<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
/ X / Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 [Fee Required]
For the Fiscal Year Ended June 30, 1996.
/ / Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 [No Fee Required]
For the transition period from _____________ to ____________
Commission File No. 0-27206
SPACEHAB, INCORPORATED
1595 SPRING HILL ROAD, SUITE 360
VIENNA, VA 22182
(703) 821-3000
Incorporated in the State of Washington IRS Employer Identification
Number 91-1273737
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Title of Each Class Name of Each Exchange
Common Stock on which Registered
(no par value) NASDAQ Stock Exchange
Number of shares of Common Stock (no par value) outstanding as of July 25,
1996: 11,069,237.
Aggregate market value of Common Stock (no par value) held by non-affiliates of
the registrant on July 25, 1996, based upon the closing price of the Common
Stock on the Nasdaq Stock Market of $9.75 was approximately $96,222,701
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO .
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. / X /.
DOCUMENTS INCORPORATED BY REFERENCE:
Annual report to stockholders for the Part of Form 10-K
fiscal year ended June 30, 1996. Parts I and II
Proxy Statement for the Annual Meeting of
Stockholders to be held October 22, 1996. Part III
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PART I
This document may contain "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, including (without limitation) under "Products
and Services," "Dependence on a Single Customer," "Research and Development"
and "Backlog" of Item 1 and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- General" and "--Liquidity and Capital
Resources" of Item 7. Such statements are subject to certain risks and
uncertainties, including those discussed herein, that could cause actual
results to differ materially from those projected in such statements.
ITEM 1. BUSINESS
BACKGROUND
SPACEHAB, Incorporated ("SPACEHAB" or the "Company") was incorporated
in 1984 to commercially develop, own, and operate space habitat modules that
are carried in the cargo bay of a Space Shuttle. Having flown five successful
missions on the Space Shuttle to date, and with six more missions currently
scheduled through 1998, SPACEHAB has become a leader among the companies that
support people who are living and working in space.
INDUSTRY OVERVIEW
The U.S. space program encompasses four broad objectives: to advance
scientific research, to establish a permanent human presence in space, to
develop new technologies that contribute to U.S. economic growth and security,
and to foster improved international relations through peaceful cooperation in
space with Europe, Japan, Russia, and other nations. SPACEHAB segments its
market into three categories: (i) microgravity and life sciences space research
aboard the Space Shuttle, (ii) space support services such as space station
logistics and ground operations and payload processing, and (iii) space
infrastructure development.
Microgravity and Life Sciences Space Research
In orbit, the forces of inertia and gravity counterbalance each other,
thereby creating a condition of near weightlessness known as "microgravity".
In a microgravity environment, materials and living matter behave in
fundamentally different ways than they do on Earth. This phenomenon has
stimulated worldwide interest from scientists and commercial researchers who
are seeking improved ways to manipulate and process materials and to study
biological processes that cannot otherwise be achieved in ground-based
laboratories.
The demand for access to a microgravity environment can be divided
into two broad categories: scientific research and commercial applications.
The National Aeronautics and Space Administration ("NASA") and other U.S. and
international government research organizations provide support for both basic
scientific research and its commercial applications to determine the
fundamental effects that gravity has on physical processes. For the 1996
Government fiscal year, NASA budgeted $540 million to conduct scientific
research and commercial microgravity applications aboard the Space Shuttle
(excluding the associated Space Shuttle launch costs for these experiments).
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Space Support Services
Space support services entail providing logistics and payload
processing support to NASA and Space Shuttle and International Space Station
("ISS") users. Permanently orbiting facilities such as the Russian Mir space
station and the planned ISS require a reliable source of logistics; the food,
clothing, equipment, and supplies that sustain the astronauts and enable them
to conduct research.
NASA's current plans call for the Space Shuttle to be launched at
least seven times per year for the foreseeable future. NASA has six more Space
Shuttle logistics missions to Mir scheduled during the next two years. As
currently planned, the ISS will require five Space Shuttle logistics missions
per year.
In order to support Space Shuttle and ISS operations, NASA requires
ground operations and payload support services before and after each mission.
Payload processing operations entail payload scheduling, mission planning,
safety/certification analysis, physical integration of the payload into its
carrier (such as SPACEHAB modules), the integration of the carriers into the
Space Shuttle's cargo bay, flight operations, technical data gathering and
synthesis, and launch and landing site activities. NASA currently spends
approximately $300 million per year on processing payloads for Space Shuttle
operations.
Space Infrastructure Development
The ISS is the largest engineering and scientific project ever
undertaken. NASA's budget for the development of the ISS has been capped by
the U.S. Congress at $2.1 billion per year and $17.5 billion for the entire
program. As ISS hardware is developed and budget limitations are being reached,
opportunities are arising for the commercial development of certain elements of
the ISS infrastructure such as the X-ray crystallography facility, a component
of the robot arm that will be used to assemble and manipulate elements of the
space station, and attached platforms for unpressurized research. Once
developed by industry, commercial infrastructure can be leased to NASA, the
international partners, and industry on a per use or long-term service
contract.
PRODUCTS AND SERVICES
SPACEHAB modules are aluminum cylinders, measuring 10 feet in length
by 13.5 feet in diameter, that incorporate a patented design including a
truncated top and flat-end caps. These fully-instrumented modules provide
experiment resources such as power, data management, thermal control, and
vacuum venting. SPACEHAB single modules are employed primarily for research
missions. In 1996, the Company completed a development program and introduced
the SPACEHAB Double Module. This new module is optimized to carry logistics
and now is being used by NASA to carry vital supplies to the astronauts and
cosmonauts who reside on the Russian space station Mir. SPACEHAB invested
$13.4 million in the design, development, and production of the Double Module.
The Double Module was completed and placed into service near the end of fiscal
1996.
SPACEHAB's fundamental business strategy is based on carefully
anticipating customer requirements, investing capital to develop space-flight
assets, contracting with established aerospace companies for engineering and
asset production while retaining ownership of these assets, and then providing
innovative, low-cost solutions that meet customer requirements using
fixed-price service contracts. This strategy has been successful in obtaining
two contracts with NASA, the $184 million Commercial Middeck Augmentation
Module (the "CMAM Contract") contract for five missions and the $52.2 million
Mir contract (the "Mir Contract") for four missions. NASA exercised three
options under the Mir Contract in fiscal 1996, subject to final price
negotiations.
The CMAM Contract, signed in November 1990, requires SPACEHAB to
furnish NASA with SPACEHAB module accommodations for experiments developed by
the Centers for the Commercial Development of Space ("CCDS") on five Space
Shuttle missions. The fourth CMAM mission was completed successfully aboard
the Space Shuttle Endeavour in May 1996 in which the Company integrated and
flew 12 CCDS experiments sponsored by industry, NASA, and academia. The
remaining experiments that will complete the CMAM Contract are intended to be
part of the Company's next mission currently scheduled for September 1996.
<PAGE> 4
The basic Mir Contract, signed in July 1995, requires the Company to
provide SPACEHAB Single and Double Module missions for the provision of
logistics resupply to the Mir space station on four Space Shuttle missions.
The first of these four missions was completed successfully in March 1996. On
this mission aboard the Space Shuttle Atlantis, a SPACEHAB Single Module
carried more than 4,600 pounds of food, equipment, and supplies for the two
Russian cosmonauts and one U.S. astronaut who are in orbit aboard Mir.
Three more SPACEHAB missions to Mir are planned in fiscal 1997 under
the Mir Contract. The next mission to Mir, currently scheduled for September
1996, is intended to accommodate the last CMAM experiments and approximately
7,000 pounds of logistics resupply. This mission also will be the first
flight of the new SPACEHAB Double Module. This new module configuration is
optimized to accommodate logistics and will substantially increase the
Company's capability to deliver supplies to Mir.
In June 1996, NASA exercised all three options on the Mir Contract,
providing a firm backlog of logistics resupply missions into 1998. These
options currently call for two Double Module missions and one Single Module
mission.
In its continuing effort to anticipate the needs of customers,
SPACEHAB has initiated the design and development of another module
configuration: a Double Module optimized for research missions. This new
Double Module is designed to augment the Company's fleet of pressurized modules
to meet both the research and logistics carrying requirements of NASA, the ISS
partner agencies, and industry.
COMPANY STRATEGY
SPACEHAB's strategy to enhance its position in all three markets is
based on seven principles.
1. Focusing on Quality of Service. SPACEHAB had two successful
missions in fiscal 1996. All five of the Company's missions to-date have been
completed successfully.
2. Expanding Company-Owned Spaceflight Assets. The Company
successfully completed the SPACEHAB Double Module that is being used by NASA to
provide logistics for the Mir space station. Initial design and development of
another Double Module, that is designed to carry experiments and unpressurized
logistics carriers, has been initiated to expand the Company's fleet of assets.
3. Maintaining Position as Low-Cost Provider. The Company continues
to offer its services to NASA and other customers on a fixed price basis that
it believes to be the lowest in the industry.
4. Continuing Entrepreneurial Initiative. The Company continues to
develop and offer innovative business arrangements to meet NASA and other
customer requirements.
5. Leveraging Skills of International Partners. The Company expanded
its international partner base in 1996 by collaborating with Spar Aerospace
Ltd. of Canada to propose the commercial development and lease of an element of
the ISS infrastructure to the Canadian Space Agency.
6. Acquiring Complementary Businesses and Assets. The Company
continues to evaluate opportunities to acquire complementary businesses,
engineering facilities, and hardware to improve its ability to perform work
associated with the Space Shuttle and ISS.
7. Attracting and Recruiting Talented Personnel. The Company hired
several highly experienced executives in 1996 to expand business development
efforts in microgravity and life sciences research, the ISS program, and
Russian activities.
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DEPENDENCE ON A SINGLE CUSTOMER
All of the Company's fiscal 1996 revenue was generated from two NASA
contracts - the CMAM Contract and the Mir Contract. The Company expects that
revenue from NASA will continue to account for a large majority of the
Company's revenue for the next several years. However, no assurances can be
made that NASA will require the Company's module services in the future.
Therefore, the Company's failure to execute new contracts with NASA would have
a material adverse effect on the Company's financial condition and results of
operations.
RESEARCH AND DEVELOPMENT
The Company believes that the timely development of new products, and
continuous enhancements to existing hardware are essential to maintaining its
competitive position. In the past two fiscal years, the Company has spent an
aggregate of $1.7 million on research and development.
Most of the research and development funds were spent on the design,
development, and qualification of the new SPACEHAB Double Module that is
optimized to carry cargo. The first flight of the Double Module is currently
scheduled for September 1996. The Company also performed research and
development activities to enhance the basic capabilities of its module system
with new features such as a video system switch, a digital television downlink
capability, and an experiment data interface to save time for astronauts while
they are conducting experiments inside SPACEHAB modules.
In fiscal 1996, the Company initiated the development of a new module
communications system that will be independent of the Space Shuttle's existing
data downlink. Once implemented, researchers with experiments on a SPACEHAB
mission will be able to have 24-hour, real-time monitoring and control of their
experiment hardware from their laboratory anywhere in the world.
In fiscal 1997, the Company plans to focus research and development
efforts on the design of another SPACEHAB Double Module that will be designed
to carry experiments. This module will be designed to be used to satisfy the
Space Shuttle-based research requirements of NASA, the International Space
Station partners, and industry beginning in 1998. Approximately $10 million
has been budgeted for fiscal 1997 to bring the science Double Module to its
critical design review.
Additional research and development is planned in fiscal 1997 to
expand the Company's product and service line to meet market requirements for
low-cost unpressurized carriers for science and cargo. Approximately $1
million is planned for expenditures in fiscal 1997 to bring these carriers to
their preliminary design reviews.
COMPETITION
Currently, there are no other companies that compete directly with
SPACEHAB by providing pressurized module services that are carried aboard the
Space Shuttle. However, NASA has a government-owned and operated system,
Spacelab, that does provide services that are similar to those provided by
SPACEHAB modules.
In the past, the Company has been selected by NASA to perform research
and logistics missions primarily due to the greater flexibility, shorter
payload integration period, and lower cost of the SPACEHAB module system
compared to Spacelab. NASA, having decided to end the Spacelab program,
scheduled the last Spacelab mission for March 1998.
The Company's long-term strategy for growth is to provide research,
logistics, infrastructure, and payload processing services to NASA and others
during the International Space Station era. This strategy will require the
Company to compete with companies such as Lockheed-Martin, The Boeing Company,
and others who have existing NASA support contracts, greater financial
resources and manufacturing capabilities, and larger marketing, sales and
technical organizations than the Company. However, SPACEHAB's existing
strategic relationships with McDonnell Douglas Aerospace, Alenia Spazio S.p.A.,
Mitsubishi Corporation, and Daimler-Benz A. G. may provide opportunities for
teaming and partnerships that management believes will enable the Company to
compete for market share.
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BACKLOG
All of the Company's revenue is generated from two contracts with
NASA , which, similar to contracts with other agencies of the U.S. government,
contain provisions for which NASA may terminate the agreement "for
convenience." The Company's contracts with NASA are conditioned by their terms
upon NASA receiving an adequate annual appropriation of funds from the United
States Congress. Failure to receive funds from Congress or a withdrawal by
Congress of prior appropriations would permit NASA to terminate its contracts
with SPACEHAB "for convenience." For fiscal year 1996, both the U.S. Senate
and House of Representatives have authorized and approved an annual
appropriation of $14.3 billion for NASA and $1.8 billion for the International
Space Station .
It is anticipated that future revenue will be derived from contracts
with entities other than agencies of the U.S. government which will not be
subject to federal contract regulations such as termination "for convenience of
the government" or federal government funding restrictions.
As of June 30, 1996, the Company's contract backlog is estimated to
be $92.3 million, of which $36.0 million represents funded backlog and $4.3
million represents non-U.S government contracts. In addition, the Company is
awaiting notification, from NASA, on submitted unsolicited proposals for
follow-on science missions. Estimated dollar amounts do not include 3 Mir
option missions which have been awarded but for which the final price has not
been negotiated. NASA has issued a contract modification in the amount of $3.5
million to allow the Company to begin work on the 3 Mir option missions during
the period needed to complete price negotiations.
CERTAIN REGULATORY MATTERS
The Company is subject to federal, state and local laws and
regulations designed to protect the environment and to regulate the discharge
of materials into the environment. The Company believes its policies,
practices and procedures are properly designed to prevent unreasonable risk of
environmental damage and the consequent financial liability to the Company.
Compliance with environmental laws and regulations has not had in the past,
and, the Company believes, will not have in the future, material effects on the
capital expenditures, earnings, or competitive position of the Company.
EMPLOYEES
As of June 30, 1996 the Company employed 25 employees, 8 of whom hold
advanced degrees and nearly all of whom have extensive experience in both the
space industry and/or governmental space agencies, with a special competence in
commercial space and human space flight. The Company believes that it is
competitive in hiring and retaining qualified personnel. None of the
Company's employees are covered by collective bargaining agreements. Underlying
all of SPACEHAB's efforts has been the dedication and skill of its personnel.
The Company believes that the dedication of its employees is critical to its
success and its relations with its employees are excellent.
ITEM 2. PROPERTIES
The Company's headquarters are located in an approximately 7,800
square-foot leased office space in Vienna, Virginia. Approximately 2,000
square-feet of additional, contiguous office space will become available to the
Company on or about January, 1997. The term of the present lease expires on
March 7, 2001. This facility houses SPACEHAB's 11 person executive management
team. The Company also leases approximately 4,500 square feet of office space
located near Johnson Space Center in Houston, Texas. The term of this lease
expires on February 28, 1998. The Houston office houses the Company's 10
person operations management team.
<PAGE> 7
The Company's payload processing facility is contained in an
approximately 40,000 square-foot plant located near the Kennedy Space Center in
Cape Canaveral, Florida. The Company owns the building but leases the land
upon which it was constructed. The payload processing facility has a prime
work area of approximately 10,000 square-feet which is designed to accommodate
the SPACEHAB Single and Double Modules, and also contains 11 secure
experiment/payload integration and work areas from 300 square-feet to 1,000
square-feet each, two off-line modifications shops, a tool room, a stock room,
and a conference/training room. The term of the lease for the land expires on
August 6, 1998, and is renewable, at the option of the Company, for two
successive five-year periods. Upon expiration of the land lease, all
improvements on the property will revert at no cost to the lessor.
The Company believes that its current facilities and equipment are
generally well maintained and are in good condition and that its existing
facilities and equipment are adequate for its present and foreseeable needs.
ITEM 3. LITIGATION
The Company is not currently involved in any material legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were voted upon during the final quarter of 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock (the "Common Stock") trades on the NASDAQ
National Market System under the symbol "SPAB". The stock has been publicly
traded since December 22, 1995, the date of the closing of the Company's
initial public offering. The high and low stock prices for fiscal 1996 are as
follows:
<TABLE>
<CAPTION>
High Low
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<S> <C> <C>
First Quarter $12 1/4 $12
Second Quarter $15 1/4 $11 3/4
Third Quarter $16 $ 8 3/4
</TABLE>
The Company has never paid cash dividends. It is the present policy
of the Company to retain earnings to finance the growth and development of its
business, and therefore, the Company does not anticipate paying cash dividends
on its common stock in the foreseeable future.
The Company has authorized 30,000,000 shares of Common Stock. At July
25, 1996, 11,069,237 shares of Common Stock were outstanding. The Company had
approximately 1,500 shareholders of record of its Common Stock on June 30,
1996.
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ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below are derived from the audited
financial statements of SPACEHAB, Incorporated. This selected financial
information should be read in conjunction with the Financial Statements of
the Company and the notes thereto included elsewhere in this report.
<TABLE>
<CAPTION>
Nine Months
Ended
Years Ended September 30, June 30,
-------------------------------------------------------------
1992 1993 1994 1995 1996
----------- ---------- ---------- --------- ---------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue(1) $ - $ 42,467 $ 43,800 $ 46,059 $ 56,397
Costs of revenue 6,140 23,204 24,227 23,349 20,985
----------- ---------- ---------- --------- ---------
Gross profit (loss) (6,140) 19,263 19,573 22,710 35,412
Marketing, general and administrative expenses 8,317 7,906 5,064 3,816 4,056
Research and development expenses 11,459 3,076 - 1,600 100
----------- ---------- ---------- --------- ---------
Operating income (loss) (25,916) 8,281 14,509 17,294 31,256
Interest expense, net of capitalized
amounts 3,983 4,209 4,863 1,365 699
Net income (loss) (29,840) 4,117 8,638(2) 15,809 29,829
Net income (loss) per common share $ (6.20) $ 0.62 $ 1.30 $ 2.37 $ 3.21
Shares used in computing net income (loss)
per common share 4,811 6,650 6,660 6,671 9,303
Other Data:
Cash provided by operations $ 27,590 $ 22,246 $ 21,831 $ 26,838 $ 13,151
Capital expenditures 29,896 16,589 76 4,943 6,266
Balance Sheet Data (at period end):
Working capital (deficit) $ (13,744) $(31,066) $(20,589) $ 7,192 $ 45,942
Total assets 100,727 118,083 95,261 86,701 129,709
Long-term debt, excluding current portion 51,333 30,325 22,884 24,886 17,318
Stockholders' equity (deficit) (34,511) (29,894) (21,184) (1,715) 71,596
</TABLE>
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(1) The Company recognizes revenue upon the completion of each flight. Prior
to the Company's first mission in June 1993, the Company was a development
stage company and accordingly had no revenue for the year ended September 30,
1992.
(2) Includes an extraordinary loss of $934, net of taxes, relating
to the write-off of unamortized deferred debt issuance costs, in conjunction
with a refinancing and the retirement of debt on that date. The Company has
not paid any dividends on the Common Stock since its inception.
<PAGE> 9
ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
GENERAL
SPACEHAB was incorporated in 1984 to commercially develop space
habitat modules to operate in the cargo bay of a Space Shuttle.
The Company currently operates under two contracts with NASA, the CMAM
Contract and the Mir Contract, with contract values of $184.1 million and $52.2
million, respectively. All of the Company's revenues for 1996 were generated
from these two contracts.
Revenue is comprised of payment for leasing lockers and/or volume
within the SPACEHAB Modules and for the integration and operations support
services provided to scientists and researchers responsible for the experiments
and/or logistics supplies for flight. To date, revenue from lockers leased to
customers other than NASA have included an amount for transportation charges
which is paid to NASA and included in the Company's costs of revenue. In the
future, the Company may incur such transportation charges associated with such
revenues.
The expenses associated with the operations of SPACEHAB are recorded
differently based on the type of expense. Costs of revenue include integration
and operations expenses associated with the performance of two types of
efforts: (i) sustaining engineering in support of all missions under a contract
and (ii) mission specific experiment support. Expenses associated with
sustaining engineering are expensed as incurred. Mission specific expenses are
recorded as an asset and expensed upon completion of each specific Space
Shuttle mission and when the related revenue is recognized. Other costs of
revenue include depreciation expense, which is allocated to each SPACEHAB
Module ratably over a ten-year useful life. Flight-related insurance covering
transportation of the SPACEHAB Modules from SPACEHAB's payload processing
facility to the Space Shuttle, in-flight insurance and third-party liability
insurance, to the extent incurred, are also included in costs of revenue and
are recorded at the time a mission is flown. In addition, through a
modification to the Mir Contract, the Company has entered into an agreement
with NASA, in which NASA has agreed to indemnify the Company for up to $8.0
million in damages to a SPACEHAB Module during a Mir mission. In exchange for
this coverage, the value of the Mir Contract has been reduced by $2.4 million.
Marketing, general and administrative, interest, and other expenses are
recognized when incurred.
Revenue is recognized upon the successful completion of each mission
and the return of SPACEHAB Modules carried aboard that Space Shuttle mission.
The CMAM Contract, awarded in 1990, is for five missions and the Mir Contract,
awarded in 1995, is for four missions plus three option missions. The three
Mir option missions have been awarded but have not yet been negotiated. The
policy to recognize revenue only after successful completion of each flight was
adopted prior to the Company's completion of the development of the SPACEHAB
Modules and before the Company had a history of demonstrated capability for
successful completion of the contracted missions. Revenue will continue to be
recognized for the existing CMAM and Mir Contracts, including options to these
contracts, at the completion of each of the remaining missions. For new
contract awards for which the capability to successfully complete the contract
can be demonstrated at contract inception, revenue recognition under the
percentage of completion method may be reported based on costs incurred over
the period of contract performance.
SPACEHAB's reported net income grew at a compound annual rate of 94%
beginning with the completion of the Company's first mission in 1993 through
completion of the fifth mission in the nine months ended June 30, 1996. This
growth rate is not expected to continue at this historical level as a result of
a variety of factors. First, the Company is continuing the research and
development of new products that will be offered to NASA and other customers,
including foreign governments and commercial users of the Space Shuttles and
the International Space Station. These significant anticipated expenditures in
research
<PAGE> 10
and development will be incurred over the next three years as SPACEHAB
completes the design phase of these new assets. Secondly, sustaining
engineering costs expensed as incurred under the CMAM Contract were higher in
preparation for the initial missions than those expenses being incurred for the
fourth and fifth missions. A similar pattern is being experienced under the Mir
Contract, although to a lesser extent. The overall improved cost experience has
put pressure on pricing to NASA for future missions carrying comparable
payloads for microgravity space research and logistics on the Space Shuttles,
which may impact future mission contract value.
RESULTS OF OPERATIONS
In 1996 the Company elected to change its fiscal year end from September
30 to June 30. Financial information for 1996, therefore, reflects nine months
of operations. Due to the Company's rate of growth and its contract schedule,
information for fiscal 1996 has not been annualized.
Nine Months Ended June 30, 1996 as Compared to the Fiscal Year Ended September
30,1995
Revenue. Revenue for the nine months ended June 30, 1996 increased
22.4% to $56.4 million, as compared with $46.1 million for fiscal year 1995.
The results of operations for this new fiscal period include revenue for two
missions completed during the quarter ended June 30, 1996. This revenue is
attributable to the Company's completion in April 1996 of the first mission
under the Mir Contract and the completion in June 1996 of the Company's fourth
CMAM mission. During the fiscal year ended September 30, 1995, SPACEHAB
completed one mission under the CMAM Contract, providing all of the revenue
reported for fiscal year 1995.
Costs of Revenue. Costs of revenue for the nine months ended June 30,
1996 decreased 10.1% to $21.0 million, as compared to $23.3 million for fiscal
year 1995. Integration, operations and transportation expenses for each of the
nine months ended June 30, 1996 and the fiscal year ended September 30, 1995
were $14.2 million. These amounts are approximately equal in absolute dollars
but, when compared on a basis of nine months to twelve months, the fiscal 1996
cost is higher. First, mission specific costs of $8.4 million for the nine
months ended June 30, 1996 supported two missions where mission specific costs
of $8.2 million for the fiscal year ended September 30, 1995 supported only
one. Second, sustaining engineering costs were $5.8 million in fiscal 1996
compared with $6.0 million in fiscal 1995. Total integration, operations and
transportation costs were only marginally higher in 1996 even though they
supported two flights, thereby reducing the cost per flight for sustaining
engineering and reducing total cost per mission in fiscal 1996.
Operating Expenses. Operating expenses for the nine months ended June
30, 1996 decreased 23.3% to $4.2 million, as compared to $5.4 million for
fiscal year 1995. The decrease is primarily because the reporting period for
fiscal 1996 was nine months and the reporting period for fiscal year 1995 was
twelve months, coupled with a decrease in research and development expenses.
There was $0.1 million incurred for research and development expense for the
nine months ended June 30, 1996 as compared to $1.6 million for fiscal year
1995. The expenditures for fiscal 1995 were used in the development of the
SPACEHAB Double Module which was required to perform the Mir Contract.
Expenditures for research and development associated with the new SPACEHAB
Double Module for microgravity and life sciences did not commence until July
1996. Marketing, general and administrative expenses for the nine months ended
June 30, 1996 increased 6.3% to $4.1 million, as compared with $3.8 million
during fiscal year 1995. Components of the increase in fiscal 1996 include
increases in salaries and benefits of approximately $0.6 million for additional
staff needed for business development and project management, offset by $0.4
million in expenses due to the shorter fiscal year.
Interest Expense. Interest expense, net of capitalized amounts, for
the nine months ended June 30, 1996 decreased 48.8% to $0.7 million from $1.4
million for fiscal year 1995, primarily due to substantially lower average
revolving loan indebtedness under the Company's credit agreement (the "Credit
<PAGE> 11
Agreement") for the nine months ended June 30, 1996. The lower average
revolving loan indebtedness was a result of repayments by the Company during
the nine months ended June 30, 1996 of $7.4 million on interest bearing debt.
An amount outstanding of $5.5 million due to a group of insurance companies
under the Credit Agreement during the nine months ended June 30, 1996 remained
non-interest bearing.
Interest Income. Interest income for the nine months ended June 30,
1996 increased to $1.2 million from $0.1 million due to the investment of
approximately $40.0 million of the initial public offering proceeds in short
term, low risk commercial paper and interest bearing cash accounts.
Net Income. Net income for the nine months ended June 30, 1996
increased 88.7% to $29.8 million as compared to $15.8 million for fiscal year
1995. Income tax expense for these periods was $1.9 million and $0.2 million,
respectively, due to the Company's use of available net operating loss
carryforwards, offset by alternative minimum taxes. As of June 30, 1996, the
Company had approximately $17.0 million of available net operating loss
carryforwards expiring between 2006 and 2009 to offset future regular taxable
income. Utilization of these net operating loss carryforwards may be subject
to limitations in the event of significant changes in the stock ownership of
the Company. There are no restrictions on transfers or sales of shares of
Common Stock that would prevent such a change from occurring.
Fiscal 1995 as Compared to Fiscal 1994.
Revenue. Revenue for fiscal year 1995 increased 5.3% to $46.1
million, as compared with $43.8 million for fiscal year 1994. This increase is
attributable to the Company's completion in February 1995 of the third mission
under the CMAM Contract, for which NASA leased 50 lockers, as compared with the
completion in February 1994 of the second mission under the CMAM Contract, for
which NASA leased 46 lockers. During fiscal year 1994, the Company also
provided NASA with two additional lockers for which the Company received
revenue only for integration and operations services.
Costs of Revenue. Costs of revenue for fiscal year 1995 decreased
3.7% to $23.3 million, as compared to $24.2 million for fiscal year 1994.
Integration, operations and transportation expenses for fiscal year 1995
decreased 6.0% to $14.2 million, as compared with $15.1 million during fiscal
year 1994. This decrease is primarily attributable to a $1.0 million
transportation charge the Company incurred during fiscal year 1994.
Operating Expenses. Operating expenses for fiscal year 1995 increased
5.9% to $5.4 million, as compared to $5.1 million for fiscal year 1994.
Research and development expenses for fiscal year 1995 were $1.6 million as
compared with no research and development expenses for fiscal year 1994. This
increase was the result of funds expended in connection with the development of
the SPACEHAB Double Module for logistics and cargo use under the Mir Contract.
The Company did not incur any research and development expense during fiscal
year 1994 due primarily to the completion of the research and development
requirements for the SPACEHAB Single Module and restrictions contained in a
prior credit facility. Marketing, general and administrative expenses for
fiscal year 1995 decreased 25.5% to $3.8 million, as compared with $5.1 million
during fiscal year 1994. This decrease is primarily attributable to a $2.4
million insurance premium amortized by the Company during fiscal year 1994.
Prior to fiscal 1994, the Company was required under the terms of a prior bank
credit agreement to maintain insurance covering losses incurred by the Company
resulting from non-appropriation of funds for the CMAM Contract. Premium
payments for the insurance were paid through February 1994 and, as such,
remaining unamortized costs were written-off as of December 1993 when the
insurance policy was terminated in connection with the Company's 1993
refinancing. No such insurance was required by the Credit Agreement during
fiscal year 1995. The decline in insurance expense was partially offset by an
increase in salary expense during fiscal year 1995 as the Company hired
additional employees.
Interest Expense. Interest expense, net of capitalized amounts, for
fiscal year 1995 decreased 71.4% to $1.4 million from $4.9 million for fiscal
year 1994, primarily due to the amortization of bank
<PAGE> 12
financing fees and the write-off of remaining unamortized bank financing fees
in conjunction with a 1993 refinancing in fiscal year 1994, and substantially
lower average revolving loan indebtedness under the Credit Agreement in fiscal
year 1995. The lower average revolving loan indebtedness was a result of
repayments by the Company during fiscal years 1994 and 1995 and the
reclassification of $21.5 million from revolving credit loans to a non-interest
bearing term loan. The refinancing in fiscal year 1994 provided the Company
with, among other things, a $21.5 million non-interest-bearing term loan from a
group of insurance companies and a revolving line of credit from McDonnell
Douglas. A portion of the proceeds from the non-interest-bearing term loan
were used to repay outstanding indebtedness under the prior bank credit
agreement which bore interest at a market rate.
Net Income. Net income for fiscal year 1995 increased 83.7% to $15.8
million as compared to $8.6 million for fiscal year 1994. The fiscal year 1994
period includes an extraordinary loss of $0.9 million as a result of the
write-off of unamortized deferred debt issuance costs in conjunction with the
refinancing. Income tax expense for these periods was minimal due to the
Company's use of available net operating loss carry-forwards.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its capital expenditures,
research and development and working capital requirements through progress
payments under both the CMAM Contract and the Mir Contract, investments
received in private and public equity offerings and borrowings under credit
facilities. On December 21, 1995, SPACEHAB completed an initial public offering
of 3,750,000 shares of Common Stock (the "Offering"). On January 21, 1996 the
Underwriters exercised their over allotment option for an additional 264,500
shares of Common Stock. The Offering provided proceeds, net of offering costs,
of approximately $43.3 million.
Cash Flows From Operating Activities. Cash provided by operations for
fiscal years 1994, 1995 and the nine months ended June 30, 1996 were $21.8
million, $26.8 million, and $13.2 million, respectively. Under both the CMAM
Contract and the Mir Contract, progress payments are structured such that
expenses incurred under these contracts are billed to NASA. NASA makes
progress payments under the CMAM Contract on specified dates for specified
amounts. Progress payments under the Mir Contract are billed to NASA monthly
at 95% of the costs incurred in the prior month. Revenue in the amount of $7.7
million remains to be recorded under the CMAM Contract. However, net cash flow
remaining under this contract is estimated to be only approximately $1.1
million. Due to proposed research and development activities in fiscal year
1997, the Company expects that net cash flow will be used in operating
activities during fiscal year 1997.
Cash Flows Used in Investing Activities. For fiscal years 1994, 1995,
and the nine months ended June 30, 1996, cash flows used in investing
activities consisted only of capital expenditures of $0.1 million, $4.9
million, and $6.3 million, respectively. Substantially all of the expenditures
prior to fiscal year 1995 were for the construction and the development of two
SPACEHAB Single Modules. Expenditures during fiscal year 1995 and the nine
months ended June 30, 1996 were for (i) the development and construction of a
tunnel and an adapter ring to be used in conjunction with the SPACEHAB Double
Module and (ii) structural upgrade work performed on the SPACEHAB structural
test article so that it can be attached to an existing SPACEHAB Single Module
to form a SPACEHAB Double Module. The Company invested a total of $11.9
million in the development and construction of the SPACEHAB Double Module
during fiscal years 1995 and the nine months ended June 30, 1996.
The Company also anticipates additional expenditures of approximately
$13.3 million for capital asset additions over the next twelve months. Of this
amount, the Company plans to use (i) $9.0 million to begin construction of an
additional aft module segment, fully outfitted for science, to be joined with
an existing SPACEHAB Single Module to form an additional SPACEHAB Double Module
to support science follow-on missions in 1998; (ii) $0.9 million to expand the
size of the SPACEHAB payload processing
<PAGE> 13
facility; (iii) $1.0 million to selectively acquire complementary businesses,
engineering facilities and hardware; and (iv) $2.4 million to enhance the
Logistics Double Module to increase its load capacity. In addition, the
Company anticipates, over the next twelve months, investing $1.0 million in an
incubator opportunity to develop products stemming from microgravity research.
The Company expects to continue funding any additional capital expenditures or
working capital requirements from the remaining proceeds of the Offering,
internally generated cash flow from progress payments under contracts and
through future debt and/or equity offerings.
Cash Flows From Financing Activities. For fiscal years 1994, 1995,
and the nine months ended June 30, 1996, cash flow provided (used) by financing
activities were ($20.9) million, ($16.2) million, and $36.9 million
respectively.
On August 20, 1996, the Credit Agreement was amended and restated.
Under this amendment, the revolving credit commitment from McDonnell Douglas
was canceled. In addition, in exchange for the full satisfaction of two term
loans owed to a group of insurance companies, the Company paid $2.5 million to
said companies at closing and agreed to pay an additional $2.0 million under a
new non-interest bearing term loan. The new term loan is due in installments of
$0.5 million in each of August 1997 and 1998, and $0.333 million in each of
August 1999, 2000, and 2001. Under this new agreement all prior liens and
encumbrances on the Company's assets and all prior restrictive covenants have
been released.
The Company believes that its available cash and cash equivalents will
be sufficient to meet its cash flow deficit from operations and meet other
funding requirements for at least the next 12 months.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to be Disposed of
("Statement 121"). Statement 121 will require that the Company review its
long-lived assets for impairment whenever events or circumstances indicate that
the carrying amount of assets may not be recoverable. To the extent that the
future cash inflows expected to be generated from an asset are less than the
related future cash outflows an impairment loss is recognized based on the
difference between the asset's carrying amount and its fair market value. The
Company is required to adopt Statement 121 during the year ending June 30,
1997. In the opinion of the management of the Company, the adoption of
Statement 121 will not have a material impact on the Company's financial
condition or results of operations.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, Accounting for Stock Based
Compensation ("Statement 123"). Under Statement 123, the Company may elect, but
is not required, to adopt a fair value approach to accounting for stock-based
awards granted to employees. The Company is required to adopt Statement 123 as
of July 1, 1996. The Company does not expect to implement the fair value
methodology of Statement 123, although certain pro forma disclosures will be
required beginning with the Company's fiscal 1997 financial statements.
<PAGE> 14
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
The Board of Directors
SPACEHAB, Incorporated:
We have audited the accompanying balance sheets of SPACEHAB, Incorporated as of
September 30, 1995 and June 30, 1996, and the related statements of income,
stockholders' equity (deficit), and cash flows for the years ended September
30, 1994 and 1995 and the nine months ended June 30, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of SPACEHAB, Incorporated as of
September 30, 1995 and June 30, 1996, and the results of its operations and its
cash flows for the years ended September 30, 1994 and 1995 and the nine months
ended June 30, 1996, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Washington, D.C.
August 5, 1996, except as to note 4
which is as of August 20, 1996
<PAGE> 15
SPACEHAB, INCORPORATED
Balance Sheets
<TABLE>
<CAPTION>
===================================================================================================================
September 30, June 30,
ASSETS 1995 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,041,020 50,795,548
Receivable from NASA (note 8) 5,565,092 5,445,765
Prepaid expenses 52,974 184,660
- -------------------------------------------------------------------------------------------------------------------
Total current assets 12,659,086 56,425,973
- -------------------------------------------------------------------------------------------------------------------
Property and equipment:
Flight modules 82,564,169 94,477,790
Module improvements in progress 6,081,081 -
Payload processing facility 3,174,802 3,384,667
Furniture, fixtures and equipment 391,111 615,036
- -------------------------------------------------------------------------------------------------------------------
92,211,163 98,477,493
Less accumulated depreciation and amortization (21,599,797) (27,987,042)
- -------------------------------------------------------------------------------------------------------------------
Property and equipment, net 70,611,366 70,490,451
- -------------------------------------------------------------------------------------------------------------------
Deferred mission costs 3,150,689 2,705,422
Other assets, net 280,259 86,769
- -------------------------------------------------------------------------------------------------------------------
$ 86,701,400 129,708,615
===================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
- -------------------------------------------------------------------------------------------------------------------
Current liabilities:
Loan payable under credit agreement, current portion (note 4) $ 120,000 2,500,000
Accounts payable and accrued expenses 1,277,412 3,270,882
Accrued consulting and subcontracting services due to
McDonnell Douglas 4,069,980 4,712,733
- -------------------------------------------------------------------------------------------------------------------
Total current liabilities 5,467,392 10,483,615
Loans payable under credit agreement, net of current portion (note 4) 14,657,373 6,179,062
Notes payable to shareholder (note 5) 9,116,828 9,968,503
Convertible note payable (note 6) 1,111,321 1,170,338
Deferred flight revenue 58,063,296 30,311,227
- -------------------------------------------------------------------------------------------------------------------
Total liabilities 88,416,210 58,112,745
- -------------------------------------------------------------------------------------------------------------------
Commitments (notes 12 and 13)
Stockholders' equity (deficit) (notes 9 and 10):
Convertible preferred stock, no par value, authorized 4,230,000 shares,
issued and outstanding, 4,011,345 and 0 shares, respectively 2,310,670 -
Common stock, no par value, authorized 30,000,000 shares, issued and
outstanding 5,083,427 and 11,069,237 shares, respectively 34,070,094 79,862,700
Additional paid-in capital 16,299 16,299
Accumulated deficit (38,111,873) (8,283,130)
- -------------------------------------------------------------------------------------------------------------------
Total stockholders' equity (deficit) (1,714,810) 71,595,869
- -------------------------------------------------------------------------------------------------------------------
$ 86,701,400 129,708,614
===================================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE> 16
SPACEHAB, INCORPORATED
Statements of Income
<TABLE>
<CAPTION>
===============================================================================================================================
Years ended September 30,
----------------------------------------- Nine months ended
1994 1995 June 30, 1996
---------------------------------------------------------------
<S> <C> <C> <C>
Revenue $ 43,799,560 46,059,000 56,397,000
- -------------------------------------------------------------------------------------------------------------------------------
Costs of revenue:
Integration, operations and transportation 15,115,685 14,155,419 14,220,334
Depreciation 8,256,417 8,256,417 6,192,313
Insurance 854,610 937,250 572,500
- -------------------------------------------------------------------------------------------------------------------------------
Total costs of revenue 24,226,712 23,349,086 20,985,147
- -------------------------------------------------------------------------------------------------------------------------------
Gross profit 19,572,848 22,709,914 35,411,853
- -------------------------------------------------------------------------------------------------------------------------------
Operating expenses:
Marketing, general and administrative 5,063,530 3,815,536 4,055,680
Research and development - 1,600,000 100,000
- -------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 5,063,530 5,415,536 4,155,680
- -------------------------------------------------------------------------------------------------------------------------------
Income from operations 14,509,318 17,294,378 31,256,173
Interest expense and amortization of debt issuance costs,
net of capitalized interest (note 3) (4,863,332) (1,364,520) (698,997)
Interest and other income, net 32,905 114,662 1,183,462
- -------------------------------------------------------------------------------------------------------------------------------
Net income before income taxes 9,678,891 16,044,520 31,740,638
Income tax expense (note 11) 106,473 235,664 1,911,895
- -------------------------------------------------------------------------------------------------------------------------------
Net income before extraordinary item 9,572,418 15,808,856 29,828,743
Extraordinary item - loss on debt extinguishment (note 2) 934,381 - -
- -------------------------------------------------------------------------------------------------------------------------------
Net income $ 8,638,037 15,808,856 29,828,743
===============================================================================================================================
Net income per common and common equivalent share:
Net income before extraordinary item $ 1.44 2.37 3.21
Extraordinary item (0.14) - -
- -------------------------------------------------------------------------------------------------------------------------------
$ 1.30 2.37 3.21
===============================================================================================================================
Shares used in computing net income per common and
common equivalent share 6,659,572 6,671,346 9,303,487
===============================================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE> 17
SPACEHAB, INCORPORATED
Statements of Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
===================================================================================================================================
Convertible
preferred stock Common stock
-------------------------------- ---------------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at September 30, 1993 3,999,345 $ 2,298,670 4,883,427 $ 30,350,094
Common stock issued upon stock option exercises - - 25,000 60,000
Preferred stock issued to consultant 12,000 12,000 - -
Net income - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1994 4,011,345 2,310,670 4,908,427 30,410,094
Common stock issued upon stock option exercises - - 25,000 60,000
Common stock issued in private placement (note 9) - - 150,000 3,600,000
Net income - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1995 4,011,345 2,310,670 5,083,427 34,070,094
Common stock issued upon stock option exercises - - 75,000 180,000
Common stock issued in public offering, net of
expenses (note 9) - - 4,014,500 43,301,936
Common stock issued upon conversion
of preferred stock (note 9) (4,011,345) (2,310,670) 1,671,312 2,310,670
Common stock issued in private placement
guarantee (note 9) - - 224,998 -
Net income - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1996 - $ - 11,069,237 $ 79,862,700
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
==============================================================================================================================
Additional Total
paid-in Accumulated Stockholders'
capital deficit equity (deficit)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at September 30, 1993 $ 16,299 $ (62,558,766) $ (29,893,703)
Common stock issued upon stock option exercises - - 60,000
Preferred stock issued to consultant - - 12,000
Net income - 8,638,037 8,638,037
- ------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1994 16,299 (53,920,729) (21,183,666)
Common stock issued upon stock option exercises - - 60,000
Common stock issued in private placement (note 9) - - 3,600,000
Net income - 15,808,856 15,808,856
- ------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1995 16,299 (38,111,873) (1,714,810)
Common stock issued upon stock option exercises - - 180,000
Common stock issued in public offering, net of
expenses (note 9) - - 43,301,936
Common stock issued upon conversion
of preferred stock (note 9) - - -
Common stock issued in private placement
guarantee (note 9) - - -
Net income - 29,828,743 29,828,743
- ------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1996 $ 16,299 $ (8,283,130) $ 71,595,869
==============================================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE> 18
SPACEHAB, INCORPORATED
Statements of Cash Flows
<TABLE>
<CAPTION>
==================================================================================================================================
Years ended September 30,
------------------------------------ Nine months ended
1994 1995 June 30, 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows provided by operating activities:
Net income $ 8,638,037 $ 15,808,856 $ 29,828,743
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 8,482,149 8,489,642 6,387,245
Amortization of financing fees 826,423 - -
Loss on debt extinguishment 934,381 - -
Payment of operating expenses with preferred stock 12,000 - -
Interest converted to notes payable 64,219 1,480,772 1,424,513
Changes in assets and liabilities:
Decrease (increase) in accounts receivable - (5,565,092) 119,327
Decrease (increase) in prepaid expenses 2,464,358 (9,360) (131,686)
Decrease (increase) in deferred mission costs (385,591) 251,494 445,267
Decrease (increase) in patent rights and other assets 9,628 (227,872) 193,490
Increase (decrease) in deferred flight revenue (595,560) 3,955,856 (27,752,069)
Increase (decrease) in accounts payable and
accrued expenses 43,531 674,600 1,993,470
Increase (decrease) in accrued consulting
and subcontracting services 1,337,869 1,978,940 642,753
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 21,831,444 26,837,836 13,151,053
- ----------------------------------------------------------------------------------------------------------------------------------
Cash flows used by investing activities - purchase of
property and equipment (75,556) (4,942,876) (6,266,330)
- ----------------------------------------------------------------------------------------------------------------------------------
Cash flows used by financing activities:
Proceeds from note payable to banks 1,500,000 - -
Payment of note payable to banks (43,850,000) - -
Proceeds from note payable to insurers 21,500,000 150,000 -
Payment of note payable to insurers - (9,707,045) (3,854,079)
Proceeds from note payable to shareholder 15,695,724 11,229,054 7,358,661
Payment of note payable to shareholder (15,800,000) (21,537,965) (10,116,713)
Proceeds from exercise of stock options 60,000 60,000 180,000
Proceeds from issuance of common stock, net of expenses - 3,600,000 43,301,936
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities (20,894,276) (16,205,956) 36,869,805
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 861,612 5,689,004 43,754,528
Cash and cash equivalents at beginning of year 490,404 1,352,016 7,041,020
- ----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 1,352,016 $ 7,041,020 $ 50,795,548
==================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE> 19
SPACEHAB, INCORPORATED
Notes to Financial Statements
================================================================================
(1) DESCRIPTION OF THE COMPANY
SPACEHAB, Incorporated (the Company) is the first company to
commercially develop, own and operate habitable modules that provide
space-based laboratory research facilities and cargo services aboard
the U.S. Space Shuttle system. The Company currently owns and
operates two pressurized laboratory modules which significantly
enhance the capabilities of the Space Shuttle fleet. The Company's
modules are unique to the U.S. Space Shuttle.
