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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required] For the Fiscal Year Ended June
30, 1999.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required] For the transition period from
_____________ to ____________
Commission File No. 0-27206
SPACEHAB, INCORPORATED
300 D STREET, SW
SUITE 814
WASHINGTON, D.C. 20024
(202) 488-3500
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Incorporated in the State of Washington IRS Employer Identification
Number 91-1273737
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE
ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION
12(g) OF THE ACT:
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Title of Each Class Name of Each Exchange
Common Stock on which Registered
(no par value) NASDAQ National Market
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Number of shares of Common Stock (no par value) outstanding as of July
23, 1999: 11,229,646.
Aggregate market value of Common Stock (no par value) held by non-affiliates of
the registrant on July 23, 1999, based upon the closing price of the Common
Stock on the Nasdaq National Market of $6.00 was approximately $67,377,876.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES_X_ NO ___.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ].
DOCUMENTS INCORPORATED BY REFERENCE:
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Proxy Statement for the Annual Meeting of Parts I, II and III of Form 10-K
Stockholders to be held October 14, 1999.
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PART I
This document may contain "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, including (without limitation) under "Products
and Services," "Company Strategy," "Dependence on a Single Customer," "Research
and Development," "Competition" and "Backlog" of Item 1 and "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
General" and "--Liquidity and Capital Resources" of Item 7. Such statements are
subject to risks and uncertainties that could cause actual results to differ
materially from those projected in the statements. In addition to those risks
and uncertainties discussed herein, such risks and uncertainties include, but
are not limited to, whether the Company will fully realize the economic benefits
under its U.S. National Aeronautics and Space Administration ("NASA") and other
customer contracts, the successful development and commercialization of the
Research Double Module and related new commercial space assets, deployment of
the International Space Station ("ISS"), technological difficulties, product
demand and market acceptance risks, the effect of economic conditions,
uncertainty in government funding and the impact of competition.
ITEM 1. BUSINESS
COMPANY BACKGROUND AND HISTORY
SPACEHAB, Incorporated ("SPACEHAB" or the "Company") was incorporated
in 1984 and is the first company to commercially develop, own and operate both
pressurized habitable modules that provide space-based laboratory research
facilities and cargo services aboard the U.S. Space Shuttle system (the "Space
Shuttle" or "STS") and an unpressurized cargo carrier system. A SPACEHAB Single
Module, when installed in the payload bay of a Space Shuttle, more than doubles
the working and living space available to astronauts for research,
experimentation, habitation and storage. The Company presently offers its
SPACEHAB Modules in a single modular version (the "Single Module") and a double
modular version (the "Double Module"). The Company also offers an unpressurized
cargo carrier system, the "ICC" or "Integrated Cargo Carrier", and is currently
completing the construction of a research double module (the "Research Double
Module" or "RDM"). During the second half of fiscal year ("FY") 1998, the
Company initiated development activities for a new asset, a docking double
module (the "Docking Double Module" or "DDM"), that could be used by NASA to
provide more flexible re-supply services to the ISS and also maintain the ISS
in its proper orbit. The Docking Double Module is intended to carry logistics
and perform research on Space Shuttle missions to the ISS and to enable the
Space Shuttle to re-boost and reposition the ISS. All versions of the SPACEHAB
Modules can accommodate a combination of lockers, racks and soft stowage
arrangements, which are provided as a service primarily to NASA. SPACEHAB
Modules, which have been outfitted with systems to facilitate laboratory
research experiments in the near-weightless ("microgravity") environment of
space, are also capable of transporting food, clothing, equipment and other
vital supplies (collectively, "logistics") to the ISS. SPACEHAB also provides a
full range of pre- and post-flight experiment and payload processing services,
and in-flight operations support to assist astronauts and researchers, in space
and on the ground, in connection with the performance of experiments aboard
SPACEHAB Modules. From June 1993 through June 1999, SPACEHAB Modules have flown
thirteen successful missions on the Space Shuttle.
To broaden the opportunities for companies to conduct space research,
SPACEHAB has established a "Microgravity Staircase" that provides a
comprehensive portfolio of ground-based, sub-orbital and space-based research
facilities. During FY 1998, SPACEHAB completed a series of marketing agreements,
asset acquisitions and joint ventures that now enable SPACEHAB to offer
researchers progressive exposure to the microgravity environment.
The Company is committed to expanding its business with NASA while also
diversifying its revenue and customer base by targeting new and related space
services markets. On February 12, 1997, the operating assets and business of
Astrotech Space Operations, L.P. ("Astrotech") were acquired from Northrop
Grumman Corporation. Astrotech is the premier commercial provider of satellite
payload processing facilities in the United States providing launch site
preparation of flight-ready satellites to major
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U.S. space launch companies and satellite manufacturers, including Lockheed
Martin Corporation ("Lockheed Martin"), Motorola Corporation ("Motorola"), The
Boeing Company ("Boeing") and Orbital Sciences Corporation ("Orbital Sciences").
The Astrotech acquisition diversified SPACEHAB's customer base to include
commercial customers of space satellite payload processing services and
broadened the Company's services to include services in support of manned as
well as unmanned space activities.
SPACEHAB expanded its core business by acquiring Johnson Engineering
Corporation, ("JE") on July 1, 1998. With over 650 employees, JE performs
several critical services for NASA including flight crew support services,
operations, training and fabrication of mockups at NASA's Neutral Buoyancy
Laboratory ("NBL") and at NASA's Space Vehicle Mockup Facility ("SVMF"), where
astronauts train for both Space Shuttle and ISS missions. JE also designs and
fabricates flight hardware, such as flight crew equipment and crew quarters
habitability outfitting as well as providing stowage integration services. JE is
also responsible for configuration management of the ISS.
SPACEHAB's fundamental business strategy is based on carefully
anticipating customer requirements, investing capital to develop space-flight
assets, contracting with established aerospace companies for engineering and
asset production while retaining ownership of these assets and providing
innovative, cost-effective solutions that meet customer requirements using
fixed-price service contracts. This strategy has been successful for the
Company in obtaining three significant contracts with NASA: a $184.2 million
Commercial Middeck Augmentation Module contract (the "CMAM Contract") for five
missions, a $91.5 million contract for four missions and three option missions
(all of which were exercised) to the Mir Space Station (the "Mir Contract") and
a $68.2 million Research and Logistics Mission Support Contract (the "REALMS
Contract") for four missions and six option missions. The REALMS Contract
provides an opportunity for the Company to provide similar services to
commercial customers. Contracts with commercial customers on STS-95 and
STS-107 are approximately $26.1 million.
The CMAM Contract, signed in November 1990, required SPACEHAB to
furnish NASA with SPACEHAB module accommodations for experiments developed by
the Centers for the Commercial Development of Space ("CCDS") on five Space
Shuttle missions. The fifth and final CMAM mission was completed successfully
during September 1996.
The basic Mir Contract signed in July 1995 required the Company to
provide Single and Double Module accommodations for the provision of logistics
resupply to the Mir Space Station on four Space Shuttle missions. The fourth
mission, STS-84, was completed successfully in May 1997. In addition, in
September 1996, the Company entered into agreements with the Japanese Space
Agency ("NASDA") and the European Space Agency ("ESA") (collectively, the
"NASDA/ESA Contract"). Pursuant to the NASDA/ESA Contract, SPACEHAB provided
hardware and integration and operations for scientific microgravity experiments
to NASDA and ESA aboard the Logistics Double Module on STS-84.
In June 1997, NASA exercised all three options for additional missions
for $39.0 million under the Mir Contract. The Mir Contract options called for
two Logistics Double Module missions and one Single Module mission that were
successfully completed in September 1997, January 1998 and June 1998,
respectively.
The REALMS Contract, signed in December 1997, requires that the Company
provide a single and a double research module to support microgravity research
payloads on two missions and two double logistics module flights to the ISS to
support outfitting of the ISS. STS-95, a research mission, flew in October 1998,
STS-96, a logistics mission, flew in May 1999. STS-101, a logistics mission, is
scheduled to fly in December 1999 and STS-107, a research mission, is scheduled
to fly in December 2000. The REALMS Contract provides an opportunity for the
Company to provide similar services to commercial customers on STS-95 and
STS-107. During FY 1998, the Company entered into agreements with NASDA, ESA,
the Canadian Space Agency ("CSA") and the Japanese Broadcasting Agency ("NHK")
(collectively, the "STS-95 Commercial Customers"). Pursuant to the agreements,
SPACEHAB provided hardware and integration and operations for scientific
microgravity experiments to the STS-95 Commercial Customers aboard the Single
Research Module on STS-95. The Company completed integration and
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operations efforts for the STS-95 and STS-96 missions and began integration and
operations efforts for STS-101 and STS-107 during FY 1999 reporting $39.1
million in revenue for these missions under the percentage-of-completion revenue
recognition policy.
JE operates under the Flight Crew Systems Development Contract (the
"FCSD Contract") with NASA, a $326.3 million multitask contract which commenced
in May 1993. JE 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 Space Vehicle Mockup Facility, where
astronauts train for both Space Shuttle and ISS missions. JE also designs and
fabricates flight hardware, such as flight crew equipment and crew quarters
habitability outfitting as well as providing stowage integration services. JE is
also responsible for configuration management of the ISS.
INDUSTRY OVERVIEW
The U.S. space program encompasses four broad objectives: to advance
scientific research, to establish a permanent human presence in space, to
develop new technologies that contribute to U.S. economic growth and security
and to foster improved international relations through peaceful cooperation in
space with Europe, Japan, Russia and other nations. SPACEHAB is focused on two
markets: (i) microgravity and life sciences space research and (ii) space
support services such as space station logistics and resupply, ground operations
and payload processing and training.
Microgravity and Life Sciences Space Research
In orbit, the forces of inertia and gravity counterbalance each other,
thereby creating a condition of near weightlessness known as "microgravity." In
a microgravity environment, materials and living matter behave in fundamentally
different ways than they do on Earth. This phenomenon has stimulated worldwide
interest from scientists and commercial researchers who are seeking improved
ways to manipulate and process materials and to study biological processes that
cannot otherwise be achieved in ground-based laboratories.
The demand for access to a microgravity environment can be divided into
two broad categories: scientific research and commercial applications. NASA and
other U.S. and international government research organizations provide support
for both basic scientific research and its commercial applications to determine
the fundamental effects that gravity has on physical processes.
Space Support Services and Training
Space support services include providing logistics and payload
processing support to NASA, other governments and commercial customers of the
Space Shuttle and the ISS. Permanently orbiting facilities such as the ISS
require reliable sources of logistics: food, clothing, equipment and supplies
that sustain the astronauts and enable them to conduct research. NASA's current
plans call for the Space Shuttle to be launched at least seven times per year
for the foreseeable future. As currently planned, the ISS will require
approximately five Space Shuttle logistics missions per year.
In order to support the Space Shuttle and ISS operations, NASA requires
ground operations and payload support services before and after each mission.
Payload processing operations entail payload scheduling, mission planning,
safety/certification analysis, physical integration of the payload into its
carrier (such as SPACEHAB modules), the integration of the carriers into the
Space Shuttle's cargo bay, flight operations, technical data gathering and
synthesis, and launch and landing site activities. Space support services also
involve the provision of specialized services and support near launch sites for
commercial satellite manufacturers and launch services. These activities include
mechanical assembly or re-assembly, electrical check, calibration, liquid
propellant loading and related activities.
A significant component of Space Support Services includes managing all
training operations and facility engineering at the NBL. NASA also requires
design and fabrication of full-scale mockups of the
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ISS elements used in NBL and SVMF training and the development of hardware for
the ISS crew living quarters that is scheduled for launch in 2003.
PRODUCTS AND SERVICES
SPACEHAB Single Modules are aluminum cylinders, measuring 10 feet in
length by 13.5 feet in diameter, that incorporate a patented design including a
truncated top and flat-end caps. These fully instrumented modules provide
experiment resources such as power, data management, thermal control and vacuum
venting. SPACEHAB Single Modules are employed primarily for research missions
such as the STS-95 flight that carried senator John Glenn back into space in
October 1998. In FY 1996, the Company completed a development program and
introduced the Logistics Double Module. This module was optimized to carry
logistics and was used by NASA to carry vital supplies to the astronauts and
cosmonauts who resided on the Russian space station Mir. SPACEHAB invested $12.5
million in the design, development, and production of the Logistics Double
Module. During FY 1997, in an effort to anticipate the need of customers, the
Company began the full-scale development and construction of its Research Module
with double module hardware, which when combined with a Single Module becomes
the RDM. The RDM is fully dedicated to microgravity research and is under
contract for the STS-107 mission which is scheduled to fly in December 2000.
Expenditures for the RDM through FY 1999 were $34.3 million. The Company
anticipates total expenditures of approximately $5.7 million to complete this
asset and place it into service. The Company expects that, in order to
completely realize its investment expenditures for the RDM, this module must be
used in seven missions of the RDM.
The Company expects that the RDM will meet or exceed all of NASA's
projected requirements for dedicated microgravity and life sciences research
that had been performed by Spacelab, the U.S. government-owned habitable module,
which was retired after its final mission in April 1998. As a result of the
retirement of NASA's Spacelab, the Company believes that its flight-proven
modules position SPACEHAB to become the sole provider of crew-tended
microgravity research capabilities for the Space Shuttles. The Company also
initiated preliminary development activities for the DDM, which could be used by
NASA to maintain the ISS in the proper orbit while providing more flexible
re-supply services to the ISS utilizing the Space shuttle Columbia.
SPACEHAB has addressed the need to carry unpressurized cargo to the ISS
by designing and developing the ICC. The ICC can be used singularly or in
combination with SPACEHAB Single or Double Modules to provide the optimum mix of
pressurized and unpressurized cargo on a single mission to the ISS. The ICC was
first flown on the first supply mission to the ISS, STS-96, in May 1999. In
order to more fully meet NASA's requirements for attached cargo, the Company has
initiated preliminary design efforts of a vertical carrier and other derivatives
with characteristics similar to the ICC.
In 1998, the Company built on a foundation of existing microgravity
research capabilities by establishing a "Microgravity Staircase" that offers
researchers a broader array of services to tailor experiments to specific
microgravity environments and budgets. The Company entered into a joint venture
with Guigne' Technologies Ltd., to build the SpaceDRUMS (TM) facility, a
facility that uses acoustic energy to position samples inside an experiment
device for "containerless processing", which is scheduled to be the first
commercial research facility on the ISS.
SPACEHAB's Astrotech payload processing business exclusively serves the
commercial satellite manufacturing and launch services industries in Florida and
at the Vandenberg Air Force Base in California. Although payload processing is
generally associated with the final preparation of a satellite or other space
payload for launch, it is also the first step in the launch process and requires
specialized facilities and support usually located at the launch site.
Astrotech's payload processing activities provide the necessary resources for
mechanical assembly or reassembly, electrical check, calibration, liquid
propellant loading and numerous other related activities. Additionally,
Astrotech's specialized facilities include, but are not limited to, clean rooms,
airlock systems, overhead crane systems, hazard-proof work areas and
environmentally controlled rooms.
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Astrotech completed the expansion of its Florida facility in 1998 to
add a new encapsulation high bay that enables parallel processing activities in
support of the new Atlas II and Delta III launch vehicle payloads. The expansion
also will support the small and medium classes of the Air Force's new Evolved
Expendable Launch Vehicle ("EELV"), which is scheduled to begin commercial
payload launch activities in 2001. Astrotech also completed an expansion of its
Vandenberg facility during 1998. Expenditures for these expansions were
approximately $4.0 million.
In FY 1999, Astrotech acquired an additional 23.5 acres of land
adjoining its existing Florida site to support the planned construction of
additional payload processing facilities to support the increased projected
launch rate and larger sized payloads associated with the new EELV's being
developed by Boeing and Lockheed Martin under Air Force contracts. Astrotech
initially plans to support commercial payload launches on the Boeing Delta IV,
which is scheduled to begin operations in 2001. Expenditures for this expansion
in FY 1999 were approximately $1.1 million.
Astrotech operates its payload processing services under exclusive
multiyear agreements with Lockheed Martin to support the processing of all
commercial Atlas payloads and with Boeing to support the processing of all Delta
payloads launched from Cape Canaveral Air Station, Florida and Vandenberg Air
Force Base, California. Astrotech also has a similar arrangement with Boeing to
support the processing of all Sea Launch payloads at Boeing's facility in Long
Beach, California.
Astrotech continues its pursuit of a second major business area,
providing sounding rocket flight hardware and launch services. In December 1998,
Astrotech entered into a relationship with Alliant Tech Services, Inc., located
in Rocket Center, WV, to develop a new sounding rocket system, named the
"Oriole." Astrotech plans to market the Oriole to NASA in support of its
suborbital microgravity and scientific research programs, and to the Department
of Defense ("DoD") in support of its Theater High Altitude Air Defense ("THAAD")
target missile programs. The test launch of the Oriole is expected to occur in
December 1999.
Astrotech also plans to pursue additional opportunities, including:
(i) providing payload processing facilities and services to new U.S. Government
customers in the defense and intelligence communities; (ii) supporting new space
launch facilities and related payload processing functions internationally and
(iii) expanding its sounding rocket services to include the provision of
microgravity research by developing research facilities and flight hardware.
On July 1, 1998, SPACEHAB broadened its core business by acquiring
Johnson Engineering. JE 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 Space Vehicle Mockup Facility,
where astronauts train for both Space Shuttle and ISS missions. JE also designs
and fabricates flight hardware, such as flight crew equipment and crew quarters
habitability outfitting as well as providing stowage integration services. JE is
also responsible for configuration management of the ISS. JE's ability to
perform detailed design, fabrication, and operations complements the Company's
traditional strengths in conceptual design and program management. The
acquisition of JE provides many of the critical skills and capabilities used to
perform SPACEHAB services that currently are acquired through subcontracting
relationships.
JE primarily operates under the FCSD Contract which is currently a
$326.3 million multitask cost-plus-award and incentive-fee contract. The
contract commenced in May 1993 and will conclude in April 2001 although NASA has
the option to exercise a one-year extension.
The Company continues to pursue new business opportunities by
identifying customer requirements and creating and implementing innovative
technical solutions. The Company believes that the demand for microgravity and
life sciences research conducted on SPACEHAB Modules and demand for the use of
its modules for logistics support and other infrastructure services including
communications, power supply and refueling and reboosting services will increase
both during the assembly phase and after the ISS becomes fully operational. The
ISS is the largest engineering and scientific project ever undertaken. More
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than a dozen nations, led by the United States, Russia, Japan and the European
Community, have spent over $25 billion to date and will spend over $90 billion
to develop, build, launch and operate the ISS. The ISS assembly began in late
1998. In addition, the Company also believes that the increasing demand for
satellites and the improvements in satellite technology will continue to provide
opportunities in the satellite launch services field.
COMPANY STRATEGY
SPACEHAB's goal is to be recognized as a global market leader providing
products and services supporting the human space flight, logistics and satellite
launch industries. The Company seeks to achieve this goal through implementation
of the following strategy:
1. Focusing on Quality of Service. SPACEHAB has had thirteen Shuttle
Missions to date, all of which have been completed successfully. The Company
intends to maintain and enhance its reputation for product reliability, process
innovation and performance excellence.
2. Expanding Scope of Business. SPACEHAB continuously evaluates
opportunities to offer new products and services to its customer base and to
develop assets and acquire complementary, attractively valued businesses. For
example, the Company is in the process of constructing the Research Double
Module and developing the Docking Double Module and has developed and flown the
Integrated Cargo Carrier. Based on SPACEHAB's continuing involvement in
microgravity research and logistics Space Shuttle missions, and its close
interaction with NASA and other users of its SPACEHAB Module services, the
Company is well positioned to anticipate emerging requirements for new services
in the human space flight industry. In 1998, the Company built on its foundation
of microgravity research services by establishing a "Microgravity Staircase."
The Microgravity Staircase offers researchers a broader array of services to
tailor experiments to specific microgravity environments and budgets. With the
acquisition of Astrotech on February 12, 1997, the Company diversified its
revenue and customer base targeting new and related space services markets.
Astrotech is the premier commercial provider of satellite payload processing
facilities in the United States providing launch site preparation of
flight-ready satellites to major U.S. space launch companies and satellite
manufacturers. The acquisition of JE on July 1, 1998 complements SPACEHAB's
traditional strengths in conceptual design and program management while adding
skills in engineering, design and training critical to NASA as well as the
successful completion of the ISS.
3. Maintaining Position as Low-Price Provider. The Company continues to
offer its payload processing and logistics support services to NASA and other
customers using SPACEHAB owned assets, on a fixed-price basis that the Company
believes is significantly lower than the cost-plus basis used by traditional
aerospace contractors. Through the focus and rigorous application of commercial
best practices in the development and operation of its hardware and facilities,
SPACEHAB substantially reduces the cost, time and complexity that burden
conventional government contractors providing services under cost-plus
contracts.
JE performs services under a cost-plus award and incentive fee contract for
government services that is requested by and directed by NASA. This contract
form provides for the lowest cost to the government by requiring a separate
negotiation of the price for each task order, thereby allowing JE to implement
commercial best practices to reduce cost. JE's capabilities also provide a base
with which to pursue commercial opportunities.
4. Continuing Entrepreneurial Initiative. The Company continues to develop
and offer innovative business arrangements to meet NASA and other customer
requirements. The Company has repeatedly taken the initiative to improve its
modules and payload processing services and to deploy new assets in anticipation
of customer needs. By focusing on the quality, cost and responsiveness of its
services, and by attracting and recruiting highly talented and experienced
personnel into its distinctly entrepreneurial organization, SPACEHAB seeks to
distinguish itself as an innovative and effective provider of commercial
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space services while achieving higher contract profit margins for module
contracts than are customary in traditional government aerospace contracts.
5. Leveraging International Strategic Alliances. The Company seeks to
create and maintain strategic alliances with key international players in the
space industry. Such relationships include Mitsubishi Corporation in Japan;
DaimlerChrysler Aerospace AG ("DASA"), Alenia Spazio S.p.A. ("Alenia") and
Intospace GmbH in Europe; and RSC Energia in Russia. On August 2, 1999, DASA
strengthened its strategic relationship with the Company by agreeing to purchase
a $12.0 million equity stake in SPACEHAB. The Company believes these alliances
have produced and will continue to produce business opportunities with these
partners, the governments of their respective countries and other industries
within those countries.
Through the Company's contracts, it continues to implement its business
strategy by identifying customer requirements, creating innovative technical
solutions, raising private capital to develop assets and providing services
pursuant to those contracts.
DEPENDENCE ON A SINGLE CUSTOMER
Approximately $85.8 million (or 79.7 percent) of the Company's FY 1999
revenue was generated from two NASA contracts - the REALMS Contract and the FCSD
Contract. While Astrotech, and the STS-95 and STS-107 commercial customer
contracts represented additional revenue sources, the Company anticipates that
revenue from NASA will continue to account for a significant amount of the
Company's revenue over the next several years. There are no assurances, however,
that NASA will require the Company's module services in the future. Therefore,
the Company's failure to execute new contracts with NASA would have a material
adverse effect on the Company's financial condition and results of operations.
Additionally, a significant portion of the revenue for JE is derived under
contracts with NASA. Accordingly, the Company continues to focus its efforts on
diversifying its customer base to include commercial companies, as evidenced
with the Astrotech acquisition.
RESEARCH AND DEVELOPMENT
The Company believes that the timely development of new products and
enhancements to existing hardware are essential to maintaining its competitive
position. In the past three fiscal years, the Company has spent an aggregate of
approximately $9.7 million on research and development.
Approximately $1.0 million of the Company's research and development
expenditures for FY 1999 were spent on the development of a new product line for
Astrotech, sounding rockets. In addition, $0.7 million was spent on various
studies conducted by third parties. In 1998 and 1997, approximately $1.9 million
and $0.7 million, respectively, was spent on the design, development and
qualification of the new SPACEHAB Universal Communications System ("SHUCS").
Beginning in FY 1996 and continuing throughout FY 1998, the Company had been
working on the development of this new proprietary module communications system
that will be independent of the Space Shuttle's existing data downlink. SPACEHAB
began capital asset construction of SHUCS in the fourth quarter of FY 1998. In
addition, in 1998, the Company spent approximately $0.6 million for research and
development of the ICC. SPACEHAB began capital asset construction of the ICC in
FY 1999. Completion of this asset expands the Company's product and service
lines to meet market requirements for low-cost unpressurized carriers for
research experiments and cargo. SPACEHAB developed the ICC to carry
unpressurized cargo to the ISS, based on a patented pallet technology (the
"Unpressurized Cargo Pallet" or "UCP"), which can be used independently or in
tandem with the SPACEHAB Single or Double Modules. The ICC's design is such that
it is located in what is ordinarily unused volume in the front of the Space
Shuttle's cargo bay. By expanding the capabilities of the Space Shuttle and by
offering flexibility in the mix of pressurized and unpressurized cargo carried
on each mission, the Company believes that the ICC could become the preferred
method for providing logistics and utilization resupply to the ISS. The Company
also incurred $1.3 million, $1.7 million and $0.4 million in other research and
development expenditures during fiscal years 1999, 1998 and 1997 respectively.
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COMPETITION
Currently, there are no other companies that compete directly with
SPACEHAB in providing pressurized module services that are carried aboard the
Space Shuttles. NASA had a government-owned and operated system, Spacelab, which
provided services similar to those provided by SPACEHAB modules. However, NASA
has terminated the Spacelab program with its final mission in April 1998. The
Company has commenced the design and construction of the Research Double Module
under a contract with Boeing (formerly McDonnell Douglas Aerospace). The
Research Double Module represents a commercial replacement for NASA's Spacelab.
The Company believes that this module will significantly outperform Spacelab in
terms of technology, capacity, functionality and cost-effectiveness.
The Company's long-term strategy for growth is to provide research,
logistics, infrastructure and payload processing services to NASA and others
during the International Space Station era. This strategy could require the
Company to compete with commercial companies such as Lockheed-Martin, Boeing and
others who have existing NASA support contracts, greater financial resources and
manufacturing capabilities, and larger marketing, sales and technical
organizations than the Company. In FY 1997, SPACEHAB entered into an agreement
with United Space Alliance ("USA"), a Boeing and Lockheed Martin joint venture,
to expand the commercial use of the Space Shuttle fleet. Although this agreement
has expired, SPACEHAB and USA are continuing to pursue joint business
opportunities. SPACEHAB's existing strategic relationships with DASA, Mitsubishi
Corporation, Boeing and Alenia, may provide additional opportunities for
teaming and partnerships that management believes will enable the Company to
compete for market share.
The Italian Space Agency has contracted to build three multi-purpose
logistics modules ("MPLM") intended for use in connection with the ISS. Although
the MPLM provides similar services as SPACEHAB's Modules for ISS logistics
missions, SPACEHAB believes that its Modules are complementary to the MPLM. Each
module is expected to be used for special situations, e.g.- the MPLM is expected
to be used when a requirement exists for heavy construction materials; when the
requirement exists for crew rotation, food, supplies and equipment, the Spacehab
modules would be used due in part to the flexibility and late access
capabilities of the SPACEHAB modules. Of the five planned or possible logistics
missions per year to the ISS, the Company expects that two or three will be
SPACEHAB missions with the remainder being MPLM missions.
Astrotech's payload processing facilities are located in Florida and
California. At present, management believes that Astrotech's U.S. competition is
limited to the California Vandenberg Air Force Base launch site where a
competitor, California Commercial Spaceport, Inc. ("CCSI") is located. CCSI was
established by obtaining surplus U.S. Air Force facilities at the VAFB launch
complex before Astrotech established its facilities there and when no commercial
alternative was available. To the Company's knowledge, CCSI has won several
contracts to process NASA spacecraft for launch from VAFB. CCSI does not have
payload processing facilities in Florida, where the majority of U.S. commercial
satellite launches occur.
JE's competitors include Boeing, Lockheed-Martin, United Space
Alliance, Raytheon Barrios Technologies, Hernandez Engineering, Cimarron and
Oceaneering Space & Thermal Systems.
BACKLOG
A significant portion of the Company's revenue is currently generated
from its contracts with NASA that, similar to contracts with other agencies of
the U.S. government, contain provisions pursuant to which NASA may terminate the
contract "for convenience." The Company's contracts with NASA are conditioned by
its terms upon NASA receiving an adequate annual appropriation of funds from the
U.S. Congress. Failure to receive funds from Congress or a withdrawal by
Congress of prior appropriations would permit NASA to terminate its contracts
with SPACEHAB "for convenience." For the government's fiscal year 1999, both the
U.S. Senate and House of Representatives have authorized and approved an annual
appropriation of $13.7 billion for NASA, including $2.3 billion for the ISS,
indicating a
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commitment by the government to the space industry. However, there can be no
assurance that the level of approved funding will be adequate for NASA to
complete all of the initiatives including those relating to the contracts with
the Company.
SPACEHAB anticipates that a portion of future revenue will be derived
from contracts with entities other than agencies of the U.S. government that
will not be subject to federal contract regulations such as termination "for
convenience of the government" or federal government funding restrictions.
However, to the extent that such contracts require the use of the Space Shuttle
for transportation, these systems must be available and will have to be obtained
at a reasonable cost to SPACEHAB.
As of June 30, 1999, the Company's contract backlog is estimated to be
approximately $167.3 million, of which $149.5 million represents U.S. government
backlog and $17.8 million represents non-U.S government contracts.
CERTAIN REGULATORY MATTERS
The Company is subject to federal, state and local laws and regulations
designed to protect the environment and to regulate the discharge of materials
into the environment. The Company believes that its policies, practices and
procedures are properly designed to prevent unreasonable risk of environmental
damage and consequential financial liability to the Company. Compliance with
environmental laws and regulations and technology export requirements has not
had in the past, and, the Company believes, will not have in the future,
material effects on the capital expenditures, earnings or competitive position
of the Company.
EMPLOYEES
As of June 30, 1999, the Company employed 745 regular employees, 28 of
whom are employed by the Astrotech subsidiary and 659 are employed by JE. Of
these 745 employees, 111 (approximately 15 percent) hold advanced degrees,
including 11 who hold doctorate degrees. Additionally, a significant number of
the Company's employees have experience in both the space industry and/or
governmental space agencies, with a special expertise in commercial space and
human space flight. None of the Company's employees are covered by collective
bargaining agreements. Underlying all of SPACEHAB's efforts has been the
dedication and skill of its personnel. The Company believes that the dedication
of its employees is critical to its success and that its relations with its
employees are excellent.
ITEM 2. PROPERTIES
The Company and its wholly-owned subsidiaries, Astrotech and JE,
currently occupy six locations, with the corporate headquarters located at 300 D
Street SW, Suite 814, Washington, DC 20024. The corporate headquarters occupy
approximately 15,499 square-feet of office space and house SPACEHAB's 19-person
executive management, accounting and marketing team. The term of the present
lease expires on December 16, 2007.
SPACEHAB has 35 employees encompassing sales and marketing, flight
system development, operations and health and sciences located at 1331 Gemini
Avenue, Suites 300 & 310, Houston, Texas 77058. The Houston offices consist of
approximately 22,930 square feet of non-contiguous office space located near the
Johnson Space Center. In January 1998, the Company negotiated an agreement for
one lease for the two office suites. The new lease is a five-year term
commencing March 1, 1998, and expiring February 28, 2003. In addition, JE
occupies a portion of Suites 300 & 310 and 4,473 square feet of the first and
second floors housing 76 employees supporting marketing, finance and corporate
services. The first and second floor space is on a month-to-month basis.
The Company's payload processing facility, housing a 3-person
operations team, is located near the Kennedy Space Center in Cape Canaveral,
Florida. The facility is contained in an approximately 50,000 square-foot plant.
The Company owns the building that houses the payload processing facility but
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<PAGE> 11
leases the land upon which it is constructed. The payload processing facility
has a clean room work area of approximately 24,000 square-feet. This work area
is designed to accommodate the SPACEHAB Single and Double Modules, as well as
the ICC. This area includes 11 secure experiment/payload integration and work
areas ranging in size from 300 square-feet to 1,000 square-feet each. In
addition, the facility provides office space, stock rooms, storage areas, a
machine shop, an electrical shop, conference rooms, and other miscellaneous
accommodations. In July 1997, the Company negotiated a new agreement with the
Canaveral Port Authority for the lease of the land. The term of the new lease is
for a forty-three year period commencing August 28, 1997. Upon expiration of the
land lease, all improvements on the property revert at no cost to the lessor.
Astrotech occupies three locations. Its headquarters are located at
6305 Ivy Lane, Suite 520, Greenbelt, MD 20770. The headquarters occupy
approximately 6,250 square-feet of leased office space at this site and house a
9-person management and administrative team. The term of the present lease is a
five-year period expiring on May 31, 2003.
Astrotech's 12-person engineering and support team is located in an
eight-building, owned facility at 1515 Chaffee Drive, Titusville, Florida 32780.
This 88,000 square-foot facility supports non-hazardous and hazardous material
processing, payload storage and customer offices. These buildings presently
occupy one-third of the 37.5-acre property owned by Astrotech, with the
remaining two-thirds available for expansion.
Astrotech has a 3-person technical staff located at the Vandenberg Air
Force Base in Vandenberg, California. Astrotech presently rents a 60-acre site
on the Air Force Base and owns four buildings comprising 16,500 square-feet,
which are dedicated to the same functions provided at the Florida facility. The
term of the present land lease expires on July 13, 2013. Upon expiration of the
land lease, all improvements on the property revert at no cost to the lessor.
JE occupies five locations. Its headquarters are located at 555 Forge
River Road, Suite 150, Webster, Texas 77058. The headquarters houses JE's
463-person engineering team within a 69,100 square-foot facility. This office
lease will expire on June 30, 2003.
JE has an 11-person fabrication shop located at 920 Gemini Avenue,
Houston, Texas, 77058. This 17,920 square-foot facility is being leased for a
three-year term that will expire on January 31, 2001.
JE also occupies two facilities used for storage at 926 and 928 Gemini
Ave, Houston, Texas 77058. These facilities are 4,431 square feet and 8,992
square feet respectively. The lease will expire on April 30, 2002.
JE also occupies 3,852 square feet of space at 18100 Upper Bay Road,
Houston, Texas 77058 that houses a 19-person engineering and laboratory team.
The lease will expire on July 31, 2000.
Additionally, JE has more than 75 additional employees who are housed
at various government facilities within the Houston area.
The Company believes that its current facilities and equipment are
generally well maintained and in good condition and are adequate for its present
and foreseeable needs.
ITEM 3. LITIGATION
The Company is not currently involved in any material legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of stockholders during the fourth
quarter of FY 1999.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock (the "Common Stock") trades on the NASDAQ
National Market System under the symbol "SPAB." The Common Stock has been
publicly traded since December 22, 1995, the date of the closing of the
Company's initial public offering. The quarterly high and low stock prices for
fiscal years 1999, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
Fiscal 1999: High Low
- ------------ ---- ---
<S> <C> <C>
First Quarter $11 3/4 $ 8 1/4
Second Quarter $10 3/4 $ 7
Third Quarter $10 13/16 $ 6
Fourth Quarter $ 6 1/8 $ 5
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1998: High Low
- ------------ ---- ---
<S> <C> <C>
First Quarter $12 3/16 $ 8 3/4
Second Quarter $11 3/8 $ 9 11/16
Third Quarter $11 3/8 $ 9 7/8
Fourth Quarter $12 $11
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1997: High Low
- ------------ ---- ---
<S> <C> <C>
First Quarter $11 1/4 $ 8
Second Quarter $ 8 1/2 $ 5 1/2
Third Quarter $ 7 1/8 $ 5
Fourth Quarter $ 9 1/4 $ 5 3/4
</TABLE>
The Company has never paid cash dividends. It is the present policy of
the Company to retain earnings to finance the growth and development of its
business and, therefore, the Company does not anticipate paying cash dividends
on its Common Stock in the foreseeable future.
The Company has authorized 30,000,000 shares of Common Stock. At July
24, 1999, 11,229,646 shares of Common Stock were outstanding. The Company had
approximately 2,151 shareholders of record and beneficial holders of its Common
Stock on June 30, 1999.
The Company has authorized and issued 975,000 shares of preferred
stock. On August 2, 1999, DASA, a shareholder, agreed to purchase an additional
$12.0 million equity stake in SPACEHAB representing 1,333,334 shares of Series B
Senior Convertible Preferred Stock. Under the agreement DASA purchased all of
SPACEHAB's 975,000 authorized and unissued shares of preferred stock. The other
358,334 shares of Series B Senior Convertible Preferred Stock will be issued
upon shareholder approval of a proposal to increase the number of authorized
shares of preferred stock that will be presented at the next stockholders
meeting scheduled for October 14, 1999. The preferred stock purchase will
increase DASA'S investment interest in SPACEHAB to approximately 11.5 percent.
The Series B Senior Convertible Preferred Stock is convertible at the holders'
option on the basis of one share of Preferred Stock for one share of Common
Stock, provides the holder to a right to vote on an "as converted" basis the
equivalent number of shares of Common Stock and has preference in liquidation,
dissolution or winding up of $9.00 per preferred share. No dividends are payable
on the convertible preferred shares.
SALES OF UNREGISTERED SECURITIES
During FY 1999, the Company issued no unregistered securities.
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ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below are derived from the
audited consolidated financial statements of SPACEHAB. This selected financial
information should be read in conjunction with the Consolidated Financial
Statements of the Company and the notes thereto included elsewhere in this
report.
<TABLE>
<CAPTION>
Nine(1)
Year Ended Months
September Ended Year Ended Year Ended Year Ended
30, June 30, June 30, June 30, June 30,
---------- --------- --------- --------- ---------
1995 1996 1997 1998 1999
---------- --------- --------- --------- ---------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue(2) $ 46,059 $ 56,397 $ 56,601(3) $ 64,087 $ 107,720(8)
Costs of revenue 23,349 20,985 34,120 35,058 89,283
--------- --------- --------- --------- ---------
Gross profit 22,710 35,412 22,481 29,029 18,437
Marketing, general and administrative
expenses 3,816 4,056 8,567 13,712 14,599
Research and development expenses 1,600 100 1,252 2,620 3,636
--------- --------- --------- --------- ---------
Operating income 17,294 31,256 12,662 12,697 202
Interest expense, net of capitalized
amounts 1,365 699 955 4,480 4,905
Net income (loss) 15,809 28,829 13,832(4) 12,131 (2,589)
Net income (loss) per common share -
Diluted(5) $ 2.36 $ 3.19 $ 1.24 $ 0.84 $ (0.23)
Shares used in computing net income
(loss) Per common share - diluted(5) 6,746 9,343 11,160 14,571 11,185
Other Data:
Cash provided by (used for) operations $ 26,838 $ 13,151 $ (5,995) $ 31,604 $ (6,331)
Total investing activities 4,943 6,266 29,308(6) 23,113 58,619(7)
Balance Sheet Data (at period end);
Working capital $ 7,192 $ 45,942 $ 3,159 $ 62,660 $ 12,374
Total assets 86,701 129,709 114,450 220,604 204,346
Long-term debt, excluding current portion 24,886 17,318 12,725 85,322 78,810
Stockholders' equity (deficit) (1,715) 71,596 86,622 96,408 94,165
</TABLE>
- ------------------------------
(1) Effective October 1, 1995, the Company changed its fiscal year-end to June
30.
(2) The Company recognized revenue upon the completion of each flight under the
Mir and CMAM Contracts. For new contract awards for which the capability to
successfully complete the contract can be demonstrated at contract inception,
revenue recognition under the percentage-of-completion method is being reported
based on costs incurred over the period of the contract.
(3) Includes revenues of $2,860 generated by Astrotech subsequent to its
acquisition on February 12, 1997.
(4) Includes an extraordinary gain of $3,274, net of taxes and legal fees,
relating to the amendment and restatement of a credit agreement.
(5) In December 1997, the Company adopted the provisions of Statement of
Financial Accounting No. 128, Earnings Per Share, which establishes new
guidelines for the calculations of earnings per
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<PAGE> 14
share. Earnings per share for FY 1994 through FY 1997 have been restated to
reflect the provisions of this new standard.
(6) Includes $20,134 of consideration for the purchase of Astrotech.
(7) Includes $24,745 of consideration for the purchase of JE and a $1,400
investment in a joint venture.
(8) Includes revenues of $58.4 million generated by Johnson
Engineering subsequent to its acquisition on July 1, 1998.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
GENERAL
SPACEHAB was incorporated in 1984 to commercially develop space habitat
modules to operate in the cargo bay of the Space Shuttles. SPACEHAB, along with
the Astrotech and JE subsidiaries define the Company.
During FY 1998 the Company operated under two contracts with NASA.
First, the Mir Contract, with a total contract value of $91.5 million, including
$39.0 million for three Mir option missions that were flown in FY 1998. Second,
the REALMS Contract, with a total contract value of $44.9 million consisting of
three missions, two of which were flown in October of 1998 and in May of 1999.
The remaining mission to be flown under the REALMS Contract is scheduled for
December of 2000. This contract also provides SPACEHAB an opportunity to have
direct commercial relationships with other space agencies by providing them
research space in the modules. In fact, on the October 1998 flight, most of the
revenue recognized came from customers other than NASA. The Company's revenues
for FY 1998 were generated primarily from the Mir Contract, the REALMS Contract,
and through the Company's commercial customer contracts. The Company's revenues
for FY 1999 were generated primarily from the REALMS Contract, with an
additional mission scheduled for December 1999, and the FCSD Contract.
SPACEHAB generates revenue by providing a turnkey service that includes
access to the modules and provides integration and operations support services
to scientists and researchers responsible for the experiments and/or logistics
supplies for module missions aboard the Space Shuttle System and under the FCSD
Contract. Under the CMAM and Mir Contracts, the Company recognized revenue only
at the completion of each Space Shuttle mission using Company assets.
Accordingly, the Company's quarterly revenue and profits fluctuated dramatically
based on NASA's launch schedule and will continue to do so for any contract for
which revenue is recognized only upon completion of a mission. For the REALMS
Contract and for new contract awards for which the capability to successfully
complete the contract can be demonstrated at contract inception, revenue
recognition under the percentage-of-completion method is being reported based on
costs incurred over the period of the contract. The percentage-of-completion
method results in the recognition of revenue over the period of contract
performance, thereby decreasing the quarter-by-quarter fluctuations of reported
revenue.
The expenses associated with the operations of SPACEHAB are recorded
differently based on the type of expense. Costs of revenue include integration
and operations expenses associated with the performance of two types of efforts:
(i) sustaining engineering in support of all missions under a contract and (ii)
mission specific support. Expenses associated with sustaining engineering are
expensed as incurred. Mission specific expenses relating to the CMAM Contract
and the Mir Contract were deferred as assets and not expensed until the specific
Space Shuttle mission was flown and the related revenue was recognized. Costs
associated with the performance of the contracts using the
percentage-of-completion method of revenue recognition are expensed as incurred.
Costs associated with the cost-plus-award and incentive fee contracts are
expensed as incurred. Other costs of revenue include depreciation expense and
costs associated with the Astrotech payload processing facilities. Flight
related insurance covering transportation of the SPACEHAB Modules from
SPACEHAB's payload processing facility to the Space Shuttle, in-flight insurance
and third-party liability insurance are also included in costs of revenue and
are recorded as incurred. Marketing, general and administrative and interest and
other expenses are recognized when incurred.
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<PAGE> 15
Astrotech revenue is derived from various multi-year fixed-price
contracts with satellite and launch vehicle manufacturers. The services and
facilities Astrotech provides to its customers support the 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.
Johnson Engineering's revenue is derived primarily from the FCSD
Contract which is a $326.3 million multitask contract which will conclude in
April 2001, although NASA has the option to exercise a one year extension. JE
performs services under a cost-plus award and incentive fee contract for
government services that is requested by and directed by NASA.
RESULTS OF OPERATIONS
FY 1997 results include the operations of Astrotech subsequent to its
acquisition on February 12, 1997. In addition, FY 1999 results include JE that
was acquired July 1, 1998.
Fiscal Year Ended June 30, 1999 as Compared to the Fiscal Year Ended June 30,
1998
Revenue. The Company's revenue increased approximately 68% to
approximately $107.7 million for the year ended June 30, 1999, as compared to
$64.1 million for the year ended June 30, 1998. For the year ended June 30,
1999, $39.1 million was recognized from the REALMS contract and related
commercial customers, $9.8 million from Astrotech, $58.4 million from JE and
$0.4 of miscellaneous revenue. Conversely, for the year ended June 30, 1998
revenue of $39.0 million was recognized from the Mir Contract, $14.3 million
from the REALMS Contract and related commercial customers and $10.8 million from
Astrotech. The decrease in module revenue from the year ended June 30, 1998 is
attributable to the delay in the ISS assembly. Astrotech's revenue declined from
the year ended June 30, 1998 due to launch vehicle failures which have been
subsequently corrected.
Costs of Revenue. Costs of revenue for the year ended June 30, 1999,
increased 146% to $89.3 million, as compared to $36.3 million for the year ended
June 30, 1998. For the year ended June 30, 1999, $25.9 million of costs was for
integration and operation costs under the REALMS Contract and related commercial
customers, $4.6 million was for integration and operations at Astrotech, $53.8
million for cost of revenue at JE, and depreciation of $5.0 million. In
contrast, the primary costs of revenue for the year ended June 30, 1998, are
$19.2 million for integration and operation costs under the Mir Contract, $7.8
million under the REALMS Contract and related commercial customers, $4.4 million
for integration and operations at Astrotech, and depreciation of $4.9 million.
Operating Expenses. Operating expenses increased by 21.0% to
approximately $18.2 million for the year ended June 30, 1999, as compared to
approximately $15.1 million for the year ended June 30, 1998. This increase is
due primarily to the inclusion of JE's operating expenses of approximately $2.5
million, staff additions and related expenses during the first half of the year
and increased consulting expenses partially offset by the decrease in R&D costs
of $0.7 million. Research and development costs for the year ended June 30, 1999
were $3.6 million, as compared to $4.3 million for the year ended June 30, 1998.
This decrease is due primarily to the completion of the ICC and SHUCS R&D
efforts partially offset by research and development expenses associated with
Astrotech's sounding rocket program.
Interest Expense. Interest expense was approximately $7.4 million for
the year ended June 30, 1999, as compared with approximately $6.4 million for
the year ended June 30, 1998. The increased interest expense is due primarily to
a full year of interest expense on the $63.3 million of convertible notes as
compared to a partial year in 1998. $2.5 million of interest expense was
capitalized in 1999 as
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<PAGE> 16
compared to $2.0 million in 1998. Interest is capitalized based primarily on the
construction of the Company's modules and payload processing facilities.
Interest Income. Interest and other income was approximately $1.6
million and $3.9 million for the years ended June 30, 1999 and 1998,
respectively. This decrease is due primarily to the Company's use of cash for
the purchase of JE and expenditures for property, plant and equipment and debt
payments. Interest income is earned by the Company through the short-term
investment of funds.
Net Income (Loss) Net Loss. Net loss for the year ended June 30, 1999,
was approximately ($2.6) million, or ($0.23) per share (basic and fully diluted
EPS), on 11,184,742 shares as compared to $9.6 million, or $0.86 per share
(basic EPS), for the year ended June 30, 1998, on 11,154,271 shares and $0.84
per share, fully diluted, on 14,571,278 shares. Income tax expense (benefit) for
these periods was ($0.5) million and $2.5 million for the years ended June 30,
1999 and 1998, respectively. As of June 30, 1999, the Company had approximately
$19.7 million of available net operating loss carry-forwards expiring between
2006 and 2019 to offset future regular taxable income
The effects of inflation and changing prices have not significantly
impacted the Company's revenue or income from continuing operations during FY
1999 and 1998.
Fiscal Year Ended June 30, 1998 as Compared to the Fiscal Year Ended June 30,
1997
Revenue. The Company's revenue increased approximately 13% to
approximately $64.1 million for the year ended June 30, 1998 as compared to
$56.6 million for the year ended June 30, 1997. For the year ended June 30,
1998, $39.0 million was recognized from the Mir Contract, $14.3 million from the
REALMS Contract and related commercial customers, and $10.8 million from
Astrotech. Conversely, for the year ended June 30, 1997, $47.1 million was
recognized from the Mir Contract, $8.0 million from the CMAM contract, $4.0
million from the NASDA/ESA contract, and $2.9 million from Astrotech.
Costs of Revenue. Costs of revenue for the year ended June 30, 1998,
increased 4% to $36.3 million, as compared to $35.0 million for the year ended
June 30, 1997. The primary components of costs of revenue for the year ended
June 30, 1998 are $19.2 million for integration and operation costs under the
Mir Contract, $7.8 million for costs under the REALMS Contract and related
commercial customers, $4.4 million for integrations and operations costs at
Astrotech, and depreciation of $4.9 million. In contrast, the primary costs of
revenue for the year ended June 30, 1997 are, $19.3 million of integration and
operation costs under the Mir Contract, $1.0 million under the CMAM Contract,
$3.6 million under the NASDA/ESA Contract, $1.3 million for integrations and
operations costs at Astrotech, and $9.8 million of depreciation. The decrease in
depreciation expense is attributable to the impact of extending the estimated
useful lives of the Company's modules to 2012. This change in accounting
estimate is treated prospectively and is based on current available information
from NASA, which extends the estimated useful life of the Space Shuttle program
to at least 2012.
Operating Expenses. Operating expenses increased by 69% to
approximately $15.1 million for the year ended June 30, 1998, as compared to
approximately $8.9 million for the year ended June 30, 1997. This increase is
due primarily to staff additions, adding strength in engineering, design and
research and development capabilities and the inclusion of a full year of
Astrotech's operating expenses as opposed to approximately four months of
expenses in 1997 subsequent to the acquisition. Research and development costs
for the year ended June 30, 1998 were $4.3 million, as compared to $1.7 million
for the year ended June 30, 1997. The increase is due primarily to the Company's
efforts to develop space related assets including the ICC and the SHUCS, which
is being developed to provide reliable and Shuttle-independent data
communication channels that are responsive to payload user requirements.
Interest Expense. Interest expense was approximately $6.4 million for
the year ended June 30, 1998, as compared with approximately $1.3 million for
the year ended June 30, 1997. The increase in interest expense was due to the
Company's issuance of its Subordinated Convertible Notes due 2007 and interest
costs from the use of a term note. There was also approximately $2.0 million and
$0.3 million of
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<PAGE> 17
interest capitalized during the year ended June 30, 1998, and year ended June
30, 1997, respectively. Interest is capitalized based primarily on the
construction of the Company's research double module and double module hardware.
Interest Income. Interest and other income was approximately $3.9
million and $1.8 million for the years ended June 30, 1998 and 1997,
respectively. This increase is due to interest earned by the Company through the
short-term investment of funds raised by the Company's financing activities.
Net Income. Net income for the year ended June 30, 1998 was
approximately $9.6 million, or $0.86 per share (basic EPS), on 11,154,271 shares
as compared to $13.8 million, or $1.24 per share (basic EPS), for the year ended
June 30, 1997, on 11,118,825 shares. Income tax expense for these periods was
$2.5 million and $3.0 million for the years ended June 30, 1998 and 1997,
respectively. As of June 30, 1998, the Company had approximately $7.9 million of
available net operating loss carry-forwards expiring between 2006 and 2009 to
offset future regular taxable income. Utilization of these net operating loss
carry-forwards may be subject to limitations in the event of significant changes
in the stock ownership of the Company. While there are no restrictions on
transfers or sales of shares of Common Stock that would prevent such a change
from occurring, there is no plan to initiate any such changes on ownership
resulting in the loss of these carry-forwards.
The effects of inflation and changing prices have not significantly
impacted the Company's revenue or income from continuing operations during FY
1998 and 1997.
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 June 30, 1999, no
amounts were drawn on this line of credit that expires in October 1999. In July
1997, Astrotech obtained a five-year term loan (the "Term Loan Agreement"),
which is guaranteed by SPACEHAB, and provides for draws of up to $15.0 million
for general corporate purposes. As of June 30, 1999, the Company had drawn $15.0
million on this loan, $1.0 million of which was drawn in April of 1999, which
had an outstanding balance on that date of $10.1 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 which has been used, in part, for capital
expenditures associated with the development and construction of space related
assets, the purchase of JE, and for general corporate purposes. In December
1998, the Company amended its agreement with Alenia 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 percent to 10 percent on the outstanding balance as of
January 1, 1999, and the interest payment due for the quarter ended December 31,
1998, was waived resulting in an effective interest rate of 8.75 percent. An
amended agreement with the senior debt holders under the Insurers' note requires
that an interest rate of 8.25 percent be applied to the senior debt with an
outstanding balance of $1.0 million as of June 30, 1999.
Subsequent to June 30, 1999, DASA agreed to purchase a $12.0 million equity
stake in SPACEHAB. DASA has agreed to purchase 1.33 million shares of preferred
stock, convertible into common shares on a one for one basis, which will
increase DASA's investment interest in SPACEHAB to approximately 11.5 percent.
Under the agreement DASA purchased all of SPACEHAB's 975,000 authorized and
unissued preferred shares. The other 358,334 shares will be issued upon
shareholder approval of a proposal to increase the number of authorized
preferred shares that will be presented at the next shareholders meeting on
October 14, 1999. No dividends are payable on the preferred shares which are
convertible into common shares on a one-for-one basis.
16
<PAGE> 18
For the period ended June 30, 1999, 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 JE. While the Company had not drawn
against the line of credit, covenant waivers were requested and received, for
the year ended June 30, 1999, from both lending institutions. The Company
believes it will be in compliance with the covenants on a going forward basis.
Cash Flows From Operating Activities. Cash provided by (used for)
operations for the years ended June 30, 1999, 1998 and 1997 was ($6.3) million,
$31.6 million and ($6.0) million, respectively. The significant changes between
1999 and 1998 were; the ($2.6) million loss due primarily to the delay in the
ISS assembly and a ($7.8) million change in deferred flight revenue due to the
decrease in progress payments for the missions under the REALMS Contract and
related commercial customers. Progress payments of $11.8 million were recorded
at the end of 1998 for missions STS-95 and STS-96. Those missions flew in 1999.
The reduction of those progress payments was partially offset by progress
payments for STS-107. The significant change between 1998 and 1997 was caused by
the timing of progress payments received by the Company under its contracts.
Under the Mir Contract, the REALMS Contract and the NASDA/ESA Contracts progress
payments are structured such that expenses incurred under these contracts are
billed as costs are incurred.
Cash Flows Used in Investing Activities. For the years ended June 30,
1999, 1998 and 1997, cash flows used in investing activities were $58.6 million,
$23.1 million and $29.3 million, respectively. Expenditures during the year
ended June 30, 1999 were $24.7 million for the purchase of JE, $27.3 million of
expenditures for the various flight assets including the RDM and ICC system,
$4.2 million for the expansion of both SPACEHAB's payload processing facilities
and Astrotech's payload processing facilities and a $1.4 million investment in
the SpaceDRUMS joint venture. For the years ended June 30, 1998 and 1997, the
major items of investing were for the construction of the RDM, which began in
1997, and the purchase of Astrotech. The Company anticipates that it will spend
approximately $5.7 million in FY 2000, $40.0 million in the aggregate, to
complete the RDM during FY 2000.
The Company expects to continue funding any additional capital
expenditures and working capital requirements from internally generated cash
flow, draw-downs on existing credit facilities and through future debt and/or
equity offerings.
Cash Flows From Financing Activities. For the years ended June 30,
1999, 1998 and 1997, cash flows provided by (used for) financing activities were
($6.0) million, $70.9 million and ($2.6) million, respectively. During the year
ended June 1999, the Company made a principal payment of $4.0 million to Alenia,
paid $2.8 million and borrowed an additional $1.0 million under the Term Loan
Agreement. During the year ended June 30, 1998, the Company received net
proceeds of approximately $14.1 million and made payments of $2.1 million under
the Term Loan Agreement. In October 1997, the Company received net proceeds
after commissions and other expenses of approximately $59.9 million by
completing an offering of $55.0 million of its 8 percent Convertible
Subordinated Notes due 2007 as well as the underwriters' exercise of the
over-allotment for an additional $8.3 million for a total of $63.3 million.
The Company believes that cash flows from the preferred share purchase
by DASA, the Convertible Notes Offering, the Term Loan Agreement, and the
Revolving Line of Credit will be sufficient to meet any cash flow requirements
from operations and other funding requirements for capital asset construction
and development for at least the next twelve months.
RECENT ACCOUNTING PRONOUNCEMENTS
In 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133").
SFAS 133 becomes effective June 15, 2000 and will require the Company to
disclose additional information on its hedging activities. The Company is
reviewing this standard; however, it is not expected that implementing this
Standard will significantly impact the Company.
17
<PAGE> 19
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. SPACEHAB expects that this will be
an on-going activity.
INVENTORY AND RISK ASSESSMENT- This phase involves taking 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 continuing to survey third party vendors to determine
their state of readiness. NASA has informed SPACEHAB that the Space Shuttle, all
onboard systems, shuttle facilities and operations are Y2K compliant.
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 are substantially complete for systems
that are under direct control of SPACEHAB. No assessment of completion dates are
available for those items 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 has been substantially completed by SPACEHAB personnel and personnel of
SPACEHAB's major subcontractor, Boeing.
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.
18
<PAGE> 20
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 are being replaced and the
replacement will be completed 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 submitted to upgrade
those systems during 1999 and work is progressing on the upgrade.
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 the inefficient and antiquated GSE equipment, which costs are estimated
to be $0.8 million. The costs of the Year 2000 program are being expensed as
incurred. Replacement of the GSE equipment will be capitalized. There was no
specific budget in FY 1999 or for FY 2000 for Y2K costs.
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. Potential Y2K impacts from
third parties include the failure of utility companies and power grids and from
the customer owned IT systems that 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. Based on third party responses to date, it appears that no significant
systems will be affected by the Y2K issue. 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."
19
<PAGE> 21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEPENDENT AUDITORS' REPORT
The Board of Directors
SPACEHAB, Incorporated and Subsidiaries:
We have audited the accompanying consolidated balance sheets of
SPACEHAB, Incorporated and subsidiaries (the Company) as of June 30, 1999 and
1998, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the years in the three-year period ended June
30, 1999. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of SPACEHAB,
Incorporated and subsidiaries as of June 30, 1999 and 1998, and the results of
their operations and their cash flows for each of the years in the three-year
period ended June 30, 1999, in conformity with generally accepted accounting
principles.
/s/ KPMG LLP
------------
KPMG LLP
McLean, Virginia
August 13, 1999, except as to note 8
which is as of September 8, 1999
20
<PAGE> 22
SPACEHAB, INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share data)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
June30,
------------------------------
ASSETS 1999 1998
- ------------------------------------------------------------------------------------------ --------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 21,346 $ 92,327
Accounts receivable, net (note 4) 17,471 5,979
Prepaid expenses and other current assets 1,146 550
- ------------------------------------------------------------------------------------------ --------- ---------
Total current assets 39,963 98,856
- ------------------------------------------------------------------------------------------ --------- ---------
Property and equipment:
Flight assets 98,594 95,046
Module improvements in progress 49,553 33,829
Payload processing facilities 23,348 21,755
Furniture, fixtures equipment and leasehold improvements 9,936 5,296
- ------------------------------------------------------------------------------------------ --------- ---------
181,431 155,926
Less accumulated depreciation and amortization (49,247) (43,338)
- ------------------------------------------------------------------------------------------ --------- ---------
Property and equipment, net 132,184 112,588
Goodwill, net of accumulated amortization of $1,339 and $230, respectively 25,498 3,224
Investment in joint venture (note 16) 1,400 --
Other assets, net 5,301 5,936
- ------------------------------------------------------------------------------------------ --------- ---------
Total assets $ 204,346 $ 220,604
- ------------------------------------------------------------------------------------------ --------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Loans payable under credit agreement, current portion (note 6) $ 333 $ 500
Loans payable, current portion (note 8) 3,126 2,824
Accounts payable 3,772 1,075
Accrued expenses 9,409 5,129
Accrued subcontracting services 6,787 13,177
Deferred revenue 4,162 13,491
- ------------------------------------------------------------------------------------------ --------- ---------
Total current liabilities 27,589 36,196
- ------------------------------------------------------------------------------------------ --------- ---------
Loans payable under credit agreement, net of current portion (note 6) 667 1,000
Loans payable, net of current portion (note 8) 7,033 9,177
Convertible notes payable to shareholder (note 7) 7,860 11,895
Convertible subordinated notes payable (note 8) 63,250 63,250
Accrued contract costs 940 --
Deferred income taxes (note 13) 2,842 2,678
- ------------------------------------------------------------------------------------------ --------- ---------
Total liabilities 110,181 124,196
- ------------------------------------------------------------------------------------------ --------- ---------
Commitments and contingencies (notes 1, 11, 15 and 16) Stockholders' equity
(notes 8, 11 and 12):
Common stock, no par value, authorized 30,000,000 shares, issued and
outstanding 11,229,646 and 11,168,161 shares, respectively 81,585 81,239
Additional paid-in capital 16 16
Retained earnings 12,564 15,153
- ------------------------------------------------------------------------------------------ --------- ---------
Total stockholders' equity 94,165 96,408
- ------------------------------------------------------------------------------------------ --------- ---------
Total liabilities and stockholders' equity $ 204,346 $ 220,604
- ------------------------------------------------------------------------------------------ --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
21
<PAGE> 23
SPACEHAB, INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except share data)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended
June 30,1999 June 30,1998 June 30,1997
- ------------------------------------------------------------------------ ------------ ------------ ------------
<S> <C> <C> <C>
Revenue $ 107,720 64,087 $ 56,601
- ------------------------------------------------------------------------ ------------ ------------ ------------
Costs of revenue:
Integration, operations and transportation 69,113 25,762 23,726
Depreciation 5,030 4,923 9,825
Other direct costs 5,334 4,373 569
Indirect costs 9,806 1,263 926
- ------------------------------------------------------------------------ ------------ ------------ ------------
Total costs of revenue 89,283 36,321 35,046
- ------------------------------------------------------------------------ ------------ ------------ ------------
Gross profit 18,437 27,766 21,555
- ------------------------------------------------------------------------ ------------ ------------ ------------
Operating expenses:
Marketing, general and administrative 14,599 10,731 7,193
Research and development 3,636 4,338 1,700
- ------------------------------------------------------------------------ ------------ ------------ ------------
Total operating expenses 18,235 15,069 8,893
- ------------------------------------------------------------------------ ------------ ------------ ------------
Income from operations 202 12,697 12,662
Interest expense, net of capitalized interest (note 3) (4,905) (4,480) (955)
Interest and other income, net 1,615 3,914 1,822
- ------------------------------------------------------------------------ ------------ ------------ ------------
Net income (loss) before income taxes and extraordinary item (3,088) 12,131 13,529
Income tax expense (benefit) (note 13) (499) 2,527 2,971
- ------------------------------------------------------------------------ ------------ ------------ ------------
Net income (loss) before extraordinary item (2,589) 9,604 10,558
Extraordinary item - gain on early retirement of debt, net of
taxes and legal fees (note 6) -- -- 3,274
- ------------------------------------------------------------------------ ------------ ------------ ------------
Net income (loss) $ (2,589) $ 9,604 $ 13,832
- ------------------------------------------------------------------------ ------------ ------------ ------------
Basic earnings (loss) per share:
Net income (loss) before extraordinary item $ (0.23) $ 0.86 $ 0.95
Extraordinary item -- -- 0.29
- ------------------------------------------------------------------------ ------------ ------------ ------------
Net income (loss) per share - basic $ (0.23) $ 0.86 $ 1.24
- ------------------------------------------------------------------------ ------------ ------------ ------------
Shares used in computing net income (loss) per share - basic 11,184,742 11,154,271 11,118,825
- ------------------------------------------------------------------------ ------------ ------------ ------------
Diluted earnings (loss) per share:
Net income (loss) before extraordinary item $ (0.23) $ 0.84 $ 0.95
Extraordinary item -- -- 0.29
- ------------------------------------------------------------------------ ------------ ------------ ------------
Net income (loss) per share - diluted $ (0.23) $ 0.84 $ 1.24
- ------------------------------------------------------------------------ ------------ ------------ ------------
Shares used in computing net income (loss) per share - diluted 11,184,742 14,571,278 11,160,322
- ------------------------------------------------------------------------ ------------ ------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
22
<PAGE> 24
SPACEHAB, INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
(In thousands, except share data)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Common stock Additional Retained Total
--------------------------- paid-in earnings stockholders'
Shares Amount capital (deficit) equity
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1996 11,069,237 $ 79,863 $ 16 $ (8,283) $ 71,596
Common stock issued upon stock option exercises 2,000 24 -- -- 24
Common stock issued upon conversion of debt (note 8) 75,000 1,170 -- -- 1,170
Net income -- -- -- 13,832 13,832
- ---------------------------------------------------- ---------- ---------- ---------- ---------- ----------
Balance at June 30, 1997 11,146,237 81,057 16 5,549 86,622
Common stock issued upon stock option exercises 8,725 60 -- -- 60
Common stock issued under employee stock purchase 13,199 122 -- -- 122
plan
Net income -- -- -- 9,604 9,604
- ---------------------------------------------------- ---------- ---------- ---------- ---------- ----------
Balance at June 30, 1998 11,168,161 81,239 16 15,153 96,408
Common stock issued upon stock option exercises 1,070 8 -- -- 8
Common stock issued under employee stock purchase 60,415 338 -- -- 338
plan
Net income (loss) -- -- -- (2,589) (2,589)
- ---------------------------------------------------- ---------- ---------- ---------- ---------- ----------
Balance at June 30, 1999 11,229,646 $ 81,585 $ 16 $ 12,564 $ 94,165
- ---------------------------------------------------- ---------- ---------- ---------- ---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
23
<PAGE> 25
SPACEHAB, INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended
June 30, 1999 June 30, 1998 June 30, 1997
- ---------------------------------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (2,589) $ 9,604 $ 13,832
Adjustments to reconcile net income (loss) to net cash provided by
(used for) operating activities:
Depreciation and amortization 7,017 5,587 10,185
Amortization of debt placement costs 538 226 --
Gain on early retirement of debt -- -- (4,093)
Interest converted to notes payable -- 670 1,300
Changes in assets and liabilities:
Decrease (increase) in accounts receivable (3,126) (803) 1,843
Increase in prepaid expenses and other current assets (290) (351) (15)
Decrease in deferred mission costs -- 1,439 1,267
Decrease (increase) in other assets (14) (1,980) (258)
Increase (decrease) in deferred flight revenue (7,762) 9,628 (28,051)
Increase (decrease) in accounts payable and --
accrued expenses 345 3,633 (968)
Increase (decrease) in advance billings (1,567) 720 (239)
Increase (decrease) in accrued
subcontracting services 97 553 (798)
Increase in deferred taxes 1,020 2,678 --
- ---------------------------------------------------------------------------- -------- -------- --------
Net cash provided by (used for) operating activities (6,331) 31,604 (5,995)
- ---------------------------------------------------------------------------- -------- -------- --------
Cash flows from investing activities:
Payments for flight assets under construction (27,381) (17,245) (8,443)
Payments for building under construction (871) (3,988) --
Purchases of property, equipment and leasehold improvements (4,222) (1,880) (731)
Purchase of Astrotech, net of cash acquired -- -- (20,134)
Purchase of Johnson Engineering, net of cash acquired (24,745) -- --
Investment in joint venture (1,400) -- --
- ---------------------------------------------------------------------------- -------- -------- --------
Net cash used for investing activities (58,619) (23,113) (29,308)
- ---------------------------------------------------------------------------- -------- -------- --------
Cash flows from financing activities:
Payments of note payable to insurers (500) (500) (2,520)
Payment of debt placement costs -- (3,984) --
Proceeds from issuance of convertible subordinated notes payable -- 63,250 --
Proceeds from note payable 1,000 14,119 --
Payments of note payable (2,842) (2,118) --
Payments of note payable to shareholder (4,035) -- --
Payments of legal fees on early retirement of debt -- -- (110)
Proceeds from exercise of stock options 8 60 24
Proceeds from issuance of common stock, net of expenses 338 122 --
- ---------------------------------------------------------------------------- -------- -------- --------
Net cash provided by (used for) financing activities (6,031) 70,949 (2,606)
- ---------------------------------------------------------------------------- -------- -------- --------
Net increase (decrease) in cash and cash equivalents (70,981) 79,440 (37,909)
Cash and cash equivalents at beginning of year 92,327 12,887 50,796
- ---------------------------------------------------------------------------- -------- -------- --------
Cash and cash equivalents at end of year $ 21,346 $ 92,327 $ 12,887
- ---------------------------------------------------------------------------- -------- -------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
24
<PAGE> 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) DESCRIPTION OF THE COMPANY
SPACEHAB, Incorporated (the Company) is the first company to
commercially develop, own and operate habitable modules that provide
space-based laboratory research facilities and cargo services aboard
the U.S. Space Shuttle system. The Company currently owns and operates
three pressurized laboratory and logistics supply modules, which
significantly enhance the capabilities of the Space Shuttle fleet. The
Company is currently constructing a new research module with associated
double module hardware. The Company's modules are unique to the Space
Shuttle fleet.
To date, the Company has successfully completed thirteen
missions aboard the Space Shuttle and substantially all of the
Company's revenue has been generated under contracts with NASA. The
Company's contracts are subject to periodic funding allocations by
NASA. NASA's funding is dependent on receiving annual appropriations
from the United States government. During the years ended June 30,
1999, 1998 and 1997, approximately 80%, 68% and 88% of the Company's
revenues were generated under U.S. Government contracts.
On February 12, 1997, the Company acquired the assets and
certain of the liabilities of Astrotech Space Operations, L.P.
("Astrotech"), a subsidiary of Northrop Grumman, a provider of
commercial satellite launch processing services and payload processing
facilities in the United States. These services are provided at the
Astrotech facilities in Cape Canaveral, Florida and Vandenberg Air
Force Base in California, and are provided to launch service providers
on a fixed-price basis. Additionally, Astrotech provides management and
consulting services to the Boeing Company for its Sea Launch program at
the Boeing facility in Long Beach, California.
On July 1, 1998, the Company acquired all of the outstanding
shares of capital stock of Johnson Engineering Corporation ("JE"). JE
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 Space Vehicle Mockup
Facility, where astronauts train for both Space Shuttle and ISS
missions. JE also designs and fabricates flight hardware, such as
flight crew equipment and crew quarters' habitability outfitting as
well as providing stowage integration services. JE is also responsible
for configuration management of the ISS.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of
SPACEHAB, Incorporated and its wholly owned subsidiaries Astrotech and
JE. All significant intercompany transactions have been eliminated in
consolidation.
CASH AND CASH EQUIVALENTS
For purposes of its consolidated statements of cash flows, the
Company considers short-term investments with original maturities of
three months or less to be cash equivalents. Cash equivalents are
primarily made up of commercial paper investments recorded at cost,
which approximates market value.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. All furniture,
fixtures and equipment are depreciated using the straight-line method
over the estimated useful lives of the respective assets,
25
<PAGE> 27
which is generally five years. The Company's payload processing
facilities are depreciated using the straight-line method over their
estimated useful lives ranging from sixteen to forty-three years.
Through June 30, 1997, the Company's flight modules were
depreciated over a ten-year period using the straight-line method.
Effective July 1, 1997, the Company extended the estimated useful lives
of its space modules through 2012. This change in accounting estimate
is treated prospectively and was based on then currently available
information from NASA, which estimated the duration of the Space
Shuttle program through at least 2012. As a result of this change in
estimate, the Company's net income increased by $6.2 million for FY
1998.
The Company has adopted Statement of Financial Accounting
Standards No. 121, Accounting for the Impairment of Long-lived Assets
and for Long-lived Assets to be Disposed Of (Statement 121). Statement
121 requires that long-lived assets to be held and used, including
goodwill, be reviewed by the Company for impairment whenever events or
circumstances indicate that the carrying amount of an asset may not be
recoverable. An impairment loss is recognized when the undiscounted net
cash flows associated with the asset are less than the asset's carrying
amount. Impairment losses, if any, are measured as the excess of the
carrying amount of the asset over its estimated fair value.
