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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 [No Fee Required] For the
Fiscal Year Ended June 30, 1998.
[ ] 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 National Market
Number of shares of Common Stock (no par value) outstanding as of
July 24, 1998: 11,168,161.
Aggregate market value of Common Stock (no par value) held by non-affiliates of
the registrant on July 24, 1998, based upon the closing price of the Common
Stock on the Nasdaq National Market of $10.625 was approximately $106,387,137.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO .
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ].
DOCUMENTS INCORPORATED BY REFERENCE:
Proxy Statement for the Annual Meeting of
Stockholders to be held October 20, 1998. Parts I, II and III of Form 10-K
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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," "Company Strategy," "Dependence on a Single Customer," "Research
and Development," "Competition" 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 that could cause actual results to
differ materially from those projected in such statements. In addition to those
risks and uncertainties discussed herein, such risks and uncertainties include,
but are not limited to, whether the Company will fully realize the economic
benefits under its U.S. National Aeronautics and Space Administration ("NASA")
and other customer contracts, the successful development and commercialization
of the Research Double Module, the unpressurized logistics carrier system, the
("Integrated Cargo Carrier" or "ICC") system and related new commercial space
assets, technological difficulties, product demand and market acceptance risks,
the effect of economic conditions, uncertainty in government funding and the
impact of competition.
ITEM 1. BUSINESS
COMPANY BACKGROUND AND HISTORY
SPACEHAB, Incorporated ("SPACEHAB" or the "Company") was incorporated
in 1984 and is the first company to commercially develop, own and operate
pressurized habitable modules that provide space-based laboratory research
facilities and cargo services aboard the U.S. Space Shuttle system (the "Space
Shuttle" or "STS"). A SPACEHAB Single Module, when installed in the cargo bay of
a Space Shuttle, more than doubles the working and living space available to
astronauts for research, experimentation, habitation and storage. The Company
presently offers its SPACEHAB Modules in a single modular version (the "Single
Module"), a logistics double modular version (the "Logistics Double Module" or
"LDM") and is currently developing a research double module (the "Research
Double Module" or "RDM") and an unpressurized logistics carrier system, the ICC,
for use in conjunction with its modules. During the second half of fiscal 1998,
the Company initiated development activities for a new asset, a docking double
module (the "Docking Double Module" or "DDM"), that could be used by NASA to
maintain the International Space Station ("ISS") in proper orbit while providing
more flexible re-supply services to the ISS. The Docking Double Module is
intended to carry logistics and perform research on Space Shuttle missions to
the ISS and enable the Space Shuttle to re-boost and reposition the ISS. All
versions of the SPACEHAB Modules can accommodate a combination of lockers, racks
and soft stowage arrangements, which are provided as a service primarily to
NASA. SPACEHAB Modules, which have been outfitted with systems to facilitate
laboratory research experiments in the near-weightless ("microgravity")
environment of space, are also capable of transporting food, clothing, equipment
and other vital supplies (collectively, "logistics") to the planned ISS.
SPACEHAB also provides a full range of pre-and post-flight experiment and
payload processing services, and in-flight operations support to assist
astronauts and researchers, in space and on the ground, in connection with the
performance of experiments aboard SPACEHAB Modules. From June 1993 through June
1998, SPACEHAB Modules have flown eleven successful missions on the Space
Shuttle.
To broaden the opportunities for companies to conduct space research,
SPACEHAB has established a "Microgravity Staircase" that provides a
comprehensive portfolio of ground-based, sub-orbital and space-based research
facilities. During fiscal year 1998, SPACEHAB completed a series of marketing
agreements, asset acquisitions and joint ventures that now enable SPACEHAB to
offer researchers progressive exposure to the microgravity environment.
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The Company is committed to expanding its business with NASA while
also diversifying its revenue and customer base by targeting new and related
space services markets. In addition to the Company's Astrotech subsidiary,
acquired on February 12, 1997, SPACEHAB, on July 1, 1998, expanded its core
business by acquiring Johnson Engineering Corporation ("JE"). With over 450
employees, JE performs several critical services for NASA including managing all
training operations and facility engineering at the Neutral Buoyancy Laboratory
(the "NBL"), NASA's underwater facility where astronauts train for space walks
and ISS assembly procedures.
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 is focused on two
markets: (i) microgravity and life sciences space research and (ii) space
support services such as space station logistics and resupply, ground operations
and payload processing and training.
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. 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.
Space Support Services and Training
Space support services include providing logistics and payload
processing support to NASA, other governments and commercial customers of the
Space Shuttle and the ISS. Permanently orbiting facilities such as the Russian
space station Mir and the planned ISS require reliable sources of logistics:
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. As currently
planned, the ISS will require approximately five Space Shuttle logistics
missions per year.
In order to support the 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. Space support services
also involve the provision of specialized services and support near launch sites
for commercial satellite manufacturers and launch services. These activities
include mechanical assembly or re-assembly, electrical check, calibration,
liquid propellant loading and related activities.
A significant component of Space Support Services includes managing
all training operations and facility engineering at the NBL. NASA also requires
design and fabrication of full-scale mockups of the ISS elements used in NBL
training and the development of hardware for the ISS crew living quarters that
is
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scheduled for launch in 2003.
PRODUCTS AND SERVICES
SPACEHAB Single 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 fiscal 1996, the Company completed a development program and introduced the
Logistics Double Module. This module was optimized to carry logistics and was
used by NASA to carry vital supplies to the astronauts and cosmonauts who reside
on the Russian space station Mir. SPACEHAB invested $12.5 million in the design,
development, and production of the Logistics Double Module. During fiscal 1997,
in an effort to anticipate the needs of customers, the Company began the
full-scale development and construction of its Research Module with double
module hardware, which when combined with a Single Module becomes the RDM. The
RDM will be fully dedicated to microgravity research and is expected to be
available in late 1999. Expenditures for the RDM through fiscal 1998 were $25.7
million. The Company anticipates additional expenditures of approximately $11.1
million to complete this asset and place it into service.
The Company expects that the RDM will meet or exceed all of NASA's
projected requirements for dedicated microgravity and life sciences research
that had been performed by Spacelab, the U.S. government-owned habitable module,
which was retired after its final mission in April 1998. As a result of the
retirement of NASA's Spacelab, the Company believes that its flight-proven
modules position SPACEHAB to become the sole provider of module based
crew-tended microgravity research capabilities for the Space Shuttles. The RDM
is currently under contract and is manifested to fly on its initial mission in
September 2000. The Company also initiated preliminary development activities
for the DDM, which could be used by NASA to maintain the ISS in the proper
orbit while providing more flexible re-supply services to the ISS.
SPACEHAB has addressed the need to carry unpressurized cargo to the
ISS by designing and developing the ICC. The ICC will be used in combination
with SPACEHAB Single or Double Modules to provide the optimum mix of pressurized
and unpressurized cargo on a single mission to the ISS. The ICC is to be flown
on the first resupply mission to the ISS, which is currently scheduled for May
1999.
In 1998, the Company built on a foundation of existing microgravity
research capabilities by establishing a "Microgravity Staircase" that offers
researchers a broader array of services to tailor experiments to specific
microgravity environments and budgets. The first step of the staircase provides
30 seconds of Microgravity aboard an airplane flying a parabolic arc. SPACEHAB
and NOVESPACE signed a marketing agreement that enables SPACEHAB to market
flights on the NOVESPACE Airbus-300. The next step provides approximately 12
minutes of Microgravity for small payloads using sub-orbital rockets. SPACEHAB
and Daimler-Benz Aerospace AG signed a joint marketing agreement to develop the
U.S. and Asian markets for industrial customers. The third step of the staircase
involves the flight proven capability of SPACEHAB research modules. Up to 16
days of experimentation can be performed on the Space Shuttle using SPACEHAB
research modules. The fourth step provides long-duration Microgravity using a
robotics free-flying spacecraft, the Wake Shield Facility which can be deployed
from the Space Shuttle or the ISS to perform research in the ultra-high vacuum
of space. SPACEHAB acquired the rights to the Wake Shield Facility, a free
flying spacecraft providing long duration access to micro-gravity developed by
the University of Houston. The Company entered into a joint venture with Guigne'
Technologies Ltd., to build the Space DRUMS (TM) facility, a facility that uses
acoustic energy to position samples inside an experiment device for
"containerless processing", which is scheduled to be the first commercial
research facility on the ISS.
The Astrotech payload processing business serves the commercial
satellite manufacturing and launch services industries in Florida and at the
Vandenberg Air Force Base in California. Although payload processing is
generally associated with the final preparation of a satellite or other space
payload for launch, it is also the first step in the launch process and requires
specialized facilities and support
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usually located at the launch site. Astrotech's payload processing activities
provide the necessary resources for mechanical assembly or reassembly,
electrical check, calibration, liquid propellant loading and numerous other
related activities. Additionally, Astrotech's specialized facilities include,
but are not limited to, clean rooms, airlock systems, overhead crane systems,
hazard-proof work areas and environmentally controlled rooms.
Astrotech recently completed expansion of its Florida facility to add
a new encapsulation high bay that enables parallel processing activities in
support of the new Atlas II and Delta III launch vehicle payloads. The expansion
also will support the small and medium classes of the Air Force's new Evolved
Expendable Launch Vehicle ("EELV"), which is scheduled to begin commercial
payload launch activities in 2001. Astrotech also completed an expansion of its
Vandenberg facility during 1998. Additional site improvements at Astrotech's
facilities are being performed under a cost reimbursable contract to NASA.
Expenditures for these expansions in fiscal 1998 were approximately $4.0
million.
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, cost-effective solutions that meet customer requirements using
fixed-price service contracts. This strategy has been successful in obtaining
three significant contracts with NASA: a $184.2 million Commercial Middeck
Augmentation Module contract (the "CMAM Contract") for five missions, a $91.5
million contract for four missions and three option missions to the Mir Space
Station (the "Mir Contract") and a $44.9 million Research and Logistics Mission
Support Contract (the "REALMS Contract") for three missions.
The CMAM Contract, signed in November 1990, required 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 fifth and final CMAM mission was completed successfully
during September 1996.
The basic Mir Contract signed in July 1995, required the Company to
provide Single and Double Module accommodations for the provision of logistics
resupply to the Mir Space Station on four Space Shuttle missions. The fourth
mission was completed successfully in May 1997.
In late September 1996, the Company entered into agreements with the
Japanese Space Agency ("NASDA") and the European Space Agency ("ESA")
(collectively, the "NASDA/ESA Contract"). Pursuant to the NASDA/ESA Contract,
SPACEHAB provided hardware and integration and operations for scientific
microgravity experiments to NASDA and ESA aboard the Logistics Double Module on
STS-84. This mission was completed in May 1997.
In June 1997, NASA exercised all three options for additional
missions for $39.0 million under the Mir Contract. The Mir Contract options
called for two Logistics Double Module missions and one Single Module mission
which were successfully completed in September 1997, January 1998 and June 1998,
respectively.
The REALMS Contract, signed in December 1997, requires that the
Company provide a single and a double research module to support microgravity
research payloads on two missions and a double logistics module to the ISS to
support outfitting of the ISS. It is anticipated that these missions will take
place in October 1998 (STS-95), May 1999 (STS-96) and September 2000 (STS-107).
The REALMS Contract provided an opportunity for the Company to offer similar
services to commercial customers on STS-95 and STS-107. During fiscal 1998, the
Company entered into agreements with NASDA, the ESA, the Canadian Space Agency
("CSA") and the Japanese Broadcasting Agency ("NHK") (collectively, the "STS-95
Commercial Customers"). Pursuant to the agreements, with an aggregate value of
$18.4 million, SPACEHAB will provide hardware and integration and operations
for scientific microgravity experiments to the STS-95 Commercial Customers
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aboard the Single Research Module on STS-95, planned for October 1998. The
Company initiated integration and operations efforts for the STS-95 and STS-96
missions during fiscal 1998 reporting $14.3 million in revenue in fiscal 1998
for these missions under the percentage-of-completion revenue recognition
policy.
The Company continues to pursue new business opportunities by
identifying customer requirements and creating and implementing innovative
technical solutions. The Company believes that the demand for microgravity and
life sciences research conducted on SPACEHAB Modules and demand for the use of
its modules for logistics support will increase both during the assembly phase
and after the planned ISS becomes operational. The ISS is the largest
engineering and scientific project ever undertaken. More than a dozen nations,
led by the United States, Russia, Japan and the European Community, have spent
over $25 billion to date and will spend over $90 billion to develop, build,
launch and operate the ISS. The ISS assembly is expected to begin in late 1998.
The Company also believes that the increasing demand for satellites and the
improvement in satellite technology will continue to provide opportunities in
the satellite launch services field.
Astrotech operates under exclusive multiyear agreements with Lockheed
Martin to process all commercial Atlas payloads and with Boeing to process all
Delta payloads and all Sea Launch program payloads at Boeing's facility in Long
Beach, California. Astrotech also plans to pursue additional opportunities,
including: (i) expanding its payload processing facilities to accommodate next
generation EELVs; (ii) providing payload processing facilities and services to
new U.S. Government customers in the defense and intelligence communities;
(iii) supporting new space launch facilities and related payload processing
functions internationally and (iv) expanding its services into microgravity
research by developing research facilities and flight hardware to support space
research programs on sounding rockets.
On July 1, 1998, SPACEHAB broadened its core business by acquiring
Johnson Engineering. JE performs a number of critical services for NASA
including managing all training operations and facility engineering at the NBL.
JE also builds full scale mockups of the ISS elements used in NBL training and
is developing hardware for the ISS crew living quarters that is scheduled for
launch in 2003. JE's ability to perform detailed design, fabrication, and
operations, complements the Company's traditional strengths in conceptual design
and program management. The acquisition of JE provides many of the critical
skills and capabilities used to perform SPACEHAB services that currently are
acquired through subcontracting relationships.
COMPANY STRATEGY
SPACEHAB's goal is to be recognized as a global market leader
providing products and services supporting the human space flight, logistics and
satellite launch industries. The Company seeks to achieve this goal through
implementation of the following strategy:
1. Focusing on Quality of Service. SPACEHAB has had eleven missions to
date, all of which have been completed successfully. The Company intends to
maintain and enhance its reputation for product reliability, process innovation
and performance excellence.
2. Expanding Scope of Business. SPACEHAB continuously evaluates
opportunities to offer new products and services to its customer base and to
develop assets and acquire complementary, attractively valued businesses. For
example, the Company is in the process of constructing the Research Double
Module and the Integrated Cargo Carrier and developing the Docking Double
Module. Based on SPACEHAB's continuing involvement in microgravity research and
logistics Space Shuttle missions, and its close interaction with NASA and other
users of its SPACEHAB Module services, the Company is well positioned to
anticipate emerging requirements for new services in the human space flight
industry. In 1998, the Company built on its foundation of microgravity research
services by establishing a "Microgravity Staircase." The Microgravity Staircase
offers researchers a broader array of services to tailor
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experiments to specific microgravity environments and budgets. The acquisition
of JE on July 1, 1998, complements SPACEHAB's traditional strengths in
conceptual design and program management while adding skills in engineering,
design and training critical to NASA and the successful completion of the ISS.
3. Maintaining Position as Low-Cost Provider. The Company continues to
offer its payload processing and logistics support services to NASA and other
customers using SPACEHAB owned assets, on a fixed-price basis that the Company
believes is significantly lower than the cost-plus basis used by traditional
aerospace contractors. Through the focus and rigorous application of commercial
best practices in the development and operation of its hardware and facilities,
SPACEHAB substantially reduces the cost, time and complexity that burden
conventional government contractors providing services under cost-plus
contracts. JE performs services under a completion-form cost-plus contract for
government services that is requested by and directed by NASA. This contract
form provides for the lowest cost to the government by requiring a separate
negotiation of the price for each task order, thereby allowing JE to implement
commercial best practices to reduce cost.
4. Continuing Entrepreneurial Initiative. The Company continues to develop
and offer innovative business arrangements to meet NASA and other customer
requirements. The Company has repeatedly taken the initiative to improve its
modules and payload processing services and to deploy new assets in anticipation
of customer needs. By focusing on the quality, cost and responsiveness of its
services, and by attracting and recruiting highly talented and experienced
personnel into its distinctly entrepreneurial organization, SPACEHAB seeks to
distinguish itself as an innovative and effective provider of commercial space
services while achieving higher contract profit margins than are customary in
traditional government aerospace contracts that provide services on a
traditional cost-plus basis.
5. Leveraging International Strategic Alliances. The Company seeks to
create and maintain strategic alliances with key international players in the
space industry. Such relationships include Mitsubishi in Japan; Alenia Spazio,
Daimler-Benz, and INTOSPACE in Europe; and RSC Energia in Russia. The Company
believes these alliances have produced and will continue to produce business
opportunities with these partners and the governments of their respective
countries.
Through the Company's contracts, it continues to implement its
business strategy by identifying customer requirements, creating innovative
technical solutions, raising private capital to develop assets and providing
services pursuant to those contracts.
DEPENDENCE ON A SINGLE CUSTOMER
Approximately $43.5 million (or 68%) of the Company's fiscal 1998
revenue was generated from two NASA contracts - the Mir Contract and the REALMS
Contract. While the acquisition of Astrotech, and the STS 95 Commercial Customer
Contracts represent additional revenue sources, the Company anticipates that
revenue from NASA will continue to account for a significant amount of the
Company's revenue over the next several years. There are no assurances, however,
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.
Additionally, a significant portion of the revenue for JE is derived under
contracts with NASA. Accordingly, the Company continues to focus its efforts on
diversifying its customer base to include commercial companies, as evidenced
by the Astrotech acquisition.
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RESEARCH AND DEVELOPMENT
The Company believes that the timely development of new products and
enhancements to existing hardware are essential to maintaining its competitive
position. In the past three fiscal years, the Company has spent an aggregate of
approximately $4.0 million on research and development.
Approximately $1.8 million of the Company's research and development
funds for fiscal 1998 were spent on the design, development and qualification of
the new SPACEHAB Universal Communications System ("SHUCS"). Beginning in fiscal
1996 and continuing throughout fiscal 1998, the Company has been working on the
development of this new proprietary module communications system that will be
independent of the Space Shuttle's existing data downlink. SPACEHAB began
capital asset construction of SHUCS in the fourth quarter of fiscal 1998. Once
implemented, it is expected that 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 laboratories anywhere in the world. The Company
also performed research and development activities to enhance the basic
capabilities of its module systems with new features such as a video system
switch, a digital television downlink capability, and an experiment data
interface, which would result in time savings for astronauts while conducting
experiments inside SPACEHAB Modules.
The Company also completed its research and development activities on
the ICC and began capital asset development for the ICC in fiscal 1998.
Completion of this asset will expand the Company's product and service lines to
meet market requirements for low-cost unpressurized carriers for research
experiments and cargo. SPACEHAB is developing the ICC to carry unpressuried
cargo to the ISS, based on SPACEHAB's pallet technology for which a patent is
pending (the "Unpressurized Cargo Pallet" or "UCP"), that can be used
independently or in tandem with the SPACEHAB Single or Double Modules. The
ICC's design is such that it would be located in what is ordinarily unused
volume in the front of the Space Shuttle's cargo bay. By expanding the
capabilities of the Space Shuttle and by offering flexibility in the mix of
pressurized and unpressurized cargo carried on each mission, the Company
believes that the ICC could become the preferred method for providing logistics
and utilization resupply to the ISS.
COMPETITION
Currently, there are no other companies that compete directly with
SPACEHAB in providing pressurized module services that are carried aboard the
Space Shuttles. NASA has a government-owned and operated system, Spacelab, which
provides services similar to those provided by SPACEHAB modules. However, NASA
has terminated the Spacelab program with its final mission in April 1998. The
Company has commenced the design and construction of the Research Double Module
under a contract with Boeing (formerly McDonnell Douglas Aerospace). The
Research Double Module represents a commercial replacement for NASA's Spacelab.
The Company believes that this module will significantly outperform Spacelab in
terms of technology, capacity, functionality and cost-effectiveness.
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 could require the
Company to compete with commercial companies such as Lockheed-Martin, Boeing and
others who have existing NASA support contracts, greater financial resources and
manufacturing capabilities, and larger marketing, sales and technical
organizations than the Company. In fiscal 1997, SPACEHAB entered into an
agreement with United Space Alliance ("USA"), a Boeing and Lockheed Martin joint
venture, to expand the commercial use of the Space Shuttle fleet. Although this
agreement has expired, SPACEHAB and USA are continuing to pursue joint business
opportunities. SPACEHAB's existing strategic relationships with Boeing, Alenia
Spazio S.p.A., Mitsubishi Corporation and Daimler-Benz A.G. may provide
additional opportunities for teaming and partnerships that management believes
will enable the Company to compete for market share.
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The Italian Space Agency has contracted to build a mini pressurized
logistics module ("MPLM") intended for use in connection with the ISS. Although
the MPLM is intended to be competitive with SPACEHAB's Modules for ISS logistics
missions, SPACEHAB believes that its Modules will be able to compete favorably
for such missions because of the flexibility and late access capabilities of the
SPACEHAB modules.
Astrotech's payload processing facilities are located in Florida and
California. At present, management believes that Astrotech's U.S. competition is
limited to the California Vandenberg Air Force Base launch site where a
competitor, California Commercial Spaceport, Inc. ("CCSI") is located. CCSI was
established by obtaining surplus U.S. Air Force facilities at the VAFB launch
complex before Astrotech established its facilities there and when no commercial
alternative was available. To the Company's knowledge, CCSI has won several
contracts to process NASA spacecraft for launch from VAFB. CCSI does not have
payload processing facilities in Florida, where the majority of U.S. commercial
satellite launches occur.
BACKLOG
A significant portion of the Company's revenue is currently generated
from its contract with NASA that, similar to contracts with other agencies of
the U.S. government, contain provisions for which NASA may terminate the
contract "for convenience." The Company's contract with NASA is conditioned by
its terms upon NASA receiving an adequate annual appropriation of funds from the
U.S. 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 the government's fiscal year 1998, both the
U.S. Senate and House of Representatives have authorized and approved an annual
appropriation of $13.6 billion for NASA, including $2.4 billion for the ISS,
indicating a commitment by the government to the space industry. However, there
can be no assurance that the level of approved funding will be adequate for NASA
to complete all of the initiatives including those relating to the contract with
the Company.
SPACEHAB anticipates that a portion of future revenue will be derived
from contracts with entities other than agencies of the U.S. government that
will not be subject to federal contract regulations such as termination "for
convenience of the government" or federal government funding restrictions.
However, to the extent that such contracts require the use of the Space Shuttle
for transportation, these systems must be available.
As of June 30, 1998, the Company's contract backlog is estimated to
be approximately $58.5 million, of which $38.7 million represents U.S.
government funded backlog and $19.8 million represents non-U.S government
contracts.
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 that its policies,
practices and procedures are properly designed to prevent unreasonable risk of
environmental damage and consequential 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, 1998, the Company employed 83 regular employees, 25 of
whom are employed by the Astrotech subsidiary. Of these 83 employees, 30
(approximately 36%) hold advanced degrees, including 5 (approximately 6%) who
hold doctorate degrees. Additionally a significant number of the Company's
employees have experience in both the space industry and/or governmental space
agencies,
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with a special expertise in commercial space and human space flight. 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 that its relations with its employees are excellent.
ITEM 2. PROPERTIES
The Company and its wholly-owned subsidiary, Astrotech, currently
occupy six locations, with the corporate headquarters located at 1595 Spring
Hill Road, Suite 360, Vienna, Virginia 22182. The corporate headquarters occupy
approximately 9,700 square-feet of office space and house SPACEHAB's 27-person
executive management team. The term of the present lease expires on March 7,
2001.
The Company's 34-person flight systems development team is located at
1331 Gemini Avenue, Suites 300 & 310, Houston, Texas 77058. The Houston offices
consist of approximately 7,800 square feet of non-contiguous office space
located near the Johnson Space Center. In January 1998, the Company negotiated
an agreement for one lease for the two office suites. The new lease is a five
year term commencing March 1, 1998 and expiring February 28, 2003.
The Company's payload processing facility is located near the Kennedy
Space Center in Cape Canaveral, Florida. The facility is contained in an
approximately 40,000 square-foot plant. The Company owns the building which
houses the payload processing facility but leases the land upon which it is
constructed. The payload processing facility has a prime work area of
approximately 10,000 square-feet. This work area is designed to accommodate the
SPACEHAB Single and Double Modules and includes 11 secure experiment/payload
integration and work areas from 300 square-feet to 1,000 square-feet each, two
off-line modification shops, a tool room, a stock room and a conference/training
room. In July 1997, the Company negotiated a new agreement with the Canaveral
Port Authority for the lease of the land. The term of the new lease is for a
forty-three year period commencing August 28, 1997. Upon expiration of the land
lease, all improvements on the property revert at no cost to the lessor.
Astrotech occupies three locations. Its headquarters are located at
6305 Ivy Lane, Suite 520, Greenbelt, MD 20770. The headquarters occupy
approximately 6,250 square-feet of leased office space at this site and house a
six-person management and administrative team. The term of the present lease is
a five-year period expiring on May 31, 2003.
Astrotech's 12-person engineering and support team is located in a
seven-building, owned facility at 1515 Chaffee Drive, Titusville, Florida 32780.
This 88,000 square-foot facility supports non-hazardous and hazardous material
processing, payload storage and customer offices. These buildings presently
occupy one-third of the 37.5-acre property owned by Astrotech, with the
remaining two-thirds available for expansion.
Astrotech has a three-person technical staff located at the
Vandenberg Air Force Base in Vandenberg, California. Astrotech presently rents a
60-acre site on the Air Force Base and owns four buildings comprising 16,500
square-feet, which are dedicated to the same functions provided at the Florida
facility. The term of the present land lease expires on July 13, 2013. Upon
expiration of the land lease, all improvements on the property revert at no cost
to the lessor.
JE occupies three locations. Its headquarters are located at 555
Forge River Road, Suite 150, Webster, Texas 77598. The headquarters houses JE's
197-person engineering team, within a 48,214 square-foot facility. This office
lease will expire on June 30, 2003.
JE has an 11-person fabrication shop located at 920 Gemini Avenue,
Houston, Texas, 77027. This 17,920 square-foot facility is being leased for a
three-year term that will expire on January 31, 2001.
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JE occupies another facility in Houston Texas, which is located at
18100 Upper Bay Road. This is a 3,952 square-foot facility that contains a
19-person engineering and laboratory team. The lease will expire on February 28,
1999.
Additionally, JE has more than 200 additional employees who are
housed at various government facilities within the Houston area.
The Company believes that its current facilities and equipment are
generally well maintained and in good condition and 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
( a ) The Annual meeting was held on October 21, 1997.
( b ) The existing Board of Directors stood for and were duly
reelected at this Annual Meeting.
The names of the directors are as follows:
Hironori Aihara
Robert A. Citron
Dr. Edward E. David, Jr.
Dr. Shelley Harrison
Dr. Shi H. Huang
Chester M. Lee
Gordon S. Macklin
Dr. Brad M. Meslin
Dr. Udo Pollvogt
Alvin L. Reeser
James R. Tompson
Prof. Ernesto Vallerani
( c ) The following matters were brought to a vote of the
shareholders at the meeting:
1. To ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors for fiscal year 1998.
For 7,180,750 Against 1,105 Abstain 3,699
2. To approve the amendments to the Company's 1994 Stock Incentive Plan
to increase the total number of shares reserved and available for distribution
under the Plan to 2,750,000.
For 2,896,691 Against 1,799,888 Abstain 13,040
3. To adopt the Company's 1997 Employee Stock Purchase Plan.
For 3,156,386 Against 1,540,226 Abstain 13,007
4. To approve the amendments to the Company's 1995 Directors Stock
Option Plan to increase the total number of shares reserved and available for
distribution under the Plan to 500,000.
For 3,916,733 Against 1,311,137 Abstain 15,048
All four items presented to the shareholders were approved and implemented.
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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 Common Stock has been
publicly traded since December 22, 1995, the date of the closing of the
Company's initial public offering. The quarterly high and low stock prices for
fiscal 1998, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
Fiscal 1998:
- ------------
High Low
---- ---
<S> <C> <C>
First Quarter $12 3/16 $ 8 3/4
Second Quarter $11 3/8 $ 9 11/16
Third Quarter $11 3/8 $ 9 7/8
Fourth Quarter $12 $11
<CAPTION>
Fiscal 1997:
- ------------
High Low
---- ---
<S> <C> <C>
First Quarter $11 1/4 $ 8
Second Quarter $ 8 1/2 $ 5 1/2
Third Quarter $ 7 1/8 $ 5
Fourth Quarter $ 9 1/4 $ 5 3/4
<CAPTION>
Fiscal 1996:
- ------------
High Low
---- ---
<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
24, 1998, 11,168,161 shares of Common Stock were outstanding. The Company had
approximately 280 shareholders of record and 1,743 beneficial shareholders of
its Common Stock on June 30, 1998.
SALES OF UNREGISTERED SECURITIES
During fiscal 1998, the Company issued no unregistered securities.
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<PAGE> 13
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below are derived from the
audited consolidated financial statements of SPACEHAB. This selected financial
information should be read in conjunction with the Consolidated Financial
Statements of the Company and the notes thereto included elsewhere in this
report.
<TABLE>
<CAPTION>
Nine
Months Year Year
Ended Ended Ended
Years Ended September 30, June 30, June 30, June 30,
---------------------------------------------------------- -------------
1994 1995 1996(1) 1997 1998
------------ ------------- -------------- ------------- -------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue(2) $ 43,800 $ 46,059 $ 56,397 $ 56,601(3) $ 64,087
Costs of revenue 24,227 23,349 20,985 34,120 35,058
------------ ------------- -------------- ------------- -------------
Gross profit 19,573 22,710 35,412 22,481 29,029
Marketing, general and administrative expenses 5,064 3,816 4,056 8,567 13,712
Research and development expenses - 1,600 100 1,252 2,620
------------ ------------- -------------- ------------- -------------
Operating income 14,509 17,294 31,256 12,662 12,697
Interest expense, net of capitalized amounts 4,863 1,365 699 955 4,480
Net income 8,638(4) 15,809 29,829 13,832(5) 12,131
Net income per common share - diluted(6) $ 1.29 $ 2.36 $ 3.19 $ 1.24 $ 0.84
Shares used in computing net income
per common share - diluted(6) 6,735 6,746 9,343 11,160 14,571
Other Data:
Cash provided by (used for) operations $ 21,831 $ 26,838 $ 13,151 $ (5,995) $ 31,604
Capital expenditures 76 4,943 6,266 29,308(7) 23,113
Balance Sheet Data (at period end):
Working capital (deficit) $(20,589) $ 7,192 $ 45,942 $ 3,159 $ 62,660
Total assets 95,261 86,701 129,709 114,450 220,604
Long-term debt, excluding current portion 22,884 24,886 17,318 12,725 85,322
Stockholders' equity (deficit) (21,184) (1,715) 71,596 86,622 96,408
</TABLE>
- ------------------------------
(1) Effective October 1, 1995, the Company changed its fiscal year-end to June
30.
(2) The Company recognized revenue upon the completion of each flight under the
Mir and CMAM Contracts. 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 is being reported
based on costs incurred over the period of the contract.
(3) Includes revenues of $2,860 generated by Astrotech subsequent to its
acquisition on February 12, 1997.
(4) 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 retirement of debt on that date.
(5) Includes an extraordinary gain of $3,274, net of taxes and legal fees,
relating to the amendment and restatement of a credit agreement.
(6) In December 1997, the Company adopted the provisions of Statement of
Financial Accounting No. 128, Earnings Per Share, which establishes new
guidelines for the calculations of earnings per share. Earnings per share for
fiscal 1994 through fiscal 1997 have been restated to reflect the provisions of
this new standard.
(7) Includes $20,134 of consideration for the purchase of Astrotech.
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<PAGE> 14
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 the Space Shuttles.
During fiscal 1998 the Company operated under two contracts with
NASA. First, the Mir Contract, with a total contract value of $91.5 million,
including $39.0 million for three Mir option missions that were flown in fiscal
1998. Second, the REALMS Contract, with a total contract value of $44.9 million
consisting of three missions to be flown in October 1998, May 1999 and September
2000. This contract also provides SPACEHAB an opportunity to have direct
commercial relationships with other space agencies by providing them research
space in the modules. In fact, on the October 1998 flight, most of the revenue
recognized will come from customers other than NASA. The Company's revenues for
fiscal 1998 were generated primarily from the Mir Contract, the REALMS Contract,
and through the Company's commercial customer contracts.
SPACEHAB generates revenue by providing a turnkey service that
includes access to the modules and provides integration and operations support
services to scientists and researchers responsible for the experiments and/or
logistics supplies for module missions aboard the Space Shuttle System. Under
the CMAM and Mir Contracts, the Company recognized revenue only at the
completion of each Space Shuttle mission using Company assets. Accordingly, the
Company's quarterly revenue and profits fluctuated dramatically based on NASA's
launch schedule and will continue to do so for any contract for which revenue is
recognized only upon completion of a mission. For the REALMS Contract and 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 is being reported based on costs incurred
over the period of the contract. The percentage-of-completion method results in
the recognition of revenue over the period of contract performance, thereby
decreasing the quarter-by-quarter fluctuations of reported revenue.
In September 1996, SPACEHAB entered into the NASDA/ESA Contracts,
pursuant to which SPACEHAB provided hardware and integration and operations
services for scientific microgravity experiments aboard the SPACEHAB Logistics
Double Module on STS-84. SPACEHAB began integration work on the NASDA/ESA
Contracts during the first quarter of fiscal 1997 and recorded revenue under
percentage of completion for these contracts. This mission was completed in May
1997, concurrently with the final mission under the basic Mir Contract.
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 support. Expenses associated with sustaining engineering are
expensed as incurred. Mission specific expenses relating to the CMAM Contract
and the Mir Contract were deferred as assets and not expensed until the specific
Space Shuttle mission was flown and the related revenue was recognized. Costs
associated with performance of the NASDA/ESA Contracts, the REALMS Contract and
future contracts using the percentage-of-completion method of revenue
recognition will be expensed as incurred. Other costs of revenue include
depreciation expense and costs associated with the Astrotech payload processing
facilities. 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 are also included in
costs of revenue and are recorded as incurred. Marketing, general and
administrative and interest and other expenses are recognized when incurred.
Astrotech revenue is derived from various multi-year fixed-price
contracts with satellite and launch vehicle manufacturers. The services and
facilities Astrotech provides to its customers support the
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<PAGE> 15
final assembly, checkout and countdown functions associated with preparing a
satellite for launch. This preparation includes: the final assembly and checkout
of the satellite, installation of the solid rocket motors, loading of the liquid
propellant, encapsulation of the satellite in the launch vehicle, transportation
to the launch pad and command and control of the satellite during pre-launch
countdown. Revenue provided by the Astrotech payload processing facilities is
recognized ratably over the occupancy period of the satellites in the Astrotech
facilities.
RESULTS OF OPERATIONS
In 1996, the Company elected to change its fiscal year end from
September 30 to June 30. Financial information for fiscal 1996, therefore,
reflects nine months of operations. Further, fiscal 1997 results include the
operations of Astrotech subsequent to its acquisition on February 12, 1997. Due
to the Company's rate of growth and its contract schedule, information for
fiscal 1996 has not been annualized.
Fiscal Year Ended June 30, 1998 as Compared to the Fiscal Year Ended June 30,
1997
Revenue. The Company's revenue increased approximately 13.3% to
approximately $64.1 million for the year ended June 30, 1998 as compared to
$56.6 million for the year ended June 30, 1997. Revenue for the year ended June
30, 1998 was from the Mir Contract ($39.0 million), the REALMS Contract and
related STS 95 Commercial Customers ($14.3 million) and Astrotech ($10.8
million). Conversely, for the year ended June 30, 1997 the Company's revenue was
attributable to the Mir Contract ($41.7 million), the CMAM contract ($8.0
million), the NASDA/ESA contract ($4.0 million), and Astrotech ($2.9 million).
Costs of Revenue. Costs of revenue for the year ended June 30, 1998
increased 2.7% to $35.1 million, as compared to $34.1 million for the year ended
June 30, 1997. The primary components of costs of revenue for the year ended
June 30, 1998 include integration and operation costs under the Mir Contract
($18.3 million), the REALMS Contract and related STS Commercial Customers ($7.1
million), Astrotech ($4.4 million), and depreciation ($4.9 million). In
contrast, the primary costs of revenue for the year ended June 30, 1997 included
integration and operation costs under the Mir Contract ($18.5 million), the CMAM
Contract ($1.0 million), the NASDA/ESA Contract ($3.5 million), Astrotech ($1.3
million), and depreciation ($9.8 million). The decrease in depreciation expense
is attributable to the impact of extending the estimated useful lives of the
Company's modules to 2012 effective July 1, 1997. This change in accounting
estimate is treated prospectively and is based on current available information
from NASA, which extends the estimated useful life of the Space Shuttle program
to at least 2012.
Operating Expenses. Operating expenses increased by 66.3% to
approximately $16.3 million for the year ended June 30, 1998 as compared to
approximately $9.8 million for the year ended June 30, 1997. This increase is
due primarily to the Company's efforts to increase staff, adding strength in
engineering, design and research and development capabilities. Research and
development costs for the year ended June 30, 1998 were $2.6 million, as
compared to $1.3 million for the year ended June 30, 1997. This increase is due
to the Company's efforts to develop space related assets including the ICC and
the SHUCS, which is being developed to provide reliable and Shuttle-independent
data communication channels that are responsive to payload user requirements.
Operating expenses related to Astrotech were approximately $1.6 million for the
year ended June 30, 1998 as compared to $0.4 million for the year ended June 30,
1997, which included only expenses subsequent to the February 1997 acquisition.
Interest Expense. Interest expense was approximately $6.4 million for
the year ended June 30, 1998, as compared with approximately $1.3 million for
the year ended June 30, 1997. The increase in interest expense was caused by the
Company's issuance of its Subordinated Convertible Notes due 2007 and interest
costs from the use of a term note. There was also approximately $1.9 million and
$0.3 million of interest capitalized during the year ended June 30, 1998 and
year ended June 30, 1997, respectively. Interest is capitalized based primarily
on the construction of the Company's research double module and double module
hardware.
15
<PAGE> 16
Interest Income. Interest and other income was approximately $3.9
million and $1.8 million for the years ended June 30, 1998 and 1997,
respectively. This increase is due to interest earned by the Company through the
short-term investment of funds raised by the Company's financing activities.
Net Income. Net income for the year ended June 30, 1998 was
approximately $9.6 million, or $0.86 per share (basic EPS), on 11,154,271 shares
as compared to $13.8 million, or $1.24 per share (basic EPS), for the year ended
June 30, 1997, on 11,118,825 shares. Income tax expense for these periods was
$2.5 million and $3.6 million for the years ended June 30, 1998 and 1997,
respectively. As of June 30, 1998, the Company had approximately $7.9 million of
available net operating loss carry-forwards expiring between 2006 and 2009 to
offset future regular taxable income. Utilization of these net operating loss
carry-forwards may be subject to limitations in the event of significant changes
in the stock ownership of the Company. While there are no restrictions on
transfers or sales of shares of Common Stock that would prevent such a change
from occurring, there is no plan to initiate any such changes of ownership
resulting in the loss of these carry-forwards.
The effects of inflation and changing prices have not significantly
impacted the Company's revenue or income from continuing operations during
fiscal 1998 and 1997.
Fiscal Year Ended June 30, 1997 as Compared to the Nine Months Ended June 30,
1996
Revenue. The Company recorded revenue of approximately $56.6 million
and $56.4 million for the year ended June 30, 1997 and the nine months ended
June 30, 1996, respectively. Revenue for the year ended June 30, 1997 was from
the Mir Contract ($41.7 million), the CMAM contract ($8.0 million), the
NASDA/ESA Contracts ($4.0 million), and Astrotech ($2.9 million). Conversely,
for the nine months ended June 30, 1996 the Company's revenue was attributable
to the Mir Contract ($10.8 million) and the CMAM contract ($45.6 million).
Costs of Revenue. Costs of revenue for the year ended June 30, 1997
increased 62.4% to $34.1 million, as compared to $21.0 million for the nine
months ended June 30, 1996. The primary components of costs of revenue for the
year ended June 30, 1997 include integration and operation costs under the Mir
Contract ($18.5 million), the CMAM Contract ($1.0 million), the NASDA/ESA
Contracts ($3.5 million), Astrotech Operations ($1.3 million), and depreciation
($9.8 million). In contrast, the primary costs of revenue for the nine months
ended June 30, 1996 included integration and operation costs under the Mir
Contract ($7.7 million), the CMAM Contract ($7.0 million), and depreciation
($6.2 million).
Operating Expenses. Operating expenses increased by 133.3% to
approximately $9.8 million for the year ended June 30, 1997 as compared to
approximately $4.2 million for the nine months ended June 30, 1996. This
increase is due primarily to the Company's efforts to increase staff, adding
strength in engineering, design and research and development capabilities. In
addition, the increase reflects the additional costs of approximately $0.4
million for operating the Astrotech subsidiary, which was acquired in February
1997. Research and development costs for year ended June 30, 1997 were $1.3
million, as compared to $0.1 million for the nine months ended June 30, 1996.
This increase is due to the Company's efforts to develop space related assets
including the ICC and the SHUCS, which is being developed to provide reliable
and Shuttle-independent data communication channels that are responsive to
payload user requirements.
Interest Expense. Interest expense was approximately $1.3 million for
the year ended June 30, 1997, as compared with approximately $1.5 million for
the nine months ended June 30, 1996. There was also approximately $0.3 million
and $0.8 million of interest capitalized during the year ended June 30, 1997 and
nine months ended June 30, 1996, respectively. Interest was capitalized based on
the construction of the Company's research double module and double module
hardware.
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<PAGE> 17
Interest Income. Interest and other income was approximately $1.8
million and $1.2 million for the year ended June 30, 1997 and the nine months
ended June 30, 1996, respectively. This increase is due to the fact that there
were three additional months of interest proceeds from short term, commercial
paper and interest bearing cash accounts in fiscal 1997.
Net Income. Net income for the year ended June 30, 1997 was
approximately $13.8 million, or $1.24 per share (basic EPS), on 11,118,825
shares as compared to $29.8 million, or $3.26 per share (basic EPS), for the
nine months ended June 30, 1996, on 9,139,465 shares. Income tax expense for
these periods was $3.6 million and $1.9 million for the year ended June 30, 1997
and the nine months ended June 30, 1996, respectively, due to the Company's use
of available net operating loss carry-forwards, offset by alternative minimum
taxes.
The effects of inflation and changing prices have not significantly
impacted the Company's revenue or income from continuing operations during
fiscal 1997 and 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its capital expenditures, research
and development and working capital requirements with progress payments under
its contracts, including the CMAM Contract, the Mir Contract, the NASDA/ESA
Contracts and Astrotech's operations, as well as with proceeds received from
private equity offerings and borrowings under credit facilities. During December
1995, SPACEHAB completed an initial public offering of common stock (the
"Offering"), which provided the Company with net proceeds of approximately $43.3
million. In June 1997, the Company signed an agreement with a financial
institution securing a $10.0 million revolving line of credit (the "Revolving
Line of Credit") that the Company may use for working capital purposes. As of
June 30, 1998, no amounts have ever been drawn on this line of credit. In July
1997, Astrotech obtained a five-year term loan (the "Term Loan Agreement"),
which is guaranteed by SPACEHAB, and provides for draws of up to $15.0 million
for general corporate purposes. As of June 30, 1998, the Company had
cumulatively drawn $14.1 million on this loan and had an outstanding balance on
that date of $12.0 million. Further, on October 21, 1997 the Company completed a
private placement offering of convertible subordinated notes due 2007 (the
"Notes Offering"), which provided the Company with net proceeds of approximately
$59.9 million to be used for capital expenditures associated with the
development and construction of space related assets and for general corporate
purposes.
Cash Flows From Operating Activities. Cash provided by (used for)
operations for the nine months ended June 30, 1996 and the fiscal years
ended June 30, 1997 and 1998 was $13.2 million, ($6.0) million and $31.6
million, respectively. The significant change was primarily caused by the
timing of progress payments received by the Company under its contracts. Under
the Mir Contract, the REALMS Contract and the NASDA/ESA Contracts progress
payments are structured such that expenses incurred under these contracts are
billed as incurred.
Cash Flows Used in Investing Activities. For the nine months ended
June 30, 1996 and the fiscal years ended June 30, 1997 and 1998, cash flows
used in investing activities were $6.3 million, $29.3 million and $23.1
million, respectively. Expenditures during 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 Logistics Double Module and (ii) structural
upgrade work performed on the SPACEHAB structural test article so that it can
be attached to an existing Single Module to form a Logistics Double Module. The
Company paid approximately $20.1 million for Astrotech during fiscal 1997.
During fiscal 1997 the Company began the construction of its Research Double
Module. The Company paid approximately $8.4 million and $17.2 million for
construction costs during fiscal 1997 and 1998, respectively. The Company
anticipates that it will spend approximately $36.8 million in the aggregate to
complete this project. Additionally, the Company paid approximately $4.0
million for the construction of two buildings on the Astrotech properties.
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<PAGE> 18
The Company expects to continue funding any additional capital
expenditures and working capital requirements from internally generated cash
flow, draw-downs on existing credit facilities and through future debt and/or
equity offerings.
Cash Flows From Financing Activities. For the nine months ended June
30, 1996 and the fiscal years ended June 30, 1997 and 1998, cash flows provided
by (used for) financing activities were $36.9 million, ($2.6) million and $71.0
million, respectively. During the year ended June 30, 1998, the Company received
net proceeds of approximately $14.1 million and made payments of $2.1 million
under the Term Loan Agreement. In October 1997, the Company received net
proceeds after commissions and other expenses of approximately $59.9 million by
completing an offering of $55.0 million of its 8% Convertible Subordinated Notes
due 2007 as well as the underwriters' exercise of the over-allotment for an
additional $8.3 million.
The Company believes that cash flows from the Convertible Notes
Offering, the Term Loan Agreement, and the Revolving Line of Credit will be
sufficient to meet any cash flow requirements from operations and other funding
requirements for capital asset construction and development for at least the
next twelve months.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income" (Statement 130). Statement 130 establishes standards for the reporting
and display of comprehensive income and its components in the financial
statements. The Company is required to adopt the provisions of Statement 130 for
the year ended June 30, 1999. Earlier application is not permitted; however,
upon adoption, the Company will be required to reclassify previously reported
annual and interim financial statements. The Company believes that the
disclosure of comprehensive income in accordance with the provisions of
Statement 130 will not materially impact the manner of presentation of its
financial statements as currently and previously reported.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information" (Statement 131). Statement
131 establishes new procedures and requirements for the (i) determination of
business segments and (ii) presentation and disclosure of segment information.
The Company is required to adopt the provisions of Statement 131 for the year
ended June 30, 1999, and is currently evaluating the impact Statement 131 will
have on its financial statements.
YEAR 2000 CONSIDERATIONS
The Year 2000 issue is the result of computer programs that were
written using two digits rather than four to define the applicable year. Any
computer programs that have date-sensitive software may recognize the date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculation causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices or
engage in similar normal business activities.
Based upon a recent initial assessment of its Year 2000 readiness,
the Company has determined that the majority of its hardware and software is
Year 2000 compliant. Accordingly, the Company believes that it will not be
required to modify or replace significant portions of its software and hardware
so that its computer systems will function properly with respect to dates in the
Year 2000 and thereafter. Additionally, because the majority of the hardware and
software in use by the Company is of the commercial off the shelf variety with
minimal customization, the Company expects its efforts and costs to bring 100%
of the hardware and software into compliance to be minimal. Final verification
of this initial assessment, including assessment of the recently acquired
Johnson Engineering, is currently underway and will result in specific
plans to upgrade the remaining non-compliant hardware and software to Year 2000
compliance by the end of fiscal year 1999. The costs of bringing non-compliant
hardware and software into compliance will be expensed as incurred.
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<PAGE> 19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEPENDENT AUDITORS' REPORT
The Board of Directors:
SPACEHAB, Incorporated and Subsidiary:
We have audited the accompanying consolidated balance sheets of SPACEHAB,
Incorporated and subsidiary (the Company) as of June 30, 1997 and 1998, and the
related consolidated statements of income, stockholders' equity (deficit), and
cash flows for the nine months ended June 30, 1996 and the years ended June 30,
1997 and 1998. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of SPACEHAB,
Incorporated and subsidiary as of June 30, 1997 and 1998, and the results of
their operations and their cash flows for the nine months ended June 30, 1996
and the years ended June 30, 1997 and 1998, in conformity with generally
accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
-------------------------
KPMG Peat Marwick LLP
McLean, Virginia
August 31, 1998
19
<PAGE> 20
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30,
-------------------------------------
(In thousands, except share data) 1997 1998
- ------------------------------------------------------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 12,887 $ 92,327
Accounts receivable (note 4) 5,176 5,979
Prepaid expenses and other current assets 199 550
- ------------------------------------------------------------------------------------------------------------------------
Total current assets 18,262 98,856
- ------------------------------------------------------------------------------------------------------------------------
Property and equipment:
Flight modules 95,046 95,046
Module improvements in progress 13,013 33,829
Payload processing facilities 17,651 21,755
Furniture, fixtures and equipment 3,368 5,296
- ------------------------------------------------------------------------------------------------------------------------
129,078 155,926
Less accumulated depreciation (38,116) (43,338)
- ------------------------------------------------------------------------------------------------------------------------
Property and equipment, net 90,962 112,588
Goodwill, net of accumulated amortization of $56 and $230, respectively 3,395 3,224
Deferred mission costs 1,439 -
Other assets, net 392 5,936
- ------------------------------------------------------------------------------------------------------------------------
Total assets $ 114,450 $ 220,604
========================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------------------------------
Current liabilities:
Loans payable under credit agreement, current portion (note 6) $ 500 $ 500
Loans payable, current portion (note 8) - 2,824
Accounts payable 682 1,075
Accrued expenses 1,762 5,129
Accrued subcontracting services 9,052 13,177
Deferred flight revenue 2,260 11,924
Advance billings 847 1,567
- ------------------------------------------------------------------------------------------------------------------------
Total current liabilities 15,103 36,196
- ------------------------------------------------------------------------------------------------------------------------
Loans payable under credit agreement, net of current portion (note 6) 1,500 1,000
Loans payable, net of current portion (note 8) - 9,177
Notes payable to shareholder (note 7) 11,225 11,895
Convertible subordinated notes payable (note 8) - 63,250
Deferred income taxes (note 13) - 2,678
- ------------------------------------------------------------------------------------------------------------------------
Total liabilities 27,828 124,196
- ------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies (notes 1, 8, 13, 15 and 16)
Stockholders' equity (notes 8, 11 and 12):
Common stock, no par value, authorized 30,000,000 shares, issued
and outstanding 11,146,237 and 11,168,161 shares, respectively 81,057 81,239
Additional paid-in capital 16 16
Retained earnings 5,549 15,153
- ------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 86,622 96,408
- ------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 114,450 $ 220,604
========================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
20
<PAGE> 21
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(In thousands, except share data) Nine months ended Year ended Year ended
June 30, 1996 June 30, 1997 June 30, 1998
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue $ 56,397 $ 56,601 $ 64,087
- -----------------------------------------------------------------------------------------------------------------------------
Costs of revenue:
Integration, operations and transportation 14,220 23,726 25,762
Depreciation 6,192 9,825 4,923
Insurance and other direct costs 573 569 4,373
- -----------------------------------------------------------------------------------------------------------------------------
Total costs of revenue 20,985 34,120 35,058
- -----------------------------------------------------------------------------------------------------------------------------
Gross profit 35,412 22,481 29,029
- -----------------------------------------------------------------------------------------------------------------------------
Operating expenses:
Marketing, general and administrative 4,056 8,567 13,712
Research and development 100 1,252 2,620
- -----------------------------------------------------------------------------------------------------------------------------
Total operating expenses 4,156 9,819 16,332
- -----------------------------------------------------------------------------------------------------------------------------
Income from operations 31,256 12,662 12,697
Interest expense, net of capitalized interest (note 3) (699) (955) (4,480)
Interest and other income, net 1,184 1,822 3,914
- -----------------------------------------------------------------------------------------------------------------------------
Net income before income taxes and extraordinary item 31,741 13,529 12,131
Income tax expense (note 13) 1,912 2,971 2,527
- -----------------------------------------------------------------------------------------------------------------------------
Net income before extraordinary item 29,829 10,558 9,604
Extraordinary item -- gain on early retirement of debt,
net of taxes and legal fees (note 6) - 3,274 -
- -----------------------------------------------------------------------------------------------------------------------------
Net income $ 29,829 $ 13,832 $ 9,604
=============================================================================================================================
Basic earnings per share:
Net income before extraordinary item $ 3.26 $ 0.95 $ 0.86
Extraordinary item - 0.29 -
- -----------------------------------------------------------------------------------------------------------------------------
Net income per share - basic $ 3.26 $ 1.24 $ 0.86
=============================================================================================================================
Shares used in computing net income per share-basic 9,139,465 11,118,825 11,154,271
=============================================================================================================================
Diluted earnings per share:
Net income before extraordinary item $ 3.19 $ 0.95 $ 0.84
Extraordinary item - 0.29 -
- -----------------------------------------------------------------------------------------------------------------------------
Net income per share - diluted $ 3.19 $ 1.24 $ 0.84
=============================================================================================================================
Shares used in computing net income per share-diluted 9,343,018 11,160,322 14,571,278
=============================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
21
<PAGE> 22
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
(In thousands, except share data)
Total
Convertible preferred stock Common stock Additional Retained stockholders'
----------------------------- --------------------- paid-in earnings equity
Shares Amount Shares Amount capital (deficit) (deficit)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1995 4,011,345 $ 2,311 5,083,427 $ 34,070 $ 16 $ (38,112) $ (1,715)
Common stock issued upon
stock option exercises - - 75,000 180 - - 180
Common stock issued in public
offering, net of expenses
(note 11) - - 4,014,500 43,302 - - 43,302
Common stock issued upon
conversion of preferred
stock (note 11) (4,011,345) (2,311) 1,671,312 2,311 - - -
Common stock issued in private
placement guarantee (note 11) - - 224,998 - - - -
Net income - - - - - 29,829 29,829
- --------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1996 - - 11,069,237 79,863 16 (8,283) 71,596
Common stock issued upon stock
option exercises - - 2,000 24 - - 24
Common stock issued upon
conversion of debt (note 8) - - 75,000 1,170 - - 1,170
Net income - - - - - 13,832 13,832
- --------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1997 - - 11,146,237 81,057 16 5,549 86,622
Common stock issued upon stock
option exercises - - 8,725 60 - - 60
Common stock issued under
employee stock purchase plan - - 13,199 122 - - 122
Net income - - - - - 9,604 9,604
- --------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1998 - $ - 11,168,161 $ 81,239 $ 16 $ 15,153 $ 96,408
================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
22
<PAGE> 23
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(In thousands)
Nine months ended Year ended Year ended
June 30, 1996 June 30, 1997 June 30, 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 29,829 $ 13,832 $ 9,604
Adjustments to reconcile net income to net cash provided by
(used for) operating activities:
Depreciation and amortization 6,387 10,185 5,587
Amortization of debt placement costs - - 226
Gain on early retirement of debt - (4,093) -
Interest converted to notes payable 1,425 1,300 670
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 119 1,843 (803)
Increase in prepaid expenses and other current assets (132) (15) (351)
Decrease in deferred mission costs 445 1,267 1,439
Decrease (increase) in other assets 194 (258) (1,980)
Increase (decrease) in deferred flight revenues (27,752) (28,051) 9,628
Increase (decrease) in accounts payable and
accrued expenses 1,993 (968) 3,633
Increase (decrease) in advance billings - (239) 720
Increase (decrease) in accrued
subcontracting services 643 (798) 533
Increase in deferred taxes - - 2,678
- ------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) operating activities 13,151 (5,995) 31,604
- ------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Payments for modules under construction - (8,443) (17,245)
Payments for building under construction - - (3,988)
Purchase of Astrotech, net of cash acquired - (20,134) -
Purchases of property and equipment (6,266) (731) (1,880)
- ------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (6,266) (29,308) (23,113)
- ------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Payments of note payable to insurers (3,854) (2,520) (500)
Payment of debt placement costs - - (3,984)
Proceeds from issuance of convertible
subordinated notes payable - - 63,250
Proceeds from note payable - - 14,119
Payments of note payable - - (2,118)
Proceeds from note payable to shareholder 7,359 - -
Payments of note payable to shareholder (10,117) - -
Payments of legal fees on early retirement of debt - (110) -
Proceeds from exercise of stock options 180 24 60
Proceeds from issuance of common stock, net of expenses 43,302 - 122
- ------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) financing activities 36,870 (2,606) 70,949
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 43,755 (37,909) 79,440
Cash and cash equivalents at beginning of year 7,041 50,796 12,887
- ------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 50,796 $ 12,887 $ 92,327
==============================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
23
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1 9 9 8
(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 three pressurized laboratory and
logistics supply modules which significantly enhance the capabilities of the
Space Shuttle fleet. The Company is currently constructing a new science module
with associated double module hardware. The Company's modules are unique to the
Space Shuttle fleet.