To date, the Company has successfully completed five missions aboard
the Space Shuttle and substantially all of the Company's revenue has
been generated under contracts with NASA. The Company's contracts are
subject to periodic funding allocations by NASA. NASA's funding is
dependent on receiving annual appropriations from the United States
Government.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR
Effective October 1, 1995, the Company changed its fiscal year-end
from September 30 to June 30. Accordingly, the accompanying financial
statements present the Company's results of operations for the years
ended September 30, 1994 and 1995 and for the nine months ended June
30, 1996.
CASH AND CASH EQUIVALENTS
For purposes of its statements of cash flows, the Company considers
short-term investments with original maturities of 3 months or less to
be cash equivalents. The Company intends to hold all of these
investments to maturity and as such are recognized at cost plus
accrued interest. As of June 30, 1996, the Company's short-term
investments included approximately $35.0 million invested in Federal
government agencies and treasury securities. Additionally, the
Company had approximately $6.0 million invested in commercial paper.
The amortized cost of such investments approximates market value.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. The Company's flight
modules are depreciated over a ten-year period using the straight-line
method. All furniture, fixtures and equipment are depreciated using
the straight-line method over the estimated useful lives of the
respective assets. The payload processing facility is amortized using
the straight-line method over the term of the land lease.
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121, Accounting for
the Impairment of Long-lived Assets and for Long-lived Assets to be
Disposed of (Statement 121). Statement 121 will require that the
Company review its long-lived assets for impairment whenever events or
circumstances indicate that the carrying amount of an asset may not be
recoverable. To the extent that the undiscounted future cash flows
expected to be generated from an asset are less than the carrying
amount of the asset, an impairment loss is recognized based on the
difference between the asset's carrying amount and its fair market
value. The Company is required to adopt Statement 121 during the year
ending June 30, 1997. In the opinion of management of the Company,
the adoption of Statement 121 will not have a material impact on the
Company's financial condition or results of operations.
<PAGE> 20
SPACEHAB, INCORPORATED
Notes to Financial Statements
================================================================================
(2) CONTINUED
DEFERRED MISSION COSTS
Deferred mission costs are expenses directly related to specific
missions which are recognized as cost of revenue as the respective
missions are completed.
DEBT ISSUANCE COSTS
Debt issuance costs associated with the note payable to the banks were
deferred and amortized using the effective interest method through
December 29, 1993, the date of the refinancing (note 4). The
unamortized deferred debt issuance costs associated with the note
payable to the banks were written off as of that date, and recognized
as an extraordinary loss in the statement of income for the year ended
September 30, 1994.
REVENUE RECOGNITION
Revenue is recognized upon completion of each flight. Total contract
price is allocated to each flight based on the amount of services the
Company provides on the flight relative to the total services provided
for all flights under contract. Obligations associated with a
specific mission, e.g., integration services, are also recognized upon
completion of the mission.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred.
INCOME TAXES
The Company recognizes income taxes under the asset and liability
method of Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes (Statement 109). Under the asset and
liability method, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. Under Statement 109, the effect
on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
NET INCOME PER SHARE
Income per common and common equivalent share is calculated by
dividing net income by the weighted average number of common and
common equivalent shares, to the extent dilutive, during the period.
Common stock equivalents are comprised of common stock options and
warrants and convertible preferred stock. Pursuant to Securities and
Exchange Commission Staff Accounting Bulletin Topic 4:D, stock issued
and stock options granted during the 12-month period preceding the
date of the Company's initial public offering have been included in
the calculation of weighted average shares of common and common
equivalent shares outstanding for all periods through the date of the
initial public offering using the treasury stock method, based on the
initial public offering price per share (note 9).
<PAGE> 21
SPACEHAB, INCORPORATED
Notes to Financial Statements
================================================================================
(2) CONTINUED
The computation of income per common and common equivalent share,
assuming full dilution, includes all other common stock that
potentially may be issued as a result of conversion privileges,
including the convertible note payable (note 6). Any reduction of
less than 3 percent in the aggregate has not been considered dilutive
in the presentation of income per common share, assuming full
dilution.
All computations of income per common share include the effect of the
1 for 2.4 reverse split of common stock (note 9).
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue
and expenses during the reported periods. Actual results could differ
from these estimates.
RECLASSIFICATIONS
Certain 1994 and 1995 amounts have been reclassified to conform to the
1996 financial statement presentation.
(3) STATEMENTS OF CASH FLOWS - SUPPLEMENTAL INFORMATION
The Company exercised its option under the Space Systems Development
Agreement (SSDA) with NASA to defer certain progress payments prior to
the termination of such contract in fiscal 1995 (note 8). Progress
payments of $8,940,079 were deferred by the Company during the year
ended September 30, 1994.
Cash paid for interest costs was approximately $3,900,000, $513,000
and $264,000 for the years ended September 30, 1994 and 1995, and the
nine months ended June 30, 1996, respectively. The Company
capitalized interest of approximately $262,000 and $766,000 during the
year ended September 30, 1995 and the nine months ended June 30, 1996,
respectively, to the module improvements in progress. No amounts were
capitalized during the year ended September 30, 1994.
The Company paid $35,125, $140,456 and $239,154 for income taxes
during the years ended September 30, 1994 and 1995 and the nine months
ended June 30, 1996, respectively.
As of the date of the refinancing (note 4), the Company converted
$13,105,900 of accrued consulting and subcontracting services to a
loan payable under credit agreement.
<PAGE> 22
SPACEHAB, INCORPORATED
Notes to Financial Statements
================================================================================
(4) LOANS PAYABLE UNDER CREDIT AGREEMENT
During 1991, the Company entered into a revolving credit agreement
with a group of banks. Under this agreement, the Company had an
original commitment from the banks for $64 million which was reduced
in accordance with the agreement to $46 million as of October 1, 1993.
Each borrowing under this original revolving credit agreement bore
interest at the Company's choice of either the London Interbank
Offered Rate (LIBOR) plus 3 percent, or the greater of the prime rate
plus 2 percent or the federal funds rate plus 2.5 percent. The rates
on borrowings outstanding from October 1, 1991 to December 29, 1993,
the date of the refinancing discussed below, ranged from 6.125 percent
to 8 percent.
Borrowings under the original revolving credit agreement were secured
by all assets and cash proceeds from contracts of the Company. The
Company was restricted by the terms of the agreement from certain
transactions, including the payment of dividends. Under the terms of
the original agreement, the Company was also required to obtain
certain insurance against events which could terminate the Spacehab
program. The Company obtained the required insurance from a group of
insurance companies, with the group of banks as named beneficiaries.
On December 29, 1993, the Company entered into an amended and restated
credit agreement between the Company, the insurance companies, and
McDonnell Douglas Corporation (McDonnell Douglas), a shareholder,
pursuant to which the insurance companies provided the Company with a
$21,500,000 noninterest-bearing term loan. This refinancing resulted
in the recognition of no gain or loss. The proceeds of the term loan
were used to extinguish all debts to the group of banks under the
original revolving credit agreement, pay McDonnell Douglas $2,000,000
for accrued consulting and subcontracting services, and provide
working capital for the Company. Prior to the $2,000,000 payment on
December 29, 1993, the Company was obligated for accrued consulting
and subcontracting services to McDonnell Douglas for a total of
$15,105,900. As of December 29, 1993, the remaining amounts due to
McDonnell Douglas were converted to amounts due under a new revolving
credit agreement, bearing interest at l percent per month. At the
option of the Company, McDonnell Douglas' subsequent monthly invoices
for services rendered under the CMAM construction and integration and
operations contracts could be added to the outstanding balance under
the revolving line of credit, up to a maximum of $19,500,000 through
December 31, 1994, and a maximum of $9,000,000 thereafter until
maturity on December 31, 1996.
Under the amended and restated credit agreement, the Company was
required to pay the insurance companies all amounts appropriated by
Congress and allocated by NASA to the CMAM contract (note 8) in excess
of $21,626,000 and $2,253,000 during the years ended September 30,
1995 and 1996, respectively; remaining amounts due under the term loan
were due no later than September 30, 2001.
In July 1995, the credit agreement was further amended, such that the
term loan with the insurance companies was segregated into two new
term loans: a $6,458,000 term loan bearing interest at 1 percent per
month due no later than August 31, 1998 (Tranche A Term Loan), and a
$5,495,000 noninterest-bearing term loan due no later than August 31,
2001 (Tranche B Term Loan).
<PAGE> 23
SPACEHAB, INCORPORATED
Notes to Financial Statements
================================================================================
(4) CONTINUED
As a result of the July 1995 amendment, the revolving credit agreement
with McDonnell Douglas was extended, with a maximum amount outstanding
of $9,000,000 through December 31, 1995, and a maximum of $6,000,000
thereafter through maturity on December 31, 1998. Amounts outstanding
bore interest at the rate of 1 percent per month. Under this
amendment, the Company had the option to add McDonnell Douglas'
monthly invoices for services rendered under the Mir construction and
integration and operations contracts (note 13), as well as the CMAM
integration and operations contract up to the available maximum
borrowing amount. As of September 30, 1995, the revolving credit loan
due McDonnell Douglas had an outstanding balance of $2,692,713.
With respect to the Tranche A Term Loan, the Company was required to
repay a minimum principal amount of $10,000 per month. Accordingly,
$120,000 was classified as current in the accompanying balance sheet
as of September 30, 1995. As of September 30, 1995, the Tranche A
Term Loan had an aggregate outstanding balance of $6,589,660. During
the nine months ended June 30, 1996 and in accordance with the terms
of the credit agreement, an aggregate of 15 percent of the net
proceeds from the Company's initial public offering (note 9) were used
to repay pro rata the then outstanding balances of the revolving
credit loan and the Tranche A Term Loan. As of June 30, 1996, the
Tranche A Term Loan had an outstanding balance of $3,179,000, and no
amounts were outstanding under the revolving credit loan due to
McDonnell Douglas.
In August 1996, the credit agreement was again amended and restated.
Under this amendment, the revolving credit commitment from McDonnell
Douglas was canceled. In exchange for the full satisfaction of the
Tranche A Term Loan and the Tranche B Term Loan, the Company paid the
insurance companies $2,500,000 and agreed to pay an additional
$2,000,000 under a new noninterest-bearing term loan. The new term
loan is due in installments of $500,000 on each of August 1, 1997 and
1998, and $333,333 on each of August 1, 1999, 2000 and 2001.
Aggregate interest cost incurred on the debts due under the credit
agreement was approximately $1,500,000, $524,000 and $561,000 for the
years ended September 30, 1994 and 1995 and the nine months ended June
30, 1996, respectively.
(5) NOTES PAYABLE TO SHAREHOLDER
The Company issued subordinated notes for a portion of the amount due
to Alenia Spazio S.p.A. (Alenia), a shareholder, under a previously
completed construction contract for the Company's flight modules.
Such notes had an aggregate outstanding balance of $9,116,828 and
$9,968,503 at September 30, 1995 and June 30, 1996, respectively. The
notes bear interest at an annual rate of 12 percent, compounded
quarterly, with all accrued interest payable 45 days after the first
mission under the CMAM contract and semiannually thereafter. However,
during the year ended September 30, 1995, Alenia agreed to defer the
payment of interest and principal until November 1998. Principal on
the notes is due at the earlier of 45 days after the seventh launch
under the Mir contract or June 15, 1997; however, no amount of
principal on the notes is due until all amounts under the amended and
restated credit agreement (note 4) are repaid. Interest cost incurred
on the notes to Alenia was approximately $970,000, $1,017,000 and
$846,000 for the years ended September 30, 1994 and 1995 and the nine
months ended June 30, 1996, respectively.
<PAGE> 24
SPACEHAB, INCORPORATED
Notes to Financial Statements
================================================================================
(6) CONVERTIBLE NOTE PAYABLE
On August 12, 1992, the Company issued a subordinated promissory note
to an investment bank in the amount of $900,000, carrying interest at
LIBOR plus 3 percent, and maturing six months after the payment of all
other indebtedness due under the amended and restated credit agreement
and the subordinated notes to Alenia. Through June 30, 1996, the
Company had elected to defer the payment of interest under the note,
which interest has been converted to additional outstanding principal.
The note had an amount outstanding of $1,111,321 and $1,170,338 at
September 30, 1995 and June 30, 1996, respectively. The original
principal amount of the note may be converted at the option of the
holder into common stock of the Company, at a conversion rate of
$12.00 per share, at any time prior to maturity.
Interest cost incurred on this subordinated promissory note was
approximately $64,000, $82,000 and $58,000 for the years ended
September 30, 1994 and 1995 and the nine months ended June 30, 1996,
respectively.
(7) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated fair
values of the Company's financial instruments as of June 30, 1996 in
accordance with Statement of Financial Accounting Standards No. 107,
Disclosures about Fair Value of Financial Instruments.
<TABLE>
<CAPTION>
June 30, 1996
------------------------
Carrying Fair
amount value
- ----------------------------------------------------------------------
<S> <C> <C>
Financial liabilities:
Loans payable under credit agreement $8,679,062 3,946,000
Note payable to shareholder 9,968,503 9,968,503
Convertible note payable 1,170,338 1,170,338
======================================================================
</TABLE>
The fair value of the Company's long-term debt is estimated based on
the current rates offered to the Company for debt of the same
remaining maturities, and taking into consideration the terms of the
August 1996 amended and restated credit agreement (note 4). The
carrying amounts of cash and cash equivalents, short-term investments,
receivable from NASA and accounts payable and accrued expenses
approximate their fair market value because of the relatively short
duration of these instruments.
<PAGE> 25
SPACEHAB, INCORPORATED
Notes to Financial Statements
================================================================================
(8) NASA CONTRACTS
COMMERCIAL MIDDECK AUGMENTATION MODULE CONTRACT
On November 30, 1990, NASA and the Company entered into the Commercial
Middeck Augmentation Module contract (CMAM) to lease to the U.S.
government a portion of the middeck augmentation modules and related
integration services at an aggregate firm fixed price of $184,236,000
over six missions. During the year ended September 30, 1994, the
terms of the CMAM contract were amended to reduce the number of
missions from six to five, although the total locker space leased by
NASA and the contract value remained the same.
NASA has agreed to pay the Company progress payments based on
achieving certain integration milestones. During the years ended
September 30, 1994 and 1995, and the nine months ended June 30, 1996,
NASA made progress payments of $43,204,000, $35,377,000, and
$8,857,000, respectively, to the Company.
During the years ended September 30, 1994 and 1995, and the nine
months ended June 30, 1996, the Company recognized $43,799,560,
$46,059,000, and 45,634,000, respectively, of revenue under the CMAM
contract.
MIR SPACE STATION CONTRACT
On July 14, 1995, NASA and the Company completed final negotiations to
lease the Company's flight modules and provide related integration
services over four missions to the Russian Space Station Mir during
1996 and 1997, at an aggregate firm fixed price of $53,980,000.
During December 1995, the contract was amended whereby the contract
price was reduced to $52,128,800 in exchange for the indemnification
by NASA of certain damage to or loss of the modules during flight.
NASA pays the Company progress payments on a monthly basis. During
the year ended September 30, 1995 and the nine months ended June 30,
1996, the Company received $9,072,764 and $19,907,258, respectively,
from NASA relating to the contract.
During the nine months ended June 30, 1996, the Company recognized
$10,772,000 of revenue under the contract relating to completion of
the first contract mission. As of June 30, 1996, the Company had
$3,724,476 of progress billings outstanding from NASA and $1,721,289
of unbilled retainages due from NASA. All of these amounts are
expected to be collected within the next 12 months.
SPACE SYSTEMS DEVELOPMENT AGREEMENT
On August 11, 1988, the Company and NASA executed the SSDA, pursuant
to which NASA agreed to provide launch and associated transportation
services for the first eight missions of the Company's Space Shuttle
middeck augmentation modules. The terms of the SSDA were amended at
various times through September 30, 1994.
During the year ended September 30, 1995, the terms of the SSDA were
further amended incorporating new launch dates for the remaining CMAM
missions and eliminating approximately $18,200,000 of previously
accrued deferred launch costs and associated interest charges. Under
the terms of the amended SSDA, launches five through eight and all
associated transportation charges to the Company were deleted. As of
June 30, 1996, the SSDA has expired.
<PAGE> 26
SPACEHAB, INCORPORATED
Notes to Financial Statements
================================================================================
(8) CONTINUED
During the year ended September 30, 1994, the Company incurred and
paid approximately $1,039,000 to NASA under the SSDA relating to the
first and second missions, respectively, which costs are included in
costs of revenue in the accompanying statements of income. During the
year ended September 30, 1995 and the nine months ended June 30, 1996,
the Company incurred no transportation costs related to CMAM missions
three and four, as these missions were dedicated to U.S. government
use.
(9) STOCKHOLDERS' EQUITY
INITIAL PUBLIC OFFERING
In December 1995 and January 1996, the Company sold, through an
underwritten initial public offering, 4,014,500 common shares at
$12.00 per share, which resulted in net proceeds to the Company of
approximately $43,300,000 after associated commissions and discounts,
and other expenses of the offering.
REVERSE STOCK SPLIT
Prior to the initial public offering, on December 11, 1995, the
Company's Board of Directors effected a 1 for 2.4 reverse split of
common stock whereby each 2.4 shares of existing common stock were
exchanged for one share of common stock. All share and per share data
appearing in the financial statements and notes thereto have been
retroactively adjusted for this reverse split.
PRIVATE EQUITY PLACEMENT
During August 1995, the Company completed the sale of 150,000 shares
of its common stock to five investors for an aggregate price of
$3,600,000. The terms of sale included a guarantee by the Company
that in the event of the completion of an initial public offering
prior to December 31, 1996, the investors would realize no less than a
25 percent premium on their investment based on the initial offering
price. In the event that the minimum premium was not realized, the
Company had the option to pay to the investors the difference between
the initial public offering price and the guaranteed minimum price in
cash or additional shares of common stock. Based on the initial
public offering price, the Company opted to issue an aggregate of
224,998 common shares to the investors in settlement of the guarantee.
CONVERTIBLE PREFERRED STOCK
As a result of the initial public offering of the Company's common
stock, all of the Company's preferred stock was automatically
converted into common stock on a 2.4 for 1 common share basis upon the
effective date of the offering in accordance with the terms of the
preferred stock.
<PAGE> 27
SPACEHAB, INCORPORATED
Notes to Financial Statements
================================================================================
(10) COMMON STOCK OPTIONS AND WARRANTS
The Company provides grants of either incentive or non-qualified stock
options to employees and members of the Board of Directors. Prior to
the adoption of the 1994 Stock Incentive Plan (the 1994 Plan), stock
options granted to the Company's officers and employees were part of
their employment contract or offer. The number and price of the
options granted was defined in the employment agreements and such
options vest over a period of years. Under the 1994 Plan, the number
and price of the options granted to employees is determined by the
Board of Directors and such options vest incrementally over a period
of four years and expire no more than ten years after the date of
grant.
Under the Directors' Stock Option Plan (the Directors' Plan), each
nonemployee member of the Board of Directors is annually granted
options to purchase 5,000 shares of common stock at exercise prices
equal to the fair market value at the date of grant. Options under
the Directors' Plan vest after one year and expire seven years from
the date of grant.
The following summarizes all option activity for the periods
presented:
<TABLE>
<CAPTION>
Number of shares Exercise price
underlying options per share Exercisable
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding September 30, 659,909 $ 2.40 - 12.00 543,248
Grants 301,027 12.00 - 24.00
Exercised 25,000 2.40
- -----------------------------------------------------------------------------
Outstanding September 30, 935,936 2.40 - 13.20 658,855
Grants 302,068 12.00 - 24.00
Exercised 25,000 2.40
- -----------------------------------------------------------------------------
Outstanding September 30, 1,213,004 2.40 - 24.00 792,176
Grants 280,000 12.00 - 14.88
Exercised 75,000 2.40
Expired 231,939 12.00 - 24.00
- -----------------------------------------------------------------------------
Outstanding June 30, 1996 1,186,065 $ 2.40 - 24.00 469,971
=============================================================================
</TABLE>
The Company also has 744,264 currently exercisable warrants
outstanding to purchase the Company's common stock at prices ranging
from $12.00 to $14.40 per share, with various expiration dates through
June 1998. All such warrants were issued at exercise prices
equivalent to, or in excess of, the determined fair market value of
the Company's common stock at the date of issuance.
<PAGE> 28
SPACEHAB, INCORPORATED
Notes to Financial Statements
================================================================================
(11) INCOME TAXES
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
Nine months
ended
Years ended September 30, June 30,
1994 1995 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 106,473 235,664 1,911,895
State and local - - -
- -----------------------------------------------------------------------------------------------
106,473 235,664 1,911,895
- -----------------------------------------------------------------------------------------------
Deferred:
Federal - - -
State and local - - -
- -----------------------------------------------------------------------------------------------
- - -
- -----------------------------------------------------------------------------------------------
Income tax expense $ 106,473 235,664 1,911,895
===============================================================================================
</TABLE>
A reconciliation of the expected amount of income tax expense by
applying the statutory federal income tax rate of 34 percent to income
before taxes to the actual amount of income tax expense recognized
follows:
<TABLE>
<CAPTION>
Nine months
ended
Years ended September 30, June 30,
1994 1995 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Expected expense $ 2,973,133 5,455,137 10,791,817
Change in valuation allowance (2,867,773) (5,222,201) (8,884,006)
Other 1,113 2,728 4,084
- --------------------------------------------------------------------------------------------------
Income tax expense $ 106,473 235,664 1,911,895
==================================================================================================
</TABLE>
<PAGE> 29
SPACEHAB, INCORPORATED
Notes to Financial Statements
================================================================================
(11) CONTINUED
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities as of
September 30, 1995 and June 30, 1996 are presented below:
<TABLE>
<CAPTION>
September 30, June 30,
1995 1996
- --------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 16,814,228 6,791,224
General business credit carryforwards 2,189,414 2,189,414
Alternative minimum tax credit carryforwards 345,693 2,270,234
Capitalized research and development costs 7,251,278 6,099,099
Other 495,175 248,000
- --------------------------------------------------------------------------------------
Total gross deferred tax assets 27,095,788 17,597,971
Less - valuation allowance 16,857,228 1,761,998
- --------------------------------------------------------------------------------------
Net deferred tax assets $ 10,238,560 15,835,973
======================================================================================
Deferred tax liabilities:
Property and equipment, principally due to
differences in depreciation $ 10,217,370 15,770,518
Prepaid insurance 21,190 65,455
- --------------------------------------------------------------------------------------
Total gross deferred tax liabilities 10,238,560 15,835,973
- --------------------------------------------------------------------------------------
Net deferred taxes $ - -
======================================================================================
</TABLE>
The valuation allowance for deferred tax assets as of October 1, 1993
and 1994 was $26,437,627 and $23,028,141, respectively. The net
changes in the total valuation allowance for the years ended September
30, 1994 and 1995 and the nine months ended June 30, 1996 were
decreases of $3,409,486, $6,170,913 and $15,095,230, respectively.
At June 30, 1995, the Company had accumulated net operating losses of
approximately $16,978,000 available to offset future regular taxable
income. These operating loss carryforwards expire between the years
2006 and 2009. Utilization of these net operating losses may be
subject to limitations in the event of significant changes in stock
ownership of the Company.
<PAGE> 30
SPACEHAB, INCORPORATED
Notes to Financial Statements
================================================================================
(11) CONTINUED
Additionally, the Company has approximately $2,189,000 and $2,270,000
of research and experimentation and alternative minimum tax credit
carryforwards, respectively, available to offset future regular tax
liabilities. The research and experimentation credits expire between
the years 2001 and 2007; the alternative minimum tax credits
carryforward indefinitely.
(12) EMPLOYEE BENEFIT PLAN
During the year ended September 30, 1995, the Company implemented a
defined contribution retirement plan which covers all employees and
officers. No contributions were made by the Company during the year
ended September 30, 1995 or the nine months ended June 30, 1996. The
Company has the right, but not the obligation, to make contributions
to the plan in future years at the discretion of the Company's Board
of Directors.
(13) COMMITMENTS
INTEGRATION AND OPERATIONS CONTRACTS
The Company has a cost-plus-fee contract with McDonnell Douglas for
standard integration and operation services for up to eight missions
aboard the Space Shuttle relating to missions under the CMAM contract.
The maximum estimated amount to be payable under this contract is
$68.4 million. The period of performance on this contract began on
November 1, 1989 and is expected to continue through 1996. At
September 30, 1995 and June 30, 1996, approximately $48,800,000 and
$54,000,000, respectively, had been incurred by the Company
cumulatively under this contract.
The Company has entered into a second cost-plus-fee contract with
McDonnell Douglas for standard integration and operations of four
missions aboard the Space Shuttle relating to missions to the Mir
Space Station. The maximum estimated amount to be payable under this
contract is $28.1 million. The period of performance on this contract
began in November 1994 and is expected to continue through June 1997.
At September 30, 1995 and June 30, 1996, approximately $4,300,000 and
$11,700,000, respectively, had been incurred by the Company under this
contract.
<PAGE> 31
SPACEHAB, INCORPORATED
Notes to Financial Statements
================================================================================
(13) CONTINUED
CONSTRUCTION AND DEVELOPMENT CONTRACT
The Company has entered into a cost-plus-fee contract with
McDonnell Douglas for the design and manufacture of an additional
aft module segment to be joined with one of the Company's existing
flight modules for purposes of fulfilling the Mir Space Station
contract with NASA. The estimated amount to be payable under this
contract is $13.9 million. The period of performance on this
contract began in November 1994 and was substantially completed in
June 1996. At September 30, 1995 and June 30, 1996 approximately
$7,300,000 and $12,400,000, respectively, had been incurred by the
Company under this contract.
Leases
The Company is obligated under noncancelable operating leases for
office space, storage space, and the land for the payload processing
facility. Future minimum payments under these noncancelable operating
leases are as follows:
<TABLE>
<CAPTION>
Year ending June 30, Amount
- -------------------------------------------
<S> <C>
1997 $ 328,000
1998 315,000
1999 211,000
2000 217,000
2001 148,000
- -------------------------------------------
$ 1,219,000
===========================================
</TABLE>
Rent expense for the years ended September 30, 1994, and 1995 and
the nine months ended June 30, 1996 was approximately $217,000,
$211,000, and $183,000, respectively.
================================================================================
<PAGE> 32
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information concerning the Company's directors, executive officers
and with regard to Item 405 of Regulation S-K will be contained in the
Company's definitive 1996 Proxy Statement with respect to the Company's annual
meeting of stockholders and is hereby incorporated by reference thereto.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item will be contained in the
Company's definitive 1996 Proxy Statement with respect to the Company's annual
meeting of stockholders and is hereby incorporated by reference thereto.
.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item will be contained in the
Company's definitive 1996 Proxy Statement with respect to the Company's annual
meeting of stockholders and is hereby incorporated by reference thereto.
.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by his item will be contained in the
Company's definitive 1996 Proxy Statement with respect to the Company's annual
meeting of stockholders and is hereby incorporated by reference thereto.
<PAGE> 33
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) The following documents are filed as part of the report:
1. Financial Statements.
The following financial statements of SPACEHAB, Incorporated and
related notes, together with the report thereon of KPMG Peat Marwick
LLP, the Company's independent auditors, are set forth herein as
indicated below.
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of KPMG Peat Marwick LLP, Independent Public Accountants................. 14
Balance Sheets ................................................................. 15
Statements of Income ....................................................... 16
Statements of Stockholders' Equity ............................................ 17
Statements of Cash Flows ...................................................... 18
Notes to Financial Statements ................................................. 19
</TABLE>
2. Financial Statement Schedules.
All financial statement schedules required to be filed in Part IV,
Item 14 (a) have been omitted because they are not applicable, not
required or because the required information is included in the
financial statements or notes thereto.
3. Exhibits.
EXHIBIT NO. DESCRIPTION OF EXHIBIT
3.1* Amended and Restated Articles of Incorporation of the Company.
3.2* Amended and Restated By-Laws of the Company.
10.1* NAS 9-18371, dated November 30, 1990, between the National
Aeronautics and Space Administration ("NASA") and the
Registrant (including the amendments thereto) (the "CMAM
Contract").
10.2* Cost Plus Incentive Fee Contract (Number SHB 1002), dated July
11, 1990, between the Registrant and McDonnell Douglas
Corporation, McDonnell Douglas Aerospace-Huntsville Division
("McDonnell Douglas") (including the amendments thereto) (the
"CMAM I/O Contract").
10.3* Cost Plus Incentive Fee Contract (Number SHB 1009), dated
November 23, 1994, between the Registrant and McDonnell
Douglas (including the amendments thereto) (the "Mir I/O
Contract").
10.4* Cost Plus Incentive Fee Contract (Number SHB 1010), dated
November 23, 1994, between the Registrant and McDonnell
Douglas (including the amendments thereto) (the "Double Module
Contract").
<PAGE> 34
10.5* NAS 9-19250, dated July 14, 1995, between NASA and the
Registrant (including amendments thereto) (the "Mir
Contract").
10.6* Amended and Restated Representation Agreement, dated August
15, 1995, by and between the Registrant and Mitsubishi
Corporation.
10.7* Letter Agreement dated August 15, 1995, by and between the
Registrant and Mitsubishi Corporation.
10.8* Exclusive European Broker Agreement, dated February 15, 1989,
by and between Intospace, GmbH and the Registrant.
10.9* Memorandum of Agreement, dated July 28, 1995, between the
Registrant and McDonnell Douglas Corporation.
10.10* Amended and Restated Credit Agreement (the "Credit
Agreement"), dated December 29, 1993, among the Registrant,
the Insurers listed therein, McDonnell Douglas Corporation,
the Chase Manhattan Bank (National Association), as agent.
10.11* Amendment No. 1 to the Credit Agreement, dated July 18, 1995.
10.12 Amended and Restated Credit Agreement, dated August 20, 1996
among the Registrant, the Insurers listed therein and the
Chase Manhattan Bank (National Association), as agent.
10.13* SPACEHAB, Incorporated Directors' Stock Option Plan.
10.14* SPACEHAB, Incorporated 1994 Stock Incentive Plan.
10.15* Office Building Lease Agreement, dated December 22, 1992,
between Gateway Associates Limited Partnership and the
Registrant (Arlington, Virginia headquarters lease).
10.16 Office Building Lease Agreement, dated March 8, 1996 between
The Equitable Life Assurance Society of The United States and
the Registrant (Vienna, Virginia headquarters lease).
10.17* Agreement of Sublease, dated April 9, 1991 by and between
Eastern American Teak Corporation and the Registrant (land
lease for Cape Canaveral, Florida facility).
10.18* Amended and Restated Space Systems Development Agreement,
dated June 24, 1994, between NASA and the Registrant (the
"SSDA").
10.19* SSDA Termination Letter Agreement, dated July 13, 1995,
between NASA and the Registrant.
10.20* Letter Agreement, dated March 24, 1995, between Alenia Spazio
and the Registrant.
10.21* Consulting Agreement, dated August 7, 1995 by and between CSP
Associates, Inc. and the Registrant.
10.22 Extension of Consulting Agreement between CSP Associates, Inc.
and the Registrant, dated February 21, 1996.
<PAGE> 35
10.23 Consulting Agreement, dated August 14, 1996 by and between
Gordon S. Macklin and the Registrant.
10.24** Employment and Non-Interference Agreement, dated December 27,
1995, between the Company and Chester M. Lee.
10.25** Employment and Non-Interference Agreement, dated December 27,
1995, between the Company and David A. Rossi.
10.26** Employment and Non-Interference Agreement, dated December 27,
1995, between the Company and Nelda J. Wilbanks.
10.27** Employment and Non-Interference Agreement, dated December 27,
1995, between the Company and M. Dale Steffey.
10.28** Employment and Non-Interference Agreement, dated December 27,
1995, between the Company and Margaret E. Grayson.
10.29** Employment and Non-Interference Agreement, dated December 27,
1995, between the Company and Richard P. Hora.
10.30** Indemnification Agreement, dated December 27, 1995, between
the Company and Dr. Shelley A. Harrison.
10.31** Indemnification Agreement, dated December 27, 1995, between
the Company and Dr. Edward E. David, Jr.
10.32** Indemnification Agreement, dated December 27, 1995, between
the Company and Richard P. Hora.
10.33** Indemnification Agreement, dated December 27, 1995, between
the Company and Robert A. Citron.
10.34** Indemnification Agreement, dated December 27, 1995, between
the Company and Alvin L. Reeser.
10.35** Indemnification Agreement, dated December 27, 1995, between
the Company and James R. Thompson.
10.36** Indemnification Agreement, dated December 27, 1995, between
the Company and Jeffrey Schuss.
10.37** Indemnification Agreement, dated December 27, 1995, between
the Company and Dr. Brad M. Meslin.
10.38** Indemnification Agreement, dated December 27, 1995, between
the Company and Chester M. Lee.
10.39** Indemnification Agreement, dated December 27, 1995, between
the Company and David A. Rossi.
10.40** Indemnification Agreement, dated December 27, 1995, between
the Company and Dr. Shi H. Huang.
<PAGE> 36
10.41** Indemnification Agreement, dated December 27, 1995, between
the Company and Nelda J. Wilbanks.
10.42** Indemnification Agreement, dated December 27, 1995, between
the Company and M. Dale Steffey.
10.43** Indemnification Agreement, dated December 27, 1995, between
the Company and Margaret E. Grayson.
10.44** Indemnification Agreement, dated December 27, 1995, between
the Company and Dr. Udo Pollvogt.
10.45** Indemnification Agreement, dated December 27, 1995, between
the Company and Ernesto Vallerani.
10.46** Indemnification Agreement, dated December 27, 1995, between
the Company and Hironori Aihara.
11. For Statement re Computation of Per Share Earnings, see Note 2
to the Financial Statements.
12. Annual Report to Stockholders for the Fiscal Year Ended June
30, 1996.
21. Subsidiaries of the Registrant.
23. Consent of KPMG Peat Marwick LLP.
27. Financial Data Schedule.
- --------------------------------------------------------------------------------
* Incorporated by reference to the Registrant's Registration Statement on
Form S-1 (File No. 33-97812) and all amendments thereto, originally filed
with the Securities and Exchange Commission on October 5, 1995.
** Incorporated by reference to the Registrant's Report on Form 10-Q for the
quarter ending December 31, 1995, filed February 14, 1996.
(b) The following reports on Form 8-K were filed by the Registrant
during the period covered by this report.
1. Report on Form 8-K filed on April 12, 1996,
in order to report the resignation of Richard
P. Hora from the position of President and
Chief Executive Officer and the assumption of
the roles of Chief Executive Officer by
Shelley A. Harrison and President by Chester
M. Lee.
2. Report on Form 8-K filed on June 14, 1996, in
order to report a change in the Registrant's
fiscal year end from September 30 to June 30.
<PAGE> 37
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, hereunto duly authorized.
SPACEHAB, Incorporated
By: /s/ Dr. Shelley A. Harrison
----------------------------------
Dr. Shelley A. Harrison
Chairman of the Board and
Chief Executive Officer
Date: September 16, 1996
By: /s/ Margaret E. Grayson
-----------------------------------
Margaret E. Grayson, Vice
President of Finance, Treasurer
and Assistant Secretary (Principal
Accounting Officer and CFO)
Date: September 16, 1996
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below by the following persons on behalf of this
registrant in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ Hironori Aihara Director September 16, 1996
- ----------------------------------
Hironori Aihara
/s/ Robert A. Citron Director September 16, 1996
- ----------------------------------
Robert A. Citron
/s/ Dr. Edward A. David, Jr. Director September 16, 1996
- ----------------------------------
Dr. Edward A. David, Jr.
/s/ Dr. Shi H. Huang Director September 16, 1996
- ----------------------------------
Dr. Shi H. Huang
/s/ Chester M. Lee Director September 16, 1996
- ----------------------------------
Chester M. Lee
/s/ Dr. Brad M. Meslin Director September 16, 1996
- ----------------------------------
Dr. Brad M. Meslin
/s/ Dr. Udo Pollvogt Director September 16, 1996
- ----------------------------------
Dr. Udo Pollvogt
/s/ Alvin L. Reeser Director September 16, 1996
- ----------------------------------
Alvin L. Reeser
</TABLE>
<PAGE> 38
<TABLE>
<S> <C> <C>
/s/ Jeffrey Schuss Director September 16, 1996
- ----------------------------------
Jeffrey Schuss
/s/ James R. Thompson Director September 16, 1996
- ----------------------------------
James R. Thompson
/s/ Prof. Ernesto Vallerani Director September 16, 1996
- ----------------------------------
Prof. Ernesto Vallerani
</TABLE>
<PAGE> 1
EXHIBIT 10.12
- --------------------------------------------------------------------------------
AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF MARCH 1, 1991
AMENDED AND RESTATED AS OF AUGUST 12, 1996
AMONG
SPACEHAB, INCORPORATED, AS BORROWER,
THE INSURERS,
AND
THE CHASE MANHATTAN BANK, SUCCESSOR BY MERGER TO THE CHASE
MANHATTAN BANK (NATIONAL ASSOCIATION),
AS AGENT
- --------------------------------------------------------------------------------
<PAGE> 2
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of March 1, 1991; as
amended by the Letter Amendments dated April 30, 1991, June 14, 1991, September
9, 1991, January 13, 1992 and March 11, 1992 (the "1991 Credit Agreement"); as
amended and restated as of December 29, 1993 and as amended by Amendment No. 1
dated as of July 18, 1995 (the 1991 Credit Agreement and all amendments and
restatements thereof prior to the date hereof being the "Current Credit
Agreement"); as hereby further amended and restated as of August 12, 1996 among
SPACEHAB, Incorporated, a Washington corporation (the "Borrower"), the Insurers
(as hereinafter defined) and The Chase Manhattan Bank, a New York banking
corporation (successor by merger to The Chase Manhattan Bank (National
Association)), as agent for the Insurers and MDC (in such capacity, the
"Agent").
W I T N E S S E T H
WHEREAS the parties hereto wish (i) to amend and restate the Current
Credit Agreement in its entirety as hereinafter set forth, (ii) to reflect that
McDonnell Douglas Corporation, a Maryland corporation ("MDC") is no longer a
party to, and has no further rights under, the Current Credit Agreement or this
Agreement and (iii) to terminate certain related agreements as hereinafter set
forth, it being the intention of the parties hereto that, except as provided
herein, the Loans (as hereinafter defined) shall continue and remain
outstanding and shall not be repaid or forgiven on the Restatement Effective
Date (as hereinafter defined).
