UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended...............December 31, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
Commission file number 0-27206
SPACEHAB, Incorporated
300 D Street, SW
Suite 814
Washington, D.C. 20024
(202) 488-3500
Incorporated in the State of Washington I.R.S. Employer
Identification
No. 91-1273737
The number of shares of Common Stock outstanding as of the close of business
on January 31, 1999:
Class Number of Shares
Outstanding
Common Stock 11,188,836
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
------ -----
<PAGE>
DECEMBER 31, 1998 QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
PART 1 FINANCIAL INFORMATION Page
Item 1. Unaudited Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of
December 31, 1998 and June 30, 1998 3
Condensed Consolidated Statements of Operations for the
Three and Six Months ended December 31, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows for the
Six Months ended December 31, 1998 and 1997 5
Notes to Unaudited Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 6. Exhibits and Reports on Form 8-K 17
<PAGE>
PART 1: FINANCIAL INFORMATION
Item 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SPACEHAB, INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands, except share data) December 31, June 30,
1998 1998
(unaudited) (audited)
--------------- ---------------
ASSETS
Cash and cash equivalents $ 38,787 $ 92,327
Receivables 18,968 5,979
Prepaid expenses and other current assets 1,695 550
--------------- ---------------
Total current assets 59,450 98,856
Property, plant and equipment, net of
accumulated depreciation and amortization
of $46,221 and $43,338 115,805 112,588
Goodwill, net of accumulated amortization of 27,148 3,224
$804 and $230
Other assets, net 6,675
5,936
--------------- ---------------
Total assets $ 209,078 $ 220,604
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Loan payable, current portion $ 2,824 $ 2,824
Loan payable under credit agreement, 333 500
current portion
Accounts payable and accrued expenses 10,683 6,204
Accrued subcontracting services 8,629 13,177
Deferred revenue 8,953
13,491
-------------- -------------
Total current liabilities 31,422 36,196
Accrued contract costs 906 -
Notes payable to shareholder 7,860 11,895
Loan payable under credit agreement, net of
current portion 667 1,000
Loan payable, net of current portion 7,765 9,177
Convertible notes payable 63,250 63,250
Deferred income taxes 2,094 2,678
-------------- --------------
Total liabilities 113,964 124,196
Commitments and contingencies
Stockholders' equity:
Common stock, no par value, authorized
30,000,000 shares, issued and outstanding
11,176,651 and 11,168,161 shares,
respectively 81,383 81,239
Additional paid-in capital 16 16
Retained earnings 13,715 15,153
-------------- --------------
Total stockholders' equity 95,114 96,408
-------------- --------------
Total liabilities and stockholders'
equity $ 209,078 $ 220,604
============= ============
See accompanying notes to unaudited condensed consolidated financial
statements.
<PAGE>
SPACEHAB, INCORPORATED AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months Six Months
(In thousands, except share data) Ended December 31, Ended December 31,
----------------------- ------------------------
1998 1997 1998 1997
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue $ 23,634 $ 17,756 $ 51,907 $ 20,293
Costs of revenue:
Integration and operations 14,547 6,143 33,237 9,961
Depreciation 1,259 1,224 2,517 2,446
Insurance and other direct costs 4,350 553 6,142 752
----------- ---------- ----------- ----------
Total costs of revenue 20,156 7,920 41,896 13,159
----------- ---------- ----------- ----------
Gross profit 3,478 9,836 10,011 7,134
Operating expenses:
Marketing, general and administrative 4,722 3,243 8,857 5,881
Research and development 763 760 1,010 1,051
----------- ---------- ----------- ----------
Total operating expenses 5,485 4,003 9,867 6,932
----------- ---------- ----------- ----------
Income (loss) from operations (2,007) 5,833 144 202
Interest expense, net of capitalized 1,227 1,176 2,658 1,379
amounts
Interest and other income (918) (1,148) (1,437) (1,410)
Other expense - - 550 -
----------- ---------- ----------- ----------
Income (loss) before income taxes (2,316) 5,805 (1,627) 233
Income tax expense (benefit) (465) 78 (189) 160
----------- ---------- ----------- ----------
Net income (loss) $ (1,851) $ 5,727 $ (1,438) $ 73
=========== ========== =========== ==========
Basic earnings per share:
Net income (loss) per share- basic $ (0.17) $ 0.51 $ (0.13) $ 0.01
=========== ========== =========== ==========
Shares used in computing net income
Per share- basic 11,176,651 11,149,789 11,172,507 11,148,830
=========== ========== =========== ===========
Diluted earnings per share:
Net income (loss) per share - diluted $ (0.17) $ 0.43 $ (0.13) $ 0.01
=========== ========== =========== ==========
Shares used in computing net income
Per share - assuming dilution 11,176,651 15,034,271 11,172,507 11,401,426
=========== ========== =========== ===========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial
statements.
<PAGE>
SPACEHAB, INCORPORATED AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
(In thousands) Six Months Ended December 31,
1998 1997
-------------- ---------------
Cash flows provided by (used for)
operating activities:
Net income (loss) $ (1,438) $ 73
Adjustments to reconcile net income
(loss) to net cash provided by
(used for)operating activities:
Depreciation and amortization 3,693 2,790
Changes in assets and liabilities:
Increase in accounts receivable (4,624) (2,915)
Increase in prepaid and other
current assets (639) (954)
Increase in deferred mission costs - (1,149)
Increase in other assets (233) (1,575)
Increase (decrease) in deferred
revenue (4,539) 9,171
Increase (decrease) in accounts
payable and accrued expenses (3,589) 887
Decrease in accrued consulting
and subcontracting services (4,570) (693)
-------------- ---------------
Net cash provided by (used for)
operating activities (15,939) 5,635
-------------- ---------------
Cash flows used for investing activities:
Payments for flight assets under
construction (3,948) (8,339)
Payments for building under
construction (446) (2,046)
Purchase of property and equipment and
other assets (2,061) (687)
Purchase of Johnson Engineering, net of
cash acquired (25,344) -
-------------- ---------------
Net cash used for investing
activities (31,799) (11,072)
-------------- ---------------
Cash flows provided by (used for)
financing activities:
Payment of note payable to Insurers (500) (500)
Payment of debt placement fees - (3,822)
Proceeds from issuance of convertible
notes payable - 63,250
Payment of note payable to shareholder (4,035) -
Proceeds from note payable - 13,413
Payment of loan payable (1,412) -
Proceeds from issuance of common stock 145 66
-------------- ---------------
Net cash provided by (used for)
financing activities (5,802) 72,407
-------------- ---------------
Net increase (decrease) in cash
and cash equivalents (53,540) 66,970
Cash and cash equivalents at beginning of
period 92,327 12,887
-------------- ---------------
Cash and cash equivalents at end of period $ 38,787 $ 79,857
============== ===============
See accompanying notes to unaudited condensed consolidated financial
statements.
<PAGE>
SPACEHAB, INCORPORATED AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
1. Basis of Presentation:
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments, consisting of only
normal recurring accruals, necessary for a fair presentation of the
consolidated financial position of SPACEHAB, Incorporated and subsidiaries
("SPACEHAB" or the "Company") as of December 31, 1998, and the results of
their operations for the three and six month periods ended December 31, 1998
and 1997 and their cash flows for the six months ended December 31, 1998 and
1997. However, the consolidated financial statements are unaudited, and do
not include all related footnote disclosures. The consolidated results of
operations for the three and six months ended December 31, 1998 and 1997 are not
necessarily indicative of the results that may be expected for the full year.
The Company's results of operations fluctuate significantly from quarter to
quarter (see note 4). The interim unaudited condensed consolidated financial
statements should be read in conjunction with the Company's audited
consolidated financial statements appearing in the Company's Form 10-K for the
year ended June 30, 1998.
2. Earnings per Share:
In December 1997, the Company adopted the provisions of Statement of Financial
Accounting Standards (SFAS) No. 128, Earnings Per Share, which establishes new
guidelines, for the calculations of earnings per share.
The following are reconciliations of the numerators and denominators of
the basic and diluted earnings per share computations for the three and
six-month periods ended December 31, 1998 and 1997, respectively:
(In thousands except Three months ended Three months ended
per share data) December 31, 1998 December 31, 1997
Income Shares Per Income Shares Per
Share Share
(Numerator)(Denominator)Amount(Numerator)(Denominator) Amount
------------------------------------------------------------
Basic EPS:
Income available
to common
stockholders $(1,851) 11,176,651 $(0.17) $5,727 11,149,789 $0.51
Effect of dilutive
securities:
Convertible notes
payable - - - $797 3,626,446 -
Options and
warrants - - - - 258,036 -
--------------------------------------------------------
Diluted EPS:
Income available
to common
stockholders $(1,851) 11,176,651 $(0.17) $6,524 15,034,271 $0.43
Six months ended Six months ended
December 31, 1998 December 31, 1997
Income Shares Per Income Shares Per
Share Share
(Numerator)(Denominator)Amount (Numerator)(Denominator)Amount
--------------------------------------------------------
Basic EPS:
Income available
to common
stockholders $(1,438) 11,172,507 $(0.13) $73 11,148,830 $0.01
Effect of dilutive
securities:
Convertible notes
payable - - - - - -
Options and
warrants - - - - 252,596 -
--------------------------------------------------------
Diluted EPS:
Income available
to common
stockholders : $(1,438) 11,172,507 $(0.13) $73 11,401,426 $0.01
Convertible notes payable outstanding as of December 31, 1998,
convertible into 4,642,202 shares of common stock at $13.625 per share and due
October 2007, were not included in the computation of diluted EPS for the
three and six months ended December 31, 1998 or the six months ending
December 31, 1997 as the inclusion of the converted notes would be
anti-dilutive for these periods.
Options and warrants to purchase 1,425,373 shares of common stock for the three
month period ended December 31,1998, at prices ranging from $8.88 to $24.00 per
share, were outstanding as of December 31, 1998 but were not included in the
computation of diluted EPS because the options' exercise prices were greater
than the average market price of the common shares during the three months ended
December 31, 1998. The options expire between February 19, 1999 and August 3,
2007.
Options and warrants to purchase 1,342,000 shares of common stock for the six
months ending December 31, 1998, at prices ranging from $9.875 to $24.00 per
share, were outstanding but were not included in the computation of diluted EPS
because the options' exercise prices were greater than the average market price
of the common shares during the six months ended December 31, 1998. The options
expire between February 19, 1999 and August 3, 2007.
Options and warrants to purchase 1,161,650 shares of common stock, at
prices ranging from $11.00 to $14.88 per share, were outstanding for the three
and six month periods ended December 31, 1997 but were not included in the
computation of diluted EPS because the options' and warrants' exercise prices
were greater than the average market price of the common shares during the
three and six month periods ended December 31, 1997. The options expire
between January 31, 1998 and October 21, 2004 and warrants expire between
December 31, 1997 and June 21, 1998.
3. Acquisition of Johnson Engineering:
On July 1, 1998, the Company acquired all of the outstanding shares of capital
stock of Johnson Engineering Corporation ("Johnson Engineering"). Johnson
Engineering performs several critical services for NASA including flight crew
support services, operations, training and fabrication of mockups at NASA's
Neutral Buoyancy Laboratory and at NASA's Mockup and Integration Laboratory,
where astronauts train for both Space Shuttle and International Space Station
missions. Johnson Engineering also designs and fabricates flight hardware,
such as flight crew equipment and crew quarters habitability outfitting as
well as provides stowage integration services. Johnson Engineering is also
responsible for configuration management of the International Space Station
(ISS).
The Company paid approximately $25.3 million, including transaction costs, to
acquire all of the capital stock of Johnson Engineering. The business
combination is being accounted for using the purchase method under Accounting
Principles Board Opinion No. 16, Business Combinations, (APB Opinion 16) to
record the purchase of all the capital stock of Johnson Engineering. The
purchase price has been allocated to the assets and liabilities acquired based
on preliminary estimates of fair value as of the date of acquisition. Based
on the allocation of the net assets acquired, goodwill of approximately $24.6
million was recorded. Such goodwill is being amortized on a straight-line
basis over 25 years. The purchase price has been allocated as follows (in
thousands):
Cash $ 2
Prepaid and other current
assets 306
Accounts receivable, net 8,366
Inventory 5
Property, plant and
equipment, net 446
Other assets 622
Goodwill 24,562
Current liabilities (8,070)
Accrued contract costs (928)
----
Total purchase price $ 25,311
========
APB Opinion 16 requires, for purchase business computations, the presentation
of pro forma combined results of operations for the current year and the
preceding year as if the combination had occurred at the beginning of the
periods presented. The following unaudited pro forma consolidated results of
operations are not necessarily indicative of actual or future results of
operations.
(in thousands except per Three Months Six Months
share data) Ended December 31, Ended December 31,
1998 1997 1998 1997
------------------------------------------------
Revenue $ 23,634 $ 29,151 $ 51,907 $ 45,467
Gross profit 3,478 11,397 10,011 9,648
Net income (loss) $ (1,851) $ 5,708 (1,438) $ 21
========== ========== ========== =========
Net income (loss) per
share - diluted $ (0.17) $ 0.43 $ (0.13) $ 0.00
========== ========== ========= =========
4. Revenue Recognition:
Under the Mir contract, revenue was recognized upon completion of each module
flight, total contract revenue was allocated to each flight based on the
amount of services the Company provided on the flight relative to 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. For the REALMS contract and for new contract
awards for which the capability to successfully complete the contract can be
reasonably assured and the costs at completion can be reliably estimated at
contract inception, revenue is recognized under the
percentage-of-completion method. This percentage-of-completion method allows
the Company to report revenue based on costs incurred on a per mission basis
over the period of that mission. The percentage of completion method results
in the recognition of revenue over the period of contract performance, thereby
decreasing significant quarter by quarter fluctuations in reported revenue.
Revenue provided by the Astrotech payload processing facilities is recognized
ratably over the occupancy period of the satellites at the Astrotech
facilities. Revenue provided by Johnson Engineering is primarily based on
cost-plus award fee contracts, whereby revenue is recognized to the extent of
costs incurred plus estimates of award fee revenues using the
percentage-of-completion method. Award fees, which provide earnings based on
the Company's contract performance as determined by NASA evaluations, are
recorded when the amounts can be reasonably estimated, or are awarded.
5. Statements of Cash Flows - Supplemental Information:
(a) Cash paid for interest costs was $3.8 million and $0.9 million for
the six months ended December 31, 1998 and 1997, respectively. The Company
capitalized interest of approximately $1.2 million and $0.8 million during
the six months ended December 31, 1998 and 1997, respectively.
(b) The Company paid $4 thousand and $1.4 million for income taxes during the
six months ended December 31, 1998 and 1997, respectively.
6. Credit Facilities:
On June 16, 1997, the Company entered into a $10.0 million 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 LIBOR-based
rate, and are collateralized by certain assets of the Company. The term of
the agreement is through October 1999. As of December 31, 1998, the Company
had not drawn against the line of credit.
On July 14, 1997, the Company's wholly owned subsidiary, Astrotech, entered
into a five-year credit facility with a financial institution for loans of up
to $15.0 million. 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. As of December 31, 1998, the
Company had drawn $14.1 million against this loan. As of December 31, 1998 and
1997, the outstanding balance on this loan was $10.6 million and $13.4
million, respectively.
In October 1997, the Company completed a private placement offering for $63.3
million of aggregate principal of 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 $59.9 million to be used for
capital expenditures associated with the development and construction of space
related assets, the purchase of Johnson Engineering and for other general
corporate purposes.
In December 1998, the Company amended the agreement with Alenia Spazio S.p.A., a
shareholder, relative to subordinated notes payable with an outstanding
principal balance of $11.9 million and due in August 2001. In exchange for
payment of $4.0 million of principal payable on or before December 31, 1998,
Alenia agreed to waive the interest payment due for the quarter ended December
31, 1998 and reduce the annual interest rate on the subordinated notes from 12%
to 10% on the outstanding balance as of January 1, 1999. The interest expense
benefit,$0.4 million for the payment waived, is being amortized over the
remaining term of the loan which is due August 2001. Beginning January 1, 1999,
the same interest rate will be applied to the senior debt (the Insurers' note)
that has an outstanding balance of $1.0 million as of December 31, 1998.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
General
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) the "General"
and "Liquidity and Capital Resources" sections of this Item 2. Such
statements are subject to certain risks and uncertainties, including those
discussed herein, which could cause actual results to differ materially from
those projected in such statements.
SPACEHAB was incorporated in 1984 to commercially develop space habitat
modules to operate in the cargo bay of the Space Shuttles.
The Company currently operates under two contracts with NASA: the Research and
Logistics Module Services Contract, (the "REALMS Contract"), a $87.8 million
contract for two research missions aboard the Space Shuttle and two logistics
missions to resupply the International Space Station; and, the Flight Crew
Systems Development Contract (the "FCSD Contract") currently a $324.9 million
multitask cost-plus-award and incentive-fee contract, that commenced in May 1993
and will conclude in April 2001. The value of the NASA portion of the REALMS
contract is $63.0 million for four firm missions and the commercial value is
currently $24.8 million. The Company has the potential to increase the total
REALMS contract value by additional $12.5 million through module usage sales to
commercial customers for microgravity space research such as the European Space
Agency (ESA), the National Space Development Agency of Japan (NASDA) and the
Canadian Space Agency (CSA). The first mission under the REALMS Contract, STS-95
which carried Senator John Glenn back into space, was completed in October 1998.
The three remaining flights are scheduled for launch in May 1999, October 1999
and December 2000. Under the FCSD Contract, Johnson Engineering provides a
variety of critical crew training, support and manufacturing functions on a cost
plus award fee and incentive fee basis.