To date, the Company has successfully completed eleven missions
aboard the Space Shuttle and substantially all of the Company's revenue has been
generated under fixed price contracts with NASA. The Company's contracts are
subject to termination for convenience and periodic funding allocations by
NASA. NASA's funding is dependent on receiving annual appropriations from the
United States government.
On February 12, 1997, the Company acquired the assets and certain of
the liabilities of Astrotech Space Operations, L.P., a subsidiary of Northrop
Grumman, a provider of commercial satellite launch processing services and
payload processing facilities in the United States. These services are provided
at the Astrotech facilities in Cape Canaveral, Florida and Vandenberg Air Force
Base in California, and are provided to launch service providers on a
fixed-price basis. Additionally, Astrotech provides management and consulting
services to the Boeing Company for its Sea Launch program at the Boeing facility
in Long Beach, California.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of
SPACEHAB, Incorporated and its wholly owned subsidiary, Astrotech Space
Operations, Inc. (Astrotech). All significant intercompany transactions have
been eliminated in consolidation.
FISCAL YEAR
Effective October 1, 1995, the Company changed its fiscal year-end
from September 30 to June 30. Accordingly, the accompanying consolidated
financial statements present the Company's results of operations for the nine
months ended June 30, 1996 and the years ended June 30, 1997 and 1998.
CASH AND CASH EQUIVALENTS
For purposes of its consolidated statements of cash flows, the
Company considers short-term investments with original maturities of three
months or less to be cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. All furniture, fixtures
and equipment are depreciated using the straight-line method over the estimated
useful lives of the respective assets, which is generally five years. The
Company's payload processing facilities are depreciated using the straight-line
method over their estimated useful lives ranging from sixteen to forty-three
years.
Through June 30, 1997, the Company's flight modules were depreciated
over a ten-year period using the straight-line method. Effective July 1, 1997,
the Company extended the estimated useful lives of its space modules through
2012. This change in accounting estimate is treated prospectively and is based
on current available information from NASA, which has estimated the duration of
the Space Shuttle Program through at least 2012. As a result of this change in
estimate, the Company's net income increased by $4,145,000 for fiscal year 1998.
During fiscal year 1997, SPACEHAB adopted 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
requires that long-lived assets to be held and used, including goodwill, be
reviewed by the Company for impairment whenever events or circumstances indicate
that the carrying amount of an asset may not be recoverable. An impairment loss
is recognized when the undiscounted net cash flows associated with the asset are
less than the asset's carrying amount. Impairment losses, if any, are measured
as
24
<PAGE> 25
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the excess of the carrying amount of the asset over its estimated fair market
value. The adoption of Statement 121 did not have an impact on the Company's
consolidated results of operations for the years ended June 30, 1997 or 1998.
GOODWILL
The excess of the cost over the fair value of Astrotech's net
tangible and identifiable intangible assets acquired has been assigned to
goodwill. Goodwill is being amortized on a straight-line basis over twenty
years.
STOCK-BASED COMPENSATION
During fiscal year 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 123, Accounting for
Stock-based Compensation (Statement 123), which encourages, but does not
require, the recognition of stock-based employee compensation at fair value. The
Company has elected to continue to account for stock-based employee compensation
using the intrinsic value method as prescribed in Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations. Accordingly, compensation cost for options to purchase common
stock granted to employees is measured as the excess, if any, of the fair value
of common stock at the date of the grant over the exercise price an employee
must pay to acquire the common stock.
Warrants to purchase common stock granted to other than employees as
consideration for goods or services rendered are recognized at fair market
value.
REVENUE RECOGNITION
Revenue was recognized upon completion of each module flight for the
CMAM and Mir contracts (note 10). Total contract price was allocated to each
flight based on the amount of services the Company provided on the flight
relative to the total services provided for all flights under contract.
Obligations associated with a specific mission, e.g., integration services, were
also recognized upon completion of the mission. Costs directly related to
specific CMAM and Mir missions were deferred until the respective missions were
completed. The CMAM contract was completed in October 1996 and the Mir contract
was completed in June 1998.
For all other contract awards for which the capability to
successfully complete the contract can be reasonably assured and costs at
completion can be reliably estimated at contract inception, revenue recognition
under the percentage-of-completion method is being used based on costs incurred
over the period of the contract. Revenue provided by Astrotech's payload
processing services is recognized ratably over the occupancy period of the
satellite while in the Astrotech facilities. Contract losses are recognized when
they become known.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred.
INCOME TAXES
The Company recognizes income taxes under the asset and liability
method. 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. 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
In December 1997, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 128, Earnings per Share, (Statement 128).
Statement 128 supersedes Accounting Principles Board Opinion No. 15, Earnings
per Share (APB 15) and its related interpretations, and promulgates new
accounting standards for the computation and manner of presentation of the
Company's earnings per share. The Company has restated previously reported
annual earnings per share data in accordance with the provisions of Statement
128 (note 14). The Company does not believe that the adoption of Statement 128
had a material impact on the computation or manner of presentation of its
earnings per share data as currently or previously presented under APB 15.
Basic earnings per share is calculated by dividing net income by the
weighted average number of common shares outstanding during the period.
25
<PAGE> 26
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The computation of diluted earnings per share includes all common stock options
and warrants and other common stock, to the extent dilutive, that potentially
may be issued as a result of conversion privileges, including the convertible
subordinated notes payable (note 8).
All computations of income per share include the effect of the 1 for
2.4 reverse split of common stock in December 1995 (note 11).
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 consolidated
financial statements and the reported amounts of revenue and expenses during the
reported periods. Actual results could differ from these estimates.
RECLASSIFICATIONS
Certain fiscal year 1996 and 1997 amounts have been reclassified to
conform to the fiscal 1998 consolidated financial statement presentation.
(3) STATEMENTS OF CASH FLOWS - SUPPLEMENTAL INFORMATION
Cash paid for interest costs was approximately $264,000, $1,300,000
and $3,400,000 for the nine months ended June 30, 1996 and the years ended June
30, 1997 and 1998, respectively. The Company capitalized interest of
approximately $766,000, $345,000 and $1,900,000 during the nine months ended
June 30, 1996 and the years ended June 30, 1997 and 1998, respectively, related
to the module improvements and building in progress.
The Company paid income taxes of approximately $248,000, $2,385,000
and $18,500 for the nine months ended June 30, 1996 and the years ended June 30,
1997 and 1998, respectively.
During fiscal year 1997, the Company's convertible note payable, with
a carrying value of approximately $1,200,000, was converted into 75,000 shares
of common stock (note 8). During fiscal year 1998, the Company entered into two
capital leases for equipment with a carrying value of approximately $180,000.
(4) ACCOUNTS RECEIVABLE
At June 30, 1997 and 1998, accounts receivable consisted of (in
thousands):
<TABLE>
<CAPTION>
1997 1998
- --------------------------------------------------------------------
<S> <C> <C>
U.S. government contracts
Billed $ - 452
Unbilled 3,521 3,202
- --------------------------------------------------------------------
Total U.S. government contracts 3,521 3,654
- --------------------------------------------------------------------
Commercial contracts
Billed 1,344 2,277
Unbilled 311 48
- --------------------------------------------------------------------
Total commercial contracts 1,655 2,235
- --------------------------------------------------------------------
Total accounts receivable $ 5,176 5,979
====================================================================
</TABLE>
The Company anticipates collecting substantially all receivables within one
year.
(5) ACQUISITION OF ASTROTECH
The Company paid $20,136,000, including transaction costs, to acquire
substantially all of the assets and certain of the liabilities of Astrotech. The
purchase was effective on February 12, 1997. The business combination has been
accounted for using the purchase method. The purchase price has been allocated
to the assets and liabilities acquired based on appraisals and other studies.
The purchase price was allocated as follows (in thousands):
<TABLE>
<S> <C>
Cash acquired $ 2
Receivables 1,573
Land 580
Buildings 13,389
Furniture, fixtures, and equipment 2,319
Goodwill 3,451
Other assets 49
Accounts payable (141)
Advanced billings (1,086)
- -------------------------------------------------------------------------
Total purchase price $ 20,136
=========================================================================
</TABLE>
26
<PAGE> 27
(5) ACQUISITION OF ASTROTECH (CONTINUED)
The following represents pro forma combined results of operations for
the prior two years as if the acquisition of Astrotech had occurred as of
October 1, 1995 (in thousands, except per share data):
<TABLE>
<CAPTION>
Nine months ended Year ended
June 30, 1996 June 30, 1997
- ------------------------------------------------------------------------
<S> <C> <C>
Revenue $ 62,716 59,980
Gross profit 39,902 23,531
Income before
extraordinary item 31,622 10,309
Net income 31,622 13,583
- ------------------------------------------------------------------------
Net income per
common share - basic $ 3.46 1.22
========================================================================
</TABLE>
(6) LOANS PAYABLE UNDER CREDIT AGREEMENT
Prior to an August 1996 amendment, the Company's credit agreement
consisted of a $6,458,000 term loan bearing interest at 1 percent per month and
a $5,495,000 noninterest-bearing term loan with several insurance companies. In
addition, a revolving credit commitment with a subcontractor and former
shareholder, provided a maximum outstanding balance of $6,000,000 and bore
interest at a rate of 1 percent per month.
In August 1996, the Company's credit agreement was amended. Under the
amendment, the revolving credit commitment with a subcontractor and former
shareholder was canceled. In exchange for the full satisfaction of the Company's
term loans with the various insurance companies, 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 $334,000 on each of August 1,
1999, 2000 and 2001. As a result of this amended and restated agreement, the
Company recognized an extraordinary gain of $3,274,000, net of income taxes and
other related expenses of $819,000 and $110,000, respectively, during the year
ended June 30, 1997.
Aggregate interest cost incurred on the debts due under the various
credit agreements was approximately $561,000 and $64,000 for the nine months
ended June 30, 1996 and the year ended June 30, 1997. There was no interest
incurred under these agreements during the year ended June 30, 1998.
(7) 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 aggregate
outstanding balances of $11,225,000 and $11,895,000 at June 30, 1997 and 1998,
respectively. The notes bear interest at an annual rate of 12 percent. No amount
of principal or accrued interest on the notes is due until all amounts under the
amended and restated credit agreement due to the various insurance companies
(note 6) are repaid. As such, all principal payments are due under these notes
on August 1, 2001. However, during fiscal 1998, the Company began paying
interest quarterly. The Company paid $357,000 of interest during the year ended
June 30, 1998 and will continue to pay interest quarterly. Additionally, the
Company has accrued interest of $357,000 as of June 30, 1998 included in
accounts payable and accrued expenses.
Interest cost converted on the notes to Alenia was approximately
$846,000, $1,300,000, and $670,000 for the nine months ended June 30, 1996 and
the years ended June 30, 1997 and 1998, respectively.
(8) LONG-TERM DEBT
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 accrued and was converted to additional
outstanding principal. The note was convertible at the option of the holder into
75,000 shares of the Company's common stock at any time prior to maturity. On
October 25, 1996, the investment bank exercised its option to convert the note
into the Company's common stock. In accordance with the terms of the agreement,
interest that accrued during fiscal year 1997 of approximately $25,000 through
the date of conversion was waived.
Interest cost incurred on this note was approximately $58,000 for the
nine months ended June 30, 1996.
27
<PAGE> 28
(8) LONG-TERM DEBT (CONTINUED)
CREDIT FACILITIES
On June 16, 1997, the Company entered into a $10,000,000 line of
credit agreement with a financial institution. Outstanding balances on the line
of credit accrue interest at either the lender's prime rate or a LIBO-based
rate. This loan is collateralized by the Company's intangible assets, accounts
receivable, and other property in which a lien is granted to the lender. The
term of the agreement is through October 1998. Through June 30, 1998, the
Company has not drawn against the line of credit.
On July 14, 1997, the Company's subsidiary, Astrotech, entered into
another credit facility for loans of up to $15,000,000 with a financial
institution. The term of the agreement is through July 13, 2002. This loan is
collateralized by the assets of Astrotech and certain other assets of the
Company, and is guaranteed by the Company. Interest accrues at LIBOR plus three
percent. Principal and interest are payable on a quarterly basis. Principal
payments of $2,824,000 are due in fiscal year 1999, 2000, 2001, and 2002 and
principal payments of $705,000 is due in fiscal year 2003. At June 30, 1998, the
Company had outstanding debt of $12,001,000 under this credit facility and
accrued interest of $330,000.
CONVERTIBLE SUBORDINATED NOTES
In October 1997, the Company completed a private placement offering
for $63,250,000 of aggregate principal of unsecured 8% Convertible Subordinated
Notes due 2007. Interest is payable semi-annually. The notes are convertible
into the common stock of the Company at a rate of $13.625 per share. This
offering provided the Company with net proceeds of approximately $59,910,000 to
be used for capital expenditures associated with the development and
construction of space related assets and for other general corporate purposes.
(9) 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, 1997 and 1998 in
accordance with Statement of Financial Accounting Standards No. 107, Disclosures
about Fair Value of Financial Instruments (in thousands):
<TABLE>
<CAPTION>
1997 1998
-------------------- -------------------
Carrying Fair Carrying Fair
amount value amount value
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial liabilities:
Loans payable under
credit agreement $ 2,000 1,630 1,500 1,279
Notes payable
to shareholder 11,225 11,225 11,895 11,895
Loans payable under
credit facility - - 12,001 12,001
Convertible notes
payable - - 63,250 68,784
=======================================================================
</TABLE>
The fair value of the Company's long-term debt is based on quoted
market price or is estimated based on the current rates offered to the Company
for debt of the same remaining maturities. The carrying amounts of cash and cash
equivalents, receivables, and accounts payable and accrued expenses approximate
their fair market value because of the relatively short duration of these
instruments.
(10) 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 NASA 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.
During the nine months ended June 30, 1996, and the years ended June
30, 1997 and 1998, the Company recognized approximately $45,634,000, $7,963,000,
and $0, respectively, of revenue under the CMAM contract. The CMAM contract was
completed during fiscal year 1997.
28
<PAGE> 29
(10) NASA CONTRACTS (CONTINUED)
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 fiscal 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 by $2,400,000 in
exchange for the indemnification by NASA of certain damage to, or loss of, "the
modules during flight and increased by $927,000 for additional services for a
new contract value of $52,507,000. During fiscal 1998, the Company and NASA
further amended the terms of the basic contract to provide for three additional
missions for an additional $38,954,000.
During the nine months ended June 30, 1996 and the years ended June
30, 1997 and 1998, the Company recognized $10,772,000, $41,735,000 and
$38,954,000, respectively, of revenue under the Mir contract. The Mir contract,
as amended, was completed with its final mission in June 1998.
RESEARCH AND LOGISTICS MODULE SERVICES CONTRACT
On December 21, 1997, the Company entered into the Research and
Logistics Module Services (REALMS) Contract to lease to NASA its flight modules
and provide related integration services over three missions at an aggregate
fixed price of $44,860,000. This contract provides for NASA to use the flight
modules for both science and logistical missions. This contract also enables the
Company to provide similar services to commercial customers.
During the year ended June 30, 1998, the Company recognized
$14,274,000 of revenue under this contract and related commercial customer
contracts.
(11) STOCKHOLDERS' EQUITY
INITIAL PUBLIC OFFERING
In December 1995 and January 1996, the Company sold, through an
underwritten initial public offering, an aggregate of 4,014,500 common shares at
$12.00 per share, which resulted in net proceeds to the Company of $43,302,000
after associated commissions and discounts, and other expenses of the offering.
CONVERTIBLE PREFERRED STOCK
Pursuant to 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 1 for 1 basis in accordance with the terms of the preferred
stock agreement. At which point, all shares of common stock were subject to the
reverse stock split.
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 consolidated
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. Based on the initial public offering price,
the Company issued an aggregate of 224,998 common shares to the investors in
settlement of the guarantee.
(12) COMMON STOCK OPTION AND STOCK PURCHASE PLANS
NON-QUALIFIED OPTIONS
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
incrementally over a period of four years and generally expire within ten years
of the date of grant.
THE 1994 PLAN
Under the terms of the 1994 Plan, the number and price of the options
granted to employees is determined by the Board of Directors and such options
vest, in most cases, incrementally over a period of four years and expire no
more than ten years after the date of grant.
29
<PAGE> 30
(12) COMMON STOCK OPTION AND STOCK PURCHASE PLANS (CONTINUED)
THE DIRECTORS' STOCK OPTION PLAN
Prior to an amendment on October 21, 1997, each nonemployee member of
the Board of Directors was annually granted options to purchase 5,000 shares of
common stock at exercise prices equal to the fair market value of the date of
grant. Subsequent to the amendment, each nonemployee member of the Board of
Directors received a one time grant of an option to purchase 10,000 shares of
common stock. Further, each new nonemployee director after the amendment date
shall receive a one-time grant of an option to purchase 10,000 shares. In
addition, effective as of the date of each annual meeting of the Company's
stockholders on or after the effective date, each nonemployee director who is
elected or continues as a member of the Board of Directors of the Company shall
be awarded an option to purchase 5,000 shares of common stock. Options under the
Director's Plan vest after one year and expire seven years from the date of
grant.
1997 EMPLOYEE STOCK PURCHASE PLAN
During the year ended June 30, 1998, the Company adopted an employee
stock purchase plan that permits eligible employees to purchase shares of common
stock of the Company at prices no less than 85 percent of the current market
price. Eligible employees may elect to participate in the plan by authorizing
payroll deductions from one percent to ten percent of gross compensation for
each payroll period. On the last day of each quarter, each participant's
contribution account is used to purchase the maximum number of whole and
fractional shares of common stock determined by dividing the contribution
account's balance by the lesser of 85 percent of the price of a share of common
stock on the first day of the quarter or the last day of a quarter. The maximum
number of shares of common stock that may be purchased under the plan is
1,500,000. Through June 30, 1998, 13,199 shares have been issued under the plan.
STOCK OPTION ACTIVITY SUMMARY
The following table summarizes the Company's stock option plans:
<TABLE>
<CAPTION>
Non-qualified options 1994 Plan Directors' plan
------------------------ ------------------------ -----------------------
Weighted Weighted Weighted
average average average
Shares exercise Shares exercise Shares exercise
outstanding price outstanding price outstanding price
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at 9/30/95 933,852 $ 11.31 256,156 $ 12.00 - $ -
Granted 8,133 24.00 744,582 13.85 - -
Exercised 75,000 2.40 - - - -
Forfeited 246,523 12.00 - - - -
- ----------------------------------------------------------------------------------------------------------------------
Outstanding at 6/30/96 620,462 12.28 1,000,738 13.35 - -
Granted 14,166 8.88 1,024,751 6.90 50,000 7.00
Exercised - - 2,000 12.00 - -
Forfeited 194,642 12.00 790,266 13.14 - -
- ----------------------------------------------------------------------------------------------------------------------
Outstanding at 6/30/97 439,986 12.01 1,233,223 8.20 50,000 7.00
Granted 10,000 10.13 257,338 11.00 145,000 10.92
Exercised - - 3,725 10.02 5,000 10.13
Forfeited 149,941 12.16 8,583 11.96 - -
- ----------------------------------------------------------------------------------------------------------------------
Outstanding at 6/30/98 300,045 $ 12.33 1,478,253 $ 8.62 190,000 $ 9.99
- ----------------------------------------------------------------------------------------------------------------------
Options exercisable at:
June 30, 1996 543,585 $ 12.07 58,247 $ 12.00 - $ -
June 30, 1997 429,720 12.16 819,742 8.49 - -
June 30, 1998 295,978 12.17 983,620 8.55 45,000 7.00
Weighted-average fair value at
date of grant during the
fiscal period ended:
June 30, 1996 8,133 5.96 744,582 6.24 - -
June 30, 1997 14,166 2.80 1,024,751 2.56 50,000 2.19
June 30, 1998 10,000 4.25 257,338 3.83 145,000 3.43
======================================================================================================================
</TABLE>
30
<PAGE> 31
(12) COMMON STOCK OPTION AND STOCK PURCHASE PLANS (CONTINUED)
The following table summarizes information about the Company's stock
options outstanding at June 30, 1998:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
-------------------------------------------- -------------------------
Weighted-
average Weighted- Weighted-
remaining average average
Number contractual exercise Number exercise
Range of exercise prices outstanding life (years) price exercisable price
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$24.00 6,100 4.25 $ 24.0000 2,033 $ 24.0000
$9.875 - $14.88 917,197 3.90 12.0114 577,035 12.6270
$5.75 - $8.88 1,045,001 4.73 6.8653 745,530 6.6988
- -----------------------------------------------------------------------------------------------------------
$5.75 - $24.00 1,968,298 4.34 $ 9.3164 1,324,598 $ 9.3078
===========================================================================================================
</TABLE>
The Company applies APB Opinion 25 and related interpretations in
accounting for its plans. Accordingly, as all options have been granted at
exercise prices equal to the fair market value as of the date of grant, no
compensation cost has been recognized under these plans in the accompanying
consolidated financial statements. Had compensation cost been determined
consistent with Statement 123, the Company's net income and earnings per common
share would have been reduced to the pro forma amounts indicated below (in
thousands, except per share data):
<TABLE>
<CAPTION>
Nine months Years ended
ended June 30, ------------------------
1996 1997 1998
- ------------------------------------------------------------------------
<S> <C> <C> <C>
As reported $ 29,829 $ 10,558 9,604
Pro forma 29,257 8,964 8,772
========================================================================
Net income per share - basic:
As reported $ 3.26 $ 0.95 0.86
Pro forma 3.20 0.81 0.79
========================================================================
</TABLE>
The fair value of each option granted is estimated on the date of
grant using the Black-Scholes option-pricing model with the following weighted
average assumptions used for grants in fiscal years 1996, 1997 and 1998: 0.0
percent dividend growth; expected volatility ranging from 35 percent to 40
percent; risk-free interest rates ranging from 5.68 percent to 6.71 percent; and
expected lives ranging from three to seven years.
The effects of compensation cost as determined under Statement 123 on
net income in fiscal year 1996, 1997 and 1998 may not be representative of the
effects on pro forma net income in future periods.
WARRANTS
The Company also has 53,000 currently exercisable warrants
outstanding to purchase the Company's common stock at $9.00 per share, with
various expiration dates through June 2002. The fair market value of these
warrants was recognized at issuance.
(13) INCOME TAXES
The components of income tax expense from continuing operations are
as follows (in thousands):
<TABLE>
<CAPTION>
Nine months ended Year ended Year ended
June 30, 1996 June 30, 1997 June 30, 1998
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 1,912 2,706 -
State and local - 85 -
- -------------------------------------------------------------------------
1,912 2,791 -
- -------------------------------------------------------------------------
Deferred:
Federal - - 2,148
State and local - - 379
- -------------------------------------------------------------------------
- - 2,527
- -------------------------------------------------------------------------
Income tax
expense $ 1,912 2,791 2,527
=========================================================================
</TABLE>
31
<PAGE> 32
(13) INCOME TAXES (CONTINUED)
During the year ended June 30, 1997, income tax expense of $819,000
was allocated to the extraordinary gain on early retirement of debt.
A reconciliation of the expected amount of income tax expense,
calculated by applying the statutory federal income tax rate of 34 percent in
fiscal 1996 and 1997 and 35 percent in fiscal 1998 to income from continuing
operations before taxes, to the actual amount of income tax expense recognized
follows (in thousands):
<TABLE>
<CAPTION>
Nine months ended Year ended Year ended
June 30, 1996 June 30, 1997 June 30, 1998
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Expected expense $10,792 4,600 4,241
Change in valuation
allowance (8,884) (2,640) (2,058)
State income tax - 1,011 299
Other 4 - 45
- ---------------------------------------------------------------------------
Income tax
expense $ 1,912 2,971 2,527
===========================================================================
</TABLE>
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax liabilities as
of June 30, 1997 and 1998 are presented below (in thousands):
<TABLE>
<CAPTION>
1997 1998
- ------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 1,504 3,140
General business credit
carryforwards 2,189 2,189
Alternative minimum tax
credit carryforwards 5,044 4,905
Capitalized research
and development costs 4,223 452
Other 63 225
- ------------------------------------------------------------------------
Total gross deferred tax assets 13,023 10,911
Less - valuation allowance 2,058 -
- ------------------------------------------------------------------------
Net deferred tax assets 10,965 10,911
- ------------------------------------------------------------------------
Deferred tax liabilities:
Property and equipment, principally
due to differences in depreciation 10,873 13,364
Other 92 74
- ------------------------------------------------------------------------
Total gross deferred tax liabilities 10,965 13,438
- ------------------------------------------------------------------------
Net deferred taxes $ - (2,527)
========================================================================
</TABLE>
As of June 30, 1998, current deferred tax assets of $151,000 are
included in prepaid expenses and other current assets in the accompanying
balance sheet.
The net changes in the total valuation allowance for the nine months
ended June 30, 1996 and the years ended June 30, 1997 and 1998 were decreases of
$10,144,000, $4,655,000, and $2,058,000, respectively.
At June 30, 1998, the Company had accumulated net operating losses of
$7,850,000 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.
Additionally, the Company has approximately $2,189,000 and $4,905,000
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.
In assessing the realizably of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets are realizable. Management considers the scheduled reversal
of deferred tax liabilities, projected future taxable income, and tax planning
strategies in making this assessment. Based upon the level of projected future
regular taxable income over the periods which the deferred tax assets are
deductible, management believes that the Company will realize the benefits of
these deductions. The amount of the deferred tax assets considered realizable,
however, could be reduced in the near term if estimates of future regular
taxable income during the carryforward period are reduced.
32
<PAGE> 33
(14) NET INCOME PER SHARE
In December 1997, the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 128, Earnings Per Share, which
established new guidelines for the calculations of earnings per share. Earnings
per share for all prior periods have been restated to reflect the provisions of
this Statement.
The following are reconciliations of the numerators and denominators
of the basic and diluted earnings per share computations for "income before
extraordinary item" and "extraordinary item" for the years ended June 30, 1998
and 1997 and the nine months ended June 30, 1996, respectively (in thousands,
except share data):
<TABLE>
<CAPTION>
Per common share Assuming dilution
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1998
Net income $ 9,604 $ 9,604
Assuming conversion of convertible subordinated notes - 2,625
- ---------------------------------------------------------------------------------------------------------------
Net income, as adjusted $ 9,604 $ 12,229
===============================================================================================================
Outstanding common shares 11,154,271 11,154,271
Outstanding stock options - 269,898
Assuming conversion of convertible subordinated notes - 3,147,109
- ---------------------------------------------------------------------------------------------------------------
Adjusted shares 11,154,271 14,571,278
===============================================================================================================
1997
Net income before extraordinary item 10,558 10,558
Net income 13,832 13,832
- ---------------------------------------------------------------------------------------------------------------
Outstanding common shares 11,118,825 11,118,825
Outstanding stock options - 14,168
Assuming conversion of convertible notes - 27,329
- ---------------------------------------------------------------------------------------------------------------
Adjusted shares 11,118,825 11,160,322
===============================================================================================================
1996
Net income $ 29,829 $ 29,829
Assuming conversion of convertible notes - 59
- ---------------------------------------------------------------------------------------------------------------
Net income, as adjusted $ 29,829 $ 29,888
- ---------------------------------------------------------------------------------------------------------------
Outstanding common shares 9,139,465 9,139,465
Outstanding stock options - 128,553
Assuming conversion of convertible notes - 75,000
- ---------------------------------------------------------------------------------------------------------------
Adjusted shares 9,139,465 9,343,018
===============================================================================================================
</TABLE>
Options and warrants to purchase 561,132, 792,361 and 899,131 shares
of common stock, at prices ranging from $7.50 to $24.00 per share were
outstanding for the nine months ended June 30, 1996 and the years ended June 30,
1997 and 1998, respectively. These were not included in the computation of
diluted earnings per share because the options' and warrants' exercise prices
were greater than the average market price of the common shares during the nine
months ended June 30, 1996 and the years ended June 30, 1997 and 1998.
33
<PAGE> 34
(15) EMPLOYEE BENEFIT PLAN
The Company has a defined contribution retirement plan which covers
all employees and officers. For the nine months ended June 30, 1996 and the
years ended June 30, 1997 and 1998, the Company contributed $0, $95,000 and
$143,000, respectively, to the plan. 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.
(16) COMMITMENTS
INTEGRATION AND OPERATIONS CONTRACTS
On August 13, 1997, the Company initiated a letter agreement with
Boeing Corporation, a major subcontractor, for standard integration and
operation services to the Company for future missions that were not already
provided for under its contract for missions to the Mir Space Station. In August
1998, this letter agreement became a letter contract whereby Boeing Corporation
will provide integration and operations services required to successfully
complete four science missions (one single module mission and three double
module missions) and two logistics double module missions. Additionally, there
are several tasks that are separately priced to yield a committed letter
contract value of $17,321,000, which provides funding through December 31, 1998.
As of June 30, 1998, $4,553,000 has been incurred under this commitment.
MODULE CONSTRUCTION CONTRACT
During fiscal year 1997, the Company entered into a $36,800,000
cost-plus-fee contract with Boeing Corporation, to construct a new research
module with associated double module hardware. The Company expects to take
delivery of the module in the spring of 1999. The Company has incurred
approximately $29,523,000 in construction costs through June 30, 1998.
JOINT VENTURE
During June 1998, the Company entered into a joint venture agreement
with Guigne Technologies Limited for the purpose of developing, fabricating,
marketing and sales of SpaceDRUMS(TM) services. In accordance with the joint
venture agreement, the Company has agreed to contribute an aggregate of
$2,000,000 of working capital to the joint venture at varying dates and amounts
through October 1999. The Company's contributions will be in the form of an
unsecured non-interest bearing note. Through June 30, 1998, the Company has made
no contributions to the joint venture.
LEASES
The Company is obligated under capital leases for equipment and
noncancelable operating leases for equipment, office space, storage space, and
the land for a payload processing facility. Future minimum payments under these
capital leases and noncancelable operating leases are as follows (in thousands):
<TABLE>
<CAPTION>
Capital Operating
Year ending June 30, leases leases
- ------------------------------------------------------------------------
<S> <C> <C>
1999 $ 68 828
2000 68 722
2001 39 639
2002 9 453
2003 and thereafter - 4,068
- ------------------------------------------------------------------------
184 $ 6,710
Less: amount representing =========
interest between 9% and 12% (18)
- ------------------------------------------------
Percent value of net minimum
capital lease payment $ 166
- ------------------------------------------------
</TABLE>
Rent expense for the nine months ended June 30, 1996 and the years
ended June 30, 1997 and 1998, was approximately $183,000, $456,000, and
$503,000, respectively.
(17) SUBSEQUENT EVENT
On July 1, 1998, the Company acquired the outstanding common stock of
Johnson Engineering Corporation ("Johnson Engineering"), a privately held
corporation, for $24,500,000. This acquisition was accounted for using the
purchase method. Johnson Engineering has a contract with NASA to provide a
number of human space flight associated services and products used on the Space
Shuttle and International Space Station Programs. These services include program
management support, engineering services, and the development and fabrication of
training and flight crew equipment.
34
<PAGE> 35
(18) SUMMARY OF SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of selected quarterly financial data for
the previous three fiscal periods (in thousands):
<TABLE>
<CAPTION>
Three months ended
---------------------------------------------------------
September 30 December 31 March 31 June 30
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year ended June 30, 1998
Revenue $ 2,537 17,756 18,997 24,797
Income (loss) from operations (5,685) 5,833 5,214 7,335
Net income (loss) (5,654) 5,727 4,891 4,640
Net income (loss) per share - basic (0.51) 0.51 0.44 0.42
Net income (loss) per share - diluted (0.51) 0.43 0.37 0.35
- ----------------------------------------------------------------------------------------------------------------
Year ended June 30, 1997
Revenue $ 113 22,992 15,031 18,465
Income (loss) from operations (6,171) 12,148 3,914 2,771
Net income (loss) before extraordinary item (7,074) 11,060 3,207 3,365
Net income (loss) (3,800) 11,060 3,207 3,365
Net income (loss) per share - basic (0.34) 1.00 0.29 0.30
Net income (loss) per share - diluted (0.34) 0.99 0.29 0.28
- ----------------------------------------------------------------------------------------------------------------
Period ended June 30, 1996
Revenue $ - - 56,397
Income (loss) from operations (5,003) (6,458) 42,717
Net income (loss) (5,274) (6,022) 41,125
- ----------------------------------------------------------------------------------------------------------------
Net income (loss) per share - basic (0.98) (0.55) 3.72
Net income (loss) per share - diluted (0.98) (0.55) 3.63
================================================================================================================
</TABLE>
35
<PAGE> 36
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 and executive
officers; as well as with respect to Item 405 of Regulation S-K will be
contained in the Company's definitive 1998 Proxy Statement in accordance with
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 1998 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 1998 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 this item will be contained in the
Company's definitive 1998 Proxy Statement with respect to the Company's annual
meeting of stockholders and is hereby incorporated by reference thereto.
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 consolidated financial statements of SPACEHAB,
Incorporated and subsidiary 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............................... 19
Consolidated Balance Sheets .................................................................. 20
Consolidated Statements of Income ............................................................ 21
Consolidated Statements of Stockholders' Equity (Deficit)..................................... 23
Consolidated Statements of Cash Flows......................................................... 23
Notes to Consolidated Financial Statements.................................................... 24
</TABLE>
36
<PAGE> 37
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.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
<S> <C>
2.1 */ Asset Purchase Agreement, dated February 5, 1997, by and among Spacehab Acquisition Corp.; SPACEHAB,
Incorporated; Astrotech Space Operations, L.P.; and Northrop Grumman Corporation.
2.2 */ Amendment No. 1 to Asset Purchase Agreement, dated as of February 12, 1997, by and among Spacehab Acquisition
Corp; SPACEHAB, Incorporated; Astrotech Space Operations, L.P.; and Northrop Grumman Corporation.
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").
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.
</TABLE>
37
<PAGE> 38
<TABLE>
<S> <C>
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 November 30, 1995, between The Equitable Life Assurance Society of The
United States and the Registrant (Vienna, Virginia headquarters lease).
10.16* Agreement of Sublease, dated April 9, 1991, by and between Eastern American Teak Corporation and the Registrant
(land lease for Cape Canaveral, Florida facility).
10.17* Letter Agreement, dated March 24, 1995, between Alenia Spazio and the Registrant.
10.18* Consulting Agreement, dated August 7, 1995, by and between CSP Associates, Inc. and the Registrant.
10.19*** Extension of Consulting Agreement between CSP Associates, Inc. and the Registrant, dated February 21, 1996.
10.20*** Consulting Agreement, dated August 14, 1996, by and between Gordon S. Macklin and the Registrant.
10.21** Employment and Non-Interference Agreement, dated December 27, 1995, between the Company and Chester M. Lee.
10.22** Employment and Non-Interference Agreement, dated December 27, 1995, between the Company and David A. Rossi.
10.23** Employment and Non-Interference Agreement, dated December 27, 1995, between the Company and Nelda J. Wilbanks.
10.24** Employment and Non-Interference Agreement, dated December 27, 1995, between the Company and M. Dale Steffey.
10.25** Employment and Non-Interference Agreement, dated December 27, 1995, between the Company and Margaret E.
Grayson.
10.26** Employment and Non-Interference Agreement, dated December 27, 1995, between the Company and Richard P. Hora.
</TABLE>
38
<PAGE> 39
<TABLE>
<S> <C>
10.27** Indemnification Agreement, dated December 27, 1995, between the Company and Dr. Shelley A. Harrison.
10.28** Indemnification Agreement, dated December 27, 1995, between the Company and Dr. Edward E. David, Jr.
10.29** Indemnification Agreement, dated December 27, 1995, between the Company and Richard P. Hora.
10.30** Indemnification Agreement, dated December 27, 1995, between the Company and Robert A. Citron.
10.31** Indemnification Agreement, dated December 27, 1995, between the Company and Alvin L. Reeser.
10.32** Indemnification Agreement, dated December 27, 1995, between the Company and James R. Thompson.
10.33** Indemnification Agreement, dated December 27, 1995, between the Company and Jeffrey Schuss.
10.34** Indemnification Agreement, dated December 27, 1995, between the Company and Dr. Brad S. Meslin.
10.35** Indemnification Agreement, dated December 27, 1995, between the Company and Chester M. Lee.
10.36** Indemnification Agreement, dated December 27, 1995, between the Company and David A. Rossi.
10.37** Indemnification Agreement, dated December 27, 1995, between the Company and Dr. Shi H. Huang.
10.38** Indemnification Agreement, dated December 27, 1995, between the Company and Nelda J. Wilbanks.
10.39** Indemnification Agreement, dated December 27, 1995, between the Company and M. Dale Steffey.
10.40** Indemnification Agreement, dated December 27, 1995, between the Company and Margaret E. Grayson.
10.41** Indemnification Agreement, dated December 27, 1995, between the Company and Dr. Udo Pollvogt.
10.42** Indemnification Agreement, dated December 27, 1995, between the Company and Ernesto Vallerani.
10.43** Indemnification Agreement, dated December 27, 1995, between the Company and Hironori Aihara.
10.44***** NASDA Contract, dated July 1996, between the Registrant and Mitsubishi Corporation (the "NASDA/ESA Contracts").
</TABLE>
39
<PAGE> 40
<TABLE>
<S> <C>
10.45***** ESA Contract, dated September 1996, between the Registrant and INTOSPACE GmbH (the "NASDA/ESA Contracts").
10.46*// Amendment to the Agreement, dated as of August 27, 1996, between the Registrant and Mitsubishi Corporation.
10.47*// Letter Contract Number SHB 1014, dated August 13, 1997, between the Registrant and McDonnell Douglas
Aerospace - Huntsville.
10.48*// Letter Agreement, dated July 23, 1997, between the Registrant and Daimler-Benz.
10.49*// Cost Plus Fee Contract (Number SHB 1013), dated July 31, 1997, between the Registrant and McDonnell Douglas
Corporation, McDonnell Douglas Aerospace Huntsville Division (the "Research Double Module Contract").
10.50*// Amendment dated March 8, 1996, to Office Building Lease Agreement, dated November 30, 1995, between The
Equitable Life Assurance Society of the United States and the Registrant (Vienna, Virginia headquarters lease).
10.51*// Agreement of Sublease, dated February 26, 1996, by and between Barrios Technology, Inc. and the Registrant
(Expansion of Houston Facility).
10.52*// Office Building Lease Agreement, dated October 6, 1993, between Astrotech and the Secretary of the Air Force
(Lease number SPCVAN -2-94-0001).
10.53*// Office Building Lease Agreement, dated May 30, 1983, between Astrotech and Randolph Park Associates II Limited
Partnership (Silver Spring, Maryland headquarters lease).
10.54*// Loan and Security Agreement, dated June 16, 1997, between the Registrant, Astrotech and Signet Bank. (the
"Revolving Credit Agreement").
10.55*// Loan and Security Agreement, dated July 14, 1997, between Astrotech and the CIT Group/Equipment Financing, Inc.
(the "Term Loan Agreement").
10.56*// Employment and Non-Interference Agreement, dated April 1, 1997, between the Company and Dr. Shelly A. Harrison.
10.57*// Employment and Non-Interference Agreement, dated April 10, 1997, between the Company and John M. Lounge.
10.58*// Indemnification Agreement, dated October 22, 1996, between the Company and John M. Lounge.
10.59*// Consulting Agreement, dated August 15, 1997, between Gordon S. Macklin and the Registrant.
10.60*// Extension of Consulting Agreement, dated August 18, 1997, between CSP Associates, Inc. and the Registrant.
10.61*// Consulting Agreement, dated October 24, 1996, between Harbor Securities and the Registrant.
10.62*// Teaming Agreement, dated May 29, 1997, between United Space Alliance, LLC (USA) and the Registrant.
</TABLE>
40
<PAGE> 41
<TABLE>
<S> <C>
10.63*// Letter Agreement, dated July 30, 1997, between RSC Energia (Energia) and the Registrant.
10.64*// Letter of Cancellation, dated June 10, 1997, of the Memorandum of Agreement, dated July 28, 1995, between
McDonnell Douglas and the Registrant (with attachment thereto).
10.65*// Royalty Agreement, dated May 1, 1997, between the University of Maryland Biotechnical Institute (UMBI) and the
Registrant.
10.66*// Agreement, dated July 15, 1997, between UAB Research Foundation on behalf of the University of Alabama at
Birmingham, Center for Macromolecular Crystallography and the Registrant (including amendments thereto).
10.67*// Letter Agreement, dated April 26, 1996, between Pennsylvania State University, Center for Cell Research and the
Registrant.
10.68*// SA42, dated July 16, 1997, between NASA and the Registrant (Amendment to the Mir Contract).
10.69*/// ESA Contract, Dated October 10, 1997, between the Registrant and INTOSPACE GmbH (the "ESA Contract")
10.70*//// NAS 9-97199, dated December 21, 1997, between the Registrant and NASA (the "REALMS Contract").
10.71*//// Letter Contract Number SHB 1014, dated August 13, 1997, between the Registrant and McDonnell Douglas
Aerospace-Huntsville (as amended).
10.72*//// Employment Agreement and Non-Interference Agreement dated January 15, 1998, between the Company and Chester
M. Lee.
10.72*//// Employment Agreement and Non-Interference Agreement dated January 15, 1998, between the Company and David A.
Rossi.
10.73*//// Amendment number 1 to Employment Agreement and Non-Interference Agreement dated April 1, 1997, between the
Company and Shelley A. Harrison.
10.74*//// Amendment number 1 to Loan and Security Agreement dated December 31, 1997, between the Company and First Union
National Bank.
10.75 STS-95 Agreement A, dated December 20, 1997, between the Registrant and Mitsubishi Corporation
10.76 STS-95 Agreement B, dated March 18, 1998, between the Registrant and Mitsubishi Corporation
10.77 NHK Contract, dated May 8, 1998, between the Registrant and Mitsubishi Corporation
10.78 SHB98001, dated January 31, 1998, between the Registrant and RSC Energia
10.79 SHB98002, dated February 11, 1998, between the Registrant and Daimler-Benz Aerospace, Space Infrastructure
Division
</TABLE>
41
<PAGE> 42
<TABLE>
<S> <C>
10.80 CSA Contract, dated May 21, 1998, between the Registrant and the Canadian Space Agency
10.81 Gemini Office Building Lease Agreement, dated January 14, 1998, between the Registrant and Puget of Texas
10.82 SHB98006, dated July 8, 1998, between the Registrant and Daimler-Benz Aerospace AG, Raumfahrt-Infrastuktur
10.83 Modification No. 22 to SHB1014, dated July 22, 1998, between the Registrant and McDonnell Douglas Corporation,
a Wholly-Owned Subsidiary of The Boeing Company
10.84 Capital Office Park Lease as amended, dated April 23, 1998, between Astrotech and Eleventh Springhill Lake
Associates L.L.P.
11. Statement regarding Computation of Per Share Earnings.
21.*// Subsidiary 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 ended December 31, 1995,
filed February 14, 1996.
*** Incorporated by reference to the Registrant's Report on Form 10-K for the fiscal year ended June 30, 1996,
filed with the Securities and Exchange Commission on September 17, 1996.
**** Incorporated by reference to the Registrant's Annual Report on Form 10-K/A for the year ended June 30, 1996,
filed with the Securities and Exchange Commission on December 20, 1996.
***** Incorporated by reference to the Registrant's Report on Form 10-Q/A for the quarter ended September 30, 1996,
filed with the Securities and Exchange Commission on December 20, 1996.
*/ Incorporated by reference to the Registrant's Report on Form 8-K filed with the Securities and Exchange
Commission on February 27, 1997.
*// Incorporated by reference to the Registrant's Report on Form 10-K for the fiscal year ended June 30, 1997,
filed with the Securities and Exchange Commission on September 12, 1997.
*/// Incorporated by reference to the Registrant's Report on Form 10-Q for the quarter ended September 30, 1997,
filed November 6, 1997.
</TABLE>
42
<PAGE> 43
<TABLE>
<S> <C>
*//// Incorporated by reference to the Registrant's Report on Form 10-Q for the quarter ended December 31, 1997,
filed February 5, 1998.
(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 October 29, 1997 disclosing the Registrant's completion of an offering of $55
million of its 8% Convertible Subordinated Notes due 2007 and the closing on an over-allotment option for an
additional $8.250 million of its 8% Convertible Subordinated Notes due 2007.
2. Report on Form 8-K filed on January 21, 1998 disclosing the Registrant's retirement of Chester M. Lee as
president and appointment of David A. Rossi, current senior Vice President of Business Development, to
president, effective on January 14, 1998.
3. Report on Form 8-K was dated on July 1, 1998 and filed on July 13, 1998 announcing the Registrant's
acquisition of all of the outstanding shares of capital stock of Johnson Engineering Corporation.
</TABLE>
43
<PAGE> 44
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, 1998
By: /s/ Margaret E. Grayson
-----------------------------------
Margaret E. Grayson Vice
President of Finance, Treasurer
and Assistant Secretary (Principal
Accounting Officer and CFO)
Date: September 16, 1998
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>
Director September 16, 1998
- -------------------------------
Hironori Aihara
Director September 16, 1998
- -------------------------------
Robert A. Citron
/s/ Dr. Edward A. David, Jr. Director September 16, 1998
- -------------------------------
Dr. Edward A. David, Jr.
Director September 16, 1998
- -------------------------------
Dr. Shi H. Huang
/s/ Chester M. Lee Director September 16, 1998
- -------------------------------
Chester M. Lee
/s/ Dr. Brad M. Meslin Director September 16, 1998
- -------------------------------
Dr. Brad M. Meslin
/s/ Gordon S. Macklin Director September 16, 1998
- -------------------------------
Gordon S. Macklin
/s/ Dr. Udo Pollvogt Director September 16, 1998
- -------------------------------
Dr. Udo Pollvogt
/s/ Alvin L. Reeser Director September 16, 1998
- -------------------------------
Alvin L. Reeser
</TABLE>
44
<PAGE> 45
<TABLE>
<S> <C> <C>
/s/ James R. Thompson Director September 16, 1998
- -------------------------------
James R. Thompson
Director September 16, 1998
- -------------------------------
Guiseppe Viriglio
</TABLE>
45
<PAGE> 1
EXHIBIT 10.75
STS-95 USER CONTRACT
(A)
This STS-95 User Contract (A) ("Contract") is made this 20th day of
December, 1997, between SPACEHAB, Incorporated ("SHI"), a Washington state
corporation with its principal office located in Vienna, Virginia and Mitsubishi
Corporation, with its principal office located in Tokyo, Japan ("MC"), as
contractor to the National Space Development Agency of Japan ("NASDA",
collectively "BUYER").
WHEREAS MC desires to procure SPACEHAB pressurized module services
("SPACEHAB" or "Module") and retain SHI to act as the carrier and interface
between the U.S. National Aeronautics and Space Administration's ("NASA") Space
Shuttle fleet and the experiments listed in Exhibit A aboard a SPACEHAB Module
Mission currently manifested as STS-95.
WHEREAS SHI desires to supply to MC such services and to act as the
carrier and interface between the NASA Space Shuttle fleet and the experiments
listed in Exhibit A aboard a SPACEHAB Module Mission currently manifested as
STS-95 ("Mission"); and
WHEREAS SHI must immediately begin to perform certain tasks associated
with the analytical and physical integration of the Exhibit A experiments into
the SPACEHAB Module in order to complete these tasks prior to the anticipated
launch date;
WHEREAS, the parties desire to perform their respective obligations
necessary to fully achieve these desires pursuant to three sequential contracts
(A, B and C); and
WHEREAS MC, NASDA, and SPACEHAB have mutually agreed to the Experiment
Chargeable Mass policy presented in the Exhibit B table.
NOW THEREFORE, in consideration of the mutual covenants hereinafter set
forth, the parties agree as follows:
1. STATEMENT OF WORK
SHI will provide, at the times and locations set forth therein and
pursuant to the terms and conditions of this Contract, the supplies and
services described in the Statement of Work ("SOW") in Exhibit C (a)
for the payloads listed in Exhibit A (both exhibits incorporated herein
by reference) as follows: VFEU (chargeable mass 215 kg), BRIC
(chargeable mass 40 kg), OCC (chargeable mass 15 kg),
Oceaneering/SPACEHAB Refrigerator/Freezer (OSRF) (chargeable mass 45
kg), and Camcorder/Microcam/StillCam (chargeable mass 10 kg). The OCC
experiment support hardware includes the 3-Dimensional Microgravity
Accelerometer (3-DMA) and the Japanese United States Thermal Sciences
Acceleration Project (JUSTSAP) supplied by the University of Alabama -
Huntsville, Consortium for Materials Development in Space. There is no
charge to MC/NASDA for use of this hardware under this contract.
2. PRICE AND TERMS OF PAYMENT
<PAGE> 2
MC shall pay SHI a fixed price of 1997 US$880,000 at the time set forth
below. Included in this price is the lease of the OSRF and the
associated integration and operations services performed by Oceaneering
Space Systems of Houston, Texas.
<TABLE>
<S> <C> <C>
- 97US$ 880,000.00 upon execution of this Contract.
Total $880,000.00
</TABLE>
The actual Chargeable Mass (reference Exhibit B) for each experiment in
Exhibit A and its supporting flight hardware shall be determined by SHI
using a calibrated scale at the time of installation of each experiment
into the module. Any upward adjustment in the total measured Chargeable
Mass flown on the mission from the Chargeable Mass referred to in
Section 1 above shall result in an upward price adjustment for that
experiment at the rate of $28,000/kg.
3. PAYMENT TERMS AND CONDITIONS
SHI shall send a Final Accounting/Billing to MC as promptly as possible
after completion of the last service provided by SHI under this
Contract. The Final Accounting/Billing will contain a final accounting
under the Contract and address additional payment requirements, if any,
from MC. If, as a result of final Accounting/Billing, an additional MC
payment is required, such payment shall be due 60 days after the
billing date of the Final Accounting/Billing.
4. MISSION DELAYS
In the event STS-95 is delayed, suspended, or postponed, there may be
additional charges to MC as specified in the following circumstances:
a. Delay caused by NASA
MC pays only additional service costs, if any, required/provided
by NASA and/or SHI.
b. Delay caused by SHI
MC pays only additional service costs, if any, required/provided
by NASA.
c. Delay caused by MC or NASDA
MC pays any additional NASA costs charged to SHI which may be
required or caused by any delay, suspension or postponement of
the launch in excess of the 72 hours allowable delay for which
NASA does not charge. MC pays for any additional costs incurred
by SHI for services provided by NASA and/or SHI.
5. OPTIONAL SERVICES
There are currently no optional services priced under this Contract.
Prices for any optional services will be negotiated on an individual
basis and will be in addition to the price as set forth in Section 2
above.
6. APPLICABILITY OF NASA/SHI SPACE SHUTTLE CONTRACTS
<PAGE> 3
SHI and MC acknowledge that performance of the services described in
this Contract and the SOW depends upon the Contract(s) governing NASA's
manifesting and use of the Module for STS-95 ("NASA Contracts"). Any
changes to these NASA/SHI Contract(s) that are imposed by NASA and
which prevent SHI from providing the services described herein shall
not constitute a breach of this Contract by either SHI or MC. In the
event of such changes by NASA, SHI and MC agree to negotiate an
equitable adjustment to this Contract that satisfies both parties as
well as NASA's new requirements. If there are any conflicts between
this Contract and the requirements of the NASA Contracts applicable to
this Contract, the NASA Contracts terms and conditions shall take
precedence.
7. EXCHANGE OF DOCUMENTATION AND INFORMATION
SHI and BUYER shall exchange all documents and information required for
each party to fulfill its responsibilities under this Contract in
accordance with the November 1997 SPACEHAB/NASDA/MC STS-95
Confidentiality & Nondisclosure Contract.
8. PERMITS AND LICENSES
SHI shall obtain any permit or license that may be required to provide
the services to be furnished under this Contract. MC will be
responsible for obtaining any permit or license that may be required to
perform an activity unique to the Exhibit A experiments that is not
included in the foregoing, such as tests involving use of radioactive
materials or particular requirements of MC's own government(s), or
governmental authorities outside the United States.
9. ALLOCATION OF CERTAIN RISKS AND LIMITATION OF LIABILITY
a. Insurance Coverage In Lieu of NASA FAR Supplement Cross-Waiver
SHI agrees to purchase indemnification insurance covering
participants who otherwise would have been covered by the cross
waiver provisions set forth in the NASA FAR Supplement in the
event MC or NASDA were materially damaged by one or more of such
participants during the payload processing activities or STS
Operations.
b. Risk of Patent Infringement
(i) SHI agrees to indemnify MC, its officers, employees and
agents against any United States Patent infringement
costs (including, but not limited to, any judgment
against MC by a court of competent jurisdiction,
reasonable administrative and litigation costs, and
settlement payments made as a result of an
administrative claim) incurred by MC which are
attributable to products, processes or articles of
manufacture used in the facilities and Services to be
furnished to MC by SHI hereunder.
(ii) MC agrees to indemnify SHI and NASA, their officers,
employees and agents against any United States Patent
infringement costs (including, but not limited to,
judgment against SHI by a court of competent
jurisdiction, reasonable administrative and litigation
costs, and settlement payments made as a result of an
administration claim) incurred by SHI and/or NASA which
are attributable to products, processes or articles of
manufacture used in Exhibit A experiments and any
supporting equipment and facilities brought to the SHI
SPPF by MC or MC's contractors or subcontractors and
any activity performed at SHI or NASA facilities
<PAGE> 4
by MC or MC's contractors or subcontractors and any
activity performed at SHI or NASA facilities by MC or
MC's contractors or subcontractors.
c. Limitation of SHI and MC Liability
Notwithstanding any other provisions herein, to the extent that
a risk of damage is not dealt with expressly in this Contract,
SHI's and MC's liability under this Contract, whether or not
arising as a result of an alleged breach of this Contract, shall
be limited to direct damages only and shall not include any loss
of revenue, profits or other indirect or consequential damages.
10. ASSISTANCE WITH THIRD PARTY CLAIMS
In the event a third party claim is asserted against SHI or MC as a
result of patent infringement, use of proprietary data, or damage,
including claims of their respective contractors or subcontractors,
arising from or in connection with the Services provided by SHI under
this Contract, SHI and MC each agree to give prompt notice to the other
of any such claim and agree to provide each other with any assistance
practicable in the defense against such claim. If a claim asserted
against one party is a claim under this Contract, the party who has
agreed to indemnify shall have the right to intervene and defend, the
right to control litigation of, and the right to determine the
appropriateness of any settlement related to such claim.
11. WARRANTIES
SHI makes no warranties of any kind, express or implied, including any
implied warranty of merchantability or fitness for a particular
purpose.
12. PUBLICITY RELATING TO CONTRACT
In cases where one Party intends to use results obtained from this
Contract or advertise his role in this Contract, it shall first request
the other Party for its prior written approval, which shall not be
unreasonably withheld.
13. APPLICABLE LAW
The Contract shall be governed by the laws of the State of Virginia.
14. ARBITRATION/DISPUTES
Disputes arising out of the interpretation or execution of this
Contract which cannot be resolved by negotiation shall, at the request
of either Party, (after giving 30 days notice to the other Party) be
submitted to arbitration. The arbitration tribunal shall sit in
Washington DC. Disputes shall be finally settled in accordance with the
Rules of Conciliation and Arbitration of the International Chamber of
Commerce by one or more arbitrators designated in conformity with those
Rules. The decision to submit a dispute shall not excuse either party
from the timely performance of its obligations hereunder which are not
the subject matter of the dispute. Further, if the lack of resolution
of the matter in dispute will adversely impact the timely completion of
preparation for launch activities, MC and SHI will perform the matter
in dispute in the manner determined by SHI, within the framework of
this Contract and without prejudice to the final resolution of the
matter in dispute.
<PAGE> 5
15. TERMINATION OF SERVICES
Both parties have the right to terminate this Contract pursuant to the
following conditions only:
a. SHI may terminate this Contract:
(i) In the event NASDA delivers any payload described in the
SOW so late beyond the mutually agreed upon delivery date
that SHI, in its sole reasonable judgment, is unable to
process such payload in time to meet the launch schedule,
SHI will terminate this Contract and shall retain all
payments made by MC to the date of termination, and MC is
further liable for all costs incurred by SHI as a result
of such NASDA failure, or
(ii) In the event of a material breach by MC which MC fails to
cure within a reasonable time after written notice
received from SHI (or immediately upon a non-curable
breach), in which case SHI shall retain all payments made
to the date of the termination, and MC is further liable
for all costs incurred by SHI resulting from MC's breach
of the Contract or,
(iii) As a result of any actions or inactions by NASA which
prevent the manifesting of the Exhibit A experiments on
STS-95, in which case SHI shall be entitled to all
payments hereunder received to the date of termination,
plus the Integration and Optional Services (if any) actual
costs incurred up to the time of termination, as well as
all termination charges which may be imposed by third
parties (such as NASA or SHI subcontractors).
b. MC may terminate this Contract:
(i) Without cause at any time before installation of the
Exhibit A experiments into the SHI module upon sufficient
written notification to SHI of such intent, in which case
MC shall be liable for and SHI shall retain all payments
hereunder received up to the date of termination, plus the
Integration and Optional Services (if any) actual costs
incurred up to the time of termination, as well as all
termination charges which may be imposed by third parties
(such as NASA or SHI subcontractors), or,
(ii) In the event of material breach by SHI which SHI fails
to cure in a reasonable time after written notice of
such material breach is received from MC, in which case
MC will be relieved from making any further payments to
SHI subsequent to the material breach hereof.
c. Termination In Special Cases:
MC may terminate this Contract by giving written notice with
immediate effect in any of the following events:
(i) If SHI becomes insolvent or if its financial position is
such that within the framework of its national law, legal
action leading towards bankruptcy may be taken against it
by its creditors;
(ii) If SHI resorts to fraudulent practices in connection with
the contract, especially by deceit concerning the nature,
quality or quantity of the supplies, and the methods or
<PAGE> 6
processes of manufacture employed or by the giving or
offering of gifts or remuneration for the purpose of
bribery to any person in the employ of NASDA or acting on
its behalf, irrespective of whether such bribes or
remuneration are made on the initiative of SHI or
otherwise.