NOW, THEREFORE, the Borrower, the Insurers and the Agent agree as
follows.
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions.
As used herein, each term set out below shall have the meaning
specified below following such term unless the context
<PAGE> 3
otherwise requires. The following definitions shall apply to both the singular
and the plural number of such terms.
(a) "Agent" shall have the meaning provided in the introductory
paragraph to this Agreement.
(b) "Agreement" shall mean this Amended and Restated Credit
Agreement, as amended, restated, supplemented or modified and in effect from
time to time.
(c) "Assignment and Acceptance Agreements" shall mean the
Assignment and Acceptance Agreements effective as of December 29, 1993 entered
into among each of the Original Banks and MDC and the Insurers and accepted and
agreed by the Borrower and the Agent pursuant to the Current Credit Agreement.
(d) "Borrower" shall have the meaning provided in the introductory
paragraph of this Agreement.
(e) "Business Day" shall mean any day other than a Saturday, Sunday
or any other day on which banks doing business in New York, New York are not
required to be open for the transaction of banking business.
(f) "Collateral" shall have the meaning assigned to such term in
the Security Documents.
(g) "Current Credit Agreement" shall have the meaning provided in
the introductory paragraph of this Agreement.
(h) "Default" shall mean any act, condition or event that
constitutes an Event of Default or which with notice or lapse of time or both
would constitute an Event of Default.
(i) "Dollars" or "$" shall mean lawful currency of the United
States of America.
(j) "Event of Default" shall have the meaning provided in Section
8.1 of this Agreement.
(k) "Indemnitee" shall have the meaning provided in Section 10.4(f)
of this Agreement.
2
<PAGE> 4
(l) "Indebtedness" of any Person shall mean, without duplication,
(i) all obligations of such Person for borrowed money or with respect to
deposits with or advances to such Person of any kind, (ii) all obligations of
such Person issued or assumed as the deferred purchase price of property or
services (other than trade payables not overdue by more than 90 days incurred
in the ordinary course of business of such Person), (iii) all obligations of
such Person created or arising under any conditional sale or other title
retention agreement relating to property or assets acquired by such Person
(even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property), (iv) all obligations of such Person upon which interest charges are
customarily paid, (v) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (vi) all obligations of any other
Person secured by (or for which the holder of such obligations has an existing
right, contingent or otherwise, to be secured by) any Lien on any property
owned or acquired by such Person, whether or not the obligations secured
thereby have been assumed, (vii) all guarantees by such Person of Indebtedness
of others, (viii) all capitalized lease obligations of such Persons, (ix) all
obligations of such Person as an account party in respect of letters of credit
and bankers' acceptances and, without duplication, all unreimbursed amounts
drawn thereunder, (x) all obligations of such Person to purchase, redeem,
retire, defease or otherwise acquire for value any capital stock of such Person
or any warrants, rights or options to acquire such capital stock, valued, in
the case of redeemable preferred stock, at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends, and (xi)
any trade payables that remain unpaid more than 90 days after the date of the
invoices related thereto (other than as a result of a good faith dispute
between the obligor and such Person). The Indebtedness of any Person shall
include the Indebtedness of any partnership in which such Person is a general
partner.
(m) "Insurers" shall mean (i) the Lloyd's Syndicates subscribing to
Lloyd's Policy No. 846/C24642 and (ii) the insurance companies listed on
Schedule A to this Agreement and their respective successors and assigns.
3
<PAGE> 5
(n) "Insurers' Representative" shall mean Martin F. Conniff or
George R. Reid II of Morgan, Lewis & Bockius LLP and/or any other or additional
Person as the Insurers may hereafter designate as an Insurers' Representative
by a Notice given to the Borrower in accordance with this Agreement.
(o) "Insurers' Transactions" shall have the meaning provided in
Section 6.2(a) of this Agreement.
(p) "Intercreditor Agreement" shall mean the Intercreditor
Agreement dated as of December 29, 1993 made among the Borrower, MDC, the
Insurers, the Agent and The Chase Manhattan Bank (National Association) as
collateral agent, as amended.
(q) "Leasehold Mortgage" shall mean the Mortgage dated May 23, 1991
between the Borrower and the Agent, as mortgagee, as amended, modified or
supplemented and in effect from time to time.
(r) "Lloyd's Insurers" shall mean those Insurers which are
Syndicates at Lloyd's, London and their respective successors and assigns.
(s) "Loans" shall mean all Revolving Credit Loans and Term Loans
pursuant to the Current Credit Agreement outstanding as of the Restatement
Effective Date.
(t) "Loan Documents" shall mean, individually and collectively,
this Agreement and the Restated Term Loan Note.
(u) "Material Adverse Effect" shall mean any material adverse
effect upon (i) the business, condition (financial or otherwise), operation,
performance, properties or prospects of the Borrower or (ii) the ability of the
Borrower to perform any of its obligations under, or of the Insurers to enforce
any of their rights under, the Loan Documents.
(v) "MDC" shall have the meaning provided in the recitals of this
Agreement.
(w) "1991 Credit Agreement" shall have the meaning provided in the
introductory paragraph of this Agreement.
4
<PAGE> 6
(x) "Notice of Removal" shall have the meaning provided in Section
9.1 of this Agreement.
(y) "Original Banks" shall mean the banks defined in the 1991
Credit Agreement.
(z) "Person" shall mean and include a natural person, a body
corporate, a partnership, a trust, a joint venture, an unincorporated
association, a governmental authority and any other entity.
(aa) "Pro Rata Share" shall mean, as to any Insurer which is an
insurance company the percentage stated following such Insurer's name on
Schedule A under the column designated "Percentage of the Entire Excess
Policies". The Pro Rata Share of the Lloyd's Insurers is stated on Schedule A
in an aggregate percentage (the "Lloyd's Pro Rata Share"). Each Lloyd's
Insurer shall in turn be entitled to a pro rata share of the Lloyd's Pro Rata
Share equal to such Syndicate's percentage participation in Lloyd's Policy No.
846/C24642 (as to each Lloyd's Insurer, its "Lloyd's Insurer's Pro Rata
Share").
(bb) "Restated Term Loan" shall mean the loans provided for by
Section 3.1 of this Agreement.
(cc) "Restated Term Loan Note" shall mean the promissory note
provided for by Section 3.2 of this Agreement.
(dd) "Restatement Effective Date" shall have the meaning provided in
Section 7.1 of this Agreement.
(ee) "Revolving Credit Commitment" shall mean the obligation of MDC
to make Revolving Credit Loans in an aggregate amount at any one time
outstanding up to but not exceeding at any time (i) on or prior to December 31,
1995, $9,000,000 and (ii) on or after January 1, 1996, $6,000,000.
(ff) "Revolving Credit Loan Note" shall mean the promissory note
issued with respect to the Revolving Credit Loans provided for by Section
2.4(a) of the Current Credit Agreement, as such Note has been amended.
5
<PAGE> 7
(gg) "Revolving Credit Loans" shall mean the loans provided for by
Section 2.1(b) of the Current Credit Agreement.
(hh) "Schedule A" shall mean the document labeled Schedule A
attached to and forming part of this Agreement.
(ii) "Security Agreement" shall mean, collectively, the Security
Agreement dated as of March 1, 1991, the Trade Mark Security Agreements dated
as of March 1, 1991, the Patent Security Agreement dated as of March 1, 1991,
the Copyright Security Agreement dated as of March 1, 1991 and the Patent
Security Agreement dated as of July 28, 1995, in each case, between the
Borrower and the Agent, as amended, modified or supplemented and in effect from
time to time.
(jj) "Security Documents" shall mean, individually and collectively,
the Security Agreement, the Leasehold Mortgage, the NASA Notice of Assignment
filed 8/11/95 and all UCC financing and continuation statements filed in
connection with any of the foregoing.
(kk) "Term Loans" shall mean the Tranche A Term Loans and the
Tranche B Term Loans provided for by the Current Credit Agreement.
(ll) "Term Loan Notes" shall mean the promissory notes issued with
respect to the Term Loans provided for by Section 2.4(a) of the Current Credit
Agreement as such Notes have been amended and may be further amended or
modified from time to time. (mm) "Tranche A Term Loans" shall mean the
Tranche A term loans provided for by Section 2.1(a), as amended, of the Current
Credit Agreement.
(nn) "Tranche B Term Loans" shall mean the Tranche B term loans
provided for by Section 2.1(a), as amended, of the Current Credit Agreement.
(oo) "Transactions" shall have the meaning provided in Section
5.2(a) of this Agreement.
(pp) "Transaction Documents" shall have the meaning provided in
Section 5.2(a) of the Agreement.
6
<PAGE> 8
SECTION 1.2 Other Definitional Terms.
The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. References to "Article",
"Section", "Schedule", "Exhibit" and like references are references to the
specified portion of this Agreement unless otherwise specified. The words
"include(s)" and "including" shall be deemed to be followed by the phrase,
"without limitation,".
ARTICLE II
ACKNOWLEDGMENT OF CANCELLATION OF THE REVOLVING CREDIT
COMMITMENT AND THE REVOLVING CREDIT LOAN NOTE
The Insurers and Borrower hereby acknowledge that (i) pursuant to a
notice given by Borrower to MDC under Section 2.8 of the Current Credit
Agreement, the Revolving Credit Commitment was terminated effective on or
before August 7, 1996, (ii) as of such date the Current Credit Agreement has no
further force and effect as between the Borrower and MDC and (iii) all of MDC's
rights and obligations under the Current Credit Agreement and the other Loan
Documents (as defined in the Current Credit Agreement) were terminated as of
such date.
ARTICLE III
RESTATEMENT OF THE TERM LOANS; REPAYMENTS
SECTION 3.1 Restatement of the Term Loans
On the Restatement Effective Date all Tranche A Term Loans and all
Tranche B Term Loans then outstanding under the Current Credit Agreement shall
be converted into a Restated Term Loan owing by the Borrower to the Insurers in
the aggregate amount of $2,000,000 with the principal amount of each Insurer's
share of the Restated Term Loan being such Insurer's Pro Rata Share of the
Restated Term Loan (and the principal amount of each Lloyd's Insurer's share of
the Restated Term Loan being its Lloyd's Insurer's Pro Rata Share of the
Lloyd's Pro Rata Share of
7
<PAGE> 9
the Restated Term Loan). Any amount outstanding under the Term Loans shall be
deemed fully satisfied and cancelled, except for the payment required by
Section 7.1(e) of this Agreement, and the Insurers shall use their best efforts
to deliver the Term Loan Notes to the Borrower marked "cancelled" as soon as
possible. Effective upon the Restatement Effective Date, the Insurers release
the Borrower from all obligations under the Term Loans and the Term Loan Notes,
except to the extent set forth under the Restated Term Loan and the Restated
Term Loan Note. The Restated Term Loan shall be payable in accordance with
Section 3.3 of this Agreement, subject to all other provisions of this
Agreement.
SECTION 3.2 Restated Term Loan Note.
(a) The Borrower's obligation to pay the Restated Term Loan shall
be evidenced by a promissory note substantially in the form of Exhibit I to
this Agreement (the "Restated Term Loan Note"), duly completed, executed and
delivered by the Borrower to the Insurers' Representative on or prior to the
Restatement Effective Date.
(b) The Restated Term Loan Note issued to the Insurers shall (i)
be payable to the order of the Insurers, (ii) be dated the Restatement
Effective Date, (iii) be in the stated principal amount of $2,000,000, (iv) be
repayable in the amounts, on the dates and in the manner specified in Sections
3.3(a) and (b) of this Agreement, (v) bear no interest except as provided in
Section 3.2(c) of this Agreement and (vi) be entitled to the benefits of this
Agreement.
(c) If all or any portion of any amount owing hereunder to the
Insurers shall not be paid within 5 days after written notice has been provided
to the Borrower that such amount was due, all of the aggregate unpaid overdue
principal amount of the Restated Term Loan and any other amounts due hereunder
to the Insurers shall bear interest at a rate per annum of fourteen percent
(14%) from the date, respectively, on which each portion thereof became due and
owing until paid.
8
<PAGE> 10
SECTION 3.3 Repayment of the Restated Term Loan.
(a) The Borrower hereby promises to pay to the Insurers the
following amounts on the following dates to be applied to the repayment of the
Restated Term Loan:
DATE AMOUNT
August 1, 1997: $ 500,000
August 1, 1998: 500,000
August 1, 1999: 333,334
August 1, 2000: 333,333
August 1, 2001: 333,333
Total $2,000,000
(b) The Borrower shall make each required repayment of the
Restated Term Loan to the Insurers by a wire transfer of immediately available
federal funds paid to the Insurers' Representative for the account of the
Insurers in accordance with the instructions set forth below (as such
instructions may be changed from time to time by a notice delivered to the
Borrower by the Insurers or the Insurers' Representative in accordance with
Section 10.1 this Agreement). Repayments shall be directed as follows:
BANK: Citibank, N.A.
153 East 53rd Street
20th Floor
New York, NY 10043
ABA NO.: 012000089
PAYEE: Morgan, Lewis & Bockius LLP
ACCOUNT NO.: 37583553
REFERENCE: SPACEHAB (59000-0003)
ATTN.: G.R. Reid II
Each repayment required hereunder shall be made not later than 12:00, noon, New
York City time, on the date when due. Whenever any repayment required
hereunder shall become due on a date which
9
<PAGE> 11
is not a Business Day, such repayment may be made on the next succeeding
Business Day without penalty or interest.
(c) The Insurers' Representative shall promptly pay any amount
received by it from the Borrower for the account of the Insurers to the
Insurers by paying over (i) to each Insurer other than the Lloyd's Insurers its
Pro Rata Share of the amount received and (ii) to the Lloyd's Claims Office or
any successor to the functions of the Lloyd's Claims Office the Lloyd's Pro
Rata Share of the amount received for distribution by the Lloyd's Claims Office
or any successor to the functions of the Lloyd's Claims Office to each Lloyd's
Insurer of its Lloyd's Insurer's Pro Rata Share of such Lloyd's Pro Rata Share.
(d) The Borrower may prepay any or all repayments required
hereunder at any time without penalty or premium, provided, however, that no
such prepayment may be made in any amount less than (i) a multiple of $100,000
or (ii) an amount equal to the then entire unpaid balance of the Restated Term
Loan. Any prepayment made by the Borrower shall be applied, serially, against
the repayments next required under this Agreement.
ARTICLE IV
CANCELLATION OF THE SECURITY DOCUMENTS
AND THE INTERCREDITOR AGREEMENT;
RELEASE OF THE COLLATERAL
SECTION 4.1 Cancellation of Other Agreements.
As of the Restatement Effective Date, the Security Documents (and each
of their constituent agreements) and the Intercreditor Agreement shall be
cancelled and of no further force and effect; and the Current Credit Agreement,
the Term Loan Notes and the Term Loans shall be merged into, and superseded by
this Agreement, the Restated Term Loan Note and the Restated Term Loan,
respectively, in accordance with the terms of this Agreement.
10
<PAGE> 12
SECTION 4.2 Release of the Collateral.
As of the Restatement Effective Date, each of the Insurers and the
Agent release and terminate all of their respective right, title and interest
in and to all of the Collateral.
SECTION 4.3 Further Cooperation; Document Deliveries.
On and promptly following the Restatement Effective Date, the Insurers
and the Agent will cooperate with the Borrower and take all lawful actions
reasonably requested by the Borrower necessary to cancel or evidence the
cancellation of the Security Agreement (and any constituent part thereof), the
Leasehold Mortgage and/or the Intercreditor Agreement and/or necessary to
release and terminate or to evidence the release and termination of any right,
title or interest which they may have in the Collateral. For purposes of this
Section 4.3, each of the Insurers irrevocably appoints the Insurers'
Representative as its agent with full authority to sign and deliver any
document required to be signed and delivered by such Insurer pursuant to this
Section 4.3 with the same force and effect as if signed and delivered by such
Insurer. All costs, fees and other charges required to effect the
cancellations, releases and terminations contemplated by this Article IV shall
be paid by the Borrower without reimbursement by any other party hereto and
none of the Insurers and the Agent shall be required to expend any sum in order
to discharge its obligations hereunder. Any filing, recording or similar
action required in order to effect the cancellations, releases and terminations
contemplated by this Article IV shall be the sole responsibility of the
Borrower. The obligations of the Agent under this Section 4.3, only, shall
survive and continue in full force and effect following its removal as Agent as
contemplated by Section 9.1 of this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
The Borrower hereby makes the following representations and warranties
to each of the other parties to this Agreement:
11
<PAGE> 13
SECTION 5.1 Organization; Power; Status.
The Borrower (a) is a corporation duly organized, validly existing and
in good standing under the laws of the State of Washington, (b) has all
requisite power and authority to own or hold under lease and operate the
property it purports to own or hold under lease and to carry on its business as
now being conducted and as proposed to be conducted and (c) is duly qualified
and authorized to do business and is in good standing as a foreign corporation
in every jurisdiction in which it owns real property or in which the nature of
its business requires it to be so qualified.
SECTION 5.2 Authorization; Enforceability;
Execution and Delivery.
(a) The Borrower has, and at all relevant times has had, all
necessary corporate power and authority (i) to execute, deliver and perform and
to modify, cancel or terminate each of the Current Credit Agreement, the Term
Loan Notes, the Loan Documents, the Security Documents and the Intercreditor
Agreement (the "Transaction Documents") to which it is a party, (ii) to borrow
money (as provided for and contemplated in the Current Credit Agreement and
this Agreement) and (iii) to grant, amend and terminate the liens provided for
in the Security Documents and the Current Credit Agreement (the transactions
referred to in the foregoing clauses (i), (ii) and (iii) being collectively
referred to in this Agreement as the "Transactions").
(b) All corporate action on the part of the Borrower that is
required for the consummation of the Transactions has been duly and effectively
taken and this Agreement and each other document to be executed in connection
herewith to which it is a party has been duly executed and delivered by the
Borrower. This Agreement and each other document to be executed in connection
herewith to which it is a party constitutes or when executed will constitute a
legal, valid and binding obligation of the Borrower, enforceable against the
Borrower in accordance with the terms hereof and thereof.
12
<PAGE> 14
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE INSURERS
Each of the Insurers hereby makes the following representations and
warranties to each of the other parties to this Agreement:
SECTION 6.1 Organization.
Such Insurer, if other than an individual, is duly organized, validly
existing and in good standing under the laws of the State or country under
which it was organized.
SECTION 6.2 Authorization; Enforceability;
Execution and Delivery.
(a) Such Insurer has, and at all relevant times has had, all
necessary power and authority (i) to execute, deliver and perform and to
modify, cancel or terminate each Transaction Document to which it is a party,
(ii) to assume the right, title and interest of the Original Banks under the
1991 Credit Agreement pursuant to the Assignment and Acceptance Agreements,
(iii) to lend money (as provided for and contemplated in the Current Credit
Agreement and in this Agreement) and (iv) to restructure the Term Loans and the
Term Loan Notes (the transactions referred to in the foregoing clauses (i),
(ii), (iii) and (iv) being collectively referred to in this Agreement as the
"Insurers' Transactions").
(b) All action on the part of such Insurer that is required for
the consummation of the Insurers' Transactions has been duly and effectively
taken and each Transaction Document to which it is a party has been duly
executed and delivered by such Insurer. Each Transaction Document to which it
is a party constitutes a legal, valid and binding obligation of such Insurer,
enforceable against such Insurer in accordance with the terms hereof and
thereof, except to the extent that any such Transaction Document has been
cancelled or terminated, converted,
13
<PAGE> 15
amended and/or restated and superseded pursuant to this Agreement.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE
EFFECTIVENESS OF THIS AGREEMENT
SECTION 7.1
This amendment and restatement of the Current Credit Agreement,
including the cancellation of the documents set forth in Section 4.1 hereof,
the releases of the Collateral, and the restructuring of the Term Loans
provided for in and contemplated by this Agreement, shall become effective on a
date (the "Restatement Effective Date") on which all of the conditions to
effectiveness set forth in this Article VII shall have been fulfilled to the
satisfaction of the Insurers; and the Borrower shall cause such conditions to
be satisfied on or before September 30, 1996. Upon the satisfaction of the
conditions to effectiveness set forth in this Article VII, the Borrower and the
Insurers (acting by means of and through the Insurers' Representative) shall
execute and deliver to each other (only one such certificate to be delivered to
the Insurers' Representative on behalf of all of the Insurers) a certificate
substantially in the form of Exhibit II to this Agreement with blanks
appropriately completed in conformity herewith which shall confirm the
fulfillment of such conditions and specify the Restatement Effective Date.
(a) Corporate and Other Proceedings Effected
All corporate and other proceedings of the Borrower in connection with
the transactions contemplated by this Agreement shall have effected in form and
substance satisfactory to the Insurers and the Agent, including proceedings
authorizing the due execution, delivery and performance of this Agreement, the
Restated Term Loan Note and any instrument, consent or document referred to
herein to which the Borrower is or is to become a party. The Insurers and the
Agent shall have received all originals, counterparts, or certified or other
copies of all such
14
<PAGE> 16
documents in connection therewith as the Insurers or the Agent may reasonably
request.
(b) Corporate Documents
The Borrower shall have delivered to the Insurers' Representative (i) a
copy of the Articles of Incorporation, including all amendments thereto, of the
Borrower, certified as of a recent date by the Secretary of State of the State
of Washington, and a certificate as to the good standing of the Borrower from
such authority as of a recent date; (ii) a certificate as to the qualification
to do business and the good standing of the Borrower certified as of a recent
date by the Secretaries of State (or the equivalent thereof) of each other
State in which the Borrower is required to be qualified to transact business;
and (iii) a certificate of the Secretary or an Assistant Secretary of the
Borrower dated the Restatement Effective Date certifying (A) that attached
thereto is a true and complete copy of the by-laws of the Borrower as in effect
on the date of such certificate and at all times since a date prior to the date
of the resolutions of the Borrower described in item (B) below, (B) that
attached thereto is a true and complete copy of the resolution duly adopted by
the Executive Committee of the Board of Directors of the Borrower authorizing
the execution, delivery and performance by the Borrower of this Agreement and
the Restated Term Loan Note and that such resolution (or other action) has not
been modified, rescinded or amended and is in full force and effect and (C) as
to the incumbency and specimen signature of each officer or other person
executing this Agreement, the Restated Term Loan Note and any other document
delivered in connection herewith on behalf of the Borrower.
(c) Execution and Delivery of this Agreement
Each of the parties hereto shall have executed and delivered originally
signed counterparts of this Agreement to each other party as follows:
15
<PAGE> 17
To Borrower: 2 duplicate originals
To the Insurers: 2 duplicate originals
(by delivery to
Insurers'
Representative)
To the Agent: 1 duplicate original
On the Restatement Effective Date this Agreement shall be the legal, valid and
binding obligation of each of the parties hereto, enforceable in accordance
with the terms hereof.
(d) Execution and delivery of the
Restated Term Loan Note
The Borrower shall have executed and delivered to the Insurers (by
delivery to the Insurers' Representative) the Restated Term Loan Note provided
for in Section 3.2 of this Agreement. On the Restatement Effective Date the
Restated Term Loan Note shall be the legal, valid and binding obligation of the
Borrower, enforceable in accordance with the terms thereof and hereof.
(e) Prepayment Against the
Tranche A Term Loans
The Borrower shall have paid to the Insurers (by payment to the
Insurers' Representative in accordance with the instructions set out in Section
3.3(b) of this Agreement) the sum of $2,500,000 as a prepayment of the Tranche
A Term Loans, which payment shall have been received by the Insurers'
Representative.
(f) No Outstanding Revolving Credit Loans
Notwithstanding the termination by the Borrower of the Current Credit
Agreement with respect to MDC, the principal balance of the Revolving Credit
Loans shall be zero ($0.00) and no sum shall be owing by the Borrower in
respect of the Revolving Credit Loan Note and the Revolving Credit Commitment.
(g) Borrower's Certificate
The Insurers' Representative shall have received (i) a certificate in
form satisfactory to him dated the Restatement
16
<PAGE> 18
Effective Date executed by a duly authorized officer of the Borrower certifying
that the conditions to effectiveness specified in Section 7.1(a) through (f)
hereof have been satisfied and that the representations and warranties made by
the Borrower in Article V hereof are true and correct as of and at the
Restatement Effective Date and (ii) such other certificates and documents as
the Insurers may reasonably require.
(h) Notice of Removal of Agent
The Insurers shall have executed and delivered the Notice of Removal
provided for in Section 9.1 of this Agreement.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1 Events of Default.
Each of the following events, acts, occurrences or conditions shall
constitute an Event of Default under this Agreement, regardless of whether such
event, act, occurrence or condition is voluntary or involuntary or results from
the operation of law or pursuant to or as a result of compliance by any Person
with any judgment, decree, order, rule or regulation of any court or
administrative or governmental body:
(a) the Borrower shall fail to make any required repayment of the
Restated Term Loan when and as the same shall become due and payable in
accordance with the terms hereof and such failure shall continue for a period
of 5 Business Days;
(b) any representation or warranty made by the Borrower in this
Agreement shall prove to have been untrue or misleading and such untrue or
misleading misrepresentation or warranty could reasonably be expected to have a
material adverse effect on the rights of the Insurers under this Agreement;
(c) the Borrower shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar law now
or hereafter in effect or
17
<PAGE> 19
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or shall
consent to any such relief or to the appointment of or taking possession by any
such official in an involuntary case or other proceeding commenced against it,
or shall make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or the Borrower shall dissolve,
or shall take any action to authorize any of the foregoing;
(d) an involuntary case or other proceeding shall be commenced
against the Borrower seeking liquidation, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for, or such appointment is not vacated
or stayed within, a period of or exceeding 60 days; or an order for relief
shall be entered against the Borrower under any such bankruptcy, insolvency or
similar law; or
(e) the maturity of any Indebtedness of the Borrower to any Person
in excess of $1,000,000 shall be accelerated prior to its stated maturity and
such Indebtedness shall remain accelerated until the earlier of the date (i) 60
days after such Indebtedness was accelerated and (ii) on which such Person
shall commence to exercise remedies with respect to such Indebtedness.
SECTION 8.2 Rights and Remedies.
Upon the occurrence of any Event of Default described in Section 9.1(c)
and (d), the unpaid aggregate amount of the Restated Term Loan shall
automatically become immediately due and payable. Upon the occurrence and
during the continuance of any other Event of Default, the Insurers (acting by
and through the Insurers' Representative, which is specifically authorized
hereby to sign and deliver any document and to take any other action permitted
or contemplated by this Section with the same force and effect as if signed,
delivered and/or taken by all of the Insurers themselves), by written notice to
the Borrower, may declare the unpaid aggregate amount of the Restated Term Loan
to
18
<PAGE> 20
be, and the same shall thereupon be, immediately due and payable. Upon the
occurrence of any Event of Default the Insurers may exercise any and all
rights, powers and remedies provided under this Agreement, or available to the
Insurers at law or in equity or by statute or otherwise, for the protection and
enforcement of the rights of the Insurers.
ARTICLE IX
THE AGENT
SECTION 9.1 Removal of the Agent
As of the Restatement Effective Date, the Agent shall be removed as
Agent, without cause, and the Agent shall thereafter have no duties or
obligations in its capacity as the Agent except, only, as set forth in Section
4.3 of this Agreement. In order to confirm this removal, as a condition to the
occurrence of the Restatement Effective Date the Insurers (which specifically
appoint the Insurers' Representative to sign and deliver such document with the
same force and effect as if executed and delivered by all of the Insurers
themselves) shall execute and deliver to the Agent and to each other party to
this Agreement a notice of removal of the Agent substantially in the form of
Exhibit III to this Agreement with blanks appropriately completed in conformity
herewith (the "Notice of Removal"). The Agent hereby agrees to pay to the
Borrower on the Restatement Effective Date an amount equal to the unearned
portion of the annual agency fee paid to the Agent on March 1, 1996 under the
Current Credit Agreement.
SECTION 9.2 Continued Protection of the Agent
Without impairing in any way the force and effect of the concluding
sentences of Sections 10.6 and 10.8(a) of the Current Credit Agreement and
notwithstanding the removal of the Agent pursuant to Section 9.1 hereof, on and
after the Restatement Effective Date the Agent shall continue to enjoy and be
entitled to all of the rights and protections, including rights to
indemnification by other parties hereto, as it enjoys and is entitled to
pursuant to Article X of the Current Credit Agreement with respect to any
action taken and any action not
19
<PAGE> 21
taken by the Agent on and prior to the Restatement Effective Date.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Notices.
Notices and other communications required or permitted hereunder (each,
a "Notice") shall be in writing, shall be signed by an officer of the party
giving the Notice (or, in the case of a Notice by or from the Insurers, by the
Insurers' Representative as provided below) and shall be delivered by hand or
sent by overnight courier service, certified or registered mailed or facsimile
as follows:
(a) if to the Borrower, to it at 1595 Spring Hill Road, Suite 360,
Vienna, VA 22182, Attention of the President (Facsimile No. (703) 821-3070;
Confirmation Tel. No. (703) 821-3000);
(b) if to the Agent, to it at Two Chase Manhattan Plaza, 5th Floor,
New York, NY 10081, Attention of Ms. Jocelin Fernandez (Facsimile No. (212)
552-6276; Confirmation Tel. No. (212) 552-4438);
(c) if to the Insurers, to them c/o Morgan, Lewis & Bockius LLP, 101
Park Avenue, New York, NY 10178, Attn. Martin F. Conniff, Esq. (Facsimile No.
(212) 309-6273; Confirmation Tel. No. (212) 309-6000).
Any Notice by or from Insurers may be signed and delivered by the Insurers'
Representative with the same force and effect as if signed and delivered by the
Insurers themselves. All Notices given to any party hereto in accordance with
the provisions of this Agreement shall be deemed to have been duly given on the
date of receipt if delivered by hand or sent by overnight courier service or
facsimile or on the date five Business Days after dispatch by certified or
registered mail if mailed, in each case if delivered, sent or mailed (properly
addressed) to such party as provided in this Section or in accordance with the
latest
20
<PAGE> 22
change in delivery instructions from such party given by a Notice given by such
party in accordance with this Section.
SECTION 10.2 Binding Effect.
This Agreement shall become effective upon the occurrence of the
Restatement Effective Date and thereupon shall be binding upon and inure to the
benefit of the Borrower, each Insurer and the Agent.
SECTION 10.3 Successors and Assigns.
(a) None of the Borrower or any Insurer may assign all or any portion
of its interests, rights and obligations under this Agreement and/or the
Restated Term Loan Note without the prior written consent of the other, which
consent shall not be unreasonably withheld.
(b) Whenever in this Agreement any of the parties hereto is referred
to, such reference shall be deemed to include, subject to the provisions of
this Section 10.3, the successors and assigns of such party.
SECTION 10.4 Expenses; Indemnity.
(a) Whether or not the transactions contemplated hereby are
consummated, the Borrower agrees to promptly pay all reasonable out-of-pocket
fees and expenses incurred by the Agent (including, without limitation, the
reasonable fees and expenses of counsel to the Agent) in connection with (i)
the preparation, execution and delivery of this Agreement and any other
documents required hereby and (ii) the enforcement or protection of its rights
in connection with this Agreement and the other Transaction Documents.
(b) The Borrower agrees that it shall pay and indemnify the Insurers
against and hold them harmless from the $10,000 fee charged to the Insurers by
Rose Hill Capital Corporation set forth in the invoice of Rose Hill Capital
Corporation dated May 10, 1996, a copy of which has been provided to the
Borrower (the "Rose Hill Invoice") and all attorneys fees and disbursements
incurred by the Insurers to Morgan, Lewis & Bockius LLP in connection with the
Current Credit Agreement and
21
<PAGE> 23
this Agreement during the period February 1, 1996 through the earlier to occur
of (i) the Restatement Effective Date and (ii) delivery by the Borrower to the
Insurers' Representative under the Current Credit Agreement of a notice stating
that the Borrower has determined to discontinue its efforts to effect the
transactions contemplated hereby, both days inclusive. The Borrower agrees
that it will pay to Morgan, Lewis & Bockius LLP, on the Restatement Effective
Date, by a wire transfer directed to Morgan, Lewis & Bockius LLP's bank in
accordance with directions delivered to the Borrower, the Rose Hill Invoice and
all statements for all or any portion of such Morgan, Lewis & Bockius LLP's
fees and disbursements received by the Borrower on or prior to the Restatement
Effective Date and that it will pay in like manner any statement received at
any later date within ten (10) Business Days of receipt thereof.
(c) The Borrower agrees that it shall pay, and indemnify the Agent and
the Insurers from and hold each of them harmless against, any and all present
and future stamp, excise, filing, mortgage recording, or documentary taxes,
assessments, fees or charges made by any governmental authority in connection
with the transactions contemplated by this Agreement.
(d) Except as expressly provided to the contrary in Section 10.4(b),
the Borrower and each of the Insurers shall be responsible for all of its own
attorneys' fees and disbursements, transaction costs and other costs and
expenses incurred in connection with the execution and delivery of the Loan
Documents, any other document required thereunder and the transactions
contemplated hereunder.
(e) The Borrower agrees to promptly pay all reasonable out-of-pocket
fees and expenses incurred after the Restatement Effective Date by the Insurers
in connection with the enforcement or protection of their rights in connection
with this Agreement and/or the Restated Term Loan Note.
(f) Whether or not the transactions contemplated hereby are
consummated, the Borrower agrees to indemnify the Agent and its respective
directors, officers, employees and agents (each such Person being called an
"Indemnitee") against, and to hold each Indemnitee harmless from, any and all
losses, claims, damages, liabilities, expenses, obligations, penalties,
22
<PAGE> 24
actions, judgments, suits, costs or disbursements of any kind or nature
whatsoever (including, without limitation, reasonable fees and expenses of
counsel for such Indemnitee in connection with any investigative,
administrative or judicial proceeding commenced or threatened, whether or not
such Indemnitee shall be designated a party thereto) incurred by, imposed on or
asserted against any Indemnitee arising out of, in any way connected with, or
as a result of (i) the execution or delivery of this Agreement or any
Transaction Document or any agreement or instrument contemplated hereby or
thereby, the performance by the parties hereto and thereto of their respective
obligations hereunder or thereunder or the consummation of the transactions
contemplated hereby or thereby, (ii) the use of the proceeds of the Loans or
(iii) any claim, litigation, investigation or proceeding relating to any of the
foregoing, whether or not any Indemnitee is a party thereto; provided that such
indemnity shall not, as to any Indemnitee, be available to the extent that such
losses, claims, damages, liabilities, expenses, obligations, penalties,
actions, judgments, suits, costs or disbursements are determined by a court of
competent jurisdiction by final and nonappealable judgment to have resulted
from the gross negligence or willful misconduct of such Indemnitee. In the
case of any indemnification under this Section 10.4(f), the Agent shall
promptly give notice to the Borrower of any such claim or demand being made
against the Agent.
(g) The provisions of this Section 10.4 shall remain operative and in
full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of the Restated Term Loan, the invalidity or unenforceability of any
term or provision of this Agreement or any other Loan Document, or any
investigation made by or on behalf of the Agent. All amounts due under this
Section 10.4 shall be payable on written demand therefor or as otherwise
provided herein.
SECTION 10.5 GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND
THEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF
THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING
TO CONFLICTS OF LAW EXCEPT SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS
LAW).
23
<PAGE> 25
SECTION 10.6 Waivers; Amendment.
(a) No failure or delay of any Insurer in exercising any power or
right hereunder or under the Restated Term Loan Note and no course of dealing
between the Borrower and any Insurer shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power hereunder or thereunder. The rights and remedies of the
Insurers hereunder and under the Restated Term Loan Note are cumulative and not
exclusive of any rights or remedies that they would otherwise have. No waiver
of any provision of this Agreement or of the Restated Term Loan Note or consent
to any departure by the Borrower therefrom shall in any event be effective
unless the same shall be permitted by subsection (b) below, and then such
waiver or consent shall be effective only in the specific instance and for the
purpose for which given. No notice or demand on the Borrower in any case shall
entitle the Borrower to any other or further notice or demand in similar or
other circumstances.
(b) Subject to the following sentence, this Agreement may not be
modified or amended except by a written agreement executed by all of the
parties hereto. This Agreement may be modified or amended by a written
agreement made only between the Borrower and the Insurers (which hereby
authorize the Insurers' Representative to make and execute any such agreement
with the same force and effect as if done by all of the Insurers), provided,
however, that no such modification or amendment may vary or affect Articles II,
IV or IX and/or Sections 10.1(b), 10.4(a), (c), (f) and/or (g) and/or otherwise
create or affect any right, protection or obligation of MDC or the Agent
hereunder in the absence of the written agreement thereof signed by MDC and/or
the Agent, as the case may be.
SECTION 10.7 Entire Agreement. This Agreement, the Restated Term Loan
Note and the other documents delivered pursuant hereto constitute the entire
agreement among the parties relative to the subject matter hereof. Any
previous agreement among the parties with respect to the subject matter hereof
is superseded by this Agreement, the Restated Term Loan Note and the other
documents delivered pursuant hereto. Nothing in this Agreement, the
24
<PAGE> 26
Restated Term Loan Note and/or the other documents delivered pursuant hereto,
expressed or implied, is intended to confer upon any party other than the
parties hereto or thereto any right, remedy, obligation or liability under or
by reason of this Agreement, the Restated Term Loan Note and/or the other
documents delivered pursuant hereto.
SECTION 10.8 SUBMISSION TO JURISDICTION. ANY LEGAL ACTION OR PROCEEDING WITH
RESPECT TO THIS AGREEMENT OR THE RESTATED TERM LOAN NOTE OR ANY DOCUMENT
RELATED HERETO OR THERETO AND ANY ACTION OR PROCEEDING FOR ENFORCEMENT OF ANY
JUDGMENT IN RESPECT HEREOF OR THEREOF MAY BE BROUGHT IN THE COURTS OF THE STATE
OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW
YORK, AND THE BORROWER AND EACH OF THE INSURERS HEREBY ACCEPTS FOR ITSELF AND
IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS. THE BORROWER AND EACH OF THE INSURERS
HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS
SET FORTH IN SECTION 10.1 HEREOF. THE BORROWER AND EACH OF THE INSURERS HEREBY
IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
JURISDICTION OVER IT OF ANY SUCH COURT IN RESPECT OF OR IN CONNECTION WITH THIS
AGREEMENT OR THE RESTATED TERM LOAN NOTE OR ANY DOCUMENT RELATED THERETO AND
HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH
COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.
SECTION 10.9 WAIVER OF TRIAL BY JURY. TO THE EXTENT PERMITTED BY APPLICABLE
LAW, THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE ALL RIGHT OF TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH
THIS AGREEMENT OR THE RESTATED TERM LOAN NOTE OR ANY DOCUMENT RELATED HERETO OR
THERETO OR ANY MATTER ARISING HEREUNDER OR THEREUNDER.
SECTION 10.10 Severability. In the event any one or more of the provisions
contained in this Agreement or in the Restated Term Loan Note should be held
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby. The parties shall
25
<PAGE> 27
endeavor in good faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 10.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one agreement, and shall become effective
as provided in Section 7.1 of this Agreement.
SECTION 10.12 Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of
this Agreement and are not to affect the construction of, nor to be taken into
consideration in interpreting, this Agreement.
SECTION 10.13 No Third Party Beneficiary. The agreements of the Insurers to
make the Restated Term Loan to the Borrower, on the terms and conditions herein
set forth, are solely for the benefit of the Borrower and no other Person shall
have any rights hereunder, as against the Agent or any Insurer, under any
Transaction Document or with respect to the Restated Term Loan or the proceeds
thereof.
26
<PAGE> 28
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
duly executed and delivered as of August 12, 1996.
SPACEHAB INCORPORATED
By: /s/ MARGARET E. GRAYSON
--------------------------------
Name: Margaret E. Grayson
Title: Vice President - Finance
THE CHASE MANHATTAN BANK,
successor by merger to THE
CHASE MANHATTAN BANK (NATIONAL
ASSOCIATION), as Agent
By: /s/ JOANN KOSEWSKI
---------------------------------
Name: Joann Kosewski
Title: VP
The Underwriting Members of
Syndicate 212
By: /s/ STEPHEN JOHN MITCHELL
---------------------------------
Name: Stephen John Mitchell
Title: Insurance Manager
27
<PAGE> 29
The Underwriting Members of
Syndicate 662
By: AUTHORIZED SIGNATURE
---------------------------------
Name:
Title:
The Underwriting Members of
all Syndicates other than
Syndicates 212 and 662
which are Lloyd's Insurers
under this Agreement
By: /s/ M. J. GIRARD
--------------------------------
Name: M. J. Girard
Title: Lloyds Claims Office
COMMERCIAL UNION ASSURANCE
COMPANY LIMITED
By: /s/ J. SCOLLEN
--------------------------------
Name: J. Scollen
Title: L.M. Claims Manager
ORION INSURANCE COMPANY PLC
By: /s/ M. V. HITCHINS
--------------------------------
Name: M. V. Hitchins
Title: Director
28
<PAGE> 30
SCOR(UK) REINSURANCE
COMPANY LIMITED
By: /s/ DAVID PARKINSON
-------------------------------
Name: David Parkinson
Title: Assistant Claims Manager
POHJOLA INSURANCE COMPANY
(UK) LIMITED
By: /s/ MICHAEL EDWIN DYKE
------------------------------
Name: Michael Edwin Dyke
Title: Technical Coordinator
FUJI INTERNATIONAL "A" A/C
By: /s/ D. F. PHILLIPS
------------------------------
Name: D. F. Phillips
Title: Underwriting Manager
SCOTTISH LION INSURANCE
COMPANY LIMITED
By: /s/ DAVID MCGOLGAN
------------------------------
Name: David McGolGan
Title: Claims Manager
29
<PAGE> 31
FEDERAL INSURANCE COMPANY
(Per Duncanson & Holt
Europe Ltd.)
By: /s/ J. D. WIMBS
------------------------------
Name: J. D. Wimbs
Title: Claims Adjuster
COMMERCIAL UNION ASSURANCE
COMPANY PLC
By: /s/ J. SCOLLEN
------------------------------
Name: J. Scollen
Title: L.M. Claims Manager
OCEAN MARINE INSURANCE
CO. LTD.