<PAGE>
Revenue
SPACEHAB generates revenue by: (i) providing lockers and/or volume
within the SPACEHAB Modules; (ii) integration and operations support services
provided to scientists and researchers responsible for the experiments; and/or
(iii) from NASA or International Agencies to carry logistics supplies for
Module missions aboard the Shuttle system. Under the Mir Contract, the
Company recognized revenue only at the completion of each Space Shuttle
mission utilizing Company assets. Accordingly, the Company's quarterly
revenue and profits had fluctuated dramatically based on NASA's launch
schedule and will continue to do so under any contract for which revenue is
recognized only upon completion of a mission. For the REALMS contract and for
future 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
on a per mission basis over the period of the mission. The
percentage-of-completion method results in the recognition of revenue over the
period of contract performance, thereby significantly decreasing the
quarter-by-quarter fluctuations in reported revenue.
Astrotech revenue is derived from various multiyear fixed price
contracts with satellite and launch vehicle manufacturers. The services and
facilities Astrotech provides to its customers support the 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. In addition, Astrotech expects to
generate additional revenue from an exclusive multiyear agreement to process
all Sea Launch program payloads at the Boeing facility in Long Beach,
California.
Johnson Engineering generates revenue primarily from its multiyear cost
plus award and incentive-fee contract with NASA. Johnson Engineering's flight
crew support services include operations, training and fabrication of mockups
at NASA's Neutral Buoyancy Laboratory, and at NASA's Mockup and Integration
Laboratory, where astronauts train for both Space Shuttle and International
Space Station missions. Johnson Engineering also designs and fabricates flight
hardware including flight crew equipment and crew quarters habitability
outfitting and provides stowage integration services. Johnson is also
responsible for configuration management of the ISS. Revenue provided by
Johnson Engineering is recognized to the extent of costs incurred plus award
fee using the percentage of completion method, measured on costs incurred.
Award fees, which provide earnings based on contract performance as determined
by periodic NASA evaluations, are recorded when the amounts can be reasonably
estimated or are awarded.
Costs of Revenue
Costs of revenue for SPACEHAB missions include integration and
operations expenses associated with the performance of three types of
efforts: (i) sustaining engineering in support of all missions under a
contract, (ii) mission specific support and (iii) other costs of revenue
including depreciation expense, related insurance, costs associated with the
Astrotech payload processing facilities and Johnson Engineering costs under
the FCSD Contract. Expenses associated with sustaining engineering are
expensed as incurred.
RESULTS OF OPERATIONS
For the three months ended December 31, 1998 as compared to the three months
ended December 31, 1997.
Revenue. Revenue increased by 33% to approximately $23.6 million as
compared to $17.8 million for the three months ended December 31, 1998 and
1997, respectively. Revenue of $9.4 million was recognized from the REALMS
contract with NASA and with related commercial customers, $11.9 million from
Johnson Engineering under the FCSD contract and $2.3 million from Astrotech.
In contrast, for the quarter ended December 31, 1997, revenue of $13.6
million was recognized for the fifth Mir mission upon the return of the
module, $1.7 million was recognized under the REALMS contract for both NASA
and related commercial customers and revenue of $2.5 million was generated by
Astrotech. Johnson's revenue was reduced during the quarter ended December
31, 1998 by $0.7 million as the result of the receipt of their award score,
for the award period April-September 1998, which was lower than accrued and
resulted in no fee earned for the period. The fee reduction addressed
performance at Johnson prior to its acquisition by SPACEHAB. Corrective
action has been taken and the award score has been appealed to NASA. For the
current award period, Johnson has been recognizing revenue based on an
anticipated award score of 75%, which management of the Company believes is
reasonable based on its understanding of the reasons for the low score and the
corrective actions taken by the Company in response to the customer's
concerns. There can be no assurance that Johnson will achieve that score.
Costs of Revenue. Costs of revenue for the quarter ended December 31,
1998 increased by 254% to $20.2 million, as compared to $7.9 million for the
prior year's quarter. This significant increase is due to the inclusion of
Johnson Engineering's costs of $11.6 million, primarily for costs incurred in
support of the FCSD contract. For the quarter ended December 31, 1998,
integration and operations costs for the REALMS and related commercial
customer contracts were $6.2 million, $1.1 million for Astrotech payload
processing and $1.3 million of depreciation expense. For the three months
ended December 1997, the components of costs of revenue include integration and
operations costs under the Mir contract of $4.6 million, $1.0 million under
the REALMS and related commercial customer contracts, $1.1 million for
Astrotech payload processing, and depreciation expense of $1.2 million.
Operating Expenses. Operating expenses increased approximately 37% to
approximately $5.5 million for the three months ended December 31, 1998 as
compared to approximately $4.0 million for the three months ended December 31,
1997. This increase is due primarily to the Company's efforts to increase
staff during fiscal year 1998 by adding strength in engineering, design and
research and development capabilities and also reflects the additional costs
of approximately $0.7 million incurred for operating the Johnson Engineering
subsidiary, which was acquired in July 1998. Research and development costs
were essentially the same for the two corresponding periods.
Interest and Other Expense. Interest expense was approximately $1.2
million for the three months ended December 31, 1998 as compared to
approximately $1.2 million for the three months ended December 31, 1997. There
was also approximately $0.6 million and $0.5 million of interest capitalized
for the quarters ended December 31, 1998 and 1997, respectively. Interest was
capitalized based on the construction of the Company's research module with
double module hardware, the ICC and an additional facilities being
constructed by Astrotech.
Interest and Other Income. Interest and other income was
approximately $0.9 million and $1.1 million for the three months ended
December 31, 1998 and 1997, respectively. Interest is earned on the Company's
short-term investments of proceeds received from the Company's debt financings
completed during July and October 1997.
Income Taxes. Based on the Company's projected taxable earnings for fiscal year
1999, the Company has recorded a $0.5 million income tax benefit for the quarter
ended December 31, 1998.
Net Income (Loss). Net income (loss) was approximately ($1.9) million
and $5.7 million for the quarter ended December 31, 1998 and 1997,
respectively. Basic earnings per share for the quarter ended December 31, 1998
and 1997 was ($0.17) per share on 11,176,651 shares and $0.51 per share on
11,149,789 shares, respectively. Diluted earnings per share for the quarter
ended December 31, 1998 and 1997 were ($0.17) per share on 11,176,762 shares
and $0.43 per share on 15,034,271 shares, respectively.
For the six months ended December 31, 1998 as compared to the six months ended
December 31, 1997.
Revenue. Revenue increased by 156% to $51.9 million as compared to
$20.3 million for the six months ended December 31, 1998 and 1997,
respectively. Revenue recognized during the six months ended December 31,
1998 was from: REALMS and commercial customer contracts of $20.8 million;
Astrotech operations of $4.8 million and Johnson Engineering operations of
$26.3 million primarily under the FCSD contract. Conversely, for the six months
ended December 31, 1997 the Company's revenue was attributable to the fifth
mission under the Mir Contract of $13.6 million, REALMS and commercial customer
contracts of $1.7 million and Astrotech operations of $5.0 million. Johnson's
revenue was reduced during the quarter ended December 31, 1998 by $0.7
million as the result of the receipt of their award score, for the award
period April-September 1998, which was lower than accrued and resulted in no
fee earned for the period. The fee reduction addressed performance at Johnson
prior to its acquisition by SPACEHAB. Corrective action has been taken and
the award score has been appealed to NASA. For the current award period,
Johnson has been recognizing revenue based on an anticipated award score of
75%, which management of the Company believes is reasonable based on its
understanding of the reasons for the low score and the corrective actions
taken by the Company in response to the customer's concerns. There can be no
assurance that Johnson will achieve that score.
Costs of Revenue. Costs of revenue for the six months ended December
31, 1998 increased 318% to $41.9 million, as compared to $13.2 million for six
months ended December 31, 1997. The primary components of costs of revenue for
the six months ended December 31, 1998 include integration and operation costs
under the REALMS and commercial customer contracts of $12.3 million,
Astrotech operations $2.3 million and Johnson Engineering $24.8 million.
Depreciation expense for the period was $2.5 million. In contrast, the primary
components of costs of revenue for the six months ended December 31, 1997
included integration and operations costs under the Mir contract of $7.5
million, REALMS and commercial customers contracts of $1.1 million, and
Astrotech operations of $2.1 million. Depreciation expense for the period
was $2.5 million.
Operating Expenses. Operating expenses increased by approximately 42% to
approximately $9.9 million for the six months ended December 31, 1998 as
compared to approximately $6.9 million for the six months ended December 31,
1997. This increase is due primarily to the Company's efforts to increase
staff, adding strength in engineering, design and research and development
capabilities during fiscal year 1998. In addition, $1.4 million of costs were
incurred for operating Johnson Engineering. Research and development expense
is similar to the prior year.
Interest and Other Expense. Interest and other expense was approximately
$3.2 million for the six months ended December 31, 1998 as compared to
approximately $1.4 million for the six months ended December 31, 1997.
There was approximately $1.2 million and $0.8 million of capitalized
interest for the six months ended December 31, 1998 and 1997, respectively.
Interest for the current fiscal year is capitalized primarily on the
construction of the Company's science module with adapter hardware, the ICC
and an additional payload processing facility being constructed by Astrotech.
The increase in interest expense between the two periods is due primarily
to the interest accrued on the convertible notes that were issued on
October 21, 1997. Additionally during the six months ended December 31,
1998, the Company recognized $0.6 million in other expense related to costs
associated with a debt offering that the Company canceled in July.
Interest and Other Income. Interest and other income was approximately
$1.4 million for the six months ended December 31, 1998 and 1997. Interest
income is due to short-term interest earned by the Company for the investment
of proceeds received from the Company's credit facilities.
Income Taxes. Based on the Company's projected taxable earnings for fiscal year
1999, the Company has recorded a $0.2 million income tax benefit for the six
months ended December 31, 1999.
Net Income (Loss). Net income (loss) was approximately ($1.4) million, or
($0.13) per share (basic and diluted EPS), on 11,172,507 shares as compared to
$0.1 million, or $0.01 per share (basic EPS and diluted), for the six months
ended December 31, 1997, on 11,148,830 shares and 11,401,426 respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its capital expenditures, research and
development and working capital requirements with progress payments under its
various contracts, as well as with proceeds received from private debt and
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
$43.5 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
December 31, 1998, no amounts were 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 December 31, 1998, the Company had drawn
$14.1 million on this loan and had an outstanding balance on that date of
$10.6 million. On October 21, 1997, the Company completed a private placement
offering of convertible subordinated notes (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, the purchase of Johnson Engineering, and for general
corporate purposes. In December 1998, the Company amended its agreement with
Alenia Spazio S.p.A. relative to subordinated notes payable with an outstanding
balance of $11.9 million. In exchange for payment of $4.0 million of
principal, Alenia agreed to reduce the annual interest rate from 12% to 10% on
the outstanding balance as of January 1, 1999 and the interest payment due for
the quarter ended December 31, 1998 was waived. An agreement with the senior
debt holders under the Insurers' note requires that the same interest rate be
applied to the senior debt with an outstanding balance of $1.0 million as of
December 31, 1998.
For the period ended December 31, 1998, the Company was in breach of certain
loan covenants of the term loan and line of credit facility. The covenants
had been negotiated prior to the acquisition of Johnson Engineering. While
the Company has not drawn against the line of credit, covenant waivers were
requested and received from both lending institutions. The Company is in the
process or renegotiating the loan covenants.
Cash Flows from Operating Activities. Cash flows provided by (used for)
operating activities for the six months ended December 31, 1998 and 1997, were
($15.9) million and $5.6 million respectively. The decrease in cash flows
provided by operating activities for the current period is due to a number of
factors. Deferred flight revenue decreased by $4.5 million during the six
months ended December 31, 1998. Accrued consulting and subcontracting services
decreased by $4.6 million. Accounts payable decreased by $3.0 million.
Accounts receivable increased by $3.6 million related to missions currently
under contract.
Cash Flows from Investing Activities. For the six months ended December
31, 1998 and 1997, cash flows used for investing activities consisted
primarily of capital expenditures related to the acquisition of Johnson
Engineering in July 1998 for $25.3 million. Additional investing included
approximately $3.9 million attributable to the construction of the ICC system
and the Company's research module with adapter hardware. $0.5 million was
invested in the expansion of the Astrotech facilities, $1.2 million for the
purchase of additional property and equipment and $0.8 million in a joint
venture with Guigne Technologies Limited.
Cash Flows from Financing Activities. Cash flows provided by (used for)
financing activities were approximately ($5.8) million and $72.4 million for
the six months ended December 31, 1998 and 1997, respectively. During the
period ended December 31, 1998, the Company made an early payment of $4.0
million of Alenia debt in exchange for a lower interest rate and a waiver of
interest expense due and payable for the quarter ended December 31, 1998.
Additional payments were made on outstanding debt of $1.9 million. During the
six months ended December 31, 1997, the Company received net proceeds of
approximately $13.4 million under the Term Loan Agreement. In August 1997,
the Company also made the first payment of $0.5 million under the Credit
Agreement. In October 1997, the Company received net proceeds of approximately
$59.9 million by completing an offering of $55.0 million of its 8% Convertible
Subordinated Notes due 2007 as well as exercise of the underwriters'
over-allotment for an additional $8.3 million.
The Company believes that cash flows from the Notes Offering, the Term Loan
Agreement, the Revolving Line of Credit and other current financing activities
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.
<PAGE>
Recent Accounting Pronouncements
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS 131). SFAS 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 SFAS 131 for the year ended June 30, 1999.
Year 2000 Readiness Disclosure Statement
The Year 2000 ("Y2K") issue is the result of computer programs that were written
using two digits rather than four to define the applicable year. Any computer
program that has date-sensitive software may recognize the date using "00" as
the year 1900 rather than the year 2000. This error could result in systems
failures and computational errors causing disruptions of operations, including,
among other things, the temporary inability to process transactions, send
invoices or engage in similar normal business activities.
SPACEHAB has established a Y2K program to address both information-technology
("IT") and non-IT problems that may exist within the SPACEHAB system, including
its vendors and customers, e.g.- NASA and the Space Shuttle. SPACEHAB's Y2K
program is divided into five major phases- Awareness and Risk Assessment,
Inventory and Risk Assessment, Repair, Replacement and Renovation, Verification
and Validation, and Implementation and Monitoring.
Phases
AWARENESS AND RISK ASSESSMENT- This phase is intended to ensure the
establishment of the Y2K program and the awareness of potential risks and
issues. This phase involves communicating the status and progress of the Y2K
program within SPACEHAB and to third parties. It is an on-going activity and
will continue as SPACEHAB proceeds through the other phases.
INVENTORY AND RISK ASSESSMENT- This phase involves taking an inventory of
SPACEHAB hardware, software and infrastructure to identify those systems that
are and are not Y2K compatible. The emphasis is on those items, which are
believed by SPACEHAB to have a significant impact on the business from a
financial, legal or service perspective. While this process is ongoing, SPACEHAB
estimates that this phase is substantially complete for Company owned hardware
and software. SPACEHAB is in the process of surveying third party vendors to
determine their state of readiness.
REPAIR, REPLACEMENT AND RENOVATION- This phase, also known as "conversion", is
intended to ensure that the appropriate items identified in the preceding phase
are upgraded to meet the Y2K compliance criteria. Material repairs, replacements
and renovations will be substantially complete by the end of the current fiscal
year for systems that are under direct control of SPACEHAB. No assessment of
completion dates are available for which third parties are responsible until the
completion of that portion of the Inventory and Risk Assessment phase.
VERIFICATION AND VALIDATION- This phase ensures that critical processes, systems
and infrastructure are verified and tested to ensure Y2K issues will not cause
major disruptions in the on-going operations and business of the Company.
Verification and testing of systems under SPACEHAB's direct control will be
performed by SPACEHAB personnel and personnel of Spacehab's major subcontractor,
Boeing. SPACEHAB expects that all testing of these systems will be complete by
the end of the Company's fiscal year.
IMPLEMENTATION AND MONITORING- Y2K upgrades are and will be installed into
SPACEHAB's operating systems as necessary. Monitoring will be employed to ensure
that unforeseen Y2K critical items are appropriately prioritized for correction.
SPACEHAB's implementation and monitoring activities are ongoing.
State of Readiness
While there is uncertainty inherent in the Y2K problem resulting in large part
from the uncertainty of the readiness of third party vendors, SPACEHAB's
progress towards completing risk assessment within the SPACEHAB systems is
expected to be completed before the end of 1999.
A) Based on an ongoing assessment, the Company has determined that the vast
majority of the hardware and software used in its administrative functions are
Y2K compliant. The computers that are not compliant will be replaced during
1999.
B) Some computer hardware used in the operations function of SPACEHAB will
require upgrading. The computers at SPACEHAB's Payload Process Facility in
Florida used for ground support electrical testing (GSE) are antiquated,
inefficient and are not Y2K compatible. A proposal has been to upgrade those
systems during 1999.
C) Surveys and/or questionnaires are being sent to those third parties that
might have an impact on SPACEHAB's business to determine their state of
readiness. Those third parties include; NASA, Boeing, Lockheed-Martin and the
various utility service companies serving our locations.
Costs
The costs associated with required modifications to become Y2K compliant are not
expected to be material to SPACEHAB's financial position or results of
operations. The current estimate to become Y2K compliant is minimal,
approximately $0.2 million, for the replacement of all hardware and software.
This estimate excludes system enhancements, modifications and upgrades to
replace inefficient and antiquated GSE equipment. The costs of the Year 2000
program are being expensed as incurred.
Risks
In a likely worse case scenario, the failure to correct a material Y2K problem
could result in an interruption in, or a failure of, certain normal business
activities or operations, including operations that are essential to the
provision of SPACEHAB's services. Due to the general uncertainty inherent in the
Y2K problem, resulting in major part from the state of readiness of third
parties, SPACEHAB is unable to determine at this time whether the consequences
of Y2K failures will have a material impact on SPACEHAB's results of operations,
liquidity or financial condition. The potential Y2K impacts from third parties
include; the failure of the utility companies and power grids, NASA and the
shuttle in particular and from the customer owned IT systems which are located
at Astrotech's payload processing facilities.