16. ASSIGNMENTS
No party shall assign to another person or entity any part of its
rights under this Agreement, including but not limited to rights for
services related to scheduled launches, unless otherwise expressly
agreed to by the other party in writing, or as may be required pursuant
to law.
17. NOTICES
All notices, requests, demands, and other communication hereunder shall
be in writing and shall be either (1) personally delivered, (2) sent by
mail or reputable overnight delivery service, or (3) transmitted by
facsimile machine as follows:
To SHI: Ms. Nelda Wilbanks
Contracts Administrator
SPACEHAB, Inc.
1595 Spring Hill Road, Suite 360
Vienna, VA 22182 USA
To MC: Mr. Kazushi Ochi
Manager, Space Systems Unit
Mitsubishi Corporation
2-6-3 Marunouchi, Chiyoda-ku
Tokyo, Japan 100-86
The effective date of each notice, demand, request or other
communication shall be deemed to be: (1) the date of receipt if
delivered personally or by mail or overnight delivery service, or (2)
the date of transmission if by facsimile. Either party may change its
address or designee for purposes hereof by informing the other party in
writing of such action and the effective date of such change.
18. FORCE MAJEURE
Neither party shall be liable for delays or breaches hereof resulting
from events or acts beyond the control of such party, including but not
limited to acts of God, strikes, lockouts, riots, acts of war,
epidemics, governmental regulations, and natural disasters. Upon the
occurrence of such event, the party whose performance is affected shall
use reasonable efforts to notify the other party of the nature and
extent of any such condition and negotiate its affects.
19. COMPLETE CONTRACT
This Contract constitutes the complete Contract and understanding with
respect to the subject matter hereof between the parties.
Mitsubishi Corporation SPACEHAB, Inc.
By:________________________ By:________________________
K. Ochi, Manager Nelda Wilbanks
Space Systems Unit Contracts Administrator
Aerospace Division
<PAGE> 7
EXHIBIT A
EXPERIMENT LIST
1. NASDA'S VESTIBULAR FUNCTION EXPERIMENT UNIT (VFEU) - CHARGEABLE MASS 215 KG
2. NASDA'S BIOLOGICAL RESEARCH IN A CANISTER (BRIC) - CHARGEABLE MASS 40 KG
3. NASDA'S ORGANIC CRYSTAL CHAMBER (OCC)* - CHARGEABLE MASS 15 KG
4. OCEANEERING/SPACEHAB REFRIGERATOR/FREEZER - CHARGEABLE MASS 45 KG
5. CAMCORDER/MICROCAM/STILLCAM - CHARGEABLE MASS 10 KG
* THE OCC EXPERIMENT SUPPORT HARDWARE INCLUDES THE 3-DIMENSIONAL MICROGRAVITY
ACCELEROMETER (3-DMA) AND THE JAPANESE UNITED STATES THERMAL SCIENCES
ACCELERATION PROJECT (JUSTSAP). HOWEVER, THERE IS NO "CHARGEABLE MASS" ALLOCATED
TO MC/NASDA FOR THE USE OF THIS HARDWARE, SUPPLIED BY THE UNIVERSITY OF ALABAMA
- - HUNTSVILLE, CONSORTIUM FOR MATERIALS DEVELOPMENT IN SPACE.
<PAGE> 1
EXHIBIT 10.76
STS-95 USER CONTRACT
(B)
This STS-95 User Contract (B) ("Contract") is made this 18th day of
March, 1998, between SPACEHAB, Incorporated ("SHI"), a Washington state
corporation with its principal office located in Vienna, Virginia and Mitsubishi
Corporation, with its principal office located in Tokyo, Japan ("MC"), as
contractor to the National Space Development Agency of Japan ("NASDA",
collectively "BUYER").
WHEREAS MC desires to procure SPACEHAB pressurized module services
("SPACEHAB" or "Module") and retain SHI to act as the carrier and interface
between the U.S. National Aeronautics and Space Administration's ("NASA") Space
Shuttle fleet and the experiments listed in Exhibit A aboard a SPACEHAB Module
Mission currently manifested as STS-95.
WHEREAS SHI desires to supply to MC such services and to act as the
carrier and interface between the NASA Space Shuttle fleet and the experiments
listed in Exhibit A aboard a SPACEHAB Module Mission currently manifested as
STS-95 ("Mission"); and
WHEREAS SHI must immediately begin to perform certain tasks associated
with the analytical and physical integration of the Exhibit A experiments into
the SPACEHAB Module in order to complete these tasks prior to the anticipated
launch date;
WHEREAS, the parties desire to perform their respective obligations
necessary to fully achieve these desires pursuant to two sequential contracts (A
and B); and
WHEREAS MC, NASDA, and SPACEHAB have mutually agreed to the Experiment
Chargeable Mass policy presented in the Exhibit B table.
NOW THEREFORE, in consideration of the mutual covenants hereinafter set
forth, the parties agree as follows:
1. STATEMENT OF WORK
SHI will provide, at the times and locations set forth therein and
pursuant to the terms and conditions of this Contract, the supplies and
services described in the Statement of Work ("SOW") in Exhibit C (b)
for the payloads listed in Exhibit A (both exhibits incorporated herein
by reference) as follows: VFEU, BRIC, OCC, Oceaneering/SPACEHAB
Refrigerator/Freezer (OSRF), and Camcorder/Microcam/StillCam. The OCC
experiment support hardware will be co-located with the 3-Dimensional
Microgravity Accelerometer (3-DMA) and the Japanese United States
Thermal Sciences Acceleration Project (JUSTSAP) supplied by the
University of Alabama - Huntsville, Consortium for Materials
Development in Space. There is no charge to MC/NASDA for co-location of
this hardware under this contract.
2. PRICE AND TERMS OF PAYMENT
MC shall pay SHI a fixed price of 1997 US$7,620,000 at the time set
forth below. Included in this price is the lease of the OSRF and the
associated integration and operations services performed by Oceaneering
Space Systems of Houston, Texas.
1
<PAGE> 2
<TABLE>
<S> <C> <C>
- 97US$ 7,620,000.00 March 31, 1998
Total $7,620,000.00
</TABLE>
The total actual Chargeable Mass (reference Exhibit B) for all
experiments in Exhibit A and any supporting flight hardware shall be
fixed at 303.572 kg.
3. PAYMENT TERMS AND CONDITIONS
Payment shall be made in accordance with Paragraph 2 above. In the
event MC requests and receives services not specified as Standard
Services in the Statement of Work, Exhibit C(b), SHI shall send a Final
Billing to MC as promptly as possible after completion of the last
service provided by SHI under this Contract. The Final Billing will
address additional payment requirements, if any, from MC. If an
additional MC payment is required, such payment shall be due 60 days
after the billing date of the Final Billing.
4. MISSION DELAYS
In the event STS-95 is delayed, suspended, or postponed, there may be
additional charges to MC as specified in the following circumstances:
a. Delay caused by NASA
MC pays only additional service costs, if any, required/provided
by NASA and/or SHI.
b. Delay caused by SHI
MC pays only additional service costs, if any, required/provided
by NASA.
c. Delay caused by MC or NASDA
MC pays any additional NASA costs charged to SHI which may be
required or caused by any delay, suspension or postponement of
the launch in excess of the 72 hours allowable delay for which
NASA does not charge. MC pays for any additional costs incurred
by SHI for services provided by NASA and/or SHI.
5. OPTIONAL SERVICES
There are currently no optional services priced under this Contract.
Prices for any optional services will be negotiated on an individual
basis and will be in addition to the price as set forth in Section 2
above.
6. APPLICABILITY OF NASA/SHI SPACE SHUTTLE CONTRACTS
SHI and MC acknowledge that performance of the services described in
this Contract and the SOW depends upon the Contract(s) governing NASA's
manifesting and use of the Module for STS-95 ("NASA Contracts"). Any
changes to these NASA/SHI Contract(s) that are imposed by NASA and
which prevent SHI from providing the services described herein shall
not constitute a breach of this Contract by either SHI or MC. In the
event of such changes by NASA, SHI and MC agree to negotiate an
equitable adjustment to this Contract that satisfies both parties as
well as NASA's new requirements. If there are any conflicts between
this Contract and the
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requirements of the NASA Contracts applicable to this Contract, the
NASA Contracts terms and conditions shall take precedence.
7. EXCHANGE OF DOCUMENTATION AND INFORMATION
SHI and BUYER shall exchange all documents and information required for
each party to fulfill its responsibilities under this Contract in
accordance with the November 1997 SPACEHAB/NASDA/MC STS-95
Confidentiality & Nondisclosure Contract.
8. PERMITS AND LICENSES
SHI shall obtain any permit or license that may be required to provide
the services to be furnished under this Contract. MC will be
responsible for obtaining any permit or license that may be required to
perform an activity unique to the Exhibit A experiments that is not
included in the foregoing, such as tests involving use of radioactive
materials or particular requirements of MC's own government(s), or
governmental authorities outside the United States.
9. ALLOCATION OF CERTAIN RISKS AND LIMITATION OF LIABILITY
a. Insurance Coverage In Lieu of NASA FAR Supplement Cross-Waiver
SHI agrees to purchase indemnification insurance covering
participants who otherwise would have been covered by the cross
waiver provisions set forth in the NASA FAR Supplement in the
event MC or NASDA were materially damaged by one or more of such
participants during the payload processing activities or STS
Operations.
b. Risk of Patent Infringement
(i) SHI agrees to indemnify MC, its officers, employees and
agents against any United States Patent infringement
costs (including, but not limited to, any judgment
against MC by a court of competent jurisdiction,
reasonable administrative and litigation costs, and
settlement payments made as a result of an
administrative claim) incurred by MC which are
attributable to products, processes or articles of
manufacture used in the facilities and Services to be
furnished to MC by SHI hereunder.
(ii) MC agrees to indemnify SHI and NASA, their officers,
employees and agents against any United States Patent
infringement costs (including, but not limited to,
judgment against SHI by a court of competent
jurisdiction, reasonable administrative and litigation
costs, and settlement payments made as a result of an
administration claim) incurred by SHI and/or NASA which
are attributable to products, processes or articles of
manufacture used in Exhibit A experiments and any
supporting equipment and facilities brought to the SHI
SPPF by MC or MC's contractors or subcontractors and
any activity performed at SHI or NASA facilities by MC
or MC's contractors or subcontractors and any activity
performed at SHI or NASA facilities by MC or MC's
contractors or subcontractors.
c. Limitation of SHI and MC Liability
Notwithstanding any other provisions herein, to the extent that
a risk of damage is not dealt with expressly in this Contract,
SHI's and MC's liability under this Contract, whether or
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not arising as a result of an alleged breach of this Contract,
shall be limited to direct damages only and shall not include
any loss of revenue, profits or other indirect or consequential
damages.
10. ASSISTANCE WITH THIRD PARTY CLAIMS
In the event a third party claim is asserted against SHI or MC as a
result of patent infringement, use of proprietary data, or damage,
including claims of their respective contractors or subcontractors,
arising from or in connection with the Services provided by SHI under
this Contract, SHI and MC each agree to give prompt notice to the other
of any such claim and agree to provide each other with any assistance
practicable in the defense against such claim. If a claim asserted
against one party is a claim under this Contract, the party who has
agreed to indemnify shall have the right to intervene and defend, the
right to control litigation of, and the right to determine the
appropriateness of any settlement related to such claim.
11. WARRANTIES
SHI makes no warranties of any kind, express or implied, including any
implied warranty of merchantability or fitness for a particular
purpose.
12. PUBLICITY RELATING TO CONTRACT
In cases where one Party intends to use results obtained from this
Contract or advertise his role in this Contract, it shall first request
the other Party for its prior written approval, which shall not be
unreasonably withheld.
13. APPLICABLE LAW
The Contract shall be governed by the laws of the State of Virginia.
14. ARBITRATION/DISPUTES
Disputes arising out of the interpretation or execution of this
Contract which cannot be resolved by negotiation shall, at the request
of either Party, (after giving 30 days notice to the other Party) be
submitted to arbitration. The arbitration tribunal shall sit in
Washington, DC. Disputes shall be finally settled in accordance with
the Rules of Conciliation and Arbitration of the International Chamber
of Commerce by one or more arbitrators designated in conformity with
those Rules. The decision to submit a dispute shall not excuse either
party from the timely performance of its obligations hereunder which
are not the subject matter of the dispute. Further, if the lack of
resolution of the matter in dispute will adversely impact the timely
completion of preparation for launch activities, MC and SHI will
perform the matter in dispute in the manner determined by SHI, within
the framework of this Contract and without prejudice to the final
resolution of the matter in dispute.
15. TERMINATION OF SERVICES
Both parties have the right to terminate this Contract pursuant to the
following conditions only:
a. SHI may terminate this Contract:
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(i) In the event NASDA delivers any payload described in the
SOW so late beyond the mutually agreed upon delivery date
that SHI, in its sole reasonable judgment, is unable to
process such payload in time to meet the launch schedule,
SHI will terminate this Contract and shall retain all
payments made by MC to the date of termination, and MC is
further liable for all costs incurred by SHI as a result
of such NASDA failure, or
(ii) In the event of a material breach by MC which MC fails to
cure within a reasonable time after written notice
received from SHI (or immediately upon a non-curable
breach), in which case SHI shall retain all payments made
to the date of the termination, and MC is further liable
for all costs incurred by SHI resulting from MC's breach
of the Contract or,
(iii) As a result of any actions or inactions by NASA which
prevent the manifesting of the Exhibit A experiments on
STS-95, in which case SHI shall be entitled to all
payments hereunder received to the date of termination,
plus the Integration and Optional Services (if any) actual
costs incurred up to the time of termination, as well as
all termination charges which may be imposed by third
parties (such as NASA or SHI subcontractors).
b. MC may terminate this Contract:
(ii) Without cause at any time before installation of the
Exhibit A experiments into the SHI module upon sufficient
written notification to SHI of such intent, in which case
MC shall be liable for and SHI shall retain all payments
hereunder received up to the date of termination, plus the
Integration and Optional Services (if any) actual costs
incurred up to the time of termination, as well as all
termination charges which may be imposed by third parties
(such as NASA or SHI subcontractors), or,
(ii) In the event of material breach by SHI which SHI fails to
cure in a reasonable time after written notice of such
material breach is received from MC, in which case MC will
be relieved from making any further payments to SHI
subsequent to the material breach hereof.
c. Termination In Special Cases:
MC may terminate this Contract by giving written notice with
immediate effect in any of the following events:
(i) If SHI becomes insolvent or if its financial position is
such that within the framework of its national law, legal
action leading towards bankruptcy may be taken against it
by its creditors;
(ii) If SHI resorts to fraudulent practices in connection with
the contract, especially by deceit concerning the nature,
quality or quantity of the supplies, and the methods or
processes of manufacture employed or by the giving or
offering of gifts or remuneration for the purpose of
bribery to any person in the employ of NASDA or acting on
its behalf, irrespective of whether such bribes or
remuneration are made on the initiative of SHI or
otherwise.
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16. ASSIGNMENTS
No party shall assign to another person or entity any part of its
rights under this Agreement, including but not limited to rights for
services related to scheduled launches, unless otherwise expressly
agreed to by the other party in writing, or as may be required pursuant
to law.
17. NOTICES
All notices, requests, demands, and other communication hereunder shall
be in writing and shall be either (1) personally delivered, (2) sent by
mail or reputable overnight delivery service, or (3) transmitted by
facsimile machine as follows:
To SHI: Ms. Nelda Wilbanks
Contracts Administrator
SPACEHAB, Inc.
1595 Spring Hill Road, Suite 360
Vienna, VA 22182 USA
To MC: Mr. Kazushi Ochi
Manager, Space Systems Unit
Mitsubishi Corporation
2-6-3 Marunouchi, Chiyoda-ku
Tokyo, Japan 100-86
The effective date of each notice, demand, request or other
communication shall be deemed to be: (1) the date of receipt if
delivered personally or by mail or overnight delivery service, or (2)
the date of transmission if by facsimile. Either party may change its
address or designee for purposes hereof by informing the other party in
writing of such action and the effective date of such change.
18. FORCE MAJEURE
Neither party shall be liable for delays or breaches hereof resulting
from events or acts beyond the control of such party, including but not
limited to acts of God, strikes, lockouts, riots, acts of war,
epidemics, governmental regulations, and natural disasters. Upon the
occurrence of such event, the party whose performance is affected shall
use reasonable efforts to notify the other party of the nature and
extent of any such condition and negotiate its affects.
19. COMPLETE CONTRACT
This Contract constitutes the complete Contract and understanding with
respect to the subject matter hereof between the parties.
Mitsubishi Corporation SPACEHAB, Inc.
By: ________________________________ By: __________________________
Name: ______________________________ Name: Nelda Wilbanks
-----------------------
Title: _____________________________ Title: Contracts Administrator
-----------------------
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EXHIBIT A
EXPERIMENT LIST
1. NASDA'S VESTIBULAR FUNCTION EXPERIMENT UNIT (VFEU)
2. NASDA'S BIOLOGICAL RESEARCH IN A CANISTER (BRIC)
3. NASDA'S ORGANIC CRYSTAL CHAMBER (OCC)*
4. OCEANEERING/SPACEHAB REFRIGERATOR/FREEZER
5. CAMCORDER/MICROCAM/STILLCAM
* THE OCC EXPERIMENT SUPPORT HARDWARE IS CO-LOCATED WITH THE 3-DIMENSIONAL
MICROGRAVITY ACCELEROMETER (3-DMA) AND THE JAPANESE UNITED STATES THERMAL
SCIENCES ACCELERATION PROJECT (JUSTSAP). HOWEVER, THERE IS NO CHARGE TO MC/NASDA
FOR THE USE OF THIS HARDWARE, SUPPLIED BY THE UNIVERSITY OF ALABAMA -
HUNTSVILLE, CONSORTIUM FOR MATERIALS DEVELOPMENT IN SPACE.
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EXHIBIT 10.77
AGREEMENT
This agreement ("Agreement") is made this 18th day of May, 1998,
between SPACEHAB, Incorporated ("SHI"), a Washington state corporation with its
principal office located in Vienna, Virginia and Mitsubishi Corporation, with
its principal office located in Tokyo, Japan ("MITSUBISHI"), as contractor to
the Japan Broadcasting Agency ("NHK") ("BUYER").
WHEREAS MITSUBISHI desires to procure SPACEHAB pressurized module
services ("SPACEHAB" or "Module") and retain SHI to act as the carrier and
interface between the U.S. National Aeronautics and Space Administration's
("NASA") Space Shuttle fleet and the NHK-provided camera hardware aboard a
SPACEHAB Module Mission currently manifested as STS-95;
WHEREAS SHI desires to supply to MITSUBISHI such services and to act as
the carrier and interface between the NASA Space Shuttle fleet and the
NHK-provided camera hardware aboard a SPACEHAB Module Mission currently
manifested as STS-95 ("Mission");
WHEREAS SHI must immediately begin to perform certain tasks associated
with the analytical and physical integration of the NHK-provided camera hardware
into the SPACEHAB Module in order to complete these tasks prior to the
anticipated launch date; and
WHEREAS MITSUBISHI, NHK and SPACEHAB have mutually agreed to the
Experiment Chargeable Mass policy presented in the Exhibit B table.
NOW THEREFORE, in consideration of the mutual covenants hereinafter set
forth, the parties agree as follows:
1. STATEMENT OF WORK
SHI will provide, at the times and locations set forth therein and
pursuant to the terms and conditions of this Agreement, the supplies
and services described in the Statement of Work ("SOW") in Exhibit C.
NHK shall provide to SHI the camera (hand-held) and all of its
associated support hardware to include, but not limited to, lenses,
microphone and cables.
2. PRICE AND TERMS OF PAYMENT
MITSUBISHI shall pay SHI a fixed price of 1998 US$280,000 for flight of
all NHK-provided camera hardware and all SPACEHAB-provided NHK camera
stowage hardware (chargeable mass 10 kg).
<TABLE>
<S> <C> <C>
- 98US$ 140,000.00 upon execution of this agreement
- 98US$ 70,000.00 upon completion of the Interface Control Document
98US$ 40,000.00 upon delivery of the flight certified camera and associated support
hardware to the SPPF
98US$ 28,000.00 STS-95 landing plus one month
</TABLE>
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<TABLE>
<S> <C> <C>
Total $280,000.00
</TABLE>
The actual Chargeable Mass for the NHK-provided camera hardware and its
supporting flight hardware shall be determined by SHI using a
calibrated scale at the time of installation of each experiment into
the module. Any upward deviation in the total measured Chargeable Mass
flown on the mission from the Chargeable Mass referred to in Section 1
above shall result in an upward price adjustment for that experiment at
the rate of $28,000/kg. The cumulative total of all experiment upward
price deviations, which shall not exceed $300,000, shall be paid to SHI
at the time of final contract payment above, in addition to the final
payment amount, also indicated above.
3. PAYMENT TERMS AND CONDITIONS
SHI shall send a Final Accounting/Billing to MITSUBISHI as promptly as
possible after completion of the last service provided by SHI under
this Agreement. The Final Accounting/Billing will contain a final
accounting under the Agreement and address additional payment
requirements, if any, from MITSUBISHI. If, as a result of final
Accounting/Billing, an additional MITSUBISHI payment is required, such
payment shall be due 60 days after the billing date of the Final
Accounting/Billing.
4. MISSION DELAYS
In the event STS-95 is delayed, suspended, or postponed, there may be
additional charges to MITSUBISHI as specified in the following
circumstances:
a. Delay caused by NASA
MITSUBISHI pays only additional service costs, if any,
required/provided by NASA and/or SHI.
b. Delay caused by SHI
MITSUBISHI pays only additional service costs, if any,
required/provided by NASA.
c. Delay caused by MITSUBISHI/NHK
MITSUBISHI pays any additional NASA costs charged to SHI which
may be required or caused by any delay, suspension or
postponement of the launch in excess of the 72 hours allowable
delay for which NASA does not charge.
- MITSUBISHI pays for any additional costs incurred by SHI
for services provided by NASA and/or SHI.
5. OPTIONAL SERVICES
There are no defined optional services.
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6. APPLICABILITY OF NASA/SHI SPACE SHUTTLE AGREEMENTS
SHI and MITSUBISHI acknowledge that performance of the services
described in this Agreement and the SOW depends upon the agreement(s)
governing NASA's lease of the Module for STS-95 or any other missions
covered herein ("NASA Contracts"). Any changes to these NASA/SHI
agreement(s) that are imposed by NASA and which prevent SHI from
providing the services described herein shall not constitute a breach
of this Agreement by either SHI or MITSUBISHI. In the event of such
changes by NASA, SHI, and MITSUBISHI agree to negotiate an equitable
adjustment to this Agreement that satisfies both parties as well as
NASA's new requirements. If there are any conflicts between this
Agreement and the requirements of the NASA Contracts applicable to this
Agreement, the NASA Contracts terms and conditions shall take
precedence.
7. EXCHANGE OF DOCUMENTATION AND INFORMATION
SHI and BUYER shall exchange all documents and information required for
each party to fulfill its responsibilities under this Contract in
accordance with the SPACEHAB/NASDA/NHK STS-95 Confidentiality &
Nondisclosure Contract.
8. PERMITS AND LICENSES
SHI shall obtain any permit or license that may be required to provide
the services to be furnished under this Agreement. MITSUBISHI will be
responsible for obtaining any permit or license that may be required to
perform an activity unique to the NHK-provided camera that is not
included in the foregoing, such as tests involving use of radioactive
materials or particular requirements of MITSUBISHI's own government(s),
or governmental authorities outside the United States.
9. ALLOCATION OF CERTAIN RISKS AND LIMITATION OF LIABILITY
a. a. Inter-Party Waiver of Liability.
In carrying out this Agreement, SHI, ESA/INTOSPACE, and NASA,
will respectively utilize their property and employees in the
SPACEHAB Payload Processing Facility ("SPPF"), NASA facilities,
and during payload processing activities and STS Operations in
close proximity to one another and to others. Furthermore, the
parties recognize that all participants are engaged in the
common goal of meaningful exploration, exploitation and
utilization of outer space. In furtherance of this goal, the
parties hereto agree to a no-fault, no-subrogation, inter-party
waiver of liability pursuant to which each party agrees not to
bring claims in arbitration or otherwise against or sue the
other party or other customers of SHI, and agrees to absorb the
financial and any other consequences arising out of damage to
its own property and employees as a result of participation in
the payload processing activities and STS Operations,
irrespective of whether such damage is caused by SHI, ESA,
INTOSPACE, other SHI customers, NASA, or other NASA customers
participating in payload processing activities and STS
Operations and regardless of whether such damage arises through
negligence or otherwise.
b. Extension of Inter-Party Waiver.
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The parties agree that this common goal will also be advanced
through extension of the inter-party waiver of liability to
other participants in the payload processing activities and STS
Operations. Accordingly, the parties agree to extend the waiver
as set forth in Section 8a above to the other party's and NASA's
contractors and subcontractors at every tier, as third party
beneficiaries, whether or not such contractors or subcontractors
causing damage bring property or employees to SHI's SPPF or
retain title to other interest in property provided by them to
be used, or otherwise involved, in the payload processing and
Launch Activity. Specifically, the parties intend to protect
these contractors and subcontractors from claims, including
"products liability" claims, which might otherwise be pursued by
the parties, or the contractors or subcontractors of the
parties, or other customers of SHI or the contractors or
subcontractors of such other customers. Moreover, it is the
intent of the parties that each will take all necessary and
reasonable steps to foreclose claims for damage by any
participant in a payload processing and Launch Activity, under
the same conditions and to the same extent as set forth in
Section 8a above, except for claims between INTOSPACE and its
contractors or subcontractors and claims between SHI and its
contractors and subcontractors.
c. Broad Construction of Inter-Party Waiver.
The parties intend that the inter-party waiver of liability set
forth above be broadly construed to achieve be intended
objectives.
d. Definitions of "payload processing activity" and "STS
Operations".
"Payload processing activity" means all activity conducted at
the SPPF or a NASA facility associated with the preparation of
the payload(s) (including but not limited to the Exhibit A
experiments) for launch and SHI and/or NASA storage of all or a
portion of the payload(s), and the handling and transportation
of all or a portion of the payload(s) outside the confines of
SHI's facility by SHI, NASA, or their contractors or
subcontractors:
"STS Operations" means:
A. All Space Shuttle System Activity
B. All payload operations
C. Use of all tangible personal property (including ground
support, test, training and simulation equipment
related to A & B above).
D. Research, design, development, test, manufacture,
assembly, integration, transportation, or use of
materials related to the above items, A, B & C.
E. Performance of any activities related to A through D.
e. The protection of cross waiver of liability for STS Operations
herein agreed to shall cover a period of time during which STS
Operations are being performed as follows:
Beginning with the signature of an Agreement or Arrangement with
NASA for Space Transportation System services and (i) when any
employee, payload or property arrives at a United States
Government Installation, or (ii) during transportation of such
to the installation by a United States Government Conveyance, or
(iii) at ingress of such into an
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<PAGE> 5
Orbiter, for the purpose of fulfilling such Agreement or
Arrangement, or (iv) the commencement of extravehicular
activities by the Shuttle Crew for the purpose of retrieval of
the payload, whichever occurs first and Ending with regard to
any employee, payload or property, when such employee, payload
or property departs (i) a U.S. Government Installation, or (ii)
the Orbiter if it lands at other than such Installation, or
(iii) a U.S. Government conveyance which transports the employee
and/or payload and related property from such Installation or
Orbiter.
f. Risk of Patent Infringement
(i) SHI agrees to indemnify MITSUBISHI, its officers,
employees and agents against any United States Patent
infringement costs (including, but not limited to, any
judgment against MITSUBISHI by a court of competent
jurisdiction, reasonable administrative and litigation
costs, and settlement payments made as a result of an
administrative claim) incurred by MITSUBISHI which are
attributable to products, processes or articles of
manufacture used in the facilities and Services to be
furnished to MITSUBISHI by SHI hereunder.
(ii) MITSUBISHI agrees to indemnify SHI and NASA, their
officers, employees and agents against any United
States Patent infringement costs (including, but not
limited to, judgment against SHI by a court of
competent jurisdiction, reasonable administrative and
litigation costs, and settlement payments made as a
result of an administration claim) incurred by SHI
and/or NASA which are attributable to products,
processes or articles of manufacture used in Exhibit A
experiments and any supporting equipment and facilities
brought to the SHI SPPF by MITSUBISHI or MITSUBISHI's
contractors or subcontractors and any activity
performed at SHI or NASA facilities by MITSUBISHI or
MITSUBISHI's contractors or subcontractors and any
activity performed at SHI or NASA facilities by
MITSUBISHI or MITSUBISHI's contractors or
subcontractors.
g. Limitation of SHI and MITSUBISHI Liability
Notwithstanding any other provisions herein, to the extent that
a risk of damage is not dealt with expressly in this Agreement,
SHI's and MITSUBISHI's liability under this Agreement, whether
or not arising as a result of an alleged breach of this
Agreement, shall be limited to direct damages only and shall not
include any loss of revenue, profits or other indirect or
consequential damages.
10. ASSISTANCE WITH THIRD PARTY CLAIMS
In the event a third party claim is asserted against SHI or MITSUBISHI
as a result of patent infringement, use of proprietary data, or damage,
including claims of their respective contractors or subcontractors,
arising from or in connection with the Services provided by SHI under
this Agreement, SHI and MITSUBISHI each agree to give prompt notice to
the other of any such claim and agree to provide each other with any
assistance practicable in the defense against such claim. If a claim
asserted against one party is a claim under this Agreement, the party
who has agreed to indemnify shall have the right to intervene and
defend, the right to control litigation of, and the right to determine
the appropriateness of any settlement related to such claim.
11. WARRANTIES
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<PAGE> 6
SHI makes no warranties of any kind, express or implied, including any
implied warranty of merchantibility or fitness for a particular
purpose.
12. PUBLICITY RELATING TO AGREEMENT
In cases where one Party intends to use results obtained from this
Agreement or advertise his role in this Agreement, it shall first
request the other Party for its prior written approval, which shall not
be unreasonably withheld.
13. APPLICABLE LAW
The Agreement shall be governed by the law of the State of Virginia.
14. ARBITRATION/DISPUTES
Disputes arising out of the interpretation or execution of this
Agreement which cannot be resolved by negotiation shall, at the request
of either Party, (after giving 30 days notice to the other Party) be
submitted to arbitration. The arbitration tribunal shall sit in
Hannover, Germany. Disputes shall be finally settled in accordance with
the Rules of Conciliation and Arbitration of the International Chamber
of Commerce by one or more arbitrators designated in conformity with
those Rules. The decision to submit a dispute shall not excuse either
party from the timely performance of its obligations hereunder which
are not the subject matter of the dispute. Further, if the lack of
resolution of the matter in dispute will adversely impact the timely
completion of preparation for launch activities, MITSUBISHI and SHI
will perform the matter in dispute in the manner determined by SHI,
within the framework of this Agreement and without prejudice to the
final resolution of the matter in dispute.
15. TERMINATION OF SERVICES
Both parties have the right to terminate this Agreement pursuant to the
following conditions only:
a. SHI may terminate this Agreement:
(i) In the event NHK delivers any payload described in the
SOW so late beyond the mutually agreed upon delivery
date that SHI, in its sole reasonable judgment, is
unable to process such payload in time to meet the
launch schedule, SHI will terminate this Agreement and
shall retain all payments made by MITSUBISHI to the date
of termination, and MITSUBISHI is further liable for all
costs incurred by SHI as a result of such NHK failure,
or
(ii) in the event of a material breach by MITSUBISHI which
MITSUBISHI fails to cure within a reasonable time after
written notice received from SHI (or immediately upon a
non-curable breach), in which case SHI shall retain all
payments made to the date of the termination, and
MITSUBISHI is further liable for all costs incurred by
SHI resulting from MITSUBISHI's breach of the Agreement
or,
(iii) as a result of any actions or inactions by NASA which
prevent the manifesting of the Exhibit A experiments on
STS-95, in which case SHI shall be entitled to all
applicable payments hereunder received, plus the
Integration and Optional Services (if any) actual costs
incurred up to the time of termination, as well
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as all termination charges which may be imposed by
third parties (such as NASA or SHI subcontractors).
b. MITSUBISHI may terminate this Agreement:
(i) without cause at any time before installation of the
Exhibit A experiments into the SHI module upon
sufficient written notification to SHI of such intent,
in which case MITSUBISHI shall be liable for and SHI
shall retain all applicable payments hereunder received,
plus the Integration and Optional Services (if any)
actual costs incurred up to the time of termination, as
well as all termination charges which may be imposed by
third parties (such as NASA or SHI subcontractors), or,
(ii) in the event of material breach by SHI which SHI fails
to cure in a reasonable time after written notice of
such material breach is received from MITSUBISHI, in
which case MITSUBISHI will be relieved from making any
further payments to SHI subsequent to the material
breach hereof.
c. Termination In Special Cases: MITSUBISHI may at any time
terminate this Agreement by giving written notice with immediate
effect in any of the following events:
(i) if SHI becomes insolvent or if its financial position is
such that within the framework of its national law,
legal action leading towards bankruptcy may be taken
against it by its creditors;
(ii) if SHI resorts to fraudulent practices in connection
with the contract, especially by deceit concerning the
nature, quality or quantity of the supplies, and the
methods or processes of manufacture employed or by the
giving or offering of gifts or remuneration for the
purpose of bribery to any person in the employ of an NHK
Member State or of NHK or acting on its behalf,
irrespective of whether such bribes or remuneration are
made on the initiative of SHI or otherwise.
16. ASSIGNMENTS
No party shall assign to another person or entity any part of its
rights under this Agreement, including but not limited to rights for
services related to scheduled launches, unless otherwise expressly
agreed to by the other party in writing, or as may be required pursuant
to law.
17. NOTICES
All notices, requests, demands, and other communication hereunder shall
be in writing and shall be either (1) personally delivered, (2) sent by
mail or reputable overnight delivery service, or (3) transmitted by
facsimile machine as follows:
To SHI: Nelda Wilbanks
Contracts Administrator
SPACEHAB, Inc.
1595 Spring Hill Road, Suite 360
Vienna, VA 22182
To MITSUBISHI: Kazushi Ochi
Mitsubishi Corporation
7
<PAGE> 8
2-6-3 Marunouchi, Chiyoda-ku
Tokyo, Japan 100-86
The effective date of each notice, demand, request or other
communication shall be deemed to be: (1) the date of receipt if
delivered personally or by mail or overnight delivery service, or (2)
the date of transmission if by facsimile. Either party may change its
address or designee for purposes hereof by informing the other party in
writing of such action and the effective date of such change.
18. FORCE MAJEURE
Neither party shall be liable for delays or breaches hereof resulting
from events or acts beyond the control of such party, including but not
limited to acts of God, strikes, lockouts, riots, acts of war,
epidemics, governmental regulations, and natural disasters. Upon the
occurrence of such event, the party whose performance is affected shall
use reasonable efforts to notify the other party of the nature and
extent of any such condition and negotiate its affects.
8
<PAGE> 9
19. COMPLETE AGREEMENT
This Agreement constitutes the complete agreement and understanding
with respect to the subject matter hereof between the parties.
Mitsubishi Corporation SPACEHAB, Inc.
BY: By:
------------------------- -----------------------
Name: Kazushi Ochi Name: Nelda Wilbanks
------------------------- -----------------------
General Manager
Title: Space Systems Unit Title: Contracts Administrator
------------------------- -----------------------
9
<PAGE> 10
EXHIBIT A
EXPERIMENT LIST
1. NHK CAMERA (HAND-HELD) AND ALL ASSOCIATED SUPPORT HARDWARE, INCLUDING,
BUT NOT LIMITED TO, LENSES, CABLES AND MICROPHONE.
10
<PAGE> 11
EXHIBIT C
SHI-MITSUBISHI (NHK) STATEMENT OF WORK:
I. GENERAL DESCRIPTION OF SHI INTEGRATION AND FLIGHT SERVICES
SHI will provide and maintain a pressurized module ("SPACEHAB") that
fits in the cargo bay of the National Aeronautics and Space
Administration's ("NASA") Space Shuttle Orbiter ("Shuttle") to act as
the carrier and interface between the Shuttle and the NHK-provided
camera hardware. The camera will be analytically, physically and
operationally integrated with other user payloads into the SPACEHAB.
Standard SHI services will include launch into orbit, in-orbit
operation by a trained flight crew, return to the launch site and to
the SPACEHAB Payload Processing Facility (SPPF), deintegration, and
return of camera hardware to NHK. No optional service requirements such
as experiment hardware late access and early retrieval will be provided
by SPACEHAB.
II. RESPONSIBILITIES OF SPACEHAB, INC. (SHI)
PROVISION OF STANDARD SERVICES
In support of the flight of the NHK-provided camera aboard the SPACEHAB
module on STS 95, SHI shall perform the following "standard" services.
1. SHI will negotiate and execute all agreements with NASA, which are
required to manifest the camera aboard SPACEHAB on STS 95.
2. SHI will provide a primary point of contact (Payload Coordinator)
to assist NHK in the provision of the required information and
hardware to support STS-95 mission integration milestones and to
facilitate all aspects of the mission integration process with
NHK.
3. In cooperation with NHK, SHI will develop an Interface Control
Document which defines all required technical and operational
interfaces between the NHK camera and the SPACEHAB module.
4. SHI will integrate the NHK camera into the STS-95 mission
operations timeline to accomplish all required video recording
objectives. The camera will hand-held only, with all images
recorded onboard for post-flight utilization (i.e., no real-time
TV downlink will be baselined or provided). Note: SPACEHAB will
continue to assess the technical feasibility of connecting the NHK
TV camera to our video downlink system so that we may identify any
issues should the flight crew desire to use the camera for
real-time video at a later time. This will be a secondary
objective only.
5. SHI will develop and publish flight procedures which enable the
flight crew to perform all required mission objectives. The NHK
camera will be flown as a "shared camcorder" and, consequently,
may be used by the flight crew to document other experiment
requirements (NASA and commercial) as required to support
integrated mission objectives. Best efforts will be made by
SPACEHAB to satisfy unique NHK video requirements which will be
fully documented in the ICD.
11
<PAGE> 12
6. SHI will physically prepare the NHK camera hardware for flight at
the SPACEHAB Payload Processing facility and stow all camera
hardware in a suitable containment compartment onboard the
SPACEHAB module.
7. SHI will provide the required flight operations support to the NHK
camera in-flight operations and work any issues with respect to
flight crew schedule or hardware performance for the duration of
the mission.
8. SHI will provide for the post-flight return of the NHK camera and
all related hardware to NHK as soon as possible following the
Shuttle landing.
9. SHI will designate a contract development and implementation
manager who will be responsible for coordinating with a
Mitsubishic counterpart all financial, scheduling, implementation
progress reporting and policy matters related to this contract.
III. RESPONSIBILITIES OF MITSUBISHI
Mitsubishi will serve as NHK's administrative agent for establishing a
contract relationship with SHI. Therefore, it is Mitsubishi's
responsibility to establish and maintain this contract directly with
SHI, on NHK's behalf, in order for NHK to obtain from SHI the necessary
lease and integration services required for the successful flight of
the camera in the SPACEHAB module. Acting in this capacity, Mitsubishi
will:
A. Facilitate NHK's completion of the following critical preparatory
functions in support of the flight of the Experiments:
1. Timely delivery of the NHK-provided camera hardware and materials to
the SPPF for preflight processing.
2. NHK support to meetings, teleconferences, flight crew training
sessions, integrated mission simulations and real-time missions
operations
3. Designation of NHK technical points of contact that will be
responsible for coordinating with the SHI Payload Coordinator all
technical activities to be performed under this Agreement
B. Designation of an Mitsubishi Contract Development and Implementation
Manager (CDIM) who will be responsible for coordinating with the SHI
CDIM all financial, scheduling, implementation progress reporting and
policy matters related to this contract.
C. Establishment and maintenance of the required contract(s) with NHK
to facilitate NHK sponsorship of the flight of the camera on STS 95.
D. Establishment and maintenance of the required contract with SHI to
obtain SHI lease and integration services necessary for the flight of
the Experiments in SPACEHAB on STS 95.
12
<PAGE> 13
E. Receipt of established contract milestone payments from NHK and
provision of established contract milestone payments to SHI for
performance of these required services.
13
<PAGE> 1
EXHIBIT 10.78
CONTRACT NUMBER SHB 98001
DATED JANUARY 31, 1998
FOR
UNPRESSURIZED CARGO PALLETS
DESIGN AND CONSTRUCTION
BETWEEN
SPACEHAB, INCORPORATED
1595 SPRING HILL ROAD
SUITE 360
VIENNA, VIRGIANIA 22182
AND
RSC-ENERGIA
4A LENIN STREET
KOROLEV, MOSCOW REGION
RUSSIA, 141070
<PAGE> 2
This contract is entered into by and between SPACEHAB, Inc., with an address at
1595 Spring Hill Road, Suite 360, Vienna, Virginia 22182 (hereinafter referred
to as "SPACEHAB") and RSC-Energia, with an address at 4A Lenin Street, Korolev,
Moscow Region, Russia, 141070 (hereinafter referred to as "Energia"). The
parties agree as follows:
Article 1. Entire Agreement
This contract, all exhibits, and other documents incorporated by reference,
whether or not attached, constitute the complete and exclusive statement of the
Contract between SPACEHAB and Energia. This contract supersedes any previous
understanding or agreement between SPACEHAB and ENERGIA (oral or written) with
respect to the subject matter of this contract.
Article 2. Scope of Work
Energia shall design, develop, manufacture, test, and deliver:
- One Unpressurized Cargo Pallet (UCP) in accordance with requirements
identified in the Prime Item Development Specification (Document No.
ICC 97002, Revision 1) and the Statement of Work (SOW) attached as
Exhibit A. (Task 1).
- One UCP in compliance with SPACEHAB's requirements; such
requirements to be presented in a revised SOW that will be agreed
upon no later than December 31, 1998 and added to this Contract.
(Task 2). Delivery of this second UCP shall be no later than
December 31, 1999.
In addition, this Contract has options for the design, development, manufacture,
test and delivery of additional UCP's. These options may be exercised in an
appropriate way by adding them to the existing Contract.
Article 3. Period of Performance
Energia shall perform the work called for under this contract as the
continuation of the effort performed under the Letter Agreement dated December
25, 1997. Work shall continue through the Initial Integrated Cargo Carrier
(IICC) system integrated acceptance fit check at SPACEHAB's ICC Processing
Facility, as described in the SOW. The period of performance of this contract
shall be from the date of contract signature through January 31, 1999 (Task 1),
and through January 31, 2000 (Task 2). The period of performance of this
contract may be extended by mutual agreement.
Article 4. Contract Amount
The fixed price to be paid to Energia for the products and services under this
Contract shall be as follows:
- $1.8 Million (U.S. Dollars) for the first UCP and associated
products (Task 1).
- $0.7 Million (U.S. Dollars) for the second UCP and associated
products (Task 2), assuming there is no design change between the
first and second UCP
The fixed price paid to Energia for the products and services under the Letter
Agreement dated December 25, 1997 shall be credited towards the $1.8 Million
total price for the first flight UCP.
In addition, a bonus payment will be made for early delivery of the first UCP as
follows:
2
<PAGE> 3
- $300,000 (U.S. Dollars) if the UCP is accepted by SPACEHAB per
Article 16 by December 31, 1998.
- $200,000 (U.S. Dollars) if the UCP is accepted by SPACEHAB per
Article 16 by January 31, 1999).
- $100,000 (U.S. Dollars) if the UCP is accepted by SPACEHAB per
Article 16 by February 28, 1999).
It is agreed that the following items will be excluded from this contract:
- Transportation of the UCP hardware items
- Personnel travel costs
- Price of options
It is also agreed that the following items are included in this contract:
- Document translation costs
- Customs costs in Russia
Article 5. Reimbursement for Travel Expenses
SPACEHAB shall reimburse RSC-Energia for actual pre-approved transportation and
hotel expenses and on a per diem basis for meals and other expenses, for travel
to SPACEHAB in the United States and to Daimler-Benz Aerospace ("DASA") in
Germany. SPACEHAB shall provide local transportation to RSC Energia to and from
work both at SPACEHAB and DASA. The per diem allowance in the United States
shall be $58 and in Germany shall be at the rate of $70 (about 112 German marks)
per day per existing Russian norms.
Article 6. Payment
Payments shall be made in compliance with the Production and Payment Schedule
provided in Exhibit B. All payments shall be made against RSC Energia's invoices
by wire transfer to the account indicated in the invoice and shall be completed
within 30 days of written ratification of completion of the associated payment
milestone by the SPACEHAB ICC Program Manager. The payment currency is in US
Dollars. All payment shall be net without any deductions for wire transfer.
Article 7. Program and Technical Direction
SPACEHAB shall be the sole source of program direction to Energia. Program
direction includes, but is not limited to, issues relating to contracts,
schedule, and requirements. For technical issues relating to the design,
development, and manufacture of the UCP flight hardware, GSE, and associated
hardware, Energia shall take direction from SPACEHAB.
For technical issues within the scope of work of the Exhibit A Statement of Work
relating to the integration of ICC hardware elements between associate
contractors, including but not limited to integrated testing, verification, and
Shuttle integration, Energia shall take direction from the Mission Integration
and Operations Support Contractor, DASA. If Energia is directed by DASA to
perform work that is out of Energia's scope, then SPACEHAB shall provide
contractual direction.
Article 8. SPACEHAB Direction
Energia shall accept direction from one of the following SPACEHAB individuals
only:
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<PAGE> 4
- Prime Contact - Pete Gadsby, ICC Program Manager
- Alternate Contact - Clark Thompson, Director, Technology Development
Article 9. Provisions for Execution
Energia and SPACEHAB shall execute two (2) copies of this contract in English
and two (2) copies in Russian, one original in each language for each party.
Article 10. Intellectual Property Rights
All worldwide Intellectual Property rights (including but not limited to
patents, copyrights, trademarks, service marks and trade secrets) created under
this contract shall be the sole property of SPACEHAB. Energia agrees to
reasonably assist SPACEHAB (at SPACEHAB's expense) in securing such rights
through patent, copyright and trade name applications in various worldwide
jurisdictions. All Intellectual Property utilized in the performance of this
contract shall remain the exclusive property of the party(s) who had the rights
in the IP prior to this contract.
Article 11. Confidentiality
SPACEHAB and Energia shall abide by the Nondisclosure Agreement between the
parties dated December 23, 1997, which terms and conditions are incorporated
herein by this reference.
Article 12. Document Translation
All textual documents provided by Energia shall be in English. Graphical
documents (drawings) may be provided in Russian. Any textual document, fax, or
letter, five (5) pages or less in size may be exchanged in native language.
Article 13. Local Services
To facilitate face-to-face meetings, the host party shall provide meeting
facilities, interpreter services, and local transportation for the visiting
contractors.
Article 14. Packaging and Marking
Packaging and marking for shipment of all items ordered under this contract
shall be in accordance with good commercial practice, and adequate to ensure
both acceptance by common carrier and safe transportation at the most economical
rates.
Article 15. Title and Delivery
All hardware deliverables to be delivered per this Contract and listed in the
SOW shall be delivered according to FCA Moscow (in compliance with Incoterms'
90). This means that RSC Energia's responsibility shall include clearing export
customs in Russia and transfer of the hardware deliverables to a carrier
identified to RSC Energia by SPACEHAB. Risk of loss or damage is with SPACEHAB
after the deliverables have been transferred to the carrier.
All document deliverables to SPACEHAB from RSC Energia shall be sent via Federal
Express or other express carrier at SPACEHAB's expense.
4
<PAGE> 5
Article 16. Inspection and Acceptance
The place of final inspection and acceptance for the deliverable hardware called
for under this contract shall be at Energia. The place of inspection and
acceptance of all deliverable reports and documentation shall be at SPACEHAB,
Houston, Texas, with a copy to SPACEHAB Cape Canaveral, Florida as specified by
SPACEHAB.
Article 17. Termination
SPACEHAB may, at its sole discretion, terminate this contract. In the event of
termination, SPACEHAB will pay actual costs, up to the total amount due through
the next scheduled payment, for all completed work through the date of
termination in accordance with Article 6, and reimburse expenses incurred up to
the date of termination in accordance with Articles 4 and 5.
In the event SPACEHAB terminates this contract, Energia shall provide the
following items to SPACEHAB to determine proper restitution:
- Detailed invoices of material expenditures including, but not
limited to procurement of long-lead items.
- Detailed list of all in-work and completed textual and graphic
documents created in the scope of this Letter Agreement.
- Detailed list of all other expenditures made with the payments made
by SPACEHAB to Energia prior to termination of this Letter
Agreement.
Upon termination Energia will deliver to SHI all products, parts and
documentation, started and completed, at the place designated for final
inspection and acceptance in Article 16 above.
Termination of this Contract does not terminate obligations of SPACEHAB and
Energia to comply with Articles 10 and 11.
Article 18. Changes
SHI and Energia may at any time make mutually agreed upon changes to this
contract.
Article 19. Governing Laws
The Commercial Law of Switzerland shall govern all provisions specified by and
performed under this contract.
Article 20. Dispute Resolution
Any and all disputes hereunder shall be resolved by binding arbitration pursuant
to the rules and procedures of the International Chamber of Commerce in
Switzerland, taking into consideration the clauses of this Letter Agreement,
without recourse to any courts. The contract clauses shall prevail over common
rules and norms of Swiss arbitration in case of discrepancies.
SPACEHAB, INC. RSC-ENERGIA
By: By:
---------------------------------- ---------------------------------
Typed Name: Nelda Wilbanks Typed Name: Y. P. Semenov
-------------------------- ------------------------
Title Contracts Administrator Title: President
-------------------------- ------------------------
Date: Date:
-------------------------- ------------------------
5
<PAGE> 6
EXHIBIT A
STATEMENT OF WORK
<PAGE> 7
EXHIBIT B
UCP #1 PAYMENT SCHEDULE ($US)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
DESCRIPTION OF WORK DATE PRICE NOTES
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Start of Work, Management 1/2/98 $ 180,000.00
- --------------------------------------------------------------------------------------------------------------
2. Preparation for Production, Long-Lead 1/31/98 250,000.00
Procurement
- --------------------------------------------------------------------------------------------------------------
3. Issuance of Manufacturing Documents and 2/28/98 200,000.00
Drawings, CDR for the UCP and GSE
- --------------------------------------------------------------------------------------------------------------
4. Fabrication of Components and Sub-Assemblies, 5/31/98 150,000.00
Development/Production Interfaces (Phase I)
- --------------------------------------------------------------------------------------------------------------
5. Fabrication of Components and Sub-Assemblies, 7/17/98 250,000.00
Development/Production Interfaces (Phase II)
- --------------------------------------------------------------------------------------------------------------
6. Fabrication of Components and Sub-Assemblies, 8/1/98 270,000.00
Development/Production Interfaces (Phase III)
- --------------------------------------------------------------------------------------------------------------
7. Static Testing at RSC-Energia 9/30/98 110,000.00
- --------------------------------------------------------------------------------------------------------------
8. Mockup Delivery to DASA 9/30/98 80,000.00
- --------------------------------------------------------------------------------------------------------------
9. Participation in Integrated Testing at DASA 11/30/98 20,000.00
- --------------------------------------------------------------------------------------------------------------
10. Modal Survey (Dynamic) Testing at Energia 11/30/98 110,000.00
- --------------------------------------------------------------------------------------------------------------
11. Acceptance of the First Flight UCP 12/31/98 80,000.00
- --------------------------------------------------------------------------------------------------------------
12. Acceptance of GSE 12/31/98 80,000.00
- --------------------------------------------------------------------------------------------------------------
13. Participation in the UCP Setup at the ICC 1/15/99 20,000.00
Processing Facility
- --------------------------------------------------------------------------------------------------------------
Total $1,800,000.00
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Bonus for Meeting Schedule 300,000.00 $200,000.00 for
delivery in
January;
$100,000.00 for
delivery in
February.
- --------------------------------------------------------------------------------------------------------------
</TABLE>
UCP #2 payment schedule of $700,000.00 will be prepared after Energia receives
SPACEHAB's order before December 31, 1998.
<PAGE> 1
Exhibit 10.79
CONTRACT NUMBER SHB 98002
DATE 02/11/98
FOR
KEEL YOKE AND ASSOCIATED MECHANISMS
DESIGN AND CONSTRUCTION
BETWEEN
SPACEHAB, INCORPORATED
1595 SPRING HILL ROAD
SUITE 360
VIENNA, VIRGINIA 22182
AND
DAIMLER-BENZ AEROSPACE
SPACE INFRASTRUCTURE DIVISION
P.O. BOX 286156
D-28361 BREMEN
GERMANY
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
Preamble ......................................................................... 3
Article 1. Entire Agreement ..................................................... 3
Article 2. Scope of Work ........................................................ 4
Article 3. Period of Performance ................................................ 4
Article 4. Contract Amount ...................................................... 5
Article 5. Reimbursement for Travel Expenses .................................... 5
Article 6. Payment .............................................................. 5
Article 7. Other Contractor and Customer Interface .............................. 6
Article 8. SPACEHAB Direction / Contractor Interface ............................ 7
Article 9. Changes .............................................................. 8
Article 10. Intellectual Property Rights ......................................... 9
Article 11. Confidentiality ...................................................... 9
Article 12. Document Translation ................................................. 9
Article 13. Local Services ....................................................... 9
Article 14. Packaging and Marking ................................................ 9
Article 15. Title and Delivery ................................................... 10
Article 16. Inspection and Acceptance ............................................ 10
Article 17. Items, Equipment, Property, Services to be Furnished by SPACEHAB, Inc. 10
Article 18. Warranty ............................................................. 11
Article 19. Termination .......................................................... 12
Article 20. Force Majeure ........................................................ 12
Article 21. Governing Laws ....................................................... 12
Article 22. Dispute Resolution ................................................... 13
Article 23. Provisions for Execution ............................................. 13
Exhibit A I - Statement of Work .................................................. 14
Exhibit A II - Prime Item Development Specification (PIDS) ....................... 15
Exhibit B - Wire Transfer Instructions ........................................... 16
</TABLE>
<PAGE> 3
This contract is entered into by and between SPACEHAB, Inc., with an address at
1595 SPRING HILL ROAD,
SUITE 360,
VIENNA, VIRGINIA 22182
(HEREINAFTER REFERRED TO AS "DASA-RE" OR " CONTRACTOR").
AND
DAIMLER-BENZ AEROSPACE,
SPACE INFRASTRUCTURE DIVISION
WITH AN ADDRESS AT
P.O. BOX 286156,
D-28361 BREMEN,
GERMANY
(HEREINAFTER REFERRED TO AS "DASA-RI" OR "CONTRACTOR").
PREAMBLE
It is recognized by both parties that:
- Dasa-RI has had and continues to have marketing efforts in
Europe to sell to the European Space Agency (ESA) and to
national Space Agencies in Europe concepts using a cargo
pallet in connection with the Intemational Space Station;
- Nothing in the contract for "Keel Yoke and Associated
Mechanisms Design and Constructions shall preclude Dasa-RI
from investing in and procuring a cargo pallet of its own in
order to be able to pursue the business opportunity described
above. SPACEHAB would also grant Dasa-RI at conditions to be
negotiated a license to build the Unpressurized Cargo Pallet
(UCP) currently developed under SPACEHAB contract;
- SPACEHAB will not unreasonably withhold the usage of its Keel
Yoke Assembly (KYA) if the pallet procured by Dasa-RI fits
technically. The KYA will be made available by SPACEHAB at
reasonable commercial conditions which are in line with
SPACEHAB's standard pricing policies towards NASA and other
national customers.
The parties agree as follows:
ARTICLE 1. ENTIRE AGREEMENT
This cone act ("Contract"), all exhibits, and other documents incorporated by
reference, whether or not attached, constitute the complete and exclusive
statement of the Contract between SPACEHAB and Dasa-RI
This contract supersedes any previous understanding or agreement between
SPACEHAB and Dasa RI (oral or written) with respect to the subject matter of
this contract.