By: /s/ J. SCOLLEN
------------------------------
Name: J. Scollen
Title: L.M. Claims Manager
TRAVELERS INDEMNITY COMPANY
By: /s/ TIMOTHY H. PENN
------------------------------
Name: Timothy H. Penn
Title: Director
30
<PAGE> 32
AMERICAN INTERNATIONAL
SURPLUS LINES INSURANCE
COMPANY
By: /s/ ANDREW MOSCHELLA
------------------------------
Name: Andrew Moschella
Title: Recovery Representative
RELIANCE INSURANCE COMPANY
OF ILLINOIS
By: /s/ M. PATRICCA HEARN
------------------------------
Name: M. Patricca Hearn
Title: Vice President Reliance
National
EVANSTON INSURANCE COMPANY
By: /s/ JOHN E. PASQUINI
------------------------------
Name: John E. Pasquini
Title: Senior Claims Attorney
THE TOKIO MARINE AND FIRE
INSURANCE COMPANY, LTD.
By: AUTHORIZED SIGNATURE
------------------------------
Name:
Title: D.G.M.
LA REUNION SPATIALE
By: /s/ JEAN-MICHEL GLOQUEL
------------------------------
Name: Jean-Michel Gloquel
Title: Depudy General Manager
31
<PAGE> 33
MITSUI MARINE AND FIRE
INSURANCE COMPANY LIMITED
(formerly TAISHO MARINE
AND FIRE INSURANCE
COMPANY, LIMITED)
By: /s/ TOTSUO FUJIOKA
------------------------------
Name: Totsuo Fujioka
Title: Chief of Space Team
UNI STOREBRAND INTERNATIONAL
INSURANCE AS
By: /s/ JANGHUGO MARTHINSEN
------------------------------
Name: Janghugo Marthinsen
Title: Senior Claim Manager/
Vice President
NIPPON FIRE AND MARINE INS.
CO. EUROPE
By: /s/ JANET ASHLEY
------------------------------
Name: Janet Ashley
Title: Aviation Claims Adjuster
SKANDIA INTERNATIONAL
INSURANCE CORPORATION
By: AUTHORIZED SIGNATURE
------------------------------
Name:
Title:
32
<PAGE> 34
Schedule A
to the Amended and
Restated Credit Agreement
UNDERWRITERS AND COMPANIES SUBSCRIBING TO THE EXCESS POLICIES
<TABLE>
<CAPTION>
Percentage of the Entire
Sublimits Excess Policies
--------- ---------------
<S> <C>
I. Lloyd's and London Companies' Policies
--------------------------------------
A. Underwriters at Lloyd's - Lloyd's Policy No. 846/C24642
-------------------------------------------------------
Percentage of 81.4% of
100% of the Excess
Policies
----------------------
Underwriters at Lloyd's 83.904529 68.298287
(the "Lloyd's Pro Rata
Share")
B. Companies Collective Policy No. 846/C24642
------------------------------------------
Percentage of 81.4% of
100% of the Excess
Company Name Policies
------------ -----------------------
Commercial Union 0.489596 .398531
Assurance Company
Limited
</TABLE>
<PAGE> 35
<TABLE>
<CAPTION>
Percentage of the Entire
Sublimits Excess Policies
--------- ---------------
C. LIRMA Policy No. 846/C24642
Percentage of 81.4% of
100% of the Excess
Company Name Policies
------------ ----------------------
<S> <C> <C>
Orion Insurance 0.244798 .199266
Company plc
Scor (UK) Reinsurance 1.223990 .996328
Company Limited
Pohjola Insurance 0.305998 .249082
Company (UK)
Limited
Fuji International 0.367197 .298898
'A' A/C
Scottish Lion Insurance 0.734394 .597797
Company
Limited
Federal Insurance 4.895961 3.985312
Company (per
Duncanson & Holt
Europe Ltd.)
Federal Insurance 6.731946 5.479804
Company (per
Duncanson & Holt
Europe Ltd.)
</TABLE>
2
<PAGE> 36
<TABLE>
<CAPTION>
Percentage of the Entire
Sublimits Excess Policies
--------- ---------------
D. ILU Policy No. 846/C24642
Percentage of 81.4% of
100% of the Excess
Company Name Policies
------------ ----------------------
<S> <C> <C>
Commercial Union 0.489596 .398531
Assurance Company plc
Ocean Marine Insurance Co. Ltd. 0.611995 .498164
---------- ---------
100.000000 81.400000
</TABLE>
II. Companies Policy No. C24642
<TABLE>
<CAPTION>
Percentage of 6.5% of
100% of the Excess
Company Name Policies
------------ ------------------------
<S> <C> <C>
Travelers Indemnity 30.7692 1.999998
Company
American International 30.7692 1.999998
Surplus Lines
Insurance Company
Reliance Insurance 15.3846 .999999
Company of Illinois
Evanston Insurance 7.6924 .500006
Company
The Tokio Marine and 15.3846 .999999
Fire Insurance
Company, Ltd
-------- --------
100.0000 6.500000
</TABLE>
3
<PAGE> 37
<TABLE>
<CAPTION>
Percentage of the Entire
Sublimits Excess Policies
--------- ---------------
III. Policy of Insurance No. 707/AA597214
Percentage of 5.0% of
100% of the Excess
Company Name Policies
------------ ---------------------
<S> <C> <C>
La Reunion Spatiale 100.00
------- ---------
100.00 5.000000
</TABLE>
IV. Policy of Insurance No. 707/AA6055H
<TABLE>
<CAPTION>
Percentage of 7.1% of
100% of the Excess
Company Name Policies
------------ ---------------------
<S> <C> <C>
La Reunion Spatiale 45.0704 3.199998
Mitsui Marine and Fire 28.169 1.999999
Insurance Company
Limited (formerly
Taisho Marine and Fire
Insurance Company,
Limited)
UNI Storebrand 21.1268 .500003
International Insurance
AS
Nippon Fire and Marine 2.8169 .200000
Ins. Co. Europe
Skandia International 02.8169 .200000
Insurance Corporation
-------- ----------
100.0000 7.100000
----------
100.000000
</TABLE>
4
<PAGE> 38
Exhibit I
to the Amended and
Restated Credit Agreement
RESTATED TERM LOAN NOTE
$2,000,000 August [ ], 1996
[Place of Closing]
FOR VALUE RECEIVED, SPACEHAB, INCORPORATED, a Washington Corporation,
(the "Borrower") hereby promises to pay to the Insurers (as defined in the
Amended and Restated Credit Agreement which is defined below; together with
their successors and assigns, the "Insurers") for their accounts at their
principal offices or as specified in such Amended and Restated Credit
Agreement, their respective Lloyd's Insurer's Pro Rata Share or Pro Rate Share
(as those terms are defined in such Amended and Restated Credit Agreement) of
the aggregate unpaid amount of the Restated Term Loan (as defined in such
Amended and Restated Credit Agreement) made by the Insurers to the Borrower
under such Amended and Restated Credit Agreement, in lawful money of the United
States of America and in immediately available federal funds, on the dates and
in the amounts provided in such Amended and Restated Credit Agreement and, in
the event interest becomes payable on such Restated Term Loan, to pay such
interest at such office and in such manner, in like money and funds, at the
rates provided in such Amended and Restated Credit Agreement. Such interest
shall be payable monthly in arrears with the first payment of interest being
due on the first Business Day of the month following the calendar month in
which interest shall begin to accrue and succeeding monthly payments of
interest being due on the first Business Day of each succeeding month for
interest accruing during the prior calendar month.
<PAGE> 39
This Restated Term Loan Note is (i) the Restated Term Loan Note referred
to in the Amended and Restated Credit Agreement dated as of August 12, 1996
(the "Amended and Restated Credit Agreement") among the Borrower, the Insurers
and The Chase Manhattan Bank, successor by merger to The Chase Manhattan Bank
(National Association), as Agent, and evidences the Restated Term Loan made by
the Insurers thereunder, (ii) subject to the terms and conditions of the
Amended and Restated Credit Agreement and (iii) entitled to the benefits of the
Amended and Restated Credit Agreement. Terms used but not defined in this
Restated Term Loan Note have the respective meanings assigned to them in the
Amended and Restated Credit Agreement.
The Amended and Restated Credit Agreement provides for the acceleration
of the maturity of this Restated Term Loan Note upon the occurrence of certain
events.
The Borrower hereby waives presentment for payment, demand, protest or
notice of presentment and notice of dishonor and any other kind of notice
required to be given by law in connection with the delivery, acceptance,
performance, default or enforcement with respect to this Restated Term Loan
Note. All amounts payable under this Restated Term Loan Note are payable
without relief from valuation and appraisement laws.
Upon the written request of any holder hereof, the Borrower shall issue
a separate Restated Term Loan Note to the order of such holder in then
outstanding principal amount of such holder's respective Lloyd's Insurer's Pro
Rata Share or Pro Rata Share of the outstanding amount of the Restated Term
Loan. Upon the issuance of such separate Restated Term Loan Note, the
outstanding principal amount of this Restated Term Loan Note shall be deemed to
be reduced by such holder's Lloyd's Insurer's Pro
2
<PAGE> 40
Rata Share or Pro Rata Share of the face amount of this Restated Term Loan Note
and such holder shall cease to have any right, title or interest under this
Restated Term Loan Note.
This Restated Term Loan Note and any separate Restated Term Loan Note
issued pursuant to the immediately preceding paragraph shall be governed by,
and construed in accordance with, the law of the State of New York (without
giving effect to the principles thereof relating to conflicts of law except
Section 5-1401 of the New York General Obligations Law).
SPACEHAB, INCORPORATED
By /s/ MARGARET E. GRAYSON
-------------------------
Name: Margaret E. Grayson
Title: Vice President - Finance
3
<PAGE> 41
Exhibit II
to the Amended and
Restated Credit Agreement
CERTIFICATE OF EFFECTIVENESS
Pursuant to Section 8.1 of the Amended and Restated Credit
Agreement referred to below, each of the undersigned hereby certifies and
confirms that:
(a) each of the conditions to effectiveness specified in
Article VII of such Amended and Restated Credit
Agreement has been fulfilled to the satisfaction of
each of them; and
(b) the Restatement Effective Date is August 20, 1996.
Capitalized terms used herein and not otherwise defined shall
have the meanings given them in the Amended and Restated Credit Agreement dated
as of August 12, 1996 (the "Amended and Restated Credit Agreement") among the
Borrower, the Insurers and the Agent.
IN WITNESS WHEREOF, the undersigned have each caused this
Certificate of Effectiveness to be duly executed and delivered this 20th day
of August, 1996.
SPACEHAB, INCORPORATED INSURERS' REPRESENTATIVE
By: /s/ MARGARET E. GRAYSON By: /s/ GEORGE R. REID II
------------------------------- --------------------------------
Name: Margaret E. Grayson Name: George R. Reid II
Title: Vice President, Finance Title: Associate
<PAGE> 42
Exhibit III
To The Amended and
Restated Credit Agreement
NOTICE OF REMOVAL OF AGENT
Pursuant to Section 10.8 of the Current Credit Agreement (as defined
in the Amended and Restated Credit Agreement referred to below) and Section 9.1
of such Amended and Restated Credit Agreement, the undersigned hereby removes,
without cause, the Agent appointed under such Current Credit Agreement and
relieves and discharges said Agent of and from all title, if any, rights,
powers and duties in its capacity as the Agent thereunder, without, however
relieving or discharging it from or affecting in any way its obligations under
Section 4.3, only, of such Amended and Restated Credit Agreement.
Capitalized terms used herein and not otherwise defined shall have the
meanings given them in the Amended and Restated Credit Agreement dated as of
August 12, 1996 (the "Amended and Restated Credit Agreement") among the
Borrower, the Insurers and the Agent.
IN WITNESS WHEREOF, the undersigned have each caused this Notice of
Removal of Agent to be duly executed and delivered this 20th day of August,
1996.
INSURERS' REPRESENTATIVE
/s/ GEORGE R. REID II
-----------------------------------
Name: George R. Reid II
Title: Associate
<PAGE> 1
EXHIBIT 10.16
LEASE AGREEMENT
BETWEEN
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
AND
SPACEHAB, INC.
<TABLE>
<CAPTION>
Table of Contents
-----------------
SECTION PAGE
------- ----
<S> <C> <C>
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. LEASE TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3. BASIC RENTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4. BASIC RENTAL ESCALATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5. SECURITY DEPOSIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
6. LANDLORD'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
7. IMPROVEMENT OF THE PREMISES . . . . . . . . . . . . . . . . . . . . . . . . . . 5
8. OPERATING EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
9. USE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
10. TENANT'S REPAIRS AND ALTERATIONS . . . . . . . . . . . . . . . . . . . . . . . 7
11. ASSIGNMENT AND SUBLETTING . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
12. INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
13. SUBORDINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
14. RULES AND REGULATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
15. INSPECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
16. CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
17. FIRES OR OTHER CASUALTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
18. HOLDING OVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
19. TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
20. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
21. REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
22. SURRENDER OF PREMISES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
23. ATTORNEYS' FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
24. INTENTIONALLY OMITTED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
25. MECHANICS' LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
26. WAIVER OF SUBROGATION; INSURANCE . . . . . . . . . . . . . . . . . . . . . . . 14
27. INTENTIONALLY OMITTED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
28. BROKERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
29. ESTOPPEL CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
30. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
31. FORCE MAJEURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
32. SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
33. AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
34. QUIET ENJOYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
35. LIABILITY OF TENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
36. LANDLORD LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
-i-
<PAGE> 2
LEASE AGREEMENT
BETWEEN
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
AND
SPACEHAB, INC.
<TABLE>
<CAPTION>
Table of Contents
-----------------
SECTION PAGE
------- ----
<S> <C> <C>
37. CERTAIN RIGHTS RESERVED BY LANDLORD . . . . . . . . . . . . . . . . . . . . . . 17
38. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
39. NOTICE TO LENDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
40. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
41. ADDITIONAL RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
42. ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
43. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
44. LAWS AND REGULATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
45. AMERICANS WITH DISABILITIES ACT ("ADA") . . . . . . . . . . . . . . . . . . . . 18
46. ENVIRONMENTAL PROTECTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
47. PARKING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
48. TENANT ACCESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
49. THE NEW PREMISES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
50. FIRST RIGHT OF OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
51. EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
-ii-
<PAGE> 3
LEASE AGREEMENT
BETWEEN
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
AND
SPACEHAB, INC.
DATA SHEET
This Data Sheet is an integral part of this Lease and all of the terms hereof
are incorporated into this Lease in all respects. In addition to the other
provisions which are elsewhere in this Lease, the following, whenever used in
this Lease, shall have the meanings set forth in this Data Sheet.
<TABLE>
<S> <C>
(a) Premises Suite No. 360 in the Building, generally outlined on the floor plan attached
hereto as Exhibit A (Section l(n)).
(b) Area of Premises Approximately 7,757 rentable square feet on the and New Premises third (3rd) floor
of the West Building (Exhibit A and Section 1(n)), and, on Substantial Completion,
an additional 1,955 rentable square feet also on the third (3rd) floor of the West
Building.
(c) Building The Concourse, located at 1593-95 Spring Hill Road, Vienna, Virginia (Section
1(e)).
(d) Basic Rental for $20.50 per rentable square foot per year payable in equal monthly Premises
installments of $13,251.54, subject to adjustment as herein provided (Sections 1(b)
and 3).
(e) Annual Basic $159,018.50 (Section 3).
Rental for
Premises
(f) Annual Basic Three percent (3%) of the escalated Basic Rental then in effect Rental Escalation
(Section 4).
(g) Additional Rent See Section 41.
(h) Lease Term Five (5) years and zero (0) months, commencing on the Commencement Date (Sections
1(k) and 2).
(i) Commencement Date See Section 1(f).
(j) Building Operation Monday through Friday, 8:00 a.m. to 6:00 p.m. and Saturday, 8:00 a.m. to
Hours 1:00 p.m.
(k) Permitted Use Any general business office purposes and for no other purpose (Sections 1(m) and
9).
(l) Tenant's 2.26% (See Section 1(u)), to be adjusted to 2.83% on Substantial Completion of
Proportionate Share of the New Premises.
Basic Cost and
Real Estate Taxes
(m) Tenant's Proportionate 27 spaces, calculated at 3.5 per 1000 rentable square feet (Section 47), with
Share of Parking Tenant receiving an additional 7 on Substantial Completion of the New Premises.
Spaces
(n) Brokers Involved Compass Management and Leasing, Inc. and The Carey Winston Company
(o) Security Deposit See Section 1(p) and 5.
(p) Notices If to Landlord:
The Equitable Life Assurance Society of the United States
c/o Compass Management and Leasing, Inc.
1595 Spring Hill Road, Suite 110
Vienna, Virginia 22182
if to Tenant:
At the Premises.
</TABLE>
- iii -
<PAGE> 4
LEASE AGREEMENT
THIS LEASE AGREEMENT is entered into as of the 30 day of Nov. 1995,
between THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES (hereinafter
called "Landlord"), whose address for purposes hereof is 1595 Spring Hill Road,
Suite 110, Vienna, Virginia 22182 and SPACEHAB, INC., a Washington corporation
(hereinafter called "Tenant"), whose address for purposes hereof is the
Premises.
1. DEFINITIONS.
(a) "Basic Cost": The actual costs incurred by the
Landlord in operating and maintaining the Building and the Land during each
calendar year of the Lease Term for which Landlord has not been reimbursed by
insurance proceeds, condemnation awards or otherwise.
Such costs shall include, by way of example rather than of
limitation, (i) real property, front-foot benefit, metropolitan district and
other similar taxes, including any taxes imposed on leases or income generated
thereon (exclusive of federal and state income and franchise taxes) or public
or private assessments, general or special, ordinary or extraordinary, foreseen
or unforeseen (other than Lease Taxes) levied against the Building or the Land;
(ii) charges or fees for, and taxes on, the furnishing of electricity, water,
sewer service, gas, fuel, or other utility services to the Building and the
Land; (iii) costs of providing elevator, janitorial and trash removal service,
restriping, resurfacing, maintaining and repairing all walkways, roadways and
parking areas on the Land, security costs, and cost of maintaining grounds,
common areas and mechanical systems of the Building and the Land; (iv) all
other costs of maintaining and repairing any or all of the Building or Land;
(v) all costs reasonably allocated by Landlord to the common areas of the
Building and the Land in a multi-building development; (vi) charges or fees for
any necessary governmental permits and licenses; (vii) management fees,
overhead and expenses reasonably related to management of the Building
(including salaries for personnel directly responsible for management of the
Building); (viii) premiums for hazard, liability, workmen's compensation or
similar insurance upon any or all of the Building and the Land; (ix) costs
arising under service contracts with independent contractors; and (x) the cost
of any other items which, under generally accepted accounting principles
consistently applied from year to year with respect to the Building or the
Land, constitute operating or maintenance costs attributable to any or all of
the Building or the Land.
Such costs shall not include (i) the expense of principal
and interest payments made by the Landlord pursuant to the provisions of any
mortgage or deed of trust covering the Building or the Land; (ii) any deduction
for depreciation of the Building taken on the landlord's income tax returns;
(iii) salaries or other compensation of any personnel whose salaries are
covered by a management fee (except that the Building Engineer salary shall be
a Basic Cost and shall not be covered by the management fee); (iv) ground rent
payments and any other charges or payments arising under any ground lease; (v)
legal fees for negotiating leases or enforcing the lease obligations of other
tenants in the Building; (vi) any costs for capital items used for the common
areas, except as otherwise provided in this Section; (vii) real estate
brokerage fees and commissions; or (viii) the cost of capital improvements made
to the Building, other than capital improvements, modifications or equipment
required by federal, state or local ordinance, rule, regulation or law or
determined by Landlord in good faith to result in savings or reductions in
Basic Cost generally, in which case the cost thereof shall be included in Basic
Cost for the calendar year in which the cost shall have been incurred and in
subsequent calendar years, on a straight line basis, such items will be
amortized over an appropriate period, in accordance with Generally Accepted
Accounting Principles, and with an appropriate reasonable interest factor
selected in good faith by Landlord. If Landlord shall have leased any such
items of capital equipment designed to result in savings or reductions in Basic
Cost, then the rental and other costs paid pursuant to such leasing shall be
included in Basic cost for each calendar year in which they shall have been
incurred.
In determining Basic Cost, where less than 95% of the
Building's rentable square footage is occupied during all or any part of a
year, those items of the Basic Cost which vary according to occupancy, such as
electricity and janitorial services, shall be increased to that amount which
would have been incurred had the Building been 95% occupied during the entire
year.
(b) "Basic Rental": $20.50 per rentable square foot
per year payable in equal monthly installments of $13,251.54, subject to
adjustment as herein provided.
(c) "Base Real Estate Taxes": The Real Estate Taxes
for the Building and the Land, payable in the calendar year 1996.
(d) "Base Year Stop": The Basic Cost incurred during
the calendar year 1996 divided by the number of rentable square feet in the
Building.
(e) "Building": The office building which has been
constructed on land located at 1593-1595 Spring Hill Road, Vienna, Virginia,
and known as the Concourse.
(f) "Commencement Date": The earlier of: (i) the date
of Substantial Completion or (ii) the date the Tenant or any one claiming under
or through the Tenant first occupies the Premises or any portion thereof. The
<PAGE> 5
Anticipated Commencement Date for the Premises is February 1, 1996, and for the
New Premises is November 1, 1996.
(g) "Event of Default": As defined in Section 20 of
this Lease.
(h) "Excess": As defined in Section 8 of this Lease.
(i) "Land": The entire tract of land on which the
Building is located and upon which other buildings are located which have
shared common facilities, and subject from time to time, to (i) increase
through the acquisition of adjoining properties, and (ii) reduction through the
sale or transfer by Landlord or the reservations of any such property from the
development of which the Building is a part.
The term Land shall also include any property that must be
maintained by Landlord due to the existence of any public or private easement.
(j) "Landlord's Contractor": As defined in Section
7(d) of this Lease.
(k) "Lease Term". The period commencing on the
Commencement Date and continuing for five (5) years and zero (0) months
thereafter; provided, however, if the term of this Lease commences on a date
other than the first day of a calendar month, the Lease Term shall consist of,
in addition to the number of years and months provided above, the remainder of
the calendar month during which this Lease is deemed to have commenced.
(l) "New Premises": 1,955 rentable square feet of
space adjoining the Premises, which Tenant will lease from Landlord upon
Substantial Completion of such space, all as more specifically outlined in
Section 49 herein.
(m) "Permitted Use": General business office purposes
and for no other purpose, subject to the provisions of Section 9.
(n) "Premises": Suite No. 360 in the Building,
generally outlined on the floor plan attached hereto as EXHIBIT A and
consisting of approximately 7,757 rentable square feet. The Premises shall be
measured in accordance with the Washington, D.C. Association of Realtors
Standard Method of Measurement for Office Buildings, and may be confirmed by
Tenant's architect, at Tenant's expense. Upon Substantial Completion of the
New Premises, the Premises shall be deemed to include the New Premises.
(o) "Rules and Regulations" The Landlord's rules and
regulations sent to Tenant in writing from time to time, as amended or
substituted for from time to time, the current form of which is attached
hereto as Exhibit C.
(p) "Security Deposit": $53,006.16.
(q) "Special Tenant Work": As defined in Section 7(d)
of this Lease.
(r) "Standard Tenant Work": As defined in Section 7(d)
of this Lease.
(s) "Substantial Completion": The date when the work
to be performed by Landlord in the Premises, or New Premises as applicable, in
accordance with this Lease shall have been substantially completed,
notwithstanding that certain details of construction, mechanical adjustment or
decoration remain to be performed, the noncompletion of which would not
materially interfere with the Tenant's use of the Premises or the New Premises.
For purposes of determining the date of Substantial
Completion, in the event of: (i) changes in the work to be completed by
Landlord in readying the Premises or New Premises for Tenant's occupancy, which
changes have been requested by Tenant after the approval by Landlord and Tenant
of the Tenant Plans; (ii) delays, not caused by Landlord, in furnishing
materials or procuring labor required by Tenant for installations or work in
the Premises or New Premises which are not encompassed within Standard Tenant
work; (iii) any failure by Tenant, to furnish any required plan, information,
approval or consent (including, without limitation, the Tenant Plans) within
the required period of time, or any failure to cooperate with Landlord in the
preparation of the Tenant Plans; or (iv) the performance of any work or
activity in the Premises or New Premises by Tenant or any of its employees,
agents or contractors, the Premises or New Premises, as applicable, shall be
deemed to be Substantially Complete as of the date the Premises or New Premises
would otherwise have been Substantially Complete absent such delay. The
decision of Landlord's architect shall be finally determinative of the date of
Substantial Completion.
(t) "Tenant Plans": As defined in Section 7(a) of
this Lease.
(u) "Tenant's Proportionate Share for Basic Cost":
2.26%. Such percentage is equal to a fraction, the numerator of which equals
the number of rentable square feet within the Premises and the denominator of
which equals the total number of rentable square feet in the Building. Tenant's
Proportionate Share for Basic cost shall increase to 2.83% on Substantial
Completion of the New Premises.
- 2 -
<PAGE> 6
(v) "Tenant's Proportionate Share for Real Estate
Taxes": 2.62%. Such percentage is equal to a fraction, the numerator of which
equals the number of rentable square feet within the Premises and the
denominator of which equals the total number of rentable square feet in the
Building. Tenant's Proportionate Share for Real Estate Taxes shall increase to
2.83% on Substantial Completion of the New Premises.
2. LEASE TERM.
(a) Landlord, in consideration of the rent to be paid
and the other covenants and agreements to be performed by Tenant and upon the
terms hereinafter stated, does hereby lease, demise and let unto Tenant the
Premises, as defined herein and generally outlined on the floor plan attached
hereto as EXHIBIT A, commencing on the Commencement Date and ending, without
the necessity of notice from either party to the other, such notice being
expressly waived, on the last day of the Lease Term, unless sooner terminated
as herein provided.
(b) If the Landlord shall be unable to tender
possession of the Premises on the Anticipated Commencement Date, the Landlord
shall not be liable for any damage caused thereby, nor shall this Lease be void
or voidable by Tenant, but in such event, unless the delay results (i) from
failure of Tenant to provide plans or otherwise perform in accordance with the
requirements of the Lease or (ii) from any delay in Landlord's ability to
tender possession of the Premises caused by Tenant, no rental shall be payable
by Tenant prior to actual tender to Tenant of possession of the Premises.
(c) By occupying the Premises, Tenant shall be deemed
to have accepted the same as suitable for the purpose herein intended and to
have acknowledged that the Premises comply fully with Landlord's obligations,
with the exception of any latent structural defects or "punch list" type items
in the Tenant Plans which may not have been completed. Tenant agrees that its
failure to deliver to Landlord such a written "punch list" within five (5) days
of occupancy shall be conclusive proof that no such items exist. Within five
(5) business days of delivery to Tenant by Landlord, Tenant agrees to execute
and return to Landlord a letter prepared by Landlord confirming the
Commencement Date, a copy of which is attached hereto as EXHIBIT B, certifying
that Tenant has accepted delivery of the Premises and that the condition of the
Premises complies with Landlord's obligations hereunder, subject to any "punch
list" items in the Tenant Plans which may not have been completed.
3. BASIC RENTAL.
(a) Tenant promises and agrees to pay Landlord the
Basic Rental (subject to adjustment as hereinafter provided) without demand,
notice, deduction, recoupment, counterclaim or set-off, for each month of the
entire Lease Term. The first monthly installment shall be due and payable upon
execution of this Lease. The Basic Rental for each subsequent month shall be
paid in advance beginning on the first day of the calendar month following the
expiration of the first calendar month of the Lease Term and continuing
thereafter on or before the first day of each succeeding calendar month during
the term hereof; provided, however, that Basic Rental for the second calendar
month shall be prorated based on one-three hundred sixtieth (1/360th) of the
current annual Basic Rental for each day of the first partial month, if any,
this Lease is in effect and shall be due and payable as aforesaid.
(b) In the event any installment of the Basic Rental,
or any other sums which became owing by Tenant to Landlord under the provisions
hereof, are not received within five (5) business days after the due date
thereof (without in any way implying Landlord's consent to such late payment),
Tenant shall pay, in addition to such installment of the Basic Rental or such
other sums owed, and not as a penalty, additional rent in the form of a late
payment charge equal to five percent (5%) of such monthly installment of the
Basic Rental or such other sums owed for each month or part thereof such
payment is overdue. Notwithstanding the foregoing, the foregoing late charges
shall not apply to any sums which may have been advanced by Landlord to or for
the benefit of Tenant pursuant to the provisions of this Lease, it being
understood that such sums shall bear interest from the date of the advance
until paid in full, which Tenant hereby agrees to pay to Landlord, at the rate
of fourteen percent (14%) per annum or the highest rate permitted by law,
whichever is less.
4. BASIC RENTAL ESCALATION.
The Basic Rental shall be increased annually, effective
on each anniversary of the first (1st) day of the first full month after the
Commencement Date during the term hereof if the Commencement Date is on a day
other than the first (1st) day of the month, or on the anniversary of the
Commencement Date if the Commencement Date is on the first (1st) day of the
month, by an amount equal to three percent (3%) of the escalated Basic Rental
then in effect, payable as follows:
<TABLE>
<CAPTION>
Year Annualized Rent Monthly Rent
---- --------------- ------------
<S> <C> <C>
1 $159,018.50 $13,251.54
2 $163,798.05 $13,649.09
3 $168,702.73 $14,058.56
4 $173,763.81 $14,480.32
5 $178,976.72 $14,914.73
</TABLE>
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<PAGE> 7
5. SECURITY DEPOSIT.
The Security Deposit, which shall be paid upon
execution of this Lease, shall be held by Landlord in a federally insured
banking or savings institution, as security for the performance by Tenant of
Tenant's covenants and obligation under the Lease. The Security Deposit shall
accrue interest, for Tenant's benefit, at the passbook rate of interest paid by
such institution from time to time during the term of the Lease. The Security
Deposit shall not be considered an advance payment of rental or a measure of
Landlord's damages in case of default by Tenant. Upon the occurrence of any
Event of Default by Tenant, and such Event of Default continues for fifteen
(15) days after written notice from Landlord (which notice may be given
simultaneously with any other notice to which Tenant is entitled under the
Lease), Landlord may, from time to time in its sole discretion, without
prejudice to any other remedy, use and apply the Security Deposit to the extent
necessary to make good any arrearages of rent and any other damage, injury,
expense or liability suffered by Landlord by such Event of Default. Following
any such application of the Security Deposit, Tenant shall pay to Landlord on
demand as additional rent the amount so applied in order to restore the
Security Deposit to its original amount. If Tenant is not then in default
hereunder, any remaining balance of the Security Deposit, together with any
interest accrued thereon, shall be returned by Landlord to Tenant within a
reasonable period of time after the termination of the Lease and (i) Tenant
shall have surrendered the entire Premises to Landlord, (ii) Landlord shall
have inspected the Premises after such vacation, and (iii) Tenant shall have
complied with all of the terms, conditions and covenants in the Lease. If
Landlord transfers its interest in the Premises during the Lease Term, Landlord
may assign the Security Deposit to the transferee and thereafter shall have no
further liability for the return of such Security Deposit.
6. LANDLORD'S OBLIGATIONS.
(a) Subject to the limitations hereinafter set forth,
Landlord agrees, while Tenant is occupying the Premises and provided an Event
of Default by Tenant has not occurred, to furnish to Tenant: (i) facilities to
provide water at those points of supply both within the Premises and those
provided for general use of tenants of the Building; (ii) facilities to provide
a supply of electrical current reasonably necessary for general business office
use and occupancy of the Premises and electric lighting and a supply of
electrical current to the common areas of the Building; (iii) heating and
refrigerated air conditioning in season; and (iv) elevator and janitorial
service to the Premises, all such services to be provided in scope, quality
and frequency to those services being customarily provided by landlords in
comparable office buildings in the surrounding area. Heating, ventilation and
air conditioning requirements and standards under this Lease shall be subject,
however, to such regulations as the Department of Energy or other local, state
or federal governmental agency, Board or commission shall adopt from time to
time. In addition, Landlord agrees to maintain the public and common areas of
the Building, such as lobbies, stairs, corridors and restrooms, in reasonably
good order and condition; provided, however, that Tenant shall reimburse
Landlord, upon demand, for all repairs and additional maintenance resulting
from damages to such public or common areas caused by Tenant, or its employees,
agents or invitees. Landlord reserves the right, exercisable without notice
and without liability to Tenant for damage or injury to property, persons or
business and without effecting an eviction, constructive or actual, or
disturbance of Tenant's use or possession of the Premises, or giving rise to
any claim by Tenant for setoff or abatement of rent, to decorate and to make
repairs, alterations, additions, modifications, changes or improvements,
whether structural or otherwise, in and about the Building, or any part
thereof, and for such purposes to enter upon the Premises and, during the
continuance of any such work, to temporarily close doors, entryways, public
space and corridors in the Building and to interrupt or temporarily suspend
Building services and facilities. Landlord shall use reasonable efforts not to
materially interfere with the operation of Tenant's business while decorating
or making such repairs pursuant to this subsection.
(b) If Landlord, to any extent, falls to make
available any of the services to be provided by Landlord expressly set forth
above or if any slowdown, stoppage or interruption of, or any change in the
quantity, character or availability of, the services to be provided by Landlord
expressly set forth above occurs, such failure or occurrence shall not render
Landlord liable in any respect for damages to either person, property or
business, nor be construed as an eviction of Tenant or work an abatement of
rent, nor relieve Tenant from fulfillment of any covenant or agreement hereof.
Should any equipment or machinery furnished by Landlord break down or for any
cause beyond Landlord's reasonable control cease to function properly, Landlord
shall use reasonable diligence to repair same promptly, but Tenant shall have
no claim for abatement of rent or damages on account of any interruptions in
service occasioned thereby or resulting therefrom; provided, however, that if
(i) any such services are not furnished to the Premises for ten (10) or more
consecutive days after Landlord receives notice from Tenant, (ii) the Premises
are thereby rendered untenable, and (iii) the Landlord is not diligently
pursuing a cure of such interruption, then commencing with the eleventh (11th)
day after Landlord receives such notice, the Basic Rental shall be abated until
the Premises are again tenable.
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<PAGE> 8
7. IMPROVEMENT PREMISES.
(a) Landlord and Tenant agree to comply with the
following schedule in buildout of the Premises:
(i) Landlord has prepared, and Tenant has
approved a Space Plan for the Premises dated November 1, 1995. Any
modifications to the space Plan made after such date shall be made at Tenant's
expense and, if delay in occupancy occurs as a result of such modifications,
Tenant shall be liable to Landlord for Basic Rental attributable to each day
beyond the Anticipated Commencement Date that delivery of the Premises is
delayed.
(ii) Landlord shall prepare and deliver to
Tenant detailed floor plan layouts, together with working drawings and written
instructions sufficiently detailed to enable Landlord to let firm contracts
(herein called "Tenant Plans") with respect to and reflecting the partitions
and improvements in the Premises. Tenant shall fully and completely cooperate
with Landlord in the preparation of the Tenant Plans, shall promptly respond to
Landlord's requests for information and approvals within three (3) business
days after inquiry, and shall use its best efforts to assist Landlord to
complete the Tenant Plans as soon as possible. Tenant agrees to deliver to
Landlord, not later than three (3) business days after delivery of the Tenant
Plans to Tenant, an original executed copy of the Tenant Plans approved by
Tenant; provided, however, if Tenant, in good faith, reasonably objects to any
aspect of the Tenant Plans submitted by Landlord, Tenant shall specify in
detail any objection to such Tenant Plans as submitted to Tenant in a written
notice to Landlord within such 3-day period. Landlord shall, if applicable,
modify such Tenant Plans to address Tenant's written objections, and submit new
Tenant Plans to Tenant for approvals. Notwithstanding the foregoing, the
Tenant Plans shall remain subject to Landlord's review and approval, which
approval shall not be unreasonably withheld, and shall be deemed modified to
take account of any changes reasonably required by Landlord. If Tenant fails
to timely deliver the Tenant Plans as required herein or makes modifications to
the Tenant Plans after the deadlines provided in this subsection, Tenant shall
(1) pay to Landlord all reasonable expenses incurred by Landlord due to
Tenant's modifications and/or delay in delivering the Tenant Plans; and (2) pay
to Landlord as additional rent a per diem Basic Rental charge for each day
beyond the Anticipated Commencement Date that occupancy is delayed due to
Tenant's failure to timely comply with the requirements in this Section.
(iii) Time is of the essence as to all dates
provided in this subsection.
(b) Any changes to any approved Tenant Plans
desired by Tenant shall be submitted in writing and in detail to Landlord and
shall be subject to Landlord's consent, which consent shall not be unreasonably
withheld.
(c) Landlord shall, in a good and workmanlike
manner, diligently cause the Premises to be improved and completed in
accordance with the Tenant Plans by "Landlord's Contractor" (as hereinafter
defined). Landlord reserves the right however, (i) to make substitutions of
material of equivalent grade and quality when and if any specified material
shall not be readily and reasonably available, and (ii) to make changes
necessitated by conditions met in the course of construction, provided that
Tenant's approval of any substantial change shall first be obtained (which
approval shall not be unreasonably withheld or delayed so long as there shall
be general conformity with Tenant Plans).
(d) In the completion and preparation of the
Premises in accordance with the Tenant Plans, Landlord agrees to perform at its
own expense those items of work set forth on the schedules attached hereto as
EXHIBIT D - Building Standard Materials and EXHIBIT E - Tenant Space Plan
(herein collectively referred to as "Standard Tenant Work"), to the extent
required by Tenant Plans. All work requested by or as a result of actions of
Tenant to be performed by Landlord in addition to or in substitution for
Standard Tenant Work is hereinafter referred to as "Special Tenant Work." All
Special Tenant Work shall be furnished, installed and performed by Landlord,
utilizing a general contractor or construction manager ("Landlord's
Contractor") selected by Landlord (which may be an affiliate of Landlord or a
partner in Landlord or an affiliate of a partner in Landlord) for and on behalf
of Tenant and at Tenant's sole expense, based on Landlord's out-of-pocket
contract or purchase price for materials, labor and service, including, without
limit, any reasonable contractor's fee for the contractor's overhead and profit
and charges for cutting, patching, cleaning up and removal of waste and debris,
plus architects' and engineers, fees, plus the product obtained by multiplying
all of the foregoing (as reduced by appropriate credits for substituted
Standard Tenant Work) by fifteen percent (15%) for Landlord's expenses and
profit in handling the substitution.
(e) Tenant shall pay Landlord as additional
rent for all Special Tenant Work from time to time during the progress of the
work, within five (5) days after Landlord shall have given Tenant an invoice or
invoices therefor, in amounts representing Landlord's cost of such Special
Tenant Work performed (including, for this purpose, material for Special Tenant
Work purchased and delivered to the Building to the date of the invoice), less
the amounts paid by Tenant on account.
- 5 -
<PAGE> 9
8. OPERATING EXPENSES.
(a) During the term of this Lease, Tenant shall pay as
additional rent an amount (per each square foot within the Premises) equal to
the excess ("Excess") from time to time by which the per square foot Basic
Cost (which shall be calculated by dividing the Basic Cost by the total
rentable square feet in the Building) exceeds the Base Year Stop. Landlord, at
its option, may collect such additional rent for each calendar year in a lump
sum, to be due and payable within thirty (30) days after Landlord furnishes to
Tenant a statement of actual Basic Cost for the previous year, or, beginning
with the first day of the thirteenth month following the Commencement Date, and
on each January 1, thereafter, Landlord shall also have the option to make a
good faith estimate of the Excess for each upcoming calendar year and may
require the monthly payment of such additional rent equal to one-twelfth (1/12)
of such estimate.
(b) By May 1 of each calendar year during Tenant's
occupancy and the calendar year following termination of this Lease, or as soon
thereafter as practical, Landlord shall furnish to Tenant a statement of
Landlord's actual Basic Cost for the previous year. If for any calendar year
additional rent collected for the prior year as a result of Landlord's estimate
of Basic Cost is (i) in excess of the additional rent actually due during such
prior year, then Landlord shall either credit such overpayment towards Tenant's
estimated share of operating expenses for the next year or refund to Tenant any
overpayment, or (ii) less than the additional rent actually due during such
prior year, then Tenant shall pay to Landlord, on demand, any underpayment with
respect to the prior year.
(c) Each statement furnished by Landlord to Tenant shall be
conclusive and binding upon Tenant unless, within sixty (60) days after receipt
of such statement, Tenant delivers to Landlord a written notice specifying the
particular details for which such statement is claimed to be incorrect.
Pending the determination of such dispute, Tenant shall pay without delay the
full amount of the additional rent payable by Tenant in accordance with each
such statement that Tenant is disputing. Without limiting the preceding
sentence, Tenant, or a certified public accountant acting as Tenant's agent,
shall have the right, during Landlord's normal business hours and after
reasonable notice, to inspect the books and records of Landlord applicable to
the determination of any statement of any additional rent payable by Tenant for
the purpose of verifying in good faith the information contained in such
statement for a period of up to one year after the receipt of such statement by
Tenant. In the event that Tenant's inspection discloses that Landlord's
billings to Tenant for increased Operating Expenses exceeded by five percent
(5%) the actual operating expenses attributable to Tenant, then Landlord shall
refund the difference as noted in subsection (b) and will pay Tenant for the
reasonable expense incurred for an independent third-party in performing such
inspection, but in any event not more than $1,000.00.
(d) Should Tenant require any additional work or service,
including but not limited to heating, ventilation and air conditioning ("HVAC")
furnished outside Landlord's normal operating hours of 8:00 a.m. to 6:00 p.m.,
Monday through Friday, 8:00 a.m. to 1:00 p.m., Saturday, excluding holidays,
Landlord may, upon reasonable advance notice by Tenant, furnish such additional
services at a charge of $50.00 per hour, subject to upward adjustment due to
increases in utilities and wage expenses, it being agreed that the cost to the
Landlord of such additional services shall not be considered or treated as
Basic Cost.
(e) Landlord may, at any time in its sole discretion,
require separate metering for gas, electric power or for any other utility
service required by Tenant if such service is deemed by Landlord to be in
excess of Building standard usage or for any other reason, in which case the
cost of such metering shall be at Tenant's sole cost and expense, due and
payable upon demand by Landlord, and in which event Tenant shall pay for all
such utility service in excess of its normal and customary usage, as metered.