Contingency Plans
After gathering information from SPACEHAB's Y2K readiness program and to prepare
for the possibility that certain information systems or third parties will not
be Y2K compliant, SPACEHAB intends to develop appropriate contingency plans. The
GSE at SPACEHAB's payload processing facility in Florida, while not Y2K
compliant, is still usable. The only functionality of the GSE that is expected
to be impaired is the printing of the correct date on computer generated
reports.
Readers are cautioned that the discussion of SPACEHAB's efforts and expectations
related to Year 2000 are forward looking statements and should be read in
conjunction with SPACEHAB's disclosure under "Management's Discussion and
Analysis of Financial Condition and Results of Operations- Forward Looking
Statements."
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NONE
ITEM 2. CHANGES IN SECURITIES
NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders was held on October 20, 1998.
( a ) At the Annual Meeting of Shareholders, the existing Board of
Directors stood for and were duly reelected, with each nominee receiving a
vote of at least 8,731,770 votes.
The reelected directors are:
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. Thompson
Giuseppe Viriglio
( b ) The appointment of KPMG LLP as the Company's independent
auditors for fiscal year 1999 was also approved and ratified.
For 9,386,175 Against 830 Abstain 11,155
ITEM 5. OTHER INFORMATION
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The separate Index to Exhibits accompanying this filing is
incorporated herein by reference.
(b) Reports on Form 8-K.
None
Exhibit No. Description of Exhibits
10.85 Letter Agreement between the Company and Alenia Aerospazio
10.86 Employment and Non-Interference Agreement dated July 1, 1998 between the
Company and William A. Jackson
10.87 Employment and Non-Interference Agreement dated July 1, 1998 between the
Company and Eugene A. Cernan
10.88 Employment and Non-Interference Agreement dated July 1, 1998 between the
Company and W.T. Short
10.89 Modification S/A 14 to NAS9-97199 dated November 25, 1998, between the
Company and NASA
11. Statement regarding Computation of Earnings Per Common Share.
27 Financial Data Schedule
<PAGE>
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SPACEHAB, INCORPORATED
Date: February 16, 1999 /s/ Mark A. Kissman
----------------------------------
Mark A. Kissman
Vice President, Finance
and Chief Financial Officer
/s/ David A. Rossi
----------------------------------
David A. Rossi
President and Chief Operating
Officer
December 10, 1998
LETTER AGREEMENT BETWEEN SPACEHAB, Inc., AND ALENIA AEROSPAZIO
This letter is to confirm our agreement regarding the outstanding debt SPACEHAB,
Inc. ("Spacehab") owes to Alenia Aerospazio("Alenia")
Notwithstanding anything to the contrary contained in the Subordinated
Promissory Notes issued by Spacehab to Alenia and subsequent agreements and
correspondence in respect thereto, it is acknowledged and agreed as follows:
1. As of today, 10 December 1998, Spacehab owes to Alenia an amount of
$11,895,000. Of such amount, Spacehab shall pay to Alenia an amount of
$4,034,928 on or before December 31, 1998.
2. Subject to compliance by Spacehab with the terms of this letter, Alenia
agrees that the remaining amount of $7,860,072 owed to Alenia shall be
finally due and payable by Spacehab to Alenia on August 1, 2001.
3. From August 1, 2001, the debt of Spacehab to Alenia shall be no longer
subordinated to the Senior Indebtedness as defined in the Subordinated
Promissory Notes. On or before August 1, 2001, Alenia may elect to
convert, in whole or in part, the principal amount into Spacehab
equity, on terms and conditions to be agreed with Spacehab.
4. Subject to compliance by Spacehab with the terms of this letter, Alenia
further agrees that: a) the interest accruing beginning January 1, 1999
on the outstanding amount owed by Spacehab to Alenia shall be
calculated at the rate of 10% per annum compounded and payable
quarterly, until the principal amount is paid in full as foreseen in
point 3 above or converted as provided therein and, b) Alenia cancels
payment of the October through December 1998 quarterly interest
obligation due under the Subordinated Promissory Notes.
5. The undersigned hereby represent and warrant that they have obtained
the necessary authorizations and consents necessary to execute and bind
the respective parties hereto.
If the foregoing is in accordance with your understanding of our arrangements,
please sign and return one copy of this letter, whereupon this letter shall
become a binding agreement among us in accordance with its terms.
Sincerely,
SPACEHAB, Inc.
by: /s/ Shelley A. Harrison
Name Shelley A. Harrison
Title Chairman and CEO
Accepted and agreed to this _________ day of _____________1998
Alenia Aerospazio Div. Spazio
A company of Finnmeccanica S.p.A.
By: /s/
Name
EMPLOYMENT AND NON-INTERFERENCE AGREEMENT
with William A. Jackson
This Employment and Non-Interference Agreement (this "Agreement"), is
dated as of July 1, 1998, by and between William A. Jackson (the "Executive")
and SPACEHAB, INCORPORATED, a Washington corporation (the "Company").
WITNESSETH:
WHEREAS, the Company wishes to retain the future services of Executive
for the Company;
WHEREAS, Executive is willing, upon the terms and conditions set forth
in this Agreement, to provide services hereunder; and
WHEREAS, the Company wishes to secure Executive's non-interference,
upon the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Nature of Employment
Subject to Section 3, the Company hereby employs Executive, and
Executive agrees to accept such employment, during the Term of Employment (as
defined in Section 3(a)), as an executive of the Company in the position of
Vice-President, Corporate Development. Executive will also undertake such duties
and responsibilities as may be reasonably assigned to Executive from time to
time by the President of the Company, by the Board of Directors of the Company,
or by such other appropriately authorized or designated executive officer of the
Company.
2. Extent of Employment
(a) During the Term of Employment, Executive shall perform his
obligations hereunder faithfully and to the best of his ability under the
direction of the President of the Company, by the Company's Board of Directors,
or by such other appropriately authorized or designated executive officer of the
Company, and shall abide by the rules, customs and usages from time to time
established by the Company.
(b) During the Term of Employment, Executive shall devote all
of his business time, energy and skill as may be reasonably necessary for the
performance of his duties, responsibilities and obligations under this Agreement
(except for vacation periods and reasonable
periods of illness or other incapacity), consistent with past practices and
norms with respect to similar positions.
(c) Nothing contained herein shall require Executive to follow
any directive or to perform any act which would violate any laws, ordinances,
regulations or rules of any governmental, regulatory or administrative body,
agent or authority, any court or judicial authority, or any public, private or
industry regulatory authority. Executive shall act in accordance with the laws,
ordinances, regulations or rules of any governmental, regulatory or
administrative body, agent or authority, any court or judicial authority, or any
public, private or industry regulatory authority.
3. Term of Employment, Termination
(a) The "Term of Employment" shall commence on the date hereof
and shall continue for a term ending July 1, 1999 (the "Initial Term"), subject
to automatic annual renewal for one-year terms thereafter (the "Additional
Term"), unless either the Company or Executive notifies the other party of its
intent not to renew within ninety (90) days prior to the end of the Initial Term
or the Additional Term as the case may be. Should Executive's employment by the
Company be earlier terminated pursuant to Section 3(b), the Term of Employment
shall end on the date of such earlier termination.
(b) Subject to the payments contemplated by Section 3(d), the
Term of Employment may be terminated at any time by the Company:
(i) upon the death of Executive;
(ii) in the event that because of physical or mental
disability, Executive is unable to perform and does not perform his
duties hereunder, for a continuous period of 90 days, and an
experienced, recognized physician specializing in such disabilities
certifies as to the foregoing in writing;
(iii) for Cause or Material Breach (each as defined
in Section 3(d));
(iv) upon the continuous poor or unacceptable
performance of Executive's duties to the Company, in the sole judgment
of the Board of Directors of the Company, which has remained uncured
for a period of 90 days after the delivery of notice by the Company to
the Executive of such dissatisfaction with Executive's performance; or
(v) for any other reason not referred to in clauses
(i) through (iv), or for no reason, such that this Agreement shall be
construed as terminable at will by the Company.
Executive acknowledges that no representations or promises have been made
concerning the grounds for termination or the future operation of the Company's
business, and that nothing contained herein or otherwise stated by or on behalf
of the Company modifies or amends the right of the Company to terminate
Executive at any time, with or without Material Breach or Cause. Termination
shall become effective upon the delivery by the Company to Executive of notice
specifying such termination and the reasons therefor, subject to the
requirements for advance notice and an opportunity to cure provided in this
Agreement, if and to the extent applicable.
(c) Subject to the payments contemplated by Section 3(d), the
Term of Employment may be terminated at any time by Executive:
(i) upon the death of Executive;
(ii) in the event that because of physical or mental
disability, Executive is unable to perform and does not perform his
duties hereunder, for a continuous period of 90 days, and an
experienced, recognized physician specializing in such disabilities
certifies as to the foregoing in writing;
(iii) as a result of the Company's material reduction
in Executive's authority, perquisites, position, title or
responsibilities (other than such a reduction by the Company because of
a temporary illness or disability or such a reduction which affects all
of the Company's senior executives on a substantially equal or
proportionate basis as a result of financial results, conditions,
prospects, reorganization, workout or distressed condition of the
Company), or the Company's willful, material violation of its
obligations under this Agreement, in each case, after 30 days' prior
written notice by Executive to the Company and its Board of Directors
and the Company's failure thereafter to cure such reduction or
violation within such 30 days; or
(iv) voluntarily or for any reason not referred to in
clauses (i) through (iii), or for no reason, in each case, after 90
days' prior written notice to the Company and its Board of Directors.
(d) For the purposes of this Section 3:
"Cause" shall mean any of the following: (i) Executive's conviction of
any crime or criminal offense involving the unlawful theft or conversion of
substantial monies or other property or any other felony (other than a criminal
offense arising solely under a statutory provision imposing criminal liability
on the Executive on a per se basis due to the offices held by the Executive); or
(ii) Executive's conviction of fraud or embezzlement.
"Material Breach" shall mean any of the following: (i) Executive's
breach of any of his fiduciary duties to the Company or its stockholders or
making of a willful misrepresentation or omission which breach,
misrepresentation or omission would reasonably be expected to materially
adversely affect the business, properties, assets, condition (financial or
other) or prospects of the Company; (ii) Executive's willful, continual and
material neglect or failure to discharge his duties, responsibilities or
obligations prescribed by Sections 1 and 2 (other than arising solely due to
physical or mental disability); (iii) Executive's habitual drunkenness or
substance abuse which materially interferes with Executive's ability to
discharge his duties, responsibilities or obligations prescribed by Sections 1
and 2; (iv) Executive's willful, continual and material breach of any
non-competition or confidentiality agreement with the Company, including without
limitation, those set forth in Sections 7 and 8 of this Agreement; and (v)
Executive's gross neglect of his duties and responsibilities, as determined by
the Company's Board of Directors; in each case, for purposes of clauses (i)
through (v), after the Company or the Board of Directors has provided Executive
with 30 days' written notice of such circumstances and the possibility of a
Material Breach, and Executive fails to cure such circumstances and Material
Breach within those 30 days.
(i) In the event Executive's employment is terminated
pursuant to Section 3(b)(i) [death], 3(b)(ii) [disability] or 3(b)(v)
[any other reason or no reason] or 3(c)(i) [death], 3(c)(ii)
[disability) or 3(c)(iii) [material reduction], the Company will: (A)
pay to Executive (or his estate or representative) the full amounts to
which the Executive would be entitled to under Section 4(a) for the
period from effectiveness of termination through the sixth month
anniversary of termination; and (B) pay to Executive (or his estate or
representative) the benefits described in Section 6 through the sixth
month anniversary of termination.
Payment of the amounts and provision of the benefits
described above will be made in accordance with the timetable and
schedule for such payments contemplated therefor as if such termination
did not occur, and will be subject to the other provisions of this
Agreement, including Section 3(g) and Sections 7 and 8. If the Company
makes the payments required by this Section 3(d)(i), such payments will
constitute severance and liquidated damages, and the Company will not
be obligated to pay any further amounts to Executive under this
Agreement or otherwise be liable to Executive in connection with any
termination.
(ii) In the event Executive's employment is
terminated pursuant to Section 3(b)(iii) [Cause or Material Breach],
3(b)(iv) [poor performance], or 3(c)(iv) [voluntary], the Company will
not be obligated to pay any further amounts to Executive under this
Agreement.
(e) In the event the Term of Employment is terminated and the
Company is obligated to make payments to Executive pursuant to Section 3(d)(i),
Executive shall have a duty
to seek to obtain alternative employment; and if Executive thereafter obtains
alternative employment, the Company's payment obligations under Section 3(d)(i),
including its obligation to provide insurance coverage, if any, will be
mitigated and reduced by and to the extent of Executive's compensation under
such alternative employment during the period for which payments are owed by the
Company pursuant to Section 3(d)(i). Moreover, in the event that Executive is
employed by or engaged in a Competitive Business as contemplated by Section
8(a)(i), then the Company will thereupon no longer be obligated to make payments
under Section 3(d)(i).
(f) In the event the Term of Employment is terminated and the
Company is obligated to make payments pursuant to Section 3(d)(i), Executive
hereby waives any and all claims against the Company and its respective
officers, directors, employees, agents, or representatives, stockholders and
affiliates relating to his employment during the term hereof and this Agreement.
(g) Termination of the Term of Employment will not
terminate Sections 3(d), 3(f)and 7 through 22.
4. Compensation
During the Term of Employment, the Company shall pay to Executive:
(a) As base compensation for his services hereunder, in
semi-monthly installments, a base salary at a rate of not less than $171,200 per
annum. Such amounts may be increased (but not decreased) annually at the
discretion of the Compensation Committee of the Board of Directors based upon an
annual review by the Compensation Committee of the Board of Directors of
Executive's performance.
(b) An annual bonus, if any, based on Executive's performance
as determined and approved by the Compensation Committee of the Board of
Directors.
5. Reimbursement of Expenses
During the Term of Employment, the Company shall pay all expenses,
including without limitation, transportation, lodging and food for Executive to
attend conventions, conferences and meetings that the Company determines are
necessary or in the best interest of the Company, and for any ordinary and
reasonable expenses incurred by Executive in the conduct of the Business of the
Company. Travel outside the United States shall be subject to the prior approval
of an executive officer of the Company.
6. Benefits
During the Term of Employment, Executive shall be entitled to any
fringe or employee benefits made available to similarly situated executives, in
each case, in accordance with guidelines or established from time to time, by
the Board of Directors.
7. Confidential Information
(a) Executive acknowledges that his employment hereunder gives
him access to Confidential Information relating to the Business of the Companies
and their customers which must remain confidential. Executive acknowledges that
this information is valuable, special, and a unique asset of the Business of the
Companies, and that it has been and will be developed by the Companies at
considerable effort and expense, and if it were to be known and used by others
engaged in a Competitive Business, it would be harmful and detrimental to the
interests of the Companies. In consideration of the foregoing, Executive hereby
agrees and covenants that, during and after the Term of Employment, Executive
will not, directly or indirectly in one or a series of transactions, disclose to
any person, or use or otherwise exploit for Executive's own benefit or for the
benefit of anyone other than the Companies, Confidential Information (as defined
in Section 10), whether prepared by Executive or not; provided, however, that
any Confidential Information may be disclosed to officers, representatives,
employees and agents of the Companies who need to know such Confidential
Information in order to perform the services or conduct the operations required
or expected of them in the Business (as defined in Section 10). Executive shall
use his best efforts to prevent the removal of any Confidential Information from
the premises of the Companies, except as required in his normal course of
employment by the Company. Executive shall use his best efforts to cause all
persons or entities to whom any Confidential Information shall be disclosed by
him hereunder to observe the terms and conditions set forth herein as though
each such person or entity was bound hereby. Executive shall have no obligation
hereunder to keep confidential any Confidential Information if and to the extent
disclosure of any thereof is specifically required by law; provided, however,
that in the event disclosure is required by applicable law, Executive shall
provide the Company with prompt notice of such requirement, prior to making any
disclosure, so that the Companies may seek an appropriate protective order. At
the request of the Company, Executive agrees to deliver to the Company, at any
time during the Term of Employment, or thereafter, all Confidential Information
which he may possess or control. Executive agrees that all Confidential
Information of the Companies (whether now or hereafter existing) conceived,
discovered or made by him during the Term of Employment exclusively belongs to
the Companies (and not to Executive). Executive will promptly disclose such
Confidential Information to the Company and perform all actions reasonably
requested by the Company to establish and confirm such exclusive ownership.
(b) In the event that Executive breaches his obligations in
any material respect under this Section 7, the Company, in addition to pursuing
all available remedies under this
Agreement, at law or otherwise, and without limiting its right to pursue the
same shall cease all payments to Executive under this Agreement.
(c) The terms of this Section 7 shall survive the termination
of this Agreement regardless of who terminates this Agreement, or the reasons
therefor.
