FOLLOW-ON

MEMORANDUM OF UNDERSTANDING

BETWEEN

THE DEPARTMENT OF DEFENSE

OF THE UNITED STATES OF AMERICA

AND

THE DEPARTMENT OF DEFENCE

OF AUSTRALIA

FOR THE

COOPERATIVE DEVELOPMENT, PRODUCTION, AND SUPPORT OF THE MK48

HEAVYWEIGHT TORPEDO

Certified to be a true opy:

Phil WheelerInternational Agreements NegotiatorNavy International Programs Office

TABLE OF CONTENTS

TABLE OF CONTENTS 2INTRODUCTION 3

SECTION I 5DEFINITIONS 5

SECTION II 14OBJECTIVES 14

SECTION III 16SCOPE OF WORK 16

SECTION IV 18MANAGEMENT 18

SECTION V 23FINANCIAL PROVISIONS 23

SECTION VI 27CONTRACTING PROVISIONS 27

SECTION VII 30PROJECT EQUIPMENT 30

SECTION VIII 33DISCLOSURE AND USE OF PROJECT INFORMATION 33

SECTION IX 42CONTROLLED UNCLASSIFIED INFORMATION 42

SECTION X 44VISITS TO ESTABLISHMENTS 44

SECTION XI 45SECURITY 45

SECTION XII 48THIRD PARTY SALES AND TRANSFERS 48

SECTION XIII 50LIABILITY AND CLAIMS 50

SECTION XIV 51PARTICIPATION OF ADDITIONAL NATIONS 51

SECTION XV 52CUSTOMS DUTIES, TAXES, AND SIMILAR CHARGES 52

SECTION XVI 53SETTLEMENT OF DISPUTES 53

SECTION XVII 54AMENDMENT, TERMINATION, ENTRY INTO EFFECT, AND DURATION 54

ANNEX A 57PROJECT MANAGMENT ORGANIZATION DIAGRAM 57

ANNEX B 58COOPERATIVE PROJECT PERSONNEL 58

ANNEX C 63PLANNED PROCUREMENT (ORDER) QUANTITIES AND ESTIMATED FUNDINGSCHEDULE MK48 HEAVYWEIGHT TORPEDO UPGRADE KITS 63

ANNEX D 65PROJECT OVERVIEW 65

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INTRODUCTION

The Department of Defense of the United States of America(U.S. DoD) and the Department of Defence of Australia(Australian DoD), hereinafter referred to as the"Participants":

Recognizing the Exchange of Notes Constituting anAgreement between the Government of the United States ofAmerica and the Government of Australia ConcerningCertain Mutual Defence Commitments done at Sydney onDecember 1, 1995 (the Chapeau Agreement), as may beamended, will apply to this Memorandum of Understanding(MOU);

Having a common interest in defense;

Recognizing that the costs and responsibilities set outin this MOU represent an equitable sharing between theParticipants of the costs and responsibilities of theProject;

Recognizing the benefits to be obtained fromstandardization, rationalization, and interoperabilityof military equipments;

Desiring to improve their mutual conventional defensecapabilities through the application of emergingtechnology;

Recognizing the intent of the Statement of Principlesfor Enhanced Cooperation between the United States Navyand the Royal Australian Navy in matters relating toSubmarines, which entered into effect May 2, 2005, tofacilitate defense cooperation activities;

Recognizing the advantages in mutual cooperation in theareas of tactical development, system employment, andoperation implementation;

Having a mutual need for the development, production,and support of the MK48 Heavyweight Torpedo to satisfycommon operational requirements;

Having independently and jointly conducted studies,research, exploratory development, and testing of theapplications of various technologies to the MK48Heavyweight Torpedo;

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Recognizing the successful work the Participants carriedout under the Memorandum of Understanding between theDepartment of Defense of the United States of Americaand the Department of Defence of Australia for theCooperative Engineering and Manufacturing Development,Production, and Support of the MK48 AdvancedCapability/Common Broadband Advanced Sonar SystemHeavyweight Torpedo, which entered into effect March 31,2003 (original MK48 MOU); and

Recognizing the benefits of continued cooperation fordevelopment, production, and support of the MK48Heavyweight Torpedo;

Have reached the following understandings:

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SECTION I

DEFINITIONS

The Participants have jointly decided upon the followingdefinitions for provisions used in this MOU:

Advanced Processing Build (APB) The APB Process is the cyclicProcess process by which capability

improvements are conceived,developed, tested, andproduced. The purpose of theAPB Process is to producehardware independent softwarebuilds to create or improvefunctionality for transition tonaval combat systems programs.Improvements and new functionsinclude software builds thatovercome obsolescence andimprove maintainability,sustainability and reliability.

Capability Development Document The Capability DevelopmentDocument (CDD) identifiesoperational performanceattributes of the proposedsystem.

Classification Guide (CG)

Classified Information

A document which lists thesecurity classification of eachdocument either provided orcreated, system, subsystem, andcomponent.

Official Information thatrequires protection in theinterests of national securityof either of the Participantsand is so designated by theapplication of a securityclassification marking. Thisinformation may be in oral,visual, magnetic or documentaryform or in the form ofequipment or technology.

Computer Data Base A collection of data recorded

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in a form capable of beingprocessed by a computer. Thisdefinition does not includeSoftware.

Computer Program

Contract

Contracting

A set of instructions, rules,or routines recorded in a formthat is capable of causing acomputer to perform a specificoperation or series ofoperations.

Any mutually binding legalrelationship under nationallaws that obligates aContractor to furnish suppliesor services, and obligates oneor both of the Participants topay for them.

The obtaining of supplies orservices by Contract fromsources outside the governmentorganizations of theParticipants. Contractingincludes description (but notdetermination) of supplies andservices required, solicitationand selection of sources,preparation and award ofContracts, and all phases ofContract administration.

Contracting Agency The entity within thegovernment organization of aParticipant that has authorityto enter into, administer, orterminate Contracts.

Contracting Officer A person representing aContracting Agency of a

. Participant who has theauthority to enter into,administer, or terminateContracts.

Contractor Any entity awarded a Contractby a Participant's ContractingAgency.

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Contractor Support Personnel

Persons specifically identifiedas providing administrative,managerial, scientific, ortechnical support services to aParticipant under a supportContract.

Controlled UnclassifiedInformation

Cooperative Project Personnel

Defense Purposes

Designated Security Authority(DSA)

Unclassified information towhich access or distributionlimitations have been appliedin accordance with applicablenational laws or regulations.It could include informationwhich has been declassified,but remains controlled.

Australian DoD military membersor civilian employees assignedto the MK48 program office orU.S. DoD field activities, andU.S. DoD military members andcivilian employees assigned toAustralian DoD fieldactivities, who performmanagerial, engineering,technical, administrative,Contracting, logistics,financial, planning or otherfunctions in furtherance of theProject.

Manufacture or other use in anypart of the world by or for thearmed forces of eitherParticipant.

The security authoritydesignated by nationalauthorities to be responsiblefor the coordination andimplementation of nationalindustrial security aspects ofthis Project.

Financial Costs Project costs met with monetarycontributions.

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Financial Cost Ceiling The maximum amount of Financial

Costs which may be dedicated tothe Project without the priorwritten approval of theParticipants.

Financial Management Procedures A document that describes theDocument (FMPD) estimated schedule, handling,

and auditing of monetarycontributions for the Projectin which one Participantcontracts on behalf of theother Participant or on behalfof both Participants to fulfillthe objectives of the Project.

Host Participant

Intellectual Property

Joint Project Office (JPO)

The Participant whose nationserves as the location of theJoint Project Office.

In accordance with the WorldTrade Organization Agreement onTrade-related Aspects ofIntellectual Property Rights ofApril 15, 1994, all copyrightand related rights, all rightsin relation to inventions(including Patent rights), allrights in registered andunregistered trademarks(including service marks),registered and unregistereddesigns, undisclosedInformation (including tradesecrets and know-how), layoutdesigns of integrated circuits,geographical indications, andany other rights resulting fromcreative activity in theindustrial, scientific,literary, and artistic fields.

The management organizationwith representatives from bothParticipants to implement theobjectives and carry out thescope of work of this MOU.

Joint Test and Evaluation Master A document to be developed by

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Plan (JTEMP)

MK48 Heavyweight Torpedo

MK48 Heavyweight Torpedo In-Service Support Plan

Non-financial Costs

Parent Participant

Participant

Patent

the Project Manager (PM) todefine joint test requirements,goals, and schedules to meetthe national requirements ofboth Participants.

The term applied to the familyof Heavyweight-Torpedoes thatincludes the current AdvancedCapability (ADCAP) CommonBroadband Advanced Sonar System(CBASS) Heavyweight Torpedo.

A plan that defines how theMK48 Heavyweight Torpedo in-service support will beachieved for the Participants.It achieves the aim of commonsupport standards, proceduresand weapon configuration.

Project costs met with non-monetary contributions.

The Participant that sends itsCooperative Project Personnel(CPP) to the JPO located in thenation of the otherParticipant.

A signatory to this MOUrepresented by its military andcivilian personnel.Contractors and ContractorSupport Personnel will not berepresentatives of aParticipant under this MOU.

Grant by any Government or aregional office acting for morethan one Government of theright to exclude others frommaking, using, importing,selling, or offering to sell aninvention. The term refers toany and all patents including,but not limited to, patents ofimplementation, improvement oraddition, petty patents,

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utility models, appearancedesign patents, registereddesigns, and inventorcertificates or like statutoryprotection, as well asdivisions, reissues,continuations, renewals, andextensions of any of these.

Production

Project

In addition to producinghardware, production is theprocess by which the APBbaseline transitions from atemporary configuration to aformally engineered and testedsystem that is certified withinthe naval environment andsupported with a logisticspackage.

The U.S. DoD-Australian DoDcooperative efforts to develop,produce, and support the MK48Heavyweight Torpedo asdescribed in this MOU.

Project Background Information Information not generated inthe performance of the Project.

Project Equipment Any material, equipment, end-item, subsystem, component,special tooling or testequipment jointly acquired orprovided for use in theProject.

Project Foreground Information Information generated in theperformance of the Project.

Project Information Any information provided to,generated in, or used in thisProject regardless of form ortype, including, but notlimited to, that of ascientific, technical,business, or financial nature,and also including Software,photographs, reports, manuals,threat data, experimental data,test data, designs,

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specifications, processes,techniques, inventions,drawings, technical writings,sound recordings, pictorialrepresentations, and othergraphical presentations,whether in magnetic tape,computer memory, or any otherform and whether or not subjectto Intellectual Propertyrights.

Project Invention

Project Management Plan

Project Security Instruction(PSI)

Prospective Contractor

Any invention in any field oftechnology, provided it is new,involves an inventive step, iscapable of industrialapplication, and is formulatedor made (conceived or "firstactually reduced to practice")in the course of work performedunder a Project. The term"first actually reduced topractice" means the firstdemonstration, sufficient toestablish to one skilled in theart to which the inventionpertains, of the operability ofan invention for its intendedpurpose and in its intendedenvironment.