For any utility services that are separately metered as prescribed herein, the
amount of said services which had been included in the calculation of the Base
Year Stop or the calculation of Basic Cost shall be excluded therefrom.
(f) Notwithstanding any expiration or termination of this
Lease prior to the end of the Lease Term, Tenant's obligations to pay any and
all additional rent pursuant to this Lease shall continue and shall cover all
periods up to the expiration or termination date of this Lease. Tenant's
obligation to pay any and all additional rent or other sums owing by Tenant to
Landlord under this Lease shall survive any expiration or termination of this
Lease.
9. USE.
Tenant shall use the Premises only for the Permitted Use.
Tenant will not occupy or use the Premises, or permit any portion of the
Premises to be occupied or used, for any business or purpose other than the
Permitted Use or for any use or purpose which is unlawful, in part or in
whole, disreputable in any manner, or extra hazardous, nor will Tenant permit
anything to be done which shall in any way cause substantial noise, vibrations
or fumes, or increase the rate of insurance on the Building or contents or
cause any cancellation of any insurance policy covering the Building or any
portion of its contents. In the event that there shall be any increase in the
rate of insurance on the Building or contents created by Tenant's acts,
omissions or conduct of business, Tenant hereby agrees to pay to Landlord the
amount of such increase on demand. Tenant
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<PAGE> 10
will conduct its business and control its agents, employees and invitees in
such a manner as not to create any nuisance, nor interfere with or disturb the
possession of other tenants or Landlord in the management of the Building.
Tenant shall not, without the prior written consent of Landlord, paint, install
lighting or decorations, which consent shall not be unreasonably withheld, or
install any signs, window or door lettering or advertising media of any type on
or about the Premises or any part thereof.
10. TENANT'S REPAIRS AND ALTERATIONS.
Tenant shall not in any manner deface or injure or make
unapproved modifications of the Premises or the Building and will pay the cost
of repairing any damage or injury done to the Premises or the Building or any
part thereof by Tenant or Tenant's agents, employees or invitees. Tenant shall
throughout the Lease Term take good care of the Premises and keep them free
from waste and nuisance of any kind. Tenant agrees, at Tenant's sole cost and
expense, to keep the Premises, including, without limitation, all fixtures
installed by Tenant and any plate glass and special store fronts, in good
condition and make all necessary non-structural repairs and replacements except
those caused by fire, casualty, Landlord's willful misconduct or negligence, or
acts of God covered by Landlord's fire insurance policy covering the Building.
Such repairs and replacements shall be in quality equal to the original work
and installation. If Tenant fails to make such repairs within fifteen (15)
days after the occurrence of the damage or injury, Landlord may, at its sole
option, make such repair, and Tenant shall, upon demand therefor, pay Landlord
for Landlord's cost thereof plus fifteen percent (15%) for overhead costs.
Notwithstanding anything in the Lease to the contrary, Tenant
will not make or allow to be made any alterations or physical additions in or
to the Premises, including changes in locks on doors, plumbing, lighting,
wiring or partitions, without the prior written consent of Landlord, such
consent not to be unreasonably withheld or delayed, as long as the alterations
or additions do not affect underlying life safety systems or common Building
operating systems. All maintenance, repairs, alterations, additions or
Improvements shall be conducted only by contractors or subcontractors approved
in advance in writing by Landlord, it being understood that Tenant shall
procure and maintain, and shall cause such contractors and subcontractors
engaged by or on behalf of Tenant to procure and maintain, insurance coverage
against such risks, in such amounts and with such companies as Landlord may
require in connection with any such maintenance, repair, alteration, addition
or improvement.
At the end or other termination of this Lease, Tenant shall
deliver up the Premises with all improvements located therein in good repair
and condition, reasonable wear and tear, fire, casualty and damage caused by
Landlord's willful misconduct or negligence excepted, and shall deliver to
Landlord all keys to the Premises. All alterations, additions or improvements
(whether temporary or permanent in character) made in or upon the Premises by
Landlord or Tenant shall be Landlord's property upon termination of this Lease
and shall remain on the Premises without compensation to Tenant; provided,
however, that if Landlord elects to have Tenant remove any alteration,
addition, improvement or partition, Landlord shall make such election upon
giving consent to such alteration, addition, improvement or partition.
Tenant shall then remove such alteration, addition, improvement or partition
whether erected by Landlord or Tenant, and shall restore the Premises to its
original condition by the date of termination of this Lease or upon earlier
vacating of the Premises, except as provided herein. Landlord hereby elects
to have any and all computer and/or telephone cables installed by Tenant or
which may in the future be installed by Tenant, removed upon the termination of
the Lease or upon Tenant's earlier vacating of the Premises. If Tenant fails
to restore the Premises upon Landlord's request, Landlord shall have the right
to perform such restoration and Tenant shall be liable for all costs and
expenses incurred by Landlord therefor.
11. ASSIGNMENT AND SUBLETTING.
(a) Landlord's Prior Consent Required. Neither Tenant nor
Tenant's representatives, successors and assigns nor any subtenant or assignee
will assign, transfer, mortgage or otherwise encumber this Lease or sublet or
rent (or permit the occupancy or use of) the Premises, or any part thereof,
without obtaining the prior written consent of Landlord. Landlord's consent
to assign this Lease or sublet the Premises will not be unreasonably withheld,
provided Tenant satisfies all applicable provisions of subsection (b) below,
nor shall any assignment or transfer of this Lease or the right of occupancy
hereunder be effectuated by operation of law or otherwise without the prior
written consent of Landlord. Any reasonable expenses incurred by Landlord with
respect to the review and consent or denial of consent of the foregoing shall
be paid by Tenant to Landlord as additional rent, and shall be due and payable
with the monthly installment of rent when billed.
(b) Qualification of Assignee or Subtenant. Subject to
the provisions of Section 11(c) hereof, Landlord shall not unreasonably
withhold its consent hereunder to any assignment or sublease by Tenant,
provided that (x) in the event of a sublease Tenant shall satisfy each of the
following conditions prior to any such sublease becoming effective; and (y) in
the event of an assignment, Tenant shall satisfy the conditions of subsections
(i), (ii), (iv), (v) and (vi) prior to any such assignment becoming
effective:
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<PAGE> 11
(i) Tenant must first notify Landlord, in writing,
of any proposed assignment or sublease, at least thirty (30) days prior to the
effective date of such proposed assignment or sublease. The notice to
Landlord must include a copy of the proposed assignment or sublease and a copy
of the proposed assignee's or subtenant's financial statement for its most
recent fiscal year, prepared in accordance with generally accepted accounting
principles and certified by a public accountant or an executive officer of the
proposed assignee or subtenant.
(ii) The assignee or subtenant must have a credit
rating is which better than or equal to that of Tenant, as reasonably determined
by Landlord.
(iii) The sublease must (A) be expressly subject
and subordinate to this Lease, (B) require that any subtenant comply with and
abide by all of the terms of the Lease, and (C) provide that any termination of
this Lease shall extinguish the sublease as well.
(iv) The assignee or subtenant may not propose to
change the use of the premises to a purpose other than as stated in Section 9
hereof, may not be a place of public accommodation as defined under the
Americans with Disabilities Act, nor conduct its business in a manner which,
in Landlord's reasonable judgment, is not appropriate for comparable office
buildings in the metropolitan Washington, D.C. area.
(v) The assignee or subtenant may not be a tenant,
subtenant, or other occupant of any part of the Building, unless Landlord is
unable to offer such occupant comparable space elsewhere in the Building.
(vi) The Tenant may not be in default under this
Lease.
(vii) The sublease shall contain the following
clause:
"Underlying Lease Agreement. This Sublease and
Subtenant's rights under this Sublease shall at all times be subject
and subordinate to the underlying Lease identified in Paragraph _____
hereof, and Subtenant shall perform all obligations of Tenant under
said Lease, with respect to the Sublease Premises. Subtenant
acknowledges that any termination of the underlying Lease shall
extinguish this Sublease. Landlord's consent to this Sublease shall
not make Landlord a party to this Sublease, shall not create any
privity of contract between Landlord and Subtenant or other
contractual liability or duty on the part of the Landlord to the
Subtenant, shall not constitute its consent or waiver of consent to
any subsequent sublease or sub-sublease, and shall not in any manner
increase, decrease or otherwise affect the rights and obligations of
Landlord and Tenant under the underlying Lease, in respect of the
Sublease Premises. Subtenant shall have no right to assign this
Sublease or further sublet the Premises without the prior written
consent of Landlord. Any term of this Sublease that in any way
conflicts with or alters the provisions of the underlying Lease shall
be of no effect as to Landlord and Landlord shall not assume any
obligations as landlord under the Sublease and Tenant shall not
acquire any rights under the Sublease directly assertable against
Landlord under the underlying Lease. Tenant hereby collaterally
assigns to Landlord this Sublease and any and all payments due to
Tenant from Subtenant as additional security for Tenant's performance
of all of its covenants and obligations under the underlying Lease,
and authorizes Landlord to collect the same directly from Subtenant
and otherwise administer the provisions of this Sublease, at the
option of Landlord. Subtenant hereby consents to such collateral
assignment of this Sublease to Landlord and agrees to observe its
obligations created hereby."
(c) Landlord's Consent. Tenant shall have the right to
assign the Lease or sublet the Premises or a portion thereof after first
obtaining the written consent of Landlord as provided in Section 11(a) above.
Upon receipt of Landlord's consent to such assignment or sublease, Tenant shall
pay Landlord, within ten (10) days of receipt, one-half (1/2) of the amount of
rent payable under such assignment or sublease in excess of the amount of rent
payable by Tenant hereunder with respect to the Premises or, in the event of a
sublease, that portion of the Premises sublet, offset by any direct expenses
incurred by Tenant actually incurred in assigning the Lease or subleasing such
portion of the Premises (amortized in equal monthly payments over the remaining
term of the Lease, if assigned, or, if applicable, over the initial term of
such sublease). Tenant covenants and agrees to provide Landlord with
semi-annual statements, prepared and verified by a certified public accountant
or executive officer of Tenant, stating the amount of rent or other
consideration received by Tenant from its assignee or subtenant(s) during such
semi-annual period. If such statement shows Tenant failed to make the full
payment to Landlord required herein, a late charge equal to ten percent (10%)
of the amount due shall be paid by Tenant to Landlord as additional rent, and
shall be due and payable by the assignee or Tenant with the monthly installment
of rent next becoming due.
(d) No Waiver or Release. The consent by Landlord to any
assignment or subletting shall not be construed as a waiver or release of
Tenant from the terms of any covenant or obligation under this Lease, nor shall
the collection or acceptance of rent from any such assignee, subtenant or
occupant
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<PAGE> 12
constitute a waiver or release of Tenant of any covenant or obligation
contained in this Lease, nor shall any such assignment or subletting be
construed to relieve Tenant from obtaining the consent in writing of Landlord
to any further as assignment or subletting. Tenant hereby assigns to Landlord
the rent due from any subtenant of Tenant and hereby authorizes each such
subtenant to pay said rent directly to Landlord, at Landlord's option, in the
event of any default by Tenant under the terms of this Lease.
(e) Subsidiary or Affiliate. Provided Tenant delivers
notice to Landlord not less than thirty (30) days prior to any such assignment
or sublease, Tenant may assign this Lease, or sublease all or part of the
Premises, without the consent of Landlord, to:
(i) any corporation that has the power to direct
Tenant's, management and operation with a net worth comparable to Tenant's, or
any corporation whose management and operation is controlled by Tenant with a
net worth comparable to Tenant's; or
(ii) any corporation a majority of whose voting
stock is owned by Tenant; or
(iii) any corporation in which or with which Tenant,
its corporate successors or assigns, is merged or consolidated, in accordance
with applicable statutory provisions for merger or consolidation of
corporations, so long as (A) the liabilities of the corporations participating
in such merger or consolidation are assumed by the corporation surviving such
merger or created by such consolidation and (B) the successor can demonstrate
by balance sheets and other financial documentation submitted to Landlord that
it is capable of servicing all of Tenant's financial obligations under this
Lease.
12. INDEMNITY.
(a) Landlord shall not be liable for, and Tenant shall
indemnify and save harmless Landlord, ground lessor, if any, and Landlord's
managing agent, if any, from and against and from all fines, damages, suits,
claims, demands, losses and actions (including reasonable attorneys' fees) for
any injury to person (including death) or damage to or loss of property on or
about the Premises caused by Tenant, its employees, contractors, subtenants,
invitees or by any other person entering the Premises or the Building under the
express or implied invitation of Tenant, or arising out of Tenant's use of the
Premises. Landlord shall not be liable or responsible for any loss or damage
to any property or death or injury to any person (including Tenant, its agents,
employees or invitees) occasioned by theft, fire, act of God, public enemy,
criminal conduct of third parties, injunction, riot, strike, insurrection, war,
court order, requisition or other governmental body or authority, by other
tenants of the Building or any other matter beyond the reasonable control of
Landlord, or for any injury or damage or inconvenience to Tenant which may
arise through repair or alteration of any part of the Building, or failure to
make repairs, or from any cause whatever except Landlord's negligence or
willful misconduct.
(b) Landlord hereby agrees to make no claim against
Tenant, and will indemnify and save Tenant, its agents, employees and invitees
harmless from any injury, damage or claim which shall be made against Tenant by
any agent, employee, licensee or invitee of Landlord or by others claiming the
right to be on or about the common areas for any injury, loss or damage to
person or property occurring upon the common areas, unless due to Tenant's
negligence or willful misconduct.
13. SUBORDINATION.
This Lease and all rights of Tenant hereunder shall be and are
subject and subordinate at all times to any deeds of trust, mortgages,
installment sale agreements and other instruments or encumbrances, as well as
to any ground leases or primary leases, that now or hereafter cover all or any
part of the Building, the Land or an interest of Landlord therein, and to any
and all advances made on the security thereof, and to any and all increases,
renewals, modifications, consolidations, replacements and extensions of any of
such deeds of trust, mortgages, installment sale agreements, instruments,
encumbrances or leases, as well as any substitutions therefor, all
automatically and without the necessity of any further action on the part of
Tenant to effectuate such subordination. Tenant shall, however, upon demand at
any time or times execute, acknowledge and deliver to Landlord any and all
instruments and certificates that in the reasonable judgment of Landlord may be
necessary or proper to confirm or evidence such subordination. Notwithstanding
the foregoing, if any mortgagee, trust beneficiary or ground lessor shall elect
to have this Lease treated as if it became effective and Tenant had taken
possession prior to the lien of its mortgage or deed of trust or prior to its
ground lease, and shall give notice thereof to Tenant, this Lease shall be
deemed to have become effective and Tenant's right to possession shall be
considered prior to such mortgage, deed of trust, or prior to its ground lease
whether this Lease is dated prior or subsequent to the date of said mortgage,
deed of trust or ground lease or the date of recording thereof. In the event
any mortgage or deed of trust to which this Lease is subordinate is foreclosed
or a deed in lieu of foreclosure is given to the mortgagee or beneficiary,
Tenant shall attorn to the purchaser at the foreclosure sale or to the grantee
under the deed in lieu of foreclosure; in the event any ground lease to which
this Lease is subordinate is terminated, Tenant
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shall attorn to the ground lessor. Tenant shall upon demand at any time
execute, acknowledge and deliver to Landlord's mortgagee (including the
beneficiary under any deed of trust) or other holder any and all instruments
and certificates that in the judgment of Landlord's mortgagee may be necessary
or proper to confirm or evidence such attornment. Notwithstanding the
foregoing, Landlord shall make reasonable efforts to obtain a non-disturbance
agreement from all mortgagees and beneficiaries of any deeds of trust now or
hereafter placed on the Building, provided that the same can be obtained at no
cost, expense, or liability to Landlord. Landlord shall, however, have no
liability to Tenant as a result of its failure to obtain any non-disturbance
agreement, provided that Landlord endeavored in good faith to obtain such an
agreement.
14. RULES AND REGULATIONS.
Tenant and Tenant's agents, contractors, employees and
invitees will comply fully with all requirements of the Rules and Regulations
of the Building and related facilities, as specified in the Rules and
Regulations now or hereafter sent by Landlord to Tenant. Landlord shall at all
times have the right to change such rules and regulations to promulgate other
Rules and Regulations in such manner as Landlord may deem advisable, in its
reasonable discretion, for safety, care or cleanliness of the Building and
related facilities or the Premises, and for preservation of good order therein,
all of which Rules and Regulations, changes and amendments will be forwarded to
Tenant in writing and shall be carried out and observed by Tenant. Any such
promulgated Rules and Regulations shall be nondiscriminatory and shall apply
fairly to all tenants of the Building. Tenant shall be responsible for
compliance therewith by the agents, contractors, employees and invitees of
Tenant.
15. INSPECTION.
Landlord or its officers, agents and representatives, and any
ground lessor or mortgagee thereof, shall have the right to enter into and upon
any and all parts of the Premises at all reasonable hours upon reasonable
advance notice (or, in any emergency or for the purpose of performing routine
maintenance, at any hour and without advance notice) to (a) inspect the
Premises at any time (including the right to perform periodic environmental
studies, audits and reports) (Landlord shall use reasonable efforts not to
materially interfere with the operation of Tenant's business during any such
inspections and shall use reasonable efforts to notify Tenant, except in
emergency situations, of such inspections) (b) clean or make repairs or
alterations or additions as Landlord may deem necessary (but without any
obligation to do so, except as expressly provided for herein), or (c) show the
Premises to prospective tenants, purchasers or lenders; and Tenant shall not be
entitled to any abatement or reduction of rent by reason thereof, nor shall
such be deemed to be an actual or constructive eviction.
16. CONDEMNATION.
If the whole or, as determined by Landlord in its sole
discretion, any substantial part of the Land or the Building should be taken
for any public or quasi-public use under governmental law, ordinance or
regulation, or by right of eminent domain, or by private purchase in lieu
thereof and the taking would prevent or materially interfere with the use of
the Premises for the purpose for which they are being used, as determined by
Landlord, this Lease shall terminate and the rent shall be abated during the
unexpired portion of this Lease, effective when the physical taking of said
Land or the Building shall occur. If part of the Land or Building shall be
taken for any public or quasi-public use under any governmental law, ordinance
or regulation, or by right of eminent domain, or by private purchase in lieu
thereof, and this Lease is not terminated as provided in the sentence above,
this Lease shall not terminate but the rent payable hereunder during the
unexpired portion of this Lease shall be adjusted to reflect Tenant's new
proportionate share of the Building. In the event of any such taking or
private purchase in lieu thereof, Landlord and Tenant shall each be entitled to
all remedies provided by law; provided, however, that any award paid to Tenant
shall not detract from any award which Landlord is entitled to receive; and if
Landlord's award is reduced to any extent as a result of any award to Tenant,
then Tenant shall assign and pay over to Landlord the amount by which
Landlord's award was so reduced.
17. FIRE OR OTHER CASUALTY.
In the event of damage to or destruction of the Premises or
the Building, or the entrance and other common facilities necessary to provide
normal access to the Premises, caused by fire or other casualty, Tenant shall
provide immediate notice thereof to Landlord, and Landlord shall make repairs
and restorations as hereafter expressly provided, unless this Lease shall be
terminated by Landlord or unless any mortgagee which is entitled to receive
casualty insurance proceeds fails to make available to Landlord a sufficient
amount of such proceeds to cover the cost of such repairs and restoration.
If (i) the damage is of such nature or extent, in the judgment
of Landlord's architect, that more than two hundred ten (210) consecutive days,
after commencement of the work, would be required (with normal work crews and
hours) to repair and restore the part of the Premises or Building which has
been damaged, or (ii) a substantial portion of the Premises or the Building is
so damaged that, in Landlord's sole judgment, it is uneconomic to restore or
repair the Premises or the Building, as the case may be, Landlord shall so
advise Tenant
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promptly; and Landlord or Tenant, for a period of ten (10) days thereafter,
shall have the right to terminate this Lease by written notice to the other, as
of the date specified in such notice, which termination date shall be no later
than thirty (30) days after the date of such notice. In the event of such fire
or other casualty, if this Lease is not terminated pursuant to the terms of
this Section 17, and if (i) sufficient casualty insurance proceeds are
available for use for such restoration or repair, and (ii) this Lease is then
in full force and effect, Landlord shall proceed promptly and diligently to
restore the Premises to its substantially similar condition prior to the
occurrence of the damage, provided that Landlord shall not be obligated to
repair or restore any alterations, additions or fixtures which Tenant or any
other tenant may have installed unless Tenant, in a manner satisfactory to
Landlord, assures payment in full of all costs which may be incurred by
Landlord in connection therewith. Landlord shall not insure any improvements
or alterations to the Premises in excess of Standard Tenant Work (unless such
improvements or alterations become fixtures), equipment or other property of
Tenant. Tenant shall, at its sole expense, insure the value of its leasehold
improvements, fixtures, equipment or other property located in the Premises,
for the purpose of providing funds to Landlord to repair and restore the
Premises to its substantially similar condition prior to occurrence of the
damage. If there be any such alteration, fixtures or additions and Tenant does
not assure or agree to assure payment of the cost or restoration or repair as
aforesaid, Landlord shall have the right to determine the manner in which the
Premises shall be restored so as to be substantially the same as the Premises
existed prior to the damage occurring, as if such alterations, additions or
fixtures had not been made or installed. The validity and effect of this Lease
shall not be impaired in any way by, and Landlord shall have no liability as a
result of, the failure of Landlord to complete repairs and restoration of the
Premises or of the Building within two hundred ten (210) consecutive days after
commencement of work, even if Landlord had in good faith notified Tenant that
it estimated that the repair and restoration would be completed within such
period, provided that Landlord proceeds diligently with such repair and
restoration.
In the case of damage to the Premises not caused by the
negligence or willful misconduct of the Tenant or any of its agents, employees
or invitees, and which is of nature or extent that Tenant's continued occupancy
is substantially impaired, the rent otherwise payable by Tenant hereunder shall
be equitably abated or adjusted for the duration of such impairment as
determined by Landlord. In no event, however, shall any damages be payable by
Landlord to Tenant in respect of business interruption resulting from any fire
or other casualty on the Premises or Building. Tenant shall be responsible to
insure and/or repair all of Tenant's leasehold improvements and all equipment,
fixtures and personal property located in the Premises.
18. HOLDING OVER.
Tenant shall, at the termination of this Lease by lapse of
time or otherwise, yield up immediate possession to Landlord. If Tenant holds
over after the expiration or termination of this Lease, all of the other terms
and provisions of this Lease shall be applicable during such period, except
that Tenant shall pay Landlord from time to time upon demand, as partial
damages for the period of any holdover, an amount equal to one hundred fifty
percent (150%) of the Basic Rental in effect on the termination date, computed
on a daily basis for each day of the holdover period. No holding over by
Tenant shall operate to extend this Lease except as otherwise expressly
provided in this Lease. The foregoing notwithstanding, Landlord, in addition
to accepting the daily damages during the period of such holding over, shall be
entitled to pursue all remedies at law or equity, including, without
limitation, rights to ejectment and damages.
19. TAXES.
(a) During each calendar year or portion thereof included
in the Lease Term, and any renewal thereof, Tenant shall pay to Landlord as
additional rent, Tenant's Proportionate Share of Real Estate Taxes which exceed
the Base Real Estate Taxes. Real Estate Taxes shall mean (i) all real estate
taxes, including general and special assessments, if any, which are imposed
upon Landlord or assessed against the Building and/or the Land during any
calendar year, and (ii) any other present or future taxes or governmental
charges that are imposed upon Landlord or assessed against the Building and/or
the Land during any calendar year which are in the nature of, in addition to or
in substitution for real estate taxes, including, without limitation, any
license fees, tax measured by or imposed upon rents, or other tax or charge
upon Landlord's business of leasing the Building, but shall not include any
capital stock tax, excess profits tax, transfer tax, or federal, state or local
corporate income tax. Real Estate Taxes shall also include all expenses
incurred by Landlord in obtaining or attempting to obtain a reduction of Real
Estate Taxes, including but not limited to, legal fees.
(b) Commencing on January 1, 1997, and on each January
1st thereafter, Landlord may deliver to Tenant a statement of Landlord's
estimate of any increase in the annual Real Estate Taxes for the then current
calendar year over the Base Estate Taxes and Tenant's percentage thereof, such
statement to be delivered on or before April 1st of said calendar year, or as
soon thereafter as possible. Within thirty (30) days after delivery of such
statement (including any statement delivered after the expiration or
termination of this Lease), Tenant shall pay to Landlord with each month's
Basic Rental, as additional rent, one-twelfth (1/12) of Tenant's aforesaid
percentage share of
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such estimated increase in the annual Real Estate Taxes, except that Tenant's
first payment shall include the (1/12th) monthly shares for the months from
January 1st through the month in which Landlord submitted the estimate of the
increase in the annual Real Estate Taxes for the then current calendar year.
(c) Commencing on January 1, 1998, Landlord shall deliver
to Tenant a statement (including therewith a copy of the Real Estate Tax Bill)
showing the determination of the increase in the annual Real Estate Taxes for
the preceding calendar year and Tenant's total percentage thereof, such
statement to be delivered on or before April 1st of the then current calendar
year, or as soon thereafter as reasonably practicable. If such statement shows
that Tenant's payments, if any, of the estimated monthly increase in the annual
Real Estate Taxes for said preceding calendar year exceeded Tenant's actual
increases for said year, then Tenant may deduct such overpayment from its next
payment or payments of monthly rent. If such statement shows that Tenant's
percentage share of Landlord's actual increase in the annual Real Estate Taxes
exceeded Tenant's payments, if any, of the estimated monthly increase in the
annual Real Estate Taxes for said preceding calendar year, then Tenant shall
pay the total amount due to Landlord, which amount shall constitute additional
rent hereunder due and payable with the first monthly installment of rent due
after delivery of said statement.
(d) In the event that the expiration date or other date
of termination of this Lease is not December 31st, the increase to be paid by
Tenant or any refund to which Tenant is entitled from Landlord for the calendar
year in which the expiration date occurs shall be determined by multiplying the
amount of Tenant's share thereof for the full calendar year by a fraction with
the number of days during such calendar year prior to the expiration date as
the numerator, and with 365 as the denominator. The termination of this Lease
shall not affect the obligations of Landlord and Tenant pursuant to this
Section to be performed after such termination.
(e) Tenant shall be liable for all taxes levied or
assessed against personal property, furniture or fixture, placed by Tenant in
the Premises, and if any such taxes for which Tenant is liable are in any way
levied or assessed against Landlord, Tenant shall pay the Landlord upon demand
that part of such taxes for which Tenant is primarily liable hereunder. Should
Landlord receive a tax credit or abatement by virtue of its ownership of the
Building, Operating Expenses and Tenant's Proportionate Share of Real Estate
Taxes shall be adjusted to reflect the benefit of such credit or abatement.
20. EVENTS OF DEFAULT.
The occurrence of any of the following events shall be deemed
to be an event of default ("Event of Default") by Tenant under this Lease:
(a) Tenant shall fail to pay when due any rental or other
sums payable by Tenant hereunder (or under any other lease now or hereafter
executed by Tenant in connection with space in the Building), and same is not
cured within five (5) business days after Landlord's written notice thereof to
Tenant.
(b) Tenant shall fail to comply with or observe any other
provision of this Lease (or any other lease now or hereafter executed by Tenant
in connection with space in the Building), and same is not cured within fifteen
(15) days after Landlord's written notice thereof to Tenant. Notwithstanding
the foregoing, if (i) the default is of such a nature that fifteen (15) days is
an unreasonably short period of time in which to cure the default; (ii) Tenant
has commenced curing the default within the fifteen (15) day period; and (iii)
Tenant is continuing to diligently pursue a cure of such default, then Tenant
shall have an additional thirty (30) days in which to complete the cure of said
default.
(c) Tenant abandons the Premises, or removes or attempts
to remove Tenant's goods or property therefrom other than in the ordinary
course of business or does not operate or hold the Premises open for business
for more than 10 consecutive days or for more than 30 non-consecutive days
during any three-month period, without regard to whether Tenant has paid to
Landlord in full all rent and charges that may have become due.
(d) Tenant or any partner or guarantor of Tenant, as the
case may be, shall apply for or consent to the appointment of a receiver,
trustee or liquidator of itself or himself or any of its or his property, admit
in writing its or his inability to pay its or his debts as they mature, make a
general assignment for the benefit of creditors, be adjudicated a bankrupt,
insolvent or file a voluntary petition in bankruptcy or a petition or an answer
seeking reorganization or an arrangement with creditors or to take advantage of
any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution
or liquidation law or statute, or an answer admitting the material allegations
of a petition filed against it or him in any proceeding under any such law, or
if action shall be taken by Tenant or any partner or guarantor of Tenant for
the purposes of effecting any of the foregoing.
(e) Any court of competent jurisdiction shall enter an
order, judgment or decree approving a petition seeking reorganization of Tenant
or all or a substantial part of the assets of Tenant or any partner or
guarantor of Tenant, or appointing a receiver, sequestrator, trustee or
liquidator of Tenant or any partner or guarantor of Tenant or any of its or his
property, and such
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order, judgment or decree shall continue unstayed and in effect for any period
of at least thirty (30) days.
21. REMEDIES.
Upon the occurrence of any Event of Default specified in this
Lease, Landlord shall have the option to pursue any one or more of the
following remedies without any notice or demand whatsoever:
(a) Distrain, collect or bring an action for such rent as
may be in arrears, and request entry of judgment therefor as provided for in
case of rent in arrears, or file a proof of claim in any bankruptcy or
insolvency proceeding for such rent, or institute any other proceedings,
whether similar or dissimilar to the foregoing, to enforce payment thereof.
(b) Declare due and payable and sue for and recover, all
unpaid rent for the unexpired period of the Lease Term (and also all additional
rent as the amounts thereof can be determined or reasonably estimated) as if by
the terms of this Lease the same were payable in advance, together with all
legal fees and other expenses by Landlord in connection with the enforcement of
any of Landlord's rights and remedies hereunder.
(c) Terminate this Lease, in which event Tenant shall
immediately surrender the Premises to Landlord; and if Tenant fails to do so,
Landlord may, without prejudice to any other remedy which it may have for
possession or arrearages in rent, enter upon and take possession of the
Premises and expel or remove Tenant and any other person who may be occupying
the Premises or any part thereof, without being liable for trespass or any
claim for damages therefor, and Tenant agrees to pay to Landlord on demand the
amount of all loss and damage which Landlord may suffer by reason of such
termination, whether through inability to relet the Premises on satisfactory
terms or otherwise, including the loss of rental for the remainder of the Lease
Term.
(d) Without termination of the Lease, enter upon and take
possession of the Premises and expel or remove Tenant and any other person who
may be occupying the Premises or any part thereof, without being liable for
trespass or any claim or damages therefor; and if Landlord so elects, relet the
Premises on behalf of the Tenant on such terms as Landlord shall deem advisable
and receive the rent therefor, and Tenant agrees to pay to Landlord on demand
any deficiency that may arise by reason of such reletting for the remainder of
the Lease Term.
(e) Without termination of the Lease, enter upon the
Premises, by force if necessary, without being liable for trespass or any claim
for damages therefor, and do whatever Tenant is obligated to do under the terms
of this Lease; and Tenant agrees to reimburse Landlord on demand for
any-expenses which Landlord may incur in thus effecting compliance with
Tenant's obligations under this Lease, and Tenant further agrees that Landlord
shall not be liable for any damages resulting to the Tenant from such action.
(f) If Tenant fails to perform any covenant or observe any
condition to be performed or observed by Tenant hereunder or acts in violation
of any covenant or condition hereof, Landlord may, but shall not be required to
on behalf of Tenant, perform such covenant and/or take such steps, including
entering upon the Premises, as may be necessary or appropriate, if Landlord
shall have given Tenant at least three (3) business days prior written notice
of Landlord's intention to do so, unless an emergency situation exists, in
which case Landlord shall have the right to proceed immediately and all costs
and expenses incurred by Landlord in so doing, including reasonable legal fees,
shall be paid by Tenant to Landlord upon demand, plus interest at the overdue
interest rate set forth herein from the date of expenditure(s) by Landlord, as
additional rent. Landlord's proceeding under the rights reserved to Landlord
under this Section shall not in any way prejudice or waive any rights Landlord
might otherwise have against Tenant by reason of Tenant's default.
(g) Exercise any other rights and remedies available to
Landlord at law or in equity. No reentry or taking possession of the Premises
by Landlord shall be construed as an election on its part to terminate this
Lease, unless a written notice of such intention be given to Tenant. Neither
pursuit of any of the foregoing remedies provided nor any other remedies
provided herein or by law shall constitute a forfeiture or waiver of any rent
due to Landlord hereunder or of any damages accruing to Landlord by reason of
the violation of any of the terms, provisions and covenants herein contained.
Landlord's acceptance of rent following an Event of Default hereunder shall not
be construed as Landlord's waiver of such Event of Default. No waiver by
Landlord of any violation or breach of any of the terms, provisions and
covenants herein contained shall be deemed or construed to constitute a waiver
of any other violation or Event of Default. The loss or damage that Landlord
may suffer by reason of termination of this Lease or the deficiency from any
reletting as provided for above shall include the expense of repossession and
any repairs or remodeling undertaken by Landlord following possession. Should
Landlord at any time terminate this Lease for any Event of Default, Tenant
shall not be relieved of its liabilities and obligations hereunder and, in
addition to any other remedy Landlord may have, Landlord may recover from
Tenant all damages Landlord may incur by reason of such Event of Default,
including the cost of recovering the Premises and the loss of rental for the
remainder of the Lease Term. Tenant's obligations and liabilities under this
Lease shall also survive repossession and reletting of the Premises by
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Landlord pursuant to the foregoing provisions of this Section 21.
Notwithstanding anything to the contrary contained in this Section, in
computing the amount due Landlord as a result of any Event of Default by
Tenant, Tenant shall not be entitled to receive any credit, upon reletting by
Landlord after Tenant's default, for any rent or other sums received by
Landlord in excess of those for which Tenant is otherwise obligated herein.
(h) The abatement of Basic Rental, if any, and other
concessions of the Landlord (which may include among other items: (i) brokerage
fees; (ii) moving allowances; (iii) Tenant improvements; (iv) Lease
assumptions; (v) unamortized portions of the buildout; and (vi) any other cash
allowances or payments) are subject to the condition that, throughout the Lease
Term, Tenant will perform and comply with all of the terms, covenants and
conditions of this Lease to be performed or complied with by Tenant. If, after
the occurrence of an Event of Default, Landlord terminates this Lease or
reenters and takes possession of the Premises without such a termination, the
abatement of Basic Rental and other Landlord concessions shall cease to apply
and Tenant shall be obligated, within 10 days after demand, to pay to Landlord
the Basic Rental abated and the value of all Landlord's concessions.
Landlord's right to recover the Basic Rental abated and the value of all
Landlord's concessions shall be in addition to any other remedies available to
Landlord as a result of such termination or reentry.
(i) All rights and remedies of Landlord and Tenant herein
enumerated shall be cumulative, and none shall exclude any other right or
remedy allowed by law.
(j) In addition to any other rights and remedies provided in
this Lease, and with or without terminating this Lease, Landlord may with force
of law, re-enter, terminate Tenant's right of possession and take possession of
the Premises, the provision of this Section 21 operating as a notice to quit,
any other notice to quit or of Landlord's intention to re-enter the Premises
being hereby expressly waived.
(k) Notwithstanding any of the provisions of this Section
21, Landlord shall not seize any legally confidential information of Tenant, of
any of Tenant's licensees or of the United States Government.
22. SURRENDER OF PREMISES.
No act done and no failure to act by Landlord or its agents
during the term hereby granted shall be deemed an acceptance of a surrender of
the Premises, and no agreement to accept a surrender of the Premises shall be
valid unless the same be made in writing and signed by Landlord.
23. ATTORNEYS' FEES.
In case it should be necessary or proper for Landlord to bring
any action under this Lease concerning a default of Tenant hereunder,
irrespective of whether such default is later cured, then Tenant shall pay any
and all reasonable attorney's fees, court costs and expenses of Landlord
incurred in connection with such enforcement.
24. INTENTIONALLY OMITTED.
25. MECHANICS' LIENS.
Tenant shall not permit any mechanical lien or other liens to
be placed upon the Premises or the Building or improvements thereon during the
Lease Term, caused by or resulting from any work performed, materials furnished
or obligation incurred by or at the request of Tenant. In the case of the
filing of any such lien Tenant will promptly, and in any event within thirty
(30) days after the filing thereof, satisfy or release such lien by means of
payment thereof, bonding Landlord against any loss occasioned thereby (in which
case Tenant shall have the right in due diligence to contest and dispute such
lien so long as such bond remains in place), or take such other action as may
be otherwise acceptable to Landlord.
26. WAIVER-OF SUBROGATION; INSURANCE.
(a) Landlord and Tenant hereby release the other from any
and all liability or responsibility to the other or anyone claiming through or
under them by way of subrogation or otherwise for any loss or damage to
property, but only to the extent that such loss or damage is covered by the
greater of any insurance then in force or required to be carried hereunder,
even if such fire or other casualty shall have been caused by the fault or
negligence of the other party, or anyone for whom such party may be
responsible; provided, however, that such release shall be applicable and in
force and effect only with respect to any loss or damage occurring during such
time as the policy or policies of insurance covering said lose shall contain a
clause or endorsement to the effect that this release shall not adversely
affect or impair said insurance or prejudice the right of the insured to
recover thereunder.
(b) Tenant shall maintain throughout the Lease Term, at
Tenant's sole cost and expense, insurance against loss or liability in
connection with bodily injury, death, property damage and destruction, in or
upon the Premises or the remainder of the Land, and arising out of the use of
all or any portion of
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the same by Tenant or its agents, employees, officers, invitees, visitors and
guests, under policies of comprehensive general public liability insurance
having such limits as to each as may be reasonably required by Landlord from
time to time, but in any event of not less than One Million Dollars
($1,000,000) per occurrence for death or injury and One Million Dollars
($1,000,000) per occurrence for property damage or destruction and personal
injury. Such policies shall name Landlord and Tenant, (and, at Landlord's or
such mortgagee's or paramount lessor's or installment seller's request) any
mortgagee of all or any portion of the Buildings and any landlord of, or
installment seller to, Landlord as additional insured parties, shall provide
that they shall not be modified or cancelled without at least thirty (30) days,
prior written notice to Landlord and any other party designated as aforesaid
and shall be issued by insurers of recognized responsibility licensed to do
business in the jurisdiction in which the Building is located and acceptable to
Landlord. Copies of all such policies certified by the insurers to be true and
complete shall be supplied to Landlord and such mortgagees, paramount lessors
and installment sellers at all times.
(c) Landlord shall maintain throughout the Lease Term
insurance coverage in such amounts as are carried by owners of other comparable
office buildings in the same general area of the Building, including, without
limitation, comprehensive general liability insurance and insurance on the
Building and the structural improvements therein.
27. INTENTIONALLY OMITTED.
28. BROKERAGE.
Tenant warrants that it has had no dealings with any broker or
agent other than Compass Management and Leasing, Inc. and The Carey Winston
Company in connection with the negotiation or execution of this Lease, and
Tenant agrees to indemnify Landlord against all costs, expenses, attorneys'
fees or other liability for commissions or other compensation or charges
claimed by any other broker or agent claiming the same by, through or under
Tenant.
29. ESTOPPEL CERTIFICATES.
Tenant shall from time to time, within ten (10) days after
Landlord shall have requested the same of Tenant, execute, acknowledge and
deliver to Landlord a written instrument in recordable form and otherwise in
such form as required by Landlord (i) certifying that this Lease is in full
force and effect and has not been modified, supplemented or amended in any way
(or, if there have been modifications, supplements or amendments thereto, that
it is in full force and effect as modified, supplemented or amended and stating
such modifications, supplements and amendments); and (ii) stating any other
fact or certifying any other condition reasonably requested by Landlord or
requested by any mortgagee or prospective mortgagee or purchaser of the
Property or of any Interest therein. In the event that Tenant shall fail to
return a fully executed copy of such certificate to Landlord within the
foregoing ten (10) day period, then Tenant shall be deemed to have approved and
confirmed all of the terms, certifications and representations contained in
such certificate, and Tenant irrevocably authorizes and appoints Landlord as
its attorney-in-fact to execute such certificate on behalf of Tenant.
30. NOTICES.
Each provision of this Lease or of any applicable governmental
laws, ordinances, regulations and other requirements with reference to the
sending, mailing or delivery of any notice or the making of any payment by
Landlord to Tenant or with reference to the sending, mailing or delivery or the
making of any payment by Tenant to Landlord shall be deemed to be complied with
when and if the following steps are taken:
(a) All rent and other payments required to be made by
Tenant to Landlord hereunder shall be payable to Landlord at the address for
Landlord set forth below or at such other address as Landlord may specify from
time to time by written notice delivered in accordance herewith. Tenant's
obligation to pay rent and any other amounts to Landlord under the terms of
this Lease shall not be deemed satisfied until such rent or other amounts have
been actually received by Landlord.
(b) All payments required to be made by Landlord to Tenant
hereunder shall be payable to Tenant at the address set forth below, or at such
other address within the continental United States as Tenant may specify from
time to time by written notice delivered in accordance herewith.
(c) With the exception of subsection (a) above, any notice or
document required or permitted to be delivered hereunder shall be deemed to be
delivered (i) when delivered personally or (ii) whether actually received or
not, when deposited in the United States Mail, postage prepaid, registered or
certified mail, return receipt requested, addressed to the parties hereto at
the respective addresses set out below, or at such other address as they have
previously specified by written notice delivered in accordance herewith.
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<PAGE> 19
If to Landlord, at:
Compass Management and Leasing, Inc.
1595 Spring Hill Road, Suite 110
Vienna, Virginia 22182
If to Tenant, at:
The Premises.
If and when included within the term "Landlord", as used in this instrument,
there are more than one person, firm or corporation, all shall jointly arrange
among themselves for their joint execution of such notice specifying some
individual at the specific address for the receipt of notices and payments to
Landlord; if and when included within the term Tenant, as used in this
instrument, there are more than one person, firm or corporation, all shall
jointly arrange among themselves for their joint execution of such notice
specifying some individual at some specific address within the continental
United States for the receipt of notices and payment to Tenant. All parties
included within the terms "Landlord" and "Tenant", respectively, shall be bound
by notices given in accordance with the provisions of this paragraph to the
same effect as if each had received such notice.