8. Non-Interference and Non-Competition
(a) Executive acknowledges that the services to be provided
give him the opportunity to have special knowledge of the Companies and their
Confidential Information and the capabilities of individuals employed by or
affiliated with the Companies, and that interference in these relationships
would cause irreparable injury to the Companies. In consideration of this
Agreement, Executive covenants and agrees that:
(i) During the Restricted Period (which shall not
include any period of violation of this Agreement by the Executive),
Executive will not, without the express written approval of the Board
of Directors of the Company, anywhere in the Market, directly or
indirectly, in one or a series of transactions, own, manage, operate,
control, invest or acquire an interest in, or otherwise engage or
participate in, whether as a proprietor, partner, stockholder, lender,
director, officer, employee, joint venturer, investor, lessor,
supplier, customer, agent, representative or other participant, in any
Competitive Business without regard to (A) whether the Competitive
Business has its office, manufacturing or other business facilities
within or without the Market, (B) whether any of the activities of
Executive referred to above occur or are performed within or without
the Market or (C) whether Executive resides, or reports to an office,
within or without the Market; provided, however, that (x) Executive
may, anywhere in the Market, directly or indirectly, in one or a series
of transactions, own, invest or acquire an interest in up to five
percent (5%) of the capital stock of a corporation whose capital stock
is traded publicly, or that (y) Executive may accept employment with a
successor company to the Company.
(ii) During the Restricted Period (which shall not
include any period of violation of this Agreement by Executive),
Executive will not without the express prior written approval of the
Board of Directors of the Company (A) directly or indirectly, in one or
a series of transactions, recruit, solicit or otherwise induce or
influence any proprietor, partner, stockholder, lender, director,
officer, employee, sales agent, joint venturer, investor, lessor,
supplier, customer, agent, representative or any other person which has
a business relationship with any of the Companies or had a business
relationship with the Companies within the twenty-four (24) month
period preceding the date of the incident in question, to discontinue,
reduce or modify such employment, agency or business relationship with
the Companies, or (B) employ or seek to employ or cause any Competitive
Business to employ or seek to employ any person or agent who is then
(or was at any time within six months
prior to the date Executive or the Competitive Business employs or
seeks to employ such person) employed or retained by the Companies.
Notwithstanding the foregoing, nothing herein shall prevent Executive
from providing a letter of recommendation to an employee with respect
to a future employment opportunity.
(iii) The scope and term of this Section 8 would not
preclude him from earning a living with an entity that is not a
Competitive Business.
(b) The terms of this Section 8 shall survive termination of
this Agreement regardless of who terminates this Agreement, or the reasons
therefor.
9. Inventions
(a) Each invention, improvement or discovery made or conceived
by Executive, either individually or with others, during the term of his
employment with the Company, which invention, improvement or discovery is
related to any of the lines of business or work of the Companies, any projected
or potential activities which the Companies have investigated or hereinafter
investigates, or which result from or are suggested by any service performed by
Executive for the Company, whether patentable or not, shall be promptly and
fully disclosed by Executive to the Company. Executive assigns each such
invention, improvement or discovery, and the patents thereof, or related
thereto, to the Company. Executive shall, during the term of his employment with
the Company and thereafter without charge to the Company, but at the request and
expense of the Company, assist the Company in obtaining or vesting in itself
patents upon such improvements and inventions. All such inventions, improvements
or discovery shall at all times become and remain the exclusive property of the
Company. Executive represents that he does not claim ownership of any
inventions, improvements, formulae or discoveries which are excluded from this
Agreement.
(b) In the event that Executive breaches his obligations in
any material respect under Sections 7, 8 or this Section 9, the Company, in
addition to pursuing all available remedies under this Agreement, at law or
otherwise, and without limiting its right to pursue the same shall cease all
payments to Executive under this Agreement.
10. Definitions
"Business" means (a) the design, manufacture, lease and operation of
pressurized habitable space modules, unpressurized space logistics and science
hardware, including unpressurized pallets, and those other businesses and
activities that are described in the Company's Form 10-K for the fiscal year
ended June 30, 1998, or (b) the provision of services relating to communication
satellite launch processing and integration, as performed by ASTROTECH SPACE
OPERATIONS, INC., a wholly-owned subsidiary of the Company, or (c) the provision
of engineering services to the
National Aeronautics and Space Administration, as performed by JOHNSON
ENGINEERING CORPORATION, a wholly-owned subsidiary of the Company, or (d) any
similar, incidental or related business conducted or pursued by, or engaged in,
or proposed to be conducted or pursued by or engaged in, by the Companies prior
to the date hereof or at any time during the Term of Employment.
"Cause" is defined in Section 3(d).
"Companies" means the Company, any of its direct or indirect
subsidiaries and affiliates and any other entity identified by the Board of
Directors in its sole discretion, whether now existing or hereafter existing.
"Company" is defined in the introduction.
"Competitive Business" means any business which competes, directly or
indirectly, with the Business in the Market.
"Confidential Information" means any trade secret, confidential study,
data, calculations, software storage media or other compilation of information,
patent, patent application, copyright, trademark, trade name, service mark,
service name, "know-how", trade secrets, customer lists, details of client or
consultant contracts, pricing policies, sales techniques, confidential
information relating to suppliers, information relating to the special and
particular needs of the Companies' customers operational methods, marketing
plans or strategies, products and formulae, product development techniques or
plans, business acquisition plans or any portion or phase of any scientific or
technical information, ideas, discoveries, designs, computer programs (including
source of object codes), processes, procedures, research or technical data,
improvements or other proprietary or intellectual property of the Companies,
whether or not in written or tangible form, and whether or not registered, and
including all files, records, manuals, books, catalogues, memoranda, notes,
summaries, plans, reports, records, documents and other evidence thereof. The
term "Confidential Information" does not include, and there shall be no
obligation hereunder with respect to, information that is or becomes generally
available to the public other than as a result of a disclosure by Executive.
"Executive" means the individual identified in the first paragraph of
this Agreement, or his or her estate, if deceased.
"Market" means any county in the United States of America and each
similar jurisdiction in any other country in which the Business was conducted or
pursued by, engaged in by the Companies prior to the date hereof or is conducted
or engaged in or pursued, or is proposed to be conducted or engaged in or
pursued, by the Companies at any time during the Term of Employment.
"Material Breach" is defined in Section 3(d).
"Non-Interference Period" means the period commencing on the date of
this Agreement and continuing through the twelfth month anniversary of the
termination of the Term of Employment.
"Prior Employment Agreement" is defined in Section 12(a).
"Restricted Period" means the period commencing on the date of this
Agreement and continuing through the sixth month anniversary of the termination
of the Term of Employment.
"Subsidiary" means any corporation, limited liability company, joint
venture, limited and general partnership, joint stock company, association or
any other type of business entity over which the Company owns, directly or
indirectly through one or more intermediaries, more than fifty percent (50%) of
the voting securities at the time of determination.
"Term of Employment" is defined in Section 3(a).
11. Notice
Any notice, request, demand or other communication required or
permitted to be given under this Agreement shall be given in writing and if
delivered personally, or sent by certified or registered mail, return receipt
requested, as follows (or to such other addressee or address as shall be set
forth in a notice given in the same manner):
If to Executive: William A. Jackson
c/o Johnson Engineering Corporation
555 Forge River Road
Webster, Texas 77598
with a copy to: Porter & Hedges, L.L.P.
700 Louisiana, 35th Floor
Houston, Texas 77002-2764
Attn: John M. Ransom
If to Company: Johnson Engineering Corporation
SPACEHAB, Incorporated
1595 Spring Hill Road, Suite 360
Vienna, Virginia 22182
Attention: President
with a copy to: Frank E. Morgan II
Dewey Ballantine, LLP
1301 Avenue of the Americas
New York, New York 10019-6092
Any such notices shall be deemed to be given on the date personally
delivered or such return receipt is issued.
12. Previous Agreements; Executive's Representation
(a) Attached hereto as Annex A are all previous employment or
severance agreements by and between Executive and the Company (collectively, the
"Prior Employment Agreements"). Executive and the Company hereby cancel, void
and render without force and effect all Prior Employment Agreements, and the
Executive releases and discharges the Company from any further obligations or
liabilities thereunder.
(b) Executive hereby warrants and presents to the Company that
Executive has carefully reviewed this Agreement and has consulted with such
advisors as Executive considers appropriate in connection with this Agreement,
is not subject to any covenants, agreements or restrictions, including without
limitation any covenants, agreements or restrictions arising out of Executive's
prior employment, which would be breached or violated by Executive's execution
of this Agreement or by Executive's performance of his duties hereunder.
13. Other Matters
Executive agrees and acknowledges that the obligations owed to
Executive under this Agreement are solely the obligations of the Company, and
that none of the Companies' stockholders, directors, officers, affiliates,
representatives, agents or lenders will have any obligations or liabilities in
respect of this Agreement and the subject matter hereof.
14. Validity
If, for any reason, any provision hereof shall be determined to be
invalid or unenforceable, the validity and effect of the other provisions hereof
shall not be affected thereby.
15. Severability
Whenever possible, each provision of this Agreement will be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or any other
jurisdiction, but this Agreement will be reformed, construed and enforced in
such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein. If any court determines that any provision of
Section 8 or any other provision hereof is unenforceable because of the power to
reduce the scope or duration of such provision, as the case may be and, in its
reduced form, such provision shall then be enforceable.
16. Waiver of Breach, Specific Performance
The waiver by the Company or Executive of a breach of any provision of
this Agreement by the other party shall not operate or be construed as a waiver
of any other breach of such other party. Each of the parties (and third party
beneficiaries) to this Agreement will be entitled to enforce its rights under
this breach of any provision of this Agreement and to exercise all other rights
existing in its favor. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of
Sections 7, 8 and 9 of this Agreement and that any party (and third party
beneficiaries) may in its sole discretion apply to any court of law or equity of
competent jurisdiction for specific performance and/or injunctive relief,
including temporary restraining orders, preliminary injunctions and permanent
injunctions in order to enforce or prevent any violations of the provisions of
this Agreement. In the event either party takes legal action to enforce any of
the terms or provisions of this Agreement against the other party, the party
against whom judgement is rendered in such action shall pay the prevailing
party's costs and expenses, including but not limited to, attorneys' fees,
incurred in such action.
17. Assignment; Third Parties
Neither Executive nor the Company may assign, transfer, pledge,
hypothecate, encumber or otherwise dispose of this Agreement or any of his or
its respective rights or obligations hereunder, without the prior written
consent of the other. The parties agree and acknowledge that each of the
Companies and the stockholders and investors therein are intended to be third
party beneficiaries of, and have rights and interests in respect of, Executive's
agreements set forth in Sections 7, 8 and 9.
18. Amendment; Entire Agreement
This Agreement may not be changed orally but only by an agreement in
writing agreed to by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought. This Agreement embodies the
entire agreement and understanding of the parties hereto in respect of the
subject matter of this Agreement, and supersedes and replaces all prior
Agreements, understandings and commitments with respect to such subject matter.
19. Litigation
THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED, APPLIED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF VIRGINIA, EXCEPT THAT NO DOCTRINE OF
CHOICE OF LAW SHALL BE USED TO APPLY ANY LAW OTHER THAN THAT OF VIRGINIA, AND NO
DEFENSE, COUNTERCLAIM OR RIGHT OF SET-OFF GIVEN OR ALLOWED BY THE LAWS OF ANY
OTHER STATE OR JURISDICTION, OR ARISING OUT OF THE ENACTMENT, MODIFICATION OR
REPEAL OF ANY LAW, REGULATION, ORDINANCE OR DECREE OF ANY FOREIGN JURISDICTION,
BE INTERPOSED IN ANY ACTION HEREON. SUBJECT TO SECTION 20, EXECUTIVE AND THE
COMPANY AGREE THAT ANY ACTION OR PROCEEDING TO ENFORCE OR ARISING OUT OF THIS
AGREEMENT MAY BE COMMENCED IN THE COURTS OF THE STATE OF VIRGINIA OR THE UNITED
STATES DISTRICT COURTS IN ARLINGTON, VIRGINIA. EXECUTIVE AND THE COMPANY CONSENT
TO SUCH JURISDICTION, AGREE THAT VENUE WILL BE PROPER IN SUCH COURTS AND WAIVE
ANY OBJECTIONS BASED UPON FORUM NON CONVENIENS. THE CHOICE OF FORUM SET FORTH IN
TIES SECTION 19 SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT
OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO
ENFORCE SAME IN ANY OTHER JURISDICTION.
20. Arbitration
EXCEPT AS DESCRIBED IN SECTION 16, EXECUTIVE AND THE COMPANY AGREE THAT
ANY DISPUTE BETWEEN OR AMONG THE PARTIES TO THIS AGREEMENT RELATING TO OR IN
RESPECT OF THIS AGREEMENT, ITS NEGOTIATION, EXECUTION, PERFORMANCE, SUBJECT
MATTER, OR ANY COURSE OF CONDUCT OR DEALING OR ACTIONS UNDER OR IN RESPECT OF
THIS AGREEMENT, SHALL BE SUBMITTED TO, AND RESOLVED EXCLUSIVELY PURSUANT TO
ARBITRATION IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN
ARBITRATION ASSOCIATION. SUCH ARBITRATION SHALL TAKE PLACE IN ARLINGTON,
VIRGINIA, AND SHALL BE SUBJECT TO THE SUBSTANTIVE LAW OF THE STATE OF VIRGINIA.
DECISIONS PURSUANT TO SUCH ARBITRATION SHALL BE FINAL, CONCLUSIVE AND BINDING ON
THE PARTIES. UPON THE CONCLUSION OF ARBITRATION, EXECUTIVE OR THE COMPANY MAY
APPLY TO ANY COURT OF THE TYPE DESCRIBED IN SECTION 19 TO ENFORCE THE DECISION
PURSUANT TO SUCH ARBITRATION. IN CONNECTION WITH THE FOREGOING, THE PARTIES
HEREBY WAIVE ANY RIGHTS TO A JURY TRIAL TO RESOLVE ANY DISPUTES OR CLAIMS
RELATING TO THIS AGREEMENT OR ITS SUBJECT MATTER.
21. Further Action
Executive and the Company agree to perform any further acts and to
execute and deliver any documents which may be reasonable to carry out the
provisions hereof.
22. Counterparts
This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have set their hands as of the
day and year first written above.
EXECUTIVE:
/s/ William A. Jackson
William A. Jackson
SPACEHAB, INCORPORATED
By: /s/ David A. Rossi
Name: David A. Rossi
Title: President
EMPLOYMENT AND NON-INTERFERENCE AGREEMENT
with Eugene A. Cernan
This Employment and Non-Interference Agreement (this "Agreement"), is
dated as of July 1, 1998, by and between Eugene A. Cernan (the "Executive") and
SPACEHAB, INCORPORATED, a Washington corporation (the "Company").
WITNESSETH:
WHEREAS, the Company wishes to retain the future services of Executive
for the Company;
WHEREAS, Executive is willing, upon the terms and conditions set forth
in this Agreement, to provide services hereunder; and
WHEREAS, the Company wishes to secure Executive's non-interference,
upon the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Nature of Employment
Subject to Section 3, the Company hereby employs Executive, and
Executive agrees to accept such employment, during the Term of Employment (as
defined in Section 3(a)), as Chairman of the Board of Directors of JOHNSON
ENGINEERING CORPORATION, a wholly-owned subsidiary of the Company. Executive
will also undertake such duties and responsibilities as may be reasonably
assigned to Executive from time to time by the President of the Company, by the
Board of Directors of the Company, or by such other appropriately authorized or
designated executive officer of the Company.
2. Extent of Employment
(a) During the Term of Employment, Executive shall perform his
obligations hereunder faithfully and to the best of his ability under the
direction of the President of the Company, by the Company's Board of Directors,
or by such other appropriately authorized or designated executive officer of the
Company, and shall abide by the rules, customs and usages from time to time
established by the Company.
(b) During the Term of Employment, Executive shall devote up
to fifteen (15) hours per week to the performance of his duties,
responsibilities and obligations under this
Agreement (except for vacation periods and reasonable periods of illness or
other incapacity), consistent with past practices and norms with respect to
similar positions.
(c) Nothing contained herein shall require Executive to follow
any directive or to perform any act which would violate any laws, ordinances,
regulations or rules of any governmental, regulatory or administrative body,
agent or authority, any court or judicial authority, or any public, private or
industry regulatory authority. Executive shall act in accordance with the laws,
ordinances, regulations or rules of any governmental, regulatory or
administrative body, agent or authority, any court or judicial authority, or any
public, private or industry regulatory authority.
3. Term of Employment, Termination
(a) The "Term of Employment" shall commence on the date hereof
and shall continue for a term ending July 1, 1999 (the "Initial Term"), subject
to automatic annual renewal for one-year terms thereafter (the "Additional
Term"), unless either the Company or Executive notifies the other party of its
intent not to renew within ninety (90) days prior to the end of the Initial Term
or the Additional Term as the case may be. Should Executive's employment by the
Company be earlier terminated pursuant to Section 3(b), the Term of Employment
shall end on the date of such earlier termination.
(b) Subject to the payments contemplated by Section 3(d), the
Term of Employment may be terminated at any time by the Company:
(i) upon the death of Executive;
(ii) in the event that because of physical or mental
disability, Executive is unable to perform and does not perform his
duties hereunder, for a continuous period of 90 days, and an
experienced, recognized physician specializing in such disabilities
certifies as to the foregoing in writing;
(iii) for Cause or Material Breach (each as defined
in Section 3(d));
(iv) upon the continuous poor or unacceptable
performance of Executive's duties to the Company, in the sole judgment
of the Board of Directors of the Company, which has remained uncured
for a period of 90 days after the delivery of notice by the Company to
the Executive of such dissatisfaction with Executive's performance; or
(v) for any other reason not referred to in clauses
(i) through (iv), or for no reason, such that this Agreement shall be
construed as terminable at will by the Company. Executive acknowledges
that no representations or promises have been made concerning the
grounds for termination or the future operation of the Company's
business, and that nothing contained herein or otherwise stated by
or on behalf of the Company modifies or amends the right of the Company
to terminate Executive at any time, with or without Material Breach or
Cause. Termination shall become effective upon the delivery by the
Company to Executive of notice specifying such termination and the
reasons therefor, subject to the requirements for advance notice and an
opportunity to cure provided in this Agreement, if and to the extent
applicable.