GOODWILL
The excess of the cost over the fair value of net tangible and
identifiable intangible assets acquired in purchase business
combinations has been assigned to goodwill. Goodwill is being amortized
on a straight-line basis over twenty to twenty-five years.
INVESTMENT IN JOINT VENTURES
The Company generally uses the equity method of accounting for
its investments in, and earnings of, investees. In accordance with the
equity method of accounting, the carrying amount of such an investment
is initially recorded at cost and is increased to reflect the Company's
share of the investee's income and is reduced to reflect the Company's
share of the investee's losses. For those investments for which the
Company has provided substantially all of the investee's funding, the
Company uses the modified equity method of accounting whereby 100% of
the investee's current period earnings or losses are recognized.
STOCK-BASED COMPENSATION
The Company has adopted Statement of Financial Accounting
Standards No. 123, Accounting for Stock-based Compensation (Statement
123), which encourages, but does not require, the recognition of
stock-based employee compensation at fair value. The Company has
elected to continue to account for stock-based employee compensation
using the intrinsic value method as prescribed in Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees, and
related interpretations. Accordingly, compensation cost for options to
purchase common stock granted to employees is measured as the excess,
if any, of the fair value of common stock at the date of the grant over
the exercise price an employee must pay to acquire the common stock.
Warrants to purchase common stock granted to other than
employees as consideration for goods or services rendered are
recognized at fair value.
REVENUE RECOGNITION
Prior to the REALMS contract (note 10), the Company recognized
revenue upon completion of each module flight. Total contract price was
allocated to each flight based on the amount of services the Company
provided on the flight relative to the total services provided for
26
<PAGE> 28
all flights under contract. Obligations associated with a specific
mission, e.g., integration services, were also recognized upon
completion of the mission. Costs directly related to specific missions
were deferred until the respective missions were completed.
For all other contract awards for which the capability to
successfully complete the contract can be reasonably assured and costs
at completion can be reliably estimated at contract inception, revenue
recognition under the percentage-of-completion method is being used
based on costs incurred over the period of the contract. Revenue
provided by Astrotech's payload processing services is recognized
ratably over the occupancy period of the satellite while in the
Astrotech facilities. Revenue provided by JE 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. Changes in estimated costs to complete, provisions for
contract losses and estimated amounts recognized as award fees are
recognized in the period they become known.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred.
INCOME TAXES
The Company recognizes income taxes under the asset and
liability method. Under the asset and liability method, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment
date.
NET INCOME (LOSS) PER SHARE
In December 1997, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 128, Earnings per
Share, (Statement 128). Statement 128 supersedes Accounting Principles
Board Opinion No. 15, Earnings per Share (APB 15) and its related
interpretations, and promulgates new accounting standards for the
computation and manner of presentation of the Company's earnings (loss)
per share. The Company has restated previously reported annual earnings
per share data in accordance with the provisions of Statement 128 (note
14). The Company does not believe that the adoption of Statement 128
had a material impact on the computation or manner of presentation of
its earnings (loss) per share data as currently or previously presented
under APB 15.
Basic earnings (loss) per share are calculated by dividing net
income (loss) by the weighted average number of common shares
outstanding during the period.
The computation of diluted earnings (loss) per share includes
all common stock options and warrants and other common stock, to the
extent dilutive, that potentially may be issued as a result of
conversion privileges, including the convertible subordinated notes
payable (note 8).
COMPREHENSIVE INCOME
During fiscal year 1999, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income ("SFAS No. 130"). SFAS No.
27
<PAGE> 29
130 requires the display of comprehensive income, which includes
unrealized gains or losses on investments and accumulated foreign
currency translation adjustments, if any. There were no such components
of other comprehensive income for the years ended June 30, 1999, 1998
or 1997.
ACCOUNTING ESTIMATES
The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the consolidated financial statements
and the reported amounts of revenue and expenses during the reported
periods. Actual results could differ from these estimates.
RECLASSIFICATIONS
Certain FY 1997 and 1998 amounts have been reclassified to
conform to the fiscal 1999 consolidated financial statement
presentation.
(3) STATEMENTS OF CASH FLOWS - SUPPLEMENTAL INFORMATION
Cash paid for interest costs was approximately $5.4 million,
$3.4 million and $1.3 million for the years ended June 30, 1999, 1998
and 1997, respectively. The Company capitalized interest of
approximately $2.5 million, $2.0 million and $0.3 million during the
years ended June 30, 1999, 1998 and 1997, respectively, related to the
module improvements and building in progress.
The Company paid income taxes of approximately $0.4 million, $19
thousand and $2.4 million for the years ended June 30, 1999, 1998 and
1997, respectively.
During FY 1997, the Company's convertible note payable, with a
carrying value of approximately $1.2 million, was converted into 75,000
shares of common stock (note 8).
28
<PAGE> 30
(4) ACCOUNTS RECEIVABLE
At June 30, 1999 and 1998, accounts receivable consisted of (in
thousands):
<TABLE>
<CAPTION>
1999 1998
- ------------------------------------------------------------------------------------------ ------- -------
<S> <C> <C>
U.S. government contracts:
Billed $ 0,523 $ 452
Unbilled 2,661 3,202
Total U.S. government contracts 13,184 3,654
- ------------------------------------------------------------------------------------------ ------- -------
Commercial contracts:
Billed 3,481 2,277
Unbilled 806 48
- ------------------------------------------------------------------------------------------ ------- -------
Total commercial contracts 4,287 2,325
- ------------------------------------------------------------------------------------------ ------- -------
Total accounts receivable $17,471 $ 5,979
- ------------------------------------------------------------------------------------------ ------- -------
</TABLE>
The Company anticipates collecting substantially all receivables within
one year.
(5) ACQUISITIONS
JOHNSON ENGINEERING
On July 1, 1998, the Company paid approximately $24.7 million,
including transaction costs, to acquire all of the capital stock of JE.
The business combination has been accounted for using the purchase
method under Accounting Principles Board Opinion No. 16, Business
Combinations, (APB Opinion 16). The purchase price has been allocated
to the assets and liabilities acquired based on estimates of fair value
as of the date of acquisition. Based on the allocation of the net
assets acquired, goodwill of approximately $23.4 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):
<TABLE>
<CAPTION>
<S> <C>
Cash $ 0
Prepaid and other current assets 306
Accounts receivable, net 8,366
Inventory 5
Property, plant and equipment, net 446
Other assets 622
Goodwill 23,362
Current liabilities (7,434)
Accrued contract costs (928)
--------
Total purchase price $ 24,745
========
</TABLE>
29
<PAGE> 31
The following represents pro forma combined results of operations for
the prior year as if the acquisition of JE had occurred as of July 1, 1997, (in
thousands, except per share data):
<TABLE>
<CAPTION>
Year ended
June 30, 1998
-------------------------------------------------------------------------- -------------
<S> <C>
Revenue $ 116,266
Gross profit 34,280
Net income 9,251
-------------------------------------------------------------------------- ---------
Net income per common share - basic $ 0.83
Net income per common share - diluted $ 0.82
-------------------------------------------------------------------------- ---------
</TABLE>
ASTROTECH
The Company paid $20.1 million, including transaction costs,
to acquire substantially all of the assets and certain of the
liabilities of Astrotech. The purchase was effective on February 12,
1997. The business combination was accounted for using the purchase
method. The purchase price was allocated to the assets and liabilities
acquired based on estimates of fair value as of the date of
acquisition. Based on the allocation of the net assets acquired,
goodwill of approximately $3.5 million was recorded and is being
amortized on a straight line basis over twenty years.
(6) LOANS PAYABLE UNDER CREDIT AGREEMENT
Prior to an August 1996 amendment, the Company's credit
agreement consisted of a $6.5 million term loan bearing interest at 1
percent per month and a $5.5 million non-interest-bearing term loan
with several insurance companies. In addition, a revolving credit
commitment with a subcontractor and former shareholder provided a
maximum outstanding balance of $6.0 million and bore interest at a rate
of 1 percent per month.
In August 1996, the Company's credit agreement was amended.
Under the amendment, the revolving credit commitment with a
subcontractor and former shareholder was canceled. In exchange for the
full satisfaction of the Company's term loans with the various
insurance companies, the Company paid the insurance companies $2.5
million and agreed to pay an additional $2.0 million under a new
non-interest-bearing term loan. As of June 30, 1999, the remaining
balance due under the term loan is due in installments of $0.33 million
on each of August 1, 1999, 2000 and 2001. As a result of this amended
and restated agreement, the Company recognized an extraordinary gain of
$3.3 million, net of income taxes and other related expenses of $0.8
million and $0.1 million, respectively, during the year ended June 30,
1997.
In conjunction with a payment of certain principal of notes
payable due to Alenia Spazio S.p.A. in December 1998, see note 7, the
annual interest rate on the outstanding balances was amended to be at
8.25 percent per year. Aggregate interest cost incurred on the debts
due under the various credit agreements was approximately $40 thousand
, $0 and $0.1 million for the years ended June 30, 1999, 1998 and 1997
respectively.
(7) NOTES PAYABLE TO SHAREHOLDER
The Company issued subordinated notes for a portion of the
amount due to Alenia Spazio S.p.A. (Alenia), a shareholder, under a
previously completed construction contract for the Company's flight
modules. In December 1998, the Company amended its agreement with
Alenia Spazio S.p.A. relative to the subordinated notes payable with an
outstanding principal balance of $11.9 million due in August 2001. In
exchange for payment of $4.0 million of principal, Alenia agreed to
waive the interest payment due for the quarter ended December 31, 1998
and to reduce
30
<PAGE> 32
the annual interest rate on the subordinated notes from 12 to 10
percent on the outstanding balance as of January 1, 1999. In addition,
Alenia may elect to convert, in whole or part, the remaining principal
amount into SPACEHAB equity, on terms and conditions to be agreed with
SPACEHAB.
The subordinated notes had aggregate outstanding balances of
$7.9 million and $11.9 million at June 30, 1999 and 1998, respectively.
The notes currently bear interest at an annual rate of 10 percent. No
amount of principal or accrued interest on the notes is due until all
amounts under the amended and restated credit agreement due to the
various insurance companies (note 6) are repaid. As such, all principal
payments are due under these notes on August 1, 2001. However, during
fiscal 1998, the Company began paying interest quarterly. The Company
paid $0.4 million of interest during the year ended June 30, 1999 and
intends to continue to pay interest quarterly.
Interest cost converted to additional principal on the notes to
Alenia was approximately $0 and $0.7 million for the years ended June
30, 1999 and 1998, respectively.
(8) OTHER LONG-TERM DEBT
CONVERTIBLE NOTE PAYABLE
On August 12, 1992, the Company issued a subordinated promissory
note to an investment bank in the amount of $0.9 million, carrying
interest at LIBOR plus 3 percent, and maturing six months after the
payment of all other indebtedness due under the amended and restated
credit agreement and the subordinated notes to Alenia. The note was
convertible at the option of the holder into 75,000 shares of the
Company's common stock at any time prior to maturity. On October 25,
1996, the investment bank exercised its option to convert the note into
the Company's common stock.
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. Certain assets of the Company collateralize this
loan. The term of the agreement is through October 1999. Through June
30, 1999, the Company has not drawn against the line of credit.
On July 14, 1997, the Company's subsidiary, Astrotech, entered
into another credit facility for loans of up to $15.0 million with a
financial institution. The term of the agreement is through July 13,
2002. This loan is collateralized by the assets of Astrotech and
certain other assets of the Company, and is guaranteed by the Company.
Interest accrues at LIBOR plus three percent. Principal and interest
are payable on a quarterly basis. In April 1999, the Company borrowed
an additional $1.0 million under this credit facility with the same
terms, conditions and expiration date of the original loan. Principal
payments of $3.1 million are due in FY 2000, 2001, and 2002 and
principal payments of $0.8 million are due in FY 2003. At June 30,
1999, the Company had an outstanding balance of $10.2 million under
this credit facility and accrued interest of $0.2 million.
COVENANT CHANGES
For the period ended June 30, 1999, 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 JE. While
the Company had not drawn against the line of credit, covenant waivers
were requested and received, for the year ended June 30, 1999, from
both lending institutions. The Company believes it will be in
compliance with the covenants on a going forward basis.
31
<PAGE> 33
CONVERTIBLE SUBORDINATED NOTES
In October 1997, the Company completed a private placement
offering for $63.3 million of aggregate principal of unsecured 8
percent 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 and for other general corporate purposes.
(9) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated
fair values of the Company's financial instruments as of June 30, 1999
and 1998 in accordance with Statement of Financial Accounting Standards
No. 107, Disclosures about Fair Value of Financial Instruments (in
thousands):
<TABLE>
<CAPTION>
June 30, 1999 June 30, 1998
-------------------------- --------------------------
Carrying Fair Carrying Fair
amount value amount value
-------------------------------------------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
Financial liabilities:
Loans payable under credit agreement $ 1,000 920 $ 1,500 1,279
Notes payable to shareholder 7,860 7,860 11,895 11,895
Loans payable under credit facility 10,159 10,159 12,001 12,001
Convertible notes payable 63,250 50,600 63,250 68,784
-------------------------------------------- ------------ ------------ ----------- ------------
</TABLE>
The fair value of the Company's long-term debt is based on quoted
market price or is estimated based on the current rates offered to the
Company for debt of similar remaining maturities and other terms. The
carrying amounts of cash and cash equivalents, receivables, and
accounts payable and accrued expenses approximate their fair market
value because of the relatively short duration of these instruments.
(10) NASA CONTRACTS
MIR SPACE STATION CONTRACT
On July 14, 1995, NASA and the Company completed final
negotiations to provide the Company's flight modules and related
integration services over four missions to the Russian Space Station
Mir. The contract was subsequently amended which resulted in a total
contract value of $91.5 million and the addition of three missions.
During the years ended June 30, 1998 and 1997, the Company
recognized $39.0 million and $41.7 million, respectively, of revenue
under the Mir contract. Work under the Mir contract, as amended, was
completed with its final mission in June 1998.
RESEARCH AND LOGISTICS MODULE SERVICES CONTRACT
On December 21, 1997, the Company entered into the Research and
Logistics Module Services (REALMS) Contract to provide to NASA its
flight modules and related integration services over three missions at
an aggregate fixed price of $44.9 million. This contract provides for
NASA to use the flight modules for both science and logistics missions.
During 1999, NASA
32
<PAGE> 34
exercised an additional option mission and change orders thereby
increasing the contract value to $68.2 million.
During the years ended June 30, 1999 and 1998, the Company
recognized $28.2 million and $14.3 million of revenue, respectively,
under this contract.
FLIGHT CREW SYSTEMS DEVELOPMENT CONTRACT ("FCSD")
JE primarily operates under NASA's FCSD Contract which is
currently a $326.3 million multi task cost plus-award and incentive fee
contract. The contract commenced in May 1993 and will conclude in April
2001. NASA has the option to exercise a one year extension. JE 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 Space Vehicle Mockup
Facility, where astronauts train for both Space Shuttle and ISS
missions. JE also designs and fabricates flight hardware, such as
flight crew equipment and crew quarters habitability outfitting as well
as providing stowage integration services. JE is also responsible for
configuration management of the ISS.
(11) STOCKHOLDER RIGHTS PLAN
On March 26, 1999, the Board of Directors adopted a Stockholder
Rights Plan designed to deter coercive takeover tactics and to prevent
a potential acquirer from gaining control of the Company without
offering a fair price to all of the Company's stockholders. A dividend
of one preferred share purchase right (a "Right") was declared on every
share of Common Stock outstanding on April 9, 1999. Each Right under
the Plan entitles the holder to buy one one-thousandth of a share of a
new series of junior participating preferred stock for $35. If any
person or group becomes the beneficial owner of 15 percent or more of
common stock (with certain limited exceptions), then each Right (not
owned by the 15 percent stockholder) will then entitle its holder to
purchase, at the Right's then current exercise price, common shares
having a market value of twice the exercise price. In addition, if
after any person has become a 15 percent stockholder, and is involved
in a merger or other business combination transaction with another
person, each Right will entitle its holder (other than the 15 percent
stockholder) to purchase, at the Right's then current exercise price,
common shares of the acquiring company having a value of twice the
Right's then current exercise price. The rights were granted to each
shareholder of record on April 9, 1999. At any time before a person or
group acquires a 15% position, SPACEHAB generally will be entitled to
redeem the Rights at a redemption price of $0.01 per Right. The Rights
will expire on April 9, 2009.
(12) COMMON STOCK OPTION AND STOCK PURCHASE PLANS
NON-QUALIFIED OPTIONS
Non-qualified options are granted at the sole discretion of the
Board of directors. Prior to the adoption of the 1994 Stock Incentive
Plan (the 1994 Plan), stock options granted to the Company's officers
and employees were part of their employment contract or offer. The
number and price of the options granted was defined in the employment
agreements and such options vest incrementally over a period of four
years and generally expire within ten years of the date of grant.
300,000 options were granted in fiscal year 1999 in connection with the
acquisition of JE.
THE 1994 PLAN
Under the terms of the 1994 Plan, the number and price of the
options granted to employees is determined by the Board of Directors
and such options vest, in most cases, incrementally over a period of
four years and expire no more than ten years after the date of grant.
33
<PAGE> 35
THE DIRECTORS' STOCK OPTION PLAN
Prior to an amendment on October 21, 1997, each nonemployee
member of the Board of Directors was annually granted options to
purchase 5,000 shares of common stock at exercise prices equal to the
fair market value on the date of grant. Subsequent to the amendment,
each nonemployee member of the Board of Directors received a one-time
grant of an option to purchase 10,000 shares of common stock. Further,
each new nonemployee director after the amendment date shall receive a
one-time grant of an option to purchase 10,000 shares. In addition,
effective as of the date of each annual meeting of the Company's
stockholders on or after the effective date, each nonemployee director
who is elected or continues as a member of the Board of Directors of
the Company shall be awarded an option to purchase 5,000 shares of
common stock. Options under the Director's Plan vest after one year and
expire seven years from the date of grant.
1997 EMPLOYEE STOCK PURCHASE PLAN
During the year ended June 30, 1998, the Company adopted an
employee stock purchase plan that permits eligible employees to
purchase shares of common stock of the Company at prices no less than
85 percent of the current market price. Eligible employees may elect to
participate in the plan by authorizing payroll deductions from one
percent to ten percent of gross compensation for each payroll period.
On the last day of each quarter, each participant's contribution
account is used to purchase the maximum number of whole and fractional
shares of common stock determined by dividing the contribution
account's balance by the lesser of 85 percent of the price of a share
of common stock on the first day of the quarter or the last day of a
quarter. The maximum number of shares of common stock that may be
purchased under the plan is 1,500,000. Through June 30, 1999, 73,614
shares have been issued under the plan.
34
<PAGE> 36
STOCK OPTION ACTIVITY SUMMARY
The following table summarizes the Company's stock option plans:
<TABLE>
<CAPTION>
Non-qualified options 1994 Plan Directors' plan
-------------------------- ------------------------- -------------------------
Weighted Weighted Weighted
average average average
Shares exercise Shares exercise Shares exercise
outstanding price outstanding price outstanding price
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at 6/30/96 620,462 12.28 1,000,738 13.35 - -
Granted 14,166 8.88 1,024,751 6.90 50,000 7.00
Exercised - - 2,000 12.00 - -
Forfeited 194,642 12.00 790,266 13.14 - -
- ------------------------------------------------------------------------------------------------------------------
Outstanding at 6/30/97 439,986 12.01 1,233,223 8.20 50,000 7.00
Granted 10,000 10.13 257,338 11.00 145,000 10.92
Exercised - - 3,725 10.02 5,000 10.13
Forfeited 149,941 12.16 8,583 11.96 - -
- ------------------------------------------------------------------------------------------------------------------
Outstanding at 6/30/98 300,045 12.33 1,478,253 8.62 190,000 9.99
Granted 300,000 14.00 572,713 11.69 50,000 7.00
Exercised - - 1,070 9.69 - -
Forfeited 106,241 12.00 140,670 9.16 - -
- ------------------------------------------------------------------------------------------------------------------
Outstanding at 6/30/99 493,804 $13.42 1,909,226 $ 9.50 240,000 $ 9.37
- ------------------------------------------------------------------------------------------------------------------
Options exercisable at:
June 30, 1997 429,720 12.16 819,742 8.49 - -
June 30, 1998 295,978 12.17 983,620 8.55 45,000 7.00
June 30, 1999 191,770 12.39 1,072,121 8.56 190,000 9.99
Weighted-average fair value
at date of grant
during the fiscal
period ended
June 30, 1997 14,166 2.80 1,024,751 2.56 50,000 2.19
June 30, 1998 10,000 4.25 257,338 3.83 145,000 3.43
June 30, 1999 300,000 3.12 572,713 4.50 50,000 2.21
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE> 37
(12) CONTINUED
The following table summarizes information about the Company's
stock options outstanding at June 30, 1999:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
--------------------------------------- --------------------------
Weighted-
average
remaining Weighted- Weighted-
contractual average average
Number life exercise Number exercise
Range of exercise prices outstanding (years) price exercisable price
------------------------------- ----------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$24.00 6,100 3.25 $ 24.00 4,066 $ 24.00
$10.13 - $14.88 1,607,551 5.45 12.30 638,243 12.29
$ 5.75 - $9.88 1,029,379 3.80 6.89 811,582 6.80
------------------------------- ----------- ----------- --------- --------- ---------
$ 5.75 - $24.00 2,643,030 4.80 $ 10.22 1,453,891 $ 9.26
------------------------------- ----------- ----------- --------- --------- ---------
</TABLE>
The Company applies APB Opinion 25 and related interpretations
in accounting for its plans. Accordingly, as all options have been
granted at exercise prices equal to the fair market value as of the
date of grant, no compensation cost has been recognized under these
plans in the accompanying consolidated financial statements. Had
compensation cost been determined consistent with Statement 123, the
Company's net income and earnings per common share would have been
reduced to the pro forma amounts indicated below (in thousands, except
per share data):
<TABLE>
<CAPTION>
Years ended June 30,
-----------------------------------------------------
1999 1998 1997
-------------------------------------------------------------------------------------------------
Net income (loss):
<S> <C> <C> <C>
As reported $ (2,589) $ 9,604 10,558
Pro forma (4,424) 8,772 8,964
-------------------------------------------------------------------------------------------------
Net income (loss) per share - basic:
As reported $ (0.23) $ 0.86 0.95
Pro forma (0.40) 0.79 0.81
-------------------------------------------------------------------------------------------------
</TABLE>
The fair value of each option granted is estimated on the date
of grant using the Black-Scholes option-pricing model with the
following weighted average assumptions used for grants in fiscal years
1999, 1998 and 1997, respectively: 0.0 percent dividend growth;
expected volatility ranging from 35 percent to 40 percent; risk-free
interest rates ranging from 5.68 percent to 6.71 percent; and expected
lives ranging from three to seven years.
The effects of compensation cost as determined under Statement
123 on net income in fiscal years 1999, 1998 and 1997 may not be
representative of the effects on pro forma net income in future
periods.
36
<PAGE> 38
WARRANTS
The Company also has 53,000 currently exercisable warrants
outstanding to purchase the Company's common stock at $9.00 per share,
with an expiration date of June 2002. The fair market value of these
warrants was recognized at issuance. All such warrants were issued at
exercise prices equivalent to, or in excess of, the determined fair
market value of the Company's common stock at the date of issuance.
(13) INCOME TAXES
The components of income tax expense (benefit) from continuing
operations are as follows (in thousands):
<TABLE>
<CAPTION>
Year ended Year ended Year ended
June 30, 1999 June 30, 1998 June 30, 1997
- ---------------------------------------------- ------------- --------------- ---------------
<S> <C> <C> <C>
Current:
Federal $(1,447) -- 2,706
State and local 15 -- 265
- ---------------------------------------------- ------- ------- -------
(1,432) -- 2,971
- ---------------------------------------------- ------- ------- -------
Deferred:
Federal 847 2,148 --
State and local 86 379 --
- ---------------------------------------------- ------- ------- -------
933 2,527 --
- ---------------------------------------------- ------- ------- -------
Income tax expense (benefit) $ (499) 2,527 2,971
- ---------------------------------------------- ------- ------- -------
</TABLE>
During the year ended June 30, 1997, income tax expense of
$819,000 was allocated to the extraordinary gain on early retirement of
debt.
A reconciliation of the expected amount of income tax expense
(benefit), calculated by applying the statutory federal income tax rate
of 34 percent in FY 1999, 1998 and 1997 to income (loss) from
continuing operations before taxes, to the actual amount of income tax
expense (benefit) recognized follows (in thousands):
<TABLE>
<CAPTION>
Years ended
-------------------------------------------------------
June 30, 1999 June 30, 1998 June 30, 1997
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Expected expense (benefit) $ (1,050) 4,241 4,600
Change in valuation allowance 169 (2,058) (2,640)
State income tax (15) 299 1,011
Other non deductibles, primarily goodwill
amortization 397 45 -
--------------------------------------------------------------------------------------------------
Income tax expense $ (499) 2,527 2,971
--------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE> 39
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities as of June 30, 1999 and 1998 are presented below (in
thousands):
<TABLE>
<CAPTION>
1999 1998
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 7,863 $ 3,140
General business credit carryforwards 2,189 2,189
Alternative minimum tax credit carryforwards 3,292 4,905
Capitalized research and development costs 270 452
Other 900 225
--------------------------------------------------------------------------------------------------
Total gross deferred tax assets 14,514 10,911
Less - valuation allowance (169) -
--------------------------------------------------------------------------------------------------
Net deferred tax assets 14,345 10,911
--------------------------------------------------------------------------------------------------
Deferred tax liabilities:
Property and equipment, principally due to
differences in depreciation 16,700 13,364
Other 487 74
--------------------------------------------------------------------------------------------------
Total gross deferred tax liabilities 17,187 13,438
--------------------------------------------------------------------------------------------------
Net deferred tax liabilities $ (2,842) $ (2,527)
--------------------------------------------------------------------------------------------------
</TABLE>
As of June 30, 1998, current deferred tax assets of $151,000 are
included in prepaid expenses and other current assets in the
accompanying balance sheet.
The net changes in the total valuation allowance for the years
ended June 30, 1999, 1998 and 1997 were an increase of $0.2 million and
decreases of $4.7 million and $2.1 million, respectively.
At June 30, 1999, the Company had accumulated net operating
losses of $19.7 million available to offset future regular taxable
income. These operating loss carryforwards expire between the years
2007 and 2019. Utilization of these net operating losses may be subject
to limitations in the event of significant changes in stock ownership
of the Company.
Additionally, the Company has approximately $2.2 million and $3.3
million of research and experimentation and alternative minimum tax
credit carryforwards, respectively, available to offset future regular
tax liabilities. The research and experimentation credits expire
between the years 2000 and 2008; the alternative minimum tax credits
carryforward indefinitely.
In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that some
portion or all of the deferred tax assets are realizable. Management
considers the scheduled reversal of deferred tax liabilities, projected
future taxable income, and tax planning strategies in making this
assessment. Based upon the level of projected future regular taxable
income over the periods, which the deferred tax assets are deductible,
management believes that the Company will realize the benefits of these
deductions. As of June 30, 1999, the Company provided a valuation
allowance of $169 thousand against deferred tax assets. The amount of
the deferred tax assets considered realizable, however, could be
reduced if estimates of future regular taxable income during the
carryforward period are reduced.
38
<PAGE> 40
(14) NET INCOME (LOSS) PER SHARE
In December 1997, the Company adopted the provisions of
Statement of Financial Accounting Standards (SFAS) No. 128, Earnings
Per Share, which established new guidelines for the calculations of
earnings (loss) per share. Earnings (loss) per share for all prior
periods have been restated to reflect the provisions of this Statement.
The following are reconciliations of the numerators and
denominators of the basic and diluted earnings (loss) per share
computations for "income (loss) before extraordinary item" and
"extraordinary item" for the years ended June 30, 1999, 1998 and 1997
(in thousands, except share data):
<TABLE>
<CAPTION>
Per common share Assuming Dilution
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1999
Net loss $ (2,589) $ (2,589)
Net loss, as adjusted $ (2,589) $ (2,589)
- -----------------------------------------------------------------------------------------------------------------------------------
Outstanding common shares 11,184,742 11,184,742
Adjusted shares 11,184,742 11,184,742
- -----------------------------------------------------------------------------------------------------------------------------------
1998
Net income $ 9,604 $ 9,604
Assuming conversion of convertible subordinated notes $ - $ 2,625
- -----------------------------------------------------------------------------------------------------------------------------------
Net income, as adjusted $ 9,604 $ 12,229
- -----------------------------------------------------------------------------------------------------------------------------------
Outstanding common shares 11,154,271 11,154,271
Outstanding stock options -- 269,898
Assuming conversion of convertible subordinated notes -- 3,147,109
- -----------------------------------------------------------------------------------------------------------------------------------
Adjusted shares 11,154,271 14,571,278
- -----------------------------------------------------------------------------------------------------------------------------------
1997
Net income before extraordinary item $ 10,558 $ 10,558
Net income $ 13,832 $ 13,832
- -----------------------------------------------------------------------------------------------------------------------------------
Outstanding common shares 11,118,825 11,118,825
Outstanding stock options -- 14,168
Assuming conversion of convertible notes -- 27,329
- -----------------------------------------------------------------------------------------------------------------------------------
Adjusted shares 11,118,825 11,160,322
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Options and warrants to purchase 899,131 and 792,361 shares of
common stock, at prices ranging from $7.50 to $24.00 per share were
outstanding for the years ended June 30, 1998 and 1997, respectively.
These were not included in the computations of diluted earnings per
share because the options' and warrants' exercise prices were greater
than the average market price of the common shares during the years
ended June 30, 1998 and 1997.
All options and warrants to purchase shares of common stock were
excluded from the computations of diluted earnings (loss) per share for
the year ended June 30, 1999, because the impact of such options and
warrants is anti-dilutive.
(15) EMPLOYEE BENEFIT PLAN
The Company has a defined contribution retirement plan, which
covers all employees and officers. For the years ended June 30, 1999,
1998 and 1997, the Company contributed $0.8 million, $0.1 million and
$0.1 million, respectively, to the plan. The Company has the right, but
not the obligation, to make contributions to the plan in future years
at the discretion of the Company's Board of Directors.
39
<PAGE> 41
(16) COMMITMENTS
INTEGRATION AND OPERATIONS CONTRACTS
On August 13, 1997, the Company initiated a letter agreement
with The Boeing Company, a major subcontractor, for standard
integration and operation services to the Company for future missions
that were not already provided for under its contract for missions to
the Mir Space Station. In August 1998, this letter agreement became a
cost plus incentive fee contract whereby Boeing will provide
integration and operations services required to successfully complete
four research missions (one single module mission and three double
module missions) and five logistics double module missions.
Additionally, there are several tasks that are separately priced to
yield a contract value of up to $42.3 million. As of June 30, 1999,
$16.2 million has been incurred under this commitment.
MODULE CONSTRUCTION CONTRACTS
During fiscal year 1997, the Company entered into a $36.8
million cost-plus-fee contract with Boeing to construct a new research
module with associated double module hardware. The Company has taken
initial delivery of the module and is in the process of completing its
construction which is expected to be completed in the middle of fiscal
year 2000. The Company has incurred approximately $32.9 million in
construction costs through June 30, 1999.
During FY 1999, the Company entered into a $4.6 million letter
agreement with Boeing to initiate activities to support the fabrication
of a double docking module. The letter contract period of performance
is through August 1999. The Company plans to extend the letter
agreement. The Company has incurred $1.0 million in costs through June
30, 1999.
JOINT VENTURE
During June 1998, the Company entered into a joint venture
agreement with Guigne Technologies Limited for the purpose of
developing, fabricating, marketing and sales of SpaceDRUMS(TM)
services. In accordance with the joint venture agreement, the Company
has agreed to contribute, in exchange for a 50 percent interest in
SpaceDRUMS(TM), an aggregate of $2.0 million of working capital to the
joint venture at varying dates and amounts through October 1999. The
Company's contributions will be in the form of an unsecured
non-interest bearing note. Through June 30, 1999, the Company has made
contributions of $1.4 million to the joint venture. During 1999, the
joint venture entered into a $5.0 million contract with the Colorado
School of Mines for the lease of the SpaceDRUMS(TM) facility.
The Company does not have the ability to exclusively control the
operational and financial policies of SpaceDRUMS, although the Company
does exert significant influence and as such is recognizing its
investment in SpaceDRUMS using the modified equity method of
accounting. During the year ended June 30, 1999, SpaceDRUMS had no
revenues and generated a net loss of approximately $0.001 million of
which the Company recognized its proportionate share. SpaceDRUMS has
total assets, total liabilities and total equity as of June 30, 1999:
$3.7 million, $2.3 million and $1.4 million respectively. The carrying
value of the investment in SpaceDRUMS is $1.4 million as of June 30,
1999.
LEASES
The Company is obligated under capital leases for equipment and
noncancelable operating leases for equipment, office space, storage
space, and the land for a payload processing facility. Future minimum
payments under these capital leases and noncancelable operating leases
are as follows (in thousands):
40
<PAGE> 42
<TABLE>
<CAPTION>
Capital Operating
Year ending June 30, leases leases
---------------------------------------------------------------------------------------------------
<S> <C> <C>
2000 $ 87 $ 2,353
2001 57 2,241
2002 28 2,093
2003 18 1,656
2004 and thereafter 17 7,224
---------------------------------------------------------------------------------------------------
207 $ 15,567
=========
Less: amount representing interest between 9% and 12% (50)
--------------------------------------------------------------------------------------
Present value of net minimum capital lease payments $ 157
======================================================================================
</TABLE>
Rent expense for the years ended June 30, 1999, 1998 and 1997,
was approximately $2.2 million, $0.5 million and $0.5 million
respectively.
(17) SEGMENT INFORMATION
The Company adopted SFAS No. 131, "Disclosure about Segments
of an Enterprise and Related Information", as of June 30, 1999. SFAS
No. 131 establishes annual and interim reporting standards for an
enterprise's operating segments.
Based on its organization, the Company operates in three
business segments; Astrotech, JE and SPACEHAB. Astrotech, acquired in
February 1997, provides payload processing facilities to serve the
satellite manufacturing and launch services industry. Astrotech
currently provides launch site preparation of flight ready satellites
to major U.S. space launch companies and satellite manufacturers. JE,
acquired in July 1998, is primarily engaged in providing engineering
services and products to the Federal Government and NASA, primarily
under the Flight Crew Systems Development Contract (FCSD). SPACEHAB was
founded to commercially develop space habitat modules to operate in the
cargo bay of the Space Shuttles. SPACEHAB provides access to the
modules and integration and integration and operations support services
for both NASA and commercial customers.
The Company's chief operating decision maker utilizes both
revenue and income before taxes, including allocated interest based on
the investment in the segment, in assessing performance and making
overall operating decisions and resource allocations. As such, other
income/expense items including taxes and corporate overhead have not
been allocated to the various segments.
The accounting policies of the segments are the same as those
described in the summary of significant accounting policies, see note
2. Information about the Company's segments is as follows:
41
<PAGE> 43
<TABLE>
<CAPTION>
(in thousands)
Fiscal year 1999: Net Depreciation
Pre-Tax Fixed And
Revenue Income (loss) Assets Amortization
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
SPACEHAB $ 39,477 $ (2,925) $ 109,912 $ 5,227
Astrotech 9,845 (505) 20,625 1,164
Johnson Engineering 58,398 342 1,647 1,164
--------------------------------------------------------------------
$107,720 $ (3,088) $ 132,184 $ 7,555
</TABLE>
<TABLE>
<CAPTION>
Fiscal year 1998: Net Depreciation
Pre-Tax Fixed And
Revenue Income Assets Amortization
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
SPACEHAB $ 53,262 $ 10,308 $ 92,815 $ 4,639
Astrotech 10,825 1,823 19,773 1,174
Johnson Engineering - - - -
--------------------------------------------------------------------
$ 64,087 $ 12,131 $ 112,588 $ 5,813
</TABLE>
<TABLE>
<CAPTION>
Fiscal year 1997: Net Depreciation
Pre-Tax Fixed And
Revenue Income Assets Amortization
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
SPACEHAB $ 53,741 $ 13,070 $ 74,620 $ 9,806
Astrotech 2,860 459 16,341 379
Johnson Engineering - - - -
--------------------------------------------------------------------
$ 56,601 $ 13,529 $ 90,961 $ 10,185
</TABLE>
(18) SUBSEQUENT EVENT
On August 2, 1999, DaimlerChrysler Aerospace AG (Dasa), a
shareholder, purchased an additional $12.0 million equity stake in
SPACEHAB representing 1,333,334 shares of Series B Senior Convertible
Preferred Stock. Under the agreement, Dasa purchased all of SPACEHAB's
975,000 authorized and unissued shares of preferred stock. The other
358,334 shares of Series B Senior Convertible Preferred Stock will be
issued upon shareholder approval of a proposal to increase the number
of authorized shares of preferred stock that will be presented at the
next stockholders meeting scheduled for October 14, 1999. The preferred
stock purchase will increase Dasa's investment interest in SPACEHAB to
approximately 11.5 percent. The Series B Senior Convertible Preferred
Stock is: convertible at the holders' option on the basis of one share
of Preferred Stock for one share of common stock, entitled to vote on
an "as converted" basis the equivalent number of shares of common stock
and has preference in liquidation, dissolution or winding up of $9.00
per preferred share. No dividends are payable on the convertible
preferred shares.
42
<PAGE> 44
(19) SUMMARY OF SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of selected quarterly financial data
for the previous three fiscal periods (in thousands, except per share
data):
<TABLE>
<CAPTION>
Three months ended
--------------------------------------------------------------
September 30 December 31 March 31 June 30
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year ended June 30, 1999
Revenue $ 28,273 23,634 26,693 29,120
Income (loss) from operations 2,151 (2,007) 338 (280)
Net income (loss) 413 (1,851) (541) (610)
Net income (loss) per share - 0.04 (0.17) (0.05) (0.05)
basic
Net income (loss) per share - 0.04 (0.17) (0.05) (0.05)
diluted
-----------------------------------------------------------------------------------------------------
Year ended June 30, 1998
Revenue $ 2,537 17,756 18,997 24.797
Income (loss) from operations (5,685) 5,833 5,214 7,335
Net income (loss) (5,654) 5,727 4,891 4,640
Net income (loss) per share - (0.51) 0.51 0.44 0.42
basic
Net income (loss) per share - (0.51) 0.43 0.37 0.35
diluted
----------------------------------------------------------------------------------------------------
Year ended June 30, 1997
Revenue $ 113 22,992 15,031 18,465
Income (loss) from operations (6,171) 12,148 3,914 2,771
Net income (loss) before (7,074) 11,060 3,207 3,365
extraordinary item
Net income (loss) (3,800) 11,060 3,207 3,365
Net income (loss) per share - (0.34) 1.00 0.29 0.30
basic
Net income (loss) per share - (0.34) 0.99 0.29 0.28
diluted
----------------------------------------------------------------------------------------------------
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this item will be contained in the
Company's definitive Proxy Statement for its 1999 annual meeting of stockholders
and is hereby incorporated by reference thereto.
43
<PAGE> 45
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item will be contained in the
Company's definitive Proxy Statement for its 1999 annual meeting of stockholders
and is hereby incorporated by reference thereto.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item will be contained in the
Company's definitive Proxy Statement for its 1999 annual meeting of stockholders
and is hereby incorporated by reference thereto.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item will be contained in the
Company's definitive Proxy Statement for its 1999 annual meeting of stockholders
and is hereby incorporated by reference thereto.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of the report:
1. Financial Statements.
The following consolidated financial statements of SPACEHAB,
Incorporated and subsidiary and related notes, together with the report
thereon of KPMG LLP, the Company's independent auditors, are set forth
herein as indicated below.
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of KPMG LLP, Independent Public Accountants............................... 23
Consolidated Balance Sheets ..................................................... 24
Consolidated Statements of Operations ........................................... 25
Consolidated Statements of Stockholders' Equity ................................. 26
Consolidated Statements of Cash Flows............................................ 27
Notes to Consolidated Financial Statements....................................... 28
</TABLE>
2. Financial Statement Schedules.
All financial statement schedules required to be filed in Part IV, Item
14(a) have been omitted because they are not applicable, not required,
or because the required information is included in the financial
statements or notes thereto.
3. Exhibits.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
<S> <C>
3.1* Amended and Restated Articles of Incorporation of the Company.
3.2* Amended and Restated By-Laws of the Company.
4.1++ Designation of Rights, Terms and Preferences of Series B Senior
Convertible Preferred Stock of the Registrant.
4.2++ Preferred Stock Purchase Agreement between the Registrant and
DaimlerChrysler Aerospace AG dated as of August 2, 1999.
4.3++ Registration Rights Agreement between the Registrant and
DaimlerChrysler Aerospace AG dated as of August 5, 1999.
</TABLE>
44
<PAGE> 46
<TABLE>
<S> <C>
4.4+ Rights Agreement, dated as of March 26, 1999, between the Registrant
and American Stock Transfer & Trust Company. The Rights Agreement
includes the Designation of Rights Terms and Preferences of Series A
Junior Preferred Stock as Exhibit A, the form of Rights Certificate
as Exhibit B and the Summary of Rights as Exhibit C.
10.3* Cost Plus Incentive Fee Contract (Number SHB 1009), dated November
23, 1994, between the Registrant and McDonnell Douglas (including
the amendments thereto) (the "Mir Contract").
10.6* Amended and Restated Representation Agreement, dated August 15,
1995, by and between the Registrant and Mitsubishi Corporation.
10.7* Letter Agreement dated August 15, 1995, by and between the
Registrant and Mitsubishi Corporation.
10.12*** Amended and Restated Credit Agreement, dated August 20, 1996 among
the Registrant, the Insurers listed therein and the Chase Manhattan
Bank (National Association), as agent.
10.13* SPACEHAB, Incorporated 1995 Directors' Stock Option Plan.
10.16* Agreement of Sublease, dated April 9, 1991, by and between Eastern
American Teak Corporation and the Registrant (land lease for Cape
Canaveral, Florida facility).
10.23** Employment and Non-Interference Agreement, dated December 27, 1995,
between the Company and Nelda J. Wilbanks.
10.24** Employment and Non-Interference Agreement, dated December 27, 1995,
between the Company and M. Dale Steffey.
10.27** Indemnification Agreement, dated December 27, 1995, between the
Company and Dr. Shelley A. Harrison.
10.28** Indemnification Agreement, dated December 27, 1995, between the
Company and Dr. Edward E. David, Jr.
10.30** Indemnification Agreement, dated December 27, 1995, between the
Company and Robert A. Citron.
10.31** Indemnification Agreement, dated December 27, 1995, between the
Company and Alvin L. Reeser.
10.32** Indemnification Agreement, dated December 27, 1995, between the
Company and James R. Thompson.
10.34** Indemnification Agreement, dated December 27, 1995, between the
Company and Dr. Brad S. Meslin.
10.35** Indemnification Agreement, dated December 27, 1995, between the
Company and Chester M. Lee.
10.36** Indemnification Agreement, dated December 27, 1995, between the
Company and David A. Rossi.
10.37** Indemnification Agreement, dated December 27, 1995, between the
Company and Dr. Shi H. Huang.
</TABLE>
45
<PAGE> 47
<TABLE>
<S> <C>
10.38** Indemnification Agreement, dated December 27, 1995, between the
Company and Nelda J. Wilbanks.
10.39** Indemnification Agreement, dated December 27, 1995, between the
Company and M. Dale Steffey.
10.41** Indemnification Agreement, dated December 27, 1995, between the
Company and Dr. Udo Pollvogt.
10.43** Indemnification Agreement, dated December 27, 1995, between the
Company and Hironori Aihara.
10.49*// Cost Plus Fee Contract (Number SHB 1013), dated July 31, 1997,
between the Registrant and McDonnell Douglas Corporation, McDonnell
Douglas Aerospace Huntsville Division (the "Research Double Module
Contract").
10.52*// Office Building Lease Agreement, dated October 6, 1993, between
Astrotech and the Secretary of the Air Force (Lease number SPCVAN -
2-94-001).
10.54*// Loan and Security Agreement, dated June 16, 1997, between the
Registrant, Astrotech and First Union National Bank (formerly known
as Signet Bank) (the "Revolving Credit Agreement").
10.55*// Loan and Security Agreement, dated July 14, 1997, between Astrotech
and the CIT Group/Equipment Financing, Inc. (the "Term Loan
Agreement").
10.57*// Employment and Non-Interference Agreement, dated April 10, 1997,
between the Company and John M. Lounge.
10.58*// Indemnification Agreement, dated October 22, 1996, between the
Company and John M. Lounge.
10.69*/// ESA Contract, Dated October 10, 1997, between the Registrant and
Intospace GmbH (the "ESA Contract").
10.70*//// NAS 9-97199, dated December 21, 1997, between the Registrant and
NASA (the "REALMS Contract").
10.72*//// Employment Agreement and Non-Interference Agreement dated January
15, 1998, between the Company and Chester M. Lee.
10.73*//// Employment Agreement and Non-Interference Agreement dated January
15, 1998, between the Company and David A. Rossi.
10.74*//// Amendment number 1 to Loan and Security Agreement dated December 31,
1997, between the Company and First Union National Bank.
10.75*///// STS-95 Agreement A, dated December 20, 1997, between the Registrant
and Mitsubishi Corporation.
10.76*///// STS-95 Agreement B, dated March 18, 1998, between the Registrant and
Mitsubishi Corporation.
10.77*///// NHK Contract, dated May 8, 1998, between the Registrant and
Mitsubishi Corporation.
</TABLE>
46
<PAGE> 48
<TABLE>
<S> <C>
10.78*///// SHB98001, dated January 31, 1998, between the Registrant and RSC
Energia
10.79*///// SHB98002, dated February 11, 1998, between the Registrant and
Daimler-Benz Aerospace, Space Infrastructure Division
10.80*///// CSA Contract, dated May 21, 1998, between the Registrant and the
Canadian Space Agency.
10.81*///// Gemini Office Building Lease Agreement, dated January 14, 1998,
between the Registrant and Puget of Texas
10.82*///// SHB98006, dated July 8, 1998, between the Registrant and
Daimler-Benz Aerospace AG, Raumfahrt-Infrastuktur
10.84*///// Capital Office Park Lease as amended, dated April 23, 1998, between
Astrotech and Eleventh Springhill Lake Associates L.L.P.
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.
10.90 SPACEHAB, Incorporated 1994 Stock Incentive Plan (as amended and
restated effective October 21, 1997).
10.91 Employment and Non-Interference Agreement, dated March 1, 1999,
between the Company and Mark Kissman.
10.92 Employment and Non-Interference Agreement, dated March 1, 1999,
between the Company and Michael Kearney.
10.93 Contract No. NAS 9-18800 between NASA and Johnson Engineering dated
April 28, 1993.
10.94 Cost Plus Incentive Fee Contract No. SHB 1014 dated August 14, 1997
between the Boeing Company and the Registrant.
10.95 Amended and Restated Employment and Non-Interference Agreement,
dated April 1, 1997, between the Company and Dr. Shelly A. Harrison,
amended and restated as of January 15, 1999.
10.96 European Marketing Agreement between Intospace GmbH and the
Registrant dated June 12, 1998.
10.97 Lease for property at 555 Forge River Dr. Suite #150, Webster, TX
between Johnson Engineering and CD UP LP a wholly-owned subsidiary
of Carey Diversified LLC,
</TABLE>
47
<PAGE> 49
<TABLE>
<S> <C>
successor in interest to J.A. Billip Development Corporation dated
April 30, 1993, as amended.
10.98 Lease for property at 18100 Upper Bay Road, Suite #208, Houston, TX
between Johnson Engineering Corporation and Nassau Development
Company, dated February 19, 1998.
10.99 Lease for property at 920, 926 and 928 Gemini Ave., Houston, TX
under Standard Commercial Lease between Johnson Engineering
Corporation and Lakeland Development dated February 1, 1998.
10.100 Lease for property at 300 D Street, SW, Suite #814, Washington, DC,
between the Registrant and The Washington Design Center, LLC dated
December 16, 1998.
10.101 Lease for property at 16850 Titan, Houston, TX between Johnson
Engineering Corporation and Computer Extension Systems, Inc. dated
August 1, 1999.
10.102 Agreement of Sale and Purchase of Leasehold Interest between Eastern
American Technologies Corporation and Spacehab, Incorporated dated
August 1997.
11. Statement regarding Computation of Per Share Earnings.
21.*// Subsidiary of the Registrant.
23. Con sent of KPMG LLP.
27. Financial Data Schedule.
* Incorporated by reference to the Registrant's Registration Statement
on Form S-1 (File No. 33-97812) and all amendments thereto,
originally filed with the Securities and Exchange Commission on
October 5, 1995.
** Incorporated by reference to the Registrant's Report on Form 10-Q
for the quarter ended December 31, 1995, filed February 14, 1996.
*** Incorporated by reference to the Registrant's Report on Form 10-K
for the fiscal year ended June 30, 1996, filed with the Securities
and Exchange Commission on September 17, 1996.
**** Incorporated by reference to the Registrant's Annual Report on Form
10-K/A for the year ended June 30, 1996, filed with the Securities
and Exchange Commission on December 20, 1996.
***** Incorporated by reference to the Registrant's Report on Form 10-Q/A
for the quarter ended September 30, 1996, filed with the Securities
and Exchange Commission on December 20, 1996.
*/ Incorporated by reference to the Registrant's Report on Form 8-K
filed with the Securities and Exchange Commission on February 27,
1997.
*// Incorporated by reference to the Registrant's Report on Form 10-K
for the fiscal year ended June 30, 1997, filed with the Securities
and Exchange Commission on September 12, 1997.
</TABLE>
48
<PAGE> 50
<TABLE>
<S> <C>
*/// Incorporated by reference to the Registrant's Report on Form
10-Q for the quarter ended September 30, 1997, filed November 6,
1997.
*//// Incorporated by reference to the Registrant's Report on Form 10-Q
for the quarter ended December 31, 1997, filed February 5, 1998.
*///// Incorporated by reference to the Registrant's Report on Form 10-K
for the fiscal year ended June 30, 1998, filed with the Securities
and Exchange Commission on September 17, 1998.
+ Incorporated by reference to the Registrant's Report on Form 8-K
filed with the Securities and Exchange Commission on April 1, 1999.
++ Incorporated by reference to the Registrant's Report on Form 8-K
filed with the Securities and Exchange Commission on August 19,
1999.
+++ Incorporated by reference to the Registrant's Report on Form 10-Q
for the quarter ended December 31, 1998.
(b) The following Reports on Form 8-K were filed by the Registrant
during the period covered by this report.
1. Report on Form 8-K filed on April 1, 1999 disclosing the
Registrant's adoption of its Stockholder Rights Plan.
2. Report on Form 8-K on July 13, 1998 disclosing the
Registrant's acquisition of all the outstanding shares
of capital stock of Johnson Engineering Corporation, a
Colorado corporation.
</TABLE>
49
<PAGE> 51
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, hereunto duly authorized.
SPACEHAB, Incorporated
By: /s/ Dr. Shelley A. Harrison
---------------------------
Dr. Shelley A. Harrison
Chairman of the Board and
Chief Executive Officer
Date: September 16, 1999
By: /s/ Mark A. Kissman
---------------------------
Mark A. Kissman
Vice President of Finance and Chief
Financial Officer
Date: September 16, 1999
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below by the following persons on behalf of this
registrant in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ Hironori Aihara Director September 16, 1999
- ------------------------------------
Hironori Aihara
/s/ Robert A. Citron Director September 16, 1999
- ------------------------------------
Robert A. Citron
Dr. Edward E. David, Jr. Director September 16, 1999
- ------------------------------------
Dr. Edward E. David, Jr.
/s/ Dr. Shi H. Huang Director September 16, 1999
- ------------------------------------
Dr. Shi H. Huang
/s/ Chester M. Lee Director September 16, 1999
- ------------------------------------
Chester M. Lee
/s/ Dr. Brad M. Meslin Director September 16, 1999
- ------------------------------------
Dr. Brad M. Meslin
/s/ Gordon S. Macklin Director September 16, 1999
- ------------------------------------
Gordon S. Macklin
Josef Kind Director September 16, 1999
- ------------------------------------
Josef Kind
/s/ Alvin L. Reeser Director September 16, 1999
- ------------------------------------
Alvin L. Reeser
</TABLE>
50
<PAGE> 52
<TABLE>
<S> <C> <C>
/s/ James R. Thompson Director September 16, 1998
- ------------------------------------
James R. Thompson
Guiseppe Viriglio Director September 16, 1998
- ------------------------------------
Guiseppe Viriglio
</TABLE>
51
<PAGE> 1
EXHIBIT 10.90
SPACEHAB, INCORPORATED
1994 STOCK INCENTIVE PLAN
(as amended and restated effective October 14, 1999)
1
<PAGE> 2
SPACEHAB INCORPORATED
1994 STOCK INCENTIVE PLAN
(as amended and restated effective October 14, 1999)
SECTION 1. PURPOSE
The purpose of the SPACEHAB, Incorporated 1994 Stock Incentive
Plan (the "Plan") is to enable SPACEHAB, Incorporated (the "Company") and its
subsidiaries (as defined below) to provide a select group of employees the
opportunity to acquire a proprietary interest in the company and to benefit from
the appreciation in the value of its common shares and thereby to enhance the
ability of the company to attract and retain employees of exceptional ability
who, by their participation in the Plan, will have a greater incentive to
contribute to the company's long-term success and growth. For purposes of the
Plan, a "subsidiary" means any subsidiary corporation as defined in Section
424(f) of the Internal Revenue Code of 1986, as amended, (the "Code").
SECTION 2. TYPES OF AWARDS
2.1. Awards under the Plan may be in the form of (i) incentive stock
options or non-qualified stock options ("Stock Options"); (ii) Stock
Appreciation Rights; (iii) Restricted Stock; (iv) Performance Shares; (v) Loans;
and/or (vi) Tax Offset Payments.
2.2. An eligible employee may be granted one or more types of awards,
which may be independent or granted in tandem. If two awards are granted in
tandem the employee may exercise (or otherwise receive the benefit of) one award
only to the extent he or she relinquishes the tandem award.
SECTION 3. ADMINISTRATION
3.1. The Plan shall be administered by the Compensation Committee of
the Company's Board of Directors (the "Board") or such other committee of
directors as the Board shall designate (the "Committee"), which shall consist of
two or more directors who are "non-employee directors" within the meaning of
Rule 16B-3 ("Rule 16b-3") promulgated under the Securities Exchange Act of 1934,
as amended (the "Act"), and who are "outside directors" within the meaning of
Section 162(m) of the Code.
3.2. The Committee shall have the authority to grant awards to eligible
employees under the Plan; to adopt, alter and repeal such administrative rules,
guidelines and practices governing the Plan as it shall deem advisable; to
interpret the terms and provisions of the Plan and any award granted under the
Plan; and to otherwise supervise the administration of the Plan. In particular,
and without limiting its authority and powers, the Committee shall have the
authority:
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(a) to determine whether and to what extent any award
or combination of awards will be granted hereunder, including whether any awards
will be granted in tandem with each other;
(b) to select the employees to whom awards will be
granted;
(c) to determine the number of shares of the common
stock of the Company (the "Stock") to be covered by each award granted
hereunder;
(d) to determine the terms and conditions of any
award granted hereunder, including, but not limited to, any vesting or other
restrictions based on performance and such other factors as the Committee may
determine, and to determine whether the terms and conditions of the award are
satisfied;
(e) to determine the treatment of awards upon an
employee's retirement, disability, death, termination for cause or other
termination of employment;
(f) to determine pursuant to a formula or otherwise
the fair market value of the stock on a given date; provided, however, that if
the Committee fails to make such a determination, fair market value shall, in
the event the Stock is traded on a national exchange, mean the closing sale
price of the Stock on a given date;
(g) to determine whether the amount of any dividends
declared with respect to the number of shares covered by an award (i) will be
paid to the employee currently or (ii) will be deferred and deemed to be
reinvested or (iii) will otherwise be credited to the employee, or that the
employee has no rights with respect to such dividends;
(h) to determine whether to what extent, and under
what circumstances Stock and other amounts payable with respect to an award will
be deferred either automatically or at the election of an employee, including
providing for and determining the amount (if any) of deemed earnings on any
deferred amount during any deferral period;
(i) to provide that the shares of Stock received as a
result of an award shall be subject to a right of first refusal, pursuant to
which the employee shall be required to offer to the Company any shares that the
employee wishes to sell, subject to such terms and conditions as the Committee
may specify;
(j) to amend the terms of any award, prospectively or
retroactively; provided, however, that no amendment shall impair the rights of
the award holder without his or her consent;
(k) to substitute new Stock Options for previously
granted Stock Options, or for options granted under other plans, in each case
including previously granted options having higher option prices; and
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(l) to allow an option holder to exercise his or her
option prior to its expiration and pay for the acquired shares with currently
owned shares, while at the same time receiving replacement options, at the then
current market price, for the same remaining term as the option exercised.
3.3. All determinations made by the Committee pursuant to the
provisions of the Plan shall be final and binding on all persons, including the
Company and Plan participants.
3.4. The Committee may from time to time delegate to one or
more officers of the Company any or all of its authority granted hereunder
except with respect to awards granted to persons subject to Section 16 of the
Act. The committee shall specify the maximum number of shares that the officer
or officers to whom such authority is delegated may award.
SECTION 4. STOCK SUBJECT TO PLAN
4.1. The total number of shares of Stock reserved and
available for distribution under the Plan shall be 3,950,000 (subject to further
adjustment as provided below). Such shares may consist of authorized but
unissued shares or treasury shares. The exercise of a Stock Appreciation Right
for cash, the payment of any other award in cash shall not count against this
share limit.
4.2. To the extent an option terminates without having been
exercised, or an award terminates without the employee having received payment
of the award, or shares awarded are forfeited, the shares subject to such award
shall again be available for distribution in connection with future awards under
the Plan. At no time will the number of shares issued under the Plan plus the
number of shares covered by outstanding awards under the Plan exceed the number
of shares authorized under the Plan.
4.3. In the event of any merger, reorganization,
consolidation, sale of substantially all assets, recapitalization, Stock
dividend, Stock split, spin-off, split-up, split-off, distribution of assets or
other change in corporate structure affecting the Stock, a substitution or
adjustment, as may be determined to be appropriate by the Committee in its sole
discretion shall be made in the aggregate number of shares reserved for issuance
under the Plan, the number of shares subject to outstanding awards and the
amounts to be paid by employees or the Company, as the case may be, with respect
to outstanding awards.
4.4. The number of shares of Stock underlying Stock Options or
free-standing Stock Appreciation Rights that may be granted under the Plan to
any one participant during any one calendar year shall not exceed 200,000
shares, subject to adjustment in the same manner as provided in subsection 4.3
above. To the extent required for exemption under Section 162(m) of the Code,
any Stock Options or Stock
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Appreciation Rights that are canceled or repriced shall not again be available
for grant under this maximum share limit.
SECTION 5. ELIGIBILITY
Officers and other key employees and consultants of the
Company or a subsidiary are eligible to be granted awards under the Plan. A
director of the Company or a subsidiary who is not also an employee of the
Company or a subsidiary will not be eligible to be granted awards under the
Plan. The participants under the Plan shall be selected from time to time by the
Committee, in its sole discretion, from among those eligible employees.
SECTION 6. STOCK OPTIONS
6.1. The Stock Options awarded under the Plan may be of two
types: (i) Incentive Stock Options within the meaning of Section 422 of the Code
or any successor provision thereto; and (ii) Non-Qualified Stock Options. To the
extent that any Stock Option does not qualify as an Incentive Stock Option, it
shall constitute a Non-Qualified Stock Option.
6.2. Subject to the following provisions, Stock Options
awarded under the Plan shall be in such form and shall have such terms and
conditions as the Committee may determine:
(a) Option Price. The option price per share of Stock
purchasable under a Stock Option shall be determined by the Committee.
(b) Option Term. The term of each Stock Option shall
be fixed by the Committee.
(c) Exercisability. Stock Options shall be
exercisable at such time or times and subject to such terms and conditions as
shall be determined by the Committee. If the Committee provides that any Stock
Option is exercisable only in installments, the Committee may waive such
installment exercise provisions at any time in whole or in part.
(d) Method of Exercise. Stock Options may be
exercised in whole or in part at any time during the option period by giving
written notice of exercise to the Company specifying the number of shares to be
purchased, accompanied by payment of the purchase price. Payment of the purchase
price shall be made in such manner as the Committee may provide in the award,
which may include cash (including cash equivalents), delivery of shares of Stock
already owned by the optionee or subject to awards hereunder through the
delivery of irrevocable instructions to a broker to deliver promptly to the
Company an amount equal to the purchase price, or by any other manner permitted
by law and determined by the Committee, or any combination of the foregoing. The
Committee may provide that all or part of the shares received upon the exercise
of a
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Stock Option which are paid for using Restricted Stock or Performance Shares
shall be restricted or deferred in accordance with the original terms of the
award in question. The Committee shall determine acceptable methods for
providing notice of exercise for tendering shares of Stock and for delivery of
irrevocable instructions to a broker and may impose such limitations and
prohibitions on the use of Stock or irrevocable instructions to a broker to
exercise as it deems appropriate.
(e) No Shareholder Rights. An optionee shall have
neither rights to dividends or other rights of a shareholder with respect to
shares subject to a Stock Option until the Optionee has given written notice of
exercise and has paid for such shares.
(f) Surrender Rights. The Committee may provide that
options may be surrendered for cash upon any terms and conditions set by the
Committee.
(g) Non-transferability. No Stock Option shall be
transferable by the optionee other than by will or by the laws of descent and
distribution. During the optionee's lifetime, all Stock Options shall be
exercisable only by the optionee.
(h) Termination of Employment. If an optionee's
employment with the Company or a subsidiary terminates by reason of death,
disability, retirement, voluntary or involuntary termination or otherwise, the
Stock Option shall be exercisable to the extent determined by the Committee. The
Committee may provide that, notwithstanding the option term fixed pursuant to
Section 6.2(b), a Stock Option which is outstanding on the date of an optionee's
death shall remain outstanding for an additional period after the date of such
death.
6.3. Notwithstanding the provision of Section 6.2, no
Incentive Stock Option shall (i) have an option price which is less than 100% of
the fair market value of the Stock on the date of the award of the Stock Option,
(ii) be exercisable more than ten years after the date such Incentive Stock
Option is awarded or (iii) be awarded more than ten years after the effective
date of the Plan. No Incentive Stock Option shall be granted to an employee who,
at the time the option is granted, owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company or of its
subsidiary, unless the option price, at the time of the award, is at least 110%
of the fair market value of the stock subject to the option and such option is
not exercisable after the expiration of five years from the date of the award.
SECTION 7. STOCK APPRECIATION RIGHTS
7.1. A Stock Appreciation Right shall entitle the holder
thereof to receive payment of an amount, in cash, shares of Stock or a
combination thereof, as determined by the Committee, equal in value to the
excess of the fair market value of the shares as to which the award is granted
on the date of exercise over an amount specified by the Committee. Any such
award shall be in such form and shall have such terms and conditions as the
Committee may determine.
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7.2. The Committee may provide that a Stock Appreciation Right
may be exercised only within a 60-day period following occurrence of a Change of
Control (as defined in Section 15.2). The Committee may also provide that in the
event of a Change of Control the amount to be paid upon the exercise of a Stock
Appreciation Right shall be based on the Change of Control Price (as defined in
Section 15.3).
SECTION 8. RESTRICTED STOCK
Subject to the following provisions, all awards of Restricted
Stock shall be in such form and shall have such terms and conditions as the
Committee may determine:
(a) The Restricted Stock award shall specify the
number of shares of Restricted Stock to be awarded, the price, if any, to be
paid by the recipient of the Restricted Stock and the date or dates on which, or
the conditions upon the satisfaction of which, the Restricted Stock will vest.
The vesting of Restricted Stock may be conditioned upon the completion of a
specified period of service with the Company or a subsidiary, upon the
attainment of specified performance goals or upon such other criteria as the
Committee may determine.
(b) Stock certificates representing the Restricted
Stock awarded to an employee shall be registered in the employee's name, but the
Committee may direct that such certificates shall be held by the Company on
behalf of the employee. Except as may be permitted by the Committee, no share of
Restricted Stock may be sold, transferred, assigned, pledged or otherwise
encumbered by the employee until such share has vested in accordance with the
terms of the Restricted Stock award. At the time Restricted Stock vests, a
certificate for such vested shares shall be delivered to the employee (or his or
her designated beneficiary in the event of death), free of all restrictions.
(c) The Committee may provide that the employee shall
have the right to vote or receive dividends on Restricted Stock. The Committee
may provide that Stock received as a dividend on, on in connection with a stock
split of Restricted Stock, shall be subject to the same restrictions as the
Restricted Stock.
(d) Except as may be provided by the Committee, in
the event of an employee's termination of employment before all of his or her
Restricted Stock has vested, or in the event any conditions to the vesting of
Restricted Stock have not been satisfied prior to any deadline for the
satisfaction of such conditions set forth in the award, the shares of Restricted
Stock which have not vested shall be forfeited, and the Committee may provide
that (i) any purchase price paid by the employee shall be returned to the
employee or (ii) a cash payment equal to the Restricted Stock's fair market
value on the date of forefeiture, if lower, shall be paid to the employee.
(e) The Committee may waive, in whole or in part, any
or all of the conditions to receipt of, or restrictions with respect to, any or
all of the employee's Restricted Stock.
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SECTION 9. PERFORMANCE SHARES AWARDS
Subject to the following provisions, all awards of Performance
Shares shall be in such form and shall have such terms and conditions as the
Committee may determine:
(a) The Performance Shares shall specify the number
of Performance Shares to be awarded to any employee and the duration of the
period (the "Performance Period") after which, and the terms pursuant to which,
the Performance Shares will be issued to the employee. The Committee may
condition the award of Performance Shares, or receipt of Stock or cash at the
end of the Performance Period, upon the attainment of specified performance
goals or such other criteria as the Committee may determine.
(b) Except as may be permitted by the Committee,
Performance Share awards may not be sold, assigned, transferred, pledged or
otherwise encumbered during the Performance Period.
(c) At the expiration of the Performance Period, the
employee (or his or her designated beneficiary in the event of death) shall
receive (i) certificates for the number of shares of Stock equal to the number
of shares covered by the Performance Share award, (ii) cash equal to the fair
market value of such Stock or (iii) a combination of shares and cash, as the
Committee may determine.
(d) Except as may be provided by the Committee, in
the event of an employee's termination of employment before the end of the
Performance Period, his or her Performance Share award shall be forfeited.
(e) The Committee may waive, in whole or in part, any
or all of the conditions to receipt of, or restrictions with respect to, Stock
or cash under a Performance Share award.
SECTION 10. LOANS
The Committee may provide that the Company shall make, or
arrange for, a loan or loans to an employee with respect to the exercise of any
Stock Option awarded under the Plan, with respect to the payment of the purchase
price, if any, of any Restricted Stock awarded hereunder, or with respect to any
taxes arising from an award hereunder; provided, however, that the Company shall
not loan to an employee more than the excess of the purchase or exercise price
of an award (together with the amount of any taxes arising from such award) over
the par value of any shares of Stock awarded. The Committee shall have full
authority to decide whether a loan will be made hereunder and to determine the
amount, term and provisions of any such loan, including the interest rate to be
charged, whether the loan will be with or without recourse against the borrower,
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any security for the loan, the terms on which the loan is to be repaid and the
conditions, if any, under the loan may be forgiven.
SECTION 11. TAX OFFSET PAYMENTS
The Committee may provide for a Tax Offset Payment by the
Company to the employee in an amount specified by the Committee, which shall not
exceed the amount necessary to pay the federal, state, local and other taxes
payable with respect to any award and receipt of the Tax Offset Payment,
assuming the employee is taxed at the maximum tax rate applicable to such
income. The Tax Offset Payment may be paid in cash, Stock or a combination
thereof, as determined by the Committee.
SECTION 12. ELECTION TO DEFER AWARDS
The Committee may permit an employee to elect to defer receipt
of an award for a specified period or until a specified event, upon such terms
as are determined by the Committee.
SECTION 13. TAX WITHHOLDING
13.1. Each employee shall, no later than the date as of which
the value of an award first becomes includible in the employee's gross income
for applicable tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding payment of any federal, state, local or
other taxes of any kind required by law to be withheld with respect to the
award. The obligations of the Company under the Plan shall be conditional on
such payment or arrangements, and the Company (and, where applicable, any
subsidiary), shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment of any kind otherwise due to the employee.
13.2. To the extent permitted by the Committee, and subject to
such terms and conditions as the Committee may provide, an employee may
irrevocably elect to have the withholding tax obligation, or any additional tax
obligation with respect to any awards hereunder, satisfied by (i) having the
Company withhold shares of Stock otherwise deliverable to the employee with
respect to the award or (ii) delivering to the Company, shares of unrestricted
Stock.
SECTION 14. AMENDMENTS AND TERMINATION
The Board may discontinue the Plan at any time and may amend
it from time to time. Solely to the extent deemed necessary or advisable by the
Board, for purposes of complying with Section 422 of the Code, Section 162(m) of
the Code or the rules of any securities exchange or for any other reason, the
Board may seek the approval of any such amendment by the Company's shareholders.
Notwithstanding the foregoing, no termination or amendment of the Plan shall in
any manner affect any award theretofore granted without the holder's consent.
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SECTION 15. CHANGE OF CONTROL
15.1. In the event of a Change of control, unless otherwise
determined by the Committee at the time of grant or by amendment (with the
holder's consent) of such grant:
(a) all outstanding Stock Options and all outstanding
Stock Appreciation Rights awarded under the Plan shall become fully exercisable
and vested;
(b) the restrictions and deferral limitations
applicable to any outstanding Restricted Stock and Deferred Stock awards under
the Plan shall lapse and such shares and awards shall be deemed fully vested;
and
(c) to the extent the cash payment of any award is
based on the fair market value of Stock, such fair market value shall be the
Change of Control Price.
15.2. A "Change of Control" shall be deemed to occur on:
(a) The date that any person or group deemed a person
under Sections 3(a)(9) and 13(d)(3) of the Act, other than the Company and its
subsidiaries as determined immediately prior to that date, in a transaction or
series of transactions has become the beneficial owner, directly or indirectly
(with beneficial ownership determined as provided in Rule 13d-3, or any
successor rule, under such Act) of 20% or more of the outstanding securities of
the Company having the right under ordinary circumstances to vote at an election
of the Board;
(b) the date on which one-third or more of the
members of the Board shall consist of persons other than Current Directors (for
these purposes, a "Current Director" shall mean any member of the Board as of
the effective date of the Plan and any successor of a Current Director whose
nomination or election has been approved by a majority of the Current Directors
then on the Board); or
(c) the date of approval by the shareholders of the
Company of an agreement providing for (A) the merger or consolidation of the
Company with another corporation where the shareholders of the Company,
immediately prior to the merger or consolidation, would not beneficially own,
immediately after the merger or consolidation, shares entitling such
shareholders to 50% or more of all votes (without consideration of the rights of
any class of stock to elect directors by a separate class vote) to which all
shareholders of the corporation issuing cash or securities in the merger or
consolidation would be entitled in the election of directors or where the
members of the Board, immediately prior to the merger or consolidation, would
not, immediately after the merger or consolidation or (B) the sale or other
disposition of all or substantially all the assets of the Company.
15.3. "Change of Control Price" means the highest price per
share paid for the Company's Stock in any transaction reported on any national
stock exchange or in
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the over-the-counter market, or paid or offered in any transaction related to a
Change of Control at any time during the 90-day period ending with the Change of
Control. Notwithstanding the foregoing sentence, in the case of Stock
Appreciation Rights granted in tandem with Incentive Stock Options, the Change
of Control Price shall be the highest price paid on the date on which the Stock
Appreciation Right is exercised.