31. FORCE MAJEURE.
Whenever a period of time is herein prescribed for action to
be taken by Landlord or Tenant or whenever Landlord or Tenant is otherwise
obligated to perform hereunder, neither Landlord nor Tenant shall be liable or
responsible for, and there shall be excluded from the computation for any such
period of time, any delays or failures to perform due to strikes, riots, acts
of God, shortages of labor or materials, war, governmental laws, regulations or
restrictions or any other causes of any kind whatsoever which are beyond the
reasonable control of that party; provided, however, that the failure to pay
any rent or additional rent hereunder, for any reason, shall not be considered
to be beyond the reasonable control of Tenant.
32. SEVERABILITY.
If any clause or provision of this Lease is illegal, invalid
or unenforceable under present or future laws effective during the Lease Term,
then and in that event, the remainder of this Lease shall not be affected
thereby.
33. AMENDMENTS; WAIVER; BINDING EFFECT.
The provisions of this Lease may not be waived, altered,
changed or amended, except by instrument in writing signed by both parties
hereto, and such instrument may be subject to the approval of any mortgagees,
and ground lessors of record. The acceptance of Basic Rental, additional rent
or other payments by Landlord, or the endorsement or statement on any check,
any letter accompanying any check or other tender of Basic Rental, additional
rent or other payment shall not be deemed an accord and satisfaction or a
waiver of any obligation of Tenant, regardless of whether Landlord had
knowledge of any breach of such obligation. The terms and conditions contained
in this Lease shall apply to, inure to the benefit of, and be binding upon the
parties hereto, and upon their respective successors in interest and legal
representatives, except as otherwise herein expressly provided.
34. QUIET ENJOYMENT.
Provided Tenant has performed all of the terms and conditions
of this Lease, including the payment of rent, to be performed by Tenant, Tenant
shall peaceably and quietly hold and enjoy the Premises for the Lease Term,
without hindrance from Landlord or others claiming through Landlord, subject to
the terms and conditions of this Lease and to all mortgages, ground leases and
other encumbrances to which this Lease is subject and subordinate.
35. LIABILITY OF TENANT.
If there is more than one Tenant, the obligations hereunder
imposed upon Tenant shall be joint and several. If there is a guarantor of
Tenant's obligations hereunder, the obligations hereunder imposed upon Tenant
shall be the joint and several obligations of Tenant and such guarantor, and
Landlord need not first proceed against Tenant before proceeding against such
guarantor nor shall any such guarantor be released from its guaranty for any
reason whatsoever, including without limitation any extensions or renewals
hereof, any amendments hereto, any waivers hereof or failure to give such
guarantor any notices hereunder.
36. LANDLORD LIABILITY.
The liability of Landlord and all officers, employees,
shareholders, venturers or partners (general or limited) of Landlord to Tenant
for any default by Landlord under the terms of this Lease shall be non-recourse
and limited to the interest of Landlord in the Building, and Landlord or any
officer, employee, shareholder, venturer or partner (general or limited) of
Landlord shall have the right to sell or transfer all or any portion of the
Land or the Building to any third party, and upon any such sale or other
transfer of all of the Building or
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<PAGE> 20
the Land, and the corresponding assignment of this Lease, the previous Landlord
shall have no further liability or obligation to Tenant hereunder or otherwise.
37. CERTAIN RIGHTS RESERVED BY LANDLORD.
Landlord shall have the following rights, exercisable without
notice, except as provided herein, and without liability to Tenant for damage
or injury to property, persons or business and without effecting an eviction,
constructive or actual, or disturbance of Tenant's use or possession or giving
rise to any claim or setoff or abatement of rent or affecting any of Tenant's
obligations hereunder:
(a) To change the name by which the Building is designated
upon four (4) months written notice to Tenant.
(b) To decorate and to make repairs, alterations, additions,
changes or improvements, whether structural or otherwise, in and about the
Building, or any part thereof, and for such purposes to enter upon the Premises
and, during the continuance of any such work, to temporarily close doors, entry
ways, public space and corridors in the Building, to interrupt or temporarily
suspend Building services and facilities and to change the arrangement and
location of entrances or passageways, doors and doorways, corridors, elevators,
stairs, toilets, or other public parts of the Building, so long as the Premises
are reasonably accessible.
(c) To grant to anyone the exclusive right to conduct any
business or render any service in or to the Building, provided such exclusive
right shall not operate to exclude Tenant from the use expressly permitted
herein.
(d) To take all such reasonable measures as Landlord may
deem advisable for the security of the Building and its occupants, including
without limitation, the search of all persons entering or leaving the Building,
the evacuation of the Building for cause, suspected cause, or for drill
purposes, the temporary denial of access to the Building, and the closing of
the Building after normal business hours and on Saturdays, Sundays and
holidays; subject, however, to Tenant's right to admittance when the Building
is closed after normal business hours under such reasonable regulations as
Landlord may prescribe from time to time which may include, by way of example
but not of limitation, that person entering or leaving the Building, whether or
not during normal business hours, identify themselves to a security officer by
registration or otherwise and that such persons establish their right to enter
or leave the Building.
Notwithstanding the foregoing, Landlord agrees to use reasonable
efforts while exercising the above rights, not to materially interfere with the
operation of Tenant's business.
38. FINANCIAL STATEMENTS.
Tenant agrees to provide to Landlord within 14 days of request
by Landlord but no more than once per year, the most recent audited annual
financial statements of Tenant, including balance sheets, income statements,
and financial notes ("Statements"). Tenant consents that Landlord may release
the Statements to Landlord's subsidiaries, affiliates, lenders, advisors, joint
venture partners, or potential purchasers of the property for the purposes of
evaluating Tenant's financial condition with respect to performance under the
Lease. Landlord agrees to keep the Statements confidential and to not release
the Statements to third parties except as set forth herein. Landlord further
agrees to make reasonable efforts to obtain a confidentiality agreement from
independent third parties reviewing the Statements.
39. NOTICE TO LENDER.
If the Premises or the Building or any part thereof are at any
time subject to a mortgage or a deed of trust or other similar instrument and
the Lease or the rentals are assigned to such mortgagee, trustee or beneficiary
and the Tenant is given written notice thereof, including the post office
address of such assignee, then Tenant shall not terminate this Lease or abate
rentals for any default on the part of Landlord without first giving written
notice by certified or registered mail, return receipt requested, to such
mortgagee, trustee, beneficiary and assignee, specifying the default in
reasonable detail, and affording such mortgagee, trustee, beneficiary and
assignee a reasonable opportunity to make performance, at its election, for and
on behalf of the Landlord.
40. MISCELLANEOUS.
(a) Any approval by Landlord and Landlord's architects
and/or engineers of any of Tenant's drawings, plans and specifications which
are prepared in connection with any construction of improvements in the
Premises shall not in any way be construed or operate to bind Landlord or to
constitute a representation or warranty of Landlord as to the adequacy or
sufficiency of such drawings, plans and specifications, or the improvements to
which they relate, or any use, purpose, or condition, but such approval shall
merely be the consent of Landlord as may be required hereunder in connection
with Tenant's construction of improvements in the Premises in accordance with
such drawings, plans and specifications.
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<PAGE> 21
(b) Each and every covenant and agreement contained in this
Lease is, and shall be construed to be, a separate and independent covenant and
agreement.
(c) Neither Landlord nor Landlord's agents or brokers have
made any representations or promises with respect to the Premises, the Building
or the Land except as herein expressly set forth and no rights, easements or
licenses are acquired by Tenant by implication or otherwise except as expressly
set forth in the provisions of this Lease.
(d) Time is of the essence as to all provisions of this
Lease applicable to Tenant's obligations hereunder.
(e) The submission of this Lease to Tenant shall not be
construed as an offer, nor shall Tenant have any rights with respect thereto
unless and until Landlord shall, or shall cause its managing agent to, execute
a copy of this Lease and deliver the same to Tenant.
(f) The terms of this Lease shall be construed in accordance
with the laws of the jurisdiction in which the Building is located.
41. ADDITIONAL RENT.
The Tenant shall pay as additional rent any money required to
be paid pursuant to the provisions of this Lease whether or not the same be
designated "additional rent". If such amounts or charges are not paid at the
time provided in this Lease, they shall nevertheless, if not paid when due, be
collectable as additional rent with the next installment of rent thereafter
falling due hereunder, but nothing herein contained shall be deemed to suspend
or delay the payment of any amount of money or charge at the time the same
becomes due and payable hereunder, or limit any other remedy of the Landlord.
42. ENTIRE AGREEMENT.
The Lease contains all covenants and agreements between
Landlord and Tenant relating in any manner to the rent, use and occupancy of
Premises and Tenant's use of the Building and other matters set forth in this
Lease. No prior agreement or understanding pertaining to the same shall be
valid or of any force or effect and the covenants and agreements of this Lease
shall not be altered, modified or added to except in writing signed by Landlord
and Tenant.
43. LEGAL PROCEEDINGS.
Landlord and Tenant hereby waive the right to a jury trial in
any action, proceeding or counterclaim between Tenant and Landlord or their
successors arising out of this Lease or Tenant's occupancy of the Premises or
Tenant's right to occupy the same.
44. LAWS AND REGULATIONS.
Tenant agrees at Tenant's expense to comply with all
applicable laws, ordinances, rules, and regulations, whether now in effect or
hereafter enacted or promulgated, of any governmental entity or agency having
jurisdiction of the Premises.
45. AMERICANS WITH DISABILITIES ACT ("ADA").
(a) Tenant hereby represents that it is not a public
accommodation, as defined in the ADA.
(b) The Landlord shall take whatever steps are necessary to
cause the common areas of the building to meet the requirements of Title III of
the ADA.
(c) Except for the initial buildout of the Premises, which
shall be Landlord's responsibility, Tenant at its sole cost and expense shall
be solely responsible for taking any and all measures which are required to
comply with the requirements of Title I and/or Title III of the ADA within the
Premises and, if the measures required outside of the Premises are attributable
to Tenant's alterations to the Premises, outside of the Premises as well. Any
Alterations to the Premises made by Tenant for the purpose of complying with
the ADA or which otherwise require compliance with the ADA shall be done in
accordance with this Lease; provided, however, that Landlord's consent to such
Alterations shall not constitute either Landlord's assumption, in whole or in
part, of Tenant's representation or confirmation by Landlord that such
Alterations comply with the provisions of the ADA.
(d) Tenant shall indemnify the Landlord for all claims,
damages, judgments, penalties, fines, administrative proceedings, costs,
expenses and liability arising from Tenant's failure to comply with any of the
requirements of Title I and/or Title III of the ADA within the Premises.
(e) Landlord shall indemnify the Tenant for all claims,
damages, judgments, penalties, fines, administrative proceedings, cost, expenses
and liability arising from Landlord's failure to comply with Title III of the
ADA within the common areas.
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<PAGE> 22
46. ENVIRONMENTAL PROTECTIONS.
(a) Notwithstanding the generality of Section 9 above,
Tenant shall conduct all activity in compliance with all federal, state, and
local laws, statutes, ordinances, rules, regulations, orders and requirements
of common law concerning protection of the environment or human health
("Environmental Laws"). Tenant shall also cause its subtenants (if subtenants
are permitted by this Lease or are hereafter approved by Landlord), licensees,
invitees, agents, contractors, subcontractors and employees to comply with all
Environmental Laws. Tenant and its permitted subtenants, licensees, invitees,
agents, contractors, and subcontractors shall obtain, maintain, and comply with
all necessary environmental permits, approvals, registrations and licenses.
In addition to and not in limitation of the foregoing, Tenant,
its permitted subtenants, licensees, invitees, agents, contractors,
subcontractors and employees shall not generate, refine, produce, transfer,
process or transport Hazardous Materials on, above, beneath or near the
Premises, the Building or the Land. As used herein, the term "Hazardous
Materials" shall include, without limitation, all of the following: (1)
hazardous substances, as such term is defined in the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C.
Section 9601 (14), as amended by the Superfund Amendments and Reauthorization
Act of 1986, Pub. L. No. 99-499, 100 Stat. 1613 (Oct. 17, 1986) ("SARA"); (2)
regulated substances, within the meaning of Title I of the Resource
Conservation and Recovery Act, 42 U.S.C. Sections 6991-6991(i), as amended by
SARA; (3) any element, compound or material which can pose a threat to the
public health or the environment when released into the environment; (4)
hazardous waste as defined in the Virginia Waste Management Act, Title 10.1,
Chapter 14 of the Code of Virginia; (5) petroleum and petroleum byproducts; (6)
an object or material which is contaminated with any of the foregoing; (7) any
other substance designated by any of the Environmental Laws or a federal, state
or local agency as detrimental to public health, safety and the environment.
Tenant shall be permitted to store reasonable quantities of cleaning and office
supplies; provided, however, that such supplies are not Hazardous Materials.
(b) Tenant shall protect, indemnify and save Landlord
harmless from and against any and all liability, loss, damage, cost or expense
(including reasonable attorneys' fees) that Landlord may suffer or incur as a
result of any claims, demands, damages, losses, liabilities, costs, charges,
suits, orders, judgments or adjudications asserted, assessed, filed, or entered
against Landlord or any of the Building or the Land, by any third party,
including, without limitation, any governmental authority, arising from
Tenant's breach of Environmental Laws or otherwise arising from the alleged
generation, refining, production, storage, handling, use, transfer, processing,
transportation, release, spillage, pumping, pouring, emission, emptying,
dumping, discharge or escape of Hazardous Materials by Tenant, its agents,
employees or invitees, on, from or affecting the Premises, the Building or the
Land, including, without limitation, liability for costs and expenses of
abatement, correction, clean-up or other remedy, fines, damages, response
(including death) and property damage.
(c) Tenant, its permitted subtenants, licensees, invitees,
agents, contractors, subcontractors and employees shall not release, spill,
pump, pour, emit, empty, dump or otherwise discharge or allow to escape
Hazardous Materials onto the Land or Building, and Tenant shall take all action
necessary to remedy the results of any such release, spillage, pumping,
pouring, emission, emptying, dumping, discharge, or escape.
(d) Tenant shall within 48 hours of receipt deliver to
Landlord copies of any written communication relating to the Building or the
Land between Tenant and any governmental agency or instrumentality concerning
or relating to Environmental Laws.
(e) Tenant's obligations under this Section shall survive
the termination or other expiration of this Lease.
(f) Landlord warrants that, to its actual knowledge as of
the execution date of this Lease, no asbestos or Hazardous Materials are
present in the Premises.
47. PARKING.
Tenant, its permitted subtenants, licensees, invitees, agents,
contractors, subcontractors and employees shall not use parking spaces on the
Land or Building in excess of that number set out on the attached Data Sheet,
which shall be provided to Tenant at no cost and which has been reasonably
determined by Landlord to be Tenant's proportionate share of the total parking
spaces available on the Building and Land. Notwithstanding anything contained
herein, if any governmental regulation or ordinance is enacted or amended after
the effective date of this Lease so as to allow or require a modification in
Tenant's number of parking spaces, Landlord reserves the right to make such
modification without modifying in any way the rent due hereunder or any other
obligations of Tenant.
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<PAGE> 23
48. TENANT ACCESS.
Subject to Landlord's reasonable regulations, Tenant shall
have access to the Premises 24 hours per day, 365 days per year, except in the
case of an emergency or when the Building may be closed by governmental
authorities. Landlord shall provide Tenant with a restricted entry access
system for afterhours access to the Building.
49. THE NEW PREMISES.
Upon Substantial Completion of the improvements to be
constructed by Landlord in accordance with the Space Plan referenced as EXHIBIT
F, Tenant shall lease from Landlord an additional 1,955 rentable square feet of
space in the Building, the outline of which is included on EXHIBIT A (the "New
Premises"). Tenant shall lease the New Premises from Landlord on the following
terms and conditions:
(a) Tenant shall pay Landlord as Basic Rental for the New
Premises at a rate of $19.75 per rentable square foot per year, with the
initial monthly installment being $3,217.60, such amount to be paid in addition
to the Basic Rental otherwise paid to Landlord for the Premises;
(b) The Basic Rental for the New Premises shall be increased
annually, effective on each anniversary of Substantial Completion of the New
Premises, by an amount equal to three percent (3%) of the escalated Basic
Rental then in effect for the New Premises, payable as follows:
<TABLE>
<CAPTION>
Year Annual Rental Monthly Rental
---- ------------- --------------
<S> <C> <C>
11/96-11/97 $38,611.25 $3,217.60
11/97-11/98 $39,769.59 $3,314.13
11/98-11/99 $40,962.65 $3,413.56
11/99-11/00 $42,191.56 $3,515.96
11/00- $43,457.30 $3,621.44
</TABLE>
(c) Landlord shall construct improvements to the New
Premises in accordance with the Space Plan for the New Premises, a copy of
which is attached hereto as EXHIBIT F, and in accordance with the provisions of
Section 7. Notwithstanding the foregoing, Landlord shall contribute up to
$19,750.00 (the "Tenant Allowance") towards the completion of the buildout of
the New Premises, which Tenant Allowance shall include the cost of preparation
of the Space Plan and the Tenant Plans. Any costs in excess of the Tenant
Allowance shall be paid solely by Tenant and shall be considered additional
rent under the terms of the Lease.
(d) Upon Substantial Completion of the New Premises,
Tenant's Proportionate Share of Basic Cost shall be increased to 2.83%, with
all Excess (as defined in Section 8) being paid by Tenant to Landlord as
additional rent in accordance with the provisions of Section 8.
(e) Except where inconsistent with the terms of this
Section, all other terms of the Lease shall apply to the New Premises,
including the Lease termination date.
50. FIRST RIGHT OF OFFER.
After the Commencement Date, Tenant shall have a one-time
first right to lease space contiguous to the Premises and the New Premises (the
"Additional Space") in the Building, provided:
(a) This right of first offer is subordinate to the rights
of (i) the current tenant in the Additional Space to renew, extend or otherwise
negotiate a new lease for the Additional Space; (ii) all future tenants in such
space, to renew or extend their leases; and (iii) existing tenants to the
Additional Space as of the date of execution of this Lease;
(b) Tenant is not in default under this Lease, either at the
time the Additional Space becomes available or at the time Tenant is to take
occupancy of the Additional Space;
(c) Landlord has made a good faith determination that Tenant
remains creditworthy;
(d) Tenant must lease all of the Additional Space offered;
(e) Tenant exercises its option as provided in this Section
by delivering to Landlord written notice of its intention within three (3)
business days after Landlord has notified Tenant that the Additional Space is
available;
(f) All terms of the lease of the Additional Space shall be
upon those terms and conditions as are negotiated in good faith between the
parties; and
(g) Tenant executes an addendum or a new lease for the
Additional Space within twenty (20) days after Landlord's receipt of Tenant's
notice to lease the Additional Space; and
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<PAGE> 24
If Tenant fails to comply with each of the above conditions
within the time specified, then this right of first offer will lapse and be of
no further force and effect, and Landlord shall have the right to lease all or
any part of the Additional Space to a third party under the same or any other
terms and conditions, whether or not such terms and conditions are more or less
favorable than those offered to Tenant. This right of first offer to lease the
Additional Space is personal to Tenant and is non-transferrable.
51. EXHIBITS.
(i) Exhibit A - Outline of Premises
(ii) Exhibit B - Tenant Acceptance Letter
(iii) Exhibit C - Rules and Regulations
(iv) Exhibit D - Building Standard Materials
(v) Exhibit E - Tenant Space Plan
(vi) Exhibit F - Space Plan for New Premises
IN WITNESS WHEREOF, the parties hereto have executed this
Lease and affixed their seals as of the date first above written.
TENANT:
WITNESS/ATTEST: SPACEHAB, INC.
/s/ WILLIAM MURRAY By: /s/ NELDA WILBANKS [SEAL]
- -------------------- -------------------
Name: Nelda Wilbanks
Title: Secretary
LANDLORD:
THE EQUITABLE LIFE ASSURANCE
WITNESS/ATTEST: SOCIETY OF THE UNITED STATES
[SIG]
- --------------------- By: /s/ R. PAUL MEHLMAN [SEAL]
---------------------
Name: R. PAUL MEHLMAN
Title: INVESTMENT OFFICER
- 21 -
<PAGE> 25
[FLOOR PLAN]
LEASE ATTACHMENT 'A'
<PAGE> 26
The Equitable Life Assurance Society of the United States
c/o Compass Management and Leasing, Inc.
1595 Spring Hill Road
Suite 110
Vienna, Virginia 22182
The undersigned, by the execution of this letter, hereby confirms that
the Commencement Date of the Lease Term of that certain lease agreement (the
"Lease Agreement") by and between Concourse Associates Limited Partnership (the
"Landlord") and the undersigned (the "Tenant") is ______________________, 1996,
and Tenant hereby accepts delivery of the Premises and recognizes that the
Landlord has fulfilled all obligations regarding the delivery of the Premises
subject to any "punch list" items in the Tenant Plans which may not have been
completed. All capitalized terms not defined herein shall have the meanings
assigned to them in the Lease Agreement.
ACCEPTED AND AGREED to this __ day of _____________________________,
1996.
TENANT:
SPACEHAB, INC.
By:
-------------------------
Title:
----------------------
EXHIBIT B
<PAGE> 27
EXHIBIT C
THE CONCOURSE
BUILDING RULES AND REGULATIONS
1. The sidewalks, entries, passages, court corridors,
stairways and elevators shall not be obstructed by any of the Tenants, their
employees or agents, or used by them for purposes other than ingress and egress
to and from their respective suites.
All safes or other heavy articles shall be carried up or into
the premises only at such times and in such manner as shall be prescribed by
the Landlord and the Landlord shall in all cases have the right to specify the
proper weight and position of any such safe or other heavy article prior to its
being brought into the Building by Tenant. Any damage done to the Building by
taking in or removing any such equipment or from overloading any floor in any
way shall be paid by Tenant. Defacing or injuring in any way any part of the
Building by the Tenant, his agents or employees, shall be paid for by the
Tenant.
2. Tenant shall refer all contractors, contractors'
representative and installation technicians rendering any service to the
premises for Tenant to Landlord for Landlord's approval and supervision before
performance of any contractual service. This provision shall apply to all
installations and improvements performed in the Building of any nature
affecting floors, walls, woodwork, trim, windows, ceilings, equipment or any
other physical portion of the Building. Such approval, if given, shall in no
way make Landlord or Owner, a party to any contract between Tenant and any such
contractor, and Landlord and Owner shall have no liability therefor.
3. No sign, advertisement or notice shall be inscribed,
painted or affixed on any part of the inside or outside of the said Building
unless of such color, size and style and in such place upon in said Building as
shall first be designated by Landlord; there shall be no obligation or duty on
Landlord to allow any sign, advertisement or notice to be inscribed, painted or
affixed on any part of the inside or outside of said Building. Signs on doors
will be arranged for the Tenant by a sign company approved by the Landlord, the
cost of the signage to be paid by the Tenant unless the Building Standard
signage listed in Exhibit C is chosen. A directory, in a conspicuous place,
with the names of the Tenants, will be provided by Landlord; any necessary
revision in this will be made by Landlord within a reasonable time after notice
from the Tenant of the error or change making the revision necessary. No
furniture shall be placed in front of the Building or in any lobby or corridors
without written consent of Landlord. Landlord shall have the right to remove
all other signs and furniture, without notice to Tenant at the expense of
Tenant.
4. Tenant shall have the non-exclusive use in common with
the Landlord, other tenants, their guests and invitees, of the automobile
parking areas, driveways and footways, subject to rules and regulations for the
use thereof as prescribed from time to time by Landlord. Landlord shall have
the right to designate parking areas for the use of the building tenants and
their employees, and the tenants and their employees shall not park in parking
areas not so designated, specifically including driveways, fire lanes,
loading/unloading areas, walkways and building entrances. Tenant agrees that
upon written notice from Landlord, it will furnish to Landlord, within five (5)
days from receipt of such notice, the state automobile license numbers assigned
to the automobiles of the Tenant and its employees. Owner and Landlord shall
not be liable for any vehicle of the Tenant or its employees that the Landlord
shall have towed from the premises when illegally or improperly parked. Owner
and Landlord will not be liable for damage to vehicles in the parking areas or
for theft of vehicles, personal property from vehicles, or equipment of
vehicles, except in the case of willful misconduct or gross negligence on the
part of Owner or Landlord.
5. Tenant shall have the non-exclusive use in common with
the Landlord, other tenants, and others approved by Landlord, of the use of the
Building's common areas, recreational areas, conference center, and designated
exterior ground areas. Tenant shall abide by any and all rules, regulations,
restrictions, requirements and procedures Landlord has imposed or may impose in
the future for use of these areas. Failure to abide by these rules by Tenant,
Tenant's employees, Tenant's visitors, and Tenant's guests may result in
Tenant's forfeiture of Tenant's use of these facilities and will be a default
under the terms of the Lease Agreement.
6. No Tenant shall do or permit anything to be done in said
premises, or bring or keep anything therein, which will in any way increase the
rate of fire insurance on said Building, or on property kept therein, or
obstruct or interfere with the rights of other tenants, or in any way injure or
annoy them or conflict with the laws relating to fire, or with any regulation
of the fire department, or with any insurance policy upon said
<PAGE> 28
Building or any part thereof, or conflict with any rules and ordinances of the
local Board of Health or any governing bodies.
7. The janitor of the Building may at all times keep a pass
key to non-restricted areas and he and other agents of the Landlord shall at
scheduled times be allowed admittance to said Demised Premises.
8. No additional locks shall be placed upon any doors
without the written consent of the Landlord. All keys to the Demised Premises
and Building security card keys shall be furnished by Landlord at the rate of
1.75 keys per 1000 rentable square feet leased. Additional keys or Building
Security Card Keys will be furnished at Tenant's cost. Upon termination of
this Lease, all keys and Building Security Card Keys shall be surrendered, and
the Tenant shall then give the Landlord or his agents explanation of the
combination of all locks upon the doors of vaults.
9. No windows or other openings that reflect or admit light
into the corridors or passageways, or to any other place in said Building,
shall be covered or obstructed by any of the Tenants with the exception of
Building Approved drapery or venetian blind installations.
10. No person shall disturb the occupants of the Building by
the use of any musical instruments, the making of unseemly noises or odors, or
any unreasonable use. No dogs or other animals or pets of any kind will be
allowed in the Building.
11. The water closets and other water fixtures shall not be
used for any purpose other than those for which they were constructed, and any
damage resulting to them from misuse, or the defacing or injury of any part of
the Building, shall be borne by the person who shall occasion it.
12. No bicycles or similar vehicles will be allowed in the
Building.
13. Nothing shall be thrown out the windows of the Building
or down the stairways or other passages.
14. Tenant shall not be permitted to use or to keep in the
Building any kerosene, camphene, burning fluid or other illuminating materials.
15. If any tenant desires, at his cost, telegraphic,
telephonic or other electric connections, Landlord or its agents will direct
the electricians as to where and how the wires may be introduced, and without
such directions, no boring or cutting for wires will be permitted.
16. If Tenant desires, at his cost, shades, draperies, or
awnings they must be of such shape, color, materials and make as shall be
prescribed by Landlord. Any outside awning proposed may be prohibited by
Landlord. Landlord or its agents shall have the right to enter the premises to
examine the same or to make such repairs, alterations or additions as Landlord
shall deem necessary for the safety, preservation or improvement of the
Building; and the Landlord or its agents may show said premises at scheduled
times and may place on the windows or doors thereof, or upon the bulletin
board, a notice "For Rent" for one month prior to the expiration of the Lease.
17. No portion of the Building shall be used for the purpose
of lodging rooms or for any immoral or unlawful purposes.
18. All glass, locks and trimmings in or about the doors and
windows and all electric fixtures belonging to the Building shall be kept
whole, and whenever broken by Tenant shall be immediately replaced or repaired
and put in order at Tenant's expense under the direction and to the
satisfaction of Landlord, and on removal shall be left whole and in good order.
19. Landlord reserves the right at any time to temporarily
take one elevator out of service to Tenants for exclusive use by the Building
Management in servicing the Building.
<PAGE> 29
EXHIBIT D
THE CONCOURSE
BUILDING STANDARD MATERIALS
NOTE: References made herein to ratios of certain improvements "per square
foot," shall be interpreted as meaning "per square foot of rentable
area."
LANDLORD SHALL PROVIDE TO THE PREMISES THE FOLLOWING:
A. FLOORING: Carpet to Building Standards or Building Standard
tile.
B. BLINDS: To Building Standards (horizontal mini-blinds).
C. OFFICE PARTITIONS: Landlord will provide the Premises with
eight foot (8') high Building Standard partitions to a maximum
of one (1) linear foot of partition per each twelve (12)
square feet of space. Partitioning will be constructed of
2-1/2 inch steel studs, 24 inches on center; 1/2 inch sheet
rock on each side, taped, spackled and painted with two coats
of paint. All Building Standard partitions shall be
insulated.
D. INTERIOR DOORS: To a maximum of one door per each two hundred
fifty (250) square feet of space, to be equipped with Building
Standard hardware and finish. Building Standard interior oak
doors shall be 7'0" x 3'0" with a solid core.
E. SUITE ENTRY DOORS: One suite entry door is provided for each
five thousand (5,000) square feet of space, to be equipped
with Building Standard hardware and finish. Building Standard
suite entry doors are oak, full height, 7'10" x 3'0" with a
solid core. Hardware for suite door shall include mortise
lock with lever handle, door close and ball bearing hinges.
F. CEILINGS: Building Standard 2' x 2' tegular acoustical tile
in suspended grid.
G. LIGHTING: Fluorescent parabolic light fixtures to a maximum
of one fixture per eighty (80) square feet of space.
H. LIGHT SWITCHES: Building Standard single-pole, single-throw
to a maximum of one (1) switch for each 200 square feet.
I. ELECTRICAL POWER FACILITIES: Power outlets (standard duplex
convenience receptacles) to a maximum ratio of one outlet per
one hundred fifty (150) square feet will be mounted on
partitions as may be appropriate. Dedicated circuits will be
provided at Tenant's expense.
J. TELEPHONE FACILITIES: Standard unwired telephone outlets,
suitable for standard telephone instruments, to a maximum of
one (1) outlet per two hundred (200) square feet will be
mounted on partitions as may be appropriate. Conduit can be
provided by Landlord at Tenant's expense.
K. SPRINKLER HEADS: Landlord will provide a sprinkler fire
protection system in the Building including a maximum of one
(1) sprinkler head per one hundred fifty (150) square feet.
Additional sprinkler heads and relocations or additions to
sprinkler heads due to Tenant change orders made subsequent
<PAGE> 30
- 2 -
to the release of the construction drawings shall be provided
by Landlord at Tenant's expense.
L. WALL FINISH: Painted to Building Standard.
M. SIGNAGE: Building Standard door sign.
N. ARCHITECTURAL SERVICES: Consultation with Landlord's architect
and preparation of Tenant's plans for all Building Standard
items at Landlord's expense.
O. GENERAL: All of the items and finishes above listed in this
"Building Standard Materials" sheet to be supplied by Landlord
will be to the Building Standard specifications, color and
quality; no credits will be allowed for any unused portion
thereof. Designs of the basic building risers for the
mechanical and electrical systems is such that Tenant's
requirements for additional power, additional lighting, and
various mechanical facilities can be made available at
Tenant's expense prior to construction by arrangement with
Landlord. The costs of modifications and changes from
Building Standard for any item shall include the cost of
architectural and engineering design. Any contractors and/or
subcontractors engaged by Tenant shall comply with all
REASONABLE regulations established by Landlord and General
Contractor to promote safety and quality of construction and
such contractors shall coordinate their efforts to ensure
timely completion of all work. All design, construction and
installation shall conform to the requirements of applicable
Building, Plumbing and Electrical Codes and the requirements
of any authority having jurisdiction over or with respect to
such work.
For purposes of measuring Tenant's linear footage of
partitioning, exterior building walls will not be included.
Demising partitioning separating adjacent tenants will be
calculated at fifty percent of the total amount. Tenant's
portion of corridor partitioning excluding interior core walls
(i.e., elevator shafts, electric and telephone closets and
restroom facilities), will be included in total linear footage
measurement.
P. If Landlord shall be unable to give possession of the Premises
on the date of commencement of the term hereof as a result of
the delivery and/or construction of any non-related tenant
special items, any delay in completing the Premises shall not
in any manner affect the commencement date of this Lease or
the Tenant's liability for the payment of rent from such
commencement date, and under such circumstances Landlord
agrees to make the Premises ready for Tenant's occupancy as
soon as delivery and construction conditions within the
Landlord's control will allow.
<PAGE> 1
EXHIBIT 10.22
[CSP ASSOCIATES, INC. LETTERHEAD]
February 21, 1996
Mr. Richard Hora
President
SPACEHAB, INC.
1215 Jefferson Davis Highway
Suite 1501
Arlington, VA 22202 BY FACSIMILE
RE: CSP Associates Consulting Services - Contract Extension
Engagement Letter
Dear Dick:
As we discussed on the telephone earlier today, CSP and Spacehab have agreed to
extend the contract between our two firms, under which CSP shall furnish
Spacehab with a range of strategic and operational support.
TASKS
The specific support to be provided by CSP to Spacehab shall be agreed between
the parties, and will involve close coordination with you, Shelley Harrison and
David Rossi. Examples include but are not limited to the following:
- - Acquisition Planning: Development, in cooperation with Spacehab
management, of an acquisition plan to complement Spacehab's
diversification strategy. This plan will include detailed screening and
evaluation of various acquisition candidates including consideration of
their financial performance, strategic fit, valuation and availability.
- - Strategic and Business Planning: Assistance relating to proposed internal
diversification or joint venture initiatives under which CSP may assist
Spacehab to identify, qualify and evaluate alternative business
propositions, and to assist Spacehab to negotiate appropriate contractual
and business arrangements.
- - International Strategy Development: Including assistance in the
development and execution of potential international business development
strategies involving support and exploitation of the European Columbus and
MPLM programs, and the Japanese JEM program by Spacehab and its
contractors. The initial emphasis of this area will be on the European
Space Station environment with respect to the pursuit of an equitable
relationship with Alenia Spazio governing MPLM operations support.
<PAGE> 2
- - Support in developing and implementing business capture plans relating to
addressable opportunities across the evolving NASA STS/TSSA operations and
logistics environment.
- - Market analysis and evaluation involving customer demand for potential
augmented Spacehab capabilities.
- - Such additional tasks as Spacehab management may request.
It is anticipated that following Spacehab's successful Initial Public Offering,
during this extended period of performance CSP shall focus its efforts more
intensively on acquisition and joint venture assistance, and on international
joint venture development.
DURATION AND DELIVERABLES
The consulting arrangement presently in force between CSP and Spacehab shall be
extended to September 30, 1996. Deliverables shall include a variety of
telephonic and on-site support including meetings, briefings and
teleconferences, as well as written memoranda, reports and briefing documents
as required.
LEVEL OF EFFORT AND BILLING INFORMATION
The additional firm fixed price level of effort associated with the extension
of this consulting agreement shall be $105,000, comprising estimated average
monthly (labor) billings of $15,000. (This level of funding is exclusive of
available finding of $24,000 remaining under the initial agreement between
Spacehab and CSP, which shall also be expended during the above-referenced
extended period of performance.) In addition, actual and reasonable expenses
(e.g., travel, on-line database research, etc.) shall be billable on a monthly
basis as incurred. If additional expenses to be incurred in any month are
expected to exceed $1,500, then CSP shall obtain Spacehab's approval prior to
incurring such additional expenses. In the event that CSP represents Spacehab
in the evaluation and/or negotiation of any potential transaction resulting in
a merger or acquisition, then CSP shall be entitled to receive a "success fee"
equivalent to of the total value of the transaction, including without
limitation the value of all debt, equity, cash consideration and deferred
compensation, if any. Such compensation may be payable in cash or in Spacehab
common equity, subject to the agreement of the parties.
The support contemplated herein shall be separate and in addition to any
stipend or reimbursable expenses payable to Dr. Brad M. Meslin in connection
with his participation in meetings of the Board of Directors of committees of
the Board.
2
<PAGE> 3
Invoices are payable thirty days from date of issue. Payment should be made
to:
CSP Associates, Inc.
55 Cambridge Parkway
Riverfront 2
Cambridge MA 02142
Please indicate your concurrence with the terms of this engagement letter by
signing and returning a copy for our files.
Sincerely,
/s/ BRAD M. MESLIN
Brad M. Meslin, Ph.D
Managing Director
Agreed and Accepted:
/s/ RICHARD HORA
- ----------------
Spacehab, Inc.
<PAGE> 1
EXHIBIT 10.23
CONSULTING AGREEMENT
AGREEMENT, made this 25th day of August, 1996, between SPACEHAB, INC.,
a corporation organized under the laws of Washington with its principal place
of business at 1595 Spring Hill Road, Vienna, Virginia 22182 (hereinafter
referred to as "SPACEHAB") and Gordon S. Macklin with offices at 8212 Burning
Tree Road, Bethesda, Maryland 20817("Consultant").
WHEREAS, Consultant desires to provide certain consulting services to
SPACEHAB and SPACEHAB desires to obtain such services from Consultant in a
capacity in which Consultant may receive or contribute confidential or
proprietary information;
NOW, THEREFORE, in consideration of such Consulting Services, and other
good and valuable consideration given or to be given, SPACEHAB and Consultant
hereby AGREE:
1. Consultant shall render workmanlike consulting services for
SPACEHAB in connection with potential strategic acquisition opportunities and
investor relations support, as more fully described in Exhibit A attached
hereto and incorporated by this reference ("Consulting Services") for a term of
one year from the above referenced date. Consultant recognizes that all
information regarding such strategic acquisitions and/or investor relations (as
well as all other SPACEHAB related business information) which (i) may be or
shall have been imparted to Consultant by SPACEHAB or its agents, or (ii) is
created or obtained by Consultant while performing, or as a result of
performing (directly or indirectly) Consulting Services, is confidential and
proprietary to SPACEHAB. Furthermore, the identity and character of services
and products required by SPACEHAB'S customers, as well as all actual or
potential business acquisitions, joint ventures, alliances and other business
arrangements of any kind constitute confidential and/or proprietary business
information of SPACEHAB.
2. The attached Confidentiality and Nondisclosure Agreement
between Consultant and SPACEHAB shall be executed simultaneously with this
Agreement and shall govern Consultant's rights and responsibilities with
respect to all SPACEHAB confidential and/or proprietary information disclosed
to or otherwise obtained by Consultant as noted in Paragraph 1 above. It is
understood that the success of SPACEHAB requires that SPACEHAB exert
extraordinary measures to safeguard the confidentiality of all such
information, and Consultant agrees to abide by all such measures established by
SPACEHAB.
3. Consultant shall be directed by Margaret Grayson (SPACEHAB's
Chief Financial Officer) in performance of the Consulting Services. Ms. Grayson
shall request and direct the specific Consulting Services tasks hereunder.
4. For the Consulting Services, SPACEHAB agrees to pay Consultant
a retainer fee of $2,000/month for the term hereof, and an Option to purchase
10,000 shares of SPACEHAB Common Stock at an exercise price per share
corresponding to the price of SPACEHAB Common Stock on the NASDAQ market as of
close of business August 15, 1996. The Options shall vest immediately upon
their granting. Actual expenses for travel, hotel accommodations and
automobile rental incurred by Consultant during performance of Consulting
Services tasks hereunder shall be reimbursed by SPACEHAB within 30 days of
submittal of expense documents to the company.
5. Either Consultant or SPACEHAB may terminate this Agreement,
without cause, with three days notice to the other party.
1
<PAGE> 2
6. Upon termination of the Consulting Services, Consultant shall
promptly deliver to SPACEHAB all (of whatever media, including but not limited
to written, digital or other computerized media, tape, disk, CD, etc.) all
documents and media, including all copies thereof, and any other materials of a
proprietary or confidential nature relating to SPACEHAB's business and which
are in the possession or under the control of Consultant. Consultant shall
promptly return to SPACEHAB any information, of whatever nature, that relates
to, or is generated by any, actual or potential, customer of SPACEHAB's
services, or any actual or potential business acquisition or other relationship
(including but not limited to joint ventures, alliances and partnerships).
SPACEHAB shall pay Consultant for the days actually worked by Consultant up to
the date of termination (including any partial day on a pro-rata basis).
7. The parties hereto desire and agree that any controversy or
claim arising out of, or relating to this Agreement, or breach thereof, shall
be settled by arbitration in Tysons Comer, Virginia, in accordance with the
rules of the American Arbitration Association, and final judgment upon award
rendered may be entered in any court having jurisdiction thereof.
8. This Agreement constitutes the complete agreement and
understanding with respect to the subject matter hereof between the parties and
supersedes all previous or contemporaneous written or oral representations,
agreements, contracts, etc. of whatever kind or nature.
CONSULTANT SPACEHAB, INC.
By: /s/ GORDON S. MACKLIN By: /s/ MARGARET E. GRAYSON
---------------------- -------------------------
Name: GORDON S. MACKLIN Name: MARGRARET E. GRAYSON
-------------------- -----------------------
Title: Title: Vice-President Finance
------------------- ----------------------
2
<PAGE> 3
EXHIBIT A
MACKLIN CONSULTING AGREEMENT
CONSULTING SERVICES
A. Investor Relations Support
- Advice and critiques regarding presentation planning for
shareholder and investor meetings
- Advice and critiques regarding presentation updates for same
- General advice regarding investment community requirements
B. Investment Community Introductions
- Expand SPACEHAB market visibility
- Expand coverage of company by analysts
C. Potential Strategic Acquisitions Opportunities/Information In SPACEHAB's
strategic Targeted Markets, Including Aerospace, Biotechnology, General
Hi-Technology and Software Integration
- Introductions to potential partners/acquisitions
- Leads regarding potential opportunities
- Facilitate potential partnerships/acquisitions
<PAGE> 4
CONFIDENTIALITY & NONDISCLOSURE AGREEMENT
This Confidentiality and Nondisclosure Agreement ("Agreement") is
entered into by and between SPACEHAB, Inc., a Washington State corporation,
having its corporate headquarters at 1595 Spring Hill Road, Vienna, Virginia
22182 (hereinafter "SPACEHAB"), and Gordon S. Macklin, having offices at 8212
Burning Tree Road, Bethesda, Maryland 20817 (hereinafter "Consultant").