(c) Subject to the payments contemplated by Section 3(d), the
Term of Employment may be terminated at any time by Executive:
(i) upon the death of Executive;
(ii) in the event that because of physical or mental
disability, Executive is unable to perform and does not perform his
duties hereunder, for a continuous period of 90 days, and an
experienced, recognized physician specializing in such disabilities
certifies as to the foregoing in writing;
(iii) as a result of the Company's material reduction
in Executive's authority, perquisites, position, title or
responsibilities (other than such a reduction by the Company because of
a temporary illness or disability or such a reduction which affects all
of the Company's senior executives on a substantially equal or
proportionate basis as a result of financial results, conditions,
prospects, reorganization, workout or distressed condition of the
Company), or the Company's willful, material violation of its
obligations under this Agreement, in each case, after 30 days' prior
written notice by Executive to the Company and its Board of Directors
and the Company's failure thereafter to cure such reduction or
violation within such 30 days; or
(iv) voluntarily or for any reason not referred to in
clauses (i) through (iii), or for no reason, in each case, after 90
days' prior written notice to the Company and its Board of Directors.
(d) For the purposes of this Section 3:
"Cause" shall mean any of the following: (i) Executive's conviction of
any crime or criminal offense involving the unlawful theft or conversion of
substantial monies or other property or any other felony (other than a criminal
offense arising solely under a statutory provision imposing criminal liability
on the Executive on a per se basis due to the offices held by the Executive); or
(ii) Executive's conviction of fraud or embezzlement.
"Material Breach" shall mean any of the following: (i) Executive's
breach of any of his fiduciary duties to the Company or its stockholders or
making of a willful misrepresentation or
omission which breach, misrepresentation or omission would reasonably be
expected to materially adversely affect the business, properties, assets,
condition (financial or other) or prospects of the Company; (ii) Executive's
willful, continual and material neglect or failure to discharge his duties,
responsibilities or obligations prescribed by Sections 1 and 2 (other than
arising solely due to physical or mental disability); (iii) Executive's habitual
drunkenness or substance abuse which materially interferes with Executive's
ability to discharge his duties, responsibilities or obligations prescribed by
Sections 1 and 2; (iv) Executive's willful, continual and material breach of any
non-competition or confidentiality agreement with the Company, including without
limitation, those set forth in Sections 7 and 8 of this Agreement; and (v)
Executive's gross neglect of his duties and responsibilities, as determined by
the Company's Board of Directors; in each case, for purposes of clauses (i)
through (v), after the Company or the Board of Directors has provided Executive
with 30 days' written notice of such circumstances and the possibility of a
Material Breach, and Executive fails to cure such circumstances and Material
Breach within those 30 days.
(i) In the event Executive's employment is terminated
pursuant to Section 3(b)(i) [death], 3(b)(ii) [disability] or 3(b)(v)
[any other reason or no reason] or 3(c)(i) [death], 3(c)(ii)
[disability) or 3(c)(iii) [material reduction], the Company will: (A)
pay to Executive (or his estate or representative) the full amounts to
which the Executive would be entitled to under Section 4(a) for the
period from effectiveness of termination through the sixth month
anniversary of termination; and (B) pay to Executive (or his estate or
representative) the benefits described in Section 6 through the sixth
month anniversary of termination.
Payment of the amounts and provision of the benefits
described above will be made in accordance with the timetable and
schedule for such payments contemplated therefor as if such termination
did not occur, and will be subject to the other provisions of this
Agreement, including Section 3(g) and Sections 7 and 8. If the Company
makes the payments required by this Section 3(d)(i), such payments will
constitute severance and liquidated damages, and the Company will not
be obligated to pay any further amounts to Executive under this
Agreement or otherwise be liable to Executive in connection with any
termination.
(ii) In the event Executive's employment is
terminated pursuant to Section 3(b)(iii) [Cause or Material Breach],
3(b)(iv) [poor performance], or 3(c)(iv) [voluntary], the Company will
not be obligated to pay any further amounts to Executive under this
Agreement.
(e) In the event the Term of Employment is terminated and the
Company is obligated to make payments to Executive pursuant to Section 3(d)(i),
Executive shall have a duty to seek to obtain alternative employment; and if
Executive thereafter obtains alternative employment, the Company's payment
obligations under Section 3(d)(i), including its obligation to provide
insurance coverage, if any, will be mitigated and reduced by and to the extent
of Executive's compensation under such alternative employment during the period
for which payments are owed by the Company pursuant to Section 3(d)(i).
Moreover, in the event that Executive is employed by or engaged in a Competitive
Business as contemplated by Section 8(a)(i), then the Company will thereupon no
longer be obligated to make payments under Section 3(d)(i).
(f) In the event the Term of Employment is terminated and the
Company is obligated to make payments pursuant to Section 3(d)(i), Executive
hereby waives any and all claims against the Company and its respective
officers, directors, employees, agents, or representatives, stockholders and
affiliates relating to his employment during the term hereof and this Agreement.
(g) Termination of the Term of Employment will not
terminate Sections 3(d), 3(f)and 7 through 22.
4. Compensation
During the Term of Employment, the Company shall pay to
Executive:
(a) As base compensation for his services hereunder, in
semi-monthly installments, a base salary at a rate of not less than $36,000 per
annum. Such amounts may be increased (but not decreased) annually at the
discretion of the Compensation Committee of the Board of Directors based upon an
annual review by the Compensation Committee of the Board of Directors of
Executive's performance.
(b) An annual bonus, if any, based on Executive's performance
as determined and approved by the Compensation Committee of the Board of
Directors. Although bonuses are entirely discretionary, it is agreed that
Executive shall be treated on the same basis as executives of the Company who
are employed at the level of Director for purposes of establishing the range of
bonuses and benefits that may be awarded to Executive.
5. Reimbursement of Expenses
During the Term of Employment, the Company shall pay all expenses,
including without limitation, transportation, lodging and food for Executive to
attend conventions, conferences and meetings that the Company determines are
necessary or in the best interest of the Company, and for any ordinary and
reasonable expenses incurred by Executive in the conduct of the Business of the
Company. Travel outside the United States shall be subject to the prior approval
of an executive officer of the Company. Executive shall also be provided with an
office at Johnson Engineering Corporation's headquarters location and shall be
provided with the services of a secretary, who shall, provided she continues to
be employable under the policies of Johnson Engineering Corporation, be
Executive's current secretary.
6. Benefits
During the Term of Employment, Executive shall be entitled to any
fringe or employee benefits made available to executives of the Company who are
employed at the level of Director, in each case, in accordance with guidelines
or established from time to time, by the Board of Directors.
7. Confidential Information
(a) Executive acknowledges that his employment hereunder gives
him access to Confidential Information relating to the Business of the Companies
and their customers which must remain confidential. Executive acknowledges that
this information is valuable, special, and a unique asset of the Business of the
Companies, and that it has been and will be developed by the Companies at
considerable effort and expense, and if it were to be known and used by others
engaged in a Competitive Business, it would be harmful and detrimental to the
interests of the Companies. In consideration of the foregoing, Executive hereby
agrees and covenants that, during and after the Term of Employment, Executive
will not, directly or indirectly in one or a series of transactions, disclose to
any person, or use or otherwise exploit for Executive's own benefit or for the
benefit of anyone other than the Companies, Confidential Information (as defined
in Section 10), whether prepared by Executive or not; provided, however, that
any Confidential Information may be disclosed to officers, representatives,
employees and agents of the Companies who need to know such Confidential
Information in order to perform the services or conduct the operations required
or expected of them in the Business (as defined in Section 10). Executive shall
use his best efforts to prevent the removal of any Confidential Information from
the premises of the Companies, except as required in his normal course of
employment by the Company. Executive shall use his best efforts to cause all
persons or entities to whom any Confidential Information shall be disclosed by
him hereunder to observe the terms and conditions set forth herein as though
each such person or entity was bound hereby. Executive shall have no obligation
hereunder to keep confidential any Confidential Information if and to the extent
disclosure of any thereof is specifically required by law; provided, however,
that in the event disclosure is required by applicable law, Executive shall
provide the Company with prompt notice of such requirement, prior to making any
disclosure, so that the Companies may seek an appropriate protective order. At
the request of the Company, Executive agrees to deliver to the Company, at any
time during the Term of Employment, or thereafter, all Confidential Information
which he may possess or control. Executive agrees that all Confidential
Information of the Companies (whether now or hereafter existing) conceived,
discovered or made by him during the Term of Employment exclusively belongs to
the Companies (and not to Executive). Executive will promptly disclose such
Confidential Information to the Company and perform all actions reasonably
requested by the Company to establish and confirm such exclusive ownership.
(b) In the event that Executive breaches his obligations in
any material respect under this Section 7, the Company, in addition to pursuing
all available remedies under this Agreement, at law or otherwise, and without
limiting its right to pursue the same shall cease all payments to Executive
under this Agreement.
(c) The terms of this Section 7 shall survive the termination
of this Agreement regardless of who terminates this Agreement, or the reasons
therefor.
8. Non-Interference and Non-Competition
(a) Executive acknowledges that the services to be provided
give him the opportunity to have special knowledge of the Companies and their
Confidential Information and the capabilities of individuals employed by or
affiliated with the Companies, and that interference in these relationships
would cause irreparable injury to the Companies. In consideration of this
Agreement, Executive covenants and agrees that:
(i) During the Restricted Period (which shall not
include any period of violation of this Agreement by the Executive),
Executive will not, without the express written approval of the Board
of Directors of the Company, anywhere in the Market, directly or
indirectly, in one or a series of transactions, own, manage, operate,
control, invest or acquire an interest in, or otherwise engage or
participate in, whether as a proprietor, partner, stockholder, lender,
director, officer, employee, joint venturer, investor, lessor,
supplier, customer, agent, representative or other participant, in any
Competitive Business without regard to (A) whether the Competitive
Business has its office, manufacturing or other business facilities
within or without the Market, (B) whether any of the activities of
Executive referred to above occur or are performed within or without
the Market or (C) whether Executive resides, or reports to an office,
within or without the Market; provided, however, that (x) Executive
may, anywhere in the Market, directly or indirectly, in one or a series
of transactions, own, invest or acquire an interest in up to five
percent (5%) of the capital stock of a corporation whose capital stock
is traded publicly, or that (y) Executive may accept employment with a
successor company to the Company.
(ii) During the Restricted Period (which shall not
include any period of violation of this Agreement by Executive),
Executive will not without the express prior written approval of the
Board of Directors of the Company (A) directly or indirectly, in one or
a series of transactions, recruit, solicit or otherwise induce or
influence any proprietor, partner, stockholder, lender, director,
officer, employee, sales agent, joint venturer, investor, lessor,
supplier, customer, agent, representative or any other person which has
a business relationship with any of the Companies or had a business
relationship with the Companies within the twenty-four (24) month
period preceding the date of the incident in question, to discontinue,
reduce or modify such employment, agency or business relationship with
the Companies, or (B)employ or seek to employ or cause any Competitive
Business to employ or seek to employ any person or agent who is then
(or was at any time within six months prior to the date Executive or
the Competitive Business employs or seeks to employ such person)
employed or retained by the Companies. Notwithstanding the foregoing,
nothing herein shall prevent Executive from providing a letter of
recommendation to an employee with respect to a future employment
opportunity.
(iii) The scope and term of this Section 8 would not
preclude him from earning a living with an entity that is not a
Competitive Business.
(b) The terms of this Section 8 shall survive termination of
this Agreement regardless of who terminates this Agreement, or the reasons
therefor.
9. Inventions
(a) Each invention, improvement or discovery made or conceived
by Executive, either individually or with others, during the term of his
employment with the Company, which invention, improvement or discovery is
related to any of the lines of business or work of the Companies, any projected
or potential activities which the Companies have investigated or hereinafter
investigates, or which result from or are suggested by any service performed by
Executive for the Company, whether patentable or not, shall be promptly and
fully disclosed by Executive to the Company. Executive assigns each such
invention, improvement or discovery, and the patents thereof, or related
thereto, to the Company. Executive shall, during the term of his employment with
the Company and thereafter without charge to the Company, but at the request and
expense of the Company, assist the Company in obtaining or vesting in itself
patents upon such improvements and inventions. All such inventions, improvements
or discovery shall at all times become and remain the exclusive property of the
Company. Executive represents that he does not claim ownership of any
inventions, improvements, formulae or discoveries which are excluded from this
Agreement.
(b) In the event that Executive breaches his obligations in
any material respect under Sections 7, 8 or this Section 9, the Company, in
addition to pursuing all available remedies under this Agreement, at law or
otherwise, and without limiting its right to pursue the same shall cease all
payments to Executive under this Agreement.
10. Definitions
"Business" means (a) the design, manufacture, lease and operation of
pressurized habitable space modules, unpressurized space logistics and science
hardware, including unpressurized pallets, and those other businesses and
activities that are described in the Company's Form 10-K for the fiscal year
ended June 30, 1998, or (b) the provision of services relating to communication
satellite launch processing and integration, as performed by ASTROTECH SPACE
OPERATIONS, INC., a wholly-owned subsidiary of the Company, or (c) the provision
of engineering services to the National Aeronautics and Space Administration, as
performed by JOHNSON ENGINEERING CORPORATION, a wholly-owned subsidiary of the
Company, or (d) any similar, incidental or related business conducted or pursued
by, or engaged in, or proposed to be conducted or pursued by or engaged in, by
the Companies prior to the date hereof or at any time during the Term of
Employment.
"Cause" is defined in Section 3(d).
"Companies" means the Company, any of its direct or indirect
subsidiaries and affiliates and any other entity identified by the Board of
Directors in its sole discretion, whether now existing or hereafter existing.
"Company" is defined in the introduction.
"Competitive Business" means any business which competes, directly or
indirectly, with the Business in the Market.
"Confidential Information" means any trade secret, confidential study,
data, calculations, software storage media or other compilation of information,
patent, patent application, copyright, trademark, trade name, service mark,
service name, "know-how", trade secrets, customer lists, details of client or
consultant contracts, pricing policies, sales techniques, confidential
information relating to suppliers, information relating to the special and
particular needs of the Companies' customers operational methods, marketing
plans or strategies, products and formulae, product development techniques or
plans, business acquisition plans or any portion or phase of any scientific or
technical information, ideas, discoveries, designs, computer programs (including
source of object codes), processes, procedures, research or technical data,
improvements or other proprietary or intellectual property of the Companies,
whether or not in written or tangible form, and whether or not registered, and
including all files, records, manuals, books, catalogues, memoranda, notes,
summaries, plans, reports, records, documents and other evidence thereof. The
term "Confidential Information" does not include, and there shall be no
obligation hereunder with respect to, information that is or becomes generally
available to the public other than as a result of a disclosure by Executive.
"Executive" means the individual identified in the first paragraph of
this Agreement, or his or her estate, if deceased.
"Market" means any county in the United States of America and each
similar jurisdiction in any other country in which the Business was conducted or
pursued by, engaged in by the Companies
prior to the date hereof or is conducted or engaged in or pursued, or is
proposed to be conducted or engaged in or pursued, by the Companies at any time
during the Term of Employment.
"Material Breach" is defined in Section 3(d).
"Non-Interference Period" means the period commencing on the date of
this Agreement and continuing through the twelfth month anniversary of the
termination of the Term of Employment.
"Prior Employment Agreement" is defined in Section 12(a).
"Restricted Period" means the period commencing on the date of this
Agreement and continuing through the sixth month anniversary of the termination
of the Term of Employment.
"Subsidiary" means any corporation, limited liability company, joint
venture, limited and general partnership, joint stock company, association or
any other type of business entity over which the Company owns, directly or
indirectly through one or more intermediaries, more than fifty percent (50%) of
the voting securities at the time of determination.
"Term of Employment" is defined in Section 3(a).
11. Notice
Any notice, request, demand or other communication required or
permitted to be given under this Agreement shall be given in writing and if
delivered personally, or sent by certified or registered mail, return receipt
requested, as follows (or to such other addressee or address as shall be set
forth in a notice given in the same manner):
If to Executive: Eugene A. Cernan
c/o Johnson Engineering Corporation
555 Forge River Road
Webster, Texas 77598
with a copy to: McDade, Fogler, Maines and Lohse
909 Fannin, Suite 1800
Houston, Texas 77010
Attn: Thomas R. McDade
If to Company: Johnson Engineering Corporation
SPACEHAB, Incorporated
1595 Spring Hill Road, Suite 360
Vienna, Virginia 22182
Attention: President
with a copy to: Frank E. Morgan II
Dewey Ballantine, LLP
1301 Avenue of the Americas
New York, New York 10019-6092
Any such notices shall be deemed to be given on the date personally
delivered or such return receipt is issued.
12. Previous Agreements; Executive's Representation
(a) Attached hereto as Annex A are all previous employment or
severance agreements by and between Executive and the Company (collectively, the
"Prior Employment Agreements"). Executive and the Company hereby cancel, void
and render without force and effect all Prior Employment Agreements, and the
Executive releases and discharges the Company from any further obligations or
liabilities thereunder.
(b) Executive hereby warrants and presents to the Company that
Executive has carefully reviewed this Agreement and has consulted with such
advisors as Executive considers appropriate in connection with this Agreement,
is not subject to any covenants, agreements or restrictions, including without
limitation any covenants, agreements or restrictions arising out of Executive's
prior employment, which would be breached or violated by Executive's execution
of this Agreement or by Executive's performance of his duties hereunder.
13. Other Matters
Executive agrees and acknowledges that the obligations owed to
Executive under this Agreement are solely the obligations of the Company, and
that none of the Companies' stockholders, directors, officers, affiliates,
representatives, agents or lenders will have any obligations or liabilities in
respect of this Agreement and the subject matter hereof.