A plan developed by the ProjectManager that provides adescription of the Project'smanagement, risks, schedule,delivery requirements, andmilestones.

A document which harmonizes,clarifies, and articulates thedomestic security policies andpractices of the Participantsas they apply to the Project.

Any entity that seeks to enterinto a Contract to be awardedby a Participant's ContractingAgency and that, in the case ofa solicitation involving arelease of export-controlled

1 1

Information, is eligible toreceive such Information.

Software

Software Documentation

Computer programs, source code,source code listings, designdetails, algorithms, processes,flow charts, formulae, andrelated materials that wouldenable software to bereproduced, recreated, orrecompiled. Software does notinclude Computer Data Bases orSoftware Documentation.

Owner's manuals, user'smanuals, installationinstructions, operatinginstructions, and other similaritems, regardless of storagemedium, that explain thecapabilities of the Software orprovide instructions for usingthe Software.

Submarine Tactical Requirements A forum of senior fleet-Group (STRG) experienced submarine officers

responsible for defining andprioritizing Submarine Forcetactical requirements, definingmodernization requirements forfuture improvements, andestablishing the targetbaseline for functionality andcapability improvements.

Technical Insertions (TI)

Third Party

Torpedo Modular Upgrade (TMU)

The process that modernizesexisting system hardware byreplacing obsolete equipment,and improving existing systemsto accommodate the greaterdemands brought about by APB-driven software changes.

A government other than theGovernment of a Participant andany person or other entitywhose Government is not thegovernment of a Participant.

An integrated development,

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production, and in serviceapproach to improve overalleffectiveness of the MK48Heavyweight Torpedo inventorywhile addressing obsolescenceissues and reducing total costof ownership.

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SECTION II

OBJECTIVES

2.1. The objectives of this Project are:

2.1.1. To identify and implement changes that willimprove and maintain the military effectiveness,safety, and availability of the MK48 HeavyweightTorpedo for both Participants.

2.1.2. To complete the deliveries extant from theoriginal MK48 MOU. Upon signature of thisfollow-on MK48 MOU by the Participants, thisfollow-on MK48 MOU will supersede the originalMK48 MOU, with the exception of those defensearticles and services obligated under theoriginal MK48 MOU but not yet delivered. Allcooperative MK48 torpedo development,production, and support activities initiatedafter both Participants sign this MOU will beconducted under this MOU. The Participantsacknowledge that all of their rights in ProjectInformation and equipment provided, generated,or produced under the original MK48 MOU willcontinue to apply in accordance with theprovisions of that MOU.

2.1.3. To design, develop, and test through theAdvanced Processing Build (APB) and TechnicalInsertions (TI) Processes, MK48 HeavyweightTorpedo upgrades meeting the requirements of theParticipants.

2.1.4. To produce MK48 Heavyweight Torpedo upgradekits, TI upgrades, APB software upgrades,maintenance, and production enhancements andinstall, test and certify them in torpedoesprovided by the Participants.

2.1.5. To provide in-service support of theParticipants' MK48 Heavyweight Torpedoesincluding obsolescence management and theupgrading of the Participants' maintenance,development, analysis, and traininginfrastructures.

2.1.6. To maintain a common configuration betweenUnited States Navy (USN) and Royal AustralianNavy (RAN) MK48 torpedoes.

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2.1.7. To provide management of the processes duringthe development, production, and support phasesto control all aspects of risk, cost, andschedule of MK48 Heavyweight Torpedoes.

2.1.8. To accommodate and support, to the maximumextent possible, any future Australian DoD andU.S. DoD requirements for logistics/resupply,support, configuration control, operation,training, training facilities, heavyweighttorpedo research and development, futureupgrades, and mutual use of facilities for theMK48 Heavyweight Torpedo.

2.1.9. To provide .a path for other related cooperativedevelopment initiatives between theParticipants. These initiatives may involveMK48 variants, targets, and the MK54 torpedo.

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SECTION III

SCOPE OF WORK

3.1. The overall work (which is described in greater detailin the Project Management Plan (PMP) and Annex D) to beperformed under this MOU includes:

3.1.1. Development of MK48 Heavyweight Torpedo hardwaremodifications and Software to satisfy the CDD tomeet the shared and unique requirements of theParticipants to the maximum extent possible. Itwill include hardware modifications and upgradesthat will enable the torpedo to operate withfuture generation Software and technologyenhancements. Hardware modifications via the TIprocess will also control obsolescence andimprove processing to support Softwareenhancements.

3.1.2. Completion of deliveries of defense articles andservices extant from the original MK48 MOU.

3.1.3. Project management of MK48 Heavyweight Torpedodevelopment, production, and support includingprogram planning, scheduling, Contracting,financial management, and risk management.

3.1.4. Implementation of a MK48 Heavyweight Torpedoobsolescence and sustainability managementprogram for the weapon and shore support,including the Participants' maintenance,development, analysis, and traininginfrastructures.

3.1 5 Testing of MK48 Heavyweight Torpedo upgrades atthe component, subsystem, and system levelincluding, as appropriate, extensive testing atindigenous weapons analysis facilities.Following upgrade installation, and asappropriate, extensive in-water testing may beconducted at U.S. DoD and Australian DoD rangesand littoral environments. Testing will beperformed in accordance with the JTEMP and AnnexD (Project Overview).

3.1.6. Preparation of detailed specifications,requirements, and other information to enablethe Participants to maintain hardware and

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Software configuration management and to trackperformance improvements against known threats.Hardware and Software configuration managementwill be performed in accordance with theconfiguration management plan and softwaremanagement plan.

3.1.7. Production, delivery, and installation, asnecessary, of hardware and Software to upgradeUSN and RAN MK48 Heavyweight Torpedoes.Production will be performed in accordance withAnnex C (Planned Procurement (Order) Quantitiesand Estimated Funding Schedule) and Annex D(Project Overview).

3.1.8. Supporting logistics and sparing requirementsincluding obsolescence and sustainabilitymanagement, as well as sharing of indigenousmaintenance capabilities.

3.1.9. Sharing Project Information relating to thedevelopment, production, and support of the MK48Heavyweight Torpedo and its employment,including fusing and insensitive munitions (IM)studies.

3.1.10. Sharing of MK54 Torpedo information as itrelates to jointly developed MK48 HeavyweightTorpedo hardware and Software, or in order todiscuss potential cooperation regarding the MK54torpedo.

3.1.11. Sharing of MK48 Mod 7AT Torpedo information asit relates to jointly developed MK48 HeavyweightTorpedo hardware and Software, or in order todiscuss potential cooperation regarding the MK48Mod 7AT Torpedo.

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SECTION IV

MANAGEMENT

4.1. This Project will be directed and administered on behalfof the Participants by an organization consisting of anExecutive Steering Committee (ESC), and a Joint Project Office(JPO) headed by a Project Manager (PM). The ESC will haveoverall authority over the PM, in accordance with this MOU.The PM will have primary responsibility for effectiveimplementation, efficient management, and direction of theProject in accordance with this MOU.

4.2. The ESC will consist of a representative appointed byeach Participant. The ESC will meet semi-annually withadditional meetings held at the request of eitherrepresentative. Each meeting of the ESC will be chaired bythe representative of the Participant hosting the meeting.Decisions of the ESC relating to joint Project requirementswill be made unanimously. In the event that the ESC is unableto reach a timely decision on an issue, each ESCrepresentative will refer the issue to its higher authorityfor resolution. In the meantime, the approved ProjectManagement Plan (PMP) will continue to be implemented withoutinterruption under the direction of the PM while the issue isbeing resolved by higher authority.

4.3. The ESC will be responsible for:

4.3.1. Exercising executive-level oversight of theProject.

4.3.2. Reviewing progress in meeting systemrequirements and overall technical progress ofthe Project as specified in the PMP and Annex D(Project Overview).

4.3.3. Reviewing the financial status of the Project toensure compliance with the provisions of SectionV (Financial Provisions) of this MOU, and theFinancial Management Procedures Document (FMPD).

4.3.4. Resolving issues brought forth by the PM orAustralian Deputy Project Manager.

4.3.5. Reviewing and forwarding to the Participants forapproval recommended amendments to this MOU inaccordance with Section XVII (Amendment,Termination, Entry into Effect, and Duration).

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4.3.6. Approving amendments to Annexes A, C, and D ofthis MOU consistent with Section XVII(Amendment, Termination, Entry into Effect, andDuration).

4.3.7. Approving plans to manage and control thetransfer of Project Equipment provided by eitherParticipant to support the execution of theProject in accordance with Section VII (ProjectEquipment).

4.3.8. Approving plans for the disposal of jointlyacquired Project Equipment under this MOU inaccordance with Section VII (Project Equipment).

4.3.9. Maintaining oversight of the security aspects ofthe Project, including reviewing and obtainingapproval from the appropriate DesignatedSecurity Authority (DSA) of a Project SecurityInstruction (PSI) prior to the transfer ofClassified Information or ControlledUnclassified Information.

4.3.10. Providing recommendations to the Participantsfor the addition of new Participants inaccordance with Section XIV (Participation ofAdditional Nations).

4.3.11. Monitoring and consulting on Third Party salesand transfers authorized in accordance withSection XII (Third Party Sales and Transfers).

4.3.12. Reviewing and approving the semi-annual statusreport presented by the PM.

4.3.13. Reviewing and approving the FMPD, the PMP, theconfiguration management plan, and the Softwaremanagement plan, including any changes to them,and reviewing and providing inputs to the JTEMPand CDD.

4.3.14. Employing its best efforts to resolve, inconsultation with the export control authoritiesof the Participant concerned, any export controlissues raised by the PM in accordance withsubparagraph 4.6.19. of this Section or raisedby a Participant's ESC representative inaccordance with subparagraph 8.1.3.2. of Section

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VIII (Disclosure and Use of Project Information)of this MOU.

4.3.15. Monitoring and consulting on the completion ofdeliveries of defense articles and servicesobligated under the original MK48 MOU but notyet delivered.

4.3.16. Two years prior to expiration of this MOU,consulting about an amendment to extend this MOUor pursuing a follow-on MOU.

4.4. The intent is for the JPO to be co-located with theUndersea Weapons Program Office to manage the Project. TheDepartment of the Navy within the U.S. DoD will appoint the PMwho, as head of the JPO, will be responsible for implementingthis MOU and for day-to-day management of the Project.

4.5. The Participants will each provide nationalrepresentation to the JPO. In accordance with Annex A(Project Management Organization Diagram), the Australian DoDwill appoint a Deputy Project Manager (DPM) and the U.S. DoDwill appoint a PM and an Assistant PM (APM). The DPM willreport to the PM heading the JPO.