3
<PAGE> 4
ARTICLE 2. SCOPE OF WORK
1. Dasa-RI shall design, develop, manufacture, test, and deliver the SPACEHAB
ICC Keel Yoke and Associated Mechanisms in accordance with requirements
identified in the Prime Item Development Specification (PIDS, Document No.
ICC 97002), and the Statement of Work (SOW, Document No. SHE ICC-S1002)
attached as Exhibit A. Furthermore Dasa-RI shall perform the task of generic
integration of the ICC which is also described in the SOW. With respect to
the coupled load analysis task it is agreed that up to CDR only one load case
will be considered and after CDR this task is excluded from this Contract and
covered under the l&O contract. In the event of conflict among referenced
documents and unless otherwise specified in this contract, the order of
precedence shall be as listed below:
1. This Contract terms and conditions
2. The Statement of Work (ICC S 1002) - Exhibit A II
3. The ICC Prime Item Development Specification (ICC 97002) - Exhibit A II 4.
The specific sectors of the documents referenced in the SOW ICC S1002
2. Dasa-RI will make available its resources for post delivery support at
conditions comparable to those contained in the present contract for a period
of up to two years; such activities are not covered under the contract amount
(Article 4 below) but are contemplated for the l&O contract.
SPACEHAB confirms that Dasa-RI is the selected cone actors for future
activities / procurements related to ICC with the exclusion of UCP related
activities - and for ICC related follow-on projects and SH herewith grants to
Dasa-RI the "right of first refusal" for future contracts related to system
sustaining engineering and enhancement of functional capabilities of ICC. /
ARTICLE 3. PERIOD OF PERFORMANCE
Dasa-RI shall perform the work called for under this contract as the
continuation of the PDR effort performed under the Letter Agreement dated July
28, 1997. Work shall continue through the Initial Integrated Cargo Carrier
(IICC) fit check at the SPACEHAB Payload Processing Facility (SPPF), as
described in the SOW. The period of performance of this contract shall be from
the date of contract signature through January 31, 1999. The period of
performance of this cone act may be extended by mutual agreement.
4
<PAGE> 5
ARTICLE 4. CONTRACT AMOUNT
1. The fixed price to be paid to Dasa-RI for the products and services under
this contract is $ 3.24 Million (in words: Three Million and Two Hundred
Forty Thousand U.S. Dollars).
2. This amount excludes the amount previously agreed under the Letter Agreement
and its No. 1 of $ 150.000 (in words: One Hundred Fifty Thousand U.S.
Dollars) for work to be performed up to PDR and also excludes the amount of $
260.000 (Two Hundred Sixty Thousand U.S. Dollars) for long lead item
procurement.
This amount does not include personnel travel costs which are dealt with
under Article 5 below.
In addition to the contract amount specified above SPACEHAB shall pay to
Dasa-RI an amount of $ 400.000 (in words: Four Hundred Thousand U.S. Dollars)
as a bonus if Dasa-RI delivers the KYA flight hardware at or before the
agreed date for delivery.
This bonus payment is reduced to 250.000 (in words: Three Hundred Thousand
U.S. Dollars) if delivery is made within the month following the agreed date
for delivery and further reduced to $ 150.000 (in words: One Hundred Fifty
Thousand U.S. Dollars) if delivery is made within two month following the
agreed date for delivery.
The bonus payment shall also be due if Dasa-RI is unable to deliver on time
because a SPACEHAB Inc. furnished item (see Article 17 below) is not
available in due time.
ARTICLE 5. REIMBURSEMENT FOR TRAVEL EXPENSES
SPACEHAB shall reimburse Dasa-RI for actual pre-approved transportation and
hotel expenses for travel to SPACEHAB in the United States and to RSC-Energia
in Russia, and on a per diem basis for meals and other expenses. The per diem
allowance in the United States and in Russia shall be at the rate of $ 58 per
day.
ARTICLE 6. PAYMENT
Payment of the contract amount shall be made in four installments upon
achievement of the following milestones:
<TABLE>
<S> <C> <C>
0. Preliminary Design Review* 12/97 $ 410.000 U.S.
1. Critical Design Review 4/98 $ 640.000 U.S.
2. Modal Survey Test of KYAFM and UCP 9/98 $ 1.200.000 U.S.
3. KYAFM acceptance and consent to ship 11/98 $ 1.050.000 U.S.
4. Fit check and acceptance of generic 1/99 $ 350.000 U.S.
integration task
</TABLE>
* listed for reference only and paid for under the letter agreement
5
<PAGE> 6
It is expressly agreed that the payments related to milestone No. 3.) and 4.)
above shall be deferred until after the first flight of the MICC hardware;
however, these payment shall be made no later than 12/99.
In addition to the installments listed above SPACEHAB shall make a bonus payment
of $ 400.000 ( in words: Four Hundred Thousand U.S. Dollars) in 12/98 upon
delivery of the KYA flight hardware to the processing facility in Florida in
accordance with article 4 section 2.
All payments including bonus payments, if any, shall be made upon receipt of
invoice by wire transfer to the account listed in Exhibit B attached hereto and
shall be completed within 30 days of written ratification of completion of the
associated payments milestone by the SPACEHAB ICC Program Manager.
ARTICLE 7. OTHER CONTRACTOR AND CUSTOMER INTERFACE
1. All formal contacts on the subject matter with SPACEHAB, Incr.'s customer
NASA, RSC-Energia, or other suppliers under contract to SPACEHAB, Inc. on the
project shall be made through the SPACEHAB, Inc. ICC Project Manager. This
restriction is not intended to inhibit technical interfaces and the
contractor may, at any time, request action by SPACEHAB, Inc. to arrange
exchanges of needed information or to provide data. It is expected that
informal contact, technical discussion and information exchange between
Dasa-RI, RSC-Energia and other suppliers on this project is mandatory, to
ensure the timely resolution of interface and integration issues. A record of
such discussions will be made and distributed to SPACEHAB, Incr.'s Project
Manager.
2. SPACEHAB has contracted with RSC-Energia of Moscow, Russia, for production of
the Unpressurized Cargo Pallet (UCP). Correspondingly all contractual aspects
related to the UCP are dealt with exclusively between SPACEHAB and
RSC-Energia.
Any formal technical direction for the UCP including but not limited to
development, production, transportation, integration and contract
deliverables will be from SPACEHAB to RSC-Energia. The ICDs are generated by
Dasa-RI and jointly agreed between SPACEHAB, RSC-Energia and Dasa-RI and
SPACEHAB shall retain full responsibility for the timely availability of the
UCP for integration into the ICC.
3. Dasa-RI shall perform the scope of work specified under Article 2. above.
Dasa-RI is expected to work directly and informally with RSC-Energia
engineers on the technical level in order to facilitate the activities
related to integration of the UCP into the MICC system. A budget is contained
in the contract amount for informal technical coordination with RSC-Energia.
6
<PAGE> 7
ARTICLE 8. SPACEHAB DIRECTION / CONTRACTOR INTERFACE
Dasa-RI shall accept direction from one of the following SPACEHAB individuals
only:
Technical and
programmatic issues
Prime Contact Pete Gadsby ICC Program Manager
Ultimate Contact: Clark Thompson Director, Technology Development
Contractual Issues: Mike Lounge Vice President of Flight System
Development
Nelda Wilbanks Contract Administrator
SPACEHAB shall address all directors and other communication only to the
following persons:
Technical and
programmatic issues
Prime Contact Owe Pape ICC Program Manager
Alternate Contact Dr. Ingo Retat ICC System Engineer
Contractual Issues: Holger Voge ICC Contracts Officer
7
<PAGE> 8
ARTICLE 9. CHANGES
All changes to the contractual baseline defined in Article 2 above shall be made
as follows:
Both Parties shall agree to the revised wording in all or appendices or
incorporated documents of this agreement necessary to implement the changes that
they have agreed upon, and the total of all such revisions to be made at a
single time shall be known as the "Amendments".
The Amendment shall be approved or disapproved by an official of each Party who
has the power and authority to bind his Party by approving Amendments to this
agreement SPACEHAB and Dasa-RI agree that the representatives of each Party
designated in accordance with the provisions of Article 8 above shall be the
only officials who have this power and authority. These officials shall be known
as the Amendment Officers" of each Party. The signing and dating of the
Amendment by an Amendment Officer of the Party shall signify his Party's consent
to be bound by the agreement as revised by the Amendment.
Directed Chances
SPACEHAB may at any time, by written order from its Program Manager, request
changes within the general scope of this agreement in any one or more of the
following:
- - Drawings, designs, or specifications when the items to be furnished are to be
specially manufactured for SPACEHAB in accordance with the drawings, designs
or specifications.
- - Method of shipment or packing.
- - Place of delivery.
- - Schedule of delivery.
If any such change causes an increase or decrease in the cost of, or the time
required for, performance of any part of the work under agreement, whether or
not changed by the order, the parties shall agree to an equitable adjustment in
the fixed price, the delivery schedule, or both, and shall modify the agreement.
The contractor shall not be liable for implementing such changes until mutual
written agreement regarding cost and schedule has been reached.
Effective Date of Amendments. An Amendment which does not involve a directed
change as set forth above by SPACEHAB shall not be effective and shall not be
binding on either Party until the Amendment is signed and dated by an Amendment
Officer of each Party, at which time this agreement, as revised by the
Amendment, shall supersede and replace the terms of the previous agreement for
all purposes. An Amendment involving a change directed by the SPACEHAB as set
forth above shall be deemed binding and effective as of the date upon which the
Amendment embodying such change is added to this agreement by the Amendment
procedure contained in this article.
8
<PAGE> 9
ARTICLE 10. INTELLECTUAL PROPERTY RIGHTS
All worldwide Intellectual Property (IP) rights (including but not limited to
patents, copyrights, trademarks, service marks and trade secrets) created under
this contract shall be the sole property of SPACEHAB. Dasa-RI agrees to
reasonably assist SPACEHAB in securing such rights through patent, copyright and
trade name applications in various worldwide jurisdictions. All IP utilized in
the performance of this contract shall remain the exclusive property of the
partys) who had the rights in the IP prior to this contract.
ARTICLE 11. CONFIDENTIALITY
SPACEHAB and Dasa-RI shall abide by the Nondisclosure Agreement between the
parties dated September 1996, which terms and conditions other than termination
date are incorporated herein by this reference. The obligations of the agreement
shall remain binding for the parties for a period of three (3) years following
final acceptance under this Contract.
ARTICLE 12. DOCUMENT TRANSLATION
All textual documents provided by Dasa-RI shall be in English.
ARTICLE 13. LOCAL SERVICES
To facilitate face-to-face meetings, the host party shall provide meeting
facilities, interpreter services, and local transportation for the visiting
contractors.
ARTICLE 14. PACKAGING AND MARKING
Packaging and marking for shipment of all items ordered under this contract
shall be in accordance with good commercial practice, and adequate to ensure
both acceptance by common carrier and safe transportation at the most economical
rates.
9
<PAGE> 10
ARTICLE 15. TITLE AND DELIVERY
The point of delivery for any hardware required shall be SPACEHAB, Inc.'s ICC
Processing Facility, Florida. Hardware deliverable items are listed in section
2.2 of the SOW. The point of delivery for any data required shall be SPACEHAB,
Ind., Houston, Texas. Data deliverable items are listed in section attachment DB
of the SOW.
Dasa-RI is responsible for transportation and insurance of all items deliverable
under the present cone act and shall cover the corresponding expenses. It is
expressly agreed that there is no such responsibility on Dasa-Rl's side with
respect to the UCP.
All taxes, customs and other duties connected with the performance of the
present contract levied on the territory of the customer's country are home by
the customer, and those levied on the territory of the contractors country are
home by the contractor.
Title to the deliverable hardware shall pass to SPACEHAB upon successful
completion of the incoming inspection at the SPACEHAB, Inc.'s ICC Processing
Facility in Florida.
ARTICLE 16. INSPECTION AND ACCEPTANCE
The place of final inspection and acceptance for the deliverable hardware called
for under this cone act shall be Dasa's facility in Bremen. Acceptance of the
generic integration task shall be after the acceptance fit check at SPACEHAB,
Inc.'s ICC Processing Facility. The place of inspection and acceptance of all
deliverable reports and documentation shall be at SPACEHAB, Houston, Texas, with
a copy to SPACEHAB Cape Canaveral, Florida as specified by SPACEHAB. (Definition
of inspection and acceptance section 4.2.7.3 of the SOW).
ARTICLE 17. ITEMS, EQUIPMENT, PROPERTY, SERVICES TO BE FURNISHED BY SPACEHAB,
INC.
1. SPACEHAB shall make available to Dasa-RI the UCP procured from RSC-Energia in
compliance with the ICD ICC-RIBRE-ICD~01 and at the times specified in the
verification plan ICC-RIBRE-PL-004.
2. SPACEHAB shall also make available all UCP and Payload related documentation,
data, results of analysis, models (e.g. input to coupled loads and thermal
analysis), etc. required to perform the generic integration task with precise
dates being agreed at CDR.
3. SPACEHAB shall also make available facilities at SPACEHAB Inc. ICC processing
facility to perform the fit-check.
10
<PAGE> 11
ARTICLE 18. WARRANTY
Dasa-RI warrants the KYA and Associated Mechanisms will be built in accordance
with the SOW SHI-ICCS1002, and that the hardware furnished under this contract
will meet the requirements of specification PIDS ICC 97002 and will be free from
defects in materials furnished and workmanship performed by DasaRl.
Dasa-RI will correct any defective services and, at Dasa's option, repair or
replace with reasonable promptness any hardware items to be delivered under this
contract which are actually defective and only if prompt notice of such defects
in hardware items or services is given, and in no event later than 6 (six)
months from the date of final acceptance of these hardware items or services.
In the event Dasa-RI cannot repair or replace a defective hardware item in a
reasonable time, Dasa-RI shall return the price of such hardware item to
SPACEHAB.
SPACEHAB shall notify Dasa-RI in writing of any defect, within ten (10) working
days after discovery of such defect, and shall furnish relevant information with
respect thereto.
Repaired items, or services performed, shall be warranted only for the unexpired
portion of the warranty applicable to the original item or service. Replaced
items shall be warranted for 6 (six) months. Any other provision of this
contract to the contrary notwithstanding, this warranty is in lieu of all other
warranties, expressed or implied, including merchantability or fitness for any
particular purpose, whether arising by law, custom, conduct or usage of trade,
and the rights and remedies provided herein are exclusive and in lieu of any
other rights or remedies. In no event shall Dasa-RI be liable for incidental or
consequential damages arising out of a breach of this warranty.
This warranty does not extend to any item which has been subject to misuse,
neglect or accident after acceptance - unless caused by Dasa itself - nor does
it extend to any item which has been repaired or altered by other than Dasa-RI
personnel. Upon request, SPACEHAB shall furnish to Dasa-RI all information
available that the defect arose from causes other than those contained in the
preceding sentence.
This warranty shall be null and void if the hardware items are handled,
transported or stored under conditions outside of those specified in the
recommended handle of procedures and the consequences cannot be resolved through
subsequent testing and/or engineering analysis.
11
<PAGE> 12
ARTICLE 19. TERMINATION
SPACEHAB may, in case of major changes in the International Space Station
Program which would preclude the use of the ICC, terminate this contract. In the
event of termination, SPACEHAB will pay for completed work before this date as
well as cost of all work in process in accordance with Article 6, and reimburse
expenses incurred up to the date of termination in accordance with Articles 4
and 5 and to also pay the bonus payment mentioned in Article 4, section 2.
In the event SPACEHAB terminates this contract, Dasa-RI shall provide the
following items to SPACEHAB to determine proper restitution:
- - Detailed invoices of material expenditures including, but not limited to
procurement of long lead items.
- - Detailed list of all in-work and completed textual and graphic documents
created in the scope of this Contract.
- - Detailed list of all other expenditures made with the payments made by
SPACEHAB to Dasa-RI prior to termination of this Contract.
Termination of this contract does not terminate obligations of SPACEHAB and
Dasa-RI to comply with Articles 10 and 11.
ARTICLE 20. FORCE MAJEURE
The contractor shall be excused for delay in delivery and/or may suspend and to
the extent of 'force majeure' which shall include the occurrence or existence of
acts of god, war, the public enemy, mobilization, riot, strike, fire, flood,
embargoes, the acts or orders of Goveernments or political subdivisions thereof,
and other cases outside the cone actors responsibility and control which
adversely and materially prevents the contractor from performing hereunder.
As soon as cases of Force Majeure occur or come to the knowledge of the
contractor, contractor shall notify SPACEHAB without delay, giving details of
the cause, the possible effects, and how the situation could be improved.
Contractor shall have no responsibility whatsover to SPACEHAB or its customer
for any consequences arising out of a force Majeure event, unless such event was
foreseeable. In no event shall cone actor be liable for incidental or
consequential damages arising out of said event.
ARTICLE 21. GOVERNING LAWS
The laws of the Commonwealth of Virginia shall govern all provisions specified
by and performed under this contract.
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<PAGE> 13
ARTICLE 22. DISPUTE RESOLUTION
Any and all disputes hereunder shall be resolved by arbitration in the
Washington, D.C. metropolitan area pursuant to the arbitration rules of the
International Chamber of Commerce. The parties hereby agree that any arbitration
findings hereunder may be enforced in any U.S. Federal Court in Washington D.C.
or Virginia and the parties hereby consent to the jurisdiction of such courts
for such purpose.
ARTICLE 23. PROVISIONS FOR EXECUTION
Dasa-RI and SPACEHAB shall execute two (2) copies of this contract in English,
one for each parW.
SPACEHAB, INC.
By: ______________________ By: ______________________
Typed Name: ______________________ Typed Name: ______________________
Title: ______________________ Title: ______________________
Date: ______________________ Date: ______________________
<PAGE> 1
Exhibit 10.80
<TABLE>
<CAPTION>
TITLE DATE
<S> <C> <C>
PURCHASING OFFICE - BUREAU DES ACHATS OSTEOPOROSISI EXPERIMENTS IN ORBIT 21-May-98
Space Sciences and Communications Division/
Division des Sciences aerospatiales des CONTRACT NO. BUYER ID
Communication 9F007 - 7- 6671- 6671/001/ST 003st
11 Laurier St./11, rue Laurie
11C1, Place du Portage
Hull, Quebec K1A 0S5 CLIENT REFERENCE NO.
9F007 - 7- 6671
REQUISITION REFERENCE NO. DATE
9F007 -7-6671 21-May-98
FILE NO.
003st. 9F007-7-6671
CONTRACT - CONTRAT
YOU ARE REQUESTED to sell to Her Majesty the
Queen in right of Canada, in accordance with
the terms and conditions set out herein,
referred to herein or attached hereto, the
supplies and/or services listed herein and
on any attached sheets at the price or
prices set out therefor.
FINANCIAL CODE(S)
0301 5410 1434 2331 62602
NOUS VOUS DEMANDONS de vendre a Sa Majeste
la Reine du chef du Canada, aux conditions
enoncees ou incluses par reference dans les
presentes, et aux annexes ci-jointes, les
articles et/ou les services enumeres dans
les presentes, et sur toute feu il le
ci-annexee, au(x) prix indique(s).
F.O.B. - F.A.B.
Destination
GST/HST-TPS/TVH DUTY- DROITS
See Herein Included
DESTINATION -OF GOODS AND SERVICES:
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
SPACE AGENCY
RM 8
100 SUSSEX DR.
OTTAWA
Ontario
K1A0R6
CANADA
INVOICES - ORIGINAL AND TWO COPIES
TO BE SENT TO: For complete
Invoicing Instructions refer to the
Method of Payment clause specified
herein:
ATTENTION: Rose Spirito
ADDRESS ENQUIRIES TO: ROSE SPIRITO
TELEPHONE NO FAX NO.
(819) 956-1389 (819) 997-2229
TOTAL ESTIMATED COST- CURRENCY TYPE-DEVISE
$570,000.00 USD
FOR THE MINISTER - POUR LE MINISTRE
The vendor hereby accepts/acknowledges this
contract. Le Foumisseur accepts le present
contract/en accuse reception.
SIGNATURE DATE
Name, tide of person authorized to sign
(type or print) Nom et titre du signataire
autorise (caractere d' impression)
COMMENTS - COMMENTAIRES
The Provision of Technical Support for STS-95
Osteoporosis Experiments in Orbit
Vendor Name and Address
Raison socials et adresse du fournisseur
X2987
SpaceHab, Inc.
1331 Gemini Avenue
Houston, Texas
77058
United States
PURCHASING OFFICE:
OSTEOPOROSISI EXPERIMENTS IN ORBIT 21-May-98
CONTRACT NO. BUYER ID
9F007 - 7- 6671/001/ST 003 st
CLIENT REFERENCE NO.
9F007 - 7- 6671
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
REQUISITION REFERENCE NO. DATE
9F007 -7-6671 21 - May-98
FILE NO.
003st. 9F007-7-6671
FINANCIAL CODE(S)
0301 5410 1434 2331 62602
F.O.B. - F.A.B.
Destination
GST/HST-TPS/TVH DUTY- DROITS
See Herein Included
DESTINATION -OF GOODS AND SERVICES:
CANADIAN SPACE AGENCY
RM 8
100 SUSSEX DR.
OTTAWA
Ontario
K1A0R6
CANADA
INVOICES - ORIGINAL AND TWO COPIES
TO BE SENT TO:
For complete Invoicing Instructions
refer to the Method of Payment
clause specified herein:
ATTENTION: Rose Spirito
ADDRESS ENQUIRIES TO: ROSE SPIRITO
TELEPHONE NO FAX NO.
(819) 956-1389 (819) 997-2229
TOTAL ESTIMATED COST- CURRENCY TYPE-DEVISE
$570,000.00 USD
</TABLE>
FOR THE MINISTER - POUR LE MINISTRE
<TABLE>
<S> <C> <C>
Contract No. - N. du contest Amd. No. - N. de la modif. Buyer ID - ID de l'acheteur
9F007-7-6671/001/ST 003ST
Client Ref. No File No. - N. du dossier CCC Client ref. No. - CCC N. de reef. du client
9F007-7-6671 003ST9F007-7-6671
</TABLE>
CLAUSES AND CONDITIONS
<PAGE> 4
SECTION A: INTRODUCTION
SECTION B: REQUIREMENT
SECTION C: AUTHORITIES
SECTION D: PAYMENT
SECTION E: OTHER TERMS AND CONDITIONS
SECTION A: INTRODUCTION
CONTRACT TITLE:
The Provision of Technical Support for STS-95
OSTEOPOROSIS EXPERIMENTS IN ORBIT
STANDARD INSTRUCTIONS AND CONDITIONS
REVISION OF DEPARTMENTAL NAME
Reference to the Minister of Supply and Services or to the Department of Supply
and Services contained in any term, condition or clause of this contract shall
be interpreted as a reference to the Minister of Public Works and Government
Services or to the Department of Public Works and Government Services, as the
case may be.
STANDARD ACQUISITION CLAUSES AND CONDITIONS MANUAL
All instructions, general terms, conditions and clauses identified herein by
title, number and date are set out in the Standard Acquisition Clauses and
Conditions (SACC) Manual, issued by the Department of Public Works and
Government Services (DPWGS), bearing Catalogue No. P60-4/1-1991E and revised as
of 16 February 1998.
The SACC Manual may be obtained from the Government of Canada, Communication
Co-ordination Services Branch, telephone (819) 9564800, and may also be viewed
on the Government Electronic Tendering Service (GETS), provided by MERX,
telephone: 1 - 800 - 964 - 6379, Internet Address: http : // www.merx.
cebra.com. m e r x . c e b r a . c o m .
<PAGE> 5
<TABLE>
<S> <C> <C>
Contract No. - N. du contest Amd. No. - N. de la modif. Buyer ID - ID de l'acheteur
9F007-7-6671/001/ST 003ST
Client Ref. No File No. - N. du dossier CCC Client ref. No. - CCC N. de reef. du client
9F007-7-6671 003ST9F007-7-6671
</TABLE>
TERMS AND CONDITIONS OF CONTRACT
1. Pursuant to the Department of Public Works and Government Services Act,
S.C.1996, c.16,
(a) the general terms, conditions and clauses identified herein by
title, number and date, are hereby incorporated by reference
into and form part of this contract, as though expressly set
out herein, subject to any other express terms and conditions
herein contained.
(b) the "Conditions" set out in part B of the Standard
Instructions and Conditions DSS-MAS 9403-5 (09/97)
Professional and Research and Development Services set out in
the SACC Manual are hereby incorporated by reference into and
form part of this Contract.
GENERAL CONDITIONS. DSS-MAS 9624
General Conditions- Research and Development, DSS-MAS 9624(16/02/98), with the
following modifications, SHALL APPLY TO AND FORM PART OF THIS CONTRACT.
1. K341 OD (04/01/94) CANADA TO OWN FOREGROUND INFORMATION
2. K001 7C (04/01/94) General Conditions- Research and Development,
DSS-MAS 9624; and
3. SUPPLEMENTAL to articles 28 and 29 of General Conditions Research and
Development, DSS-MAS 9624(16/02/98):
1) The Contractor may, by giving written notice to Canada,
terminate this Contract:
a) in the event Canada delivers any payload described in the
Statement of Work so late beyond the mutually agreed upon
delivery date that the Contractor is unable to process such
payload in time to meet the launch schedule, or as a result of
breach by Canada if Canada has not cured the breach within a
reasonable time after written notice to Canada or immediately
in the case of a non-curable breach;
b) as a result of any action or inactions by NASA which prevents
the manifesting of the Exhibit A experiment on STS-95
2) Subject to subsection 3, upon the giving of a notice provided
for in paragraph (1) (a), the Contractor shall retain all
payments made by Canada to the date of termination and Canada
may be further liable for all costs incurred by the Contractor
as a result of such failure or breach of the Contract. Subject
to subsection 3, upon the giving of a notice provided for in
paragraph (1)(b), the Contractor shall be entitled to all
applicable payments hereunder received, plus the Integration
and Optional Services (if any) actual costs incurred up to the
time of termination, as well as termination charges which may
be imposed by third parties, such as NASA or subcontractors.
3) Notwithstanding anything in subsection (2), the total of the
amounts to which the Contractor is entitled under subsection
(2), together with any amounts paid or due or becoming due to
the Contractor under other provisions of the Contract, shall
not exceed the Contract Price."
<PAGE> 6
<TABLE>
<S> <C> <C>
Contract No. - N. du contest Amd. No. - N. de la modif. Buyer ID - Id de l'acheteur
9F007-7-6671/001/ST 003ST
Client Ref. No File No. - N. du dossier CCC Client ref. No. - CCC N. de reef. du client
9F007-7-6671 003ST9F007-7-6671
</TABLE>
SECTION B: REQUIREMENT
PRIORITY OF DOCUMENTS
The documents specified below form part of and are incorporated into this
Contract. If there is a discrepancy between the wording of any other document
which appears on the list, the wording of the document which first appears shall
prevail over the wording of any document which subsequently appears on the list:
1) these articles of agreement;
2) General Conditions- Research and Development, DSS-MAS 9624 (16102198);
3) Annex "A", Statement of Work
4) Annex "B", Disclosure Certification
5) Annex "C", Treasury Board Travel and Living Guidelines
6) Claim for Progress Payment, Form DSS 1111 (2/90)
7) The Contractor's proposal dated March 25, 1998 submitted to Public Works
and Government Services Canada (PWGSC) in response to the Request for
Proposal (RFP) dated March 18, 1998.
PERIOD OF CONTRACT
The Contract is in effect from (DATE OF AWARD PENDING PWGSC AUTHORIZATION) TO
DECEMBER 31. 1998 OR 30 DAYS FOLLOWING THE STS-95 LANDING. WHICHEVER IS LATER
inclusive.
PRIOR RIGHTS AND OBLIGATIONS
1. The Work undertaken by the Contractor from the 22 DAY OF OCTOBER, 1997 to
the date hereof shall be considered to have been undertaken solely in
support of its obligations and undertakings herein contained, and the
benefits of this Precontractual Work shall vest in and remain the property
of Canada from the date of the Contract. All rights moral and otherwise,
title, and interest in and to the technical data, intellectual property,
patents and trademarks, inventions and acquisitions, except as otherwise
provided in the Contract, shall be and are hereby transferred and assigned
irrevocably to Canada.
2. In consideration of the foregoing, the Contractor shall be paid a sum for
such Precontractual work calculated in accordance with the Basis of
Payment herein
<PAGE> 7
<TABLE>
<S> <C> <C>
Contract No. - N. du contest Amd. No. - N. de la modif. Buyer ID - Id de l'acheteur
9F007-7-6671/001/ST 003ST
Client Ref. No File No. - N. du dossier CCC Client ref. No. - CCC N. de reef. du client
9F007-7-6671 003ST9F007-7-6671
</TABLE>
and the said sum shall form part of Canada's liability to the Contractor as set
forth UNDER the Limitation of Expenditure.
STATEMENT OF WORK
The Contractor shall perform the Work as outlined in the Statement of Work
attached hereto as Annex "A" and in accordance with the Contractor's technical
and management portions of the Contractor's proposal dated March 25, 1998, and
forming part of this Contract.
DELIVERABLES:
All deliverables must be received by the Scientific Authority
on/before 31 DECEMBER 1998, OR 30 DAYS FOLLOWING THE STS-95 LANDING.
WHICHEVER IS LATER
The Contractor shall deliver to the Scientific Authority at the place and time
designated hereunder the sunder as detailed in the Statement of Work attached
hereto as Annex "A".
DELIVERABLES DELIVERY DATE
VARIOUS TASK REPORTS Dates as noted in Annex A
(refer to the Statement of Work)
POST FLIGHT REPORT -
FINAL/PROJECT REPORT on or before 31 December 1998, or
(see Item 1 hereunder) 30 DAYS FOLLOWING THE STS-95
LANDING, WHICHEVER IS LATER
DISCLOSURE CERTIFICATION
(see Item 2 hereunder)
The Contractor shall notify the Science Contracting Officer. in writing. once
these items have been delivered.
<PAGE> 8
<TABLE>
<S> <C> <C>
Contract No. - N. du contest Amd. No. - N. de la modif. Buyer ID - Id de l'acheteur
9F007-7-6671/001/ST 003ST
Client Ref. No File No. - N. du dossier CCC Client ref. No. - CCC N. de reef. du client
9F007-7-6671 003ST9F007-7-6671
</TABLE>
1. FINAL REPORT - (Post Flight Report)
A final report in electronic format with five (5) hard copies shall be
submitted to the Scientific AUTHORITY ON OR BEFORE 31 DECEMBER 1998, OR 30
DAYS FOLLOWING THE STS-95 LANDING, WHICHEVER IS LATER. It must be a
comprehensive report on all facets of the Work and must include sufficient
drawings, sketches, photographs and a discussion of problems and successes
associated with the Work to facilitate a full and accurate evaluation of
the Work by the Scientific Authority. The report will be prepared in
accordance with good engineering/professional practices and will include,
as a minimum, the following: a title page, a table of contents, an
executive summary, an introduction, a technical discussion with
conclusions and include, as applicable, supporting graphs, tables and
figures.
NOTE:
One copy of the title page of the final report shall be submitted to the Science
Contracting Officer.
DISCLOSURE CERTIFICATION
On completion of the Work under this Contract, the Contractor shall submit a
certification to the Scientific Authority and to the Science Contracting Officer
stating that all applicable disclosures were submitted or that there were no
disclosures to submit under section 22 of General Conditions - Research and
Development, DSS-MAS 9624. A copy of a Disclosures Certification is attached as
ANNEX "B".
<PAGE> 9
<TABLE>
<S> <C> <C>
Contract No. - N. du contest Amd. No. - N. de la modif. Buyer ID - Id de l'acheteur
9F007-7-6671/001/ST 003ST
Client Ref. No File No. - N. du dossier CCC Client ref. No. - CCC N. de reef. du client
9F007-7-6671 003ST9F007-7-6671
</TABLE>
3. GOVERNMENT FURNISHED HARDWARE/INFORMATION -
NON-CONSUMABLE EQUIPMENT AND MATERIAL
(Cross- reference with Annex "A", Statement of Work, Section 3.0
entitled "CANADIAN SPACE AGENCY RESPONSIBLILITIES")
The Crown will provide the Contractor with access to the appropriate
equipment required in performance of the work for this contract as noted
in Annex "A under item 3 "CANADIAN SPACE AGENCY RESPONSIBLILITIES".
The Contractor shall take reasonable and proper care of all non-consumable
equipment and material charged against this Contract while it is in the
possession of the Contractor. Concurrently with the submission of the
final report, the Contractor shall provide the Scientific Authority with a
detailed list of all such equipment and material and request disposal
instructions.
A copy of the list shall also be forwarded to the Science Contracting
Officer.
THE CONTRACTOR SHALL NOTIFY THE SCIENCE CONTRACTING OFFICER, IN WRITING, ONCE
THESE ITEMS HAVE BEEN DELIVERED.
INSPECTION AND ACCEPTANCE: WORK PERFORMED UNDER THIS CONTRACT SHALL BE SUBJECT
TO INSPECTION AND ACCEPTANCE BY THE SCIENTIFIC AUTHORITY DESIGNATED HEREIN.
<PAGE> 10
<TABLE>
<S> <C> <C>
Contract No. - N. du contest Amd. No. - N. de la modif. Buyer ID - Id de l'acheteur
9F007-7-6671/001/ST 003ST
Client Ref. No File No. - N. du dossier CCC Client ref. No. - CCC N. de reef. du client
9F007-7-6671 003ST9F007-7-6671
</TABLE>
provided that:
(a) the Contractor submits a claim for payment on form DSS-MAS 1111,
Claim for Progress Payment. A sample is attached as Annex "C";
(b) all of the certificates appearing on the said form are signed by the
respective persons indicated thereon or their delegate; and
(c) all reports required for the milestone claimed have been received
and accepted by the Scientific Authority.
2. The claim must show the following:
(a) amount currently claimed;
(b) total of all previous claims against the Contract and the extensions
of the total to date; Requisition Number (RN), Financial Code (FC),
and Contract Number as shown on page 1 of this Contract.
3. The Contractor shall prepare and certify an original and four (4) copies
of its claim on form DSS-MAS 1111. The claim will be forwarded to the
ScienceContracting Officer who will certify the claim and forward it to
the Scientific Authority for certification and payment.
4. The balance of the amount payable will be made following:
(a) delivery and acceptance of all deliverable items; (b) the approval
of the final claim by the Science Contracting Officer and by the
Scientific Authority.
5. Payment by Canada to the Contractor for the Work shall be made:
(a) In the case of a milestone payment other than the final payment,
within thirty (30) days following the date of receipt of a duly
completed milestone claim on form DSS-MAS 1111;
(b) in the case of a final payment, within thirty (30) days following
the date of receipt of a duly completed final milestone claim, on
form DSS-MAS 1111, or within thirty (30) days following the date on
which the Work is completed, whichever date is the later;
<PAGE> 11
<TABLE>
<S> <C> <C>
Contract No. - N. du contest Amd. No. - N. de la modif. Buyer ID - Id de l'acheteur
9F007-7-6671/001/ST 003ST
Client Ref. No File No. - N. du dossier CCC Client ref. No. - CCC N. de reef. du client
9F007-7-6671 003ST9F007-7-6671
</TABLE>
(c) if Canada has any objection to the form of the milestone claim, within
fifteen (15) days of its receipt, Canada shall notify the Contractor of
the nature of the objection. "Form of the claim" means a claim which
contains or is accompanied by such substantiating documentation as Canada
requires. Failure by Canada to act within fifteen (15) days will only
result in the date specified in subparagraphs 5(a) and (b) of this clause
applying for the sole purpose of calculating interest on overdue accounts.
SECTION E: OTHER TERMS AND CONDITIONS
WORK FORCE REDUCTION PROGRAMS
1. It is a term of this contract:
(a) that the Contractor has declared to the Contracting Authority
whether the Contractor has received a lump sum payment made pursuant
to any work force reduction program, including but not limited to
the Work Force Adjustment Directive, the Early Departure Incentive
Program, the Early Retirement incentive Program or the Executive
Employment Transition Program, which has been implemented to reduce
the public service;
(b) that the Contractor has informed the Contracting Authority of the
terms and conditions of that work force reduction program, pursuant
to which the Contractor was made a lump sum payment, including the
termination date, the amount of the lump sum payment and the rate of
pay on which the lump sum payment was based; and
(c) that the Contractor has informed the Contracting Authority of any
exemption in respect of the abatement of a contract fee received by
the Contractor under the Early Departure Incentive Program Order or
paragraph 4 of Policy Notice 1995-8, of July 28, 1995.
2. The Contractor represents and warrants that the information
submitted with its bid is accurate and complete. The Contractor
acknowledges that the Minister has relied upon such representation
to enter into this Contract. Such representation may be verified in
such manner as the Minister may reasonably require.
3. The Contractor acknowledges that in the event of a breach of such
covenant. the Minister shall have the right to rescind the Contract.
4. Nothing in this clause shall be interpreted as limiting the rights
and remedies which Canada or the Minister may otherwise have in
relation to or pursuant to this Contract.
<PAGE> 12
<TABLE>
<S> <C> <C>
Contract No. - N. du contest Amd. No. - N. de la modif. Buyer ID - Id de l'acheteur
9F007-7-6671/001/ST 003ST
Client Ref. No File No. - N. du dossier CCC Client ref. No. - CCC N. de reef. du client
9F007-7-6671 003ST9F007-7-6671
</TABLE>
INTERNATIONAL SANCTIONS
1. Persons and companies in Canada are bound by economic sanctions imposed by
Canada by regulations passed pursuant to the United Nations Act,
R.S.C. 1985, c.U-2, the Special Economic Measures Act, S.C. 1992, c.
17 or the Export and Import Permits Act, R.S.C. 1985, c. E-19. As a
result, the Government of Canada cannot accept delivery of goods or
services that originate, either directly or indirectly, from the
countries subject to economic sanctions. As of this date, the
following regulations implement economic sanctions:
(a) United Nations Iraq Regulations;
(b) United Nations Libya Regulations;
(c) United Nations Federal Republic of Yugoslavia (Serbia and
Montenegro) Regulations.
2. It is a condition of this Standing Offer and of any ensuing
call-ups, if any, that the Offeror not supply to the Government of
Canada any goods or services which are subject to economic sanctions
as described in paragraph 1 above.
3. During the performance of any call-up under the Standing Offer,
should the addition of a country to the list of sanctioned countries
or the addition of a good or service to the list of sanctioned goods
and services prevent the Offeror from performing all or part of its
obligations pursuant to a call-up made against this Standing Offer,
the Offeror shall treat the situation as a force majeure. The
Offeror shall forthwith inform Canada of the situation and follow
the procedures applicable to force mature.
APPLICABLE LAWS
This Contract shall be interpreted and governed, and the relations between the
Parties, determined by the laws in force in ONTARIO.
C0101D 01/05/96 DISCRETIONARY AUDIT
<PAGE> 13
ANNEX "A"
PAGE 1 OF 9
STATEMENT OF WORK
OSTEOPOROSIS EXPERIMENTS ORBIT
1.0 INTRODUCTION
This project consists of a suite of three Canadian experiments examining the
effects of the space environment on bone cell activity utilising a Canadian bone
cell culture system (OSTEO). The hardware contractor, Millenium Biologix Inc.,
Kingston, Ontario, produces a commercial product that is being used to perform
the cell culture experiments and has adapted their terrestrial procedure for
spaceflight. As well, industry support has been attracted and Allelix
Biopharmaceuticals Inc., Mississauga, Ontario, is supporting its own experiment
and science team.
For STS-95, SPACEHAB has been contracted as sole agent by the National
Astronautics and Space Administration, NASA, to commercialize a portion of the
SPACEHAB resources on the Space Shuttle to all international partners as well as
others.
This document defines the Statement of Work for the integration of the OSTEO
hardware aboard the SPACEHAB mission STS-95 utilizing a MIDDECK locker, the
launch and operation of the OSTEO hardware by trained crew during orbit, return
of the hardware to the launch site and the de-integration of the OSTEO hardware
and return of hardware to the Crown.
SPACEHAB will provide, times, and locations set forth in the following document,
the supplies, and services described in the Statement of Work for a payload
chargeable mass not to exceed 35 kg.
2.0 TASKS
1. SPACEHAB SHALL PROVIDE THE NECESSARY FACILITIES, FUNCTIONS, AND
DOCUMENTATION FOR THE OPERATION OF THE OSTEO EXPERIMENTS ON BOARD STS-95.
SPACEHAB will negotiate and execute all agreements with NASA, which are
required to manifest OSTEO onboard STS-95 in the MIDDECK.
2. PROVISION OF OSTEO INTERFACE DEFINITION AND ANALYTICAL INTEGRATION.
SPACEHAB will assess the Crown-developed hardware data, performance
analyses, and SPACEHAB subsystem resource requirements and perform the
following experiment requirements and analysis tasks:
<PAGE> 14
\ ANNEX "A"
PAGE 2 OF 9
STATEMENT OF WORK
OSTEOPOROSIS EXPERIMENTS IN ORBIT
a) Development and maintenance of the core SPACEHAB/OSTEO Interface
Control Documents (ICD); the respective ICD Appendix A (Ground
Operations Interface Requirements); the respective ICD Appendix B
(Safety Verification Requirements); and the respective ICD Appendix
C (Flight Operations Interface Requirements).
b) Development of OSTEO stowage requirements.
c) Analysis of all OSTEO tesVanalytical data as they pertain to the
physical (structural) interface with a MIDDECK locker
d) Performance of OSTEO's mass/centre of gravity (c.g.) analysis:
e) Performance of OSTEO's materials analysis.
f) Performance of OSTEO's resource requirements assessment.
3. PROVISION OF MISSION ANALYTICAL INTEGRATION.
Based upon OSTEO's data and operational requirements, provided by the
Crown, SPACEHAB will locate OSTEO in a MIDDECK locker within the
Shuttle/SPACEHAB pressurised volume (with a compatible complement of
payloads), will integrate OSTEO's resource requirements and safety data
with those of other payloads, and will develop flight procedures and
timelines for operation of OSTEO in-orbit. Specifically, SPACEHAB will
perform the following mission integration tasks for the Crown:
a) Development of an integrated Mission Requirements and
AllocationsDocument (MRAD) which incorporates the MIDDECK or
SPACEHAB module and Shuttle mission resource requirements necessary
for successful imlementation of all of OSTEO's objectives.
b) Development and submittal to NASA of the required Shuttle programme
documentation data as they pertain to OSTEO's requirements for
Shuttle resources.
<PAGE> 15
ANNEX "A"
PAGE 3 0F 9
STATEMENT OF WORK
OSTEOPOROSIS EXPERIMENTS IN ORBIT
c) DEVELOPMENT AND IMPLEMENTATION OF AN INTEGRATED CREW TRAINING PLAN which
includes documentation requirements for OSTEO's flight crew training,
scheduling of all OSTEO's crew training sessions with the NASA Training
Co-ordinator, Co-ordination of all OSTEO's training sessions with the
Crown OSTEO PROJECT MANAGER, and direction of all integrated timeline
training session at the SPACEHAB Payload Processing Facility (SPPF).
d) Development and production of a flight-qualified Experiment Operation/
checklist (EOC) for onboard use by the flight crew.
e) Development of OSTEO's crew activity timeline inputs for inclusion
by NASA in the integrated Shuttle Crew Activity Plan. and production
of a flight-qualified Experiment Operations Checklist (EOC) for
onboard use by the flight crew.
f) Integration of the Crown-provided OSTEO flight and ground safety
data
g) into mission safety packages for review by the NASA Flight and
Ground Payload Safety Review Boards.
h) Representation of the Crown and OSTEO to NASA at all NASA payload
integration process forums and meetings, payload safety reviews.
4. PROVISION OF HARDWARE PHYSICAL INTEGRATION AND REINTEGRATION.
This task involves the physical integration and Reintegration of the OSTEO
MIDDECK locker to the Shuttle MIDDECK interface bulkhead. SPACEHAB will provide
both the MIDDECK Locker and foam insert for the OSTEO MIDDECK Locker. (the Crown
will integrate the OSTEO experiment components into the SPACEHAB-provided
MIDDECK locker using SPACEHAB-provided foam.) The task also includes logistics
and ground operations planning, ground procedures development, integrated
schedule development, hardware physical installation and removal and the Crown
personnel accommodation. The physical payload integration activities not
performed by the Crown personnel in Canada associated with this function will be
performed either within the SPPF at Cape
<PAGE> 16
ANNEX "A
PAGE 4 OF 9
STATEMENT OF WORK
OSTEOPOROSIS EXPERIMENTS IN ORBIT
Canaveral, Florida or on the Kennedy Space Centre grounds. Specifically,
SPACEHAB will provide to the Crown the following services:
a) DESIGN AND FABRICATION OF THE FOAM REQUIRED TO SAFELY SECURE THE OSTEO
experiment inside a MIDDECK locker.
b) Coordination of shipping and receiving of OSTEO training hardware to and
from Canada to the SPPF, Marshall Space Flight Centre, or Johnson Space
Centre (JSC), wherever training activities may occur.
The Crown is responsible for shipping training hardware to the SPPF;
SPACEHAB is responsible for returning the training hardware to the Crown.
Customs coordination will be performed by SPACEHAB personnel. For training
activities at Johnson Space Centre or Marshall Space Flight Centre,
SPACEHAB personnel will arrange for transportation between the SPPF and
the specific training site. However, the hardware must not be out the SPPF
inventory for over 1 20 days.
c) Coordination of shipping and receiving of OSTEO flight hardware from
Canada to the Kennedy Space Centre, if the Crown is unable to perform
flight preparation activities in Canada.
The Crown is responsible for shipping flight hardware to and from the
SPPF. Customs coordination will be performed by SPACEHAB personnel.
d) Provision of a Customer Work Area at the SPPF, with the necessary security
and administrative/laboratory equipment for the Crown to control, store,
and prepare for flight all OSTEO parts, experiment materials and
supporting equipment. This provision will only be required if the Crown is
unable to perform flight preparation activities in
e) Provision of a Customer Work Area during the mission for the maintenance
by the Crown of the OSTEO ground control hardware and experiments.
f) Provision at the SPPF or JSC for access to a high fidelity mockup of the
MIDDECK or the SPACEHAB module for use in OSTEO interface checks and in
integrated timeline training with the flight crew.
<PAGE> 17
ANNEX "A"
PAGE 5 OF 9
STATEMENT OF WORK
OSTEOPOROSIS EXPERIMENTS IN ORBIT
g) INTEGRATION OF OSTEO MIDDECK LOCKER INTO SHUTTLE MIDDECK AND performance
of MIDDECK resource accommodations InterfaceVerification Test (IVT).
5. PROVISION FOR FLIGHT OPERATIONS SUPPORT
For the Flight Phase, SPACEHAB will provide accommodations for the
Crown management, technical, and scientific personnel in the Mission
Control Centre (MCC) at NASA's JSC. The following services will be
provided at the MCC:
a) Physical accommodations, orientation, and training for
personnel to monitor real-time operations during the
Pre-launch, Flight, and Post-landing phases of the STS-95
mission.
b) Voice and video data as required to monitor and control the
progress of OSTEO operations throughout the duration of the
mission.
c) Provision of a Mission Console Handbook which provides
administrative, technical, and logistics information about
OSTEO and other experiments aboard the SPACEHAB module as well
as about the cadre of NASA, the Crown, and SPACEHAB personnel
supporting the mission.
d) Administrative services for acquiring/copying and routing of
mission-related data and correspondence to local and remote
sites.
6. PROVISION OF SUPPORT TO POST-FLIGHT DATA ANALYSIS
SPACEHAB will provide or coordinate the timely provision (not more
than 30 days post-landing) of the required historical OSTEO flight
data including MIDDECK or SPACEHAB module environmental data and
as-flown timeline information in support of OSTEO post-flight
analysis activities.
<PAGE> 18
ANNEX "A"
PAGE 6 OF 9
STATEMENT OF WORK
OSTEOPOROSIS EXPERIMENTS IN ORBIT
7. PROVISION OF FURTHER SERVICES
SPACEHAB will acquire from NASA the following services required by the
Crown to achieve OSTEO's experimental objectives:
a) SPACEHAB will negotiate with NASA to have the OSTEO payload stowed
in a MIDDECK locker in the Orbiter MIDDECK.
b) Provision by SPACEHAB to arrange pre-launch baggage and customs
clearance for the Crown personnel at KSC.
c) Perform OSTEO e.g. and weight assessment and evaluation of
verification test documentation provided by the Crown personnel, at
KSC.
d) Provision by SPACEHAB of powered transport of the flight ready OSTEO
for late installation into the Launch Vehicle.
e) Provision by SPACEHAB of the installation of OSTEO into the MIDDECK
during the latest allowable period prior to Shuttle launch. This
includes the performance of an electrical Interface Verification
Test after OSTEO is installed in the MIDDECK locker.
f) Provision by SPACEHAB to perform an OSTEO experiment maintenance
procedure in the event of a scrub and a decision by the Crown to
maintain the OSTEO flight unit onboard the Launch Vehicle.
g) Provision by SPACEHAB of support to all the required launch
scrub/turnaround activities at the launch site.
8. PROVISION OF OSTEO PROJECT MANAGEMENT
SPACEHAB will provide the following OSTEO project management personnel and
methods to organize, schedule, and manage the provision of the services
previously described:
<PAGE> 19
ANNEX "A"
PAGE 7 0F 9
STATEMENT OF WORK
OSTEOPOROSIS EXPERIMENTS IN ORBIT
a) SPACEHAB will designate a SPACEHAB Contract Development and Implementation
Manager (CDIM) who will be responsible for coordinating with the Crown all
financial, scheduling, implementation progress reporting and policy
matters relating to this contract. The CDIM will:
1. Coordinate SPACEHAB inputs to the development and maintenance
of this contract with the Crown personnel, as required.
2. Establish methods for communication of contract implementation
activities between Spacehab and the Crown (teleconferences,
email lists, key meetings).
b) SPACEHAB will designate a SPACEHAB OSTEO Payload Coordinator (PC)
for the OSTEO project. The PC will:
1. Be the principle SPACEHAB advocate for the successful flight
of OSTEO.
2. Be responsible for coordinating with SPACEHAB, the Crown, and
NASA, all technical points of contact and resources of all
SPACEHAB support related to the technical and operations
implementation of the services described above.
3. Be responsible for the identification and resolution of all
technical and operational issues pertaining to the flight of
the OSTEO payload.
9. PROVISION OF OSTEO PROJECT REPORTING
In order to facilitate the routine exchange of mission integration
and scheduling information and a team-oriented approach to problem
identification and resolution, the following methods of
communication will be established:
a) The PC will hold weekly (or as required) teleconferences with key
project participants to plan and/or assess status of integration
activities and to solve issues.
<PAGE> 20
ANNEX "A"
PAGE 8 OF 9
STATEMENT OF WORK
OSTEOPOROSIS EXPERIMENTS IN ORBIT
b) The PC will develop and maintain a detailed, date specific OSTEO
Integration Milestones Template, which identifies all key deliverables as
well as all key mission preparation milestones.
c) The SPACEHAB CDIM will provide regular reports (verbal or written as
appropriate) to the Crown on the status of the OSTEO mission integration
activities.
3.0 CANADIAN SPACE AGENCY RESPONSIBILITIES
The Crown will provide, in a timely manner, (to be negotiated) the
following:
1. Timely selection and identification of all OSTEO hardware and materials
for flight. All OSTEO hardware and experiment materials shall conform to
established NASA payload safety requirements documentation and will be
subject to review and approval by the NASA Flight and Ground Safety Review
Boards.
2. Identification of a the Crown OSTEO Project Manager who will provide
timely coordination with the SPACEHAB PC in the development of the OSTEO
Experiment Requirements Document, Functional Objectives and flight and
ground operations protocols and procedures.
3. Timely delivery of the following Government Furnished Equipment
a) flight-ready OSTEO hardware complete with documentation b) OSTEO
hardware and materials to the SPPF for pre-flight processing.
4. Support to meetings, teleconferences, flight crew training sessions,
integrated mission simulations and real-time mission operations.
5. Designation of the Crown technical points of contact that will be
responsible for coordinating with SPACEHAB PC all technical activities to
be performed under this contract.
<PAGE> 21
ANNEX "A"
PAGE 9 0F 9
STATEMENT OF WORK
OSTEOPOROSIS EXPERIMENTS IN ORBIT
4.0 LIST OF DELIVERABLES
The following are a list of deliverables required from SPACEHAB.
<TABLE>
<CAPTION>
ITEM QUANTITY DUE DATE
<S> <C> <C>
1. Jointly signed agreement, COMMERCIAL REQUIREMENTS
DOCUMENT, between NASA and SPACEHAB to provide OSTEO
Space Shuttle Transportation on STS-95
2. SPACEHAB/OSTEO Interface Control Documents 3 copies March 31, 1998
3. Integrated Mission Requirements and Allocations
Documents
4. MISSION TRAINING PLAN
5. Flight-qualified Experiment Operations Checklist
6. Integration hardware as may be required for OSTEO
interfaces with MIDDECK locker. (i.e. foam packaging)
7. Customer Work Area at the SPPF.
8. Access to a high fidelity mockup of MIDDECK locker
9. Report on the Interface Verification Test.
10. Accommodation and orientation for the CROWN personnel
in the JSC MCC
11. Voice and video data required to monitor OSTEO
operations.
12. Historical OSTEO flight data including environmental
data from the MIDDECK locker location.
13. Mission Console Handbook. 5 copies
14. POST FLIGHT REPORT- Landing + 30 days. 5 copies
</TABLE>
5.0 SCHEDULE
See SPACEHAB/OSTEO - INTEGRATED CONTROL DOCUMENTS (ICD)
<PAGE> 22
ANNEX "B"
INTELLECTUAL PROPERTY DISCLOSURE CERTIFICATION
This form is to be completed and signed by the Contractor upon completion of the
contract and returned to:
ROSE SPIRITO, Science Contracting Officer Science Directorate,
Public Works and Government Services Canada Place du Portage,
Phase III, floor 11C1 11 Laurier Street,
Hull, Quebec K1A 0S5
Contract Title: The Provision of Technical Support for STS-95 OSTEOPOROSIS
EXPERIMENTS IN ORBIT"
Contract Number: 9F007-7-6671/001/ST the Crown-Client
Reference Number: 9F007-7-6671
It is a term of the referenced contract that, regardless of its ownership, all
Foreground Information' that could be Inventions' and all other Foreground
Information, shall be promptly and fully disclosed to Canada.
defined in the General Conditions identified in the Contract
CONSEQUENTLY, THE UNDERSIGNED, BEING A DULY AUTHORIZED OFFICER OF THE
CONTRACTOR, CERTIFIES THAT DURING THE TENURE OF THE CONTRACT (MARK APPROPRIATE
BOX):
[ ] No Foreground Information was conceived, developed or produced as part of
the Work and, therefore the Contractor has nothing to disclose.
[ ] All Foreground Information which was conceived, developed or produced as
part of the Work was fully disclosed and documented in the technical
reports delivered by the Contractor to the Technical Authority designated
in the Contract, and the Contractor has nothing further to disclose.
[ ] All Foreground Information conceived, developed or produced as part of the
Work by the Contractor is hereby fully disclosed in the attached document.
Signature:
--------------------------------
Print Name:
-------------------------------
Title:
----------------------------
COMPANY/CONTRACTOR NAME: SPACEHAB INC.
Date:
-----------------------------------
<PAGE> 1
Exhibit 10.81
GEMINI OFFICE BUILDING
LEASE AGREEMENT
THIS LEASE is made and entered into this 14th day of January 1998, by
and between PUGET OF TEXAS, INC., a Texas corporation (the "Landlord"), and
SPACEHAB, a Texas corporation (the "Tenant").
W I T N E S S E T H
ARTICLE 1
1.01 PREMISES. Landlord hereby leases to Tenant, and Tenant hereby
leases from Landlord, for the rent and subject to the provisions of this Lease,
the space (the "Premises") reflected on the floor plan(s) attached hereto as
Exhibit "A", which shall be designated as Suite 300, located on floor three of
the building known as the Gemini Office Building (the "Buildings), located at
1331 Gemini Street, Clear Lake City, Harris County, Texas (such Building, any
parking areas and garages, the land on which such improvements are located, and
any present or future associated underground or elevated pedestrian tunnels or
walkways being hereinafter collectively referred to as the "Project"). The legal
description of the land on which the Building is situated is attached hereto
marked as Exhibit "D" and incorporated herein by this reference.
Landlord and Tenant hereby agree that the Premises contains 14,642.66
square feet of net rentable area. Landlord and Tenant hereby stipulate to the
foregoing definition of the rentable area whether the same shall be more or less
as a result of minor variations resulting from the actual construction and
completion of the Premises for occupancy. The rentable area includes the floor
area in the Building available for the exclusive use of Tenant, and a
proportional allocation of the floor area of the Building and other Building
areas available for the non-exclusive use of Tenant together with other tenants
in the Building including, without limitation, entrance lobbies, fire-rated exit
corridors, elevator lobbies and mechanical rooms.