14. Validity
If, for any reason, any provision hereof shall be determined to be
invalid or unenforceable, the validity and effect of the other provisions hereof
shall not be affected thereby.
15. Severability
Whenever possible, each provision of this Agreement will be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or any other jurisdiction, but this Agreement will be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision had never been contained herein. If any court determines that any
provision of Section 8 or any other provision hereof is unenforceable because of
the power to reduce the scope or duration of such provision, as the case may be
and, in its reduced form, such provision shall then be enforceable.
16. Waiver of Breach, Specific Performance
The waiver by the Company or Executive of a breach of any provision of
this Agreement by the other party shall not operate or be construed as a waiver
of any other breach of such other party. Each of the parties (and third party
beneficiaries) to this Agreement will be entitled to enforce its rights under
this breach of any provision of this Agreement and to exercise all other rights
existing in its favor. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of
Sections 7, 8 and 9 of this Agreement and that any party (and third party
beneficiaries) may in its sole discretion apply to any court of law or equity of
competent jurisdiction for specific performance and/or injunctive relief,
including temporary restraining orders, preliminary injunctions and permanent
injunctions in order to enforce or prevent any violations of the provisions of
this Agreement. In the event either party takes legal action to enforce any of
the terms or provisions of this Agreement against the other party, the party
against whom judgement is rendered in such action shall pay the prevailing
party's costs and expenses, including but not limited to, attorneys' fees,
incurred in such action.
<PAGE>
17. Assignment; Third Parties
Neither Executive nor the Company may assign, transfer, pledge,
hypothecate, encumber or otherwise dispose of this Agreement or any of his or
its respective rights or obligations hereunder, without the prior written
consent of the other. The parties agree and acknowledge that each of the
Companies and the stockholders and investors therein are intended to be third
party beneficiaries of, and have rights and interests in respect of, Executive's
agreements set forth in Sections 7, 8 and 9.
18. Amendment; Entire Agreement
This Agreement may not be changed orally but only by an agreement in
writing agreed to by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought. This Agreement embodies the
entire agreement and understanding of the parties hereto in respect of the
subject matter of this Agreement, and supersedes and replaces all prior
Agreements, understandings and commitments with respect to such subject matter.
19. Litigation
THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED, APPLIED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF VIRGINIA, EXCEPT THAT NO DOCTRINE OF
CHOICE OF LAW SHALL BE USED TO APPLY ANY LAW OTHER THAN THAT OF VIRGINIA, AND NO
DEFENSE, COUNTERCLAIM OR RIGHT OF SET-OFF GIVEN OR ALLOWED BY THE LAWS OF ANY
OTHER STATE OR JURISDICTION, OR ARISING OUT OF THE ENACTMENT, MODIFICATION OR
REPEAL OF ANY LAW, REGULATION, ORDINANCE OR DECREE OF ANY FOREIGN JURISDICTION,
BE INTERPOSED IN ANY ACTION HEREON. SUBJECT TO SECTION 20, EXECUTIVE AND THE
COMPANY AGREE THAT ANY ACTION OR PROCEEDING TO ENFORCE OR ARISING OUT OF THIS
AGREEMENT MAY BE COMMENCED IN THE COURTS OF THE STATE OF VIRGINIA OR THE UNITED
STATES DISTRICT COURTS IN ARLINGTON, VIRGINIA. EXECUTIVE AND THE COMPANY CONSENT
TO SUCH JURISDICTION, AGREE THAT VENUE WILL BE PROPER IN SUCH COURTS AND WAIVE
ANY OBJECTIONS BASED UPON FORUM NON CONVENIENS. THE CHOICE OF FORUM SET FORTH IN
TIES SECTION 19 SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT
OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO
ENFORCE SAME IN ANY OTHER JURISDICTION.
20. Arbitration
EXCEPT AS DESCRIBED IN SECTION 16, EXECUTIVE AND THE COMPANY
AGREE THAT ANY DISPUTE BETWEEN OR AMONG THE PARTIES TO THIS
AGREEMENT RELATING TO OR IN RESPECT OF THIS AGREEMENT, ITS NEGOTIATION,
EXECUTION, PERFORMANCE, SUBJECT MATTER, OR ANY COURSE OF CONDUCT OR DEALING OR
ACTIONS UNDER OR IN RESPECT OF THIS AGREEMENT, SHALL BE SUBMITTED TO, AND
RESOLVED EXCLUSIVELY PURSUANT TO ARBITRATION IN ACCORDANCE WITH THE COMMERCIAL
ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION. SUCH ARBITRATION
SHALL TAKE PLACE IN ARLINGTON, VIRGINIA, AND SHALL BE SUBJECT TO THE SUBSTANTIVE
LAW OF THE STATE OF VIRGINIA. DECISIONS PURSUANT TO SUCH ARBITRATION SHALL BE
FINAL, CONCLUSIVE AND BINDING ON THE PARTIES. UPON THE CONCLUSION OF
ARBITRATION, EXECUTIVE OR THE COMPANY MAY APPLY TO ANY COURT OF THE TYPE
DESCRIBED IN SECTION 19 TO ENFORCE THE DECISION PURSUANT TO SUCH ARBITRATION. IN
CONNECTION WITH THE FOREGOING, THE PARTIES HEREBY WAIVE ANY RIGHTS TO A JURY
TRIAL TO RESOLVE ANY DISPUTES OR CLAIMS RELATING TO THIS AGREEMENT OR ITS
SUBJECT MATTER.
21. Further Action
Executive and the Company agree to perform any further acts and to
execute and deliver any documents which may be reasonable to carry out the
provisions hereof.
22. Counterparts
This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have set their hands as of the
day and year first written above.
EXECUTIVE:
/s/ Eugene A. Cernan
Eugene A. Cernan
SPACEHAB, INCORPORATED
By: /s/ David A. Rossi
Name: David A. Rossi
Title: President
EMPLOYMENT AND NON-INTERFERENCE AGREEMENT
with W. T. Short
This Employment and Non-Interference Agreement (this "Agreement"), is
dated as of July 1, 1998, by and between W.T. Short (the "Executive") and
SPACEHAB, INCORPORATED, a Washington corporation (the "Company").
WITNESSETH:
WHEREAS, the Company wishes to retain the future services of Executive
for the Company;
WHEREAS, Executive is willing, upon the terms and conditions set forth
in this Agreement, to provide services hereunder; and
WHEREAS, the Company wishes to secure Executive's non-interference,
upon the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Nature of Employment
Subject to Section 3, the Company hereby employs Executive, and
Executive agrees to accept such employment, during the Term of Employment (as
defined in Section 3(a)), as an executive of the Company in the position of
Vice-President, Johnson Engineering, and as an executive of JOHNSON ENGINEERING
CORPORATION, a wholly-owned subsidiary of the Company, in the position of
President of JOHNSON ENGINEERING CORPORATION. Executive will also undertake such
duties and responsibilities as may be reasonably assigned to Executive from time
to time by the President of the Company, by the Board of Directors of the
Company, or by such other appropriately authorized or designated executive
officer of the Company.
2. Extent of Employment
(a) During the Term of Employment, Executive shall perform his
obligations hereunder faithfully and to the best of his ability under
the direction of the President of the Company, by the Company's Board
of Directors, or by such other appropriately authorized or designated
executive officer of the Company, and shall abide by the rules, customs
and usages from time to time established by the Company.
(b) During the Term of Employment, Executive shall devote all
of his business time, energy and skill as may be reasonably necessary
for the performance of his duties,
responsibilities and obligations under this Agreement (except for
vacation periods and reasonable periods of illness or other
incapacity), consistent with past practices and norms with respect to
similar positions.
(c) Nothing contained herein shall require Executive to follow
any directive or to perform any act which would violate any laws,
ordinances, regulations or rules of any governmental, regulatory or
administrative body, agent or authority, any court or judicial
authority, or any public, private or industry regulatory authority.
Executive shall act in accordance with the laws, ordinances,
regulations or rules of any governmental, regulatory or administrative
body, agent or authority, any court or judicial authority, or any
public, private or industry regulatory authority.
3. Term of Employment, Termination
(a) The "Term of Employment" shall commence on the date hereof
and shall continue for a term ending July 1, 1999 (the "Initial Term"),
subject to automatic annual renewal for one-year terms thereafter (the
"Additional Term"), unless either the Company or Executive notifies the
other party of its intent not to renew within ninety (90) days prior to
the end of the Initial Term or the Additional Term as the case may be.
Should Executive's employment by the Company be earlier terminated
pursuant to Section 3(b), the Term of Employment shall end on the date
of such earlier termination.
(b) Subject to the payments contemplated by Section 3(d), the
Term of Employment may be terminated at any time by the Company:
(i) upon the death of Executive;
(ii) in the event that because of physical or mental
disability, Executive is unable to perform and does not
perform his duties hereunder, for a continuous period of 90
days, and an experienced, recognized physician specializing in
such disabilities certifies as to the foregoing in writing;
(iii) for Cause or Material Breach (each as defined
in Section 3(d));
(iv) upon the continuous poor or unacceptable
performance of Executive's duties to the Company, in the sole
judgment of the Board of Directors of the Company, which has
remained uncured for a period of 90 days after the delivery of
notice by the Company to the Executive of such dissatisfaction
with Executive's performance; or
(v) for any other reason not referred to in clauses
(i) through (iv), or for no reason, such that this Agreement
shall be construed as terminable at will by the Company.
Executive acknowledges that no representations or promises have been
made concerning the grounds for termination or the future operation of
the Company's business, and that nothing contained herein or otherwise
stated by or on behalf of the Company modifies or amends the right of
the Company to terminate Executive at any time, with or without
Material Breach or Cause. Termination shall become effective upon the
delivery by the Company to Executive of notice specifying such
termination and the reasons therefor, subject to the requirements for
advance notice and an opportunity to cure provided in this Agreement,
if and to the extent applicable.
(c) Subject to the payments contemplated by Section 3(d), the
Term of Employment may be terminated at any time by Executive:
(i) upon the death of Executive;
(ii) in the event that because of physical or mental
disability, Executive is unable to perform and does not
perform his duties hereunder, for a continuous period of 90
days, and an experienced, recognized physician specializing in
such disabilities certifies as to the foregoing in writing;
(iii) as a result of the Company's material reduction
in Executive's authority, perquisites, position, title or
responsibilities (other than such a reduction by the Company
because of a temporary illness or disability or such a
reduction which affects all of the Company's senior executives
on a substantially equal or proportionate basis as a result of
financial results, conditions, prospects, reorganization,
workout or distressed condition of the Company), or the
Company's willful, material violation of its obligations under
this Agreement, in each case, after 30 days' prior written
notice by Executive to the Company and its Board of Directors
and the Company's failure thereafter to cure such reduction or
violation within such 30 days; or
(iv) voluntarily or for any reason not referred to in
clauses (i) through (iii), or for no reason, in each case,
after 90 days' prior written notice to the Company and its
Board of Directors.
(d) For the purposes of this Section 3:
"Cause" shall mean any of the following: (i) Executive's
conviction of any crime or criminal offense involving the unlawful
theft or conversion of substantial monies or other property or any
other felony (other than a criminal offense arising solely under a
statutory provision imposing criminal liability on the Executive on a
per se basis due to the offices held by the Executive); or (ii)
Executive's conviction of fraud or embezzlement.
"Material Breach" shall mean any of the following: (i)
Executive's breach of any of his fiduciary duties to the Company or its
stockholders or making of a willful misrepresentation or omission which
breach, misrepresentation or omission would reasonably be expected to
materially adversely affect the business, properties, assets, condition
(financial or other) or prospects of the Company; (ii) Executive's
willful, continual and material neglect or failure to discharge his
duties, responsibilities or obligations prescribed by Sections 1 and 2
(other than arising solely due to physical or mental disability); (iii)
Executive's habitual drunkenness or substance abuse which materially
interferes with Executive's ability to discharge his duties,
responsibilities or obligations prescribed by Sections 1 and 2; (iv)
Executive's willful, continual and material breach of any
non-competition or confidentiality agreement with the Company,
including without limitation, those set forth in Sections 7 and 8 of
this Agreement; and (v) Executive's gross neglect of his duties and
responsibilities, as determined by the Company's Board of Directors; in
each case, for purposes of clauses (i) through (v), after the Company
or the Board of Directors has provided Executive with 30 days' written
notice of such circumstances and the possibility of a Material Breach,
and Executive fails to cure such circumstances and Material Breach
within those 30 days.
(i) In the event Executive's employment is terminated
pursuant to Section 3(b)(i) [death], 3(b)(ii) [disability] or
3(b)(v) [any other reason or no reason] or 3(c)(i) [death],
3(c)(ii) [disability) or 3(c)(iii) [material reduction], the
Company will: (A) pay to Executive (or his estate or
representative) the full amounts to which the Executive would
be entitled to under Section 4(a) for the period from
effectiveness of termination through the sixth month
anniversary of termination; and (B) pay to Executive (or his
estate or representative) the benefits described in Section 6
through the sixth month anniversary of termination.
Payment of the amounts and provision of the benefits described
above will be made in accordance with the timetable and schedule for
such payments contemplated therefor as if such termination did not
occur, and will be subject to the other provisions of this Agreement,
including Section 3(g) and Sections 7 and 8. If the Company makes the
payments required by this Section 3(d)(i), such payments will
constitute severance and
liquidated damages, and the Company will not be obligated to pay any
further amounts to Executive under this Agreement or otherwise be
liable to Executive in connection with any termination.
(ii) In the event Executive's employment is
terminated pursuant to Section 3(b)(iii) [Cause or Material
Breach], 3(b)(iv) [poor performance], or 3(c)(iv) [voluntary],
the Company will not be obligated to pay any further amounts
to Executive under this Agreement.
(e) In the event the Term of Employment is terminated and the
Company is obligated to make payments to Executive pursuant to Section
3(d)(i), Executive shall have a duty to seek to obtain alternative
employment; and if Executive thereafter obtains alternative employment,
the Company's payment obligations under Section 3(d)(i), including its
obligation to provide insurance coverage, if any, will be mitigated and
reduced by and to the extent of Executive's compensation under such
alternative employment during the period for which payments are owed by
the Company pursuant to Section 3(d)(i). Moreover, in the event that
Executive is employed by or engaged in a Competitive Business as
contemplated by Section 8(a)(i), then the Company will thereupon no
longer be obligated to make payments under Section 3(d)(i).
(f) In the event the Term of Employment is terminated and the
Company is obligated to make payments pursuant to Section 3(d)(i),
Executive hereby waives any and all claims against the Company and its
respective officers, directors, employees, agents, or representatives,
stockholders and affiliates relating to his employment during the term
hereof and this Agreement.
(g) Termination of the Term of Employment will not terminate
Sections 3(d), 3(f) and 7 through 22.
4. Compensation
During the Term of Employment, the Company shall pay to Executive:
(a) As base compensation for his services hereunder, in
semi-monthly installments, a base salary at a rate of not less than
$171,200 per annum. Such amounts may be increased (but not decreased)
annually at the discretion of the Compensation Committee of the Board
of Directors based upon an annual review by the Compensation Committee
of the Board of Directors of Executive's performance.
(b) An annual bonus, if any, based on Executive's performance
as determined and approved by the Compensation Committee of the Board
of Directors.
5. Reimbursement of Expenses
During the Term of Employment, the Company shall pay all expenses,
including without limitation, transportation, lodging and food for Executive to
attend conventions, conferences and meetings that the Company determines are
necessary or in the best interest of the Company, and for any ordinary and
reasonable expenses incurred by Executive in the conduct of the Business of the
Company. Travel outside the United States shall be subject to the prior approval
of an executive officer of the Company.
6. Benefits
During the Term of Employment, Executive shall be entitled to any
fringe or employee benefits made available to similarly situated executives, in
each case, in accordance with guidelines or established from time to time, by
the Board of Directors.
7. Confidential Information
(a) Executive acknowledges that his employment hereunder gives
him access to Confidential Information relating to the Business of the
Companies and their customers which must remain confidential. Executive
acknowledges that this information is valuable, special, and a unique
asset of the Business of the Companies, and that it has been and will
be developed by the Companies at considerable effort and expense, and
if it were to be known and used by others engaged in a Competitive
Business, it would be harmful and detrimental to the interests of the
Companies. In consideration of the foregoing, Executive hereby agrees
and covenants that, during and after the Term of Employment, Executive
will not, directly or indirectly in one or a series of transactions,
disclose to any person, or use or otherwise exploit for Executive's own
benefit or for the benefit of anyone other than the Companies,
Confidential Information (as defined in Section 10), whether prepared
by Executive or not; provided, however, that any Confidential
Information may be disclosed to officers, representatives, employees
and agents of the Companies who need to know such Confidential
Information in order to perform the services or conduct the operations
required or expected of them in the Business (as defined in Section
10). Executive shall use his best efforts to prevent the removal of any
Confidential Information from the premises of the Companies, except as
required in his normal course of employment by the Company. Executive
shall use his best efforts to cause all persons or entities to whom any
Confidential Information shall be disclosed by him hereunder to observe
the terms and conditions set forth herein as though each such person or
entity was bound hereby. Executive shall have no obligation hereunder
to keep confidential any Confidential Information if and to the extent
disclosure of any thereof is specifically required by law; provided,
however, that in the event disclosure is required by applicable law,
Executive shall provide the Company with prompt
notice of such requirement, prior to making any disclosure, so that the
Companies may seek an appropriate protective order. At the request of
the Company, Executive agrees to deliver to the Company, at any time
during the Term of Employment, or thereafter, all Confidential
Information which he may possess or control. Executive agrees that all
Confidential Information of the Companies (whether now or hereafter
existing) conceived, discovered or made by him during the Term of
Employment exclusively belongs to the Companies (and not to Executive).
Executive will promptly disclose such Confidential Information to the
Company and perform all actions reasonably requested by the Company to
establish and confirm such exclusive ownership.