4.6. The PM will be responsible for:

4.6.1. Managing the cost, schedule, performancerequirements, technical, security, and financialaspects of the Project described in this MOU.

4.6.2. Executing the approved Annex D (ProjectOverview).

4.6.3 Developing, submitting for approval by the ESC(including any proposed changes), implementing,and maintaining the PMP.

4.6.4. Developing, submitting for approval by the ESC(including any proposed changes), implementing,and maintaining the FMPD.

4.6.5. Executing the financial aspects of the Projectin accordance with Section V (FinancialProvisions) of this MOU, Annex C (PlannedProcurement (Orders) and Estimated FundingSchedule), and the FMPD.

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4.6.6. In consultation with the Australian DPM,referring issues to the ESC that cannot beresolved within the JPO.

4.6.7. Developing and recommending amendments to thisMOU and its Annexes to the ESC.

4.6.8. Developing and implementing ESC-approved plansto manage and control the transfer of ProjectEquipment provided by either Participant inaccordance with Section VII (Project Equipment).

4.6.9. Developing and implementing ESC-approved plansfor the disposal of jointly acquired ProjectEquipment under this MOU in accordance withSection VII (Project Equipment).

4.6.10. Developing and forwarding to the ESC a PSI andClassification Guide (CG) for the Project.

4.6.11. Forwarding recommendations to the ESC for theaddition of new Participants in accordance withSection XIV (Participation of AdditionalNations).

4.6.12. Providing a semi-annual status report to theESC.

4.6.13. Developing, approving, and executing theconfiguration management plan.

4.6.14. Developing, approving, and executing theSoftware management plan.

4.6.15. Providing recommendations on programmaticaspects of combat system requirements of bothParticipants to the USN Submarine TacticalRequirements Group (STRG).

4.6.16. Developing and forwarding to the ESC a JTEMP,and managing its implementation upon approval.

4.6.17. Appointing a Project security officer.

4.6.18. Developing and submitting to the ESC forapproval the FMPD, implementing and maintainingthe FMPD, and developing and submitting to theESC for approval any required changes to theapproved FMPD.

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4.6.19. Monitoring export control arrangements requiredto implement this MOU and, if applicable,referring immediately to the ESC any exportcontrol issues that could adversely affect theimplementation of this MOU.

4.6.20. In coordination with the Australian DPM, workingwith the appropriate Australian DoD and U.S. DoDagencies to plan for and prepare the appropriateexport licenses, authorizations, and necessarydocumentation to support the transfer ofequipment and Project Information.

4.7. Either Participant may assign personnel to the otherParticipant's facilities to assist in the Project. The hostParticipant will provide office space and administrativesupport to personnel of the other Participant in accordancewith the host Participant's normal practices. A Participant'sassigned personnel will be subject to the normal proceduresand regulations of the host Participant. Provisions for thepersonnel provided are described in Annex B (CooperativeProject Personnel) to this MOU.

4.8. Representatives from both the U.S. DoD and AustralianDoD will participate in the STRG, In Service Support WorkingGroup (ISSWG), Test and Evaluation Working Group (T&EWG), andother working groups that help define the requirements anddirection of future improvements to the MK48 HeavyweightTorpedo. Annex D (Project Overview) provides greater detailon the role the APB Process plays in the evolution of the MK48Heavyweight Torpedo as defined in this MOU. One of theobjectives of these working groups is to reflect equitably theParticipants' operational, support, and capabilityrequirements.

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SECTION V

FINANCIAL PROVISIONS

5.1. The Participants estimate that the performance of theshared responsibilities under this MOU will not cost more thana Financial Cost Ceiling of $407.262 million Then Year (TY)U.S. dollars. A Financial Cost Ceiling may be changed onlyupon the written consent of the Participants. The U.S. dollarwill be the reference currency for the Project, and theProject fiscal years will be based on the U.S. fiscal year.

5.1.1. The Participants will use their best efforts toperform, or to have performed, the workspecified in Section III (Scope of Work) andfulfill all of the responsibilities under thisMOU within the Financial Cost Ceilingsdelineated in paragraph 5.1. and 5.3. of thisMOU.

5.1.2. If at any time the PM has reason to believe thatthe Financial Cost Ceiling of any phase of theProject will be exceeded, the PM will promptlynotify the ESC and will set forth a new estimateof the Financial Cost Ceiling of the Projecttogether with supporting documentation. The ESCwill advise the PM as to what action should betaken.

5.1.3. The estimated unique financial contributions ofboth Participants in support of the goals of theProject as defined in Section II (Objectives)and Section III (Scope of Work) are reflected inAnnex C (Planned Procurement (Order) Quantitiesand Estimated Funding Schedule).

5.2. In accordance with this MOU, each Participant willcontribute its equitable share of the full Financial and Non-financial Costs of the Project including overhead costs,administrative costs, and costs of claims, and will receive anequitable share of the results of the Project. TheParticipants will share as Financial Costs JPO administrativeand associated support services costs. The Participants willshare as Non-financial Costs Contract award, Contractadministration, office space, security services, informationtechnology services, communications services, and supplies,the values of which have been mutually determined by theParticipants.

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5.3. The shared Financial Cost Ceilings and non-financialCosts for the Project will be as follows:

U.S. DoD Financial $346.173

Australian DoD Financial $ 61.089

Total Financial Shared $407.262

million TY U.S.

million TY U.S.

million TY U.S.

(The ratio of shared financial contributions 85:15, U.S.DoD:Australian DoD)

U.S. DoD Non-financial $29.174 million TY U.S.

Australian Non-financial $10.000 million TY U.S.

Total Non-Financial Shared $39.174 million TY U.S.

5.4. In addition to the shared costs of JPO administrationand contractor support services costs included in paragraphs5.2. and 5.3., the cost of personnel in the JPO or CPPassigned to field activities will be borne as follows:

5.4.1. The host Participant will bear the costs of allpay, allowances, and travel of host Participantpersonnel in the JPO or the host Participant'sfield activities.

5.4.2. The parent Participant will bear the followingCPP-related costs:

5.4.2.1. All pay, allowances, and travel of CPPassigned to the JPO or field activity.

5.4.2.2. Transportation of CPP, CPP dependents,and their personal property to the JPOor host Participant's field activity'slocation prior to commencement of theCPP assignment and returntransportation of the foregoing fromthe JPO or field activity locationupon completion or termination of theCPP assignment.

5.4.2.3. Compensation for loss of, or damageto, the personal property of CPP orCPP dependants, subject to the laws

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and regulations of the Parent Party'sgovernment.

5.4.2.4. Preparation and shipment of remainsand funeral expenses in the event ofthe death of CPP or CPP dependents.

5.5. The following costs will be borne entirely by theParticipant incurring the costs or on whose behalf the costsare incurred:

5.5.1. Costs associated with national representation atmeetings by non-JPO members.

5.5.2. Costs associated with any unique nationalrequirements identified by a Participant.

5.6. The PM will be responsible for establishing the detailedfinancial management procedures under which the Project willoperate. These procedures, which will be in accordance withU.S. national accounting and audit requirements, will bedetailed in an FMPD prepared by the PM and subject to theapproval of the ESC.

5.7. The Participants recognize that, in performingContracting responsibilities on behalf of the otherParticipant, it may become necessary for the ContractingParticipant to incur contractual or other responsibilities forthe benefit of the other Participant prior to receipt of theother Participant's funds. In such event, the otherParticipant will make funds available in such amounts and atsuch times as may be required by a Contract or otherresponsibility and will pay any damages and costs that mayaccrue from the performance or cancellation of the Contract orother responsibility in advance of the time such payments,damages, or costs are due.

5.8. A Participant will promptly notify the other Participantif available funds are not adequate to fulfill itsresponsibilities under this MOU. If a Participant notifiesthe other Participant that it is terminating or reducing itsfunding for this Project, both Participants will immediatelyconsult with a view toward continuation on a modified basis.

5.9. The U.S. DoD will be responsible for the audit of theprocurement activities for which it is responsible under theProject in accordance with its national practices. The U.S.DoD will be responsible for the internal audit regardingadministration of any Project funds provided by the Australian

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DoD to the U.S. DoD for this MOU in accordance with itsnational practices. Audit reports of such procurementactivities will be promptly made available to the AustralianDoD.

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SECTION VI

CONTRACTING PROVISIONS

6.1. The U.S. DOD (acting through the Department of the Navy)will be responsible for Contracting for this Project inaccordance with U.S. Contracting laws, regulations, andprocedures. However, for specific Contracts the ESC maydetermine that the Australian DOD may provide the ContractingAgency and Contracting Officer. Such Contracting would beconducted in accordance with Australian Contracting laws,regulations, and procedures. The Contracting Officer is theexclusive source for providing contractual direction andinstructions to Contractors.

6.2. The PM will be responsible for the coordination ofactivities relating to the Project, and will cooperate withthe Contracting Officer in the areas of Contract procedures,Contract negotiation, evaluation of offers, and Contractaward. The PM, in consultation with the Australian DPM, willreview statements of work and prospective contractual termsprior to and during the development of solicitations to insurethat they are in accordance with this MOU. In addition, theContracting Officer will keep the PM and the Australian DPMadvised of all financial arrangements with the primeContractor.

6.3. The Contracting Officer will negotiate to obtain therights to use and disclose Project Information required bySection VIII (Disclosure and Use of Project Information). TheContracting Officer will insert into prospective Contracts(and require its Contractors to insert in subcontracts)suitable provisions to satisfy the requirements of this MOU,including Section VIII (Disclosure and Use of ProjectInformation), Section IX (Controlled UnclassifiedInformation), Section XI (Security), Section XII (Third PartySales and Transfers), and Section XVII (Amendment,Termination, Entry into Effect, and Duration) of this MOU,including the export control provisions in accordance withthis MOU, in particular paragraphs 6.4. and 6.5. of thisSection. During the Contracting process, the ContractingOfficer will advise prospective Contractors of theirresponsibility to immediately notify the Contracting Agency,before Contract award, if they are subject to any license orarrangement that will restrict their freedom to discloseinformation or permit its use. The Contracting Officer willalso advise prospective Contractors to employ their bestefforts not to enter into any new agreement or arrangementthat will result in any such use or disclosure restrictions.

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6.4. Each Participant will legally bind its Contractors to arequirement that the Contractor will not retransfer orotherwise use export-controlled information furnished by theother Participant for any purpose other than the purposesauthorized under this MOU. The Contractor will also belegally bound not to retransfer the export-controlledinformation to another Contractor or subcontractor unless thatContractor or subcontractor has been legally bound to limituse of the information to the purposes authorized under thisMOU. Export-controlled information furnished by oneParticipant under this MOU may only be retransferred by theother Participant to its Contractors if the legal arrangementsrequired by this paragraph have been established.