SECTION 16. GENERAL PROVISIONS
16.1. Each award under the Plan shall be subject to the
requirement that, if at any time the Committee shall determine that (i) the
listing, registration or qualification of the Stock subject to the award or
related thereto upon any securities exchange or under any state or federal law,
or (ii) the consent or approval of any government regulatory body or (iii) an
agreement by the recipient of an award with respect to the disposition of Stock,
is necessary or desirable (in connection with any requirement or interpretation
of any federal or state securities law, rule or regulation) as a condition of,
or in connection with, the granting of such award or the issuance, purchase or
delivery of Stock thereunder, such award shall not be granted or exercised, in
whole or in part, unless such listing, registration, qualification, consent,
approval or agreement shall have been effected or obtained free of any
conditions not acceptable to the Committee.
16.2. Nothing set forth in this Plan shall prevent the Board
from adopting other or additional compensation arrangements. Neither the
adoption of the Plan nor any award hereunder shall confer upon any employee of
the Company, or of a subsidiary, any right to continued employment.
16.3. Determinations by the Committee under the Plan relating
to the form, amount and terms and conditions of awards need not be uniform, and
may be made selectively among persons who receive or are eligible to receive
awards under the Plan, whether or not such persons are similarly situated.
16.4. No member of the Board or the Committee, nor any officer
or employee of the Company acting on behalf of the Board or the Committee, shall
be personally liable for any action, determination or interpretation taken or
made with respect to the Plan, and all members of the Board or the Committee and
all officers or employees of the Company acting on their behalf shall, to the
extent permitted by law, be fully indemnified and protected by the Company in
respect of any such action, determination or interpretation.
SECTION 17. EFFECTIVE DATE OF PLAN
The Plan shall become effective upon approval by the Company's
shareholders.
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EXHIBIT 10.91
EMPLOYMENT AND NON-INTERFERENCE AGREEMENT
This Employment and Non-Interference Agreement (this
"Agreement"), is dated as of March 1, 1999, by and between Mark A. Kissman (the
"Executive") and SPACEHAB, Incorporated, a Washington corporation (the
"Company").
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 Vice President, Finance and Chief Financial
Officer and to undertake such duties and responsibilities as may be reasonably
assigned to Executive from time to time by the Chief Executive Officer, Board of
Directors of the Company, or 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 Chief Executive Officer, Chief Operating Officer, Board of
Directors of the Company, or 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
<PAGE> 2
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 March 1, 1999
and shall continue through July 31, 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 at least ninety (90) days prior to the end of the Initial Term or
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:
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(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
noncompetition 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)
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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.
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(g) Termination of the Term of Employment will not terminate
Sections 3(d), 3(f), and 7 through 21.
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 $170,000 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 incentive bonus, if any, based on Executive's
and/or Company's performance as determined and approved by the Compensation
Committee of the Board of Directors.
(c) An annual stock option grant, if any, based on
Executive's, Company's and/or Company Stock 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
benefits (including health, disability, pension and life insurance benefits
consistent with Company policy, or as increased from time to time), in each
case, in accordance with guidelines or established from time to time, by the
Board of Directors for senior executives of the Company.
7. Confidential Information
(a) Executive acknowledges that his employment hereunder gives
him access to Confidential Information relating to the Company's Business and
its customers which must remain confidential. Executive acknowledges that this
information is valuable, special, and a unique asset of the Company's Business,
and that it has been and will be developed by the Company 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
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Company. 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 Company 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
(a) Executive acknowledges that the services to be provided
give him the opportunity to have special knowledge of the Company and its
Confidential Information and the capabilities of individuals employed by or
affiliated with the Company, and that interference in these relationships would
cause irreparable injury to the Company. 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,
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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 the Company or had a
business relationship with the Company 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 Company, 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 Company. 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
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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 discoveries
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 and unpressurized space modules, flight hardware and
subsystems, and those other businesses and activities that are described in the
Company's Form 10-K for the fiscal year ended June 30, 1998, and Form 10-Q for
the quarter ending September 30, 1998, or (b) 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 and any of its direct or
indirect subsidiaries, 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,
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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 not
permissible hereunder.
"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).
"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 of 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: Mark A. Kissman
1134 Springvale Road
Great Falls, VA 22066
If to Company: SPACEHAB, Incorporated
300 D Street, S.W.
Washington, D.C. 20024
Any such notices shall be deemed to be given on the date personally delivered or
such return receipt is issued.
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12. Previous Agreements; Executive's Representation
(a) Attached hereto as Annex A are all previous employment or
severance agreements, if any, 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. Notwithstanding the foregoing,
the terms and provisions in any Prior Employment Agreement relating to any
grants of stock options or other derivative securities for the purchase of the
Company's common stock, no par value per share, shall remain in full force and
effect and shall not be amended in any manner as a result of the execution of
this Agreement.
(b) Executive hereby warrants and represents 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.
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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 DISTRICT OF COLUMBIA, EXCEPT THAT NO
DOCTRINE OF CHOICE OF LAW SHALL BE USED TO APPLY ANY LAW OTHER THAN THAT OF
DISTRICT OF COLUMBIA, 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,
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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 WASHINGTON, D.C. OR THE UNITED STATES DISTRICT COURTS IN
DISTRICT OF COLUMBIA. 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 THIS 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
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 WASHINGTON, D.C., AND SHALL BE SUBJECT TO
THE SUBSTANTIVE LAW OF THE DISTRICT OF COLUMBIA. 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.
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IN WITNESS WHEREOF, the parties hereto have set their hands as
of the day and year first written above.
EXECUTIVE:
/s/Mark A. Kissman
Mark A. Kissman
SPACEHAB, INCORPORATED
/s/David A. Rossi
David A. Rossi, President
<PAGE> 1
EXHIBIT 10.92
EMPLOYMENT AND NON-INTERFERENCE AGREEMENT
This Employment and Non-Interference Agreement (this
"Agreement"), is dated as of March 1, 1999, by and between Michael E. Kearney
(the "Executive") and SPACEHAB, Incorporated, a Washington state corporation
(the "Company").
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 Vice President, Marketing and Sales, and to
undertake such duties and responsibilities as may be reasonably assigned to
Executive from time to time by the Chief Executive Officer, Chief Operating
Officer, Board of Directors of the Company, or 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 Chief Executive Officer, Chief Operating Officer, Board of
Directors of the Company, or 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
<PAGE> 2
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 March 1, 1999
and shall continue through July 31, 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
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.
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(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)
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Executive's willful, continual and material breach of any noncompetition 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
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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 21.
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 $188,000 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 and/or
Company's performance as determined and approved by the Compensation Committee
of the Board of Directors.
(c) An annual stock option grant, if any, based on
Executive's, Company's and/or Company Stock 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
benefits (including health, disability, pension and life insurance benefits
consistent with Company policy, or as increased from time to time), in each
case, in accordance with guidelines or established from time to time by the
Board of Directors for senior executives of the Company.
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7. Confidential Information
(a) Executive acknowledges that his employment hereunder gives
him access to Confidential Information relating to the Company's Business and
its customers which must remain confidential. Executive acknowledges that this
information is valuable, special, and a unique asset of the Company's Business,
and that it has been and will be developed by the Company 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 Company. 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 Company 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.
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8. Non-Interference
(a) Executive acknowledges that the services to be provided
give him the opportunity to have special knowledge of the Company and its
Confidential Information and the capabilities of individuals employed by or
affiliated with the Company, and that interference in these relationships would
cause irreparable injury to the Company. 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 the Company or had a
business relationship with the Company 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 Company, 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 Company. Notwithstanding
the foregoing, nothing herein shall prevent Executive from
providing a letter of recommendation to an employee with
respect to a future employment opportunity.
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(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 discoveries 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 and unpressurized space modules, flight hardware and
subsystems, and those other businesses and activities that are described in the
Company's Form 10-K for the fiscal year ended June 30, 1998, and Form 10 Q for
the quarter ending September 30, 1998, or (b) any similar, incidental or related
business 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 and any of its direct or
indirect subsidiaries, now existing or hereafter existing.
"Company" is defined in the introduction.
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"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 not permissible hereunder.
"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).
"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 of 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).
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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: Michael E. Kearney
6103 Newcastle Drive
Bellaire, TX 77401
If to Company: SPACEHAB, Incorporated
300 D Street, S.W.
Washington, D.C. 20024
Attention: General Counsel
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, if any, 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. Notwithstanding the foregoing,
the terms and provisions in any Prior Employment Agreement relating to any
grants of stock options or other derivative securities for the purchase of the
Company's common stock, no par value per share, shall remain in full force and
effect and shall not be amended in any manner as a result of the execution of
this Agreement.
(b) Executive hereby warrants and represents 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.
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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
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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 DISTRICT OF COLUMBIA, EXCEPT THAT NO
DOCTRINE OF CHOICE OF LAW SHALL BE USED TO APPLY ANY LAW OTHER THAN THAT OF
DISTRICT OF COLUMBIA, 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 DISTRICT OF
COLUMBIA OR THE UNITED STATES DISTRICT COURTS IN WASHINGTON, D.C. 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 THIS 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.
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 DISTRICT OF
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COLUMBIA. 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/ Michael E. Kearney
------------------------------
Michael E. Kearney
SPACEHAB, INCORPORATED
By: /s/ David A. Rossi
-------------------------
David A. Rossi, President
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EXHIBIT 10.93
U.S. Gov't
STATEMENT OF WORK
FLIGHT CREW SYSTEMS DEVELOPMENT CONTRACT
1.0 INTRODUCTION
Section 1.0 of this statement of work defines the overall scope of work
and provides a summary of the technical support effort. Section 2.0 provides
detailed descriptions of the technical support requirements for each major
function to be performed. Section 3.0 defines functions which are general in
nature and are considered common to all major functional areas.
1.1 SCOPE
The Flight Crew Systems Development Contract (FCSDC) Contract
statement of work provides for support services to all elements of the Flight
Crew Support Division, and peripherally to other Space and Life Sciences
Directorate elements for related functions. This involves providing non-personal
services support including management, technical and administrative manpower,
and, as required, facilities, equipment and material necessary for accomplishing
this support function. These requirements apply to all current and future
programs involving the Flight Crew Support Division of the Johnson Space Center.
The activities to be supported are located at and near the
NASA Johnson Space Center (JSC) in Houston, Texas, and at the Marshall Space
Flight Center in Huntsville, Alabama. Technical support activities are currently
performed in the following JSC buildings: J9A/J9B, Mockup and Integration
Laboratory; J29, Weightless Environment Training Facility, Anthropometric and
Biomechanics Laboratory; J32E/J32T, Mockup and Trainer Support Shop; J220,
Mockup Assembly and Support Area; J15, Optics and 70mm Camera Laboratory,
Engineering Design Support Laboratory, Electronic Still Camera Laboratory, Laser
Anthropometric Mapping System Facility, Computer Facility, Graphics Analysis
Facility, Remote Operation Interaction Laboratory; J17, Hygiene and Housekeeping
Systems Development Laboratory, Tools and Diagnostics Laboratory, Small Format
Camera Laboratory, Human Computer Interaction Laboratory, Food Systems
Engineering Facility. Some engineering and management support personnel are
currently housed onsite. Offsite facilities may be required for support
activities consisting of technical interchange, planning and management
activities, research planning, performance and analysis, project management,
design/drafting, Crew Compartment Configuration Drawing production and archival,
Decal Laboratory and Lighting Laboratory operations, warehousing for temporary
storage of mockups and training articles, and secured (bonded) storage for
flight hardware components and materials and mission logistics hardware
complements. Federal Information Processing (FIP) resources and users requiring
support are located in all of these buildings and facilities. Technical support
activities performed at the Marshall Space Flight Center will be housed onsite
at that installation.
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1.2 SUMMARY DESCRIPTION
The engineering, scientific, analytical, test and evaluation,
integration and operations support capabilities of the Flight Crew Support
Division provide a broad multi-disciplinary technical resource which supports
technical requirements from organizations both within and outside the Johnson
Space Center. These include elements internal to the Space and Life Sciences
Directorate, the Engineering Directorate, the Mission Operations Directorate,
the Flight Crew Operations Directorate, the Program Offices, the New Initiatives
Office, the Public Affairs Office, other NASA centers, international
partners/organizations, other agencies, the scientific community, professional
societies and commercial industries. Technical and schedule requirements are
provided by sponsoring organizations, and are sensitive to such factors as
program modifications, test and evaluation anomalies, technology changes and
flight schedules. Work is initiated and authorized through a system of Action
Memoranda (AM's) and Project Work Sheets (PWS's) specifically approved by
contract technical management personnel.
In support of the requirements defined by this statement of
work the contractor shall be required to provide functions ranging from hands-on
maintenance and operations tasks to end-to-end research and engineering
associated with requirements definition and application to major systems
projects. Typically these requirements include activities in the following
areas: engineering; design; development; fabrication; test and evaluation;
scientific research and analysis; engineering analysis; data acquisition;
documentation and publication; project management and coordination;
systems/mission integration; mission logistics support; real-time mission
support; facility development and operation; software systems development and
implementation; programming; maintenance of laboratories and facilities and
associated equipment; technical interchange of scientific and engineering
information; and the definition, acquisition, installation, test, and
verification of components, flight hardware and certification hardware,
instrumentation, equipment, mockups and trainers, test articles, and FIP
hardware/software systems and services. Much of the work is experimental in
nature and some hazardous operations are involved. More detailed descriptions of
requirements and contractor support functions are provided in the following
sections of this statement of work.
2.0 SUPPORT TASKS
2.1 FLIGHT HARDWARE DEVELOPMENT AND PROVISIONING
This support requirement encompasses the various functions
involved in developing and provisioning flight hardware in support of current
and future NASA programs. This hardware includes flight crew equipment,
experiments and payload related systems or subsystems. The functions include the
various phases of design, from the preliminary and conceptual stage, through the
detailed engineering drawing production for fabrication. Also included are the
tasks of fabrication and testing. Coupled with testing is hardware
qualification, including generation of specifications and associated
documentation. Integration of the developed system or subsystem into its use
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location, and post-use analysis of performance are included in these functions.
The following are descriptions of the support activities to be performed by the
contractor to meet this requirement. Flight Program/Project requirements are
defined by JSC 17038E, NSTS 21096, and JSC 31040.
2.1.1 ENGINEERING AND TECHNICAL SUPPORT FOR FLIGHT HARDWARE DESIGN,
DEVELOPMENT, TEST AND EVALUATION (DDT&E)
The contractor shall provide engineering manpower and materials
necessary to support flight hardware DDT&E. All disciplines of engineering will
be required for proper project implementation. This includes the tasks of
concept development, performing engineering studies and technical analyses,
design of components and subsystems, production of prototypes and test articles,
manufacture and procurement of components and subsystems, testing and
certification of flight hardware, interface definition and implementation,
production and maintenance of documentation, configuration management, mission
logistics support, sustaining engineering and subsystem management support, real
time mission support, evaluation of flight hardware and test hardware
performance, and anomaly resolutions. Generation of detailed engineering and
fabrication drawings is required. The contractor shall furnish the required
expertise in materials and processes, test procedures, certification and
documentation, and accepted practices for integration of flight hardware into a
flight vehicle or planetary surface element.
2.1.1.1 Design and Engineering Drawings
Experienced design engineering support in the disciplines of
mechanical, electrical/electronic, structural, thermodynamics,
vibration/acoustical, materials, industrial and computer/microchip design is
required to perform this task. Design draftsmen which are well versed in both
manual drafting as well as the use of Computer Aided Design (CAD) equipment
shall be provided. The quality control of engineering drawings requires that
drawing checking capabilities be provided, using experienced personnel who can
ensure all requirements are met. All drawings shall be prepared in accordance
with JSCM 8500 and DOD-STD-100C, and all flight hardware engineering drawings
shall be released through the JSC Engineering Drawing Control Center.
2.1.1.2 Engineering Studies, Analyses and Tradeoffs
The contractor shall provide qualified manpower and materials for the
performance of in-depth engineering studies, analysis, and trade studies. These
studies may require hardware testing, documentation research, and the use of
recognized experts to prepare recommendations for specific courses of action.
Analyses of test data, statistical data, and documentation surveys shall also be
provided. Engineering tradeoffs performed by competent personnel shall be
performed to establish design concepts and configurations.
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2.1.1.3 Fabrication and Evaluation of Prototypes
The contractor shall provide the technical support and material
necessary to produce and evaluate prototypes of flight equipment. These
evaluations will examine weight, power, volume, reliability, ease of
manufacture, crew interface, stowage, ground and on-orbit maintenance and
repair, and cost. The support for this requirement requires shop facilities with
wood, plastic, metal, electrical/electronics, and fabric capabilities, and
qualified technicians who can work in close communications with design engineers
to construct or modify prototype items.
2.1.1.4 Production/Maintenance of Hardware Documentation
The contractor shall provide qualified manpower and materials to
support hardware documentation requirements for current and future space
programs. Tasks include the preparation, coordination, and presentation of
Safety Analysis Reports (SAR) and Hazard Reports (HR). A documentation tracking
system is required that provides current configuration information as well as
historical background on the evolution of approved changes.
2.1.1.5 Manufacture/Production of Flight and Test Hardware
The contractor shall provide qualified manpower and materials to
produce and procure components and subsystems qualifiable for use as space
flight or test hardware. All procured materials and components shall be
purchased with necessary proof of quality according to NASA flight hardware
procurement requirements. Materials and component storage shall be provided in
accordance with NASA flight hardware storage and control requirements. The
provisioning of flight hardware shall be in compliance with NASA SR&QA
requirements, as defined in the appropriate paragraphs of section 3.6 of this
SOW.
2.1.1.6 Test and Flight Certification
The contractor shall provide qualified manpower and materials to
prepare test plans, staff necessary test facilities, provide required test
fixtures, prepare test schedules, gain NASA approval of proposed test plans and
procedures and conduct/monitor tests to obtain performance and certification
data from hardware components and subsystems. Test results shall be documented
and formal presentations made to gain final flight certification of hardware
designs.
2.1.1.7 Mission Logistics Support
The contractor shall provide qualified manpower and materials to
support mission logistics operations for flight hardware. This function includes
providing bonded storage for staging and/or storing, and mission hardware
preparation and delivery to a prepacking facility and/or launch site or vehicle
installation. Examples include camera film loading, battery testing, camera lens
adjustment, pre-launch flight crew food monitoring, and preparation of ancillary
flight crew equipment. Additionally, the mission logistics support requires
downloading flight equipment upon completion of mission
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usage, including landing site standard film retrieval. The contractor shall
provide for replenishment of consumable, expendables, and spare parts, and shall
support the repair, modification, and refurbishment of flight hardware.
2.1.1.8 Subsystem Management Technical Support
The contractor shall provide qualified manpower and materials to
support man-systems subsystem managers in the performance of engineering and
integration functions, and to ensure all relevant requirements are met by
developers and suppliers of flight hardware. Contractor personnel shall
technically represent the man-systems subsystems managers in support of such
programmatic activities as preliminary design reviews, critical design reviews,
planning sessions, panel and board meetings, hardware testing, flight equipment
installation and removal, post mission debriefings and hardware performance
analyses.
2.1.1.9 Real Time Mission Support
The contractor shall provide qualified manpower and materials to
support flight operations during missions. Support personnel are required to
have in-depth knowledge of Flight Crew Support Division hardware manifested for
a given mission. The purpose of this activity is to maintain a presence in
mission evaluation facilities to monitor crew activities and man-systems
hardware performance, to make informed recommendations for changes to flight
activities in the event of inflight problems or contingencies, and to
technically support inflight anomaly resolutions.
2.1.1.10 Man-Systems Hardware Performance Evaluation/Anomaly
Resolution
The contractor shall provide qualified manpower and materials to
participate in tests, analysis, and mission and crew debriefings, in order to
identify the causes for abnormal man-systems hardware performance, recommend
corrective actions when required, and assist in properly documenting all events
and communicating them to Flight Crew Support Division managers, subsystem
managers, and other elements within NASA/JSC.
2.1.2 TECHNICAL SUPPORT FOR RESEARCH AND DEVELOPMENT (R&D) AND
LABORATORY OPERATIONS
The Flight Crew Support Division performs significant R&D in support of
flight hardware development and provisioning. These activities are primarily
associated with subsystems involving flight crew equipment and accommodations,
such as food, clothing, personal hygiene, housekeeping and trash management,
tools and diagnostic equipment, restraints and mobility aids, off duty
activities equipment, photographic and electronic imaging equipment, and decals
and nomenclature placards. Several laboratories and facilities are operated to
accommodate these R&D activities and to support other flight equipment DDT&E
functions, including components and subsystems test and checkout, assembly and
make-ready, and performance evaluation and anomaly resolutions. The contractor
shall provide qualified manpower and material to operate and
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technically support these facilities and perform these multifunctional
activities for spaceflight and planetary surface program requirements.
2.1.2.1 Food Systems Engineering Facility
The contractor shall be responsible for operating and supporting the
NASA Food Systems Engineering Facility. This facility supports flight food
definition and evaluation and space food packaging design and development. This
facility develops and maintains all specifications and standards used in the
production of flight food. Inflight menus, and preflight menus for crew health
stabilization and maintenance are produced by this facility. Space food
packaging includes the design and development of complete new systems as well as
modifications to existing food systems. Design and development of the associated
packaging production equipment is also the responsibility of this facility. Food
research and development activities include extension of shelf life by
formulation and packaging technologies, new preservation and processing
techniques, and improvement in organoleptic qualities.
2.1.2.2 Hygiene and Housekeeping Systems Development
Laboratory
The contractor shall be responsible for operating and supporting the
NASA Hygiene and Housekeeping Systems Development Laboratory. This laboratory
supports research and development, and training of personal hygiene and
housekeeping systems and techniques for maintaining crewmember cleanliness and a
satisfactory living environment while assuring materials and, subsystems
compatibility with the environmental control systems. Some typical components
and subsystems include cleansing agents (soaps, detergents), personal grooming
devices, trash management equipment (vacuum cleaners, trash compactors), and
miscellaneous soft goods (biocides and wipes).
2.1.2.3 Tools and Diagnostics Laboratory
The contractor be responsible for operating and supporting the NASA
Tools and Diagnostics Laboratory. This laboratory supports research and
development of tools and inflight maintenance items intended for on-orbit or
planetary surface usage by the flight crews for maintenance and repair
functions.
2.1.2.4 Optics and Film Camera Laboratories
The contractor shall be responsible for operating and supporting the
NASA photographic systems laboratories, comprised of the Optics and 70mm Camera
Laboratory and the Small Format Camera Laboratory. These laboratories support
research and development of film camera components and subsystems for
spaceflight applications. In addition, DDT&E functions for all manifested
missions, including test and checkout, assembly and make-ready, performance
evaluation and anomaly resolutions involving film camera flight hardware shall
be supported.
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2.1.2.5 Electronic Still Camera Laboratory
The contractor shall be responsible for operating and supporting the
NASA Electronic Still Camera Laboratory. This laboratory supports research and
development of high resolution digital imaging technologies, including
components, subsystems and techniques for image acquisition, storage,
transmission (compression and restoration), and reproduction. These emerging
technologies will be required for near real-time imagery availability from space
exploration and long duration orbital or surface activities.
2.1.2.6 Engineering Design Support Laboratory
The contractor shall be responsible for operating and supporting the
NASA Engineering Design Support Laboratory. This laboratory provides design and
drafting support to the Flight Crew-Support Division flight hardware development
and provisioning activities.
2.1.2.7 Decal Laboratory
The contractor shall be responsible for operating and supporting the
NASA Decal Laboratory. This laboratory develops and provides flight qualified
decals and placards for all NASA manned spacecraft, and prototype decals and
placards for mockups, trainers and engineering evaluations.
2.1.2.8 Prototyping Capability
The contractor shall provide a rapid response prototyping capability.
This capability shall include the development and modification of prototype
equipment in support of the R&D and DDT&E activities identified in this SOW.
2.2 CREW STATION INTEGRATION AND HUMAN FACTORS SUPPORT
The contractor shall provide the Crew Station Integration and
Human Factors support detailed in the following paragraphs.
2.2.1 DEVELOPMENT AND INTEGRATION OF MANNED SPACECRAFT CREW STATIONS
AND HABITATS
The contractor shall provide qualified technical personnel and
materials to support the development and integration of manned spacecraft crew
stations. The specific support required in this area is as follows:
a. Provide technical expertise to aid in the development and
integration of manned spacecraft crew stations and habitable volumes.
b. Assist in the formulation of crew station design requirements and
concept design solutions.
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c. Provide engineering sketches, layouts, and illustrations required to
support NASA's technical management of the crew station development and
integration.
d. Provide technical support to the NASA crew station subsystem manager
to help review programmatic documentation from a man-systems/crew station
integration standpoint; and to aid in the preparation, conducting, and follow-up
of Crew Station Reviews (CSR's). CSR support shall include helping prepare the
agenda, taking review minutes and action Items, and following up to ensure that
action items are closed.
e. Provide project management support to the Flight Crew Support
Division Manager for Space Station, the Flight Crew Support Resident Office
Manager at Marshall Space Flight Center, and as required for any future
man-systems management office.
2.2.2 INTEGRATION OF PAYLOADS AND EXPERIMENTS INTO CREW COMPARTMENTS
AND HABITATS
The contractor shall provide qualified technical personnel and
materials to support the integration of payloads and experiments into crew
compartments and habitats. Specifically, the Contractor shall perform the
following:
2.2.2.1 Integration Engineering
a. Support Cargo Integration Reviews, Flight Stowage and Planning
Reviews, and other programmatic reviews with integration/compatibility analyses,
configuration definition, and stowage/installation status. Formal presentations
of these items shall be made to both NASA program and customer management.
b. Provide support to develop and integrate student experiments
selected as part of programs such as the Shuttle Student Involvement Project.
This effort requires interpersonal skills, innovation, and multidiscipline
design ability to successfully support a wide variety of experiments, students,
and sponsors.
2.2.2.2 Payload/Crew Station Annex Production/Maintenance
Provide qualified full time project engineering support for the
integration of payloads into crew compartments and habitats, including the
preparation, release, and updating of both Annex 6 to the STS Payload
Integration Plans and interface control documentation for STS middeck payloads,
and applicable documentation for other programs.
2.2.3 STOWAGE ENGINEERING, INTEGRATION, AND DOCUMENTATION
The contractor shall provide qualified personnel and materials to
establish a suitable stowage configuration and document the stowage and
installation of crew compartment or crew-related equipment for manned spacecraft
flights. The specific crew compartment configuration support required is as
follows:
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a. Perform the necessary stowage engineering and generate Crew
Compartment Configuration Drawings (CCCD's) for each Shuttle flight to prescribe
the arrangements, stowage, and installation of all mission variable equipment
within the crew compartment.
b. Perform the necessary stowage engineering and generate Space Station
Stowage and Configuration Control Drawings for each Space Station flight,
depicting the internal and external configuration of the Space Station,
including the arrangements, stowage, and installation of all mission variable
equipment. These drawings will establish and document planned prelaunch,
on-orbit and post flight stowage configuration for each flight.
c. Perform the necessary stowage engineering and generate a Spacelab
Configuration Drawing (SLCD) depicting the interior Spacelab configuration and
the stowage of loose equipment for JSC managed Spacelab missions.
d. Provide stowage and interior configuration drawings, as required, to
support program development, missions, and reconfiguration.
e. All formal crew compartment configuration drawings shall be per
DoD-STD-100C and JSCM 8500 and shall be released through the JSC Engineering
Drawing Control Center.
f. Technically support the establishment and maintenance of a crew
equipment manifest for each Shuttle mission based upon the approved
requirements. Support the distribution of the manifest through the Shuttle Level
II Baseline Accounting and Retrieval System (BARS).
g. Support loose equipment stowage reviews and provide real time
mission support as required.
2.2.4 HUMAN ENGINEERING
The contractor shall provide qualified technical personnel and
materials to support the conduct of space human factors evaluations, research,
and standards development. The specific support required is as follows:
2.2.4.1 Space Human Factors Research
a. Define, develop, perform and document applied research to advance
the state-of-the-art of space human factors in such areas as spacecraft
interiors, surface habitats, crew equipment, workstation interfaces, maintenance
and repair, crew workload definition, crew task design, crew timeline analysis,
and general habitability enhancement.
b. Develop, maintain, and update the space human factors Operational
Experience Data Base by reviewing the results of past manned missions and
participating in real time data collection during ongoing missions and
collecting and
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analyzing applicable postflight data through crew debriefings, transcript
reviews; and film/photo/TV analyses.
2.2.4.2 Space Human Factors Standards
Maintain and update the current Man-Systems Integration Standards,
NASA-STD-3000, and develop new volumes as required.
2.2.4.3 Applied Crew Interface Analysis
Identify, evaluate, and recommend solutions for manned spaceflight crew
interface issues.
2.2.5 TECHNICAL SUPPORT FOR RESEARCH, ANALYSIS, AND OPERATIONS OF
FACILITY & LABORATORY
The contractor shall provide qualified technical personnel and
materials to conduct research, analysis, and operations as described in the
following paragraphs.
2.2.5.1 Graphics Analysis Facility
a. Perform and document research and development in computer science,
graphics, and human modeling.
b. Construct high fidelity computer models of spacecraft using
engineering drawings and information from knowledgeable sources to serve as a
basis for analyzing such issues as clearance, fields of view, lighting, fit,
function, and reach, while using human motion models in three dimensional space.
2.2.5.2 Human-Computer Interaction Laboratory
a. Develop, maintain, and update requirements and guidelines for manned
spacecraft human computer interfaces.
b. Initiate, conduct, and prepare for publication relevant research in
human computer interfaces, cognitive models as applied to human computer
interfaces, and knowledge acquisition and interface tools for intelligent
systems.
c. Design, program, test and document interfaces for computer programs
as applied to crew interfaces with manned spacecraft.
2.2.5.3 Anthropometry and Biomechanics; Laboratory
a. Collect, analyse and document anthropometric, biomechanical, and
selected physiological data on human subjects.
b. Conduct and document anthropometric and biomechanical experiments
and tests in the laboratory, aboard the KC-135 reduced gravity aircraft, in
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the Weightless Environment Training Facility, on the Precision Air Bearing
Floor, and within such other facilities which simulate spaceflight or planetary
surface conditions.
c. Develop and test new equipment for use in the measurement of
anthropometric and biomechanic parameters.
d. Operate the Laser-Based Anthropometric Mapping System as a
supplementary adjunct to the laboratory.
e. Develop, support, and document inflight investigations into
spaceflight anthropometry and biomechanical performance.
2.2.5.4 Remote Operator Interaction Laboratory
Conduct and document R&D in human requirements for remotely operated
systems, teleoperation and telescience, and robotic interfaces including
lighting requirements, hand controller configurations, sensory feedback
requirements, displays and controls, and advanced techniques in visual
enhancement of video displays.
2.2.5.5 Lighting Laboratory
a. Perform and document tests on the visual environment in space
and on planetary surface through the use of models, light sources, and
photometric instrumentation.
b. Measure luminance, illuminance, reflectivity, transmissivity
of Windows, and the color characteristics of light, and provide the results for
incorporation into systems design specifications and to enhance the performance
of spaceflight tasks.
2.2.5.6 Task Analysis Laboratory
a. Conduct and document research and analysis of crew tasks
performance during manned spaceflight and planetary surface stays, specifically
examining workload and timelining of tasks.
b. Develop nonintrusive data collection techniques and tools to
identify environmental stressors and their effect on task performance.
2.3 MOCKUP AND TRAINER SUPPORT
The contractor shall provide qualified manpower and materials to
support the JSC mockup, trainer and neutral buoyancy complex as detailed in the
following paragraphs.
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2.3.1 DESIGN AND DEVELOPMENT OF MOCKUPS AND TRAINERS
2.3.1.1 Project Engineering
The contractor shall provide the necessary technical personnel and
materials to provide project engineering for the design development, and
modification of mockups, trainers, facilities, and support equipment. The
specific types of services required are described below.
a. Project engineering is required for each of the major mockups,
trainers, and facilities. Project engineering includes maintaining in depth
knowledge of the NASA flight programs and spacecraft configurations, the ability
to synthesize program information into suitable mockup and trainer designs, and
the ability to engineer and manage all aspects of mockup and trainer operations.
b. Mockup, trainer, and neutral buoyancy complex scheduling and
support for configuration control are required.
c. Maintain files of drawings and appropriate programmatic
information that support the mockup, trainer, and neutral buoyancy complex.
d. The contractor shall be responsible for providing inflatables
which shall simulate payloads for use in the Manipulator Development Facility,
the Mobile Remote Manipulator Development Facility, and other applicable
facilities. This task may require providing the engineering capability to define
requirements to subcontractors and vendors.
e. Shop engineering liaison is required to support project
engineering, design/drafting, the mockup shop, subcontractors, and/or the JSC
Technical Services Division. Direct engineering support to the mockup shop shall
be required to facilitate the fabrication of articles for which there are no
existing design or engineering drawings.
2.3.1.2 Design/Drafting Support
The contractor shall provide the necessary technical personnel to
produce the engineering documentation required by the mockup, trainer, and
neutral buoyancy complex. Technical support shall be provided in the areas of
structural, mechanical, electrical, electronic, computer (hardware and
software), fluid, and communications systems. The specific types of services
required are described below.
a. Engineering analyses and calculations are required to
establish the design integrity and safety of the mockups, trainers, and
facilities.
b. Engineering drawings shall be produced to define the original
C, designs or modifications to the mockups and trainers with assembly,
subassembly and detail drawings as necessary to facilitate shop fabrication and
installation. Drawings shall be prepared in accordance with DoD-STD-100C, and
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8500 when required for release through the JSC Engineering Drawings Control
Center. All drawings shall be checked and approved by the contractor prior to
submittal to NASA.
c. Layouts of vehicles, ground support equipment, and buildings
are required for crew station development and mockup, trainer, and neutral
buoyancy complex planning purposes.
2.3.2 FABRICATION AND MODIFICATION OF MOCKUPS AND TRAINERS
The contractor shall provide qualified manpower and materials to
fabricate, install, and maintain mockup hardware for engineering evaluation,
flight crew training, and testing in the mockup, trainer, and neutral buoyancy
complex. The specific services required are described below.
a. The contractor shall provide personnel with the necessary skills for
working with materials such as wood, sheet metal, bar stock, foamcore,
fiberglass, plastic, fabric, and paint; and with the skills for operating
woodworking, sewing, metal working/sheetmetal machines and tools, and shall
fabricate, maintain, or modify mockup and trainer hardware. This task also
includes the responsibility to support repair and modification of inflatables.
b. The contractor shall maintain the inventory of supplies and mockup
components required by each shop, mockup, trainer, and neutral buoyancy area.
2.3.3 OPERATION AND MAINTENANCE OF FLIGHT CREW SUPPORT MOCKUP AND
TRAINER FACILITIES
The contractor shall provide qualified technical support and materials
for the Installation, operation, maintenance, and safety of flight crew support
mockup and trainer facilities and supporting subsystems, both current and
future. Required services are described in the following paragraphs.
2.3.3.1 Mockup and Integration Laboratory (MAIL)
2.3.3.1.1 Operations Support
The Mockup and Integration Laboratory (MAIL) consists of all mockup and
trainer facilities located in building 9A and 9B. These facilities currently
include the Crew Compartment Trainer (CCT), the Crew Compartment Trainer II
(CCT-II), the Full Fuselage Trainer (FIFT), the Air Bearing Floor (ABF), the
Precision Air Bearing Floor (PABF), the Space Station Mockup and Trainer
Facility (SSMTF), Preflight Adaptation Trainer (PAT), Partial Gravity Simulator
(PGS), payload mockups, part-task trainers, and planetary surface habitat
mockups. The specific MAIL operations support services required are described
below.
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a. The contractor shall provide all necessary operational support
to assure facilities and equipment operation during engineering studies,
hardware evaluations, procedures evaluations, and crew training. This support
includes the necessary checkout, testing, and cleaning of equipment;
notification of equipment availability; and supporting preparations for MAIL
operations.
b. The contractor shall maintain cognizance of stowage lists and
procedures and shall utilize them to configure and/or stow mockups and trainers
for various training and/or engineering sessions. Personnel must be capable of
reading and interpreting installation and stowage engineering drawings, stowage
lists, or other data such as initial configuration documents, and must be
familiar with the operation of the spacecraft stowage containers, provisions,
and the stowed loose equipment.
c. The contractor shall maintain and operate a loose equipment
storage area and shall provide the necessary support for the accounting and
distribution of mockup and trainer loose equipment.
d. The contractor shall develop for NASA approval a set of
Standard Operating Procedures for each element making up the MAIL and shall
ensure compliance with these procedures during all MAIL operations.
e. The contractor shall maintain training records of all persons
who operate these facilities.
2.3.3.1.2 Real Time Support
a. The contractor shall provide real time support during all
operations of the MAIL, including those involving experiment and customer
furnished training hardware. Contractor support shall include monitoring
communication systems, data processing systems, air bearing floor pneumatic
systems, and suit pressurization consoles to provide immediate corrective action
in the event of equipment failure or other operational changes.
b. The contractor shall monitor each trainer or mockup exercise
and shall be able to assist the crew, engineers, or instructors with any
facility related task. All pressure suited exercises will require support with
personnel trained in cardiopulmonary recussitation (CPR).
c. The contractor shall maintain a log for each element of the
MAIL, and any significant equipment or configuration problem or, deficiency
shall be documented for corrective action. A responsive and efficient
problem/improvement reporting and implementation system shall be maintained.
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2.3.3.1.3 Communication and Human-Computer Interaction
Systems Support C
The contractor shall be responsible for the engineering, design,
fabrication, modification, maintenance, and operation of the communication and
human computer interaction systems in the mockups and trainers. These systems
include both mockup-peculiar and trainer-peculiar hardware and flight type units
which are used collectively to simulate spacecraft displays and controls or
workstations.
a. The contractor shall provide exterior communication and human
computer interaction systems plug-in units throughout the trainer areas, as
required to support operations; and shall provide connections with other systems
as required such as mission simulators, control centers, and the JSC TV system.
b. The contractor shall maintain systems documentation and spares
for the communication and human computer interaction systems.
2.3.3.1.4 Other Related MAIL Support
a. The contractor shall be the responsible for the installation
and check out of externally supplied modification kits, using supplied
engineering drawings.
b. The contractor shall provide control documentation to support
equipment modifications. This includes recording all modification requests,
activities, status, and directives.
c. The contractor shall be required to operate lifting hardware
and ancillary support equipment.
d. The contractor shall provide support for mockup and trainer
electrical power systems. This includes engineering, design, installation,
operation, modification, maintenance, repair, and documentation of electrical
systems.
e. The contractor shall be responsible f or the engineering,
maintenance, operation, and updating of the ABF and PABF, air pads, air sleds,
and associated systems.
f. The contractor shall be responsible for providing and
maintaining MAIL facility baseline documentation in compliance with JSCMD
8830.1C.
g. The contractor shall maintain the facility in a clean, neat
and orderly condition.
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2.3.3.2 Neutral Buoyancy Simulation
The contractor shall provide qualified operations, maintenance, and
engineering support for the safe operations of the WETF and/or the Neutral
Buoyance Laboratory (NBL) when it is completed (currently planned for 1996). The
specific support requirements are described below.
2.3.3.2.1 Operations Support
The contractor shall provide the necessary test personnel
to assure that crew training, procedure, development, and engineering
evaluations are accomplished in an efficient, effective, and safe manner.
Pre-test support shall include the checkout and verification of all facility
hardware and required mockups. Any missing and/or defective equipment shall be
reported in a timely manner. The contractor shall be proficient in setting up
all configurations of neutral buoyancy trainers and mockups for each exercise in
the WETF (NBL). Rigging procedures for each test or training mockup shall be
developed by the contractor and approved by NASA. The contractor shall maintain
all of the required scuba equipment. All contractor personnel shall be trained
in accordance with the WETF (NBL) Training Plan, JSC 16961. All contractor
operations shall comply with the WETF (NBL) General Operating Plan (GOP), JSC
16908, WETF (NBL) Standard Operating Procedures (SOP), JSC 16941, and NASA
Safety Standard for Underwater Facilities, NSS/WS1740.10.
2.3.3.2.2 Activities Support
The contractor shall support all suited and scuba
exercises in the WETF (NBL) pool, bailout training and water egress exercises,
and topside one-g extravehicular activities (EVA) exercises. During suited
operations, the contractor shall staff all of the duty stations as specified in
the WETF (NBL) Training Plan. The contractor shall assist all WETF (NBL)
operations as required. The contractor shall attend the pre-dive briefings and
the post-dive debriefing for every suited run in the WETF (NBL). The contractor
shall provide suited subjects, test directors, scuba instructors, and swim
instructors when required. All equipment that malfunctions or fails during a
test shall be reported to the test director. A log book shall be kept on each
exercise. Any significant equipment or configuration problem shall be documented
for corrective action.
2.3.3.2.3 Environmental Control System (ECS) Support
The contractor shall be responsible for the engineering,
fabrication, assembly, maintenance, operating, and updating of the WETF (NBL)
ECS. The contractor shall provide adequate qualified ECS operators to assure
operational readiness and support under contingency situations. The contractor
shall provide all ECS maintenance and pressure checks. Spare parts and inventory
control for the ECS shall also be provided.
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2.3.3.2.4 Communication System Support
The contractor shall be responsible for the engineering,
fabrication, assembly, maintenance, operation, and updating of the WETF (NBL)
communication system. The contractor shall provide adequate qualified electronic
technicians capable of operating and maintaining the communication system to
assure operational readiness and support under contingency situations. Spare
parts and inventory control for the communication system shall be provided.
2.3.3.2.5 WETF (NBL) Remote Manipulator System (RMS) Support
The contractor shall be responsible for the engineering,
fabrication, assembly, maintenance, operation, and updating of the WETF (NBL)
RMS. The contractor shall provide hydraulic and pneumatic technical expertise
capable of operating and maintaining the WETF (NBL) RMS. Spare parts and
inventory control for the WETF (NBL) RMS shall be provided.
2.3.3.2.6 Mockups and EVA Tools Support
The contractor shall be responsible for the upkeep of all
WETF (NBL) mockups and WETF (NBL) EVA tools. Limited modifications and
maintenance shall be accomplished by the contractor at the WETF (NBL). The
contractor shall maintain the hand tools and light shop equipment at the WETF
(NBL).
2.3.3.2.7 Diver Tracking System (DTS) Support
The contractor shall be responsible for the engineering
installation, checkout, operation, maintenance, and updating of the WETF (NBL)
DTS. The DTS includes individual underwater transmitting and receiving units,
the underwater receiving and transmitting units for the Dive Supervisor Station,
and the computer controlled display at the Dive Supervisor Station. Spare parts
and inventory control for the DTS shall be provided.
2.3.3.2.8 Other WETF (NBL) Support
a. The contractor shall keep the WETF (NBL) facility
(pool, building interior, locker rooms, and associated areas) clean, neat, and
orderly. The contractor shall comply with standard personal hygiene practices in
order to minimize ear infections and other related medical diving problems.
b. The contractor shall be responsible for providing and
maintaining WETF (NBL) facility baseline documentation in compliance with JSCMD
8830.1C.
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2.4 OTHER RELATED SUPPORT
The contractor shall provide the qualified manpower and
materials to perform the support detailed in the following paragraphs.
2.4.1 FIP RESOURCES SUPPORT
The contractor shall provide the necessary technical manpower
and materials to support the FIP requirements of selected tasks of the Space and
Life Sciences Directorate (SLSD) and the Flight Crew Support Division. The
Flight Crew Support Computer Facility currently includes Digital Equipment
Corporation VAX and PDP computational systems and peripherals utilizing VAX/VMS,
Unix, DOS, RSX-11M, and Macintosh as operating systems. The primary functions of
the Computer Facility include data processing and analysis, customized FIP
hardware interface design and development, customized software design and
development, office automation support, and the projection of future FIP
requirements. The activities the facility supports are engineering development
and analyses tasks, mission and subsystem performance analysis, man-machine
interface evaluation, proposed mission evaluation studies, experiments data
processing, database system design and support, advanced studies, data
reduction, and management application design and development. Functions to be
performed by the contractor in support of FIP resources are described below.
2.4.1.1 Computer Facility Support
a. The contractor shall provide systems and operations support
for the computer systems and peripheral hardware. This includes maintaining tape
and hardware/software documentation libraries, developing documentation for
computer systems and laboratory operating procedures, screening and installing
operating system and application software, providing laboratory management,
systems management and operator support, performing laboratory engineering
evaluation studies, performing computer systems and software performance
evaluation studies, providing computer systems networking support receiving and
shipping user data products, and maintaining an equipment tracking system.
b. The contractor shall develop, procure, install, maintain
and document software applications as required for remote sensor data processing
and evaluation, crew station development, astronaut anthropometric measurements
evaluations, displays and controls optimizations, simulation data reduction and
analysis, office automation support applications, and computer graphics. This
includes development and maintenance of a database management system to support
all data processing and dissemination requirements. Appropriate computer
security measures shall be implemented.
c. The contractor shall provide hardware support for
troubleshooting, inspection, and repair of selected computer systems, peripheral
hardware, and user workstations. These include terminals, CAD workstations,
graphics terminals and workstations, and personal computers; cable fabrication
and routing for
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remote terminals and other peripherals; network design, development, maintenance
and management support; and design, development, installation, and maintenance
of special purpose computer interfaces. A variety of network protocols are
utilized including DECNET, ETHERNET, TCP/IP, NOVELL and Appletalk.
2.4.1.2 FIP Systems Support
a. The contractor shall design, implement, and ensure the
continued operation of SLSD nodes, and their interfaces with other networks. The
contractor shall expand and modify these systems as required. The contractor
shall design and develop programs to automate and improve research and
management information systems and provide user assistance during checkout and
utilization.
b. The contractor shall support the unique computing
applications of the SLSD with assistance in configuration planning, capability
reporting, schedule development, user help, training, hardware and software
procurement, network design, documentation, data base development, laboratory
modifications, and computer language capabilities.
c. The contractor shall ensure security in the acquisition and
operation of FIP systems. These security requirements shall cover the total
system, including all aspects of hardware, software, facilities, personnel,
data, and operations. The contractor shall develop a security plan for approval,
by NASA which shall provide adequate safeguards for the total system. In
providing FIP systems security support, the contractor shall comply with
security provisions set forth in the JSC Automated Information Systems Security
Plan, JSC 23668.
d. The contractor shall conduct an analysis of existing Flight
Crew Support Division FIP resources and prepare a migration plan to open systems
technology. The contractor will be responsible for making recommendations
concerning upgrading and modifying M-SD facilities and laboratories to meet
current or anticipated future requirements. The plan will be directed towards
acquiring competitive products and reducing the dependence on a single vendor,
brand of hardware, or proprietary or restrictive environments. The contractor
shall conduct research prior to acquisition in which the dependence on
specialized or proprietary FIP hardware or software will be minimized. The
contractor will continually evaluate the market to identify new products and
technologies that will meet the functional requirements of this contract as well
as proceed in the direction of open systems technology and full and open
competition.
2.4.2 TECHNICAL INTERCHANGE SUPPORT
The contractor shall provide a capability to plan and conduct meetings,
workshops, and symposia; arrange for visiting scientists and engineers as
participants and lecturers; and perform other tasks which promote technical
interchange. These interchanges shall include other NASA Centers, foreign and
domestic government agencies, universities, professional societies, and industry
on topics of specialized research, development and applications related to the
major functions defined in this
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statement of work. This support shall include the planning and organization of
meetings and presentations, logistical support (including travel and subsistence
for participants), conducting of meetings, and reporting of results.
2.4.3 GRAPHICS, ILLUSTRATIONS, AND TECHNICAL PUBLICATIONS SUPPORT
The contractor shall provide graphics, illustrations, and technical
publications support for producing original artwork and reproductions in black
and white and/or color, and for supporting the documentation and technical
interchange requirements of this SOW. Renderings shall typically be required of
components, subsystems, test articles, test setups, internal and external views
of mockups, trainers, facilities and their support equipment, and of concepts
and integrated configurations of crew stations and habitats. Tabular and
graphical presentations of scientific and engineering data shall be required for
documentation and reporting of research, test and evaluation activities.
Technical editing, arrangement and reproduction of reports, technical papers,
presentations and other technical material shall also be required.
3.0 GENERAL SUPPORT REQUIREMENTS
This section of the SOW describes general functions which are
considered common to the overall technical support effort contained in section
2.0. The contractor shall implement the use of the metric system of measurement
in activities performed in support this SOW in compliance with NMI 8010.2A, as
specified in JSC-25290, JSC Metrication Plan and Man-Systems Division
Metrication Implementation Plan, JSC 25862.
3.1 MAINTENANCE AND OPERATIONS SUPPORT
The contractor shall be responsible for maintenance and operation
support to all laboratories, facilities and related hardware/software systems
and equipment. This includes all presently available systems and any new
instruments, equipment, and systems that may be added during the course of this
contract. The contractor shall ensure the operational availability of all
equipment through continued development and execution of maintenance plans and
procedures, by providing properly trained personnel and by ensuring that
adequate maintenance tools are available. Contractor maintenance personnel shall
be proficient in the equipment and systems under their individual areas of
responsibility and shall be sufficiently familiar with interfacing systems so as
to trouble-shoot interface anomalies. Where it is not beneficial to the
government for the contractor to maintain local expertise on specific equipment
the contractor shall provide for preventive maintenance agreements and/or
call-in of specialists in a manner consistent with equipment availability
requirements. The contractor shall provide preventive maintenance which includes
periodic testing, adjusting, cleaning, lubricating, and replacing of parts for
all equipments to insure proper and continued operation. Remedial maintenance
shall be performed to restore failed equipment to its proper operating
condition. Remedial maintenance, as used herein, includes the requirement to
perform, upon request from the government, capital type rehabilitation on, or to
replace,
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equipment or systems which cannot be physically repaired or for which continued
routine maintenance is not economically feasible.
3.2 LOGISTICS SUPPORT
The contractor shall provide a logistics support function for the
contract, to include all acquisition, implementation, inventory control, receipt
and inspection, storage, redistribution, and disposal functions necessary to
meet the requirements of implementing this SOW. More specifically, the
contractor shall be responsible for providing all equipment and materials
necessary for performing the required support functions. This includes such
items as components, piece parts, subassemblies, and assemblies of hardware
(flight and non-flight), mockups, trainers, test articles, test equipment,
instrumentation, supplies, and materials. Included in this function is the
requirement to provide storage for relatively large articles and quantities of
materials.
3.3 SYSTEMS ENGINEERING AND INTEGRATION SUPPORT
The contractor shall provide a capability to perform multidiscipline
projects transcending the requirements of a single discipline or the
responsibility of any single functional area as described in this SOW. This
shall include providing project management and multidiscipline technical support
for projects requiring definition, design, research, development, fabrication,
and testing of complex facilities, systems, flight, and flight-like hardware.
3.4 TRAINING
The contractor shall establish and maintain a training plan designed to
provide and maintain a highly versatile work force. In addition to training in
their own fields of specialization, it is highly desirable to provide personnel
with cross-training in related fields to broaden the scope of their
qualifications, including capabilities to perform work in other areas, as
required to provide flexibility to meet peak workloads and provide contingency
backup capability. Training records shall be established and maintained for all
personnel including training manuals and documentation of certification and
periodic recertification of personnel. Typical types of training to be included
are (a) selected outside training arranged by the contractor, (b) contractor
provided classroom and/or on-the-job training, and (c) specialized training as
necessary. Emphasis shall be placed on implementing a Total Quality Program
within the contract and shall include the team building aspects of developing a
cohesive contractor/NASA team.
3.5 CONFIGURATION CONTROL
The contractor shall maintain detailed, accurate, and complete
documentation describing the current configuration and changes to the
configuration of equipment, hardware and software systems covered under this
contract. Drawings, schematics, reference manuals, and other appropriate
documentation shall be prepared and maintained for such items as electrical and
mechanical test and data systems, laboratory control systems, and
instrumentation layouts for each major laboratory test
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activity. Building fixed equipment (such as utilities) will normally be excluded
from this requirement.
3.6 SAFETY, RELIABILITY AND QUALITY ASSURANCE (SR&QA)
SR&QA requirements to be implemented by the contractor for the work
defined in this SOW are as follows:
3.6.1 Surveys
A formal Safety, Reliability, and Quality Assurance (SR&QA) survey may
be conducted by JSC at any time during the contract. A written notice of the
intended survey shall be made 30 days prior to the survey. The contractor shall
support these surveys with necessary documentation and personnel not to exceed
one week per survey and not to exceed one survey per calendar year for the
contract duration.
NASA may conduct an incremental survey at any time to support the
resolution of a specific problem. One week (five working days) prior to the
incremental survey, verification of this survey shall be given to the contractor
either by telecon or letter from the Contracting Officer. An incremental survey
is intended to cover only a specific area such as a process control problem or
any other unsatisfactory detail that would be of such magnitude that the
resulting hardware would be unacceptable to NASA.
For surveys that result in recommended actions, the contractor is
required to respond within 30 days after receipt of the survey report and to
submit a status report every 30 days thereafter until all actions are closed.
3.6.2 SAFETY AND HEALTH
The contractor shall perform tasks to ensure the protection of
personnel, property, equipment, and the environment in contractor products and
activities generated in support of institutional and space flight program
objectives. To ensure compliance with pertinent NASA policies and requirements
and Federal, State, and local regulations for safety, health, environmental
protection, and fire protection, the contractor shall develop and implement a
safety and health program in accordance with a safety and health plan as
approved by NASA. The contractor shall implement system safety engineering tasks
for flight and institutional program activities and products in accordance with
the schedule and applicable flight and institutional requirements as documented
in the contractor's system safety program plans (SSPP) which have been approved
by NASA. The contractor shall develop and implement risk management techniques
(including risk assessment) to be applied to hazards derived from analyses of
activities and products for the purpose of eliminating or controlling hazards as
specified in NASA policies and requirements for hazard reduction.
3.6.3 RELIABILITY
The contractor shall maintain a reliability activity consistent with
the requirements for JSC-sponsored flight hardware or JSC-modified flight
hardware as
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described in the various functional areas of the SOW. Reliability functions
shall be an integral part of the design and development process and shall
include the evaluation of hardware reliability through analysis, review, and
assessment. Reliability requirements for Flight Crew Support Division Flight
Hardware have been derived from NHB 5300.4 (ID-2) and JSC 31000. These
requirements are documented in JSC 25472A, JSC Reliability and Maintainability
Plan for Flight Crew Support Division for Government-Furnished Equipment (GFE)
for Space Hardware Projects. For training hardware, these requirements are
limited to that hardware which interfaces with flight hardware and to failures
on flight-like hardware that could exist in the flight hardware. The contractor
shall be responsible for preparing a reliability plan and assuring its proper
execution.
3.6.4 QUALITY ASSURANCE
The contractor shall establish, implement, and maintain a quality
assurance program in accordance with NHB 5300.4 (1B) "Quality Program Provisions
for Aeronautical and Space System Contractors." This publication establishes
common, general requirements for contractor quality programs to ensure the
required high quality of NASA aeronautical and space systems.
The contractor shall maintain an effective and timely quality program
planned and developed in conjunction with all other contract functions necessary
to satisfy all requirements. Overlapping or interfacing requirements, such as,
reliability, safety, and test, or applicable quality policies/procedures as
referenced below shall not result in duplication of contractors efforts. The
contractor shall submit a quality plan in accordance with DRD QA-004.
Quality Assurance documents for the Space Shuttle Program [NHB 5300.4
(1D-2)] and the Space Station Program (JSC 31000, Vol 4) are commensurate to NHB
5300.4 (1B). In addition, work performed within JSC facilities shall be in
accordance with the JSC Quality Assurance Manual, 53120, and the applicable JSC
project quality requirements, as tailored by NSTS 21096, JSC 16427, JSC 17038E,
JSC 31040 and JSC 20658B.
The contractor shall provide a system for the reporting of all problems
(failures and unsatisfactory condition reports) and the establishment of
corrective action for all problems concerning flight and certification hardware,
GSE for which the contractor is cognizant, and spare hardware. The contractor
shall be responsible for ensuring that his supplier implemented problem
reporting and corrective action systems will meet the requirements of this
section. Formal failure reporting shall commence at the start of the acceptance
testing of the production hardware (including certification hardware). The
contractor shall maintain a status on all open problems. The methods employed by
the contractor in maintaining the status of problems shall be compatible with
those of NASA in responding to requests for information. Reporting of problems
shall be as directed in DRD QA-002.
The contractor shall comply with the JSC metrology requirements. Onsite
equipment calibration, repair services, and a computerized instrument recall
program will
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be provided by the JSC Measurements Standards and Calibration Laboratory (MSCL).
Detailed procedures are in JSCM 8070B, JSC Metrology Requirements Manual, NMI
5330.9 Metrology Calibration and JSCI 8070.1E Metrology and Calibration
Services.
3.7 DATA REQUIREMENTS
The contractor shall prepare, maintain, and/or submit data throughout
the life of this contract in accordance with the Data Requirements List (DRL)
and the Data Requirements Descriptions (DRD's) in Appendix C-I. Data submitted
shall be in legible form and in the quantity of copies specified in the DRL. The
DRD's define the content, format, and maintenance requirements for the data
items. Each DRD defines the minimum requirements that will be accepted for the
documentation. Where applicable, the contractor's own internal documents shall
be utilized to meet and/or supplement the requirement specified herein.
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EXHIBIT 10.94
Supplemental Agreement (SA) 01
2 September 1998
COST PLUS INCENTIVE FEE CONTRACT
NUMBER SHB 1014
AUGUST 14, 1997
FOR
MULTIPLE MISSION INTEGRATION AND OPERATION (I&O) SUPPORT
BETWEEN
MCDONNELL DOUGLAS CORPORATION,
A WHOLLY-OWNED SUBSIDIARY OF
THE BOEING COMPANY
499 BOEING BOULEVARD
HUNTSVILLE, ALABAMA 35824
AND
SPACEHAB, INCORPORATED
1595 SPRING HILL ROAD
SUITE 360
VIENNA, VIRGINIA 22182
<PAGE> 2
Supplemental Agreement (SA) 01
2 September 1998
TABLE OF CONTENTS
Article 1 - Entire Agreement..........................................1
Article 2 - Definitions...............................................1
Article 3 - Scope of Work.............................................1
Article 4 - Studies/Analyses..........................................1
Article 5 - Period of Performance.....................................2
Article 6 - Contract Amount...........................................2
Article 7 - Payment...................................................3
Article 8 - Limitation of Funds.......................................3
Article 9 - Supplies/Services and Delivery Schedule...................4
Article 10 - Title and Delivery........................................4
Article 11 - Packaging and Marking.....................................4
Article 12 - Inspection and Acceptance.................................5
Article 13 - Place of Performance......................................5
Article 14 - Items, Equipment, Property, Services to be Furnished
by SPACEHAB, Inc. And/or the Government on a
"No Charge" Basis.........................................5
Article 15 - Exchange of Technical Information.........................6
Article 16 - Excusable Delays..........................................6
Article 17 - Changes...................................................7
Article 18 - Amendments................................................8
Article 19 - Stop Work Orders..........................................8
Article 20 - Notices...................................................8
Article 21 - Key Personnel.............................................9
Article 22 - Termination...............................................9
Article 23 - Governing Law.............................................9
Article 24 - Arbitration/Disputes......................................9
Article 25 - Audit....................................................10
Article 26 - Indemnity Against Patent Infringement....................10
Article 27 - Limitation of Liability..................................11
Article 28 - Insurance and Indemnification............................10
Article 29 - MDC Employee Injury......................................11
Article 30 - Warranty.................................................11
Article 31 - Relationship of Parties..................................11
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Article 32 - Manned Space Flight Item.................................12
Article 33 - Order of Precedence......................................12
Article 34 - Technical Data...........................................12
Article 35 - Patent Rights............................................12
Article 36 - Use of Company Logo......................................12
ii
<PAGE> 4
Supplemental Agreement (SA) 01
2 September 1998
THIS CONTRACT, by and between SPACEHAB, Inc. with an address at 1595 Spring Hill
Road, Suite 360, Vienna, Virginia 22182 (hereinafter referred to as "SPACEHAB,
Inc." or "SHI") and McDonnell Douglas Corporation, A Wholly-Owned Subsidiary of
The Boeing Company, with an address at 499 Boeing Boulevard, Huntsville, Alabama
35824, (hereinafter referred to as "MDC"). (McDonnell Douglas Corporation
represents and warrants that it is acting on behalf of The Boeing Company and
that it has the corporate power and authority to legally add The Boeing Company
to the terms and conditions of this Contract.) The parties hereby agree as
follows:
Article 1 - Entire Agreement
This Contract, all exhibits and other documents incorporated herein by
reference, whether or not attached hereto, constitute the complete and exclusive
statement of the Contract between the parties hereto. This Contract supersedes
any previous understanding or agreement between SHI and MDC (oral or written)
with respect to the subject matter hereof. Further, this Contract constitutes a
definitization of Letter Contract SHB 1014 dated 14 August 1997 including
modifications thereto through Modification No. 24 dated 20 August 1998 between
SHI and MDC, subject to an equitable adjustment of Estimated Target Cost Plus
Target Incentive Fee resulting from these modifications.
Article 2 - Definitions
A. The term "MDC" shall include McDonnell Douglas Corporation, A
Wholly-Owned Subsidiary of The Boeing Company, formerly known as
McDonnell Douglas Aerospace - Huntsville.
B. The terms "General Agreement," "Basic Agreement," "Basic Terms and
Conditions," "Agreement" and "Contract" shall mean this Contract and
shall be deemed to include all exhibits, specifications, drawings, or
other documents incorporated herein by reference.
Article 3 - Scope of Work
MDC is the prime Contractor responsible for performance of all work set forth in
this Contract, including work to be performed by any subcontractor.
MDC shall perform the work identified in Exhibit A, "SPACEHAB Multi-Mission
Integration and Operations Contract Statement of Work, enclosed herein and made
a part hereof.
In accordance with the Statement of work requirements herein, it is intended
that MDC will perform the Integration and Operations of four (4) SPACEHAB
science missions (1 single module mission and 3 double module missions) and 5
SPACEHAB cargo double module missions aboard the NASA Orbiter within the
Contract period of performance and maintain accountability and operation of
SPACEHAB hardware which was developed by the Phase C/D Contracts SHB 1001, SHB
1010 and SHB 1013, or the I&O Contracts SHB 1002 and SHB 1009 between SHI and
MDC.
Article 4 - Studies/Analyses
A. Task Directives. As set forth in WBS 9.1.9.5 of the Statement of Work,
MDC will be required to perform Studies/Analyses as specified in
written Task Directives. Task Directives may be authorized solely by
the SHI personnel specified in Article 20 and will be jointly signed by
the appropriate MDC personnel. These directives shall define the scope
of work for the task to be performed, provide the time and place of
performance desired, provide the total funding
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<PAGE> 5
authorized for this task by this Task Directive, and will provide such
other instructions as may be required to properly define the effort. No
work is to be performed under this clause unless authorized by a
Specific Task Directive.
B. The Studies/Services effort will be cost plus fixed fee of 12% and not
subject to the cost/fee sharing arrangement described in Article 6.
Funding authorization shall be issued annually on a SHI fiscal year
basis. Funding authorized for each study area and each SHI fiscal year
shall be defined in Exhibit D of this contract. If at any time during
the current year, MDC has reason to believe the effort will exceed the
authorized funding, MDC will notify SHI and furnish with such
notification, a new estimate of the total funding required. In the
event SHI desires to continue the effort, a contract change will be
issued authorizing the additional funding and the contract will be
adjusted. The annual level of effort under this article is anticipated
to be on the order of 5 to 10 equivalent personnel plus travel and
miscellaneous materials.
C. Financial Management. Costs incurred under this provision for Studies
shall be reported as a part of the 9.1.9.5 WBS, with expenditures
segregated by Task Directive in the Monthly Compliance Report.
Article 5 - Period of Performance
MDC shall perform the work called for under this Contract in accordance with the
agreed to Statement of Work as specified in Article 3 herein, including
preparation and submission of all reports, during the period of performance
beginning 14 August 1997 and continuing through 31 December 2002, and as may be
extended by mutual agreement.
Article 6 - Contract Amount
A. General. This is a Cost Plus Incentive Fee Contract. The following
estimated target cost and target incentive fee is established for the
effort required by the Contract for services as specified in Statement
of Work defined in Article 3 above and in accordance with the schedule
specified in Article 9 for nine (9) SPACEHAB missions. The amounts
include negotiated target cost and target incentive fee for
Modifications 3, 6, 11, and 12 to the Letter Contract.
Estimated Target Cost: $86,810,379
Estimated Target Incentive Fee: $10,365,680
Estimated Target Cost Plus Target Incentive Fee: $97,176,059
Estimated Studies Cost: $ 2,269,935
Estimated Studies Fixed Fee: $ 276,565
Total Estimated Contract Price: $99,722,559
B. Target Cost and Target Incentive Fee. The Target Cost and Incentive Fee
of 12% specified in Paragraph A above are subject to adjustment if the
Contract is modified in accordance with Article 6.C.2 below.
1. "Target Cost," as used in this Contract, shall mean the cost
of this Contract as initially negotiated, and as modified in
accordance with the Changes Clause of this Contract.
2. "Target Incentive Fee" as used in this Contract, shall mean
the fee that is subject to the Incentive formula, as described
in Article 6.C.1 below.
C. Fees payable.
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<PAGE> 6
1. The Total Target Incentive Fee shall be payable under this
Contract in accordance with Article 7 below and shall be
increased by 30 cents for every dollar that the actual cost
incurred (exclusive of fees) is less than the Target Cost, or
decreased by 30 cents for every dollar that the actual cost
exceeds Target Cost. In no event shall the Total Target
Incentive Fee, as modified, be more than 15% or be less than
8% of the Total Target Cost.
2. Equitable Adjustment. When the work under this Contract is
increased or decreased by a modification to this Contract,
then the Target Cost and Incentive Fee shall be modified as
appropriate in a supplemental agreement to this Contract.
D. Estimated Studies Cost and Estimated Studies Fixed Fee specified in
Paragraph A above are allocated to specific studies areas under WBS
9.1.9.5 and to SPACEHAB fiscal years in accordance with Exhibit C
attached hereto. The specific amounts in Paragraph A above and in
Exhibit C are subject to adjustment in accordance with Article 4.B
above.
E. Facilities Capital Cost of Money. Facilities capital cost of money
shall be an allowable cost under this contract.
F. Exclusion of Taxes. The parties agree that no sales or use tax, either
Alabama or Florida has been included in the target cost. Sales or use
tax, if any, shall be subject to the Changes Clause of this Contract.
Article 7 - Payment
A. MDC shall submit invoices monthly for the payment of actual costs
incurred plus the Target Incentive Fee of 12%. Such invoices shall be
submitted to SHI at:
SPACEHAB, Inc.
1595 Spring Hill Road
Suite 360
Vienna, VA 22182
Payment will be made by or on behalf of SPACEHAB, Inc. to:
McDonnell Douglas Corporation
P. O. Box 516
St. Louis, Missouri 63166
Attention: Accounts Receivable
Such invoices shall be due and payable by SHI, 30 days after receipt of an
invoice. If any such invoice remains unpaid 45 days after receipt of such
invoice, MDC shall have the right to stop work under this Contract. If such
invoice continues to remain unpaid 60 days after receipt of such invoice, MDC
may at its option, consider SHI to have breached this Contract and may pursue
remedies as provided by law.
Article 8 - Limitation of Funds
A. The sum of $17,356,207 is presently available for payment and is
allotted to this contract covering the period of performance through 31
December 1998. It is anticipated that from time to time additional
funds will be allotted in writing to this contract up to the total
estimated contract price. When additional funds are allotted from time
to time for continued performance
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<PAGE> 7
of the work under this contract, the parties shall agree on the
applicable period of performance which shall be covered by such funds.
B. MDC agrees to use its best efforts to perform, or have performed,
the work on this contract up to the point at which the total amount
paid and payable by SHI under the contract approximates but does not
exceed the amount specified in Paragraph (A). Unless otherwise agreed
in writing, SHI shall not be obligated to reimburse MDC for costs
incurred in excess of the total amount allotted by SHI to this contract
during the stated period of performance.
C. Upon expenditure of 85% of allotted funds set forth in Paragraph (A),
MDC shall notify SHI in writing as to the estimated amount of
additional funds required for the timely performance of the contract.
Such notice shall specify any additional funds and period of
performance required.
D. If, after the notification called for in Paragraph (C) above,
additional funds are not allotted to this contract, MDC may request
that this contract be terminated, in accordance with the provisions of
the Terminations Clause of this contract, and SHI shall comply.
E. MDC is not obligated to continue performance under this contract
(including actions under the Termination clause of this contract) or
otherwise incur costs, which when added to the applicable fee would be
in excess of the amount then allotted to the contract by SHI until SHI
notifies MDC in writing that the amount allotted has been increased.
Article 9 - Supplies/Services and Delivery Schedule
A. The scope of work to be performed under this Contract shall include,
the provision of all labor, materials, services, and equipment
necessary to perform the work as set forth in Exhibit A, SPACEHAB
Multi-Mission Integration and Operations Contract Statement of Work.
B. The flight schedule for which MDC shall provide services is as follows:
MISSION LAUNCH DATE
- Science 1, single module October, 1998
- Cargo 1, double module April, 1999
- Cargo 2, double module October, 1999
- Science 2, double module May, 2000
- Cargo 3, double module December, 2000
- Science 3, double module June, 2001
- Cargo 4, double module November, 2001
- Science 4, double module April, 2002
- Cargo 5, double module November, 2002
C. MDC shall submit on a monthly basis to SHI a compliance report mutually
agreeable to MDC and SHI which documents MDC's expenditures pertaining
to this contract.
Article 10 - Title and Delivery
The point of delivery for any hardware required shall be Cape Canaveral, Florida
USA. The point of delivery for any data required shall be SPACEHAB, Inc.,
Vienna, VA.
Article 11 - Packaging and Marking
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Packaging and marking for shipment of all items ordered hereunder shall be in
accordance with good commercial practice, and adequate to ensure both acceptance
by common carrier and safe transportation at the most economical rate(s).
Article 12 - Inspection and Acceptance
The place of final inspection and acceptance for the services and deliverable
hardware called for under this Contract shall be SHI's facility at Cape
Canaveral, Florida, or other designated place(s) or performance. The place of
inspection and acceptance of all deliverable reports and documentation shall be
at SHI, Vienna, VA with copy to SHI Houston, Texas and SHI Cape Canaveral, FL as
specified by SHI.
Article 13 - Place of Performance
MDC shall perform the work under this contract at its facility located in
Huntsville, Alabama, at SHI's facility located at Cape Canaveral, Florida, and
at any other locations as may be required.
Article 14 - Items, Equipment, Property, Services to be Furnished by SPACEHAB,
Inc. and/or the Government on a "No Charge" Basis
A. SHI and/or the Government shall furnish to MDC, for use in connection
with and under the terms of this contract on a "no-charge" basis, the
SHI and/or Government owned equipment, property, items, services, etc.
which are suitable for the intended use. SPACEHAB Furnished Equipment
(SFE) to be provided is identified in Exhibit B. Government Furnished
Property (GFP) to be provided is identified in Exhibit B.
B. Off nominal conditions, inadequacies, and delivery delays in SHI and/or
Government supplied items identified herein will be the basis for a MDC
Contract Change proposal and subsequent Contract amendment reflecting
the cost, fee, schedule, and technical impact of defective or late
delivery of SHI and/or Government supplied items.
C. MDC is authorized to commingle all material without physical
segregation or identification to the individual SHI contracts. The
applicability of NASA FAR 52.245-5 Government Property is agreed to
apply to Government furnished or owned equipment only and does not
apply to purchases under this Contract since it is understood that
title to all items provided under this Contract would vest with
SPACEHAB, Inc.
D. SPACEHAB Furnished Equipment as identified in Exhibit B will include
the following information:
- Acceptance Data Package (ADP)
- Functional capabilities
- Interface definition
- Environmental constraints
- Mechanical characteristics (dimensions, weight, c.g., etc...)
- Electrical power requirements (peak, start-up/in-rush,
profile, ...)
- Special requirements (commanding, downlink,...)