ARTICLE 2
2.01 TERM. Subject to the other provisions hereof, this Lease shall be
for a term of five 15) years commencing on March 1, 1998 (the "Commencement
Date") and expiring on February 28, 2003 (the "Expiration Date"). Such term, as
it may be modified, is herein called the "Term".
2.02 COMMENCEMENT. Subject to Article 2.03 hereof, if on the
Commencement Date any of the work described in Exhibit "B" attached hereto and
made a part hereof for all purposes, that is required to be performed by
Landlord at Landlord's expense has not been substantially completed, or if
Landlord is unable to tender possession of the Premises to Tenant on such
specified date due to any other reason beyond the reasonable control of
Landlord, then the Commencement Date shall be postponed until such work is
substantially completed and Landlord has tendered possession of the Premises,
and the Experation Date shall be extended so that the Term shall continue for
the full number of years set forth in Article 2.01, and Landlord shall not be
liable for any claims or damages in connection with such failure to complete
construction or tender possession on the Commencement Date.
2.03 LATE POSSESSION. No delay in the completion of the Premises
resulting from delay or failure on the part of Tenant or Tenant's agents,
employees or contractors in furnishing information, work or other matters
required in Exhibit "B" shall delay the Commencement Date or Expiration Date.
2.04 EARLY POSSESSION. If prior to the Commencement Date, Tenant shall
enter into possession of all or any part of the Premises, such
<PAGE> 2
possession shall be subject to all the provisions of this Lease, and the Term
and the payment of all rent shall commence, with respect to all or such part of
the Premises as are so occupied by Tenant, on the date of such entry, and that
total amount of all Rent due hereunder shall be increased accordingly, provided
that no such early entry shall operate to change the Expiration Date provided
herein.
ARTICLE 3
3.01 BASE RENT. Tenant, in consideration for this Lease, agrees to pay
to Landlord a base rental ("Base Rent") for the first three (3) years of Twelve
and 38/100 Dollars ($12.38) per year and years four (4) and five (5) at Thirteen
and 637100 Dollars ($13.63) per year for each of the square feet of rentable
area agreed by Landlord and Tenant to be within the Premises, in equal monthly
installments for years one (l) through three (3) at Fifteen Thousand One Hundred
Six and 34/100 Dollars($15,106.34) and years four (4) and five (5) at Sixteen
Thousand Six Hundred Thirty-One and 62/100 Dollars ($16,631.62) payable at
Landlord's address herein provided in legal tender of the United States of
America, without notice, demand, set-off or abatement, in advance on the first
day of each calendar month throughout the Term, except that the first such
monthly installment is due upon the date of execution of this Lease by Tenant.
All rental payments shall be made in full. Payment or receipt of a rental
payment of less than the amount stated in the Lease shall be deemed to be
nothing more than partial payment. Under no circumstances shall owner's
acceptance constitute accord and satisfaction. Nor will owner's acceptance of a
partial payment forfeit owner's right to collect the balance on the account,
despite any endorsement, stipulation, or other statement on any check.
3.02 RENTAL ADJUSTMENT. "Tenant's Pro Rata Share" of all Operating
Expenses (hereinafter defined) for purposes of rental adjustment shall be equal
to the ratio that the square feet of rentable area of the Premises bears to the
total net rentable area of the Building, which is agreed to be 62,044 square
feet. In accordance with the foregoing, it is agreed that Tenant's Pro Rata
Share of all Operating Expenses is Twenty-Three and 60/100 percent (23.60%). On
or before the Commencement Date and thereafter on or before the first day of
each calendar year of the Term Landlord shall provide to Tenant the Estimated
Operating Expense Increase (defined in Article 3.03) for the upcoming year.
shall receive a credit equivalent to such excess which shall be deducted by
Landlord from the next monthly installment(s) of Tenant's Pro Rata Share of the
Estimated Operating Increase, unless this Lease shall be terminated before such
installments become due in which case Landlord shall refund such difference to
Tenant. Otherwise, within thirty (30) days after Landlord furnishes such
statement to Tenant, Tenant shall make a lump sum payment to Landlord equal to
Tenant's Pro Rata Share of the positive difference between the Actual Operating
Expense Increase and the Estimated Operating Expense Increase theretofore paid
by Tenant, such obligation to survive the termination of this Lease and/or the
expiration of the Term. As used in this Lease the term "Rent" shall refer
collectively to the Base Rent and all rental adjustments. If the Term commences
on a day other than the first day of the month or calendar year, or terminates
on a day other than the last day of a month or calendar year, then Tenant shall
be required to pay only a pro rata portion of the installments and adjustments
of Rent due for such month or year.
3.03 OPERATING EXPENSES. "Operating Expenses" shall mean and include
all amounts, expenses, and costs of whatsoever nature incurred directly related
to the ownership, management, operation repair and maintenance of the Project,
all additional operating facilities which may be added to the Project, and
Landlord's personal property which may be utilized in connection therewith; with
said Operating Expenses including, but not being limited to, the following:
<PAGE> 3
(a) wages and salaries of all employees directly engaged in the operation,
maintenance or security of the Project, including taxes, insurance and
benefits relating thereto;
(b) all supplies and materials used in the operation and maintenance of
the Project;
(c) cost of all utilities for the Project including the cost of water and
power for heating, lighting, air-conditioning and ventilating
(excluding those costs billed to specific tenants);
(d) cost of all maintenance and service agreements for the Project and the
equipment therein, including security service, window cleaning,
elevator maintenance and janitorial service;
(e) cost of all insurance relating to the Project, including, but not
limited to, the cost of casualty, rental loss and liability insurance
applicable to the Property and Landlord's personal property used in
connection therewith;
(f) all taxes, assessments and governmental charges, whether federal,
state, county or municipal and whether they are assessed by taxing
districts or authorities presently taxing the Project or by other
subsequently created or otherwise, and any other taxes and assessments
attributable to the Project or their operation, excluding however,
federal and state taxes on income, death taxes, excess profit taxes,
franchise taxes, or any taxes imposed or measured on or by income of
Landlord from the operation of the Project. It is agreed that Tenant
will be responsible for the payment of all ad valorem taxes on its
personal property and on the value of the leasehold improvements in
the leased premises to shall receive a credit equivalent to such
excess which shall be deducted by Landlord from the next monthly
installment(s) of Tenant's Pro Rata Share of the Estimated Operating
Increase, unless this Lease shall be terminated before such
installments become due in which case Landlord shall refund such
difference to Tenant. Otherwise, within thirty (30) days after
Landlord furnishes such statement to Tenant, Tenant shall make a lump
sum payment to Landlord equal to Tenant's Pro Rata Share of the
positive difference between the Actual Operating Expense Increase and
the Estimated Operating Expense Increase theretofore paid by Tenant,
such obligation to survive the termination of this Lease and/or the
expiration of the Term. As used in this Lease the term "Rent" shall
refer collectively to the Base Rent and all rental adjustments. If the
Term commences on a day other than the first day of the month or
calendar year, or terminates on a day other than the last day of a
month or calendar year, then Tenant shall be required to pay only a
pro rata portion of the installments and adjustments of Rent due for
such month or year.
3.03 OPERATING EXPENSES. "Operating EXPENSES" shall mean and include
all amounts, expenses, and costs of whatsoever nature incurred directly related
the ownership, management, operation repair and maintenance of the Project, all
additional operating facilities which may be added to the Project, and
Landlord's personal property which may be utilized in connection therewith; with
said Operating Expenses including, but not being limited to, the following:
(a) wages and salaries of all employees directly engaged in the operation,
maintenance or security of the Project, including taxes, insurance and
benefits relating thereto;
(b) all supplies and materials used in the operation and maintenance of
the Project;
<PAGE> 4
(c) cost of all utilities for the Project including the cost of water and
power for heating, lighting, air-conditioning and ventilating
(excluding those costs billed to specific tenants);
(d) cost of all maintenance and service agreements for the Project and the
equipment therein, including security service, window cleaning,
elevator maintenance and janitorial service;
(e) cost of all insurance relating to the Project, including, but not
limited to, the cost of casualty, rental loss and liability insurance
applicable to the Property and Landlord's personal property used in
connection therewith;
(f) all taxes, assessments and governmental charges, whether federal,
state, county or municipal and whether they are assessed by taxing
districts or authorities presently taxing the Project or by other
subsequently created or otherwise, and any other taxes and assessments
attributable to the Project or their operation, excluding however,
federal and state taxes on income, death taxes, excess profit taxes,
franchise taxes, or any taxes imposed or measured on or by income of
Landlord from the operation of the Project or imposed in connection
with any change of ownership of the Project. It is agreed that Tenant
will be responsible for the payment of all ad velorem taxes on its
personal property and on the value of the leasehold improvements in
the leased premises to the extent that the same exceed building
standard allowances and to such extent, said ad valorem taxes on
Tenant's personal property and leasehold improvements in excess of the
building standard improvements will not be considered herein;
(g) cost of repairs and general maintenance (excluding repairs and general
maintenance paid by proceeds of insurance or by Tenant or third
parties, and alterations attributable solely to Tenants of the Project
other than Tenant);
(h) a reasonable amortization charge on account of any capital expenditure
incurred to effect a reduction in the operating expenses of the
Project, or which relates to a capital item installed pursuant to
governmental law, rule or order;
(i) allocation of Landlord's central office costs incurred in managing the
Project, which allocation shall not exceed five percent (5%) of the
gross rentals of the Building; and
(j) cost, fees, and expenses charged to Landlord in connection with any
contract for the management of the Project.
Operating Expenses shall not include capital improvements (except as
indicated above), depreciation, interest and principle payments on mortgage and
other non-operating debts of Landlord, and specific costs for special items or
services billed to and paid by specific tenants.
Operating Expenses shall be determined on an accrual basis in
accordance with generally accepted accounting principles consistently applied.
The Base Operating Expense for the Project shall equal the actual Operating
Expenses for the Project for the calendar year 1998. The "Estimated Operating
Expense Increase" shall equal the positive difference between the Landlord's
estimate of Operating Expenses for the applicable calendar year less the Base
Operating Expense. Landlord's statement of the Estimated Operating Expense
Increase shall control for the year specified in such statement and for each
succeeding year during the Term until Landlord provides a new statement of the
Estimated Operating Expense Increase. The "Actual Operating Expense Increase"
shall equal the positive difference of the actual Operating Expenses for the
applicable calendar year less the Base Operating Expense. Notwithstanding any
provision contained herein to the contrary, if less than ninety-five percent
(95%) of the total rental area in the Building is occupied by tenant(s) or
Landlord is not supplying services to 95% of
<PAGE> 5
the total rentable area of the Building at any time during any calendar year,
Operating Expenses for such calendar year, including the Base Operating Expense
year, shall be determined to be an amount equal to the like expense which would
normally be expected to be incurred had such occupancy been 95% of the
Building's total rentable area and had Landlord been supplying services to 95%
of the Building's total rentable area throughout such calendar year.
3.04 AUDIT OF BOOKS AND RECORDS BY TENANT. Tenant, at its expense,
shall have the right once each calendar year during the Term, at a reasonable
time, to audit Landlord's books and records relating to the Operation Expenses
for the previous calendar year if additional rental payments became due during
such previous calendar year pursuant to one provisions of Article 3.02 hereof;
provided, however, if the statement of Actual Operating Expense Increase for the
previous calendar year is overstated by more than five percent (5%) of the total
amount of actual Operating Expenses for such calendar year reflected by the
books and records, Landlord shall pay for the reasonable costs of such audit.
3.05 SECURITY DEPOSIT.
ARTICLE 4
4.01 USE. Tenant shall use and occupy the Premises only for office
purposes and Computer lab, and for no other purposes. Tenant shall not do or
permit anything to be done in or about the Premises nor bring or keep anything
therein which will in any way increase the existing rate of or affect any fire
or other insurance upon the Project or any of its contents, or cause the
cancellation of any commercially reasonable insurance policy covering the
Project or any part thereof or any of its contents. Tenant shall not do or
permit anything to be done in or about the Premises which will in any way
obstruct or interfere with the rights of other tenants or occupants of the
Project or injure them. Tenant shall not permit any nuisance in, on or about the
Premises. Tenant shall not commit or suffer to be committed any waste in or upon
the Premises. Tenant shall not use the Premises or permit anything to be done in
or about the Premises which will in any way conflict with any private
restrictive covenant, law, statute, ordinance or any rule or regulation of
Landlord or any governmental or quasi-governmental authority now in force or
which may hereafter be enacted or promulgated.
ARTICLE 5
5.01 LANDLORD'S SERVICES. Provided Tenant is not in default hereunder,
Landlord shall, at Landlord's expense, except as provided to the contrary in
this Lease, furnish to Tenant the following services:
(a) air-conditioning and central heat, shall be supplied in sufficient
quantities for the Premises and all public areas by Landlord at
Landlord's expense during Building hours, in order to maintain a
temperature in the Premises, in the range of 65(Degree) to 75(Degree)
Fahrenheit, drybulb, and a maximum relative humidity of 60% in season,
Normal Building hours, are presently scheduled to be 7:30 a.m. through
5:30 p.m. on weekdays and 7:30 a.m. through 1:00 p.m. on Saturdays,
exclusive of normal business holidays. Normal business holidays for
purposes of this Lease, shall be New Year's Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day;
(b) janitorial services in the Premises and public portions of the
Building, in accordance with Exhibit "_" at no extra charge, for all
days except Saturdays, Sundays, and normal business holidays;
(c) water at those points of supply provided for drinking, toilet, and
lavatory purposes;
(d) normal and customary routine maintenance of all public, structural,
and exterior portions of the Project according to Landlord's
standards;
<PAGE> 6
(e) electric lighting service for all public portions of the Project;
(f) automatic passenger elevator service at all times for access to and
egress from the Premises. Freight elevator service, in common with
other tenants, shall be provided during reasonable business hours as
prescribed by Landlord, exclusive of Saturdays, Sundays, and normal
business holidays;
(g) electric energy that Tenant shall require for normal office equipment
such as typewriters, desktop personal computers, usual office
duplicating equipment, dictation machines, calculators, other machines
of similar low electrical consumption, and building standard lighting
in the premises. Without Landlord's prior written consent, Tenant
shall not be entitled to employ lighting on the Premises which
consumes electrical current in excess of building standard nor utilize
any office equipment that consumes more than 0.5 kilowatts per hour at
rated capacity or requires a voltage other than 120 volts single
phase; and
(h) replacement of fluorescent light bulbs in any fluorescent light
fixtures which are located in the Premises and which contain the
building standard light fixture.
5.02 ADDITIONAL SERVICE COST. Tenant shall pay Landlord, upon demand,
such additional amounts as are necessary to recover additional costs incurred by
Landlord in performing or providing janitorial, maintenance, security, or other
services or requirements of Tenant (and in paying additional taxes) as to any
non-building standard installations in the Premises. Tenant shall pay Landlord,
upon demand, reasonable costs incurred by Landlord for providing off-hour and
non-standard air-conditioning, heating and electricity; provided, however, that
Tenant's excessive use or consumption of heating, air-conditioning and/or
electrical services in violation of Article 5.01 above, without Landlord's
consent, shall constitute a default under this Lease.
5.03 SERVICE INTERRUPTION. Landlord shall not be liable for any
damages, losses. Expenses, and costs directly or indirectly resulting from, nor
shall any Rent be abated by reason of the installation, use or interruption of
use of any equipment in connection with the furnishing of any of the foregoing
services, or failure to furnish, or delay in furnishing any such service when
such failure of delay is caused by accident or any other occurrence or condition
beyond the reasonable control of Landlord or by the making of necessary repairs
or improvements to the Premises or to the Building. The failure to furnish any
of such services shall not be construed as an eviction of Tenant or relieve
Tenant from the duty of observing and performing any of its obligations under
this Lease unless such failure substantially handicaps, impedes or impairs the
normal use of the Premises by Tenant for the purposes authorized in this Lease
and within a reasonable time after delivery to Landlord by Tenant a written
notice setting forth in reasonable detail a description of the services not so
furnished, Landlord fails to commence curing any such failure or thereafter
fails to continue the curing thereof with appropriate diligence and speed under
the circumstances until cured.
The obligations of Landlord to provide services and utilities herein
provided for shall be subject to governmental regulation thereof (i.e.
rationing, temperature control, et cetera) and any such regulation which
requires Landlord to provide such services or utilities other than as herein
provided shall not constitute a default hereunder but rather compliance with
such regulations shall be deemed to be compliance with the obligations and
agreements of Landlord hereunder.
ARTICLE 6
<PAGE> 7
6.01 ALTERATIONS. Tenant shall make no alterations, installations,
additions or improvements in or to the Premises without Landlord's prior written
consent, which consent shall not be unreasonably withheld. All alterations,
installations, additions, or improvements, other than movable furniture and
trade fixtures, made by Tenant to the Premises shall remain upon and be
surrendered with the Premises and become the property of Landlord at the
expiration or termination of this Lease or the termination of Tenant's right to
possession of the Premises; provided, however, that Landlord may require Tenant,
at Tenant's cost, to remove any or all of such items that are not building
standard upon the expiration or termination of this Lease or the termination of
Tenant's right to possession of the Premises, provided Landlord notified Tenant
of such removal requirement at the time of Landlord's written consent torch
alteration or addition. Tenant, at its sole cost and prior to the expiration or
termination of this Lease, shall remove all of Tenant's property from the
Premises and make, or reimburse Landlord for the cost of all repairs to the
Premises and/or Project for damage resulting from such removal. All work shall
be completed promptly and in a good and workmanlike manner and shall be
performed in such a manner that no mechanic's, materialmen's or other similar
liens shall attach to Tenant's leasehold estate and in no event shall Tenant
permit, or be authorized to permit, any such liens or other claims to be
asserted against Landlord or Landlord's rights, estate and interests with
respect to the Project or this Lease. Landlord may require, at Tenant's sole
cost and expense, a lien and completion bond in an amount equal to the estimated
cost of any improvements, additions or alterations in the Premises.
6.02 TENANT REPAIRS. By taking possession of the Premises, Tenant
shall be deemed to have accepted the Premises as being in good, sanitary order,
condition and repair. Tenant shall, at Tenant's sole cost and expense, keep the
Premises in good condition and repair, damage thereto from causes beyond the
reasonable control of Tenant and ordinary wear and tear excepted. Tenant shall,
upon the expiration or sooner termination of this Lease, surrender the Premises
to the Landlord in good condition, ordinary wear and tear damage from causes
beyond the reasonable control of Tenant excepted. Any injury or damage to the
Premises or Project, or the appurtenances or fixtures thereof, caused by or
resulting from the act, omission or neglect of Tenant or Tenant's employees,
servants, agents, invitees, assignees, or subtenants shall be repaired or
replaced by Tenant, or at Landlord's option by Landlord, at the expense of
Tenant. If Tenant fails to maintain the Premises or fails to repair or replace
any damage to the Premises or Project resulting from the negligence or
intentional act of Tenant, its employees, servants, agents, invitees, assignees
or subtenants, Landlord may, but shall not be obligated to, cause such
maintenance, repair or replacement to be done, as Landlord deems necessary, and
Tenant shall immediately pay to Landlord all costs related thereto plus a charge
for overhead of ten percent (10~) of such costs.
6.03 LANDLORD REPAIRS. Landlord shall repair and maintain the
structural portions of the Project, including the basic plumbing,
air-conditioning, heating, elevator, and electrical systems installed or
furnished by Landlord, and all areas of the Project available for the common,
non-exclusive use of all tenants in the Project, unless such maintenance and
repairs are caused in part or in whole by the act, neglect, or omission of any
duty by the Tenant, its agents, servants, employees or invitees, or unless such
maintenance or repairs are otherwise herein provided to be made by Tenant.
Landlord shall not be liable for any failure to make such repairs or to perform
any maintenance unless such failure shall persist for thirty (30) days after
written notice of the need of such repairs or maintenance is given to Landlord
by Tenant. Landlord shall not be liable for any damages, compensations or claims
for loss of the use of the whole or any part of the Premises or Tenant's
personal
<PAGE> 8
property, or any inconvenience, loss of business, or annoyance arising from any
such repair and/or maintenance performed by Landlord hereunder, except for
damage resulting from Landlord's gross negligence or willful misconduct.
ARTICLE 7
7.01 LANDLORD INSURANCE. Landlord shall insure the Project and shall
maintain fire and extended casualty liability and other insurance in such
amounts as Landlord, in its sole discretion, may deem appropriate. Such
insurance shall be an "Operating Expense" as defined in Article 3.03 above. Such
insurance shall be for the sole benefit of Landlord and, if required, Landlord's
mortgagee.
7.02 TENANT INSURANCE. Tenant shall, at Tenant's expense, fully insure
its property located in the Premises, against fire and other casualty and shall
maintain comprehensive general public liability insurance with broad form
endorsement insuring Landlord and Tenant against any liability arising out of
ownership, use, occupancy or maintenance of the Premises and all areas
appurtenant thereto, including contractual liability insurance (with respect to
Article 7.04 hereof), and with limits of liability of at least $1,000,000 with
respect to death of or injuries to one or more persons, and at least $1,000,000
with respect to loss of or damage to property.
A copy of the certificate of insurance, shall be delivered to Landlord.
Furthermore, in the event this Lease is hereafter modified or amended in any
manner which will cause all or any portion of the Premises not to be covered by
the comprehensive public liability insurance to include all portions of the
Premises.
7.03 WAIVERS OF RECOVERY AND SUBROGATION. Landlord and Tenant hereby
waive any rights of recovery, claim, action or cause of action each may have
against the other on account of any loss or damage occasioned to Landlord or
Tenant arising from any risk covered by the fire and extended casualty insurance
covering the Project or the general public liability insurance with broad form
endorsement covering the Premises or any other property used or occupied by
Tenant pursuant to the terms of this Lease or otherwise and which is maintained
hereunder. Landlord and Tenant, on behalf of their insurance company or
companies insuring the Project and/or the Premises and any property located
thereon or any other property used or occupied by Tenant pursuant to the terms
of this Lease or otherwise, waive any right of recovery and/or subrogation that
they may have one against the other. Because this paragraph will preclude the
assignment of any claim mentioned in it by way of subrogation or otherwise to an
insurance company or any other person, each party to this Lease agrees
immediately to give to each insurance company which has issued to it policies of
insurance covering all risk of direct physical loss, written notice of the terms
of the mutual waivers contained in this paragraph, and to have the insurance
policies properly endorsed, if necessary, to prevent the invalidation of the
insurance coverage by reason of the mutual waivers contained in this paragraph.
7.04 INDEMNITY. Tenant hereby indemnifies and holds harmless
Landlord's and Landlord hereby indemnifies and holds harmless Tenant's agents,
directors, officers, employees, invitees, successors, assigns, and contractors,
from all claims, losses, costs, damages, or expenses (including but not limited
to attorney's fees) resulting or arising from any and all injuries or death of
any person or damage to any property caused by an act, omission, or negligence
of Tenant, or any parties contracting with Tenant relating to the Premises.
Landlord shall not be liable for any damage of any kind or for any damage to
property, death or injury to persons from any cause whatsoever by reason of the
use and occupancy of the Premises by Tenant. Landlord shall not be liable to
Tenant and Tenant hereby waives all claims against Landlord or
<PAGE> 9
Landlord's directors, officers, employees, or agents for any indirect damages or
loss of profits, business interruption, and for any damage to property, death or
injury to persons from any cause whatsoever including, but not limited to, acts
of other tenants, vandalism, loss of trade secrets or other confidential
information, any damage, loss or injury caused by defect in the Premises or the
Building, pipes, air-conditioning, heating, plumbing or by water leakage of any
kind from the roof, walls, windows, basement or other portion of the Premises or
the Building, or caused by electricity, gas, oil, fire or any cause whatsoever
in, on, or about the Premises, Building or Project or any part thereof, unless
caused by the willful misconduct or gross negligence of Landlord.
ARTICLE 8
8.01 CASUALTY. If the Premises or Project, or any portion of either,
shall be damaged by fire or other casualty covered by the insurance carried by
Landlord hereunder and the cost of repairing such damage shall not be greater
than eighty percent (80%) of the then full replacement cost thereof, then,
subject to the following provisions of this Article 8, Landlord shall proceed
with due diligence to repair the Premises and/or Project. If the Premises or
Project shall be damaged (a) by fire or other casualty not covered by insurance
carried by Landlord hereunder, or (b) to an extent greater than eighty percent
(80%) of the then full replacement cost thereof, then Landlord shall have the
option (i) to repair or reconstruct the same to substantially the same condition
as immediately prior to such fire or other casualty, or (ii) terminate this
Lease by so notifying Tenant within one louvered, twenty (10) thirty (30) days
after the date of such fire or others casualty, such termination to be effective
as of the date of such fire or other casualty. Failure to give notice of
Landlord's decision within such thirty (30): one hundred twenty (1~0) day
period, notwithstanding the foregoing, if such destruction results in the
premises being untenable in whole, or insubstantial part, for a period
reasonably estimated by the responsible contractor selected by Landlord to be
six (6) months or longer after the date of casualty or in the event of total or
substantial damage or destruction of the building from any cause of which the
period to restore is reasonably estimated by the aforesaid contractor to be six
(6) months or longer after the casualty (and irrespective whether or not the
Premises are damaged), then Tenant or Landlord may terminate this Lease within
thirty (30) days after the date of Landlord's notice described below and all
rentals owed up to the time of such destruction or termination must be paid by
Tenant (it being understood that Tenant must pay rentals on all tenable space
until termination of this Lease). Landlord will give Tenant written notice
thirty (30) days after any such damage or destruction. Any such termination,
either by Landlord or Tenant, will not relieve Tenant of its obligations and
liability (whether under this Section 8.01 or elsewhere in this Lease) which are
expressly provided to survive the expiration or earlier termination of this
Lease. If Landlord elects not to rebuild, then Landlord will be entitled to
retain all of the insurance proceeds of the fire, and casualty insurance
maintained by it and its interest in Tenant's insurance which Tenant is required
to maintain pursuant to Section 7.02 above. Notwithstanding anything contained
in this Section 8.01, Landlord will be obligated to restore or rebuild only the
damaged and/or affected portions of the Premises to the same condition,
excepting reasonable wear and tear installed by Landlord at the commencement of
the Lease pursuant to the approved Plans attached as Exhibit "-".
8.02 END OF TERM CASUALTY. Notwithstanding anything to the contrary in
this Article 8, Landlord shall not have any obligation whatsoever to repair,
reconstruct or restore the Premises or the Project when the damage resulting
from any casualty covered under this Article 8 occurs during the last twelve
(12) months of the Term or any extension thereof.
<PAGE> 10
ARTICLE 9
9.01 TAKING. If all or any part of or interest in the Premises shall
be taken as a result of the exercise of the power of eminent domain, this Lease
shall terminate as to the part so taken as of the date of taking. If only a part
of or interest in the Premises or if a substantial portion of the Building is so
taken, either Landlord or Tenant shall have the right to terminate as to the
part so taken as of the date of taking. If only a part of or interest in the
Premises or if a substantial portion of the Building is taken, either Landlord
or Tenant shall have the right to terminate this Lease as to the balance of the
Premises by written notice to the other within thirty (30) days after the date
of taking, provided, however, that a condition to the exercise by Tenant of such
right to terminate shall be that the portion of the Premises or Building taken
shall be of such extent and nature as to materially handicap, impede or impair
Tenant's use of the Premises or the balance of the Premises remaining. In the
event of any taking, Landlord shall be entitled to any and all compensation,
damages, income, rent and awards with respect thereto except for an award, if
any, specified by the condemning authority for any property that Tenant has the
right to remove upon termination of this Lease. Tenant shall have no claim
against Landlord for the value of any unexpired Term. In the event of a partial
taking of the Premises which does not result in a termination of this Lease, the
Rent thereafter to be paid shall be equitably reduced.
ARTICLE 10
10.01 ENTRY. Landlord, its agents, employees and representatives,
shall have the right to enter the Premises at any time upon reasonable notice to
Tenant (which notice may be oral and not in compliance with Article 15.08
hereof, but no notice shall be required in the case of routine maintenance or an
emergency) for any purpose which Landlord may reasonably deem necessary for the
operation and maintenance of the Project, subject to the safety and security
regulations of Tenant and the Government of the United States of America. Tenant
hereby waives any claim for damages or for any injury or inconvenience to or
interference with Tenant's business, any loss of occupancy or quiet enjoyment of
the Premises, and any other loss occasioned thereby. For each of the aforesaid
purposes, Landlord shall at all times have and retain a key with which to unlock
all of the doors in, upon and about the Premises, excluding Tenant's vaults,
safes and files, and Landlord shallhavethe right to use any and all means which
Landlord may deem proper to open said doors in an emergency, in order to obtain
entry to the Premises without liability to Tenant except for any failure to
exercise due care for Tenant's property.
ARTICLE 11
11.01 SUBORDINATION. The rights and interest of Tenant under this
Lease and in and to the Premises shall be subject and subordinate to all deeds
of trust, mortgages, and other security instruments and to all renewals,
modifications, consolidation, replacements, and extensions thereof (the
"Security Documents") heretofore or hereafter executed by Landlord and/or any
subsequent purchaser, grantee or assignee covering the Premises, and/or the
Project, or any parts thereof to the same extent as if the Security Documents
had been executed, delivered and recorded prior to the execution of this Lease.
After the delivery to Tenant of a notice from Landlord that it has entered into
one or more Security Documents, then during the term of such Security Documents,
Tenant shall deliver to the holder or holders of all Security Documents a copy
of all notices to Landlord and shall grant to such holder or holders the right
to cure all defaults, if any, of Landlord hereunder within the same time period
provided in this Lease for curing such defaults by Landlord and, except with the
prior written consent of the holder of the Security Documents, shall not (i)
amend this Lease, (ii) surrender or terminate this Lease except pursuant to a
right to terminate expressly set forth in this Lease, or (iii) pay any Rent more
than one (1) month in advance or pay any Rent or other amounts payable hereunder
other than in strict accordance with the terms hereof. The
<PAGE> 11
provisions of this subsection shall be self-operative and shall not require
further agreement by Tenant; however, at the request of Landlord, Tenant shall
execute such further documents as may be required to evidence and set forth for
the benefit of the holder of any Security Documents the obligations of Tenant
hereunder including, but not limited to, the Tenant's obligation to subordinate
Tenant's interest in this Lease to any such Security Documents as may be desired
by Landlord and/or the mortgagee or trustee, provided however, that any such
instruments shall not effect Tenant's rights and privileges under this Lease, or
alter the business or legal terms of this Lease. At any time and from time to
time upon not less than ten (10) days prior notice by Landlord, Tenant shall
execute, acknowledge and deliver to the Landlord a statement of the Tenant in
writing certifying that this Lease is unmodified and in full force and effect
(or if there have been modifications, that the same is in full force and effect
as modified and stating the modifications, if any), and stating whether or not
to the best knowledge of Tenant the Landlord is in default in the keeping,
observance or performance of any covenant, agreements, term, provision or
condition contained in this Lease and, if so, specifying each default of which
Tenant may have knowledge, it being intended that any such statement may be
relied upon by any prospective purchaser, tenant, mortgagee or assignee of any
mortgage of the Building or land or of Landlord's interest therein.
Notwithstanding the above, with respect to any present of future mortgagee and
/or beneficiary of any Deed of Trust or other lien covering the property, or
Lessor underground lease (collectively "Landlord's Mortgagee") during the term
of this Lease or any extension thereof. Landlord will secure and deliver to
Tenant a non-disturbance agreement form executed by Landlord's Mortgagee for the
benefit of Tenant whereby Tenant will not be disturbed in its possession of he
lease Premises or its rights under the Lease modified or terminated so long as
an event of default by Tenant is not continuing under the terms of this lease.
11.02 QUIET ENJOYMENT. Tenant, on paying the Rent and keeping and
performing the conditions and covenants herein contained, shall and may
peaceably and quietly enjoy the Premises for the Term, subject to the aforesaid
underlying leases and mortgages, all applicable laws and other governmental and
legal requirements, applicable insurance requirements and regulations, and the
provisions of this Lease.
ARTICLE 12
12.01 ASSIGNMENT AND SUBLETTING. Tenant shall not, voluntarily, by
operation of law, or otherwise, assign, transfer, mortgage, pledge, or encumber
this Lease or sublease the Premises or any part thereof, or suffer any person
other than Tenant, its employees, agents, servants and invitees to occupy or use
the Premises or any portion thereof, without the express prior written consent
of Landlord which consent shall not be unreasonably withheld or delayed. If
Tenant so requests Landlord's consent, Landlord may, (a) deny such request and
continue to enforce the terms and conditions of this Lease as to Tenant; (b)
grant such consent subject to Landlord's approval of the assignee, transferee,
subtenant, or mortgagee; or (c) elect to terminate this Lease with respect to
the Premises or any portion thereof to be affected by such assignment, sublease
or other event specified above. In no event may Tenant assign this Lease or
sublease the Premises or any portion thereof to any party whose operations in
the Project would not be in keeping with, or would detract from the operations
of other tenants in the Project. If Tenant is not a public company that is
registered on a national stock exchange or that is required to register its
stock with the Securities and Exchange Commission under Section 12(g) of the
Securities and Exchange Act of 1934, then any change in a majority of the voting
rights or other controlling rights or interests of Tenant shall be deemed an
assignment for the purposes hereof.
<PAGE> 12
12.02 CONTINUED LIABILITY. Tenant shall, despite any permitted
assignment or sublease, remain directly and primarily liable for the performance
of all of the covenants, duties, and obligations of Tenant hereunder and
Landlord shall be permitted to enforce the provisions of this Lease against
Tenant or any assignee or sublessee without demand upon or proceeding in any way
against any other person.
12.03 CONSENT. Consent by Landlord to a particular assignment or
sublease shall not be deemed a consent to any subsequent assignment or sublease.
If this Lease is assigned or if the Premises are subleased without the
permission of Landlord, then Landlord may nevertheless collect rent from the
assignee or sublessee and apply the net amount collected to the Rent payable
hereunder, but no such transaction or collection of rent or application thereof
by Landlord shall be deemed a waiver of any provision hereof, a release of
Tenant from the performance of the obligations of the Tenant hereunder or of any
remedy of Landlord under this Lease.
12.04 PROCEEDS. All cash or other proceeds of any assignment, sale or
sublease of Tenant's interest in this Lease, whether consented to by Landlord or
not, shall be paid to Landlord notwithstanding the fact that such proceeds
exceed the Rent called for hereunder, and Tenant hereby assigns all rights it
might have or ever acquire in any such proceeds to Landlord, less Tenant's
upfront costs of such assignment or sublease.
13.01 DEFAULT. Each of the following shall constitute a "Default" by
Tenant:
Each of the following shall constitute a
(a) the failure of Tenant to pay the Rent or any part thereof when due;
(a) Tenant shall become insolvent or unable to pay its debts as they
become due, or Tenant notifies Landlord that it anticipates either
condition;
(b) the making by Tenant of a general assignment for the benefit of its
creditors;
(d) Tenant takes any action to, or notifies Landlord that Tenant intends
to file a petition under any section or chapter of the United States
Bankruptcy Code, as amended from time to time, or under any similar
law or statute of the United States or any state thereof; or a
petition shall be filed against Tenant under any such statute or
Tenant notifies Landlord that it knows such a petition will be filed;
or the appointment of a receiver or trustee to take possession of
substantially all of Tenant's assets located at the Premises or of
Tenant's interest in this Lease or the attachment, execution or other
judicial seizure of substantially all of Tenant's assets located at
the Premises or of Tenant's interest in this Lease;
(e) the failure of Tenant to discharge or appeal any judgment for Landlord
and against Tenant within sixty (60) days after such judgment becomes
final;
(f) Tenant shall fail to fulfill or perform, in whole or in part, any of
its obligations under this Lease (other than the payment of Rent) and
such failure or non-performance shall continue for a period of thirty
(30) Ad days after written received notice thereof has been given by
Landlord to Tenant;
(g) Tenant shall vacate or abandon the Premises or any significant portion
thereof unless Tenant continues to pay all of its rental obligations
as defined herein; or
<PAGE> 13
(h) Tenant shall fail to take possession of the Premises when Landlord
notifies Tenant that the same are ready for occupancy.
13.02 RIGHTS UPON DEFAULT. If a Default occurs, then at any time
thereafter prior to the curing thereof, with notice or demand and without
waiving any additional or remaining rights herein available to Landlord,
Landlord may exercise any and all rights and remedies available to Landlord
under this Lease, at law, or in equity, including, without limitation,
termination of this Lease and termination of Tenant's right to possession
without terminating the Lease. In the event of a Default, Landlord may, without
additional notice and without court proceedings, re-enter and repossess the
Premises and remove all persons and property therefrom and said Tenant hereby
agrees to surrender possession of the Premises and waives any claim arising by
reason thereof or by reason of issuance of any distress warrant or writ of
sequestration and agrees to hold Landlord harmless from any such claims.
If Landlord elects to terminate this Lease, it may treat the Default
as an entire breach of this Lease and Tenant shall immediately become liable to
Landlord for damages equal to the total of: (i) the reasonable cost of
recovering, reletting (including, without limitation, the cost of lease
commission attributable to the unexpired portion of the Term of this Lease), and
remodeling the Premises per building standards; (ii) all unpaid Rent and other
amounts earned or due through such termination; plus, (iii) the total Rent and
other amounts to be paid by Tenant hereunder for the remainder of the full Term.
If Landlord elects to terminate Tenant's right to possession of the Premises
without terminating the Lease, Landlord shall make commercially reasonable
efforts to rent the Premises or any part thereof for the account of Tenant to
any person or persons for such rent and for such terms and conditions as
Landlord deems appropriate, and Tenant shall be liable to Landlord for the
amount, if any, by which the Rent for the unexpired balance of the Term exceeds
the net amount, if any, received by Landlord from such reletting, (such amount
received by Landlord being the gross amount so received by Landlord less the
reasonable costs of repossession, reletting, remodeling, and other expenses
incurred by Landlord). Such sum or sums shall be paid by Tenant in monthly
installments on the first day of each month of the Term. In no case shall
Landlord be liable for failure to relet the Premises or to collect the rent due
under such reletting, and in no event shall Tenant be entitled to any excess
rents received by Landlord. All rights and remedies of Landlord shall be
cumulative and not exclusive.
13.03 COSTS. If Landlord elects to terminate Tenant's right to
possession without terminating the Lease, Landlord shall have the right at any
time thereafter to terminate this Lease, whereupon the foregoing provisions with
respect to termination will thereafter apply. If any Act of Default occurs or in
case of any holding over or possession by Tenant of the Premises after the
expiration or termination of this Lease, Tenant shall reimburse Landlord on
demand for all costs incurred by Landlord in connection therewith including, but
not limited to, reasonable attorney's fees, court costs, and related costs plus
interest thereon at the rate of ten percent (10%) per annum from the date such
costs are paid by Landlord.
13.04 INTEREST. All late payments of Rent, costs or other amounts due
from Tenant under this Lease shall bear interest from the date due until paid at
the rate of ten percent (10%) per annum.
13.05 NON-WAIVER. The failure of Landlord or Tenant to seek redress
for violation of, or to insist upon the strict performance of, any covenant or
condition of this Lease shall not prevent a subsequent act or omission that
would have originally constituted a violation of this Lease from having all the
force and effect of an original violation. The receipt by Landlord of Rent with
or without knowledge of the breach of any provision of this Lease shall not be
deemed a waiver of such breach, shall not reinstate this Lease or Tenant's right
of possession if either or both have been terminated, and shall not otherwise
affect any notice, election, action, or suit by Landlord. No provision of this
Lease shall be deemed to have been waived
<PAGE> 14
by Landlord unless such waiver shall be in writing signed by Landlord. No act or
thing done by Landlord during the Term shall be deemed an acceptance of
surrender of the Premises and no agreement to accept such surrender shall be
valid, unless expressly acknowledged and in writing and signed by Landlord.
ARTICLE 14
14.01 LIMITATION OF WARRANTIES. LANDLORD AND TENANT AGREE THAT THERE
ARE AND WERE NO VERBAL REPRESENTATIONS, WARRANTIES, UNDERSTANDINGS,
STIPULATIONS, AGREEMENTS OR PROMISES PERTAINING TO THIS LEASE OR THE EXPRESSLY
MENTIONED WRITTEN EXTRINSIC DOCUMENTS NOT INCORPORATED IN WRITING IN THIS LEASE.
LANDLORD AND TENANT EXPRESSLY AGREE THAT THERE ARE AND SHALL BE NO EXPRESS OR
IMPLIED WARRANTIES OF MERCHANTABILITY, HABITABILITY, SUITABILITY, FITNESS FOR A
PARTICULAR PURPOSE OR OF ANY OTHER KIND ARISING OUT OF THIS LEASE AND TENANT
HEREBY WAIVES ANY AND ALL CLAIMS AGAINST LANDLORD IN THIS REGARD. TENANT HAS
ITSELF INSPECTED THE PROPERTY AND AGREES TO ACCEPT THE SAME AS IS, WHERE IS AND
WITH ALL FAULTS, IF ANY.
ARTICLE 15
15.01 AMENDMENT. Any agreement hereafter made between Landlord and
Tenant shall be ineffective to modify, release, or otherwise affect this Lease,
in whole or in part, unless such agreement is in writing and signed by the party
to be bound thereby.
15.02 SEVERABILITY. If any term or provision of this Lease shall, to
any extent, be held invalid or unenforceable by a final judgment of a court of
competent jurisdiction, the remainder of this Lease shall not be affected
thereby.
15.03 ESTOPPEL LETTERS. Tenant shall promptly, upon request from
Landlord, execute and acknowledge a certificate containing such information as
may be reasonably requested for the benefit of Landlord, and prospective
purchaser or any current or prospective mortgagee of all or any portion of the
Project. Such Estoppel Letters will be limited to no more than three (3) a year.
15.04 LANDLORD'S LIABILITY AND AUTHORITY. The liability of Landlord to
Tenant for any default by Landlord under the terms of this Lease or in the event
Landlord expressly or impliedly agrees to any other liability under the terms of
this Lease for any actions of Landlord or its directors, officers, employees,
agents or contractors shall be limited to the interest of Landlord in the
Project, it being intended that Landlord shall not be personally liable for any
judgment or deficiency.
15.05 HOLDOVER. If Tenant shall remain in possession of the Premises
after the Expiration /date or earlier termination of this Lease, then Tenant
shall be deemed a tenant-at-sufferance, terminable at any time, at one and
one-half the Rent in effect on the date of such termination or expiration, but
otherwise shall be subject to all of the obligations of Tenant under this Lease.
Additionally, Tenant shall pay to Landlord all damages sustained by Landlord on
account of such holding over by Tenant including, but not limited to, reasonable
attorney's fees.
15.06 SURRENDER. Upon the expiration or earlier termination of the
Term, Tenant shall peaceably quit and surrender the Premises in good order and
condition, excepting ordinary wear and tear, but subject to Article 6.01 and
Article 6.02 hereof. All obligations of Tenant for the period of time prior to
the expiration or earlier termination of the Term shall survive such expiration
or termination.
15.07 PARTIES AND SUCCESSORS. Subject to the limitations and
conditions set forth elsewhere herein, this Lease shall bind and inure to the
benefit of the respective heirs, legal representatives, successors, and
permitted Assigns and/or subleases of the parties hereto. The term "Landlord",
as used in this Lease, so far as the
<PAGE> 15
performance of any covenants or obligations on the part of Landlord under this
Lease are concerned, shall mean only the owner of the Project at the time in
question, so that in the event of any transfer of title to the Project, the
party by whom any such transfer is made shall be relieved of all liability and
obligations of the Landlord arising under this Lease from and after the date of
such transfer.
15.08 NOTICE. Except as otherwise provided herein, any statement,
notice or other communication which Landlord or Tenant is required to give to
the other in writing shall be deemed sufficiently given or rendered if hand
delivered, or if sent by registered or certified mail, return receipt requested,
postage prepaid and addressed to the other as follows:
If to Landlord: 691 Sleater-Kinney Road S.E., Suite 100
P.O. Box 3487
Lacey, Washington 98503
If to Tenant: The Premises
or
---------------------------------------
---------------------------------------
---------------------------------------
or at such other addressees) as the other party shall from time to time
designate by prior written notice, and such notice shall be effective when the
same is received or mailed as herein provided.
15.09 RULES AND REGULATIONS. Tenant, its servants, employees, agents,
visitors, invitees, and licensees shall observe faithfully and comply strictly
with the Rules and Regulations set forth in Exhibit "C" hereto, and shall abide
by and conform to such further rules and regulations as Landlord may from time
to time reasonably make or adopt after Tenant receives a copy thereof.
15.10 CAPTIONS. The captions in this Lease are inserted only as a
matter of convenience and for reference and they in no way define, limit, or
describe the scope of this Lease or the intent of any provision hereof.
15.11 NUMBER AND GENDER. All genders used in this Lease shall include
other genders, the singular shall include the plural, and the plural shall
include the singular, whenever and as often as may be appropriate.
15.12 GOVERNING LAW. This Lease shall be governed by and construed in
accordance with the laws of the State of Texas and all obligations hereunder are
performable in Harris County, Texas.
15.13 INABILITY TO PERFORM. Notwithstanding Article 15.18 below,
whenever a period of time is herein prescribed for the taking of any action by
Landlord or Tenant, Landlord or Tenant, shall not be liable or responsible for,
and there shall be excluded from the computation of such period of time, any
delays due to strikes, riots, Act of God, shortages of labor or materials, war,
governmental laws, regulations or restrictions, or any other cause whatsoever
beyond the control of Landlord or Tenant, and such nonperformance or delay in
performance by Landlord shall not constitute a breach or default by Landlord
under this Lease nor give rise to any claim against Landlord for damages or
constitute a total or partial eviction, constructive or otherwise.
15.14 USE OF NAME. Tenant shall not, except to designate Tenant's
business address (and then only in a conventional manner and without emphasis or
display) use the name or mark Gemini for any
<PAGE> 16
purpose whatsoever. Spacehab, at Tenant's expense, shall be the highlighted name
on all building signs including current "Tombstone."
15.15 BROKER. Tenant represents and warrants that Tenant has dealt
with, and only with Lisa Cole-Gross as broker(s) in connection with this Lease
and that, insofar as Tenant knows, no other broker(s) negotiated this Lease or
are entitled to any commission in connection herewith. Landlord shall pay such
broker its commission of 4% of the total rent relating to this Lease equaling
$37,719.49. Payment shall be made upon execution of lease document, and payment
of rent. Tenant shall indemnify and hold harmless Landlord from and against all
claims (and costs of defending against and investigating such claims) of any
other broker(s) or similar parties claiming under Tenant in connection with this
Lease.
15.16 MEMORANDUM OF LEASE. Without the prior written consent of
Landlord, which may not be unreasonably withheld, Tenant shall not record this
Lease or a memorandum or other instrument with respect to this Lease.
15.17 ENTIRE AGREEMENT. This Lease, including all Exhibits attached
hereto (which Exhibits are hereby incorporated herein and shall constitute a
portion hereof), contains the entire agreement between Landlord and Tenant with
respect to the subject matter hereof. Tenant hereby acknowledges and agrees that
neither Landlord nor Landlord's agents or representatives have made any
representations, warranties, or promises with respect to the Project, the
Premises, Landlord's services, or any other matter or thing 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.
15.18 TIME OF ESSENCE. Time is of the essence of this Lease and each
and all of its provisions in which performance is a factor.
15.19 PARKING. Landlord hereby reserves the right to make, modify and
enforce rules and regulations relating to the parking of cars, and Tenant will
abide by such rules and regulations, and will ensure the compliance with such
rules by its employees, agents, guests and invitees. Landlord further agrees to
designate the prior Barrios parking places for Tenant's exclusive use.
Tenant shall pay, or cause to be paid, before delinquency, any and all
taxes levied or assessed and which become payable during the term hereof upon
all of Tenant's leasehold improvements, equipment, furniture, fixtures and
personal property located in the Premises except that which has been paid for by
Landlord or is the standard of the Building.
<PAGE> 17
IN WITNESS THEREOF, Landlord and Tenant have here unto executed this
Lease as of the day and year first above written.
LANDLORD TENANT
PUGET OF TEXAS INC., SPACEHAB, INC.
a Texas corporation a Washington corporation
By: /s/R. Blume BY: /s/John M. Lounge
----------------- --------------------
Title: President/CEO Title: Vice-President/GM
-----------------
STATE OF WASHINGTON )
)
THURSTON COUNTY )
I certify that I know or have satisfactory evidence that Robert L.
Blume is the person who appeared before me, and said person acknowledged that he
signed this instrument, on oath stated that he was authorized to execute the
instrument and acknowledged it as the President/C of Puget of Texas, Inc., a
Texas corporation to be thee and voluntary act of such party for the uses and
purposes mentioned in the instrument.
Dated: 2/4/98 Sandra Ellen Burnes
----------------------------
Notary Public in and for the
State of Washington
Residing at Olympia
----------------
My Commission expires: 11/19/99
--------
STATE OF TEXAS )
)
COUNTY OF Harris )
This instrument was acknowledged before me on the 29th day of January,
1998, by John Lounge, of SPACEHAB, a _________________________
corporation, on behalf of said corporation.
My commission expires: 8-23-98 /S/Ann Houston
----------------------------
Notary Public in and for the
State of Texas
S/Ann Houston
------------------------
(Printed Name of Notary)
<PAGE> 18
DIAGRAM
FLOOR PLAN LAYOUT
21
<PAGE> 19
EXHIBIT B
1. Landlord grants Tenant a two 12) year option to renew at the then prevailing
rate, to be exercised in writing, no less than six (6) months prior to
expiration date.
2. Tenant will retain a firm expansion option on any and all then available
unencumbered space on the third floor of the building. Should Tenant desire to
expand into such areas, Tenant will give Landlord thirty (30) days written
notice of its intention to expand. The terms of the expansion space shall be the
same terms and conditions of the master lease.
3. Tenant hereby agrees to indemnify and hold Landlord and its agents,
successors and assigns harmless against all injury, loss, costs, expenses,
claims and damages to any person or property arising from Tenant's negligence or
misconduct.
4. Tenant accepts space in an "As Is" condition.
5. Spacehab shall assume Barrios' primary identity to the building.
<PAGE> 20
EXHIBIT C
BUILDING RULES AND REGULATIONS
1. Directories will be placed by Lessor, at its own expense, in conspicuous
places in the Building. No other directories shall be permitted unless
previously consented to by Lessor in writing.
2. Lessee will refer all contractors, contractor's representatives, and
installation technicians, rendering any service to Lessee, to Lessor for
Lessor's supervision, approval and control before performance of any contractual
service. This provision shall apply to all work performed in the Building
including installations of telephones, telegraph equipment, electrical devices
and attachments, and installations of any nature affecting floors, walls,
woodwork, trim, windows, ceilings, equipment or any other physical portion of
the Building.
3. Movement in or out of the Building of furniture or office equipment, or
dispatch or receipt by Lessee of any merchandise or materials which require use
of elevators or stairways, or movement through Building entrances or lobby shall
be restricted to hours designated by Lessor. All such movement shall be under
supervision of Lessor and in the manner agreed between Lessee and Lessor by
prearrangement before performance, subject to Lessor's decision and control as
to the time, method and routing of movement and as to limitations imposed for
safety or other concerns which may prohibit any article, equipment or any other
item from being brought into the Building. Lessee is to assume all risk as to
damage to articles moved and injury to persons or public engaged or not engaged
in such movement, including equipment, property and personnel of Lessor if
damaged or injured as a result of acts in connection with carrying out services
for Lessee, from time of entering property to completion of work, and Lessor
shall not be liable for acts of any person engaged in or any damage or loss to
any of said property or persons resulting from any act in connection with such
service performed for Lessee.
4. No signs, advertisements or notices shall be painted or allowed on or to any
window(s) or door(s), or other parts of the Building, except of color, size and
style and in such places, as shall be first approved in writing by Lessor. No
nails, hooks or screws shall be driven or inserted in any part of the Building,
except by the Building maintenance personnel, nor shall any part be defaced by
Lessee. All signs will be contracted for by Lessor at the rate fixed by Lessor
from time to time, and Lessee will be billed and pay for such service
accordingly.
5. No portion of Lessee's area or any other part of the Building shall at any
time be used or occupied as sleeping or lodging quarters.
6. Lessee shall not place, install or operate in the Premises or in any part of
the Building, any engine or machinery, or maintain, use or keep any inflammable,
explosive, or hazardous material without the prior written consent of Lessor.
7. No birds or animals shall be brought into or kept in or about the Building
(except seeing eye dogs for the handicapped).
8. Employees of Lessor shall not receive or carry messages for or to Lessee or
other persons, nor contract with or render free or paid services to Lessee's
agents, employees, or invitees.
9. Lessor will not permit entrance to Lessee's office(s) by use of pass keys
controlled by Lessor to any person at any time without written
<PAGE> 21
permission by Lessee, except employees, contractors, or service personnel
directly supervised by Lessor.
10. The entries, passages, doors, elevators, elevator doors, hallways or
stairways shall not be blocked or obstructed, no rubbish, litter, trash or
material of any nature shall be placed, emptied or thrown into these areas and
such areas shall not be used at any time except for ingress or egress by Lessee,
Lessee's agents, employees, invitees or visitors to or from the Premises.
11. Plumbing fixtures and appliances shall be used only for purposes for which
constructed, and no sweepings, rubbish, rags or other unsuitable material shall
be thrown or placed therein. Damage resulting to any such fixtures or appliances
from misuse by Lessee shall be repaired and/or replaced at Lessee's sole cost
and expense, and Lessor shall not in any case be responsible therefor.
12. Lessee shall not do, or permit anything to be done in or about the Building,
or bring or keep anything therein, that will in any way increase the rate of
fire or other insurance on the Building or on property kept therein, or obstruct
or interfere with the right of, or otherwise injure or annoy other tenants, or
do anything in conflict with the valid pertinent laws, rules or regulations of
any governmental authority.
13. The Lessor desires to maintain the highest standards of environmental
comfort and convenience for the tenantry. It will be appreciated if any
undesirable conditions or lacks of courtesy or attention are reported directly
to the management.
14. The work of the janitor or cleaning personnel shall not be hindered by
Lessee after 5:30 p.m. Windows, doors and fixtures may be cleaned at any time.
Lessee shall provide adequate waste and rubbish receptacles, cabinets, book
cases, map cases, etc. necessary to prevent unreasonable hardship to Lessor in
discharging its obligation regarding cleaning service.
15. Lessor shall have the right to determine and prescribe the weight and proper
position of any unusually heavy equipment including safes, large files, etc.
that are to be placed in the Building, and only those which in the opinion of
Lessor might not with reasonable probability do damage to the floors, structure
and or freight elevator may be moved into said Building. Any damage occasioned
in connection with the moving or installing of such aforementioned articles in
said Building or the existence of same in said Building shall be paid for by
Lessee, unless otherwise covered by insurance.
16. Lessor shall have the right to prohibit the use of the name of the Building
or any other publicity by Lessee which in Lessor's opinion tends to impair the
reputation of the Building or its desirability for the executive offices of
Lessor or of other lessees, and, upon written notice from Lessor, Lessee will
refrain from or discontinue such publicity.
17. The leased Premises shall not be used for lodging, sleeping or cooking or
any immoral or illegal purpose or for any purpose that will damage the Premises
or the reputation thereof, or for any purpose other than that specified in the
Lease covering the Premises. -
18. Lessee and its employees shall at all times during the term of the Lease
park in the parking area located adjacent to the Building or in the undesignated
parking spaces contiguous to the parking area at the rear of the Building. At no
time shall Lessee and its employees park in the parking area located at the
front of the Building unless specific provisions in the Lease allow for
designated parking spaces to the Lessee. Should Lessee or its employees not
abide by this Building rule and regulation, Lessor shall tow Lessee's or its
employees vehicles at Lessee's or its employees sole expense.