WHEREAS, SPACEHAB desires to provide and CONSULTANT desires to receive
sensitive and proprietary information, including technical, marketing and/or
financial data, relating to certain SPACEHAB business pursuits and activities
in order for CONSULTANT to perform consulting services for SPACEHAB; and
WHEREAS, SPACEHAB, seeks to fully protect such confidential proprietary
information from any and all unauthorized use, reproduction, or disclosure;
NOW, THEREFORE, the parties hereto agree as follows:
1. "Proprietary Information" shall mean any and all information
regarding SPACEHAB's business activities, competitors, customers, trade
secrets, industrial and technical knowledge, etc. (including but not limited to
marketing, technical, financial and other business data or information) however
disclosed by SPACEHAB or its agents (including but not limited to written,
oral, visual, magnetic recording or any other machine readable form) which is
directly or indirectly related to any consulting or other services requested by
SPACEHAB to be provided by CONSULTANT, unless SPACEHAB explicitly exempts such
information or data in writing from coverage by this Agreement.
2. CONSULTANT agrees that it, as well as all its directors,
officers, employees and agents, will protect from unauthorized use,
reproduction, and disclosure and will not disclose to any person or entity
outside CONSULTANT or to any person within CONSULTANT not having a need to know
for the purposes of the Agreement and will not use or reproduce, except for the
purposes of this Agreement, any and all Proprietary Information disclosed
by SPACEHAB or its agents.
3. CONSULTANT shall not be liable for disclosure of certain
Proprietary Information if CONSULTANT obtains the prior written approval of
SPACEHAB to disclose such Proprietary Information.
4. Any and all Proprietary Information received by CONSULTANT
hereunder shall be fully protected as required by this Agreement for a period
of five (5) years from the date of CONSULTANT's receipt thereof.
5. CONSULTANT shall not be liable for the inadvertent or accidental
disclosure of Proprietary Information received hereunder provided that it has
exercised the same degree of care in protecting such Proprietary Information as
it normally exercises to protect its own proprietary and confidential
information (provided such degree of care is no less than a reasonable degree
under the circumstances) and provided, further, that immediately upon
discovering the loss or unauthorized disclosure of such Proprietary Information
received under this Agreement, it notifies SPACEHAB thereof and takes all
reasonable steps to retrieve, and prevent further unauthorized disclosure of
such Proprietary Information.
6. This Agreement shall not restrict disclosure or use of
Proprietary Information which: (1) was in the public domain at the time of
disclosure or thereafter enters the public domain through no breach of this
Agreement by CONSULTANT; (2) was, at the time of
<PAGE> 5
receipt, otherwise known to CONSULTANT without restrictions as to use or
disclosure; (3) becomes known to CONSULTANT from a source other than SPACEHAB
or its agents without breach of this Agreement by CONSULTANT; (4) is developed
independently by CONSULTANT without the use of Proprietary Information
disclosed to it hereunder; or (5) is disclosed more than five years after it is
first received hereunder.
8. Nothing contained in this Agreement shall be construed as
granting or conferring any rights by license or otherwise in any Proprietary
Information disclosed under this Agreement.
9. The respective address and point of contact for each party to
which all correspondence and notices hereunder are to be sent is as follows:
<TABLE>
<CAPTION>
<S> <C>
If to SPACEHAB: If to CONSULTANT:
Attn.: William Dawson Attn.: Gordon S. Macklin
General Counsel 8212 Burning Tree Road
SPACEHAB, Inc. Bethesda, Maryland 20817
1595 Spring Hill Road.
Suite 360
Vienna,VA 22182
</TABLE>
Each party may change its respective address or point of contact by delivering
a written notice thereof to the other party.
10. This Agreement is not intended to, and shall not, constitute,
create, give effect to, or otherwise recognize a joint venture, partnership,
pooling arrangement or formal business entity between the parties of any kind.
The rights and obligations of the parties shall be limited to those expressly
set forth herein. Nothing herein shall be construed as providing for the
sharing of profits or losses arising out of the efforts of either or both
parties. Each party shall act as an independent contractor and not as an agent
of the other for any purpose whatsoever and neither party shall have any
authority to bind the other party except as specifically set forth herein.
Neither party shall be liable to the other for any of the costs associated with
the other party's efforts or compliance in connection with this Agreement.
11. This Agreement shall become effective on the date on which it is
signed by the last of the parties hereto to sign, and it shall expire one (1)
year thereafter, at which time all proprietary information received hereunder
(and any copies thereof) shall be returned to the providing party unless a
different arrangement has been entered into between the parties in writing.
Expiration of the term of this Agreement, however, shall have no effect on the
obligations imposed on the party with respect to the protection of proprietary
information received hereunder for the full period of time required by Paragraph
4 of this Agreement.
12. This is the entire agreement between the parties concerning the
exchange and protection of Proprietary Information, and it supersedes any prior
written or oral agreements relating thereto and may not be amended or modified
except by subsequent agreement in writing signed by a duly authorized officer or
representative of each party.
13. Each signatory, by signing below, certifies that he or she has
authority to bind to this Agreement the respective party for which he or she
signs.
<PAGE> 6
14. This Agreement does not contemplate export from the United States
of any "technical data" (as defined by the regulation of the Office of Defense
Trade Controls, United States Department of State) related to items on the U.S.
Munitions List. If the parties determine that the export of any "technical
data" is necessary , the Parties will seek the necessary license or approval
prior to the export of any such "technical date".
IN WITNESS WHEREOF, each party hereto has caused this Agreement to be
duly executed in duplicate originals by its respective duly authorized
representative as follows:
CONSULTANT SPACEHAB, Inc.
By: /s/ GORDON S. MACKLIN By: /s/ MARGARET E. GRAYSON
---------------------- ---------------------------
Name: GORDON S. MACKLIN Name: MARGARET E. GRAYSON
-------------------- -------------------------
Title: Title: Vice President - Finance
-------------------- -------------------------
Date: 8/14/96 Date: 8/14/96
-------------------- -------------------------
<PAGE> 1
Exhibit 11
SPACEHAB, INCORPORATED
COMPUTATIONS OF PRIMARY EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30, NINE MONTHS
----------------------------------------- ENDED JUNE 30,
1994 1995 1996
---------------------------------------------------------------
<S> <C> <C> <C>
Weighted average common shares outstanding:
Average shares outstanding during the period 4,908,260 4,940,034 9,139,464
Unexercised stock options and warrants
using the treasury stock method 80,000 60,000 164,023
Convertible preferred stock (1) 1,671,312 1,671,312 --
-------------- ------------ ------------
Total weighted average common shares 6,659,572 6,671,346 9,303,487
============== ============ ============
Net income applicable to common shares:
Net income $ 8,638,037 $ 15,808,856 $ 29,828,743
============== ============ ============
Primary earnings per Common Share $ 1.30 $ 2.37 $ 3.21
============== ============ ============
</TABLE>
(1) Assumed converted as of the beginning of the period.
(Continued)
<PAGE> 2
Exhibit 11, continued
SPACEHAB, INCORPORATED
COMPUTATIONS OF FULLY DILUTED EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30, NINE MONTHS
------------------------------------- ENDED JUNE 30,
1994 1995 1996
------------------------------------------------------------
<S> <C> <C> <C>
Weighted average common shares outstanding:
Average shares outstanding during the period 4,908,260 4,940,034 9,139,464
Unexercised stock options and warrants using
using the treasury stock method 80,000 60,000 164,023
Convertible preferred stock (1) 1,671,312 1,671,312 --
Convertible note payable (1) 75,000 75,000 75,000
----------- ----------- -----------
Total weighted average common shares 6,734,572 6,746,346 9,378,487
=========== =========== ===========
Not income applicable to common shares:
Net income $ 8,638,037 $15,808,856 $29,828,743
Increase in earnings, net of taxes,
resulting from the conversion of the
convertible note payable 62,935 80,163 59,017
----------- ----------- -----------
Net income applicable to common shares $ 8,700,972 $15,889,019 $29,887,760
=========== =========== ===========
Fully diluted earnings per Common Share (2) $ 1.29 $ 2.36 $ 3.19
=========== =========== ===========
</TABLE>
(1) Assumed converted as of the beginning of the period, or date of original
issuance if later.
(2) Dilution of less than 3% of the primary earnings per share computation
is not presented in the Company's financial statements.
<PAGE> 1
Exhibit 12
ANNUAL REPORT TO STOCKHOLDERS FOR THE FISCAL YEAR ENDED
JUNE 30, 1996
<PAGE> 2
TO OUR SHAREHOLDERS
It is our pleasure to welcome SPACEHAB's new investors from the Company's
Initial Public Offering (IPO) completed in December, 1995 and update our long
term investors from around the globe. Fiscal 1996 was an important year in the
development of SPACEHAB, Inc. We have accomplished certain objectives that more
clearly define our strategic course for investment and growth into the future.
Financial results for the fiscal period ended June 30, 1996 were very
positive. Earlier this year, we changed our fiscal year-end from September 30
(which had coincided with the U.S. government fiscal year-end) to June 30,
making the fiscal year for 1996 only nine months long. We are reporting
substantial 1996 revenue and income growth over the last fiscal year ended
September 30, 1995. Revenue for the 1996 fiscal period was $56.4 million, a 22%
increase from fiscal 1995 revenue of $46.1 million. Net income increased to
$29.8 million in fiscal 1996 from $15.8 million in fiscal 1995.
Mission operations during 1996 were focused primarily on our two NASA
programs: the Mir Contract to carry vital supplies aboard the Space Shuttle to
the Russian space station Mir, and the Commercial Middeck Augmentation Module
(CMAM) Contract to support NASA's commercial mircrogravity research on the
Space Shuttle. Our first mission in March 1996 aboard the space shuttle
Atlantis carried more than 4,600 pounds of food, equipment, and supplies for
the two Russian cosmonauts and one U.S. astronaut who are in orbit aboard Mir.
Three more SPACEHAB missions to Mir are planned in fiscal 1997 under the Mir
Contract. The next mission to Mir currently is scheduled for September 1996
when we will introduce our Logistics Double Module. This new module
configuration is optimized to accommodate cargo and will substantially increase
our capability to deliver supplies to Mir. In June 1996, NASA exercised all
three options on the Mir Contract providing a firm backlog of cargo missions
through 1998.
Our second mission in 1996, launched only two months later in May aboard the
space shuttle Endeavour, was the fourth mission under the CMAM contract. We
accommodated 12 experiments sponsored by industry, NASA, and academia.
Promising research was conducted in biotechnology, semiconductor materials, and
polymers. The remaining experiments that will complete the CMAM contract will
be accommodated as part of the September mission.
In our continuing effort to anticipate the needs of our customers, SPACEHAB
has initiated the design and development of another module configuration: a
Science Double Module optimized for research missions. This new Double Module
will augment our fleet of pressurized modules to meet both the research and
cargo-carrying requirements of NASA, the International Space Station (ISS)
partner agencies and industry. Our management team was expanded to address
opportunities in life sciences, the ISS program, and U.S./Russian activities.
SPACEHAB has enjoyed a compound annual growth rate in net income of 94% since
it began flight operations in 1993, lowering cumulative losses from $62.6
million in 1993 to just $8.3 million in 1996, allowing the Company to recover a
substantial portion of the initial investment in SPACEHAB's modules over the
first four years of operations. The Company now is entering its next important
phase of research, development and construction of new market assets to expand
its future business franchise in human space activity.
[PHOTO OF SHELLEY A. HARRISON (LEFT)]
CHAIRMAN AND CEO
[PHOTO OF CHESTER M. LEE (RIGHT)]
PRESIDENT
Investment in research and development is expected to continue for the next
four years to expand our fleet of space-flight hardware in conjunction with the
launch and assembly of the ISS. We also expect that new NASA contracts for
science and logistics missions may experience pricing pressure as a result of
competing demands for NASA funds.
In December 1995, SPACEHAB completed a successful IPO that raised net
proceeds of $43.5 million. Proceeds from the offering, net of certain debt
repayments, are being used to develop new products and services to solidify our
position in existing business sectors, and to evaluate and enter new markets.
In April, SPACEHAB's Board of Directors asked that we take on additional
responsibilities and management roles as your CEO and your President. You have
our commitment to continue this effort to achieve our strategic growth and
positioning goals by increasing our successful record of shuttle based
missions, expanding our asset base, enhancing our customer base and growing our
relationships with international and domestic partners to strengthen your
Company.
We believe that the 21st century will see ever increasing human habitation of
space, driven by the quest for knowledge, discovery, and adventure. SPACEHAB
already is at the forefront of this journey. Welcome aboard.
/s/ SHELLEY A. HARRISON /s/ CHESTER M. LEE
Shelley A. Harrison Chester M. Lee
Chairman and CEO President
September 16, 1996
<PAGE> 3
Human Presence In Space
- ---------------------------------------------------------
INTERNATIONAL SPACE STATION
- ---------------------------------------------------------
Largest international scientific effort in history
Assembly 1997 - 2002
Operations 2002 - 2017
20+ YEARS PLANNED OPERATIONS
- ---------------------------------------------------------
UNITED STATES - RUSSIA - EUROPE - JAPAN - CANADA
- ---------------------------------------------------------
- -----------------------------------------------
U.S. SPACE SHUTTLE
- -----------------------------------------------
- 4 Orbiters
- 7 - 8 Launches per year
- 78 Flights to date
- 15 Years cumulative experience
- -----------------------------------------------
- -----------------------------------------------
RUSSIAN MIR SPACE STATION
- -----------------------------------------------
- 10 Years of operations
- Continuous human presence in space
- Joint U.S.-Russian preparation for ISS
- -----------------------------------------------
1984
RESEARCH AND
DEVELOPMENT
PHASE BEGINS--
DESIGN OF
SPACEHAB
MODULES
SPACEHAB
FORMED
1990
COMMERCIAL MIDDECK
AUGMENTATION MODULE (CMAM)
CONTRACT AWARDED--
$184 MILLION
The first and only company to commercially
develop, own and operate habitable modules
that provide space-based laboratory research
facilities and space station resupply services
aboard the U.S. Space Shuttle System
The SPACEHAB Payload
Processing Facility is a
42,000 square-foot state-
of-the-art integration and
training facility near NASA's
Kennedy Space Center in
Cape Canaveral, Florida.
[PHOTO OF THE SPACEHAB PAYLOAD PROCESSING FACILITY]
Artist's rendition of a SPACEHAB Single
Module in the payload bay of the Space
Shuttle Endeavour. Astronauts float through a
tunnel from the Shuttle's crew compartment
into the SPACEHAB Module.
[PHOTO OF SPACEHAB SINGLE MODULE IN THE PAYLOAD BAY OF THE SPACE SHUTTLE
ENDEAVOUR]
[PHOTO OF TECHNICIANS LOADING EXPERIMENTS]
[PHOTO OF TECHNICIANS PREPARING THE SPACEHAB MODULE FOR FLIGHT]
Technicians loading experiments
and preparing the SPACEHAB Module
for flight at the SPACEHAB Payload
Processing Facility.
<PAGE> 4
CMAM FLIGHTS BEGIN (1993)
- - Supports commercial and scientific microgravity research
- - $184 million fixed-price contract with NASA
- - Five flights through FY1996
- - Real-time mission support services
Profitable since inception of operations
Building SPACEHAB Modules
1990 to 1993
Our Company Is Launched
The 1980's ushered in a new era for America's space program. Once the sole
domain of government for exploration and defense, U.S. space activities began
to evolve into an international endeavor that would create benefits on Earth
through research and commerce in space. SPACEHAB, Inc., founded in 1984, was
one of the first companies formed to capitalize on this sweeping
transformation.
Today, SPACEHAB is globally recognized as a leader supporting people who are
living and working in space. For the benefit of those shareholders who joined
us this year, a glimpse of our past will sharpen your view of our future...
The Space Shuttle
The space program's new era began with the 1981 launch and landing of the
world's first reusable spacecraft -- the U.S. Space Shuttle. Designed to
provide frequent, reliable transportation to a low-Earth orbit 150 miles
overhead, NASA's space shuttle fleet of four vehicles became the heart of the
U.S. manned space program. Each Space Shuttle features a payload bay, where
satellites are carried and then released into space, and a pressurized middeck,
where research in a weightless, or microgravity, environment can be conducted
by astronauts. NASA has launched 78 successful Space Shuttle missions to date
and plans at least seven missions per year for the next 15 to 20 years.
The Innovation
Experience from the early Space Shuttle missions demonstrated that the
astronauts needed more living and working space than was available in the
middeck. SPACEHAB recognized this unmet need and developed a unique solution
that adds pressurized volume -- SPACEHAB modules that ride in the payload bay
and are connected to the middeck by a short tunnel.
SPACEHAB modules are aluminum cylinders, measuring 10 feet in length by 13.5
feet in diameter, that incorporate a patented design including a truncated top
and flat-end caps. These fully-instrumented modules provide experiment
resources such as power, data management, and vacuum venting. When carried
aboard the Space Shuttle, SPACEHAB modules serve as an additional research lab
and habitation area and double the working, living, and storage area for the
astronauts. Considering that SPACEHAB modules occupy only a fraction of the
payload bay, NASA is able to carry other payloads on the same flight.
The Business
The potential benefits from microgravity research became more apparent with
each Space Shuttle mission. In 1985, NASA established a national network of
Centers for the Commercial Development of Space (CCDS) to exploit these
benefits through a combination of government and industry investment in space
research. The resulting commercial interest generated a substantial requirement
for access to the Space Shuttle's microgravity environment and prompted NASA to
request proposals to satisfy this demand. In 1990, SPACEHAB was awarded the
$184 million Commercial Middeck Augmentation Module (CMAM) contract to carry
CCDS experiments aboard SPACEHAB modules on five flights through 1996.
SPACEHAB's first CMAM mission in 1993 carried 21 experiments from the CCDS's
and other NASA field centers. This virtually flawless flight set the tone for
the Company's subsequent missions: on-time, on-budget, mission accomplished! We
have flown five missions to date and six more missions already are scheduled
for launch in the next two fiscal years.
<PAGE> 5
More commercial space research & development
on SPACEHAB Modules than on all missions since
1960's combined
Uniquely positioned to be the dominant commercial supplier
to NASA, the other international space agencies and industry
1994
CMAM
FEB '94
CMAM
JUNE '93
WE ACHIEVE ORBIT
SPACEHAB's fundamental business strategy was forged with the CMAM contract. We
carefully anticipate customer requirements, invest our capital to develop
space-flight assets, contract with established aerospace companies for
engineering and production, retain ownership of these assets, and provide
innovative, low-cost solutions to meet customer requirements using fixed-price
service contracts.
The Company's strategy also recognizes two essential elements of our
success: NASA's importance as a customer as well as a supplier of Space Shuttle
transportation, and the growing internationalization of space activities.
Our NASA Relationship
Our close relationship with NASA was strengthened by locating SPACEHAB's
offices near NASA Headquarters in Washington, DC and NASA's Johnson Space
Center in Houston, Texas. SPACEHAB's Payload Processing Facility (SPPF), where
the SPACEHAB modules are housed, assembled, and
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
MICROGRAVITY RESEARCH
CONDUCTED ON SPACEHAB
- ---------------------------------------------------------------------
Sponsor Experiment Application
- ---------------------------------------------------------------------
<S> <C> <C>
Upjohn Co. Malic enzyme Anti-parasite
crystallization drugs
- ---------------------------------------------------------------------
Eli Lilly and Co. Human insulin Time-release
crystallization diabetes drugs
- ---------------------------------------------------------------------
Chiron Corp. Immune AIDS symptoms
suppression relief
- ---------------------------------------------------------------------
Schering-Plough Alpha interferon Cancer
Corp. crystallization treatment
- ---------------------------------------------------------------------
Bioserve Space Plant cell and Improved
Technologies hormone mixing crop yields
- ---------------------------------------------------------------------
Paragon Vision Polymers Improved
Sciences contact lenses
- ---------------------------------------------------------------------
Kennametal Inc. New metal alloys Harder tool bits
Parker Hannafin Corp.
- ---------------------------------------------------------------------
</TABLE>
SPACEHAB technicians install a
NASA-sponsored experiment.
[PHOTO OF EXPERIMENT]
(Below) SPACEHAB utilizing proprietary
payload processing procedures
to prepare its Module for flight.
(Right) Typical crew activity aboard a
SPACEHAB Module in space.
[PHOTO SHOWING SPACEHAB PAYLOAD PROCEDURES]
[PHOTO OF TYPICAL CREW ACTIVITY]
<PAGE> 6
[PICTURE DEPICTING SPACE SHUTTLE]
SPACEHAB Double Module
Mir Docking Module
Access tunnels
1995
NASA AWARDS MIR CONTRACT--
$54 MILLION
CMAM
FEB '95
DESIGN/BUILD
DOUBLE MODULE
1995 - 1996
MIR
FLIGHTS BEGIN
(1996)
1996
integrated before launch and after landing is located adjacent to NASA's
Kennedy Space Center in Cape Canaveral, Florida. This 42,000 square-foot,
Company-owned facility is a key to SPACEHAB's low-cost and flexible operations.
The SPPF's primary work area is a 17,500 square-foot integration hall and
clean room where the modules are prepared and we train the astronauts prior to
each mission. The facility also offers 11 secure customer work areas that
enable researchers to adjust and refine their experiments until just a few days
before flight.
Strategic Alliances
International and domestic strategic alliances with major aerospace
companies were established early in SPACEHAB's history. In 1985, Alenia Spazio
S.p.A., Italy's largest and most experienced aerospace company, was selected to
build the primary structure of the modules. A year later, McDonnell Douglas
Aerospace was chosen as our prime contractor to outfit the modules and to
provide on-going payload integration and engineering support.
To address international markets for SPACEHAB's services, Mitsubishi
Corporation was selected as SPACEHAB's exclusive representative in Japan.
INTOSPACE GmbH, a commercial space marketing company owned by a consortium of
European companies and government agencies, represents SPACEHAB in Europe.
In addition to Alenia Spazio S.p.A., McDonnell Douglas, and Mitsubishi
Corporation, SPACEHAB's strategic investors include Daimler-Benz Aerospace A.G.
in Germany, SPACEHAB Taiwan and the government of Singapore. Our partners are
well positioned in their respective nations to help the Company address
upcoming requirements for microgravity and life science research, logistics
missions, and payload processing as we move into the International Space
Station ("ISS") era.
New Services
Our business strategy was employed successfully again in 1994 to expand our
product and service line when NASA and the Russian Space Agency created a joint
program to prepare for the ISS. This program established Space Shuttle docking
missions with the Russian space station Mir that require transportation of
thousands of pounds of logistics (food, supplies, etc.) to Mir and an exchange
of American astronauts and Russian cosmonauts.
Anticipating the growing cargo requirements for the Shuttle/Mir program, we
developed a new SPACEHAB Double Module to meet these requirements and then
[PHOTO OF SPACEHAB DOUBLE MODULE BEING DELIVERED]
[PHOTO OF ASTRONAUTS EXAMINING INTERIOR OF SPACEHAB]
(Far left) Picture depicting the SPACEHAB Double Module being delivered to
NASA's Kennedy Space Center to be installed into the payload bay of Space
Shuttle Atlantis on the launch pad.
(Left) Astronauts examining the interior of the SPACEHAB Double Module packed
with supplies and experiments to carry to the Russian Space Station Mir.
<PAGE> 7
Billion dollar markets opening up over the next decade
Alliances with international strategic partners whose governments are
significant participants in the development of the International Space Station
1997
MIR
MARCH '96
CMAM
MAY '96
CMAM/MIR
SEPT '96
MIR
JAN '97
MIR
JUNE '97
offered a logistics service to NASA for a fixed price. In July 1995, NASA
selected SPACEHAB modules as the Shuttle/Mir logistics carrier and awarded the
Company a $54 million contract for one Single Module mission and three Double
Module missions.
SPACEHAB's first mission to Mir was flown successfully in March 1996, only
two months before SPACEHAB's successful May 1996 CMAM flight, thus marking the
first time SPACEHAB has conducted two or more missions in a single year. The
maiden voyage of the Double Module currently is scheduled to rendezvous and
dock with Mir in September 1996.
As the Shuttle/Mir program requirements continued to expand, NASA added
three more missions to our basic contract. These additional Shuttle/Mir
logistics flights will provide a substantial business base for SPACEHAB into
1998.
The International Space Station
Just as the Space Shuttle has been the heart of the U.S. space program in
the 1980's and 1990's, the new millennium will begin with the ISS as the focus
for all human space activities. More than a dozen nations are committed to
developing this permanent orbiting laboratory.
Although NASA has taken the lead in developing and launching the ISS, major
components will be supplied by the space agencies of Russia, Europe, Japan,
Italy, and Canada. With strong domestic and international strategic partners
and an unblemished record for mission success, SPACEHAB is positioned to become
a key participant in the growing market to resupply, augment, utilize, and
support the ISS.
Growth Markets
SPACEHAB modules have become an essential component of NASA's Space Shuttle
program; of the seven shuttle missions planned this year, SPACEHAB modules will
be flown on three. Our presence on these missions, and the additional five
scheduled to follow in 1997 and 1998, provides
[PICTURE OF SPACE SHUTTLE ATLANTIS]
An artist's rendition of the Space Shuttle Atlantis docked with
the Russian Space Station Mir. The Space Shuttle is carrying the
SPACEHAB Double Module in its payload bay. The SPACEHAB
Module is used to carry logistics such as food, clothing, and
equipment to resupply Mir.
<PAGE> 8
EARTH-GROWN
[PICTURE DEPICTING PROTEIN CRYSTALS]
SPACE-GROWN
[PICTURE DEPICTING LARGER PROTEIN CRYSTALS]
Larger and more well-ordered
protein crystals (right photo) of
human insulin were grown in
space onboard a SPACEHAB
module in 1994. Private companies,
universities, and research institutes
are conducting biotechnology
research to develop a time-release
insulin treatment for diabetes, as
well as possible future treatments
for other diseases such as cancer,
osteoporosis, and AIDS.
(Both photos same microscope
magnification.)
<TABLE>
<CAPTION>
THREE GROWTH MARKETS
- -----------------------------------------------------------------------------------------------------------------------
MICROGRAVITY AND SPACE SUPPORT SPACE INFRASTRUCTURE
LIFE SCIENCES RESEARCH SERVICES DEVELOPMENT
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Scientific and commercial research Space station logistics, payload ISS experiment facilities and
on the Space Shuttles and ISS processing, and ground operations telerobotic operations
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
1998
MIR
OCT '97
MIR
JAN '98
MIR
MAY '98
SPACEHAB with insight and access to human space activities in our three core
business segments: microgravity and life science research, space support
services, and space infrastructure development.
More space research and development already has been performed on SPACEHAB
modules than on all other space missions since the 1960's combined. SPACEHAB
will capitalize on this knowledge and experience base by establishing an
incubator program to sponsor and invest in commercially promising space
research activities such as protein crystal growth, organic materials
separation, semiconductor crystal growth, and polymer development.
We believe that space-based protein crystal growth is an especially
promising research area for application in structure-based pharmaceutical
design. A pilot cooperative research program with the biotechnology industry
will be initiated in 1997 to develop incubator projects in this field.
TO BOLDLY GO...
Humankind's future in space is rich with possibilities: treatments for
debilitating diseases such as osteoporosis, new medicines for diabetes,
improved contact lenses, and other paybacks may soon arise from the worldwide
investment in microgravity research. As a leader in the commercial space
industry, SPACEHAB will continue to offer innovative, aggressive, low-cost
approaches to satisfy customer needs. In time, a revolution in healthcare on
Earth could begin aboard a SPACEHAB module in space.
<PAGE> 9
SELECTED FINANCIAL INFORMATION SPACEHAB INC.
<TABLE>
<CAPTION>
Nine Months
Fiscal Years Ended September 30, Ended June 30
------------------------------------------------- -------------
1992 1993 1994 1995 1996
----------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Statement of Operations
Revenue $ -- $ 42,467 $ 43,800 $ 46,059 $ 56,397
Costs of revenue 6,140 23,204 24,227 23,349 20,985
----------- --------- --------- ---------- ----------
Gross profit (loss) (6,140) 19,263 19,573 22,710 35,412
Marketing, general and administrative expenses 8,317 7,906 5,064 3,816 4,056
Research and development expenses 11,459 3,076 -- 1,600 100
----------- --------- --------- ---------- ----------
Operating income (loss) (25,916) 8,281 14,509 17,294 31,256
Interest expense, net of capitalized amounts 3,983 4,209 4,863 1,365 699
Net income (loss) (29,840) 4,117 8,638 15,809 29,829
Net income (loss) per common share$ (6.20) $ (6.20) 0.62 $ 1.30 $ 2.37 $ 3.21
Shares used in computing net income (loss) 4,811 6,650 6,660 6,671 9,303
Other Data:
Cash provided by operations $ 27,590 $ 22,246 $ 21,831 $ 26,838 $ 13,151
Capital expenditures 29,896 16,589 76 4,943 6,266
Balance Sheet Data (at period end):
Working capital (deficit) $ (13,744) $ (31,066) $ (20,589) $ 7,192 $ 45,942
Total assets 100,727 118,083 95,261 86,701 129,709
Long-term debt, excluding current portion 51,333 30,325 22,884 24,886 17,318
Stockholders' equity (deficit) (34,511) (29,894) (21,184) (1,715) 71,596
</TABLE>
OFFICERS AND DIRECTORS
SHELLEY HARRISON, PH.D.
Chairman and CEO
CHESTER M. LEE
President
MARGARET E. GRAYSON
Vice President
Finance and Treasurer
DAVID A. ROSSI
Senior Vice President
Business Development
J. MICHAEL LOUNGE
Vice President
Operations
M. DALE STEFFEY
Vice President
Engineering & Integration
DIRECTORS
HIRONORI AIHARA
Mitsubishi Corporation
ROBERT A. CITRON
Kistler Aerospace
DR. EDWARD DAVID, JR.
Consultant
SHELLEY HARRISON, PH.D.
Chairman and CEO
DR. SHI H. HUANG
ChinFon Global Corp.
SPACEHAB Taiwan
DR. BRAD MESLIN
CSP Associates
DR. UDO POLLVOGT
Daimler-Benz Aerospace AG
ALVIN L. REESER
Consultant
JEFFREY SCHUSS
William D. Witter, Inc.
J.R. THOMPSON
Orbital Sciences Corporation
ERNESTO VALLERANI
Alenia Spazio S.p.A.
TRANSFER AGENT
AMERICAN STOCK TRANSFER
& TRUST CO.
40 Wall Street
New York, New York 10005
[PICTURE SHOWING THE SPACE SHUTTLE]
The discussions in this annual report contain both historical information and
forward looking statements. The forward looking statements involve risks and
uncertainties that affect the Company's operations, markets, products,
services, prices and other factors as discussed in the Company's filings with
the Securities and Exchange Commission. These risks and uncertainties include,
but are not limited to, economic, competitive, governmental and technological
factors.
<PAGE> 10
[SPACEHAB LOGO]
NOTICE OF 1996 ANNUAL MEETING OF STOCKHOLDERS
To The Stockholders of SPACEHAB, Incorporated:
The 1996 Annual Meeting of Stockholders (the "Annual Meeting")
of SPACEHAB, Incorporated (the "Company") will be held at the Company's
headquarters located at 1595 Spring Hill Road, Vienna, Virginia 22182 on
October 22, 1996 at 10:00 a.m., for the following purposes:
1. To elect 12 directors to the Company's Board of
Directors, each to hold office until their successors
are elected at the 1997 Annual Meeting of
Stockholders;
2. To ratify the appointment of KPMG Peat Marwick LLP as
independent public accountants for the Company;
3. To transact such other business as may properly come
before the meeting and any adjournment thereof.
A proxy statement with respect to the Annual Meeting
accompanies and forms a part of this Notice. The Annual Report of the Company
for the fiscal year ended June 30, 1996 also accompanies this Notice.
The Board of Directors has fixed the close of business on
September 6, 1996 as the record date for determining stockholders entitled to
notice of, and to vote at, the Annual Meeting.
By Order of the Board of Directors,
Nelda Wilbanks
Secretary
Vienna, Virginia
September 16, 1996
YOUR VOTE IS IMPORTANT
PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY CARD
AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR
NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING.
<PAGE> 11
[SPACEHAB LOGO]
September 16, 1996
Dear Stockholder:
You are cordially invited to attend the 1996 Annual Meeting of
Stockholders of SPACEHAB, Incorporated (the "Company") to be held at the
Company's headquarters located at 1595 Spring Hill Road, Vienna, Virginia 22182
on October 22, 1996 at 10:00 a.m. Information about the meeting, the nominees
for directors and the proposals to be considered is presented in the Notice of
Annual Meeting and the Proxy Statement on the following pages.
At the meeting, you will be asked to elect 12 directors to the
Company's Board of Directors, each for a one-year term expiring at the 1997
Annual Meeting of Stockholders, and to ratify the appointment of KPMG Peat
Marwick LLP as independent public accountants for the Company. The Board of
Directors has unanimously approved these proposals and we urge you to vote in
favor of these proposals and such other matters as may be submitted to you for
a vote at the meeting.
Your participation in SPACEHAB's affairs is important,
regardless of the number of shares you hold. To ensure your representation at
the meeting, even if you anticipate attending in person, we urge you to mark,
sign, date and return the enclosed proxy card promptly. If you attend, you
will, of course, be entitled to vote in person.
Thank you for your assistance in returning your proxy card
promptly.
Sincerely,
DR. SHELLEY A. HARRISON
Chairman and Chief Executive Officer
<PAGE> 12
SPACEHAB, Incorporated
1595 Spring Hill Road
Suite 360
Vienna, Virginia 22182
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the
solicitation by the Board of Directors (the "Board of Directors") of SPACEHAB,
Incorporated, a Washington corporation ("SPACEHAB" or the "Company"), of
proxies to be voted at the 1996 Annual Meeting of Stockholders on October 22,
1996 (the "Annual Meeting"). This Proxy Statement, the accompanying proxy card
and Annual Report to Stockholders are first being mailed to stockholders on or
about September 16, 1996.
VOTING SECURITIES
The Board of Directors has fixed the close of business on
September 6, 1996 as the record date (the "Record Date") for the determination
of stockholders entitled to notice of, and to vote at, the Annual Meeting. As
of the Record Date, the Company had outstanding 11,071,237 shares of common
stock, no par value per share (the "Common Stock"). Holders of Common Stock
are entitled to notice of and to one vote per share of Common Stock owned as of
the Record Date at the Annual Meeting.
PROXIES
Dr. Shelley A. Harrison and Margaret E. Grayson, the persons
named as proxies on the proxy card accompanying this Proxy Statement, were
selected by the Board of Directors of the Company to serve in such capacity.
Dr. Harrison is Chairman of the Board of Directors and Chief Executive Officer
and Ms. Grayson is Vice President of Finance and Treasurer. Each stockholder
giving a proxy has the power to revoke it at any time before the shares it
represents are voted. Revocation of a proxy is effective upon receipt by the
Secretary of the Company of either (i) an instrument revoking the proxy or (ii)
a duly executed proxy bearing a later date. Additionally, a stockholder may
change or revoke a previously executed proxy by voting in person at the Annual
Meeting.
VOTING OF PROXIES
Since many SPACEHAB stockholders are unable to attend the
Company's Annual Meeting, the Board of Directors solicits proxies to give each
stockholder an opportunity to vote on all matters scheduled to come before the
meeting and set forth in this Proxy Statement. Stockholders are urged to read
carefully the material in this Proxy Statement, specify their choice on each
matter by marking the appropriate boxes on the enclosed proxy card, and sign,
date and return the card in the enclosed stamped envelope.
If no choice is specified and the card is properly signed and
returned, the shares will be voted by the persons named as proxies in
accordance with the recommendations of the Board of Directors contained in this
Proxy Statement.
QUORUM; METHOD OF TABULATION
The holders of at least one-third of the Common Stock issued
and outstanding and entitled to vote at the Annual Meeting, if represented in
person or by proxy, will constitute a quorum at the Annual Meeting. Under
applicable law and the Company's Articles of Incorporation and By-Laws, and
assuming that a quorum is present, in the election of directors, the persons
elected will be the persons receiving the greatest number of votes, up to the
number of directors to be elected, of the stockholders present in person or by
proxy and entitled to vote thereon; provided that no stockholder
<PAGE> 13
shall be allowed to cumulate his votes. At the Annual Meeting, the vote of a
majority in interest of the stockholders present in person or by proxy and
entitled to vote thereon is required to ratify the appointment of KPMG Peat
Marwick LLP as the independent public accountants of the Company's financial
statements for the fiscal year ending June 30, 1997.
One or more inspectors of election appointed for the meeting
will tabulate the votes cast in person or by proxy at the Annual Meeting and
will determine whether or not a quorum is present. The inspectors of election
will treat abstentions as shares that are present and entitled to vote for
purposes of determining the presence of a quorum but as unvoted for purposes of
determining the approval of any matter submitted to the stockholders for a
vote. If a broker indicates on a proxy that it does not have discretionary
authority as to certain shares to vote on a particular matter, those shares
will not be considered as present and entitled to vote with respect to that
matter.
PROPOSAL 1 - ELECTION OF DIRECTORS
A Board of 12 directors will be elected at the Annual Meeting.
All directors hold office until the next annual meeting of stockholders or
until their successors are duly elected and qualified. The Company's Articles
of Incorporation authorize the Board of Directors from time to time to
determine the number of its members. Vacancies in unexpired terms and any
additional positions created by board action may be filled by action of the
existing Board of Directors.
The nominees for whom the enclosed proxy is intended to be
voted are set forth below. It is contemplated that all nominees will be
available for election, but if one or more is not, the proxy will be voted in
accordance with the best judgment of the proxyholder for such person or persons
as may be designated by the Board of Directors unless the stockholder has
directed otherwise.
NOMINEES FOR ELECTION AS DIRECTORS:
HIRONORI AIHARA
Mr. Aihara (age 58) has served as a director of the Company
since April 1992. Mr. Aihara has held various executive level positions with
Mitsubishi Corporation, including Managing Director of Information Systems and
Services Group from June 1990 until the present.
ROBERT A. CITRON
Mr. Citron (age 63) founded SPACEHAB in 1983 and was its
Chairman of the Board of Directors, President and Chief Executive Officer from
1983 to 1987. Mr. Citron is currently the President of Kistler Aerospace
Corporation, a Seattle-based space technology company.
DR. EDWARD E. DAVID, JR.
Dr. David (age 71) has served as a director of the Company
since August 1993. Dr. David is currently the President of EED, Inc., advisors
to industry, government and academia on technology, research and innovation.
Dr. David was Science Advisor to President Nixon and Director of the White
House Office of Science and Technology from 1970 to 1973. He has also served
as President of Exxon Research and Engineering Company from 1977 to 1986, and
as Executive Director of Bell Telephone Laboratories from 1950 to 1970. Dr.
David is also a director of California Microwave, Inc., Intermagnetics General
Corporation, and Protein Polymer Technologies Inc.
2
<PAGE> 14
DR. SHELLEY A. HARRISON
Dr. Harrison (age 53) has served as the Company's Chief
Executive Officer since April 1996, Chairman of the Board of Directors since
August 1993 and has been a member of the Company's Board of Directors since
1987. Dr. Harrison was a Member of Technical Staff at Bell Telephone
Laboratories and a Professor of Electrical Sciences at the State University of
New York at Stony Brook. In 1973, Dr. Harrison co-founded Symbol Technologies
Inc., the world's leading provider of bar-code laser scanners and portable
terminals where he served as Chairman and Chief Executive Officer until 1982.
As President of Harrison Enterprises from 1982 to 1986, he managed venture
financings and technology start-ups. Since 1987, Dr. Harrison has been a
managing general partner of a high technology venture capital fund, Poly
Ventures, L.P. ("Poly Ventures"). Dr. Harrison is also a director of
NetManage, Inc. and several privately held high technology portfolio companies.
He is Chairman of the New York State Center for Advanced Technology in
Telecommunications and a Trustee of Polytechnic University.
DR. SHI H. HUANG
Dr. Huang (age 70) has served as a director of the Company
since July 1990. Dr. Huang is the Chairman of the Board of Chinfon Global
Corp., a Republic of China on Taiwan-based conglomerate, which operates 28
affiliated companies in such fields as automobile/motorcycle manufacturing,
banking, and trading. Since 1989, Dr. Huang has also served as the Chairman of
SPACEHAB Taiwan, Inc., a corporation organized as an investment vehicle for
certain Company investors from the Republic of China. Except for its ownership
of Common Stock, SPACEHAB Taiwan, Inc. has no other affiliation with the
Company.
CHESTER M. LEE
Mr. Lee (age 77) has served as President of the Company since April
1996. Prior to assuming his current responsibilities, Mr. Lee served as the
Company's Vice President-Operations since November 1987. Prior to joining
SPACEHAB, Mr. Lee worked for NASA for 23 years. His last position at NASA was
Assistant Associate Administrator for Policy, Planning, and Department of
Defense-Affairs in the Office of Space Flight at NASA. While working at NASA,
Mr. Lee held various other senior positions, including Director of Shuttle
Customer Services Division, Director of Space Transportation Utilization
Division, Director of Space Transportation Systems Operations, and Apollo
Mission Director for Apollo flights 12 through 17 to the moon.
GORDON S. MACKLIN
Mr. Macklin (age 68) has been Chairman of White River
Corporation since 1993. From 1987 to 1992, he was Chairman of Hambrecht &
Quist, LLC. Mr. Macklin served as President of The National Association of
Securities Dealers, Inc. from 1970 to 1987, and was formerly a partner and
Member of the Executive Committee of McDonald & Company, an investment banking
firm, from 1950 to 1970. Mr. Macklin is a director, trustee, or managing
general partner, as the case may be, of 53 of the investment companies in the
Franklin/Templeton Group, and a director of Fund American, MCI Communications
Corporation, Fusion Systems Corp., MedImmune, Inc., Source One Mortgage
Services Corp. and Shoppers Express Inc. Mr. Macklin currently serves as a
consultant to the Company.