6.5. Each Participant will legally bind its ProspectiveContractors to a requirement that the Prospective Contractorwill not retransfer or otherwise use export-controlledinformation furnished by the other Participant for any purposeother than responding to a solicitation issued in furtheranceof the purposes authorized under this MOU. ProspectiveContractors will not be authorized use for any other purposeif they are not awarded a Contract. The ProspectiveContractors will also be legally bound not to retransfer theexport-controlled information to a prospective subcontractorunless that prospective subcontractor has been legally boundto limit use of the export-controlled information for thepurpose of responding to the solicitation. Export-controlledinformation furnished by one Participant under this MOU mayonly be retransferred by the other Participant to itsProspective Contractors if the legal arrangements required bythis paragraph have been established. Upon request by thefurnishing Participant, the receiving Participant willidentify its Prospective Contractors and prospectivesubcontractors receiving such export-controlled information.

6.6. In the event the Contracting Officer is unable to secureadequate rights to use and disclose Project Information asrequired by Section VIII (Disclosure and Use of ProjectInformation), or is notified by Contractors or ProspectiveContractors of any restrictions on the disclosure and use ofinformation, the matter will be referred to the ESC forresolution prior to Contract award.

6.7. The Contracting Officer will immediately advise the ESCof any cost growth, schedule change, or performance problemsof any Contractor for which the Contracting Officer isresponsible.

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6.8. If the Participants mutually consent in writing, andconsistent with Section II (Objectives), a Participant maycontract for the unique national requirements of the otherParticipant.

6.9. The ESC will consult regularly during the developmentphase to determine whether to continue contractually with theproduction and support phases of the Project. The goal ofthis consultation will be to determine mutual willingness toproceed with other contractual phases of the Project.

6.10. Whenever feasible and consistent with law, regulation,and policy, sources from both Participants will be permittedto bid for Project work on equal terms and conditions andsubcontractors will be competitively selected. BothParticipants will encourage industry and their respectiveresearch and development organizations to provide competitiveopportunities to sources from the other Participant toparticipate in the work of the Project, provided that suchparticipation will not adversely impact the Project and willbe consistent with high technical merit, reasonable cost, andthe need to achieve the timely, economical, and efficientexecution of the Project. No requirements will be imposed byany Participant for worksharing or other industrialcompensation in connection with this MOU that is not inaccordance with this MOU.

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SECTION VII

PROJECT EQUIPMENT

7.1. Each Participant may provide Project Equipmentidentified as being necessary for executing the MOU to theother Participant without charge. Project Equipment willremain the property of the providing Participant. A list ofall Project Equipment provided by one Participant to anotherParticipant will be developed and maintained by the PM andapproved by the ESC in accordance with Section IV (Management(Organization and Responsibility)) prior to such transfers.

7.2. The receiving Participant will maintain any such ProjectEquipment in good order, repair, and operable condition.Unless the providing Participant has authorized the ProjectEquipment to be expended or otherwise consumed in connectionwith the Project without reimbursement to the providingParticipant, the receiving Participant will return the ProjectEquipment to the providing Participant in as good condition asreceived, normal wear and tear excepted, or return the ProjectEquipment and pay the cost to restore it.

7.3. If the Project Equipment is damaged beyond economicrepair, the receiving Participant will return it to theproviding Participant (unless otherwise specified in writingby the providing Participant) and pay the replacement value ascomputed pursuant to the providing Participant's nationallaws, regulations, and procedures. If the Project Equipmentis lost while in the custody of the receiving Participant, thereceiving Participant will issue a certificate of loss to theproviding Participant and will pay the replacement value ascomputed pursuant to the providing Participant's nationallaws, regulations, and procedures.

7.4. The providing Participant will deliver Project Equipmentto the receiving Participant at a mutually determinedlocation. Possession of the Project Equipment will pass fromthe providing Participant to the receiving Participant at thetime of receipt of the Project Equipment. Any furthertransportation is the responsibility of the receivingParticipant.

7.5. All Project Equipment that is transferred will be usedby the receiving Participant only for the purposes of carryingout this MOU, unless otherwise consented to in writing by theproviding Participant. The providing Participant will furnishthe receiving Participant with such information as isnecessary to enable the Project Equipment to be used. In

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addition, in accordance with Section XII (Third Party Salesand Transfers) Project Equipment will not be re-transferred toa Third Party without the prior written consent of theproviding Participant.

7.6. Project Equipment transferred to one Participant underthis MOU will be returned to the providing Participant priorto the termination or expiration of this MOU.

7.7. Project Equipment that is jointly acquired is subject tothe following provisions unless otherwise mutually determinedby the Participants:

7.7.1. Jointly acquired Project Equipment will remainthe property of both Participants in shares ofthe same ratio as their shared financialcontributions under this MOU.

7.7.2. The Participants will maintain such jointlyacquired Project Equipment in good order,repair and operable condition, normal wear andtear excepted, unless the Participants havemutually determined that it be expended orotherwise consumed in connection with theProject.

7.7.3. The responsible Participant will pay the costto repair damage to jointly acquired ProjectEquipment that is not to be expended orotherwise consumed in accordance with paragraph7.7.2. of this MOO. Where the jointly acquiredProject Equipment is damaged beyond economicrepair or is lost, the responsible Participantwill pay the replacement value of that ProjectEquipment.

7.7.4. Jointly acquired Project Equipment will be usedfor the Purposes of carrying out this MOO andwill not be retransferred to a Third Partywithout the prior written consent of bothParticipants.

7.8. Any Project Equipment which is jointly acquired onbehalf of both Participants for use under this MOU will bedisposed of during this Project or when the Project ceases, asdetermined by the ESC.

7.9. Disposal of jointly acquired Project Equipment mayinclude a transfer of the interest of one Participant in suchProject Equipment to the other Participant, or the sale of

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such equipment to a non-Third Party entity, or to a ThirdParty in accordance with Section XII (Third Party Sales andTransfers) of this MOU. The Participants will share theconsideration from jointly acquired Project Equipmenttransferred or sold to a Third Party or non-Third Party entityin the same ratio as their shared Financial Costs under thisMOU.

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SECTION VIII

DISCLOSURE AND USE OF PROJECT INFORMATION

8.1. General

8.1.1. Both Participants recognize that successfulcollaboration depends on full and prompt exchange ofinformation necessary for carrying out this Project.The Participants intend to acquire sufficient ProjectInformation and rights to use and disclose suchinformation to enable the development, production, andsupport of the MK48 Heavyweight Torpedo. The nature andamount of Project Information to be acquired will beconsistent with the objectives stated in Section II(Objectives) and Section III (Scope of Work).Notwithstanding any other provision in this MOU,disclosure of Project Information will be in accordancewith the Participants' respective national disclosurepolicies. The Participants will use their best effortsto maximize disclosure of Project Information under thisMOU within their national disclosure policies.

8.1.2. Understanding that the provisions of Sections8.4. and 8.5. will apply, the Participants also intendthat the U.S. DoD will use its best efforts to obtainthe disclosure of and the right for the Australian DoDto use Contractor Foreground Information and ContractorBackground Information necessary to use that ContractorForeground Information for Defense Purposes. Where theU.S. DoD is unable or unlikely to be able to obtain suchrights, then, in accordance with paragraph 6.6., theU.S. DoD will notify the Australian DoD prior toContract award and the Australian DoD will be affordedthe opportunity to negotiate to obtain such rights.

8.1.3. The following export control provisions willapply to the transfer of Project Information:

8.1.3.1. Transfer of Project Information willbe consistent with furnishingParticipant's applicable exportcontrol laws and regulations.

8.1.3.2. Unless otherwise restricted by dulyauthorized officials of thefurnishing Participant at the time oftransfer to the other Participant,

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all export-controlled ProjectInformation furnished by oneParticipant to the other Participantmay be retransferred to the otherParticipant's Contractors,subcontractors, ProspectiveContractors, and prospectivesubcontractors, subject to therequirements of paragraphs 6.4. and6.5. of Section VI (ContractingProvisions) of this MOU.

8.1.3.3. Export-controlled Project Informationmay be furnished by Contractors,subcontractors, ProspectiveContractors, and prospectivesubcontractors of one Participant'snation to the Contractors,subcontractors, ProspectiveContractors, and prospectivesubcontractors of the otherParticipant's nation pursuant to thisMOU, subject to the conditionsestablished in licenses or otherapprovals issued by the Government ofthe former Participant in accordancewith its applicable export controllaws and regulations.

8.1.3.4. If a Participant finds it necessaryto exercise a restriction on theretransfer of export-controlledProject Information as set out insubparagraph 8.1.3.2. of thisSection, it will promptly inform theother Participant. If a restrictionis then exercised and the affectedParticipant objects, thatParticipant's ESC representative willnotify promptly the otherParticipant's ESC representative andthey will immediately consult inorder to discuss ways to resolve suchissues or mitigate any adverseeffects.

8.2. Government Project Foreground Information

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8.2.1. Disclosure: All Government Project ForegroundInformation generated by a Participant'smilitary or civilian employees (hereinafterreferred to as "Government Project ForegroundInformation") will be disclosed promptly andwithout charge to both Participants.

8.2.2. Use: Each Participant may use or have used allGovernment Project Foreground Informationwithout charge for Defense Purposes. TheParticipant generating Government ProjectForeground Information will also retain all itsrights of use thereto. Any sale or othertransfer to a Third Party will be subject to theprovisions of Section XII (Third Party Sales andTransfers) of this MOU.

8.3. Government Project Background Information

8.3.1. Disclosure: Each Participant, upon request,will disclose promptly and without charge to theother Participant any relevant GovernmentProject Background Information generated by itsmilitary or civilian employees, provided that:

8.3.1.1. Such Government Project BackgroundInformation is necessary to or usefulin the Project, with the Participantin possession of the informationdetermining, after consultation withthe other Participant, whether it is"necessary to"-or "useful in" theProject;

8.3.1.2. Such Government Project BackgroundInformation may be made available onlyif the rights of holders ofIntellectual Property rights are notinfringed.

8.3.1.3. Disclosure of such Government ProjectBackground Information is consistentwith national disclosure policies andregulations of the furnishingParticipant.

8.3.1.4. Any disclosure or transfer of suchGovernment Project BackgroundInformation to Contractors isconsistent with the furnishing

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Participant's export control laws andregulations.

8.3.2. Use: Government Project Background Informationfurnished by one Participant to the requestingParticipant may be used without charge by or forthe requesting Participant for Project purposes.However, subject to Intellectual Property rightsheld by entities other than the Participants,such Government Project Background Informationmay be used for Defense Purposes by therequesting Participant, without charge, whensuch Information is necessary for the use ofProject Foreground Information. The furnishingParticipant, in consultation with the otherParticipant, will determine whether theGovernment Project Background Information isnecessary for the use of Project ForegroundInformation. The furnishing Participant willretain all its rights with respect to suchGovernment Project Background Information.

8.4. Contractor Project Foreground Information

8.4.1. Disclosure: Contractor Project ForegroundInformation generated and delivered byContractors (hereinafter referred to as"Contractor Project Foreground Information")will be disclosed promptly and without charge toboth Participants.