- Verification data (including safety data)
- Test requirements for processing/integration activities
- Operations requirements and procedures (flight and ground)
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Maintenance/repair of SFE that was designed and built by SHI will be
the responsibility of SHI. Boeing shall be responsible to report
hardware failures immediately to SHI via Material Review Record (MRR).
To do this, Boeing will perform trouble shooting to locate problem to,
but not within, the SFE component. Boeing support to SHI for trouble
shooting within the SFE component and shipping or repairing the
component will be authorized by task directive and is funded under the
Studies/Services element of the statement of work (Reference Article 4
and SOW paragraph 9.1.9.5).
Boeing shall be provided an ADP for all SFE at turnover. SFE hardware
and corresponding documentation shall be identified by part number
including revision level (and serial number when appropriate).
Changes/revisions post turnover (to Boeing) shall be accompanied by the
appropriate revised documentation and updated ADP.
Article 15 - Exchange of Technical Information
During the term of this Contract, SHI and MDC, to the extent of their right to
do so, agree to exchange all such technical and management information as may
reasonably be required for each to perform its obligations hereunder. To the
extent that proprietary information of either party is disclosed, such
information or data which is (i) submitted in writing, must be designated by an
appropriate stamp, marking or legend thereon to be of proprietary or
confidential nature, or (ii) orally submitted, must be identified as proprietary
or confidential prior to disclosure and the disclosing party notifies the
receiving party, in writing, specifically identifying any such proprietary or
confidential information so orally submitted within thirty days after such oral
submission. Notwithstanding termination or expiration of this Contract, each
party will keep in confidence and prevent the disclosure of all such proprietary
information and data, whether technical or commercial, to any third party.
Neither party shall be liable for disclosure of any such proprietary information
or data, if such information:
A. Was in the public domain at the time it was disclosed, or later becomes
part of the public domain other than throughout the action of the party
receiving it; or
B. Was known to the party receiving it at the time of disclosure; or
C. Is disclosed with the prior written approval of the other party; or
D. Is disclosed by the party providing the same, to others, on a
non-restricted basis; or
E. Is disclosed inadvertently despite the exercise of the same degree of
care that the receiving party takes to preserve or safeguard its own
proprietary information; or
F. Becomes known to the receiving party from a source other than the
disclosing party without breach of this Section by the receiving party;
or
G. Is disclosed one (1) year after expiration or termination of this
Contract; or
H. Is disclosed to a government agency for certification or export license
purposes, taking all reasonable precautions to prevent further
disclosure by such agency.
Article 16 - Excusable Delays
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Except for default of subcontractors at any tier, MDC shall not be in default
because of any failure to perform this Contract under its terms if the failure
arises from causes beyond the control and without the fault or negligence of
MDC. Examples of these causes include but are not limited to are (1) acts of God
or of the public enemy, (2) acts of Government in either its sovereign or
contractual capacity, (3) fires, (4) floods, (5) epidemics, (6) quarantine
restrictions, (7) strikes, (8) freight embargoes, and (9) unusually severe
weather. In each instance, the failure to perform must be beyond the control and
without the fault or negligence of MDC. "Default" includes failure to make
progress in the work so as to endanger performance.
MDC shall not be in default, if the failure to perform is caused by the failure
of a subcontractor at any tier to perform or make progress, and if the cause of
the failure was beyond the control of both MDC and subcontractor, and without
fault or negligence of either, unless (1) MDC knew of other sources to obtain
the subcontracted supplies or services from to meet schedule; (2) SHI ordered
MDC in writing to purchase these supplies or services from the other source; and
(3) MDC failed to comply reasonably with this order.
If SHI determined that any failure to perform results from one or more of the
causes above, the delivery schedule shall be revised, subject to the rights of
SHI under the Termination Clause of this Contract.
Article 17 - Changes
A. SHI may at any time, by written order, and with such concurrence to not
be unreasonably withheld from MDC, make changes within the general
scope of this Contract in any one or more of the following:
(1) Description of services to be performed.
(2) Time of performance (i.e., hours of the day, days of the week,
etc.).
(3) Place of performance of the services.
(4) Drawings, designs, or specifications.
(5) Method of shipment or packing of supplies.
(6) Place of delivery.
(7) Types and amounts of SHI and/or Government-Furnished Property
to be provided.
B. If any such change causes an increase or decrease in the estimated cost
of, or the time required for, performance of any part of the work under
this contract, whether or not changed by the order, or otherwise
affects any other terms and conditions of this contract, SHI shall make
an equitable adjustment in the (1) estimated cost, delivery or
completion schedule, or both; (2) amount of fee; and (3) other affected
terms and shall modify the contract accordingly.
C. MDC shall assert its right to an adjustment under this clause within 60
days from the date of receipt of the written order. However, if SHI
decides that the facts justify it, SHI may receive and act upon a
proposal submitted before final payment of the contract.
D. Failure to agree to any adjustment shall be a dispute under the
Disputes Clause. However, nothing in this clause shall excuse MDC from
proceeding with the contract as changed.
E. Notwithstanding the terms and conditions of paragraphs (a) and (b)
above, the estimated cost of this contract and, if this contract is
incrementally funded, the funds allotted for the performance of this
contract, shall not be increased or considered to be increased except
by specific written modification of the contract indicating the new
contract estimated cost and, if this contract is incrementally funded,
the new amount allotted to the contract. Until this modification is
made,
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MDC shall not be obligated to continue performance or incur costs
beyond the point established in the Limitation of Funds Clause of this
Contract.
Article 18 - Amendments
Neither this Contract, nor any term or condition thereof, shall be amended or
changed in any manner except by an instrument in writing hereto, executed by
both parties acting through their duly authorized representatives.
Article 19 - Stop Work Orders
SHI may, at any time, by written order to MDC, require MDC to stop all, or any
part, of the work called for by this contract for a period of up to 90 days
after the order is delivered to MDC, and for any further period to which the
parties may agree. The order shall be specifically identified as a stop-work
order issued under this clause. Upon receipt of the order, MDC shall immediately
comply with its terms and take all reasonable steps to minimize the incurrence
of costs allocable to the work covered by the order during the period of work
stoppage.
Article 20 - Notices
A. Except as herein specifically provided otherwise, all notices, reports,
and other communications hereunder shall be given in writing either by
personal delivery, by first class mail, or by electronic transmission,
addressed to the respective parties as specified herein below.
B. The date upon which any such communication is personally delivered or,
if such communication is transmitted by mail or by electronic
transmission, the date upon which it is received by the addressee,
shall be deemed to be the effective date of such communication.
C. Each party shall promptly advise the other in the event of any change
in their respective addresses.
D. The SHI personnel authorized to issue written orders, in accordance
with the Changes Clause, are M.E. Grayson, W.S.Dawson, or Nelda
Wilbanks. The SHI personnel authorized to issue written Task Directives
in accordance with Article 4. are M. D. Steffey, J. M. Lounge, and B.
A. Harris.
The SHI personnel authorized to give technical direction are E. M.
Chewning and D. A. Bland.
E. The addresses of SHI and MDC, for the purpose of Paragraph A above, are
as follows:
FOR COMMUNICATION TO SPACEHAB, INC.
SPACEHAB, Inc.
1595 Spring Hill Road, Suite 360
Vienna, VA 22182
Attention: Nelda Wilbanks with copies to E.M.
Chewning and D. A. Bland.
When transmitted by mail: Same as above
When transmitted by electronic transmission:
Fax Number: (703) 821-3070
FOR COMMUNICATION TO MDC
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The Boeing Company
499 Boeing Boulevard
Huntsville, AL 35824
Attention: Contract Administrator with copy to
SPACEHAB Program Manager
When transmitted by mail: Same as above
When transmitted by electronic transmission:
Fax Number: (256) 461-2460
Article 21 - Key Personnel
The personnel listed below are considered essential to the work being performed
under this contract. Before removing, replacing, or diverting any of the listed
personnel, MDA shall notify SHI in advance, and shall provide rationale
including identification and qualifications of candidate replacement, and shall
not remove, replace or divert such personnel without SHI's written consent,
which shall not be unreasonably withheld. In such event, the list of personnel
shall then be amended accordingly.
Key Personnel Title/Position
J. H. James Director, SPACEHAB Program
E. L. Streams Senior Manager, SPACEHAB Product Engineering
R. K. Keen Senior Manager, SPACEHAB Multi Mission Integration and
Operations
D. A. Biggs Senior Manager, SPACEHAB Integration and Operations
W. A. Koelle Senior Manager, SPACEHAB Safety and Mission Assurance
W. H. Turner Senior Manager, SPACEHAB Ground Operations
Article 22 - Termination
A. SHI may terminate this Contract at any time by written notice, in whole
or in part, if SPACEHAB, in its sole discretion, determines that a
termination is in its own best interest. SHI shall terminate by
delivering to the Contractor a Notice of Termination specifying the
extent of termination and the effective date. To minimize the cost of
effecting the termination in accordance with MDC policy, best efforts
shall be made by SHI to provide 60 to 90 days notice prior to the
effective date of termination.
B. In the event of a termination, SHI will reimburse MDC for all costs
incurred, including applicable fee and termination costs. For purposes
of the Termination Clause, incurred costs includes all outstanding
commitments not yet paid and for delivery of all hardware, software and
services, whether complete or incomplete, identified herein, to SHI.
Termination costs are those actual and reasonable costs incurred in
terminating the Contract including usual and customary severance pay
and other labor costs in the ordinary course of business or as
otherwise required by law, storage and protection costs, and costs of
settlement and termination of subcontracts.
C. SHI may terminate this contract if MDC fails to deliver the goods or
perform the services required by this contract within the time
specified and any extension thereto granted by SHI.
Article 23 - Governing Law
This agreement shall be governed by and interpreted in accordance with the law
of the State of Delaware.
Article 24 - Arbitration/Disputes
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Disputes arising out of the interpretation or execution of this contract which
cannot be resolved by negotiation shall, at the request of either Party, (after
giving 30 days notice to the other Party) be submitted to arbitration. The
arbitration tribunal shall sit in Huntsville, AL. Disputes shall be finally
settled in accordance with the Rules of Conciliation and Arbitration of the
American Arbitration Association by one or more arbitrators designated in
conformity with those Rules. The decision to submit a dispute shall not excuse
either party from the timely performance of its obligations hereunder which are
not the subject matter of the dispute. Further, if the lack of resolution of the
matter in dispute will adversely impact the timely completion of preparation for
launch activities, MDC and SHI will perform the matter in dispute in the manner
determined by SHI, within the framework of this Contract and without prejudice
to the final resolution of the matter in dispute.
Article 25 - Audit
A. MDC will maintain accurate records of labor hours expended, subcontract
billings and travel costs incurred by Cost Charge Number. Such records
shall be made available for inspection by an independent certified
public account retained by SHI during normal business hours for a
period of three (3) years after completion of this Contract.
B. MDC's books, records, documents and other supporting data shall be made
available to an independent certified public accountant retained by SHI
for inspection and audit as reasonably required in conjunction with the
negotiation of any changes hereunder, including termination claims.
C. In case of any dispute, the parties agree to continue Contract
performance pending resolution.
Article 26 - Indemnity Against Patent Infringement
A. MDC shall indemnify SHI against any liabilities or losses which SHI may
be required to pay in the case of any actual or alleged infringement of
any United States patent or any negotiation or litigation based
thereon, with respect to any products purchased pursuant to the terms
of this Contract unless such products are made to a specific and detail
design furnished by SHI which is not a modification of a MDC design.
Such liabilities or losses (i) include: (a) counsel fees, (b) cost of
replacing any infringing product with a suitable non-infringing
substitute or of otherwise curing any infringement, but (ii) do not
include any losses by SHI due to loss of use, at any time, of equipment
or component utilizing any of said products which are the subject of
any actual or alleged infringement.
B. With respect to any such actual or alleged patent infringement for
which MDC is obligated to indemnify SHI: (i) MDC shall, as soon as
practicable, report to SHI promptly and in reasonable written detail,
each notice of claim against MDC of patent infringement; and (ii) SHI
will notify MDC as soon as practicable after receipt by SHI of
appropriate notice of any charge of infringement or commencement of any
suit or action for infringement against SHI in either case, MDC shall
have the option to (a) conduct negotiations with the party or parties
charging infringement or (b) assume, conduct and control the defense of
any suit or action of infringement against MDC or SHI. In the event MDC
does not pursue either option, then SHI shall have the option to
conduct such negotiations and defense without expense or liability to
SHI as provided under Paragraph A. above.
Article 27 - Limitation of Liability
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In no event, shall MDC be liable under any legal or equitable theory (including
but not limited to contract, tort, negligence, or strict liability) for any
incidental or consequential damages, including but not limited to damages for
lost profits, lost sales, or loss of use of property.
Article 28 - Insurance and Indemnification
Upon delivery and final acceptance by SHI of a SPACEHAB module, SHI shall
indemnify and save harmless MDC, its subcontractors and any officers, directors,
employees, and agents of any of them from any liability and expense on account
of loss of damage to the property of third parties (including the US Government)
or bodily injury to any persons, including death, caused by or resulting from
the use of the goods furnished hereunder and/or arising from the provision of
services under this Contract excepting only such loss, damage, or injury caused
by the indemnities willful misconduct, and SHI shall defend any suits or other
proceedings brought against MDC and its subcontractors and the officers,
directors, employees, and agents of any of them on account thereof an shall pay
all expenses and satisfy all judgments which may be incurred or rendered against
them or any of them in connection therewith. MDC shall give SHI prompt written
notice of any claim of such loss, damage, or injury and shall cooperate with SHI
and its insurers in every reasonable way in defending against such claim. SHI
shall obtain insurance, naming MDC as an additional named insured, against such
liabilities to third parties as are referred to in this paragraph.
MDC shall indemnify SHI against any liability, loss, claim, and/or proceeding in
respect of personal injury to and/or death of any person, or loss or damage to
property, arising out of the performance of the Contract; but only if the same
is due to the negligent acts or omission of MDC, its employees or agents; or any
subcontractor, its employees or agents.
Article 29 - MDC Employee Injury
MDC shall indemnify and hold harmless SHI, its officers, agents, and employees
from any liability, loss or damage they may suffer as a result of death or
injury to any MDC employees connected with or related to the performance of
Contract work on SHI's premises, and which results from the negligence of MDC,
its officers, agents, or employees.
Article 30 - Warranty
A. MDC hereby warrants to SHI that all deliverables furnished under this
contract shall be free from defects in workmanship for a period of one
(1) year from the date of their acceptance. The cost of and associated
fees for remedies of any defects shall be paid pursuant to the payment
provisions of this contract. SHI shall notify MDC in writing, via fax
or any equivalent means within 48 hours of any defects found after
acceptance of the products. MDC's liability under this clause shall not
extend:
1. to defects arising from the misuse of the items after
acceptance.
2. to defects in materials, assemblies or other supplies issued
by SHI for incorporation therein, provided always that MDC
shall have properly exercised its duties as custodian of such
issues and shall have incorporated them in accordance with the
requirements of the contract.
B. MDC's warranty shall not extend to compensation for damage resulting
from the use of articles covered by the contract after acceptance.
Consequently, SHI and/or SHI customers shall have no claim against MDC
for damage suffered by it.
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C. Where defects in items are remedied by repair under this warranty, the
repaired item shall be warranted for the remainder of the unexpired
warranty. Where defective items are replace by new ones the full
guarantee period stipulated in the Contract shall apply to such
replacement items form the date of their acceptance.
D. EXCEPT AS PROVIDED IN THIS ARTICLE, MDC MAKES NO WARRANTIES OF ANY
KIND, EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
Article 31 - Relationship of Parties
This Contract is not intended by the parties to constitute or create a joint
venture, partnership or formal business organization of any kind. The rights and
obligations of the parties shall be only those expressly set forth herein. The
relationship established by this Contract is exclusively that of seller and
buyer.
Article 32 - Manned Space Flight Item
MDC shall include the following statement in all subcontracts and purchase
orders placed by it in support of this Contract, without exception as to amount
or subcontractual level:
For use in manned space flight; materials, manufacturing, and
workmanship of highest quality standards are essential to astronaut
safety.
If you are able to supply the desired item with a higher quality than
that of the items specified or proposed, you are requested to bring
this fact to the immediate attention of the purchaser.
Article 33 - Order of Precedence
In the event of any conflict between Contract and the Statement of Work, the
contract shall take precedence.
Article 34 - Technical Data
All technical data, of whatever type or kind, produced and deliverable under
this Contract shall be the "joint" property of SHI and MDC, and SHI and MDC
shall each have a "royalty-free" right or license to use such data for any
purpose including performance under this Contract.
Article 35 - Patent Rights
All discovery or inventions of whatever type or kind first made or reduced to
practice in connection with the performance of this Contract are the "joint"
property of SHI and MDC, and SHI and MDC (and any of the parties' present or
future employees, agents, consultants or subcontractors pursuant to contractual
rights with one of the parties - hereinafter "Agent") shall each have a
royalty-free right or license therein.
Article 36 - Use of Company Logo
Use of The Boeing Company logo by SHI in marketing presentations and printed or
electronic publications shall be coordinated with and approved by MDC prior to
dissemination.
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IN WITNESS WHEREOF, the parties have caused their duly authorized representative
to execute this Contract in duplicate.
MCDONNELL DOUGLAS CORPORATION, SPACEHAB, INC.
A WHOLLY-OWNED SUBSIDIARY OF
THE BOEING COMPANY
By: _____________________________ By:
Name: W.D. McBride Name: Nelda Wilbanks
Title: Senior Contracts Administrator Title: Contracts Administrator
Date: _____________________________ Date:
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EXHIBIT 10.95
AMENDED AND RESTATED EMPLOYMENT AND
NON-INTERFERENCE AGREEMENT
This Employment and Non-Interference Agreement (this
"Agreement"), is dated as of April 1, 1997 (the "Effective Date") and amended on
January 15, 1998 and January 15, 1999 by and between Dr. Shelley A. Harrison
(the "Executive") and SPACEHAB, Incorporated, a Washington corporation (the
"Company").
W I T N E S S E T H:
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 Chief Executive Officer of the Company and to
undertake such duties and responsibilities as may be reasonably assigned to
Executive from time to time by the Board of Directors of the Company, provided
however, that nothing herein shall require Executive to relocate his principal
residence from the Long Island, New York area.
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 Board of Directors of the Company, or 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.
<PAGE> 2
(b) During the Term of Employment, Executive shall devote such
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, provided however, that the Company acknowledges that Employee is a
General Partner in several venture capital funds and is a director, consultant
and/or advisor to certain companies and associations. The Company specifically
agrees that such current and future activities of the same general type and
scope are permitted under the terms of this Agreement and are not in derogation
of Employee's duties and obligations under this Agreement.
(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 Effective
Date and shall continue for a term ending on March 31, 2002 (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 an Additional Term, as the case may be. Should Executive's
employment by the Company be earlier terminated pursuant to Section 3(b) or
3(c), 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
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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 compensation or 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 for any proposal that would require the relocation of
Executive from the Long Island, New York area; provided,
however, that in the event the Executive's employment is
terminated following a Change in Control, the Executive shall
serve the Company as a consultant under the terms of the
Consulting and Non-Competition Agreement between the Executive
and the Company dated
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January 15, 1999 (the "Consulting and Non-Competition
Agreement"); 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.
"Change in Control" of the Company shall be deemed to occur
on: (i) the date that any person or group deemed a person under Sections 3(a)(9)
and 13(d)(3) of the Act, other than the Company and its subsidiaries as
determined immediately prior to that date, in a transaction or series of
transactions has become the beneficial owner, directly or indirectly (with
beneficial ownership determined as provided in Rule 13d-3, or any successor
rule, under such Act) of 20% or more of the outstanding securities of the
Company having the right under ordinary circumstances to vote at an election of
the Board of Directors of the Company; (ii) the date on which one-third or more
of the members of the Board of Directors of the Company shall consist of persons
other than Current Directors (for these purposes, a "Current Director" shall
mean any member of the Board of Directors of the Company as of the effective
date of the Plan and any successor of a Current Director whose nomination or
election has been approved by a majority of the Current Directors then on the
Board of Directors of the Company); or (iii) the date of approval by the
shareholders of the Company of an agreement providing for (A) the merger or
consolidation of the Company with another corporation where the shareholders of
the Company, immediately prior to the merger or consolidation, would not
beneficially own, immediately after the merger or consolidation, shares
entitling such shareholders to 50% or more of all votes (without consideration
of the rights of any class of stock to elect directors by a separate class vote)
to which all shareholders of the corporation issuing cash or securities in the
merger or consolidation would be entitled in the election of directors or where
the members of the Board of Directors of the Company, immediately prior to the
merger or consolidation, would not, immediately after the merger or
consolidation or (B) the sale or other disposition of all or substantially all
the assets of the Company.
"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,
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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
noncompetition or confidentiality agreement with the Company, including without
limitation, those set forth in Sections 8 and 9 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) [by the Company for any other reason or no reason] or
3(c)(i) [death], 3(c)(ii) [disability], 3(c)(iii) [material
reduction], the Company will: (A) provide to the Executive all
payments, rights and benefits due as of the date of
termination under the terms of the Company's employee and
fringe benefit plans and programs in which the Executive
participated during the Employment Period and pay to Executive
(or his estate or representative) a lump-sum amount equal to
the sum of his earned but unpaid base salary through the date
of termination, any earned but unpaid annual bonus for any
completed fiscal year, a pro rata portion of the annual bonus
for the year in which the termination occurs (determined by
multiplying the target annual bonus for the year of
termination by a fraction the numerator of which is the number
of days in the calendar year that precede the date of
termination and the denominator of which is 365), and any
unreimbursed business expenses or other amounts due to the
Executive from the Company as of the date of termination
(together with the employee and fringe benefit rights
described above, the "Accrued Rights"), (B) pay to Executive
(or his estate or representative) the full amounts to which
the Executive would be entitled to under Sections 4(a) and
4(b) for the period from effectiveness of termination through
the thirtieth month anniversary of termination; and (C) pay to
Executive (or his estate or representative) the benefits
described in Section 6 through the thirtieth 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(h) and
Sections 8 and 9. If the Company makes the payments required
by this Section 3(d)(i), such payments will constitute
severance
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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 pay and provide to the Executive any Accrued
Rights and the Company will not be obligated to pay any
further amounts to Executive under this Agreement.
(iii) Notwithstanding the provisions of paragraphs
(i) and (ii) above, in the event Executive's employment is
terminated following a Change in Control pursuant to Section
3(b)(v) [by the Company for any other reason or no reason] or
Section 3(c)(iii) [by the Executive for material reduction],
the Company will: (A) pay and provide to Executive (or his
estate or representative) any Accrued Rights; (B) pay to
Executive (or his estate or representative) a lump-sum amount
equal to three times the sum of (1) the Executive's
then-current base salary and (2) the average of the last three
annual bonuses paid to the Executive; and (C) pay to Executive
(or his estate or representative) the benefits described in
Section 6 through the thirty-sixth month anniversary of
termination.
If the Company makes the payments required by this
Section 3(d)(iii), 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, other than any amounts under the Consulting and
Non-Competition 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),
Executive shall not be under a duty to seek to obtain alternative employment;
and if Executive thereafter obtains alternative employment, the Company's
payment obligations under Section 3(d), including its obligation to provide
insurance coverage, if any, will not be mitigated or reduced by Executive's
compensation under such alternative employment.
(f) In the event the Term of Employment is terminated and the
Company is obligated to make payments pursuant to Section 3(d), 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, other than
claims relating to the Executive's right to payments or benefits under Sections
3(d) or 3(g) or under the Consulting and Non-Competition Agreement.
(g) Notwithstanding the terms of any stock option plan or
grant
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documentation, any unexercised stock options granted to the Executive
(whether pursuant to this Agreement or otherwise) shall immediately vest and be
immediately exercisable and any and all stock options then held by Executive
shall remain exercisable for their full ten year term in the event of a
termination of employment, unless such termination is pursuant to Sections
3(b)(iii) of (iv) or 3(c)(iv) hereof.
(h) Termination of the Term of Employment will not terminate
Sections 3(d), 3(f), 3(g), and 8 through 25 or the Consulting and
Non-Competition Agreement.
4. Compensation
During the Term of Employment, the Company shall pay to
Executive:
(a) As base compensation for his services hereunder, in
bi-monthly installments, a base salary at a minimum rate in the first year of
this Agreement of $275,000 per annum, in the second year of the Agreement of
$300,000 per annum and in the third year of the Agreement of $325,000, in the
fourth year of the Agreement of $350,000 and in the fifth year of the Agreement
of $375,000. 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.
(c) In connection with the successful completion of a
transaction constituting a Change in Control, the Company shall pay Executive a
special completion bonus in a lump sum equal to three times the highest of the
last three annual bonuses paid to the Executive (the "Completion Bonus"). The
Completion Bonus shall be in addition to and shall not reduce in any way the
other payments and benefits to which Executive is or may become entitled to
under the terms of this Agreement or otherwise.
5. Reimbursement of Expenses
During the Term of Employment, the Company shall pay all
expenses, including without limitation, transportation, lodging (including but
not limited to the use of an apartment in the Washington, D.C. area) and food
for Executive to travel between his home and the Company's headquarters and to
any of its other offices, 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.
6. Benefits
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During the Term of Employment, Executive shall be entitled to
benefits (including health, disability, pension and life insurance benefits
consistent with Company policy, or as increased from time to time), in each
case, in accordance with guidelines or established from time to time, by the
Board of Directors for senior executives of the Company.
7. Parachute Tax Indemnity
(a) If it shall be determined that any amount paid,
distributed or treated as paid or distributed by the Company to or for the
Executive's benefit (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise, but determined without
regard to any additional payments required under this Section 7) (a "Payment")
would be subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code") or any interest or penalties are
incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, being hereinafter collectively
referred to as the "Excise Tax"), then the Executive shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all federal, state and local taxes (including
any interest or penalties imposed with respect to such taxes), including,
without limitation, any income taxes (and any interest and penalties imposed
with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) All determinations required to be made under this Section
7, including whether and when a Gross-Up Payment is required and the amount of
such Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by a nationally recognized accounting firm (the
"Accounting Firm") which shall provide detailed supporting calculations both to
the Company and the Executive within 15 business days of the receipt of notice
from the Executive that there has been a Payment, or such earlier time as is
requested by the Company. The Accounting Firm shall be appointed jointly by two
other nationally recognized accounting firms, one of which is appointed by the
Executive and one of which is appointed by the Company for such purpose. The
Accounting Firm shall not be an accounting firm serving as accountant or auditor
for the individual, entity or group effecting the Change of Control. All fees
and expenses of the Accounting Firm shall be borne by the Company. Any Gross-Up
Payment, as determined pursuant to this Section 7, shall be paid by the Company
to the Executive within five days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of the uncertainty in the application
of Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event that the
Company exhausts its remedies
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pursuant to this Section 7 and the Executive thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly paid
by the Company to or for the Executive's benefit.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later then ten business days after the Executive
is informed in writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall: (i) give the Company any information reasonably requested by the Company
relating to such claim; (ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company; (iii) cooperate
with the Company in good faith in order to effectively contest such claim; and
(iv) permit the Company to participate in any proceeding relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expense. Without limitation on the foregoing provisions of
this Section 7, the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis, and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with respect to
such advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the Executive's taxable year with
respect to which such contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, the Company's control of the contest shall
be limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and the Executive shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service or any
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other taxing authority, so long as such action does not have a material adverse
effect on the contest being pursued by the Company.
(d) If, after the Executive's receipt of an amount advanced by
the Company pursuant to this Section 7, the Executive becomes entitled to
receive any refund with respect to such claim, the Executive shall (subject to
the Company's complying with the requirements of this Section 7) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the Executive's
receipt of an amount advanced by the Company pursuant to this Section 7, a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
8. Confidential Information
(a) Executive acknowledges that his employment hereunder gives
him access to Confidential Information relating to the Company's Business and
its customers which must remain confidential. Executive acknowledges that this
information is valuable, special, and a unique asset of the Company's Business,
and that it has been and will be developed by the Company 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 Company. 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 11), 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 11). 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 Company may seek an appropriate protective order. At the
request of the Company, Executive agrees to deliver to the Company, at any time
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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 8, 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 8 shall survive the termination
of this Agreement regardless of who terminates this Agreement, or the reasons
therefor.
9. Non-Interference
(a) Executive acknowledges that the services to be provided
give him the opportunity to have special knowledge of the Company and its
Confidential Information and the capabilities of individuals employed by or
affiliated with the Company, and that interference in these relationships would
cause irreparable injury to the Company. 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
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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 the Company or had a business relationship
with the Company 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 Company, 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 Company. 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 9 would not
preclude him from earning a living with an entity that is not
a Competitive Business.
(b) The terms of this Section 9 shall survive termination of
this Agreement regardless of who terminates this Agreement, or the reasons
therefor.
10. 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 discoveries 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 an arbitrator or a court of competent
jurisdiction determines that Executive has breached his obligations in any
material respect under
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Sections 8, 9, or this Section 10, 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.
11. Definitions
"Business" means (a) the design, manufacture, lease and
operation of pressurized habitable space capsules and those other businesses and
activities that are described in the Company's Form 10-K for the fiscal year
ended June 30, 1997, or (b) 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).
"Change in Control" is defined in Section 3(d).
"Companies" means the Company and any of its direct or
indirect subsidiaries, 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 not permissible hereunder.
"Executive" means the individual identified in the first
paragraph of this Agreement, or his or her estate, if deceased.
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"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 13(a).
"Restricted 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.
"Subsidiary" means any corporation, limited liability company,
joint venture, limited and general partnership, joint stock company, association
or any other type of business entity of 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).
12. 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: Dr. Shelley A. Harrison
5 Norma Lane
Dix Hills, NY 11746
If to Company: SPACEHAB, Incorporated
1595 Spring Hill Road, Suite 3600
Vienna, Virginia 22182
Attention: President
with a copy to:
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Frank E. Morgan II
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
Any such notices shall be deemed to be given on the date personally delivered or
such return receipt is issued.
13. Previous Agreements; Executive's Representation
(a) Executive and the Company hereby cancel, void and render
without force and effect all prior employment or severance agreements between
Executive and the Company ("Prior Employment Agreements"), and the Executive
releases and discharges the Company from any further obligations or liabilities
thereunder. Notwithstanding the foregoing, the terms and provisions in any Prior
Employment Agreement relating to any grants of stock options or other derivative
securities for the purchase of the Company's common stock, no par value per
share, shall remain in full force and effect and shall not be amended in any
manner as a result of the execution of this Agreement. Further, this release and
discharge shall not apply in any respect to the Consulting and Non-Competition
Agreement.
(b) Executive hereby warrants and represents 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.
14. 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.
15. 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.
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17. 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 9 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.
17. 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 8, 9, and 10 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.
18. Successors
This Agreement shall be binding upon and shall inure to the
benefit of the Company, its successors and any person, firm, corporation or
other entity which succeeds to all or substantially all of the business, assets
or property of the Company. The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business, assets or property of the Company, to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, the "Company" shall mean
the Company as hereinbefore defined and any successor to its business, assets or
property as aforesaid which executes and delivers an agreement provided for in
this Section 18 or which otherwise becomes bound by all the terms and provisions
of this Agreement by operation of law.
19. Assignment; Third Parties
Neither Executive nor the Company may assign, transfer,
pledge,
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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 are intended to be third party beneficiaries of, and have rights and
interests in respect of, Executive's agreements set forth in Sections 8, 9, and
10.
20. 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
and the Consulting and Non-Competition Agreement embody the entire agreement and
understanding of the parties hereto in respect of the subject matter of this
Agreement, and supersede and replace all prior Agreements, understandings and
commitments with respect to such subject matter.
21. Method of Payment
Any lump-sum payments provided for in Section 3(d) shall be
made in a cash payment, net of any required tax withholding, no later than the
fifth business day following the date of the Executive's termination of
employment. Any payment that is not made in a timely manner shall bear interest
at a rate equal to 100% of the short term applicable federal rate, compounded
semi-annually, as defined under Section 1274(d) of the Code, as in effect for
the month in which payment is required to be made.
22. Litigation
THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED, APPLIED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH 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 22,
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 COMMONWEALTH
OF VIRGINIA OR THE UNITED STATES DISTRICT COURTS IN THE NORTHERN DISTRICT OF
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 THIS SECTION 22 SHALL NOT BE
DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT OBTAINED
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IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME
IN ANY OTHER JURISDICTION.
23. Arbitration
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 22 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.
24. 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.
25. Legal Fees and Expenses.
To induce the Executive to execute this Agreement and to
provide the Executive with reasonable assurance that the purposes of this
Agreement will not be frustrated by the cost of its enforcement should the
Company fail to perform its obligations hereunder, the Company shall pay and be
solely responsible for any attorneys' fees and expenses and court costs incurred
by the Executive as a result of a claim that the Company has breached or
otherwise failed to perform this Agreement or any provision hereof to be
performed by the Company, regardless of which party, if any, prevails in the
contest.
26. 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
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instrument.
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IN WITNESS WHEREOF, the parties hereto have set their hands as
of the day and year first written above.
EXECUTIVE:
-----------------------------------
Dr. Shelley A. Harrison
SPACEHAB, INCORPORATED
By:
-----------------------------------
David A. Rossi
President
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Exhibit 10.96
Revised Draft: 11 June 1998
SPACEHAB, INC. AND
INTOSPACE GmbH
EUROPEAN MARKETING AGREEMENT
<PAGE> 2
This Agreement is made and entered into on this __ day of _________ 1998, by and
between SPACEHAB, Inc., a corporation organized under the laws of the State of
Washington, United States of America with its principal place of business
located at 1595 Spring Hill Road, Vienna, Virginia 22182 (hereinafter referred
to as "SPACEHAB") and INTOSPACE, GmbH, a corporation organized under the laws of
the Federal Republic of Germany with its principal offices located at
Sophienstrasse 6, D-30159 Hannover, Germany (hereinafter referred to as
"INTOSPACE").
Since 1989 SPACEHAB and INTOSPACE have maintained a close and mutually
beneficial relationship in marketing research payload flight opportunities on
SPACEHAB's Space Shuttlebased carriers to user organizations in Europe.
SPACEHAB, following consultations with its European partners Alenia Aerospazio
and Daimler-Benz Aerospace, and INTOSPACE, following consultations with its
Steering Board, now seek to enhance their relationship by concluding a new
marketing Agreement to replace the "Exclusive European Broker Agreement" entered
into on February 15, 1989.
This Agreement is intended to focus INTOSPACE's marketing efforts on attracting
additional European customers for research payload flight opportunities on
SPACEHAB's Shuttle-based carriers, particularly customers from the industrial
and national government sectors. In so doing, SPACEHAB and INTOSPACE hope to
promote increased microgravity research and prepare for scientific and
commercial utilization of the International Space Station.
ARTICLE I -- RESPECTIVE RESPONSIBILITIES
In implementing this Agreement, INTOSPACE shall act as the principal European
agent for SPACEHAB in the marketing of research opportunities on SPACEHAB's
Space Shuttle-based carriers.
In carrying out its responsibilities, INTOSPACE shall:
- - Market Space Shuttle research payload flight opportunities on SPACEHAB's
Shuttle-based carriers to prospective customers in the European territory
as defined in Article III below.
- - Establish a new SPACEHAB-INTOSPACE Joint Customer Support Office as
described in Article II below.
- - Assist SPACEHAB in meeting current customer requirements for technical
information.
- - Conduct accommodation studies for potential new customers within the
capabilities of the Joint Office.
- - Assist SPACEHAB in concluding contracts with European customers of SPACEHAB
research flight services consistent with customer requests.
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- - Promote enhanced European and international microgravity research through
continued publication and distribution of the INTOSPACE "Low G" journal on
a quarterly basis including SPACEHAB special editions for international
missions provided the Joint Office planned target budget (discussed in
Article II, below) is reached.
- - Promote SPACEHAB research payload flight opportunities to the European
market through:
- Distribution of a bimonthly newsletter "INTOSPACEHAB"
- Participation in European exhibitions, workshops and symposia.
- Periodic presentations to key European government and industry
decision-makers.
In carrying out its responsibilities, SPACEHAB shall:
- - Keep INTOSPACE informed regarding confirmed and prospective research
payload flight opportunities for SPACEHAB's Shuttle-based carriers.
- - Ensure INTOSPACE has current information regarding SPACEHAB pricing,
accommodation requirements and procedures and other relevant technical
information.
- - Pay INTOSPACE marketing fees for executed contracts in accordance with the
conditions and fee structure discussed in Article V below.
- - Assist INTOSPACE in its European marketing activities through:
- Technical support for accommodations studies and proposal preparation.
- Provision of SPACEHAB marketing literature, exhibition support and
other materials.
- Participation of SPACEHAB personnel in selected workshops, symposia,
marketing meetings and presentations to key European decision-makers
within available marketing and sales resources.
- - Support the SPACEHAB-INTOSPACE Joint Customer Support Office by
periodically arranging for SPACEHAB personnel to visit and temporarily work
at the Office in connection with SPACEHAB's customer support and marketing
activities.
- - Distribute the quarterly INTOSPACE "Low G" journal to interested
organizations in the United States.
<PAGE> 4
ARTICLE II -- JOINT EUROPEAN CUSTOMER SUPPORT OFFICE
In support of this marketing Agreement and as noted above, INTOSPACE will
establish a Joint SPACEHAB-INTOSPACE Customer Support Office in The Netherlands
as agreed in the Share Purchase Agreement dated ______.
The activities of the Joint Customer Support Office will begin operations on
September 1, 1998 and continue through June 2001. During the third year of
operations, INTOSPACE and SPACEHAB will review the current status and
accomplishments of the Joint Customer Support Office to determine whether and
under what conditions the Joint Office should be continued.
INTOSPACE and SPACEHAB will jointly recruit a manager for the Joint Office. In
this new capacity, the Joint Office manager will carry a business card
representing the Joint Customer Support Office.
To guide the operation of the Joint Customer Support Office, INTOSPACE and
SPACEHAB will prepare an office operations plan. This plan will include a
baseline office budget as well as a target budget for the three-year period. The
baseline and target budget figures will be based on the estimates developed by
INTOSPACE and SPACEHAB in March 1998. The office operations plan will also
elaborate on INTOSPACE's planned marketing activities on SPACEHAB's behalf. The
operations plan will be completed no later than August 30, 1998 and will be
reviewed annually in June.
INTOSPACE's Managing Director and SPACEHAB's Vice President for Marketing and
Sales will be jointly responsible for the overall direction of the Joint
Customer Support Office, and for approval review and changes to the joint office
operations plan. Both representatives must approve the annual office operations
plan, and any amendments thereto.
INTOSPACE will be responsible for providing office space and other necessary
services, and for all expenses associated with the operation of the Joint
Office. SPACEHAB's sole contribution to these expenses will be made through
SPACEHAB's purchase of INTOSPACE shares as set forth in Paragraph 1.4 of the
SPACEHAB/INTOSPACE Share Purchase Agreement dated _____________.
INTOSPACE and SPACEHAB will each maintain general liability insurance to cover
the acts of their respective employees who support the activities of the Joint
Customer Support Office and other related SPACEHAB marketing activities in
Europe.
ARTICLE III -- MARKETING TERRITORY
For the purposes of this Agreement, the marketing activities will be performed
in Europe, which shall be defined as the geographic territory of the member
nations of the European Union as of January 1, 1998 plus Switzerland and Norway.
These European Union member states are Austria, Belgium, Denmark, Finland,
France, Germany, Greece, Ireland, Italy, Luxembourg, The Netherlands, Portugal,
Spain, Sweden, and the United Kingdom.
ARTICLE IV -- NON-EXCLUSIVITY
INTOSPACE will be SPACEHAB's principal European Shuttle microgravity flight
opportunity marketing agent. In this role, INTOSPACE shall promote and market
research payload flight opportunities on SPACEHAB's shuttle-based carriers on a
non-exclusive basis throughout the European territory.
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SPACEHAB reserves the right to establish additional marketing arrangements with,
and to place contracts through, other European companies in order to expand its
marketing presence in Europe. SPACEHAB will consult with INTOSPACE prior to
concluding any new European marketing arrangements. SPACEHAB will also take into
account concrete, pre-existing business arrangements that INTOSPACE may have
made and, should these arrangements result in revenues, provide appropriate
compensation to INTOSPACE for its marketing efforts.
ARTICLE V -- MARKETING FEES
SPACEHAB shall pay INTOSPACE marketing fees as a percentage of the final sales
price actually received from contracts executed by SPACEHAB with customers in
the European territory in accordance with the following schedule:
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<TABLE>
<CAPTION>
CUSTOMER FEE BASIS TOTAL FEE PAID
-------- --------- --------------
<S> <C> <C>
All customers in the European territory Basic fee 2.5%
European Space Agency Basic fee 2.5%
European national space agencies Basic fee + 2.5% 5%
European industry and European Union Basic fee + 7.5% 10%
</TABLE>
The above fee schedule replaces the fee provisions of the February 1989
"Exclusive European Broker Agreement." Notwithstanding this change, INTOSPACE
will receive a marketing fee of 10% of the executed contract amounts to be paid
to SPACEHAB for the ESA contracts for the STS-95 mission and the planned STS-107
SPACEHAB mission (or its successor if the Shuttle flight assignment is altered)
where INTOSPACE has entered into a reservation agreement with SPACEHAB and has
already begun contract negotiations with ESA.
Recent NASA/ESA Space Station barter arrangements have resulted in lost business
revenues from ESA payloads on STS-95 and STS-107. Should any future ESA and NASA
barters result in lost revenues and should NASA compensate SPACEHAB for these
lost revenues, SPACEHAB will compensate INTOSPACE in accordance with the above
fee structure.
Marketing fees paid under this Agreement are based on percentages of the total
executed SPACEHAB/European customer contract amounts actually received by
SPACEHAB exclusive of any NASA Space Shuttle or other NASA charges. These fees
will be paid within thirty (30) days of the date SPACEHAB receives full cash
payment from the customer or at such times as may be mutually agreed between
INTOSPACE and SPACEHAB. Marketing fee payments will be made using electronic
fund transfers to a bank designated in writing by INTOSPACE.
ARTICLE VI -- INDEPENDENT CONTRACTOR RELATIONSHIP
The parties to this Agreement are and shall remain independent contractors to
one another. Notwithstanding the above-described role of the Joint Customer
Support Office manager, SPACEHAB and INTOSPACE personnel performing work in
support of this contract will continue to be employees of their existing
organizations. INTOSPACE and SPACEHAB employees are not authorized to make
commitments or create express or implied obligations on behalf of the other
party.
SPACEHAB reserves the right, in its sole discretion, to refuse to enter into a
contractual agreement with customers solicited by INTOSPACE except that SPACEHAB
shall not unreasonably or arbitrarily refuse to enter into contracts solicited
by INTOSPACE.
Except as otherwise noted in this Agreement, each party shall bear its own costs
with respect to the performance of this Agreement. No claim for the
reimbursement of such costs shall be made.
ARTICLE VII -- TITLE
Title to, and ownership of, all tangible personal property and software supplied
to customers or users of SPACEHAB Shuttle-based carriers or utilized in the
course of business pursuant to this Agreement shall remain with and be vested in
the party supplying such property and in no event shall the other party acquire
any right, title or interest therein.
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The property of each party provided in connection with the use of SPACEHAB
Shuttle-based carriers shall be clearly marked as to ownership, and the other
party shall not remove, change or obscure any such markings as may properly
identify the title and ownership thereof.
Title to, and ownership of, all intellectual property such as patents,
copyrights and trade secrets which are incorporated in or related to property
supplied to customers or users of SPACEHAB Shuttle-based carriers or utilized in
the course of business pursuant to this agreement shall remain with and be
vested in the party supplying such property, and in no event shall the other
party acquire any right, title, license or interest therein.
ARTICLE VIII -- PROPRIETARY INFORMATION
During the term of this Agreement and for a period of five (5) years from the
termination of this Agreement, each party shall not communicate, divulge or in
any manner whatsoever, directly or indirectly, make known to any other person or
entity, or use to the benefit of any third parties, any trade secrets, business
and technical knowledge, processes of manufacturing, software or software
know-how, or other proprietary information of the other party or their
customers, or the knowledge such party obtains as a result of the performance of
this Agreement, and which was disclosed and identified in writing, or if
disclosed orally then confirmed in writing within thirty (30) days, as being the
proprietary information of such disclosing party.
Neither party shall have an obligation to disclose or grant to the other party
any right to the technology that it brings to this Agreement, or may acquire by
reason of the relationship of the parties under this Agreement.
ARTICLE IX -- FULL AGREEMENT WITHOUT DELEGATION, ASSIGNMENT OR ORAL MODIFICATION
This Agreement is the complete marketing agreement between SPACEHAB and
INTOSPACE. It replaces and supersedes the February 15, 1989 Exclusive European
Broker Agreement which hereafter is null and void. This Agreement also replaces
any other representations, communications and understandings, whether written or
oral, between SPACEHAB and INTOSPACE. No oral modification of this Agreement is
permissible. A course of dealing does not effect a waiver or modification unless
ratified in writing.
Neither party shall assign its rights or delegate or otherwise transfer its
duties under this Agreement without the prior written consent of the other
party.
ARTICLE X -- NOTICE AND COMMUNICATIONS
Any notice or communication necessary to ensure the timely performance of this
Agreement shall be sent to:
Mr. David A. Rossi Mr. Jurgen K. von der Lippe
President Managing Director
SPACEHAB, Inc. INTOSPACE GmbH
Suite 360 Sophienstrasse 6
1595 Spring Hill Road D-30159 Hannover
Vienna, Virginia USA Germany
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All notices and communications required pursuant to the performance of this
Agreement shall be in writing. The date of any notice is the date it is
received.
ARTICLE XI -- MISCELLANEOUS PROVISIONS
This Agreement shall be governed by the laws of the Commonwealth of Virginia,
USA.
Any controversy or claim arising out of or relating to this agreement, which
cannot be resolved in a timely manner by the mutual agreement of the parties,
shall be subject to arbitration in accordance with the commercial Rules of the
American Arbitration Association if effect at the time the arbitration is
initiated, unless the parties mutually agree otherwise, and judgement upon the
award rendered by the arbitration may be in any court having jurisdiction
thereof. Arbitration shall be held in the District of Columbia.
This Agreement shall inure to the benefit of and be binding upon the parties to
this Agreement and their successors and permitted assigns.
Any provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall be ineffective to the extent of such prohibition or
unenforceability only without invalidating the remaining provisions of this
Agreement and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.
Either party may waive any breach by the other of any of the provisions
contained in this Agreement, or any default by such other party in the
observance or performance of any covenant, agreement or condition required to be
kept, observed or performed by a party under this Agreement, provided that such
waiver shall not be effective unless expressed in writing, and provided that no
act or omission by a party in respect of such breach or default shall extend to
or be taken in any manner whatsoever to effect any subsequent breach or default,
or to effect the rights of a party resulting from such subsequent breach or
default.
INTOSPACE shall not be responsible for the performance of any agreement between
SPACEHAB and its European customers. SPACEHAB shall hold harmless and indemnify
INTOSPACE with respect to any liability arising from any agreement between
SPACEHAB and a European customer. INTOSPACE shall not be responsible for
receiving any governmental approvals necessary for implementation of the
agreements between SPACEHAB and its European customers but shall assist SPACEHAB
and its European customers in obtaining any required approval.
In order to optimize its marketing efforts in European countries with national
space agencies, INTOSPACE may cooperate with selected local companies if so
deemed to be beneficial to acquire orders from national funding authorities.
INTOSPACE shall notify SPACEHAB of any prospective business cooperation
arrangements with third parties and will give SPACEHAB the opportunity to review
and approve such arrangements prior to INTOSPACE implementing such arrangements.
The parties shall use their best efforts to inform the other of any relevant
activity undertaken that may affect or be related to the subject of this
Agreement.
ARTICLE XII -- AGREEMENT TERM
This Agreement shall take effect on July 1, 1998 with a term of three (3) years.
The Agreement may be extended by mutual written agreement of the parties only.
Either SPACEHAB or INTOSPACE may terminate this Agreement at any time after two
years from the effective date upon six (6) months prior written notice.
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Obligations to pay marketing fees incurred during the period this Agreement is
in effect and commitments with respect to the protection of proprietary
information shall survive the termination of this contract and shall remain
continuing obligations of the parties.
Signed on this 12th day of June, 1998.
SPACEHAB, Inc. INTOSPACE, GmbH
/s/ David Rossi
- ------------------------- ------------------------------
David A. Rossi Jurgen K. von der Lippe
President Managing Director
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Agreement
By and between
SPACEHAB, Inc.
Suite 360, 1595 Spring Hill Road
Vienna, VA 22182
USA
and
INTOSPACE GmbH
Sophienstrasse 6
D-30159 Hannover
Germany
Preamble
Since 1989 SPACEHAB, Inc. and INTOSPACE GmbH have maintained a close and
mutually beneficial relationship in marketing research payload flight
opportunities on SPACEHAB's Space Shuttle-based carriers to user organizations
in Europe. This agreement furthers that relationship through the purchase by
SPACEHAB of 7.5% of INTOSPACE's share capital and the establishment of a Joint
Customer Support Office.
1. SPACEHAB PURCHASE OF INTOSPACE SHARES
1.1 Status and Shareholders
INTOSPACE GmbH is a private company under German law with headquarters in
Hannover, Germany, and an office in Brussels, Belgium, and is presently owned by
64 shareholders from 9 European countries.
1.2 Share Value
The total value of INTOSPACE's share capital is DM 1 Million or approximately
U.S. $555,600. Since its establishment in 1985, INTOSPACE's shareholders have
invested additional funds in the company.
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2
1.3 Steering Board Membership
As provided for in the INTOSPACE Shareholders' Agreement of May 1, 1986,
shareholders having 7.5% of the total share capital have the right to nominate a
representative to the INTOSPACE Steering Board.
1.4 Share Purchase
SPACEHAB, Inc. agrees to purchase 7.5% of the INTOSPACE share capital at a price
of US $293,000. This purchase will take effect on July 1, 1998. The purchase is
payable within 30 days after signature of the purchase/transfer agreement. The
payment will be made to INTOSPACE's bank account and in any event will be made
no later than July 31, 1998.
1.5 Shareholders' Agreement
SPACEHAB, Inc. will enter into and sign the Shareholders' Agreement on INTOSPACE
GmbH, Revised Issue No. 1 of May 1, 1986.
1.6 Steering Board Nomination
As provided in the INTOSPACE Shareholders' Agreement, SPACEHAB, Inc. will be
entitled to one seat on the INTOSPACE Steering Board and will nominate the
SPACEHAB representative in due course.
2. JOINT EUROPEAN CUSTOMER SUPPORT OFFICE
2.1 Objective
SPACEHAB and INTOSPACE plan to establish a Joint Customer Support Office to
provide support to SPACEHAB's European customers and to enhance INTOSPACE's
marketing of research payload flight opportunities on SPACEHAB's Shuttle-based
carriers.
2.2 Operation
To guide the operation the Joint Customer Support Office, INTOSPACE and SPACEHAB
will prepare an office operations plan. This plan will include a baseline office
budget as well as a target budget for the three-year period. The line and target
budget figures will be based on the estimates developed by INTOSPACE and
SPACEHAB in March 1998. The office operations plan will also elaborate on
INTOSPACE's planned marketing activities on SPACEHAB's behalf. The operations
plan will be completed no later than August 30, 1998 and will be reviewed
annually in June.
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3
INTOSPACE's Managing Director and SPACEHAB's Vice President for Marketing and
Sales will be jointly responsible for the overall direction of the Joint
Customer Support Office, and for approval, review and changes to the joint
office operations plan. Both representatives must approve the annual office
operations plan, and any amendments thereto.
2.3 Staff
The Joint Customer Support Office will be staffed by one permanent member from
INTOSPACE supplemented by occasional visits of SPACEHAB personnel for technical
liaison and marketing support.
INTOSPACE and SPACEHAB will each fund the cost of their respective personnel
assigned to work at the Joint Office. This includes travel and applicable local
living expenses.
INTOSPACE and SPACEHAB will jointly recruit a manager for the Joint Office. In
this new capacity, the Joint Office manager will carry a business card,
representing the Joint Customer Support Office.
2.4 Location
The office will be established in the vicinity of the European Space Agency's
ESTEC center. INTOSPACE and SPACEHAB plan to select a location which is close to
other space business activities and convenient from the international travel
standpoint. This is likely to be in or near the university town of Leiden.
2.5 Expenses
INTOSPACE will be responsible for providing office space and other necessary
services, and for all expenses associated with the operation of the Joint
Office. SPACEHAB's sole contribution to these expenses will be made through
SPACEHAB's purchase of INTOSPACE shares as set forth in Paragraph 1.4 above.
2.6 Liability insurance
INTOSPACE and SPACEHAB will each maintain general liability insurance to cover
the acts of their respective employees who support the activities of the Joint
Customer Support Office and other related SPACEHAB marketing activities in
Europe.
2.7 Duration
The activities of the Joint Customer Support Office will begin operations on
September 1, 1998 and continue through June 2001. During the third year of
operations, INTOSPACE and SPACEHAB will review the current status and
accomplishments of the Joint Customer Support Office to determine whether and
under what conditions the Joint Office should be continued.
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4
3. COMING INTO FORCE
This Agreement will come into force, if and when the European Marketing
Agreement by and between both parties is signed.
Signed on this 12th day of June, 1998.
SPACEHAB, Inc. INTOSPACE GmbH
/s/ David A. Rossi /s/ Jurgen K. von der Lippe
- ------------------------- ------------------------------
David A. Rossi Jurgen K. von der Lippe
President Managing Director
<PAGE> 1
EXHIBIT 10.97
LEASE AGREEMENT
STATE OF TEXAS
COUNTY OF HARRIS
THIS LEASE AGREEMENT, made and entered into by and between J.A. BILLIPP
DEVELOPMENT CORPORATION, A TEXAS CORPORATION hereinafter referred to as
"Landlord" and JOHNSON ENGINEERING CORPORATION hereinafter referred to as
"Tenant".
W I T N E S S E T H :
1. PREMISES AND TERM. In consideration of the obligation of Tenant to
pay rent as herein provided, and in consideration of the other terms, provisions
and covenants hereof, Landlord hereby demises and leases to Tenant, and Tenant
hereby takes from Landlord certain premises to be situated at _________________
Forge River, Houston, within the County of Harris, State of Texas, 77058, more
particularly described on Exhibit "A" attached hereto and incorporated herein by
reference, together with all rights, privileges, easements, appurtenances and
amenities belonging to or in any way pertaining to the premises and together
with the building, more particularly described in the plans and specifications
of the premises which are or will be signed and initialed by the parties for
identification and attached hereto as Exhibit "B" (the "Plans") and incorporated
herein by referenced reference of building design and construction documents,
consisting of not less than 27,064 square feet of rentable area and other
improvements situated or to be situated upon said premises (the said real
property, building and improvements being hereinafter referred to as the
"Premises"). The Plans shall include the leasehold improvements to be
constructed by Landlord in the Premises. The rentable area for the entire
building is expected to be 108,300 square feet. The rentable area of the
Premises for purposes of this agreement shall be deemed to be 27,064 square
feet, however, the actual rentable area may be adjusted upward, after final
Tenant space planning is complete, as mutually agreed by Landlord and Tenant.
TO HAVE AND TO HOLD the same for a term commencing on the "Commencement
Date", as hereinafter defined, and ending one hundred eight (108) months
thereafter, subject to the provisions of Paragraph 28 herein, provided, however,
that in the event the "Commencement Date" is a date other than the first day of
a calendar month, said term shall extend for said number of months in addition
to the remainder of the calendar month following the "Commencement Date".
(a) The "Commencement Date" shall be the date upon which the leased
Premises shall have been substantially completed in accordance with the plans
and specifications mutually agreed to by Landlord and Tenant, hereinafter
referred to as the Commencement Date, which is anticipated to be approximately
March 15, 1994, but to be not less than eleven (11) months after Tenant gives
written notice to Landlord that
<PAGE> 2
Tenant has received the NASA Related Contract (hereinafter defined) award (the
"Award Notice"). Landlord shall notify Tenant in writing as soon as Landlord
deems said Premises to be completed and ready for occupancy as aforesaid. The
phrase "substantially completed", or derivative thereof as used herein shall be
used to describe that degree of completion as is necessary to allow Tenant to
enter upon and take possession of the Premises for the uses and purposes stated
herein, notwithstanding the fact that certain "punch list" type items may still
need to be completed. After such Commencement Date, Tenant shall, upon demand,
execute and deliver to Landlord a letter of acceptance of delivery of the
Premises provided, or as soon as, Landlord's architect certifies the Premises
have been substantially completed. In the event of any dispute as to substantial
completion of work performed or required to be performed by Landlord, the
certificate of Landlord's architect shall be conclusive.
(b) If Landlord is unable to tender possession of the Premises to
Tenant on the Commencement Date due to any reason caused by the acts or
omissions or delays of Tenant, its agents, employees or contractors after Tenant
has given Landlord the Award Notice, then Landlord shall notify Tenant in
writing of these events and the Commencement Date shall be postponed until the
Leasehold Improvements are complete, and such postponement shall operate to
extend the expiration date specified in Section 1 in order to give full effect
to the stated duration of the term of this Lease. In this event, however, the
commencement of installments of base rental and payment of other amounts due as
provided herein shall not be postponed and shall become due and payable
commencing eleven (11) months after Tenant has given Landlord the Award Notice.
(c) If Landlord is unable to tender possession of the Premises to
Tenant on the Commencement Date for any reason (specifically including any
delays caused in the awarding of the NASA Related Contract) other than that
specified in Paragraph 1(b) above, then the Commencement Date (and commencement
of installments of base rental and payment of other amounts due as provided
herein) shall be postponed until the Leasehold Improvements are completed, and
such postponement shall operate to extend the expiration date specified in
Section 1 in order to give full effect to the stated duration of the term of
this Lease; provided, however, that in the event Landlord is unable to tender
possession of the Premises to Tenant for any such reason not specified in
Paragraph 1(b) above before the expiration of sixty (60) days after expiration
of the eleven (11) month period after Tenant has given Landlord the Award
Notice, then Tenant, shall have the right to terminate this Lease by giving
Landlord written notice of such termination.
(d) Landlord shall promptly notify Tenant in writing of any delay in
the Commencement Date which in the opinion of Landlord is caused for any reason
specified in Paragraph 1(b). Tenant shall promptly notify Landlord in writing of
any delay in the Commencement Date which in the opinion of Tenant is caused for
any reason specified in Paragraph 1(c). Any delay in the Commencement Date
resulting from the acts or omissions of Landlord or Tenant of which the other
party does not give such delaying party written notification shall not be
included in the ninety (90) day period referred to in Paragraph 1(c) hereof.
Landlord shall notify Tenant in advance and secure Tenant's approval to proceed
if any change requested by Tenant will result in a delay.
2
<PAGE> 3
The Plans shall not be changed except pursuant to a written change order or
other written request, executed by Tenant and approved by Landlord. Any such
change may only be requested or made on behalf of Tenant by Mr. Dale R. Johnson,
or any other representative of Tenant designated to Landlord in writing.
(e) Tenant's taking possession of the Premises shall be deemed
conclusive evidence that as of the date of taking possession thereof, the
Premises are in good order and satisfactory condition, except for latent defects
and such matters as to which Tenant gave Landlord written notice on or before
the Commencement Date; provided however, Landlord agrees that Tenant will have
thirty (30) days from the date Tenant takes occupancy of the Premises to inspect
and request any reasonable changes or repairs in defective workmanship to the
Premises, but such right shall not delay the Commencement Date or the payment of
installments of base rental or other amounts due hereunder.
2. RENT AND SECURITY DEPOSIT.
(a) As part of the consideration for the execution of this Lease, and
for the lease and use of the Premises, Tenant covenants and agrees and promises
to pay as rental to Landlord or Landlord's assignees, a sum of $20,975 per month
($9.30/SF/Yr.) in months 1 - 52; and $22,555 per month ($10.00/SF/Yr.) in months
53 - 100. The first such monthly installment in the amount of $20,975 shall be
due and payable on the date of execution of this agreement, which shall be
credited toward the first monthly installment due on the Commencement Date, and
each monthly installment as stated above shall be due and payable in advance,
without demand, deduction or set off, on or before the first day of each
succeeding calendar month during the hereby demised term, except that the rental
payment for any fractional month at the commencement of the lease term shall be
prorated.
(b) In addition, Tenant agrees to deposit with Landlord on the date
that Tenant gives written notice to Landlord to not renew or to terminate this
lease agreement, and at least four months prior to the expiration of the lease
term, the sum of twenty-two Thousand Five Hundred Fifty-Five and 00/100 Dollars
($22,555.00), which sum shall be held by Landlord, without obligation for
interest, as security for the performance of Tenant's covenants and obligations
under this Lease, it being expressly understood and agreed that such deposit is
not an advance rental deposit or a measure of Landlord's damages in case of
Tenant's default. Upon the occurrence of any event of default by Tenant,
Landlord may without prejudice to any other remedy provided herein or provided
by law, use such funds to the extent necessary to make good any arrears of rent
or other payments due Landlord hereunder, and any other damage, injury, expense
or liability caused by such event of default. Although the security deposit
shall be deemed the property of the Landlord, all or any remaining balance of
such deposit shall be returned by Landlord to Tenant at such time after
termination of this Lease that all Tenant's obligations under this Lease have
been fulfilled.
(c) Tenant agrees to pay to Landlord, as additional rental, all charges
for any service, goods, or materials furnished by Landlord at Tenant's request
which are
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not required to be furnished by Landlord under this Lease, (as well as all other
sums payable by Tenant hereunder), within thirty (30) days after Landlord
renders a statement therefor to Tenant. All past due installments of rent and
additional rental amounts shall bear interest from the date due until paid at
the rate of Texas Commerce Bank Prime Rate plus three percent (3%) per annum.
Additionally, if Landlord incurs any expenses or costs as a result of Tenant's
failure to pay any installment of rent or additional rental amount when due,
then Tenant shall immediately upon receipt of notice of such expense or cost
from Landlord reimburse Landlord for such amount.
3. USE. The Premises shall be used only for the purpose of business
offices, receiving, storing, shipping, light manufacturing and selling (other
than retail) products, materials, merchandise and services made and/or
distributed by Tenant, photography laboratory, and for any other lawful and
permitted purposes. Tenant shall conduct such activities in such a manner as to
not constitute a violation of the covenants and deed restrictions of Bay Terrace
Subdivision and Friendswood Development Company. Outside storage, including,
without limitation, trucks and other vehicles, is prohibited without Landlord's
prior written consent. Tenant shall at its own cost and expense obtain any and
all licenses and permits necessary for any use of the Premises. Tenant shall
comply with all governmental laws, ordinances and regulations applicable to the
use of the Premises, and shall promptly comply with all governmental orders and
directives for the correction, prevention and abatement of nuisances in or upon,
or connected with the Premises, all at Tenant's sole expense. Tenant shall not
permit any objectionable or unpleasant odors, smoke, dust, gas, noise or
vibrations to emanate from the Premises. Without Landlord's prior written
consent, Tenant shall not receive, store or otherwise handle any product,
material or merchandise which is explosive or highly inflammable. Tenant will
not permit the Premises to be used for any purpose which would render the
property or liability insurance thereon void or the insurance risk more
hazardous or cause the State Board of Insurance or other insurance authority to
disallow any sprinkler credits.
4. TAXES AND OTHER ASSESSMENTS.
(a) Tenant agrees to pay to Landlord or directly to the various taxing
authorities, before they become delinquent, Tenant's prorata share of all taxes
(both general and special), assessments or governmental charges of any kind and
nature whatsoever (hereinafter collectively referred to as the "taxes"), levied
or assessed against the Premises or any part thereof before they become
delinquent. Taxes are deemed to be additional rentals payable by Tenant and are
subject to the provisions of Paragraph 2(b) above.
(b) If at any time during the term of this Lease, the present method of
taxation shall be changed so that in lieu of the whole or any part of any taxes,
assessments, levies or charges levied, assessed or imposed on the Premises
thereon there shall be levied, assessed or imposed on Landlord a capital levy or
other tax directly on the rents received therefrom and/or a franchise tax,
assessment, levy or charge measured by or based, in whole or in part upon such
rents for the Premises, then all such taxes,
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assessments, levies or charges or the part thereof so measured or based, shall
be deemed to be included within the term "taxes" for the purposes hereof.
(c) Any payment to be made pursuant to this Paragraph 4 with respect to
the real estate tax year in which this Lease commences or terminates shall bear
the same ratio to the payment which would be required to be made for the full
tax year as that part of such tax year covered by the term of this Lease bears
to a full tax year.
(d) The Landlord shall have the right to employ a tax consulting firm
to attempt to assure a fair tax burden on the Premises within the applicable
taxing jurisdictions. Tenant shall reimburse Landlord for the cost of such
service, which shall not exceed $400/Yr., unless otherwise agreed by and between
Landlord and Tenant.
(e) Tenant may, at its sole cost and expense, in its own name and/or in
the name of Landlord, dispute and contest any Taxes, appraisals, or valuations.
Landlord, as owner of the demised Premises, agrees to lend friendly assistance
to Tenant in connection with all matters pertaining to Taxes hereunder,
including, without limitation, joining in any proceedings instituted by Tenant
in respect thereof, provided Tenant indemnifies and holds Landlord harmless from
any costs incurred by Landlord in respect thereof.
(f) Tenant agrees to pay to Landlord all owners' association (Clear
Lake City Community Association) annual assessments (currently covers
maintenance and repair of public recreational facilities, street medians and
subdivision entrance ways and ambulance service) and any special assessments
levied or assessed against the Premises or any part thereof before they become
delinquent. Tenant may elect to make such payments payable directly to the
appropriate assessment authorities and Landlord shall give written notice to
Tenant within five (5) days after receipt of assessment payments from Tenant
that such payments have been forwarded to the appropriate assessment
authorities. Any sums paid by Landlord on behalf of Tenant shall be deemed to be
additional rental owed by Tenant to Landlord and shall be due and payable on
demand by Landlord together with interest thereon at the rate of Texas Commerce
Bank Prime Rate plus three percent (3%) per annum if not received from Tenant
within thirty (30) days from the date the invoice is received from Landlord.
5. REPAIRS AND MAINTENANCE.
(a) After completion by Landlord of the building and the leasehold
improvements specified in Exhibit "B", Tenant shall at its own cost and expense
keep, maintain and take good care of the Premises and, except as expressly
provided in Paragraph 11(b) hereof, make all necessary repairs thereto, interior
and exterior, ordinary and extraordinary, and shall suffer no waste or nuisance,
however, Tenant shall not be responsible for latent construction or material
defects. Landlord will be responsible only for repairs required to maintain the
structural integrity of the building foundation, concrete wall panels and steel
structure, unless such repairs are required as a result of Tenant damage. Any
material and/or equipment warranties or guarantees provided by the construction
contractor will be administered by Landlord for the benefit of Tenant. At
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the end of the term or other termination of this Lease, Tenant shall deliver the
Premises with all improvements thereon in good repair and condition, reasonable
wear and tear only excepted. Tenant may request Landlord to complete any or all
of these Tenant maintenance or repair responsibilities and will reimburse
Landlord for Landlord's direct cost of such maintenance or repair.
(b) Tenant at its own cost and expense shall be responsible for its
prorata share of the maintenance and care of the building and grounds around the
building on the Premises, including the regular mowing of grass, care of shrubs
and general landscaping and will keep the parking areas, driveways, alleys and
the whole of the Premises in a clean and sanitary condition. Landlord will
administer these services, and Tenant shall reimburse Landlord for Tenant's
prorata share of Landlord's direct cost and expense.
(c) Tenant at its own cost and expense shall enter into a regularly
scheduled preventive maintenance/service contract with a maintenance contractor
for servicing all hot water, heating and air conditioning systems and equipment
within the Premises. The service contract will include all services suggested by
the equipment manufacturer within the operation/maintenance manual and will
become effective (and a copy thereof delivered to Landlord) within thirty (30)
days of the date Tenant takes possession of the Premises.
(d) The Landlord shall provide a ten (10) year manufacturer's guaranty
for the building roof system from Owens-Corning Fiberglass Corporation (or
equal). The guaranty will be administered by Landlord for the benefit of
Tenant(s).
6. ALTERATIONS. Tenant shall not make any alterations, additions or
improvements to the Premises without the prior written consent of Landlord.
Tenant may, without the consent of Landlord, but at its own cost and expense and
in a good workmanlike manner make such minor alterations, additions or
improvements or erect, remove or alter such partitions, or erect such shelves,
bins, machinery and trade fixtures as it may deem advisable, without altering
the basic character of the building or improvements and without overloading or
damaging such building or improvements, and in each case complying with all
applicable governmental laws, ordinances, regulations, and other requirements.
All alterations, additions, improvements and partitions erected by Tenant shall
be and remain the property of Tenant during the term of the Lease. Unless
otherwise mutually-agreed by Landlord and Tenant, such improvements shall become
the property of the Landlord as of the date of the end of the term of this Lease
(as such term may be extended pursuant to any renewals, extensions or holdover
period) and shall be delivered up to the Landlord with the Premises and Tenant
shall have no obligation to restore the premises to their original condition.
All shelves, bins, machinery and trade fixtures installed by Tenant will be
removed by Tenant prior to the termination of this Lease, unless otherwise
agreed by Landlord. All such removals and restoration shall be accomplished in
good workmanlike manner so as not to damage the primary structure or structural
qualities of the building and other improvements situated on the Premises.
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7. SIGNS. Tenant shall have the right to install signs upon the
exterior of the building only when first approved in writing by Landlord and
subject to any applicable governmental laws, ordinances, regulations, deed
restrictions and other requirements. Tenant shall remove all such signs upon the
termination of this Lease. Such installations and removals shall be made in such
manner as to avoid injury to or defacement of the building and other
improvements. Tenant shall repair any injury or defacement, including without
limitation discoloration, caused by such installation and/or removal, if so
required by Landlord. Landlord will provide an allowance of up to $3,000 for the
installation of a building or monument sign as specified by Tenant.
8. INSPECTION. Subject to Tenant's reasonable security regulations,
Landlord and Landlord's agent and representatives shall have the right to enter
and inspect the Premises at any reasonable time during business hours, for the
purpose of ascertaining the condition of the Premises after receiving prior
permission from Tenant. During the period that is six (6) months prior to the
end of the term hereof, Landlord and Landlord's agents and representatives shall
have the right, with the prior consent of Tenant, to enter the Premises at any
reasonable time during business hours for the purpose of showing the Premises
and shall have the right to erect on the Premises a suitable sign indicating
that the Premises are available for lease. Tenant shall give written notice to
Landlord at least thirty (30) days prior to vacating the Premises and shall
arrange to meet with Landlord for a joint inspection of the Premises prior to
vacating.
9. UTILITIES. Landlord agrees to provide water, electricity, and
telephone service connections to the Premises; but Tenant shall pay all charges
incurred for any utility services used on or from the Premises, and any
maintenance charges for utilities, and shall furnish all replacement electric
light bulbs and tubes. Landlord shall in no event be liable for any interruption
or failure of utility services on the Premises.
10. ASSIGNMENT AND SUBLETTING.
(a) Neither Tenant nor Tenant's legal representatives or successors in
interest by operation of law or otherwise shall assign this Lease or sublease
the leased Premises or any part thereof, or mortgage, pledge or hypothecate its
leasehold interest or grant any concession or license within the leased Premises
without the prior written permission of Landlord (which permission shall not be
unreasonably withheld or delayed), and any attempt to do any of the foregoing
without the prior express written permission of Landlord shall be void and of no
effect. Notwithstanding the foregoing, Landlord's consent shall not be required
for the assignment or subletting, in whole or in part, of the Leased Premises to
any parent, subsidiary, division or affiliate of Tenant, or any corporation in
or with which any of the foregoing may be duly merged, converted or consolidated
under any statutory proceeding, or to NASA (National Aeronautics & Space
Administration); provided, however, Tenant shall give Landlord written notice
prior to any such assignment or subletting, and any such assignment or
subletting by Tenant shall not serve to release Tenant from primary liability
hereunder.