<PAGE> 22
19. Lessee and its employees shall provide Lessor with automobile license plate
numbers. Should said automobile license plate numbers change, Lessee and its
employees shall provide Lessor with updated information.
the Harris County Official Public Records of Real Property and being the
Northwest corner of this tract;
THENCE South 66 deg. 46 min. 00 sec. East, 55.50 feet to a 5/8 inch iron rod
found for a corner in the South line of said 3.7381 acres of land and being a
corner in the North line of this tract;
THENCE South 23 deg. 14 min. 00 sec. West, 186.18 feet (called 186.19 feet) to
an "X" cut in concrete found for the most Southerly Southwest corner of said
3.7381 acres of land and being a corner in the North line of this tract;
THENCE South 66 deg. 46 min. 00 sec. East, 301.16 feet to a 5/8 inch iron rod
found for the Southeast corner of said 3.7381 acres of land and being the
Northeast corner of this tract and also being in the West right-of-way line of
Gemini Avenue, based on 80 feet in width;
THENCE 32.52 feet, with the arc of a curve to the right in the West right-of-way
line of said Gemini Avenue whose chord bears South 22 deg. 39 min. 00 sec. West,
32.52 feet and having a central angle of 01 deg. 00 min. 00 sec. and a radius of
1,597.02 feet, to a 5/8 inch iron rod found for the end of the curve;
THENCE South 23 deg. 14 min. 00 sec. West, 492.78 feet, with the West
right-of-way line of said Gemini Avenue, to an "X" cut in concrete found for the
most Northerly East corner of said 0.8259 acre tract and being the Southeast
corner of this tract;
THENCE North 66 deg. 46 min. 00 sec. West, 56.00 feet to an "X" cut in concrete
found for a corner in the North line of said 0.8259 acre tract, and being a
corner in the South line of this tract;
THENCE North 23 deg. 14 min. 00 sec. East, 87.50 feet to an "X" cut in concrete
found for the most Easterly North corner of said 0.8259 acre tract and being a
corner in the South line of this tract;
THENCE North 66 deg. 46 min. 00 sec. West, 230.00 feet to an "X" cut in concrete
found for the most Westerly North corner of said 0.8259 acre tract and being a
corner in the South line of this tract;
THENCE South 23 deg. 14 min. 00 sec. West, 57.00 feet to an "X" cut in concrete
found for a corner in the North line of said 0.8259 acre tract, and being a
corner in the South line of this tract;
THENCE North 66 deg. 46 min. 00 sec. West, 56.00 feet to an "X" cut in concrete
found for a corner in the North line of said 0.8259 acre tract, and being a
corner in the South line of this tract;
THENCE South 23 deg. 14 min. 00 sec. West, 30.50 feet to an "X" cut in concrete
found for a corner in the North line of said 0.8259 acre tract, and being a
corner in the South line of this tract.
THENCE North 66 deg. 46 min. 00 sec. West, 68.00 feet to the PLACE OF BEGINNING
and containing 4.517 acres (196,761 square feet) of land.
<PAGE> 1
Exhibit 10.82
COST PLUS INCENTIVE CONTRACT
NUMBER SHB 98006
7/06/98
FOR
INTEGRATED CARGO CARRIER (ICC) INTEGRATION AND OPERATION (I&O) SUPPORT
BETWEEN
DAIMLER-BENZ AEROSPACE AG
RAUMFAHRT-INFRASTRUKTUR
POSTFACH 10 59 09
28059 BREMEN
AND
SPACEHAB, INCORPORATED
1595 SPRING HILL ROAD
SUITE 360
VIENNA, VIRIGINIA 22182
<PAGE> 2
TABLE OF CONTENTS
Article 1 - Entire Agreement...............................................1
Article 2 - Definitions....................................................1
Article 3 - Scope of Work..................................................1
Article 4 - Period of Performance..........................................2
Article 5 - Contract Amount................................................2
Article 6 - Payment........................................................3
Article 7 - Limitation of Funds............................................4
Article 8 - Supplies/Services and Delivery Schedule........................4
Article 9 - Title and Delivery.............................................5
Article 10 - Packaging and Marking..........................................5
Article 11 - Inspection and Acceptance......................................5
Article 12 - Place of Performance...........................................5
Article 13 - Items, Equipment, Property, Services to
be Furnished by SPACEHAB, Inc.
And/or the Government on a "No Charge" Basis...................5
Article 14 - Exchange of Technical Information..............................6
Article 15 - Excusable Delays...............................................7
Article 16 - Changes........................................................7
Article 17 - Amendments.....................................................8
Article 18 - Stop Work Orders...............................................8
Article 19 - Notices........................................................8
Article 20 - Key Personnel..................................................9
Article 21 - Termination...................................................10
Article 22 - Governing Law.................................................10
Article 23 - Arbitration/Disputes..........................................10
Article 24 - Audit.........................................................11
Article 25 - Indemnity Against Patent Infringement.........................11
Article 26 - Limitation of Liability.......................................11
Article 27 - Insurance and Indemnification.................................11
Article 28 - DASA Employee Injury..........................................11
Article 29 - Warranty......................................................12
Article 30 - Relationship of Parties.......................................13
Article 31 - Manned Space Flight Item......................................13
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Article 32 - Order of Precedence...........................................13
Article 33 - Technical Data................................................13
Article 34 - Intellectual Property Rights..................................14
Exhibit A: Statement of Work (SOW) for the SPACEHAB Integrated Cargo
Carrier (ICC) Integration and Operation
Exhibit B: SPACEHAB Furnished Equipment (SFE)
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<PAGE> 4
THIS CONTRACT is by and between SPACEHAB, Inc. with an address at 1595 Spring
Hill Road, Suite 360, Vienna, Virginia 22182, (hereinafter referred to as
"SPACEHAB, Inc." or "SHI") and Daimler-Benz Aerospace AG,
Raumfahrt-Infrastruktur, Postfach 10 59 09, 28059 Bremen (hereinafter referred
to as "DASA"). The parties hereby agree as follows:
Article 1 - Entire Agreement
This Contract, all exhibits and other documents incorporated herein by
reference, whether or not attached hereto, constitute the complete and exclusive
statement of the Contract between the parties hereto. This Contract supersedes
any previous understanding or agreement between SHI and DASA (oral or written)
with respect to the subject matter hereof. Further, this Contract constitutes a
definitization of Letter Contract SHB98006 dated 17 April 1998.
Article 2 - Definitions
A. The term "DASA" shall mean Daimler-Benz Aerospace AG - Space
Infrastructure - .
B. The terms "General Agreement," "Basic Agreement," "Basic Terms and
Conditions," "Agreement" and "Contract" shall mean this Contract and
shall be deemed to include all exhibits, specifications, drawings, or
other documents incorporated herein by reference.
Article 3 - Scope of Work
A. Mission STS-96
DASA is the prime Contractor responsible for performance of all work
set forth in this Contract, including work to be performed by any
subcontractor.
DASA shall perform the work identified in Exhibit A, "SPACEHAB
Integrated Cargo Carrier (ICC) Integration and Operations Contract
Statement of Work (SOW)" as far as relevant for STS-96, enclosed herein
and made a part hereof.
B. Future Missions
In accordance with the Statement of Work requirements herein, it is
intended that DASA will under separate contracts perform the
Integration and Operations of up to nine additional option missions of
the SPACEHAB ICC aboard the Space Shuttle through the year 2003. These
options may include active payloads, as well as I&O for a deployed
version of the Unpressurized Cargo Pallet (UCP) for operations onboard
the International Space Station (ISS).
DASA's role as preferred provider of ICC I&O services for future
missions is dependent on NASA approval and satisfactory performance of
the I&O task for the mission STS 96.
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Article 4 - Period of Performance
DASA shall perform the work called for under this Contract in accordance with
the agreed to Statement of Work as specified in Article 3 herein, including
preparation and submission of all reports, during the period of performance
beginning 11 February 1998, and continuing through 30 June 1999, and as may be
extended by mutual agreement.
Article 5 - Contract Amount
A. Mission STS-96
1. General. This is a Cost Plus Incentive Contract. The following
estimated cost and nominal fee is established for the effort
required by the Contract for services as specified in
Statement of Work defined in Article 3.A. above:
<TABLE>
<S> <C>
*Total Cost: $ 2,117,765
Nominal Fee: $ 168,816
Total Contract Price: $ 2,286,581
</TABLE>
2. Cost and Nominal Fee: The Cost and Nominal Fee of 10%
specified in section 1. above are subject to adjustment if the
contract is modified in accordance with Article 16 below.
The *Total Cost includes an amount of $249,608 for travel
expenses plus 5% overhead. Dasa will charge only economy class
for travel. Also included is an amount of $180,000 for
services provided by ASI. This amount includes a fixed fee and
is not subject to the incentive scheme. Dasa does not charge
overhead or profit on this amount.
3. Incentive Scheme. If the Actual Cost incurred under this
contract is higher (overrun) or lower (under-run) than the
Total Cost as agreed in accordance with section 1 and 2 here
above, then the Seller shares the cost of any overrun or
under-run as follows:
a. In the case of a cost overrun, the Seller shall get
reimbursement of only fifty (50) percent of the cost
above Total Cost until the nominal fee is reduced to
an actual fee of two (2) percent of the Total Cost.
In case of a cost overrun above this limit, the
Seller is entitled to full reimbursement of the cost
for any additional effort but with no fee.
b. In the case of a cost under-run, the Seller is
entitled to an additional fee representing fifty (50)
percent of the difference between Actual Cost
incurred and Total Cost as agreed until the nominal
fee is increased up to sixteen (16) percent of the
Total Cost.
4. Fees Payable. The Buyer will pay the nominal fee of ten (10)
percent based on the monthly invoices of Seller, except for
travel cost and ASI activities, until the amount of Total Cost
is reached or the contract work completed with cost under-run.
Any adjustment of the fee in accordance with the incentive
schedule (see section 3. above) will be made thereafter.
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<PAGE> 6
B. Future Missions. For future missions, the contract price will be
determined as follows:
1. In case the complexity of the integration & operations task
for an executed option mission is the same as for the STS-96
mission, and, similar to the STS-96 mission, the executed
option mission is the only DASA ICC integration activity
on-going during the period of performance, the same contract
price, excluding any costs and fees allocated to process
development, will apply.
2. In case an option mission is added which results in
overlapping of integration schedules and therefore sharing of
fixed costs between mission integration and operations
efforts, the contract price for the additional mission will be
reduced accordingly.
3. In case the complexity of the integration of operations task
for an executed option mission is increased, the additional
required effort will be agreed between Buyer and Seller and
the contract price will be increased accordingly.
4. In any case, an adjustment will be made to the reference price
of mission STS-96 which reflects the rate and overhead
structure of DASA valid for the period of performance of the
I&O task for the respective mission.
5. The incentive scheme agreed for mission STS-96 will be valid
also for the future missions.
Article 6 - Payment
A. DASA shall submit invoices monthly for the payment of actual costs
incurred plus the Nominal Fee of 10%.
Invoices shall segregate costs into the following categories:
Sustaining
- Labor
- Material and Sub-contracted Services
- Travel
Mission-unique (for each individual mission)
- Labor
- Material and Sub-contracted Services
- Travel
Process Development
- Labor
- Capital Equipment
Such invoices shall be submitted to SHI at:
SPACEHAB, Inc.
1595 Spring Hill Road, Suite 360
Vienna, VA 22182
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<PAGE> 7
Payment will be made by or on behalf of SPACEHAB, Inc. to:
Exhibit B - Wire Transfer Instructions
Account of Daimler Benz Aerospace-RI
Account No. 1435264741
At Bremer Landesbank
BLZ 290 500 00
Such invoices shall be due and payable by SHI, 30 days after receipt of an
invoice. If any such invoice remains unpaid 45 days after receipt of such
invoice, DASA shall have the right to stop work under this Contract. If such
invoice continues to remain unpaid 60 days after receipt of such invoice, DASA
may at its option, consider SHI to have breached this Contract and may pursue
remedies as provided by law.
Article 7 - Limitation of Funds
A. The sum of $ 2,286,581 is presently available for payment and is
allotted to this contract covering the period of performance through 30
June 1999.
B. DASA agrees to use reasonable efforts to perform, or have performed,
the work on this contract up to the point at which the total amount
paid and payable by SHI under the contract approximates but does not
exceed the amount specified in paragraph (A). Unless otherwise agreed
in writing, SHI shall not be obligated to reimburse DASA for costs
incurred in excess of the total amount allotted by SHI to this contract
during the stated period of performance.
C. Upon expenditure of 85% of allotted funds set forth in paragraph (A),
DASA shall notify SHI in writing as to the estimated amount of
additional funds required for the timely performance of the contract.
Such notice shall specify any additional funds and period of
performance required.
D. If, after the notification called for in Paragraph (C) above,
additional funds are not allotted to this contract, DASA may request
that this contract be terminated, in accordance with the provisions of
the Terminations Clause of this contract, and SHI shall comply.
E. DASA is not obligated to continue performance under this contract
(including actions under the Termination clause of this contract) or
otherwise incur costs, which when added to the applicable fee would be
in excess of the amount then allotted to the contract by SHI until SHI
notifies DASA in writing that the amount allotted has been increased.
Article 8 - Supplies/Services and Delivery Schedule
A. The scope of work to be performed under this Contract shall include,
the provision of all labor, materials, services, and equipment
necessary to perform the work as set forth in Exhibit A, SPACEHAB
Integrated Cargo Carrier Integration and Operations Contract Statement
of Work.
B. In addition to invoicing, the Seller shall submit a cost compliance
report each month describing any obligations incurred during the month
prior and segregating those obligations into cost categories identical
to those appearing on invoices.
In order to provide timely reporting of actual expenditures, the cost
compliance report may be manual and unofficial. Any significant
discrepancies between cost compliance reports and actual invoices
should be explained either on the invoice when billed, or on the cost
compliance report for the month corresponding to the invoice in which
the discrepancy becomes apparent.
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<PAGE> 8
Significant discrepancies between the manual cost compliance report and
any request for payment must be clarified before the payment will be
issued.
Along with or in addition to the cost compliance report, Seller shall
submit each month to the SPACEHAB project manager a name-list of those
persons who performed chargeable work to this contract in the month
prior. The list shall include each individual's name, phone number and
task or function.
Article 9 - Title and Delivery
The point of delivery for any hardware required shall be Titusville, Florida
USA. The point of delivery for any data required shall be SPACEHAB, Inc.,
Vienna, VA.
Article 10 - Packaging and Marking
Packaging and marking for shipment of all items ordered hereunder shall be in
accordance with good commercial practice, and adequate to ensure both acceptance
by common carrier and safe transportation at the most economical rate(s).
Article 11 - Inspection and Acceptance
The place of final inspection and acceptance for the services and deliverable
hardware called for under this Contract shall be SHI's facility at Titusville,
Florida, or other designated place(s) of performance. The place of inspection
and acceptance of all deliverable reports and documentation shall be at SHI,
Vienna, VA with copy to SHI Houston, Texas and SHI Cape Canaveral, FL as
specified by SHI.
Article 12 - Place of Performance
DASA shall perform the work under this contract at its facility located in
Bremen, Germany, at SHI's facility located in Houston, Texas or Titusville,
Florida, and at any other locations within the USA or Germany as may be
required.
Article 13 - Items, Equipment, Property, Services to be Furnished by SPACEHAB,
Inc. and/or the Government on a "No Charge" Basis
A. SHI and/or the Government shall furnish to DASA, for use in connection
with and under the terms of this contract on a "no-charge" basis, the
SHI and/or Government owned equipment, property, items, services, etc.
which are suitable for the intended use. SPACEHAB Furnished Equipment
(SFE) to be provided is identified in Exhibit B.
B. Out of tolerance conditions, inadequacies, and delivery delays in SHI
and/or Government supplied items identified herein will be the basis
for a DASA Contract Change proposal and subsequent Contract amendment
reflecting the cost, fee, schedule, and technical impact of defective
or late delivery of SHI and/or Government supplied items.
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<PAGE> 9
C. The applicability of NASA FAR 52.245-5 Government Property is agreed to
apply to Government furnished or owned equipment only and does not
apply to purchases under this Contract since it is understood that
title to all items provided under this Contract would vest with
SPACEHAB, Inc.
D. SPACEHAB Furnished Equipment as identified in Exhibit B will include
the following information:
- Functional capabilities
- Interface definition
- Environmental constraints
- Mechanical characteristics (dimensions, weight, c.g., etc...)
- Electrical power requirements (peak, start-up/in-rush,
profile, ...)
- Special requirements (commanding, downlink,...)
- Verification data (including safety data)
- Operations requirements and procedures
Maintenance/repair of SFE that was designed and built by SHI will be
the responsibility of SHI. DASA shall be responsible to report hardware
failures immediately to SHI via Material Review Record (MRR). To do
this, DASA will perform trouble shooting to locate problem to, but not
within, the SFE component. DASA support to SHI for trouble shooting
within the SFE component and shipping or repairing the component will
be authorized by task directive and where necessary funded under a
contract change. DASA shall maintain configuration control of the SFE.
At turnover to DASA, SFE hardware and corresponding documentation shall
be identified by part number including revision level (and serial
number when appropriate). Documentation shall be placed under DASA
documentation control. Changes/revisions post turnover (to DASA) shall
be accompanied by the appropriate revised documentation.
Article 14 - Exchange of Technical Information
During the term of this Contract, SHI and DASA, to the extent of their right to
do so, agree to exchange all such technical and management information as may
reasonably be required for each to perform its obligations hereunder. To the
extent that proprietary information of either party is disclosed, such
information or data which is (i) submitted in writing, must be designated by an
appropriate stamp, marking or legend thereon to be of proprietary or
confidential nature, or (ii) orally submitted, must be identified as proprietary
or confidential prior to disclosure and the disclosing party notifies the
receiving party, in writing, specifically identifying any such proprietary or
confidential information so orally submitted within thirty days after such oral
submission. Notwithstanding termination or expiration of this Contract, each
party will keep in confidence and prevent the disclosure of all such proprietary
information and data, whether technical or commercial, to any third party.
Neither party shall be liable for disclosure of any such proprietary information
or data, if such information:
A. Was in the public domain at the time it was disclosed, or later becomes
part of the public domain other than throughout the action of the party
receiving it; or
B. Was known to the party receiving it at the time of disclosure; or
C. Is disclosed with the prior written approval of the other party; or
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<PAGE> 10
D. Is disclosed by the party providing the same, to others, on a
non-restricted basis; or
E. Is disclosed inadvertently despite the exercise of the same degree of
care that the receiving party takes to preserve or safeguard its own
proprietary information; or
F. Becomes known to the receiving party from a source other than the
disclosing party without breach of this Section by the receiving party;
or
G. Is disclosed one (1) year after expiration or termination of this
Contract; or
H. Is disclosed to a government agency for certification or export license
purposes, taking all reasonable precautions to prevent further
disclosure by such agency.
Article 15 - Excusable Delays
Except for default of subcontractors at any tier, either party shall not be in
default because of any failure to perform this Contract under its terms if the
failure arises from causes beyond the control and without the fault or
negligence of DASA. Examples of these causes include but are not limited to are
(1) acts of God or of the public enemy, (2) acts of Government in either its
sovereign or contractual capacity, (3) fires, (4) floods, (5) epidemics, (6)
quarantine restrictions, (7) strikes, (8) freight embargoes, and (9) unusually
severe weather. In each instance, the failure to perform must be beyond the
control and without the fault or negligence of DASA. "Default" includes failure
to make progress in the work so as to endanger performance.
DASA shall not be in default, if the failure to perform is caused by the failure
of a subcontractor at any tier to perform or make progress, and if the cause of
the failure was beyond the control of both DASA and subcontractor, and without
fault or negligence of either, unless (1) DASA knew of other sources to obtain
the subcontracted supplies or services from to meet schedule; (2) SHI ordered
DASA in writing to purchase these supplies or services from the other source;
and (3) DASA failed to comply reasonably with this order.
If SHI determined that any failure to perform results from one or more of the
causes above, the delivery schedule shall be revised, subject to the rights of
SHI under the Termination Clause of this Contract.
Article 16 - Changes
A. Wherever in the SOW an activity is specified "as required", "as
necessary" or "if required", the amount of work actually to be
performed will be agreed between the SHI and Dasa-RI mission manager on
a case by case basis. If the amount of work actually to be performed
exceeds the effort allocated to that activity in the staffing profile,
a formal change of the contract is required in accordance with the
procedure agreed here below.
B. SHI may at any time, by written order, and with such concurrence to not
be unreasonably withheld from DASA, make changes within the general
scope of this Contract in any one or more of the following:
(1) Description of services to be performed.
(2) Time of performance (i.e., hours of the day, days of the week,
etc.).
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(3) Place of performance of the services.
(4) Drawings, designs, or specifications.
(5) Method of shipment or packing of supplies.
(6) Place of delivery.
(7) Types and amounts of SHI and/or Government-Furnished Property
to be provided.
C. If any such change causes an increase or decrease in the estimated cost
of, or the time required for, performance of any part of the work under
this contract, whether or not changed by the order, or otherwise
affects any other terms and conditions of this contract, SHI shall make
an equitable adjustment in the (1) estimated cost, delivery or
completion schedule, or both; (2) amount of fee; and (3) other affected
terms and shall modify the contract accordingly.
D. DASA shall assert its right to an adjustment under this clause within
60 days from the date of receipt of the written order. However, if SHI
decides that the facts justify it, SHI may receive and act upon a
proposal submitted before final payment of the contract.
E. Failure to agree to any adjustment shall be a dispute under the
Disputes Clause. However, nothing in this clause shall excuse DASA from
proceeding with the contract as changed.
F. Notwithstanding the terms and conditions of paragraphs (a) and (b)
above, the estimated cost of this contract and, if this contract is
incrementally funded, the funds allotted for the performance of this
contract, shall not be increased or considered to be increased except
by specific written modification of the contract indicating the new
contract estimated cost and, if this contract is incrementally funded,
the new amount allotted to the contract. Until this modification is
made, DASA shall not be obligated to continue performance or incur
costs beyond the point established in the Limitation of Funds Clause of
this Contract.
Article 17 - Amendments
Neither this Contract, nor any term or condition thereof, shall be amended or
changed in any manner except by an instrument in writing hereto, executed by
both parties acting through their duly authorized representatives.
Article 18 - Stop Work Orders
SHI may, at any time, by written order to DASA, require DASA to stop all, or any
part, of the work called for by this contract for a period of up to 90 days
after the order is delivered to DASA, and for any further period to which the
parties may agree. The order shall be specifically identified as a stop-work
order issued under this clause. Upon receipt of the order, DASA shall
immediately comply with its terms and take all reasonable steps to minimize the
incurrence of costs allocable to the work covered by the order during the period
of work stoppage.
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Article 19 - Notices
A. Except as herein specifically provided otherwise, all notices, reports,
and other communications hereunder shall be given in writing either by
personal delivery, by first class mail, or by electronic transmission,
addressed to the respective parties as specified herein below.
B. The date upon which any such communication is personally delivered or,
if such communication is transmitted by mail or by electronic
transmission, the date upon which it is received by the addressee,
shall be deemed to be the effective date of such communication.
C. Each party shall promptly advise the other in the event of any change
in their respective addresses.
D. The SHI personnel authorized to issue written orders, in accordance
with the Changes Clause, are W.S. Dawson or Nelda Wilbanks.
The SHI personnel authorized to give technical direction are M. E.
Bain, or M. Dale Steffey.
E. The DASA personnel authorized to accept writtten orders, negotiate
changes or sign amendments are:
- Holger Voge for contractual matters and
- Uwe Pape for technical and programatical matters
F. The addresses of SHI and DASA, for the purpose of paragraph A above,
are as follows:
<TABLE>
<S> <C>
FOR COMMUNICATION TO SPACEHAB, INC.
SPACEHAB, Inc.
1595 Spring Hill Road, Suite 360
Vienna, VA 22182
Attention: Nelda Wilbanks with copies to M.E. Bain.
When transmitted by mail: Same as above
When transmitted by electronic transmission: Fax Number: (703) 821-3070
FOR COMMUNICATION TO DASA
Daimler-Benz Aerospace AG
- Space Infrastructure -
Postfach 10 59 09
D-28059 Bremen
Attention: Holger Voge with copies to Uwe Pape
When transmitted by mail: Same as above
When transmitted by electronic transmission: Fax Number: (0421) 539-4137
</TABLE>
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Article 20 - Key Personnel
The personnel listed below are considered essential to the work being performed
under this contract. Before removing, replacing, or diverting any of the listed
personnel, DASA shall notify SHI in advance, and shall provide rationale
including identification and qualifications of candidate replacement, and shall
not remove, replace or divert such personnel without SHI's written consent,
which shall not be unreasonably withheld. In such event, the list of personnel
shall then be amended accordingly.
Key Personnel Title/Position
- ------------- --------------
H.J. Zachrau Mission Manager
M. Ott Bremen Team Lead
C. Schepker Mission Analytical Integration and Payload Coordination
Article 21 - Termination
A. SHI may terminate this Contract at any time by written notice, in whole
or in part, if SPACEHAB, in its sole discretion, determines that a
termination is in its own best interest. SHI shall terminate by
delivering to the Contractor a Notice of Termination specifying the
extent of termination and the effective date.
B. In the event of a termination, SHI will reimburse DASA for all costs
incurred, including applicable fee and termination costs. For purposes
of the Termination Clause, incurred costs includes all outstanding
commitments not yet paid and for delivery of all hardware, software and
services, whether complete or incomplete, identified herein, to SHI.
Termination costs are those actual and reasonable costs incurred in
terminating the Contract including usual and customary severance pay
and other labor costs in the ordinary course of business or as
otherwise required by law, storage and protection costs, and costs of
settlement and termination of subcontracts.
C. SHI may terminate this contract if DASA fails to deliver the goods or
perform the services required by this contract within the time
specified and any extension thereto granted by SHI.
D. The minimum value of the subcontract with ASI is $180,000. In the event
that this task, or the entire contract, is terminated by SHI, without
default of ASI, DASA will be entitled to the remainder (minimum
contract value minus the actual payments to date of termination).
Article 22 - Governing Law
This agreement shall be governed by and interpreted in accordance with the law
of the Commonwealth of Virginia.
Article 23 - Arbitration/Disputes
Disputes arising out of the interpretation or execution of this contract which
cannot be resolved by negotiation shall, at the request of either Party, (after
giving 30 days notice to the other Party) be submitted to arbitration. The
arbitration tribunal shall sit in Vienna, VA. Disputes shall be finally settled
pursuant to the arbitration rules of the International Chamber of Commerce. The
parties hereby agree that any arbitration findings hereunder may be enforced in
any U.S. Federal Court in Washington, D.C. or
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<PAGE> 14
Virginia and the parties hereby consent to the jurisdiction of such courts for
such purpose. The decision to submit a dispute shall not excuse either party
from the timely performance of its obligations hereunder which are not the
subject matter of the dispute. Further, if the lack of resolution of the matter
in dispute will adversely impact the timely completion of preparation for launch
activities, DASA and SHI will perform the matter in dispute in the manner
determined by SHI, within the framework of this Contract and without prejudice
to the final resolution of the matter in dispute.
Article 24 - Audit
A. DASA will maintain accurate records of labor hours expended,
subcontract billings and travel costs incurred by Cost Charge Number.
Such records shall be made available for inspection by an independent
certified public accountant retained by SHI during normal business
hours for a period of three (3) years after completion of this
Contract.
B. DASA's books, records, documents and other supporting data shall be
made available to the independent certified public accountant
responsible for auditing DASA on behalf of DASA and ESA (Price Auditing
Office of the City of Bremen) for inspection and audit as reasonably
required in conjunction with the negotiation of any changes hereunder,
including termination claims.
C. In case of any dispute, the parties agree to continue Contract
performance pending resolution.
Article 25 - Indemnity Against Patent Infringement
A. DASA shall indemnify SHI against any liabilities or losses which SHI
may be required to pay in the case of any actual or alleged
infringement of any United States patent or any negotiation or
litigation based thereon, with respect to any products purchased
pursuant to the terms of this Contract unless such products are made to
a specific and detail design furnished by SHI which is not a
modification of a DASA design. Such liabilities or losses (i) include:
(a) counsel fees, (b) cost of replacing any infringing product with a
suitable non-infringing substitute or of otherwise curing any
infringement, but (ii) do not include any losses by SHI due to loss of
use, at any time, of equipment or component utilizing any of said
products which are the subject of any actual infringement.
B. With respect to any such actual or alleged patent infringement for
which DASA is obligated to indemnify SHI: (i) DASA shall, as soon as
practicable, report to SHI promptly an din reasonable written detail,
each notice of claim against DASA of patent infringement; and (ii) SHI
will notify DASA as soon as practicable after receipt by SHI of
appropriate notice of any charge of infringement or commencement of any
suit or action for infringement against SHI in either case, DASA shall
have the option to (a) conduct negotiations with the party or parties
charging infringement or (b) assume, conduct and control the defense of
any suit or action of infringement against DASA or SHI. In the event
DASA does not pursue either option, then SHI shall have the option to
conduct such negotiations and defense without expense or liability to
SHI as provided under Paragraph A. above.
Article 26 - Limitation of Liability
In no event, shall DASA be liable under any legal or equitable theory (including
but not limited to contract, tort, negligence, or strict liability) for any
incidental or consequential damages, including but not limited to damages for
lost profits, lost sales, or loss of use of property.
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Article 27 - Insurance and Indemnification
Upon delivery and final acceptance by SHI of an Integrated Cargo Carrier, SHI
shall indemnify and save harmless DASA, its subcontractors and any officers,
directors, employees, and agents of any of them form any liability and expense
on account of loss of damage to the property of third parties (including the US
Government) or bodily injury to any persons, including death, caused by or
resulting from the use of the goods furnished hereunder and/or arising from the
provision of services under this Contract excepting only such loss, damage, or
injury caused by the indemnities willful misconduct, and SHI shall defend any
suits or other proceedings brought against DASA and its subcontractors and the
officers, directors, employees, and agents of any of them on account thereof an
shall pay all expenses and satisfy all judgments which may be incurred or
rendered against them or any of them in connection therewith. DASA shall give
SHI prompt written notice of any claim of such loss, damage, or injury and shall
cooperate with SHI and its insurers in every reasonable way in defending against
such claim. SHI shall obtain insurance, naming DASA as an additional named
insured, against such liabilities to third parties as are referred to in this
paragraph.
DASA shall indemnify SHI against any liability, loss, claim, and/or proceeding
in respect of personal injury to and/or death of any person, or loss or damage
to property, arising out of the performance of the Contract; but only if the
same is due to the negligent acts or omission of DASA, its employees or agents;
or any subcontractor, its employees or agents.
Article 28 - DASA Employee Injury
DASA shall indemnify and hold harmless SHI, its officers, agents, and employees
from any liability, loss or damage they may suffer as a result of death or
injury to any DASA employees connected with or related to the performance of
Contract work whether or not on SHI's premises, and which results wholly or
partly from the negligence of DASA, its officers, agents, or employees. SHI
shall indemnify DASA against any liability, loss, claim, and/or proceeding in
respect of personal injury to and/or death of any person, or loss or damage to
property, arising out of the performance of the Contract; but only if the same
is due to the negligent acts or omission of SHI, its employees or agents; or any
subcontractor, its employees or agents.
Article 29 - Warranty
A. DASA hereby warrants to SHI that all deliverables furnished under this
contract shall be free from defects in workmanship for a period of one
(1) year from the date of their acceptance. The cost of and associated
fees for remedies of any defects shall be paid pursuant to the payment
provisions of this contract. SHI shall notify DASA in writing, via fax
or any equivalent means within 48 hours of any defects found after
acceptance of the products. DASA's liability under this clause shall
not extend:
1. to defects arising form the misuse of the items after
acceptance.
2. to defects in materials, assemblies or other supplies issued
by SHI for incorporation therein, provided always that DASA
shall have properly exercised its duties as custodian of such
issues and shall have incorporated them in accordance with the
requirements of the contract.
12
<PAGE> 16
B. Where defects in items are remedied by repair under this warranty, the
repaired item shall be warranted for the remainder of the unexpired
warranty. Where defective items are replace by new ones the full
guarantee period stipulated in the Contract shall apply to such
replacement items form the date of their acceptance.
Article 30 - Relationship of Parties
This Contract is not intended by the parties to constitute or create a joint
venture, partnership or formal business organization of any kind. The rights and
obligations of the parties shall be only those expressly set forth herein. The
relationship established by this Contract is exclusively that of seller and
buyer.
Article 31 - Manned Space Flight Item
DASA shall include the following statement in all subcontracts and purchase
orders placed by it in support of this Contract, without exception as to amount
or subcontractual level:
For use in manned space flight; materials, manufacturing, and
workmanship of highest quality standards are essential to astronaut
safety.
If you are able to supply the desired item with a higher quality than
that of the items specified or proposed, you are requested to bring
this fact to the immediate attention of the purchaser.
Article 32 - Order of Precedence
In the event of any conflict between Contract and the Statement of Work, the
contract shall take precedence.
Article 33 - Technical Data
All technical data produced and paid for, of whatever type or kind, under this
Contract shall be the property of SHI.
13
<PAGE> 17
Article 34 - Intellectual Property Rights
All worldwide Intellectual Property (IP) rights (including but not limited to
patents, copyrights, trademarks, service marks and trade secrets) created and
paid for under this contract shall be the sole property of SPACEHAB. DASA-RI
agrees to reasonably assist SPACEHAB in securing such rights through patent,
copyright and trade name applications in various worldwide jurisdictions. All
intellectual property (IP) utilized in the performance of this contract shall
remain the exclusive property of the party(s) who had the rights in the IP prior
to this contract.
IN WITNESS WHEREOF, the parties have caused their duly authorized representative
to execute this Contract in duplicate.
DAIMLER-BENZ AEROSPACE AG SPACEHAB, INC.
- - SPACE INFRASTRUCTURE -
By: By:
------------------------------- --------------------------------
Name: U. Pape H. Voge Name: Nelda Wilbanks
------------------------------- --------------------------------
Title: Project Mgr. Contracts Mgr. Title: Contracts Administrator
------------------------------- --------------------------------
Date: 30 June 1998 Date: 30 June 1998
------------------------------- --------------------------------
14
<PAGE> 18
EXHIBIT B
I. SPACEHAB FURNISHED EQUIPMENT (SFE), DATA AND SERVICES
1. SPACEHAB - ASTROTECH Payload Processing Facility
- Environmental Controlled Integration Area
- Logistics Support by ASTROTECH, customs clearance,
transport arrangement, transports
- Standard Facility Handling Equipment
- Support Personnel assisting in crane operations and
facility support tasks
- Adequate Storage areas for flight hardware and GSE
2. UCP - Unpressurized Cargo Pallet (UCP) including GSE
3. Keel Yoke Assembly (KYA) including GSE and Transport Container
4. Strela - ICC Mounting Hardware
5. SPACEHAB - OCEANEERING SPACE SYSTEMS TRANSIT CONTAINER
(SHOSS-TC) and associated GSE
- SHOSS Geometry
- Verified Models
- Phase II Safety Data*
- Payload Mass Properties
- Training Mock-up incl. ICC Standard Interface Plates
- Phase III Safety Data*
- SHOSS Transit Container
- SHOSS - TC Attach Hardware
6. Fully operational ICC Transport GSE
15
<PAGE> 19
II. GOVERNMENT FURNISHED EQUIPMENT & DATA (GFE)
1. Strela Crane (including operator post, FGB adapter, safety
ring, boom and Strela adapter plates) and associated GSE
- Structural/Thermal Math Models
- Phase II Safety Data*
- Design Mass Properties
- Design Documentation
- Training Mock-up (Strela on adapter plates)
- Test Verified Loads Models
- Phase III Safety Data*
- Strela Flight Hardware
- Strela-ICC Mounting Hardware attached to UCP
2. ORU Transfer Device (OTD) and associated GSE
- Payload Geometry
- Verified Models
- Phase II Safety Data*
- Training Mock-up incl. Payload-Unique ICC Interface
Plates
- Phase III Safety Data*
- OTD & Transition Plate
- Payload-unique ICC Interface Plates
3. EVA Support Equipment/ Trainer
- EVA-MSE
- ICC-STIPLs (EVAS attach hardware)
- Fully configured ICC Training Mock-up (including
Cargo Mock-ups)
* (ISS formatted data packages)
All SFE/GFE is expected to be made available at or before the date(s) specified
in the latest agreed to ICC I&O Master Schedule.
16
<PAGE> 1
Exhibit 10.83
Letter Contract No. SHB 1014
Modification No. 21
Date: July 22, 1998
To: From:
The Boeing Company SPACEHAB, Inc.
499 Boeing Blvd. 1595 Spring Hill Road
P. O. Box 24002 Suite 360
Huntsville, AL 35824-6402 Vienna, VA 22182
Attn: Doyle McBride
Senior Contracts Administrator
Dear Mr. McBride:
Letter Contract No. 1014 is hereby amended as follows:
1. Paragraph 1 is deleted in its entirety and replaced with the following:
"1. SPACEHAB, Inc. ("SPACEHAB"), hereby commercially contracts with
McDonnell Douglas Aerospace - Huntsville (hereinafter referred to as
"MDA-Huntsville" or "Seller"), a division of the McDonnell Douglas
Corporation, a wholly-owned subsidiary of the Boeing Company, for the
following:
a. The performance of all integration and operations tasks
required to successfully complete 4 SPACEHAB science
missions (1 single module mission and 3 double module
missions) and 2 SPACEHAB cargo double module missions
(Multiple Mission Integration and Operations (MM I/O
Tasks)). The definitized contract will include options for 3
additional cargo double module missions that may be executed
in accordance with the definitized schedule. For ISS
logistics missions, NASA has requested that equipment stowed
in soft stowage bags be transferred in the bags to the
appropriate location onboard the ISS for stowage. NASA's
preferred bag is similar to the Collapsible Transfer Bags
(CTB) currently used for Mir resupply missions. SPACEHAB,
Inc. (SHI) has agreed to transfer bags (including existing
bags, if appropriate) to the ISS and to provide the new
CTB-like bags for use on ISS logistics missions.
Accordingly, SHI will provide the new bags to Boeing
Huntsville for inclusion in the SH inventory in accordance
with the provisions for SHI Furnished Equipment
<PAGE> 2
Letter Contract No. SHB1014
Modification No. 21
22 July 1998
(SFE) to be included in the new Multiple Mission Integration
and Operations Contract (MMIOC). Boeing Huntsville is
requested and authorized to modify mission planning for the
STS-96 mission to include maximum use of the new bags (half,
single, and double MLVE sizes). Assume bags in each size are
available in sufficient quantity to meet the optimum packing
arrangement. Additionally, the contents of each bag are to
be grouped as much as possible, in accordance with their
destination location on the ISS.
b. Initiation of effort to enhance cargo carrying capability of
the SPACEHAB module consistent with capabilities presented
to SHI on 28 August 1997 as follows: i) Ceiling stowage
system is desired for use on STS-95 (2 bags are required).
Use best efforts for partial system capability (2 bags) for
use on STS-91. Provide a firm quotation for 1 set of ceiling
enhancement hardware within 150 days from the date of
Modification 01 to this Letter Agreement and ii) Rack front
stowage system (along with ceiling system) is required for
use on STS-96. Provide a firm quotation for 3 sets of rack
enhancement hardware within 180 days from the date of
Modification 01 to this Letter Agreement.
c. (i) Stop work on all effort in support of initiation of
effort to design, develop, build, and certify a roof-top
stowage adapter plate system, as described to SHI on 6
November 1997 as directed by Modification No. 03 dated 19
November 1997 and provide a status of contract change effort
through the date of this Modification No. 07.
(ii)(a) Develop requirements, preliminary interface
definition, and a list of technical questions for
the Strella payload. These requirements are to be
transmitted to SPACEHAB, Inc. for use in their
technical interchange meetings with the Russians.
(b) Design, analyze, fabricate, and install the
necessary rooftop adaptive structure for the
Strella payload on STS-96 as determined based on
the above noted requirements and subsequent
technical interchange meetings with Boeing,
SPACEHAB, Inc., NASA and the Russian Strella
payload representatives. Provide a firm quotation
for this effort by 3 April 1998.
d. Initiation of effort to design, develop, build, and certify
the necessary hardware to accommodate the Experiment Water
Pump Package in a SPACEHAB double rack. This capability is
required for STS-95. Provide a firm quotation with prices
for 1, 2, or 3 sets of this within 90 days of the date of
Modification 03 to this Letter Agreement.
e. Initiation of effort to design, develop, build, and certify
new MGSE for the 27.14 inch tunnel as described to SHI on 7
November 1997. This equipment is required to process STS-95.
Provide a firm quotation for this
<PAGE> 3
Letter Contract No. SHB1014
Modification No. 21
22 July 1998
effort within 90 days of the date of Modification 03 to this
Letter Agreement.
f. Initiation of the effort to perform the following tasks
under WBS 9.1.9.5.2 Flight Systems:
(i) 9.1.9.5.2.1 Logistics Double Module Enhancements.
This element contains the labor effort necessary
to identify, evaluate, and recommend ways to
enhance the cargo carrying capability of the
Logistics Double Module.
(ii) 9.1.9.5.2.2 Research Double Module Enhancements.
This element contains the labor effort necessary
to identify, evaluate, and recommend ways to
enhance the capability of the Research Double
module to accommodate new payloads and improve
accommodations for existing payloads.
(iii) 9.1.9.5.2.3 Integrated Cargo Services. This
element contains the labor effort necessary to
evaluate future storage/cargo requirements
associated with the International Space Station
and determine proposed solutions considering all
SPACEHAB assets. This element includes studies,
evaluations, and support of the new SPACEHAB
provided Integrated Cargo Carrier assets.
g. Initiation of effort to provide payload optional services
for STS-95 including the design and development of a triple
mounting plate for BioBox and the design and development of
a double mounting plate for MGBX. Provide a firm quotation
for this effort within 90 days of this modification.
h. Initiation of effort to upgrade the existing engineering
prototype SCU unit for use as flight spare on STS-95 and
provide a firm quotation for this effort within 90 days of
this modification.
i. Initiation of effort to perform a GTS Win NT upgrade as
proposed in Supplement No. 1.
j. Initiation of the effort to perform the following tasks
under WBS 9.1.9.5.3 Microgravity and Life Sciences:
(i) Microgravity and Life Sciences Payload
Assessments. This element contains the effort
necessary to identify and characterize potential
new internal and external microgravity and life
sciences payload customers and requirements for
the International Space Station (ISS) and the
Space Shuttle Program (SSP). This effort includes
experiment integration assessments with respect to
safety and unique integration hardware and
attendant experiment hardware modifications.
Assessments may include development of payload
accommodation requirements, performance of payload
resource utilization analyses, and development of
ROM estimates for unique hardware modifications
and integration elements.
k. Initiation of the effort to perform the following task under
WBS 9.1.9.3.4:
<PAGE> 4
Letter Contract No. SHB1014
Modification No. 21
22 July 1998
(i) Procure critical long lead material for the
Docking Double Module. This effort includes the
procurement of 2 aluminum ingots from Alenia's
European supplier to protect the critical path raw
material required to produce the DDM FU-5 end ring
forgings.
The period of performance of this effort is 6 February 1998
through 30 June 1998. The NTE for this effort is $170,000.
l. Initiation of effort under WBS 9.1.9.3.1 to support training
in Germany for the FAST experiment on STS-95. Labor for
training is considered in scope to WBS 9.1.9.2.1. This
modification authorizes the travel costs of Boeing
personnel. Provide a firm quotation for this effort within
60 days of the date of this modification. The NTE for this
effort is $25,000.
m. Initiation of effort under WBS 9.1.9.3.1 to perform the
additional task of preparing Phase III Flight Safety Data
Packages for the SSD-MOMO and APCF experiments. The
experimenter organizations will furnish supporting data as
requested by Boeing in a timely manner for enabling this
activity. Provide a firm quotation for this effort within 60
days of this modification. The NTE for this effort is
$15,000.
n. Initiation of effort under WBS 9.1.9.3.4 to provide the
additional experiment transportation containers required to
meet STS-95 requirements. Provide a firm quotation for this
effort within 60 days of this modification. The NTE for this
effort is $20,000.
o. Initiation of effort under WBS 9.1.9.3.4 to upgrade the
SPACEHAB crew trainer module assembly at the SPPF. The
upgrades are to be in accordance with the plan reviewed with
SPACEHAB on 26 March 1997. It is highly desirable that the
modifications be completed prior to the STS-95 crew training
scheduled in July 1998. Please provide a firm quotation for
this effort within 60 days of this modification. The NTE for
this effort is $50,000.
p. Initiation of effort under WBS 9.1.9.1 to provide 40 new
experiment battery packs and 4 chargers. Labor for this
effort is considered in scope to WBS 9.1.9.1. This
modification authorizes materials and procurement. The new
batteries are required to support the STS-95 processing
schedule. Please provide a firm quotation for this effort
within 60 days of this modification. The NTE for this effort
is $50,000.
q. Initiate effort under WBS 9.1.9.3.3 to integrate the LeRC
Combustion Module (CM) experiment in STS-107. Please provide
a firm quotation for this effort within 90 days of this
modification. The NTE for this 90 day effort is $100,000.
r. Initiate effort under WBS 9.1.9.3.3 to integrate the MSFC
Volatile Removal Assembly/Vapor Compression Distillation
(VRA/VCD) experiment in STS-107. Please provide a firm
quotation for this effort within 90 days of this
modification. The NTE for this 90 day effort is $100,000.
<PAGE> 5
Letter Contract No. SHB1014
Modification No. 21
22 July 1998
s. Initiate effort under WBS 9.1.9.3.3 to integrate the rack
mounted and aft module subfloor pallet mounted ISS ORUs as
defined in the baselined STS-96 MRAD. Please provide a firm
quotation for this effort within 90 days of this
modification. The NTE for this 90 day effort is $100,000.
t. Initiate effort to provide all program sustaining labor,
travel, materials, vendor services, and other sustaining
services under this contract beginning 1 June 1998. Provide
a firm quotation for the impact of this modification within
60 days of the date of this modification.
u. Initiate effort under WBS 9.1.9.3.4 to upgrade the current
SPACEHAB EGSE at the SPPF to enable the system to function
past the year 2000. The initial efforts are to include
refinement of the EGSE system upgrade concept; definition of
physical configuration and cable modification requirements;
draft changes to system requirements documentation; and
identification and procurement of software development
tools. Provide a firm quotation for the EGSE upgrade effort
within 90 days of this modification. The NTE for this 90 day
effort is $80,000.
v. Initiate effort under WBS 9.1.9.3.4 to provide a new tunnel
configuration for STS-96. This new configuration results
from the addition of existing tunnel segment(s) to move the
module further aft in the cargo bay and is intended to
eliminate planned ballast and provide additional payload
capability to the ICC. Perform detailed engineering
assessment of the new tunnel structural compatibility to
include stress analysis of struts, trunnions, tunnel
cylinder, and rings. Evaluate Orbiter compatibility of
tunnel and ICC sharing payload bridges, including assessment
of compatibility of the tunnel and ICC fittings with the
orbiter latches. Evaluate rotation of 27.51 tunnel segment
to disable existing duct/plenums and the addition of drag-on
ducts. Determine modifications required, including any
structural modifications, outfitting changes, and new MLI
sections. Verification of the structural compatibility is
required ASAP for use in STS-96 mission planning. Provide a
detailed schedule and firm quotation and firm quotation to
support the STS-96 mission within 60 days of this
modification. The NTE for this 60 day effort is $30,000.
w. Initiate effort under WBS 9.1.9.3.2 to support NASDA's BRIC
in-module plant growth activities (test planning and test
execution) in the SPPF beginning Thursday, June 25 and
completing no later than midnight Saturday, June 27, 1998.
The NTE for this effort is $11,000.
x. Initiation of the effort to perform the following tasks
under WBS 9.1.9.5.1 Operations:
(i) 9.1.9.5.1.2 Payload Development. This element
contains effort necessary to support SHI in the
development of new payload customers. This
includes identification of potential new
customers, development of their requirements and
accommodation studies.
<PAGE> 6
Letter Contract No. SHB1014
Modification No. 21
22 July 1998
y. Under WBS 9.1.9.2, Mission Recurring, perform STS-107
pre-mission integration efforts as follows:
(i) Develop mini-MRAD based on the commercial payloads
identified to date. Provide a firm quotation
within 90 days. The NTE for this 90 day effort is
$50,000.
z. Initiate the effort to accommodate Spacelab equipment
provided by NASA. This initial effort consists of the
following tasks:
(i) Coordinate the shipping/receiving of hardware from
NASA with SPACEHAB, Inc, NASA-KSC, and NASA REALMS
program office; (ii) determine what NASA has
delivered to the SPPF by part number and quantity;
(iii) Determine if any hardware items are not to
be kept by SPACEHAB (returned to NASA or
scrapped/sold). Implement return to NASA or scrap
as necessary; (iv) Enter the hardware in a
tracking database; (v) Place retained hardware in
appropriate storage; (vi) Determine documentation
required for proper use of retained hardware (ADP,
handling/constraints, operations manuals, etc...).
Provide a firm quotation for this effort within 60
days of this modification. The NTE for this effort
is $15,000.
aa. Proceed with the repair of PPRV #1 (s/n 2665-0001-13) and
return it to inventory as soon as possible. Provide a firm
quotation for this effort within 60 days of this
modification. The NTE for this effort is $18,000.
bb. Initiate effort to modify the VFEU experiment water loop
plumbing to increase the VFEU inlet water temperature to
within the range of 10(Degree) - 25(Degree)C. Provide a firm
quotation for this effort within 90 days of this
modification. The NTE for this total effort is $45,000.
cc. Proceed with the effort to perform the tasks under WBS
9.1.9.5.2 Flight Systems for the period 1 July 1998 through
31 June 1999.
dd. Initiate effort to provide new tools for two additional RDM
cable building workstations. Please provide a firm quotation
for this effort within 30 days of this modification. The NTE
for this 30 day effort is $18,000."
Paragraph 3 is deleted in its entirety and replaced with the following.
"3. The maximum amount (including, but not limited to, a reasonable amount for
termination costs and for 12 percent fee) for which SPACEHAB shall be liable
under this letter contract is $13,769,507.00 for the effort described in
Paragraph 1.a; $235,000.00 for the effort described in Paragraph 1.b; $90,000.00
for the effort described in Paragraph 1.c.; $45,000.00 for the effort described
in Paragraph 1.d.; $60,000.00 for the effort described in Paragraph 1.e.;
$25,000.00 for the effort described in Paragraph 1.f.(i); $100,000.00 for the
effort described in Paragraph 1.f.(ii); $630,000.00 for the effort described in
Paragraph 1.f.(iii); $45,000 for the effort described in Paragraph 1.g.;
$15,000.00 for the effort described in Paragraph 1.h.; $20,700 for the effort
described in Paragraph 1.i.; $75,000 for
<PAGE> 7
Letter Contract No. SHB1014
Modification No. 21
22 July 1998
the effort described in Paragraph 1.j.(i); $170,000 for the effort described in
Paragraph 1.k.; $25,000 for the effort described in Paragraph 1.l; $15,000 for
the effort described in Paragraph 1.m; $20,000 for the effort described in
Paragraph 1.n.; $50,000 for the effort described in Paragraph 1.o.; $50,000 for
the effort described in Paragraph 1.p.; $100,000 for the effort described in
Paragraph 1.q.; $100,000 for the effort described in Paragraph 1.r.;$100,000 for
the effort described in Paragraph 1.s.; $600,000 for the effort described in
Paragraph 1.t.; $80,000 for the effort described in Paragraph 1.u.; $30,000 for
the effort described in Paragraph 1.v.; $11,000 for the effort described in
Paragraph 1.w.; $225,000 for the effort described in Paragraph 1.x.(i); $50,000
for the effort described in Paragraph 1.y.; $15,000 for the effort described in
Paragraph 1.z; $18,000 for the effort described in Paragraph 1.aa; $45,000 for
the effort described in Paragraph 1.bb; $155,000 for the effort described in
Paragraph 1.cc. and $18,000 for the effort described in Paragraph 1.dd."
Except as hereby modified, all conditions of said contract as heretofore
modified, remain unchanged and in full force and effect.
Contractor is directed to account for costs in such a manner as to allow
visibility into the costs of effort authorized in this change order.
Please acknowledge receipt of this Change Notice by returning the acknowledgment
copy (within l0 days of receipt) signed with date of receipt indicated.
- ------------------ ----------------------------------
Nelda Wilbanks McDonnell Douglas Corporation,
SPACEHAB, Inc. A Wholly-Owned Subsidiary of
The Boeing Company
<PAGE> 1
Exhibit 10.84
COMMERCIAL
A DIVISION of COMMUNITY REALTY COMPANY, INC.
April 24, 1998
VIA CERTIFIED MAIL
RETURN RECEIPT REQUESTED
Mr. George D. Baker
Astrotech Space Operations, Inc.
12510 Prosperity Drive, Suite 100
Silver Spring, Maryland 20904
Dear Mr. Baker:
I am pleased to enclose one (1) fully executed original counterpart of the Lease
and First Amendment To Lease for approximately 6,250 square feet of office space
at Capital Office Park, 6305 Ivy Lane, Suite 520, Greenbelt, Maryland.
If I may be of further assistance, please do not hesitate to call.
Sincerely,
CRC COMMERCIAL
Lauren Weiss
Assistant Director
Commercial Leasing and Sales
LW/bjm
Enclosures
COMMERCIAL LEASING . SALES . PROPERTY MANAGEMENT
6301 IVY LANE . SUITE 400 . GREENBELT, MARYLAND 20770-1407 . 301/441/3434 .
FAX: 301/474-2064
<PAGE> 2
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE is made as of the 23rd day of April, 1998,
by and between ELEVENTH SPRINGHILL LAKE ASSOCIATS L.L.L.P., a Maryland limited
liability limited partnership ("Landlord", and ASTROTECH SPACE OPERATIONS, INC.,
a Delaware corporation "Tenant").
RECITALS.
A. Pursuant to Lease dated 23rd day of April, 1998 the ("Lease"), Landlord has
leased to tenant Suit described (the "demised premises" or the "premises") on
the 5th Floor of the building known as Capital Office Park Building III with
street address of 6305 Ivy Lane, Greenbelt, Maryland.
B. The parties desire hereby to amend the Lease, in order to confirm certain
understandings concerning payments for the I costs of Landlord's Work to be
performed by Landlord or its contractor pursuant to Section 29 of the Lease. All
terms and I phrases in this Amendment shall have the meanings defined for same
in the Lease, unless otherwise expressly stated in this Amendment. The
provisions of this Amendment shall prevail over contrary hereof contained in the
Lease. I NOW, THEREFORE, for $1.00 and other valuable consideration l paid by
each party to the other, the receipt and sufficiency of | which are
acknowledged, and intending to be legally bound, the/parties hereby agree that
the Lease is amended as follows:
1. Payments for Landlord's Work. With respect to the Landlord's Work
shown on Exhibit KEY to the Lease, to be performed by Landlord or
its contractor pursuant to Lease Section 29(A), the parties agree
as follows:
(a) Landlord has obtained from its contractor a final bid for
the total coats of Landlord's Work shown on Lease Exhibit
UK", said total costs being in the amount of $109,913.00
(the "Total CostsH). Landlord and Tenant hereby approve of
said Total Costs figure.
(b) The amount of the one-time Work Allowance, comprising the
portion of the of the Total Costs of Landlord's Work which
Landlord has agreed to pay pursuant to Lease Section 29(A),
is hereby changed to be up to and including but not
exceeding $94,913.00 (the Work Allowance@), instead of the
$87,500.00 originally specified in Lease Section 29(A) as
constituting the Work Allowance.
(c) Accordingly, it is agreed that Tenant is obligated and
hereby agrees to pay, as the Tenant's Portion of the Total
Costs of Landlord's Work, $15,000 (herein, and for all
purposes of the Lease, referred to as the Tenant's
Portions).
(d) Tenant agrees to pay to Landlord, simultaneously with the
execution of this Amendment, the entire aforesaid $15,000
Tenant's Portion of the Total Costs of Landlord's Work;
such payment to be made by good check subject to collection
payable to the order of Community Realty Company, Inc.,
Landlord's management agent. Time is of the essence of said
payment.
1
<PAGE> 3
(e) Landlord will apply the aforesaid $15,000 Work Allowance on
account of payment to its contractor of the balance of the
Total Costs of Landlord's Work.
(f) The $94,913.00 Work Allowance described in Paragraph l(b)
of this Amendment supersedes and fully replaces (and is in
lieu of) the original $87,500 Work Allowance described in
Section 29(A) of the Lease.
(2) Cost Work. This Amendment does not modify nor other
wise alter or affect Tenant's obligation for payment
of all costs of any Additional Work, Change Orders
and Cost Work, as required under Section 29 of
Lease.
(3) Continuing Force. Except as hereby amended, the
Lease shall be and remain in full force and effect.
This Amendment contains the entire agreements of the
parties concerning the matters covered hereby, and
cannot be modified except by written instrument
executed by Landlord, and Tenant.
WITNESS the execution hereof by the parties as of the date first above
written.
LANDLORD:
COMMUNITY RELATY CO., INC.
Agent for:
ELEVENTH SPRINGHILL LAKE
ASSOCIATES L.L.L.P.
- -----------------------------
Witness By: (SEAL)
------------------------
President
ATTEST: TENANT:
- -----------------------------
John B. Satrom ASTROTECH SPACE OPERATIONS INC.
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
2
<PAGE> 4
CAPITAL OFFICE PARK
LEASE BETWEEN ELEVENTH SPRINGHILL LAKE
ASSOCIATES L.L.L.P. ("LANDLORD")
AND ASTROTECH SPACE OPERATIONS, INC.