8.4.2. Use: Each Participant may use or have usedwithout charge for its Defense Purposes allContractor Project Foreground Informationgenerated and delivered by Contractors of theother Participant. The Participant whoseContractors generate and deliver ContractorProject Foreground Information will also retainall its rights of use thereto in accordance withthe applicable Contract(s). Any sale or othertransfer to a Third Party of Contractor ProjectForeground Information, will be subject to theprovisions of Section XII (Third Party Sales andTransfers) of this MOU.

8.5. Contractor Project Background Information

8.5.1. Disclosure: A Contracting Participant will makeavailable to the other Participant promptly andwithout charge all Contractor Project Background

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Information generated by Contractors that isdelivered under Contracts awarded in accordancewith this MOU. Any other Project BackgroundInformation that is generated by Contractors andthat is in the possession of one Participantwill be made available promptly and withoutcharge to the other Participant, upon itsrequest, provided the following conditions aremet:

8.5.1.1. Such Contractor Project BackgroundInformation is necessary to or usefulin the Project, with the Participantin possession of the informationdetermining, after consultation withthe other Participant, whether it is"necessary to" or "useful in" theProject;

8.5.1.2. Such Contractor Project BackgroundInformation may be made available onlyif the rights of holders ofIntellectual Property rights are notinfringed.

8.5.1.3. Disclosure of such Contractor ProjectBackground Information is consistentwith national disclosure policies andregulations of the furnishingParticipant.

8.5.1.4. Any disclosure or transfer of suchContractor Project BackgroundInformation to Contractors isconsistent with the furnishingParticipant's export control laws andregulations.

8.5.2. Use: All Contractor Project BackgroundInformation delivered by Contractors underContracts awarded in accordance with this MOUmay be used by or for the receivingParticipant, without charge, for Projectpurposes, subject to any restrictions byholders of Intellectual Property rights otherthan the Participants. Any other ContractorProject Background Information furnished by oneParticipant's Contractors and disclosed to arequesting Participant may be used withoutcharge by the requesting Participant for

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Project purposes, subject to any restrictionsby holders of Intellectual Property rightsother than the Participants; also, whennecessary for the use of Project ForegroundInformation, such other Contractor ProjectBackground Information may be used by therequesting Participant for Defense purposes,subject to such fair and reasonable terms asmay be necessary to be arranged with theContractor. The furnishing Participant, inconsultation with the requesting Participant,will determine whether such other ContractorProject Background Information is necessary forthe use of Project Foreground Information. Thefurnishing Participant will retain all itsrights with respect to Contractor ProjectBackground Information.

8.6. Alternative Uses of Project Information

8.6.1. The prior written consent of each Participantwill be required for the use of ProjectForeground Information for purposes other thanthose provided for in this MOU.

8.6.2. Any Project Background Information provided byone Participant will be used by the otherParticipant only for the purposes set forth inthis MOU, unless otherwise consented to inwriting by the providing Participant.

8.7. Project Information Subject to Intellectual PropertyRights

8.7.1. All Project Information that is subject todisclosure and use restrictions with respect toIntellectual Property rights will be identifiedand marked, and it will be handled as ControlledUnclassified Information or as ClassifiedInformation, depending on its securityclassification.

8.7.2. Before a Participant transfers any ProjectInformation subject to Intellectual Propertyrights to a Contractor, the Participant willensure that its Contractor has entered into allnecessary and appropriate arrangements (such asnon-disclosure agreements) directly with theContractor or other entity that owns the Project

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Information or otherwise holds IntellectualProperty rights in that Project Information.

8.8. Patents

8.8.1. Each Participant will include in all itsContracts for the Project a provision governingthe disposition of rights in regard to ProjectInventions and Patent rights relating theretothat either:

8.8.1.1. Provides that the Participant willhold title to all such ProjectInventions together with the right tomake Patent applications for thesame, free of encumbrance from theContractor concerned; or

8.8.1.2. Provides that the Contractor willhold title (or may elect to retaintitle) for such Project Inventionstogether with the right to makePatent applications for the same,while securing for the Participants alicense for the Project Inventions,and any Patents thereto, on terms incompliance with the provisions ofsubparagraph 8.8.2. of this Section.

8.8.2 In the event that a Contractor owns title (orelects to retain title) to any ProjectInvention, the Contracting Participant willsecure-. for the other Participant non-exclusive,irrevocable, royalty-free licenses under allPatents secured for that invention, to practiceor have practiced the patented ProjectInvention throughout the world for DefensePurposes.

8.8.3. The provisions of subparagraphs 8.8.4. through8.8.7. of this Section will apply in regard toPatent rights for all Project Inventions madeby the Participants' military or civilianemployees, including those within Government-owned facilities, and for all ProjectInventions made by Contractors for which theContracting Participant holds title or isentitled to acquire title.

8.8.4 When a Participant has or can secure the right

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to file a Patent application with regard to aProject Invention, that Participant willconsult with the other Participant regardingthe filing of such Patent application. TheParticipant that has or receives title to suchProject Invention will, in other countries,file, cause to be filed, or provide the otherParticipant with the opportunity to file onbehalf of the Participant holding title, Patentapplications covering that Project Invention.A Participant will immediately notify otherParticipant that a Patent application has beenfiled. If a Participant, having filed orcaused to be filed a Patent application,abandons prosecution of the application orceases maintaining the Patent granted or issuedon the application, that Participant willnotify the other Participant of that decisionand permit the other Participant to continuethe prosecution or maintain the Patent as thecase may be. If a Participant holding a Patentstops paying maintenance fees or taking otheradministrative actions required during the termof the Patent, that Participant will notify theother Participant and permit the otherParticipant to continue with payment of themaintenance fees or other administrativeactions.

8.8.5. Each Participant will be furnished with copiesof Patent applications filed and Patentsgranted with regard to Project Inventions.

8.8.6. Each Participant will grant to the otherParticipant a non-exclusive, irrevocable,royalty-free license under its Patents forProject Inventions, to practice or havepracticed the Project Invention throughout theworld for Defense Purposes.

8.8.7. Patent applications to be filed under this MOUwhich contain Classified Information will beprotected and safeguarded in accordance withthe requirements in the Exchange of NotesConstituting an Agreement between the UnitedStates and Australia Approving the Proceduresfor Reciprocal Filing of Classified PatentApplications, which entered into force October2, 1961, which implements the Agreement betweenthe Government of the United States of America

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and the Government of the Commonwealth ofAustralia to Facilitate Interchange of PatentRights and Technical Information for DefensePurposes, which entered into force January 24,1958.

8.9. Each Participant will promptly notify the otherParticipant in writing of any Intellectual Propertyinfringement claims brought against that Participant arisingin the course of work performed under the Project on behalf ofthe other Participant. Insofar as possible, the otherapplicable Participant will provide Information available toit that may assist in defending such claims. Each Participantwill be responsible for handling such Intellectual Propertyinfringement claims brought against it, and will consult withthe other Participant during the handling, and prior to anysettlement, of such claims. The Participants will share thecosts of resolving such Intellectual Property infringementclaims in proportion to their Financial Costs for that workspecified in Section V (Financial Provisions) of this MOU.

8.10. The Participants will, as permitted by their nationallaws, regulations, and practices, give their authorization andconsent for all use and manufacture in the course of workperformed under the Project of any invention covered byPatent, or as determined to be necessary for work under theProject, authorization and consent for non-commercialcopyright, granted or otherwise provided by their respectivecountries.

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SECTION IX

CONTROLLED UNCLASSIFIED INFORMATION

9.1. Except as otherwise provided in this MOU or asauthorized in writing by the originating Participant,Controlled Unclassified Information provided or generatedpursuant to this MOU will be controlled as follows:

9.1.1. Such information will be used only for thepurposes authorized for use of ProjectInformation as specified in Section VIII(Disclosure and Use of Project Information) ofthis MOU.

9.1.2. Access to such information will be limited topersonnel whose access is necessary for thepermitted use under subparagraph 9.1.1., andwill be subject to the provisions of Section XII(Third Party Sales and Transfers) of this MOU.

9.1.3. Each Participant will take the necessary andlawful steps, which may include nationalclassification, available to it to keep suchinformation free from further disclosure(including requests under any legislativeprovisions), except as provided in subparagraph9.1.2., unless the originating Participantconsents to such disclosure. In the event ofunauthorized disclosure, or if it becomesprobable that the information may have to befurther disclosed under any legislativeprovision, immediate written notification willbe given to the originating Participant.

9.2. To assist in providing the appropriate controls, theoriginating Participant will ensure that ControlledUnclassified Information is appropriately marked to ensure its"in confidence" nature. The Participants' export-controlledinformation will be marked in accordance with the applicableParticipant's export control markings as documented in thesecurity CG. The Participants will decide, in advance and inwriting, on the markings to be placed on the ControlledUnclassified Information. The appropriate markings will bedefined in the PSI.

9.3. Controlled Unclassified Information provided orgenerated pursuant to this MOU will be handled in a manner

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that ensures control as provided for in paragraph 9.1. of thisSection.

9.4. Prior to authorizing the release of ControlledUnclassified Information to Contractors, the Participants willensure the Contractors are legally bound to control suchinformation in accordance with the provisions of this Section.

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SECTION X

VISITS TO ESTABLISHMENTS

10.1. Each Participant will permit visits to its governmentestablishments, agencies and laboratories, and Contractorindustrial facilities by employees of the other Participant orby employees of the other Participant's Contractor(s),provided that the visit is authorized by both Participants inwriting and the employees have any necessary and appropriatesecurity clearances and a need-to-know.

10.2. All visiting personnel will be required to comply withsecurity regulations of the host Participant. Any informationdisclosed or made available to visitors will be treated as ifsupplied to the Participant sponsoring the visiting personnel,and will be subject to the provisions of this MOU.

10.3. Requests for visits by personnel of one Participant to afacility of the other Participant will be coordinated throughofficial channels, and will conform with the established visitprocedures of the host Participant. Requests for visits willbear the name of the Project.

10.4. Lists of personnel of each Participant required tovisit, on a continuing basis, facilities of the otherParticipant will be submitted through official channels inaccordance with recurring international visit procedures.

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SECTION XI

SECURITY

11.1. All Classified Information provided or generatedpursuant to this MOU will be stored, handled, transmitted, andsafeguarded in accordance with the Agreement Between theGovernment of the United States of America and the Governmentof Australia Concerning Security Measures For the Protectionof Classified Information, which entered into force November7, 2002.

11.2. Classified Information will be transferred only throughofficial government-to-government channels or through channelsapproved by the DSAs of the Participants. For the AustralianDoD, the Defence Security Authority is the DSA. SuchClassified Information will bear the level of classification,denote the country of origin, the provisions of release, andthe fact that the information relates to this MOU.

