCES MAKE/MODEL EASUR PRICE PRICE PRICE PRICE Mobile Unit V1 (MUV1) x001 Mobile Unit V1 Part IIIb, Appendix III MU-V1 ea $XX $XX $XX $XX z002 Mobile Unit V1 Sub-units x002AA Mobile Terminal with Mag Part IIIb, Appendix III MT2010-1MM ea $XX $XX $XX $XX Mount & Extra Battery (SCI) includes subCLIN 003AB (1 ea) x002AB PCMCIA and Cable Ass'y for Part IIIb, Appendix III ELAN/SL232 ea $XX $XX $XX $XX PLGER Port PC Card x002AC Palmtop and battery set, Part IIIb, Appendix III HP 360 LX (HP) ea $XX $XX $XX $XX includes messaging software, subCLINs 003AD-AG (1 ea) x002AD Transit Case Part IIIb, Appendix III Case V1 (ESC) ea $XX $XX $XX $XX x003 Mobile Unit V1 Replaceable Items x003AA MT 2010 Battery - Mobile Part IIIb, Appendix III V1-BA-001(SCI) ea $XX $XX $XX $XX Terminal x003AB 10 ft cable fm Tx/Rx and Part IIIb, Appendix III V1-CBL-020(SCI)ea $XX $XX $XX $XX 2-Item Power Adapter x003AC PCMCIA and Cable Ass'y Part IIIb, Appendix III ELAN/SL232 for PLGER Port PC Card ea $XX $XX $XX $XX x003AD Synch Cable Part IIIb, Appendix III HP/F1238 ea $XX $XX $XX $XX x003AE Power Cable Part IIIb, Appendix III HP ea $XX $XX $XX $XX x003AF Battery Set (Extra battery) Part IIIb, Appendix III HP ea $XX $XX $XX $XX x003AG World Wide Battery Charger Part IIIb, Appendix III HP/F1218#ABA ea $XX $XX $XX $XX x004 Mobile Unit V1, Commercial Manual Part IIIb, Para 6.5 Include in Clin x001 x005 Mobile Unit V1, MTS Manual Part IIIb, Para 6.5 ea $XX $XX $XX $XX and Training Materiel Mobile Unit V2 (MUV2) x006 Mobile Unit V2 Part IIIb, Appendix III MU-V2 ea $XX $XX $XX $XX x007 Mobile Unit V2 Sub-units x007AA Mobile Terminal with Part IIIb, Appendix III MT2010-1 (SCI) ea $XX $XX $XX $XX Extra Battery x007AB Laptop Computer w. battery Part IIIb, Appendix III HHC 133 (PGI) ea $XX $XX $XX $XX & extra battery, mappin messaging software, subCLINs 008AD-AF (1 ea) x007AC Keyboard Part IIIb, Appendix III PGI ea $XX $XX $XX $XX x007AD Hard Drive (HHC-133) Part IIIb, Appendix III HHC133-HD(PGI) ea $XX $XX $XX $XX x007AE Transit Case Part IIIb, Appendix III Case V2 (ESC) ea $XX $XX $XX $XX x008 Mobile Unit V2 Replaceable Items x008AA MT 2010 Battery - Mobile Part IIIb, Appendix III V1-BA-001 SCI) ea $XX $XX $XX $XX Terminal x008AB Keyboard (HHC-133) Part IIIb, Appendix III PS2 (PGI) ea $XX $XX $XX $XX x008AC Battery (HHC-133) Part IIIb, Appendix III HHC133-BA(PGI) ea $XX $XX $XX $XX x008AD Data Cable (HHC-133) Part IIIb, Appendix III HHC133-DC(PGI) ea $XX $XX $XX $XX 1 DAAB15-99-D-0014 SECTION I.b - CLIN LIST (BASED YEAR THROUGH OPTION YEAR 3) BASE OPTION YR OPTION YR OPTION YR YEAR ONE TWO THREE UNIT 0xxx 1xxx 2xxx 3xxx OEM/ OF UNIT UNIT UNIT UNIT CLIN DESCRIPTION REFERENCES MAKE/MODEL EASUR PRICE PRICE PRICE PRICE x008AE Power Cable (HHC-133) to Part IIIb, Appendix III HHC133-PC(PGI) ea $XX $XX $XX $XX DC Power x008AF Battery Charger (HHC-133) Part IIIb, Appendix III HHC133-BC(PGI) ea $XX $XX $XX $XX (World-wide) x009 Mobile Unit V2, Commercial Part IIIb, Para 6.5 Included in Manual Clin x006 x010 Mobile Unit V2, MTS Part IIIb, Para 6.5 ea $XX $XX $XX $XX Manuals and Training Materie Control Station (CS) x011 Control Station Part IIIb, Appendix III CS-1 ea $XX $XX $XX $XX x012 Control Station Sub-units x012AA Mobile Terminal and Extra Part IIIb, Appendix III MT2010-1 (SCI) ea $XX $XX $XX $XX Battery and subCLIN 013 x012AB Laptop Computer w. battery Part IIIb, Appendix III DC2020 (SCI) ea $XX $XX $XX $XX & extra battery, mappin messaging software, & subCLIN 013AD (1 ea) x012AC Hard Disk DC 2020 Laptop Part IIIb, Appendix III CS-HD-001(SCI) ea $XX $XX $XX $XX x012AD Printer and 2 batteries, Part IIIb, Appendix III HP 340CBi (HP) ea $XX $XX $XX $XX w. subCLINs 0013AE-AG(1 x012AE Transit Case Part IIIb, Appendix III Case CS (ESC) ea $XX $XX $XX $XX x013 Control Station Replaceable Items x013AA MT 2010 Battery, Mobile Part IIIb, Appendix III V1-BA-001(SCI) ea $XX $XX $XX $XX Terminal x013AB 100 FT Cable & Power Part IIIb, Appendix III CS-CPC-100(SCI)ea $XX $XX $XX $XX Converter x013AC Battery DC 2020 Laptop Part IIIb, Appendix III CS-BA-001(SCI) ea $XX $XX $XX $XX x013AD Battery Charger DC 2020 Part IIIb, Appendix III CS-BC-001(SCI) ea $XX $XX $XX $XX Laptop x013AE Printer Cartridge HP 340CBi Part IIIb, Appendix III 51625A (HP) ea $XX $XX $XX $XX x013AF Printer Cable HP 340CBi Part IIIb, Appendix III C2991A (HP) ea $XX $XX $XX $XX (10 Ft) x013AG Battery Charger HP 340BCi Part IIIb, Appendix III C3004A (HP) ea $XX $XX $XX $XX (World-wide) - Printer x013AH Battery HP 340CBi - Part IIIb, Appendix III C3059A (HP) ea $XX $XX $XX $XX Printer x014 Control Station, Part IIIb, Para 6.5 Include in Commercial Manual Clin x011 x015 Control Station, MTS Manual Part IIIb, Para 6.5 ea $XX $XX $XX $XX and Training Materiels Documentation, Reports and Support Services x016 Monthly Project Status Part IIIb, para 6.7.1 Monthly$XX $XX $XX $XX Report x017 Quarterly Logistics and Part IIIb, para 6.7.2 Quarterly$XX $XX $XX $XX Maintenance Report x018 Worldwide Web Site Part IIIb, para 6.7.3 Yearly $XX $XX $XX $XX x019 Technical Support Services x019AA Program Manager Part IIIb, para 6.11 hour $XX $XX $XX $XX x019AB Site Leader Part IIIb, para 6.11 hour $XX $XX $XX $XX 2 DAAB15-99-D-0014 SECTION I.b - CLIN LIST (BASED YEAR THROUGH OPTION YEAR 3) BASE OPTION YR OPTION YR OPTION YR YEAR ONE TWO THREE UNIT 0xxx 1xxx 2xxx 3xxx OEM/ OF UNIT UNIT UNIT UNIT CLIN DESCRIPTION REFERENCES MAKE/MODEL EASUR PRICE PRICE PRICE PRICE x019AC Mechanical Installer Part IIIb., para 6.11 hour $XX $XX $XX $XX x019AD Systems Trainer Part IIIb., para 6.11 hour $XX $XX $XX $XX x019AE Senior Engineer Part IIIb., para 6.11 hour $XX $XX $XX $XX x019AF Junior Engineer Part IIIb., para 6.11 hour $XX $XX $XX $XX x019AG Senior Software Analyst Part IIIb., para 6.11 hour $XX $XX $XX $XX x019AH System Analyst Part IIIb., para 6.11 hour $XX $XX $XX $XX x019AI Software Programmer Part IIIb., para 6.11 hour $XX $XX $XX $XX x019AJ Test Analyst Part IIIb., para 6.11 hour $XX $XX $XX $XX x019AK Mechanical Engineer Part IIIb., para 6.11 hour $XX $XX $XX $XX x019AL Mechanical Fabricator Part IIIb., para 6.11 hour $XX $XX $XX $XX x019AM Electrical Engineer Part IIIb., para 6.11 hour $XX $XX $XX $XX x019AN Electrical Fabricator Part IIIb., para 6.11 hour $XX $XX $XX $XX x019AO Technical Writer Part IIIb., para 6.11 hour $XX $XX $XX $XX x019AP Clerical Part IIIb., para 6.11 hour $XX $XX $XX $XX x020 Air Time Per Unit Part IIIb., para 6.9 x020AA Mobile Unit V1 Part IIIb., para 6.9 Day $XX $XX $XX x020AB Mobile Unit V2 Part IIIb., para 6.9 Day $XX $XX $XX x020AC Control Station Part IIIb., para 6.9 Day $XX $XX $XX x021 Maintenance x021AA Maintenance: x001 Part IIIb., para 6.4.6 MU-V1 Month $XX x021AB Maintenance: x006 Part IIIb., para 6.4.6 MU-V2 Month $XX x021AC Maintenance: x0011 Part IIIb., para 6.4.6 CS-1 Month $XX 3
DAAB15-99-D-0014 SECTION I.b - CLIN LIST (BASED YEAR 4 THROUGH OPTION YEAR 7)
BASE YR OPTION YR OPTION YR OPTION YR FOUR FIVE SIX SEVEN UNIT 4xxx 5xxx 6xxx 7xxx OEM/ OF UNIT UNIT UNIT UNIT CLIN DESCRIPTION REFERENCES MAKE/MODEL EASUR PRICE PRICE PRICE PRICE Mobile Unit V1 (MUV1) x001 Mobile Unit V1 Part IIIb, Appendix III MU-V1 ea $XX x002 Mobile Unit V1 Sub-units x002AA Mobile Terminal with Mag Part IIIb, Appendix III MT2010-1MM(SCI)ea $XX Mount & Extra Battery includes subCLIN 003AB (1 ea) x002AB PCMCIA and Cable Ass'y Part IIIb, Appendix III ELAN/SL232PC for PLGER Port Card ea $XX x002AC Palmtop and battery set, Part IIIb, Appendix III HP360 LX (HP) ea $XX includes messaging software, subCLINs 003AD-AG (1 ea) x002AD Transit Case Part IIIb, Appendix III Case VI (ESC) ea $XX x003 Mobile Unit VI Replaceable Items x003AA MT 2010 Battery - Part IIIb, Appendix III VI-BA-001(SCI) ea $XX $XX $XX $XX Mobile Terminal x003AB 10 ft cable fm Tx/Rx and Part IIIb, Appendix III VI-CBL-020(SCI)ea $XX $XX $XX $XX 2-Item Power Adapter x003AC PCMCIA and Cable Ass'y for Part IIIb, Appendix III ELAN/SL232PC PLGER Port Card ea $XX $XX $XX $XX x003AD Synch Cable Part IIIb, Appendix III HP/F1238 ea $XX $XX $XX $XX x003AE Power Cable Part IIIb, Appendix III HP ea $XX $XX $XX $XX x003AF Battery Set (Extra battery) Part IIIb, Appendix III HP ea $XX $XX $XX $XX x003AG World Wide Battery Charger Part IIIb, Appendix III HP/F1218#ABA ea $XX $XX $XX $XX x004 Mobile Unit V1, Commercial Part IIIb, Para 6.5 Included in Manual Clin x001 x005 Moblie Unit V1, MTS Manual Part IIIb, Para 6.5 ea $XX and Training Materiels Mobile Unit V2 (MUV2) x006 Mobile Unit V2 Part IIIb, Appendix III MU-V2 ea $XX x007 Mobile Unit V2 Sub-units x007AA Mobile Terminal with Extra Part IIIb, Appendix III MT2010-1(SCI) ea $XX Battery x007AB Laptop Computer w. battery Part IIIb, Appendix III HHC 133 (PGI) ea $XX & extra battery, mapping messaging software, subCLINs 008AD-AF (1 ea) x007AC Keyboard Part IIIb, Appendix III PGI ea $XX x007AD Hard Drive (HHC-133) Part IIIb, Appendix III HHC 133-HD(PGI)ea $XX x007AE Transit Case Part IIIb, Appendix III Case V2 (ESC) ea $XX x008 Mobile Unit V2 Replaceable Items 4 DAAB15-99-D-0014 SECTION I.b - CLIN LIST (BASED YEAR 4 THROUGH OPTION YEAR 7) BASE YR OPTION YR OPTION YR OPTION YR FOUR FIVE SIX SEVEN UNIT 4xxx 5xxx 6xxx 7xxx OEM/ OF UNIT UNIT UNIT UNIT CLIN DESCRIPTION REFERENCES MAKE/MODEL EASUR PRICE PRICE PRICE PRICE x008AA MT2010 Battery - Mobile Part IIIb, Appendix III V1-BA-001(SCI) ea $XX $XX $XX $XX Terminal x008AB Keyboard (HHC-133) Part IIIb, Appendix III PS2(PGI) ea $XX $XX $XX $XX x008AC Battery (HHC-133) Part IIIb, Appendix III HHC133-BA(PGI) ea $XX $XX $XX $XX x008AD Data Cable (HHC-133) Part IIIb, Appendix III HHC133-DC(PGI) ea $XX $XX $XX $XX x008AE Power Cable (HHC-133) to Part IIIb, Appendix III HHC133-PC(PGI) ea $XX $XX $XX $XX DC Power x008AF Battery Charger (HHC-133) Part IIIb, Appendix III HHC133-BC(PGI) ea $XX $XX $XX $XX Worldwide x009 Mobile Unit V2, Commercial Part IIIb, Para 6.5 Included in Manual Clin x006 x010 Mobile Unit V2, MTs Manuals Part IIIb, Para 6.5 ea $XX and Training Materiel Control Station x011 Control Station (CS) Part IIIb, Appendix III CS-1 ea $XX x012 Control Station Sub-units x012AA Mobile Terminal and Extra Part IIIb, Appendix III MT2010-1(SCI) ea $XX Battery and subCLIN 013 x012AB Laptop Computer w. battery Part IIIb, Appendix III DC2020(SCI) ea $XX & extra battery, mapping messaging software, & subCLIN 013AD (1 ea) x012AC Hard Disk DC 2020 Laptop Part IIIb, Appendix III CS-HD-001(SCI) ea $XX x012AD Printer and 2 batteries, Part IIIb, Appendix III HP 340CBi(HP) ea $XX w. subCLINs 0013AE-AG (1 x012AE Transit Case Part IIIb, Appendix III Case CS (ESC) ea $XX x013 Control Station Replacement Items x013AA MT 2010 Battery, Mobile Part IIIb, Appendix III V1-BA-001(SCI) ea $XX $XX $XX $XX Terminal x013AB 100 FT Cable & Power Part IIIb, Appendix III CS-CPC-100(SCI)ea $XX $XX $XX $XX Converter x013AC Battery DC 2020 Laptop Part IIIb, Appendix III CS-BA-001(SCI) ea $XX $XX $XX $XX x013AD Battery Charger DC 2020 Part IIIb, Appendix III CS-BC-001(SCI) ea $XX $XX $XX $XX Laptop x013AE Printer Cartridge HP 340CBi Part IIIb, Appendix III 51625A (HP) ea $XX $XX $XX $XX x013AF Printer Cable HP 340CBi Part IIIb, Appendix III C2991A(HP) ea $XX $XX $XX $XX (10 Ft) x013AG Battery Charger HP 340BCi Part IIIb, Appendix III C3004A (HP) ea $XX $XX $XX $XX (World-wide) - Printer x013AH Battery HP 340CBi - Printer Part IIIb, Appendix III C3059A (H) ea $XX $XX $XX $XX x014 Control Station, Commercial Part IIIb.,Para 6.5 Included in Manual Clin x011 x015 Control Station, MTS Manual Part IIIb.,Para 6.5 ea $XX and Training Materiels Documentation, Reports and 5 DAAB15-99-D-0014 SECTION I.b - CLIN LIST (BASED YEAR 4 THROUGH OPTION YEAR 7) BASE YR OPTION YR OPTION YR OPTION YR FOUR FIVE SIX SEVEN UNIT 4xxx 5xxx 6xxx 7xxx OEM/ OF UNIT UNIT UNIT UNIT CLIN DESCRIPTION REFERENCES MAKE/MODEL EASUR PRICE PRICE PRICE PRICE Support Services x016 Monthly Project Status Part IIIb., para 6.7.1 Monthly$XX $XX $XX $XX Report x017 Quarterly Logistics and Part IIIb., para 6.7.2 Quarterly$XX $XX $XX $XX Maintenance Report x018 Worldwide Web Site Part IIIb., para 6.7.3 Yearly $XX $XX $XX $XX x019 Technical Support Services x019AA Program Manager Part IIIb., para 6.11 hour$XX $XX $XX $XX x019AB Site Leader Part IIIb., para 6.11 hour$XX $XX $XX $XX x019AC Mechanical Installer Part IIIb., para 6.11 hour$XX $XX $XX $XX x019AD Systems Trainer Part IIIb., para 6.11 hour$XX $XX $XX $XX x019AE Senior Engineer Part IIIb., para 6.11 hour$XX $XX $XX $XX x019AF Junior Engineer Part IIIb., para 6.11 hour$XX $XX $XX $XX x019AG Senior Software Analyst Part IIIb., para 6.11 hour$XX $XX $XX $XX x019AH System Analyst Part IIIb., para 6.11 hour$XX $XX $XX $XX x019AI Software Programmer Part IIIb., para 6.11 hour$XX $XX $XX $XX x019AJ Test Analyst Part IIIb., para 6.11 hour$XX $XX $XX $XX x019AK Mechanical Engineer Part IIIb., para 6.11 hour$XX $XX $XX $XX x019AL Mechanical Fabricator Part IIIb., para 6.11 hour$XX $XX $XX $XX x019AM Electrical Engineer Part IIIb., para 6.11 hour$XX $XX $XX $XX x019AN Electrical Fabricator Part IIIb., para 6.11 hour$XX $XX $XX $XX x019AO Technical Writer Part IIIb., para 6.11 hour$XX $XX $XX $XX x019AP Clerical Part IIIb., para 6.11 hour$XX $XX $XX $XX x20 Air Time Per Unit x020AA Mobile Unit V1 Part IIIb., para 6.9 Day $XX $XX $XX $XX x020AB Mobile Unit V2 Part IIIb., para 6.9 Day $XX $XX $XX $XX x020AC Control Station Part IIIb., para 6.9 Day $XX $XX $XX $XX x021 Maintenance 6 DAAB15-99-D-0014 SECTION I.b - CLIN LIST (BASED YEAR 4 THROUGH OPTION YEAR 7) BASE YR OPTION YR OPTION YR OPTION YR FOUR FIVE SIX SEVEN UNIT 4xxx 5xxx 6xxx 7xxx OEM/ OF UNIT UNIT UNIT UNIT CLIN DESCRIPTION REFERENCES MAKE/MODEL MEASURE PRICE PRICE PRICE PRICE x021AA Maintenance: x001 Part IIIb. Para 6.4.6 MU-V1 Month $XX $XX $XX $XX x021AB Maintenance: x006 Part IIIb. Para 6.4.6 MU-V2 Month $XX $XX $XX $XX x021AC Maintenance: x0011 Part IIIb. Para 6.4.6 CS-1 Month $XX $XX $XX $XX 7
DAAB15-99-D-0014-99-D-0014 In accordance with FAR 12.302, Tailoring of Provisions and Clauses for the Acquisition of Commercial Items, FAR Clause 52.212-4 is tailored as follows to reflect special contact terms and conditions that are unique for this contract. This tailored clause supersedes the version of FAR Clause 52.212-4 that was incorporated by reference into the contract. Part II.a FAR CLAUSE 52.212-4 AND ADDENDA CONTRACT TERMS AND CONDITIONS-COMMERCIAL ITEMS, (APR 98) (a) Inspection/Acceptance. (1) The Contractor shall only tender for acceptance those items that conform to the requirements of this contract. The Government reserves the right to inspect or test any supplies or services that have been tendered for acceptance. The Government may require repair or replacement of nonconforming supplies or reperformance of nonconforming services at no increase in contract price. The Government must exercise its post-acceptance rights (1) within a reasonable time after the defect was discovered or should have been discovered; and (2) before any substantial change occurs in the condition of the item, unless the change is due to the defect in the item. (2) A Defense Contract Management Command representative shall inspect and accept supplies at the place of origin. At the option of the Administrative Contracting Officer (ACO), alternate release procedures, in accordance with Defense Acquisition Regulation Supplement (DFARS) 246.471 (b) and DFARS Appendix F, may be utilized. The using activity representative, as stated on each delivery order, shall inspect and accept services at the using activity. (b) Assignment. The Contractor or its assignee's rights to be paid amounts due as a result of performance of this contract, may be assigned to a bank, trust company, or other financing institution, including any Federal lending agency in accordance with the Assignment of Claims Act (31 U.S.C. 3727). (c) Changes. The Government reserves the right to issue unilateral modifications to effect administrative changes. All other changes in the terms and conditions of this contract may be made only by written agreement of the parties. (d) Disputes. This contract is subject to the Contract Disputes Act of 1978, as amended (41 U.S.C. 601-613). Failure of the parties to this contract to reach agreement on any request for equitable adjustment, claim, appeal or action arising under or relating to this contract shall be a dispute to be resolved in accordance with the clause at FAR 52.233-1, Disputes, which is incorporated herein by reference. The Contractor shall proceed diligently with performance of this contract, pending final resolution of any dispute arising under the contract. (e) Definitions. The clause at FAR 52.202-1, Definitions, is incorporated herein by reference. (f) Excusable delays. The Contractor shall be liable for default unless nonperformance is caused by an occurrence beyond the reasonable control of the Contractor and without its fault or negligence such as, acts of God or the public enemy, acts of the Government in either its sovereign or contractual capacity, fires, floods, epidemics, quarantine restrictions, strikes, and unusually severe weather. The Contractor Part II: CLAUSES Part II.a: Addendum to FAR Clause 52.212-4 File Name: 2-a-b-c.doc 1 DAAB15-99-D-0014 shall notify the Contracting Officer in writing as soon as it is reasonably possible after the commencement of any excusable delay, setting forth the full particulars in connection therewith, shall remedy such occurrence with all reasonable dispatch, and shall promptly give written notice to the Contracting Officer of the cessation of such occurrence. (g) Invoice. The Contractor shall submit an original invoice and three copies (or electronic invoice, if authorized,) to the address designated in the contract to receive invoices. An invoice must include: (1) Name and address of the Contractor; (2) Invoice date; (3) Contract number, contract line item number and, if applicable, the order number; (4) Description, quantity, unit of measure, unit price and extended price of the items delivered; (5) Shipping number and date of shipment including the bill of lading number and weight of shipment if shipped on Government bill of lading; (6) Terms of any prompt payment discount offered; (7) Name and address of official to whom payment is to be sent; and (8) Name, title, and phone number of person to be notified in event of defective invoice. Invoices will be handled in accordance with the Prompt Payment Act (31 U.S.C. 3903) and Office of Management and Bud(yet (OMB) Circular A-125, Prompt Payment. Contractors are encouraged to assign an identification number to each invoice. (h) Patent indemnity. The Contractor shall indemnity the Government and its officers, employees and agents against liability, including costs, for actual or alleged direct or contributory infringement of, or inducement to infringe, any United States or foreign patent, trademark or copyright, arising out of the performance of this contract, provided the Contractor is reasonably notified of such claims and proceedings. (i) Payment. Payment shall be made for items accepted by the Government that have been delivered to the delivery destinations set forth in this contract. The Govemment will make payment in accordance with the Prompt Payment Act (31 U.S.C. 3903) and Office of Management and Budget (OMB) Circular A125, Prompt Payment. Unless otherwise provided by an addendum to this contract, the Government shall make payment in accordance with the clause at FAR 52.232-33, Mandatory Information for Electronic Funds Transfer Payment, which is incorporated herein by reference. In connection with any discount offered for early payment, time shall be computed from the date of the invoice. For the purpose of computing the discount earned, payment shall be considered to have been made on the date which appears on the payment check or the specified payment date if an electronic funds transfer payment is made. (1) Termination for the Government's convenience. The Govemment reserves the right to terminate this contract or any part hereof, for its sole convenience. In the event of such termination, the Contractor shall immediately stop all work hereunder and shall immediately cause any and all of its suppliers and Part H: CLAUSES Part 11.a: Addendum to FAR Clause 52.212-4 File Name: 2-a-b-c.doc 2 DAAB15-99-D-0014 subcontractors to cease work. Subject to the terms of this contract, the Contractor shall be paid a percentage of the contract price reflecting the percentage of the work performed prior to the notice of termination, plus reasonable charges the Contractor can demonstrate to the satisfaction of the Government using its standard record keeping system, have resulted from the termination. The Contractor shall not be required to comply with the cost accounting standards or contract cost principles for this purpose. This paragraph does not give the Government any right to audit the Contractor's records. The Contractor shall not be paid for any work performed or costs incurred which reasonably could have been avoided. (m) Termination for Cause. The Government may terminate this contract, or any part hereof, for cause in the event of any default by the Contractor, or if the Contractor fails to comply with any contract terms and conditions, or fails to provide the Government upon request, with adequate assurances of future performance. In the event of termination for cause, the Government shall not be liable to the Contractor for any amount for supplies or services not accepted or for any portion of the contract minimum guaranteed quantity remaining at the time of termination, and the Contractor shall be liable to the Government for any and all rights and remedies provided by law. If it is determined that the Government improperly terminated this contract for default, such termination shall be deemed a termination for convenience. (n) Title. Unless specified elsewhere in this contract, title to items furnished under this contract shall pass to the Government upon acceptance, regardless of when or where the Government takes physical possession. (o) Warranty. The Contractor warrants and implies that the items delivered hereunder are merchantable and fit for use for the particular purpose described in this contract. Additional warranty requirements are discussed in Part III.b., paragraph 6.4. (p) Limitation of liability. Except as otherwise provided by an express or implied warranty, the Contractor will not be liable to the Government for consequential damages resulting from any defect or deficiencies in accepted items. (q) Other compliances. The Contractor shall comply with all applicable Federal, State and local laws, executive orders, rules and regulations applicable to its performance under this contract. (r) Compliance with laws unique to Government contracts. The Contractor agrees to comply with 31 U.S.C. 1352 relating to limitations on the use of appropriated funds to influence certain Federal contracts; 18 U.S.C. 431 relating to officials not to benefit; 40 U.S.C 327, et seq., Contract Work Hours and Safety Standards Act; 41 U.S.C. 51-58, Anti-Kickback Act of 1986; 41 U.S.C. 265 and 10 U.S.C. 2409 relating to whistle blower protections; 49 U.S.C 40118, Fly American; and 41 U.S.C. 423 relating to procurement integrity. (s) Order of Precedence. Any inconsistencies in this solicitation or contract shall be resolved by giving precedence in the following order: (1) Offeror's executed Certification of Requirements (Part III.d); (2) the schedule of supplies/services (i.e., Blocks 19 through 24 of the Standard Form 1449 as set forth at Contract Parts I.a and I.b.); Part 11: CLAUSES Part II.a: Addendum to FAR Clause 52.212-4 File Name: 2-a-b-c.doc 3 DAAB15-99-D-0014 (3) the Assigmnents, Disputes, Payments, Invoice, Other Compliances, and Compliance with Laws Unique to Government Contracts paragraphs of this clause; (4) FAR Clause 52.212-5 (as set forth at Contract Part II.b) (5) DFARS Clause 252.212-7001 (as set forth at Contract Part II.c); (6) other provisions (i.e., Addendum to FAR Provision 52.212-1, Intructions to Offeror-Commercial Items, FAR Provision 52.212-3, DFARS Provision 252.212-7000, FAR Provision 52.219-23, and DFARS Provision 252.225-7006, as set forth at solicitation/contract Parts IV.a, IV.b, IV.c, IV.d, IV.e and IV.f respectively); (7) other paragraphs of this clause as tailored; (8) the Standard Form 1449, excluding the schedule of supplies/services; (9) the Statement of Work (SOW) and Specification (excluding Appendices I and II) (at Part III.b); (10) SOW Appendix III (at Part III.b); (11) SOW Appendix II (at Part III.b); (12) SOW Appendix I (at Part III.b) (13) Other documents, exhibits, and attachments; and (14) the Contractor's proposal (excluding the executed Offeror's Certification of Requirements) incorporated into this contract per Part 1.a, Blocks 27.a and 29. (t) Postaward Conference. The Contractor agrees to attend a postaward conference convened by the contracting activity or contract administration office in accordance with Federal Acquisition Regulation Subpart 42.5. (u) Notice To Proceed. The Contractor shall take no actions on this contract, or incur any costs, without the Contracting Officer's official notice to proceed. It is anticipated that this notice to proceed will generally be issued when the Contracting Officer determines that there is no threat of protest. All delivery dates based upon "days after effective date of contract" shall be interpreted as "days after receipt of notice to proceed." (v) Only New Equipment and Reconditioned Parts. Only new equipment shall be delivered under this contract. The Contracting Officer will not grant approval for used or reconditioned equipment. Components of such equipment may be reconditioned provided such components are drawn from stockage which does not differentiate between new and reconditioned components. (w) Alternative Sourcing. (1) An alternative source is another means of supply for a functionally equivalent item for an existing proposed item. Alternative sourcing is a post-award contract activity. Alternative sources will Part H: CLAUSES Part II.a: Addendum to FAR Clause 52.212-4 File Name: 2-a-b-c.doc 4 DAAB15-99-D-0014 not be considered during the pre-award phase of the contract. It is a means of enabling contractors to overcome market conditions beyond their control. (2) When an alternate source is proposed, the contractor shall complete the certification found at the end of this provision that the proposed alternate item is equal or better in functionality and performance than the existing proposed item. Acceptability of proposed alternative sources is at the sole discretion of the Contracting Officer and no delivery of items from an alternative source will be allowed without formal modification to the contract. (3) Normally, the pricing for alternative-sourced items will be the same as the original proposed item for which an alternative source is proposed. However, a downward price adjustment may be required at the time of alternative sourcing if the pricing for the item is no longer comparative to concurrent "street pricing". However, all sources for any one given CLIN/sub-CLIN will be priced the same in the resulting contract modification. (4) Delivery orders may state a preferred source for an item. However, it will be at the discretion of the contractor which item will be shipped. Also, the contractor shall not mix sources for a given CLIN/sub-CLIN on the individual delivery orders. (5) Prior to accepting an alternative-source proposal, the