(b) Notwithstanding that the prior written permission of Landlord to
any of the aforesaid transactions may have been obtained, the following shall
apply:
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(1) In the event of an assignment, contemporaneously with the
granting of Landlord's aforesaid consent, Tenant shall cause the
assignee to expressly assume in writing and agree to perform all of the
covenants, duties and obligations of Tenant hereunder.
(2) A signed counterpart of all instruments relative thereto
(executed by all parties to such transaction with the exception of
Landlord) shall be submitted by Tenant to Landlord prior to or
contemporaneously with the request for Landlord's written consent
thereto (it being understood that no such instrument shall be effective
without the written consent of Landlord).
(3) No usage of the leased Premises different from the usage
herein provided to be made by Tenant shall be permitted, and all other
terms and provision of this Lease shall continue to apply after any
such assignment or subleasing.
11. INSURANCE; FIRE AND CASUALTY DAMAGE.
(a) Landlord agrees to maintain property insurance covering the
Premises in an amount not less than 90% (or such greater percentage as may be
necessary to comply with the provisions of any co-insurance clauses of the
policy) of the "replacement cost" thereof as such term is defined in the
Replacement Cost Endorsement to be attached thereto, insuring against the perils
of Fire, Lightning, Extended Coverage, Vandalism and Malicious Mischief,
extended by Special Extended Coverage Endorsement to insure against all other
Risks of Direct Physical Loss, such coverage and endorsements to be as defined,
provided and limited in the standard bureau forms prescribed by the insurance
regulatory authority for the State of Texas for use by insurance companies
admitted in Texas for the writing of such insurance on risks located within
Texas. Such insurance shall cover those risks of loss that a reasonable and
prudent property owner of a like or similar building located in Clear Lake City
or Houston, Texas would insure against, including liability and loss of rents
coverage. Subject to the provisions of subparagraphs 11(b), 11(c) and 11(g)
below, such insurance shall be for the sole benefit of Landlord. Tenant shall
reimburse Landlord Tenant's prorata share for Landlord's direct cost of
maintaining such property insurance.
(b) Tenant shall provide, at Tenant's own expense, all insurance
coverage necessary or desirable to cover Tenant's goods, furniture or other
property placed in the leased Premises, and Tenant shall further maintain
comprehensive general liability insurance to include coverage for its business
operations, independent contractors, contractual and products coverage for its
business operations, independent contractors, contractual and products coverage,
with limits for bodily injury liability of not less than $1,000,000 and limits
for property damage of not less than the greater of $100,000 or the full
insurable value of Tenant's property. Landlord shall not be obligated to insure
any portion of the leased Premises consisting of tenant improvements other than
the Leasehold Improvements, or any of Tenant's goods, fixtures, furniture or
other property placed or incorporated in the leased Premises.
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(c) If the Premises should be damaged or destroyed by any peril covered
by the insurance to be provided by Landlord under subparagraph 11(a) above,
Tenant shall give immediate notice thereof to Landlord and Landlord shall at its
sole cost and expense, but only to the extent insurance proceeds are available,
thereupon proceed with reasonable diligence to rebuild and repair the Premises
to substantially the condition in which they existed prior to such damage or
destruction, except that Landlord shall not be required to rebuild, repair or
replace any part of the partitions, fixtures, additions and other improvements
which may have been placed in, on or about the Premises by Tenant.
(d) If at any time during the Lease term, the leased Premises or any
portion of the building shall be damaged or destroyed by fire or other casualty
in such a manner as to require substantial alteration or reconstruction of the
building or the leased Premises, and such alterations or reconstruction cannot
be completed within 180 days from the date of the damage, then Landlord or
Tenant shall have the election to terminate this Lease.
(e) In the event Tenant elects not to terminate the Lease, rental shall
abate proportionately during the period and to the extent that the leased
Premises are unfit for use by Tenant in the ordinary conduct of its business. If
Landlord and Tenant mutually agree that Landlord is able to repair and restore
the leased Premises or the building within the time provided in Subparagraph
11d) above, this Lease shall continue in full force and effect and such repairs
will be made within a reasonable time thereafter, subject to delays arising from
shortages of labor or material, acts of God, war or other conditions beyond
Landlord's reasonable control. In the event that this Lease is terminated as
herein provided, Landlord shall refund to Tenant any prepaid rent (as of the
date of damage or destruction) less any sum then owing Landlord by Tenant.
(f) If the Premises should be damaged or destroyed by a casualty other
than a peril covered by the insurance to be provided under subparagraph 11(a)
above, and the casualty or loss was the result of willful misconduct or gross
negligence by Tenant or Tenant's employees, agents, guests, customers,
representatives or invitees, Tenant shall at its sole cost and expense thereupon
proceed with reasonable diligence to rebuild and repair the Premises to
substantially the condition in which they existed prior to such damage or
destruction, in accordance with the original plans and specifications for the
building and Premises.
(g) Notwithstanding anything herein to the contrary, in the event the
holder of any indebtedness secured by a mortgage or deed of trust covering the
Premises requires that the insurance proceeds be applied to such indebtedness as
a result of total loss or constructive total loss of the Premises, then the
Landlord shall have the right to terminate this Lease by delivering written
notice of termination to Tenant within fifteen (15) days after such requirement
is made by any such holder, whereupon all rights and obligations hereunder shall
cease and terminate. The insurance proceeds arising out of any loss which is not
a total loss or a constructive total loss shall be applied by Landlord in the
manner prescribed in subparagraph 11(c) above.
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(h) Each of Landlord and Tenant hereby releases the other from any and
all liability or responsibility to the other or anyone claiming through or under
them by way of subrogation or otherwise for any loss or damage to property
caused by fire or any other perils insured in policies of insurance covering
such property, even if such loss or damage shall have been caused by the fault
or negligence of the other party, or anyone for whom such party may be
responsible, provided, however, that this release shall be applicable and in
force and effect only with respect to loss or damage occurring during such times
as the releasor's policies shall contain a clause or endorsement to the effect
that any such release shall not adversely affect or impair said policies or
prejudice the right of the releasor to recover thereunder and then only to the
extent of the insurance proceeds payable under such policies. Each of Landlord
and Tenant agrees that it will request its insurance carriers to include in its
policies such a clause or endorsement. If extra cost shall be charged therefor,
each party shall advise the other thereof and of the amount of the extra cost,
and the other party, at its election, may pay the same, but shall not be
obligated to do so.
12. LIABILITY. Landlord shall not be liable to Tenant or Tenant's
employees, agents, patrons or visitors, or to any other person whomsoever, for
any injury to person or damage to property on or about the Premises, caused by
the negligence or misconduct of Tenant, its agents, servants or employees, or of
any other person entering upon the Premises under express or implied invitation
of Tenant, or caused by the buildings and improvements located on the Premises
becoming out of repair, or caused by leakage of gas, oil, water or steam or by
electricity emanating from the Premises, or due to any cause whatsoever. Tenant
shall procure and maintain throughout the term of this Lease a policy or
policies of insurance, at its sole cost and expense, insuring both Landlord and
Tenant against all claims, demands, or actions arising out of or in connection
with: (i) the Premises; (ii) the condition of the Premises; and (iii) Tenant's
operations in and maintenance and use of the Premises. The limits of such policy
or policies should have a combined single limit of not less than $1,000,000 per
person and per occurrence in respect of injury to persons (including death) and
not less than $100,000 per occurrence in respect of property damage or
destruction, including loss of use thereof. All such policies shall be procured
by Tenant from responsible insurance companies satisfactory to Landlord.
Certificates of Insurance for each such policies, shall be delivered to
Landlord, upon Landlord's written request. Not less than fifteen (15) days prior
to the expiration date of any such policies, new Certificates of Insurance shall
be delivered to Landlord upon Landlord's written request. Such policies shall
further provide that not less than thirty (30) days written notice shall be
given to Landlord before such policy may be cancelled or changed to reduce
insurance provided thereby.
13. CONDEMNATION/EMINENT DOMAIN. If there shall be taken by
condemnation or by exercise of the power of eminent domain during the term of
this Lease any substantial part of the leased Premises, the building or the
land, either Tenant or Landlord may elect to terminate this Lease or continue
same in effect. If both Landlord and Tenant may mutually elect to continue this
Lease in effect, the base rental shall be reduced in proportion to the area of
the leased Premises taken, if any, and Landlord shall repair any damage to the
leased Premises or the building which results from such taking. All sums awarded
or agreed upon between Landlord and the
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condemning authority for the taking of the interest of Landlord or Tenant,
whether as damages or as compensation, will be the property of Landlord, without
prejudice, except for claims of Tenant against the condemning authority on
account of the unamortized cost of improvements which have been paid for by
Tenant or relocation assistance, as applicable. If this Lease should be
terminated under any provisions of this Paragraph 13, base rental and other sums
payable hereunder, shall be payable up to the date that possession is taken by
the taking authority, and Landlord will refund to Tenant any prepaid unaccrued
rent, less any sum then owing by Tenant to Landlord. Should such partial taking
render the remaining portion of the Leased Premises unusable for the conduct of
Tenant's business, then Tenant shall have the right to terminate this Lease.
14. HOLDING OVER. Tenant will, at the termination of this Lease by
lapse of time or otherwise, yield up immediate possession to Landlord. If
Landlord agrees in writing that Tenant may hold over after the expiration or
termination of this Lease, unless the parties hereto otherwise agree in writing
on the terms of such holding over, the hold over tenancy shall be subject to
termination by Landlord at any time upon not less than five (5) days advance
written notice, or by Tenant at any time upon not less than thirty (30) days
advance written notice, and all of the other terms and provisions of this Lease
shall be applicable during that period, except that Tenant shall pay Landlord
from time to time upon demand, as rental for the period of any hold over, an
amount equal to one and one-half (1-1/2) times rent in effect on the expiration
or termination date, computed on a daily basis for each day of the hold over
period. No holding over by Tenant, whether with or without consent of Landlord,
shall operate to extend this Lease except as otherwise expressly provided. The
preceding provisions of this Paragraph 14 shall not be construed as Landlord's
consent for Tenant to hold over.
15. QUIET ENJOYMENT. Landlord covenants that it now has, or will
acquire before Tenant takes possession of the Premises, good title to the
Premises, free and clear, of all liens and encumbrances, excepting only the lien
for current taxes not yet due, such mortgage or mortgages as are permitted by
the terms of this Lease, zoning ordinances and other building and fire
ordinances and governmental regulations relating to the use of such property,
and easements, restrictions and other conditions of record. Landlord represents
and warrants that it has full right and authority to enter into this Lease and
that Tenant upon paying the rental herein set forth and performing its other
covenants and agreements herein set forth, shall peaceably and quietly enjoy the
Premises for the term hereof without hindrance or molestation from any person,
subject to the terms and provisions of this Lease.
16. EVENTS OF DEFAULT. The following events shall be deemed to be
events of default by Tenant under this Lease:
(a) Tenant shall fail to pay any installment of the rent hereby
reserved when due, or any other payment or reimbursement to Landlord required
herein, and such failure shall continue for a period of ten (10) days from the
date of written notification from Landlord to Tenant delivered to address
herein.
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(b) Tenant shall become insolvent, or shall make a transfer in fraud of
creditors, or shall make an assignment for the benefit of creditors.
(c) Tenant shall file a petition, voluntary or involuntary, under any
section or chapter of the National Bankruptcy Act, as amended, or under any
similar law or statute of the United States or any State thereof, or Tenant
shall be adjudged bankrupt, or insolvent in proceedings filed against Tenant
thereunder.
(d) A receiver or trustee shall be appointed for all or substantially
all of the assets of Tenant.
(e) Tenant shall fail to comply with any term, provision or covenant of
this Lease (other than the foregoing in this Paragraph 16), and shall not
undertake good faith efforts to cure such failure within twenty (20) days after
written notice thereof to Tenant.
17. REMEDIES. Upon the occurrence of any of such events of default
described in Paragraph 16 hereof, Landlord shall have the option to pursue any
one or more of the following remedies without any notice or demand whatsoever:
(a) Terminate this Lease, after first giving thirty (30) days written
notice to Tenant at its Houston address, in which event Tenant shall immediately
surrender the Premises to Landlord, and if Tenant fails so to do, Landlord may,
without prejudice to any other remedy which it may have for possession or
arrearage in rent, enter upon and take possession of the Premises and Tenant
agrees to pay to Landlord on demand the amount of any loss and damage which
Landlord may suffer by reason of such termination, whether through inability to
relet the Premises on satisfactory terms or otherwise.
(b) Enter upon and take possession of the Premises; and relet the
Premises and receive the rent therefor; and Tenant agrees to pay to the Landlord
on demand any deficiency that may arise by reason of such reletting. In the
event Landlord is successful in reletting the Premises at a rental in excess of
that agreed to be paid by Tenant pursuant to the terms of this Lease, Landlord
and Tenant each mutually agree that Tenant shall not be entitled, under any
circumstances, to such excess rental, and Tenant does hereby specifically waive
any claim to such excess rental.
(c) Enter upon the Premises, and do whatever Tenant is obligated to do
under the terms of this Lease; and Tenant agrees to reimburse Landlord on demand
for any expenses which Landlord may incur in thus effecting compliance with
Tenant's obligations under this Lease.
(d) Alter locks and other security devices at the Premises.
(e) Receive payment from Tenant, in addition to any sum provided to be
paid above, for any and all of the following expenses for which Tenant shall be
considered liable:
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1. Broker's fees incurred by Landlord in connection with
reletting the whole or any part of the Premises;
2. The cost of repairing, altering, remodeling or otherwise
putting the Premises into condition, acceptable to a new tenant or
tenants, plus a reasonable charge to cover overhead;
3. The cost of removing and storing Tenant's or other
occupants' property; and
4. All reasonable expenses incurred by Landlord in enforcing
Landlord's remedies.
In the event Tenant fails to pay and installment of rent hereunder as
and when such installment is due, to help defray the additional cost to
Landlord for processing such late payments Tenant shall pay to Landlord on
demand a late charge in an amount equal to five percent (5%) of such
installment; and the failure to pay such amount within thirty (30) days after
receipt of written demand notice from Landlord to Tenant shall be an event of
default hereunder. The provision for such late charge shall be in addition to
all of Landlord's other rights and remedies hereunder or at law and shall not be
construed as liquidated damages or as limiting Landlord's remedies in any
manner.
Pursuit of any of the foregoing remedies shall not preclude pursuit of
any of the other remedies herein provided or any other remedies provided by law,
nor shall pursuit of any remedy herein provided constitute a forfeiture or
waiver of any rent due to Landlord hereunder or of any damages accruing to
Landlord by reason of the violation of any of the terms, provisions and
covenants herein contained. No act or thing done by the Landlord or its agents
during the term hereby granted shall be deemed a termination of this Lease or an
acceptance of the surrender of the Premises, and no agreement to terminate this
Lease or to accept a surrender of said Premises shall be valid unless in writing
and signed by Landlord. No waiver by Landlord of any violation or breach of any
of the terms, provisions and covenants herein contained shall be deemed or
construed to constitute a waiver of any other violation or breach of any of the
other terms, provisions and covenants herein contained. Landlord's acceptance of
the payment of rental or other payments hereunder after the occurrence of an
event of default shall not be construed as a waiver of such default, unless
Landlord so notifies Tenant in writing. Forbearance by Landlord to enforce one
or more of the remedies herein provided upon an event of default shall not be
deemed or construed to constitute a waiver of such default or of any subsequent
default. If, on account of any breach or default by Tenant in Tenant's
obligations under the terms and conditions of this Lease, it shall become
necessary or appropriate for Landlord to employ or consult with an attorney
concerning any of Landlord's rights or remedies hereunder or to enforce or
defend any of the Landlord's rights or remedies hereunder, Tenant agrees to pay
any reasonable attorney's fees so incurred.
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18. SUBORDINATION AND LANDLORD'S MORTGAGEE.
(a) This Lease Agreement shall be automatically subject to and
subordinated, at Landlord's option, to any lease wherein Landlord is the tenant
and to any lien of any mortgage or deed of trust, provided Landlord delivers to
Tenant a non-disturbance agreement executed by Landlord's mortgagee(s) in a form
reasonably acceptable to Tenant, Landlord, and Landlord's mortgagee(s). Although
no instrument or act on the part of the Tenant shall be necessary to effectuate
such subordination, the Tenant will, nevertheless, execute and deliver such
further instruments, including reasonable non-material amendments to this Lease,
subordinating this Lease to the lien of any such lease or mortgage, as may be
required by the lessor or mortgagee(s), provided that any such instrument Tenant
is requested to execute, shall contain a reasonable non-disturbance and
attornment agreement by the lessor or mortgagee requesting subordination.
(b) Tenant will, at such time or times as Landlord or Landlord's
mortgagee may request, sign a certificate stating whether this Lease is in full
force and effect; whether any amendments or modifications exist; whether there
are any defaults hereunder; and such other information and agreements, as may be
reasonably requested.
19. LANDLORD'S DEFAULT.
(a) In the event Landlord should default in any of its obligations
hereunder, Tenant shall simultaneously give Landlord and Landlord's mortgagee
written notice specifying such default and Landlord shall thereupon have thirty
(30) days (plus an additional reasonable period as may be required in the
exercise by Landlord of due diligence) in which to cure any such default. In
addition, Landlord's mortgagee shall have the right (but not the obligation) to
cure or remedy such default during the period that is permitted to Landlord
hereunder, plus an additional period of thirty (30) days, and Tenant will accept
such curative or remedial action taken by Landlord's mortgagee with the same
effect as if such action had been taken by Landlord.
(b) Upon the failure of Landlord or Landlord's mortgagee to cure such
default in accordance with the provisions of Paragraph 19(a) hereof, Tenant
shall be authorized and empowered to pay any such items for and on behalf of
Landlord, and the amount of any item so paid by Tenant for and on behalf of
Landlord, together with any interest or penalty required to be paid in
connection therewith, shall be payable on demand by Landlord to Tenant.
20. ASSIGNMENT BY LANDLORD. Landlord shall have the right to assign or
transfer, in whole or in part every feature of its rights and obligations
hereunder and the Premises provided such assignee or transferee recognizes and
agrees to be bound by the terms of this Lease. Such assignments or transfers may
be made to a corporation, trust, trust company, individual or group of
individuals, and howsoever made shall be in all things respected and recognized
by Tenant.
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21. DISCLAIMER. This Lease and the obligation of Tenant to pay rent
hereunder and perform all of the other covenants and agreements hereunder on the
part of the Tenant to be performed shall not be affected, impaired or executed
because Landlord is unable to fulfill any of its covenants and obligations under
this Lease, expressly or impliedly to be performed by Landlord, if Landlord is
prevented or delayed from doing so by reason of strikes, labor troubles,
accident, or by any reason or cause whatsoever reasonably beyond Landlord's
control. Reasons beyond Landlord's control shall include, but not be limited to,
laws, governmental preemption in connection with a National Emergency or by any
reason of any rule, order or regulation of any governmental agency, federal
state, county or municipal authority or any department or subdivision thereof,
or by reason of the conditions of supply and demand which have been or are
affected by war or other emergency. In the event Landlord is unable to fulfill
any of its covenants and obligations under this Lease for reasons beyond its
control, such that Tenant's ability to use the Premises for its intended purpose
is partially or wholly impaired, and this condition continues for a period of
sixty (60) consecutive days, after receipt of written notice to Landlord from
Tenant, then Tenant's obligation to pay rent hereunder shall partially or wholly
abate until such condition is cured, at which time Tenant's obligation to pay
rent hereunder shall resume.
22. MECHANIC'S LIENS. Tenant shall have no authority, express or
implied, to create or place any lien or encumbrance, of any kind or nature
whatsoever, upon, or in any manner to bind, the interest of Landlord in the
Premises for any claim in favor of any person dealing with Tenant, including
those who may furnish materials or perform labor for any construction or
repairs, and each such claim shall affect and each such lien shall attach to, if
at all, only the leasehold interest granted to Tenant by this instrument. Tenant
covenants and agrees that it will pay or cause to be paid all sums legally due
and payable by it on account of any labor performed or materials furnished in
connection with any work performed on the Premises on which any lien is or can
be validly and legally asserted against its leasehold interest in the Premises
or the improvements thereon, and that it will save and hold Landlord harmless
from any and all loss, cost or expense based on or arising out of asserted
claims or liens against the leasehold estate or against the right, title and
interest of the Landlord in the Premises or under the terms of this Lease.
23. NOTICES. Each provision of this instrument or of any applicable
governmental laws, ordinances, regulations and other requirements with reference
to the sending, mailing or delivery of any notice or the making of any payment
by Landlord to Tenant or with reference to the sending, mailing or delivery of
any notice or the making of any payment by Tenant to Landlord shall be deemed to
be complied with when and if the following steps are taken:
(a) All rent and other payments required to be made by Tenant to
Landlord hereunder shall be payable to Landlord at the address hereinbelow set
forth or at such other address as Landlord may specify from time to time by
written notice delivered in accordance herewith. Tenant's obligation to pay rent
and any other amounts to Landlord under the terms of this Lease shall not be
deemed satisfied until rent and other amounts have been actually received by
Landlord.
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<PAGE> 16
(b) All payments required to be made by Landlord to Tenant hereunder
shall be payable to Tenant at the address hereinbelow set forth, or at such
other address within the continental United States as Tenant may specify from
time to time by written notice delivered in accordance herewith.
(c) Any notice or document required or permitted to be delivered
hereunder shall be deemed to be delivered whether actually received or not when
deposited in the United States Mail, postage prepaid, Certified or Registered
Mail, addressed to the parties hereto at the respective addresses set out below,
or at such other address as they have theretofore specified by written notice
delivered in accordance herewith:
LANDLORD: TENANT: Before Commencement Date:
J.A. BILLIPP DEVELOPMENT CORPORATION JOHNSON ENGINEERING CORPORATION
c/o J.A. BILLIPP COMPANY 3055 Center Green Drive
10000 Memorial Drive, Suite 310 Boulder, CO 80301-5406
Houston, TX 77024
After Commencement Date:
JOHNSON ENGINEERING CORPORATION
Forge River Road
Houston, TX 77058-2777
If and when included within the term "Landlord", as used in this
instrument, there are more than one person, firm or corporation, all shall
jointly arrange among themselves for their joint execution of such a notice
specifying some individual at some specific address for the receipt of notices
and payments to Landlord; if and when included within the term "Tenant", as used
in this instrument, there are more than one person, firm or corporation, all
shall jointly arrange among themselves for their joint execution of such a
notice specifying some individual at some specific address within the
continental United States for the receipt of notices and payments to Tenant. All
parties included within the terms "Landlord" and "Tenant", respectively, shall
be bound by notices given in accordance with the provisions of this Paragraph to
the same effect as if each had received such notice.
24. MISCELLANEOUS.
(a) Words of any gender used in this Lease shall be held and construed
to include any other gender and words in the singular number shall be held to
include the plural, unless the context otherwise requires.
(b) The terms, provisions, covenants and conditions contained in this
Lease shall apply to, inure to the benefit of, and be binding upon, the parties
hereto and
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<PAGE> 17
upon their respective heirs, legal representatives, successors and permitted
assigns except as otherwise herein expressly provided.
(c) The captions inserted in this Lease are for convenience only and in
no way define, limit or otherwise describe the scope or intent of this Lease, or
any provision hereof, or in any way affect the interpretation of this Lease.
(d) Tenant agrees, from time to time, within ten (10) days after
request of Landlord, to deliver to Landlord, or Landlord's designee, an estoppel
certificate stating that this Lease is in full force and effect, the date to
which rent has been paid, the unexpired term of this Lease and such other
matters pertaining to this Lease as may be reasonably requested by Landlord.
(e) All obligations of Tenant hereunder not fully performed as of the
expiration or earlier termination of the term of this Lease shall survive the
expiration or earlier termination of the term hereof, including, without
limitation, all payment obligations with respect to taxes and insurance and all
obligations concerning the condition of the Premises. Upon the expiration or
earlier termination of the term hereof, and prior to Tenant vacating the
Premises, Tenant shall pay to Landlord the amount reasonably estimated by
Landlord as necessary to put the Premises, including, without limitation, all
heating and air conditioning systems and equipment therein, in good condition
and repair. Tenant shall also, prior to vacating the Premises, pay to Landlord
the amount, as estimated by Landlord, of Tenant's obligation hereunder for real
estate taxes and insurance premiums for the year in which the Lease expires or
terminates. All such amounts shall be used and held by Landlord for payment of
such obligations of Tenant hereunder, with Tenant being liable for any
additional costs therefor upon demand by Landlord, or with any excess to be
returned to Tenant after all such obligations have been determined and
satisfied, as the case may be.
(f) If any clause or provision of this Lease is illegal, invalid or
unenforceable under present or future laws effective during the term of this
Lease, then and in that event, it is the intention of the parties hereto that
the remainder of this Lease shall not be affected thereby, and it is also the
intention of the parties to this Lease that, in lieu of each clause or provision
of this Lease that is illegal, invalid or unenforceable, there be added as a
part of this Lease contract a clause or provision as similar in terms to such
illegal, invalid or unenforceable clause or provision as may be possible and be
legal, valid and enforceable.
(g) All references in this Lease to "the date hereof" or similar
references shall be deemed to refer to the last date, in point of time, on which
all parties hereto have executed this Lease.
(h) This Lease may not be altered, changed or amended except by an
instrument in writing signed by both parties hereto.
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(i) Landlord and Tenant acknowledge and agree that this Lease shall be
interpreted and enforced in accordance with the laws of the State of Texas and
all obligations and duties are performable exclusively in Houston, Harris
County, Texas.
(j) party agrees to furnish to the other, promptly upon demand, a
corporate resolution, proof of due authorization by partners, or other
appropriate documentation evidencing the due authorization of such party to
enter into this Lease.
(k) Whenever a clause or provision of this Lease requires Landlord's
consent or approval, Landlord agrees not to withhold or delay its consent or
approval unreasonably.
(l) This Lease may be signed in any number of counterparts, each of
which shall be an original for all purposes, but all of which taken together
shall constitute only one agreement. The production of any executed counterpart
of this Lease shall be sufficient for all purposes without producing or
accounting for the other counterparts hereof.
(m) For purposes of determining Tenant's responsibility for payment of
operating expenses for the Premises (including but not limited to real estate
taxes, property insurance, building and grounds and common area maintenance
items, property owners association fees, etc.), in the event that Tenant does
not occupy the total building of which the Premises is a part, Tenant's
proportionate share of expense will be determined by the ratio of the square
footage of the Tenant Premises to the total square footage in the building of
which the Premises is a part.
25. HAZARDOUS SUBSTANCES AND ENVIRONMENTAL INDEMNIFICATION. Tenant
shall not cause or permit any Hazardous Substances to be used, stored, generated
or disposed of in, on or about the real property, building or Premises by
Tenant, its agents, employees, contractors or invitees, except for such
Hazardous Substances as are normally utilized in an office environment and
photography laboratory, and are necessary to Tenant's business. Any such
Hazardous Substances permitted on the Premises as hereinabove provided, and all
containers therefor, shall be used, kept, stored and disposed of in a manner
that complies with all federal, state and local laws or regulations applicable
to any such Hazardous Substances. Tenant agrees to indemnify, defend and hold
Landlord and its employees and agents harmless from any claims, judgments,
damages, penalties, fines, costs, liabilities and losses, including attorneys'
fees, which arise during or after the term of this Lease from or in connection
with the use, storage, generation or disposal of Hazardous Substances, or the
presence of toxic or Hazardous Substances in the soil or ground water on or
under the building, but only to the extent such toxic or hazardous substances
are present as a result of actions of Tenant, its officers, employees, agents,
contractors or invitees. Except to the extent described in the preceding
sentence, Landlord agrees to indemnify, defend and hold Tenant and its officers,
employees and agents harmless from and claims, judgments, damages, penalties,
fines, costs, liabilities and losses, including attorneys' fees, which arise
before, during or after the term of this Lease from or in connection with the
presence of toxic or hazardous substances in the soil or ground water on or
under the
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building. The term "hazardous substances" as utilized in this clause shall have
the meaning as defined in the Comprehensive Environmental Response Compensation
and Liability Act of 1980, as amended.
ENVIRONMENTAL CERTIFICATION
Landlord hereby certifies that to the best of its knowledge:
(a) The Premises does not contain any asbestos or asbestos containing
materials;
(b) The Premises does not contain nor is served by any electrical
equipment containing polychlorinated biphenyls ("PCB's), including but not
limited to transformers, capacitors, or ballasts;
(c) The Premises and building are not impacted by any environmental or
industrial hygiene impairment.
26. INDEMNIFICATION.
(a) Subject to the provisions of Paragraph 11(h), Tenant agrees to
defend, indemnify and hold and save harmless Landlord and its partners, agents,
employees, invitees and contractors from any and all claims, losses, costs,
damages, or expenses resulting or arising or alleged to result to arise from any
and all injuries to or death of any person or damage to or loss of any property
caused by Tenant's willful misconduct, negligence or the negligence of its
agents, employees, invitees or contractors.
(b) Subject to the provisions of Paragraph 11(h), Landlord agrees to
defend, indemnify and hold and save harmless Tenant and its agents, employees,
invitees and contractors from any and all claims, losses, costs, damages, or
expenses resulting or arising or alleged to result to arise from any and all
injuries to or death of any person or damage to or loss of any property caused
by Landlord's willful misconduct, negligence or the negligence of its agents,
employees, invitees or contractors.
27. OPTIONS TO RENEW.
(a) Provided that Tenant is not then in default under this Lease and
there shall not have occurred and be continuing any event of default, Tenant
shall have the right to renew and extend this Lease with respect to all of the
leased Premises, for one (1) renewal term of up to sixty (60) months (such term
being hereinafter referred to as the "Renewal Term"), commencing upon the
expiration of the initial one hundred eight (108) month term of this Lease. The
base rental applicable to the Renewal Term shall be mutually agreed by Landlord
and Tenant.
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<PAGE> 20
(b) In order to exercise such renewal option, Tenant shall advise
Landlord in writing of its intention to renew not less than six (6) months prior
to the expiration of the initial term of the Lease.
(c) During the Renewal Term of this Lease, the renewal Premises shall
be leased by Tenant on an "as is" basis, unless otherwise agreed upon in
writing, and Landlord shall not be obligated to make any alterations or install
or modify any improvements therein. The leasing of the Premises during any
Renewal Term hereof shall be upon the same terms and conditions as are set forth
in this Lease.
28. EARLY TERMINATION PROVISION. Only in the event that Tenant no
longer has the NASA "Flight Crew Systems Development Contract" (FCSDC) or its
equivalent being more fully described in Exhibit "C" attached hereto ("NASA
Related Contract"), Tenant shall have the right after five (5) years from the
date of commencement of the NASA Related Contract, but not less than fifty-two
(52) months from the Lease Commencement Date, to wholly (but not partially)
terminate this Lease with no further rental payments or obligations, after first
giving four (4) months prior written notice to Landlord ("First Right to
Terminate"). Similarly, if Tenant no longer has the NASA Related Contract or its
equivalent, Tenant shall also have the right after eight (8) years from the date
of commencement of the NASA Related Contract, to wholly (but not partially)
terminate this Lease with no further rental payments or obligations, after first
giving four (4) months prior written notice to Landlord ("Second Right to
Terminate").
29. EXPANSION OPTIONS. After receiving written notice from Landlord of
its intent to lease to a third-party tenant, Tenant shall have the first right,
prior to building completion, to lease up to 4,050 square feet (one 135' X 30'
bay) immediately adjacent to the Premises, with the expansion lease term to
coincide with the primary Lease term. Landlord shall provide a Tenant
improvement allowance of $16.00 per square foot for this expansion space, with
the annual base rental rate for the expansion space to be the same as the annual
base rental rate for the primary Premises.
30. PARKING. In accordance with Clear Lake City Development Guidelines
and Friendswood Development Company requirements, Landlord shall provide a
minimum of 4.5 automobile parking spaces per 1,000 square feet of Tenant lease
area.
31. OPERATING EXPENSES AND BUILDING MANAGEMENT. Notwithstanding Tenant
obligations as stated herein, Landlord shall agree to perform all building and
property maintenance and management functions on behalf of Tenant, and Tenant
shall reimburse Landlord for Landlord's cost of providing these services. In
this regard, Landlord shall guarantee Tenant that for the initial Lease year the
cost of building/grounds maintenance and services, janitorial and trash removal,
and property management shall not exceed $1.50 per square foot in the aggregate.
Tenant acknowledges that it will continue to be responsible for its prorata
share of property taxes, owners association fees, extended coverage building
insurance, electrical service and water service, which shall be invoiced by the
Landlord and paid directly by the Tenant.
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Landlord will allow Tenant to audit Landlord's books and records
relating to the operating expenses and building management during normal
business hours after a written request to Landlord describing which expenses
Tenant wishes to examine. Landlord will use its best efforts to obtain services,
including building maintenance, management, and property insurance that are
competitively priced and of the quality befitting a Class "A" office/technical
building in the Clear Lake area.
32. NASA CONTRACT AWARD. All terms of this Lease Agreement shall be
subject to Landlord receiving written notice from Tenant confirming that Tenant
has been awarded the NASA Related Contract for a contract term (including NASA
options) of at least nine (9) years, and confirming the final square footage of
the Premises and the commencement date of the NASA Related Contract. Unless
otherwise agreed by Landlord and Tenant, if Tenant has not provided such written
notice prior to April 30, 1993, Landlord and Tenant may agree in good faith to
adjust the Commencement Date and/or the Base Rental Rates and/or the building
size stated herein, if required to satisfy possible changes in development
schedule and/or interest rates and/or project financing requirements. If both
parties are unable to reach a mutually-acceptable Lease Agreement amendment,
Landlord may either proceed with the terms of the Lease Agreement as stated
herein, or Landlord may terminate the Lease Agreement with no further
obligation. In this event, Landlord shall return the full amount of the Tenant's
first rental payment which is payable upon execution of this Lease Agreement,
less one-half (1/2) of the amount of Landlord's project design and development
expense; provided, however, Tenant's prorata share shall not exceed $1,600.00.
In the event that the NASA Related Contract terms are such that Tenant
requires more than 31,114 square feet of rentable area, or less than 27,064
square feet of rentable area initially, to accomplish the scope of work on the
NASA Related Contract, Landlord may terminate this Lease Agreement and neither
party will have any further obligations under this Lease Agreement. In this
event, Landlord shall return the full amount of the Tenant's first rental
payment which is payable upon execution of this Lease Agreement, less one-half
(1/2) of the amount of Landlord's project design and development expense;
provided, however, Tenant's prorata share shall not exceed $1,600.00. This
termination would not preclude Landlord and Tenant from mutually agreeing to a
revision to this Lease Agreement or a new lease agreement for a substantially
smaller or larger lease area than defined in Paragraph 1.
33. TENANT IMPROVEMENT BUILD-OUT ALLOWANCE. Included in the base rental
is a $16.50 per square foot build-out allowance to be provided by Landlord for
"Tenant Improvements", as indicated on the preliminary architectural drawing
(floor plan) dated October 14, 1992, attached hereto as Exhibit "D" and
incorporated herein by reference, which may be revised as mutually agreed by
Landlord and Tenant before final construction documents are prepared for
construction purposes. If, the cost for the Tenant Improvements exceeds $16.50
per square foot, Tenant shall have the option, in its sole discretion, to
either: (i) mutually agree with Landlord as to the excess cost of the Tenant
Improvements, and equally amortize said excess cost over the first fifty-two
(52) months of the Lease term in addition to the monthly base rental for the
Premises, provided Landlord is able to increase its construction loan and
permanent
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financing amount; or (ii) pay directly for the excess cost of the Tenant
Improvements over the $16.50 per square foot build-out allowance.
34. BROKERAGE. Landlord and Tenant each represent that it has not dealt
with any real estate broker or agent in connection with this Lease or its
negotiation other than Cole-Gross Company. Landlord and Tenant shall each
indemnify and hold the other harmless from and against any and all expenses,
judgments and reasonable attorneys' fees incurred in defending the claim of any
other agent or broker who alleges that Landlord or Tenant dealt with him in
connection with this Lease. Landlord shall pay a commission to Cole-Gross
Company in accordance with a separate written commission agreement.
EXECUTED this 30th
day of April, 1993.
J.A. BILLIPP DEVELOPMENT
CORPORATION
By: /s/ J. Andrew Billipp
--------------------------------
Title: President - LANDLORD
JOHNSON ENGINEERING
CORPORATION
By: /s/ Dale R. Johnson
--------------------------------
Title: President - TENANT
22
<PAGE> 23
FIRST AMENDMENT TO LEASE AGREEMENT
THIS FIRST AMENDMENT TO LEASE AGREEMENT (the "First Amendment") is
entered into effective as of the 22nd day of September, 1993, by and between
J.A. BILLIPP DEVELOPMENT CORPORATION, a Texas corporation (hereinafter referred
to as "Landlord") and JOHNSON ENGINEERING CORPORATION (hereinafter referred to
as "Tenant").
WHEREAS, Landlord and Tenant entered into that certain Lease Agreement
dated April 30, 1993 (the "Lease"), demising a portion of the improvements (the
"Premises") located on that certain real property whose street address is 555
Forge River Drive situated in Harris County, Texas (the "Property"), both the
Premises and the Property being more particularly described in the Lease; and
WHEREAS, Landlord and Tenant desire to amend the Lease in order to
change certain terms of the Lease and to expand the size of the Premises;
NOW, THEREFORE, based upon the mutual promises and covenants contained
herein and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, Landlord and Tenant hereby agree as follows:
1. One (1) additional bay totaling 4,050 square feet of rentable area ("First
Expansion Area") is added to the Premises under the terms of Section 29 of
the Lease, "Expansion Options".
2. The total rentable area of the Tenant Premises is increased to 31,114
square feet.
3. The building floor plan which has been modified to incorporate the 4,050
square feet First Expansion Area is attached as Exhibit A to the First
Amendment to the Lease and incorporated herein by reference. Landlord and
Tenant have approved the floor plan for completion of construction
documents. In accordance with Section 29 of the Lease, Landlord will provide
a $16.00 per square foot allowance for interior office and tenant
improvements to be constructed within the 4,050 SF First Expansion Area.
4. The monthly rental as defined in Section 2(a) of the Lease will be increased
by $3,139 per month in months 1-52 and $3,375 per month in months 53-100 to
include rental for the First Expansion Area. The total monthly rental for
the 31,114 square feet Premises will be $24,114 per month in months 1-52 and
$25,930 per month in months 53-100.
Landlord acknowledges receipt of $20,975 which is to be applied toward the
rental for the first full month of the Lease term. An additional $3,139 is
due and payable on the date of execution of this First Amendment, which will
be applied toward the balance of the first month's rental due for the total
31,114 square feet Premises.
<PAGE> 24
5. Except as expressly provided herein, all other terms, covenants and
conditions of the Lease Agreement shall remain the same, in full force
and effect, and are hereby ratified and confirmed by Landlord and Tenant.
EXECUTED effective as of the date first written above.
J.A. BILLIPP DEVELOPMENT CORPORATION JOHNSON ENGINEERING CORPORATION
By:_________________________________ By:____________________________
Name: J. ANDREW BILLIPP Name: DALE R. JOHNSON
Title: PRESIDENT Title: PRESIDENT
LANDLORD TENANT
2
NY--360135.1
<PAGE> 25
SECOND AMENDMENT TO LEASE AGREEMENT
THIS SECOND AMENDMENT TO LEASE AGREEMENT (the "Second Amendment") is
entered into effective as the 1st day of August, 1994, by and between J.A.
BILLIPP DEVELOPMENT CORPORATION, a Texas corporation (hereinafter referred to
as "Landlord") and JOHNSON ENGINEERING CORPORATION (hereinafter referred to as
"Tenant").
WHEREAS, Landlord and Tenant entered into that certain Lease Agreement
dated April 30, 1993 as amended by First Amendment to Lease Agreement dated
September 22, 1993 (the "Lease"), demising a portion of the improvements (the
"Premises") located on that certain real property whose street address is 555
Forge River Drive situated in Harris County, Texas (the "Property"), both the
Premises and the Property being more particularly described in the Lease; and
WHEREAS, Landlord and Tenant desire to amend the Lease in order to clarify
certain terms of the Lease;
NOW, THEREFORE, based upon the mutual promises and covenants contained
herein and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, Landlord and Tenant hereby agree as follows:
1. The term of the Lease is 108 months plus 4 days as confirmed by letter
agreement dated June 29, 1994.
2. The monthly rental as defined in Section 2(a) of the Lease, as further
modified in the First Amendment to Lease Agreement, shall be Twenty-Four
Thousand One Hundred Fourteen and 00/100 Dollars ($24,114.00) per month for
months 1-52 (plus a proportionate amount for the initial 4 days), and
Twenty-Five Thousand Nine Hundred Thirty and 00/100 Dollars ($25,930.00)
per month for months 53-108.
3. Except as expressly provided herein, all other terms, covenants and
conditions of the Lease shall remain the same, in full force and effect,
and are hereby ratified and confirmed by Landlord and Tenant.
EXECUTED effective as of the date first written above.
J.A. BILLIPP DEVELOPMENT JOHNSON ENGINEERING
CORPORATION CORPORATION
By: By:
----------------------------------- -----------------------------------
Name: J. ANDREW BILLIPP Name: DALE R. JOHNSON
------------------------------- ---------------------------------
Title: PRESIDENT Title: PRESIDENT
------------------------------- -------------------------------
LANDLORD TENANT
<PAGE> 26
THIRD AMENDMENT TO LEASE AGREEMENT
THIS THIRD AMENDMENT TO LEASE AGREEMENT (the "Third Amendment") is
entered into effective as of the 20th day of February, 1997, by and between
J.A. BILLIPP DEVELOPMENT CORPORATION, a Texas corporation (hereinafter referred
to as "Landlord") and JOHNSON ENGINEERING CORPORATION (hereinafter referred to
as "Tenant").
WHEREAS, Landlord and Tenant entered into that certain Lease Agreement
dated April 30, 1993, as amended by First Amendment to Lease Agreement dated
September 22, 1993, and as amended by Second Amendment to Lease Agreement dated
August 1, 1994 (the "Lease"), demising a portion of the improvements (the
"Premises") located on that certain real property located at 555 Forge River
Drive, in the City of Webster, Harris County, Texas (the "Property"), both the
Premises and the Property being more particularly described in the Lease; and
WHEREAS, Landlord and Tenant desire to amend the Lease in order to
expand the size of the Premises and to modify certain other terms of the Lease;
NOW, THEREFORE, based upon the mutual promises and covenants contained
herein and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, Landlord and Tenant hereby agree as follows:
1. Approximately 7,890 SF or rentable area ("Second Expansion Area") is added
to the Premises as of the date of substantial completion of the tenant
improvements, as documented by Landlord's architect, Munson Kennedy
Architects. The commencement date for rental payments and all other lease
obligations relating to the Second Expansion Area shall be the earlier of
such date of substantial completion or July 15, 1997 ("Second Expansion Area
Commencement Date"). The Second Expansion Area Commencement Date will be
confirmed and documented by a separate letter agreement between Landlord and
Tenant.
2. The 7,890 SF Second Expansion Area increases the total rentable area of the
Premises to approximately 39,004 SF.
3. Attached as Exhibit A to this Third Amendment, is a building floor plan
showing the delineated 7,890 SF Second Expansion Area, and an approximately
4,500 SF area marked "Short-term Storage Area" which is contiguous to the
Second Expansion Area.
4. Landlord shall provide an allowance of up to One Hundred Thirty-Four
Thousand Seven Hundred Fifty and No/100 Dollars ($134,750.00) for the
construction of the tenant improvements within the Second Expansion Area, to
include all office and technical/storage area finish, heating and air
conditioning, separate electrical service, mini-blinds, permit fees, sales
tax costs, etc., in accordance with construction documents mutually approved
by Landlord and Tenant. Landlord shall provide an additional allowance of
up to Nine Thousand Eight Hundred Sixty-Two and 50/100 Dollars ($9,862.50)
for the architectural and engineering
2
<PAGE> 27
services and construction documents associated with the facility design and
construction. Upon completion of construction drawings, Landlord agrees to
competitively bid the tenant improvements construction work to at least two
(2) qualified general contractors as mutually agreed by Landlord and
Tenant, one of whom may be selected by Tenant. All contractors must be
pre-approved by Landlord prior to being allowed to bid on the construction
contract. Landlord will give Tenant a preliminary estimate of the total
costs for designing and constructing the tenant improvements associated
with the Second Expansion Area as soon as possible after preliminary design
is complete. If the actual total cost of design and construction is greater
than the sum of the two respective allowances provided, Tenant shall pay to
Landlord that amount which exceeds the stated allowances within twenty (20)
days after receipt of Landlord invoice, or as otherwise mutually agreed
prior to commencement of tenant improvements construction.
5. The monthly rental as defined in Section 2(a) of the Lease, and as further
modified in the First Amendment to Lease Agreement and Second Amendment to
Lease Agreement, shall be increased by Five Thousand Six Hundred Fifty-Five
and No/100 Dollars ($5,655.00) per month beginning on the Second Expansion
Area Commencement Date. Any partial month will be prorated based upon the
number of days then remaining in the month. Thereafter, the total monthly
rental for the 39,004 SF will be Twenty-Nine Thousand Seven Hundred
Sixty-Nine and No/100 Dollars ($29,679.00) per month for the current lease
term period through October 31, 1998, and Thirty-One Thousand Five Hundred
Eighty-Five and No/100 Dollars ($31,585.00) per month for the period
November 1, 1998 through June 30, 2003.
6. Landlord shall provide, at Landlord's sole cost, a thirty-foot (30')
flagpole to be located as mutually agreed by Landlord and Tenant in the
vicinity of the parking area near the Tenant main entry to the building, of
which the Premises is a part. The single flagpole and U.S. Flag will be
comparable to the flagpoles located at the east end of the building.
7. Tenant shall have the use of the Short-term Storage Area at no charge until
such time as this area is either leased to Tenant on a longer-term basis,
or is leased to a third-party tenant, or is otherwise required for use by
Landlord. Landlord shall give Tenant at least thirty (30) days prior
written notice before requiring Tenant to vacate the Short-term Storage
Area. At any time prior to such notice, Landlord and Tenant may agree to a
longer-term lease of all or a portion of the Short-term Storage Area as
may be available, with lease terms to be mutually agreed at the time of the
lease expansion. Until such formal lease agreement amendment incorporates
all or a portion of the Short-term Storage Area within the total rentable
area of the Premises, this Short-Term Storage Area is provided "as-is" and
with no services, warranties, or finish to be provided by Landlord. Tenant
shall make no alterations or improvements in the Short-term Storage Area
without prior written approval from Landlord.
3
<PAGE> 28
8. In the event that Tenant exercises its right to terminate the Lease
pertaining to the expanded 39,004 SF Lease Premises, under the conditions
and procedures outlined in Paragraph 28 of the Lease Agreement, Tenant
shall nevertheless be obligated to make all lease payments and expenses
reimbursements (to include Tenant's proportionate share of property
taxes, insurance, common area maintenance ["CAM"] costs) for the Second
Expansion Area for a minimum of thirty-six (36) months after the Second
Expansion Area Commencement Date.
9. Except as expressly provided herein, all other terms, covenants and
conditions of the Lease shall remain the same, in full force and effect,
and are hereby ratified and confirmed by Landlord and Tenant.
EXECUTED effective as of the date first written above.
J.A. BILLIPP DEVELOPMENT JOHNSON ENGINEERING
CORPORATION CORPORATION
By: By:
--------------------------------- ---------------------------------
Name: J. ANDREW BILLIPP Name:
------------------------------- -------------------------------
Title: PRESIDENT Title:
------------------------------ ------------------------------
LANDLORD TENANT
4
NY--360180.1
<PAGE> 29
FOURTH AMENDMENT TO LEASE AGREEMENT
THIS FOURTH AMENDMENT TO LEASE AGREEMENT ( the "Fourth Amendment") is
entered into effective as of the 7th day of January, 1997, by and between J.A.
BILLIPP DEVELOPMENT CORPORATION, a Texas corporation (hereinafter referred to
as "Landlord") and JOHNSON ENGINEERING CORPORATION (hereinafter referred to
as "Tenant").
WHEREAS, Landlord and Tenant entered into that certain Lease Agreement
dated April 30, 1993, as amended by First Amendment to Lease Agreement dated
September 22, 1993, as amended by Second Amendment to Lease Agreement dated
August 1, 1994, and as amended by Third Amendment to Lease Agreement dated
February 20, 1997 (the "Lease"), demising a portion of the improvements (the
"Premises") located on that certain property located at 555 Forge River Drive,
in the City of Webster, Harris County, Texas (the "Property"), both the
Premises and the Property being more particularly described in the Lease; and
WHEREAS, Landlord and Tenant desire to amend the Lease in order to
expand the size of the Premises and to modify certain other terms of the Lease;
NOW, THEREFORE, based upon the mutual promises and covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Landlord and Tenant agree as
follows:
1. Approximately 9,210 SF of rentable area ("Third Expansion Area") is added
to the Premises as of the date of substantial completion of the tenant
improvements, as documented by Landlord's architect, Munson Kennedy
Architects. The commencement date for rental payments and all other lease
obligations relating to the Third Expansion Area shall be the date of
substantial completion of the interior improvement construction to be
completed by Landlord, but not later than April 1, 1998 unless mutually
agreed by both parties ("Third Expansion Area Commencement Date"). The
Third Expansion Area Commencement Date will be confirmed and documented by
a separate letter agreement between Landlord and Tenant, and, if required
by the Property lender, additionally by an estoppel letter.
2. The 9,210 SF Third Expansion Area increases the total rentable area of
the Premises to approximately 48,214 SF.
3. Attached as Exhibit A to this Fourth Amendment is a building floor plan
showing the delineated 9,210 SF Third Expansion Area.
4. Landlord shall provide an allowance of up to One Hundred Thirty-Three
Thousand Eighty-Five and No/100 Dollars ($133,085.00) for the construction
of the tenant improvements within the Third Expansion Area, to include all
office, shop and storage area improvements in accordance with construction
documents mutually approved by Landlord and Tenant ("Standard Tenant
Finish Allowance Provided by Landlord").
5
<PAGE> 30
5. Landlord shall also provide an allowance of up to Eleven Thousand Five
Hundred Fifteen and No/100 Dollars ($11,515.00) for the architectural and
engineering services and construction documents associated with the
facility design and construction ("A & E Allowance Provided by
Landlord"). Upon completion of construction drawings, Landlord agrees to
competitively bid the tenant improvements construction work to at least
two (2) qualified general contractors. If the actual total cost of design
and construction is greater than the total sum of the Standard Tenant
Finish Allowance Provided by Landlord and the A & E Allowance Provided by
Landlord ("Over Allowance Cost"), Tenant shall pay to Landlord the Over
Allowance Cost within twenty (20) days after receipt of Landlord invoice,
or as otherwise mutually agreed prior to commencement of tenant
improvement construction.
6. Within five (5) days after the construction cost bid amounts are given to
Tenant by Landlord, Tenant may elect to have Landlord provide an
additional Fifty Thousand and No/100 Dollars ($50,000.00) tenant finish
allowance ("Additional $50,000.00 Landlord Allowance") which would
decrease the payment due Landlord for the Over Allowance Cost described
in Paragraph 5 above by Fifty Thousand and No/100 Dollars ($50,000.00)
and would concurrently increase the base monthly rental as described
below.
7. The monthly rental as defined in Section 2(a) of the Lease, and as
further modified in the First Amendment to Lease Agreement, Second
Amendment to Lease Agreement, and Third Amendment to Lease Agreement
("Prior Base Monthly Rental"), shall be increased as follows beginning on
the Third Expansion Area Commencement Date. Any partial month rentals due
for the Third Expansion Area will be prorated based upon the number of
days then remaining in the month.
<TABLE>
<CAPTION>
THROUGH NOV. 1, 1998 -
OCT. 31, 1998 JUNE 30, 2003
---------------- ----------------
<S> <C> <C>
Prior Base Monthly Rental: $29,769.00 $31,585.00
Third Expansion Base Monthly Rental: 6,907.00 6,907.00
----------- -----------
TOTAL BASE MONTHLY RENTAL WITHOUT
ADDITIONAL $50,000 LANDLORD ALLOWANCE: $36,676.00 $38,492.00
Incremental Base Monthly Rental for Additional
$50,000 Landlord Allowance: 1,255.00 1,255.00
------------ ------------
TOTAL BASE MONTHLY RENTAL WITH ADDITIONAL
$50,000 LANDLORD ALLOWANCE: $37,931.00 $39,747.00
============ ============
</TABLE>
8. In the event that Tenant exercises its right to terminate the Lease under
the conditions and procedures outlined in Paragraph 28 of the Lease
Agreement, Tenant shall nevertheless be obligated to make all lease
payments and expense reimbursements (to include Tenant's proportionate
share of property taxes, insurance, common area maintenance ["CAM"]
costs, etc.) for the Third
6
<PAGE> 31
Expansion Area for a minimum of fifty (50) months after the Third Expansion
Area Commencement Date.
9. Except as expressly provided herein, all other terms, covenants and
conditions of the Lease shall remain the same, in full force and effect,
and are hereby ratified and confirmed by Landlord and Tenant.
EXECUTED effective as of the date first written above.
J.A. BILLIPP DEVELOPMENT JOHNSON ENGINEERING
CORPORATION CORPORATION
By:---------------------------------- By:-----------------------------------
Name: J. ANDREW BILLIPP Name: DALE R. JOHNSON
------------------------------- --------------------------------
Title: PRESIDENT Title: PRESIDENT
------------------------------- --------------------------------
LANDLORD TENANT
7
<PAGE> 1
Exhibit 10.98
NASSAU DEVELOPMENT COMPANY
"LESSOR"
AND
JOHNSON ENGINEERING INC.
"LESSEE"
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
LESSOR AND LESSEE........................................................................................1
I.A LEASED PREMISES...............................................................................1
II.A TERM..........................................................................................1
II.B USE...........................................................................................1
II.C BASE RENTAL RATE..............................................................................2
II.D SECURITY DEPOSIT..............................................................................2
II.E RENTAL ESCALATION.............................................................................2
II.F BASIC COSTS FOR ESCALATION....................................................................3
II.G PAYMENT OF RENT...............................................................................4
III.A SERVICES TO BE FURNISHED BY LESSOR............................................................4
III.B PEACEFUL ENJOYMENT............................................................................5
IV.A PAYMENTS BY LESSEE............................................................................5
IV.B REPAIRS BY LESSOR.............................................................................5
IV.C REPAIRS BY LESSEE.............................................................................6
IV.D CARE OF THE LEASED PREMISES...................................................................6
IV.E ASSIGNMENT OR SUBLEASE........................................................................6
IV.F ALTERATIONS, ADDITIONS AND IMPROVEMENTS.......................................................6
IV.G LEGAL USE AND VIOLATIONS OF INSURANCE COVERAGE................................................7
IV.H LAWS AND REGULATIONS; RULES OF BUILDING.......................................................7
IV.I ENTRY FOR REPAIRS AND INSPECTION..............................................................7
IV.J NUISANCE......................................................................................7
IV.K ASSIGNMENT....................................................................................7
IV.L DEFAULT.......................................................................................8
IV.M WAIVER........................................................................................8
IV.N BANKRUPTCY BY LESSEE..........................................................................9
IV.O AD VALOREM TAXES..............................................................................9
IV.P CASUALTY INSURANCE............................................................................9
IV.Q INDEMNITY.....................................................................................9
V.A CONDEMNATION AND LOSS OR DAMAGE..............................................................10
V.B LESSOR'S LIEN FOR RENT.......................................................................10
V.C ABANDONMENT..................................................................................11
V.D HOLDING OVER.................................................................................11
V.E FIRE CLAUSE..................................................................................11
V.F ESTOPPEL CERTIFICATE.........................................................................12
V.G ATTORNEY'S FEE...............................................................................12
V.H ALTERATION...................................................................................12
V.I WAIVER OF SUBROGATION RIGHTS.................................................................12
V.J NOTICES......................................................................................13
V.K LEGAL INTERPRETATION.........................................................................13
</TABLE>
i
<PAGE> 3
LEASE AGREEMENT
THE STATE OF TEXAS
COUNTY OF HARRIS
LESSOR AND LESSEE
This Lease Agreement made and entered into on this the 19th day of February,
1998, between Nassau Development Company, "Lessor" whose address for purposes
hereof is 18100 Upper Bay Road, Suite A, Houston, Texas 77058, acting by and
through its duly authorized representative, and Johnson Engineering Inc.,
"Lessee" whose address in Houston, Texas, for purposes hereof is 18100 Upper Bay
Road, Suite 207, Houston, Texas 77058.
W I T N E S S E T H:
I.
I.A LEASED PREMISES
(1) Subject to and upon the terms, provisions and conditions hereinafter set
forth, and each in consideration of the duties, covenants and obligations of the
other hereunder, Lessor has leased, demised and rented to Lessee the following
described premises, suites 204, 207 and 220 (herein referred to as "Leased
Premises") which is a total of 3,952 rentable square feet, situated in B. XII,
the "Building," located at 18100 Upper Bay Road, Suite 207, Houston, Harris
County, Texas.
(2) The number of square feet of gross rentable area comprising the building of
which the Leased Premises are situated in shall be 24,148 square feet unless
enlarged or reduced by written amendment or addendum hereto.
II.
II.A TERM
Subject to and upon the terms and conditions set forth herein, or in any exhibit
or addendum hereto, this lease shall continue in force for a term of one year,
beginning on the 1st of March, 1998. This Lease will expire on February 28,
1999.
II.B USE
The Leased Premises are to be used and occupied by Lessee solely for the
purposes of conducting its business of aerospace engineering. Provided, however,
that Lessee may
<PAGE> 4
not use the Leased Premises in such a way as to interfere with
the use and enjoyment of other tenants or which is otherwise inconsistent with
the terms of this Agreement.
II.C BASE RENTAL RATE
The base rental shall be $9.60 per square foot per year ($.80 per square foot
per month) for each square foot of gross rentable area then being leased by
Lessee under the terms and provisions hereof. ($3,161.60 Dollars of Rent per
Month).
II.D SECURITY DEPOSIT
[text cut off] Lessee shall timely discharge in full all its obligation under
this Agreement, the security deposit shall be returned to Lessee thirty (30)
days after the expiration of the term of this Agreement. In the event of
transfer of this Agreement by Lessor, Lessor shall have the right to transfer
the security deposit to the transferee in which event Lessor shall have no
further obligation to Lessee for return of the security deposit.
II.E RENTAL ESCALATION
(1) The term "Lease Year," as used herein, shall mean the fiscal year ending
March 31 of the year in which this Lease Agreement is entered into and any
subsequent fiscal year(s) during the initial term hereof and any extensions or
renewals hereof. In any Lease Year in which the Basic Costs (as defined in
paragraph II.F below) for maintaining and operating the Building, of which the
leased premises are a part, exceed the amount of FIVE AND 00/100 Dollars ($5.00)
per square foot of rentable area then leased by Lessee for that year (the "Base
Stop"), Lessee shall pay as additional rent the amount equal to Lessee's
proportionate share of the amount of the Basic Costs that exceed the Base Stop.
Lessee's "proportionate share" of the amount of Basic Costs that exceed the Base
Stop shall be the same percentage of the amount of Basic Costs over the Base
Stop as is equal to the percentage which the gross rentable area then leased by
Lessee in the Building bears to the total gross rentable area contained in the
Building.
(2) Lessor may submit to Lessee, and Lessee agrees to pay, a bill or invoice as
frequently as each month for one-twelfth (1/12) of the estimated annual amount
as may be ascertained by Lessor to be due by Lessee under this Article.
Alternatively, Lessor may submit to Lessee (at Lessor's sole discretion), and
Lessee agrees to pay, a bill or invoice as frequently as each month for the
actual increase in Basic Costs over the amount of the Base Stop for that month
and any preceding months for which rental escalation is due under this Article.
In the event of such billing or invoicing as provided hereunder by Lessor,
Lessee agrees and covenants to pay such additional amount contemporaneously with
the Base Rental on the first day of each calendar month, monthly in advance.
(3) Following the close of each Lease Year, Lessor shall determine the Basic
Costs for such Lease Year and give written notice thereof to Lessee which notice
shall also contain or be accompanied by a computation of additional rental, if
any, paid by Lessee as above provided and the balance, if any, then owing by
Lessee. In the event a balance is owing
2
<PAGE> 5
by Lessee, same shall be paid by Lessee within ten (10) days of such notice. In
the event the computation for such Lease Year reflects a negative balance, same
shall be refunded by Lessor to Lessee within ten (10) days of such notice
provided that in no event shall the rental to be paid by Lessee for the leased
premises during the term of this Lease Agreement, and any extensions or renewals
hereof, ever be less than the base rental stated in Paragraph II.C of this Lease
Agreement. Lessee shall receive no benefit for a decrease in Basic Costs or the
amount of Basic Costs below the Base Stop for any calendar or fiscal year, or
any part thereof, during the term of this Lease Agreement, or any extensions and
renewals thereof. For the last Lease Year, Lessee shall only pay for such Lease
Year that portion of its proportionate share of the amount of Basic Costs that
exceed the Base Stop as the number of calendar days in the last Lease Year that
this Lease Agreement is in effect bears to 365.
II.F BASIC COSTS FOR ESCALATION
(1) "Basic Costs" as said term is used herein shall consist of the operating
expenses of the Building, which shall be computed on the accrual basis. All
operating expenses shall be determined in accordance with generally accepted
accounting principles which shall be consistently applied. The term "operating
expenses" as used herein shall mean all expenses, costs and disbursements (but
not replacement of capital investment items) of every kind and nature which
Lessor shall incur, pay or be obligated to pay because of or in connection with
the ownership, and/or operating of the Building, including, but not limited to,
the following:
(a) All expenses of employment of all employees engaged in
operation and maintenance of the Building including wages and
salaries, employer's Social Security taxes, unemployment taxes
or insurance, and any other taxes which may be levied on such
wages and salaries as well as the cost of disability and
hospitalization insurance and pension or retirement benefits
for such employees.
(b) All supplies and materials used in operation and maintenance
of the Building.
(c) Cost of utilities, except those billed directly to tenants,
including but not limited to water and power, heating,
lighting, air conditioning and ventilating the Building.
(d) Cost of all maintenance and service agreements on equipment,
including alarm service, janitorial service, landscaping,
window cleaning and elevator maintenance.
(e) Cost of casualty and liability insurance applicable to the
Building and Lessor's personal property used in connection
therewith.
(f) All taxes, assessments and governmental charges whether
federal, state, county or municipal, and whether they be by
taxing districts or authorities
3
<PAGE> 6
presently taxing the Leased Premises or by others,
subsequently created or otherwise, and any other taxes and
assessments attributable to the Building or its operation
excluding, however, federal and state taxes on income.
(g) Cost of repairs and general maintenance. (The costs of repairs
and general maintenance shall exclude alterations attributable
solely to tenants of the Building other than Lessee.)
(h) Management fees not to exceed five (5%) percent of the base
rentals, rental escalations, tenant assessments and other
rents, costs, charges or expenses incurred, derived from or
associated with the Building.
(i) Accounting fees actually incurred by Lessor in operation of
the Building and determination of escalation charges.
(j) A reasonable amortization charge on account of any capital
expenditures incurred to effect a reduction in operating
expenses of the Building.
(2) Lessee at its expense shall have the right at all reasonable times to audit
Lessor's book and records relating to this lease for any year or years for which
additional rental payments become due.
II.G PAYMENT OF RENT
(1) The annual base rent adjusted in accordance with any exhibits hereto, if
applicable, shall be due and payable in advance in twelve (12) equal monthly
installments on the first day of each calendar month during the initial term and
any extensions or renewals thereof, and Lessee hereby agrees to so pay such rent
to Lessor at Lessor's address as provided herein monthly in advance without
demand. Additional rental for Lessee's share of Lessor's increased costs in
accordance with the escalation formula shall be due and payable quarterly as
provided in II.E above.
III.
III.A SERVICES TO BE FURNISHED BY LESSOR
(1) Lessee shall pay for the electricity, gas and water utilized in operating
any and all facilities servicing the Leased Premises except as otherwise
provided herein.
(2) "Lessor shall furnish to Lessee, while occupying the premises:
(a) Hot and cold water at those points of supply provided for
general use of other tenants in the Building, central heat and
air conditioning in season, at such times as Lessor normally
furnishes these services to other tenants in the Building, and
at such temperatures and in such amounts as are considered by
Lessor to be standard, such service on Saturdays, Sundays and
legal holidays to be furnished only upon the request of Lessee,
who
4
<PAGE> 7
shall bear the entire cost thereof; janitorial service on a
five (5) day week basis, electric lighting service for all
public areas and special service areas of the Building in the
manner and to the extent deemed by Lessor to be standard; but
failure by Lessor to any extent to furnish these defined
services, or any cessation thereof, resulting from causes beyond
the control of Lessor, shall not render Lessor liable in any
respect for damages to either person or property, not be
construed as an eviction of Lessee, nor work an abatement of
rent, nor relieve Lessee from fulfillment of any covenant
or agreement hereof. Should any of the equipment or machinery
break down, or for any cause cease to function properly, Lessor
shall use reasonable diligence to repair same promptly, but
Lessee shall have no claim for rebate of rent or damages on
account of any interruptions in service occasioned thereby or
resulting therefrom.
(b) Proper electrical facilities to furnish sufficient power for
typewriters, voice writers, calculating machines and other
machines of similar low electrical consumption; provided,
however, that Lessee shall bear the utility costs, air
conditioning costs and costs to install appropriate meters to
determine such costs occasioned by electro-data processing
machines and similar machines of high electrical consumption.
Such machines of high electrical consumption shall not be
installed within the Building without the prior written
consent of Lessor.
III.B PEACEFUL ENJOYMENT
(1) Lessee shall, any may peacefully have, hold and enjoy the Leased Premises,
subject to the other terms hereof, provided that Lessee pays the rental herein
recited and performs all of its covenants, duties and agreements herein
contained.
IV.
IV.A PAYMENTS BY LESSEE
(1) Lessee shall pay all rent and sums provided to be paid by lessor hereunder
at the times and in the manner herein provided.
IV.B REPAIRS BY LESSOR
(1) Unless otherwise expressly stipulated herein, Lessor shall not be required
to make any improvements or repairs of any kind or character on the Leased
Premises during the term of this lease, except such repairs as may be required
for structural or exterior building maintenance including the painting of and
repairs to walls, floors, corridors, windows, and other structures and Building
equipment within and serving the Leased Premises, and such additional
maintenance as may be necessary because of damages by persons other than Lessee,
its invites, visitors, or anyone acting at its direction or on its behalf; and
as may be necessary solely because of the negligence of Lessor at its expense
beginning not more than fifteen (15) days after written notice thereof by
Lessee.
5
<PAGE> 8
IV.C REPAIRS BY LESSEE
(1) At its own cost and expense, Lessee shall repair or replace any damage or
injury done to the Building, or any part thereof, caused by Lessee, its agents,
employees, invitees, or visitors; provided however, if Lessee fails to make such
repairs or replacements promptly Lessor may, at its option, make such repairs or
replacements, and Lessee shall repay the costs thereof to Lessor on demand.
Lessee's indemnity obligation hereunder shall survive regardless of whether
Lessor is or is alleged to have caused or contributed to such damages through
its actions or interactions constituting negligence, or giving rise to strict
liability or statutory liability. Lessee agrees to keep the Leased Premises and
the Building free at all times of any mechanics' and materialmen's liens or
other liens arising from such repair or replacement, including, but not limited
to, posting bond to obtain a release of any such lien.
IV.D CARE OF THE LEASED PREMISES
(1) Lessee shall not commit or allow any waste or damage to be committed on any
portion of the Leased Premises, and at the termination of this lease, by lapse
of time or otherwise, shall deliver up said Leased Premises to Lessor in as good
condition as at date of original possession by Lessee, ordinary wear and tear
excepted, and upon such termination of this lease, Lessor shall have the right
to re-enter and resume possession of the Leased Premises.
IV.E ASSIGNMENT OR SUBLEASE
(1) Lessee shall not assign this Agreement or sublet the Leased Premises, or any
part thereof, without first obtaining the written consent of Lessor, however
Lessor agrees that it will not unreasonably or arbitrarily refuse to give such
permission or consent. No assignment or sublease of the Leased Premises shall be
valid or binding upon Lessor without such consent. In no event shall any such
assignment or sublease ever release Lessee from any obligation or liability
hereunder.
IV.F ALTERATIONS, ADDITIONS AND IMPROVEMENTS
(1) Lessee shall not permit the Leased Premises to be used for any other purpose
than that stated in the use clause hereof, or make or allow to be made any
alterations [text cut off].
(2) The cost of any alterations, physical additions, or improvements shall be
borne and paid for solely by Lessee. Lessee agrees to keep the Leased Premises
and the Building free at all times of any mechanics' and materialmen's liens or
other liens arising from such alterations, physical additions or improvements
including, but not limited to, posting a bond to obtain a release of any such
lien. Lessor shall have the right to insist on adequate security by way of
insurance, bonding or other means, prior to any modification or alteration to
ensure compliance with this clause.
6
<PAGE> 9
(3) Though all alterations, physical additions, or improvements made by Lessee
become the property of Lessor upon the termination of this lease, Lessor may
require that Lessee remove any or all alterations, additions, and improvements
installed or made by Lessee, and any other property placed on the premises by
Lessee, upon termination of the lease. In the event that Lessor requires Lessee
to remove all such alterations, additions, or improvements, Lessee shall bear
and pay the cost of such removal and shall repair any damage to the premises
caused by such removal and, absent express written permission of Lessor, to
restore the Leased Premises to its original condition, reasonable wear and tear
excepted.
IV.G LEGAL USE AND VIOLATIONS OF INSURANCE COVERAGE
(1) Lessee shall not occupy or use, or permit any portion of the Leased Premises
to be occupied or used for any business or purpose which is unlawful,
disreputable or deemed to be extra-hazardous on account of fire, or permit
anything to be done which would in any way increase the rate of fire insurance
coverage on said Building and/or its contents.
IV.H LAWS AND REGULATIONS; RULES OF BUILDING
(1) Lessee shall comply with all laws, ordinances, orders, rules and regulations
(state, federal, municipal and other agencies or bodies having any jurisdiction
thereof) relating to the use, condition or occupancy of the Leased Premises.
Lessee will comply with the rules of the Building adopted by Lessor which are
set forth as Exhibit "B" attached hereto to be initialed by the parties hereto,
and made a part hereof as fully as though set forth herein. Lessor shall have
the right at all times to change such rules and regulations or to amend them in
any reasonable manner as may be deemed advisable by Lessor for the safety, care
and cleanliness of the Leased Premises and for preservation of good order
therein, all of which changes and amendments will be sent by Lessor to Lessee in
writing and shall be thereafter carried out and observed by Lessee.
IV.I ENTRY FOR REPAIRS AND INSPECTION
(1) Lessee shall permit Lessor, its agents or representatives to enter into and
upon any part of the Leased Premises at all reasonable hours to inspect same or
to clean, make repairs, alterations or additions thereto, as Lessor may deem
necessary or desirable, and Lessee shall not be entitled to any abatement or
reduction of rent by reason thereof.
IV.J NUISANCE
(1) Lessee shall conduct its business and control its agents, employees,
invitees, and visitors in such manner as not to create any nuisance, or
interfere with, annoy or disturb any other tenant or Lessor in his operation of
the Building.
IV.K ASSIGNMENT
(1) Lessor shall have the right to transfer and assign, in whole or in part, all
of its rights and
7
<PAGE> 10
IV.L DEFAULT
(1) Default on the part of the Lessee on paying said rent or any installment
thereof, as herein above provided, or default on Lessee's part in keeping or
performing any other term, covenant or condition of this lease such as to create
a breach thereof, shall authorize Lessor, at its sole option at any time after
such default, and after ten (10) days' written notice thereof to Lessee, to
declare this lease terminated, and upon the occurrence of any one or more of
such defaults, Lessor immediately, or at any time thereafter, may re-enter said
premises and remove all persons therefrom with or without legal process, and
without prejudice to any of its other legal rights. All claims for damages by
reason of such re-entry are expressly waived, as also are all claims for damages
by reason of any distress warrants or proceedings by way of sequestration which
Lessor may employ to recover said rents or possession of said premises;
provided, that Lessor shall not have the right to declare this lease terminated,
if, within ten (10) days after notice of any default, Lessee corrects the
default. Provided, however, that nothing herein shall restrict Lessor's rights
at law or equity to recover possession of the Leased Premises in the event of
multiple or repeated defaults, if consistent with the laws of this state.