DR. BRAD M. MESLIN
Dr. Meslin (age 37) has served as a director of the Company
since April 1985 and as a Vice President of the Company from December 1984 to
April 1985. Since 1984, Dr. Meslin has served as Managing Director of CSP
Associates, Inc. ("CSP"), an international aerospace and defense management
consulting firm. Dr. Meslin currently serves as a consultant to the Company.
3
<PAGE> 15
DR. UDO POLLVOGT
Dr. Pollvogt (age 58) has served as a director of the Company
since August 1993. Dr. Pollvogt is currently Executive Vice President for
Government Relations of Daimler-Benz. Prior to that, he was the President of
the Space Infrastructure Division of Deutsche Aerospace AG from 1991 to 1995
and Vice President of the Columbus Program of MBB-ERNO Raumfahrnechnik GmbH, an
aerospace corporation, from 1990 to 1991.
ALVIN L. REESER
Mr. Reeser (age 68) has served as a director of the Company
since August 1991. Mr. Reeser was President and Chief Executive Officer of
SPACEHAB from August 1991 until his retirement in October 1994. Prior to
joining SPACEHAB, Mr. Reeser was the Executive Vice President and General
Manager of USBI Co., an aerospace corporation, from March 1987 to August 1991.
JAMES R. THOMPSON
Mr. Thompson (age 60) has served as a director of the Company
since August 1993. Mr. Thompson is a director, Executive Vice President and
General Manager of the Launch Systems Group of OSC, which he joined following
his service as NASA's Deputy Administrator from 1989 to 1991. Prior to that,
Mr. Thompson served as Director of the Marshall Spaceflight Center in
Huntsville, Alabama from September 1986 to July 1989. Mr. Thompson is also a
director of Nichols Research Corporation.
PROF. ERNESTO VALLERANI
Professor Vallerani (age 60) has served as a director of the
Company since July 1990. Professor Vallerani is President and a director of
Alenia Spazio. Professor Vallerani has more than 30 years experience in
international aerospace projects.
STOCKHOLDER AGREEMENTS
Four stockholders of the Company have entered into separate
letter agreements in which each agreed to vote its shares of Common Stock to
elect the nominee proposed by Mitsubishi Corporation. Mr. Aihara is such
nominee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF
EACH NOMINEE FOR DIRECTOR NAMED ABOVE.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
Board Meetings
In fiscal year 1996(1), there were 4 meetings of the Board of
Directors (including regularly scheduled and special meetings). During fiscal
year 1996, the following five directors of the Company participated in fewer
than 75% of the aggregate number of meetings of the Board of Directors and the
committees thereof on which he served: Hironori Aihara, Dr. Edward E. David,
Jr., Dr. Shi H. Huang, Dr. Udo Pollvogt and Prof. Ernesto Vallerani.
Committees of the Board of Directors
The Committees of the Board of Directors consist of the Audit
Committee, the Compensation Committee and the Executive Committee. The Board
of Directors does not have a Nominating Committee. Information concerning the
committees is set forth below.
- ----------------------------------
(1) On June 4, 1996, the Company's Board of Directors voted to change the
Company's fiscal year end from September 30 to June 30. As a result, fiscal
year 1996 began on October 1, 1995 and ended on June 30, 1996.
4
<PAGE> 16
The Audit Committee recommends the appointment of a firm of
independent public accountants to audit the Company's financial statements, as
well as oversees the performance, and reviews the scope, of the audit performed
by the Company's independent accountants. The Audit Committee also reviews
audit plans and procedures, changes in accounting policies and the use of the
independent accountants for non-audit services. The Audit Committee currently
consists of Mr. Schuss (Chairman), Dr. Harrison, Dr. Meslin and Mr. Thompson.
During fiscal 1996, the Audit Committee met two times.
The Compensation Committee determines the compensation and
benefits of all officers of the Company and establishes general policies
relating to compensation and benefits of employees of the Company. The
Compensation Committee is also responsible for administering the Company's
Stock Incentive Plan and the Directors' Stock Option Plan in accordance with
the terms and conditions set forth therein. The Compensation Committee
currently consists of Mr. Thompson (Chairman), Mr. Schuss and Dr. Harrison.
During fiscal 1996, the Compensation Committee met four times.
The Executive Committee is responsible for all matters which
arise between regular meetings of the Board of Directors to the extent
permitted by applicable law. The Executive Committee currently consists of Dr.
Harrison (Chairman), Dr. Meslin, Mr. Reeser and Mr. Thompson. During fiscal
1996, the Executive Committee met five times.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Dr. Harrison, the Company's Chairman and Chief Executive
Officer, is a member of the Compensation Committee.
Director Compensation
All directors are reimbursed for expenses incurred in
connection with their attendance at meetings of the Board of Directors and
non-employee directors receive a fee of $500 per day for each meeting of the
Board of Directors they attend. The Company also has a Directors' Stock Option
Plan pursuant to which each member of the Board of Directors who is not an
employee of the Company who is elected or continues as a member of the Board of
Directors is entitled to receive annually options to purchase 5,000 shares of
Common Stock at an exercise price equal to fair market value; provided,
however, that no director may receive under the Directors' Stock Option Plan
options to purchase an aggregate of more than 25,000 shares of Common Stock.
The Company does not pay any additional remuneration to officers of the Company
for serving as directors.
PROPOSAL 2 - APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee recommended and the Board of Directors
approved the appointment of KPMG Peat Marwick LLP as independent public
accountants for fiscal 1997, subject to stockholder ratification. The Audit
Committee, in arriving at its recommendation to the Board, reviewed the
performance of KPMG Peat Marwick LLP in prior years as well as the firm's
reputation for integrity and competence in the fields of accounting and
auditing. The Audit Committee has expressed its satisfaction with KPMG Peat
Marwick LLP in these respects.
KPMG Peat Marwick LLP has served as the Company's independent
auditor since 1985. Representatives of KPMG Peat Marwick LLP are expected to
be present at the Annual Meeting and will have the opportunity to make such
statements as they may desire. They are also expected to be available to
respond to appropriate questions from the stockholders present.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION
OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT PUBLIC ACCOUNTANTS
OF THE COMPANY FOR THE FISCAL YEAR ENDING JUNE 30, 1997.
5
<PAGE> 17
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth at June 30, 1996, certain
information regarding the beneficial ownership of Common Stock held by (i) each
person known by the Company to own beneficially more than five percent of the
outstanding Common Stock, (ii) each of the Company's directors and director
nominees, (iii) the Named Executive Officers and (iv) all directors and
executive officers of the Company as a group:
<TABLE>
<CAPTION>
Beneficial Ownership
--------------------
Number Percent(1)
of Shares -------
---------
<S> <C> <C>
PRINCIPAL STOCKHOLDERS:
Zesiger Capital Group LLC . . . . . . . . . . . . . . . . . . . . . . . . 1,083,257(2) 9.7%
SPACEHAB Taiwan, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 791,666(3) 7.2
Mitsubishi Corporation . . . . . . . . . . . . . . . . . . . . . . . . . 639,581(4) 5.8
NON-EMPLOYEE DIRECTORS:
Dr. Shi H. Huang . . . . . . . . . . . . . . . . . . . . . . . . . . . . 924,183(5) 8.3
Alvin L. Reeser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115,624(6) 1.0
Hironori Aihara . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,498(7) *
Robert A. Citron . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,695(8) *
Dr. Edward E. David, Jr. . . . . . . . . . . . . . . . . . . . . . . . . 12,498(9) *
Dr. Brad M. Meslin . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,857(10) *
Dr. Udo Pollvogt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,498(11) *
Jeffrey Schuss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,663(12) *
James R. Thompson . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,498(13 *
Prof. Ernesto Vallerani . . . . . . . . . . . . . . . . . . . . . . . . . 12,499(14) *
DIRECTOR NOMINEE:
Gordon S. Macklin . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
NAMED EXECUTIVE OFFICERS:
Dr. Shelley A. Harrison . . . . . . . . . . . . . . . . . . . . . . . . . 616,560(15) 5.3
Richard P. Hora** . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,666(16) *
David A. Rossi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,997(17) *
Chester M. Lee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,345(18) *
Margaret E. Grayson . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,333(19) *
John M. Lounge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,931(20) *
ALL DIRECTORS AND EXECUTIVE OFFICERS
AS A GROUP (16 PERSONS) . . . . . . . . . . . . . . . . . . . . . . . . 2,112,093 17.8
</TABLE>
- -------------------------------
* Indicates beneficial ownership of less than 1% of the outstanding
shares of Common Stock.
** Mr. Hora resigned as Chief Executive Officer, President and as a
director effective April 10, 1996.
(1) Calculated pursuant to Rule 13d-3(d) of the Securities Exchange Act
of 1934 (the "Exchange Act"). Under Rule 13d-3(d), shares not
outstanding which are subject to options, warrants, rights
or conversion privileges exercisable within 60 days are deemed
outstanding for the purpose of calculating the number and percentage
owned by such person, but not deemed outstanding for the purpose of
calculating the percentage owned by each other person listed. As of
June 30, 1996, the Company had 11,069,237 shares of Common Stock
outstanding.
(2) Represents (i) immediately exercisable warrants to purchase 103,883
shares of Common Stock and (ii) 979,374 shares of Common Stock held by
Zesiger Capital Group LLC ("ZCG") in discretionary accounts for the
benefit of its clients. ZCG disclaims beneficial ownership of all
warrants and shares of Common Stock held by it. Its address is 320
Park Avenue, New York, New York 10022.
(3) Except for its ownership of shares of Common Stock, SPACEHAB Taiwan,
Inc. has no other affiliation with the Company. Its address is 14th
Floor No. 180, Chang-Shiao E. Road, Sec. 4, Taipei, Taiwan, R.O.C.
(4) Includes an aggregate of 614,582 shares of Common Stock and
immediately exercisable warrants to purchase 24,999 shares of Common
Stock beneficially owned by Mitsubishi Corporation and its affiliates.
The address of Mitsubishi Corporation is 3-1, Marunouchi 2-chome,
Chiyoda-ku, Tokyo, Japan.
(5) Includes: (i) immediately exercisable options to purchase 12,498
shares of Common Stock and 791,666 shares of Common Stock
6
<PAGE> 18
held by SPACEHAB Taiwan, Inc., of which Dr. Huang is Chairman and
shares voting and investment power with respect to such shares of
Common Stock and (ii) 120,019 shares of Common Stock held by Chinfon
Global Corp., of which Dr. Huang is the Chairman of the Board and
retains investment and voting power with respect to such securities.
Dr. Huang's address is c/o SPACEHAB Taiwan, Inc., 14th Floor No. 180,
Chang-Shiao E. Road, Sec. 4, Taipei, Taiwan, R.O.C.
(6) Represents the aggregate amount of immediately exercisable options to
purchase shares of Common Stock.
(7) Represents immediately exercisable options to purchase 12,498 shares
of Common Stock. Excludes 614,582 shares of Common Stock and
immediately exercisable warrants to purchase 24,999 shares
of Common Stock held by Mitsubishi Corporation and its affiliates.
Mr. Aihara is the Managing Director of Information Systems and
Services Group of Mitsubishi Corporation. Mr. Aihara disclaims
beneficial ownership of all warrants and shares of Common Stock held
by Mitsubishi Corporation and its affiliates.
(8) Includes immediately exercisable options to purchase 12,498 shares of
Common Stock.
(9) Represents immediately exercisable options to purchase 12,498 shares
of Common Stock.
(10) Includes: 1,537 shares of Common Stock held in the CSP Associates,
Inc. ("CSP") Profit Sharing Plan & Trust for the benefit of Dr.
Meslin; (ii) immediately exercisable options to purchase 8,332 shares
of Common Stock held by CSP for the benefit of Dr. Meslin; (iii) 8,487
shares of Common Stock held by CSP, of which Dr. Meslin is the managing
director; and (iv) immediately exercisable options to purchase 4,166
shares of Common Stock. Dr. Meslin disclaims beneficial ownership of
all shares of Common Stock held by CSP which are not held for his
benefit.
(11) Represents immediately exercisable options to purchase 12,498 shares
of Common Stock.
(12) Includes immediately exercisable options to purchase 12,498 shares of
Common Stock and immediately exercisable warrants to purchase 2,707
shares of Common Stock.
(13) Represents immediately exercisable options to purchase 12,498 shares
of Common Stock.
(14) Includes immediately exercisable options to purchase 12,498 shares of
Common Stock. Excludes an aggregate of 343,416 shares of Common
Stock and Company warrants held by Alenia Spazio, of which Prof.
Vallerani serves as President. Prof. Vallerani disclaims beneficial
ownership of all shares of Common Stock and all warrants held by Alenia
Spazio.
(15) Includes: (i) immediately exercisable options to purchase 300,000
shares of Common Stock; (ii) immediately exercisable warrants to
purchase 132,353 shares of Common Stock held by Poly Ventures, of
which Dr. Harrison is a managing general partner and shares voting and
investment power with respect to shares of Common Stock beneficially
owned by Poly Ventures and its affiliates; (iii) 26,918 shares of
Common Stock and immediately exercisable options held by Poly Ventures
Associates, Inc. to purchase 74,998 shares of Common Stock; and (iv)
82,291 shares of Common Stock held by Harrison Enterprises, Inc., of
which Dr. Harrison is a director and officer and retains sole voting
and investment power with respect to such shares.
(16) Represents the aggregate amount of immediately exercisable options to
purchase shares of Common Stock.
(17) Represents immediately exercisable options to purchase 24,997
shares of Common Stock.
(18) Includes 2,987 shares of Common Stock held in the Chester M. Lee
Revocable Trust, of which Mr. Lee is the sole trustee, and
immediately exercisable warrants and options to purchase 778 and 64,580
shares of Common Stock, respectively.
(19) Represents immediately exercisable options to purchase 8,333 shares
of Common Stock.
(20) Includes immediately exercisable options to purchase 45,831 shares of
Common Stock.
7
<PAGE> 19
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table summarizes the compensation paid by the
Company for the last three fiscal years to its Chief Executive Officer and the
Company's four other most highly compensated executive officers other than the
Chief Executive Officer (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM
COMPENSATION
- ---------------------------------------------------------------------------------------------------------------
Other Securities
Name and Fiscal Bonus Annual Underlying
Principal Position Year Salary ($) ($) Comp.($)(1) Options/SARs(#)
------------------ ---- ----------- --- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Dr. Shelley A. Harrison . . . 1996(2) 8,546 35,117 125,685(3) 420,000
Chairman and Chief 1995 -- -- -- --
Executive Officer 1994 -- -- -- --
(effective April 10, 1996)
Richard P. Hora . . . . . . . 1996(2) 131,250 -- 97,705(4) --
Former Chief Executive 1995 157,500 23,000 98,000(5) 166,667
Officer and President 1994 -- -- -- --
(resignation effective April
10, 1996)
Chester M. Lee . . . . . . . . 1996(2) 109,375 31,945 -- 110,416
President 1995 112,467 15,000 -- --
1994 108,333 -- -- 27,083
David A. Rossi . . . . . . . . 1996(2) 112,500 32,652 -- 29,166
Senior Vice President - 1995 116,094 50,000 -- --
Business Development 1994 106,250 -- -- 41,666
John M. Lounge 1996(2) 98,059 28,638 -- 25,000
Vice President - Operations 1995 108,900 10,000 -- --
1994 107,375 -- -- 16,666
Margaret E. Grayson . . . . . . 1996(2) 93,750 28,638 -- --
Vice President of Finance 1995 102,708 15,000 -- --
(CFO), Treasurer and 1994 4,166 -- -- 33,332
Assistant Secretary
</TABLE>
- ----------------------
(1) Except as indicated, no executive named in the above table received Other
Annual Compensation in an amount in excess of the lesser of either $50,000
or 10% of the total of salary and bonus reported for him in the two
preceding columns.
(2) Fiscal year 1996 compensation figures are for a short fiscal year, from
October 1, 1995 through June 30, 1996.
(3) Represents the amount paid by the Company to Poly Ventures Associates,
L.P. for Dr. Harrison's
8
<PAGE> 20
services to the Company for the period from October 1, 1995 to June 18,
1996. Dr. Harrison is a general partner of Poly Ventures Associates, L.P.
(4) Represents (i) $58,117 in relocation expenses and (ii) $39,588 in payments
to Mr. Hora following the termination of his employment with the Company.
(5) Represents the amount paid by the Company for relocation expenses incurred
in connection with the commencement of Mr. Hora's employment with the
Company.
Option Grants in Fiscal 1996
The following table sets forth information relating to the
grant of stock options by the Company during fiscal year 1996 to the Named
Executive Officers under the Company's Stock Incentive Plan. The Company did
not grant any stock appreciation rights ("SARs") in fiscal year 1996.
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------------------------
% of Total Potential Realizable Value at
Number of Options Exercise Assumed Annual Rates of
Securities Granted to Price Per Stock Price Appreciation for
Underlying Employees in Share Expiration Option Term (1)
Name Options (#) Fiscal 1996 ($/sh) Date 5% 10%
---- ----------- ------------- --------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Dr. Shelley A. Harrison.. 120,000(2) 14.2% 12.00 (3) 587,333 1,374,656
300,000(4) 42.6 14.50 (5) 1,479,416 3,356,290
Chester M. Lee............. 10,416(6) 1.5 12.00 (7) 42,509 96,439
100,000(8) 14.2 14.50 (9) 643,793 1,530,408
David A. Rossi ............. 29,166(10) 4.1 12.00 (11) 155,394 369,398
John M. Lounge............. 25,000(12) 3.5% 14.50 (13) 160,948 382,602
</TABLE>
- ---------
(1) The indicated dollar amounts are the result of calculations based on
the exercise price of the options and assume five and ten percent
appreciation rates set by the Securities and Exchange Commission and,
therefore, are not intended to forecast possible future appreciation,
if any, of the Company's stock price.
(2) Represents 120,000 options which vest ratably over a three-year period
commencing on October 11, 1996.
(3) The options expire ratably over a three-year period commencing October
11, 2001.
(4) Represents 300,000 options which vested on the date of grant.
(5) The options expire on April 10, 2001.
(6) Represents 10,416 options which vested on the date of grant.
(7) The options expire on December 21, 2000.
(8) Represents 100,000 options which vest ratably over a four-year period
commencing on April 10, 1997.
(9) The options expire ratably over a four-year period commencing on April
10, 2002.
(10) The options vest ratably over a four-year period commencing on
December 21, 1996.
9
<PAGE> 21
(11) The options expire ratably over a four-year period commencing on
December 21, 2001.
(12) The options vest ratably over a four-year period commencing on April
10, 1997.
(13) The options expire ratably over a four-year period commencing on April
10, 2002.
Aggregated Option Exercises in Fiscal 1996 and Fiscal Year-End Values
The following table sets forth the number of shares covered by
stock options held by the Named Executive Officers at June 30, 1996, and also
shows the value of "in-the-money" options (market price of the Company's stock
less the exercise price) at that date. Except as listed in the table, no other
Named Executive Officer exercised any Company stock options or beneficially
owned unexercised Company stock options.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised Options In-the-Money Options
Held at June 30, 1996 at June 30, 1996(1)
(#) ($)
------------------------------- -----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------------ ------------ ---------------- ------------ ---------------
<S> <C> <C> <C> <C>
Dr. Shelley A. Harrison . . . . . . . . . 300,000 120,000 0 0
Richard P. Hora . . . . . . . . . . . . . 41,666 0 0 0
Chester M. Lee . . . . . . . . . . . . . 10,416 100,000 0 0
David A. Rossi . . . . . . . . . . . . . 24,997 66,665 0 0
John M. Lounge . . . . . . . . . . . . . 45,831 33,333 0 0
Margaret E. Grayson . . . . . . . . . . . 8,333 24,999 0 0
</TABLE>
- ----------------------------------
(1) Based on the difference between the closing market price on June 28, 1996
for the Common Stock, which was $11.00 per share, and the option exercise
price. The above valuations may not reflect the actual value of
unexercised options as the value of unexercised options will fluctuate
with market activity.
10
<PAGE> 22
EMPLOYMENT AGREEMENTS
On December 27, 1995, the Company entered into employment
agreements (the "Agreements") with each of Mr. Rossi, Mr. Lee and Ms. Grayson.
The Agreements provide that the officers will serve the Company in the
respective offices listed in the Summary Compensation Table for a term of three
years, subject to earlier termination as provided in the Agreements. The
Agreements set forth the minimum base salary of each officer during the term of
the Agreements ($150,000 for Mr. Rossi; $125,000 for Mr. Lee; and $125,000 for
Ms. Grayson), subject to increase at the sole discretion of the Compensation
Committee of the Board of Directors. Each officer is also eligible to receive,
at the sole discretion of the Compensation Committee, an annual
performance-based bonus. The officers are entitled to participate in the
employee benefit plans of the Company and are eligible for the grant of stock
options, in the sole discretion of the Compensation Committee, under the
Company's Stock Incentive Plan. The Agreements include provisions that are
effective upon the termination of employment of the officers under certain
circumstances. In general, the officers are entitled to continuation of base
salary and medical coverage and certain other benefits for six months following
a termination of employment by the Company other than for "cause" or a
"material breach" (each as defined in the Agreements).
The Agreements include certain restrictive covenants for the
benefit of the Company relating to non-disclosure by the officers of the
Company's confidential business information, the Company's right to inventions
and technical improvements of the officers, and noncompetition by the officers
with the Company's business for a period of six months following termination of
employment.
On December 27, 1995, the Company entered into an employment
agreement with Mr. Hora (the "Hora Employment Agreement"), which provided that
Mr. Hora would serve the Company as President and Chief Executive Officer for a
term of three years, subject to earlier termination as provided in the Hora
Employment Agreement. The Hora Employment Agreement provided for a minimum
base salary of $190,000 annually, subject to increase at the sole discretion of
the Compensation Committee. Under the Hora Employment Agreement, Mr. Hora was
also eligible to receive an annual performance-based bonus at the sole
discretion of the Compensation Committee. The Hora Employment Agreement
included provisions effective upon termination of Mr. Hora's employment under
certain circumstances. In general, the Hora Employment Agreement provided for
the continuation of base salary and medical coverage and certain other benefits
for 12 months following the termination of Mr. Hora's employment by the Company
other than for "cause" or a "material breach" (each as defined in the Hora
Employment Agreement).
The Hora Employment Agreement also included certain
restrictive covenants for the benefit of the Company relating to non-disclosure
by Mr. Hora of the Company's confidential business information, the Company's
right to inventions and technical improvements of Mr. Hora, and noncompetition
by Mr. Hora with the Company's business for a period of 12 months following
termination of employment.
In connection with Mr. Hora's resignation as President and
Chief Executive Officer of the Company on April 10, 1996, the Company agreed to
continue Mr. Hora's base salary and benefits for a period of 12 months.
STOCK INCENTIVE PLAN
In July 1994, the Company adopted a stock incentive plan (the
"Stock Incentive Plan"). Under the Stock Incentive Plan, stock options, stock
appreciation rights, restricted stock and performance shares may be granted for
the purpose of attracting and motivating key employees and consultants to the
Company. In addition, the Stock Incentive Plan permits the extension of loans
by the Company to a participant in connection with the payment of the exercise
price of options, the purchase price of restricted shares or the tax incurred
with respect to any award. Furthermore, the Compensation Committee may provide
for a payment in the form of cash or shares of Common Stock to offset a
participant's tax incurred with respect to the receipt of an award and any such
tax offset payment. The Compensation Committee has all powers with respect to
the administration of the Stock Incentive Plan, including without limitation,
selecting which employees will receive awards and the extent of the award,
determining the terms and conditions of the award, and resolving all questions
arising under the Stock Incentive Plan.
The Stock Incentive Plan provides for the grant of options to
purchase shares of Common Stock that are either "qualified," that is, those
that satisfy the requirements of Section 422 of the Code for incentive stock
options ("ISOs"), or "nonqualified," that is, those that are not intended to
satisfy the requirements of Section 422 of the Code ("NQOs"). Options granted
under the Stock Incentive Plan, in most cases, vest ratably on each of the
first through the fourth anniversaries of the date of grant, and are
exercisable for a period not to exceed ten years from the date of grant.
Pursuant to the terms of the Stock Incentive Plan, ISOs will not be (i) granted
at less than the fair market value of the Common Stock at the time of grant,
(ii) exercisable for more than ten years after the date of grant, (iii) awarded
after July 13, 2004, and (iv) granted to an employee who, at the time the ISO
is granted, beneficially owns more than 10% of the total voting power of the
Company, unless
11
<PAGE> 23
the exercise price is at least 110% of the fair market value at the date of
grant and such option is not exercisable after the expiration of five years
from the date of the award. All awards under the Stock Incentive Plan become
immediately exercisable and fully vested upon a "change of control" of the
Company (as defined therein).
The maximum number of shares of Common Stock reserved for
issuance under the Stock Incentive Plan is 1,250,000 shares (subject to
adjustment for certain events such as stock splits and stock dividends). As of
June 30, 1996, options to purchase 966,322 shares of Common Stock pursuant to
the Stock Incentive Plan were issued and outstanding. Since the inception of
the Stock Incentive Plan, the Compensation Committee has neither granted any
SARs, restricted stock awards or performance share awards, nor made any loans
or tax offset payments. During fiscal 1996, each of the Named Executive
Officers received the number of stock options set forth following his name:
Dr. Shelley A. Harrison (420,000); Richard P. Hora (0); Chester M. Lee
(110,416); David A. Rossi (29,166); John M. Lounge (25,000); and Margaret E.
Grayson (0). An aggregate of 705,000 stock options were granted to Company
employees during fiscal 1996.
DIRECTORS' STOCK OPTION PLAN
In November 1995, the Company adopted a directors' stock
option plan (the "Directors' Plan"), pursuant to which each member of the Board
of Directors who is not an employee of the Company who is elected or continues
as a member of the Board of Directors is entitled to receive annually options
to purchase 5,000 shares of Common Stock at an exercise price equal to fair
market value; provided, however, that no director may receive under the
Directors' Plan options to purchase an aggregate of more than 25,000 shares of
Common Stock. The Compensation Committee of the Board of Directors administers
the Directors' Plan, however, it cannot direct the number, timing or price of
options granted to eligible recipients thereunder.
Each option grant under the Directors' Plan vests after the
first anniversary of the date of grant and expires six years thereafter. The
number of shares of Common Stock related to awards that expire unexercised or
are forfeited, surrendered, terminated or cancelled are available for future
awards under the Directors' Plan. If a director's service on the Board of
Directors terminates for any reason other than death, all vested options may be
exercisable by such director until the earlier of his or her death or the
expiration date of the option grant. In the event of a director's death, any
options which such director was entitled to exercise on the date immediately
preceding his or her death may be exercised by a transferee of such director
for the six month period after the date of the director's death.
The maximum number of shares of Common Stock reserved for
issuance under the Directors' Plan is 250,000 shares (subject to adjustment for
certain events such as stock splits and stock dividends). As of August 31,
1996, the Company had not granted any options under the Directors' Plan. The
first grants will be made in connection with the Annual Meeting of Stockholders
on October 22, 1996.
INDEMNIFICATION AGREEMENTS
The Company has entered into indemnification agreements with
each of its directors, Named Executive Officers (with the exception of John M.
Lounge) and with certain other officers and senior managers. The agreements
provide that the Company shall indemnity and hold harmless each indemnitee from
liabilities incurred as a result of such indemnitee's status as a result of
such indemnitee's status as a director, officer or employee of the Company,
subject to certain limitations.
CERTAIN TRANSACTIONS
On August 7, 1995, the Company and CSP Associates, Inc.
("CSP") entered into a consulting agreement (the "CSP Consulting Agreement"),
whereby CSP agreed to render consulting services to the Company regarding the
Company's initial public offering and the operation and expansion of the
Company's business for an aggregate consulting fee of $99,000. The initial
duration of the CSP Consulting Agreement was from August 14, 1995 through
February 14, 1996. As of February 21, 1996, the CSP Consulting Agreement was
extended to September 30, 1996 for an aggregate fee of $105,000. During the
extended period of the CSP Consulting Agreement, CSP is to focus its efforts on
acquisition and joint venture assistance and development. CSP shall be
entitled to receive a "success fee" under certain circumstances, in an amount
to be determined. The Company is also required to pay CSP for the actual and
reasonable expenses incurred by its personnel in connection with the rendering
of services under the CSP Consulting Agreement. Dr. Meslin, a director of the
Company, is also the Managing Director of CSP.
On August 14, 1996, the Company entered into a consulting
agreement with Gordon S. Macklin (the "Macklin Consulting Agreement"), whereby
Mr. Macklin agreed to render consulting services to the Company in connection
with potential strategic acquisition opportunities and investor relations
support for a monthly retainer fee of $2,000 and the one-time grant of
immediately exercisable options to purchase 10,000 shares of Common Stock at an
exercise price per share of $8.75. The Macklin Consulting Agreement is for a
12
<PAGE> 24
one-year term, commencing on August 14, 1996.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation of the Company's executives is subject to review
and approval by the Compensation Committee (the "Compensation Committee") of
the Company's Board of Directors. The Compensation Committee consists of two
outside directors James R. Thompson (Chairman) and Jeffrey Schuss, and the
Chairman and Chief Executive Officer of the Company (Dr. Shelley A. Harrison).
Compensation Philosophy.
In determining executive compensation policies, the
Compensation Committee has four primary objectives:
(1) to attract, motivate and retain key executive talent;
(2) to balance the flexibility to reward individuals'
skills with the need to structure compensation for
defined roles;
(3) to ensure that executive compensation is competitive
with that of other leading companies in related
fields; and
(4) to provide incentives to achieve corporate
objectives, thereby contributing to the overall goal
of enhancing stockholder value.
The Compensation Committee's compensation policies discussed
below are designed to achieve the foregoing objectives. The Compensation
Committee expects to continuously review and refine the Company's compensation
practices as necessary to respond to a changing business environment.
In order to evaluate and establish appropriate compensation
practices, the Company consults multiple sources of information. The
Compensation Committee uses data from benchmark companies within the aerospace
or similar high technology industries to assess the Company's performance and
compensation levels. Benchmark companies are selected according to, among
other factors, the comparability of their operations, product lines, revenues
and markets served. The Compensation Committee seeks to set its executive
compensation levels competitively with the benchmark companies, to the extent
such targets are consistent with the Compensation Committee's objectives.
During fiscal year 1996, the Company retained an independent compensation
consultant to evaluate its compensation practices, and, in particular, salary
and bonus levels. The Company utilized the recommendations of the compensation
consultant's report in setting incentive bonus levels at the end of fiscal year
1996.
Elements of Executive Compensation.
The Company's executive compensation program has three
components: (1) annual cash compensation in the form of base salary and
incentive bonus payments, (2) long-term incentive compensation in the form of
stock options granted under the Company's Stock Incentive Plan and (3) other
compensation and employee benefits generally available to all employees of the
Company, such as health insurance. Annual cash compensation is primarily
designed to reward current performance. Long-term incentives and other
compensation and employee benefits are primarily designed to create performance
incentives over the long term for executive officers and employees.
Base Salary. The base salary for each executive officer is set at a
level deemed sufficient to attract and retain qualified executive
officers. The Compensation Committee has generally determined target
base salaries according to the average base salaries paid by benchmark
high technology companies. Aggregate base salary increases are
intended to maintain compensation levels that are in line with leading
companies in related fields, while individual base salary increases
are set to reflect individual performance levels. The base salaries
of certain executive officers are subject to minimums set forth in
individual employment agreements.
Incentive Bonuses. Annual cash bonuses are designed to provide
incentives based on individual contribution to the achievement of the
Company's annual business goals. Bonus payments have generally been
reflective of the Company's performance in achieving revenues,
profitability and other operating and corporate objectives, as well as
the scope of an executive officer's responsibilities. The
Compensation Committee makes a determination as to incentive bonus
payments at the end of each year based on a subjective valuation of
the contributions of individual executive officers to the achievement
of the Company's annual business goals. The award of annual incentive
bonuses is based on achieving corporate
13
<PAGE> 25
goals and the amount of individual incentive bonus payments is
determined by percentage ranges established annually by the
Compensation Committee.
Long-Term Incentives. The grant of stock options is the Company's
current method for providing long-term incentive compensation to its
employees. The Compensation Committee believes that the use of stock
options attracts and retains qualified personnel for positions of
substantial responsibility and also serves to motivate its executive
officers to promote the success of the Company's business and maximize
stockholder value.
Compensation of Chief Executive Officer.
The Compensation Committee based the fiscal year 1996 Chief
Executive Officer ("CEO") compensation on the policies described above. During
fiscal 1996, two individuals served, at separate times, in the position of CEO,
as described below:
Richard P. Hora served as CEO from October 1, 1995 until his
resignation on April 10, 1996. During fiscal 1996, Mr. Hora received total
compensation of $228,955. Mr. Hora's base salary for fiscal 1996 was
determined pursuant to an employment agreement entered into in December, 1995
between Mr. Hora and the Company in connection with the Company's initial
public offering of its Common Stock. The Compensation Committee deemed that
the level selected for Mr. Hora's base salary plus any bonus/long-term
incentive compensation was consistent with the compensation paid by benchmark
high technology companies, the Company's overall performance, the successful
completion of the Company's initial public offering, and the achievement of
individual performance objectives as evaluated by the Compensation Committee.
No specific weighting was assigned to these factors when Mr. Hora's total
compensation for fiscal 1996 was reviewed.
Dr. Shelley A. Harrison served as Chairman of the Company
throughout the fiscal year and assumed the additional position of CEO,
effective April 10, 1996. During fiscal 1996, Dr. Harrison and an affiliated
partnership received a total of $169,348 for his services. Dr. Harrison's
compensation level for fiscal 1996 was deemed by the Compensation Committee to
be appropriate given Dr. Harrison's qualifications and contribution to meeting
the Company's objectives.
Tax Deductibility of Executive Compensation.
Section 162(m) of the Internal Revenue Code disallows
corporate deductibility for certain compensation paid in excess of $1 million
to the Company's Chief Executive Officer and to each of the four other most
highly paid executive officers of publicly-held companies. "Performance-based
compensation," as defined in Section 162(m), is not subject to the
deductibility limitation provided certain stockholder approval and other
requirements are met. The Company believes that the stock options granted in
fiscal 1996 and prior years satisfied the requirements of federal tax law and
thus compensation recognized in connection with such awards should be fully
deductible. It is the Company's intention to maximize the deductibility of
compensation paid to its officers, to the extent consistent with the best
interests of the Company. During fiscal 1996, the Company did not exceed the
$1 million deductibility cap with respect to any officer covered by Section
162(m).
COMPENSATION COMMITTEE,
James R. Thompson, Chairman
Jeffrey Schuss
Dr. Shelley A. Harrison
14
<PAGE> 26
Notwithstanding any statement to the contrary in any of the
Company's previous or future filings with the Securities and Exchange
Commission, the Report of the Compensation Committee and the accompanying
Performance Graph shall not be deemed to be incorporated by reference as a
result of any general incorporation by reference of this Proxy Statement or any
part thereof into any such filings.
PERFORMANCE GRAPH
Set forth below is a line graph comparing the Company's
cumulative total stockholder return on its Common Stock since December 22,
1995, the date the Common Stock began trading on the Nasdaq National Market (as
measured by dividing the difference between the Company's share price at the
beginning and the end of the measurement period by the share price at the
beginning of the measurement period) with (i) the cumulative total return of
the Nasdaq Stock Market Index of U.S. Companies and (ii) the cumulative total
return of the Dow Jones Aerospace/Defense Index.
COMPARISON OF CUMULATIVE TOTAL RETURN*
[GRAPH]
<TABLE>
<CAPTION>
SPACEHAB, INC. NASDAQ DOW JONES
U.S. COMPANY AEROSPACE/DEFENSE
INDEX INDEX
<S> <C> <C> <C>
12/22/95 $100.00 $100.00 $100.00
6/30/96 $91.70 $113.80 $113.50
</TABLE>
- ----------------------------
* Assumes that the value of an investment in the Company's Common
Stock, the Nasdaq Stock Market Index of U.S. Companies and the Dow Jones
Aerospace/Defense Index was $100 on December 22, 1995 and that all
dividends were reinvested.
15
<PAGE> 27
OTHER MATTERS
The Board of Directors of the Company knows of no matters to
be presented at the Annual Meeting other than those described in this Proxy
Statement. In the event that other business properly comes before the meeting,
the persons named as proxies will have discretionary authority to vote the
shares represented by the accompanying proxy in accordance with their own
judgment.
PROXY SOLICITATION EXPENSE
The cost of the solicitation of proxies will be borne by the
Company. In addition to solicitation by mail, directors, officers and
employees of the Company, without receiving any additional compensation, may
solicit proxies personally or by telephone or facsimile. The Company has
retained American Stock Transfer & Trust Company to request brokerage houses,
banks and other custodians or nominees holding stock in their names for others
to forward proxy materials to their customers or principals who are the
beneficial owners of shares and will reimburse them for their expenses in doing
so. The Company does not anticipate that the costs and expenses incurred in
connection with this proxy solicitation will exceed those normally expended for
a proxy solicitation for those matters to be voted on in the Annual Meeting.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's directors and executive officers and persons who beneficially own
more than 10% of the Company's Common Stock to file reports of ownership and
changes in ownership with the Securities and Exchange Commission (the "SEC").
Such directors, executive officers and greater than 10% stockholders are
required by SEC regulation to furnish to the Company copies of all Section
16(a) forms they file.
Based solely on the Company's review of copies of such forms
that it received, or written representations from certain reporting persons,
the Company believes that, during fiscal year 1996, all Section 16(a) filing
requirements were satisfied on a timely basis.
DEADLINE FOR SUBMISSION OF STOCKHOLDER
PROPOSALS FOR NEXT YEAR'S ANNUAL MEETING
The proxy rules adopted by the SEC provide that certain
stockholder proposals must be included in the proxy statement for the Company's
Annual Meeting. For a proposal to be considered for inclusion in the Company's
proxy materials for the Company's 1997 Annual Meeting of Stockholders, it must
be received in writing by the Company on or before May 16, 1997 at its
principal office, 1595 Spring Hill Road, Suite 3600, Vienna, Virginia 22182,
Attention: Secretary.
The Company's Annual Report to Stockholders, including the
Company's audited financial statements for the year ended June 30, 1996, is
being mailed herewith to all stockholders of record on the Record Date.
By Order of the Board of Directors,
Nelda Wilbanks
Secretary
Vienna, Virginia
September 16, 1996
Each stockholder, whether or not he or she expects to be present in person at
the Annual Meeting, is requested to MARK, SIGN, DATE and RETURN THE ENCLOSED
PROXY CARD in the accompanying envelope as promptly as possible. A stockholder
may revoke his or her proxy at any time prior to voting.
16
<PAGE> 28
SPACEHAB, INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS -- OCTOBER 22, 1996
P
R The undersigned hereby appoints Dr. Shelley A. Harrison and Margaret
E. Grayson, and each of them, as proxies of the undersigned, each
with full power to act without the other and with full power of
O substitution and re-substitution, to vote all the shares of
Common Stock of SPACEHAB, Incorporated that the undersigned is
entitled to vote at the Annual Meeting of Stockholders to be held on
X October 22, 1996, at 10:00 a.m. (local time), and at any postponements
or adjournments thereof, with all the powers the undersigned would
have if personally present, as follows:
Y
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING ITEMS:
(1) To elect to the Board of Directors the following nominees for
the term indicated in the Proxy Statement.
<TABLE>
<S> <C>
FOR all nominees listed below (except as WITHHOLD AUTHORITY
marked to the contrary below) 9 to vote for all nominees listed below 9
Dr. Shelley A. Harrison Hironori Aihara Robert A. Citron
Dr. Edward E. David, Jr. Dr. Shi H. Huang Chester M. Lee
Gordon S. Macklin Dr. Brad M. Meslin Dr. Udo Pollvogt
Alvin L. Reeser James R. Thompson Prof. Ernesto Vallerani
</TABLE>
INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name in the space provided below.
---------------------------------------------------------
(2) Ratification of the appointment by the Board of Directors of
KPMG Peat Marwick LLP as independent public accountants for fiscal
1997.
9 FOR 9 AGAINST 9 ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting, all in accordance with the
accompanying Notice and Proxy Statement, receipt of which is hereby
acknowledged.
IF THIS PROXY IS PROPERLY EXECUTED AND RETURNED, THE SHARES
REPRESENTED THEREBY WILL BE VOTED. IF A CHOICE IS SPECIFIED BY THE
STOCKHOLDER, THE SHARES WILL BE VOTED ACCORDINGLY. IF NOT OTHERWISE SPECIFIED,
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR ITEMS 1 AND 2.
Dated . . . . . . . . . . . . . . ., 1996
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
Sign exactly as name appears hereon.
When signing in a representative
capacity, please give full title. Joint
owners (if any) should each sign.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
none
<PAGE> 1
Exhibit 23
ACCOUNTANTS' CONSENT
The Board of Directors
SPACEHAB, Incorporated:
We consent to incorporation by reference in the registration statements (Nos.
333-3634, 333-3636, and 333-3638) on Form S-8 of SPACEHAB, Incorporated of our
report dated August 5, 1996, except as to note 4 which is as of August 20,
1996, relating to the balance sheets of SPACEHAB, Incorporated as of September
30, 1995 and June 30, 1996, and the related statements of income, stockholders'
equity (deficit), and cash flows for the years ended September 30, 1994 and
1995 and the nine months ended June 30, 1996, which report appears in the June
30, 1996 annual report on Form 10-K of SPACEHAB, Incorporated.
KPMG Peat Marwick LLP
Washington, D.C.
September 16, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 50,795,548
<SECURITIES> 0
<RECEIVABLES> 5,445,765
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 56,425,973
<PP&E> 98,477,493
<DEPRECIATION> 27,987,042
<TOTAL-ASSETS> 129,708,615
<CURRENT-LIABILITIES> 10,483,615
<BONDS> 0
0
0
<COMMON> 79,862,700
<OTHER-SE> 16,299
<TOTAL-LIABILITY-AND-EQUITY> 129,708,614
<SALES> 56,397
<TOTAL-REVENUES> 56,397,000
<CGS> 20,985,147
<TOTAL-COSTS> 20,985,147
<OTHER-EXPENSES> 5,583,110
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 698,997
<INCOME-PRETAX> 31,740,638
<INCOME-TAX> 1,911,895
<INCOME-CONTINUING> 29,828,743
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,828,743
<EPS-PRIMARY> 3.21
<EPS-DILUTED> 3.21
</TABLE>