Government may require the Contractor to conduct a Government-witnessed demonstration to validate that the proposed product(s) are capable of performing in a manner equal to or better than the existing product. ALTERNATIVE SOURCE CERTIFICATION Except as expressly identified in writing as part of the altemative-source proposal, I, _______, represent that the additional item offered as an alternative source for an existing item provided under the contract (each identified below) is equal to or better in functionality and performance than the existing item, and that it satisfies all of the requirements set forth in Part III.a of the contract EXISTING ITEM ALTERNATIVE SOURCE ITEM Signature:_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Date:_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ (x) Licenses. (1) Software and software documentation delivered under this contract shall be subject to the terms of this clause and the governing commercial product license, to the extent the latter is consistent with Federal law and FAR 12.212. Notwithstanding the foregoing, the commercial product license shall apply only if a copy of the license is provided with the delivered product. In the event of conflict between this clause and the commercial software product license, this clause shall govern. Part H: CLAUSES Part II.a: Addendum to FAR Clause 52.212-4 File Name: 2-a-b-c.doc 5 DAAB15-99-D-0014 (2) All software shall be licensed and priced for use on a single computer or for use on any computer at a particular site. The Government shall pay the charge set forth in Part 1.b for each copy of the software which the Government acquires. (3) The license shall be in the name of the U. S. Government. (4) The license shall be perpetual (also referred to as a nonexclusive, paid-up, world-wide license). (5) Software and software documentation shall be provided with license rights no less than rights provided with the software and the software documentation when sold to the public. (6) The license shall apply to any software changes or new releases. (y) Continued Performance. (1) The requirements of this contract have been identified by the U. S. Government as being essential to the mission and operational readiness of the U. S. Army operating world-wide. Therefore, the contractor may be required to perform this contract during crisis situations, including war or a state of emergency, subject to the requirements and this provision. (2) The contractor shall be responsible for performing all requirements of this contract notwithstanding a crisis situation including the existence of any state of war, whether declared or undeclared, or state of emergency, by the United States or the host nation, commencement of hostilities, internal strife, rioting, civil disturbances, or activities of any type which would endanger the welfare and security of U. S. Forces in the host nation. Failure to perform may subject the contractor to a termination of this contract for cause. If a crisis situation is determined, an equitable adjustment will be negotiated. (3) Crisis situations shall be determined by the overseas theater Commander-In-Chief or when Defense Readiness Condition (DEFCON) Three (3) is declared for that area. (4) Contractor personnel and dependents may be integrated into Government contingency plans and afforded the same rights, privileges, protection, and priority as U. S. Government personnel. The Government may provide security, housing, and messing facilities for contractor personnel and dependents should conditions warrant. (5) The contractor further agrees to assure that formal company policies and procedures effectively address the obligations in this clause, and that all employees associated with this contract are fully aware of those specified policies, procedures, and obligations. (z) Clauses Incorporated by Reference. In accordance with FAR 52.252-2, this contract incorporates the following FAR clauses by reference with the same force and effect as if they were given in full text: 52.204-2, Security Requirements (AUG 1996) 52.216-18, Ordering (OCT 1995): Paragraph (a)...Such orders may be issued from the date of the notice to proceed (pursuant to paragraph (u) of this clause) through: Part H: CLAUSES Part 11.a: Addendum to FAR Clause 52.212-4 File Name: 2-a-b-c.doc 6 DAAB15-99-D-0014 - FOR REPLACEABLE ITEMS, REPORTS, THE WORLDWIDE WEB SITE, MAINTENANCE, AND TECHNICAL SUPPORT: the 96th month and - FOR ALL OTHER SUPPLIES AND SERVICES: the 60th month. 52.216-19, Delivery-Order Limitations (OCT 1995): (a) Minimum order ... less than $1,000,... (b) Maximum order... (1)$50 million ... (2) ... $100 million ... (3) ... seven .... (d) ... five... 52.216-22, Indefinite Quantity (OCT 1995): (d) ... 45 days after expiration of the contract term. 52.217-9, Option to Extend the Term of the Contract (MAR 1989): (a) ... the term of the contract... (c) ... 96 months. 52.223-3, Hazardous Material Identification and Material Safety Data (JAN 1997) 52.232-18, Availability of Funds (APR 1984) 52.232-19, Availability of Funds for the Next Fiscal Year (The blanks will be completed at the issuance of a delivery order when this clause would be applicable.) (APR 1984) 52.245-2, Government Property (Fixed-Price Contracts) (DEC 1989) 52.247-35, FOB Designation, Within Consignee's Premises (APR 1984) 52.247-48, FOB Designation - Evidence of Shipment (JUL 1995) (aa) Release of Contract. The contractor agrees that subsequent to issuance of the notice to proceed (pursuant to paragraph (u) above), the Government may post an electronic copy of this contract on the CECOM Acquisition Center - Washington World Wide Web (WWW) with unlimited access thereto. (ab) Release of Unit Prices. Upon award of the contract, the contractor's unit prices will be made publicly available pursuant to FAR 15.503(b)(1)(iv). However, pursuant to FAR 15.503(b)((1)(iv), in no event shall the contractor's cost breakdown, profit overhead rates, trade secrets, manufacturing processes and techniques, or other confidential business information be disclosed. Also, pursuant to 10 U.S.C. section 2305(g)(1), the unit prices of unsuccessful offerors will not be released. (ac) E: Mail Clauses 1. 52.6110 - Mandatory Use of Contractor to Government E: Mail (a) Unless exempted by the Contracting Officer in writing, communications after contract award shall be transmitted via electronic mail (e-mail). This shall include all communication between the Government and the contractor except Contract Awards, Contract Modifications, Proposals, Procurement Sensitive Information, Classified Information and Proprietary Information. Return receipt will be used if a commercial application is available. CECOM will announce commercial applications for these items when they are available. At that time the above items will also be sent via e-mail. Part II: CLAUSES Part II.a: Addendum to FAR Clause 52.212-4 File Name: 2-a-b-c.doc 7 DAAB15-99-D-0014 (b) The format for all communication shall be compatible with the following: Microsoft Word Office 97, Microsoft Excel Office 97, and Microsoft Access Office 97. (c) Files larger than one (1) megabyte must use alternate means of transmission such as Zip Compression/Inflation, File Transfer Protocol, Winfax or any Fax Modem. (Note: This includes both the text message and the attachment). If an attachment is in binary format, the number of bytes for the attachment increases by 33%. Large items can be put on disk and mailed with the Contracting Officer's approval. (d) A copy of all communications, with the exception of technical reports, shall be provided to the contract specialist. (e) The following examples include, but are not limited to, the types of communication that shall be transmitted via e-mail: Routine Letters Requests for Proposals under the contract Price Issues (except contractor pricing data) Contract Data Requirements List Submittals Contract Data Requirements List Comments Approvals/Disapprovals by the Government Technical Evaluations of Contract Items Clarifications Configuration Control Drawings (not to exceed 1/2 megabyte) Revised Shipping Instructions Change Order Directions (f) In order to be contractually binding, all Government communications must be sent from the Contracting Officer's e-mail address and contain the /a/ symbol above the Contracting Officer's signature block. The contractor shall designate the personnel with signature authority who can contractually bind the contractor. All binding contractor communication shall be sent from this contractor e-mail address. (g) The Government reserves the right to upgrade to more advanced commercial applications at any time during the life of the contract. (h) Upon award, the Contractor shall provide the Contracting Officer with a list of e-mail addresses for all administrative and Technical personnel assigned to this contract. If known, the contractor shall also furnish the email addresses of the Administrative Contracting Officer, DFAS and DCAA cognizant personnel. (i) The Contracting Officer's e-mail address is: KSomme@hoffman-issaa2.army.mil The Contract Specialist's e-mail address is: DKeyes@hoffman-issaa2.army.mil The Technical Point of Contact's e-mail address is: NDizda@hoffman-issaa2.army.mil Part II: CLAUSES Part II.a: Addendum to FAR Clause 52.212-4 File Name: 2-a-b-c.doc 8 DAAB15-99-D-0014 (End of Clause) 2. 52.7055 - Mandatory Use of Government to Government E: Mail (a) Unless exempted by the Procuring Contracting Officer in writing, communication after contract award between Government agencies shall be transmitted via electronic mail (e-mail). (b) The following examples include, but are not limited to, the types of communication that shall be transmitted via e-mail: Instructions to Contract Ordering Officer Instructions to Administrative Contracting Officer* Instructions to other Defense Contract Management Command personnel* Instructions to Defense Finance Administration Services Instructions to Defense Contract Audit Agency *Includes Government to Government data not covered by the Government's Defense Contract Management Contract ALERTS Program. Audits and audit requests shall be processed through the Source Selection/PRAG Branch, e-mail box AMSEL-AC-SP-D@CECOM3.army:monmouth.mil. (c) See Part II.a Clause 52.6110, Mandatory Use of Contractor to Government Electronic Mail, for further guidance. (End of Clause) (ad) Year 2000 Warranty (Commercial Items) (a) The contractor warrants that any hardware or firmware (as these terms are generally defined), computer database, computer software, computer program(s), or commercial computer software (as those terms are defined in DFARS 252.227-7013 and 252.227-7014) products delivered under this contract shall be able to accurately process date/time data and date related data from, into and between the twentieth and twenty-first centuries, and the years 1999 and 2000, including leap year calculations. Processing date/time data and date related data correctly shall include but not be limited to, correctly calculating, comparing, and sequencing the date/time data and date related data and shall be transparent to the user. Contractor provided products, when used in combination with other products, shall accurately process date/time data provided that such other products properly exchange date/time data with them. The contractor warrants that any system delivered under this contract which includes any hardware, firmware or software (as defined above), shall correctly process date and date related data as an entire system and individually, from the date of contract award. Any items that are not compliant with the above requirements shall be identified by the contractor, prior to contract award, and shall be upgraded to be compliant prior to Contract award at no additional cost to the Government, if: (1) the contract proposes those noncompliant items to satisfy a technical requirement and (2) the noncompliant item has a path identified by the manufacturer to be made compliant. It is the intent of the Government to not purchase any new items under this contract that are not compliant or that will not be made compliant by contract award. Part II: CLAUSES Part II.a: Addendum to FAR Clause 52.212-4 File Name: 2-a-b-c.doc 9 DAAB15-99-D-0014 (b) All warranties in the foregoing paragraph shall run from date of delivery to 30 April 2001. Should a warranted item fail to meet the requirements set out in the foregoing paragraph, the Contractor agrees to correct or replace the item at no cost to the Government. The parties agree that this correction or replacement shall not act as a limitation of remedies and that the Government may seek such additional remedies as may be available through this contract or at law or equity. (c) This clause takes precedence over any other warranty or disclaimer thereof in this contract. It is in addition to the rights and remedies set forth in any other warranty for this item. (End of Clause) (ae) INVITED CONTRACTOR OR TECHNICAL REPRESENTATIVE STATUS: REPUBLIC OF KOREA 1. Invited contractor or technical representative status under the U.S.-ROK SOFA is subject to the written approval of HQ USFK, ACofS, Acquisition Management. 2. The contracting officer will coordinate with HQ USFA, ACofS, Acquisition Management, in accordance with DFARS, subject 225.8, and USFA Reg 700-19. The ACofS, Acquisition Management, will determine the appropriate contractor status under the SOFA and notify the contracting of the determination. 3. Subject to the above approval, the contractor, including their employees and lawful dependents, may be accorded such privileges and exemptions as specified in the U.S.-ROK SOFA, and implemented per USFK Reg 700-19, subject to the conditions and limitations imposed by the SOFA and this regulation. Those privileges and exemptions may be furnished during the performance period of the contract, subject to their availability and provided the invited contractor of technical representative status is not withdrawn by USFK. 4. The contractor officials and employees performing under this contract colectively and separately warrant that they are not now performing, nor will perform during the period of this contract, any contract services or otherwise engage in business activities in the ROK other than those pertaining to the U.S. armed forces. 5. During performance of the work in the ROK required by this contract, the contractor will be governed by USFK regulations pertaining to the direct hiring and the personnel administration of Korean National employees. 6. The authorities of the ROK will have the right to exercise jurisdiction over invited contractors and technical representatives, including officials and employees and their dependents, for offenses committed in the ROK and punishable by the laws of the ROK. In recognition of the role of such persons in the defense of the ROK, they will be subject to the provisions of Article XXII, U.S.-ROK SOFA, related Agreed Minutes and Understandings on Implementation. In those cases in which the authorities of the ROK decide not to exercise jurisdiction, they shall notify the U.S. military authorities as soon as possible. On such notification, the military authorities will have the right to exercise such jurisdiction over the persons referred to, as is conferred on them by law of the United States. Part II: CLAUSES Part II.a: Addendum to FAR Clause 52.212-4 File Name: 2-a-b-c.doc 10 DAAB15-99-D-0014 7. Invited contractors and technical representatives agree to cooperate fully with the USFK sponsoring agency and responsible officer on all matters pertaining to logistic support. In particular, contractors will provide prompt and accurate reporting of changes in employee status as required by this regulation to the assigned sponsoring agency. Except for contractor air crews flying Military Airlift Command missions, all U.S. contractors performing work on United States Air Force classified contracts will report to the nearest Security Police Information Security Section for the geographical area where the contract is to be performed. 8. Invited contractor and technical representative status will be withdrawn by USFK on- a. Completion or termination of the contract b. Proof that the contractor of employees are engaged in business activities in the ROK other than those pertaining to U.S. armed forces. c. Proof that the contractor or employees are engaged in practices illegal in the ROK USFK regulations. 9. It is agreed that the withdrawal of the invited contractor or technical representative status or any of the privileges associated herewith by the U.S. Government, will not constitute grounds for excusable delay by the contractor in the performance of the contract nor will it justify or excuse the contractor defaulting the performance of this contract; and such withdrawal will not serve as a basis for the filing of any claims against the U.S. Government if the withdrawal is made for the reasons stated in subparagraph h above. Under no circumstances will the withdrawal of such status or privileges be considered or construed as a breach of contract by the U.S. Government. The determination to withdraw SOFA status and privileges by USFK shall be final and binding on the parties unless it is patently arbitrary, capricious, and lacking in good faith. (End of Clause) (af) Technical Representative SOFA benefits (ROK ONLY). Article I of the SOFA 14th Joint Committee Meeting allows USFK to provide benefits to technical representatives. The following benefits are conferred under this contract to those designated as technical representatives: 1. Access to and movement between U.S. armed forces facilities and areas as provided for in Article X, Access of Vessels and Aircraft. 2. Entry into the ROK as provided for in Article VIII, Entry and Exit. 3. Exemption from customs duties and other such charges as provided for in Article IX, Customs and Duties. 4. Use of nonappropriated fund organizations as provided for in Article XIII, Nonappropriated Fund Organizations. 5. Exemption from foreign exchange controls as provided for in Article XVIII, Foreign Exchange Controls. Part II: CLAUSES Part II.a: Addendum to FAR Clause 52.212-4 File Name: 2-a-b-c.doc 11 DAAB15-99-D-0014 6. Use of military banking facilities as provided for in Article XIX, Military Payment Certificates. 7. Use of military post offices as provided for in Article XX, Military Post Offices. 8. Use of utilities and services as provided for in Article VI, Utilities and Services. 9. Exemption from the laws and regulations of the ROK with respect to terms and conditions of employment as provided for in Article XVII, Labor. (However, contractors that directly hire Korean Nationals must comply with USFK Reg 690-1, and other applicable USFK regulations concerning the employment of Korean Nationals.) 10. Exemption from ROK taxes as provided for in Article XIV, Taxation. 11. Although subject to ROK criminal jurisdiction, contractor personnel shall be granted the protections as provided for in Article XXII, Criminal Jurisdiction. 12. Licensing and registration of privately owned vehicles as provided for in Article XXIV, Vehicle and Driver's Licenses. (ag) LOGISTIC SUPPORT (ROK ONLY) a. Logistic support, corporate and individual, may be provided to USFK invited contractors and technical representatives only in accordance with the U.S. ROK SOFA, USFK regulations, subject to availability, and on a reimbursable basis. Based upon eligibility, individuals may be provided the below listed logistic support based on Individually Sponsored Status (unless specifically excluded by the terms of the contract). THE CONTRACT PROVIDES THE PRIVILEGES LISTED AT PARAGRAPHS (1), (2), (3), AND (12) BELOW, ONLY. (1) SOFA status for contractor employee (excludes employee's dependents). (2) Duty-free importation privileges in accordance with SOFA and USFK regulations. (3) DD Form 1173 (Uniformed Services Identification and Privilege Card). (4) USFK Form 73 (USFK Ration Control Plate) family size - one (for employee only). (5) PX or BX privileges family size--one Part 11: CLAUSES Part II.a: Addendum to FAR Clause 52.212-4 File Name: 2-a-b-c.doc 12 DAAB15-99-D-0014 (6) Commissary privileges (only authorized if contractor employee is going to be in the ROK for more than 60 days; family size--one). (7) Class VI store privileges (family size--one). (8) Purchase of gasoline and POL products at PX or BX facilities. (9) Military postal service privileges (Army post office and fleet post office). (10) Military banking and credit union privileges. (11) Motor vehicle operator's permit. (12) Registration of one privately owned vehicle per family. (13) Registration of pets and firearms. (14) Medical services on a reimbursable basis. (15) Dental services for emergency care only on a reimbursable basis. (16) Mortuary services on a reimbursable basis. To be individually sponsored for ration control purposes, the contractor employee must be in a paid status of 30 hours or more per week on this contract, and be other than local hire / local hire / local hire AND perform in ROK less than 1 year / 1 year or more / less than 1 year (respectively). If paid status is 29 or less hours per week on this contract, no support will be authorized. No support for dependents is authorized. Local hire is defined as a U.S. or third-country national employee who is ordinarily resident in the U.S. but was hired in the ROK and has no transportation agreement with the employer. b. Corporation Logistic Support. USFK may provide logistic support to corporations that have been designated as invited contractors or technical representatives by HQ USFK, AcofS, Acquisition as follows: (1) SOFA status exemptions. (See above). (2) Use of postal facilities for corporate mail. For shipments through the APO, shipments shall meet the size, weight, and other limitations prescribed by the U.S. Postal Service. Packages shall not exceed 70 pounds and the combined length and girth shall not be more than 108" Additionally, packages shall be labeled to indicate that the contents are exempt from customs and are for official use only. CORPORATE OR APO USE HAS NOT BEEN EXTENDED UNDER THE CONTRACT. Part 11: CLAUSES Part II.a: Addendum to FAR Clause 52.212-4 File Name: 2-a-b-c.doc 13 DAAB15-99-D-0014 All other corporate logistic support (fuel purchases and registration of company~-owned vehicles authorized) must be coordinated between the contracting office and the USFK sponsoring agency and approved by the USFK sponsoring agency before contract performance in ROK. (ah) Electronic Ordering. The Government anticipates the utilization of electronic ordering during the life of this contract. Therefore, the contractor should anticipate the use of a mutually agreeable system with the ability to send, receive and process delivery/task orders electronically. This will be established at no additional cost to the Government. END OF PART II.A Part II: CLAUSES Part II.a: Addendum to FAR Clause 52.212-4 File Name: 2-a-b-c.doc 14 DAAB15-99-D-0014 NOTE: A FAR Reference column has been added to the table in paragraphs (b) and (c)for ease of contract administrafion. Part II.b FAR CLAUSE 52.212-5 CONTRACT TERMS AND CONDITIONS REQUIRED TO IMPLEMENT STATUTES OR EXECUTIVE ORDERS-COMMERCIAL ITEMS (OCT 98) (a) The Contractor agrees to comply with the following FAR clauses, which are incorporated in this contract by reference, to implement provisions of law or executive orders applicable to acquisitions of commercial items: (1) 52.222-3, Convict Labor (E.O. 11755); and (2) 52.233-3, Protest After Award (31 U.S.C. 3553). (b) The Contractor agrees to comply with the FAR clauses in this paragraph (b) which the contracting officer has indicated as being incorporated in this contract by reference to implement provision of law or executive orders applicable to acquisitions of commercial items or components: (Contracting Officer check as appropriate) CLAUSE # CLAUSE TITLE FAR REFERENCE X 52.203-6 Restrictions on Subcontractor Sales to 3.503-2 the Government, with Alternate 1(41 U.S.C. 253g and 10 U.S.C. 2402) RESERVED X 52.219-8 Utilization of Small Business Concerns 19.708(a) and Small Disadvantaged Business Concerns (15 U.S.C. 637(d)(2) and (3)) X 52.219-9 Small, Small Disadvantaged and Women- 19.708(b)(1) Owned Small Business Subcontracting Plan (15 U.S.C. 637(d)(4)) 52.219-14 Limitation on Subcontracting (15 U.S.C. 19.508(e) 637 (a)(14)) X 52.219-23 Notice of Price Evaluation Adjustment 19.1104 for Small Disadvantaged Business Concerns (Pub. L. 103-355, section 7102, and 10 U.S.C. 2323)(If the offeror elects to waive the adjustment, it shall so indicate in its offer). Alternate I of 52.219-23 19.1104 X 52.222-26 Equal Opportunity (E.O. 11246) 22.810(e) X 52.222-35 Affirmative Action for Disabled Veterans 22.1308(a) and Veterans of the Vietnam Era (38 U.S.C. 4212) X 52.222-36 Affirmative Action for Workers with 22.1408 Disabilities (29 U.S.C. 793) X 52.222-37 Employment Reports on Disabled Veterans 22.1308(b) and Veterans of the Vietnam Era (38 U.S.C. 4212) Part II: CLAUSES Part II.b: FAR Clause 52.212-5 File Name: 2-a-b-c.doc 15 52.225-3 Buy American Act-Suppliese (41 U.S.C. 10) 25.109(d) 52.225-9 Buy American Act-Trade Agreements Act- 25.407(a)(2) Balance of Payments Program (41 U.S.C. 10, 19 U.S.C. 2501-2582) RESERVED 52.225-18 European Union Sanction for End Products 25.1003(a) (E.O. 12849) 52.225-19 European Union Sanction for Services 251003(b) (E.O. 12849) 52.225-21 Buy American Act-North American Free Trade 25.408(a)(4) Agreement Implementation Act-Balance of Payments Program (41 U.S.C. 10, Pub. L 103-187) Alternate I of 52.225-21 25.408(a)(4) 52.239-1 Privacy or Security Safeguards (5 39.106 U.S.C. 552a) X 52.247-64 Preference for Privately Owned U.S.