(2) If Lessee defaults, Lessor shall be entitled to recover damages, including,
but not limited to, the total of all payments owing and unpaid as of the date of
the default, plus interest from the date due until paid at the greatest possible
non-usurious rate permitted by law (provided that if no usury statute shall
apply, past due rent and other payments shall bear interest at eighteen percent
(18%) per annum from the due date until paid); the costs of re-entry and
reletting, including without limitation the cost of any clean-up, reasonable
refurbishing, removal of Lessee's property and fixtures; other expenses caused
by Lessee's failure to quit the premises and leave the same in the required
condition; reasonable attorney's fees, including those incurred at trial and all
appeals; court costs; expert witness fees; advertising costs; and the difference
between (i) the annual base rent and all of Lessee's other obligations under
this lease and (ii) the actual annual base rent received by the landlord for the
period commencing with the date of the default and continuing through the
termination date. Damages shall survive the termination of this lease.
(3) Pursuit of any of the above-stated remedies by Lessor after a default by
Lessee shall not preclude pursuit of any other remedies provided in this lease
or applicable law, nor shall pursuit of any remedy constitute a forfeiture or
waiver of any payment due to Lessor.
IV.M WAIVER
(1) Failure of Lessor to declare any default immediately upon occurrence
thereof, or delay in taking any action in connection therewith, shall not waive
such default, but Lessor shall have the right to declare any such default at any
time and take such action as might be lawful or authorized hereunder, either in
law or in equity.
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<PAGE> 11
IV.N BANKRUPTCY BY LESSEE
(1) If voluntary bankruptcy proceedings are instituted by Lessee, or if Lessee
is adjudged a bankrupt, or if Lessee makes an assignment for the benefit of its
creditors, or if execution is issued against it, or if the interest of Lessee
hereunder passes by operation of law to any person other than Lessee, this lease
may, at the option of Lessor, be terminated by notice mailed by registered mail
and addressed to Lessee.
IV.O AD VALOREM TAXES
(1) Lessor shall pay all ad valorem taxes which accrue against the Building
during the term of this lease. Lessee shall pay all ad valorem and similar taxes
levied upon or applicable to all personal property within the Leased Premises
and improvements in excess of building standard improvements.
IV.P CASUALTY INSURANCE
(1) Lessor shall, at all times during the term of this lease, at its expense,
maintain a policy or policies of insurance issued by and binding upon some
insurance company, insuring the Building against loss or damage by fire,
explosion, or other hazards and contingencies for the full insurable value
thereof; provided that Lessor shall not insure any goods, property, or supplies
not owned by Lessor and/or covered lease which Lessee may bring or obtain upon
the Leased Premises, or any additional improvements which Lessee may construct
thereon. If the annual premiums charged Lessor for such casualty insurance
exceed the standard premium rates because the nature of Lessee's operation
results in extra-hazardous exposure, then Lessee shall upon receipt of
appropriate premium invoices reimburse Lessor for any such increases covering in
such premiums.
(2) Lessee shall be responsible for providing, at Lessee's own expense, all
insurance coverage necessary for protection against loss or damage from fire,
theft, or other casualty of Lessee's goods, furniture, leasehold improvements,
equipment, files and all other property placed in the Leased Premises and
liability insurance covering the Leased Premises.
IV.Q INDEMNITY
(1) Lessee agrees to and does hereby hold harmless and unconditionally indemnify
Lessor, its agent, officers, directors, employees, representatives, invitees,
guests, and contractors (collectively referred to in this paragraph as "Lessor")
against and for all costs, expenses, claims, liability, and damages of every
nature (including, but not limited to attorney's fees, court costs, expert
witness fees and interest) which Lessor may at any time suffer, sustain or
become liable for by reason of any and all accidents, damages, losses or
injuries resulting in personal injury, death and/or loss of or damage to any
property in any manner arising from or related to, in whole or in part, the
presence, conduct of business or any act or omission of Lessee, its agents,
officers, directors, employees, representatives, invitees, guests, contractors
or any parties contracting or conducting business with Lessee. Lessee agrees to
hold Lessor harmless for such costs,
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<PAGE> 12
expenses, claims, liability and damages even if same arise or are alleged to
arise in any manner from any negligent act or omission of Lessor, or any act for
which Lessor could be liable under theories of strict or statutory liability,
excepting only that arising from the sole negligence of Lessor. In case of any
action or proceeding brought against Lessor by reason of such claim, Lessee,
upon notice from Lessor, shall defend such action or proceeding by counsel of
Lessor's own choosing.
V.
V.A CONDEMNATION AND LOSS OR DAMAGE
(1) If the Leased Premises shall be taken or condemned in whole or in part for
any public purpose, this lease shall, at the option of either party, forthwith
cease and terminate; and Lessor or Lessee shall not be liable or responsible to
each other for any loss or damage to any property or person occasioned by theft,
fire, act of God, public enemy, injunction, riot, strike, insurrection, war,
court order, requisition, or order of [text cut off on bottom of page]
governmental body or authority beyond the control of Lessor or Lessee, as the
case may be, or for any damage or inconvenience which may arise through repair
or alteration of any part of the Building, or failure to make any such repairs,
or from any cause whatever, unless caused solely by Lessor's or Lessee's gross
negligence, as the case may be, except as may be herein otherwise expressly
provided.
V.B LESSOR'S LIEN FOR RENT
(1) Lessor shall have, at all times, a valid security interest to secure payment
of all rentals and other sums of money becoming due under this Lease from
Lessee, and to secure payment of any damages or loss that Lessor may suffer by
reason of the breach by Lessee of any covenant, agreement or condition contained
in this Lease, upon all goods, wares, equipment, fixtures, furniture, and other
personal property of Lessee which is now on the premises or which is placed on
the premises at some later date, and all proceeds from them. This property shall
not be removed from the premises without the consent of Lessor until all
arrearages in rent and all other sums of money then due to Lessor under this
Lease have been paid and discharged, and all the covenants, agreements, and
conditions of this Lease have been fully complied with and performed by Lessee.
Upon the occurrence of an event of* default by Lessee, Lessor may, in addition
to any other remedies provided in this Lease or by law, after giving reasonable
notice of the intent to take possession and giving an opportunity for a hearing
on the issue, enter upon the premises and take possession of any and all goods,
wares, equipment, fixtures, furniture, and other personal property of Lessee
situated on the premises without liability for trespass or conversion, and sell
the same at public or private sale, with or without having the property at the
sake, after giving Lessee reasonable notice of the time and place of
* Upon the occurrence of an event of default by Lessee, Lessor shall not take
possession of any government owned goods, wares, equipment, furniture, and
other kinds of government property situated on the premises.
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<PAGE> 13
any public sale or of the time after which any private sale is to be made.
Lessor or its assigns may purchase any items to be sold at such a sale unless
they are prohibited from doing so by law. Unless otherwise provided by law, and
without intending to exclude any other manner of giving Lessee reasonable
notice, the requirement of reasonable notice shall be met if such notice is
given at least twenty-one (21) days before the time of the sale. The proceeds
from any such dispositions, less any and all expenses connected with the taking
of possession, holding and selling of the property (including reasonable
attorney's fees and other expenses), shall be applied as a credit against the
indebtedness secured by the security interest granted in this section. Any
surplus shall be paid to Lessee or as otherwise required by law; and Lessee
shall pay any deficiencies immediately. Upon request by Lessor, Lessee agrees to
execute and deliver to Lessor a financing statement in form sufficient to
perfect the security interest of Lessor in the aforementioned property and
proceeds under the provisions of the Uniform Commercial Code in force in the
State of Texas. The statutory lien for rent is not waived, the security interest
granted in this article being in additions and supplementary, to that lien.
V.C ABANDONMENT
(1) In the event the Leased Premises are abandoned by Lessee, Lessor shall have
the right, but not the obligation, to relet same for the remainder of the term
provided for herein; and if the rent received through such reletting does not at
least equal the rent provided for herein, Lessee shall pay and satisfy any
deficiency between the amount of the rent so provided for and that received
through reletting, and, in addition thereto, shall pay all expenses incurred in
connection with any such reletting, including, but not limited to, the cost of
restoring premises to its prior condition. Nothing herein shall be construed as
in any way denying Lessor the right in the event of abandonment of said premises
or other breach of this Agreement by Lessee, to treat the same as an entire
breach and at Lessor's option immediately sue for the entire breach of this
Agreement and any and all damages which Lessor suffers thereby.
V.D HOLDING OVER
(1) In the event of holding over by Lessee after expiration of termination of
this lease, Lessee shall pay as liquidated damages double rent on a per diem
basis, for the entire holdover period. No holding over by Lessee after the term
of this lease, either with or without consent and acquiescence of Lessor, shall
operate to extend the lease for a longer period than one (1) month; and any
holding over with the consent of Lessor in writing shall thereafter constitute
this lease a lease from month to month.
V.E FIRE CLAUSE
(1) In the event of a fire in the Leased Premises, Lessee shall immediately give
notice thereof to Lessor, if the Leased Premises, through no fault or neglect of
Lessee, its agents, employees, invitees or visitors, shall be partially
destroyed by fire or other casualty so as to render the premises untenantable,
the rental herein shall cease thereafter until such time as the Leased Premises
are made tenantable by Lessor. In the event of the total destruction of the
Leased Premises without fault or neglect of Lessee, its agents,
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<PAGE> 14
employees, invitees or visitors, or if from such cause the same shall be so
damaged that Lessor shall decide not to rebuild, then all rent owed up to the
time of such destruction or termination shall be paid by Lessee and thenceforth
this lease shall cease and come to an end. If such damage is due to the fault or
neglect of Lessee, then all repairs shall be at Lessee's expense and there shall
be no abatement of rent. This obligation shall survive regardless of whether
Lessor is or is alleged to be concurrently negligent in connection with said
damages.
V.F ESTOPPEL CERTIFICATE
(1) The Lessee agrees, at any time and from time to time, upon not less than
fifteen (15) business days' prior notice from the Lessor, to execute,
acknowledge and deliver to the Lessor a statement in writing (1) certifying that
this Lease is unmodified and in full force and effect (or if there have been
modifications, that this Lease is in full force and effect as modified and
stating the modifications); (2) stating the dates to which the rent and other
charges hereunder have been paid by the Lessee; (3) stating whether or not the
Lessee has knowledge that the Lessor is in default in the performance of any
covenant, agreement or condition contained in this Lease, and, if the Lessee has
knowledge of such a default, specifying each such default and (4) stating the
address to which notices to the Lessee shall be sent. Prior to the commencement
of or during the term of this Lease the Lessor shall, if requested by the
Lessee, deliver an estoppel certificate, in the substance and form described
above, relative to the status of this Lease and/or any ground lease, underlying
lease and/or mortgage encumbering the building, parking facility or land.
V.G ATTORNEY'S FEE
(1) In the event Lessee makes default in the performance of any of the terms,
covenants, agreements or conditions contained in this lease such as to create a
breach thereof, and Lessor places the enforcement of this lease, or any part
thereof, or the collection of any rent due, or to become due hereunder, or
recovery of the possession of the Leased Premises in the hands of an attorney,
or files suit upon the same, Lessee agrees to pay Lessor its reasonable
attorney's fees, court costs, expert witness fees, and other costs of collection
as may be reasonably incurred by Lessor.
V.H ALTERATION
(1) Lessor and Lessee agree that this Agreement supersedes all prior oral or
written agreements and may not be altered, changed or amended, except by an
instrument in writing, signed by both parties hereto.
V.I WAIVER OF SUBROGATION RIGHTS
(1) Anything in this lease to the contrary notwithstanding, Lessee hereto hereby
waives any and all rights of recovery, claim, action or cause of action, against
Lessor, its agents, officers, employees and representatives for any loss or
damage that may occur to the premises hereby demised, or any improvements
thereto, or said Building of which the Leased Premises are a part, or any
improvements thereto, by reason of fire, the elements,
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<PAGE> 15
or any other cause which could be insured against under the terms of
standard fire and extended coverage or liability insurance policies, regardless
of cause or origin, including negligence, strict liability or statutory
liability of the Lessor, its agents, officers, employees and representatives.
V.J NOTICES
(1) Any and all notices or other communication required or permitted by this
lease to be served on or given to either party to this lease by the other party
hereto shall be in writing and shall be deemed duly served and given when
personally delivered to the party to whom it is directed, or in lieu of such
personal service, when deposited in the United States mail, properly addressed,
with postage prepaid, to the parties at the following addresses:
Lessor
Name: Michael L. Austin
Title: Property Manager
Company: Nassau Development Company
Address: 18100 Upper Bay Road, Ste. A
Houston, TX 77058
Lessee
Name: Scott Hanson
Title: Controller
Company: Johnson Engineering Inc.
Address: 555 Forge River Road, Suite 150
Webster, Texas 77598
The addresses or other information provided above may be changed by either party
upon giving the other party seven (7) days written notice of such change. Such
notice shall identify this Lease Agreement and shall provide the information
specified above.
V.K LEGAL INTERPRETATION
(1) This lease shall be governed by and construed in accordance with the laws of
the State of Texas. If any clause or provision of this lease is illegal, invalid
or unenforceable under present or future laws effective during the lease term or
any renewals or extensions thereof, then and in that event, it is the intention
of the parties hereto that the remainder of this lease shall not be affected
thereby, and it is also the intention of the parties to this lease that in lieu
of each clause or provision of this lease that is illegal, invalid or
unenforceable, there be added as a part of this lease a clause or provision as
may be possible and legal, valid and enforceable. The heading of the paragraphs
have been inserted for convenience only and are not to be considered in any way
in the construction or interpretation of this lease agreement.
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<PAGE> 16
This lease shall be binding upon and inure to the benefit of the heirs, personal
representatives and assigns of Lessor, and shall be binding upon and inure to
the benefit of the successors and assigns of Lessee. The pronouns of any gender
shall include the other genders, and either the singular or the plural shall
include the other.
The undersigned represent that they are authorized to sign this document, agree
to the foregoing and accept same on behalf of and as an act and deed of Lessor
and Lessee, as evidenced by their signatures below.
- ------------------------------ -----------------------------------
Lessor Lessee
BY: BY:
--------------------------- --------------------------------
TITLE: TITLE:
------------------------ -----------------------------
DATE: DATE:
------------------------- ------------------------------
14
<PAGE> 17
NASSAU DEVELOPMENT COMPANY
"LESSOR"
AND
JOHNSON ENGINEERING INC.
"LESSEE"
<PAGE> 18
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
PARTIES..................................................................................................1
I.A LEASED PREMISES...............................................................................1
II.A TERM..........................................................................................1
II.B USE...........................................................................................1
II.C BASE RENTAL RATE..............................................................................2
II.D SECURITY DEPOSIT..............................................................................2
II.E RENTAL ESCALATION.............................................................................2
II.F BASIC COSTS OF ESCALATION.....................................................................3
II.G PAYMENT OF RENT...............................................................................4
III.A SERVICES TO BE FURNISHED BY LESSOR............................................................4
III.B PEACEFUL ENJOYMENT............................................................................5
IV.A PAYMENTS BY LESSEE............................................................................5
IV.B REPAIRS BY LESSOR.............................................................................5
IV.C REPAIRS BY LESSEE.............................................................................6
IV.D CARE OF LEASED PREMISES.......................................................................6
IV.E ASSIGNMENT OR SUBLEASE........................................................................6
IV.F ALTERATIONS, ADDITIONS, AND IMPROVEMENTS......................................................6
IV.G LEGAL USE AND VIOLATIONS OF INSURANCE COVERAGE................................................7
IV.H LAWS AND REGULATIONS; RULES OF BUILDING.......................................................7
IV.I ENTRY FOR REPAIRS AND INSPECTION..............................................................7
IV.J NUISANCE......................................................................................8
IV.K ASSIGNMENT....................................................................................8
IV.L DEFAULT.......................................................................................8
IV.M WAIVER........................................................................................9
IV.N BANKRUPTCY BY LESSEE..........................................................................9
IV.O AD VALOREM TAXES..............................................................................9
IV.P CASUALTY INSURANCE............................................................................9
IV.Q INDEMNITY....................................................................................10
V.A CONDEMNATION AND LOSS OR DAMAGE..............................................................10
V.B LESSOR'S LIEN FOR RENT.......................................................................10
V.C ABANDONMENT..................................................................................11
V.D HOLDING OVER.................................................................................11
V.E FIRE CLAUSE..................................................................................12
V.F ESTOPPEL CERTIFICATE.........................................................................12
V.G ATTORNEY'S FEE...............................................................................12
V.H ALTERATION...................................................................................13
</TABLE>
i
<PAGE> 19
LEASE AGREEMENT
THE STATE OF TEXAS
COUNTY OF HARRIS
LESSOR AND LESSEE
This Lease Agreement made and entered into on this the 26th day of January,
1998, between Nassau Development Company, "Lessor" whose address for purposes
hereof is 18100 Upper Bay Road, Suite A, Houston, Texas 77058, acting by and
through its duly authorized representative, and Johnson Engineering Corporation,
"Lessee" whose address in Houston, Texas, for purposes hereof is 18100 Upper Bay
Road, Suite 208, Houston, Texas 77058.
W I T N E S S E T H:
I.
I.A LEASED PREMISES
(1) Subject to and upon the terms, provisions and conditions hereinafter set
forth, and each in consideration of the duties, covenants and obligations of the
other hereunder, Lessor has leased, demised and rented to Lessee the following
described premises (herein referred to as "Leased Premises") which is a total of
2,958 rentable square feet, situated in B.XII, the "Building", located at 18100
Upper Bay Road, Suite 208, Houston, Harris County, Texas.
(2) The number of square feet of gross rentable area comprising the building of
which the Leased Premises are situated in shall be 24,148 square feet unless
enlarged or reduced by written amendment or addendum hereto.
II.
II.A TERM
Subject to and upon the terms and conditions set forth herein, or in any exhibit
or addendum hereto, this lease shall continue in force for a term of six (6)
months, beginning on the 1st of February, 1998. This Lease will expire on July
31, 1998.
II.B USE
The Leased Premises are to be used and occupied by Lessee solely for the
purposes of conducting its business of aerospace engineering. Provided, however,
that Lessee may not use the Leased Premises in such a way as to interfere with
the use and enjoyment of other tenants or which is otherwise inconsistent with
the terms of this Agreement.
<PAGE> 20
II.C BASE RENTAL RATE
The base rental rate shall be $9.60 per square foot per year ($.80 per square
foot per month) for each square foot of gross rentable area then being leased by
Lessee under the terms and provisions hereof. ($2,366.40 Dollars of Rent per
Month).
II.D SECURITY DEPOSIT
Lessee has deposited with Lessor the sum of TWO THOUSAND THREE HUNDRED SIXTY SIX
& 40/100 DOLLARS ($2,366.40) as security for the faithful performance by Lessee
of its obligations under this Lease Agreement. In the event Lessee defaults in
any of its obligations hereunder, it is agreed Lessor, at its option without
notice to Lessee may use, apply or retain the whole or any part of the funds so
deposited as security to the extent required to discharge any such obligation of
Lessee and in the event such sum shall be insufficient to discharge such
obligation, Lessee shall remain liable for the balance of any such sum remaining
after application of the security deposit. In the event Lessee shall timely
discharge in full all its obligation under this Agreement, the security deposit
shall be returned to Lessee thirty (30) days after the expiration of the term of
this Agreement. In the event of transfer of this Agreement by Lessor, Lessor
shall have the right to transfer the security deposit to the transferee in which
event Lessor shall have no further obligation to Lessee for return of the
security deposit.
II.E RENTAL ESCALATION
(1) The term "Lease Year", as used herein, shall mean the fiscal year ending
March 31 of the year in which this Lease Agreement is entered into and any
subsequent fiscal year(s) during the initial term hereof and any extensions or
renewals hereof. In any Lease Year in which the Basic Costs (as defined in
paragraph II.F below) for maintaining and operating the Building, of which the
leased premises are a part, exceed the amount of FIVE AND XX/100 Dollars ($5.00)
per square foot of rentable area then leased by Lessee for that year (the "Base
Stop"), Lessee shall pay as additional rent the amount equal to Lessee's
proportionate share of the amount of the Basic Costs that exceed the Base Stop.
Lessee's "proportionate share" of the amount of Basic Costs that exceed the Base
Stop shall be the same percentage of the amount of Basic Costs over the Base
Stop as is equal to the percentage which the gross rentable area then leased by
Lessee in the Building bears to the total gross rentable area contained in the
Building.
(2) Lessor may submit to Lessee, and Lessee agrees to pay, a bill or invoice as
frequently as each month for one-twelfth (1/12) of the estimated annual amount
as may be ascertained by Lessor to be due by Lessee under this Article.
Alternatively, Lessor may submit to Lessee (at Lessor's sole discretion), and
Lessee agrees to pay, a bill or invoice as frequently as each month for the
actual increase in Basic Costs over the amount of the Base Stop for that month
and any preceding months for which rental escalation is due under this Article.
In the event of such billing or invoicing as provided hereunder by Lessor,
Lessee agrees, and covenants to pay such additional amount contemporaneously
with the Base Rental on the first day of each calendar month, monthly in
advance.
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<PAGE> 21
(3) Following the close of each Lease Year, Lessor shall determine the Basic
Costs for such Lease Year and give written notice thereof to Lessee which notice
shall also contain or be accompanied by a computation of additional rental, if
any, paid by Lessee as above provided and the balance, if any, then owing by
Lessee. In the event a balance is owing by Lessee, same shall be paid by Lessee
within ten (10) days of such notice. In the event the computation for such Lease
Year reflects a negative balance, same shall be refunded by Lessor to Lessee
within ten (10) days of such notice provided that in no event shall the rental
to be paid by Lessee for the leased premises during the term of this Lease
Agreement, and any extensions or renewals hereof, ever be less than the base
rental stated in Paragraph II.C of this Lease Agreement. Lessee shall receive no
benefit for a decrease in Basic Costs or the amount of Basic Costs below the
Base Stop for any calendar or fiscal year, or any part thereof, during the term
of this Lease Agreement, or any extensions and renewals thereof. For the last
Lease Year, Lessee shall only pay for such Lease Year that portion of its
proportionate share of the amount of Basic Costs that exceed the Base Stop as
the number of calendar days in the last Lease Year that this Lease Agreement is
in effect bears to 365.
II.F BASIC COSTS FOR ESCALATION
(1) "Basic Costs as said term is used herein shall consist of the operating
expenses of the Building, which shall be computed on the accrual basis. All
operating expenses shall be determined in accordance with generally accepted
accounting principles which shall be consistently applied. The term "operating
expenses" as used herein shall mean all expenses, costs and disbursements (but
not replacement of capital investment items) of every kind and nature which
Lessor shall incur, pay or be obligated to pay because of or in connection with
the ownership, and/or operation of the Building, including, but not limited to,
the following:
(a) All expenses of employment of all employees engaged in
operation and maintenance of the Building including wages and
salaries, employer's Social Security taxes, unemployment taxes
or insurance, and any other taxes which may be levied on such
wages and salaries as well as the cost of disability and
hospitalization insurance and pension or retirement benefits
for such employees.
(b) All supplies and materials used in operation and maintenance of
the Building.
(c) Cost of utilities, except those billed directly to tenants,
including but not limited to water and power, heating,
lighting, air conditioning and ventilating the Building.
(d) Cost of all maintenance and service agreements on equipment,
including alarm service, janitorial service, landscaping,
window cleaning and elevator maintenance.
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<PAGE> 22
(e) Cost of casualty and liability insurance applicable to the
Building and Lessor's personal property used in connection
therewith.
(f) All taxes, assessments and governmental charges whether
federal, state, county or municipal, and whether they be by
taxing districts or authorities presently taxing the Leased
Premises or by others, subsequently created or otherwise, and
any other taxes and assessments attributable to the Building
or its operation excluding, however, federal and state taxes
on income.
(g) Cost of repairs and general maintenance (The costs of repairs
and general maintenance shall exclude alterations attributable
solely to tenants of the Building other than Lessee.)
(h) Management fees not to exceed five (5%) percent of the base
rentals, rental escalations, tenant assessments and other
rents, costs, charges or expenses incurred, derived from or
associated with the Building.
(i) Accounting fees actually incurred by Lessor in operation of
the Building and determination of escalation charges.
(j) A reasonable amortization charge on account of any capital
expenditures incurred to effect a reduction in operating
expenses of the Building.
(2) Lessee at its expense shall have the right at all reasonable times to audit
Lessor's book and records relating to this lease for any year or years for which
additional rental payments become due.
II.G PAYMENT OF RENT
(1) The annual base rent adjusted in accordance, with any exhibits hereto, if
applicable, shall be due and payable in advance in twelve (12) equal monthly
installments on the first day of each calendar month during the initial term and
any extensions or renewals thereof, and Lessee hereby agrees to so pay such rent
to Lessor at Lessor's address, as provided herein monthly in advance without
demand. Additional rental for Lessee's share of Lessor's increased costs in
accordance with the escalation formula shall be due and payable quarterly as
provided in II.E above.
III.
III.A SERVICES TO BE FURNISHED BY LESSOR
(1) Lessee shall pay for the electricity, gas and water utilized in operating
any and all facilities serving the Leased Premises except as otherwise provided
herein.
(2) "Lessor shall furnish to Lessee, while occupying the premises:
(a) Hot and cold water at those points of supply provided for
general use of other tenants in the Building, central heat and
air conditioning in season, at
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<PAGE> 23
such times as Lessor normally furnishes these services to
other tenants in the Building, and at such temperatures and in
such amounts as are considered by Lessor to be standard, such
service on Saturdays, Sundays and legal holidays to be furnished
only upon the request of Lessee, who shall bear the entire cost
thereof; janitorial service on a five (5) day week basis,
electric lighting service for all public areas and special
service areas of the Building in the manner and to the extent
deemed by Lessor to be standard; but failure by Lessor to any
extent to furnish these defined services, or any cessation
thereof, resulting from causes beyond the control of Lessor,
shall not render Lessor liable in any respect for damages to
either person or property, nor be construed as an eviction of
Lessee, nor work an abatement of rent, nor relieve Lessee from
fulfillment of any covenant or agreement hereof. Should any of
the equipment or machinery break down, or for any cause cease to
function properly, Lessor shall use reasonable diligence to
repair same promptly, but Lessee shall have no claim for rebate
of rent or damages on account of any interruptions in service
occasioned thereby or resulting therefrom.
(b) Proper electrical facilities to furnish sufficient power
for typewriters, voice writers, calculating machines and other
machines of similar low electrical consumption; provided,
however, that Lessee shall bear the utility costs, air
conditioning costs and costs to install appropriate meters to
determine such costs occasioned by electro-data processing
machines and similar machines of high electrical consumption.
Such machines of high electrical consumption shall not be
installed within the Building without the prior written consent
of Lessor.
III.B PEACEFUL ENJOYMENT
(1) Lessee shall, and may peacefully have, hold and enjoy the Leased Premises,
subject to the other terms hereof, provided that Lessee pays the rental herein
recited and performs all of its covenants, duties and agreements herein
contained.
IV.
IV.A PAYMENTS BY LESSEE
(1) Lessee shall pay all rent and sums provided to be paid by Lessor hereunder
at the times and in the manner herein provided.
IV.B REPAIRS BY LESSOR
(1) Unless otherwise expressly stipulated herein, Lessor shall not be required
to make any improvements or repairs of any kind or character on the Leased
Premises during the term of this lease, except such repairs as may be required
for structural or exterior building maintenance including the painting of and
repairs to walls, floors, corridors, windows, and other structures and Building
equipment within and serving the Leased
5
<PAGE> 24
Premises, and such additional maintenance as may be necessary because of
damages by persons other than Lessee, its invites, visitors, or anyone acting at
its direction or on its behalf, and as may be necessary solely because of the
negligence of Lessor at its expense beginning not more than fifteen (15) days
after written notice thereof by Lessee.
IV.C REPAIRS BY LESSEE
(1) At its own cost and expense, Lessee shall repair or replace any damage or
injury done to the Building, or any part thereof, caused by Lessee, its agents,
employees, invitees, or visitors; provided, however, if Lessee fails to make
such repairs or replacements promptly Lessor may, at its option, make such
repairs or replacements, and Lessee shall repay the costs thereof to Lessor on
demand. Lessee's indemnity obligation hereunder shall survive regardless of
whether Lessor is or is alleged to have caused or contributed to such damages
through its actions or interactions constituting negligence, or giving rise to
strict liability or statutory liability. Lessee agrees to keep the Leased
Premises and the Building free at all times of any mechanics' and materialmen's
liens or other liens arising from such repair or replacement including, but not
limited to, posting bond to obtain a release of any such lien.
IV.D CARE OF LEASED PREMISES
(1) Lessee shall not commit or allow any waste or damage to be committed on any
portion of the Leased Premises, and at the termination of this lease, by lapse
of time or otherwise, shall deliver up said Leased Premises to Lessor in as good
condition as at date of original possession by Lessee, ordinary wear and tear
excepted, and upon such termination of this lease, Lessor shall have the right
to re-enter and resume possession of the Leased Premises.
IV.E ASSIGNMENT OR SUBLEASE
(1) Lessee shall not assign this Agreement or sublet the Leased Premises, or any
part thereof, without first obtaining the written consent of Lessor, however
Lessor agrees that it will not unreasonably or arbitrarily refuse to give such
permission or consent. No assignment or sublease of the Leased Premises shall be
valid or binding upon Lessor without such consent. In no event shall any such
assignment or sublease ever release Lessee from any obligation or liability
hereunder.
IV.F ALTERATIONS, ADDITIONS, AND IMPROVEMENTS
(1) Lessee shall not permit the Leased Premises to be used for any other purpose
than that stated in the use clause hereof, or make or allow to be made any
alterations or physical additions in or to the Leased Premises without first
obtaining the written consent of the Lessor. Any and all alterations, physical
additions, or improvements, when made to the Leased Premises by Lessee, shall at
once become the property of Lessor and shall be surrendered to Lessor upon the
termination of this lease by lapse of time or otherwise; provided, however, this
clause shall not apply to moveable equipment or furniture owned by Lessee.
6
<PAGE> 25
(2) The cost of any alterations, physical additions, or improvements shall be
borne and paid for solely by Lessee. Lessee agrees to keep the Leased Premises
and the Building free at all times of any mechanics' and materialmen's liens or
other liens arising from such alterations, physical additions or improvements
including, but not limited to, posting a bond to obtain a release of any such
lien. Lessor shall have the right to insist on adequate security by way of
insurance, bonding or other means, prior to any modification or alteration to
ensure compliance with this clause.
(3) Though all alterations, physical additions, or improvements made by Lessee
become the property of Lessor upon the termination of this lease, Lessor may
require that Lessee remove any or all alterations, additions, or improvements
installed or made by Lessee, and any other property placed on the premises by
Lessee, upon termination of the lease. In the event that Lessor requires Lessee
to remove all such alterations, additions, or, improvements, Lessee shall bear
and pay the cost of such removal and shall repair any damage to the premises
caused by such removal and, absent express written permission of Lessor, to
restore the Leased Premises to its original condition, reasonable wear and tear
excepted.
IV.G LEGAL USE AND VIOLATIONS OF INSURANCE COVERAGE
(1) Lessee shall not occupy or use, or permit any portion of the Leased Premises
to be occupied or used for any business purpose which is unlawful, disreputable
or deemed to be extra-hazardous on account of fire, or permit anything to be
done which would in any way increase the rate of fire insurance coverage on said
Building and/or its contents.
IV.H LAWS AND REGULATIONS; RULES OF BUILDING
(1) Lessee shall comply with all laws, ordinances, orders, rules and regulations
(state, federal, municipal and other agencies or bodies having any jurisdiction
thereof) relating to the use, condition or occupancy of the Leased Premises.
Lessee will comply with the rules of the Building adopted by Lessor which are
set forth as Exhibit "B" attached hereto to be initialed by the parties hereto,
and made a part hereof as fully as though set forth herein. Lessor shall have
the right at all times to change such rules and regulations or to amend them in
any reasonable manner as may be deemed advisable by Lessor for the safety, care
and cleanliness of the Leased Premises and for preservation of good order
therein, all of which changes and amendments Will be sent by Lessor to Lessee in
writing and shall be there after carried out and observed by Lessee.
IV.I ENTRY FOR REPAIRS AND INSPECTION
(1) Lessee shall permit Lessor, its agents or representatives to enter into and
upon any part of the Leased Promises at all reasonable hours to inspect same or
to clean, make repairs, alterations or additions thereto, as Lessor may deem
necessary or desirable, and Lessee shall not be entitled to any abatement or
reduction of rent by reason thereof
7
<PAGE> 26
IV.J NUISANCE
(1) Lessee shall conduct its business and control its agents, employees,
invitees, and visitors in such manner as not to create any nuisance, or
interfere with, annoy or disturb any other tenant or Lessor in his operation of
the Building.
IV.K ASSIGNMENT
(1) Lessor shall have the right to transfer and assign, in whole or in part, all
of its rights and obligations hereunder in the Building and property referred to
herein and Lease shall execute any estoppel certificate reasonably required in
connection therewith within fifteen (15) days of receipt of request for such
estoppel certificate, as further explained in Paragraph V.F.
IV.L DEFAULT
(1) Default on the part of the Lessee on paying said rent or any installment
thereof, as hereinabove provided, or default on Lessee's in keeping or
performing any other term, covenant or condition of this lease such as to create
a breach thereof, shall authorize Lessor, at its sole option at any time after
such default, and after ten (10) days' written notice thereof to Lessee, to
declare this lease terminated, and upon the occurrence of any one or more of
such defaults, Lessor immediately, or at any time thereafter may re-enter said
premises and remove all persons therefrom with or without legal process, and
without prejudice to any of its other legal rights. All claims for damages by
reason of such re-entry are expressly waived, as also are all claims for damages
by reason of any distress warrants or proceedings by way or sequestration which
Lessor may employ to recover said rents or possession of said premises;
provided, that Lessor shall not have the right to declare this lease terminated
if within ten (10) days after notice of any default, Lessee corrects the
default. Provided, however, that nothing herein shall restrict Lessor's rights
at law or equity to recover possession of the Leased Premises in the event of
multiple or repeated defaults, if consistent with the laws of this state.
(2) If Lessee defaults, Lessor shall be entitled to recover damages, including,
but not limited to, the total of all payments owing and unpaid as of the date of
the default, plus interest from the date due until paid at the greatest possible
non-usurious rate permitted by law (provided that if no usury statute shall
apply, past due rent and other payments shall bear interest at eighteen percent
(18%) per annum from the due date until paid); the costs of re-entry and
reletting, including without limitation the cost of any clean-up, reasonable
refurbishing, removal of Lessee's property and fixtures; other expenses caused
by Lessee's failure to quit the premises and leave the same in the required
condition; reasonable attorney's fees, including those incurred at trial and all
appeals; court costs; expert witness fees; advertising costs; and the difference
between (i) the annual base rent and all of Lessee's other obligations under
this lease and (ii) the actual annual base rent received by the landlord for the
period commencing with the date of the default and continuing through the
termination date. Damages shall survive the termination of this lease.
8
<PAGE> 27
(3) Pursuit of any of the above-stated remedies by Lessor after a default by
Lessee shall not preclude pursuit of any other remedies provided in this lease
or applicable law, nor shall pursuit of any remedy constitute a forfeiture or
waiver of any payment due to Lessor.
IV.M WAIVER
(1) Failure of Lessor to declare any default immediately upon occurrence
thereof, or delay in taking any action in connection therewith, shall not waive
such default, but Lessor shall have the right to declare any such default at any
time and take such action as might be lawful or authorized hereunder, either in
law or in equity.
IV.N BANKRUPTCY BY LESSEE
(1) If voluntary bankruptcy proceedings are instituted by Lessee, or if Lessee
is adjudged a bankrupt, or if Lessee makes an assignment for the benefit of its
creditors, or if execution is issued against it, or if the interest of Lessee
hereunder passes by operation of law to any person other than Lessee, this lease
may, at the option of Lessor, be terminated by notice mailed by registered mail
and addressed to Lessee.
IV.O AD VALOREM TAXES
(1) Lessor shall pay all ad valorem taxes which accrue against the Building
during the term of this lease. Lessee shall pay all ad valorem and similar taxes
levied upon or applicable to all personal property within the Leased Premises
and improvements in excess of building standard improvements.
IV.P CASUALTY INSURANCE
(1) Lessor shall, at all times during the term of this lease, at its expense,
maintain a policy or policies of insurance issued by and binding upon some
insurance company, insuring the Building against loss or damage by fire,
explosion, or other hazards and contingencies for the full insurable value
thereof, provided that Lessor shall not insure any goods, property, or supplies
not owned by Lessor and/or covered lease which lessee may bring or obtain upon
the Leased Premises, or any additional improvements which Lessee may construct
thereon. If the annual premiums charged Lessor for such casualty insurance
exceed the standard premium rates because the nature of Lessee's operation
results in extra-hazardous exposure, then Lessee shall upon receipt of
appropriate premium invoices reimburse Lessor for any such increases covering in
such premiums.
(2) Lessee shall be responsible for providing, at Lessee's own expense, all
insurance coverage necessary for protection against loss or damage from fire,
theft, or other casualty of Lessee's goods, furniture, leasehold improvements,
equipment, files, and all other property placed in the Leased Premises and
liability insurance covering the Leased Premises.
9
<PAGE> 28
IV.Q INDEMNITY
(1) Lessee agrees to and does hereby hold harmless and unconditionally indemnify
Lessor, its agents, officers, directors, employees, representatives, invitees,
guests, and contractors (collectively referred to in this paragraph as "Lessor")
against and for all costs, expenses, claims, liability, and damages of every
nature (including, but, not limited to attorney's fees, court costs, expert
witness fees and interest) which Lessor may at any time suffer, sustain or
become liable for by reason of any and all accidents, damages, losses or
injuries resulting in personal injury, death and/or loss of or damage to any
property in any manner arising from or related to, in whole or in part, the
presence, conduct of business or any act or omission of Lessee, its agents,
officers, directors, employees, representatives, invitees, guests, contractors
or any parties contracting or conducting business with Lessee. Lessee agrees to
hold Lessor harmless for such costs, expenses, claims, liability and damages
even if same arise or are alleged to arise in any manner from any negligent act
or omission of Lessor, or any act for which Lessor could be liable under
theories of strict or statutory liability, excepting only that arising from the
sole negligence of Lessor. In case of any action or proceeding brought against
Lessor by reason of such claim, Lessee, upon notice from Lessor, shall defend
such action or proceeding by counsel of Lessor's own choosing.
V.
V.A CONDEMNATION AND LOSS OR DAMAGE
(1) If the Leased Premises shall be taken or condemned in whole or in part for
any public purpose, this lease shall, at the option of either party, forthwith
cease and terminate; and Lessor or Lessee shall not be liable or responsible to
each other for any loss or damage to any property or person occasioned by theft,
fire, act of God, public enemy, injunction, riot, strike, insurrection, war,
court order, requisition or order of governmental body or authority beyond the
control of Lessor or Lessee, as the case may be, or for any damage or
inconvenience which may arise through repair or alteration of any part of the
Building, or failure to make any such repairs, or from any cause whatever,
unless caused solely by Lessor's or Lessee's gross negligence, as the case may
be, except as may be herein otherwise expressly provided.
V.B LESSOR'S LIEN FOR RENT
(1) Lessor shall have at all times, a valid security interest to secure payment
of all rentals and other sums of money due under this Lease from Lessee, and to
secure payment of any damages or loss that Lessor may suffer by reason of the
breach by Lessee of any covenant, agreement or condition contained in this
Lease, upon all goods, wares, equipment, fixtures, furniture, and other personal
property of Lessee which is now on the premises or which is placed on the
premises at some later date, and all proceeds from them. This property shall not
be removed from the premises without the consent of Lessor until all arrearages
in rent and all other sums of money then due to Lessor under this Lease have
been paid and discharged, and all the covenants, agreements, and conditions of
this Lease have been fully complied with and performed by Lessee. Upon
10
<PAGE> 29
the occurrence of an event of* default by Lessee, Lessor may, in addition to any
other remedies provided in this Lease or by law, after giving reasonable notice
of the intent to take possession and giving an opportunity for a hearing on the
issue, enter upon the premises and take possession of any and all goods, wares,
equipment, fixtures, furniture, and other personal property of Lessee situated
on the premises without liability for trespass or conversion, and sell the same
at public or private sale, with or without having the property at the sale,
after giving Lessee reasonable notice of the time and place of any public sale
or of the time after which any private sale is to be made. Lessor or its assigns
may purchase any items to be sold at such a sale unless they are prohibited from
doing so by law. Unless otherwise provided by law, and without intending to
exclude any other manner of giving Lessee reasonable notice, the requirement of
reasonable notice shall be met if such notice is given at least twenty-one (21)
days before the time of the sale. The proceeds from any such dispositions, less
any and all expenses connected with the taking of possession, holding and
selling of the property (including reasonable attorney's fees and other
expenses), shall be applied as a credit against the indebtedness secured by the
security interest granted in this section. Any surplus shall be paid to Lessee
or as otherwise required by law; and Lessee shall pay any deficiencies
immediately. Upon request by Lessor, Lessee agrees to execute and deliver to
Lessor a financing statement in form sufficient to perfect the security interest
of Lessor in the aforementioned property and proceeds under the provisions of
the Uniform Commercial Code in force in the State of Texas. The statutory lien
for rent is not waived, the security interest granted in this article being in
additions and supplementary, to that lien.
V.C ABANDONMENT
(1) In the event the Leased Premises are abandoned by Lessee, Lessor shall have
the right, but not the obligation, to relet same for the remainder of the term
provided for herein; and if the rent received through such reletting does not at
least equal the rent provided for herein, Lessee shall pay and satisfy any
deficiency between the amount of the rent so provided for and that received
through reletting, and, in addition thereto, shall pay all expenses incurred in
connection with any such reletting including but not limited to the cost of
restoring premises to its prior condition. Nothing herein shall be construed as
in any way denying Lessor the right in the event of abandonment of said premises
or other breach of this Agreement by Lessee, to treat the same as an entire
breach and at Lessor's option immediately sue for the entire breach of this
Agreement and any and all damages which Lessor suffers thereby.
V.D HOLDING OVER
(1) In the event of holding over by Lessee after expiration of termination of
this lease, Lessee shall pay as liquidated damages double rent on a per diem
basis, for the entire
* Upon the occurrence of an event of default by Lessee, Lessor shall not take
possession of any government owned goods, wares, equipment, furniture, and
other kinds of government property situated on the premises.
11
<PAGE> 30
holdover period. No holding over by Lessee after the term of this lease, either
with or without consent and acquiescence of Lessor, shall operate to extend the
lease for a longer period than one (1) month; and any holding over with the
consent of Lessor in writing shall thereafter constitute this lease a lease from
month to month.
V.E FIRE CLAUSE
(I) In the event of a fire in the Leased Premises, Lessee shall immediately give
notice thereof to Lessor, if the Leased Premises, through no fault or neglect of
Lessee, its agents, employees, invitees or visitors, shall be partially
destroyed by fire or other casualty so as to render the premises untenantable,
the rental herein shall cease thereafter until such time as the Leased Premises
are made tenantable by Lessor. In the event of the total destruction of the
Leased Premises without fault or neglect of Lessee, its agents, employees,
invitees or visitors, or if from such cause the same shall be so damaged that
Lessor shall decide not to rebuild, then all rent owed up to the time of such
destruction or termination shall be paid by Lessee and thenceforth this lease
shall cease and come to an end. If such damage is due to the fault or neglect of
Lessee, then all repairs shall be at Lessee's expense and there shall be no
abatement of rent. This obligation shall survive regardless of whether Lessor is
or is alleged to be concurrently negligent in connection with said damages.
V.F ESTOPPEL CERTIFICATE
(1) The Lessee agrees, at any time and from time to time, upon not less than
fifteen (15) business days' prior notice from the Lessor, to execute,
acknowledge and deliver to the Lessor a statement in writing (1) certifying that
this Lease is unmodified and in full force and effect (or if there have been
modifications, that this Lease is in full force and effect as modified and
stating the modifications); (2) stating the dates to which the rent and other
charges hereunder have been paid by the Lessee; (3) stating whether or not the
Lessee has knowledge that the Lessor is in default in the performance of any
covenant, agreement or condition contained in this Lease, and, if the Lessee has
knowledge of such a default specifying each such default; and (4) stating the
address to which notices to the Lessee shall be sent. Prior to the commencement
of or during the term of this Lease the Lessor shall, if requested by the
Lessee, deliver an estoppel certificate, in the substance and form described
above, relative to the status of this Lease and/or any ground lease, underlying
lease and/or mortgage encumbering the building, parking facility or land.
V.G ATTORNEY'S FEE
(1) In the event Lessee makes default in the performance of any of the terms,
covenants, agreements or conditions contained in this lease such as to create a
breach thereof, and Lessor places the enforcement of this lease, or any part
thereof, or the collection of any rent due, or to become due hereunder, or
recovery of the possession of the Leased Premises in the hands of an attorney,
or files suit upon the same, Lessee agrees to pay Lessor its reasonable
attorney's fees, court costs, expert witness fees, and other costs of collection
as may be reasonably incurred by Lessor.
12
<PAGE> 31
V.H ALTERATION
(1) Lessor and Lessee agree that this Agreement supersedes all prior oral or
written agreements and may not be altered, changed or amended, except by an
instrument in writing, signed by both parties hereto.
This lease shall be binding upon and inure to the benefit of the heirs, personal
representatives and assigns of Lessor, and shall be binding upon and inure to
the benefit of the successors and assigns of Lessee. The pronouns of any gender
shall include the other genders, and either the singular or the plural shall
include the other.
The undersigned represent that they are authorized to sign this document, agree
to the foregoing and accept same on behalf of and as an act and deed of Lessor
and Lessee, as evidenced by their signatures below.
- -------------------------- -----------------------------------
Lessor Lessee
BY: BY:
------------------------ --------------------------------
TITLE: TITLE:
------------------------ ------------------------------
DATE: DATE:
--------------------- ------------------------------
13
<PAGE> 32
NASSAU DEVELOPMENT COMPANY "LESSOR"
AND
JOHNSON ENGINEERING CORPORATION "LESSEE"
STATE OF TEXAS
COUNTY OF HARRIS
This is an addendum to the above mentioned Lease Agreements whereby effective
August 1, 1999, the existing Leases are hereby merged to form a single Lease
(hereinafter becoming The Lease) with a master suite address of 18100 Upper Bay
Road, Suite 207, Houston, Harris County, Texas 77058; hereinafter the term
Leased Premises shall apply to all rentable area under lease by Lessor to
Lessee. The following Articles, are hereby amended to read as follows:
ARTICLE I.A. LEASED PREMISES:
1. Subject to and upon the terms, provisions and conditions hereinafter set
forth, and each in consideration of the duties, covenants and obligations of the
other hereunder, Lessor has leased, demised and rented to Lessee the following
described premises (hereinafter referred to as "Leased Premises") which is a
total of 6,910 rentable square feet, situated in B. XII, the "Building", located
at 18100 Upper Bay Road, Suite 207, Houston, Harris County, Texas 77058.
2. The number of square feet of gross rentable area comprising the building of
which the Leased Premises are situated shall be 24,148 square feet unless
enlarged or reduced by written amendment or addendum hereto.
ARTICLE II.A TERM:
Subject to and upon the terms and conditions set forth herein, or in any exhibit
or addendum hereto, this Lease shall continue in force for a term of one (1)
year, beginning on the 1st of August, 1999. The Lease will expire on July 31,
2000.
ARTICLE II.C BASE RENTAL RATE:
The base rental rate shall be $9.60 per square foot per year ($.80 per square
foot per month) for each square foot of gross rentable area then being leased by
Lessee under the terms and provisions hereof. The Rent due for the Leased
Premises is therefore $5,528.00 Dollars of Rent per Month.
Exhibit D.1 becomes an attachment to the Lease per this Lease Amendment.
<PAGE> 33
All other terms and conditions of the above mentioned lease shall remain the
same and enforced. The undersigned represents that they are authorized to sign
this document, agree to the foregoing and accept same on behalf of and as an act
and deed of Lessor and Lessee, as evidenced by their signatures below.
- --------------------------- ---------------------------------
LESSOR LESSEE
BY: BY:
------------------------ -----------------------------
TITLE: TITLE:
--------------------- ---------------------------
DATE: DATE:
---------------------- ----------------------------
2
<PAGE> 1
EXHIBIT 10.99
STANDARD COMMERCIAL LEASE
ARTICLE 1.00 BASIC LEASE TERMS
1.01. PARTIES. This lease agreement ("Lease") is entered into by and between the
following Lessor and Lessee:
Clear Lake Properties ("Lessor")
- --------------------------------------------------------------------------------
Johnson Engineering ("Lessee")
- --------------------------------------------------------------------------------
1.02. LEASED PREMISES. In consideration of the rents, terms, provisions and
covenants of this Lease, Lessor hereby leases, lets and demises to Lessee the
following described premises ("leased premises"):
17,920 square feet of warehouse/showroom space located at
Gemini Park (Name of building or project)
920 Gemini Avenue (Street address/suite number)
Houston, Texas 77058 (City, State, and Zip Code)
1.03. TERM. Subject to and upon the conditions set forth herein, the term of
this Lease shall commence on (February 1, 1998 the "commencement date"), and
shall terminate on the last day of the 36th month thereafter. Tenant to occupy
and Lease to commence December 22, 1997 at no cost until February 1, 1998.
1.04. BASE RENT AND SECURITY DEPOSIT. Base rent is $See Article 16.01 per month.
Security deposit is $7,710.00.
1.05. ADDRESSES.
<TABLE>
<CAPTION>
Lessor's Address: Lessee's Address:
<S> <C>
Clear Lake Properties c/o The Centra Group, L.L.C. 555 Forge River Road, #150
- -------------------------------------------------- --------------------------
1001 West Loop South, Suite 810 Webster, Texas 77598
- -------------------------------------------------- --------------------------
Houston, Texas 77027 Attn.: William A. Jackson
- -------------------------------------------------- --------------------------
</TABLE>
1.06. PERMITTED USE. Warehouse/showroom, assembly, light manufacturing, welding,
and machine shop.
ARTICLE 2.00 RENT
2.01. BASE RENT. Lessee agrees to pay monthly as base rent during the term of
this Lease the sum of money set forth in section 1.04 of this Lease, which
amount shall be payable to Lessor at
<PAGE> 2
the address shown above. One monthly installment of rent shall be due and
payable on the date of execution of this Lease by Lessee for the first month's
rent and a like monthly installment shall be due and payable on or before the
first day of each calendar month succeeding the commencement date or completion
date during the term of this Lease; provided, if the commencement date or the
completion date should be a date other than the first day of a calendar month,
the monthly rental set forth above shall be prorated to the end of that calendar
month, and all succeeding installments of rent shall be payable on or before the
first day of each succeeding calendar month during the term of this Lease.
Lessee shall pay, as additional rent, all other sums due under this Lease.
2.02. OPERATING EXPENSES. In the event Lessor's operating expenses for the
building and/or project of which the leased premises are a part shall, in any
calendar year during the term of this Lease, exceed the sum of $1997 Base Year
Operating Expenses, including taxes and insurance per square foot, taxes, and
insurance. Lessee agrees to pay as additional rent lessee's pro rata share of
such excess operating expenses. Lessee occupies 17,920 square feet of space in a
project totaling 140,762 square feet (12.73%). Lessor may invoice Lessee monthly
for Lessee's pro rata share of the estimated operating expenses for each
calendar year, which amount shall be adjusted each year based upon anticipated
operating expenses. Within nine months following the close of each calendar
year, Lessor shall provide Lessee an accounting showing in reasonable detail all
computations of additional rent due under this section. In the event the
accounting shows that the total of the monthly payments made by Lessee exceeds
the amount of additional rent due by Lessee under this section, the accounting
shall be accompanied by a refund. In the event the accounting shows that the
total of the monthly payments made by Lessee is less than the amount of
additional rent due by Lessee under this section, the account shall be
accompanied by an invoice for the additional rent. Notwithstanding any other
provision in this Lease, during the year in which the Lease terminates, Lessor,
prior to the termination date, shall have the option to invoice Lessee for
Lessee's pro rata share of the excess operating expenses based upon the previous
year's operating expenses. If this Lease shall terminate on a day other than the
last day of a calendar year, the amount of any additional rent payable by Lessee
applicable to the year in which such termination shall occur shall be prorated
on the ratio that the number of days from the commencement of the calendar year
to and including the termination date bears to 365. Lessee shall have the right,
at its own expense and within a reasonable time, to audit Lessor's books
relevant to the additional rent payable under this section. Lessee agrees to pay
any additional rent due under this section within ten days following receipt of
the invoice or accounting showing additional rent due.
2.03. DEFINITION OF OPERATING EXPENSES. The term "operating expenses" includes
all expenses incurred by Lessor with respect to the maintenance and operation of
the building of which the leased premises are a part, including, but not limited
to, the following: maintenance, repair and replacement costs; security;
management fees, wages and benefits payable to employees of Lessor whose duties
are directly connected with the operation and maintenance of the building; all
services, utilities, supplies, repairs, replacements or other expenses for
maintaining and operating the common parking and plaza areas; the cost,
including interest, amortized over its useful life, of any capital improvement
made to the building by Lessor after the date of this Lease which is required
under any governmental law or regulation that was not applicable to the building
at the time it was constructed; the cost, including interest, amortized over its
useful life, of installation of any device or other equipment which improves the
operating efficiency of any
2
<PAGE> 3
system within the leased premises and thereby reduces operating expenses; all
other expenses which would generally be regarded as operating and maintenance
expenses which would reasonably be amortized over a period not to exceed five
years; all real property taxes and installments of special assessments,
including dues and assessments by means of deed restrictions and/or owners'
associations which accrue against the building of which the leased premises are
a part during the term of this Lease; and all insurance premiums Lessor is
required to pay or deems necessary to pay, including public liability insurance,
with respect to the building. The term operating expenses does not include the
following: repairs, restoration or other work occasioned by fire, wind, the
elements or other casualty; income and franchise taxes of Lessor; expenses
incurred in leasing to or procuring of lessees, leasing commissions, advertising
expenses and expenses for the renovating of space for new lessees; interest or
principal payments on any mortgage or other indebtedness of Lessor; compensation
paid to any employee of Lessor above the grade of property manager, any
depreciation allowance or expense; or operating expenses which are the
responsibility of Lessee.
2.04. LATE PAYMENT CHARGE. Other remedies for nonpayment of rent withstanding,
if the monthly rental payment is not received by Lessor on or before the tenth
day of the month for which the rent is due, or if any other payment due Lessor
by Lessee is not received by Lessor on or before the tenth day of the month next
following the month in which Lessee was invoiced, a late payment charge of five
percent of such past due amount shall become due and payable in addition to such
amounts owed under this Lease.
2.05. INCREASE IN INSURANCE PREMIUMS. If an increase in any insurance premiums
paid by Lessor for the building is caused by Lessee's use of the leased premises
in a manner other than as set forth in section 1.06, or if Lessee vacates the
leased premises and causes an increase in such premiums, then Lessee shall pay
as additional rent the amount of such increase to Lessor.
2.06. SECURITY DEPOSIT. The security deposit set forth above shall be held by
Lessor for the performance of Lessee's covenants and obligations under this
Lease, it being expressly understood that the deposit shall not be considered an
advance payment of rental or a measure of Lessor's damage in case of default by
Lessee. Upon the occurrence of any event of default by Lessee or breach by
Lessee of Lessee's covenants under this Lease, Lessor may, from time to time,
without prejudice to any other remedy, use the security deposit to the extent
necessary to make good any arrears of rent, or to repair any damage or injury,
or pay any expense or liability incurred by Lessor as a result of the event of
default or breach of covenant, and any remaining balance of the security deposit
shall be returned by Lessor to Lessee upon termination of this Lease. If any
portion of the security deposit is so used or applied, Lessee shall upon ten
days written notice from Lessor, deposit with Lessor by cash or cashier's check
an amount sufficient to restore the security deposit to its original amount. The
security deposit shall transfer and be the responsibility of any new Owner or
transferee.
2.07. HOLDING OVER. In the event that the Lessee does not vacate the leased
premises upon the expiration or termination of this Lease, Lessee shall be a
tenant at will for the holdover period and all of the terms and provisions of
this Lease shall be applicable during that period, except that Lessee shall pay
Lessor as base rental for the period of such holdover an amount equal to one and
one-half times the base rent which would have been payable by Lessee had the
holdover period been a part of the original term of this Lease. Lessee agrees to
vacate and deliver the
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leased premises to Lessor upon Lessee's receipt of notice from Lessor to vacate.
The rental payable during the holdover period shall be payable to Lessor on
demand. No holding over by Lessee, whether with or without the consent of
Lessor, shall operate to extend the term of this Lease.
ARTICLE 3.00 OCCUPANCY AND USE
3.01. USE. Lessee warrants and represents to Lessor that the leased premises
shall be used and occupied only for the purpose as set forth in section 1.06.
Lessee shall occupy the leased premises, conduct its business and control its
agents, employees, invitees and visitors in such a manner as is lawful,
reputable and will not create a nuisance. Lessee shall not permit any operation
which emits any odor or matter which intrudes into other portions of the
building, use any apparatus or machine which makes undue noise or causes
vibration in any portion of the building or otherwise interfere with, annoy or
disturb any other lessee in its normal business operations or Lessor in its
management of the building. Lessee shall neither permit any waste on the lease
premises nor allow the leased premises to be used in any way which would, in the
opinion of Lessor, be extra hazardous on account of fire or which would in any
way increase or render void the fire insurance on the building. Lessee warrants
to Lessor that the insurance questionnaire (filled out by Lessee, signed and
presented to Lessor prior to the execution of this Lease) accurately reflects
Lessee's original intended use of the leased premises. The insurance
questionnaire is made a part of this Lease by reference as though fully copied
herein. If at any time during the term of this Lease the State Board of
Insurance or other insurance authority disallows any of Lessor's sprinkler
credits or imposes any additional penalty or surcharge in Lessor's insurance
premiums because of Lessee's original or subsequent placement or use of storage
racks or bins, method of storage or nature of Lessee's inventory or any other
act of Lessee, Lessee agrees to pay as additional rent the increase (between
fire walls) in Lessor's insurance premiums.
3.02. SIGNS. No sign of any type or description shall be erected, placed or
painted in or about the leased premises or project except those signs submitted
to Lessor in writing and approved by Lessor in writing, and which signs are in
conformance with Lessor's sign criteria established for the project.
3.03. COMPLIANCE WITH LAWS, RULES AND REGULATIONS. Lessee, at Lessee's sole cost
and expense, shall comply with all laws, ordinance, orders, rules and
regulations of state, federal, municipal or other agencies or bodies having
jurisdiction over use, condition and occupancy of the leased premises. Lessee
will comply with the rules and regulations of the building adopted by Lessor
which are set forth on a schedule attached to this Lease. Lessor shall have the
right at all times to change and amend the rules and regulations in any
reasonable manner as may be deemed advisable for the safety, care, cleanliness,
preservation of good order and operation or use of the building or the lease
premises. All changes and amendments to the rules and regulations of the
building will be sent by Lessor to Lessee in writing and shall thereafter be
carried out and observed by Lessee.
3.04. WARRANTY OF POSSESSION. Lessor warrants that it has the right and
authority to execute this Lease, and Lessee, upon payment of the required rents
and subject to the terms, conditions, covenants and agreements contained in this
Lease, shall have possession of the leased premises
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during the full term of this Lease as well as any extension or renewal thereof.
Lessor shall not be responsible for the acts or omissions of any other lessee or
third party that may interfere with Lessee's use and enjoyment of the leased
premises. In the event of sale or transfer of building, Tenant's lease shall not
be disturbed.
3.05. INSPECTION. Lessor or its authorized agents shall at any and all
reasonable times have the right to enter the leased premises with reasonable
notice to inspect the same, to supply janitorial service or any other service to
be provided by Lessor, to show the leased premises to prospective purchasers or
lessees, and to alter improve or repair the leased premises or any other portion
of the building. Lessee hereby waives any claim for damages for injury or
inconvenience to or interference with Lessee's business, any loss of occupancy
or use of the leased premises, and any other loss occasioned thereby. Lessor
shall at all times have and retain a key with which to unlock all of the doors
in, upon and about the leased premises. Lessee shall not change Lessor's lock
system or in any other manner prohibit Lessor from entering the leased premises.
Lessor shall have the right to use any and all means which Lessor may deem
proper to open any door in an emergency without liability therefor.
ARTICLE 4.00 UTILITIES AND SERVICE
4.01. BUILDING SERVICES. Lessor shall provide the normal utility serve
connections to the building. Lessee shall pay the cost of all utility services,
including, but not limited to, initial connection charges, all charges for gas,
electricity, water, sanitary and storm sewer service, and for all electric
lights. However, in a multi-occupancy building, Lessor may provide water to the
leased premises, in which case Lessee agrees to pay to Lessor its pro rata share
of the cost of such water. Lessee shall pay all costs caused by Lessee
introducing excessive pollutants or solids other than ordinary human waste into
the sanitary sewer system, including permits, fees and charges levied by any
governmental subdivision for any such pollutants or solids. Lessee shall be
responsible for the installation and maintenance of any dilution tanks, holding
tanks, settling tanks, sewer sampling devices, sand traps, grease traps or
similar devices as may be required by any governmental subdivision for Lessee's
use of the sanitary sewer system. If the leased premises are in a
multi-occupancy building, Lessee shall pay all surcharges levied due to Lessee's
use of sanitary sewer or waste removal services insofar as such surcharges
affect Lessor or other lessees in the building. Lessor shall not be required to
pay for any utility services, supplies or upkeep in connection with the leased
premises or building.
4.02. THEFT OR BURGLARY. Lessor shall not be liable to Lessee for losses to
Lessee's property or personal injury caused by criminal acts or entry by
unauthorized persons into the leased premises or the building.
ARTICLE 5.00 REPAIRS AND MAINTENANCE
5.01. LESSOR REPAIRS. Lessor shall not be required to make any improvements,
replacements or repairs of any kind or character to the leased premises or the
project during the term of this Lease except as are set forth in this section.
Lessor shall maintain only the roof, foundation, parking and common areas, and
the structural soundness of the exterior walls (excluding windows, window glass,
plate glass and doors). Lessor's costs of maintaining the items set forth in
this section are subject to the additional rent provisions in section 2.02.
Lessor shall not be
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liable to Lessee, except as expressly provided in this Lease, for any damage or
inconvenience; and Lessee shall not be entitled to any abatement or reduction of
rent by reason of any repairs, alterations or additions made by Lessor under
this Lease. Roof shall be free of any leakage upon Tenant's occupancy or a
reasonable time thereafter.
5.02. LESSEE REPAIRS. Lessee shall, at its sole cost and expense, maintain,
repair and replace all other parts of the leased premises in good repair and
condition, including, but not limited to, heating, ventilating and air
conditioning systems, down spouts, fire sprinkler system, dock bumpers, lawn
maintenance, pest control and extermination, trash pick-up and removal, and
painting the building and exterior doors. Lessee shall repair and pay for any
damage caused by any act or omission of Lessee or Lessee's agents, employees,
invitees, licensees or visitors. If the leased premises are in a multi-occupancy
building or project, Lessor shall perform, on behalf of Lessee, lawn
maintenance, painting, and trash pick-up and removal; Lessee agrees to pay
Lessor, as additional rent, Lessee's pro rata share of the cost of such services
within ten days from receipt of lessor's invoice, or Lessor may by monthly
invoice direct Lessee to prepay the estimated costs for the current calendar
year, and such amount shall be adjusted annually. If the leased premises are
served by rail, Lessee agrees, if requested by the railroad, to enter into a
joint maintenance agreement with the railroad and bear its pro rata share of the
cost of maintaining the railroad ____. If Lessee fails to make the repairs or
replacements promptly as required herein, Lessor may, at its option, make the
repairs and replacements and the cost of such repairs and replacements shall be
charged to Lessee as additional rent and shall become due and payable by Lessee
within ten days from receipt of Lessor's invoice. Costs incurred under this
section are the total responsibility of Lessee and do not constitute operating
expense under section 2.02.
5.03. REQUEST FOR REPAIRS. All requests for repairs or maintenance that are the
responsibility of Lessor pursuant to any provision of this Lease must be made in
writing to Lessor at the address in section 1.05. If Landlord does not repair
within a reasonable time, Tenant shall make repairs and seek reimbursement from
Landlord or offset future rent due.
5.04. LESSEE DAMAGES. Lessee shall not allow any damage to be committed on any
portion of the leased premises or building, and at the termination of this
Lease, by lapse of time or otherwise, Lessee shall deliver the leased premises
to Lessor in as good condition as existed at the commencement date of this
Lease, ordinary wear and tear excepted. The cost and expense of any repairs
necessary to restore the condition of the leased premises shall be borne by
Lessee.
5.05. MAINTENANCE CONTRACT. Lessee shall, at its sole cost and expense, during
the term of this Lease maintain a regularly scheduled preventative maintenance
service contract with a maintenance contractor for the servicing of all hot
water, heating and air conditioning systems and equipment within the leased
premises. The maintenance contractor and contract must be approved by Lessor and
must include all services suggested by the equipment manufacturer.
ARTICLE 6.00 ALTERATIONS AND IMPROVEMENTS
6.01. LESSOR IMPROVEMENTS. If construction to the leased premises is to be
performed by Lessor prior to or during Lessee's occupancy, Lessor will complete
the construction of the improvements to the leased premises, in accordance with
plans and specifications agreed to by Lessor and Lessee, which plans and
specifications are made a part of this Lease by reference.
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Lessee shall execute a copy of the plans and specifications and change orders,
if applicable, setting forth the amount of any costs to be borne by Lessee
within seven days of receipt of the plans and specifications. In the event
Lessee fails to execute the plans and specifications and change order within the
seven day period, Lessor may, at its sole option, declare this Lease cancelled
or notify Lessee that the base rent shall commence on the completion date even
though the improvements to be constructed by Lessor may not be complete. Any
changes or modifications to the approved plans and specifications shall be made
and accepted by written change order or agreement signed by Lessor and Lessee
and shall constitute an amendment to this Lease.
6.02. LESSEE IMPROVEMENTS. Lessee shall not make or allow to be made any
alterations or physical additions in or to the leased premises without first
obtaining the written consent of Lessor. Any alterations, physical additions or
improvements to the leased premises made by Lessee shall at once become the
property of Lessor and shall be surrendered to Lessor upon the termination of
this Lease; provided, however, Lessor, at its option, may require Lessee to
remove any physical additions and/or repair any alterations in order to restore
the leased premises to the condition existing at the time Lessee took
possession, all costs and removal and/or alterations to be borne by Lessee. This
clause shall not apply to moveable equipment or furniture owned by Lessee, which
may be removed by Lessee at the end of the term of this Lease if Lessee is not
then in default and if such equipment and furniture are not then subject to any
other rights, liens and interest of Lessor.
ARTICLE 7.00 CASUALTY AND INSURANCE
7.01. SUBSTANTIAL DESTRUCTION. If the leased premises should be totally
destroyed by fire or other casualty, or if the leased premises should be damaged
so that rebuilding cannot reasonably be completed within ninety working days
after the date of written notification by Lessee to Lessor of the destruction,
this Lease shall terminate and the rent shall be abated for the unexpired
portion of the Lease, effective as of the date of the written notification.
7.02. PARTIAL DESTRUCTION. If the leased premises should be partially damaged by
fire or other casualty, and rebuilding or repairs can reasonably be completed
within ninety working days from the date of written notification by Lessee to
Lessor of the destruction, this Lease shall not terminate, and Lessor shall at
its sole risk and expense proceed with reasonable diligence to rebuild or repair
the building or other improvements to substantially the same condition in which
they existed prior to the damage. If the leased premises are to be rebuilt or
repaired and are untenantable in whole or in part following the damage, and the
damage or destruction was not caused or contributed to by act or negligence of
Lessee, its agents, employees, invitees or those for whom Lessee is responsible,
the rent payable under this Lease during the period for which the leased
premises are untenantable shall be adjusted to such an extent, as may be fair
and reasonable under the circumstances. In the event that Lessor fails to
complete the necessary repairs or rebuilding within ninety working days from the
date of written notification by Lessee to Lessor of the destruction, Lessee may
at its option terminate this Lease by delivering written notice of termination
to Lessor, whereupon all rights and obligations under this Lease shall cease to
exist.
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7.03. PROPERTY INSURANCE. Lessor shall at all times during the term of this
Lease maintain a policy or policies of insurance with the premiums paid in
advance, issued by and binding upon some solvent insurance company, insuring the
building against all risk of direct physical loss in an amount equal to at least
ninety percent of the full replacement cost of the building structure and its
improvements as of the date of the loss; provided, Lessor shall not be obligated
in any way or manner to insure any personal property (including, but not limited
to, any furniture, machinery, goods or supplies) of Lessee upon or within the
leased premises, any fixtures installed or paid for by Lessee upon or within the
leased premises, or any improvements which Lessee may construct on the leased
premises. Lessee shall have no right in or claim to the proceeds of any policy
of insurance maintained by Lessor even if the cost of such insurance is borne by
Lessee as set forth in article 2.00.
7.04. WAIVER OF SUBROGATION. Anything in this Lease to the contrary
notwithstanding, Lessor and Lessee hereby waives and release each other of and
from any and all right of recovery, claim, action or cause of action, against
each other, their agents, officers and employees, for any loss or damage that
may occur to the leased premises, improvements to the building of which the
leased premises are a part, or personal property within the building, by reason
of fire or the elements, regardless of cause or origin, including negligence of
Lessor or Lessee and their agents, officers and employees. Lessor and Lessee
agree immediately to give their respective insurance companies which have issued
policies of insurance covering all risk of direct physical loss, written notice
of the terms of the mutual waivers contained in this section, and to have the
insurance policies properly endorsed, if necessary, to prevent the invalidation
of the insurance coverages by reason of the mutual waivers.
7.05. HOLD HARMLESS. Lessor shall not be liable to Lessee's employees, agents,
invitees, licensees, or to any other person, for an injury to person or damage
to property on or about the leased premises caused by any act or omission of
Lessee, its agents, servants or employees, or of any other person entering upon
the leased premises under express or implied invitation by Lessee, or caused by
the improvements located on the leased premises becoming out of repair, the
failure or cessation of any service provided by Lessor (including security
service and devices), or caused by leakage of gas, oil, water or steam or by
electricity emanating from the leased premises. Lessee agrees to indemnify and
hold harmless Lessor of and from any loss, attorney's fees, expenses or claims
arising out of any such damage or injury.
ARTICLE 8.00 CONDEMNATION
8.01. SUBSTANTIAL TAKING. If all or a substantial part of the leased premises
are taken for any public or quasi-public use under any governmental law,
ordinance or regulation, or by right of eminent domain or by purchase in lieu
thereof, and the taking would prevent or materially interfere with the use of
the leased premises for the purpose for which it is then being used, this Lease
shall terminate and the rent shall be abated during the unexpired portion of
this Lease effective on the date physical possession is taken by the condemning
authority. Lessee shall have no claim to the condemnation award or proceeds in
lieu thereof.
8.02. PARTIAL TAKING. If a portion of the leased premises shall be taken for any
public or quasi-public use under any governmental law, ordinance or regulation,
or by right of eminent domain or by purchase in lieu thereof, and this Lease is
not terminated as provided in section 8.01 above,
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Lessor shall at Lessor's sole risk and expense, restore and reconstruct the
building and other improvements on the leased premises to the extent necessary
to make it reasonably tenantable. The rent payable under this Lease during the
unexpired portion of the term shall be adjusted to such an extent as may be fair
and reasonable under the circumstances. Lessee shall have no claim to the
condemnation award or proceeds in lieu thereof.