(b) In the event that Executive breaches his obligations in
any material respect under this Section 7, the Company, in addition to
pursuing all available remedies under this Agreement, at law or
otherwise, and without limiting its right to pursue the same shall
cease all payments to Executive under this Agreement.
(c) The terms of this Section 7 shall survive the termination
of this Agreement regardless of who terminates this Agreement, or the
reasons therefor.
8. Non-Interference and Non-Competition
(a) Executive acknowledges that the services to be provided
give him the opportunity to have special knowledge of the Companies and
their Confidential Information and the capabilities of individuals
employed by or affiliated with the Companies, and that interference in
these relationships would cause irreparable injury to the Companies. In
consideration of this Agreement, Executive covenants and agrees that:
(i) During the Restricted Period (which shall not
include any period of violation of this Agreement by the
Executive), Executive will not, without the express written
approval of the Board of Directors of the Company, anywhere in
the Market, directly or indirectly, in one or a series of
transactions, own, manage, operate, control, invest or acquire
an interest in, or otherwise engage or participate in, whether
as a proprietor, partner, stockholder, lender, director,
officer, employee, joint venturer, investor, lessor, supplier,
customer, agent, representative or other participant, in any
Competitive Business without regard to (A) whether the
Competitive Business has its office, manufacturing or other
business facilities within or without the Market, (B) whether
any of the activities of Executive referred to above occur or
are performed within or without the Market or (C) whether
Executive resides, or reports to an office, within or without
the Market; provided, however, that (x) Executive may,
anywhere in the Market, directly or indirectly, in one or a
series of transactions, own, invest or acquire an interest in
up to five percent (5%) of the
capital stock of a corporation whose capital stock is traded
publicly, or that (y) Executive may accept employment with a
successor company to the Company.
(ii) During the Restricted Period (which shall not
include any period of violation of this Agreement by
Executive), Executive will not without the express prior
written approval of the Board of Directors of the Company (A)
directly or indirectly, in one or a series of transactions,
recruit, solicit or otherwise induce or influence any
proprietor, partner, stockholder, lender, director, officer,
employee, sales agent, joint venturer, investor, lessor,
supplier, customer, agent, representative or any other person
which has a business relationship with any of the Companies or
had a business relationship with the Companies within the
twenty-four (24) month period preceding the date of the
incident in question, to discontinue, reduce or modify such
employment, agency or business relationship with the
Companies, or (B) employ or seek to employ or cause any
Competitive Business to employ or seek to employ any person or
agent who is then (or was at any time within six months prior
to the date Executive or the Competitive Business employs or
seeks to employ such person) employed or retained by the
Companies. Notwithstanding the foregoing, nothing herein shall
prevent Executive from providing a letter of recommendation to
an employee with respect to a future employment opportunity.
(iii) The scope and term of this Section 8 would not
preclude him from earning a living with an entity that is not
a Competitive Business.
(b) The terms of this Section 8 shall survive termination of
this Agreement regardless of who terminates this Agreement, or the
reasons therefor.
9. Inventions
(a) Each invention, improvement or discovery made or conceived
by Executive, either individually or with others, during the term of
his employment with the Company, which invention, improvement or
discovery is related to any of the lines of business or work of the
Companies, any projected or potential activities which the Companies
have investigated or hereinafter investigates, or which result from or
are suggested by any service performed by Executive for the Company,
whether patentable or not, shall be promptly and fully disclosed by
Executive to the Company. Executive assigns each such invention,
improvement or discovery, and the patents thereof, or related thereto,
to the Company. Executive shall, during the term of his employment with
the Company and thereafter without charge to the Company, but at the
request and expense of the Company, assist the Company in obtaining or
vesting in itself patents upon such improvements and inventions. All
such inventions, improvements or discovery shall at all times become
and remain the exclusive
property of the Company. Executive represents that he does not claim
ownership of any inventions, improvements, formulae or discoveries
which are excluded from this Agreement.
(b) In the event that Executive breaches his obligations in
any material respect under Sections 7, 8 or this Section 9, the
Company, in addition to pursuing all available remedies under this
Agreement, at law or otherwise, and without limiting its right to
pursue the same shall cease all payments to Executive under this
Agreement.
10. Definitions
"Business" means (a) the design, manufacture, lease and operation of
pressurized habitable space modules, unpressurized space logistics and science
hardware, including unpressurized pallets, and those other businesses and
activities that are described in the Company's Form 10-K for the fiscal year
ended June 30, 1998, or (b) the provision of services relating to communication
satellite launch processing and integration, as performed by ASTROTECH SPACE
OPERATIONS, INC., a wholly-owned subsidiary of the Company, or (c) the provision
of engineering services to the National Aeronautics and Space Administration, as
performed by JOHNSON ENGINEERING CORPORATION, a wholly-owned subsidiary of the
Company, or (d) any similar, incidental or related business conducted or pursued
by, or engaged in, or proposed to be conducted or pursued by or engaged in, by
the Companies prior to the date hereof or at any time during the Term of
Employment.
"Cause" is defined in Section 3(d).
"Companies" means the Company, any of its direct or indirect
subsidiaries and affiliates and any other entity identified by the Board of
Directors in its sole discretion, whether now existing or hereafter existing.
"Company" is defined in the introduction.
"Competitive Business" means any business which competes, directly or
indirectly, with the Business in the Market.
"Confidential Information" means any trade secret, confidential study,
data, calculations, software storage media or other compilation of information,
patent, patent application, copyright, trademark, trade name, service mark,
service name, "know-how", trade secrets, customer lists, details of client or
consultant contracts, pricing policies, sales techniques, confidential
information relating to suppliers, information relating to the special and
particular needs of the Companies' customers operational methods, marketing
plans or strategies, products and formulae, product development techniques or
plans, business acquisition plans or any portion or phase of any scientific
or technical information, ideas, discoveries, designs, computer programs
(including source of object codes), processes, procedures, research or technical
data, improvements or other proprietary or intellectual property of the
Companies, whether or not in written or tangible form, and whether or not
registered, and including all files, records, manuals, books, catalogues,
memoranda, notes, summaries, plans, reports, records, documents and other
evidence thereof. The term "Confidential Information" does not include, and
there shall be no obligation hereunder with respect to, information that is or
becomes generally available to the public other than as a result of a disclosure
by Executive.
"Executive" means the individual identified in the first paragraph of
this Agreement, or his or her estate, if deceased.
"Market" means any county in the United States of America and each
similar jurisdiction in any other country in which the Business was conducted or
pursued by, engaged in by the Companies prior to the date hereof or is conducted
or engaged in or pursued, or is proposed to be conducted or engaged in or
pursued, by the Companies at any time during the Term of Employment.
"Material Breach" is defined in Section 3(d).
"Non-Interference Period" means the period commencing on the date of
this Agreement and continuing through the twelfth month anniversary of the
termination of the Term of Employment.
"Prior Employment Agreement" is defined in Section 12(a).
"Restricted Period" means the period commencing on the date of this
Agreement and continuing through the sixth month anniversary of the termination
of the Term of Employment.
"Subsidiary" means any corporation, limited liability company, joint
venture, limited and general partnership, joint stock company, association or
any other type of business entity over which the Company owns, directly or
indirectly through one or more intermediaries, more than fifty percent (50%) of
the voting securities at the time of determination.
"Term of Employment" is defined in Section 3(a).
11. Notice
Any notice, request, demand or other communication required or
permitted to be given under this Agreement shall be given in writing and if
delivered personally, or sent by certified or registered mail, return receipt
requested, as follows (or to such other addressee or address as shall be set
forth in a notice given in the same manner):
If to Executive: W.T. Short
c/o Johnson Engineering Corporation
555 Forge River Road
Webster, Texas 77598
with a copy to: Porter & Hedges, L.L.P.
700 Louisiana, 35th Floor
Houston, Texas 77002-2764
Attn: John M. Ransom
If to Company: Johnson Engineering Corporation
SPACEHAB, Incorporated
1595 Spring Hill Road, Suite 360
Vienna, Virginia 22182
Attention: President
with a copy to: Frank E. Morgan II
Dewey Ballantine, LLP
1301 Avenue of the Americas
New York, New York 10019-6092
Any such notices shall be deemed to be given on the date personally
delivered or such return receipt is issued.
12. Previous Agreements; Executive's Representation
(a) Attached hereto as Annex A are all previous employment or
severance agreements by and between Executive and the Company
(collectively, the "Prior Employment Agreements"). Executive and the
Company hereby cancel, void and render without force and effect all
Prior Employment Agreements, and the Executive releases and discharges
the Company from any further obligations or liabilities thereunder.
(b) Executive hereby warrants and presents to the Company that
Executive has carefully reviewed this Agreement and has consulted with
such advisors as Executive considers appropriate in connection with
this Agreement, is not subject to any covenants, agreements or
restrictions, including without limitation any covenants, agreements or
restrictions arising out of Executive's prior employment, which would
be breached or violated by Executive's execution of this Agreement or
by Executive's performance of his duties hereunder.
13. Other Matters
Executive agrees and acknowledges that the obligations owed to
Executive under this Agreement are solely the obligations of the Company, and
that none of the Companies' stockholders, directors, officers, affiliates,
representatives, agents or lenders will have any obligations or liabilities in
respect of this Agreement and the subject matter hereof.
14. Validity
If, for any reason, any provision hereof shall be determined to be
invalid or unenforceable, the validity and effect of the other provisions hereof
shall not be affected thereby.
15. Severability
Whenever possible, each provision of this Agreement will be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or any other jurisdiction, but this Agreement will be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision had never been contained herein. If any court determines that any
provision of Section 8 or any other provision hereof is unenforceable because of
the power to reduce the scope or duration of such provision, as the case may be
and, in its reduced form, such provision shall then be enforceable.
16. Waiver of Breach, Specific Performance
The waiver by the Company or Executive of a breach of any provision of
this Agreement by the other party shall not operate or be construed as a waiver
of any other breach of such other party. Each of the parties (and third party
beneficiaries) to this Agreement will be entitled to enforce its rights under
this breach of any provision of this Agreement and to exercise all other rights
existing in its favor. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of
Sections 7, 8 and 9 of this Agreement and that any party
(and third party beneficiaries) may in its sole discretion apply to any court of
law or equity of competent jurisdiction for specific performance and/or
injunctive relief, including temporary restraining orders, preliminary
injunctions and permanent injunctions in order to enforce or prevent any
violations of the provisions of this Agreement. In the event either party takes
legal action to enforce any of the terms or provisions of this Agreement against
the other party, the party against whom judgement is rendered in such action
shall pay the prevailing party's costs and expenses, including but not limited
to, attorneys' fees, incurred in such action.
17. Assignment; Third Parties
Neither Executive nor the Company may assign, transfer, pledge,
hypothecate, encumber or otherwise dispose of this Agreement or any of his or
its respective rights or obligations hereunder, without the prior written
consent of the other. The parties agree and acknowledge that each of the
Companies and the stockholders and investors therein are intended to be third
party beneficiaries of, and have rights and interests in respect of, Executive's
agreements set forth in Sections 7, 8 and 9.
18. Amendment; Entire Agreement
This Agreement may not be changed orally but only by an agreement in
writing agreed to by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought. This Agreement embodies the
entire agreement and understanding of the parties hereto in respect of the
subject matter of this Agreement, and supersedes and replaces all prior
Agreements, understandings and commitments with respect to such subject matter.
19. Litigation
THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED, APPLIED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF VIRGINIA, EXCEPT THAT NO DOCTRINE OF
CHOICE OF LAW SHALL BE USED TO APPLY ANY LAW OTHER THAN THAT OF VIRGINIA, AND NO
DEFENSE, COUNTERCLAIM OR RIGHT OF SET-OFF GIVEN OR ALLOWED BY THE LAWS OF ANY
OTHER STATE OR JURISDICTION, OR ARISING OUT OF THE ENACTMENT, MODIFICATION OR
REPEAL OF ANY LAW, REGULATION, ORDINANCE OR DECREE OF ANY FOREIGN JURISDICTION,
BE INTERPOSED IN ANY ACTION HEREON. SUBJECT TO SECTION 20, EXECUTIVE AND THE
COMPANY AGREE THAT ANY ACTION OR PROCEEDING TO ENFORCE OR ARISING OUT OF THIS
AGREEMENT MAY BE COMMENCED IN THE COURTS OF THE STATE OF VIRGINIA OR THE UNITED
STATES DISTRICT COURTS IN ARLINGTON, VIRGINIA. EXECUTIVE AND THE COMPANY CONSENT
TO SUCH JURISDICTION, AGREE THAT VENUE WILL BE PROPER IN SUCH COURTS AND WAIVE
ANY OBJECTIONS BASED UPON FORUM NON CONVENIENS. THE CHOICE OF FORUM
SET FORTH IN TIES SECTION 19 SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF
ANY JUDGMENT OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS
AGREEMENT TO ENFORCE SAME IN ANY OTHER JURISDICTION.
20. Arbitration
EXCEPT AS DESCRIBED IN SECTION 16, EXECUTIVE AND THE COMPANY AGREE THAT
ANY DISPUTE BETWEEN OR AMONG THE PARTIES TO THIS AGREEMENT RELATING TO OR IN
RESPECT OF THIS AGREEMENT, ITS NEGOTIATION, EXECUTION, PERFORMANCE, SUBJECT
MATTER, OR ANY COURSE OF CONDUCT OR DEALING OR ACTIONS UNDER OR IN RESPECT OF
THIS AGREEMENT, SHALL BE SUBMITTED TO, AND RESOLVED EXCLUSIVELY PURSUANT TO
ARBITRATION IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN
ARBITRATION ASSOCIATION. SUCH ARBITRATION SHALL TAKE PLACE IN ARLINGTON,
VIRGINIA, AND SHALL BE SUBJECT TO THE SUBSTANTIVE LAW OF THE STATE OF VIRGINIA.
DECISIONS PURSUANT TO SUCH ARBITRATION SHALL BE FINAL, CONCLUSIVE AND BINDING ON
THE PARTIES. UPON THE CONCLUSION OF ARBITRATION, EXECUTIVE OR THE COMPANY MAY
APPLY TO ANY COURT OF THE TYPE DESCRIBED IN SECTION 19 TO ENFORCE THE DECISION
PURSUANT TO SUCH ARBITRATION. IN CONNECTION WITH THE FOREGOING, THE PARTIES
HEREBY WAIVE ANY RIGHTS TO A JURY TRIAL TO RESOLVE ANY DISPUTES OR CLAIMS
RELATING TO THIS AGREEMENT OR ITS SUBJECT MATTER.
21. Further Action
Executive and the Company agree to perform any further acts and to
execute and deliver any documents which may be reasonable to carry out the
provisions hereof.
22. Counterparts
This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have set their hands as of the
day and year first written above.
EXECUTIVE:
/s/ W.T. Short
W.T. Short
SPACEHAB, INCORPORATED
By: /s/ David A. Rossi
Name: David A. Rossi
Title: President
AMENDMENT OF SOLICIATION/MODIFICATION OF CONTRACT
1. CONTRACT ID CODE
2. AMENDMENT/MODIFICATION NO.
S/A 14
3. EFFECTIVE DATE
See Block 16C
4. REQUISITION REQ. NO
N/A
5. PROJECT NO. (if applicable)
6. ISSUED BY CODE BV2/Y55
NASA/Johnson Space Center
Space Shuttle Acquisition Management Office
Attn: Christine L. Mack
Houston, TX 77058
7. ADMINISTERED BY (if other than Item 6) CODE
8. NAME AND ADDRESS OF CONTRACTOR (No, street, county, State, and ZIP Code)
SPACEHAB, Inc.
Attn: Nelda Wilbanks
1595 Springhill Rd., Suite 360
Vienna, VA 22182
CODE FACILITY CODE
9A. AMENDMENT OF SOLICITATION NO. 9B. DATED (SEE ITEM 11)
x 10A. MODIFIACTION OF CONTRACT/ORDER NO. 10B. DATED (SEE ITEM 13)
NAS9-97199 12/18/97
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICIATIONS
____ The above numbered solicitation is amended as set forth in Item 14. The
hour and date specified for receipt of Offers _____ is extended, _____ is not
extended. Offers must acknowledge receipt of this amendment prior to the hour
and date specified in the solicitation or as amended, by on the following
methods:
(a) By completing Items 8 and 15, and returning _____ copies of the amendment;
(b) By acknowledging receipt of this amendment on each copy of the offor
submitted; or (c) By separate letter or telegram which includes a reference to
the solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE
RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND
DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this
amendment you desire to change an offer already submitted, such change may be
made by telegram or letter, provided each telegram or letter makes reference to
the solicitation of this amendment, and is received prior to the opening hour
and date specified.
12. ACCOUNTING AND APPROPRIATION DATE (if required)
N/A
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS, IT MODIFIES
THE CONTRACT/ORDER NO AS DESCRIBED IN ITEM 14.(x)
A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE
CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT/ORDER NO.
IN ITEM 10A.
B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE
ADMINISTRATIVE CHANGES (such as changes in paying office, appropriation
date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF
FAR 43.103(b)
X C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO THE
AUTHORITY OF: F.3 OPTION TO EXTEND COMPLETION OF WORK
D. other (Specify type of modification and authority)
E. IMPORTANT: Contractor ____ is not, __X___ is required to sign this
document and return 3 copies to the issuing office.
14. description of amendment/modification (Organized by UCF section
headings, including solicitation/contract subject matter where
feasible.)