-Flag 47.507(a) Commercial Vessels (46 U.S.C. 1241) c) The Contractor agrees to comply with the FAR clauses in this paragraph (c), applicable to commercial services, which the Contracting Officer has indicated as being incorporated in this contract by reference to implement provisions of law or executive orders applicable to acquisitions of commercial items or components: (Contracting officer check as appropriate) CLAUSE # CLAUSE TITLE FAR REFERENCE 52.222-41 Service Contract Act of 1965, As amended 22.1006(a) (41 U.S.C. 351, et seq) 52.222-42 Statement of Equivalent Rates for Federal 22.1006(b) Hires (29 U.S.C. 206 and 41 U.S.C. 351, et seq.) 52.222-43 Fair Labor Standards Act and Service 22.1006(C)(1) Contract Act-Price Adjustment (Multiple Year and Option Contracts) (29 U.S.C. 206 and 41 U.S.C. 351 et seq.) 52.222-44 Fair Labor Standards Act and Service 22.1006(c)(2) Contract Act-Price Adjustment (29 U.S.C. 206 and 41 U.S.C. 351 et seq.) 52.222-47 SCA Minimum Wages and Fringe Benefits 22.1006(d) Applicable to Successor Contract Pursuant 22.1012-3(d)(1) to Predecessor Contractor Collective Bargaining Agreement (CBA) (41 U.S.C. 351 et seq.) (d) Comptroller General Examination of Record. The Contractor agrees to comply with the provisions of this paragraph (d) if this contract was awarded using other than sealed bid, is in excess of the simplified acquisition threshold, and does not contain the clause at 52.215-2, Audit and Records - Negotiation: (1) The Comptroller General of the United States, or an authorized representative of the Comptroller General, shall have access to and right to examine any of the Contractor's directly pertinent records involving transactions related to this contract. (2) The Contractor shall make available at its offices at all reasonable times the records, materials, and other evidence for examination, audit, or reproduction, until 3 years after final payment under this Part II: CLAUSES Part II.b: FAR Clause 52.212-5 File Name: 2-a-b-c.doc 16 DAAB15-99-D-0014 contract or for any shorter period specified in FAR Subpart 4.7 , Contractor Records Retention, of the other clauses of this contract. If this contract is completely or partially terminated, the records relating to the work terminated shall be made available for 3 years after any resulting final termination settlement. Records relating to appeals under the disputes clause or to litigation or the settlement of claims arising under or relating to this contract shall be made available until such appeals, litigation, or claims are finally resolved. (3) As used in this clause, records include books, documents, accounting procedures and practices, and other data, regardless of type and regardless of form. This does not require the Contractor to create or maintain any record that the Contractor does not maintain in the ordinary course of business or pursuant to a provision of law. (e) Notwithstanding the requirements of the clauses in paragraphs (a), (b), (c) or (d) of this clause, the Contractor is not required to include any FAR clause, other than those listed below (and as may be required by an addenda to this paragraph to establish the reasonableness of prices under Part 15), in a subcontract for commercial items or commercial components-- (1) 52.222-26, Equal Opportunity (E.O. 11246); (2) 52.222-35, Affumative Action for Special Disabled and Vietnam Era Veterans (38 U.S.C. 2012(a)); (3) 52.222-36, Affirmative Action for Workers with Disabilities (29 U.S.C. 793); and (4) 52.247-64, Preference for Privately-Owned U.S.-Flagged Commercial Vessels (46 U.S.C. 1241) (flow down not required for subcontracts awarded beginning May 1, 1996.) (End of Clause) END OF PART II.B Part II: CLAUSES Part II.b: FAR Clause 52.212-5 File Name: 2-a-b-c.doc 17 DAAB15-99-D-0014 NOTE: A DFARS Reference column has been added to the table in paragraph (b) for ease of contract administration. Part II.c DFARS CLAUSE 252.212-7001 CONTRACT TERMS AND CONDITIONS REQUIRED TO IMPLEMENT STATUTES OR EXECUTIVE ORDERS APPLICABLE TO DEFENSE ACQUISITIONS OF COMMERCIAL ITEMS (MAR 98) (a) The Contractor agrees to comply with the Defense Federal Acquisition Regulation Supplement (DFARS) clause 252.247-7023, Transportation of Supplies by Sea, which is included in this contract by reference to implement 10 U.S.C. 2631. (b) The Contractor agrees to comply with any clause that is checked on the following list of DFARS clauses which, if checked, is included in this contract by reference to implement provisions of law or Executive Orders applicable to acquisitions of commercial items or components. (Contracting officer check as appropriate) CLAUSE # CLAUSE TITLE DFARS REFERENCE X 252.205-7000 Provision of Information to Cooperative 205.470-2 Agreement Holders (10 U.S.C. 2416) 252.206-7000 Domestic Source Restriction (10 U.S.C. 206.302-3-70 2304) 252.219-7001 Notice of Partial Small Business Set-Aside 219.508(d) with Preferential Consideration for Small Disadvantage Business Concerns (__ Alternate I) (Section 9004, Pub.L. 101-165 (10 U.S.C. 2301 (repealed) note)) 252.219-7002 Notice of Small Disadvantaged Business 219.508-70 Set-Aside (__ Alternate I)(15 U.S.C.644) X 252.219-7003 Small Business and Small Disadvantage 219.708(b)(1)(A) Business Subcontracting Plan (DoD Contracts) (15 U.S.C. 637) X 252.219-7005 Incentive for Subcontracting With Small 219.708(c)(1) Business, Small Disadvantage Businesses, Historically Black Colleges and Universities and Minority Institutions (___ Alternate I) (Section 9004, Pub. L. 101-165 (10 U.S.C. 2301 (repealed) note)) Para (a): one 252.219-7006 Notice of Evaluation Preference for Small 219.7003 Disadvantaged Business Concerns (___ Alternate I) (15 U.S.C. 644) X 252.225-7001 Buy American Act and Balance of Payment 225.109(d) Program (41 U.S.C. 10a-10d, E.O. 10582) X 252.219-7007 Buy American Act-Trade Agreements- 225.407(a)(2) Balance of Payments Part II: CLAUSES Part II.c: DFARS Clause 252.212-7001 File Name: 2-a-b-c.doc 18 DAAB15-99-D-0014 Program (__ Alternate I) (41 U.S.C. 10a-10d, 19 U.S.C. 2501-2518, and 19 U.S.C. 3301 Note). 252.225-7012 Preference for Certain Domestic Commodities 225.7002-4(a) 252.225-7014 Preference for Domestic Speciality Metals 225.7002-4(c) (10 U.S.C. 2241 note) 252.225-7015 Preference for Domestic Hand or Measuring 225.7002-4(d) Tools (10 U.S.C. 2241 note) 252.225-7021 Trade Agreements (__ Alternate I)(19 U.S.C. 2501-2518 and 19 U.S.C. 3301 note). 252.225-7027 Restriction on Contingent Fees for Foreign 225.7308(a) Military Sales (22 U.S.C. 2779) 252.225-7028 Exclusionary Policies and Practices of 225.7308(b) Foreign Governments (22 U.S.C. 2755) 252.225-7029 Restriction on Acquisition of Air Circuit 225.7016-4 Breakers (10 U.S.C. 2534(a)(3)) 252.225-7036 Buy American Act-North American Free Trade 225.408(a)(4) Agreement Implementation Act-Balance of Payments Program (___ Alternate I) (41 U.S.C. 10a-10d and 19 U.S.C. 3301 note). X 252.227-7015 Technical Data-- Commerical Items (10 227.7102-3 U.S.C. 2320) X 252.225-7037 Validation of Restrictive Markings on 227.7102-3(c) Technical Data (10 U.S.C. 2321) 227.7103-6(e)(4) 252.243-7002 Certification of Requests for Equitable 243.205-72 Adjustment (10 U.S.C. 2410) X 252.247-7024 Notification of Transportation of Supplies 247.573(c) by Sea (10 U.S.C. 2631) (c) In addition to the clauses listed in paragraph (e) of the Contract Terms and Conditions Required to Implement Statutes or Executive Orders-Commercial Items clause of this contract, if applicable, in subcontracts for commercial items or commercial components, awarded at any tier under this contract: __252.225-7014, Preference for Domestic Specialty Metals, Alternate I (10 U.S.C. 2241 note). (End of Clause) DFARS CLAUSE 252.227-7013 RIGHTS IN TECHNICAL DATA - NONCOMMERCIAL ITEMS (NOV 1995) The above clause is hereby incorporated by reference. Part II: CLAUSES Part II.c: DFARS Clause 252.212-7001 File Name: 2-a-b-c.doc 19 DAAB15-99-D-0014 END OF PART II.C Part 11: CLAUSES Part II.c: DFARS Clause 252.212-7001 File Name: 2-a-b-c.doc 20 DAAB15-99-D-0014 PART 111.a Statement of Objectives for the Movement Tracking System (MTS) 1. Program Goals. The MTS is a world-wide, data communications capability for locating and managing the movement of logistics and combat support vehicles. MTS will provide in-transit visibility and velocity management of logistics and other Army combat support assets anywhere from the sustaining base to the theater of operations. MTS will be used to support missions throughout the full range of military operations from peacetime to war. MTS will provide commanders with near real-time data for location and status of logistics and combat support movement. MTS will provide key capabilities to enable and enhance in-transit visibility and velocity management such as the ability to reroute supplies due to changing priorities, helping avoid hazards, and maintaining updated unit status. The MTS capability will improve the efficiency and the effectiveness of distribution of resources and assets. 2. Program Objectives. The Army will field an effective capability in response to the MTS mission needs statement and MTS Operational Requirements Document (ORD). The MTS capability will be consistent with the Army Force and Combat Service Support initiatives. The Army recognizes that the key technologies required for MTS are available as commercial or non-developmental items. However, the commercial satellite communication services are not as prevalent and may be characterized as emerging and not stable in terms of capability and service availability on a world-wide basis. The Army recognizes that the acquisition and fielding of the MTS must be accomplished at the same time that necessary technology and services are advancing. Therefore, the Army will acquire the MTS with an initial set of capabilities and provisions for Pre-Planned Product Improvements (P3I), technology insertion, and technology additions consistent with the baseline requirements and subsequent requirements of the ORD. The MTS program is an integration program expected to leverage commercial items, non-developmental items, and commercial communication services. MTS will incorporate elements such as Global Positioning System (GPS), geographic information system (GIS) mapping technologies, automatic identification technologies (AIT), Information Security (INFOSEC), and encryption techniques, Communications Security (COMSEC), and commercial satellite services. In order to provide a baseline capability in the short term, the MTS will be procured with a set of initial capabilities followed by P3I, technology insertion, and technology additions. A key objective is to develop a system architecture capable of accommodating system evolution without redesign. The initial requirements must provide a significant, identifiable operational capability and be supportable in the Army operational environment. Another key objective is to provide the necessary software and hardware modularity in the system design so that system elements can be separated from the others for specialized upgrades. P3I, technology insertion, and technology additions will provide incremental upgrades that will incorporate additional functionality as stated in the MTS technical specifications. P3I, 1 DAAB15-99-D-0014 technology insertion, and technology additions will also be utilized to incorporate additional services and technology improvements to include access to multiple satellite service providers. This approach will allow the program to achieve overall capability through fielding and support of incremental upgrades to the baseline operational capability. 3. System/contract management A Government/Contractor Integrated Product Team (IPT) will be established to provide assistance, oversight, and review as the MTS proceeds through its acquisition lifecycle. The EPT will execute the program using a plan and schedule that will be developed after contract award. 4. Specific Objectives Provide world-wide MTS operational capability; articulate a stable system design and architecture that provides for system evolution. 5. System Design and Integration Provide a modular software and hardware system design with an upgrade path for system evolution. Maximize use of commercial, non-developmental items, and open systems. Provide capability that satisfies Information Security (INFOSEC) requirements for sensitive but unclassified data as specified in MTS technical specifications, use current robust industry encryption standards, and plan for cost-effective future encryption improvements. Provide necessary interfaces as specified in MTS technical specifications. Perform total system integration (total system integration responsibility) prior to delivery. All operating and system support software will be loaded. All components will be integrated, configured, tested, and each equipment set will be made operational. 6. Validation Demonstration and Deployment Conduct a Government-witnessed demonstration to validate that the system is capable of performing as claimed in the winning proposal. The demonstration will be scheduled in accordance with the MTS contract requirements. Deliver equipment in accordance with MTS contract requirements. 7. Operations and Support Develop operations training and maintenance training. Provide responsive, customer focused, full-service assistance program as described in the MTS SOW/specification. This will include a problem report and tracking process, telephonic trouble shooting assistance and problem resolution, and feedback. Provide an order processing and tracking information service for delivery/task orders via email, World Wide Web or satellite messaging. 8. System Evolution and P3I. Design the MTS using highly modular elements allowing easy upgrade and system evolution to include future access to multiple satellite service providers. DAAB15-99-D-0014 Conduct operational evaluation and pre-planned product improvements resulting in delivery of objective requirements. 9. System Cost. Minimize cost of upgrades to objective requirements. Minimize recurring unit cost of handheld, mobile, and control stations. Minimize system life cycle costs. 3 DAAB15-99-D-0014 MOVEMENT TRACKING SYSTEM SPECIFICATION AND STATEMENT OF WORK TABLE OF CONTENTS PART III.b MOVEMENT TRACKING SYSTEM STATEMENT OF WORK AND SPECIFICATION 1. PURPOSE 2. SCOPE 3. OPERATIONAL ENVIRONMENT 4. APPLICABLE DOCUMENTS 5. TERMS AND DEFINITIONS 6. FUNCTIONAL REQUIREMENTS 6.1. Provision of Equipment 6.1.1 General 6.1.2 Validation Demonstration 6.1.3 System Integration 6.1.4 Delivery Requirements 6.1.5 Post Award Testing 6.2 GOVERNMENT FURNISHED PROPERTY (GFP) 6.3 CUSTOMER ASSISTANCE 6.3.1 Telephonic Assistance 6.3.2 Order Processing Tracking Information 6.4 WARRANTY 6.4.1 Warranty Period 6.4.2 Return to Service 6.4.3 Replacement Parts 6.4.4 Warranty Conditions 6.4.5 Post Warranty Maintenance 6.5 HARDWARE AND SOFTWARE DOCUMENTATION 6.6 CONFIGURATION MANAGEMENT 6.6.1 Correction of Safety Hazards or Equipment Malfunctions 1 DAAB15-99-D-0014 6.6.2 Current Technology Substitutions/Insertions/Additions 6.6.3 Replaceable Items 6.7 CONTRACT MANAGEMENT 6.7.1 Monthly Project Status Reports 6.7.2 Quarterly Logistics and Maintenance Report 6.7.3 World-Wide Web Site 6.8 SECURITY 6.9 USAGE TIME/AIR TIME 6.10 PART NUMBERS 6.11 TECHNICAL SUPPORT SERVICES 6.11.1 General 6.11.2 Site Surveys 6.11.3 On-Site Installation and Training 6.11.4 Relocation of Equipment 6.11.5 Post-Installation Support 6.11.6 Engineering Studies and Documentation 6.11.7 Impact Studies 6.11.8 Development/Modification of Software Programs to Achieve Additional Functionality 6.11.9 Development and Documentation of A-Kits for Different Families of Vehicles 6.11.10 CONUS and OCONUS Shipping and Delivery 6.11.11 Additional System Integration 6.11.12 Demonstration Support END OF STATEMENT OF WORK APPENDIX I TO THE MTS STATEMENT OF WORK AND SPECIFICATION APPLICABLE DOCUMENTS I.1 TECHNICAL ARCHITECTURE DOCUMENTS I.2 GPS USER EQUIPMENT INTERFACE CONTROL DOCUMENT FOR THE RS-232/RS-422 INTER- FACE OF DoD STANDARD GPS UE RADIO RECEIVERS 2 DAAB15-99-D-0014 END OF APPENDIX I TO STATEMENT OF WORK APPENDIX II TO THE MTS STATEMENT OF WORK AND SPECIFICATION DEFINITIONS II.1 DEFINITIONS END OF APPENDIX II TO STATEMENT OF WORK APPENDIX III TO THE MTS STATEMENT OF WORK AND SPECIFICATION EQUIPMENT SPECIFICATION III.1 INTRODUCTION III.2 GENERAL PERFORMANCE REQUIREMENTS III.2.1 Commercial Equipment III.2.2 Only New Equipment III.2.3 World-wide Usage/Operating Authority III.2.4 Federal Communications Commission (FCC) Certification III.2.5 Year 2000 Warranty--Commercial Supply Items III.2.6 Compliance with Joint Technical Architecture-Army (JTA-A) III.2.7 Power Requirements III.2.8 User Replaceable Components III.2.9 Commercial Software III.2.10 Handheld Mobile Unit (V1) III.2.11 Vehicle Mounted Mobile Unit (V2) III.2.12 Control Station III.2.13 GPS III.2.14 System Operational Requirements EXHIBIT-A 3 DAAB15-99-D-0014 SAFE SEPARATION DISTANCE BETWEEN AN RF SOURCE AND UNSHIELDED MUNITIONS CONTAINING 10 mA NO-FIRE CURRENT ELECTRO-EXPLOSIVE DEVICES(EEDs) III.2.14 Transit Cases III.2.15 Pre-Planned Product Improvements (P3I) 4 DAAB15-99-D-0014 PART III.b MOVEMENT TRACKING SYSTEM STATEMENT OF WORK AND SPECIFICATION 1. PURPOSE The purpose of this procurement is to provide GPS, commercial computer equipment; system support software; installation kits (A-Kit), air time, associated documentation and reports; integration; maintenance; and technical support services and services to provide a world-wide two-way data communications and geo-location capability between mobile units (Handheld Mobile Unit [V1] and Vehicle Mounted Mobile Unit [V2], also called B-Kits) and designated control points (Control Stations). To the extent practical, the equipment shall represent state-of-the-art technology. MTS will support military operations on a world-wide basis in peacetime, peacekeeping and wartime operations. MTS system components shall be capable of operating without the use of direct telephone (land line or cellular) connections or LAN/WAN/INTERNET direct connectivity. 2. SCOPE The equipment and services shall support the MTS program and operate in an open systems environment on a world-wide basis. This environment requires solutions that are compliant with open systems standards defined in the Department of Army Joint Technical Architecture - Army (JTA-A). As part of the technical support services provided under this contract, the Contractor may perform engineering studies, technical services, develop device drivers to facilitate the passing of data to an open systems environment compliant with the JTA-A and interfaces, and develop A-Kits to facilitate vehicle integration. The U.S. Army, other U.S. Armed Services, Department of Defense (DoD) Agencies, other U.S. Federal Government Agencies, and foreign allied military services shall be authorized to order from this contract. 3. OPERATIONAL ENVIRONMENT The Control Station will be operated in a fixed, heated/cooled environment (operation center, etc.), but is required to be transportable and capable of being interfaced to a LAN, and wide area network (WAN) for subsequent passing of data. No dedicated power generation equipment is required. The Control Station equipment requires standard 110-volt (CONUS) or 220-volt (OCONUS) 50/60 Hz commercial power. Devices to protect against power surges (e.g., surge suppressers) are required in CONUS and OCONUS. The Control Station is also required to operate from battery power. The V1 and V2 units will be operated in a mobile environment inside a vehicle. V1 units require battery power and an additional connection for operation from vehicle power. V2 units, mounted in a vehicle, require power from the vehicle only when the engine is running. The V2 shall be capable of operating from standard 110-volt (CONUS) or 220-volt (OCONUS) 50/60 Hz commercial power. 4. APPLICABLE DOCUMENTS 5 DAAB15-99-D-0014 The documents listed in Appendix I to this statement of work form a part of the technical specifications set forth in this statement of work and specification. In the event of conflict between the documents listed and the contents of this statement of work and specification, this statement of work and specification shall govern. 5. TERMS AND DEFINITIONS Definitions and meanings of data processing, data communications, and information systems terms used in this statement of work and specification which are not defined herein or in Appendix II shall be interpreted in accordance with FIPS PUB 11-3, Guideline: American National Dictionary for Information Systems. 6. FUNCTIONAL REQUIREMENTS The Contractor shall deliver supplies and services set forth in this statement of work and specification pursuant to issuance of delivery/task orders. Except as stated herein, the Contractor, acting independently, and not as an agent of the Government, shall furnish all management, personnel, equipment, software, services, travel, and other items necessary to deliver the supplies and services. 6.1 Provision of Equipment 6.1.1 General Appendix III, Equipment Specification, represents minimum requirements. At a minimum, the Contractor shall provide equipment that satisfies the minimum requirements set forth in Appendix III. 6.1.2 Validation Test a. Within 30 to 60 days after contract award, the Contractor shall conduct a contractor funded Government witnessed test at the contractor's facility to demonstrate that the Contractor's proposed MTS is capable of performing in a manner equal to or better than the contract requirements. b. The test shall be conducted over a two day period. The Control Station shall be located at the Contractor's facility. A V1 and V2 unit shall be located in Heidleberg, Germany, and a V1 and V2 unit shall be located in Fort Hood, Texas. The V1 and V2 units shall be placed in a contractor provided vehicle (permanent installation of the V2 is not required) at each location. The Contractor's driver shall be accompanied by one or more Government witnesses and shall follow a Government prescribed route. Communications between the various units shall be established and geolocation of units shall be demonstrated. The full range of MTS capabilities shall be demonstrated. c. At least 15 days prior to commencement of the test, the Contractor shall deliver to the Government a test plan which includes an agenda, procedures, and any constraints. The Government may approve or reject the test plan. If the plan is rejected the Government win return the plan with the necessary changes. The Government reserves the right to have at least five Government-designated representatives witness the test. The test may be witnessed by the Army Operational Evaluation Command. d. All approvals (e.g., landing rights) required to conduct the test are the sole responsibility of the contractor. 6 DAAB15-99-D-0014 e. The Contractor shall successfully complete the test of all equipment and functions. In the event that the Contractor fails to successfully complete all aspects of the test, the Government may, at its option, extend the test period on a day-by-day basis. Failure to complete any part of the test may result in the termination of the contract at no cost to the Government. f. Within one day after successful completion of the test, the Contractor shall deliver to the Contracting Officer a summary of the test results 6.1.3 System Integration Prior to delivering equipment under this contract, the Contractor shall fully test, configure, integrate, and make operational each equipment platform. The integration process shall include loading the required operating and system support software and integrating all Contractor-provided equipment. 6.1.4 Delivery Requirements The Contractor shall deliver equipment to any CONUS location within 30 days of receipt of a delivery order. All shipping costs shall be included in the price of the end item. All components of an order shall be shipped concurrently to the same address, unless otherwise instructed by the Contracting Officer. A packing list shall be placed in each shipping container. The Contractor shall pack each applicable component in its transit case(s) prior to shipping. The transit case(s), containing the configuration and/or components, shall be appropriately packed and shipped in standard commercial wrappings; e.g., shrink wrappings. Each unit shipped shall have its own users manual packed in the transit case. 6.1.5 Post Award Testing a. The MTS components may be subjected to Nuclear, Biological, Chemical (NBC) Contamination testing and High Altitude Electro-Magnetic Pulse (HAEMP) testing by the Government after contract award. Pending results of the tests, the Contracting Officer may request a proposal in accordance with the Current Technology Substitutions/Insertions/Additions Clause (6.6.2) to upgrade the MTS components to meet the Government's NBC, HAEMP, and other requirements. Presently, the NBC and HAEMP requirements are internal to the Government and do not reflect the current requirements of this solicitation. b. MTS will also be required to obtain a safety release based on signal radiation. c. MTS will also undergo computer security standard C2 certification to determine its level of protection. 6.2 GOVERNMENT FURNISHED PROPERTY (GFP) a. NIMA/DMA maps will be provided as GFP on this contract. b. Other GFP on this contract will be provided as required for any future testing and development. 6.3 CUSTOMER ASSISTANCE 6.3.1 Repair Assistance a. The Contractor shall provide support via a local and/or toll-free telephone number(s) to users in the following areas of operation: CONUS, Alaska, Hawaii, Germany, and Korea. A telephone 7 DAAB15-99-D-0014 number shall also be provided for all other world-wide users. At a minimum, the telephonic support shall consist of the services set forth at paragraph 6.3.2. b. The Contractor shall provide a staffed telephonic support service, answering machine service, email, World-Wide Web, and satellite message service during the Principle Period of Operation (PPO). The PPO hours for CONUS, Alaska and Hawaii are Monday through Friday, 8:00 am. through 5:00 p.m. local time, excluding U.S. Government holidays. The PPO for Germany and Korea is Monday through Friday, 8:00 a.m. through 5:00 p.m., OCONUS local time, excluding U.S. Government holidays and OCONUS Host Nation holidays. c. The Contractor shall provide answering machine service, email, World-Wide Web, and satellite message service to receive problem reports from users Outside of Principle Period of Operations (OPPO). The OPPO hours for CONUS, Alaska and Hawaii are Monday through Friday, 5:01 p.m. through 7:59 a.m., local time and 24 hours a day Saturday, Sunday and U.S. Government holidays. The OPPO hours for Germany and Korea are Monday through Friday, 5:01 p.m. through 7:59 a.m., OCONUS local time and 24 hours a day Saturday, Sunday and U.S. Government holidays and OCONUS Host Nation holidays. d. The support personnel shall receive problem reports and attendant requests for assistance and perform the necessary actions to facilitate the timely resolution of reported problems. The support personnel shall be sufficiently proficient in spoken and written American English so that they can effectively communicate with users 6.3.2 Order Processing/Tracking Information During the PPO hours, as requested, the telephonic support personnel shall provide users with current order processing and tracking information applicable to given delivery/task orders. Examples of such information are the date the Contractor received the delivery/task orders, the scheduled delivery dates, and the shipment status. The telephone support personnel shall receive problems with an order and attendant requests for assistance and perform the necessary actions to facilitate the timely (less than 9 business hours) resolution of reported problems. 