ARTICLE 9.00 ASSIGNMENT OR SUBLEASE
9.01. LESSOR ASSIGNMENT. Lessor shall have the right to sell, transfer or
assign, in whole or in part, its rights and obligations under this Lease and in
the building. Any such sale, transfer or assignment shall operate to release
Lessor from any and all liabilities under this Lease arising after the date of
such sale, assignment or transfer, except Security Deposit shall be transferred
to the new party.
9.02. LESSEE ASSIGNMENT. Lessee shall not assign, in whole or in part, this
Lease, or allow it to be assigned, in whole or in part, by operation of law or
otherwise (including without limitation by transfer of a majority interest of
stock, merger, or dissolution, which transfer of majority interest of stock,
merger or dissolution shall be deemed an assignment) or mortgage or pledge the
same, or sublet the leased premises, in whole or in part, without the prior
written consent of Lessor, and in no event shall any such assignment or sublease
ever release Lessee or any guarantor from any obligation or liability hereunder.
No assignee or sublessee of the leased premises or any portion thereof may
assign or sublet the leased premises or any portion thereof. Landlord shall not
unreasonably withhold consent to Sublease.
9.03. CONDITIONS OF ASSIGNMENT. If Lessee desires to assign or sublet all or any
part of the leased premises to an outside third party, it shall so notify Lessor
at least thirty days in advance of the date on which Lessee desires to make such
assignment or sublease. Lessee shall provide Lessor with a copy of the proposed
assignment or sublease and such information as Lessor might request concerning
the proposed sublessee or assignee to allow Lessor to make informed judgments as
to the financial condition, reputation, operations and general desirability of
the proposed sublessee or assignee. Within fifteen days after Lessor's receipt
of Lessee's proposed assignment or sublease and all required information
concerning the proposed sublessee or assignee, Lessor shall have the following
options: (1) cancel this Lease as to the leased premises or portion thereof
proposed to be assigned or sublet; (2) consent to the proposed assignment or
sublease, and, if the rent due and payable by any assignee or sublessee under
any such permitted assignment or sublease (or a combination of the rent payable
under such assignment or sublease plus any bonus or any other consideration or
any payment incident thereto) exceeds the rent payable under this Lease for such
space, Lessee shall pay to Lessor all such excess rent and other excess
consideration within ten days following receipt thereof by Lessee; or (3)
refuse, with reasonable cause, to consent to the proposed assignment or
sublease, which refusal shall be deemed to have been exercised unless Lessor
gives Lessee written notice providing otherwise. Upon the occurrence of an event
of default, if all or any part of the leased premises are then assigned or
sublet, Lessor, in addition to any other remedies provided by this Lease or
provided by law, may, at its option, collect directly from the assignee or
sublessee all rents becoming due to Lessee by reason of the assignment or
sublease, and Lessor shall have a security interest in all properties on the
leased premises to secure payment of such sums. Any collection directly by
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Lessor from the assignee or sublessee shall not be construed to constitute a
novation or a release of Lessee or any guarantor from the further performance of
its obligations under this Lease.
9.04. RIGHTS OF MORTGAGEE. Lessee accepts this Lease subject and subordinate to
any recorded mortgage or deed of trust lien presently existing or hereafter
created upon the building or project and to all existing recorded restrictions,
covenants, easements and agreements with respect to the building or project.
Lessor is hereby irrevocably vested with full power and authority to subordinate
Lessee's interest under this Lease to any first mortgage or deed of trust lien
hereafter placed on the leased premises, and Lessee agrees upon demand to
execute additional instruments subordinating this Lease as Lessor may require.
If the interest of Lessor under this Lease shall be transferred by reason of
foreclosure or other proceedings for enforcement of any first mortgage or deed
of trust on the leased premises, Lessee shall be bound to the transferee
(sometimes called the "Purchaser") at the option of the Purchaser, under the
terms, covenants and conditions of this Lease for the balance of the term
remaining, including any extensions or renewals, with the same force and effect
as if the Purchaser were Lessor under this Lease, and, if requested by the
Purchaser, Lessee agrees to attorn to the Purchaser, including the first
mortgagee under any such mortgage if it be the Purchaser, as its Lessor.
9.05. ESTOPPEL CERTIFICATES. Lessee agrees to furnish, from time to time, within
ten days after receipt of a request from Lessor or Lessor's mortgagee, a
statement certifying, if applicable, the following: Lessee is in possession of
the leased premises; the leased premises are acceptable; the Lease is in full
force and effect; the Lease is unmodified; Lessee claims no present charge,
lien, or claim of offset against rent; the rent is paid for the current month,
but is not prepaid for more than one month and will not be prepaid for more than
one month in advance; there is no existing default by reason of some act or
omission by Lessor; and such other matters as may be reasonably required by
Lessor or Lessor's mortgagee. Lessee's failure to deliver such statement, in
addition to being a default under this Lease, shall be deemed to establish
conclusively that this Lease is in full force and effect except as declared by
Lessor, that Lessor is not in default of any of its obligations under this
Lease, and that Lessor has not received more than one month's rent in advance.
ARTICLE 10.00 LIENS
10.01. LANDLORD'S LIEN. As security for payment of rent, damages and all other
payments required to be made by this Lease, Lessee hereby grants to Lessor a
lien upon all property of Lessee now or subsequently located upon the leased
premises. If Lessee abandons or vacates any substantial portion of the leased
premises or is in default in the payment of any rentals, damages or other
payments required to be made by this Lease or is in default of any other
provision of this Lease, Lessor may enter upon the leased premises, by picking
or changing locks if necessary, and take possession of all or any part of the
personal property, and may sell all or any part of the personal property at a
public or private sale, in one or successive sales, with or without notice, to
the highest bidder for cash, and, on behalf of Lessee, sell and convey all or
part of the personal property to the highest bidder, delivering to the highest
bidder all of Lessee's title and interest in the personal property sold. The
proceeds of the sale of the personal property shall be applied by Lessor toward
the reasonable costs and expenses of the sale, including attorney's fees, and
then toward the payment of all sums then due by Lessee to Lessor under the terms
of
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this Lease. Any excess remaining shall be paid to Lessee or any other person
entitled thereto by law.
10.02. UNIFORM COMMERCIAL CODE. This Lease is intended as and constitutes a
security agreement within the meaning of the Uniform Commercial Code of the
state in which the leased premises are situated. Lessor, in addition to the
rights prescribed in this Lease, shall have all of the rights, titles, liens and
interests in and to Lessee's property, now or hereafter located upon the leased
premises, which may be granted a secured party, as that term is defined, under
the Uniform Commercial Code to secure to Lessor payment of all sums due and the
full performance of all Lessee's covenants under this Lease. Lessee will on
request execute and deliver to Lessor a financing statement for the purpose of
perfecting Lessor's security interest under this Lease or Lessor may file this
Lease or a copy thereof as a financing statement. Unless otherwise provided by
law and for the purpose of exercising any right pursuant to this section, Lessor
and Lessee agree that reasonable notice shall be met if such notice is given by
ten days written notice, certified mail, return receipt requested, to Lessor or
Lessee at the addresses specified herein.
10.03. LANDLORD'S LIEN. Landlord's lien shall subordinate to Tenant's first
lienholders and shall not apply to contents owned by outside parties.
ARTICLE 11.00 DEFAULT AND REMEDIES
11.01. DEFAULT BY LESSEE. The following shall be deemed to be events of default
by Lessee under this Lease: (1) Lessee shall fail to pay when due any
installment of rent or any other payment required pursuant to this Lease; (2)
Lessee shall abandon any substantial portion of the leased premises; (3) Lessee
shall fail to comply with any term, provision or covenant of this Lease, other
than the payment of rent, and the failure is not cured within ten days after
written notice to Lessee; (4) Lessee shall file a petition or be adjudged
bankrupt or insolvent under any applicable federal or state bankruptcy or
insolvency law or admit that it cannot meet its financial obligations as they
become due; or a receiver or trustee shall be appointed for all or substantially
all of the assets of Lessee; or Lessee shall make a transfer in fraud of
creditors or shall make an assignment for the benefit of creditors; or (5)
Lessee shall do or permit to be done any act which results in a lien being filed
against the leased premises or the building and/or project of which the leased
premises are a part.
11.02. REMEDIES FOR LESSEE'S DEFAULT. Upon the occurrence of any event of
default set forth in this Lease, Lessor shall have the option to pursue any one
or more of the remedies set forth herein without any notice or demand. (1)
Lessor may enter upon and take possession of the leased premises, by picking or
changing locks if necessary, and lock out, expel or remove Lessee and any other
person who may be occupying all or any part of the leased premises without being
liable for any claim for damages, and relet the leased premises on behalf of
Lessee and receive the rent directly by reason of the reletting. Lessee agrees
to pay Lessor on demand any deficiency that may arise by reason of any reletting
of the leased premises; further, Lessee agrees to reimburse Lessor for any
expenditures made by it in order to relet the leased premises, including, but
not limited to, remodeling and repair costs. (2) Lessor may enter upon the
leased premises, by picking or changing locks if necessary, without being liable
for any claim for damages, and do whatever Lessee is obligated to do under the
terms of this Lease. Lessee agrees to reimburse Lessor on demand for any
expenses which Lessor may incur in effecting
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compliance with Lessee's obligations under this Lease; further, Lessee agrees
that Lessor shall not be liable for any damages resulting to Lessee from
effecting compliance with Lessee's obligations under this Lease caused by the
negligence of Lessor or otherwise. (3) Lessor may terminate this Lease, in which
event Lessee shall immediately surrender the leased premises to Lessor, and if
Lessee fails to surrender the leased premises, Lessor may, without prejudice to
any other remedy which it may have for possession or arrearages in rent, enter
upon and take possession of the leased premises, by picking or changing locks if
necessary, and lock out, expel or remove Lessee and any other person who may be
occupying all or any part of the lease premises without being liable for any
claim for damages. Lessee agrees to pay on demand the amount of all loss and
damage which Lessor may suffer by reason of the termination of this Lease under
this section, whether through inability to relet the leased premises on
satisfactory terms or otherwise. Notwithstanding any other remedy set forth in
this Lease, in the event Lessor has made rent concessions of any type or
character, or waived any base rent, and Lessee fails to take possession of the
leased premises on the commencement or completion date or otherwise defaults at
any time during the term of this Lease, the rent concessions, including any
waived base rent, shall be cancelled and the amount of the base rent or other
rent concessions shall be due and payable immediately as if no rent concessions
or waiver of any base rent had ever been granted. A rent concession or waiver of
the base rent shall not relieve Lessee of any obligation to pay any other charge
due and payable under this Lease including without limitation any sum due under
section 2.02. Notwithstanding anything contained in this Lease to the contrary,
this Lease may be terminated by Lessor only by mailing or delivering written
notice of such termination to Lessee, and no other act or omission of Lessor
shall be construed as a termination of this Lease.
ARTICLE 12.00 DEFINITIONS
12.01. ABANDON. "Abandon" means the vacating of all or a substantial portion of
the leased premises by Lessee, whether or not Lessee is in default of the rental
payments due under this Lease.
12.02. ACT OF GOD OR FORCE MAJEURE. An "act of God" or "force majeure" is
defined for purposes of this Lease as strikes, lockouts, sit downs, material or
labor restrictions by any governmental authority, unusual transportation delays,
riots, floods, washouts, explosions, earthquakes, fire, storms, weather
(including wet grounds or inclement weather which prevents construction), acts
of the public enemy, wars, insurrections and any other cause not reasonably
within the control of Lessor and which by the exercise of due diligence Lessor
is unable, wholly or in part, to prevent or overcome.
12.03. BUILDING OR PROJECT. "Building" or "project" as used in this Lease means
the building and/or project described in section 1.02, including the leased
premises and the land upon which the building or project is situated.
12.04. COMMENCEMENT DATE. "Commencement date" shall be the date set forth in
section 1.03. The commencement date shall constitute the commencement of the
term of this Lease for all purposes, whether or not Lessee has actually taken
possession.
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<PAGE> 13
12.05. COMPLETION DATE. "Completion Date" shall be the date on which the
improvements erected and to be erected upon the leased premises shall have been
completed in accordance with the plans and specifications described in article
6.00. The completion date shall constitute the commencement of the term of this
Lease for all purposes, whether or not Lessee has actually taken possession.
Lessor shall use its best efforts to establish the completion date as the date
set forth in section 1.03. In the event that the improvements have not in fact
been completed as of that date, Lessee shall notify Lessor in writing of its
objections. Lessor shall have a reasonable time after delivery of the notice in
which to take such corrective action as may be necessary and shall notify Lessee
in writing as soon as it deems such corrective action has been completed and the
improvements are ready for occupancy. Upon completion of construction, Lessee
shall deliver to Lessor a letter accepting the leased premises as suitable for
the purposes for which they are let and the date of such letter shall constitute
the commencement of the term of this Lease. Whether or not Lessee has executed
such letter of acceptance, taking possession of the leased premises by Lessee
shall be deemed to establish conclusively that the improvements have been
completed in accordance with the plans and specifications, are suitable for the
purposes for which the leased premises are let, and that the leased premises are
in good and satisfactory condition as of the date possession was so taken by
Lessee, except for latent defects, if any.
12.06. SQUARE FEET. "Square feet" or "square foot" as used in this Lease
includes the area contained within the leased premises.
ARTICLE 13.00 MISCELLANEOUS
13.01. WAIVER. Failure of Lessor to declare an event of default immediately upon
its occurrence, or delay in taking any action in connection with an event of
default, shall not constitute a waiver of the default, but Lessor shall have the
right to declare the default at any time and take such action as is lawful or
authorized under this Lease. Pursuit of any one or more of the remedies set
forth in article 11.00 above shall not preclude pursuit of any one or more of
the other remedies provided elsewhere in this Lease or provided by law, nor
shall pursuit of any remedy constitute forfeiture or waiver of any rent or
damages accruing to Lessor by reason of the violation of any of the terms,
provisions or covenants of this Lease. Failure by Lessor to enforce one or more
of the remedies provided upon an event of default shall not be deemed or
construed to constitute a waiver of the default or of any other violation or
breach of any of the terms, provisions and covenants contained in this Lease.
13.02. ACT OF GOD. Lessor shall not be required to perform any covenant or
obligation in this Lease, or be liable in damages to Lessee, so long as the
performance or non-performance of the covenant of obligation is delayed, caused
or prevented by an act of God, force majeure or by Lessee.
13.03. ATTORNEY'S FEES. In the event Lessee defaults in the performance of any
of the terms, covenants, agreements or conditions contained in this Lease and
Lessor places in the hands of an attorney the enforcement of all or any part of
this Lease, the collection of any rent due or to become due or recovery of the
possession of the lease premises, Lessee agrees to pay Lessor's costs of
collection, including reasonable attorney's fees for the services of the
attorney, whether suit is actually filed or not.
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<PAGE> 14
13.04. SUCCESSORS. This Lease shall be binding upon and inure to the benefit of
Lessor and Lessee and their respective heirs, personal representatives,
successors and assigns. It is hereby convenanted and agreed that should Lessor's
interest in the leased premises cease to exist for any reason during the term of
this Lease, then notwithstanding the happening of such event this Lease
nevertheless shall remain unimpaired and in full force and effect, and Lessee
hereunder agrees to attorn to the then owner of the leased premises.
13.05. RENT TAX. If applicable in the jurisdiction where the leased premises are
situated, Lessee shall pay and be liable for all rental, sales and use taxes or
other similar taxes, if any, levied or imposed by any city, state, county or
other governmental body having authority, such payments to be in addition to all
other payments required to be paid to Lessor by Lessee under the terms of this
Lease. Any such payment shall be paid concurrently with the payment of the rent,
additional rent, operating expenses or other charge upon which the tax is based
as set forth above.
13.06. CAPTIONS. The captions appearing in this Lease are inserted only as a
matter of convenience and in no way define, limit, construe or describe the
scope or intent of any section.
13.07. NOTICE. All rent and other payments required to be made by Lessee shall
be payable to Lessor at the address set forth in section 1.05. All payments
required to be made by Lessor to Lessee shall be payable to Lessee at the
address set forth in section 1.05, or at any other address within the United
States as Lessee may specify from time to time by written notice. Any notice or
document required or permitted to be delivered by the terms of this Lease shall
be deemed to be delivered (whether or not actually received) when deposited in
the United States Mail, postage prepaid, certified mail, return receipt
requested, addressed to the parties at the respective addresses set forth in
section 1.05.
13.08. SUBMISSION OF LEASE. Submission of this Lease to Lessee for signature
does not constitute a reservation of space or an option to lease. This Lease is
not effective until execution by and delivery to both Lessor and Lessee.
13.09. CORPORATE AUTHORITY. If Lessee executes this Lease as a corporation, each
of the persons executing this Lease on behalf of Lessee does hereby personally
represent and warrant that Lessee is a duly authorized and existing corporation,
that Lessee is qualified to do business in the state in which the leased
premises are located, that the corporation has full right and authority to enter
into this Lease, and that each person signing on behalf of the corporation is
authorized to do so. In the event any representation or warranty is false, all
persons who execute this Lease shall be liable, individually, as Lessee.
13.10. SEVERABILITY. If any provision of this Lease or the application thereof
to any person or circumstance shall be invalid or unenforceable to any extent,
the remainder of this Lease and the application of such provisions to other
persons or circumstances shall not be affected thereby and shall be enforced to
the greatest extent permitted by law.
13.11. LESSOR'S LIABILITY. If Lessor shall be in default under this Lease and,
if as a consequence of such default, Lessee shall recover a money judgment
against Lessor, such judgment shall be satisfied only out of the right, title
and interest of Lessor in the building as the same may then be encumbered and
neither Lessor nor any person or entity comprising Lessor shall be liable for
any
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<PAGE> 15
deficiency. In no event shall Lessee have the right to levy execution against
any property of Lessor nor any person or entity comprising Lessor other than its
interest in the building as herein expressly provided.
13.12. INDEMNITY. Lessor agrees to indemnify and hold harmless Lessee from and
against any liability or claim, whether meritorious or not, arising with respect
to any broker, except Tenant's Broker Zann Commercial Brokerage, Inc., which
shall be paid a three percent (3%) commission, whose claim arises by, through or
on behalf of Lessor. Lessee agrees to indemnify and hold harmless Lessor from
and against any liability or claim, whether meritorious or not, arising with
respect to any broker whose claim arises by, through or on behalf of Lessee.
ARTICLE 14.00 AMENDMENT AND LIMITATION OF WARRANTIES
14.01. ENTIRE AGREEMENT. IT IS EXPRESSELY AGREED BY LESSEE, AS A MATERIAL
CONSIDERATION FOR THE EXECUTION OF THIS LEASE, THAT THIS LEASE, WITH THE
SPECIFIC REFERENCES TO WRITTEN EXTRINSIC DOCUMENTS, IS THE ENTIRE AGREEMENT OF
THE PARTIES; THAT THERE ARE, AND WERE, NO VERBAL REPRESENTATIONS, WARRANTIES,
UNDERSTANDINGS, STIPULATIONS, AGREEMENTS OR PROMISES PERTAINING TO THIS LEASE OR
TO THE EXPRESSLY MENTIONED WRITTEN EXTRINSIC DOCUMENTS NOT INCORPORATED IN
WRITING IN THIS LEASE.
14.02. AMENDMENT. THIS LEASE MAY NOT BE ALTERED, WAIVED, AMENDED OR EXTENDED
EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY LESSOR AND LESSEE.
14.03. LIMITATION OF WARRANTIES. LESSOR AND LESSEE EXPRESSELY AGREE THAT THERE
ARE AND SHALL BE NO IMPLIED WARRANTIES OF MERCHANTABILITY, HABITABILITY, FITNESS
FOR A PARTICULAR PURPOSE OR OF ANY OTHER KIND ARISING OUT OF THIS LEASE, AND
THERE ARE NO WARRANTIES WHICH EXTEND BEYOND THOSE EXPRESSELY SET FORTH IN THIS
LEASE.
ARTICLE 15.00 OTHER PROVISIONS
15.01. MONTHLY RENTAL SCHEDULE. 2-01-98 - 1-31-2001
$8064.00\Month
15.02. EXHIBIT "A": - SITE PLAN
15.03. EXHIBIT "B" - SPACE PLAN
15.04. EXHIBIT "C" - LANDLORD'S IMPROVEMENTS
15.05. BUILDING RULES AND REGULATIONS. SEE ATTACHED.
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15.06. Tenant shall have Two (2), Two (2) year options to renew lease at a
negotiated market rate. Tenant shall give Landlord ninety (90) days written
notice prior to end of lease term to exercise said renewal options.
15.07. Landlord shall provide a courtesy notification of any contiguous space,
which becomes available during this lease.
15.08. Tenant shall be permitted to occupy the leased premises before
commencement date and upon full execution of the Lease document. (See Clause
1.03)
ARTICLE 16.00 SIGNATURES
SIGNED at Houston this 22 day of December ,1997
LESSOR LESSEE
Clear Lake Properties Johnson Engineering, Inc.
- ----------------------------- --------------------------------
By: By:
- ----------------------------- --------------------------------
- ----------------------------- --------------------------------
(Type Name and Title) (Type Name and Title)
16
<PAGE> 17
FIRST AMENDMENT TO LEASE
WHEREAS, CLEAR LAKE PROPERTIES as "Lessor" and Johnson Engineering as
"Lessee" entered into that certain lease agreement (the "Lease Agreement") dated
December 22, 1997 covering approximately 17,920 square feet of net rentable
space known as 920 Gemini-Building B; and
WHEREAS, Lessor and Lessee desire to amend the Lease Agreement and
extend the Lease Agreement;
WITNESSETH
WHEREAS, Lessor and Lessee hereby amend the Lease Agreement as follows:
AGREEMENT
NOW, THEREFORE, for and in consideration of the covenants and mutual
benefits to be derived by the parties hereto for; the matter set forth herein,
and for other good and valuable consideration, Lessor and Lessee agree as
follows:
I
IT IS AGREED that the Leased Premises will be expanded to include Suite
926 and Suite 928 Gemini containing approximately 4,531 and 8992 square feet
respectively for a total Leased Premises of 31,443 square feet.
II
IT IS FURTHER AGREED that Lessor will provide Lessee with build out
allowance in the amount of only $21,358.00 to be used toward on (1) fifteen (15)
ton HVAC installed in Suite 920, together with attending electrical wiring and
insulation of R-10 factor, as well as other improvements in Suite 920, 926 and
in 928 ("Improvements"). Lessee will use good faith efforts to have the
Improvements completed by April 30, 1999. Lessor shall cooperate with Lessee or
Lessee's agent as may be necessary to complete the Improvements.
Lessee, through Lessee's contractor(s), will construct the
Improvements. Once the Improvements are substantially complete, Lessee will
submit to Lessor a copy of the contractor's invoice. Lessor will then have the
option of inspecting the Leased Premises to insure that the Improvements, in
Lessor's reasonable judgment, have been completed. Lessor will then pay to
Lessee's contractor (which payment will be made within thirty (30) days) the
amount of any and all invoices up to $21,358.00. If the actual amount of
invoices total more than $21,358.00, Lessee will pay the excess amount.
III
IT IS FURTHER AGREED that Lessee will deposit and additional $6,753.78
as security deposit, making the security deposit by Lessee a total of
$14,463.78.
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FIRST AMENDMENT TO LEASE
IV
IT IS FURTHER AGREED that the Lease shall be extended by fifteen (15)
months from the expiration of the Lease Agreement to expire on April 30, 2002.
V
IT IS FURTHER AGREED that the new monthly Base Rent will be as follows:
11/01/1998 Thru 10/03/2000 = $14,149.35 or $0.45 per sq. ft. per month.
11/01/2000 Thru 04/30/2002 = $14,463.78 or $0.46 per sq. ft. per month.
VI
IT IS FURTHER AGREED that Lessor will warrant the existing HVAC in
Suite 928 through April 30, 1999.
VII
IT IS FURTHER AGREED that all the terms of the Lease Agreement shall
remain in full force and effect, according to the terms thereof. Lessor and
Lessee hereby ratify and confirm the Lease Agreement and expressly acknowledge
that the Lease Agreement, as modified by this First Amendment, represents the
entire agreement between Lessor and Lessee. Lessee expressingly acknowledges
that Lessee knows of no default on the part of Lessor that would otherwise
affect the rights and obligations of the parties under the Lease Agreement.
Lessee further acknowledges and agrees that Lessor nor Lessor's agents has not
made and is not making any warranties, representations, promises or statements,
except to the extent that the same are expressly set forth in the Lease
Agreement and this document.
EXECUTED, in multiple and counterparts, each of which shall have the
full force and affect.
LESSOR: LESSEE:
Clear Lake Properties Johnson Engineering
By: ________________________ By: ___________________________
2
<PAGE> 1
EXHIBIT 10.100
OFFICE LEASE
300 D. THIRD STREET, S.W.
WASHINGTON, D.C.
Between
Washington Design Center L.L.C.
Landlord
and
SPACEHAB, Incorporated
Tenant
December 16, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I Premises; Landlord's Rights 1
1.01 Premises 1
1.02 Landlord's Rights 1
1.03 Roof-Top Rights 2
ARTICLE II Term; Commencement Date 2
2.01 Term 2
2.02 Commencement Date 2
2.03 Commencement of Work 2
2.04 Tenant Allowance 2
2.05 Renewal Option 3
ARTICLE III Use; Legal Requirements 4
3.01 Use 4
3.02 Legal Requirements 4
ARTICLE IV Base Rent; Additional Rent 4
4.01 Rent Generally 4
4.02 Base Rent 4
4.03 Additional Rent 5
4.04 Rent Payments; No Waiver 5
4.05 Moratorium 6
4.06 No Conditions 6
ARTICLE V Rent Adjustments 6
5.01 Real Estate Taxes 6
5.02 Operating Expense 7
5.03 Payments of Rent Adjustments 7
5.04 Audit Rights by Tenant 8
ARTICLE VI Financial Reports 9
6.01 Tenant's Financial Reports 9
ARTICLE VII Condition of Premises; Duty of Care 9
7.01 Condition of the Premises 9
7.02 Tenant's Duty of Care 9
ARTICLE VIII Tenant's Alterations and Equipment 9
8.01 Alterations; Equipment 9
8.02 Landlord's Consent 10
ARTICLE IX Services 11
9.01 Business Hours 11
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
9.02 Utilities; Access 11
9.03 HVAC 11
9.04 Cleaning 11
9.05 Security 12
9.06 Signage 12
9.07 Parking 12
ARTICLE X Assignment; Sublease 12
10.01 Prohibited Leasehold 12
10.02 Landlord's Consent 12
10.03 Recapture 14
ARTICLE XI Right of First Offer 15
11.01 Right of First Offer 15
ARTICLE XII Surrender; Holdover 15
12.01 Surrender of the Premises 15
12.02 Holdover 16
ARTICLE XIII Quiet Enjoyment; Subordination 17
13.01 Covenant of Quiet Enjoyment 17
13.02 Subordination 17
13.03 Subordination, Attornment and Non-Disturbance
Agreement; Estoppel Certificate 18
ARTICLE XIV Fire or Casualty; Condemnation 19
14.01 Fire or Casualty 19
14.02 Condemnation 19
ARTICLE XV Landlord's Access, Repairs and Alterations 20
15.01 Access, Repairs; Alterations 20
ARTICLE XVI Insurance; Waiver of Claims; Indemnity 21
16.01 Insurance Generally 21
16.02 Casualty Insurance 22
16.03 Property Insurance 22
16.04 Waiver of Claim 22
16.05 Indemnity 22
16.06 Landlord's Insurance 23
ARTICLE XVII [RESERVED] 23
ARTICLE XVIII Insolvency; Events of Default; Remedies 23
18.01 Events of Insolvency 23
18.02 Events of Default 24
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
18.03 Remedies; Waivers 25
18.04 Intentionally Deleted 26
18.05 Late Payments; Interest 26
18.06 Landlord's Right to Cure Defaults 26
ARTICLE XIX Miscellaneous 26
19.01 Rules and Regulations 26
19.02 Brokerage 26
19.03 Transfers of Title 27
19.04 Notices 27
19.05 Interpretation 28
19.06 Successors and Assigns 28
19.07 Cumulative Rights and Remedies 29
19.08 Counterpart 29
19.09 Rule Against Perpetuities 29
19.10 Authority/Limitation of Landlord's Liability 29
19.11 Affirmative Action Program 30
</TABLE>
Addendum
Exhibit A-1 Office Space
A-2 Land
Exhibit B Reserved
Exhibit C Reserved
Exhibit D Reserved
Exhibit E Cleaning Services
Exhibit F Reserved
Exhibit G Form of Estoppel Certificate
Exhibit H Rules and Regulations
Exhibit I License Agreement
Exhibit J Affirmative Action Program
Exhibit K Title Instruments of Record
-iii-
<PAGE> 5
DEED OF LEASE
THIS DEED OF LEASE (the "Lease") made as of December 16, 1998, between
WASHINGTON DESIGN CENTER L.L.C., a Delaware limited liability company
("Landlord"), and SPACEHAB, INCORPORATED, a Washington corporation ("Tenant").
In consideration of the mutual promises set forth below, the parties
agree as follows:
ARTICLE I
PREMISES; LANDLORD'S RIGHTS
1.01 Premises. Subject to the terms and conditions hereof, Landlord
hereby leases to Tenant and Tenant hereby leases from Landlord Suite 814,
containing approximately 15,499 rentable square feet as indicated on the floor
plan attached hereto as Exhibit A- 1 (the "Premises"), of the building
constructed on the land identified in the legal description attached hereto as
Exhibit A-2 (the "Land"), known by street address as 300 D Street, S.W.,
Washington, D.C. (the "Building"). The "Property" consists of the Land and the
Building, together with all present and future easements, additions, expansions,
improvements and other rights appurtenant thereto. In addition to the exclusive
right to use and occupy the Premises subject to the terms hereof, Tenant shall,
subject to the terms hereof, have nonexclusive access to such portions of the
Property which are designated by Landlord as common areas and which are
reasonably required for the access to and use of the Premises (e.g., main lobby
entrances, common elevators, and the corridors, elevator lobby and restrooms on
the floor on which the Premises is located). Tenant shall have no other rights
to any portion of the Property other than as expressly set forth herein.
Landlord and Tenant agree that the rentable area of the Premises set forth above
shall be conclusive for all purposes of this Lease.
1.02 Landlord's Rights. Landlord retains the exclusive right to use or
modify in any manner whatsoever all Property other than the Premises located
outside of the interior walls, ceiling and floor of the Premises, Building
systems, and structural parts of the Building. For example, Landlord may: (1)
change the name or the street address of the Building, (2) install or replace
any signs located outside the Premises; (3) regulate window treatments, fighting
fixtures and similar items visible from the common areas or exterior of the
Building; (4) regulate the finishing of services [including utilities and
telephone (but not including the telephone equipment within Tenant's Premises or
the servicer used by Tenant provided that such servicer shall have no right to
install equipment or fines of any type in the Building except within the
Premises) at commercially reasonable rates] to the Building or any occupant
thereof, (5) grant any person the exclusive right to conduct any business or
render any service in the Building, provided that such exclusive right shall not
operate to exclude Tenant from any use expressly permitted herein; and (6)
regulate the movement of individuals and property into and throughout the
Building outside the Premises, provided that the exercise of such rights does
not unreasonably limit access to the Premises or Tenant's right to conduct its
business and operate the Premises in its discretion (subject to the other terms
of this Lease). Landlord also retains the right to demolish that portion of the
Building which does not contain the Premises and to erect new improvements on
the Land, so long as such demolition and construction does not interfere with
and interrupt Tenant's use of the Premises; provided that, Landlord shall not
demolish the restrooms on the floor on which the Premises are located, the
existing means of access to the Premises, or any systems
1
<PAGE> 6
which provide HVAC, electricity, plumbing or other services to the Premises,
unless Landlord makes arrangements for substitute facilities or services for the
same.
1.03 Roof-Top Rights. Provided Tenant first executes and delivers to
Landlord the License Agreement attached hereto as Exhibit I, Tenant shall have
the right to utilize a portion of the roof of the Building for purposes of
installing and operating one or more satellite dishes or antennas, subject to
and in accordance with the terms of said Exhibit I.
ARTICLE II
TERM; COMMENCEMENT DATE
2.01 Term. The initial term of this Lease (the "Initial Term") shall
commence upon the date of this Lease (the "Commencement Date") and shall end at
11:59 p.m. on the day preceding the ninth (9th) anniversary of the Rent
Commencement Date as defined herein or any earlier date on which this Lease is
terminated (the "Expiration Date"). The Initial Term, together with the Renewal
Term (if any), is referred to herein as the "Term."
2.02 Commencement Date. Landlord shall deliver all available portions
of the Premises to Tenant upon the execution hereof, and shall use reasonable
efforts to deliver the remainder of the Premises on or before January 20, 1998.
If Landlord fails to tender possession of the entire Premises to Tenant by
January 20, 1998, Landlord shall not be subject to liability, nor shall this
Lease be void or voidable in whole or in part, but in such event the Tenant
shall be entitled to one (1) additional day of rent abatement with regard to the
Premises for each day of delay in the tender of the Premises or any portion
thereof not tendered by January 20, 1998 which is not due to the acts or
omissions of Tenant or Tenant's agents, employees or contractors. The Premises
shall be provided to tenant in an "as is" condition pursuant to Section 7.01.
Upon delivery of the remainder of the Premises, Tenant shall execute and deliver
to Landlord a Declarations to Date of Delivery and Acceptance of Premises,
substantially in the form of Exhibit C attached hereto, confirming the
Commencement Date and delivery of the entire Premises.
2.03 Commencement of Work. Tenant shall be permitted, subject to the
terms hereof, to commence construction of the Tenant Work (as herein defined)
and installation of telephones, computers, fixtures, furniture, etc., in the
Premises upon delivery thereof.
2.04 Tenant Allowance. Landlord will provide Tenant with and allowance
(the "Tenant Allowance") of up to Three Hundred Nine Thousand Nine Hundred
Eighty Dollars ($309,980.00) for any construction, architectural, design, MEP
and cabling costs incurred in connection with the Tenant Work, Landlord will
reimburse Tenant for such costs incurred by the Tenant (not to exceed the amount
of the Tenant Allowance) upon completion of Tenant Work and Tenant providing
Landlord copies of paid bills supporting the amount of Tenant Allowance
requested and appropriate lien waiver and releases of liens. After final
completion of the Tenant Work and full payment of all costs incurred in
connection therewith, if directed by Tenant any unused Tenant Allowance shall be
applied to Tenant's rent obligations under this Lease next due after Tenant
provides written notice to Landlord to so apply the Tenant Allowance or
remaining portion thereof.
2.05 Renewal Option. Subject to the terms and conditions hereof, Tenant
is hereby granted one (1) option (the "Renewal Option") to extend the Term for
an additional period of five (5) years (the "Renewal Term"), to commence at the
expiration of the Initial Term provided Tenant notifies
2
<PAGE> 7
Landlord in writing of its intent to exercise the Renewal Option a minimum of
nine (9) months prior to the Expiration Date, and further provided that if
Tenant is in default on the date of giving such notice, said notice shall be
totally ineffective, or if Tenant is in default beyond the applicable notice and
cure period(s) (if any) pursuant to Section 18.02 on the last day of the Initial
Term at Landlord's option the Renewal Term shall not commence and this Lease
shall terminate at the end of the Initial Term. It is mutually agreed that all
provisions of the Lease, unless otherwise provided, will remain in full force
and effect for the Renewal Term (including the pass through of increases in
Operating Expenses and Real Estate Taxes which shall continue uninterrupted) and
further provided that Base Rent shall be the prevailing fair rental value of the
Premises as determined in accordance with this Section 2.05 at the time the
Renewal Term is to commence. Landlord shall notify Tenant of its determination
of fair rental value within thirty (30) days after Tenant exercises its Renewal
Option. If Tenant does not agree with Landlord's determination of fair rental
value, Tenant shall advise Landlord and each party shall designate in writing,
within ten (10) days after the expiration of the aforementioned thirty (30) day
period, an MAI or similarly accredited appraiser having at least 10 years
experience in the appraisal of commercial real estate in the Metropolitan
Washington, D.C. area, for the purpose of determining fair rental value. The
appraiser may not be affiliated in any respect with either Landlord or Tenant or
their respective affiliates. Within fifteen (15) days after the designation of
the appraisers, the two appraisers so designated shall designate a third
appraiser of the same qualifications. The appraisers so designated, shall within
forty-five (45) days after the date the third appraiser is designated, determine
the fair rental value of the Premises, taking into consideration all relevant
factors (including, but not limited to, that the Tax Base Year and the Operating
Expense Base Year are not being updated). If the three appraisers are unable to
agree upon the fair rental value, then the fair rental value of the Premises
shall be the average of the two closest appraisals.
ARTICLE III
USE; LEGAL REQUIREMENTS
3.01 Use. The Premises shall be used solely for general office purposes
and not in violation of any Legal Requirements (as defined in Section 3.02
hereof. Tenant shall not carry on or permit any activities which might: (1)
invalidate or increase the costs of any insurance coverages carried with respect
to the Building; (2) involve the storage, use or disposal of medical or
hazardous wastes or substances or the creation of an environmental hazard; or
(3) impair or interfere with (i) the structure of the Building or the operation
of Building systems, (ii) the character, reputation or appearance of the
Building as a first-class office building, (iii) the furnishing of services
(including utilities and telephone) to any portion of the Building or (iv) the
enjoyment by other occupants of the Building of the benefits of such occupancy
(for example, free of noise, odors or vibration emanating from the Premises).
The Premises shall not be used for the purposes of so-called "office suites,"
schools, governmental agencies, employment agencies, medical treatment
facilities, or any commercial or retail activities (other than general office
purposes as set forth above). Tenant shall at no expense to Landlord comply with
all Legal Requirements imposing any duty on Tenant or, to the extent
responsibility for the action required by such Legal Requirement is allocated to
Tenant hereunder with respect to the Premises and the use or occupation thereof
by Tenant.
3.02 Legal Requirements. "Legal Requirements" means: (1) all laws,
statutes, ordinances, rules, regulations, directives and orders of federal
state, county or municipal authorities, whether now or hereafter in effect which
may be applicable to any portion of the Property, the use or operation thereof
or any interest therein; and (2) all requirements, obligations and conditions of
all instruments of record (as described on Exhibit K attached hereto and made a
part hereof) pertaining to any portion of
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the Property, the use or operation thereof or any interest therein, now or
hereafter of record; provided that "Legal Requirements" shall exclude any
affirmative obligations imposed by any instrument placed of record after the
date hereof which exceed the Tenant's obligations hereunder or which conflict
with Tenant's rights hereunder.
ARTICLE IV
BASE RENT; ADDITIONAL RENT
4.01 Rent Generally. Each reference herein to "rent" shall unless
otherwise specified, mean the aggregate amount of "Base Rent" and "additional
rent" payable at any time or from time to time hereunder. Each item of rent
shall accrue continuously from the Rent Commencement Date until the Expiration
Date, and Tenant's obligation to pay the same shall survive termination of
Tenant's right of possession to the Premises and the end of the Term.
4.02 Base Rent.
(a) From December 28, 1998 (the "Rent Commencement Date") and
during each of the Lease Years (as defined below), the "Base Rent" shall be Four
Hundred Sixty-eight Thousand Eight Hundred Forty-four and 75/100 Dollars
($468,844.75) annually (the annual Base Rent being the product of 15,499
rentable square feet times $30.25 per rentable square foot), payable by Tenant,
without demand therefor, in advance on the first day of each calendar month in
equal installments of Thirty-nine Thousand Seventy and 40/100 Dollars
($39,070.40); provided that the first installment of Base Rent shall be due upon
the execution of this Lease. Commencing on the first day of the sixth Lease
Year, Base Rent shall increase by $1.00 per square foot above the then escalated
amount of Base Rent. Notwithstanding the provisions of this subparagraph (a)
provided Tenant is not in default hereunder, Base Rent shall abate for the
ninety (90) day period commencing on the Rent Commencement Date.
(b) Commencing with the first day of the second Lease Year (as
defined below) and the first day of each Lease Year thereafter, with the
exception of the sixth Lease Year, Base Rent shall increase by an amount equal
to 2% of the Base Rent payable for the immediately preceding Lease Year, said
increase to be payable in equal monthly installments as aforesaid. The Base Rent
as so adjusted shall be the new Base Rent.
(c) "Lease Year" shall mean the twelve-month period beginning
on the first day of a calendar month occurring on or immediately after the Rent
Commencement Date, and each twelve-month period thereafter beginning on the
anniversary of such first day. If the Commencement Date is other than the first
day of a calendar month or this Lease terminates other than on the last day of a
calendar month, the Base Rent for each such partial calendar month shall be
prorated on the basis of 1/365 of the then current annual Base Rent.
4.03 Additional Rent. All amounts, other than the Base Rent, payable by
Tenant hereunder or under any other agreement between Landlord and Tenant
relating to the Premises or Tenant's use or occupancy thereof shall be deemed to
be "additional rent." Each item of additional rent shall be payable immediately
upon Landlord's demand, unless otherwise expressly provided for herein.
Landlord's failure to make demand upon Tenant during the Term for any item of
additional rent (including rent adjustments provided for in Article V hereof)
shall not operate as a waiver of Landlord's right to demand or Tenant's
obligation to pay such additional rent, so long as Landlord makes such demand
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within two (2) years after the date such amounts were originally due in
accordance with the terms hereof The determination of any item of additional
rent shall result in no decrease in the Base Rent. Whenever an item of
additional rent is to be determined based upon the amount of Base Rent, such
amount shall be determined pursuant to Section 4.02 hereof with no reduction for
credits, abatements or concessions.
4.04 Rent Payments; No Waiver. Tenant shall pay all rents in lawful
money of the United States by good check (subject to collection) drawn to
Landlord's order on a national bank, and delivered to Landlord, c/o Merchandise
Mart Properties, Inc., 222 Merchandise Mart Plaza, Room 470, Chicago, Illinois
60654. Landlord's acceptance of rent with the knowledge of an existing default
hereunder shall not constitute a waiver thereof. Each rent payment shall be on
account of rents longest past due, and Landlord's acceptance of less than the
full amount of rent then due shall not constitute a waiver of any unpaid rent.
No writing accompanying any check or payment of rent shall constitute an accord
and satisfaction and Landlord may accept and endorse such check or payment
without limiting Landlord's right to recover the balance of such rent or pursue
any other remedy hereunder.
4.05 Moratorium. If by virtue of any Legal Requirement the amount of
rent which Landlord may collect hereunder is limited, Tenant shall remain liable
for all rent provided for hereunder and such rent shall continue to accrue. When
such limitation is no longer in effect, Tenant shall promptly pay all accrued
and unpaid rent upon Landlord's demand, so long as Landlord makes such demand
within two (2) years after the date such amounts were originally due in
accordance with the terms hereof
4.06 No Conditions. Tenant's covenant to pay rent is independent of all
other covenants and conditions, except for Landlord's covenant of quiet
enjoyment set forth in Section 13.01. Notwithstanding any other provision hereof
Tenant shall pay in full each item of rent when due without any demand (unless
expressly provided for herein), deduction or set-off, except with respect to
unused Tenant Allowance pursuant to Section 2.04 above and regardless of any
counterclaim.
ARTICLE V
RENT ADJUSTMENTS
5.01 Real Estate Taxes.
(a) In addition to the Base Rent, Tenant shall, in monthly
installments pursuant to Section 5.04 hereof pay to Landlord as additional rent
an amount (the "Tax Adjustment") equal to four and one tenth percent (4.1%),
subject to adjustment as provided for below ("Tenant's Share of Real Estate Tax
Increases"), of the amount by which Real Estate Taxes (as defined below) for the
then current Tax Year exceed Real Estate Taxes for the Tax Base Year. "Tax Year"
shall mean the 12-month, District of Columbia tax year commencing each October 1
and ending the following September 30. "Tax Base Year" shall mean the Tax Year
commencing October 1, 1998 and ending September 30, 1999. If the Tax Year
changes and the effect of the change can be reasonably determined, Landlord may
adjust Real Estate Taxes for the Tax Base Year to produce Tax Adjustments
substantially equivalent to those which would have been calculated without a
change in the Tax Year. Real Estate Taxes shall be calculated for each Tax Year,
including the Tax Base Year as if the building was at least 95% occupied.
(b) "Real Estate Taxes" shall mean all taxes, rates and
assessments, general and special foreseen or unforeseen of every kind and nature
which Landlord shall pay or become obligated
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to pay because of or in any way connected with the ownership, leasing or
operation of the Property, including general real estate taxes, assessments,
impositions and governmental charges (including vault fees and transit or other
special district assessments) levied on or charged against the real estate or
personal property used in connection with the operation of the Property, or on
the right or privilege of leasing real estate or on the rentals or other
receipts from the Property (or on the value of the leases thereon), or on the
value of improvements made to the Property at any time for any purpose, or in
any way attributable to the ownership, leasing or operation of the Property.
Real Estate Taxes shall include all reassessments in connection with the sale or
lease of any portion of the Property, and all fees, costs and expenses
(including reasonable attorneys' fees and expenses) that Landlord incurs
contesting or attempting to reduce or limit Real Estate Taxes. The amount of any
tax refunds shall be applied as a credit to Real Estate Taxes for the relevant
Tax Year. If a refund is applicable to the Tax Base Year, Real Estate Taxes for
the Tax Base Year shall be reduced thereby, and Tax Adjustments shall be
recalculated. If the system of real estate taxation is changed or any new tax or
assessment is imposed or levied on the Property in lieu of any item of Real
Estate Taxes presently imposed or levied on real estate or fixtures in the
District of Columbia, Real Estate Taxes shall include the new tax, assessment
and levy. Real Estate Taxes shall not include any net income, inheritance or
estate taxes.
5.02 Operating Expenses.
(a) In addition to the Base Rent, Tenant shall, in monthly
installments pursuant to Section 5.04 hereof pay to Landlord as additional rent
an amount (the "Operating Expense Adjustment") equal to four and one tenth
percent (4.1%) ("Tenant's Share of Operating Expense Increases") of the amount
by which Operating Expenses (as defined below) for the then current calendar
year exceed Operating Expenses for the calendar year commencing the January 1,
1999 (the "Operating Expense Base Year"). Operating Expenses shall be calculated
for each calendar year as if the Building was not less than 95% occupied.
(b) "Operating Expenses" shall mean all expenses, costs and
disbursements of every kind and nature paid, incurred, or otherwise arising
because of or in any way connected with the management, maintenance, servicing
repair and/or operation of the Property (including the costs of electrical
service, HVAC, cleaning, employee salaries, withholding and other taxes and
employee benefits, water and sewerage, landscaping, maintenance and service
contracts, security systems, management fees (not to exceed four percent)
equipment rental and all other usual and customary costs of operating and
maintaining a first-class office building in downtown Washington, D.C.).
Operating Expenses shall not include: (1) interest payments; (2) ground rental;
(3) depreciation; or (4) capital expenditures other than (i) those capital
expenditures incurred to reduce Operating Expenses and (ii) those capital
expenditures incurred to comply with any Legal Requirement to the extent such
compliance is not required as of the date hereof Landlord agrees to amortize the
cost of any capital expenditure (together with interest thereon at nine percent)
over the shorter of (i) the useful life thereof as determined under generally
accepted accounting principles, or (ii) the depreciation period permitted by the
Internal Revenue Code and only the portion of such amortization allocable to
each year shall be included in Operating Expenses for such year.
5.03 Payments of Rent Adjustments. Commencing on the first day of the
month immediately following a notice from Landlord setting forth the then
cur-rent estimated Tax Adjustment and/or Operating Expense Adjustment
(collectively, "Rent Adjustments"), as estimated by Landlord from time to time,
Tenant shall pay monthly installments on account of Rent Adjustments. The amount
of each such installment shall equal the aggregate unpaid balance of the then
current estimated Rent Adjustments, divided by the number of months remaining in
the Lease Year. If upon the final determination of Rent Adjustments for each
Lease Year, the total installments paid on account of Rent
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Adjustments do not equal the total actual amount of Rent Adjustments, Tenant
shall pay any balance due within thirty (30) days after receiving Landlord's
demand therefor, or, if applicable, Landlord shall credit against the next
payment of Base Rent due hereunder the amount of any overpayment.
5.04 Audit Rights by Tenant. If Tenant disputes any Operating Expenses
or Real Estate Taxes statement, Tenant must provide Landlord with specific
written objections within 30 days after receiving the statement (failing which,
the statement will be deemed conclusive). Within 30 days after receiving these
objections, Landlord will either adjust the disputed statement in response to
Tenant's objection(s) and credit any overpayment to Tenant as stated above, or
notify Tenant that it believes Tenant's objection is without merit. If Tenant
timely disputes a statement and Landlord notifies Tenant that Tenant's objection
is without merit, Tenant may -- if Tenant is not then in default beyond any
applicable cure period -- cause a nationally recognized independent, certified
public accountant ("CPA") to audit the supporting data for the disputed
statement. However, Tenant may not exercise its audit right unless the audit
commences within 20 days after Landlord notifies Tenant that Tenant's objection
is without merit, nor may Tenant audit any statement more than once. The CPA
must sign a confidentiality statement in form acceptable to Landlord. Each audit
under this Section 5.04 must be conducted at Landlord's property manager's
District of Columbia office. If Landlord does not agree with the audit results
of the CPA Tenant selects, Landlord and Tenant will endeavor to resolve their
differences (failing which, the dispute will be conclusively determined based on
an independent audit by a third-party CPA selected by the parties or, failing
agreement, appointed by the American Arbitration Association or any recognized
successor thereto upon application by either party). The parties will make any
necessary adjustments in accordance with the third-party CPA audit. Tenant must
pay all costs and expenses of Tenant's audit (including, but not limited to,
reasonable copying charges). In addition, Tenant must pay the costs incurred in
connection with the third-party CPA audit (including, but not limited to,
reasonable copying charges) unless the amounts paid by Tenant to Landlord for
the year in question exceeded the amounts to which Landlord was entitled by more
than 5%, in which event Landlord will pay the costs incurred in connection with
the third-party CPA audit. If the third-party CPA audit shows Tenant has
underpaid Operating Expenses or Real Estate Taxes (or both), in addition to
paying to Landlord the underpayment amount and bearing the third-party CPA audit
costs, Tenant must reimburse Landlord upon demand for all reasonable costs,
expenses and fees incurred by Landlord in connection with such dispute. Tenant
has no right to withhold or reduce any performance by Tenant under the Lease
pending or based upon any audit under this Section 5.04.
ARTICLE VI
FINANCIAL REPORTS
6.01 Tenant's Financial Reports. Tenant shall deliver to Landlord as
they become available, a copy of Tenant's quarterly and annual reports.
ARTICLE VII
CONDITION OF PREMISES; DUTY OF CARE
7.01 Condition of the Premises. Tenant shall accept possession of the
Premises in their current "as-is" condition, broom clean with all equipment in
working order. In compliance with Article VIII
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hereof and at no expense to Landlord, Tenant shall do such work as Tenant shall
deem necessary or desirable to render the Premises suitable for Tenant's use.
Landlord shall have no obligation with respect to the alteration, remodeling or
improvement of the Premises.
7.02 Tenant's Duty of Care. Tenant at its expense shall take good care
of and allow no damage (other than ordinary wear and tear) to the Premises, and
shall keep the Premises in clean, safe and sanitary condition. Tenant shall
segregate, store and dispose of trash and garbage in the manner Landlord
reasonably specifies. Tenant shall promptly notify Landlord of the occurrence of
any event or the existence of any condition that may adversely affect the
Premises or the Building or the occupancy, use or operation thereof If the
Building or the Premises are damaged by Tenant its employees, agents,
contractors, licensees or invitees (including any damage in connection with the
making of an Alteration or Tenant's surrender of the Premises), Tenant shall
promptly notify Landlord and, except to the extent such damage is covered by
nominal and customary extended coverage fire and casualty insurance, shall pay
to Landlord upon demand as additional rent all actual documented costs
(including attorneys' fees and expenses and Landlord's customary overhead,
profit and costs of general conditions) Landlord incurs for the repair and
restoration of the same. Tenant shall promptly remove from all common areas in
or around the Property Tenant's property and items placed or delivered there on
Tenant's behalf
ARTICLE VIII
TENANT'S ALTERATIONS AND EQUIPMENT
8.01 Alterations; Equipment. Except as expressly permitted herein,
Tenant shall not, without in each instance obtaining Landlord's prior consent,
make or permit any Alteration. "Alteration" shall mean any alteration,
installation, removal or improvement of any nature with respect to the Premises
or the Building, or any installation, removal or operation in the Premises of
any equipment or machinery, except for office equipment which (1) is normally
used in modem offices for general office use, and (2) does not (i) require
electrical power in excess of the power requirements for office tenants of the
Building (it being understood that Tenant's connected load for fighting and
outlets shall not exceed five (5) watts per square foot of the Premises); (ii)
require changes to the electrical, water, plumbing, or HVAC systems, (iii) be so
heavy as to create any risk of structural damage to the Building, or (iv) cause
any unreasonable noise, vibration or odor to be transmitted to the structure of
the Building or outside the Premises.
8.02 Landlord's Consent. Landlord shall not unreasonably withhold,
delay or condition its consent to the making of any Alteration. Landlord shall
not be obligated to give its consent if Landlord believes in good faith that
there is a significant risk that the Alteration (x) would not be made in a
manner comparable in workmanship and quality with the reputation and character
of the Building as a first-class office building, or (y) would materially
adversely affect (i) the structure or the appearance of the Building or the
operation of Budding systems, (ii) Landlord's ability to rent the Premises at
the end of the Term to other tenants at then current market rates, or (iii) the
enjoyment by other occupants of the Building of the benefits of such occupancy.
Landlord's consent to an Alteration, if given, shall be subject in each instance
to the following conditions:
(1) Landlord acknowledges that it has approved Tenant's
preliminary plans for the Premises. At least ten (10) days prior to commencing
work, Tenant shall submit to Landlord final plans and specifications therefor
which are consistent with the preliminary plans previously approved by Landlord
and sufficient to obtain a building permit therefor, together with detailed
background
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information, references and, with respect to contractors and subcontractors,
current financial statements, about the architects, engineers, contractors and
subcontractors to be utilized, and full information regarding the materials to
be used, and Tenant shall promptly submit for Landlord's approval every material
change to the work, the scope of the work or the plans and/or specifications
therefor. A "material charge" shall mean any change which (i) requires a
building permit or permit modification (ii) involves the Building mechanical,
electrical, plumbing, HVAC or other systems, (iii) is likely to adversely affect
any other tenant or occupant of the Building, or (iv) will cost in excess of Two
Thousand Five Hundred Dollars ($2,500.00) to implement. The work shall be
performed by persons and pursuant to plans, specifications and change orders
that Landlord shall have approved (such approval not to be unreasonably withheld
or delayed) and in accordance with all Legal Requirements and requirements of
Landlord's insurance carriers, and Tenant shall at no expense to Landlord insure
continuous compliance with the same and, upon demand, promptly submit to
Landlord satisfactory evidence of such performance (including all permits,
approvals and certificates required therefor). If in connection with making any
Alteration any conflict arises for any reason whatsoever between any persons
under Tenant's direct or indirect control engaged in making the Alteration and
Landlord's contractors, subcontractors or other persons performing work for
Landlord, Tenant shall take all reasonable actions necessary to eliminate such
conflict.
(2) All architects and engineers shall continuously carry
errors and omissions insurance in such reasonable amounts as Landlord may
specify, and all contractors and subcontractors shall continuously carry such
amounts of workers' compensation, employer's liability and
commercial/comprehensive general liability insurance as Landlord may reasonably
specify, and, upon demand, Tenant shall furnish Landlord with certificates
evidencing such insurance coverages.
(3) Upon completion of the Alteration, Tenant shall furnish
Landlord with enforceable releases of all claims and waivers of all liens
executed by each contractor, subcontractor and material supplier involved in
making the Alteration and paid invoices with respect to the costs thereof. If in
connection with the work any mechanic's materialman's lien is filed against any
portion of the Property, Tenant shall at no expense to Landlord cause such lien
to be released of record within ten (10) days after notice thereof.
(4) In connection with the making of the Alteration or the
maintenance or repair thereof, Landlord shall have no obligation to modify,
install or replace any structural component or system contained in the Building
or bear any cost.
(5) At the time Landlord consents to any Alteration,
improvements, fixtures and other property, Landlord shall advise Tenant what
Alterations, improvements, fixtures and other property must be removed by Tenant
before the end of the Term.
ARTICLE IX
SERVICES
9.01 Business Hours. "Business Hours" shall mean 7:00 a.m. to 6:00
p.m., Monday through Friday, and 9:00 a.m. to 1:00 p.m., Saturday, except for
holidays recognized by the Federal government ("Holidays").
9.02 Utilities; Access. Twenty-four hours a day, seven days a week,
Landlord shall provide to the Premises: (1) electricity, running water, and
sewerage removal services at (i) current locations and
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(ii) such usage levels as are customary in general office space; and (2) access
via at least one operating elevator.
9.03 HVAC. During Business Hours, Landlord shall provide heating and
cooling to the Premises. Upon twenty-four (24) hours prior notice, Landlord
shall provide heating and cooling to the Premises outside Business Hours, with
the minimum charge being based on four (4) hours usage. Landlord shall adjust
overtime charges to reflect actual heating and cooling expenses. Initially, the
following hourly rates will apply:
<TABLE>
<S> <C>
Monday - Saturday $ 25.00/hour
Sunday 37.50/hour
Holidays 37.50/hour
</TABLE>
9.04 Cleaning. After Business Hours, Monday through Friday, except for
Holidays, Landlord shall provide the Premises with the cleaning and janitorial
services specified in Exhibit E attached hereto.
9.05 Security. Landlord shall provide the following security services:
a staffed reception/guard desk in the lobby of the Building during Business
Hours.
9.06 Signage. Landlord intends that all tenants will be identified on
the Budding directory signs. Landlord shall, at its expense for the initial
names designated by Tenant at the Commencement Date, provide Tenant with a pro
rata number of lines on the directory in the Building lobby. Any names placed on
the directory after the initial name shall be at Tenant's expense. Landlord, at
its sole cost and expense, will also provide Tenant with building standard
signage on Tenant's suite entry door.
9.07 Parking. Tenant may, by notice to Landlord, acquire up to fifteen
(15) monthly parking contracts in the Building garage at the prevailing monthly
rates in effect from time to time, subject to availability. Tenant shall abide
the rules and regulations issued by the Building garage operator.
ARTICLE X
ASSIGNMENT; SUBLEASE
10.01 Prohibited Leasehold Transfers.
(a) Except as expressly permitted herein, Tenant shall not,
without in each instance obtaining Landlord's prior consent, make or permit any
Leasehold Transfer. "Leasehold Transfer" shall mean, whether voluntarily or by
operation of law, the assignment, transfer, subleasing or encumbering of any
portion of Tenant's rights to and interest in this Lease or the Premises,
including permitting any person to use or occupy any portion of the Premises
(except in connection with Tenant's use of the Premises permitted herein). The
transfer (however effected) of a "controlling ownership interest" in a person
(defined to mean an ownership interest in whatever form by which the holder
thereof exercises effective control over the management and policies of such
person) shall be deemed to be a Leasehold Transfer if such person holds any
interest in this Lease or the Premises; provided that, this sentence shall not
apply to transfers of a controlling ownership interest in any corporation while
the stock of such corporation is publicly traded on the New York or American
Stock Exchanges or while listed in the NASDAQ National Market.
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(b) Any apparent Leasehold Transfer made without Landlord's
consent shall be void. Nevertheless, without waiving any of Tenant's obligations
hereunder or the failure to obtain Landlord's consent Landlord may collect from
any person occupying the Premises in connection with an attempted Leasehold
Transfer all rent due with respect to the portion of the Premises occupied
thereby, and apply the same to the satisfaction of Tenant's obligations
hereunder.
10.02 Landlord's Consent.
(a) In seeking Landlord's consent to a Leasehold Transfer,
Tenant shall at least twenty (20) days before the anticipated effective date of
the Leasehold Transfer submit: (1) the proposed terms and conditions of the
Leasehold Transfer; (2) all relevant information about the proposed transferee;
and (3) satisfactory evidence that the Leasehold Transfer will result in the
Premises being used only as permitted pursuant to Article III hereof.
(b) Landlord shall not unreasonably withhold, delay or
condition its consent to any Leasehold Transfer. The reasonableness of any
decision by Landlord to withhold, delay or condition its consent shall be
evaluated in light of all of the relevant circumstances. Landlord shall not be
obligated to give its consent if (i) any event exists which constitutes or which
with the lapse of time or the giving of notice would constitute a material
default hereunder, (ii) Landlord has pursuant to Section 10.03 hereof exercised
its recapture right with respect to the Leasehold Transfer, (iii) the Leasehold
Transfer would result in the Premises being used for a purpose prohibited
hereunder, or (iv) if the Leasehold Transfer is to be effectuated during the
last two (2) years of the Initial Term or the Renewal Term, the rent under the
Leasehold Transfer would be less than the rental rate at which Landlord is then
offering to lease comparable space in the Building. Landlord's consent to a
Leasehold Transfer, if given, shall be subject in each instance to the following
conditions:
(1) Tenant shall remain fully and primarily liable
for the performance of all of Tenant's obligations hereunder, whenever such
performance may be required. The transferee with respect to the Leasehold
Transfer shall be subject to any defaults by Tenant hereunder and bound by all
of the terms and conditions of this Article X. Landlord's consent to any
Leasehold Transfer shall not constitute consent to any other or subsequent
Leasehold Transfer, except in each case as permitted herein.
(2) Within five (5) days after Tenant receives
Landlord's consent thereto and prior to the effective date of the Leasehold
Transfer, Tenant shall deliver to Landlord a fully executed and acknowledged
instrument in form and substance satisfactory to Landlord, providing for: (i)
the Leasehold Transfer on substantially the same terms and conditions previously
submitted to Landlord; (ii) the transferee's unconditional agreement to be bound
by, and to hold the Premises subject to, all of the terms and conditions hereof
and, if the Leasehold Transfer involves an assignment of all or a portion of the
Premises, to assume a of Tenant's obligations hereunder with respect thereto;
and (iii) an effective date of the Leasehold Transfer not later than six (6)
months after the execution of such instrument. The Leasehold Transfer shall be
effective only in accordance with the terms and conditions of such instrument.
Landlord and Tenant may amend this Lease at any time, and Landlord may take any
other action in connection herewith, and Landlord shall not be obligated to give
any notice to or obtain the consent of any Leasehold Transfer transferee for any
reason whatsoever. The transferee shall automatically be bound by the terms and
conditions of this Lease as amended by Landlord and Tenant at any time.
(3) Tenant hereby assigns to Landlord the rents due
from the transferee and authorizes the transferee to pay such rents directly to
Landlord, at Landlord's option, upon the
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occurrence of any default by Tenant under this Lease, whereupon Landlord may,
without waiving any of Tenant's obligations hereunder, collect and apply such
rents to the satisfaction of such obligations.
(4) Tenant shall promptly reimburse Landlord upon
demand for all reasonable costs (including reasonable attorney's fees and
expenses) Landlord incurs in connection with the Leasehold Transfer and the
transferee thereunder.
(5) Tenant shall promptly pay Landlord as additional
rent fifty percent (50%) of all of the consideration for the Leasehold Transfer.
"Consideration" shall mean (i) all rents in excess of the rents payable by
Tenant hereunder with respect to the space subject to the Leasehold Transfer,
and all profits in connection with the Leasehold Transfer (including, but not
limited to, all proceeds from the sale or rental of Tenant's fixtures, leasehold
improvements, equipment, furniture, furnishings and other personal property, to
the extent the price or rent paid therefor exceeds the fair market value or the
fair rental value, as the case may be, of the fixtures, improvements, equipment,
furniture, furnishings or other personal property so sold or rented), less (ii)
all reasonable out-of-pocket expenses Tenant incurs in effecting the Leasehold
Transfer. Upon demand, Tenant's chief financial officer shall promptly certify
to Landlord accountings setting forth the character, amount and date of receipt
or expenditure of each item of consideration and expense, and submit such
supporting documentation as Landlord may reasonably request.
10.03 Recapture. Landlord may, with respect to each Leasehold Transfer
for which Landlord's consent is required, elect to: (1) become Tenant's
subtenant with respect to the space subject to the proposed Leasehold Transfer,
or (2) terminate Tenant's leasehold interest in such space, in either case
effective thirty (30) days after Landlord notifies Tenant of Landlord's exercise
of its recapture right with respect to the Leasehold Transfer. With respect to a
Leasehold Transfer for which Tenant has requested Landlord's consent, Landlord
shall so notify Tenant within twenty (20) days after receiving Tenant's request
or Landlord shall be deemed to have declined to exercise its recapture right
with respect to such Leasehold Transfer. If Landlord declines to exercise its
recapture right with respect to a Leasehold Transfer, Landlord's consent to the
Leasehold Transfer shall nonetheless be required. If Landlord exercises its
recapture right with respect to a Leasehold Transfer: (i) Landlord may at
Tenant's expense reconfigure the Premises to provide public access to the
recaptured space; and (ii) Tenant shall promptly execute and deliver to Landlord
(x) if Landlord elects to sublet the space, a sublease in a form reasonably
satisfactory to Landlord and providing that Landlord shall be required during
the term of the sublease to abate all rents accruing with respect to the space,
or (y) if Landlord elects to terminate Tenant's leasehold interest in the space,
an amendment hereto in a form reasonably satisfactory to Landlord and providing
for such termination. Landlord may, without incurring any liability to Tenant,
lease or sublet the recaptured space to any person (including any person which
Tenant proposed as a transferee under a Leasehold Transfer).
ARTICLE XI
RIGHT OF FIRST OFFER
11.01 Right of First Offer. Provided no Event of Default has occurred
under this Lease, and subject to the right of Landlord to renew the lease of any
tenant currently leasing space on the eighth (8th) floor on the date of this
Lease, Tenant shall have the right of first offering to lease contiguous office
space located on the eighth (8th) floor of the Building (the "Additional
Premises"). Such right shall arise whenever, during the Term the Landlord wishes
to lease the Additional Premises. Landlord shall provide Tenant with not less
than thirty (30) days written notice ("Landlord's Notice") setting forth the
date the Additional Premises will be
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available. Tenant shall exercise its right of first offering (if at all) by
written notice ("Tenant's Notice"), delivered to Landlord not later than twenty
(20) days after delivery of Landlord's Notice to Tenant, and agreeing to lease
the Additional Premises commencing on the date the Additional Premises are
available as set forth in Landlord's Notice. In the event the Tenant's Notice is
not timely given, Tenant shall be deemed to have waived its right of first
offering and Landlord may proceed to lease the Additional Premises to third
parties. Prior to the commencement of the term for the Additional Premises,
Tenant agrees to execute an amendment to this Lease incorporating the Additional
Premises into this Lease as part of the Premises on the following terms and
conditions:
(a) If the Tenant exercises its right of first offer for the
Additional Premises during the first three Lease Years the terms and conditions
applicable to the Additional Premises shall be the same terms and conditions as
the terms of this Lease including rental rates. The term for the Additional
Premises will be co-terminous with the Term under this Lease. The Tenant
allowance shall be prorated based on the number of months remaining in the first
three Lease Years.
(b) If the Tenant takes the Additional Premises during the
last six Lease Years, the rental rate, Tenant allowance and other terms
applicable to the Additional Premises (other than Lease Term, which will be
co-terminous with the Lease Term for the Premises) will be subject to the then
current market terms and conditions for similar space within the Building
(taking into consideration the applicable Lease Term).
ARTICLE XII
SURRENDER; HOLDOVER
12.01 Surrender of the Premises.
(a) At the end of the Term Tenant shall deliver to Landlord
exclusive possession of the Premises, broom clean and in "as is" condition on
the Commencement Date, ordinary wear and tear excepted; provided, however, that
Tenant shall remove from the Premises and the Building all property specified in
subsection (b) below. The delivery of keys to the Premises to anyone (including
delivery of the keys to Landlord so that Landlord may sublet the Premises for
Tenant) shall not terminate this Lease or effect a surrender of the Premises.
(b) Tenant may not, without Landlord's consent, remove any
Alterations, other improvements to the Premises or fixtures (including all such
improvements and fixtures existing on the Commencement Date), which cannot be
removed without damage to the Premises or the Building. Tenant shall, at no
expense to Landlord and subject to Article VIII hereof, remove any Alteration,
improvements, fixtures and other property which, pursuant to Section 8.02(5)
Landlord has advised Tenant must be removed before the end of the Term. Where
furnished by Tenant or at its expense, all moveable furnishings and trade
fixtures shall remain Tenant's property, which Tenant may at no expense to
Landlord remove before the end of the Term. Alterations, improvements, fixtures
and other property, which Tenant is required pursuant to Section 8.02(5) or
permitted to remove from the Premises and which remain on the Premises after the
end of the Term, shall be deemed to be abandoned, and Landlord may, at Tenant's
expense and without incurring any liability (as a bailee or otherwise) to
Tenant, remove and dispose of the same in any fashion.
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(c) Upon demand, Tenant shall promptly pay to Landlord as
additional rent all reasonable direct costs (including reasonable attorneys'
fees and expenses), Landlord incurs in connection with the removal of property
from the Premises and the Building and the disposal thereof pursuant hereto, and
the repair of any damage to the Premises or the Building occasioned thereby.
12.02 Holdover. If Tenant fails to surrender the Premises at the end of
the Term, at Landlord's option the Tenant shall become a month-to-month tenant
subject to all of the terms and conditions hereof, except that Tenant shall on
account of such tenancy pay in advance on the first day of each calendar month,
without demand therefor, a monthly rental equal to the greater of (i) two
hundred percent (200%) of the aggregate amount of Base Rent plus Rent
Adjustments in effect immediately preceding the end of the Lease Term, or (ii)
the fair market rental value of the Premises, prorated on a monthly basis;
provided that, notwithstanding the foregoing, during the first (1st) ninety (90)
days of any such monthly tenancy, Tenant shall pay a monthly rental equal to the
greater of (i) one hundred fifty percent (150%) of the aggregate amount of Base
Rent plus Rent Adjustments in effect immediately preceding the end of the Lease
Term, or (ii) the fair market rental value of the Premises. Such tenancy may be
terminated by either party upon thirty (30) days prior notice. During such
tenancy Landlord may with respect to any default hereunder exercise all rights
and remedies provided for herein. Notwithstanding the foregoing, any time prior
to Landlord's acceptance of rent from Tenant as a monthly tenant hereunder,
Landlord, at its option, may forthwith re-enter and take possession of the
Premises by any means permitted by law, TENANT HEREBY WAIVING ANY NOTICE TO
QUIT; provided, however, that (i) Tenant shall pay Landlord as damages (but not
as rent) the greater of the fair market value rent for the Premises or two (2)
times (1.5 times, during the first 90 days of such holdover) the Base Rent plus
all Additional Rent payable for the last month of the Term, for each month or
portion thereof that Tenant remains in possession following the Expiration Date,
and (ii) Tenant shall defend, indemnify and hold Landlord harmless from and
against any and all claims, losses, liabilities or damages resulting from
Tenant's failure to surrender possession of the Premises on the Expiration Date
(including, but not limited to, claims made by any succeeding tenant).
ARTICLE XIII
QUIET ENJOYMENT; SUBORDINATION
13.01 Covenant of Quiet Enjoyment. Subject to all of the terms and
conditions of this Lease, Tenant's interest in this Lease and possession of the
Premises shall not be terminated during the Term by Landlord or any person
claiming an interest in the Premises, the Building or the Land through Landlord.