("TENANT"), SUITE NO. 520 AT 6305 IVY LANE
GREENBELT, MARYLAND
TABLE OF CONTENTS
ARTICLE PAGE
1. Premises; Term; Basic ....................................................1
2. Possessionon..............................................................2
3. Use.......................................................................3
4. Upkeep of Premises........................................................4
5. Assignment and Subletting ................................................5
6. Compliance with Governmental requirement..................................6
7. Alterations...............................................................7
8. Signs and Other Agreements of Tenant......................................8
9. Tenant's Electrical Equipment ............................................9
10. Equipment ...............................................................10
11. Landlord's Access........................................................10
12. Illegal Use..............................................................11
13. Rules and Regulations....................................................11
14. Damage...................................................................11
15. Personal Property .......................................................11
16. Liability................................................................12
17. Public Liability Insurance...............................................13
18. Service..................................................................13
19. Estoppel Certificates....................................................14
20. Bankruptcy...............................................................15
21. Defaults and Remedies....................................................17
22. Damage by Fire or Casualty...............................................18
23. Subordination............................................................20
24. Eminent Domain...........................................................21
<PAGE> 5
25. Successors...............................................................22
26. Tenant Holdover..........................................................22
27. Mutual Waiver of Claims..................................................23
28. Tenant Access............................................................23
29. Landlord's Work..........................................................23
30. Pronouns.................................................................25
31. Jury Trial Waiver........................................................25
32. Notices..................................................................26
33. Security Deposit.........................................................26
34. Lien for Rent............................................................26
35. Landlord's Liability.....................................................27
36. Entire Agreement.........................................................27
37. Fire Insurance Increases.................................................27
38. Miscellaneous............................................................28
39. Quiet Enjoyment..........................................................30
40. Automobile Parking Areas.................................................30
41. Lender Requirments.......................................................30
42. Garage Parking ..........................................................31
<PAGE> 6
EXHIBIT "A": Drawing showing demised premises (See Section 1 of Lease).
EXHIBIT "B": Declaration by Landlord and Tenant as to Date of Delivery
and Acceptance of possession of Leased Premises (See
Section 2 of Lease).
EXHIBIT "C": Rules and Regulations (See Section 13 of Lease).
EXHIBIT "D": Tenant Estoppel Certificate (See Section 19 of Lease).
EXHIBIT "E": Preliminary Plan for Landlord's Work (See Section 29 of
Lease).
<PAGE> 7
THIS AGREEMENT OF LEASE made the 23rd day of April, 1998, by and between
ELEVENTH SPRINGHILL LAKE 't ASSOCIATES L.L.L.P., a Maryland limited liability
limited partnership (hereinafter called "Landlord") and ASTROTECH SPACE
OPERATIONS, INC., a corporation organized and existing under the laws of the
State of Delaware (hereinafter called "Tenant").
WITNESSETH:
1. Premises; Term; Basic Rental.
(a) That Landlord, in consideration of the covenants and agreements
herein set forth and the rents herein reserved and agreed to be paid by Tenant,
doe" hereby lease and demise unto Tenant, and Tenant does hereby lease and hire
as tenant Or the Landlord, at the rental and upon the terms, covenants and
conditions herein set forth, the space described as follows: Suite No. 520 on
the Fifth Floor, said demised space (hereinafter called the "demised premises"
or the "premises" or the Premises), containing an agreed upon area of
approximately 6, 250 square feet of rentable floor area and being as outlined
on the drawing attached hereto as Exhibit "A" and made a part hereof, in the
building known by street address as 6305 Ivy Lane, Greenbelt, Prince George's
County, Maryland (herein called the "building" or the "Building"), said building
being one of a group of office buildings now known as "Capital Office Park"
(which under said name or any change therein is herein called the "Office
Park"), for the term of rive (5) years or until such term shall sooner cease and
expire as hereinafter provided, commencing on June 1, 1998 (the "Lease
Commencement Date") and ending on the 31st day of May, 2003, both dates
inclusive. Tenant hereby covenants and agrees to pay as rent during each lease
year of the original term of this Lease, a basic annual rental during the
respective lease year, payable in equal monthly installments, as set forth in
the following table, namely:
<TABLE>
<CAPTION>
LEASE YEAR BASIC ANNUAL RENT BASIC MONTHLY RENT
---------- ----------------- ------------------
<S> <C> <C>
1st $128,124.96 $10,677.08
2nd $131,968.68 $10,997.39
3rd $135,927.72 $11,327.31
4th $140,005.56 $11,667.13
5th $144,205.68 $12,017.14
</TABLE>
Upon execution of this Lease, Tenant shall pay to Landlord (in addition
to the security deposit described in Section 33 below) the first installment of
basic monthly rent in the amount Of $10,677.08, the same to be applied on
account of basic monthly rent for the first month Or the term hereof. Each
subsequent installment of basic monthly rent, in the applicable amount shown
above during a given lease year, shall be due and payable in advance without
deduction, setoff or demand on the first (1st) day of each calendar month during
the term hereof, commencing for the first such payment on the first day of the
second calendar month of the term hereof. All rentals and other amounts payable
by Tenant hereunder shall be pro-rated and paid on a per diem bests, for any
fraction of a calendar month at the beginning and end of the term hereof, and
such pro-rated sums shall be paid by Tenant to Landlord within five (5) days
after billed to Tenant. All rentals and other sums payable by Tenant hereunder
shall be paid by good check (subject to collection) made payable to the order
of:
<PAGE> 8
Community Realty Co., Inc. (unless otherwise directed in writing by Landlord),
and shall be delivered to Landlord at the office of its management agent,
Community Realty Co., Inc. at 6305 Ivy Lane, Suite 210, Greenbelt, Maryland
20770, or at such other address as Landlord may from time to time designate to
Tenant in writing. All sums, which Tenant is required to pay to Landlord under
this Lease, (which are in addition to the aforesaid basic monthly rent), shall
be deemed to be additional rentals payable hereunder. If Tenant is in default in
any payments of basic and/or additional rental hereunder more than twice during
the term hereof, then in such event Landlord at its option may require that all
future payments Of basic and additional rentals and other sums thereafter
payable by Tenant be made by certified or cashier's check (in addition to and
not in limitation of any other remedies available to Landlord under this Lease).
(b) Real Estate Tax and Operating Expense Increases. In addition to the
basic monthly rent herein above specified, Tenant shall pay to Landlord as
further and additional rental hereunder, the amounts determined as set forth
below in this Paragraph l(b).
DEFINITIONS. As used in this Lease, the terms listed below shall have the
meanings indicated therefor, namely:
(1) "Calendar Year" shall mean each consecutive twelve (12)
months' period from January 1st through the succeeding December 31st of any year
in which this Lease is in force and effect.
(2) "Tenant's Proportionate Share" shall be five and 577/1000
of one percent (5.577%), representing the approximate and mutually agreed upon
ratio that the rentable area of the demised premises bears to the total rentable
area of all space contained in the building.
(3) "Taxes" shall mean all taxes, rates and assessments,
general and special (including, without limitation, annual benefit charges of
Washington Suburban Sanitary Commission), and including also all increases in
tax rate and/or in assessed valuation, which are now or at any time(s) hereafter
levied, assessed or imposed upon or with respect to the building and all lands
upon which the building is erected or which are appurtenant or related to the
operation of the building and its fixtures and equipment and other related
facilities, and/or upon Landlord's leasehold interest (if applicable) in the
said lands, and including also without limitation real estate taxes, personal
property taxes and assessments of any and every kind and nature whatsoever, and
all unincorporated and other business license and franchise taxes, and any
taxes, assessments or other levies which may at any time be imposed and/or
collected by any federal, state, county, municipal, quasi-governmental or
corporate entity in respect of bus, subway or other public transportation
facilities operating in the metropolitan area of the jurisdiction wherein the
building is located, and including also any tax assessment or other charges in
the nature of sales, use or other tax upon the Landlord, the demised premises,
the building, the land and/or the rents payable hereunder (except net income
taxes, estate or inheritance taxes Of the Landlord). The phrase Taxes shall also
include all costs and expenses including but not limited to accountants' and
attorneys' fees and court costs, incurred by Landlord to contest-or appeal
Taxes, if Landlord elects to do so. If the system of real estate taxation shall
be altered or varied and any new tax or levy shall be levied or imposed on the
building and/or land and/or Landlord, in addition to or in
<PAGE> 9
substitution for real estate taxes and/or personal property taxes presently
levied or imposed on immovables in the State of Maryland, and including also
without limitation any taxes on rents, then any such new tax or levy shall be
included within the term "Taxes". If any such tax is levied or assessed in such
manner that the amount thereof required to be paid by Tenant hereunder in
respect of the Tenant's Proportionate Share of the aforesaid Taxes is not
ascertainable because such tax relates to more than the demised premises or to
more than the rents payable hereunder, then the proportionate share of said
items to be paid by Tenant as part of said Taxes shall be determined by Landlord
in the Landlord's reasonable discretion.
(4) "Operating Expenses" shall mean any and all expenses
incurred by Landlord in connection with the operation, maintenance, servicing
and repair of the building and its appurtenances. By way of example, but without
limitation, Operating Expenses shall include any and all of the following: All
building personnel costs including but not limited to salaries, wages, medical,
surgical and other fringe benefits and general welfare benefits (including also
premiums, coats and expenses for group medical and other types Or health,
disability and tire insurance and workmen's compensation insurance) and pension
payments, for employees of Landlord engaged in the operation, maintenance,
servicing or repair Or the building; and all other direct and indirect costs of
engineers, superintendents, watchmen, porters and all other building personnel;
payroll taxes; license fees; repairs and maintenance; utility taxes; water and
sewer charges; gas (if any); electricity; oil and other fuels; all other utility
charges (including also surcharges) of whatever nature; and all premiums, costs
and expenses for rent interruption insurance, casualty, liability and other
insurance of any kind; accounting and auditing fees in connection with
preparation of operating statements; security and access control services and
equipment; char and cleaning services including also but not limited to all
costs of complying with any present or future federal, state, county and
municipal governmental laws, orders or regulations concerning collection,
sorting, separation, recycling or removal of trash, garbage, refuse or wastes
(collectively herein referred to as "recycling laws"); building and cleaning
supplies; uniforms and dry cleaning and laundering; window cleaning; snow
removal; repair. Maintenance and cleaning of the sidewalks, driveways, parking
facilities, roadways and grounds; service or management contracts with
independent contractors; accounting and legal fees; all costs, charges and
payments under contracts for services, maintenance, repairs and/or replacements
of any kind, including but not limited to chillers, boilers, controls,
elevators, mail chutes, window cleaning, janitorial and general cleaning, and
security services; all payments made under any management contracts or
agreements, including without limitation management commissions and fees and
out-of-pocket reimbursements; advertising costs; all other maintenance and
repair expenses and supplies which are deducted by Landlord in computing its
federal income tax liability; the costs of any additional services not provided
to the building at the date the initial term of this Lease commences but
thereafter provided by Landlord in the prudent management of the building, as
determined by Landlord in its exclusive discretion; telephone, telegraph,
postage, stationery, supplies and other materials and expenses required for the
operation of the building; and any and all other expenses or charges of any
nature whatsoever, whether or not herein mentioned, which are incurred by
Landlord in connection with the servicing, operation, management, maintenance,
repair and protection of the building and related interior or exterior
appurtenances, and all other expenses and charges of any
<PAGE> 10
Nature, which would be included in operating expenses in accordance with
generally, accepted accounting and management principles with respect to
operation of first-class office buildings in the Washington, DC, Metropolitan
Area. For purposes hereof, the phrase Operating Expenses shall not include any
Of the following: expenses for capital improvements, except those for equipment,
systems or materials installed to reduce operating expenses; painting or
decorating areas of the building other than public area; interest and principal
amortization on mortgages; ground rents (if any); depreciation of the building
(except for depreciation of equipment, systems, or materials installed to reduce
operating expenses); and commissions paid to officers and executives of Landlord
for leasing fees.
PAYMENTS OF INCREASES IN TAXES AND OPERATING EXPENSES.
(i) Tenant hereby covenants and agrees to pay to Landlord,
during the entire initial term and any renewal or extension term of this Lease
and any holdover term, in addition to the basic monthly rent and other charges
and sums payable by Tenant under this Lease, and as additional rental hereunder,
the Tenant's Proportionate Share Of any and all Taxes and Operating Expenses for
a given fiscal year of the building that exceed an amount therein referred to as
the DBase Amounts) equal to the aggregate amount of all Taxes and Operating
Expenses for the entire calendar year 1998 as determined by Landlord, such
payments to be made by Tenant for each fiscal year of the building and for each
traction of a building fiscal year during the term hereof and during any
renewal, extended and holdover term. The payments called for in the preceding
sentence are herein sometimes called the "Adjustment Rent"; and any such
payments of the Adjustment Rent due from Tenant hereunder shall be adjusted and
pro-rated (as calculated and determined by Landlord) and shall be paid by Tenant
for any fraction of a building fiscal year at the commencement and at the
expiration of the term of this lease. The payments Of said Adjustment Rent shall
be computed by Landlord on the basis Or each fiscal year Of the building during
the initial term Of this Lease and any renewal, extended and holdover term
thereof (which building fiscal year may be on a calendar year basis or such
other fiscal year as Landlord may determine from time to time in its exclusive
discretion), and shall be paid by Tenant at the times and in the manner
specified hereinbelow. Tenant shall pay to Landlord the amounts of said
Adjustment Rent within thirty (30) days after each and every request therefor
from Landlord. Copies of the appropriate government-issued real estate tax bills
or assessment notices, and copies of Landlord's annual statements Of Operating
Expenses Of the building prepared by Landlord or Landlord's accountants,
covering said Adjustment Rent shall be furnished to Tenant as soon as is
reasonably practicable after Tenant's written request following Landlord's
billing Of such Adjustment Rent under this Subparagraph l(b)(i), and shall be
deemed conclusive and binding on the parties. Tenant's obligation to make the
payments of Adjustment Rent under this Subparagraph l(b)(i) shall survive the
expiration or any termination of this Lease, regards payments thereof covering
any part or the term hereof at the expiration or termination of this Lease.
(ii) At the option and exclusive discretion of Landlord, the
Landlord may from time to time during the term hereof deliver to Tenant a
written estimate by Landlord Of the amount Or annual Adjustment Rent which
Landlord may estimate and determine will be payable by Tenant during an ensuing
building fiscal year (such estimated sum being hereinafter called the "Estimated
<PAGE> 11
Adjustment Rent"). Commencing with the first monthly installment of rent
becoming due and payable hereunder after the date of any such statement of
Estimated Adjustment Rent, and with each successive monthly installment during
the then ensuing building fiscal year, the Tenant shall pay to t: Landlord (in
addition to the basic monthly rent, and as additional rental) a sum as specified
by Landlord which is equal to one-twelfth (l/12th) of said Estimated Adjustment
Rent, such payments to continue to be due and payable until further notice from
Landlord. In addition, Tenant shall pay to Landlord within thirty (30) days
after request any accumulated unpaid monthly installments of such Estimated
Adjustment Rent for the fiscal year covered by an estimate delivered after the
beginning of such year. Landlord shall furnish to Tenant, as soon as practicable
after the end of each building fiscal year, an annual statement setting Forth
the actual amount of the annual Adjustment Rent due and payable for such
immediately preceding and expired building fiscal year in which such monthly
installments of Estimated Adjustment Rent were paid pertinent to this Paragraph
l(b)(ii), and the partioa shall then make an appropriate adjustment (either by
Tenant's payment to Landlord of any deficiency within thirty (30) days after
Landlord's request therefor, or at Landlord's option by Landlord's refund to
Tenant or credit toward future installments of basic monthly rent in case of
overpayment by Tenant) of said Estimated Adjustment Rent paid by Tenant for the
then expired building fiscal year.
(iii) For purposes of this Lease, the phrase "Lease year"
shall mean each period of twelve (32) consecutive months, commencing for the
first lease year on the "Lease Commencement Date", and with each succeeding
lease year to commence on each anniversary Or the Lease Commencement Date.
(c) Any additional rental on account of increases aforesaid due
and payable for a partial lease year at the end of the term shall be equitably
pro-rated, based upon the number of months remaining until expiration of the
term of this Lease, and the amount or amounts found to be owing by the Tenant
shall be paid within ten (10) days after Landlord's demand. If the term of this
Lease is extended, the provisions of this subparagraph (d) shall apply only to
the last year of the extended term.
2. Possession. If Landlord shall be unable to tender to Tenant possession
Or the demised premises on the Lease Commencement Date by reason of the fact
that Landlord's Work (if any) described in Section 29 hereof has not been
substantially completed, or because a certificate of occupancy has not been
provided (if legally necessary), or by reason of the holding over or retention
of possession of any prior lessee or occupant of the demised premises, or for
any other reason whatsoever, then and in any such event Landlord shall not be
subject to any liability for failure to tender to Tenant possession of the
demised premises on the Lease Commencement Date. Under such circumstances, the
basic monthly rent payable under Section l(a) hereof shall be abated and shall
not commence to be due and payable until the date possession of the demised
premises is tendered to Tenant with Landlord's Work (if any) therefor
substantially COMPLETED AS DEFINED IN SECTION 29 (THE "Tender Date"), as such
Tender Date is established by written notice from Landlord to Tenant. No such
failure of Landlord to deliver to Tenant possession on the Lease Commencement
Date shall affect the validity Or this Lease or the obligations of Tenant
hereunder, except that in such event the Lease Commencement Date shall be
postponed to be the Tender Date, and the expiration date of the term hereof
shall be the last day of the sixtieth (60th) full calendar month after the
<PAGE> 12
tender Date. However, if delay in Landlord's tender of possession of the
premises or in substantial completion of Landlord 'a Work is caused by any act,
omission or default of Tenant, its employees or contractors (a "Tenant Delays or
"Tenant Delays"), then the term hereof and Tenant's ': obligation to pay rent
and other sums hereunder shall commence on such earlier date (as determined by
Landlord's contractor) when Landlord's Work could have been substantially
completed absent such Tenant Delay. On the date when possession of the demised
premises is delivered to Tenant, Landlord and Tenant shall jointly execute a
Declaration, in the form attached as Exhibit "Be annexed hereto, setting forth
the date on which possession has been delivered to the Tenant, and the
commencement date and expiration date of the term of this Lease as determined
hereunder, and the other matters shown on Exhibit "B" with all blanks therein
properly completed. If permission is given to Tenant to enter into possession of
the demised premises prior to the date specified as the Lease Commencement Date,
Tenant covenants and agrees that such occupancy shall be deemed to be under all
the terms, covenants, conditions and provisions of this lease.
3. D86. The Tenant shall use and occupy the demised premises only as
executive offices; subject to Tenant's compliance at its own expense with all
federal, state, county and municipal laws, codes, orders, rules and regulations
applicable at any time to the conduct and operation of such use at the demised
premises; but for no other purpose whatsoever without the prior written consent
of Landlord. Tenant shall promptly comply with all laws, ordinances, rules,
orders and regulations of all government authorities and Of the Board of Fire
Underwriters (and any successor thereto) at any time promulgated and in force,
and with all requirements of Landlord's insurance companies, concerning the use
or manner of use or occupancy by Tenant of the demised premises, or any part
thereof.
4. Upkeep of Premises. The Tenant agrees that it will, at its own
expense, keep the demised premises and the fixtures therein in good order and
condition and will, at the expiration or other termination of the term hereof
surrender and deliver up the same broom clean and in like good order and
condition as the same is in at the commencement of the initial term hereof,
ordinary wear and tear excepted, and free of subleases and occupants and with
all personal property owned by Tenant, its sublease's and assignees removed from
the building.
5. Assignment and Subletting. Tenant will not assign, transfer, mortgage
or otherwise encumber this Lease nor sublet or rent the premises, or any part
thereof or any desk space or other space, without obtaining the prior written
consent of Landlord, 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; which consent of Landlord in all
instances aforesaid may be granted or refused in the exclusive and arbitrary
discretion of Landlord. 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 constitute a waiver or
release of Tenant from any covenant or obligation contained in this lease, nor
shall any such assignment or subletting be construed to relieve Tenant from
obtaining the prior written consent of Landlord to any further assignment or
subletting. In the event that Tenant defaults hereunder, Tenant hereby assigns
to Landlord the rent due from any subtenant of Tenant and hereby authorizes each
such
<PAGE> 13
subtenant to pay said rent directly to Landlord. In the event the Tenant desires
to sublet all or a portion of the demised premises, Tenant shall give to the
Landlord at least thirty (30) days' prior written notice of Tenant's intention
so to do. Within thirty (30) days after its receipt of amid notice, Landlord
shall have the right at its option and exclusive discretion, (a) if the Tenant
desires to sublet a portion of the space, to sublet that portion of space from
the Tenant at a rental equal to a percentage of the rental stipulated herein,
said percentage being the percentage the sublet portion of space bears to all of
the demised premises; or (b) if the Tenant desires to sublet all of the demised
premises, Landlord shall have the right at its option and exclusive discretion
to either sublet the demised premises from the Tenant at the same rental
stipulated herein, or to terminate this Lease on a date to be specified by
Landlord. In the event Landlord has not exercised its right to sublet the
demised premises or to terminate this Lease as provided above in this Paragraph,
Tenant may sublet the demised premises after obtaining the written consent of
the Landlord. In no event shall Tenant attempt or be entitled to sublet all or
any part of the demised premises to, or assign this Lease to, any party or
parties who are then lessees or prospective lessees (i.e., parties with whom
Landlord or its affiliated owners of buildings in the Office Park are then
negotiating or considering negotiating a lease) of space in the building, and/or
in any of the buildings within the Office Park; nor shall Landlord be obliged to
entertain any request for such subletting or assignment or to consent thereto;
it being expressly agreed that Landlord shall be entitled to all legal and
equitable remedies for any breach by Tenant of this understanding. Furthermore,
Landlord shall be entitled to receive from Tenant on demand the amount of any
sub-rentals or other payments received by Tenant from any subleases or assignee
of Tenant, with respect to this Lease or the premises, which are in excess of
the rentals payable hereunder for the space involved in such assignment or
sublease. Tenant shall pay to Landlord upon request the administrative expenses
and reasonable attorneys' and accountants' fees incurred by Landlord in review
of any proposed assignment or subletting, and in preparing or reviewing any
documents, financial data or other information concerning a proposed assignment
or subletting by Tenant. The exercise of any powers of approval or consent
conferred on Landlord under this paragraph shall not be subject to any
requirement of reasonableness, and may be withheld or granted in Landlord's
exclusive and arbitrary discretion.
6. Compliance with Governmental Requirements. Tenant shall, at its own
cost and expense, properly and promptly comply with all laws, orders,
ordinances, rules, regulations and requirements, as the same now exist or may
hereafter be enacted, amended or promulgated, of any federal, municipal, state,
county or other governmental authorities and/or any department or agency
thereof, and of the Board of Fire Underwriters or any similar organization
having jurisdiction and all present and future recycling laws concerning
separation and recycling of garbage, wastes, refuse, trash and rubbish
(collectively herein called "Governmental Requirements") relating to Tenant's
use and occupancy of the demised premises or to the conduct and operation of
Tenant's business therein. Nothing contained in this Paragraph, or in Section 13
or any other provisions of this Lease, shall obligate Landlord to enforce the
provisions hereof for the benefit of any other lessee or occupant of space in
the building; it-being expressly understood and agreed that all such provisions
are included herein solely for Landlord's benefit and for its enforcement at its
exclusive option and discretion. Similarly, Tenant shall have no right to
require Landlord to enforce such-or
<PAGE> 14
similar provisions in other leases for the benefit of Tenant; any such
enforcement being solely in Landlord's discretion. Tenant at its own expense
agrees to fully and timely comply with all federal, state, county and municipal
laws, regulations and requirements now or hereafter in force involving
handicapped persons, which pertain to the demised premises, any alterations
thereof or the use and occupancy of the premises or conduct of business therein
or any facilities of, or to means of access within, or to any other elements of
the demised premises, including also any path of travel requirements affected by
any alterations to the premises. Tenant agrees to indemnify, defend and hold
Landlord harmless from all liability, expense, fines and claims resulting from
any breach of Tenant's obligations under this paragraph.
7. Alterations. Tenant will not make any alterations, installations,
changes, replacements, additions or improvements (structur41 or otherwise) in or
to the demised premises or any part thereof, without the prior written consent
of the Landlord in each instance. The exercise by Landlord of any powers of
approval or consent, and the refusal or granting thereof or any conditions of
approval, shall not constitute a representation or assurance by Landlord as to
the legality, safety, compliance with laws, codes or regulations, or any other
aspects of the matters involved; such powers and the exercise thereof and
conditions imposed by Landlord being solely for its own benefit and protection.
If Landlord consents to any alterations, changes, replacements, additions,
improvements or other work which Tenant desires to perform, then such work shall
be done by Tenant at its own expense, using contractors approved in writing by
Landlord, and in compliance with all applicable laws, codes, regulations and
requirements of governmental authorities, the Board of Fire Underwriters and
Landlord's insurers, free of damage to the building and free of mechanic's and
other liens (such damage to be repaired and such liens to be removed promptly by
and at the expense of Tenant), and in strict compliance with plans and
specifications therefor approved in writing by Landlord. Tenant shall at its own
expense keep in force, during the course and until completion of such work,
builder's risk, worker's compensation and such other insurance in amounts and
forms as Landlord may reasonably require, and Tenant will furnish to Landlord
copies or certificates of the insurance policies within five (5) days after
Landlord's request. No equipment or other items installed by or work performed
by or for Tenant or through its contractors shall require any changes in the
utility lines and/or mechanical systems of the building, unless Landlord
expressly agrees in writing to such changes (Tenant to pay to Landlord all costs
of any such changes, on demand, and to comply at its own expense with all
conditions imposed by Landlord in granting such consent). It is distinctly
understood that all alterations, installations, changes, replacements, additions
to or improvements of the demised premises, whether made by or at the expense of
Landlord or Tenant, and including without limitation wall papers and coverings,
floor tile, ceiling light fixtures, window blinds, and wall to wall carpeting
(whether made with ore without the Landlord's consent), shall at the election of
the Landlord remain upon and be surrendered with the demised premises at the
expiration of this lease without disturbance, molestation or injury. However,
Landlord at its option and discretion may require that Tenant, at Tenant's
expense, remove at the expiration or any termination of this Lease any or all
alterations to the demised premises made by Tenant, and restore the premises to
the condition thereof prior to such alterations, and that Tenant repair any
damage to the demised premises or building caused by such removal; and Tenant
will promptly comply With
<PAGE> 15
such directions. In addition to all legal, equitable and other rights and
remedies available to Landlord, it is agreed that if Tenant does not comply with
its obligations under this Paragraph or any other provisions of this Lease, the
Landlord shall have the right (but not the obligation)' to perform or cause to
be performed Tenant's obligations, duties and covenants, in which event Tenant
shall reimburse to Landlord within five (5) days after demand all costs incurred
by Landlord plus a sum equal to fifteen percent tl5%) of such costs representing
overhead and administrative expenses of Landlord in such matters.
8. Signs and Other Agreements of Tenants (A) Tenant further agrees that
no sign, advertisement or notice shall be inscribed, painted or affixed on any
part of the outside or inside of the demised premises or building, except on the
directories and doors of offices, and then only in such size, color and style as
the Landlord shall approve. No sign, notice or advertisement of any kind shall
be affixed to, inscribed on or placed so as to be visible outside of any
windows, or on any glass or other doors or sidelights at the premises so as to
be visible outside the premises. Landlord shall have the right to prohibit any
advertisement of Tenant which includes the name of Landlord and/or of the Office
Park and/or the name or address of the building, and which in the Landlord's
opinion tends to impair the reputation of the building or its desirability as a
building for offices or for financial, insurance or other institutions and
bnainQsses of like nature, and upon written notice from the Landlord, Tenant
shall refrain from and discontinue such advertisement. The Landlord shall have
the right to prescribe the weight, and method of installation and position of
safes and other heavy fixtures or equipment, and Tenant will not install in the
demised premises any fixtures, equipment or machinery that will place a load
upon any floor exceeding the floor load per square foot area which such floor
was designed to carry. All damage done to the building by taking in or removing
a safe or any other article of Tenant's office equipment, or due to its being in
the demised premises, shall be repaired at the expense of the Tenant. No
freight, furniture or other bulky matter of any description will be received
into the building or carried in the elevators except when and as approved by the
Landlord. All moving of furniture, material and equipment shall be under the
direct control and supervision of the Landlord, who shall, however, not be
responsible for any damage to or charges for moving same. Tenant agrees promptly
to remove from the public area adjacent to said building any of Tenant's
merchandise there delivered or deposited.
(B) Notwithstanding the preceding provisions of this Section 8, it is
agreed that upon Landlord's tender to Tenant of possession of the premises,
Tenant at its own expense may install its three-dimensional artwork comprising
only Tenant's corporate name and logo, mounted on a wall within the reception
area of the demised premises. Such sign installation shall be performed by
Tenant in compliance with all provisions of this Lease, including without
limitation the provisions of Sections 6, 7-and 10. By not later than the
expiration or termination of this Lease, Tenant at its own expense shall remove
the aforesaid artwork and sign and shall repair any damage to the promises
caused by installation and removal thereof. Tenant shall keep said sign in good
appearance and condition. Said sign shall not include any blinking, flashing or
neon or other bright lighting of any kind.
(C) Tenant desires to install in the demised premises two (2) Mosler
safes, each of which weighs seven hundred (700) pounds (the "Safes").
<PAGE> 16
Prior to bringing the Safes into the Building or installing the Safes
in the demised premises, Tenant shall consult with Landlord's management agent
and Tenant shall pay to Landlord within five (5) days from receipt of invoices
therefor all costs of any work Landlord deems ~ necessary to accommodate the
moving and installation of the Safes, including but not limited to any special
handling and installation of any special structural or other supports to prevent
the Safes from damaging or adversely affecting the structural integrity or other
elements of the Building. The Safes shall be maintained in good condition by
Tenant. The Safes shall be removed from the demised premises and from the
Building and from the Office Park by Tenant at its own expense in a manner
acceptable to Landlord (with any damage to the Building caused thereby to be
repaired by and at the sole expense of Tenant) by not later than expiration or
termination of this Lease. The Safes shall be installed only at a location in
the premises approved in writing in advance by Landlord, and shall not be
relocated within the premises nor moved without Landlord's prior written
consent. All powers of approval and consent conferred on or exercised by
Landlord are solely for its own protection, and shall not be deemed a warranty
of any kind from Landlord or its agents.
9. Tenant's Electrical Equipment. The Tenant will not install or operate
in the demised premises any electrically operated equipment or other machinery,
other than typewriters, adding machines, and such other electrically operated
office machinery and equipment normally used by office tenants in modern office
buildings (provided that no such electrical equipment shall require electrical
power that exceeds building standard electric service and systems or that
requires special or dedicated circuitry), without obtaining the prior written
consent of the Landlord. Landlord may condition such consent upon the payment by
the Tenant of additional rent as compensation for such excess consumption of
water and/or electricity and other utilities as may be occasioned by the
operation of said equipment or machinery. Tenant shall not install any equipment
of any kind or nature whatsoever which will or may necessitate any changes,
replacements or additions to, or require the use of, the water system, plumbing
system, heating system, air conditioning system or the electrical system of the
demised premises or of the building, without the prior written consent of the
Landlord, in accordance with the provisions of Section 7 hereof.
10. Equipment. Maintenance and repair of equipment such as kitchen
fixtures, separate air conditioning equipment, or any other type of special
equipment, whether installed by Tenant or by Landlord on behalf of Tenant, shall
be the sole responsibility of Tenant; and Landlord shall have no obligation in
connection therewith. However, the foregoing provisions of this Section 10 as
well as Section 7 hereof, shall not be deemed to permit Tenant to perform any
work on or affecting the building utility lines or equipment without Landlord's
prior written consent.
11. Landlord's Access. (A) Tenant further agrees that it will allow the
Landlord, its agents and employees, to enter the demised premises at all times,
to examine, inspect or to protect the same or prevent damage or injury to the
same, or to make such alterations and repairs to the demised premises or other
premises as the Landlord may deem necessary; and Tenant will permit Landlord and
Landlord 'a mortgagees, prospective purchasers of the building and the
representatives of any such parties to enter and inspect the demised premises at
all times, and will permit-Landlord to exhibit the same to prospective tenants
during the last one hundred eighty (180) days of the term of this lease.
<PAGE> 17
(B) Landlord shall give Tenant at least two (2) days advance written or
oral notice of Landlord's desire for access to the demised premises for the
purposes described in this Section 11; except that no advance notice shall be
required of Landlord in emergencies.
12. Illegal Use. The Tenant will not use or permit the demised premises
or any part thereof to be used for any disorderly, unlawful or extra hazardous
purpose nor for any other purpose than hereinbefore specified; and will not
manufacture any commodity therein, without the prior written consent of the
Landlord.
13. Rules and Regulations. Tenant, its agents, employees, invitees,
licensees, customers, clients, family members and guests shall at all times
abide by and observe the rules and regulations attached hereto as Exhibit "C"
and made a part hereof. In addition, Tenant, its agents, employees, invitees,
licensees, customers, clients, family members and guests shall abide by and
observe such other rules or regulations as may be promulgated from time to time
by Landlord with a copy sent to Tenant, for the operation and maintenance of the
building, provided, however, that the same are necessary in Landlord's
reasonable judgment for the general well being, safety, care or cleanliness of
the building or its appurtenances. Nothing contained in this Lease shall be
construed to impose upon Landlord any duty or obligation to enforce such rules
and regulations, or the terms, conditions or covenants contained in any other
lease, as against any other tenant, and Landlord shall not be liable to Tenant
for violations of the same by any other tenant, its employees, agents, business
invitees, licensees, customers, clients, family members or guests. If there is
any inconsistency between this Lease and the Rules and Regulations set forth in
Exhibit ~c", this Lease shall govern.
14. Damage. (A) All injury to the demised premises or the building caused
by moving the property of Tenant into, within or out of, the building or the
demised premises, and all breakage done by Tenant, or the agents, servants,
employees and visitors of Tenant, shall be repaired by and at the expense of the
Tenant. In the event that the Tenant shall fail to do so, then the Landlord
shall have the right to make such necessary repairs, alterations and
replacements (structural, non-structural or otherwise) and any charge or cost so
incurred by the Landlord shall be paid by the Tenant with the right on the part
of the Landlord to elect in its discretion, to regard the same as additional
rent, in which event such cost or charge shall become additional rent payable
with the installment of rent next becoming due or thereafter falling due under
the terms of this Lease. This provision shall be construed as an additional
remedy granted to the Landlord and not in limitation of any other rights and
remedies that the Landlord has or may have in said circumstances.
(B) The provisions of Section 14(A) hereof shall not apply to normal
reasonable wear and tear.
15. Personal Property.
(A) All personal property of the Tenant in the demised
premises or in the building of which the demised premises is a part shall be
maintained therein at the sole risk of the Tenant. The Landlord shall not be
liable for any accident to or damage to property of Tenant resulting from the
use or operation of elevators or of the heating, cooling, electrical or plumbing
apparatus. Landlord shall not, in any event, be liable for damages to property
resulting from water, steam or other causes. Tenant hereby
<PAGE> 18
expressly releases Landlord from any liability incurred or claimed by reason of
damage to Tenant's property. Landlord shall not be liable in damages, nor shall
this lease be affected for conditions arising or resulting, and which may affect
the building of which the demised premises is a pact, due to construction on
contiguous parcels of land. The provisions Or this paragraph shall not relieve
Landlord from liability for damage to Tenant's property in the demised premises,
if and to the extent ouch damage is caused by gross negligence or willful
misconduct of Landlord (except as otherwise provided in Section 27 of this
Lease, the provisions of which shall control in all events).
(B) All fixtures, equipment, leasehold improvements and other
improvements and installations attached to, or built into, the demised premise.
At the commencement of or during the term of this Lease shall be and remain part
of the demised premises and be deemed the property of Landlord. Notwithstanding
the foregoing, any movable personal property installed by and at the sole
expense of Tenant ("Tenant's Property") shall be deemed to be the property of
Tenant and, except for any of Tenant's Property comprising a part of the Layout
Work (i.e., property affixed to the demised premises) or unless Tenant is in
default, shall be removed by Tenant prior to the expiration of the term of this
Lease or before any earlier termination thereof. Tenant shall repair, or shall
reimburse Landlord immediately upon demand for the cost of repairing, any damage
to the demised premises or the building occasioned by such removal. Any of
Tenant's Property which shall not be removed as aforesaid shall be deemed to
have been abandoned by Tenant. If Landlord removes any of Tenant's Property not
timely removed by Tenant, Landlord shall have the right to immediate
reimbursement from Tenant for all charges incurred. All such obligations of
Tenant to make any reimbursements or payments to Landlord under this Paragraph
15(B) or elsewhere in this Lease shall survive any termination or expiration of
this Lease. If Tenant is in default, it shall not remove any of Tenant's
Property without Landlord's prior written consent; provided, however, that as
long as Tenant's personal property is encumbered by any equipment financing or
equipment leasing, the rights of Tenant's equipment lender or equipment lessor
in and to Tenant's personal property under equipment financing or leasing
agreements between Tenant and such parties shall prevail over the rights of
Landlord to any lien on Tenant's personal property in the demised premises.
Further, the rights of The CIT Group/Equipment Financing, Incorporated in and to
Tenant's personal property under any loan agreement which predates this Lease
shall prevail over the rights of Landlord to any lien on Tenant's personal
property in the demised premises. However, the rights of such equipment lender
or equipment lessor shall not subject Landlord or it. Partners or agents to any
liability or expense, nor delay or inhibit the exercise by Landlord of any of
its rights and remedies against Tenant, its subleases, successors or assigns for
any default of Tenant under this Lease, nor confer on any such equipment lessor
or equipment lender any rights under this Lease or in the demised premises.
16. Liabiltiy. The Landlord assumes no liability or responsibility
whatsoever with respect to the conduct-and operation of the business to be
conducted in the demised premises. The Landlord shall not be liable for any
accident or injury to any person(s) or property in or about the demised premises
which are caused by the conduct and operation of said business, or by virtue of
equipment or property of the Tenant in the demised premises. The Tenant agrees
to hold the Landlord harmless against all such claims. Furthermore, Tenant shall
and hereby does defend,
<PAGE> 19
Indemnify and save harmless Landlord and Landlord's partners, officers,
directors, agents and employees (collectively, "Indemnitees") from and against
all liability (statutory or otherwise), claims, suits, causes of action'
demands, judgments, costs, interest and expenses (including also counsel fees
and disbursements incurred in the defense thereof) to which any Indemnities may
(except insofar as it arises out of the fault or neglect of such Indemnitees) be
subject or suffer, whether by reason of any claim for, any injury to, or death
of, any person(s) or damage to or loss of property (including also any loss of
use thereof) or otherwise, and arising from or in connection with the use by
Tenant of, or from any work or anything whatsoever done by Tenant (or any of its
officers, directors, agents, contractors, employees, licensees or invitees) in,
at or about any part of the demised premises or the building during the term of
this Lease or during the period of time, if any, prior to the term commencement
date with respect to such part that Tenant may have been given access to for the
purpose of occupancy or doing work, or arising from any condition of the demised
premises or the building due to or resulting from any default by Tenant in the
keeping, observance or performance of any covenant or agreement contained in
this Lease or from any fault or neglect of Tenant or any of its officers,
directors, agents, contractors, employees, licensees or invitees. The provisions
of this paragraph shall not relieve Landlord from liability for damage to
Tenant's property in the demised premises, if and to the extent such damage is
caused by gross negligence or willful misconduct of Landlord (except as
otherwise provided in Section 27 of this Lease, the provisions of which shall
control in all events).
17. Public Liability Insurance. Tenant shall obtain and maintain in
effect at all times during the term of this Lease, a policy of comprehensive
public liability insurance, naming Landlord its management agent and all
mortgagees of Landlord as additional insurers, protecting Landlord, Tenant and
all such mortgagees against any liability for bodily injury, death or property
damage occurring upon, in or about any part of the demised premises arising from
any act against which Tenant is required to indemnify Landlord, with such
policies to afford protection in a combined single limit of not less than ONE
MILLION' DOLLARS ($1,000,000) as concerns death or injury to one (1) or more
person(s) in any one occurrence, and not less than One Hundred Thousand Dollars
($100,000) with respect to damage to property. Such insurance policies shall be
issued by responsible insurance companies licensed to do business in the State
of Maryland. Neither the issuance of any insurance policy required under this
Lease, nor the minimum limits specified herein with respect to Tenant's
insurance coverage, shall be deemed to limit or restrict in any way Tenant's
liability arising under or out of this Lease. Copies and certificates of said
policies with evidence of premiums paid, will be delivered to Landlord at
commencement of the term hereof, and renewal certificates will be delivered to
Landlord at least ten (10) days before expiration of any such policy. Each such
policy shall require at least fifteen (15) days prior written notice to Landlord
and Tenant for any cancellation or amendment thereof. The provisions of this
Section 17 shall not limit any liability of Tenant under Section 16 hereof.
18. Service. The Landlord shall furnish reasonably adequate electric
current (subject to Section 9 hereof), water, lavatory supplies, lighting,
fluorescent tube replacement (limited, however, to building standard ceiling
fluorescent tubes, it being agreed that Tenant at its own expense will furnish
or reimburse Landlord on demand the costs of all other light fixtures, bulbs and
tubes, and also
<PAGE> 20
all replacements of light tubes, bulbs and related equipment for non-building
standard lighting fixtures for the premises), and automatically operated
elevator service, during normal hours of operation of the building, and normal
and usual cleaning and char service (after 6:00 P.M. Mondays to Fridays only,
both inclusive, except on holidays) without additional cost to the Tenant,
except for Tenant's payments under Section l(b) and Section 9 hereof. The
Landlord further agrees to furnish heat and air conditioning from the building's
central systems during the appropriate seasons of the year, during the normal
hours of operation of the building. Landlord shall have the right to remove
elevators from service as the same shall be required for moving freight, or for
servicing or maintaining the elevators and/or the building, provided, however
that at least one elevator shall be in operation on a twenty-four hour basis,
seven days a week. The normal hours of operation of the Building are 8:00 A.M.
to 6:00 P.M., Monday through Friday (except holidays) and 8:00 A.M. to 1:00 P.M.
Saturday (except holidays). There are no normal hours of operation of the
Building on Sundays or holidays, and Landlord shall not be obligated to maintain
or operate the Building or to furnish services thereto on such excluded days or
outside the normal hours of operation aforesaid, unless special arrangements are
made by Tenant and approved in writing by Landlord. Landlord will furnish all
services and utilities required by this Lease only during the normal hours of
operation of the building, unless otherwise specified herein. It is also agreed
that if Tenant desires air-conditioning, heat, electricity or other building
services beyond the normal hours of operation set forth herein and provided
arrangements are made therefor with the Landlord's management agent (with such
advance written notice of such desire as Landlord or its management agent may
require from time to time), the Landlord will furnish such air-conditioning,
heat, electricity or other building services outside of normal hours of
operation of the building and the Tenant agrees to pay for the same with the
next monthly installment of rent or at such other time(s) as Landlord may
require, in accordance with the then current schedule of coats and assessments
therefor, which such schedules shall be established from time to time by
Landlord and furnished to Tenant on its request. It is understood and agreed
that Landlord shall not be liable for failure to furnish or for delay or
suspension in furnishing, any of the utilities or services required to be
performed by Landlord caused by breakdown, maintenance, repairs, strikes,
shortage of or limitations upon the consumption or use of public utilities,
shortage or unavailability of labor or materials, acts of God or from any other
cause whatsoever. Tenant shall fully and timely comply with all governmental and
utility company restrictions imposed from time to time on temperature settings
and U8Q of electricity and other utilities in the demised premises ("Utility
Regulations"). Tenant agrees that it shall not be entitled to any reduction in
rent or other sums nor to terminate or otherwise adversely affect this Lease or
Landlord's rights hereunder as a result of any such Utility Regulations or
Tenant's obligation to comply therewith.
19. Estoppel Certificates. Tenant agrees, at any time and from time to
time, within five (5) days after written request from Landlord, to execute,
acknowledge and deliver to Landlord a statement in writing in the form attached
hereto as Exhibit Act certifying. (i) that this Lease is unmodified and in full
force and effect (or if there have been modifications, that the Lease is in full
force and effect as modified and stating the modifications), (ii) the date to
which the rent and other charges hereunder have been paid by Tenant, (iii)
whether or not to the best knowledge of Tenant; Landlord is in default in the
<PAGE> 21
performance of any covenant, agreement or condition contained in this Lease, and
if so, specifying each such default of which Tenant may have knowledge, (iv) the
address to which notices to Tenant should be sent, and tv) such other matters as
are shown on Exhibit ~D" or which Landlord may request. Any such statement
delivered pursuant hereto may be relied upon by any owner of the building, any
prospective purchaser of the building, any mortgagee or prospective mortgagee of
the building or of Landlord's interest, or any prospective assignee of any such
mortgagee.
20. Bankruptcy.
(A) Events of Bankruptcy. For purposes of this Lease, the
following shall be deemed "Events of Bankruptcy" of Tenant: (i) if Tenant
becomes "insolvent", as defined in Title 11 of the United States Code, entitled
"Bankruptcy", 11 U.S.C. Section 101 et seq. (the "Bankruptcy Code"), or under
the insolvency laws of any state, district, commonwealth or territory of the
United States of America ("Insolvency Laws"); or (ii) if a receiver or custodian
is appointed for any or all of Tenant's property or assets, or if there is
instituted a foreclosure action on any of Tenant's property; or (iii) if Tenant
files a voluntary petition under the Bankruptcy Code or Insolvency Laws; or (iv)
if there is filed an involuntary petition against Tenant as the subject debtor
under the Bankruptcy Code or Insolvency Laws, which is not dismissed within
sixty (60) days of filing, or results in issuance of an order for relief against
the debtor; or (v) if Tenant makes or consents to an assignment of its assets,
in whole or in part, for the benefit of creditors, or a common law composition
of creditors.
(B) Landlords Option to Terminate Lease. Upon the occurrence
of an Event of Bankruptcy, or if Tenant takes advantage of any Insolvency Laws,
then in any such event Landlord at its option and sole discretion may terminate
this Lease by written notice to Tenant (subject, however, to applicable
provisions of the Bankruptcy Code or Insolvency Laws during the pendency of any
action thereunder involving Tenant as the subject debtor). If this Lease is
terminated under this Paragraph, Tenant shall immediately surrender possession
of and vacate the demised premises, waives all statutory or other notice to
quit, and agrees that Landlord's obligations under this Lease shall cease from
such termination date, and Landlord may recover possession by process of law or
in any other lawful manner. Furthermore, if this Lease is terminated under this
Paragraph, Landlord shall have all rights and remedies against Tenant provided
in case of defaults of Tenant in payment of rent (subject, however, to
applicable provisions Or the Bankruptcy Code or Insolvency Laws).
(C) Assumption of Lease. If Tenant becomes the subject debtor
in a case pending under the Bankruptcy Code, Landlord's right to terminate this
Lease under this paragraph shall be subject to the applicable rights (if any) of
the trustee in bankruptcy to assume or reject this Lease as then provided for in
the Bankruptcy Code. However, the Trustee in Bankruptcy must give to Landlord
and Landlord must receive proper written notice of the Trustee's assumption or
rejection of this Lease, within sixty (60) days after the date Or the Trustee's
appointment or such other period provided by applicable bankruptcy law (the
Assumption or Rejection Period"); it being agreed that the failure of the
Trustee to give notice of such assumption hereof within the Assumption or
Rejection Period shall conclusively and irrevocably constitute the Trustee's
rejection of this Lease and waiver of any rights of the Trustee to assume or
assign this Lease. The Trustee shall
<PAGE> 22
not have the right to assume or assign this Lease unless said Trustee (i)
promptly and fully cures all defaults under this Lease, (ii) promptly and fully
compensates Landlord for all monetary damages incurred as a result of such
default, and (iii) provides to Landlord "adequate assurance of future
performances (as defined hereinbelow). Landlord and Tenant hereby agree in
advance that "adequate assurance of future performances, as used in this
paragraph, shall mean that all of the following minimum criteria must be met:
(a) the Tenant or the Trustee must pay to Landlord, at the time the next payment
of rent is then due under this Lease, in addition to such payment of rent, an
amount equal to the next Four (4) months rent due under this Lease, said amount
to be held by Landlord in escrow until either the Trustee or Tenant defaults in
its payment of rent or other obligations under this Lease (whereupon Landlord
shall have the right to draw on such escrowed funds) or until the expiration of
this Lease (whereupon the funds shall be returned to the Trustee or Tenant if no
Event of Default exists, less any amounts thereof applied to cure Tenant's
defaults); (b) the Tenant or Trustee must agree in a writing delivered to
Landlord to pay to Landlord, at any time the Landlord is authorized to and does
draw on the funds escrowed pursuant to clause (a) of this Paragraph 20(C)(iii),
the amount necessary to restore such escrow account to the original level
required by said provision; (c) Tenant must pay to Landlord all rentals and
other sums payable by Tenant hereunder including also therein its share (as
estimated by Landlord) of the coat of all services if any provided by Landlord
(whether directly or through agents or contractors, and whether or not the cost
of such services is to be passed through to Tenant), in advance of the
performance or provision of such services, and (d) the Tenant must agree (by
writing delivered to Landlord) that the Tenant's business shall be conducted in
a first class manner, and that no liquidating sales, auctions, or other
non-first class business operations shall be conducted on the demised premises,
and that the U8Q of the demised premises as stated in this Lease will remain
unchanged, and that the assumption or assignment of this Lease will not violate
or affect the rights of any other lessees in the building. In the event Tenant
is unable to: (i) cure its defaults, (ii) reimburse Landlord for its monetary
damages, (iii) pay the rents due under this Lease or any other payments required
of Tenant under this Lease on time, or (iv) meet the criteria and obligations
imposed by (a) through (d) above of this Subparagraph 20(C), then in any such
event Tenant hereby agrees in advance that it has not met its burden to provide
adequate assurance of future performance, and this Lease may be terminated by
Landlord in accordance with Paragraph 20(B).
(D) Damages. It is further stipulated and agreed that, in the
event of the termination of the term of this Lease by the happening of any such
event described in this Article 20, Landlord shall forthwith, upon such
termination, and any other provisions of this Lease to the contrary
notwithstanding, become entitled to recover as and for the damages caused by
such breach of the provisions of this Lease all such claims as are permitted by
applicable laws and court decisions.
(E) Consent to Lift Stay, In the event-that this Lease is
terminated by notice and the Tenant shall thereafter seek protection under the
Bankruptcy Code or any equivalent state Insolvency Laws or regulations, then the
Tenant (if a debtor-in-possession) agrees to consent to any application by the
Landlord to terminate the automatic stay provisions of the Bankruptcy Code or
any Insolvency Laws one the grounds that there is no equity in the Lease as a
result of the pre-petition termination notice.
<PAGE> 23
21. Defaults and Remedies.
(A) It is agreed that if Tenant shall fail to pay the rent or
any installment thereof or any additional rent or other amounts when and as the
same become due end t payable under this Lease, whether or not any demand shall
have been made for such payment, or if the Tenant shall violate or fail or
neglect to keep and perform any of the other covenants, conditions and
agreements herein contained on the part of the Tenant to be kept and performed,
or if the Premises shall become abandoned, vacant or deserted, or if Tenant's
estate hereby created shall be taken upon execution or other process of law;
then, and in each and every such event from henceforth, and at-all times
thereafter, at the option and exclusive discretion of the Landlord (and in
addition to and not in limitation of Landlord's right to distrain for rent, and
other remedies), this Lease and the Tenant 'a right Or possession shall
thereupon cease and terminate, and the Landlord shall be entitled to the
possession Or the demised premises and to re-enter the same and remove all
persons and property therefrom, without demand of rent or demand of possession
of said demised premises, and may forthwith proceed to recover possession of the
demised premises with or without process of law, any statutory or other notice
to quit or of intention to re-enter the same being hereby expressly waived by
the Tenant. In the event of such re-entry by process Or law or otherwise, the
Tenant nevertheless agrees to remain answerable for any and all damages,
deficiency and lose of rent which the Landlord may sustain by such re-entry,
including also reasonable attorneys' fees and court costs; and in such case, the
Landlord reserves full power, which is hereby acceded to by the Tenant, to relet
the demised premises at the risk and expense of the Tenant. Any such re-lettings
may be of all or any part of the demised premises, and may be for a term or
terms lass than or greater than the then remaining portion of the term of this
Lease, all at Landlord's exclusive discretion. Such relettings shall be on such
terms, rental and conditions as Landlord may determine. Whether or not Landlord
elects to terminate this Lease under this Section 21, Tenant shall remain liable
for all damages, deficiencies, loss, coats and expenses Landlord may sustain,
including without limitation deficiency in rent, reasonable attorneys' fees,
court costs, brokerage commissions, and expenses incurred in preparing the
demised premises for re-letting (including any necessary alterations, none of
which shall be deemed to release Tenant from liability hereunder). Tenant shall
have no right to any rents collected by Landlord in such re-lettings, whether or
not such rents exceed the rentals payable hereunder. Landlord shall not be
liable for failure to re-let or to collect rentals under re-lettings, nor shall
Tenant be released from liability by reason thereof. Any damage or loss of rent
sustained by Landlord may be recovered from Tenant, at Landlord's option, at
time of re-letting, or in separate actions as said damages become determinable
from re-lettings, or in a single action deferred until expiration of the term
hereof (in which last event the cause of action shall not accrue until the
stated expiration date hereof), or in single action prior to the re-letting or
termination or expiration hereof. Nothing herein shall prevent Landlord from
proving in full damages for rent accrued prior to termination hereof and not
paid, and from proving under any applicable laws any amounts allowed thereby,
and recovering such sums. It is further agreed that if under the provisions
hereof, applicable summary process shall be: served, and a compromise or
settlement thereof shall be made, such compromise or settlement shall not
constituted waiver of any breach of any covenant, condition or agreement herein
contained, and that no waiver by Landlord of any breach of any covenant,
condition or agreement-herein
<PAGE> 24
contained shall operate as a waiver Of the covenant, condition or agreement
itself, or of any subsequent breach thereof. No provision of this Lease shall be
deemed to have been waived by Landlord unless such waiver shall be in writing
signed by Landlord. No payment by Tenant or receipt by Landlord of a lesser
amount than the monthly installments of rent herein stipulated shall be deemed
to be other than on account Or the earliest stipulated rent, nor shall any
endorsement or statement on any check or any letter accompanying any check or
payment as rent be deemed an accord and satisfaction, and the Landlord may
accept such check or payment without prejudice to the Landlord's right to
recover the balance of such rent or pursue any other remedy in this Lease
provided. In the event Tenant defaults in payment of any installment or
installments of rent or any other sums, and if such default is not corrected
within five (5j days after the due date of such payment, the Tenant shall pay to
the Landlord, in addition to the rental or other sums so in default, a "late
charge" in an amount equal to ten cents ($0.10) for each one dollar t$1.00) so
in default. Regarding all of Tenant's covenants and obligations under this
Lease, time is of the essence. Any installments of rental or other sums not paid
in full within ten (10) days from the date due thereof shall, in addition to the
aforesaid late charges, bear interest from the date due payable by Tenant to
Landlord on demand at the rate Of fourteen percent (14%) per annum until fully
paid.
(B) In addition to and not in limitation of the other remedies
in this Lease provided, the Landlord shall be entitled to the restraint by
injunction of any violation or attempted or threatened violation of any of the
terms, covenants, conditions, provisions or agreements of this Lease.
(C) The remedies of Landlord provided for in this Lease are
cumulative and are not intended to be exclusive of any other remedies to which
Landlord may be lawfully entitled. The exercise by Landlord of any remedy to
which it is entitled shall not preclude or hinder the exercise of any other
remedy, nor constitute an election of remedies.
(D) If Tenant is in default under this Lease beyond the
applicable notice and cure period, then in addition to but not in limitation of
any other available remedies, Landlord shall have the right (but not the
obligation) to take such action as may be necessary to cure such default, in
which event Tenant shall reimburse to Landlord within fifteen (15) days after
demand all costs incurred by Landlord plus administrative expenses equal to ten
percent (FOR) of such costs. Any such action taken by Landlord under this
paragraph shall not be deemed to release Tenant of liability for the default nor
to waive any of Landlord's rights or remedies or any of Tenant's obligations
under this Lease.
(E) Tenant hereby expressly waives any provision of law now in
force or which hereafter may be enacted giving Tenant the right under any
condition after default to the redemption and repossession Of the demised
premises or any part thereof.