11.3. Each Participant will take the necessary and lawfulsteps available to it to ensure that Classified Informationprovided or generated pursuant to this MOU is protected fromfurther disclosure, except as permitted by this Section,unless the other Participant consents to such disclosure.Accordingly, each Participant will ensure that:

11.3.1. The recipient will not release the ClassifiedInformation to any government, national,organization, or other entity of a Third Partyexcept as permitted under the procedures setforth in Section XII (Third Party Sales andTransfers) of this MOU.

11.3.2. The recipient will not use the ClassifiedInformation for other than the purposes providedfor in this MOU.

11.3.3. The recipient will comply with any distributionand access restrictions on Classified Information that isprovided under this MOU.

11.4. The Participants will investigate all cases in which itis known or where there are grounds for suspecting thatClassified Information provided or generated pursuant to thisMOU has been lost or disclosed to unauthorized persons. EachParticipant also will promptly and fully inform the otherParticipant in writing of the details of any such occurrences,

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and of the final results of the investigation and of thecorrective action taken to preclude recurrences.

11.5. The PM will prepare a PSI and a CG for the Project. ThePSI and the CG will describe the methods by which ProjectInformation and material will be classified, marked, used,transmitted, and safeguarded, and will require that markingsfor all export-controlled Classified Information will includethe applicable export control markings identified in the PSIin accordance with paragraph 9.2. of Section IX (ControlledUnclassified Information) of this MOU. The PSI and CG will beapproved at the time of signature of this MOU. They will bereviewed and forwarded to the Participants' DSAs for approvaland will be applicable to all government and Contractorpersonnel participating in the Project. The CG will besubject to regular review and revision with the aim ofdowngrading the classification whenever this is appropriate.The PSI and the CG will be approved by the appropriate DSAprior to the transfer of any Classified Information orControlled Unclassified Information.

11.6. The DSA of the Participant in which a classifiedContract is awarded will assume responsibility foradministering within its territory security measures for theprotection of the Classified Information, in accordance withits laws and regulations. Prior to the release to aContractor, prospective Contractor, or subcontractor of anyClassified Information received under this MOU, the DSAs will:

11.6.1. Ensure that such Contractor, prospectiveContractor or subcontractor and theirfacility(ies) have the capability to protect theClassified Information adequately.

11.6.2. Grant a security clearance to the facility(ies),if appropriate.

11.6.3. Grant a security clearance for all personnelwhose duties require access to ClassifiedInformation, if appropriate.

11.6.4. Ensure that all persons having access to theClassified Information are informed of theirresponsibilities to protect the ClassifiedInformation in accordance with national securitylaws and regulations, and provisions of thisMOU.

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11.6.5. Carry out periodic security inspections ofcleared facilities to ensure that the ClassifiedInformation is properly protected.

11.6.6. Ensure that access to the Classified Informationis limited to those persons who have a need-to-know for purposes of the MOU.

11.7. Contractors, Prospective Contractors, or subcontractorsthat are determined by DSAs to be under financial,administrative, policy or management control of nationals orentities of a Third Party, may participate in a Contract orsubcontract requiring access to Classified Informationprovided or generated pursuant to this MOU only whenenforceable measures are in effect to ensure that nationals orother entities of a Third Party will not have access toClassified Information. If enforceable measures are not ineffect to preclude access by nationals or other entities of aThird Party, the other Participant will be consulted forapproval prior to permitting such access.

11.8. For any facility wherein Classified Information is to beused, the responsible Participant or Contractor will approvethe appointment of a person or persons to exercise effectivelythe responsibilities for safeguarding at such facility theinformation or material pertaining to this MOU. Theseofficials will be responsible for limiting access toClassified Information involved in this MOU to those personswho have been properly approved for access and have a need-to-know.

11.9. Each Participant will ensure that access to ClassifiedInformation is limited to those persons who possess requisitesecurity clearances and have a specific need for access to theClassified Information in order to participate in the Project.

11.10. Information or material provided or generated pursuantto this MOU may be classified as high as Top Secret. Theexistence of this MOU is Unclassified and the contents areUnclassified.

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SECTION XII

THIRD PARTY SALES AND TRANSFERS

12.1. The U.S. DoD will not sell, transfer title to, disclose,or transfer possession of Project Foreground Information orjointly acquired Project Equipment, or any item producedeither wholly or in part from Project Foreground Informationto any Third Party without prior consultation with theAustralian DoD. Furthermore, the U.S. DoD will not permit anysuch sale, disclosure, or transfer by others, including by theowner of the item, without prior consultation with theAustralian DoD. The U.S. DoD recognizes that it is importantto the Australian DoD that U.S. DoD decisions on suchpotential sales, disclosures, or other transfers take intoaccount the Australian DoD views on security matters. TheU.S. DoD recognizes that sales, disclosures, or othertransfers described in this paragraph will only be made if thegovernment of the intended recipient consents in writing thatit will:

12.1.1. Not retransfer, or permit the further retransferof, any equipment or information provided; and

12.1.2. Use, or permit the use of, the equipment orinformation provided only for the purposes forwhich such equipment or information isfurnished.

12.2. The Australian DoD will not sell, transfer title to,disclose, or transfer possession of Project ForegroundInformation, jointly acquired Project Equipment, or any itemproduced either wholly or in part from Project ForegroundInformation to any Third Party without the prior writtenconsent of the U.S. Government. Furthermore, the AustralianDoD will not permit any such sales, disclosure, or transfer byothers, including the owner of the item, without the priorwritten consent of the U.S. Government. The Australian DoDrecognizes that sales, disclosures, and other transfersdescribed in this paragraph will not be authorized by the U.S.Government unless the government of the intended recipientconsents in writing that it will:

12.2.1. Not retransfer, or permit the further retransferof, any equipment or information provided; and

12.2.2. Use, or permit the use of, the equipment orinformation provided only for the purposes for

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which such equipment or information isfurnished.

12.3. A Participant will not sell, transfer title to,disclose, or transfer possession of Project Equipment orProject Background Information provided by the otherParticipant to any Third Party without the prior writtenconsent of the Participant which provided such equipment orinformation. The providing Participant will be solelyresponsible for authorizing such transfers and, as applicable,specifying the method and provisions for implementing suchtransfers.

12.4. Sales and other transfers of equipment developed, orProject Foreground Information generated under this MOU, mayattract a levy to be shared between the Participants. Prior toany such sale or other transfer, the amounts of any levy andthe procedures for assessing and distributing such levy willbe mutually determined by both Participants consistent withthe laws and regulations of each Participant. EitherParticipant may reduce or waive the assessment of its share ofthe levy.

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SECTION XIII

LIABILITY AND CLAIMS

13.1. Claims arising under this MOU will be dealt with underparagraph 1 of the Chapeau Agreement. Any costs to be sharedunder paragraph 1 b)ii of that Agreement will be shared asfollows:

13.1.1. Where one Participant alone is responsible forthe injury, death or damage, the costs will bethe sole responsibility of that Participant;

13.1.2. Where the Participants are jointly responsiblefor injury, death or damage, or it is notpossible to attribute responsibility for theinjury, death or damage, the costs will beshared in accordance with the ratio of theParticipants' shared Financial Costs.

13.2. The Contracting Participant will not indemnifyContractors against liability for claims by any other persons.

13.3. Any costs as a result of claims arising under anyContract awarded pursuant to section VI (ContractualArrangements) will be shared in accordance with the ratio ofthe Participants' shared Financial Costs, or as mutuallydetermined by the Participants.

50

SECTION XIV

PARTICIPATION OF ADDITIONAL NATIONS

14.1. It is recognized that other national defenseorganizations may wish to join the Project.

14.2. Mutual written consent of the Participants will berequired to conduct discussions with potential additionalParticipants. The Participants will discuss the arrangementsunder which another Participant might join, including thefurnishing of releasable Project Information for evaluationprior to joining. If the disclosure of Project Information isnecessary to conduct discussions, such disclosure will be inaccordance with Section VIII (Disclosure and Use of ProjectInformation), Section IX (Controlled UnclassifiedInformation), and Section XII (Third Party Sales andTransfers).

14.3. The Participants will jointly formulate the provisionsunder which additional Participants might join. The additionof new Participants to the Project will require amendment ofthis MOU by the Participants.

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SECTION XV

CUSTOMS DUTIES, TAXES, AND SIMILAR CHARGES

15.1. Customs duties, import and export taxes, and similarcharges will be administered in accordance with eachParticipant's respective laws and regulations. Insofar asexisting national laws and regulations permit, theParticipants will endeavor to ensure that such readilyidentifiable duties, taxes and similar charges, as well asquantitative or other restrictions on imports and exports, arenot imposed in connection with work carried out under thisProject.

15.2. Each Participant will use its best efforts to ensurethat customs duties, import and export taxes, and similarcharges are administered in a manner favorable to theefficient and economical conduct of the work. If any suchcustoms duties, import and export taxes, or similar chargesare levied, the Participant in whose country they are leviedwill bear such costs.

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SECTION XVI

SETTLEMENT OF DISPUTES

16.1. Disputes between the Participants arising under orrelating to this MOU will be resolved only by consultationbetween the Participants and will not be referred to anational court, an international tribunal, or to any otherperson or entity for settlement.

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SECTION XVII

AMENDMENT, TERMINATION, ENTRY INTO EFFECT, AND DURATION

17.1. All activities of the Participants under this MOU willbe carried out in accordance with their national laws andregulations, including their respective export control lawsand regulations. The .responsibilities of the Participantswill be subject to the availability of funds for suchpurposes.

17.2. In the event of a conflict between a Section of this MOUand any Annex to this MOU, the Section will control.

17.3. Except as otherwise provided, this MOU may be amended bythe mutual written consent of the Participants. Annexes A, Cand D of this MOU may be amended by the written approval ofthe ESC.

17.4. This MOU may be terminated at any time upon the writtenconsent of the Participants. In the event both Participant'sconsent to terminate this MOU, the Participants will consultprior to the date of termination to ensure termination on themost economical and equitable provisions.

17.5. Either Participant may terminate this MOU upon 90 dayswritten notification to the other Participant. Such noticewill be the subject of immediate consultation by the ESC todecide upon the appropriate course of action. In the event ofsuch termination, the following rules apply:

17.5.1. The terminating Participant will continueparticipation, financial or otherwise, up to theeffective date of termination.

17.5.2. Except as to Contracts awarded on behalf of bothParticipants, each Participant will beresponsible for its own Project-related costsassociated with termination of the Project. ForContracts awarded on behalf of bothParticipants, the terminating Participant willpay all Contract modification or terminationcosts that would not otherwise have beenincurred but for the decision to terminate; inno event, however, will a terminatingParticipant's total financial contribution,including Contract termination costs, exceedthat Participant's total Financial Cost share asestablished in Section V (Financial

54

Arrangements). Any part of a Participant'sfinancial contribution made available to theother Participant, but not expended, will bereturned to the providing Participant.