Neither Landlord's inability to perform Landlord's obligations hereunder
(including the furnishing of utilities and HVAC) by virtue of any circumstance
beyond Landlord's reasonable control nor the taking of any action in or around
the Premises permitted hereunder, shall constitute an actual or constructive
eviction of Tenant in whole or in part or provide any grounds (including an
interruption or reduction in Tenant s business) for an abatement of rent or for
Landlord's liability; provided that, notwithstanding the foregoing, if Landlord
fails to provide HVAC or electric service to the Premises for a period in excess
of five (5) consecutive business days, Landlord agrees to thereafter abate the
Rent payable hereunder for so long as Tenant cannot and in fact does not use the
Premises as a result of such failure.
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13.02 Subordination.
(a) This Lease shall be automatically subordinate to and bound
by each underlying lease, deed of trust and mortgage (including all advances
made thereunder at any time), and all amendments thereto and renewals,
extensions, modifications, consolidations, replacements and transfers thereof
(whether by sale, assignment, foreclosure or otherwise), now or hereafter
affecting any portion of the Land, the Building or the Premises (in each case, a
"Superior Instrument"). Tenant may not terminate this Lease, and this Lease
shall remain in effect upon any sale or assignment or foreclosure upon, any
portion of the Property pursuant to any Superior Instrument, or upon the
termination of any Superior Instrument. Notwithstanding any other provision
hereof, no holder of a Superior Instrument shall be liable for any act, omission
or default of Landlord, subject to any offsets, claims or defenses which Tenant
may have against Landlord, bound by any rent that Tenant paid to Landlord more
than one (1) month in advance, or bound by any amendment, waiver or termination
of this Lease, unless consented to by such holder in writing. If by virtue of
Landlord's default Tenant may obtain an abatement of rent remedy such default or
terminate this Lease, Tenant shall not exercise such right(s) unless Tenant
first notifies each holder of a Superior Instrument (which notice may be given
simultaneously with any notice Tenant gives to Landlord), which has furnished
Tenant with its address, and such holder fails to initiate promptly and use
reasonable efforts to cure such Landlord's default. If in connection with any
financing of any portion of the Property or improvements thereto the holder of a
Superior Instrument requires modifications to this Lease, Tenant shall not
unreasonably withhold, delay or condition Tenant's consent to such
modifications, so long as such modifications do not increase the rents payable
by Tenant hereunder, reduce or extend the Term, reduce or increase the area of
the Premises, or materially adversely affect Tenant's rights and obligations
hereunder. The holder of a Superior Instrument may subordinate such Instrument
to this Lease at any time and Tenant hereby consents to such subordination. Upon
request Tenant shall execute, acknowledge and deliver in recordable form such
instruments effecting such subordination.
(b) Upon request of the holder or beneficiary of any Superior
Instrument (each a "Lender"), Tenant shall agree in writing that no action taken
by such holder or beneficiary to enforce said Superior Instrument shall
terminate this Lease or invalidate or constitute a breach of any of the
provisions hereof and Tenant will attorn to such Lender, or to any purchaser of
the Budding or Property at any foreclosure sale or sale in lieu of foreclosure,
for the balance of the Term of this Lease and on all other terms and conditions
herein set forth. Tenant, by entering into this Lease, covenants and agrees that
(a) upon the written direction of Lender it shall pay all rents arising under
this Lease as directed by such Lender; and (b) in the event such Lender enforces
its rights under the Superior Instrument due to a default by Landlord this Lease
is not extinguished by a foreclosure of the Superior Instrument, and Tenant will
upon request of any person succeeding to the interest of Landlord in the
Property ("successor in interest") as the result of said enforcement,
automatically attorn to such successor in interest, without any change in terms
or other provisions of this Lease; provided, however, that said successor in
interest shall not be: (i) bound by any payment of rent or additional rent for
more than one month in advance, except payments in the nature of security (but
only to the extent such payments have been delivered to such successor in
interest); (ii) bound by any modifications to the Lease (including, but not
limited to, any agreement providing for early termination or cancellation of the
Lease) made without any requisite consent of the Lender or any such successor in
interest; (iii) liable for damages for any act or omission of any prior landlord
(including, but not limited to, Landlord); or (iv) subject to any offsets or
defenses which Tenant might have against any prior landlord (including, but not
limited to, Landlord). Notwithstanding the foregoing, Tenant shall retain any
rights it may have to proceed against the original Landlord.
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13.03 Subordination, Attornment and Non-Disturbance Agreement; Estoppel
Certificate. Within ten (10) days after demand therefor by Landlord, the holder
or beneficiary of any Superior Instrument or any of their successors in
interest, Tenant shall execute, acknowledge and deliver in recordable form: (1)
a Subordination, Attornment and Non-Disturbance Agreement and/or (2) an estoppel
certificate substantially in the form of Exhibit G attached hereto.
ARTICLE XIV
FIRE OR CASUALTY; CONDEMNATION
14.01 Fire or Casualty.
(a) The occurrence of any fire or other casualty shall
constitute no basis for the termination of this Lease or any abatement of rent,
except as expressly provided for herein. If the Building is damaged by fire or
other casualty (whether or not the Premises are damaged) and if Landlord obtains
a reasonable professional estimate that the cost of restoring the Building would
exceed fifty percent (50%) of the full insurable value of the Building, Landlord
may, by notice to Tenant within sixty (60) days after such fire or other
casualty, terminate this Lease without incurring any liability to Tenant. If
Landlord fails so to notify Tenant, Landlord shall use reasonable efforts to
repair the Building (including the restoration of the demising walls of the
Premises and Building services to the outside perimeter of the Premises) with
reasonable dispatch, allowing for the adjustment and settlement of insurance
claims, the preparation of plans and specifications, the obtaining of
governmental approvals and certificates, the obtaining of contractors and
laborers and any other delay. So long as Landlord restores the Building so it is
suitable for substantially the same uses, Landlord shall not be obligated to
duplicate the original construction or design of the Building. Landlord shall
not be obligated to repair, restore or replace: (1) any property within the
Premises; (2) any damage that occurs during the last year of the Term (as
extended, if at all, pursuant to the exercise of any Renewal Option); or (3) any
damage for the repair of which insurance proceeds are not available. Tenant
shall cooperate fully with all repairs made to the Building (including removing
Tenant's moveable property and trade fixtures from the Premises as soon as
practicable to clear the way therefor).
(b) Rents hereunder shall be abated during the period and
to the extent that a material portion of the Premises is rendered untenantable
because of a fire or other casualty. If more than thirty percent (30%) of the
Premises is rendered untenantable by fire or other casualty and Landlord cannot,
given Tenant's full cooperation, substantially complete such repairs so that the
Premises are rendered substantially tenantable within one hundred eighty (180)
days after such fire or other casualty, then Tenant may, by notice to Landlord,
terminate this Lease with thirty (30) days of the date of such casualty.
14.02 Condemnation.
(a) The occurrence of any condemnation or taking pursuant to
the exercise of the power of eminent domain, or any sale in lieu thereof, shall
constitute no basis for the termination of this Lease or any abatement of rent,
except as expressly provided for herein. If the entire Premises are lawfully
condemned or taken, this Lease shall terminate as of the date title vests
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pursuant to such condemnation or taking, and Tenant shall have no claim for the
value of the unexpired portion hereof. If fifteen percent (15%) or more of the
Premises, or the means of access thereto, are lawfully condemned or taken,
Tenant may, by notice to Landlord within thirty (30) days after the date title
vest pursuant to such condemnation or taking, terminate this Lease. If any
portion of the Premises is lawfully condemned or taken and this Lease is not
terminated as provided herein, Tenant shall be entitled to a rent abatement with
respect thereto, commencing the date title vests pursuant to such condemnation
or taking. However, if any portion of the Premises is condemned or taken without
compensation to effect compliance with any Legal Requirement and if such
compliance is Tenant's obligation hereunder, Tenant shall be entitled to no rent
abatement. If only a portion of the Building is lawfully condemned or taken and
if such condemnation or taking would permit Landlord to terminate leases with
respect to a significant portion of the leased space in the Building, Landlord
may, by notice to Tenant within thirty (30) days after the date title vests
pursuant to such condemnation or taking, terminate this Lease (whether or not
the Premises are affected by such condemnation or taking).
(b) Landlord shall receive the entire award made in each
proceeding in connection with the condemnation or taking of the Building, the
Premises or any portion thereof (including any award made for the value of
Tenant's interest in this Lease or the Premises), and Tenant hereby assigns to
Landlord any and all right, title and interest Tenant may have now or in the
future to any such award or any part thereof Tenant may pursue a separate claim
against the condemning authority, so long as such claim does not in any way
diminish the award or compensation payable to or recoverable by Landlord in
connection with such taking or condemnation.
ARTICLE XV
LANDLORD'S ACCESS, REPAIRS AND ALTERATIONS
15.01 Access, Repairs; Alterations. Tenant shall furnish Landlord with
keys and other means of effecting entry into all portions of the Premises at all
times. Upon prior notice to Tenant Landlord may enter the Premises from time to
time to: (1) inspect, maintain, clean, repair, make alterations to and install
equipment in the Premises (and for such purposes Landlord may bring into and
store in the Premises reasonable quantities of equipment and materials); (2)
comply with the demand of any person submitting reasonable evidence of a lawful
purpose and a legal entitlement to access to the Premises; (3) show the Premises
to potential purchasers and mortgagees of the Building; and (4) within the last
twelve (12) months of the Term, show the Premises to prospective tenants.
Landlord may change the arrangement and location of entrances, passageways,
doorways, corridors, elevators, stairways, toilets and other parts of the
Premises and the Building, so long as doing so will not substantially or
materially adversely interfere with Tenant's access to the Premises. In any
emergency, Landlord may without notice enter the Premises by any and all means
which are reasonable under the circumstances and take all necessary or desirable
measures to resolve the emergency. In resolving an emergency, Landlord shall not
be liable for any damage to Tenant's property, so long as such damage is not
caused by Landlord's gross negligence or willful misconduct in taking actions
permitted by this Section, Landlord shall use reasonable efforts to accommodate
Tenant, but shall not be obligated to incur overtime or premium costs.
ARTICLE XVI
INSURANCE; WAIVER OF CLAIMS; INDEMNITY
16.01 Insurance Generally.
(a) Throughout the Term, Landlord and Tenant shall each obtain
and maintain in effect the insurance coverages specified in this Article, by
virtue of insurance policies underwritten only
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by solvent insurance companies authorized to do business in the District of
Columbia. The insurance policies that Tenant is required to carry hereunder
shall: (1) be written as primary coverage and not contributing with or in excess
of any coverages Landlord may carry, (2) contain an endorsement requiring each
insurer to provide thirty (30) days prior written notice to Landlord before any
cancellation or material change in the type or amount of any coverage
thereunder, and (3) designate Landlord as an "additional insured" and, at
Landlord's request, if available, include a standard mortgagee clause for the
benefit of any person holding an insurable interest in the Premises or the
Building.
(b) Tenant shall give Landlord prompt notice and a detailed
description of each event which might constitute the basis for a material claim
under any of the insurance policies required to be carried hereunder. Tenant
shall cooperate fully with Landlord in prosecuting and resolving all such
claims. Whether or not Tenant fully complies with all of the provisions of this
Article, the description of required insurance policies and related maximum
coverage amounts set forth herein shall not operate to limit Tenant's liability
under any provision of this Lease. On an annual basis, if requested by Landlord,
Tenant shall promptly furnish Landlord certificates evidencing the insurance
coverages required to be maintained hereunder and the payment of premiums
therefor.
(c) Tenant shall not act or fail to act, or permit any person
under Tenant's reasonable control to act or fad to act, in any way which might
invalidate or reduce any coverages or increase the premiums therefor under any
insurance policies required to be carried hereunder or carried by Landlord with
respect to the Property or the use or operation thereof. If any insurance
carrier or board of underwriters determines that any such coverage shall be
invalidated or reduced or premiums therefor shall be increased as a direct or
indirect result of any act or omission of Tenant or any person under Tenant's
reasonable control (whether or not such act or omission would otherwise
constitute a default hereunder), Tenant shall promptly pay to Landlord as
additional rent the costs of securing comparable coverages and the increased
premiums.
(d) Each party hereunder shall, at its own expense, cause each
insurance policy that it obtains in connection with this Lease, the Premises or
the Building to contain an endorsement providing that: (1) the issuer of such
policy waives all rights of subrogation against the other party; and (2) such
policy shall not be invalidated if the insured, prior to a loss, waives in
writing all rights of recovery against any person for losses covered by such
policy.
16.02 Casualty Insurance. Tenant shall maintain a
commercial/comprehensive general liability policy with a limit of at least
$3,000,000 per occurrence and $3,000,000 in the general aggregate and the
following coverages: (1) a broad form, commercial liability endorsement; (2)
endorsements covering premises/operations, independent contractors and host
liquor liability; and (3) a broad form contractual liability endorsement
insuring the performance of Tenant's indemnification obligations hereunder.
16.03 Property Insurance. Tenant shall carry all risk property
insurance in such amounts as shall be sufficient to cover the repair,
restoration and replacement of all Alterations, other improvements to the
Premises and fixtures (including all such improvements and fixtures existing on
the Commencement Date). Tenant shall carry such other insurance as Tenant may
deem necessary or desirable to protect Tenant's property located in or around
the Premises. Landlord shall have no obligation to insure the Premises or
Tenant's property. Landlord shall obtain and maintain all risk property
insurance in an amount equal to the full replacement cost of the Building.
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16.04 Waiver of Claim. Each party hereunder hereby waives all rights of
recovery against the other party for any claim, loss, injury or expense in
connection with any property damage or loss, to the extent such claims are
covered by casualty insurance maintained (or required hereby to be maintained)
by the injured party, each party hereby agreeing to look only to its insurance
policies for recovery in respect of any such property damage or suffered by it.
Notwithstanding anything herein contained to the contrary, Landlord shall not be
liable for any claim, loss, injury or expense (including any claim for
compensation for reduction in the value of Tenant's leasehold or interest in the
Premises, inconvenience or annoyance to Tenant, injury to Tenant's business or
property, or, except as expressly set forth herein, rent abatement in connection
with Landlord's taking any action permitted hereunder) in connection with this
Lease, the Property, or Tenant's use or occupancy of the Premises. In any event
Landlord's aggregate liability in connection with this Lease, the Property and
Tenant's use and occupancy of the Premises shall be limited as set forth in
Section 19.10 and in no event shall Landlord be liable for any indirect or
consequential damages for any reason whatsoever.
16.05 Indemnity. Subject to the provisions of Section 16.04 above,
Tenant hereby indemnifies and shall hold harmless and defend Landlord, its
partners, directors, officers, employees, contractors and agents against all
claim, liabilities, losses, injuries and expenses (including attorneys' fees and
expenses and the costs of investigating and/or settlement claims) arising
directly or indirectly out of. (1) the occurrence of any event within the
Premises; (2) any act or omission of Tenant, its employees or agents, or any
contractor performing work in or to, or any licensee operating within, the
Premises; (3) alterations to, or installation or operation of equipment in, any
portion of the Building or the Premises by Tenant or a Leasehold Transfer
transferee; (4) any breach of Tenant's representations, warranties or covenants
hereunder, or (5) any act or failure to act by Tenant or any Leasehold Transfer
transferee invalidating or reducing any coverages under any insurance policies
required to be carried hereunder or carried by Landlord with respect to the
Property or the use or operation thereof. The foregoing indemnity shall not be
applicable insofar as Landlord incurs a loss or expense through its gross
negligence or willful misconduct. The provisions of this Section shall survive
termination of Tenant's right of possession to the Premises and the end of the
Term.
16.06 Landlord's Insurance. Landlord agrees to carry broad form fire
and casualty insurance with respect to the Budding, in such amounts and form as
required by Landlord's mortgagee with respect to the Building from time to time,
but in all events in an amount sufficient to satisfy any insurance requirements.
ARTICLE XVII
[RESERVED]
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ARTICLE XVIII
INSOLVENCY; EVENTS OF DEFAULT; REMEDIES
18.01 Events of Insolvency.
(a) "Event of Insolvency" means: (1) Tenant (including, with
respect to Events of Insolvency, any guarantor of Tenant's obligations
hereunder) becomes bankrupt or insolvent under any applicable federal, state or
local state or rule of law (collectively, "Insolvency Laws"); (2) Tenant files a
petition, or acquiesces in a petition filed, under any Insolvency Law; (3) an
involuntary petition is filed against Tenant under any Insolvency Law, which is
neither dismissed within sixty (60) days after such filing or results in the
issuance of an order for relief against Tenant whichever occurs earlier; (4) a
receiver or trustee is appointed for, or a foreclosure action is instituted
upon, all or a substantial portion of Tenant's property or assets; or (5) Tenant
makes or consents to an assignment or other conveyance in trust for the benefit
of creditors.
(b) This Lease shall not be considered an asset of Tenant's
estate in bankruptcy or insolvency. Upon an Event of Insolvency, Landlord may by
notice to Tenant terminate this Lease; provided that Tenant shall remain liable
for all rents and other damages payable hereunder without prejudice to
Landlord's right in any proceeding under any Insolvency Law to prove and obtain
as liquidated damages the maximum such amount permitted thereby; and provided,
further, that if, by virtue of any Insolvency Law, Landlord is not permitted to
enforce such termination, the following provisions shall apply, to the extent
enforceable:
(1) If there is an uncured default under this Lease,
no receiver or trustee may assume and retain, or assign, this Lease unless at
the time of such assumption or assignment the receiver or trustee (x) cures such
default or provides adequate assurance to Landlord's reasonable satisfaction
that such default will be cured promptly, (y) compensates, or provides adequate
assurance to Landlord's reasonable satisfaction that such receiver or trustee
will promptly compensate, Landlord for any actual pecuniary loss incurred by
Landlord as a result of such default, and (z) provides adequate assurance to
Landlord's reasonable satisfaction of the future performance of all of Tenant's
obligations under this Lease.
(2) No receiver or trustee may require Landlord to
furnish any services or supplies required to be furnished under this Lease
unless (x) Landlord is compensated therefor before such services or supplies are
furnished, or (y) such receiver or trustee assumes this Lease as provided in
clause (1) above.
18.02 Events of Default. The occurrence of an Event of Default shall
constitute a breach of Tenant's obligations hereunder. "Event of Default" shall
mean any of the following:
(a) the failure to pay Landlord an installment of Base Rent or
any Rent Adjustment within five (5) days after notice to Tenant of the failure
to make such payment when due, or the failure to make any other payment of
additional rent within five (5) days after Landlord's second demand therefor,
(b) the transfer by operation of law or otherwise of any
portion of Tenant's interest herein or in any portion of the Premises to any
person other than as expressly permitted hereunder,
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(c) by virtue of Tenant's interest herein or occupancy of the
Premises or any act or omission of Tenant, its employees, agents, contractors,
invitees or licensees, or any transferee under a Leasehold Transfer, any portion
of the Property or Landlord's interest therein becomes subject to any claim,
lien or other encumbrance which is not irrevocably released and removed of
record at no expense to Landlord within thirty (30) days thereafter,
(d) the failure to maintain insurance in the amounts and
coverages required to be maintained by Tenant hereunder,
(e) the abandonment or vacating of the Premises for a
continuous period of thirty (30) days or more, except as expressly permitted
hereunder, provided that, abandonment of the Premises shall not be deemed an
Event of Default if (i) Tenant notifies Landlord in writing of Tenant's intent
to vacate or abandon not less than thirty (30) days in advance, (ii) Tenant
obtains and provides to Landlord prior to vacating all necessary endorsements
required to ensure that Tenant's insurance with respect to the Premises shall
remain in full force and effect notwithstanding such abandonment, (iii) Tenant
takes all commercially reasonable steps necessary to secure the Premises against
unauthorized entry during the period of such vacancy or abandonment, and (iv)
Tenant indemnifies Landlord against any claim, cost, damage, expense, fee,
liability or suit arising from or out of, or in connection with, such vacating
or abandonment.
(f) the occurrence of any breach of any of Tenant's
representations, warranties or covenants hereunder (excluding the Events of
Default described above) or of a material breach under any other agreement
between Landlord and Tenant relating to the Premises or under any other lease
between Tenant and Landlord: (1) which breach is not cured within thirty (30)
days thereafter, or (2) if such breach cannot be cured with reasonable efforts
within such thirty-day period and if extending the cure period will not (i)
subject Landlord to the risk of a civil claim or criminal liability or the
Property to any claim or encumbrance, or (ii) result in the termination or
impairment of any Superior Instrument, the failure of Tenant to initiate the
cure thereof within such thirty-day period and to continuously and diligently
prosecute the same to completion; or
(g) the occurrence more than twice in any twelve-month period
of any event which would have constituted an Event of Default but for the curing
thereof within the applicable grace period provided for herein.
18.03 Remedies; Waivers.
(a) In the event of any breach of any of Tenant's
representations, warranties or covenants hereunder, Landlord may pursue any and
all remedies available at law or in equity. Upon demand, Tenant shall pay
Landlord as additional rent: (1) all damages, losses and expenses Landlord
reasonably incurs as the result of each such breach, including (i) reasonable
attorneys' fees and expenses in enforcing Landlord's rights and remedies
hereunder, and (ii) in connection with any attempt by Landlord to re-let the
Premises, attorneys' fees and expenses, advertising costs, brokerage
commissions, lease concessions, improvement allowances, architects' and
engineers' fees and expenses; and (2) the aggregate amount of all abatements of
Base Rent, tenant allowances under the Work Letter and all other concessionary
payments to Tenant.
(b) Upon the occurrence of an Event of Insolvency or Event of
Default, Landlord may, without incurring any liability to Tenant: (1) by notice
to Tenant terminate this Lease; or (2) with or without terminating this Lease
and without notice to Tenant to quit or making a demand for rent or possession
(such notices and demands being hereby waived by Tenant), enter into and take
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possession of the Premises pursuant to summary dispossession proceedings or any
other action at law. Without limiting whatsoever any of its rights and remedies
hereunder, Landlord may retain all monies (including the Security Deposit) that
Tenant has paid, and shall credit the same against rents payable hereunder.
Landlord shall use reasonable efforts to re-let the Premises for Tenant's
benefit, in which event Landlord shall credit against rent payable hereunder,
but only to the extent thereof, the rent Landlord collects on or before the
Expiration Date from such reletting.
(c) Landlord may initiate legal proceedings against Tenant at
any time and from time to time to recover any and all rent due hereunder, and
the bringing of any such proceedings shall not preclude Landlord from bringing,
simultaneously and in the future, other proceedings against Tenant in connection
with this Lease. No provision of this Lease shall be deemed to require Landlord
to postpone any legal or equitable proceedings until the end of the Term. Tenant
hereby waives all rights of redemption available under any present or future
law, regardless of the grounds that might support any claim to such rights.
Landlord and Tenant hereby waive trial by jury in any action, proceeding or
counterclaim arising in connection with this Lease, the relationship of Landlord
and Tenant, or Tenant's use or occupancy of the Premises.
18.04 Intentionally Deleted.
18.05 Late Payments; Interest. Tenant shall promptly pay to Landlord as
additional rent with respect to any amount due hereunder and not paid interest
accruing at an annual rate equal to the lesser of eighteen percent (18%) and the
maximum rate, if any, that Landlord may charge Tenant under applicable law (the
"Interest Rate"), from the date upon which such amount is due (as specified
herein with respect to installment payments and, with respect to other rent
payments, as specified in Landlord's demand to Tenant for payment as provided
for herein). If Tenant shall fail to pay any installment of Base Rent, Real
Estate Taxes, Operating Expenses, or annual Base Rent Adjustments when due and
payable as provided for herein, a five percent (5%) late charge shall be added
to each such late installment.
18.06 Landlord's Right to Cure Defaults. Upon a breach of any of
Tenant's obligations hereunder, Landlord may, at Tenant's expense and without
limiting Tenant's liability for such breach and without incurring any liability
to Tenant, take all necessary or desirable actions (including entering the
Premises) to cure such breach. Upon demand, Tenant shall pay to Landlord as
additional rent (1) all direct and indirect costs (including the fees and
disbursements of attorneys, architects and engineers and Landlord's customary
overhead, profit and costs of general conditions) Landlord incurs in taking such
actions, together with (2) interest thereon, which interest shall accrue at the
Interest Rate from the date Landlord incurs such costs.
ARTICLE XIX
MISCELLANEOUS
19.01 Rules and Regulations. Tenant shall comply, and cause all persons
under Tenant's reasonable control to comply, with the rules and regulations set
forth in Exhibit H attached hereto and such additional rules and regulations as
Landlord may reasonably adopt (collectively, the "Rules and Regulations"). If
any of the Rules and Regulations conflict with the provisions of this Lease, the
provisions of the lease shall control. Landlord shall not be required to
enforce, and shall not be liable for fading to enforce, the Rules and
Regulations against any other tenant in the Building, and
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Landlord's failure to enforce the Rules and Regulations against any such tenant
shall not constitute a waiver of Tenant's obligations hereunder.
19.02 Brokerage. Tenant represents and wan-ants that neither it nor its
employees nor agents have dealt with any broker or finder other than Cushman and
Wakefield of Washington, D.C., Incorporated ("Landlord's Broker") and Spaulding
& Slye ("Tenant's Broker") (collectively the "Brokers") in connection with this
Lease or the transactions contemplated hereby. Landlord shall have no obligation
to compensate the Brokers, other than the compensation Landlord shall pay to
Landlord's Broker pursuant to the separate agreement between Landlord's Broker
and Landlord. By executing this Lease, Tenant's Broker releases Landlord from
all claims whatsoever in connection with the negotiation and execution of this
Lease and all options Tenant may exercise hereunder. Tenant's Broker agrees to
look to Landlord's Broker for compensation pursuant to a separate agreement
between Landlord's Broker and Tenant's Broker.
19.03 Transfers of Title. If title to the Building or any other portion
of the Property is transferred or the leasehold estate in the entire Building
becomes vested in another person (whether voluntarily or by operation of law),
thereafter and upon notice to Tenant and the delivery of the Security Deposit if
any, to the transferee, the transferor shall be entirely released from and
relieved of all existing and future covenants, obligations and liabilities
hereunder so long as transferee is obligated to perform all of Landlord's
obligations hereunder. The provisions of this Section shall be self-executing
and deemed to be a covenant running with the land.
19.04 Notices.
(a) Any notice, demand, consent, approval disapproval or
statement (collectively, "Notices") required or permitted to be given hereunder
or any applicable law shall be in writing and shall be deemed duly given when
personally delivered or deposited in the mail (postage prepaid, registered or
certified mail) or with an overnight courier service, in each case with return
receipt requested addressed as follows (or pursuant to such other address as any
party may specify upon ten (10) days prior Notice):
If to Landlord:
Washington Design Center L.L.C.
300 D Street, S.W.
Washington, D.C. 20024
Attention: Vice President, Property Manager
and
Merchandise Mart Properties, Inc.
222 Merchandise Mart Plaza
Room 470
Chicago, IL 60654
Attention: Executive Vice President, Chief Operating Officer
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If to Tenant prior to the Rent Commencement Date:
Spacehab, Incorporated
1595 Springhill Road
Suite 360
Vienna, Virginia 22182
Attention: Director, Human Resources; and
If to Tenant after the Rent Commencement Date:
Spacehab, Incorporated
300 D Street, S.W.
Suite 814
Washington, D.C. 20024
Attention: Director, Human Resources.
(b) A Notice shall be deemed received: (1) if delivered, as of
the date of delivery as indicated by affidavit, if personally delivered, or
return receipt, if delivered by mail or overnight courier, or (2) if not
delivered because of a changed address of which no Notice was given or a refusal
to accept delivery, as of the date such delivery was attempted but unsuccessful
as indicated by affidavit, if personal delivery was attempted, or return
receipt, if delivery by mail or overnight courier was attempted.
(c) Where this Lease provides for a specified period of time
for providing notice, taking action, etc., and the end of such period, as
specified, would occur on a day that is a holiday, the end of such period shall
be deemed to occur on the immediately following business day that is not a
holiday.
19.05 Interpretation.
(a) "Person" means any individual or entity, private or
governmental, having substance under any applicable law. "Including" means
"including without limitation." "Landlord" means only the owner, the mortgagee
in possession or the lessor, for the time being, of the Building. "Tenant" means
the party executing this Lease as tenant and each transferee pursuant to a
permitted Leasehold Transfer. "Hereof," "herein" and "hereunder" and other
compounds of "here" refer to this Lease in its entirety, unless otherwise
expressly specified. The "end of the Term," the "expiration of the Term," and
"termination of this Lease" are used interchangeably to mean the termination of
this Lease, whether pursuant hereto, by agreement or by operation of law. The
captions appearing herein are for convenience and identification only and shall
not define or limit the scope of any provision hereof. Words and pronouns shall
be deemed to include any gender and number as the context may require. The
Addendum and all exhibits attached hereto are incorporated herein by reference
and made a part hereof
(b) Except as expressly set forth herein, neither Landlord nor
its employees nor agents has made any representations or warranties concerning
the Premises, the Building, the operation thereof, the surrounding vicinity, or
Tenant's ability or prospects for carrying out any business by virtue of
Tenant's occupancy of the Premises. This Lease contains the entire agreement
between the parties as of the date hereof. This Lease cannot be modified, or any
term or condition hereof waived, except by a written instrument executed by the
party against whom enforcement of the modification or waiver is sought.
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(c) The laws of the District of Columbia shall govern the
validity, enforcement and interpretation of this Lease. If any provision of this
Lease or the application thereof is held invalid or unenforceable, the other
provisions hereof shall not be affected thereby and shall be enforced to the
extent possible.
19.06 Successors and Assigns. This Lease shall not give rise to any
rights for the benefit of any persons other than the parties hereto. This Lease
shall bind and inure to the benefit of the parties hereto and their respective
heirs, administrators, successors and assigns; provided, however, that no
transferee of Tenant's interest herein or in the Premises shall be entitled to
any benefit of this Lease except pursuant to a permitted Leasehold Transfer.
19.07 Cumulative Rights and Remedies. The rights and remedies provided
for hereunder are cumulative, and the exercise of any one right or remedy by a
party hereto shall not preclude or waive such party's recourse to any or all
other rights and remedies available at law or in equity.
19.08 Counterpart. This Lease may be executed in one or more
counterparts, each of which shall be fully effective as an original, and
together all such counterparts shall constitute the same instrument.
19.09 Rule Against Perpetuities. If this Lease has not been previously
terminated pursuant to the terms and provisions contained herein, and if the
term of this Lease and/or the Commencement Date has not occurred within five (5)
years from the date hereof, then and in that event this Lease shall thereupon
become null and void and have no further force and effect.
19.10 Authority/Limitation of Landlord's Liability.
(a) Landlord has appointed Merchandise Mart Properties, Inc.
("MMPI"), as its authorized signatory to execute this Lease. Tenant acknowledges
that MMPI will not be acting in a personal capacity, but rather in a
representative capacity as the authorized signatory for Landlord. Tenant agrees
that it shall look only to Landlord, subject to the provisions of Section
19.10(b), for the performance of Landlord's obligations under this Lease and for
the satisfaction of any right of Tenant for the collection of any claim,
judgment or other judicial determinations (whether at law or in equity) or
arbitration award requiring the payment of money, and neither MMPI nor any of
its agents, incorporators, shareholders, beneficiaries, trustees, officers,
directors, employees, partners, principals (disclosed or nondisclosed) or
affiliates or any of their respective assets or property shall be subject to any
claim, judgment, levy, lien, execution, attachment or other enforcement
procedure (whether at law or in equity) for the satisfaction of Tenant's rights
and remedies under or with respect to this Lease or under law, or Tenant's use
and occupancy of the Premises or any liability or obligation of Landlord to
Tenant. The limitation of MMPI's liability under this Lease, including any
waiver of subrogation rights, shall apply with equal force and effect to, and as
a limitation on and a waiver of any liability of MMPI.
(b) Tenant agrees to look solely to Landlord's interest in the
Property for the enforcement or payment of any judgment, award, order or other
remedy under or in connection with this Lease or any related agreement,
instrument or document or in respect of any matter whatsoever relating to this
Lease, the Premises or the Property. No other assets of Landlord (or any assets
of any partners, beneficiaries, managers, members, stockholders, officers,
employees or agents of Landlord) shall be subject to levy, execution or other
procedures for the satisfaction of Tenant's remedies. No personal liability is
assumed by, nor shall at any time be asserted or enforceable against Landlord,
its
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members, any successor owner or their respective successors or assigns or the
members, partners, beneficiaries, officers, directors, employees, shareholders
or partners thereof, or the agents or employees of any of them on account of
this Lease or any covenant, undertaking or agreement of Landlord in this Lease
contained.
19.11 Affirmative Action Program. Tenant acknowledges receipt of a copy
of Section III of the Affirmative Action Program submitted with respect to the
Building (the same being attached hereto as Exhibit J). Tenant is not a party to
this program and this Lease is not subject to the terms thereof. Nonetheless,
Landlord encourages Tenant to utilize the procedures contained in said Section
III regarding the dissemination of employment information.
IN WITNESS WHEREOF, each of the undersigned has caused its duly
authorized representative to execute this Lease under seal as of the date first
written above.
LANDLORD
WASHINGTON DESIGN CENTER L.L.C.
By: Merchandise Mart Properties, Inc., agent
---------------------------------------
TENANT
SPACEHAB, INCORPORATED
By: [SEAL]
---------------------------------------
----------------------------------------
General Counsel
----------------------------------------
BROKER
Accepted and agreed to only for the purposes of
Section 19.02 hereof
CUSHMAN & WAKEFIELD OF WASHINGTON, D.C.,
INCORPORATED
By: [SEAL]
---------------------------------------
DIRECTOR
---------------------------------------
---------------------------------------
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SPAULDING & SLYE
By: [SEAL]
---------------------------------------
---------------------------------------
---------------------------------------
27
<PAGE> 1
EXHIBIT 10.101
[LOGO]
TEXAS ASSOCIATION OF REALTORS(R)
COMMERCIAL LEASE
This lease agreement is made and entered into by and between Computer
Extension Systems, Inc. (Landlord) and Johnson Engineering, Inc. (Tenant).
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord that
certain property with the improvements thereon, containing approximately ____
square feet, hereinafter called the "leased premises", known as 16850 Titan
Drive, Houston, Texas 77058 (address), Lot ____, Block ____, ________________
Addition, City of Houston, Harris County, Texas; or as more particularly
described below or on attached exhibit:
Approximately 13,357 square feet (See attached Exhibit A "Leased
Premises")
The primary term of this lease shall be 24 months commencing on the 1st
day of August, 1999, and ending on the last day of July, 2001, upon the
following terms, conditions, and covenants:
1. TAXES. Each year during the term of this lease, Landlord shall pay
real estate taxes assessed against the leased premises in an amount equal to the
total real estate taxes assessed against the leased premises in the base year.
Each year during the term of this lease, Tenant shall pay as additional rental,
upon receipt of a statement from Landlord together with tax statements or other
verification from the proper taxing authority, his pro rata share of any
increase in real estate taxes over the base year on the property of which the
leased premises is a part. Any increase in real estate taxes for a fractional
year shall be prorated. The base year shall be 1999.
2. UTILITIES. Tenant shall pay all charges for utility services to the
leased premises except for a pro rata share which shall be paid by the Landlord.
3. HOLDING OVER. Failure of Tenant to surrender the leased premises at
the expiration of the lease constitutes a holding over which shall be construed
as a tenancy from month to month at a rental of $11,991 per month.
4. RENT. Tenant agrees to and shall pay Landlord at 16580 Titan Drive,
County of Harris, Texas, or at such other place Landlord shall designate from
time to time in writing, as rent for the leased premises, the total sum of
$191,856.00 payable without demand in equal monthly payments of $7,994.00 each
in advance on or before the 1st day of each month, commencing on August 1, 1999,
and continuing thereafter until the total sum shall be paid. Adjustment to the
rent, if any, for rent escalators, for percentage of net rent, or for increases
in building operation costs (including but not limited to insurance, custodial
services, maintenance and utilities) shall be as set forth in an attached
addendum. Rent received after the first day of the month shall be deemed
delinquent. If rent is not received by Landlord by the 10th of each month,
Tenant shall pay a late charge of $25.00 plus a penalty of $10.00 per day until
rent is received in full. Tenant shall pay $25.00 for each returned check.
<PAGE> 2
5. USE. Tenant shall use the leased premises for the following purpose
and not other: Production and warehousing of space flight materials and office
support.
6. SECURITY DEPOSIT. Tenant shall pay to Landlord a security deposit in
the sum of $7,994.00, payable on or before the commencement of this lease for
Tenant's faithful performance hereunder. Refund thereof shall be made upon
performance of this lease agreement by Tenant, minus any assessments or damages
unless Landlord and Tenant provide otherwise in Special Provisions.
7. INSURANCE. Landlord shall pay for fire and extended coverage
insurance on the buildings and other improvements on the leased premises in an
amount not less than $500,000.00, which amount shall be increased yearly in
proportion to the increase in market value of the premises. If Landlord provides
any insurance herein, Tenant shall pay to Landlord, during the term hereof, the
amount of any increase in premiums for the insurance required over and above
such premiums paid during the first year of this lease. Tenant shall provide
public liability and property damage insurance for its business operations on
the leased premises in the amount of $100,000.00 which policy shall cover the
Landlord as well as the Tenant. Said insurance policies required to be provided
by Tenant herein shall name Landlord as an insured and shall be issued by an
insurance company approved by Landlord. Tenant shall provide Landlord with
certificates of insurance evidencing the coverage required herein. Tenant shall
be solely responsible for fire and casualty insurance on Tenant's property on or
about the leased premises. If Tenant does not maintain such insurance in full
force and effect, Landlord may notify Tenant of such failure and if Tenant does
not deliver to Landlord within 10 days after such notice certification showing
all such insurance to be in full force and effect, Landlord may at his option,
take out the necessary insurance to comply with the provision hereof and pay the
premiums on the items specified in such notice, and Tenant covenants thereupon
on demand to reimburse and pay Landlord any amount so paid or expended in the
payment of the insurance premiums required hereby and specified in the notice,
with interest thereon at the rate of 10 percent per annum from the date of such
payment by Landlord until repaid by Tenant.
8. CONDITION OF PREMISES. Tenant has examined and accepts the leased
premises in its present as is condition as suitable for the purposes for which
the same are leased, and does hereby accept the leased premises regardless of
reasonable deterioration between the date of this lease and the date Tenant
begins occupying the leased premises unless Landlord and Tenant agree to repairs
or refurbishment as noted in Special Provisions.
9. MAINTENANCE AND REPAIRS. Landlord shall keep the foundation, the
exterior walls (except glass; window; doors; door closure devices; window and
door frames, molding, locks, and hardware; and interior painting or other
treatment of exterior walls), and the roof of the leased premises in good repair
except that Landlord shall not be required to make any repairs occasioned by the
act or negligence of Tenant, its employees, subtenants, licensees and
concessionaires. Landlord is responsible for maintenance of the common area and
common area equipment. If Landlord is responsible for any such repair and
maintenance, Tenant agrees to give Landlord written
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<PAGE> 3
notice of needed repairs. Landlord shall make such repairs within a reasonable
time. Tenant shall notify Landlord immediately of any emergency repairs. Tenant
shall keep the leased premises in good, clean condition and shall at its sole
cost and expense, make all needed repairs and replacements, including
replacement of cracked or broken glass, except for repairs and replacements
required to be made by Landlord under this section. If any repairs required to
be made by Tenant hereunder are not made within ten (10) days after written
notice delivered to Tenant by Landlord, Landlord may at its option make such
repairs without liability to Tenant for any loss or damage which may result by
reason of such repairs, and Tenant shall pay to Landlord upon demand as
additional rent hereunder the cost of such repairs plus interest. At the
termination of this lease, Tenant shall deliver the leased premises in good
order and condition, reasonable wear and tear excepted.
10. ALTERATIONS. All alterations, additions and improvements, except
trade fixtures, installed at expense of Tenant, shall become the property of
Landlord and shall remain upon and be surrendered with the leased premises as a
part thereof on the termination of this lease. Such alterations, additions, and
improvements may only be made with the prior written consent of Landlord, which
consent shall not be unreasonably withheld. If consent is granted for the making
of improvements or alterations to the leased premises, such improvements and
alterations shall not commence until Tenant has furnished to Landlord a
certificate of insurance showing coverage in an amount satisfactory to Landlord
protecting Landlord from liability for injury to any person and damage to any
personal property, on or off the leased premises, in connection with the making
of such improvements or alterations. No cooling tower, equipment, or structure
of any kind shall be placed on the roof or elsewhere on the leased premises by
Tenant without prior written permission of Landlord. If such permission is
granted, such work or installation shall be done at Tenant's expense and in such
a manner that the roof shall not be damaged thereby. If it becomes necessary to
remove such cooling tower, equipment or structure temporarily, so that repairs
to the roof can be made, Tenant shall promptly remove and reinstall the cooling
tower, equipment or structure at Tenant's expense and shall repair at Tenant's
expense any damage resulting from such removal or reinstallation. Upon
termination of this lease, Tenant shall remove or cause to be removed from the
roof any cooling tower, equipment or structure if directed to do so by Landlord.
Tenant shall promptly repair at its expense any damages resulting from such
removal. At the termination of this lease, Tenant shall deliver the leased
premises in good order and condition, natural deterioration only excepted. Any
damage caused by the installation or removal of trade fixtures shall be repaired
at Tenant's expense prior to the expiration of the lease term. All alterations,
improvements, additions, and repairs made by Tenant shall be made in good and
workmanlike manner.
11. COMPLIANCE WITH LAWS AND REGULATIONS. Tenant shall, at its own
expense, comply with all laws, orders, and requirements of all governmental
entities with reference to the use and occupancy of the leased premises. Tenant
and Tenant's agents, employees and invitees shall fully comply with any rules
and regulations governing the use of the building or other improvements to the
leased premises as required by Landlord. Landlord may make reasonable changes in
such rules and
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<PAGE> 4
regulations from time to time as deemed advisable for the safety, care and
cleanliness of the leased premises, provided same are in writing and are not in
conflict with this lease.
12. ASSIGNMENT AND SUBLETTING. Tenant shall not assign this lease nor
sublet the leased premises or any interest therein without first obtaining the
written consent of Landlord. An assignment or subletting without the written
consent of Landlord shall be void and shall, at the option of Landlord,
terminate this lease. (Landlord consent shall not be unreasonably withheld.)
13. DESTRUCTION. In the event the leased premises is partially damaged
or destroyed or rendered partially unfit for occupancy by fire or other
casualty, Tenant shall give immediate notice to Landlord. Landlord may repair
the damage and restore the leased premises to substantially the same condition
as immediately prior to the occurrence of the casualty. Such repairs shall be
made at Landlord's expense unless due to Tenant's negligence. Landlord shall
allow Tenant a fair reduction of rent during the time the leased premises are
partially unfit for occupancy. If the leased premises are totally destroyed or
deemed by the Landlord to be rendered unfit for occupancy by fire or other
casualty, or if Landlord shall decide not to repair or rebuild, this lease shall
terminate and the rent shall be paid to the time of such casualty.
14. TENANT DEFAULT. If Tenant abandons the premises or otherwise
defaults in the performance of any obligations or covenants herein, Landlord may
enforce the performance of this lease in any manner provided by law. This lease
may be terminated at Landlord's discretion if such abandonment or default
continues for a period of 10 days after Landlord notifies Tenant of such
abandonment or default and of Landlord's intention to declare this lease
terminated. Such notice shall be sent by Landlord to Tenant at the leased
premises by certified mail or otherwise. If Tenant has not completely removed or
cured default within the 10 day period, this lease shall terminate. Thereafter,
Landlord or its agents shall have the right, without further notice or demand,
to enter the leased premises and remove all persons and property without being
deemed guilty of trespass and without waiving any other remedies for arrears of
rent or breach of covenant. Upon abandonment or default by Tenant, the remaining
unpaid portion of the rental from paragraph 4 herein, shall become due and
payable.
15. LIEN. Landlord is granted an express contractual lien, in addition
to any lien provided by law, and a security interest in all property of Tenant
found on the leased premises to secure the compliance by Tenant with all terms
of this lease. In the event of default, Landlord or its agents may peaceably
enter the leased premises and remove all property and dispose of same as
Landlord shall see fit.
16. SUBORDINATION. Landlord is hereby irrevocably vested with full
power and authority to subordinate this lease to any mortgage, deed of Trust, or
other lien hereafter placed on the demised premised and Tenant agrees on demand
to execute such further instruments subordinating this lease as Landlord may
request, provided such subordination shall be on the express condition that this
lease shall be recognized by the mortgagee, and the rights of Tenant shall
remain in full force and effect during the term
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<PAGE> 5
of this lease so long as Tenant shall continue to perform all of the covenants
and conditions of this lease.
17. INDEMNITY. Landlord and its employees and agents shall not be
liable to Tenant or to Tenant's employees, patrons, visitors, invitees, or any
other persons for any injury to any such persons or for nay damage to personal
property caused by an act, omission, or neglect of Tenant or Tenant's agents or
of any other tenant of the premises of which the leased premises is a part.
Tenant agrees to indemnify and hold Landlord and its employees and agents
harmless from any and all claims for such injury and damages, whether the injury
occurs on or off the leased premises.
18. SIGNS. Tenant shall not post or paint any signs at, on, or about
the leased premises or paint the exterior walls of the building except with the
prior written consent of the Landlord. Landlord shall have the right to remove
any sign or signs in order to maintain the leased premises or to make any
repairs or alterations thereto.
19. TENANT BANKRUPTCY. If Tenant becomes bankrupt or makes voluntary
assignment for the benefits of creditors or if a receiver is appointed for
Tenant, Landlord may terminate this lease by giving five (5) days written notice
to Tenant of Landlord's intention to do so.
20. CONDEMNATION. If the whole or any substantial par of the leased
premises is taken for any public or quasi-public use under any governmental law,
ordinance or regulation or by right of eminent domain or should the leased
premises be sold to a condemning authority under threat of condemnation, this
lease shall terminate and the rent shall be abated during the unexpired portion
of the lease effective from the date of the physical taking of the leased
premises.
21. BROKER'S FEE. ZANN COMMERCIAL BROKERAGE, INC. Broker and CB RICHARD
ELLIS Co-Broker, as Real Estate Broker (the Broker) has negotiated this lease
and Landlord agrees to pay Broker in Harris County, Texas, upon commencement of
this lease, a negotiated fee of $________ or 6% of the total rental provided for
in this lease to be divided as follows: 4% to co-broker, 2% to broker. In the
event this lease is extended, expanded or renewed, Landlord agrees to pay Broker
an additional negotiated fee of $________ or 4% of the total rental for such
extension, expansion or renewal period, payable at the time of commencement of
such extension, expansion or renewal, said fee to be divided as follows: 3% to
co-broker, 1% to broker. Tenant warrants that it has had no dealings with any
real estate broker or agents in connection with the negotiation of this lease
excepting only CB RICHARD ELLIS and it knows of no other real estate broker or
agent who is entitled to a commission in connection with this Lease. If Tenant
during the term of this Lease, or any extension, expansion or renewal period
thereof, or within 180 days of the expiration of this Lease, or any extension,
expansion or renewal period thereof, purchases the property herein leased,
Landlord agrees to pay Broker,_________________ in Harris County, Texas, a
negotiated fee of $__________ or 6% of the sales price upon closing of the sale
of this property.
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22. NOTICES. Notices to Tenant shall be by certified mail or other
delivery to the leased premises. Notices to Landlord shall be by certified mail
to the place where rent is payable.
23. DEFAULT BY LANDLORD. In the event of breach by Landlord of any
covenant, warranty, term or obligation of this lease, then Landlord's failure to
cure same or commence a good faith effort to cure same within 10 days after
written notice thereof by Tenant shall be considered a default and shall entitle
Tenant either to terminate this lease or cure the default and make the necessary
repairs and any expense incurred by Tenant shall be reimbursed by the Landlord
after reasonable notice of the repairs and expenses incurred. If any utility
services furnished by Landlord are interrupted and continue to be interrupted
despite the good faith efforts of Landlord to remedy same, Landlord shall not be
liable in any respect for damages to the person or property of Tenant or
Tenant's employees, agents, or guests, and same shall not be construed as
grounds for constructive eviction or abatement of rent. Landlord shall use
reasonable diligence to repair and remedy such interruption promptly.
24. SIGNS. During the last 90 days of this lease, a "For Sale" sign
and/or a "For Lease" sign may be displayed on the leased premises and the leased
premises may be shown at reasonable times to prospective purchasers or tenants.
25. RIGHT OF ENTRY. Landlord shall have the right during normal
business hours to enter the demised premises; a) to inspect the general
condition and state of repair thereof, b) to make repairs required or permitted
under this lease, or c) for any other reasonable purpose.
26. WAIVER OF BREACH. The waiver by Landlord of any breach of any
provision of this lease shall not constitute a continuing waiver or a waiver of
any subsequent breach of the same or a different provision of this lease.
27. TIME OF ESSENCE. Time is expressly declared to be of the essence in
this lease.
28. BINDING OF HEIRS AND ASSIGNS. Subject to the provisions of this
lease pertaining to assignment of the Tenant's interest, all provisions of this
lease shall extend to and bind, or inure to the benefit not only of the parties
to this lease but to each and every one of the heirs, executors,
representatives, successors, and assigns of Landlord or Tenant.
29. RIGHTS AND REMEDIES CUMULATIVE. The rights and remedies by this
lease agreement are cumulative and the use of any one right or remedy by either
party shall not preclude or waive its right to use any or all other remedies.
Said rights and remedies are given in addition to any other rights the parties
may have by law, statute, ordinance, or otherwise.
30. TEXAS LAW TO APPLY. This agreement shall be construed under and in
accordance with the laws of the State of Texas.
6
<PAGE> 7
31. LEGAL CONSTRUCTION. In case any one or more of the provisions
contained in this agreement shall for any reason be held to be invalid, illegal,
or unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any other provision hereof and this agreement
shall be construed as if such invalid, illegal, or unenforceable provision had
never been contained herein.
32. PRIOR AGREEMENTS SUPERCEDED. This agreement constitutes the sole
and only agreement of the parties to this lease and supersedes any prior
understandings or written or oral agreements between the parties respecting the
subject matter of this lease.
33. AMENDMENT. No amendment, modification, or alteration of the terms
hereof shall be binding unless it is in writing, dated subsequent to the date
hereof, and duly executed by the parties.
34. ATTORNEY'S FEES. Any signatory to this lease agreement who is the
prevailing party in any legal proceeding against any other signatory brought
under or with relation to this lease agreement or this transaction shall be
additionally entitled to recover court costs, reasonable attorney fees, and all
other out-of-pocket costs of litigation, including deposition, travel and
witness costs, from the nonprevailing party.
35. SPECIAL PROVISIONS. (This section to include additional factual
data not included above.)
See attached Exhibit B SPECIAL PROVISIONS
EXECUTED this ____ day of __________, 19___.
TENANT or TENANTS LANDLORD
COMPUTER EXTENSION SYSTEMS, INC.
- ------------------------------ ---------------------------------
/s/ /s/ Kurt Wagner, President
REAL ESTATE BROKER REAL ESTATE BROKER
CB RICHARD ELLIS ZANN COMMERCIAL BROKERAGE, INC.
License No. 0433521
By:___________________________ By:______________________________
[Note: This form has been prepared by Babb & Hanna, P.C., attorneys for
the Texas Association of REALTORS (TAR). Babb & Hanna, P.C. has approved this
form for use by TAR member brokers and salespersons for the purpose of leasing
improved commercial real property for business purposes. This form has not been
drafted for a specific transaction, therefore, the parties are advised to
consult an attorney of their choice before signing.]
7
<PAGE> 1
EXHIBIT 10.102
AGREEMENT OF SALE AND PURCHASE OF LEASEHOLD INTEREST
between
EASTERN AMERICAN TECHNOLOGIES CORPORATION
(formerly known as Eastern American Teak Corporation),
as Seller
and
SPACEHAB, INCORPORATED,
as Buyer
<PAGE> 2
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Agreement to Sell and Purchase............................................ 1
2. Purchase Price............................................................ 1
3. Closing................................................................... 1
4. Documents to be Delivered at Closing by Seller............................ 2
5. Documents to be Delivered at Closing by Buyer............................. 2
6. Representations and Warranties of Seller.................................. 2
7. Survival.................................................................. 3
8. Environmental Matters..................................................... 4
9. Notices................................................................... 5
10. Miscellaneous............................................................. 7
</TABLE>
(i)
<PAGE> 3
AGREEMENT OF SALE AND PURCHASE
THIS AGREEMENT made this _____ day of August, 1997, by and
between EASTERN AMERICAN TECHNOLOGIES CORPORATION (formerly known as Eastern
American Teak Corporation), having an address at 720 Mullet Road, Suite H, Cape
Canaveral, Florida 32920 ("Seller") and SPACEHAB, INCORPORATED having an address
at 1595 Spring Hill Road, Suite 360, Vienna, Virginia 22182 ("Buyer").
WITNESSETH :
In consideration of the covenants and provisions contained in
this Agreement, the parties agree as follows:
1. Agreement to Sell and Purchase. Seller agrees to sell to
Buyer, and Buyer agrees to purchase from Seller, subject to all of the terms and
conditions of this Agreement, Seller's interest (the "Interest") in that certain
Lease Agreement between Canaveral Port Authority ("CPA"), as lessor, and Seller,
as lessee, dated February 1, 1991, for certain real property located at State
Road #401 and 620 Magellan Road in Port Canaveral, County of Brevard, State of
Florida, as more particularly described on Schedule A attached hereto.
2. Purchase Price.
(a) Purchase Price. The purchase price ("Purchase Price") for
the Interest, subject to adjustments as provided in this Agreement, shall be One
Million Six Hundred Thousand Dollars ($1,600,000) and shall be paid by Buyer to
Seller at Closing (as hereinafter defined) by wire transfer of immediately
available funds.
3. Closing. The closing and settlement of this transaction
("Closing") shall take place by mail. Closing shall be on August __, 1997, or on
such earlier date as Buyer shall designate by at least five (5) days' prior
written notice to Seller (the "Closing Date").
4. Buyer's Conditions to Closing. Buyer's obligation to
purchase the interest is subject to the following:
(a) compliance by Seller with its obligations hereunder;
(b) Buyer's receipt of an irrevocable title insurance
commitment issued by a reputable title insurance company selected by
Buyer and the premium shall have been paid in full by Seller insuring
the Interest in a form reasonably satisfactory to Buyer with the title
insurance policy to be delivered post-Closing;
(c) Buyer's receipt of a Collateral Assignment of Lease
executed by CPA in a form reasonably satisfactory to Buyer, a form of
which is attached hereto as Exhibit ;
<PAGE> 4
(d) CIT shall have funded Spacehab $3,719,025 of which
$1,600,000 shall be used to pay the Purchase Price;
(e) receipt by CIT of a title insurance commitment followed by
a policy of title insurance issued at Buyer's expense by a reputable
title insurance company selected by CIT insuring CIT's lien on the
Interest; and
(f) Buyer's receipt of evidence of CPA's consent to the
assignment of the Interest and a landlord's estoppel by CPA, each in a
form reasonably satisfactory to Buyer.
5. Seller's Conditions to Closing. Seller's obligation to sell
the interest is subject to the compliance by Buyer with its obligations
hereunder.
6. Documents to be Delivered at Closing by Seller. At Closing,
Seller shall deliver to Buyer the following documents duly executed by Seller,
acknowledged and in recordable form, where appropriate, and dated as of the date
of Closing:
(a) the Assignment and Assumption of Lease in form and
substance satisfactory to the parties hereto, together with the Lease,
the cost of documentary stamp tax and recording to be paid by Buyer;
and
(b) any other document reasonably deemed necessary by Buyer.
7. Documents to be Delivered at Closing by Buyer. At Closing,
Buyer shall deliver to Seller the following documents duly executed by Buyer,
acknowledged and in recordable form, where appropriate, and dated as of the date
of Closing:
(a) the Assignment and Assumption of Lease in form and
substance satisfactory to the parties hereto and to CPA; and
(b) any other document reasonably deemed necessary by Seller.
8. Representations and Warranties of Seller. Seller, to induce
Buyer to enter into this Agreement and to complete Closing, makes the following
representations and warranties to Buyer, which representations and warranties
are true and correct as of the date of this Agreement, and shall be true and
correct at and as of the Closing Date in all respects as though such
representations and warranties were made both at and as of the date of this
Agreement and at and as of the Closing Date.
(a) Seller was duly organized as a corporation and is in good
standing under the laws of the State of its formation and in the State where the
Property is located, and is qualified to do business in the state where the
Property is located.
(b) The execution and delivery of this Agreement and the
performance by Seller of its obligations under it have been duly authorized by
all requisite corporate
2
<PAGE> 5
action, and will not conflict with or result in a breach of any of the terms,
conditions or provisions of the Certificate of Incorporation or Bylaws of
Seller, and will not conflict with or result in a breach of any law, regulation
or order, or any agreement or instrument to which Seller is a party or by which
Seller is bound or the Property is subject; and this Agreement and the documents
to be delivered by Seller pursuant to this Agreement, will each constitute the
legal, valid, and binding obligations of Seller, enforceable in accordance with
their respective terms, covenants, and conditions.
(c) To the best knowledge of Seller, there is no action, suit
or proceeding pending or threatened against or affecting Seller or the Property,
or relating to or arising out of Seller's ownership of the Interest, in any
court or before or by any federal, state, county or municipal department,
commission, board, bureau, or agency or other governmental instrumentality.
(d) Buyer has been in full possession and occupancy of the
Property since August 6, 1991 and Seller has not conducted any activity on the
Property since August 7, 1992.
9. Representations and Warranties of Buyer.
(a) Buyer was duly organized as a corporation and is in good
standing under the laws of the State of its formation and in the State where the
Property is located, and is qualified to do business in the state where the
Property is located.
(b) The execution and delivery of this Agreement and the
performance by Buyer of its obligations under it have been duly authorized by
all requisite corporate action, and will not conflict with or result in a breach
of any of the terms, conditions or provisions of the Certificate of
Incorporation or Bylaws of Buyer, and will not conflict with or result in a
breach of any law, regulation or order, or any agreement or instrument to which
Buyer is a party or by which Buyer is bound or the Property is subject; and this
Agreement and the documents to be delivered by Buyer pursuant to this Agreement,
will each constitute the legal, valid, and binding obligations of Buyer,
enforceable in accordance with their respective terms, covenants, and
conditions.
10. Survival.
(a) Surviving Representations and Warranties. The
representations and warranties of Seller set forth in Section 8 shall remain in
effect for a period of two (2) years following the Closing Date and also
thereafter if Buyer shall have given to Seller notice of a breach thereof within
such two-year period.
(b) Notices. Promptly after receipt thereof by Seller, Seller
shall deliver to Buyer a copy of any notice of default given or received under
the Lease.
11. Environmental Matters.
(a) Representations and Warranties. Seller represents and
warrants to Buyer that:
3
<PAGE> 6
(i) As of August 7, 1992 and to the best of Seller's knowledge
without inquiry, the Property and all activities and conditions at the
Property were in compliance with the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C.Sections 9601 et
seq., as amended from time to time ("CERCLA"), the Resource
Conservation and Recovery Act, 42 U.S.C. Sections 6901 et seq., as
amended from time to time ("RCRA"), the Clean Water Act, 33 U.S.C.
Sections 1251 et seq., as amended from time to time, the Clean Air Act,
42 U.S.C. Sections 7401 et seq., as amended from time to time, the
Toxic Substances Control Act, 15 U.S.C. Sections 2601 et seq., as
amended from time to time, and with all other federal, state and local
environmental statutes, ordinances, regulations, orders and
requirements of common law, including without limitation: (A) those
relating to the construction, operation, maintenance or repair of any
improvements or equipment or other Personal Property, (B) the
discharge, emission or release of any Contaminant (hereinafter defined)
to the air, soil, surface water or ground water; the discharge of any
dredge or fill material to a wetland or other water of the United
States (as hereinafter defined), (C) the storage, treatment, disposal
or handling of any Contaminant, or (D) the construction, operation,
maintenance or repair of aboveground or underground storage tanks
(collectively, "Environmental Laws").
(ii) As of August 7, 1992, Seller did not, nor to the best of
its knowledge without inquiry did anyone else, generate, store, treat,
dispose of, discharge, release, emit or otherwise handle any
Contaminant on, over, under, from or in any manner affecting the
Property. The term "Contaminant" shall mean any "hazardous substance",
"pollutant or contaminant" as defined pursuant to CERCLA, "petroleum"
as defined pursuant to RCRA or any material containing petroleum, any
polychlorinated biphenyls ("PCBs") or substances containing PCBs, any
urea formaldehyde foam, or any asbestos or materials containing
asbestos; provided, the term "Contaminant" shall not include
construction materials (other than asbestos, PCBs or urea formaldehyde
foam), office equipment, fuel and other similar products contained in
vehicles and cleaning solutions and other maintenance materials that
are customarily used or stored incidental to and are reasonably
necessary for the operation or maintenance of the Property.
(iii) As of August 7, 1992 Seller disclosed to Buyer the
location of all underground or aboveground storage tanks located at the
Property.
(iv) Seller has to the best of its knowledge without inquiry
provided Buyer with copies of all: (A) permits, licenses, certificates,
registrations, approvals, and any amendments thereto, required for the
Property and for the use of the Property pursuant to or necessary for
compliance with Environmental Laws; (B) applications, reports or other
materials submitted to any governmental agency in connection with any
Environmental Law; (C) records or manifests required to be maintained
pursuant to Environmental Laws or which are relevant to the issue of
compliance with Environmental Laws; (D) correspondence, notices of
violation, summonses, orders, administrative, civil or criminal
complaints,
4
<PAGE> 7
requests for information or other documents received by Seller or its
agents pertaining to compliance with Environmental Laws or the
generation, storage, treatment, handling, discharge, emission, release
or migration of any Contaminant on, over, under, from or affecting the
Property; and (E) records and analyses of any environmental tests
pertaining to the Property, including without limitation the results of
any air, water or soil analyses or tank integrity testing, which are in
the possession of Seller.
(v) No notice has been received by Seller that any civil,
criminal or administrative proceeding is pending or threatened relating
to Environmental Laws or Contaminants on, over, under, from or
affecting the Property; Seller has not received any notice of violation
or potential liability regarding the Property or activities thereon
relating to Environmental Law or Contaminants on, over, under, from or
affecting the Property and Seller has no reason to believe such notices
will be received and has no reason to know of circumstances that would
give rise to such notices or proceedings in the future; Seller has not
entered into any consent order, consent decree, administrative order,
judicial order or settlement relating to Environmental Laws or
Contaminants on, over, under, migrating from or affecting the Property.
(b) Cooperation. Seller will assist Buyer in giving notice to
applicable government agencies and in transferring or reissuing to Buyer any
permit, license, certificate, registration or other approval necessary to
continue operations at the Property, or in obtaining for Buyer any new permit,
license, certificate, registration or approval required of Buyer under any
Environmental Law.
(c) Survival. The provisions of this Section 11 shall survive
Closing.
12. Notices.
(a) Written. All notices, demands, requests or other
communications from each party to the other required or permitted under the term
of this Agreement shall be in writing and, unless and until otherwise specified
in a written notice by the party to whom notice is intended to be given, shall
be sent to the parties at the following respective addresses:
if intended for Seller:
Eastern American Technologies Corporation
720 Mullet Road, Suite H
Cape Canaveral, Florida 32920
Fax No.: (407) 799-1245
Attention: Mr. Gene Smith
5
<PAGE> 8
with a copy to:
Dean, Mead, Spielvogel, Goldman & Boyd
101 South Courtenay Parkway
P.O. Box 541366
Merritt Island, Florida 32954-1366
Fax No.: (407) 453-8641
Attention: Leonard Spielvogel, Esq.
if intended for Buyer:
Spacehab, Incorporated
1595 Spring Hill Road, Suite 360
Vienna, Virginia 22182
Fax No.: (703) 821-3070
Attention: William Dawson, Esq.
with a copy to:
Dewey Ballantine
1301 Avenue of the Americas
New York, New York 10019
Fax No.: 212/259-6333
Attention: Frank E. Morgan, II, Esq.
Notices may be given on behalf of any party by its legal counsel.
(b) Manner of Giving. Each such notice, demand, request or
other communication shall be given (i) against a written receipt of delivery,
(ii) by registered or certified mail of the United States Postal Service, return
receipt requested, postage prepaid, or (iii) by a nationally recognized
overnight courier service for next business day delivery, or (iv) delivered via
telecopier or facsimile transmission to the facsimile number listed above,
provided, however, that if such communication is given via telecopier or
facsimile transmission, an original counterpart of such communication shall
concurrently be sent in either the manner specified in clause (i) or (iii)
above.
(c) Deemed Given. Each such notice, demand request, or other
communication shall be deemed to have been given upon the earliest of (i) actual
receipt or refusal by the addressee, or (ii) deposit thereof at any main or
branch United States post office if sent in accordance with section (b)(ii)
above or (iii) deposit thereof with the courier if sent pursuant to section
(b)(iii) above.
13. Miscellaneous.
(a) Captions. The captions in this Agreement are inserted for
convenience of reference only; they form no part of this Agreement and shall not
affect its interpretation.
6
<PAGE> 9
(b) Successors and Assigns. With respect to Seller, this
Agreement shall not be assignable; provided, however, that any representations
and warranties that survive Closing pursuant to the terms hereof shall be
binding on Seller's successors and assigns. This Agreement shall be binding upon
and shall inure to the benefit of Buyer and its heirs, personal representatives,
successors and assigns.
(c) Entire Agreement; Governing Law. This Agreement contains
the entire understanding of the parties with respect to the subject matter
hereof, supersedes all prior or other negotiations, representations,
understandings and agreements of, by or among the parties, express or implied,
oral or written, which are fully merged herein. The express terms of this
Agreement control and supersede any course of performance and/or customary
practice inconsistent with any such terms. Any agreement hereafter made shall be
ineffective to change, modify, discharge or effect an abandonment of this
Agreement unless such agreement is in writing and signed by the party against
whom enforcement of such change, modification, discharge or abandonment is
sought. This Agreement shall be governed by and construed under the laws of the
State of Florida.
(d) Provisions Separable. The provisions of this Agreement are
independent of and separable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other provision may be invalid or unenforceable in whole or in part.
(e) Gender, etc. Words used in this Agreement, regardless of
the number and gender specifically used, shall be deemed and construed to
include any other number, singular or plural, and any other gender, masculine,
feminine or neuter, as the context indicates is appropriate.
(f) Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original as against any
party whose signature appears thereon, and all of which shall together
constitute one and the same instrument. This Agreement shall be binding when one
or more counterparts hereof, individually or taken together, shall bear the
signatures of all of the parties reflected on this Agreement as the signatories.
(g) No Waiver. Neither the failure nor any delay on the part
of either party to this Agreement to exercise any right, remedy, power or
privilege under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, remedy, power or privilege preclude any
other or further exercise of the same or of any other right, remedy, power or
privilege, nor shall any waiver of any right, remedy, power or privilege with
respect to any occurrence be construed as a waiver of any such right, remedy,
power or privilege with respect to any other occurrence. No waiver shall be
effective unless it is in writing and is signed by the party asserted to have
granted such waiver.
(h) Interpretation. No provision of this Agreement is to be
interpreted for or against either party because that party or that party's legal
representative or counsel drafted such provision.
7
<PAGE> 10
(i) Time. Time is of the essence of this Agreement. In
computing the number of days for purposes of this Agreement, all days shall be
counted, including Saturdays, Sundays and holidays; provided, however, that if
the final day of any time period provided in this Agreement shall end on a
Saturday, Sunday or legal holiday, then the final day shall extend to 5:00 p.m.
of the next full business day. For the purposes of this Section, the term
"holiday" shall mean a day other than a Saturday or Sunday on which banks in the
state in which the Property is located are or may elect to be closed.
(j) Buyer's Exercise of Right to Terminate. If Buyer desires
to terminate its obligations under this Agreement pursuant to any of the
provisions hereof, Buyer shall do so by delivering written notice of termination
to Seller. Upon any such termination, this Agreement shall be and become null
and void and neither party shall have any further rights or obligations under
this Agreement.
(k) Confidentiality. No press release or other public
disclosure concerning the transaction contemplated by this Agreement shall be
made by either party without the prior written consent of the other.
IN WITNESS WHEREOF, intending to be legally bound, the parties
have executed this Agreement as a sealed instrument as of the day and year first
above written.
Witness: SELLER:
EASTERN AMERICAN TECHNOLOGIES
CORPORATION, a Florida corporation
- ------------------------------
By /s/ Henry Happel (SEAL)
-------------------------------------
Name: Henry Happel
Title: President
Witness: BUYER:
SPACEHAB, INCORPORATED, a Washington
corporation
- ------------------------------
By (SEAL)
-------------------------------------
Name:
Title:
8
<PAGE> 1
EXHIBIT 11
SPACEHAB, INCORPORATED AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT SHARE DATA) YEAR YEAR YEAR
ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30,
------------ ------------ ------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net Income (loss) and Adjusted Earnings:
Net income (loss) applicable to common
Shareholders used for primary
Computations $ (2,589) $ 9,604 $ 13,832
------------ ------------ ------------
Fully diluted adjustments:
Savings in convertible note payable interest expense,
net of tax 3,036 2,625 --
------------ ------------ ------------
Adjusted net income applicable to
Common shareholders assuming full dilution $ 447 $ 12,229 $ 13,832
============ ============ ============
Average number of shares of common stock
used for basic computation 11,184,742 11,154,271 11,118,825
------------ ------------ ------------
Diluted adjustments (1):
Weighted Average Shares and Share
Equivalents Outstanding:
Stock options assumed exercised at average
Fair market value 109,928 269,898 14,168
Assumed conversion of convertible debt 4,642,202 3,147,109 27,329
------------ ------------ ------------
Total number of shares assumed to be
Outstanding assuming full dilution 15,936,872 14,571,278 11,186,886
------------ ------------ ------------
Earnings Common Per Share:
Income (loss) per common share:
Income (loss) before extraordinary item ($ 0.23) $ 0.86 $ 0.95
Extraordinary item -- -- 0.29
------------ ------------ ------------
Basic ($ 0.23) $ 0.86 $ 1.24
============ ============ ============
Income (loss) before extraordinary item $ 0.03 $ 0.84 $ 0.95
Extraordinary item -- -- 0.29
------------ ------------ ------------
Diluted (1): $ 0.03 $ 0.84 $ 1.24
------------ ------------ ------------
</TABLE>
(1) The assumed exercise of options and warrants and the conversion of
convertible debt is anti-dilutive but are included in the calculation of
dilutive earnings per share in accordance with Regulation S-K Item 601 (a)(11).
<PAGE> 1
EXHIBIT 23
ACCOUNTANTS' CONSENT
The Board of Directors
SPACEHAB, Incorporated:
We consent to incorporation by reference in the registration statements (Nos.
333-3634, 333-36779, 333-43159, and 333-43181) on Form S-8 and the registration
statement (No. 333-43221) on Form S-3 of SPACEHAB, Incorporated of our report
dated August 13, 1999, relating to the consolidated balance sheets of SPACEHAB,
Incorporated and subsidiary as of June 30, 1999 and 1998, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three-year period ended June 30, 1999 which report
appears in the June 30, 1999, annual report on Form 10-K of SPACEHAB,
Incorporated.
KPMG LLP
McLean, Virginia
September 16, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001001907
<NAME> SPACEHAB, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1,000
<CASH> 21,346
<SECURITIES> 0
<RECEIVABLES> 17,471
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 39,963
<PP&E> 181,431
<DEPRECIATION> 49,247
<TOTAL-ASSETS> 204,346
<CURRENT-LIABILITIES> 27,589
<BONDS> 0
0
0
<COMMON> 81,585
<OTHER-SE> 16
<TOTAL-LIABILITY-AND-EQUITY> 204,346
<SALES> 107,720
<TOTAL-REVENUES> 107,720
<CGS> 89,283
<TOTAL-COSTS> 89,283
<OTHER-EXPENSES> 18,235
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,906
<INCOME-PRETAX> (3,088)
<INCOME-TAX> (499)
<INCOME-CONTINUING> (2,589)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,589)
<EPS-BASIC> (0.23)
<EPS-DILUTED> (0.23)
</TABLE>