6.4 WARRANTY REMEDIES AND PROCEDURES The contractor shall be obligated, under the provisions of the Warranty for items delivered pursuant to this contract, to repair or replace or otherwise provide a remedy for warranted items only if damage or loss results from or is caused by the warranted item. The Contractor is not obligated to provide repair, replacement or other remedies in the event that damage or loss is the result of or is caused by actions or events other than the warranted item, to include such causes as: (1) misuse or abuse of the item beyond the use contemplated in the Specification; (2) accidental damage, to include aircraft crashes; (3) combat damage; (4) natural disasters, to include flood, earthquake, hurricane, tornado; and (5) fires or explosions not originating on or within the warranted item. 6.4.1 Warranty Period The Contractor shall provide a minimum thirty six (36) month warranty including parts and labor for all equipment delivered under this contract. All warranties for items accepted on the same date shall be for the same duration. The warranty period shall begin upon Government acceptance of the MTS equipment and items. For the purposes of warranty, software or firmware shall be considered equipment. The warranty may include on-site procedures or mail- 8 DAAB15-99-D-0014 in or a combination of both. The Government reserves the right to carry in MTS equipment for repair at no additional cost to the Government. If mail-in/carry-in procedures are provided, the Contractor shall provide no-cost repair for MTS equipment delivered to the Contractor by mail or commercial carrier. The Contractor shall bear all shipping and packaging costs both from and to Government sites. The Contractor shall be responsible for the equipment from time of shipment until safe return to the Government site. 6.4.2 Return to Service Equipment located in CONUS, Alaska, Hawaii, Germany, Korea and Southwest Asia (including but not limited to Kuwait, Saudi Arabia, Bahrain and Qatar), shall be returned to a fully operational status or replaced with a fully operational unit within seventy two (72) hours of a bona fide attempt to report the problem to the Contractor using the services provided pursuant to paragraph 6.3. Equipment located in all other locations shall be returned to a fully operational status or replaced with a fully operational unit within two hundred forty (240) hours of a bona fide attempt to report the problem to the Contractor using the services provided pursuant to paragraph 6.3. A bona fide attempt is established once the user has established contact with the staffed telephone support service or after a user leaves an answering machine service message or receives a delivery receipt notice to an email, World-Wide Web or satellite message request for service. 6.4.3 Replacement Parts a. When the Contractor replaces a defective part during the warranty period, the newly installed part shall become Government property. The defective part shall become the property of the Contractor, except the Government reserves the right to retain defective disk drives containing sensitive or classified material which is required by statute or regulation to be destroyed or retained by the Government. The Contractor shall ensure that the hard drives are separately priced as a sub-component CLIN. b. The effective warranty for all replacement items installed during the initial warranty period shall be equal to the remaining warranty period on the original item or 90 calendar days, whichever is greater. c. Only new parts or parts certified by the Original Equipment Manufacturer (OEM) as equal to new shall be used in effecting warranty repairs. Additionally, all replacement parts shall be equal to or better than the replaced parts in terms of quality and performance. 6.4.4 Warranty Conditions The Government may upgrade equipment delivered under this contract by inserting items or attaching other devices such as third party cards or disk drives without voiding the applicable warranty. Substitutions and additions of equipment not manufactured or supplied by the Contractor shall be subject to the following: a. The Contractor shall not be responsible for damage caused to the original equipment provided the damage results from the use of third-party equipment. b. The Contractor shall not be responsible for defects or overall system performance degradation if such defects or performance degradation result from the use of third-party equipment. 6.4.5 Post Warranty Maintenance 9 DAAB15-99-D-0014 The contractor shall propose follow on post initial warranty maintenance on a monthly fixed price basis for all items in accordance with the provisions of paragraph 6.4. 6.5 HARDWARE AND SOFTWARE DOCUMENTATION a. Commercial Manuals. The Contractor shall provide commercial quality documentation for all hardware and software delivered under this contract in accordance with commercial practices. To the extent that it is consistent with commercial practices, the hardware and software documentation shall be provided as separately orderable items and not included in the equipment prices. b. MTS Manuals and Training Material. The contractor shall provide commercial quality data to the Government in the form of MTS users manuals and training documentation for the V1, V2, and Control Station. The users manuals and training documentation shall include step by step procedures for set-up hear-down, power on, power off, concept of operations, diagrams of all equipment, shall also include a discussion of the purpose, function and operation of all switches and connectors, full discussion of operating procedures, troubleshooting and a Frequently Asked Question section. c. The contractor shall submit a draft for all contractor developed documentation 45 days after contract award date. The Government has 20 days to review and submit comments. The final documentation shall be submitted to the Government within 30 days. 6.6 CONFIGURATION MANAGEMENT 6.6.1 Correction of Safety Hazards or Equipment Malfunctions a. In accordance with commercial practices, the Contractor shall notify the Contracting Officer and the PM office of all OEM-sponsored changes to correct safety hazards or equipment malfunctions. b. The Contractor shall implement changes to correct safety hazards in accordance with commercial practices. The implementation shall be in accordance with a mutually agreed-upon schedule. All such changes shall be implemented at no additional cost to the Government. c. During the equipment warranty period or during any period in which post-warranty repair services are procured, the Contractor shall implement changes to correct equipment malfunctions in accordance with commercial practices. The implementation shall be in accordance with a mutually agreed-upon schedule. These changes shall be made at no additional cost to the Government. 6.6.2 Current Technology Substitutions/Insertions/Additions a. The Contractor shall propose changes within the general scope of the contract for the purpose of product substitutions, technology insertions, and/or additions to assure that state-of-the-art, commercial items are available for delivery in accordance with the contract terms and conditions. (1) Product substitutions are replacement of contract items which have been officially announced as either out-of-production or no longer supported by the OEM. Substituted items shall be at the same or greater performance for the same or lesser price of the contract item being replaced. (2) Technology insertions are upgrades and advancements in technology for existing contract items. 10 DAAB15-99-D-0014 (3) Additions provide for new functionality not available on the contract. A new CLIN or sub-CLIN will be added to the contract for the addition of the new item. b. The offer of product substitution, insertion, or addition shall include information sufficient to determine that the proposal satisfies the terms and conditions of the contract and in particular, this section of the SOW. The proposal shall be subject to negotiations and shall, as a minimum, include the following information: (1) A description, in detail, of the difference between the existing contract item(s) and the product substitution or technology insertion and a specific analysis of the comparative advantages and disadvantages of each. For additions, the proposal shall provide a complete description of the new item and a correlative analysis of how the new item will benefit the Government. (2) A discussion of how specific contract items would be changed if the proposal is accepted (e.g., if new equipment is offered to replace currently installed, will the old equipment be exchanged for the new equipment and on what basis). (3) A statement as to how the changes will affect performance, costs, etc., and an item-by-item summary of any "street pricing" (including source of the "street price") and any GSA pricing (including GSA Schedule Number). (4) If applicable, an evaluation of all the effects the change would have on the Contract Life Costs, maintenance, personnel, site modifications, and energy consumption, etc. (5) An analysis of a timeframe in which the change should be instituted to obtain maximum benefit to the Government for the remainder of the contract. c. The Contractor shall manage and propose product substitutions, technology insertions, and additions in a timely manner in order to allow sufficient time for Government evaluation approval and to provide, without a lapse in availability, Government-approved products throughout the entire ordering period of the contract. (Government review times will vary depending upon the complexity and newness of the item.) d. The Government reserves the right to request a proposal for technology additions. Upon the Government's request the Contractor shall prepare a proposal that complies with the requirements of paragraph 6.11.l.b. e. The Government shall not reimburse the Contractor for proposal costs for product substitutions, technology insertions, and additions. f. All approved changes shall be determined to be within the general scope of the contract and to be in the best interest of the Government. The decision as to the acceptability of such a proposal shall be at the sole and exclusive discretion of the Contracting Officer and is not subject to the Disputes clause of this contract. Acceptance of such a proposal shall be made by issuance of a written modification to this contract. Unless and until such a modification is issued to the Contractor, the Contractor remains obligated to perform in accordance with the terms of the existing contract. g. In the event the contract modification results in equipment changes to any of the basic computer configurations, the Government may require the Contractor to perform a Government witnessed demonstration prior to the first delivery of the revised configuration(s). As a minimum, the Contractor shall demonstrate that the equipment is capable of performing in a 11 DAAB15-99-D-0014 manner equal to or better than the applicable Contractor's certified benchmark test results and is capable of successfully performing. In such an event, the Contractor shall perform the demonstration within 15 days after the Contracting Officer's request for the demonstration. At least seven days prior to the demonstration, the Contractor shall deliver to the Government a plan that outlines the agenda, procedures, and any constraints related to the demonstration. h. All new equipment shall be backward compatible with hardware previously purchased under this contract. 6.6.3 Replaceable Items The contractor shall offer replaceable items such as external antennas, cables, power cords, batteries, printer cartridges, etc., as separately orderable items for the MTS Control Station, V1, and V2. 6.6.4 Sub-units The contractor shall offer components of each MTS control Station, V1, and V2. A sub-unit is a subassembly of the parent item such as a laptop computer, software, transit case, printer, hard drive, etc. These are items that are typically user removable and installable in the event of field loss or damage. A sub-unit/subassembly is NOT typically a circuit card assembly or other items requiring specialized skill to remove and install (except hard drives). These items are to be determined by the offeror, however, in aggregate all sub-units shall make up the unit. 6.7 CONTRACT MANAGEMENT With the exception of excusable delays as set forth in Part II.a, paragraph (f), the Contractor shall be liable for non-performance under this contract. In addition to the reporting requirements set forth in this paragraph, the Contractor shall notify the Contracting Officer in writing as soon as it is reasonably possible when non-performance is imminent or has occurred. 6.7.1 Monthly Project Status Reports a. The Contractor shall provide monthly project status reports. At a minimum, the reports shall include the following information for the reporting period: (1) Summary of Equipment Orders: This shall include the orders received, deliveries made, and the delivery location and required and actual delivery dates of each order (2) Summary of Technical Support Services Orders: This shall include the orders received, deliveries made, and the delivery location and required and actual delivery dates of each order (3) Summary of Warranty Repairs: This shall include identification of pertinent dates (e.g., date notified of problem, date item received by contractor, date repaired, date returned to unit, etc.) (4) Summary of Maintenance Provided: This shall include identification of pertinent dates (e.g., date notified of problem, date repaired, etc.) and provide a consolidated failure rate (Mean Time Between Failure (MTBF) rate) and projected life expectancy values. This shall be recorded at the sub-component level in order to facilitate future repair/support budgets. (5) Current Technology Substitutions/Insertions/Additions Proposal Information 12 DAAB15-99-D-0014 (6) Dollar Value of Delivery/Task Orders (7) Concerns, Risks (to include those which are Government attributed), Issues, and Potential Mitigating Actions (8) Air Time usage/ seventy five percent or greater of purchased usage b. The first reporting period shall be from receipt of the first delivery/task order through the end of the next full calendar month. All subsequent reporting periods shall be from the first calendar day of the month through the last calendar day of the month. The monthly reports shall be submitted to the Government Program Manager (PM) within ten workdays from the end of the reporting period. The monthly status report shall be subject to Government approval. Any revisions to the report shall be submitted to the PM within three workdays of receipt of Government comments. c. The report shall be delivered in hard and soft copy formats to the PM, the COR, and the Contracting Officer within two workdays following approval by the PM. The Government is currently using MS Word 6.0 and Excel 5.0. The soft copy report shall be provided in the same or compatible format. d. The Contractor shall attend meetings with the PM as necessary to discuss issues and concerns relating to the contract. The location of each meeting will be within the National Capital Region or at Ft Lee, VA. 6.7.2 Quarterly Logistics and Maintenance Report a. The Government has a requirement to track logistics and maintenance information. The Contractor shall provide a Quarterly Logistics and Maintenance Report which contains information on all equipment delivered under the contract, (i.e., those components which are separately priced) for input into the Government's database. The report shall contain, at a minimum, the following information: (1) Control Number (a number to track transactions) (2) Delivery Order Number (3) CLIN (4) Description (5) Manufacturer, including Commercial and Government Entity (CAGE) code (6) Model/Part Number (7) Serial Number (8) Delivery point (including Unit/organization, Unit Identification Code (UIC), and DoD Activity Address Code (DODAAC)) (9) Warranty Start Date (10)Maintenance Start Date and Expiration Date (excluding warranty) (11)Quarterly and Cumulative Air Time Usage by Unit (12)Air Time Start Date 13 DAAB15-99-D-0014 b. The report shall be provided on a quarterly basis. The first reporting period shall be from receipt of the first delivery order through the end of the first complete Government fiscal quarter. All subsequent reporting periods shall be from the first calendar day of the fiscal quarter through the last calendar day of the fiscal quarter. The report shall be submitted to the PM within ten workdays from the end of the reporting period. The report shall be subject to the PM approval. Any revisions to the report shall be submitted to the PM within three workdays of receipt of Government comments. c. The report shall be delivered to the PM within two workdays following approval by the PM and shall be posted to the Web site pursuant to and in accordance with paragraph 6.7.3. The report shall be submitted in a format that is consistent with the Contractor's commercial practices. 6.7.3 World-Wide Web Site a. Within 60 days after the effective date of the contract, the Contractor shall provide a Web site that shall be available on a 24-hour basis. The Web site shall be a restricted site, accessible only to military and DoD civilian employees with a .mil email address. As a minimum, the Web site shall include, or provide hyperlinks to, the following downloadable information. (1) Quarterly Logistics and Maintenance Report (delivered pursuant to paragraph 6.7.2). This information, and any updates to this information, shall be posted to the Web site within 48 hours of Government approval. The Contractor may restrict access to the Quarterly Logistics and Maintenance Report that is posted on the Web Site to those individuals identified by the PM. (2) Copies of Device Drivers. The Government desires that all drivers needed to adequately operate the MTS equipment be posted to the Web site. At a minimum, the Contractor shall post to the Web site those drivers that were developed by the Contractor for use under this contract. Any initial drivers shall be posted to the Web site within 60 days after the contract effective date. New/updated drivers shall be posted to the Web site within 48 hours of Government approval. In the event that drivers are updated, the original version shall be maintained on the Web site. (3) Ordering Catalog. At a minimum, this catalog shall contain sufficient information to allow users to prepare a delivery order and to determine which contract line items (to include pertinent terms and conditions) best meet operational requirements. With the exception of during the last contract year, the ordering guide shall contain, at a minimum, CLINs and prices for a two-year period (i.e., the then current year and subsequent year). The ordering guide shall be subject to Government approval prior to posting on the Web site. Any revisions to the information shall be submitted to the PM within three workdays of receipt of Government comments. The approved ordering catalog shall be posted to the Web site within 60 days after contract effective date. An updated version of the catalog shall be posted to the Web site within two days of any changes to the information contained in the catalog. No orders shall actually be placed through the Web site. (4) Application Load Procedures and Tapes. The Contractor shall post the software load procedures on the Web site. New/revised software load procedures and/or tapes shall be posted to the Web site within 48 hours of availability. (5) Other Information Normally Provided to Commercial Customers. The Contractor shall post to the Web site any other information which is normally provided to commercial customers via a Web site and which the Contractor feels would be useful to MTS users. 14 DAAB15-99-D-0014 b. The downloadable electronic documents shall be readable and printable using software applications that are compatible with MS Office Suite. 6.8 SECURITY a. The Contractor shall ensure that Contractor personnel have the necessary Government security clearances. The highest clearance level required under the contract will be Secret as established by DD Form 254, Contract Security Classification Specification, at Part III, Attachment III.b of the contract. The Contractor shall not claim lack of security clearances as a reason for non-compliance. The specific security access requirements will be set forth in each respective delivery/task order. b. As necessary for performance on this contract, the Government will provide assistance to the Contractor in gaining access to Government facilities, including controlled access areas. 6.9 USAGE TIME/AIR TIME a. It is anticipated that the equipment proposed will require access to a commercial communications provider. All costs for such usage shall be at a fixed price for continuous unlimited usage on a daily, continuous 24 hour period, basis, i.e. $X/per day/per unit, unlimited use. Daily unlimited use shall work this way. A day of unlimited use shall be charged against a specific serialized unit once that unit sends a message, or other traffic on that day, then within that same 24 hour period that specific unit shall be afforded complete unlimited access. No other notification to the contractor shall be required other than to send a message. For these purposes, the sending of an acknowledgment "ACK" to a received message shall also constitute activation of that days air time on and for that unit. Usage of days of air time may not be continuous, but shall be tracked by the contractor to inform the user, via the World-Wide Web Site, of how many days of usage are remaining. b. The contractor shall include a minimum 400 days of unlimited usage air time in the price of both mobile units (V1 and V2) and Control Station. The 400 days included with the units are required to be used within a maximum period of eight years from contract award. Additional days of air time shall be separately priced. All air time provided with the equipment, for equipment purchased on the same date, shall be for the same duration. Availability of connection to a commercial communications provider shall commence upon Government acceptance of the system, with the 400 days ready for use. The charging or decrementing of days used shall commence once a specific unit is activated with a message being sent. The contractor shall have an accounting system that tracks usage time/air time and allows the Government to obtain records of this usage by accessing the contractor established WEB page (CLIN x018), with a method provided to allow a user to query a specific unit to obtain the number of prepaid days of unlimited use remaining. All MTS units which have reached 75% of the initial 400 days of usage time/air time or subsequently purchased air time shall also be identified in the database. c. The contractor shall also provide monthly notification when 75% of the initial 400 days or any subsequently purchased usage time/air time has been expended for any of the MTS units. This list shall be included in the monthly Project Status Report submitted under CLIN 0016. 15 DAAB15-99-D-0014 d. The Government also has the option of purchasing MTS units and usage time/air time in groups/pools of units. In these cases, the usage time/air time shall be tracked by total usage time/air time of the group/pool rather than by the individual MTS unit. e. Prior to the end of this contract, the contractor should provide a means by which the Government may acquire and pay for subsequent usage time/air time usage for systems they already own. f. The data contained in the table below is provided as information only. The numbers are estimates. Actual government usage is unknown and is dependent on many factors such as the addition of applications identified in Paragraph III.2.15 of this document. This information is not meant to change or modify the Government's requirement for "fixed price for continuous unlimited usage on a daily basis, i.e. $X/per day/per unit unlimited use." ANTICIPATED MESSAGE USAGE PROFILE Daily In-Use Time Yearly Days of Text Message Send Operation Frequency * 200 (war) Send 1 test message every 5 minutes Control Station 24 hours 90 (peacetime) V1 and V2 20 hours 200 (war) Send 2-3 text Mobile messages per hour 90 (peacetime) and Send 1 GPS position update every 5 minutes * Each text message estimated at 100 alphanumeric characters 6.10 PART NUMBERS The contractor shall implement and use a part number scheme to facilitate reporting. Each part number shall be unique. The contractor shall also maintain a contractor to OEM part number cross reference as part of the web site. Major components should have unique serial numbers affixed to each unit. 6.11 TECHNICAL SUPPORT SERVICES 6.11.1 General a. When ordered, the Contractor shall provide technical support services that are within the scope of this section. Technical support services include: (1) Site surveys (2) On-site installations and training 16 DAAB15-99-D-0014 (3) Relocation of equipment (4) Post-installation support (5) Engineering studies and documentation (6) Integration/interface impact studies (7) Development/modification of software programs to achieve additional functionality (8) Development and documentation of A-Kits for different families of vehicles (9) Expedited Delivery and OCONUS shipping (10)Additional System Integration (11)Demonstration Support b. Labor Categories and Tasks: (1) Program Manager - Lead task order, maintain cost, technical, schedule and overall management of resources to accomplish task requirements (2) Site Leader - Serve as senior contractor POC at a field site with total knowledge of task areas and authority to manage personnel (3) Mechanical Installer - Capable of following drawings and installation criteria, making changes to vehicles and installing A-Kits into vehicles and performing overall system or installation tests (4) System Trainer - Capable of training the system operation to soldiers (5) Senior Engineer - Capable of analyzing requirements and designing system changes (6) Junior Engineer - Capable of supporting the analysis of requirements and designing system changes (7) Senior Software Analyst - Capable of working with software requirements and to plan changes to design based upon new/changed requirements (8) System Analyst - Capable of integrating across all system requirements to produce new/modified requirements (9) Software Programmer - Capable of making software changes to implement new/changed requirements (10) Test Analyst - Capable of testing hardware/software changes to task requirements (11) Mechanical Engineer - Capable of designing A-Kit mechanical components based upon requirements (12) Mechanical Fabricator - Capable of fabricating/assembling A-Kit mechanical components (13) Electrical Engineer - Capable of designing A-Kit electrical components based upon requirements (14) Electrical Fabricator - Capable of fabricating/assembling A-Kit electrical components (15) Technical Writer - Capable of producing technical documentation for task order requirements 17 DAAB15-99-D-0014 (16) Clerical - Capable of using automated tools for the production of documentation; capable of performing final proofing, making changes and providing general clerical support to task order areas c. Prior to issuance of a task order for technical support services, the Contracting Officer will provide the Contractor with a request for a proposal, which includes a description of the task(s) to be performed. Within 15 days of receipt of the request, the Contractor shall deliver to the Contracting Officer a proposal for performing the services. The proposal shall contain sufficient detail to enable the Government to determine the acceptability of the proposal and shall include, as a minimum: (1) A brief description of the technical approach which demonstrates the Contractor's understanding of the requirement (2) A proposed milestone chart (3) Proposed labor categories from the Master CLIN listing and the number of hours proposed for each category, and (4) Proposed other direct costs (ODCs), to include any proposed travel costs, which are consistent with the Joint Travel Regulation. d. The Government reserves the right to accept or reject any proposal for technical support services. This decision shall be final and not subject to the "Disputes" clause of this contract. After the Government has reviewed and accepted the Contractor's proposal (negotiations may be required), subject to availability of funds, a firm-fixed-price task order will be issued. The Contractor shall then perform the technical support services in accordance with the approved proposal. 