The purpose of this modification is to: (1) Reduce Milestone 1(e) by $6,000 to
$494,999 as consideration for use of the LSLE Mine O-scope and Battery Pack; (2)
Exercise option 4 of the contraction in accordance with Article F.3, Option To
Extend Completion of Work, with the exception of the date of issuance, type of
modification ; (3) Revise Section C, Statement of Work, sections 1.0 Scope, 2.3
Summary of Module Resources, and 3.1 Module Configuration, 3.2.1 Heat Rejection,
3.3 Power, and 5.2 Ground Operations are modified to reference STS-101 and the
reduced processing time where required; and (4) Revise the Milestone Schedule
for the option mission. Due to the time constraints prior to launch of STS-101,
this option is bilaterally exercised in a shorter period than 15 months prior to
the launch date. To implement the above action, the following changes are made:
1. Article B.3, Milestone Schedule, Item 1e, is deleted in its entirety and
replaced with the following:
" Delivery Firm-Fixed
Item Number Services Date Price
1e Delivery of flight-ready SPACEHAB
single module in accordance with the
SOW to KSC L-1 mo. $ 494,000"
2. Article B.2, Firm-Fixed-Price, (NASA 1852.216-78) (DEC 1988) is deleted in
its entirety and replaced with the following:
"B.2 FIRM-FIXED PRICE (NASA 1852.216-78) (DEC 1988)
The total firm-fixed price of this contract is $60,714,000.
(End of clause)"
3. Article B.3 entitled, "Milestone Schedule" is modified to add the following
milestones established as follows:
" Delivery Firm-Fixed
Item Number Services Date Price
4 Lease of Logistics Double Module and
related integration services
on STS-101 (100% NASA Allocation)
4a Preliminary MRAD, submit CIP
Addendum, Delivery of Finite Element
structural models, thermal models,
and Mission Training Plan L-8 mo. $ 5,023,125
4b Baseline MRAD, Submittal of Phase
III Safety Data Packages
(Flight & Ground) L-5 mo. $ 6,139,375
4c All Interface Control Agreements
(core ICD's, SIA's, PTA's)
baselined L-3 mo. $ 2,232,500
4d Analytical Engineering Analyses
(Structural, Thermal, EMI/EMC and
Acoustics) delivered to SSP L-2 mo. $ 1,116,250
Delivery Firm-Fixed
Item Number Services Date Price
4e Delivery of flight-ready SPACEHAB
double module in accordance with the
SOW to KSC L-1 mo. $ 1,116,250
4f Post-flight destow process complete R+1 mo. $ 2,232,500
SUBTOTAL STS-TBD $ 17,860,000
TOTAL PAYMENTS $ 60,714,000"
"
4. Statement of work sections 1.0 Scope is deleted in its entirety and replaced
with the following to reference STS-101 where required:
"1.0 SCOPE
From time to time, the National Aeronautics and Space Administration (NASA)
offers Space Shuttle flight opportunities in support of research in the fields
of materials science/processing, biological research, fluid dynamics, etc. This
research requires accommodations in a pressurized habitable volume and
interactive flight crew operations. Additionally, outfitting and logistical
resupply of the International Space Station (ISS) requires a pressurized
habitable volume much greater than that available in the Orbiter middeck to
carry the necessary items. To provide flight opportunities for research missions
and to support the logistics needs of the ISS, NASA must obtain pressurized
habitable modules with integration services from the private sector to augment
the present Space Shuttle Orbiter middeck capabilities. Use of unpressurized
payload accommodation capability resulting from the installation of pressurized
habitable modules is not precluded on any mission.
In order to provide flight opportunities to a complement of research payloads on
two missions the Contractor shall provide a SPACEHAB Single Module (SM) payload
carrier with end-to-end payload and mission management, and integration and
operations services for Space Transportation System (STS) Mission-95 (STS-95),
currently scheduled to launch on October 29, 1998. The Contractor shall provide
a Research Double Module (RDM) payload carrier with end-to-end payload and
mission management, and integration and operations services for the STS-107
mission, currently scheduled to launch in September, 2000.
To support the outfitting of the ISS, the Contractor shall provide a Logistics
Double Module (LDM) payload carrier with end-to-end payload and mission
management, and integration and operations services for the STS-96 mission,
currently scheduled to launch on May 13, 1999; and for the STS-101 mission,
currently scheduled to launch on August 5, 1999.
To determine the degree of interest in the research and new technology community
in commercial space flight opportunities NASA will allow the Contractor to
contract with its commercial, international and external (non-NASA) customers
for payload carrying capability (gross payload mass) not required by the
Government. No carryover of unused capacity from mission to mission, or contract
to contract, shall be allowed.
The following terms are used frequently throughout this Statement Of Work (SOW).
The term "payload" corresponds to all research hardware, samples, logistics
items and support equipment carried in the SPACEHAB module. Also included as
"payload" are research hardware, samples, logistics items and support equipment
carried in the Space Shuttle Orbiter crew compartment middeck lockers for which
the Contractor has been assigned specific responsibility. "Module" refers to
either single or double module configurations (unless explicitly stated) plus
the module integration hardware required to effect a complete interface with the
Orbiter. The integrated module and payload are referred to as the SPACEHAB
`cargo element.'"
5. 2.3 Summary of Module Resources, paragraph (j), is deleted in its entirety
and replaced with the following to reference STS-101 information:
"
Mass NASA Allocation Contractor Allocation
Mission Config. Capability %, (lbm), [kg] %, (lbm), [kg]
STS-95 SM 4800 lbm 55, (2640), [1197] 45, (2160), [980]
STS-96 LDM 9000 lbm 100, (9000), [4082] 0
STS-101 LDM 9000 lbm 100, (9000), (4082) 0
STS-107 RDM 9000 lbm 82, (7380), [3347] 18, (1620), [735]
The Contractor shall provide and maintain the pressurized SPACEHAB modules for
each mission. Depending upon payload requirements and mission manifest
opportunity, the SPACEHAB module configuration may be: 1) a Single Module (SM)
configuration (as flown on STS-95) with a maximum gross payload mass
accommodation capacity of 4800 lb.; 2) a Logistics Double Module (LDM)
configuration (as flown on STS-96 and STS-101) with a maximum gross payload mass
internal accommodation capability of 9000 lb.; or 3) a Research Double Module
(RDM) configuration (as flown on STS-107) with a maximum gross payload mass
internal accommodation capability of 9000 lb. Note that the fully resourced RDM
is in development and is not expected to be available for flight before October,
1999.
Active payloads (those requiring extensive ICD and safety packages, module
electrical power, crew training, procedures and flight support), either bulkhead
or rack mounted, are not precluded on any mission. Active payloads manifested on
the STS-95 SM mission and any Research-class mission shall nominally constitute
up to 80% of the total net ascent payload mass accommodated in the SPACEHAB
module on those missions. Active payload content up to 100% is not precluded on
any Research-class mission. Active payloads manifested on STS-96 LDM mission,
and any Logistics-class mission, shall nominally constitute up to 20% of the
total net ascent payload mass accommodated in the SPACEHAB module on those
missions. Net ascent payload mass is the mass of the payloads, including
Government Furnished Equipment (GFE) or Contractor-provided support equipment,
less integration hardware or stowage accommodation hardware, as delivered to the
Contractor for installation for launch.
The following table quantifies the SPACEHAB module resources which shall be
available for the payloads defined in the STS-95, STS-96, STS-101 and STS-107
MRAD's. Other special-purpose hardware, software and services are available as
non-standard services (see Article H.8 of the contract). Generic module resource
capabilities and allocations, (i.e. number of racks and lockers, power and heat
rejection, data transmission rate and onboard storage, etc.) will be tailored to
the specific payload complement requirements for each mission."
SPACEHAB Module Resources Available to Payloads
SPACEHAB Single Logistics Double Research Double
Module Module Module
STS-95 STS-96, -101 STS-107
Gross Payload 4800 [2177] 10,000 [4535] 10,000 [4535]
Capacity (lbm) [kg] (internal + (internal + external)(internal + external)
external)
Gross Payload 4800 [2177] 9000 [4082] 9000 [4082]
Capability (lbm)[kg] (internal + (internal) (internal)
external)
Power - on orbit (2 SMCH) (2 SMCH) (4 SMCH)
DC (Watts) 3150 3150 5500
AC (Volt Amperes) 690 690 1380
Heat Rejection - 4000 4000 5500
on orbit (Watts)
Vacuum Venting 1 Experiment Vent 1 EVV forward 1 EVV forward
Valve (EVV) 1 EVV aft 1 EVV aft
Data Downlink low rate PDI low rate PDI - low rate PDI
(discrete, analog, (discrete, analog, (discrete,
serial - 13 kbps serial - 13 kbps analog, serial -
total) total) 26 kbps total)
- RS-232 via - RS-232 via - KuSP Channel 2
Serial Converter Serial Converter (2Mbps total)
Units Units - KuSP Channel 3
(48 Mbps total)
- RS-232/422
- Ethernet
- MIL-1553 Data Bus
- RAU Serial
- LOS data
record/playback
Video Downlink Video Switch Unit Video Switch Unit VideoSwitch Unit
- 8 module inputs - 8 module inputs - 8 module inputs
- camcorder power - camcorder power - camcorder power
- onboard monitors - onboard monitors - onboard monitors
- output to - output to - output to
Orbiter CCTV PL Orbiter CCTV PL Orbiter CCTV PL
input input input
- selectable - selectable - selectable
outputs to video outputs to video outputs to
digitizer digitizer video digitizer
Commanding Uplink - low rate PSP - low rate PSP - low rate PSP
(2 Kbps max.) (2 Kbps max.) (2 Kbps max.)
- high rate
KuSP fwd link
(128 Kbps)
Locker Capability 42 - 62 27 - 61 27-61
Rack Capability - 2 SH double or - 4 SH double or - 6 SH double or
single racks single racks single racks
- 1 ISPR may sub - 1 ISPR may sub - 1 ISPR may
for a SPACEHAB for a forward sub for a
rack via an ISA SPACEHAB rack via forward
an ISA SPACEHAB rack
via an ISA
Viewports 0 - 2 0 - 3 0 - 3
NOTE: The number of lockers and racks that can be accommodated on any mission
is dependent on locker and rack types and mounting locations and is determined
during the mission complement analysis process."
6. Statement of Work Section 3.1, Module Configuration, the first three
paragraphs, are deleted in their entirety and replaced with the following to
reference STS-101 where required:
"3.1 MODULE CONFIGURATION
The dimensions, mass, volume and other accommodations of the SPACEHAB module
described in this section shall be such that they are contained within the
Orbiter cargo bay and connect to the Tunnel Adapter or External Airlock hatch
opening. The structural/mechanical interface between the SPACEHAB module and the
Space Shuttle Orbiter shall consist of four longeron trunnions and one keel
trunnion that shall attach to SSP-provided longeron and keel attach fittings.
The cargo bay configuration for STS-95 is shown in Figure 2, and for STS-96 and
STS-101 in Figure 3. The cargo bay configuration for STS-107 is TBD.
The Contractor shall provide, beginning with the STS-95 mission, a tunnel
segment 27.14 inches long which shall interface with a tunnel segment or flex
section, and the SPACEHAB module forward bulkhead.
For the STS-95, STS-96 and STS-101 missions the complete structural/mechanical
interface between the SPACEHAB SM, the LDM and the Orbiter shall be specified in
ICD-A-21095, Shuttle Orbiter/SPACEHAB Cargo Element Interfaces, the SSP A-level
Orbiter-to-SPACEHAB Interface Control Document (ICD). For the STS-107 mission
the complete structural/mechanical interface between the RDM and the Orbiter
shall be specified in ICD-A-TBD, Shuttle Orbiter/SPACEHAB RDM Cargo Element
Interfaces."
7. Statement of Work Section 3.2.1, Heat Rejection, is deleted in its entirety
to reference STS-101 where required:
"3.2.1 Heat Rejection
The SPACEHAB modules, when integrated into the Orbiter, shall reject heat from
subsystems and payloads using module air flow or utilizing a forced air and/or
liquid cooling system. The total SPACEHAB Single Module (STS-95) and limited
resource LDM (STS-96 and STS-101) cargo element may require up to 6.0 kilowatts
of active cooling on orbit and 1,500 watts during prelaunch, ascent, descent and
post-landing phases of flight. The RDM (STS-107) cargo element may require up to
8.5 kilowatts of active cooling on orbit and 1.52 kilowatts during prelaunch,
ascent, descent and post-landing phases of flight. Heat rejection shall be
compatible with Shuttle Orbiter/Cargo Standard Interfaces, ICD-2-19001, and
defined in ICD-A-21095 (STS-95/-96/-101) and ICD-A-TBD (STS-107). The Contractor
shall perform mission-unique thermal analyses as a part of the SPACEHAB Mission
Performance Analyses (DRL Line Item No. 4) which verify that the SPACEHAB module
and its manifested payloads can operate during routine mission situations at a
cabin temperature between 65 deg. F and 80 deg. F, consistent with the cooling
requirements of the payloads."
8. Statement of Work Section 3.3, Power, paragraph one, the first sentence, is
deleted in its entirety and replaced with the following to reference STS-101
where required:
"3.3 POWER
The SPACEHAB Single Module (STS-95) and LDM (STS-96 and STS-101), when
integrated into the Orbiter, shall be capable of accommodating two (2) Orbiter
power feeds to supply up to 3.5 kilowatts of continuous and 6 kilowatts peak DC
power during on-orbit (payload bay doors open) operations."
9. Statement of Work Section 5.2 Ground Operations, is deleted in its entirety
and replaced with the following to reflect the compressed mission schedule for
STS-101 in the last sentence:
"5.2 GROUND OPERATIONS
Because of the potential for unforeseeable launch delays in the Space Shuttle
Program launch schedule, changes to projected launch dates are likely to occur
and are recognized as being beyond the Contractor's ability to control. The
effort required by the Contractor to adjust his ground operations schedules and
processes to those in support of SSP ground processing shall be considered to be
within the scope of this contract, unless the total contract period of
performance is lengthened, or unless SSP schedules do not allow the Contractor
at least 45 working days in the SPPF for processing Logistics-class modules
between consecutive missions, or 60 days for Research-class modules between
consecutive missions. The STS-101 mission is an exception to the 45 day minimum
allowable period in the SPPF for processing Logistics modules. Module internal
configuration changes were minimized to accelerate the turnaround between the
STS-96 and STS-101 missions to not less than 32 non-premium (Monday through
Friday, single shift) working days."
15A. NAME AND TITLE OF SIGNER 16A. NAME AND TITLE OF
(Type or print) CONTRACTING OFFICER (Type or print)
Nelda Wilbanks, Contracts Administrator John E. Trahan, Contracting Officer
15B. CONTRACTOR/OFFEROR 16B. UNITED STATES OF AMERICA
/s/ Nelda Wilbanks BY: /s/ John E. Trahan
15C. DATE SIGNED 16C. DATE SIGNED
11/25/98 11/30/98
<TABLE>
<CAPTION>
Exhibit 11
SPACEHAB, INCORPORATED AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
Three Months Six Months
Ended December 31, Ended December 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
----------- ----------- ----------- -----------
Net Income and Adjusted Earnings:
Net income applicable to common
shareholders used for basic
computations $(1,851,607) $5,726,775 $(1,438,394) $ 72,637
----------- ----------- ----------- -----------
Dilution adjustments:
Savings in convertible note payable
interest expense net of tax 775,867 797,063 1,551,734 797,063
----------- ----------- ----------- -----------
Adjusted net income applicable to
common shareholders assuming
dilution $(1,075,740) $6,523,838 $113,340 $ 869,700
=========== =========== =========== ===========
Average number of shares of common
stock used for basic computation 11,176,651 11,149,789 11,172,507 11,148,830
----------- ----------- ----------- -----------
Diluted adjustments (1):
Weighted Average Shares and Share
Equivalents Outstanding:
Assumed exercise of options and
warrants 144,866 258,036 165,924 252,596
Assumed conversion of
convertible debt 4,642,202 3,626,446 4,642,202 1,813,223
----------- ----------- ----------- -----------
Total number of shares assumed to be
outstanding assuming dilution 15,963,719 15,034,271 15,980,633 13,215,581
----------- ----------- ----------- -----------
Earnings Common Per Share:
Income per common share:
Income before extraordinary item $ (0.17) $ 0.51 $ (0.13) $ 0.01
Extraordinary item - - - -
=========== =========== =========== ===========
Basic $ (0.17) $ 0.51 $ (0.13) $ 0.01
=========== =========== =========== ===========
Income before extraordinary item $ (0.07) $ 0.43 $ 0.01 $ 0.07
Extraordinary item - - - -
----------- ----------- ----------- -----------
Diluted (1): $ (0.07) $ 0.43 $ 0.01 $ 0.07
=========== =========== =========== ===========
</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).
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
Exhibit 27
SPACEHAB, INCORPORATED AND SUBSIDIARIES
FINANCIAL DATA SCHEDULE
<ARTICLE> 5
<CIK> 0001001907
<NAME> SPACEHAB, Inc.
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Jun-30-1999
<PERIOD-START> Jul-01-1998
<PERIOD-END> Dec-31-1998
<EXCHANGE-RATE> 1.000
<CASH> 38,787
<SECURITIES> 0
<RECEIVABLES> 18,968
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 59,450
<PP&E> 115,805
<DEPRECIATION> 46,221
<TOTAL-ASSETS> 209,078
<CURRENT-LIABILITIES> 31,422
<BONDS> 0
0
0
<COMMON> 81,383
<OTHER-SE> 16
<TOTAL-LIABILITY-AND-EQUITY> 209,078
<SALES> 51,907
<TOTAL-REVENUES> 51,907
<CGS> 41,896
<TOTAL-COSTS> 41,896
<OTHER-EXPENSES> 9,867
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,658
<INCOME-PRETAX> (1,627)
<INCOME-TAX> (189)
<INCOME-CONTINUING> (1,438)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,438)
<EPS-PRIMARY> (0.13)
<EPS-DILUTED> (0.13)
</TABLE>