17.5.3. All Project Information and benefits thereinreceived under the provisions of this MOU priorto the termination will be retained by theParticipants, subject to the provisions of thisMOU.

17.6. The respective benefits and responsibilities of theParticipants regarding Section VII (Project Equipment),Section VIII (Disclosure and Use of Project Information),Section IX (Controlled Unclassified Information), Section XI(Security), Section XII (Third Party Sales and Transfers),Section XIII (Liability and Claims), and Section XVII(Amendment, Termination, Entry into Effect, and Duration) willcontinue notwithstanding termination or expiration of thisMOU.

17.7. This MOU, which consists of 17 Sections and fourAnnexes, will come into effect upon signature by bothParticipants and will remain in effect for ten years. It maybe extended by written consent of the Participants.

55

The foregoing represents the understandings reached betweenthe Department of Defense of the United States of America andthe Department of Defence of Australia.

Signed, in duplicate, in the English language by authorizedrepresentatives.

FOR THE DEPARTMENT OFDEFENSE OF THE UNITEDSTA S OF!AMRI

FOR THE DEPARTMENT OFDEFENCE OF AUSTRALIA

Signature

e-R2-CC-9A-rA Cr'ice{2 Title

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Title

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56

ANNEX A

PROJECT MANAGMENT ORGANIZATION DIAGRAM

EXECUTIVE STEERING COMMITTEE(U.S. Representative, Australian Representative)

JOINT PROJECT OFFICE(U.S. Project Manager)

Australian Deputy Project Manager

U.S. Assistant Project Manager

WORKING GROUPS AND FIELD ACTIVITIES(Financial, Logistics, Systems Engineering, etc.)

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ANNEX B

COOPERATIVE PROJECT PERSONNEL

1.0. Purpose and Scope.

1.1. This Annex establishes the provisions which will governthe conduct of MK48 Cooperative Project Personnel. TheAustralian DoD will assign military members or civilianemployees to the MK48 Program Office or to U.S. DoD fieldactivities in accordance with Section IV (Management), Annex A(Project Management Organization Diagram), and this Annex.The U.S. DoD may assign military members or civilian employeesto Australian DoD field activities in accordance with SectionIV (Management), Annex A (Project Management OrganizationDiagram), and this Annex. MK48 Cooperative Project Personnelwill be able to perform all the responsibilities for thepositions assigned to them under this MOU and the ProjectManagement Plan (PMP). Commencement of assignments will besubject to any requirements that may be imposed by the HostParticipant or its government regarding acceptance of MK48Cooperative Project Personnel, such as, but not limited to,visas, and visit request documentation.

1.2. MK48 Cooperative Project Personnel will be assignedto the MK48 Program Office or U.S. DoD or Australian DoD fieldactivities for Project work and will report to theirdesignated supervisor within those organizations regardingthat work. The U.S. Project Manager will be responsible forinsuring accurate duty statements are contained in the ProjectManagement Plan for Cooperative Project Personnel.Cooperative Project Personnel will be employed on a best-for-project purpose and not act as liaison officers for the ParentParticipant. However, they may act from time to time onbehalf of their ESC representative if the latter so authorizesin writing.

1.3. MK48 Cooperative Project Personnel will not beassigned to command or other positions that would require themto exercise responsibilities that are reserved by law orregulation to an officer or employee of the Host Participant'sgovernment.

2.0. Security.

2.1. The U.S. DoD and Australian DoD ESC representativeswill establish the maximum level of security clearancerequired to permit MK48 Cooperative Project Personnel to have

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access to Classified Information and facilities in whichClassified Information is used in accordance with the ProjectSecurity Instruction (PSI) and Classification Guide (CG).Access to Classified Information and facilities in whichClassified Information is used will be consistent with, andlimited by, Section II (Objectives) and Section III (Scope ofWork) of this MOU and the corresponding provisions of thisAnnex, and will be kept to the minimum required to accomplishthe work assignments.

2.2. The Parent Participant will file visit requests forthe MK48 Cooperative Project Personnel through prescribedchannels in compliance with the Host Participant's procedures.As part of the visit request procedures, the ParentParticipant will cause security assurances to be filed,through their respective embassies, specifying the securityclearances for the MK48 Cooperative Project Personnel beingassigned.

2.3. The Participants will use their best efforts toensure that both Australian DoD and U.S. DoD personnelassigned to the MK48 Program Office, or field activities areaware of, and comply with, applicable laws and regulationspertaining to Controlled Unclassified Information andClassified Information as well as the requirements of SectionIX (Controlled Unclassified Information), Section X (Visits toEstablishments), Section XI (Security), and paragraph 17.7. ofSection XVII (Amendment, Withdrawal, Termination, Entry intoEffect, and Duration) of this MOU and the correspondingprovisions of this Annex, the PSI, and the CG. Prior tocommencing assigned duties, MK48 Cooperative Project Personnelwill, if required by the Host Participant's government laws,regulations, policies, or procedures, sign a certificationconcerning the conditions and responsibilities of MK48Cooperative Project Personnel.

2.4. MK48 Cooperative Project Personnel will at all timesbe required to comply with the security and export controllaws, regulations, and procedures of the Host Participant'sgovernment. Any violation of security procedures by MK48Cooperative Project Personnel during their assignment will bereported to the Parent Participant for appropriate action.MK48 Cooperative Project Personnel committing significantviolations of security or export control laws, regulations, orprocedures during their assignments will be withdrawn from theProject with a view toward appropriate administrative ordisciplinary action by the Parent Participant.

2.5. All Classified Information made available to MK48Cooperative Project Personnel will be considered as Classified

59

Information furnished to the Australian DoD or U.S. DoD andwill be subject to all of the provisions and safeguardsprovided for in Section XI (Security) of this MOU, this Annex,and the PSI and the CG.

2.6. MK48 Cooperative Project Personnel will be grantedaccess and custody of Classified Information in accordancewith Section XI (Security) of this MOU and the provisions ofthe PSI when access is necessary to perform Project work.

2.7. MK48 Cooperative Project Personnel will not serve asa conduit between the U.S. DoD and Australian DoD for requestsfor and/or transmission of Classified Information unlessspecifically authorized by the PSI.

3.0. Technical and Administrative Matters.

3.1. The tax treatment of income received by CPP from theParent Participant will be determined by reference to the taxlegislation of the Government of the Host Participant and theGovernment of the Parent Participant, subject to the terms ofany double taxation agreement in force between the Governmentof the Host Participant and the Government of the ParentParticipant.

3.2. Upon or shortly after arrival, MK48 CooperativeProject Personnel will be provided briefings arranged by theMK48 Program Office or Host Participant field or Contractoractivities about applicable laws, orders, regulations, andcustoms and the need to comply with them. MK48 CooperativeProject Personnel will also be provided briefings arranged bythe MK48 Program Office or Host Participant field orContractor activities regarding applicable potentialentitlements, privileges, and responsibilities such as:

3.2.1. Any medical and dental care that may beprovided to MK48 Cooperative Project Personnel andtheir dependents at the Host Participant's medicalfacilities, subject to applicable laws andregulations, including reimbursement requirements.

3.2.2 Purchasing and patronage privileges atmilitary commissaries, exchanges, theaters and clubsfor MK48 Cooperative Project Personnel and theirdependents, subject to applicable laws andregulations.

3.2.3. The Host Participant will provide, ifavailable, housing and messing facilities for MK48Cooperative Project Personnel and their dependents

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on the same basis and priority as for its ownpersonnel. MK48 Cooperative Project Personnel willpay messing and housing charges to the same extentas Host Participant personnel. At locations wherefacilities are not provided by the Host Participantfor its own personnel, the Parent Participant willmake suitable arrangements for its MK48 CooperativeProject Personnel.

3.2.4. Responsibility of MK48 Cooperative ProjectPersonnel and those dependents accompanying them toobtain motor vehicle liability insurance coverage inaccordance with laws and regulations applicable inthe area where they are residing. In case of claimsinvolving the use of private motor vehicles by MK48Cooperative Project Personnel and their dependents,the recourse will be against such insurance.

3.3. The MK48 Program Manager, through the MK48 ProgramOffice and Host Participant field activities, will establishstandard operating procedures for MK48 Cooperative ProjectPersonnel in the following areas:

3.3.1. Working hours, including public holidayschedules.

3.3.2. Leave authorization, consistent to the extentpossible with the military or civilian personnelregulations and practices of both Participants.

3.3.3. Dress regulations, consistent to the extentpossible with the military or civilian personnelregulations and practices of both Participants.

3.3.4. Performance evaluations, recognizing thatsuch evaluations will be rendered in accordance withthe Parent Participant's military or civilianpersonnel regulations and practices.

3.4. MK48 Cooperative Project Personnel committing anoffense under the laws of the government of either Participantmay be withdrawn from this Project with a view toward furtheradministrative or disciplinary action by the ParentParticipant. Disciplinary action, however, will not be takenby the Host Participant against MK48 Cooperative ProjectPersonnel, nor will MK48 Cooperative Project Personnelexercise disciplinary authority over Host Participantpersonnel. In accordance with the Host Participant'sgovernment laws, regulations, and procedures, the HostParticipant will assist the Parent Participant in carrying out

61

investigations of offenses involving MK48 Cooperative ProjectPersonnel.

3.5.During their assignment, MK48 Cooperative ProjectPersonnel will not be placed in the following duty status orenvironments unless mutually decided by the ESC:

3.5.1. Areas of political sensitivity where theirpresence may jeopardize the interests of either theHost Participant or Parent Participant, or where, inthe normal course of their duty, they may becomeinvolved in activities which may embarrass eitherParticipant.

3.5.2 Deployments in non-direct hostilitysituations, such as UN peacekeeping or multi-national operations, or third countries.

3.5.3. Duty assignments in which direct hostilitiesare likely. Should the MK48 Program Office or thefield or Contractor activity of either Participantto which MK48 Cooperative Project Personnel areassigned become involved in hostilitiesunexpectedly, MK48 Cooperative Project Personnelassigned there will not be involved in thehostilities. Any such MK48 Cooperative ProjectPersonnel approved by the ESC for involvement inhostilities will be given specific guidance as tothe conditions under which the assignment will becarried out by the appropriate authorities of theHost Participant and Parent Participant.

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ANNEX C

PLANNED PROCUREMENT (ORDER) QUANTITIES AND ESTIMATED FUNDINGSCHEDULE MK48 HEAVYWEIGHT TORPEDO UPGRADE KITS

Table Annex-1: ESTIMATED PROCUREMENT QUANTITIESNote: M = MK48 Heavyweight Torpedoes

TI = Technical Insertions (These TI quantities coveronly a portion of available inventory and are based onprojected funding.)