6.11.2 Site Surveys a. The Contractor shall perform site surveys in accordance with approved proposals submitted pursuant to paragraph 6.11.1.b. The primary purpose of the survey is to provide a detailed scope of work required for the later installation/fielding of MTS equipment, and for the purpose of fitting the system to a new vehicle family. The Government will make available a representative sample of any vehicle for contractor access. b. Within seven days after completion of the survey, the Contractor shall deliver a survey report to the Government official identified on the applicable task order. The report shall include a description of any actions (e.g., site modifications) which must be completed prior to installation of the MTS equipment and it shall be sufficiently detailed to facilitate successful installation of the equipment. The report shall be subject to Government approval. Any revisions to the report shall be submitted to the Government official within three workdays of receipt of Government comments. c. The Government will be responsible for performing site modifications (e.g., A/C, power, etc.) which are identified in the survey report. d. In instances where work to be performed by the Contractor requires interaction with existing facilities and equipment, the Contractor shall be responsible for any damage to existing facilities or equipment resulting from the Contractor's efforts. 6.11.3 On-Site Installation and Training 18 DAAB15-99-D-0014 a. The Contractor shall perform on-site installation of MTS equipment in accordance with approved proposals submitted pursuant to paragraph 6.11.1.b. Installation services include both initial installation and upgrades to existing MTS equipment, as well as conducting training on the equipment installation, use and maintenance. b. After installation is completed, the Contractor shall restore any Contractor-used Government work and storage areas to a clean condition. c. The contractor may be required to supplement training data provided under paragraph 6.5.b in a more military style: (1) Training Analysis Process. A front end training analysis will be accomplished to develop a general training concept, a training Master Task List (MTL), and identify the Terminal Learning Objectives and Enabling Learning Objectives to support each task. Subject matter experts (SME) will subsequently review the analysis. Following approval of the MTL, a Task Selection Matrix (TSM) will be developed, critical tasks identified for training, and methods of training will be determined. An Instructional Media Design Report (IMDR) (details the flow, appearance, and subject matter of the interactive courseware) will be completed and training scenarios reflecting operational environments will be developed. From the approved TSM, tests for each task will be developed, draft Programs of Instruction (POI), Lesson Plans (LP) Storyboards, Handouts (HO), Practical Exercises (PE), and a Training Database will be developed. As the system matures, a Detailed Task Selection Matrix will be developed to identify step-by-step procedures required to accomplish each task. Draft Training Packages and supporting documentation will be tested and adjusted prior to the Operational Test (OT). SME support will be provided/coordinated by USA Combined Arms Support Command (CASCOM) throughout the development process. The development contractors will visit and/or coordinate directly with designated Points of Contact (POC) (2) Multimedia Training. Multimedia Training shall be the primary method of training for the MTS. The multimedia training will be on a separate CD ROM that must be periodically updated to reflect the changes to the system. It will satisfy the majority of the requirements for extension, sustainment, collective, and instructor and key personnel (IKP) training for the mobile unit operator and Control Station operator. (a) The V2 and Control Station system software shall contain a Training Menu Option which will allow the selection for training and training support functions and will replicate the prime system. Training will address the user by name based on log-in information and will provide the supervisor with the ability to manage the training environment to include establishing training requirements, selecting specific material for students, setting performance criteria, and producing training reports and comprehensive end of course tests. Interactive multimedia training is the required medium to train and evaluate the user's performance. (b) The Multimedia Training will consist of two major elements: training and help. Multimedia Help shall be accessible from two different means: Menu Selectable Help and Context Sensitive Help (to at least 4 levels). To the extent possible, commercial software with help utilities will be incorporated. The multimedia training (CD ROM) will include as a minimum a V1 Operator Course, a V2 Operator Course and a Control Station Operator Course. System Administration and System Support will be provided by the contractor. 19 DAAB15-99-D-0014 (c) A multimedia package will be developed. It must have hooks embedded into the prime system software (embedded training) so the user can obtain access to the training system and receive training by clicking on the hyper text, go to training, and return to the work area (training itself may be on CD-ROM). This will be an option load with the prime system. The training package must also be capable of operating separately, to provide the capability for conduct of initial or sustainment training; it will be MTS specific and capable of use on any compatible DOS computer. Training screens will be identical to the prime system screens and help capabilities. (3) Paper-Based Training. Paper-based training will be developed for designated tasks and those tasks not identified for embedded training. These packages must contain approved task lists, Programs of Instruction (POIs) and Lesson Plans (to include handouts, slides, practical exercises and tests) to assist the unit in conducting sustainment training. (4) System Extension Training (SET). A training team will conduct operator and Control Station operator training at each training location. The extension packages will include training for all critical tasks identified during the Front End Analysis and the design and development efforts that were selected for training. The approved training package will be utilized to provide this initial training. The training will be provided on-site at each extension location that has system hardware being fielded to that site. Representative system hardware will be utilized. Monitorship and on-the-job training will occur following classroom training and system extension. The purpose of the monitorship is to ensure training effectiveness. Over-the-shoulder individual assistance will be provided as required, until the training team is satisfied that the operators and managers have the capability to exercise the system to its full capacity. The team will ensure full conversion and operation of the system prior to departure from the installation. (5) Unit / Sustainment Training. Multimedia Embedded Training (EI) will be provided with the system and will have hooks resident in the system software to effect ET. Training CD-ROM disks will also be provided. A complete copy of the system extension training package, to include those tasks not selected for ET (including POI, Lesson Plans, and any other paper-based material), will be provided to units for unit sustainment training. Commanders of TOE / TDA units are responsible for conducting unit sustainment training as required. (6) Training Evaluation and Manual Verification. USA CASCOM training evaluators will conduct a training Operational Test and Readiness Evaluation (OTRE) of the final training package when the operational test players are being trained. An OTRE will be conducted for all training provided. The training will include ET, Help, the Program of Instruction (POI), Task Selection Matrix (TSM), Lesson Plans (LP)/Story Boards, Practical Exercises (PE), test, tutorials and manuals (on-line and paper-based). USA CASCOM will issue a training Operational Test Readiness Statement (OTRS) through TRADOC to OPTEC as a result of the OTRE. To insure a successful OTRE, the PM MTS should request a customer test by USA CASCOM at any time prior to the OT. 6.11.4 Relocation of Equipment The Contractor shall assist in, or perform, the relocation of MTS equipment in accordance with approved proposals submitted pursuant to paragraph 6.11.1.b. The extent of the services to be performed by the Contractor will vary by task order from minimal involvement (e.g., survey assistance) to total responsibility for the relocation. 20 DAAB15-99-D-0014 6.11.5 Post-Installation Support Pursuant to approved proposals submitted in accordance with paragraph 6.11.1.b, the Contractor shall provide post-installation support and guidance to assist users in successful transition to MTS equipment. Such services can relate to general system operations or to specific tasks; e.g., porting data files. 6.11.6 Engineering Studies and Documentation a. Pursuant to approved proposals submitted in accordance with paragraph 6.11.1.b, the Contractor shall perform engineering studies. These studies shall be related to the present and possible future physical and performance characteristics of equipment used in support of the system. Examples of such studies could include, but are not limited to system engineering feasibility studies, network studies, technology assessment studies, and quality-related practices studies. These studies may respond to, but are not limited to, the following: (1) An unexpected decreased level of system responsiveness; (2) Planned expansions of computing services or network connectivity; and (3) Sudden changes in traffic and data storage requirements which adversely affect network performance. b. All engineering studies shall be subject to Government approval. Any revisions to the studies shall be submitted to the Government official within three workdays of receipt of the Government comments. 6.11.7 Impact Studies a. During the life of the contract it is anticipated that changes will be made to the interfacing system/support software and/or equipment purchased from sources other than the MTS Contractor, which may require integration into the MTS configuration. b. In such cases, pursuant to paragraph 6.11.1.b, the Government may request the Contractor provide an impact study which addresses, at a minimum, the following: (1) A description of any MTS equipment modifications and/or additions (including any device drivers) necessary to at least maintain the current level of system performance. (2) A description of any revisions and/or additions to system application and/or Government owned system support software which are necessary to at least maintain the current level of system performance. (3) A price proposal for effecting the necessary changes to the MTS equipment (including any device drivers) identified pursuant to paragraph (1) above. (4) A proposed schedule to implement the recommended changes identified in the impact study. c. All impact studies shall be subject to Government approval. Any revisions to the studies shall be submitted to the Government official within three workdays of receipt of the Government comments. d. The Government reserves the right to have the Contractor implement the changes identified in the approved study. The proposed price shall be subject to negotiations. If accepted by the Government, a contract modification will be executed to effect the change. e. In the event the contract modification results in equipment changes to any of the basic computer configurations, the Government may require the Contractor to perform a Government- 21 DAAB15-99-D-0014 witnessed demonstration prior to the first delivery of the revised configuration(s). As a minimum, the Contractor shall demonstrate that the equipment is capable of performing in a manner equal to or better than the Contractor's certified benchmark test results and is capable of successfully executing. In such an event the Contractor shall perform the demonstration within 15 days after the Contracting Officer's request for the demonstration. At least seven days prior to the demonstration, the Contractor shall deliver to the Government a plan that outlines the agenda, procedures, and any constraints related to the demonstration. 6.11.8 Development/Modification of Software Programs to Achieve Additional Functionality The Contractor shall perform software development to achieve additional functionality in accordance with approved proposals submitted pursuant to paragraph 6.11.1.c. 6.11.9 Development and Documentation of A-Kits for Different Families of Vehicles a. The Contractor shall perform non-recurring engineering to support the development, qualification and Government acceptance for production of specified A-Kits. A-Kits are the mechanical mounting devices for mounting mobile units to a vehicle in accordance with approved proposals submitted pursuant to paragraph 6.11.1.c. A-Kits shall include the necessary shock, vibration and electrical isolation required based on the operational profile of the vehicle, and shall include cable harnesses, cable egress panels, etc. needed for installation of the required equipment. Typically, the contractor shall work with designated Government or vehicle contractor personnel in the design, development and prototyping of an A-Kit. Subsequent to development of an A-Kit, that equipment will be added by contract modification as a separately orderable CLIN on the contract. b. It is anticipated that, over the life of this contract, several sets of A-Kits and documentation will need to be developed, one for each vehicle type. The contractor shall provide technical data to the Government to allow subsequent development of Integrated Logistics Support (ILS) products for the vehicles on to which the MTS will be installed. The data the contractor shall provide will allow the government to provision, catalog, document and support MTS A-kit parts. The contractor shall also provide data sufficient to allow the government to produce a technical manual documenting installation of the A-kit in the selected vehicle and installation of the B-kit (mobile unit) to the A-kit and repairs of the MTS A-kit. The contractor shall provide all data necessary to allow the government to produce installation and maintenance instructions for the MTS A-kit on a vehicle. (1) Maintenance Analysis and Parts Provisioning Drawing Package; The contractor shall provide a complete MTS A-kit drawing package for each designated vehicle. The drawing package shall include a top level or top level drawings, the drawing tree or drawing structure and all individual piece part and component drawings, all assembly and manufacturing instructions. The drawing package may be in contractor format. The drawing package may be supplemented with additional narTative information to complete these requirements. The drawings or supplemental documentation to the drawing package shall include: Material Data Safety Sheets Complete warranty information Wear limits for wear parts 22 DAAB15-99-D-0014 Torque Values for all fasteners Scheduled Maintenance Requirements Lubrication requirements Troubleshooting procedures Safety/hazard precautions Requirements for special tools Copy right release for all data provided All instructions required to install the MTS A-kit on the designated vehicle including all steps required to modify the vehicle to accept the MTS A-kit, and all steps to install the B-kit on the A-kit All drawings and publication data shall be in the English language (2) Parts Provisioning; The contractor shall provide the government the following data for each MTS A-kit part: Complete set of approved supplier service drawings Component manufacturer part numbers Component manufacturer Cage Codes to be stamped or typed on the drawing. Unit Package quantities Weights and Dimensions Shelf Life limitations Optimum Quantity Prices Available Reliability or Projected Failure Rate Data Repair Kit information Each and Unit Package Prices Dimensional Data for all hardware (nuts, bolts washers) All drawing and publication data shall be in the English language (3) Publications Support; The contractor shall provide the government any available commercial off the shelf manual/ literature and all necessary technical data to develop initial installation, operations, maintenance, repair, service, inspection storage and test procedures required to use and maintain the MTS A-Kit. 6.11.10 CONUS and OCONUS Shipping and Delivery a. The Contractor shall pack each applicable component in its transit case(s) prior to shipping. This transit case(s), containing the configuration and/or components, shall be appropriately packed and shipped in standard commercial wrappings; e.g., shrink wrappings. Each unit shipped shall have its own users manual packed in the shipping container. 23 DAAB15-99-D-0014 b. The Government may require expedited andlor OCONUS shipments during the term of the contract. A packing list shall be placed in each shipping container. 6.11.11 Additional System Integration a. The contractor may be required to perform integration services at field locations to support the initial installation or troubleshooting of the system surveys in accordance with approved proposals submitted pursuant to paragraph 6.11.1.b. Any such requirement will be identified to the contractor in a separately issued task order. The Contractor shall be responsible for all items provided to the Contractor until they are safely returned to the Government in the condition in which they were provided. It is anticipated that over the life of the contract additional system integration services may be required. In such cases, these requirements may be added to this contract by contract modification. In such an event, the Contracting Officer will request a proposal from the Contractor. The request will include a description of the integration and the operational environment; the typical configuration(s); the specific performance requirements; the loading and operating instructions; test criteria and data; and access to any required application software. b. Prior to the first delivery of equipment that has been integrated pursuant to a contract line item number (CLIN) that has been added, the Government may require the Contractor to conduct a Government-witnessed demonstration to validate that the integration configuration is capable of successfully executing the requirement. In such an event, the Contractor shall perform the demonstration within 15 days after the Contracting Officer's request for the demonstration. At least 7 days prior to the demonstration, the Contractor shall deliver to the Government a plan that outlines the agenda, procedures, and any constraints. The Government reserves the right to have at least two Government-designated representatives witness each demonstration. 6.11.12 Demonstration Support The contractor may be required to provide technical/support staff to assist the government at system demonstrations and/or briefings. Any such requirement will be identified to the contractor in a separately issued task order. END OF STATEMENT OF WORK 24 DAAB15-99-D-0014 APPENDIX I TO THE MTS STATEMENT OF WORK AND SPECIFICATION APPLICABLE DOCUMENTS In the event that any of the documents listed in this Appendix have been canceled or superseded, the most recent document in effect at the time of release of the solicitation shall govern. I.1 TECHNICAL ARCHITECTURE DOCUMENTS The following technical architecture documents are available on the World-Wide Web at the identified URLs. Department of the Army Joint Technical Architecture - Army (JTA-A), Version 5.0, dated 11 September 1997, available at: http://www.hqda.army.mil/techarch/jtaa50/jtaa50.htm I.2 GPS USER EQUIPMENT INTERFACE CONTROL DOCUMENT FOR THE RS-232/RS422 INTERFACE OF DoD STANDARD GPS UE RADIO RECEIVERS a. Department of Defense ICD-GPS-153 GPS User Equipment Interface Control Document for the RS-232/RS422 Interface of DoD Standard GPS UE Radio Receivers, dated 27 June 1995, is available at the Global Positioning System (GPS) Joint Program Office (JPO), SMC/CZ (AFMC), P.O. Box 92960, Los Angeles Air Force Base, CA 90009-2960. The POC is Mr. Del Crane whose email address is DEL.CRANE@losangeles.af mil. b. The ICD-GPS-153 document is export controlled technical data with military application controlled under the Arms Export Control Act as implemented by the International Traffic in Arms Regulation. Distribution of the ICD-GPS-153 is authorized to Department of Defense and DoD Contractors only. However, the document can be released to prospective contractors provided they registered with and receive authorization from the Defense Logistics Agency (DLA). DLA has a web site that explains the procedure and requirements at: http://www.dlsc.dla.mil/ccal DLA also has a telephone information number 1-800-352-3572. The registration and authorization process takes approximately five to ten working days. Offerors; are encouraged to start the registration process as soon as possible. END OF APPENDIX I TO STATEMENT OF WORK 25 DAAB15-99-D-0014 APPENDIX II TO THE MTS STATEMENT OF WORK AND SPECIFICATION DEFINITIONS II.1 DEFINITIONS II.1.1 A-Kit: That mechanical device which provides a mounting capability between a vehicle and the Vehicle Mounted Mobile Unit (V2). II.1.2 B-Kit: The Vehicle Mounted Mobile Unit (V2). II.1.3 Continental United States (CONUS): All locations and sites within the 48 contiguous states, including the District of Columbia. II.1.4 Days: Unless otherwise noted as "working days", all references to days shall refer to calendar days. II.1.5 Equipment: The term equipment as used throughout the specification refers to hardware, software, and/or firmware. II.1.6 Hours: Unless otherwise noted as "business" hours, all references to hours shall refer to wall clock hours. II.1.7 INFOSEC: The term INFOSEC as used throughout the specification refers to Information Security which includes the protection of all MTS data, message contents, and position report contents. II.1.8 World-wide: This encompasses the physical face of the planet between 70 degrees north latitude and 70 degrees south latitude to include all oceans and islands. II.1.9 Outside the Continental United States (OCONUS): All locations outside the 48 contiguous states of the United States. II.1.10 State-of-the-Art Technology: Commercial products that represent recent product designs and performance features. It does not include out-of-date, discontinued hardware and software. II.1.11 System Modularity: Equipment that is developed as a series of smaller parts ("modules" or "system elements") that can be functionally separated from the other system parts in order to facilitate integration and specialized upgrades. II.1.12 Year 2000 Compliant: Year 2000 compliant means information technology purchased under this contract that complies with Part III.a, Appendix III, paragraph III.2.5 of this contract. END OF APPENDIX II TO STATEMENT OF WORK 26 DAAB15-99-D-0014 APPENDIX III TO THE MTS STATEMENT OF WORK AND SPECIFICATION EQUIPMENT SPECIFICATION III.1 INTRODUCTION All equipment delivered under this contract shall satisfy the general performance requirements set forth at paragraph 111.2. III.2 GENERAL PERFORMANCE REQUIREMENTS III.2.1 Commercial Equipment All equipment delivered under this contract shall be commercial items as defined in the Federal Acquisition Regulation (FAR) Clause 52.202-1. To allow for system modularity and commonality of parts, the same hardware may be used in all three configurations. III.2.2 Only New Equipment Only new equipment shall be delivered under this contract. The Contracting Officer will not grant approval for used or reconditioned equipment. Components of such equipment may be reconditioned provided such components are drawn from stockage that does not differentiate between new and reconditioned components. III.2.3 World-wide Usage/Operating Authority a. MTS shall be physically capable of transmitting and receiving messages world-wide. The initial version of MTS shall also have the legal authority to operate in as many countries as possible. Not later than June 7, 2000, MTS shall have the legal authority to operate in the following countries: a. United States (to include Alaska, Hawaii, and territories) b. Honduras c. Panama d. Germany e. Netherlands f. Belgium g. Italy h. Turkey i. Austria j. Hungary k. Bosnia 1. Croatia m. Japan 27 DAAB15-99-D-0014 n. Republic of South Korea o. Israel p. Egypt q. Saudi Arabia r. Kuwait b. There shall be no additional fee for landing rights, backhaul, tariff or any other additional cost for air time. The Contractor shall include all such expenses in their price proposal such that the government pays one fixed rate, regardless of location. III.2.4 Federal Communications Commission (FCC) Certification All applicable hardware components shall meet, as appropriate, the requirements of the FCC Class A. The FCC Class A qualification for all MTS equipment shall remain unchanged after installation of contractor-provided internal devices. All applicable hardware components for Outside Continental United States (OCONUS) shall meet the International Special Committee on Radio Interference (CISPR) 22, Class A (International) standards for Radio Frequency Interference/ Electromagnetic Interference (RFI/EMI), be Underwriters and European Community (CE) certified. III.2.5 Year 2000 Warranty--Commercial Supply Items The contractor shall ensure products provided under this contract, to include hardware, software, firmware and middleware, whether acting alone or combined as a system, are Year 2000 compliant as defined in FAR Part 39 and as specified in Part.II a (ac) of this solicitation document. III.2.6 Compliance with Joint Technical Architecture-Army (JTA-A) All applicable equipment components provided under this contract shall meet the requirements of the JTA-A. The JTA-A is the minimal set of rules governing the arrangement, interaction, and interdependence of the parts or elements that together may be used to form an Army information system. Its purpose is to ensure that a conformant system satisfies a specified set of requirements. The JTA-A applies to all systems that produce, use, or exchange information electronically. The JTA-A will be used by anyone involved in the management, development, or acquisition of new or improved Army Information Systems. The JTA-A uses the concept of a Common Operating Environment (COE) that provides a re-useable set of common software services via standard application programming interfaces (APIs). Any computer provided as part of the solution for paragraphs III.2.11 (V2) and III.2.12 (Control Station) shall conform to the Windows Operating System as defined by the Win32 APIs, Microsoft Win32 Programmers Reference Manual, Volumes 1-5, 1993, Microsoft Press. Commercial software provided shall have documented and published APIs to allow integration with other applications which may evolve. III.2.7 Power Requirements 28 DAAB15-99-D-0014 a. The V1 shall be primarily powered by one or more internal batteries. Fully charged batteries shall allow for sending 36 position reports and 36 text messages with a message size of approximately 100 characters over a minimum period of at least 12 hours. The V1 shall also come with a vehicle power adapter to enable operations from vehicular supplied power which is nominally between 12-32 volts direct current. b. The V2 shall operate from vehicular supplied power which is nominally between 12-32 volts direct current. Vehicle power is used only when the V2 unit is mounted in the vehicle and when the engine is running. The V2 shall be capable of operating from standard 110-volt (CONUS) or 220-volt (OCONUS) 50/60 Hz commercial power. c. The Control Station equipment shall be autosensing between 110 and 220 volts alternating current and between 60 and 50 Hz. The Control Station shall have one or more internal batteries. d. All equipment (V1, V2, and Control Station) shall be properly protected from electrical damage due to fluctuations in power, nearby lightning and high power microwaves to acceptable industry standards. Employment of user replaceable one time use fuses is not allowed. e. All equipment shall be certified by Underwriters Laboratory or an equivalent laboratory. f. The V2 shall have an integral backup power source that will allow the operator to send a minimum of five position reports and five 100 character text messages over a 90-minute period when the primary power source is depleted or not available. The V2 shall have an indicator to inform the operator that he is operating on backup power. V2 shall be capable of receiving messages for up to 8 hours using integral backup power. III.2.8 User Replaceable Components All user-replaceable components; e.g., batteries, diskettes, shall be replaceable by the user without requiring special tools or a maintenance technician. III.2.9 Commercial Software All commercial software fixes, patches, and revisions available free to licensed users within the general public shall be provided free to the Government. III.2.10 Handheld Mobile Unit (V1) These requirements are applicable only to the Handheld Mobile Unit [V1]. a. Have integrated send/receive messaging capability per III.2.14.a. b. Have integrated GPS capability. c. Does not require a graphical map. d. Contain the required battery. e. Have one transit case per V1 as specified in III.2.13. f. Reserved g. Be water-resistant to the point that it remains fully functional in the rain. h. Requires an alphanumeric text display. 