22. Damage by Fire or Casualty. In the event Ordamage to or destruction
of the demised premises by fire or any other casualty, this Lease shall not
terminate (except as otherwlae expressly herein provided), but the demised
premises shall be promptly and fully repaired and restored as the case may be by
the Landlord at its own expense, subject, however, to the following terms and
conditions. Landlord's obligation to repair and restore the demised
<PAGE> 25
premises shall be limited and conditioned, at Landlord 's option and absolute
discretion, to its receipt of sufficient insurance proceeds to cover all costs
of such repairs and restoration including any related or attendant work. Any
such repairs and restoration to be performed by Landlord under this Section 22
shall be limited to work originally done by Landlord in construction Of the
demised premises, and in no event shall Landlord be obligated to make any
repairs or restoration Or Tenant's equipment, furniture, furnishings,
decorations or other property of Tenant (Tenant to do so at its own cost and
expense and at no coat to Landlord and without interfering with Landlord 'a
repairs). Landlord reserves the right to elect not to repair, and instead to
terminate this Lease, if the demised premises are substantially damaged or if a
major portion of the building, as determined by Landlord (and whether or not
including the demised premises) is damaged. Within forty-five (45) days after
the occurrence of any fire or other casualty damage to the demised premises,
Landlord shall notify Tenant in writing as to whether or not Landlord elects to
repair such damage or to terminate this Lease. If Landlord elects to make any
such repairs or restoration under this Paragraph, then due allowance shall be
given for reasonable time required for adjustment and settlement Or insurance
claims, time required to obtain licenses and permits for the work, and for such
other delays as may result from government restrictions and controls on
construction, if any, and for strikes, national emergencies and other conditions
beyond the reasonable control of the Landlord. It is agreed that in any Or the
aforesaid events, if Landlord does not elect to terminate this Lease pursuant to
this Paragraph, this Lease shall continue in full force and effect, but if the
condition is such as to make the entire demised premises untenantable, then all
rentals which the Tenant is obligated to pay hereunder shall abate as of the
date of the damage until the Landlord has substantially completed the repairs
and restoration work to be performed by it under this Paragraph. Any unpaid or
prepaid rent for the month in which such damage to the demised premises occurs
shall be pro-rated to the date of the damage. If the demised premises are
partially damaged or destroyed, then during the period that Tenant is deprived
of the use of the damaged portion of the demised premises, Tenant shall be
required to pay rental covering only that part of the demised premises that it
is able to occupy, based on that portion of the total rent which the amount of
square foot area remaining that can be occupied bears to the total square foot
area of all the demised premises covered by this Lease. In the event the demised
premises are substantially or totally destroyed by fire or other casualty so as
to be entirely untenantable and it shall require more than one hundred twenty
(120) days for the Landlord to restore same, then Landlord upon written notice
to the Tenant may terminate this Lease, in which case the rent shall be
apportioned and paid to the date of said fire or other casualty. No
compensation, or claim, or diminution of rent will be allowed or paid by
Landlord by reason of inconvenience, annoyance, or loss of or injury to business
arising from the necessity of or any delays in repairing the demised premises or
any portion of the building, however the necessity may occur. Tenant shall
notify Landlord of any damage to the demised premises promptly upon occurrence
thereof. Despite anything to the contrary in this Paragraph, if the damage is
caused by any act, negligence or omission of Tenant, its employees, agents or
contractors, then rent shall not be abated as aforesaid, and Tenant shall
reimburse to Landlord within five (5) days after request all costs of repairs,
replacements and restoration in excess of the insurance proceeds made available
to Landlord to pay for such
<PAGE> 26
work. In no event shall Landlord be liable in damages or otherwise for any delay
in or failure to restore the damaged premises.
23.Subordination. This Lease and all rights Or Tenant hereunder are
subject and subordinate to all mortgages and deeds Of trust, and to all ground
or underlying leases (if any), which may now or hereafter affect the real
property Of which the demised premises form a part, and to all renewals,
modifications, consolidations, re-castings, replacements and extensions thereof.
It is the intention of the parties that this clause shall be self-operative and
that no further instrument of subordination shall be necessary to effectuate
such subordination of this Lease. However, in confirmation of such
subordination's, Tenant shall execute and deliver within seven (7) days after
any request of Landlord or its mortgagees any certificate that the Landlord or
its mortgagees may request confirming such subordination's. Despite the
foregoing, the party secured by any such mortgage or deed Or trust or purchaser
at foreclosure thereof shall have the right at it" option and discretion to
recognize this Lease and, in the event of any foreclosure sale under such
mortgage or deed of trust, such party secured or purchaser at foreclosure sale
may at its option require that this Lease remain in force thereafter; and in
such event, the Tenant agrees that, in the event of any foreclosure of any such
mortgage or deed of trust or conveyance in lieu of foreclosure, the Tenant will
attorn to and recognize the purchaser at any such sale as its landlord under
this Lease, and will execute, acknowledge and deliver promptly upon request Or
Landlord or such mortgagee or any purchaser at or prior to foreclosure, any
instrument which in the opinion of such party aforesaid requesting same is
necessary or appropriate to evidence such attornment by Tenant and/or the
subordination of such mortgage or deed of trust to this Lease. The Tenant hereby
waives the provisions of any statute or rule of law, now or hereafter existing,
which may give or purport to give Tenant any right to terminate or otherwise
adversely affect this Lease and Tenants obligations hereunder in the event of
any such foreclosure or conveyance in lieu of foreclosure. At the option Of any
lessor under any ground or underlying lease to which this Lease is now or may
hereafter become subject or subordinate, Tenant agrees that neither the
cancellation nor termination of such ground or underlying lease shall by
operation of law or otherwise result in cancellation or termination of this
Lease or the obligations Or Tenant hereunder, and Tenant will attorn to such
ground lessor or to any successor to Landlord's interest in such ground or
underlying lease, and in such event this Lease shall continue as a direct lease
between Tenant and such ground lessor or its successor. Any mortgagee or
purchaser at foreclosure, and any such ground lessor or its successor under any
such ground or underlying lease who requests such attornment shall not (a) be
bound by any prepayment of rent or additional rent for more than thirty (30)
days in advance Or the due date Or such rent or which Tenant might have paid for
more than the current month to any prior lessor (including Landlord); (so that
rent shall be payable after such deed of trust or mortgage foreclosure or
termination of the ground or underlying lease, as the case may be, in case of a
requested attornment as aforesaid, in accordance with the terms of this Lease as
if such prepayment Of rent for more than one month in advance had not been
made), nor (b) be bound by any amendment or modification to this Lease or: by
any waiver or forbearance on the part of any prior lessor (including Landlord)
made or given without the prior written consent of Landlord's mortgagees and (if
any) ground lessor; nor (c) be liable for any act or omission of any prior
lessor (including the Landlord); nor (d) be subject to any
<PAGE> 27
offsets or defenses which Tenant might have against any prior lessor (including
Landlord); nor (e) be bound by nor subject to any provisions of this Lease which
confer on Tenant any rights or options to lease additional space, or which grant
Tenant any indemnification from Landlord; and furthermore, Landlord 'a
mortgagees shall be discharged Or any responsibility hereunder to Tenant which
may have arisen (by reason of the mortgagee becoming a mortgagee in possession,
a lessor or otherwise) after such mortgagee disposes of its interest in the
building of which the demised premises forms a part. Tenant hereby agrees not to
look to Landlord's mortgagees, as mortgagees, mortgagees in possession, or
successor in title to the building or to any leasehold interest in the land for
accountability for any security deposit required or held by Landlord hereunder,
unless and to the extent that such sums have actually been received by said
mortgagees as security for Tenant's performance of or under this Lease.
24. Eminent Domain.
(A) In the event that the whole of the building shall be
lawfully condemned or taken in any manner for any public or quasi-public use,
this Lease and the term and estate hereby granted shall forthwith cease and
terminate as of the later to occur of the date of vesting of title in such
condemnation or taking or the date of taking of possession by the condemning
authority (such later date, whether with reference to a complete or partial
taking of the building, being referred to hereinafter as the "taking date.), and
the Tenant shall have no claim against Landlord. In the event that only a part
of the building shall be so condemned or taken, then (a) if substantial
alteration or reconstruction of the building shall, in the opinion of Landlord,
be necessary or desirable as a result of such condemnation or taking (whether or
not the demised premises are affected thereby), this Lease and the term and
estate hereby granted may be terminated, effective as of the taking date, by and
at the exclusive option of Landlord by giving notice of such termination to
Tenant on or before the date which is sixty (60) days following the taking date,
and (b) if such condemnation or taking shall be Of a substantial part Of the
demised premises or Of a substantial part Of all means of access thereto, this
Lease and the term and estate hereby granted may be terminated by Tenant,
effective as of the taking date, by its giving notice of such termination to
Landlord on or before the date which is thirty (30) days after the taking date,
or (c) if neither Landlord nor Tenant elects to terminate this Lease, as
aforesaid, this Lease shall be and remain unaffected by such condemnation or
taking, except that this Lease and the term and estate hereby granted with
respect to the part of the demised premises (if any) so condemned or taken shall
expire on the taking date, and except that the fixed rent payable hereunder
shall be appropriately reduced after the taking date in proportion to the area
of the demised premises so taken or condemned. In the event that only a part of
the demised premises shall be so condemned or taken and this. Lease and the term
and estate hereby granted with respect to the remaining portion of the demised
premises are not terminated as hereinbefore provided, Landlord shall proceed
with reasonable diligence to restore the remaining portion of the demised
premises (other than Tenant's personal property or any Or Tenant's goods,
furniture or furnishings, Tenant at its own expense to repair same) as nearly as
practicable to it's condition prior to such condemnation or taking.
(B) In the event of any condemnation or taking of all or a
part of the building, Landlord shall not be liable to Tenant in damages or
otherwise, and Landlord shall be entitled to receive the entire award in the
condemnation proceeding, including also any award made for the value of the
estate vested by this Lease in Tenant, and Tenant hereby assigns to Landlord any
and all right, title and interest of
21
<PAGE> 28
Tenant now or hereafter arising in or to any such award or any part thereof, and
Tenant shall be entitled to receive no part of such award. However, nothing
herein contained shall preclude Tenant at its own expense in a separate action
from Landlord's condemnation proceedings, from claiming against the condemning
authority any compensation to which Tenant may otherwise lawfully be entitled in
such case in respect of Tenant's personal property or for moving to a new
location, provided that such claims Of and award to Tenant do not reduce or
adversely affect Landlord's claims or award for the taking of Landlord's fee
simple or leasehold interest in the demised premises and the building, the land
or Landlord 'a interest in this Lease.
25. Successors. It is agreed that all rights, remedies and liabilities
herein given to or imposed upon either of the parties hereto, shall extend to
their respective heirs, executors, administrators, successors and (subject to
Paragraph 5 hereof) assigns.
26. Tenant Holdover. If the Tenant shall, with the knowledge and consent
of the Landlord, continue to remain in the demised premises after the expiration
of the term of this Lease, then and in that event, Tenant shall, by virtue Of
this Lease become a tenant by the month at the greater Of (i) the monthly rental
payable in the last month of the immediately preceding expired term hereof, or
(ii) the then prevailing rental rate, as determined from time-to-time in the
sole and absolute discretion of Landlord (the "hold over rents). Said monthly
tenancy shall commence with the first day next after the end of the term above
demised; and said Tenant shall give to the Landlord at least thirty (30) days'
prior written notice of any intention to quit the demised premises, and Tenant
shall be entitled to thirty (30) days' written notice to quit the demised
premises, except in the event Of nonpayment of rent in advance or the breach Or
any other covenant by the said Tenant, in which event Tenant shall not be
entitled to any notice to quit, the statutory thirty (30) days' notice and all
other notices to quit being hereby expressly waived by Tenant. However, if
Tenant shall hold over after the expiration of the term hereby created, and if
the Landlord shall desire to regain possession of the demised premises promptly
at the expiration of the term aforesaid, then at any time prior to Landlord's
acceptance of rent from the Tenant as a monthly tenant hereunder, the Landlord,
at Landlord's option, may forthwith re-enter and take possession of the demised
premises without process, or by any legal process in force; and Tenant's failure
to timely surrender possession at the expiration hereof shall be a default by it
under this Lease and entitle Landlord to exercise any or all available remedies.
Furthermore, notwithstanding the foregoing, in the event Tenant shall wrongfully
hold over subsequent to the expiration of the term of this Lease, Landlord shall
in lieu of rent be entitled to demand and receive from Tenant monthly use and
occupancy payments for each month in which Tenant shall wrongfully hold over
subsequent to the expiration of the term of this Lease, such payments to be in
an amount equal to twice the monthly rental payable in the last month of the
immediately preceding expired term Of this Lease. Each such use and occupancy
payment shall be due on or before the first day of each calendar month in which
Tenant shall wrongfully hold over hereunder. In no event shall Landlord's demand
or acceptance of such use and occupancy payments be considered to constitute an
acquiescence by Landlord to the extension of the term hereof, and Landlord shall
be entitled to obtain immediate possession of the demised premises, irrespective
of any such demand or acceptance. In the event Tenant shall pay monthly use and
occupancy payments for
<PAGE> 29
any calendar month following expiration of the term hereof, such payment shall
be prorated on a per diem basis upon Tenant's surrender of full and exclusive
possession of the premises to the Landlord, free of all subtenants and any other
parties claiming by, through or under the Tenant. Tenant hereby expressly and
irrevocably waives the right to any notice required to be given by Landlord
pursuant to Section 8-402 of the Real Property Article of the Annotated Code of
Maryland, as amended.
27. Mutual Waiver of Claims. Anything herein contained to the contrary
notwithstanding, the Landlord and Tenant do each hereby release the other from
any and all liability for any lose or damage to their respective properties
caused by fire or any of the other casualties covered by the risks included in
extended coverage insurance. This limited mutual release is given
notwithstanding that such fire or other casualty shall have resulted from the
act, omission or negligence of Landlord or Tenant or their respective agents,
employees, licensees or contractors. Landlord and Tenant agree to cause their
respective insurance policies covering the building and/or the demised premises
and contents thereof to contain an appropriate endorsement whereby the insurer
agrees that the insurance policy and coverage will not be invalidated by reason
Of the foregoing waiver of the right of recovery against Landlord or Tenant,
respectively, for loss occurring to the properties covered by such policies, and
whereby such insurers also waive any right of subrogation against the Landlord
and Tenant (as the case may be); and each party will, upon request, deliver to
the other a certificate evidencing such waiver of subrogation by the insurer.
However, the provisions of this Section 27 shall not be operative during any
period of time when such "waiver of subrogation" feature is not available from
insurance companies licensed to do business in the State of Maryland.
28. Tenant Ad. After Landlord tenders to Tenant possession of the demised
premises, Tenant and its staff during the term hereof shall have access to the
demised premises on a twenty-four (24) hours per day, seven (7) days per week
basis by means of a computerized card access control system or such other access
control system as Landlord shall determine from time to time; subject, however,
to all of the terms and provisions of this Lease.
29. Landlord's Work. (A) Attached hereto as Exhibit "E" is a preliminary
plan which contains a complete description, mutually approved by Landlord and
Tenant, of all partition, electrical, telephone and other work and requirements
which shall comprise the work ("Landlord's Work") to be performed for the
demised premises by Landlord or Landlord's contractor. Landlord shall not be
required to perform any work for the demised premises, other than the Landlord's
Work described on Exhibit "E".
The costs of Landlord's Work shall be paid as follows: (i) Landlord
shall pay up to and including (but not exceeding) the first Eighty-seven
Thousand Five Hundred Dollars ($87,500.00) of the costs Of Landlord's Work (said
amount herein called the Work Allowances); and (ii) Tenant shall pay to
Landlord, in accordance with Section 29(C) hereof, all costs Of Landlord's Work
that exceed the Work Allowance (such amounts to be paid by Tenant being herein
called the Tenant Portion.). Tenant also shall pay the entire coats of all
Change Orders and of all Additional Work, in accordance with Section 29(C)
hereof.
Landlord shall perform the Landlord's Work, or shall cause same to be
performed by Landlord's contractor, as selected by Landlord. It is further
agreed that all costs to perform, and all costs of designs, plans and
<PAGE> 30
specifications and working drawings for, any work in excess of the Landlord's
Work called for on Exhibit "E" and which Tenant may at any time request Landlord
to perform and which Landlord may approve (the "Additional Work"), shall be paid
by Tenant to Landlord as called for Section 29(C) hereof. Exhibit "E" has been
prepared and furnished by Tenant and is herein sometimes referred to as the
"Preliminary Plans", same being hereby approved by Landlord and Tenant; from
which Landlord shall cause its architect to prepare working drawings for
Landlord's Work. Tenant will cooperate in and will approve within five (5) days
after Landlord's request, any request from Landlord for such revisions of the
Preliminary Plans as Landlord's architect may deem necessary in order to
facilitate preparation of the working drawings for Landlord's Work or to comply
with applicable building codes or to meet any special requirements of the
building.
(B) Tenant will meet with and fully cooperate with (and will
cause its space planner to do so) Landlord's space planner/designer for
development of the working drawings for Landlord's Work, whenever requested to
do so by Landlord. Within five (5) days after Landlord's submission of working
drawings for Landlord's Work, the Tenant shall note its approval thereon and
sign or initial same and return same to Landlord (such working drawings as
mutually approved by Landlord and Tenant being herein called the Approved
Working Drawings"). If Tenant fails to comply with any of Tenant's obligations,
duties or agreements specified in this Section 29 by the date stated or within
the time specified, then any delays in the substantial completion of Landlord's
Work shall not in any manner postpone or otherwise affect the Lease Commencement
Date or Tender Date specified in this Lease, or the Tenant's liability for the
payment of rent from such Lease Commencement Date, and under such circumstances
Landlord agrees to make the demised premises ready for Tenant's occupancy not
later than the Lease Commencement Date, plus the number of days' delay resulting
from Tenant's failure to comply with the provisions of this Section 29. If any
work performed or to be performed by Tenant's contractors delays Landlord's Work
or delays Tenant's occupancy by the Lease Commencement Date, or if any Change
Orders or requests by Tenant therefor or any acts, omissions or defaults Of
Tenant or its agents, employees or contractors or the inclusion of any Special
Items in Landlord's Work delays Landlord's Work or the acquisition Or permits
for Landlord's Work or a certificate Of use and occupancy for the premises, all
as determined by Landlord (any or all such events being collectively included as
"Tenant Delays"), then in any such event Tenant shall nevertheless remain liable
for the payment Of rent and all other sums and for performance of all other
obligations Of Tenant hereunder from the date (the "Assumed Tender Date") when
Landlord could have substantially completed Landlord's Work absent any Tenant
Delays, as determined by Landlord.
(C) Tenant shall pay to Landlord all costs Of any "Change
Orders" (defined below) and all costs of all Additional Work, and the Tenant
Portion of the costs Of Landlord's Work as mentioned in Section 29(A) hereof
(all such costs being collectively herein referred to as the "Coat Works), in
accordance with this Section 29(C). Landlord shall not be required to commence
performance of said Cost Work unless Tenant agrees to make payment of the costs
thereof in a manner and within a specific time acceptable to the Landlord. Such
undertaking by the Tenant for payment of the Cost Work shall be Set forth in a
separate memorandum agreement (or by an addendum or amendment to this Lease)
and/or in a promissory note, as
<PAGE> 31
designated by the Landlord. Tenant agrees to execute and deliver such
instruments to Landlord (the "Costs document") within five (5) days after
Landlord's request, and Tenant agrees to make timely and full payments of said
amounts when and as therein required.
(D) For all purposes of this Lease, it is agreed that
Landlord's Work for the demised premises shall be deemed completed when Landlord
certifies to Tenant that such work has been "substantially completed". The
phrase "substantially completed", or words of similar import as used in this
Lease, shall mean that the Landlord's Work has been performed "excluding any
portion thereof which is delayed due to the inclusion in Landlord's Work of any
(and excluding the incomplete or unperformed status of any) "Special Items" or
"Change Orders", and excluding "Punch List Items"), to the extent reasonably
necessary to enable the Tenant to install its furniture and office equipment in
the premises; all as determined by Landlord. The Tenant agrees to fully
cooperate and assist Landlord on request in efforts to obtain a certificate of
occupancy for the premises. For purposes hereof, (a) "Special Items" means any
elements of Landlord's Work which are not readily available in adequate
quantities in the Washington, D.C., Metropolitan Area, as determined by
Landlord's contractor; and (b) "Change Orders" means any changes in the
Landlord's Work requested by Tenant, from the work shown on the Exhibit "E"
Preliminary Plans or requested by Tenant after Landlord receives the Approved
Working Drawings; and (c) "Punch List Items" means minor incomplete elements of
Landlord's Work which do not materially interfere with use or occupancy of the
demised premises for the purposes permitted in the Lease, as determined by
Landlord. If any Tenant Delays delay Landlord's Work, then Landlord's Work shall
be deemed substantially completed when same could have been completed absent
such Tenant Delays, as determined by Landlord.
(E) Tenant covenants and agrees that Tenant and its
contractors shall not commence or perform any decoration or other work in the
demised premises or installation of its furniture, decorations, cabling, wiring,
equipment or other property therein, nor apply for any permits for any such
work, until notified by Landlord that Tenant may do so. Tenant shall not use any
labor in the performance of its work which conflicts with the type of labor
engaged by Landlord to perform Landlord's Work hereunder or any other work in
the building, and Tenant shall immediately cease the use of any conflicting
labor upon Landlord's request. If any work done by Tenant causes any delay in
Landlord's Work, then rental shall not abate nor shall the term hereof be
extended by the period of any such delays. Any breach by Tenant or its
contractors under this paragraph, and any delay in substantial completion-of
Landlord's Work or acquisition of permits therefor or a certificate of occupancy
for the premises, shall be deemed Tenant Delays for all purposes of this Lease.
Tenant agrees to immediately withdraw any permit application filed by or for it
in violation of this paragraph.
30. Pronouns. Feminine or neuter pronouns shall be substituted for those
of the masculine form, and the plural shall be substituted for the singular
number, in any place or places herein in which the context may require any such
substitutions. The Landlord herein for convenience has been sometimes referred
to in neuter form.
31. Jury Trial Waiver. Landlord and Tenant hereby waive trial by jury in
any action, proceeding or counterclaim brought by either of the parties hereto
against the other on or in respect of any matter whatsoever arising out of or in
any way connected with this Lease, the relationship of Landlord and
<PAGE> 32
Tenant hereunder, Tenant 'a use or occupancy of the demised premises, and/or
claim of injury or damage.
32. Notices. All notices required or desired to be given hereunder by
either party to the other shall be given in writing by first class registered or
certified mail, return receipt requested, with proper postage prepaid, or by
hand delivery with dated receipt therefor obtained. Notices to the respective
parties shall be addressed as follows:
if to Landlord;
c/o Community Realty Co., Inc.
6305 Ivy Lane, Suite 210
Greenbelt, Maryland 20770
If to Tenant:
Prior to the Lease Commencement Date:
12510 Prosperity Drive
Suite 100
Silver Spring, Maryland 20904
After the Lease Commencement Date:
At the demised premises
Either party may by like notice given at least seven (7) days in advance of the
date such change becomes effective, designate a new address to which notices
shall be directed to it.
33. Security Deposit. Simultaneously with the execution of this Lease,
Tenant shall deposit with Landlord, in addition to the first monthly installment
of basic monthly rent, an additional Ten Thousand Six Hundred Seventy-seven and
08/lOO Dollars ($10,677.08) as a security deposit. Such security deposit (which
shall not bear interest to Tenant) shall be considered as security for the
payment and performance by Tenant of all of Tenant's obligations, covenants,
conditions and agreements under this Lease. Within twenty (20) days after the
expiration of the term hereof, Landlord shall (provided that Tenant is not in
default under the terms hereof) refund such security deposit to Tenant, less
such portion thereof as Landlord shall have applied to make good any default by
Tenant with respect to any of Tenant's obligations, covenants, conditions or
agreements under this Lease. In the event of any default by Tenant hereunder,
Landlord shall have the right, but shall not be obligated, to apply all or any
portion of the security deposit to cure such default, in which event Tenant
shall be obligated to and will, within five (5) days after request from
Landlord, deposit with Landlord the amount necessary to restore the security
deposit to its original amount aforesaid at all times. The use of said security
deposit by Landlord, as aforesaid, shall not excuse Tenant's liability for
defaults hereunder nor limit Landlord's remedies. In the event of the sale or
transfer of Landlord's interest in the building, Landlord shall transfer the
security deposit to such purchaser or transferee, in which event Tenant shall
look only to the new landlord for the return of the security deposit, and
Landlord shall thereupon be released from all liability to Tenant for the return
of such security deposit. Tenant agrees that it will not look to any mortgagee,
as mortgagee, mortgagee in possession, or successor in title to the building,
for accountability for any security deposit or related sums held by Landlord or
its successor lessors hereunder, unless and only to the extent such sums have
actually been received by said mortgagee.
<PAGE> 33
34. Lien for Rent. In consideration of the mutual benefits arising under
this Lease, the Tenant hereby grants to Landlord a lien on all property of the
Tenant in or on the demised premises (except such part of any property that may
be exchanged, replaced or sold from time to time in the ordinary course of
business operation of the Tenant while not in default under this Lease), and
such property shall be and remain subject to the lion of Landlord for the
payment of all rental and other sums agreed to be paid by the Tenant herein.
Said lien shall be in addition to any lien provided to the Landlord by law.
35. Landlord's Liability. It is expressly hereby agreed that the
obligations of the undersigned Landlord shall only bind the party or parties
from time to time owning the building during either respective periods of
ownership thereof; so that Landlord and its successors in interest respectively
shall cease to have any liability hereunder after they respectively cease to own
the building, and such liability shall pass to and bind only the owner from time
to time of the building as landlord hereunder. Further, the liability of
Landlord hereunder shall be limited solely to Landlord's interest in the
building, and in no event shall Tenant be entitled to obtain a deficiency
judgment against any partner, agent, officer, director or stockholder of
Landlord, nor shall Tenant have recourse to any assets or property of Landlord
or of any partners in Landlord (other than Landlord's interest in the building)
for enforcement of any obligations of Landlord under this Lease. Landlord and
Tenant shall not be deemed by virtue of this Lease to be partners or joint
venturers, and their relationship hereby established is deemed to be only that
of lessor and lessee, respectively.
36. Entire Aqreement. This Lease, together with the exhibits referenced
herein, attached hereto and made a part hereof, and any Addendum annexed hereto
and executed by Landlord and Tenant, contain and embody the entire agreement of
the parties hereto, and no representations, inducements or agreements, oral or
otherwise between the parties not contained and embodied in this Lease and said
exhibits hereto, shall be of any force or effect. This Lease may not be modified
or changed in whole or in part in any manner other than by an agreement in
writing duly signed by all parties hereto or their successors in interest.
37. Fire Insurance Increases. Tenant will not carry on any activity in or
about the demised premises, nor abutting said premises nor in or about the
building, nor do or cause anything to be done thereat, which is contrary to any
Governmental Requirements; and Tenant shall not permit nor do anything which
would increase the basic rate of the fire insurance or any other insurance
carried by Landlord, as established by the appropriate agency having
jurisdiction. For purposes of definition herein, the "basic rate" shall be such
rate as is published by the said appropriate agency, exclusive, however, of any
excess or surcharges appended thereon by virtue of or attributable to so-called
faults of management. If Tenant's use of or activities or occupancy at the
demised premises causes an increase in the Landlord's insurance premiums or rate
for the demised premises over and above the basic premiums and/or rate for
construction of its type occupied for the purposes permitted hereunder, then
Tenant, upon written notice from Landlord, shall immediately take all necessary
steps to eliminate the excess charge attributable to such faults of management.
Should Tenant refuse or fail to take such action as may be necessary to
eliminate the cause for said excess charges, Tenant shall pay to Landlord on
demand in addition to all other rentals and other sums payable hereunder, that
portion of the aforesaid fire and extended coverage and other insurance premiums
caused by such excess charge on all
<PAGE> 34
outstanding insurance carried on the demised premises and on the building of
which they form a part.
38. Miscellaneous.
(A) Governing Law. This Lease shall be governed by and
construed in accordance with the laws of the State of Maryland.
(B) Severability. If any covenant or agreement of this Lease
or the application thereof to any person or circumstance shall be held to be
invalid or unenforceable, then and in each such event the remainder of this
Lease or the application of such covenant or agreement to any other person or
any other circumstance shall not be thereby affected, and each covenant and
agreement hereof shall remain valid and enforceable to the fullest extent
permitted by law.
(C) Mechanics Liens. The Tenant shall not do or suffer
anything to be done whereby the land and/or building of which the demised
premises are a part may be encumbered by any mechanic's or material men's lien.
Tenant shall, whenever and as often as any mechanic's or materialmen's lien is
filed against the said land and/or building purporting to be for labor or
material furnished or to be furnished to the Tenant, discharge such liens of
record within ten (10) days after the date of filing thereof. Notice is hereby
given that the Landlord shall not be liable for any labor or materials furnished
or to be furnished to the Tenant upon credit, and that no mechanic's or material
men's or other lien for any such labor or materials shall attach to or affect
the reversionary or other estate or interest of the Landlord in and to the land
and building of which the demised premises are a part. Tenant shall indemnify,
defend and save harmless Landlord and Landlord's mortgagees and (if any) ground
lessors from any such liens and all claims, costs and expenses relating thereto.
(D) Captions. The paragraph captions and headings throughout
this Lease are for convenience of reference only, and the words contained in
such captions shall in no way be held or deemed to define, limit, describe,
explain, modify, amplify or add to the interpretation, construction or meaning
of any provision of this Lease.
(E) Broker. Landlord hereby recognizes Community Realty
Company, Inc. (CRC) representing Landlord and Spaulding and Slye representing
(Tenant together herein sometimes referred to as the brokers), as the only real
estate brokers involved in the procuring and negotiation of this Lease. Landlord
has agreed to pay said Brokers for their services in procuring this Lease a
leasing commission in an amount and upon terms agreed upon between Landlord and
said Brokers by separate written agreement. Tenant covenants and agrees to
indemnify, defend and hold Landlord and CRC harmless from all obligations to pay
any leasing brokerage commission to any broker (other than said two Brokers),
engaged by Tenant in connection with this Lease. Tenant further represents that
it has dealt with no broker in connection with this Lease other than the two (2)
aforenamed Brokers, and Tenant shall hold Landlord and CRC harmless from and
against any and all liability, 1088, damage, expense, claims, actions, demands,
suits and obligations arising out of or relating to a breach by Tenant of its
representations in this paragraph.
(F) No Liability. Landlord shall not be liable to Tenant, its
employees, agents, business invitees, licensees, customers, clients, family
members or guests for any damages, compensation or claim arising from the
necessity of repairing any areas of the premises or the building, the
interruption of
<PAGE> 35
the use or occupancy of the premises, any accident or damage resulting from the
use or operation (by Landlord, Tenant, or any other person or persons
whatsoever) of elevators or heating, cooling, electrical or plumbing equipment
or apparatus; or the termination of the Lease by reason of the destruction of
the premises; or from any fire, robbery, theft, mysterious ~: DISAPPEARANCE
and/or any other casualty or from any leakage in all or any part of the premises
or the building, or from water, rain or snow that may leak into or flow from any
part of the premises or the building, or from drains, pipes, or plumbing work in
the building, or from any other cause whatsoever. Any goods, property or
personal effects, stored or placed by the Tenant or its employees in or about
the premises or building, shall be there at the risk of the Tenant; it being
agreed that Landlord shall not in any manner be held responsible therefor. The
employees of the Landlord are prohibited from receiving any packages or other
articles delivered to the building or Tenant, and if any such employee receives
any such package or articles, such employee shall be the agent of the Tenant for
such purposes and not the agent of the Landlord.
(G) Tenant's Equipment. Business machines and mechanical
equipment belonging to Tenant which cause noise or vibration that may be
transmitted to the structure of the building or to any space therein to such a
degree as to be objectionable to Landlord or to any other tenant in the building
shall be installed and maintained by Tenant, at Tenant's expense, on vibration
eliminators or other devices sufficient to eliminate such noise and vibration.
(H) Intentionally Deleted.
(I) Reserved Rights. Landlord reserves the right at any time
and from time to time, as often as Landlord deems desirable, without the same
constituting an actual or constructive eviction and without incurring any
liability to Tenant or otherwise affecting Tenant's obligations under this
Lease, to make changes, alterations, additions, improvements, repairs,
relocations or replacements in or to the building and the fixtures and equipment
thereof, as well as in or to the street entrances, halls, passages, stairways
and other common facilities thereof, and to change the name by which the
building is commonly known and/or the building's address. Landlord reserves the
right from time to time to install, use, maintain, repair and replace pipes,
ducts, conduits, wires and appurtenant meters and equipment for service to other
parts of the building, above the ceiling surfaces, below the floor surfaces,
within the walls and in the central core areas of the demised premises, and to
relocate any pipes, ducts, conduits, wires and appurtenant meters and equipment
included in the demised premises which are located in the demised premises or
located elsewhere outside the demised premises. Landlord further reserves the
right at any time to alter, expand or reduce the parking facilities, to change
the means of ingress thereto and egress therefrom, and to impose charges for
parking in such facilities. Nothing contained herein shall be deemed to relieve
Tenant of any duty, obligation or liability with respect to making any repair,
replacement or improvement or complying with any law, order or requirement of
any government or other authority; and nothing contained herein shall be deemed
or construed to impose upon Landlord any obligation, responsibility or liability
whatsoever, for the care, supervision or repair of the building, or any part
thereof, other than as expressly provided in this Lease. Landlord shall exercise
reasonable efforts to minimize any interference with Tenant's use and enjoyment
of the demised premises and reasonable means of access to the premises, in
exercising Landlord 'a rights under this Section 38(I).
<PAGE> 36
(J) Rules of Construction. The parties acknowledge that each
party and its counsel have reviewed and revised this Lease, and the parties
hereby agree that the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Lease or any amendments thereto.(X) Draft Not
Binding. Submission of this Lease in any number of drafts unexecuted by Landlord
and Tenant shall not constitute, nor shall any negotiations between Landlord and
Tenant constitute, a legally binding obligation of Landlord and Tenant of any
kind; it being agreed that this Lease shall only be binding upon Landlord and
Tenant when fully executed by Landlord and Tenant with a counterpart fully
executed original hereof received by each of said parties.
39. Ouiet Enjoyment. Provided that Tenant is not in default under this
Lease, Tenant shall be entitled to use and occupy the demised premises during
the term hereof for the purposes herein permitted and subject to the terms and
conditions herein contained, without molestation or interference by Landlord.
40. Automobile Parking Areas. Any exterior parking areas adjacent to the
building which may be Set aside by Landlord for the parking of automobiles of
lessees in the building may be used by Tenant and Tenant's employees, visitors
and invitees (on an unreserved basis), without payment by Tenant of any parking
space rentals therefor, during the term of this Lease while engaged in business
in the building, for the parking of their automobiles, in common with like use
by other lessees of space in the building. The use of acid automobile parking
areas by Tenant and Tenant's employees, visitors and invitees shall be at their
sole risk and expense, and in no event shall Landlord have any liability for
personal injury to Tenant or its employees, staff or invitees, or for damage to,
theft or lose of property of the Tenant or of Tenant 'a employees, visitors or
invitees suffered or sustained in or about said parking areas. Said parking
areas shall be under the exclusive control of Landlord or its management agent
or parking operator, who shall have the right to establish rules and regulations
governing the use of said parking areas, and the right to change such rules and
regulations from time to time. Tenant agrees to keep, observe and comply with
all such rules and regulations so established by Landlord or its management
agent or parking operator, and will direct and require its employees, visitors
and invitees to comply therewith. No employee of Landlord is authorized to
accept possession of any vehicle from the Tenant or from Tenant's employees,
visitors or invitees, nor to accept custody of any articles from Tenant. Upon
expiration or termination of this Lease, Tenant will cause its automobiles and
those of its personnel to be removed from the parking arena.
41. Lender Requirements. In the event that Landlord's lender(s) providing
deed of trust financing for the building require(s) as a condition of such
financing, that modifications to this Lease be made, and provided that such
modifications (i) do not adversely affect Tenant's use of or access to the
demised premises as herein permitted, (ii) do not increase the rent and other
sums required to be paid by Tenant hereunder, and (iii) do not materially
adversely affect Tenant's rights under this Lease, then Landlord may submit to
Tenant a written amendment to this Lease incorporating such required
modifications, and Tenant shall execute and return to Landlord such written
amendment within ten (10) days after the same has been submitted to Tenant.
<PAGE> 37
42. Garage Parking.
(A) Subject to the terms and conditions of this Section 42,
Tenant shall have the right during the term of this Lease, while it occupies the
entire demised premises but ending upon the expiration of or any termination of
this Lease, to lease from Landlord or its garage operator three (3) reserved
parking spaces in the garage of the building for use by Tenant's staff (the
"Reserved Spaces") at locations in the garage as determined by Landlord, upon
payment of garage rent for said Reserved Spaces at the monthly rate in force
from time to time as determined by Landlord or its garage operator (which rental
rate is now S50.00 per month per garage space leased, and is subject to
increases as determined by Landlord or its garage operator) plus all parking
taxes which may be levied from time to time by governmental authorities.
Landlord reserves and shall have the right to relocate the Reserved Spaces from
time to time as necessary for the safety, protection or security of the
building, or as necessary for the leasing of space in the building or for
operation of any of the building's equipment; all as determined by Landlord.
(B) Tenant shall execute and deliver to Landlord or its garage
operator, within five (5) days after request, such parking space rental
agreement as Landlord may from time to time require covering the Reserved
Spaces; and Tenant shall pay to Landlord the garage rent plus all parking taxes
for said Reserved Spaces when and as required in the parking space rental
agreement. Tenant shall comply, and shall cause its staff using such garage
spaces to comply, with the rules and regulations established from time to time
by Landlord or its garage operator for the use of and access to the said
Reserved Spaces. Upon any termination or expiration of this Lease, Tenant will
cause its or its staff's automobiles to be removed from the garage, and said
parking space rental agreement held by Tenant shall terminate. Such parking
shall be self-parking (not valet parking), unless otherwise determined from time
to time by Landlord or its garage operator.
(c) If Tenant does not timely execute and deliver to Landlord
the parking space rental agreement covering the Reserved Spaces, then such
Reserved Spaces may be leased by Landlord or its garage operator to others, and
Tenant's rights under this Section 42 to lease the Reserved Spaces so leased to
others shall be subject to such Reserved Spaces again becoming available for
leasing to Tenant only after expiration of the leasing thereof (including all
renewals of such leases) by Landlord to such other parties. Tenant's rights
under this Section 42 shall not be assignable.
IN WITNESS WHEREOF, Landlord has caused these presents to be
signed and sealed by its undersigned Agent, and the Tenant has hereunto set his
hand and seal (or the Tenant has caused these presents to be signed in its
<PAGE> 38
corporate name by its duly authorized officer and its corporate seal to be
hereto affixed and duly attested by its Secretary), all done as of the date
first above written.
LANDLORD
COMMUNITY REALTY CO., INC.,
Agent for:
ELEVENTH SPRINGHILL LAKE
ASSOCIATES L.L.L.P.
By: (SEAL)
- ------------------------- ----------------------------
WITNESS President
TENANT:
ASTROTECH SPACE OPERATIONS, INC.
ATTEST: By:
----------------------------
Name:
- ------------------------- --------------------------
Title:
-------------------------
<PAGE> 39
EXHIBIT "B"
DECLARATION BY LANDLORD AND TENANT
AS TO DATE OF DELIVERY AND ACCEPTANCE
OF POSSESSION OF LEASED PREMISES
ATTACHED to and made a part of the Lease dated
THE __________ DAY OF , 19 (THE "LEASE"),
entered into by and between ELEVENTH SPRINGHILL LAKE ASSOCIATES L.L.L.P., a
Maryland limited liability limited partnership as Landlord, and ASTROTECH SPACE
OPERATIONS, INC., a corporation organized and existing under the laws of the
State of Delaware, as Tenant, covering Suite No. 520 (the "leased premises") in
the office building having street address of 6305 Ivy Lane, Greenbelt, Prince
George's County, Maryland (the "Building").
The undersigned Landlord and Tenant do hereby declare that possession
of the leased premises with Landlord's Work (as defined in the Lease)
substantially completed by Landlord and accepted by Tenant was delivered to and
accepted by Tenant on the ______ day of ______ 19 ____ , the Lease is now in
full force and effect, and for the purpose of this Declaration and said Lease,
the Lease Commencement Date is established as being the _______ day of ________
19 ____,and the Lease expiration date is the day of ________ , 19 ____, and, as
of the date hereof, there is no right to set-off against rents claimed by Tenant
against Landlord. The "lease year", as that phrase is used in the Lease,
commences on the ________ day of each month of ________ and ends on the last day
of the succeeding month of.
LANDLORD
COMMUNITY REALTY CO., INC.
Agent for:
ELEVENTH SPRINGHILL LAKE
ASSOCIATES L.L.L.P.
By: ______________________
President
TENANT:
ASTROTECH SPACE OPERATIONS,INC.
By: ____________________
Name: __________________
Title: ____________________
<PAGE> 40
EXHIBIT "C"
RULES AND REGULATIONS
Reference is made to the foregoing and annexed Lease of even date
attached herewith (the "LEASE") to which these Rules and Regulations are made a
part. Definition of terms are set forth in the Lease.
The following rules and regulations have been formulated for the safety
and well-being of all tenants of the Building and to insure compliance with all
municipal and other requirements. Strict adherence to these rules and
regulations is necessary to guarantee that each and every tenant will enjoy a
safe and unannoyed occupancy in the Building in accordance with the Lease. Any
continuing violation of these rules and regulations by Tenant, after notice from
Landlord, shall be sufficient cause for termination of the Lease, at the option
of Landlord.
Landlord may, upon request by any tenant, waive the compliance by such
tenant with any of these rules and regulations, provided that (i) no waiver
shall be effective unless signed by Landlord or Landlord's authorized agent,
(ii) any such waiver shall not relieve such tenant from the obligation to comply
with such rule or regulation in the future unless expressly consented to by
Landlord, (iii) no waiver granted to any tenant shall relieve any other tenant
from the obligation of complying with the rules and regulations unless such
other tenant has received a similar waiver in writing from the Landlord, and
(iv) any such waiver by Landlord shall not relieve Tenant from any obligation or
liability of Tenant to Landlord pursuant to the Lease for any loss or damage
occasioned as a result of Tenant's failure to comply with any such rule or
regulation.
1. The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors or halls or other parts of the Building not occupied by any
tenant shall not be obstructed or encumbered by any tenant or used for any
purpose other than ingress and egress to and from the premises and if the
premise" are situated on the ground floor of the Building, the tenant thereof
shall, at said tenant's own expense, keep the sidewalks and curb directly in
front of premises clean and free from ice and snow. Landlord shall have the
right to control and operate the public portions of the Building, and the
facilities furnished for common USE of the tenants, in such manner as Landlord
deems best for the benefit of the tenants generally. No tenant shall permit the
visit to the premises of persona in such numbers or under such conditions as to
interfere with the use and enjoyment by other tenants of the entrances,
corridors, elevators and other common or public portions or facilities of the
Building.
2. No awning or other projections shall be attached to the outside
walls of the Building without the prior written consent of Landlord. No drapes,
blinds, shades, or screens shall be attached to or hung in or used in connection
with any window or door of the premises, without the prior written consent of
Landlord. Such awnings, projections, curtains, blinds, shades, screens or other
fixtures must be of a quality, type, design and color, and attached in a manner
approved by Landlord.
3. No showcases or other articles shall be put in front of or affixed
to any part of the exterior of the Building, nor placed in the halls, corridors
or vestibules without the prior written consent of Landlord.
<PAGE> 41
Page 2
4. The water and wash closets and other plumbing fixtures shall not be
used for any purposes other than those for which they were constructed, and no
sweepings, rubbish, rags, or other substances shall be thrown therein. All
damages resulting from any misuse of the fixtures shall be borne by the tenant
who, or whose servants, employees, agents, invitees or licensee shall have
caused, the same.
5. There shall be no marking, painting, drilling into or in any way
defacing the Building or any part of the premises. Tenant shall not construct,
maintain, use or operate within the premises any electrical device, wiring or
apparatus in connection with a loud speaker system or other sound system, except
as reasonably required for its communication system and approved prior to the
installation thereof in writing by Landlord. No such loud speaker or sound
system shall be constructed, maintained, used or operated outside of the
premises.
6. No bicycles, vehicles or animals, birds or pets of any kind shall be
brought into or kept in or about the premises, and no cooking (except for
micro-wave oven or hot-plate cooking by Tenant's employees for their own
consumption, the location and equipment of which is first approved by Landlord)
shall be done or permitted by any tenant on the premises. No tenant shall cause
or permit any unusual or objectionable odors, vapors, or other substances to be
produced upon or permeate from the premises.
7. No space in the Building shall be used for manufacturing of goods
for sale in the ordinary course of business, for the storage of merchandise for
sale in the ordinary course of business, or for the sale at auction of
merchandise, goods or property of any kind. Furthermore, the use of the premises
by each tenant as stated in its Lease was approved by Landlord prior to
execution of the Lease and such use may not be changed without the prior
approval of Landlord.
8. No tenant shall make any unseemly or disturbing noises or disturb or
interfere with occupants of this or neighboring buildings or premises or those
having business with them whether by the use of any musical instrument, radio,
talking machine, unmusical noise, WHISTLING, MUSIC, dancing, singing, or in any
other way. No tenant shall throw anything out of the doors or windows or down
the corridors or stairs.
9. No inflammable, combustible or explosive fluid, chemical or
substance shall be brought or kept upon the premises.
10. No additional locks or bolts of any kind shall be placed upon any
of the doors or windows by any tenant, nor shall any changes be made in existing
locks or the mechanism thereof. The doors leading to the corridors or main halls
shall be kept closed during business hours except as they may be used for
ingress or ogress. Each tenant shall, upon the termination of his tenancy,
return to the Landlord all keys of stores, offices, storage and toilet rooms
either furnished to, or otherwise procured by, such tenant, and in the event of
the loss of any keys so furnished, such tenant shall pay to Landlord the loss
thereof. Tenant's key system shall be separate from that for the rest of the
Building.
<PAGE> 42
Page 3
11. Landlord reserves the right to inspect all freight to be brought
into the Building and to exclude from the Building all freight which violates
any of these rules and regulations or the Lease.
12. No tenants shall pay any employees on the premises, except those
actually working for such tenant on the premises.
13. Landlord reserves the right to exclude from the Building at all
times any person who is not known or coos not properly identify himself to the
Building management or watchman on duty. Landlord may, at its option, require
all persons admitted to or leaving the Building between the hours of 6:00 PM and
8:00 AM, Monday through Friday, and at any hour, Saturdays, Sundays and legal
holidays, to register. Each tenant shall be responsible for all persons for whom
he authorizes entry into or exit out of the Building, and shall be liable to
Landlord for all acts or omissions of such persons.
14. The premises shall not, at any time, be used for lodging or
sleeping or for any immoral or illegal purpose.
15. Each tenant, before closing and leaving the premises at any time,
shall see that all windows are closed and all lights turned off.
16. Landlord's employees shall not perform any work or do anything
outside of their regular duties, unless under special instruction from the
management of the Building. The requirements of the tenants will be attended to
only upon application to Landlord and any such special requirements shall be
billed to Tenant (and paid with the next installment of rent due) at the
schedule of charges maintained by Landlord from time to time or at such charge
as is agreed upon in advance by Landlord and Tenant.
17. Canvassing, soliciting and peddling in the Building is prohibited
and each tenant shall cooperate to prevent the same.
18. There shall not be used in any space, or in the public halls of the
Building, either by any tenant or by Jobbers or others, in the delivery or
receipt of merchandise, any hand trucks, except those equipped with rubber tires
and aide guards and Tenant shall be responsible to Landlord for any loss or
damage resulting From any deliveries of Tenant's to the Building.
19. Mats, trash or other objects shall not be placed in the public
corridors or stairways.
20. Landlord does not maintain suite finishes which are non-standard,
such as kitchens, bathrooms, wallpaper, special lights, etc. However, should the
need for repairs of items not maintained by Landlord arise, Landlord may elect
to arrange for the work to be done at Tenant's expense.
<PAGE> 43
Page 4
21. Drapes and blinds installed by Landlord or Tenant, which are
visible from the exterior of the Building, must be cleaned by Tenant at roast
once a year, without notice, at Tenant's own expense.
22. All office machines shall be installed upon proper insulation or
pads, to prevent vibration from such machines damaging this Building or annoying
other occupants.
<PAGE> 44
EXHIBIT "D"
TENANT ESTOPPED CrRTIFICATE
This Certification made this _______________________________ day of
_______________________ 19_______, by _______ ___________________ ________ .
WITNESSETH:
WHEREAS, by Lease Agreement dated
(hereinafter referred to as "Lease") between ELEVENTH
SPRINGHILL LAKE ASSOCIATES L.L.L.P., a Maryland limited liability limited
partnership as Landlord (hereinafter referred to as "Landlord") and ASTROTECH
SPACE OPERATIONS, INC., a corporation organized and existing under the laws of
the State of Delaware, as Tenant (hereinafter referred to as "Tenant"), Landlord
leased to Tenant certain space known as Suite No. ~e (the "leased premises") in
an ~20 office building known by street address 6305 Ivy Lane, Greenbelt, Prince
George's County, Maryland (the "Building"), for a term and upon the terms and
conditions set forth in said Lesser and
WHEREAS (hereinafter called "Lender") is about to disburse or
has disbursed a mortgage loan to Landlord secured or to be secured by a Deed of
Trust covering said office building and related improvements; and
WHEREAS, Lender, as a condition to making said loan, requires
confirmation of lease forms and provisions by Tenant.
NOW, THEREFORE, Tenant knowing that Lender will rely on this
Certification, and intending to be legally bound hereby, certifies to Lender as
follows:
1. That the above mentioned Lease has not been changed,
modified, amended or assigned by Tenant, and that said Lease is in full force
and effect, and neither Landlord nor Tenant is in default thereunder.
2. That Tenant has accepted and taken possession of the
leased premises demised to it pursuant to said Lease; has commenced payment of
rental at the rate and upon the terms called for in said Lease, and certifies
that the Lease term commenced on the day of 19 , and subject to option(s) to
renew, the original term of the Lease will terminate on
the day of 19
3. That all improvements for the leased premises have been
fully completed by Landlord in accordance with plans and specifications approved
by Tenant, and Tenant is in full and complete possession and occupancy thereof,
and Tenant is paying rent under said Lease on a current basis.
4. That the Tenant has made no advances of funds for or on
behalf of the Landlord for which it has the right to deduct from or offset
against future rentals as of the date of this Certification.
<PAGE> 45
EXHIBIT "D"
Page 2
5. That the Tenant has not paid rent for more than the
current month during which this Certificate is made.
6. That there are no rental offsets or claims, defenses or
other offsets against or to enforcement of the Lease by Landlord.
IN WITNESS WHEREOF, the undersigned has executed this
Certification the day and year first above written.
ATTEST/WITNESS TENANT:
__________________________ ___________________________
<PAGE> 46
~
PERKINS INTERIOR CONSTRUCTION, INC.
4041 POWDERMILL ROAD - SUITE 400 ~ CALVERION' MARYLAND 20705
~ PHONE (301) 572-2863 - FAX: (301) 572-6901
Astrotech Space Operations
COP 3 -5TH FLOOR
6,250 SQ. FT.
Take-Off Dated 3/30/98
Revised for Tenant Drawing 3/30/98
Rev. 4/16/98
DEMOLITION:
413 Lft. Interior Partition
14 Interior Doors - 9-R.H; 5-L.H.
1 Pr. Double Suite Entry Doors
6 Pr. Bifold Doors - (1) 6'-0"; (3} 5'-0"; (2) 4'-0"
24 Duplex Outlets
3 Dedicated Duplex
10 Quad. Outlets
11 Computer Outlets
16 Telephone Outlets
6 Heat Pumps -removed and capped off
37 LR Rod &Shelf
560 Sq. Ft. VCT
591 Sq. Yds. Carpet
Demo Ex. 2 x 4 Ceiling Tile
Cleaning, Labor, Trash Removal
<PAGE> 47
EXHIBIT E
Perkins Interior Construction, Inc.
16 Apr. 98 - Page 2 of 3
Astrotech Space Operations
COP 3-5th FLOOR
6,250 SQ. FT.
Take-Of Dated 3/30/98
revised for Tenant Drawing 3/30/98
(Excl. Drywall Ceiling )
Rev. 4/16/98
NEW CONSTRUCTION:
420 Lft. Interior Partition
11 Interior Doors - 5L.H.; 6-R.H. - reuse
1 Pr. Doiuble Interior door w/glass inserts
5 Pr. Bifold Doors-(4) 4'-0", (1) 5'-0"
2 heat Pumps (relocated )
16 Lft. Rod & Shelf (3 closets)
50 Lft. Fixed Shelving - 24" D;
10 Shelves - 5'-o" W.pt. grade plywd
1 PANTRY:
26Lft. P.L. Counter Top & Wall Cabinets;
17'6" Lft. Base Cabinet, Sink, Ultra-Hot, Disposal
R.I., Permits, (2) Cold Water Line & Connections
610 Sq. Yds. 30oz. Cut Pile Carpet (L.L. Selection)
w/ Vinyl Base throughout
750 Sq. Ft. V.C. T. @ File Rm, Equip. Rm & Pantry
Paint & Point Up
Replace 6,250 +/-Sq. Ft. Ceiling Tile
Point up and Paint Ex. Ceiling Grid
Relocate (69) 2x4 Light Fixtures
Furnish & Install (11) new 2x4 Light Fixtures
Furnish & Install (12) new Wall Washers (L.L. Selection)
Furnish & Install (1) Downlight (L.L. Selection)
NEW CONSTRUC11Oh":
420
<PAGE> 48
11
1
s
2
16
~0
1
Lit. Anterior Partition
Astrotech Space Operations
COP 3 -5TH FLOOR
6,250 SQ. FT/
Take-Off Dated 3/30/98
Revised for Tenant Drawing 3/30/98
(Excl. Drywall Ceiling )
Rev. 4/16/98
NEW CONSTRUCTION(CONT'D):
Furnish & Install (1) 1 x 4 Surface Mounted Light
(L.L. Selection)
Electrical / Tel
Mechanical at Ceiling
Relocate / Modify Sprinkler
Add/Relocate Fire Flashers, Speakers
Reswitch & Recircuit Lights
Cleaning, Labor, Trash Removal, Permits
(1) Note: Per tenant drying dated 3/30/98
(2) Note: Existing slot diffusers and returns; to be relocated as required
(3) ID Note: Scope of Landlord work does not include separate A/C unit and
my work associated with A/C installation
<PAGE> 1
EXHIBIT 11
SPACEHAB, INCORPORATED AND SUBSIDIARY
COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
NINE MONTHS YEAR YEAR
ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30,
--------------- ---------------- -----------------
1996 1997 1998
--------------- ---------------- -----------------
<S> <C> <C> <C>
Net Income and Adjusted Earnings:
Net income applicable to common
shareholders used for primary
computations $29,828,743 $13,831,625 $ 9,604,465
----------- ----------- -----------
Fully diluted adjustments:
Savings in convertible note payable interest
expense, net of tax 59,017 - 2,624,875
----------- ----------- -----------
Adjusted net income applicable to
common shareholders assuming full dilution $29,887,760 $13,831,625 $12,229,340
=========== =========== ===========
Average number of shares of common stock
used for basic computation 9,139,465 11,118,825 11,154,271
----------- ----------- -----------
Diluted adjustments (1):
Weighted Average Shares and Share
Equivalents Outstanding:
Stock options assumed exercised at ending
fair market value 128,553 14,168 269,898
Assumed conversion of convertible debt 75,000 27,329 3,147,109
----------- ----------- -----------
Total number of shares assumed to be
Outstanding assuming full dilution 9,343,018 11,186,886 14,571,278
----------- ----------- -----------
Earnings Common Per Share:
Income per common share:
Income before extraordinary item $ 3.26 $ 0.95 $ 0.86
Extraordinary item - 0.29 -
----------- ----------- -----------
Basic $ 3.26 $ 1.24 $ 0.86
=========== =========== ===========
Income before extraordinary item $ 3.19 $ 0.95 $ 0.84
Extraordinary item - 0.29 -
----------- ----------- -----------
Diluted (1): $ 3.19 $ 1.24 $ 0.84
----------- ----------- -----------
</TABLE>
(1) The assumed exercise of options and warrants and the conversion of
convertible debt is anti-dilutive but are included in the calculation of
dilutive earnings per share in accordance with Regulation S-K Item 601 (a)(11).
<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, 333-36779, 333-43159, and 333-43181) on Form S-8 and the registration
statement (No. 333-43221) on Form S-3 of SPACEHAB, Incorporated of our report
dated August 31, 1998, relating to the consolidated balance sheets of SPACEHAB,
Incorporated and subsidiary as of June 30, 1997 and 1998, and the related
consolidated statements of income, stockholders' equity (deficit), and cash
flows for the nine months ended June 30, 1996 and the years ended June 30, 1997
and 1998, which report appears in the June 30, 1998, annual report on Form 10-K
of SPACEHAB, Incorporated.
/s/ KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP
McLean, VA
September 17, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001001907
<NAME> SPACEHAB, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 92,327,099
<SECURITIES> 0
<RECEIVABLES> 5,978,709
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 98,856,212
<PP&E> 155,925,259
<DEPRECIATION> 43,338,132
<TOTAL-ASSETS> 220,604,091
<CURRENT-LIABILITIES> 36,195,616
<BONDS> 0
0
0
<COMMON> 81,238,925
<OTHER-SE> 16,299
<TOTAL-LIABILITY-AND-EQUITY> 220,604,091
<SALES> 64,087,401
<TOTAL-REVENUES> 64,087,401
<CGS> 35,058,041
<TOTAL-COSTS> 35,058,041
<OTHER-EXPENSES> 16,331,727
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,479,787
<INCOME-PRETAX> 12,131,388
<INCOME-TAX> 2,526,923
<INCOME-CONTINUING> 9,604,465
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,604,465
<EPS-PRIMARY> .86
<EPS-DILUTED> .84
</TABLE>