FY10 FY11 FY12 FY13 FY14

USN 95 M 89 M 90 M 95 M 95 M

RAN 23 M 0 0 0 0

FY15 FY16 FY17 FY18 FY19 Total95 M 95 M 95 M 95 M 95 M 939 M

USN 95 TI 95 TI 95 TI 95 TI 95 TI 475 TI0 0 0 0 0 23 M

RAN 10 TI 12 TI 12 TI 12 TI 12 TI 58 TI

ESTIMATED SHARED FINANCIAL CONTRIBUTION SCHEDULE - DEVELOPMENT PHASE

FY10 FY11 FY12 FY13 FY14

USN 17.712 16.620 15.199 15.399 15.808

RAN 3.126 2.933 2.682 2.717 2.790

FY15 FY16 FY17 FY18 FY19 TotalUSN 16.178 16.507 16.842 17.183 17.482 164.930RAN 2.855 2.913 2.972 3.032 3.085 29.105

ESTIMATED UNIQUE FINANCIAL CONTRIBUTION SCHEDULE - DEVELOPMENT PHASE

FY10 FY11 FY12 FY13 FY14

USN 11.600 12.202 10.328 10.553 10.748RAN 0.752 0.100 0.100 0.000 0.000

FY15 FY16 FY17 FY18 FY19 Total

USN 10.953 11.166 11.384 11.605 11.891 112.430

RAN 0.000 0.000 0.000 0.000 0.000 0.952

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ESTIMATED SHARED FINANCIAL CONTRIBUTION SCHEDULE - PRODUCTION PHASE

FY10 FY11 FY12 FY13 FY14USN 4.762 5.394 3.590 3.766 3.845

RAN 0.840 0.952 0.633 0.665 0.679

FY15 FY16 FY17 FY18 FY19 TotalUSN 3.927 4.010 4.095 4.182 4.222 41.793RAN 0.693 0.708 0.723 0.738 0.744 7.375

ESTIMATED UNIQUE FINANCIAL CONTRIBUTION SCHEDULE - PRODUCTION PHASE

FY10 FY11 FY12 FY13 FY14USN 56.007 57.473 60.638 69.150 70.400

RAN 5.233 1.097 0.040 0.041 0.042

FY15 FY16 FY17 FY18 FY19 TotalUSN 71.624 73.051 74.506 75.990 77.564 686.403RAN 0.043 0.044 0.045 0.046 0.048 6.679

ESTIMATED SHARED FINANCIAL CONTRIBUTION SCHEDULE - SUPPORT PHASE

FY10 FY11 FY12 FY13 FY14USN 13.610 13.354 13.416 13.367 13.641RAN 2.402 2.357 2.367 2.359 2.407

FY15 FY16 FY17 FY18 FY19 TotalUSN 13.920 14.205 14.495 14.792 14.650 139.450RAN 2.456 2.507 2.558 2.610 2.586 24.609

ESTIMATED UNIQUE FINANCIAL CONTRIBUTION SCHEDULE - SUPPORT PHASE

FY10 FY11 FY12 FY13 FY14USN 70.289 72.859 73.530 74.277 75.497RAN 5.876 3.236 3.290 3.351 3.211

FY15 FY16 FY17 FY18 FY19 TotalUSN 76.673 78.199 79.755 81.342 83.481 765.902RAN 4.788 3.333 6.332 3.460 5.043 41.921

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ANNEX D

PROJECT OVERVIEW

BACKGROUND

The Memorandum of Understanding between the Department ofDefense of the United States of America and the Department ofDefence of Australia for the Cooperative Engineering andManufacturing Development, Production, and Support of the MK48Advanced Capability/Common Broadband Advanced Sonar SystemHeavyweight Torpedo entered into effect on March 31, 2003(original MK48 MOU). The Joint Project under the originalMK48 MOU consisted of three concurrent phases over a ten-yearperiod: Engineering and Manufacturing Development (EMD),Production, and Support. The development of the MK48Heavyweight Torpedo resulted in a broadband sonar capabilityfor enhanced target acquisition.

This follow-on MK48 Heavyweight Torpedo MOU extends thesuccessful partnership that began under the original MK48 MOO.Although the original MK48 MOU would not have expired untilMarch 2013, clearer definition of what was identified as CBASSPhase 2 under the original MK48 MOU, namely the TorpedoModular Upgrade (TMU) Program, necessitated this follow-onMK48 MOO. In addition, this follow-on MK48 MOU employs theAdvanced Processing Build (APB) process for periodic softwareupgrades and hardware modifications for the MK48 HeavyweightTorpedo. This follow-on MK48 MOU extends the partnershipbetween the U.S DoD and the Australian DoD for 10 years fromthe date of the signature of this MOU. The Participants willconduct an assessment of the project as required and presentthe findings to the ESC.

PROJECT SUMMARY DESCRIPTION

In November 2006, the MK48 CBASS weapon was approved forInitial Operational Capability (IOC) by the United States Navy(USN). The MK48 CBASS weapon was approved for InitialOperational Release (IOR) by the Royal Australian Navy (RAN).Since it is essential to further strengthen the ability ofboth Participants to meet current and future undersea andsurface threats, this follow-on MK48 MOU seeks to takeadvantage of this common weapon system, development, andsupport capabilities which have been developed and implementedby both nations under the original MK48 MOU. BothParticipants desire to continue and expand the cooperativedevelopment, production, and support of the planned MK48

65

Heavyweight TMU Program improvements. The project will againconsist of three concurrent phases over a 10-year period:Development, Production, and Support. The resultant plannedconfiguration of the MK48 Heavyweight Torpedo will includedevelopment of MK48 Heavyweight Heavyweight Torpedo hardwaremodifications and Software for enhanced target acquisition tosatisfy the Capabilities Development Document (CDD). It willalso include the implementation of MK48 Heavyweight Torpedoobsolescence and sustainability management program for theweapon and shore support, including the Participants'maintenance, development, analysis, and traininginfrastructures.

Cooperative development, production, and support will involveFinancial and Non-financial Costs from both the U.S. DoD andthe Australian DoD to maximize the mutual benefits ofinteroperability and the synergy of equipment production andlogistics support.

This MOU revises the scope, objectives, and financialstructure of the original MK48 MOO due to clearer definitionof the Torpedo Modular Upgrade (TMU) and budget changes thathave occurred. The USN requirement for an improved MK48 Mod 6torpedo was originally identified in the OperationalRequirement Documents 482-87-98 of March 1998, entitled"Common Broadband Advanced Sonar System," and 310-87-93 ofNovember 1993 entitled "Torpedo Propulsion Upgrade." The RANrequirement was identified in the Replacement Heavy WeightTorpedo (HWT) Detailed Operational Requirements (DOR) Version4.0 effective December 22, 2002, which was the genesis of itsProject SEA 1429, Replacement Heavyweight Torpedo Project.Both the U.S. DoD and the Australian DOD are committed to MK48Heavyweight Torpedo improvements as part of the commonrequirements identified in the proposed joint CDD. The U.S.DoD plans to issue periodic software upgrades (Spirals),products of the APB process, and hardware upgrades (TIs) asoutlined in the TMU Program. The Australian DOD plans tocontribute to the TMU Process and provide technical expertisein developing the APBs and TIs so that both Participantsbenefit.

DEVELOPMENT

During the Development Phase, the U.S. DoD and Australian DODpersonnel will jointly develop upgrades to the MK48Heavyweight Torpedo through software spiral upgrades andTechnical Insertions (TI) as governed by the TMU Program. Theoverarching objectives for the TMU Program are to ensure thatthe MK48 Torpedo maintains contemporary capability andsupportability.

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The specific software spiral upgrades will be products of theAPB Process. The goal of the APB Process is to producehardware-independent software builds that create or improvefunctionality and incorporate them into the MK48 HeavyweightTorpedo. APB improvements provide new technology based onadvanced development. To ensure that the most capablefunctionality is transitioned, the APB Process is open toeligible industries of both Participants who can provide theappropriate technology. The APB Process introduces softwareenhancements via a four-step evolutionary process designed topromote a balance between innovation and utility while rapidlymaturing and transitioning science and technology intooperationally useful systems. The process is designed toprovide capability deliveries while ensuring operator input isincorporated throughout the entire development and test cycle.

The goal of TIs is to modernize existing system hardware andreplace obsolete equipment while providing more processingpower to accommodate the greater demands brought about bysoftware changes through the APB Process. Development of theTI will include hardware changes that are based on engineeringimprovements to existing systems and technologies.

During the development phase, appropriate software andhardware upgrades will be extensively tested on the WeaponsAnalysis Facility (WAF), located at the Naval Undersea WeaponsCenter (NUWC) in Newport, Rhode Island and on the TorpedoAnalysis Facility (TAF), located at the Defence Science andTechnology Organisation (DSTO) in Edinburgh, South Australia.The WAF and TAF share common hardware and software and arehighly sophisticated "Hardware in the Loop" simulators. In-water testing may be conducted using weapons, instrumentedweapon ranges, and weapon preparation facilities in bothnations.

PRODUCTION

The Production Phase will consist of procuring and installingHardware Technical Refreshes and TIs into the MK48 Torpedoesowned by both nations. Production will also include thoseweapons and hardware that were procured under the originalMK48 MOU [deliveries]. Technical Refreshes include hardwareupgrades driven by hardware obsolescence. The TechnicalRefreshes are implemented with the annual production contractsthrough the U.S. DoD and may or may not be retrofitted intopreviously existing weapon inventory. TIs are haidwareupgrades designed to accommodate capability improvements whichcould be retrofitted into existing MK48 inventory. Timing ofthe production and installation of software spiral upgrades

and TI upgrades will be in accordance with the Participants'unique requirements. However, configuration management forweapons for both Participants will be strictly maintained. Itis the objective of each nation to keep a common baseline tomaximize the hardware and software commonality. Destructivein-water testing or expenditure of MK48 torpedoes from theoperational inventories of the Participants may be conductedas part of the Project, and may be conducted by platforms ofeither Participant on ranges or in the waters of eitherParticipant, in accordance with the laws, regulations, andpolicies of the Participants. In the event that the torpedoof a Participant is expended during these destructive testevents, that torpedo can be replaced from the productionassets of either Participant, at the discretion of theproviding Participant and subject to mutually determinedarrangements. The replacement of an expended torpedo will beconsidered to be a unique national requirement.

SUPPORT

The Support Phase will consist of jointly managing the supplyand support, plans, schedules, and logistic budgets of bothnations - full life cycle management and budget planning tothe fullest extent possible. The joint In-Service SupportWorking Group (ISSWG) has established the methodology oflogistics support using one common logistics system asdocumented in the CBASS In-Service Support Implementation Plan(CISSIP). The Support Phase will also schedule theimplementation of Hardware Technical Refreshes and TIs intoexisting inventories and support and test equipment. Thesupport infrastructure includes a fully operational andcertified Torpedo Maintenance Facility in Australia (GuidedWeapons Support - West) and three Intermediate MaintenanceActivities (IMA) in the U.S. that comprise the MK48 IMANetwork.

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