29 DAAB15-99-D-0014 i. Have an RS-232/RS-422 Interface conforming to the DoD Standard GPS User Equipment Interface of Radio Receivers, if applicable. III.2.11 Vehicle Mounted Mobile Unit (V2) These requirements are applicable only to the V2. a. Have integrated send/receive messaging capability per HI.2.14.a. b. Have integrated GPS capability. c. Have the capability to display full color graphical maps as described in paragraph III.2.11.g. d. Have one transit case per V2 as specified in III.2.13. e. Ability to integrate with (mount, operate and draw power from) the host vehicle without the need to relocate vehicle components or externally mount non-antenna components. The first vehicle to use the MTS is the PLS. Some, but not all, possible additional vehicles are the HEMTT, HET, M915 Tractor, M800-series and M900-series (5-Ton), M35-series (2.5-Ton), LMTV, FMTV, FOX (NBC), M1114/M998 (MP/C2) HMMWV, all wheeled ambulances and all recovery vehicles. f. Withstand shock and vibration experienced by the host vehicle without becoming inoperable, when installed with an A-Kit developed per 6.11.9. g. Provide computer imaging which simultaneously displays digital maps with computer generated icons representing the geographic positions of user selected MTS equipped operations. The MTS will utilize standard digital mapping data and the map media provided by Defense Mapping Agency (now known as NIMA). V2 users shall be able to view their location on the map. Additionally, both the V2 and Control Station shall come configured with a commercial world-wide map to give initial map background capability to the MTS in the event that a NIMA map is not available. The resolution of this commercial map shall include at least country boundaries, major cities and major highways and shall be zoomable to several levels of granularity. Easy transition between this commercial world-wide map and a user loaded NIMA map shall be provided. h. Have the capability to perform the same functions as a Control Station, i.e. to become a Control Station in a headquarters/operations center. The V2 shall be capable of operating from standard 110-volt (CONUS) or 220-volt (OCONUS) 50/60 Hz commercial power. LAN/WAN connectivity is not required. The mobile unit (except A-Kit mounting bracket and cables) must be easily installed and removed in less than 10 minutes. i. Two type II PCMCIA slots that can function as a type III PCMCIA slot, available for future uses to be determined by the Government. j. Have an RS-232/RS-422 Interface, available for future uses to be determined by the Government k. Have an additional RS-232/RS-422 Interface conforming to the DoD Standard GPS User Equipment Interface of Radio Receivers, if applicable III.2.12 Control Station These requirements are applicable only to the Control Station. a. Have integrated send/receive messaging capability per III.2.14.a 30 DAAB15-99-D-0014 b. Have integrated GPS capability c. Have a separate transit case(s) as specified in III.2.13 d. Contain the required battery. e. Be furnished with a portable color inkjet printer, capable of at least 300 x 300 dots per inch resolution, at least 3 pages per minute print speed, have an industry standard 10 foot parallel cable f. Weigh 30 pounds or less when stored in its transit case g. The Control Station shall be a portable system capable of being set up in a fixed environment. This requires that the Control Station be operable within 15 minutes of set up. All antenna cable length for the Control Station shall be at least 100 feet h. Be a laptop computer running in a windows operating system and shall be capable of minimally storing sufficient map backgrounds for a 300 mile square area of operations i. Have the capability of using standard CD ROMS issued by NIMA containing military map backgrounds j. Be capable of loading map backgrounds to a mobile unit via a computer to computer connection if the V2 cannot self-load the data k. Provide computer imaging which simultaneously displays full color digital maps, as described in paragraph III.2.11.g, with computer generated icons which represent the geographic positions of operator selected MTS users. User with Control Stations shall be able to view their own and subordinate users l. Mapping product shall be expandable to have active layers in order to provide pull down map data, such as bridge and road classifications, vehicle and cargo locations and unclassified situational awareness overlays m. Minimum Control Station hardware requirements: Pentium 266 (P266) class processor 20x CDROM drive 128MB RAM 3.5" 1.44MB Floppy Drive 5.0 GB Hard drive Active Matrix display Two type II PCMCIA slots that can function as a type III PCMCIA slot, available for future uses to be determined by the Government RS-232 port, available for future uses to be determined by the Government n. The Control Station software application shall also be capable of executing as another active application on another Government provided computer which is running in a Windows operating system environment. 31 DAAB15-99-D-0014 o. Have an additional RS-232/RS-422 Interface conforming to the DoD Standard GPS User Equipment Interface of Radio Receivers, if applicable. III.2.13 GPS GPS has two signals. One signal is referred to as military requiring decryption to obtain the precise location data and one is commercial. MTS shall use GPS Joint Program Office (JPO) approved military GPS. However offerors may propose either the military or civilian signal to meet requirements as follows: a. If the military GPS signal is proposed then the embedded circuit design shall be DoD GPS Joint Program Office (JPO) approved prior to submission of proposals. Requirements for obtaining DoD GPS JPO approval can be obtained from that organization. See Appendix I, Paragraph 1.2 b of this document for the address and point of contact. b. If the initial MTS does not have approved embedded military GPS then it shall have an embedded commercial GPS capability with an external electronic interface to a DoD PLGR such that the PLGR location data can be automatically sent to MTS and override the commercial GPS data. The physical PLGR interface connection to the MTS shall be readily accessible. Instructions for obtaining the PLGR Interface Control Document are located at Appendix I, Paragraph I.2 b of this document. III.2.14 System Operational Requirements These requirements are applicable to the entire system and all three configurations (V1, V2 and Control Station). a. The system shall provide near-real time two way data/messaging communications between MTS equipped users (those with V1s, V2s, and Control Stations) at any distance on a worldwide basis. The Government desires world-wide messaging capability and availability at time of contract award. World-wide is defined at Paragraph II.1.8. b. The MTS will utilize standard digital mapping data and the map media provided by Defense Mapping Agency (now known as NIMA) in ARC Digitized Raster Graphics (ADRG), Compressed ADRG (CADRG) or Controlled Image Base (CIB) format. c. The MTS shall provide the following transfer time for each message. Message transfer time measurement shall start from the time the operator initiates message transmission and ends when the message is received by a recipients unit (CS, V1, V2). 100 Byte Messages - --------------------------- Delivery Percentile Delivery Time will be less than n (seconds) 95% 90 85% 30 75% 15 50% 6 32 DAAB15-99-D-0014 Position Reports - --------------------------- Delivery Percentile Delivery Time will be less than n (seconds) 95% 15 85% 15 75% 3 50% 3 d. The system shall be capable of operating (tracking locations of users and communicating) at any location world-wide and shall provide the capability for delivery of messages to multiple recipients with a single transmission from the sender. e. The MTS system components, the V1, V2 and Control Stations, shall be capable of operating without the use of direct telephone (landline or cellular) connections or LAN/WAN/INTERNET direct connectivity. The Control Station configuration, only, shall be capable of operating via telephone (landline or cellular) as an alternate means of communication. f. The system shall be operable immediately upon world-wide deployment without changing any equipment, reconfiguring of equipment, or installation of new equipment. The configuration of internal addresses in any software table is permitted, so long as not to exceed 10 minutes and is able to be performed by the end user. g. Updating a user identification contained in the MTS shall require a minimum of operator input and be completed in less than 2 minutes. h. MTS message and position transmission and reception will use a system designed to lower interception, detection, exploitation and jamming of message traffic. i. Provide both user definable, fixed format and user generated data ('free-text') communications between MTS equipped users. j. Provide scheduled and on demand transmission of geographic positioning data. k. The system shall be capable of displaying last known and current location of selected MTS users along with the time/date of the last location report. 1. Permit installation and operation while wearing cold weather clothing and Mission Oriented Protective Posture gear. m. Permit installation while wearing Night Vision devices. n. The system will not emit any noise that is higher than 70dB(A) at the operators positions. o. All MTS displays shall have automatic or operator adjustable brightness and contrast controls. p. All WS components shall be capable of surviving temperatures ranging from -25 to 120 degrees Fahrenheit. All MTS components that are exposed to the elements (e.g. antennas, cables/connectors, etc.) must be able to operate in temperatures ranging from -25 to 120 degrees Fahrenheit. MTS components that are operated from a heated/cooled environment (cab of vehicle, operation center, etc.) must be capable of operating within the temperature range of 25 to 100 degrees Fahrenheit and the associated humidity ranges. 33 DAAB15-99-D-0014 q. The Control Station shall have the capability to poll mobile units for data at anytime. r. MTS is an unclassified system. The MTS shall employ a commercial INFOSEC capability to ensure against enemy exploitation of vehicle location and logistics information through unauthorized access to message content. The MTS shall employ INFOSEC measures that require the MTS operator to identify himself to the MTS network This identification procedure shall be periodically updated. The system shall notify the primary controlling station of failed operator identification attempts. The Control Station shall have the capability to prevent the operator in question from transmitting and receiving any messages. s. Support objectives for initial operational capability shall be full organic support. The use of built in test/built in test equipment, if feasible, will reduce the maintenance burden. t. System must fit into existing and future operational architectures without creating new military occupational specialties (MOS) or creating a burden on current MOS. u. RESERVED v. The Contractor shall certify with the submission of the proposal, that V1 and V2 Mobile Units are safe to use as close as five inches from unsbielded munitions that contain 10 mA no-fire current, electro-explosive devices (EEDs). This certification shall be required for each type of RF component provided on the Contract, throughout the life of the Contract. A determination of the required safe separation distance can be made by referring to the graph entitled "Safe Separation Distance Between an RF Source and Unshielded Munitions Containing 10 mA No-fire Current Electro-Explosive Devices (EEDs)" in Exhibit-A. This graph relates safe separation distances to irradiated output power as a function of operating frequency. Although many ordnance items have no EEDs, and other items have EEDs that are less sensitive to RF energy, this requirement represents a worst-case scenario that ensures safe operation around what frequently is unknown ordnance (unknown to transporters and others). Transmitters, RF Relays and any other emitter shall be furnished, with a warning label that clearly indicates the safe separation distance that must be maintained between ordnance and the irradiating source. w. The MTS shall provide positive acknowledgement to the message sender/user. 34 DAAB15-99-D-0014 EXHIBIT-A SAFE SEPARATION DISTANCE BETWEEN A RF SOURCE AND UNSHIELDED MUNITIONS CONTAINING 10 mA NO-FIRE CURRENT ELECTRO-EXPLOSIVE DEVICES (EEDs) [GRAPH OMITTED] NOTE: The lines in the above graph are only a visual representation and may not be accurate. Actual values for plotting all Slopes and Horizontals shall be calculated using the equations provided in the chart. III.2.15 Transit Cases a. Ruggedized, reusable, rigid transit cases shall be provided for the V1, V2, and the Control Station for use in storing and transporting the configurations by surface or air. Each MTS configuration, V1, V2 and the Control Station shall have a separate transit case. The transit cases shall be of sufficient size to accommodate all component/items each of the configurations, an extra battery, and related documentation. 35 DAAB15-99-D-0014 b. Environmental and Weight Requirements. Transit cases shall protect the components from damage resulting from dropping during cargo loading and unloading; when transported as loose cargo over unpaved secondary roads; and from water vapor, humidity, salt, and fog. The transit cases shall be capable of withstanding temperatures ranging from -54 to 74 degrees C or -65 to 165 degrees F and relative humidity ranging from 0 to 100% over the temperature extremes. The weight of equipment placed in the transit case shall be uniformly distributed within the case in relation to the handles. The weight limit per pair of handles of a case loaded with its equipment shall not exceed 37 lbs. The weight for a loaded case with a single handle shall not exceed 18 lbs. c. Contents. Transit cases shall contain inserts to protect the contents from damage during transit and storage. Inserts shall be split so as to be an integral part of the top and bottom pieces of the transit case. Cushioning material used for the inserts shall be permanent, reusable, and have a non-flaking surface. d. Inventory List. Each transit case shall have a durable and permanent inventory list of all items in the case. Graphic packing instructions shall be affixed to the inside top cover and visible to the user. e. Handles Location. The transit case handles shall be installed sufficiently above the center of gravity of the equipment to ensure carrying stability and preclude uncontrolled swinging or tilting of the case when lifted. Additionally, the handles shall be positioned to allow the lifters to easily carry the transit cases through doorways. When not in use, handles shall return to a closed position by a spring-loaded mechanism or simple restraining mechanism. Clasps shall be easily accessible and operable by personnel utilizing Mission Oriented Protective Posture (MOPP) Gear or wearing low-temperature, protective gloves. f. Labeling. Labels shall be placed horizontally (to the front of the case) and externally on the top of each transit case in a consistent manner to identify: (1) gross or loaded weight, (2) volume in cubic feet and cubic centimeters, and (3) external linear dimensions in inches and centimeters. All transit cases with a total loaded case weight between 35 and 70 pounds shall be clearly marked as "TWO-PERSON LIFT" and all cases with a total loaded weight exceeding 70 pounds shall be clearly marked as "FOUR-PERSON LIFT". g. Attributes. The transit cases shall contain an automatic, pressure-vacuum relief valve that shall accommodate transportation by air. The cases shall allow stacking of up to four like cases, that are loaded, on one another with no skidding. h. Color. Transit cases shall be olive drab green in color. III.2.16 Pre-Planned Product Improvements (P31) Expandability a. As a future growth capability, MTS will be capable of interfacing with several types of systems, such as, receiving, storing and transmitting data from Automated Identification Technology (AIT), i.e., bar code readers, radio frequency tags, etc. MTS must also provide the capability for electronic linkage to and from an Army specified Standard Army Management Information System (STAMIS), command and control system via LAN/WAN, satellite or other communications system. MTS may be used as a wireless conduit for data transfer. MTS will also have the capability to receive, store, transmit vehicle diagnostic/prognostic data.. MTS will transition to the GPS Receiver Application Module/Selective Availability Anti-Spoofing Module (GRAM/SAASM). This growth capability is required in the initial contract, but exact interfaces 36 DAAB15-99-D-0014 will be specified and developed via a future contract modification. MTS will be capable of migrating to future mapping products produced by NIMA. 37 DAAB15-99-D-0014 b. Other areas identified for future growth capability, include the capability to interface with multiple satellite service providers. The capability to provide position location in the absence of the GPS signal. Interface with Transportation Coordinators'-Automated Information for Movements System (TC-AIMS) II, the Army Battle Command System (ABCS) (to include Maneuver Control System (MCS), Force XXI Battle Command Brigade and Below (FBCB2) and Combat Service Support Computer System (CSSCS)) in order to update ABCS' situational awareness and logistical picture with MTS equipped units TC AIMS II Interface. MTS will allow soldiers to conduct operations with night vision devices. The MTS will provide migration paths to achieve higher levels of classification and LPI/LPD. The MTS will provide High Altitude Electro-Magnetic Pulse (HAEMP) protection. The MTS, will provide NBC Contamination survivability. The MTS shall provide HAEMP, ECM, ECCM, and EM Interference, etc. survivability. Capability for dead reckoned positions. END OF APPENDIX III TO STATEMENT OF WORK 38 APPENDAGE# 1 TO DD FORM 254 SAFEGUARDING "FOR OFFICIAL USE ONLY" (FOUO) INFORMATION Provided by the Security Support Division Directorate for Intelligence & Information Security 1. The "For Official Use Only" (FOUO) marking is assigned to information at the time of its creation in a DOD User Agency. It is not authorized as a substitute for a security classification marking but it is used on official government information that may be withheld from the public under exemptions 2 through 9 of the Freedom of Information Act. 2. Other non-secutity markings, such as "Limited Official Use" and "Official Use Only" are used by non-DoD User Agencies for the same type of information and should be safeguarded and handled in accordance with instructions received from such agencies. 3. Use of the above markings does not mean that the information cannot be released to the public, only that it must be reviewed by the Government prior to its release to determine whether a significant and legitimate government purpose is served by withholding the information or portions of it. 4. IDENTIFICATION MARKINGS a. An unclassified document containing FOUO information will be marked "FOR OFFICIAL USE ONLY" at the bottom of the front cover (if any), on the first page, on each page containing FOUO information, on the back page, and on the outside of the back cover (if any). No portion marking will be shown. b. Within a classified document an individual page that contains FOUO and classified information will be marked at the top and bottom with the highest security classification appearing on the page. If an individual portion contains FOUO information but no classified information, the portion will be marked, "FOUO". c. Any "FOR OFFICIAL USE ONLY" information released to a contractor by a DoD User Agency is requi!red to be marked with the following statement prior to transfer. THIS DOCUMENT CONTAINS INFORMATION EXEMPT FROM MANDATORY DISCLOSURE UNDER THE FOIA. EXEMPTIONS ----------- APPLY d. Removal of the "FOR OFFICIAL USE ONLY" marking can only be accomplished by the originator or other competent authority. When "FOR OFFICIAL USE ONLY" status is terminated, all known holders will be notified to the extent practical. S. DISSEMINATION: Contractors may disseminate "FOR OFFICIAL USE ONLY" information to their employees and subcontractors who have a need for the information in connection with a classified contract. 6. STORAGE During working hours, "FOR OFFICIAL USE ONLY" information shall be placed in an out-of-sight location if the work area is accessible to persons who do not have a need for the information. During nonworking hours, the information shall be stored to preclude unauthorized access. Filing such material with other unclassified records in unlocked files or desks, is adequate when internal building security is provided during nonworking hours. When such internal security control is not exercised, locked buildings or rooms will provide adequate after-hours protection or the material can be stored in locked receptacles such as file cabinets, desks or bookcases. 7. TRANSMISSION: "FOR OFFICIAL USE ONLY" information may be sent via first-class mail or parcel post. Bulky shipments may be sent by fourth-class mail. 8. DISPOSITION: When no longer needed, FOUO information may be disposed of by tearing each copy into pieces to preclude reconstructing, and placing it in a regular trash container or as directed by the User Agency. 9. UNAUTHORIZED DISCLOSURE: Unauthorized disclosure of "FOR OFFICIAL USE ONLY" information does not constitute a security violation but the releasing agency should be informed of any unauthorized disclosure. The unauthorized disclosure of FOUO information protected by the Privacy Act may result in criminal sanctions. APPENDAGE #2 TO DD FORM 254 ADDITIONAL SECURITY GUIDELINES FOR COMSEC Provided by Security Support Division Directorate for Intelligence & Information Security ADDITIONAL COMSEC GUIDELINES Contractor Generated COMSEC Material: Any material generated by the contractor (including, but not limited to: correspondence, drawings, models, mockups, photographs, schematics, status programs and special inspection reports, engineering notes, computations and training aids) will be classified according to its own content Classification guidance will be taken from other elements of this Contract Security Classification Specification, DD Form 254, Government furnished equipment or data, or special instructions issued by the Contracting Officer, or his/her duly appointed representative. REQUIREMENTS 1. Contractor employees or cleared commercial carriers shall not carry classified COMSEC material on commercial passenger aircraft anywhere in the world without the approval of the procuring and/or the administrative contracting officer. 2. No contractor generated COMSEC or government furnished material may be provided to the Defense Technical Information Center (DTIC). Contractor generated technical reports will bear the statement "Not Releasable to the Defense. Technical Information Center per DOD Directive, 5100-38." 3. No contractor generated COMSEC or government furnished material may be provided to the Defense Documentation Center. Contractor generated technical reports will bear the statement "Not Releasable to the Defense Documentation Center per DOD Instruction 5100.28." 4. Classified paper COMSEC material may be destroyed by burning, pulping, or pulverizing. When a method other than burning is used, all residue must be reduced to pieces 5mm or smaller in any dimension. When classified COMSEC material other than paper is to be destroyed, specific guidance must be obtained from the User Agency. 5. The following downgrading and declassification notation applies to all classified COMSEC information provided to and generated by the contractor. DERIVED FROM: NSA/CSSM-123-2 DECLASSIFY ON: Source marked "OADR" DATE OF SOURCE: (Date of document from which information is derived) 6. All contractor personnel to be granted access to classified COMSEC information must be U.S. citizens granted FINAL clearance by the government prior to being given access. Immigrant aliens, interim cleared personnel, or personnel holding a contractor granted CONFIDENTIAL clearance are not eligible for access to classified COMSEC information released or generated under this contract without the express permission of the Director, NSA. If applicable; contractor personnel having access to TOP SECRET COMSEC material must comply with AR 380-40, Chapter 8 and be registered in the Department of the Army Cryptographic Access Program (DACAP). 7. Unclassified COMSEC information released or generated under this contract shall be restricted in its dissemination to personnel involved in the contract. Release in open literature or exhibition of such information without the express written permission of the Director, NSA, is strictly prohibited. S. Recipients of COMSEC information under this contract may not release information to subcontractors without permission of the User Agency. 9. The requirements of DOD 5220-22-M National Industrial Security Program Operating Manual (NISPOM) and COMSEC Supplements are applicable to this effort. 10. Additional notices to be affixed to the cover and title or first page of contractor generated COMSEC documents: a. "COMSEC MATERIAL - ACCESS BY CONTRACTOR PERSONNEL RESTRICTED TO U.S. CITIZENS HOLDING FINAL GOVERNMENT CLEARANCE." b. "THIS PUBLICATION OR INFORMATION IT CONTAINS MAY NOT BE RELEASED TO FOREIGN NATIONALS WITHOUT PRIOR SPECIFIC APPROVAL FROM THE DIRECTOR, NSA. ALL APPROVALS WILL IDENTIFY THE SPECIFIC INFORMATION AND COPIES OF THIS PUBLICATION AUTHORIZED FOR RELEASE TO SPECIFIC FOREIGN HOLDERS. ALL REQUESTS FOR ADDITIONAL ISSUANCES MUST RECEIVE PRIOR SPECIFIC APPROVAL FROM THE DIRECTOR, NSA." 2 DAAB15-99-D-0014 PART III.d NOTE: Offerors take exception to requirements at their own risk. Tbe Government may choose not to negotiate with any offerer who takes exception to any requirement. OFFEROR'S CERTIFICATION OF REQUIREMENTS Except as noted below, the offeror hereby certifies that their proposal submitted in response to solicitation DAAB 15-99-R-0004 meets all the requirements of the solicitation (including Part III.b). This applies to all proposed products and products proposed under Part III.b, paragraph 6.6.2, Current Technology Substitutions/Insertions/Additions. In the event that the offeror is awarded the contract and fails to successfully complete the validation demonstration required by Part III.b, paragraph 6.1.2, of the solicitation, or that the offered products or services fail to meet the requirements, the Government may require the contractor, at no additional cost, to make any changes necessary to the products or services. or the Government may terminate the contract at no cost to the Government and may award the contract to the offeror who is next in line for award. In the latter case, the offeror shall not be entitled to the contract guaranteed amount. Paragraph # Exception and Rationale for Exception - ----------- -------------------------------------------------- - ----------- -------------------------------------------------- - ----------- -------------------------------------------------- - ----------- -------------------------------------------------- - ----------- -------------------------------------------------- - ----------- -------------------------------------------------- - ----------- -------------------------------------------------- Signature: Print/Type Name: Joel R. Alper Title: President Part IV: PROVISIONS Part IV.g: Offeror's Certification of Requirements File Name: Tab 2, Vol 4 Contracts.doc 43 DEPARTMENT OF DEFENSE CONTRACT SECURITY CLASSIFICATION SPECIFICATION (The requirements of the DoD Industrial Security Manual apply to all security aspects of this effort.) 1. CLEARANCE AND SAFEGUARDING a. FACILITY CLEARANCE REQUIRED SECRET ---------------------------------------------------------------------------- b. LEVEL OF SAFEGUARDING REQUIRED NONE ________________________________________________________________________________ 2. THIS SPECIFICATION IS FOR: (X and complete as applicable) [X] a. PRIME CONTRACT NUMBER DAAB15-99 D-0014 ---------------------------------------------------------------------------- [ ] b. SUBCONTRACT NUMBER ---------------------------------------------------------------------------- [ ] c. SOLICITATION OR OTHER NUMBER DAAB15-99-R-0004 ---------------------------------------------------------------------------- DUE DATE (YYMMDD) ________________________________________________________________________________ 3. THIS SPECIFICATION IS: (X and complete as applicable) [X] a. ORIGINAL (Complete date in all cases) Date (YYMMDD) 98 03 02 ---------------------------------------------------------------------------- [X] b. REVISED Revision No. Date (YYMMDD) (Supersedes all previous specs) 001 99 05 10 ---------------------------------------------------------------------------- [ ] c. FINAL Date (YYMMDD) (Complete item 5 in all cases) ---------------------------------------------------------------------------- ________________________________________________________________________________ 4. IS THIS A FOLLOW-ON CONTRACT? [ ] YES [X] NO. If yes, complete the following: Classified material received or generate under ____________________________ (Preceding Contract Number) is transferred to this follow-on contract. ________________________________________________________________________________ 5. IS THIS A FINAL DD FORM 254? [ ] YES [X] NO. If yes, complete the following: In response to the contractor's request dated _______________, retention of the identified classified material is authorized for this period of _____________________ ________________________________________________________________________________ 6. CONTRACTOR (Include Commercial and Government Entity (CAGE) Code) ________________________________________________________________________________ a. NAME, ADDRESS AND ZIP CODE b. CAGE CODE c. COGNIZANT SECURITY OFFICE (Name, Address and Zip Code) Comtech Mobile Datacom Corp. 19540 Amaranth Drive 04NA3 Germantown, MD 20874 ________________________________________________________________________________ 7. SUBCONTRACTOR ________________________________________________________________________________ a. NAME, ADDRESS AND ZIP CODE b. CAGE CODE c. COGNIZANT SECURITY OFFICE (Name, Address and Zip Code) ________________________________________________________________________________ 8. ACTUAL PERFORMANCE ________________________________________________________________________________ a. LOCATION b. CAGE CODE c. COGNIZANT SECURITY OFFICE (Name, Address and Zip Code) TBD ________________________________________________________________________________ 9. GENERAL IDENTIFICATION OF THIS PROCUREMENT To acquire commercial communications equipment, associated computers, integation services, maintenance, airtime, and technical support services to support the U.S. Army Movement Tracking System (MTS). ________________________________________________________________________________ 10. THIS CONTRACT WILL REQUIRE ACCESS TO: YES NO a. COMMUNICATION SECURITY (COMSEC) INFORMATION [X] [ ] b. RESTRICTED DATA [ ] [X] c. CRITICAL NUCLEAR WEAPON DESIGN INFORMATION [ ] [X] d. FORMERLY RESTRICTED DATA [ ] [X] e. INTELLIGENCE INFORMATION: (1) Sensitive Compartmented Information (SCI) [ ] [X] (2) Non-SCI [ ] [X] f. SPECIAL ACCESS INFORMATION [ ] [X] g. NATO INFORMATION [ ] [X] h. FOREIGN GOVERNMENT INFORMATION [ ] [X] i. LIMITED DISSEMINATION INFORMATION [ ] [X] j. FOR OFFICIAL USE ONLY INFORMATION [X] [ ] k. OTHER (specify) [ ] [X] ________________________________________________________________________________ 11. IN PERFORMING THIS CONTRACT, THE CONTRACTOR WILL: YES NO a. HAVE ACCESS TO CLASSIFIED INFORMATION ONLY AT ANOTHER CONTRACTOR'S FACILITY OR A GOVERNMENT ACTIVITY [ ] [X] b. RECEIVE CLASSIFIED DOCUMENTS ONLY [ ] [X] c. RECEIVE AND GENERATE CLASSIFIED MATERIAL [ ] [X] d. FABRICATE, MODIFY, OR STORE CLASSIFIED HARDWARE [ ] [X] e. PERFORM SERVICES ONLY [X] [ ] f. HAVE ACCESS TO U.S. CLASSIFIED INFORMATION OUTSIDE THE U.S., PUERTO RICO, U.S. POSSESSIONS AND TRUST TERRITORIES [ ] [X] g. BE AUTHORIZED TO USE THE SERVICES OF DEFENSE TECHNICAL INFORMATION CENTER (DTIC) OR OTHER SECONDARY DISTRIBUTION CENTER [ ] [X] h. REQUIRE A COMSEC ACCOUNT [ ] [X] i. HAVE TEMPEST REQUIREMENTS [ ] [X] j. HAVE OPERATIONS SECURITY (OPSEC) REQUIREMENTS [ ] [X] k. BE AUTHORIZED TO USE THE DEFENSE COURIER SERVICE [ ] [X] l. OTHER (Specify) [ ] [X] ________________________________________________________________________________ DD Form 254, DEC 90 Part III.c Previous editions are obsolete USAPPC V1.00 12. PUBLIC RELEASE. Any information (classified or unclassified) pertaining to this contract shall not be released for public dissemination except as provided by the Industrial Security Manual or unless it has been approved for public relase by appropriate U.S. Government authority. Proposed public releases shall be submitted for approval prior to release [ ] Direct [X] Through (Specify): CECOM Aquisition Center - Washington 2461 Eisenhowere Ave., Hoffman 1, Rm 284 Alexandria, VA 22331-0700 to the Directorate for Freedom of Information and Security Review, Office of the Assistant Secretary of Defense (Public Affairs)* for review. * In the case of non-DoD User Agencies, requests for disclosure shall be submitted to that agency. ________________________________________________________________________________ 13. SECURITY GUIDANCE. The security classification guidance needed for this classified effort is identified below. If any difficulty is encountered in applying this guidance or if any other contributing factor indicates a need for changes in this guidance, the contractor is authorized and encouraged to provide recommended changes; to challenge the guidance or the classification assigned to any information or material furnished or generated under this contract; and to submit any questions for interpretation of this guidance to the official identified below. Pending final decision, the information involved shall be handled and protected at the highest level of classification assigned or recommended. (Fill in as appropriate for the classifed effort. Attach, or forward under separate correspondence, any documents/guides/extracts referenced herein. Add additional pages as needed to provide complete guidance.) All Contractor personnel requiring access to a facility where services are to be performed shall have SECRET clearances. Contractor personnel will be required to work in a limited and controlled access areas. Contractor personnel may be exposed to cryptographic equipment and documentation up to the SECRET level. The Contractor shall furnish personnel clearance information in accordance with the National Industrial Security Program Operating Manual (NISPOM) to the Security Office at the location where services are to be performed. The information contained in this form is certified to the best of my knowledge as being accurate and complete. FOUO Protection - Appendage #1 CONSEC - Appendage #2 ________________________________________________________________________________ 14. ADDITIONAL SECURITY REQUIREMENTS. Requirements, [ ] YES [x] No in addition to ISM requirements, are established for this contract. (If Yes, identify the pertinent contractual clauses in the contract document itself, or provide an appropriate statement which identifies the additional requirements. Provide a copy of the requirements to the cognizant security office. Use Item 13 if additional space is needed.) ________________________________________________________________________________ 15. INSPECTIONS. Elements of this contract are [ ] YES [x] No outside the inspection responsibility of the cognizant security office. (If Yes, explain and identify specific areas or elements carved out and the activity responsible for inspections. Use Item 13 if additional space is needed.) ________________________________________________________________________________ 16. CERTIFICATION AND SIGNATURE. Security requirements stated herein are complete and adequate for safeguarding the classified information to be released or generated under this classified effort. All questions shall be referred to the official named below. - -------------------------------------------------------------------------------- a. TYPED NAME OF b. TITLE c. TELEPHONE CERTIFYING OFFICIAL (Include Area Code) HERBERT R. ANDRESEN Product Manager, MTS (804) 734-6047 - -------------------------------------------------------------------------------- d. ADDRESS (Include Zip Code) Department of Army PM GCSS-ARMY 800 Lee Ave., Ft. Lee, VA 23801-1718 - -------------------------------------------------------------------------------- e. Signature ________________________________________________________________________________ 17. REQUIRED DISTRIBUTION [X] a. CONTRACTOR [ ] b. SUBCONTRACTOR [X] c. COGNIZANT SECURITY OFFICE FOR PRIME AND SUBCONTRACTOR [ ] d. U.S. ACTIVITY RESPONSIBLE FOR OVERSEAS SECURITY ADMINISTRATION [X] e. ADMINISTRATIVE CONTRACTING OFFICER [ ] f. OTHERS AS NECESSARY ________________________________________________________________________________ DD Form 254 Reverse, DEC 90 Part III.c USAPPC V1.00 EX-10.(H) 4 LICENSE AGREEMENT LICENSE AGREEMENT Between Vistar Telecommunications Inc. Suite 1410, 427 Laurier Avenue West Ottawa, Ontario, Canada, K1G 3J4 (hereinafter referred to as "Vistar") And Comtech Mobile Datacom Corp. 19540 Amaranth Dr. P.O. Box 2126 Germantown, Maryland, USA, 20875-2126 (hereinafter referred to as "CMDC") WHEREAS, Vistar and CMDC entered into a Memorandum of Agreement (MOA) dated December 12, 1997 intending to pursue opportunities related to the development and supply of mobile satellite terminals for use on domestic and international satellite systems and having identified an opportunity with the United States Department of Defense under the Commercial Operations and Support Savings Initiative (the "Project"); WHEREAS, Vistar intended to provide engineering capabilities with respect to designing and prototyping mobile satellite terminals; WHEREAS, CMDC intended to provide engineering capabilities with respect to designing and producing satellite access and control equipment and is a supplier of mobile satellite equipment to the American Government and commercial users; WHEREAS, pursuant to the said MOA the Parties intended to enter into a Development and Supply Contract (DSC) within 90 days; WHEREAS, the Parties commenced performance of their respective obligations but failed to enter into a DSC; WHEREAS, CMDC is now desirous of licensing certain Vistar Technology for the purpose of continuing with the Project, including the development and marketing of Mobile Satellite Terminals; WHEREAS, Vistar is desirous of granting CMDC certain rights to license its MST Technology; NOW THEREFORE, in mutual consideration, the payment and sufficiency of which is hereby expressly acknowledged by both Vistar and CMDC, the Parties hereby agree as follows: 1 1. DEFINITIONS Defined terms used in this License Agreement shall have the meanings set forth below: 1.1 "Background Technology" shall mean all technology incorporated into the MST that is not first conceived, developed or reduced to practice as part of the activities carried out by the Parties pursuant to the terms of this Agreement and/or the MOA. Background Technology includes, without limitation, any hardware and software designs that come with Vistar to this Agreement and are proprietary to, or the Confidential Information of Vistar, its subcontractors or any other supplier of Vistar. 1.2 "CECOM" shall mean the United States Army Communications - Electronics Command. 1.3 "Confidential Information" or "Information" shall mean all materials relating to the business or affairs of either Party whether of a financial, technical operation or economic nature including, without limitation, MTS Technology, Background Technology, all unpublished know-how, technical data, techniques, records, formulae, processes, designs, sketches, photographs, plans, drawings, specifications, samples, reports, studies, manuals, documents, prototypes, business plans, equipment, working materials, lists of customers, findings, inventions and ideas whether patentable or not, whether they be trade secrets or not and whether they be in written, machine readable, graphic or oral form, that are now or hereafter owned or acquired by the Disclosing Party and disclosed to the Receiving Party. It is expressly understood that Confidential Information shall include all copies and/or reproductions made by the Receiving Party of Information originally provided under this License Agreement and that all Confidential Information shall at all times remain the property of the Disclosing Party. Confidential Information does not include information which the Receiving Party can clearly demonstrate to the satisfaction of the Disclosing Party: (i) is at the time of disclosure, or thereafter becomes, a part of the public domain through no act or error by the Receiving Party; or (ii) was in the lawful possession of the Receiving Party before disclosure by the Disclosing Party as shown by competent written evidence and was not already subject to an agreement between the Parties restricting the disclosure of the said Confidential Information; or (iii)is developed independently by the Receiving Party prior to receipt of the Information from the Disclosing Party, as shown by competent written evidence; or (iv) is required to be released under court order or government regulation, provided that, to the extent permitted by law, the Disclosing Party is promptly given a copy of such order and the Receiving Party co-operates with the Disclosing Party if the Disclosing Party elects to dispute such requirement for disclosure. 2 1.4 "Deliverables" shall mean the items including, without limitation, the Technology stipulated in Schedules A and B that one Party to this Agreement is obligated to provide to the other. 1.5 "Disclosing Party" shall mean the Party to this Agreement that discloses Confidential Information to the Receiving Party. 1.6 "Dispute" shall mean any disagreement or dispute arising under, out of, in connection with or relating to the intent or operation of this License Agreement. 1.7 "Effective Date" shall mean the date upon which this License Agreement becomes effective, which shall be deemed by the Parties to be _________________ . 1.8 "Intellectual Property" shall mean all forms of intellectual property pertaining to the subject matter of this License Agreement, and may include, without limitation, all right, title and interest in and to all: (i) issued patents and all filed or pending applications for patents, including any continuations, continuations in part, re-issues, re-examinations, substitutions and extensions thereof, in any country or other jurisdiction in the world; (ii) trade secrets, and all trade secret rights and equivalent rights arising under the common law, state law, Federal law, Provincial law and laws of foreign countries; (iii) mask works, copyrights, other literary property or authors' rights, whether or not protected by copyright or as a mask work, under common law, state law, Federal law, Provincial law and laws of foreign countries; (iv) proprietary indicia, trademarks, trade names, symbols, logos and/or brand names under common law, state law, Federal law, Provincial law and laws of foreign countries; and (v) other Confidential Information. 1.9 "Intellectual Property Rights" shall mean all forms of intellectual property rights and protection in any country or other jurisdiction of the world that may be obtained for, or pertain to Intellectual Property. 3 1.10 "License" shall mean the license, granted by Vistar to CMDC, subject to the terms and conditions of this Agreement, including, without limitation, those set out in Section 3. 1.11 "License Agreement" or "Agreement" shall mean this legal document and the Schedules hereto, containing the rights and obligations of the Parties, including, without limitation, those relating to the Deliverables and the licensing by Vistar to CMDC of certain rights in the MST Technology. 1.12 "Marks" shall mean all trademarks, trade names, symbols, brand names, logos and other proprietary indicia wherein a Party to this Agreement has a right, title or interest. 1.13 "Material Breach" unless otherwise stated, shall mean a failure by one Party to perform a material covenant, condition or obligation of this Agreement. 1.14 "Mobile Satellite Terminal" or "MST" shall mean a terminal containing MST Technology. 1.15 "Mobile Satellite Terminal Technology", "MST Technology" or "Technology" shall mean the Vistar proprietary terminal design contained within the Vistar Deliverables including all Intellectual Property Rights therein licensed to CMDC pursuant to the terms of this Agreement. 1.16 "Receiving Party" shall mean the Party to this Agreement that receives Confidential Information from the Disclosing Party. 1.17 "Royalty" or "Royalties" shall mean the payments which CMDC is obligated to pay Vistar in accordance with the terms of Section 3.3 of this Agreement. 1.18 "Specifications" shall mean the MTS system and terminal specifications attached hereto as Schedule C. 1.19 "Term" shall have the meaning set forth in Section 5 of this License Agreement. 4 2. DELIVERABLES 2.1 Vistar Deliverables. Vistar hereby agrees to provide to CMDC the Deliverables in accordance with the terms of Schedule A. Upon CMDC's receipt of such Deliverables, and upon Vistar's receipt of payment for such Deliverables in accordance with the terms of Section 4, Vistar agrees to grant CMDC the License described in Section 3. 2.2 CMDC Deliverables. CMDC hereby agrees to provide to Vistar the Deliverables set out in Schedule B. It is expressly understood that Vistar requires such CMDC Deliverables inasmuch as the said CMDC Deliverables are required by Vistar in order for it to commence and/or continue performance of Vistar's obligations. Such CMDC Deliverables, including but not limited to PCB boards, enclosures, components and connectors associated with the prototype Rev D units shall be manufactured, provided and assembled in accordance with the requirements set out in the Vistar Deliverables. 2.3 Inventory in Stock. Vistar agrees to provide to CMDC, in a timely manner, for use by CMDC and or its manufacturer, any inventory held by Vistar on May 14, 1999 of applicable parts for up to six (6) prototype boards. 2.4 CMDC Indemnification. Any costs incurred by CMDC and/or its manufacturer relating to the obligations of this Section are the responsibility of CMDC. Subject to the terms of this Agreement, including, without limitation, Section 7, CMDC assumes liability associated with the obligations of CMDC under this Section and indemnifies Vistar for any losses and/or damages incurred by Vistar in connection with CMDC's failure to perform its obligations under this Section. 2.5 Vistar Indemnification. Subject to the terms of this Agreement, including without limitation, Section 7, Vistar assumes liability associated with the obligations of Vistar under this Section 2 and indemnifies CMDC for any losses and/or damages incurred by CMDC in connection with Vistar's failure to perform its obligations under this Section. 5 3. LICENSE AND ROYALTIES 3.1 No Transfer of Technology. Except as expressly set out in this Section 3, this Agreement shall not result in a conveyance, transfer of title, license, or grant of any rights in any technology or Intellectual Property of one Party to another. 3.2 Mobile Satellite Terminal License. In consideration of CMDC's obligations under this Agreement, Vistar hereby grants to CMDC during the Term of this Agreement only: (i) a non-exclusive, non-transferable license to use, modify, maintain, lease or sell Mobile Satellite Terminals containing MST Technology; (ii) subject to the provisions of Subsection 3.2(iv), a non-exclusive, non-transferable license to provide, to the MST manufacturers selected by CMDC, the MST Technology excluding Source Code required by such manufacturers for the sole purpose of manufacturing MSTs. However, the Parties expressly agree that in the event the manufacturer selected by CMDC is not located in the United States or Canada, CMDC must obtain the prior written consent of Vistar, which consent shall not be unreasonably withheld, for release of MST Technology to the Manufacturer; (iii)notwithstanding Subsection 3.2(i) above, subject to the requirement to obtain Vistar's prior written consent in each case, which consent shall not be unreasonably withheld, and subject to the terms of Subsection 3.2(iv) as well as any other commercially reasonable terms stipulated by Vistar, Vistar agrees to grant CMDC the right to sub-license MST Technology, on a case by case basis, to third parties. The Parties hereby acknowledge that such commercial terms may, in Vistar's sole discretion, include amendments to, or replacements of, the terms respecting Royalties. In such an event, the Parties agree, for the purposes of only the specific sub-license under consideration, to enter into a written agreement reflecting any such amendments. In the event that Vistar grants its consent to a sub-license it is expressly understood that CMDC remains responsible for the payment to Vistar of all Royalties associated with MSTs sub-licensed in accordance with the terms of this Subsection 3.2(iii) and/or for any other payments due to Vistar pursuant to the said modifications to the Royalty terms; iv) In the event that MST Technology, or part thereof is authorized by Vistar for release to a third party manufacturer pursuant to Subsection 3.2(ii) above, or the granting of a sub-license to a third party is authorized by Vistar pursuant to Subsection 3.2(iii) then as a pre-condition to the said authorization coming into effect, CMDC must enter into (i) a sub-license agreement, in a form satisfactory to Vistar, with such third party stipulating the terms of the 6 sub-license; and (ii) a Confidentiality Agreement in the form set out in Schedule D with such third party and Vistar. CMDC hereby agrees to indemnify Vistar for all losses and/or damages including, without limitation, legal fees, resulting from the breach of such agreement by such third party. 3.3 Royalties. (i) CMDC will also pay to VISTAR, upon successful production and sale of Mobile Satellite Terminals, a Royalty calculated at the rate of XX dollars ($XX) per MST for up to and including each of the first ten thousand (10,000) terminals produced and sold, and XX dollars ($XX) per terminal for each and every terminal produced and sold thereafter. (ii) Unless the Term of this Agreement is extended pursuant to Section 6.2, the Royalty shall be payable for a period of six (6) years commencing on the production of the first commercial MST. In the event that the Term of the Agreement is extended pursuant to Section 6.2 then the Royalty shall continue to be payable to Vistar for an additional period equivalent to the length of the extension to the Term. It is expressly agreed that in accordance with this methodology, CMDC's obligations to pay Royalties will continue after the expiration of the Term of the Agreement until the expiration of the periods of time described in this Subsection. (iii)Royalties shall be paid on a quarterly basis with the payments reflecting the Royalties associated with MSTs produced and sold during the immediately preceding quarter. A report detailing the Royalty calculation shall be provided with each Royalty payment. On an annual basis, at Vistar's option, Vistar can request an audit of the Royalty calculation. The audit will be at Vistar's expense unless it is determined through the audit that CMDC failed to pay any Royalties owing to Vistar under this Agreement, exceeding five percent (5%) of the Royalty amount paid by CMDC in which case, CMDC shall bear all costs of the audit. 7 4. MILESTONE AND PAYMENT 4.1 Vistar Schedule of Milestones and Corresponding CMDC Payments. Milestone Milestone Date Milestone Description Amount - -------------------------- ------------------------------------ ---------------- WEEK 2 Letter of Intent May 14, 1999 Rev C Documentation Package: o Softcopy Schematic o Softcopy (Board) Layout $XX o Softcopy Mechanical Drawing of Enclosure o Bill of Materials (Costed) o Specifications for Custom o Order Parts (Hardcopy) o Test Proecedure (Softcopy) o Softcopy (or hardcopy) mechanical drawing of antenna - -------------------------- ------------------------------------ ---------------- WEEK 14, AUG. 9, 1999 Execution of Transfer of Licensing $XX Agreement WEEK 8, 6/25/99 Rev D Schematic and WEEK 10, 7/13/99 BOM (Prototype Build) WEEK 11, 7/23/99 Rev D Layout Sent for Board Build $XX WEEK 17, 8/26/99 Start of Rev D Test $XX WEEK 11, 7/23/99 Rev D Enclosure Drawings $XX WEEKS 17-23 8/26-10/7 Rev D Test WEEK 24, 10/14 Deliver Rev D Hardware-Golden Boards Deliver Rev D Documentation WEEK 25, 10/21 Deliver Rev D Software $XX Deliver Test Equipment (Item 2), OS License (Item 4) COMPLETION TOTAL $XX - -------------------------- ------------------------------------ ---------------- 8 4.2 Payment Terms. Subject to the terms of this Agreement, CMDC shall pay, and VISTAR agrees to accept the sum of XX dollars ($XX) in satisfaction of its obligation to provide Deliverables in accordance with this Agreement. The Parties agree that payment for Vistar Deliverables shall be made in accordance with the above Mileston Schedule. Vistar shall invoice CMDC immediately upon completion of a Milestone. All Milestone payments shall be paid by CMDC net thirty (30) days from receipt of an invoice. 4.3 CMDC Schedule of Milestones. Milestone Date Milestone Description - ------------------------------------------------------------------------ 8/26/99 Two Prototype Rev D Boards ready for Test 9/2/99 Two Sets of Test Housings 5. TAXES Except for taxes on the income of Vistar, CMDC shall be responsible for any and all taxes of whatever nature due or arising under or out of this Agreement. All rates and/or prices set forth in Subsections 3.3, 4.1(i), 15.19 and 15.20 are exclusive of any and all taxes, levies, assessments, surcharges, duties or similar items assessed by a government body, and CMDC shall be solely and exclusively responsible for collection, remittance and/or compliance with any such taxes. 6. TERM 6.1 Initial Term. This License Agreement shall come into force on the Effective Date and shall remain in effect for a period of six (6) years from the production of the first commercial MST or, in the event that CMDC fails to commercially produce MSTs, eighteen (18) months from the Effective Date. 6.2 Extension to Initial Term. At CMDC's option, and subject to CMDC's obligations in Subsection 3.3(ii) the Term may be extended for four (4) subsequent one year periods. In the event that CMDC wishes to exercise an option to extend the Term of this Agreement, then prior to the expiration of the current Term it must provide Vistar with no less than sixty (60) days prior written notice of its intent to extend the Term. In no event shall the Term of this Agreement exceed ten (10) years. 9 7. LIABILITY 7.1 LIMITATION OF LIABILITY. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY OR ANY OTHER ENTITY FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL, OR INDIRECT DAMAGES, HOWEVER CAUSED, ON ANY THEORY OF LIABILITY, AND REGARDLESS OF WHETHER SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THIS LIMITATION SHALL APPLY NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY. 7.2 Monetary Limitation. As a material condition of Vistar entering into this Agreement, and in regard to any causes of action arising out of or related to this Agreement including, but not limited to, claims of negligence, breach of contract or breach of warranty or otherwise, or any other claim whether in contract, tort or any other legal theory, CMDC agrees that the liability of Vistar shall in no event exceed the total amount already paid by CMDC to Vistar, including all Royalties, under this Agreement. 8. INTELLECTUAL PROPERTY RIGHTS AND CONFIDENTIALITY 8.1 Intellectual Property Rights. (i) CMDC acknowledges that VISTAR owns: a. Background Technology, and the Intellectual Property Rights therein; b. the MST Technology including, without limitation, all hardware and software designs and implementations associated with the MST Technology and the Intellectual Property Rights therein; and c. other Vistar Confidential Information including all Intellectual Property Rights therein. (ii) VISTAR acknowledges that CMDC owns: a. the Intellectual Property Rights to those additional components of the MST which are not MST Technology or Vistar Background Technology as defined in this Agreement; and b. other CMDC Confidential Information including without limitation to the Specifications and all Intellectual Property Rights therein. 10 8.2 Use of Marks. All documents (in whatever form, including machine readable or electronic form) and other product materials owned by a Party must contain all proper Marks, legends, copyright notices and patent markings reflecting the Intellectual Property Rights of that Party in such documents and materials. This License Agreement gives neither Party any proprietary or other rights whatsoever in the other Party's Marks. 8.3 Confidentiality. Each Party agrees: (i) to observe confidentiality with respect to the other Party's Confidential Information; (ii) not to disclose, or permit any third party or entity access to, the Confidential Information (or any portion thereof) without prior written permission of the Disclosing Party; and (iii)to ensure that any employees, or any authorized third parties who receive access to the Confidential Information, are advised of the confidential and proprietary nature thereof and are prohibited from copying, utilizing or otherwise revealing the Confidential Information; and (iv) without limiting the foregoing, each Party agrees to employ with regard to the Confidential Information procedures no less restrictive than the procedures used by such Party to protect its own similar confidential and proprietary information, but at a minimum commercially reasonable procedures. 8.4 Breach and Survival. It is expressly agreed and understood by the Parties that a breach of this Section 8 shall be deemed a Material Breach of this Agreement which breach will give rise to injuries that are not fully compensable by damages. Accordingly, the Party not in breach shall be entitled to apply for equitable relief. This Section 8 shall survive the expiration or termination of the Agreement in any manner whatsoever. 11 9. INTELLECTUAL PROPERTY RIGHTS INDEMNITY 9.1 Defense by CMDC. Except as provided in Subsection 9.2 below, CMDC shall defend, at its own expense, any action brought against Vistar to the extent that such action is based upon an IP Claim that the use of MST by CMDC, its permitted licenses and/or assigns infringes any Intellectual Property rights of a third party. 9.2 Defense by Vistar. (i) Vistar shall defend, at its expense, any action brought against CMDC to the extent that it is based on a claim that the use of the MST Technology developed by Vistar infringes any Intellectual Property Right of any third party ("IP Claim" or "IP Claimant"). CMDC agrees to notify Vistar promptly in writing of any IP Claim, to permit Vistar to defend, compromise or settle such IP Claim and to provide reasonably available information and assistance regarding such IP Claim; provided that if Vistar fails to retain defense counsel for any such claim, CMDC may retain its own defense counsel and defend against such IP Claim. (ii) Should the MST Technology in the opinion of Vistar's Legal Counsel, be likely to become the subject of an IP Claim, Vistar shall either: a. Procure for CMDC, at no cost to CMDC, the right for CMDC to continue exercising the rights granted under the CMDC License; b. Replace or modify the MST Technology at no cost to CMDC to make the MST Technology non-infringing, provided that the replacement or modified MST Technology provides substantially similar functionality and performance; or c. If neither a. or b. is technically feasible, terminate CMDC's then existing rights under this Agreement and refund of all amounts already paid to Vistar by CMDC under this Agreement, including all Royalties. 9.3 Limitation. Vistar shall have no liability for any IP Claim to the extent that it is based upon the operation or use of CMDC or third party designs, applications, products or materials not supplied, specified or approved by Vistar in writing and such IP Claim would not have occurred but for the use of such unapproved CMDC or third party designs, applications, products or materials, even if the operation or use of such designs, applications, products or materials is permitted by the terms of CMDC's License. 12 9.4 Notification of Unauthorized Use. Each Party shall promptly notify the other in writing upon its discovery of any allegedly unauthorized use or infringement of the MST Technology or the Confidential Information. In the event that an action is brought regarding such allegedly unauthorized use or infringement, the Parties shall co-operate and provide full information and assistance to each other in connection with any such action or proceeding. 10. REPRESENTATIONS, WARRANTIES 10.1 General Representations and Warranties. Each Party represents and warrants to the other Party that: (i) it is authorized to enter into this License Agreement and to perform its obligations hereunder; (ii) except as otherwise set forth in this License Agreement, it will not impair or encumber, in any manner, the Intellectual Property Rights or other ownership rights of the other Party; (iii)the execution of this Agreement does not violate any applicable law, statute or breach any agreement or covenant to which it is a party or is bound; and (iv) the performance of its rights and obligations under this Agreement will not infringe up on any third party's trademark, copyright, patent or trade secret. 10.2 Vistar Warranties: (i) Vistar represents and warrants that the MST Technology Deliverables provided by Vistar under this Agreement are designed to be used prior, to, during and after Calendar year 2000 A.D., and that the said MST Technology will operate during each such time period without error relating to date data, specifically including any error relating to, or the product of, date data which represents or references different centuries or more than one century. (ii) The MST Technology shall substantially conform to and achieve the functionality stated in the Specifications. 10.3 No Other Representations, Warranties or Guarantees. EXCEPT FOR THE EXPRESS WARRANTIES STATED HEREIN, NEITHER PARTY IS PROVIDING TO THE OTHER PARTY ANY OTHER EXPRESS OR IMPLIED WARRANTIES UNDER THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. 13 11. TERMINATION 11.1 Early Termination. (i) Either Party. This License Agreement shall terminate, without notice, a. upon the institution by either Party of insolvency, receivership or bankruptcy proceedings, b. upon the institution against either Party of insolvency, receivership or bankruptcy proceedings, if such proceedings are not dismissed within ninety (90) days of the Party's receipt of notice of such proceedings against it; c. upon either Party's making an assignment for the benefit of creditors of all or part of its assets, or d. upon either Party's dissolution or ceasing to do business or upon a decision by the Shareholders and/or Board of Directors of either Party to cease to do business. (ii) Upon the occurrence of any of the events set forth in Subsection 11.1 (i), the Party making the filing, assignment, receiving notice thereof, or dissolving or ceasing to do business shall immediately inform the other Party in writing of such event. (iii)Upon the occurrence of any of the events in Subsection 11.1(i), in the event that Vistar is the party with respect to which the event occurred, CMDC shall be entitled to exercise the rights set out in Section 12. 11.2 Termination for Material Breach. Except in the case of a Material Breach of Sections 8, in the event of a Material Breach of any provision of this License Agreement, the non-breaching Party may terminate this License Agreement by giving thirty (30) days prior written notice to the breaching Party; provided, however, that this License Agreement shall not terminate if the breaching Party has cured the breach prior to the expiration of such thirty (30) day period, or if subject to the terms of this Agreement any Dispute regarding such breach has been referred to Arbitration in accordance with the provisions of Section 13. In the event of a Material Breach of Sections 8, if the breach is not capable of being cured to the reasonable satisfaction of the non-breaching Party, the Party not in default may elect to terminate this License Agreement upon ten (10) business days prior written notice to the Party in default. In such circumstances, the Agreement shall terminate at the conclusion of this notice period unless otherwise mutually agreed upon by the Parties. 14 11.3 Effects of Termination. In addition to pursuing the remedies available under the law, in the event of the termination of this Agreement by CMDC, Vistar may revoke CMDC's License upon five days written advance notice. Upon receipt of such notice CMDC shall: (i) immediately cease all development and marketing of MSTs and all use of Vistar Confidential Information, Marks, equipment, materials and documentation; and (ii) Pay all amounts owing to Vistar including all amounts owing as a result of Section 4 and Subsections 3.3 and 15.19. 12. SOURCE CODE Vistar shall deliver into escrow the VSLP source code for the Viterbi decoder and frequency estimator modules. The Parties hereby agree that the escrow agent shall be legal counsel for Vistar, more particularly: Nelligan Power Law Offices 66 Slater Street, 19th Floor Ottawa, Ontario K1P 5H1 Attention: Stephanie M. Traynor Upon the occurrence of an event set out in Subsection 11.1(i), provided only that Vistar is the party with respect to which the event occurred, the above described source code shall be released to CMDC and Vistar shall be deemed to have granted CMDC a license to such source code on the same terms as set out in Subsection 3.2. 15 13. ARBITRATION AND DISPUTE RESOLUTION 13.1 Disputes. In the event of any Dispute, each Party shall provide the other Party with written notice setting forth the outstanding issues and positions of such Party regarding such Dispute. It shall be the obligation and responsibility of each Party to use his or her best efforts, in good faith, to resolve any such Dispute, in co-operation with appropriate representatives of both Parties, as soon as reasonably possible. 13.2 Arbitration. If the Parties are unable to resolve a Dispute within thirty (30) days of their initial discussions concerning such Dispute, except for Disputes arising under Section 8, any such Dispute shall be settled by arbitration in accordance with the Ontario Arbitration Act. The Parties shall mutually select a single arbitrator. If the Parties are unable to agree on the selection of an arbitrator within thirty (30) days of starting their selection process, then the number of arbitrators shall be three (3), and each Party shall select one arbitrator and the two arbitrators shall mutually select and agree upon the third arbitrator. The Parties shall provide the arbitrators and any expert witnesses with all information and resources they may require to make their decision. Any failure of either Party to comply with such request of the arbitrators shall be deemed a Material Breach of this License Agreement. An arbitration decision shall be binding. The prevailing Party may enter such decision in any court having competent jurisdiction and failure to comply with such arbitration decision shall result in a Material Breach by the non-complying Party. The arbitration proceeding shall be conducted in the English language in Ottawa, Ontario, unless the Parties agree in writing to conduct the arbitration in another location. Failure of either Party to attend arbitration shall result in a Material Breach by the absent Party. 14. CECOM OBLIGATIONS Vistar acknowledges and agrees to be bound by the flowdown clauses imposed by CECOM set forth in Schedule E attached hereto and incorporated by reference herein. For the purpose of this Schedule, Vistar is deemed to be the "Seller" and CMDC is deemed to be the "Buyer" therein. As an exception to Subsection 15.2, Vistar acknowledges and agrees that the rights of the Government of the United States as reflected in Schedule E shall be governed by the U.S. Federal Laws and to the extent that State law may apply, by the laws of the State of Maryland. Vistar's obligations with respect to Schedule E shall terminate concurrent with the termination of CMDC's obligations thereunder. 16 15. GENERAL PROVISIONS 15.1 Independent Contractors. The relationship of Vistar and CMDC established by this License Agreement is that of independent contractors, and nothing contained in this License Agreement shall be construed to (i) give either Party the power to direct and control the day-to-day activities of the other, (ii) constitute the Parties as Partners, joint venturers, co-owners or otherwise as participants in a joint or common undertaking, or (iii)allow either Party to create or assume any obligation on behalf of the other Party for any purpose whatsoever. 15.2 Governing law. This License Agreement shall be governed by and construed under the laws of the Province of Ontario and the laws of Canada, without reference to conflicts of law principles thereof. 15.3 Notices. All formal notices hereunder shall be in writing and shall be deemed effective upon receipt when delivered by hand, overnight delivery courier, by facsimile transmission (provided such notice is also given in any of the other manners set forth herein) or when mailed by registered or certified mail (return receipt requested), postage prepaid, to the Parties at the addresses listed below (or at such other address for a Party as shall be specified by like notice). If to Vistar: Vistar Telecommunications, Inc. Suite 1410, 427 Laurier Avenue West Ottawa, Ontario K1G 3J4 Attention: Vice President, Technology and Programs If to CMDC: Comtech Mobile Datacom Corp. 19540 Amaranch Drive P.O. Box 2126 Germantown, MD 20875-2126 Attention: Joel Alper, President 17 15.4 Assignability and Binding Effect. CMDC may not assign this License Agreement to any third party without the prior written consent of Vistar, which consent shall not be unreasonably withheld. 15.5 Inurement. Subject to the terms and conditions of this License Agreement, this License Agreement shall be binding upon and inure to the benefit of the Parties hereto and their permitted successors and assigns. 15.6 Amounts in U.S. Currency. Except as otherwise specified in this License Agreement, all amounts payable under this Agreement or the Schedules are in the currency of the United States. 15.7 Pre-Printed Terms Void. The pre-printed terms on any order, acknowledgment, packing slip or similar document provided by one Party to the other in connection with this License Agreement shall be of no force or effect. 15.8 Notice of Actions. Each Party agrees to notify the other Party immediately upon the commencement of or threat of commencement of any claim, suit or action brought or that may be brought against either Party, where the outcome of such claim, suit or action may affect the rights or obligations of either Party under this License Agreement. 15.9 Headings. The headings contained in this License Agreement are for convenience of reference only and shall not control the interpretation of any term or condition contained herein. 15.10 Severability. If any provision of this License Agreement is invalid, illegal or unenforceable in any jurisdiction, such provision shall be deemed amended to conform to applicable laws so as to be valid and enforceable, or, if it cannot be so amended without materially altering the intention of the Parties hereto, it shall be stricken, and the remainder of this License Agreement shall remain in full force and effect. 18 15.11 Cumulation of Remedies. Except as otherwise expressly stated in this License Agreement, all remedies available to either Party for breach of this License Agreement are cumulative and may be exercised concurrently or separately and the exercise of any one remedy shall not be deemed an election of such remedy to the exclusion of other remedies. 15.12 Equitable Relief. The Parties agree that certain breaches of this Agreement may give rise to injuries that are not fully compensable by damages. Therefore, the Parties acknowledge and agree that in addition to any other remedies available at law, and notwithstanding the provisions of Section 12.2, a Party shall be entitled to apply to a court of competent jurisdiction and seek injunctive or other equitable relief, including, without limitation, specific performance, from the other Party to enjoin any breach by the other Party of the provisions of this Agreement. 15.13 Interest. Any amount that is not paid when due will bear interest until fully paid at the rate of the lesser of (i) one percent and one half (1.5%), per month compounded monthly, or (ii) the highest rate permitted by applicable law. Vistar shall also be entitled to recover its costs and expenses, if any, incurred in collecting such amount. Vistar's entitlement to interest shall in no way effect CMDC's obligations to make payments in accordance with Section 4 of this Agreement, and Vistar's acceptance of such interest shall not be deemed to be waiver of any of CMDC's obligations respecting payments. 15.14 Waiver. No term or provision hereof shall be deemed waived and no breach excused unless such waiver or consent shall be in writing and signed by the Party claimed to have waived or consented, and such written waiver shall only serve to waive or excuse, as the case may be, the particular breach to which it applies and no other. 15.15 Force Majeure. Each Party shall be excused from performance under this License Agreement and shall have no liability to the other Party for any period if it is prevented from performing any of its obligations (other than payment obligations) in whole or in part, as a result of delays caused by an act of God, war, civil disturbance, company or industry-wide labour disputes, or other cause beyond its reasonable control and such non-performance shall not be a default under, or grounds for termination of this License Agreement. However, if a Force Majeure event continues for more than one hundred and eighty (180) days, then the Party whose performance is not affected by the Force Majeure shall have the right to terminate this License Agreement. 19 15.16 Schedules. Schedules A, B, C, D and E of this License Agreement form part of and are incorporated into this License Agreement as fully and effectively as if they were set forth in this License Agreement. In the event of any conflict or inconsistency between the provisions of this License Agreement and one or more of the Schedules, the conflict or inconsistency shall be resolved in favour of the License Agreement. 15.17 Acknowledgment. Each Party acknowledges that it has read this License Agreement, including the Schedules attached hereto and forming part hereof, and each Party understands and agrees to be bound by its terms and conditions. 15.18 Changes to this License Agreement. No changes to any provision of this License Agreement, including the Schedules hereto, shall be effective unless reduced to writing and signed by the Parties hereto. 15.19 Expenses. Travel and living expenses incurred by Vistar shall be invoiced to CMDC at cost with associated receipts. Travel and living expenses must be authorized in advance by CMDC. 15.20 Operating Systems. To the extent permitted by law or Vistar's existing contractual obligations, Vistar agrees to make available to CMDC the Precise MQX Operating System license associated with the CMDC terminal for a price of $XX. 15.21 Survival. Except as otherwise provided in this License Agreement, the provisions of Sections 4, 5, 7, 8, 9, 10 and 15 with the exception of Subsections 15.15, 15.17, 15.18, 15.19, 15.20 and Subsections 3.1, 3.3 and 13.2, as well as the guarantees and/or indemnifications in Subsections 3.2(iii) and 3.2(iv) shall survive the termination or rescission of this License Agreement for any reason. Nothing in this License Agreement shall be construed so as to extend or override a statutory limitation on the time within which any action or actions based on this License Agreement may be brought. 20 15.22 Publicity. Any press release or other publication by either Party regarding the existence or terms of this License Agreement must be approved by both Parties prior to its publication. 15.23 Entire Agreement. This License Agreement, together with Schedules A, B, C, D and E set forth and constitutes the entire agreement by and between the Parties with respect to the development and licensing of MST Technology and supersedes any and all prior agreements, understandings and representations made by the Parties concerning the subject matter of this Agreement. For greater certainty it is expressly acknowledged and agreed that co-incident with the execution of this agreement the MOA and amendments thereto shall be terminated and each Party releases the other of all obligations under that agreement. 21 WHEREOF, Vistar and CMDC have caused this License Agreement to be duly executed by their respective authorized representatives as of the Effective Date. Vistar Telecommunications, Inc. (Vistar) Comtech Mobile Datacom Corp. (CMDC) By: By: /s/ /s/ Name: Dr. Michael Zuliani Name: Joel Alper Title:President and Chief Executive Officer Title: President Date: August 31, 1999 Date: August 9, 1999 22 EX-21 5 SUBSIDIARIES OF THE COMPANY Exhibit 21 SUBSIDIARIES The following is a list of the subsidiaries of the Company as of October 22, 1999: Subsidiary State of Incorporation - ---------- ---------------------- Telecommunications Transmission Business Segment CASI - Comtech Antenna Systems, Inc. Delaware CCC - Comtech Communications Corp. Delaware CSI - Comtech Systems, Inc. Delaware RF Microwave Amplifier Business Segment CPST - Comtech PST Corp. New York Mobile Data Communications Services Business Segment CMDC - Comtech Mobile Datacom Corp. Delaware EX-23 6 CONSENT OF KPMG LLP [LOGO] KPMG Independent Auditors' Consent The Board of Directors Comtech Telecommunications Corp.: We consent to incorporation by reference in the Registration Statement (No. 2-89857) on Form S-8 of Comtech Telecommunications Corp. of our report dated September 24, 1999, relating to the consolidated balance sheets of Comtech Telecommunications Corp. and subsidiaries as of July 31, 1999 and 1998 and the related consolidated statements of operations, stockholders' equity and cash flows for each of the years in the three-year period ended July 31, 1999 and related schedule II, which report appears in the July 31, 1999 annual report on Form 10-K of Comtech Telecommunications Corp. and subsidiaries. /s/ KPMG LLP KPMG LLP Melville, New York October 27, 1999 EX-27 7 FDS
5 This schedule contains summary financial information extracted from Consolidated Financial Statements Form 10K July 31, 1999 and is qualified in its entirety by reference to such financial statements. 1,000 YEAR JUL-31-1999 AUG-01-1998 JUL-31-1999 5,896 0 5,297 145 7,879 20,723 18,097 13,787 29,847 10,531 0 0 0 447 17,910 29,847 37,886 37,886 11,481 35,059 0 0 204 2,727 (3,754) 6,481 5,265 0 0 5,265 1.27 1.15
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