-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Qle6Te2VhyXwwgjq9IPV8x0U8PQ+tJ7fNPLtjral3PtZxniIuql6OgkGCwAiNGTm 31MZNgRZGhYjiRsQEu1zjw== 0000950133-98-003325.txt : 19980918 0000950133-98-003325.hdr.sgml : 19980918 ACCESSION NUMBER: 0000950133-98-003325 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980917 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPACEHAB INC \WA\ CENTRAL INDEX KEY: 0001001907 STANDARD INDUSTRIAL CLASSIFICATION: GUIDED MISSILES & SPACE VEHICLES & PARTS [3760] IRS NUMBER: 911273737 STATE OF INCORPORATION: WA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-27206 FILM NUMBER: 98711049 BUSINESS ADDRESS: STREET 1: 1595 SPRING HILL ROAD STREET 2: STE 360 CITY: VIENNA STATE: VA ZIP: 22182 BUSINESS PHONE: 7038213000 MAIL ADDRESS: STREET 1: 1595 SPRING HILL ROAD STREET 2: SUITE 360 CITY: VIENNA STATE: VA ZIP: 22182 10-K 1 SPACEHAB, INC. FORM 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K (Mark One) [ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [No Fee Required] For the Fiscal Year Ended June 30, 1998. [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [No Fee Required] For the transition period from _____________ to ____________ Commission File No. 0-27206 SPACEHAB, INCORPORATED 1595 SPRING HILL ROAD, SUITE 360 VIENNA, VA 22182 (703) 821-3000 Incorporated in the State of Washington IRS Employer Identification Number 91-1273737 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Title of Each Class Name of Each Exchange Common Stock on which Registered (no par value) NASDAQ National Market Number of shares of Common Stock (no par value) outstanding as of July 24, 1998: 11,168,161. Aggregate market value of Common Stock (no par value) held by non-affiliates of the registrant on July 24, 1998, based upon the closing price of the Common Stock on the Nasdaq National Market of $10.625 was approximately $106,387,137. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO . --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]. DOCUMENTS INCORPORATED BY REFERENCE: Proxy Statement for the Annual Meeting of Stockholders to be held October 20, 1998. Parts I, II and III of Form 10-K 2 PART I This document may contain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including (without limitation) under "Products and Services," "Company Strategy," "Dependence on a Single Customer," "Research and Development," "Competition" and "Backlog" of Item 1 and "Management's Discussion and Analysis of Financial Condition and Results of Operations -- General" and "--Liquidity and Capital Resources" of Item 7. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected in such statements. In addition to those risks and uncertainties discussed herein, such risks and uncertainties include, but are not limited to, whether the Company will fully realize the economic benefits under its U.S. National Aeronautics and Space Administration ("NASA") and other customer contracts, the successful development and commercialization of the Research Double Module, the unpressurized logistics carrier system, the ("Integrated Cargo Carrier" or "ICC") system and related new commercial space assets, technological difficulties, product demand and market acceptance risks, the effect of economic conditions, uncertainty in government funding and the impact of competition. ITEM 1. BUSINESS COMPANY BACKGROUND AND HISTORY SPACEHAB, Incorporated ("SPACEHAB" or the "Company") was incorporated in 1984 and is the first company to commercially develop, own and operate pressurized habitable modules that provide space-based laboratory research facilities and cargo services aboard the U.S. Space Shuttle system (the "Space Shuttle" or "STS"). A SPACEHAB Single Module, when installed in the cargo bay of a Space Shuttle, more than doubles the working and living space available to astronauts for research, experimentation, habitation and storage. The Company presently offers its SPACEHAB Modules in a single modular version (the "Single Module"), a logistics double modular version (the "Logistics Double Module" or "LDM") and is currently developing a research double module (the "Research Double Module" or "RDM") and an unpressurized logistics carrier system, the ICC, for use in conjunction with its modules. During the second half of fiscal 1998, the Company initiated development activities for a new asset, a docking double module (the "Docking Double Module" or "DDM"), that could be used by NASA to maintain the International Space Station ("ISS") in proper orbit while providing more flexible re-supply services to the ISS. The Docking Double Module is intended to carry logistics and perform research on Space Shuttle missions to the ISS and enable the Space Shuttle to re-boost and reposition the ISS. All versions of the SPACEHAB Modules can accommodate a combination of lockers, racks and soft stowage arrangements, which are provided as a service primarily to NASA. SPACEHAB Modules, which have been outfitted with systems to facilitate laboratory research experiments in the near-weightless ("microgravity") environment of space, are also capable of transporting food, clothing, equipment and other vital supplies (collectively, "logistics") to the planned ISS. SPACEHAB also provides a full range of pre-and post-flight experiment and payload processing services, and in-flight operations support to assist astronauts and researchers, in space and on the ground, in connection with the performance of experiments aboard SPACEHAB Modules. From June 1993 through June 1998, SPACEHAB Modules have flown eleven successful missions on the Space Shuttle. To broaden the opportunities for companies to conduct space research, SPACEHAB has established a "Microgravity Staircase" that provides a comprehensive portfolio of ground-based, sub-orbital and space-based research facilities. During fiscal year 1998, SPACEHAB completed a series of marketing agreements, asset acquisitions and joint ventures that now enable SPACEHAB to offer researchers progressive exposure to the microgravity environment. 2 3 The Company is committed to expanding its business with NASA while also diversifying its revenue and customer base by targeting new and related space services markets. In addition to the Company's Astrotech subsidiary, acquired on February 12, 1997, SPACEHAB, on July 1, 1998, expanded its core business by acquiring Johnson Engineering Corporation ("JE"). With over 450 employees, JE performs several critical services for NASA including managing all training operations and facility engineering at the Neutral Buoyancy Laboratory (the "NBL"), NASA's underwater facility where astronauts train for space walks and ISS assembly procedures. INDUSTRY OVERVIEW The U.S. space program encompasses four broad objectives: to advance scientific research, to establish a permanent human presence in space, to develop new technologies that contribute to U.S. economic growth and security and to foster improved international relations through peaceful cooperation in space with Europe, Japan, Russia and other nations. SPACEHAB is focused on two markets: (i) microgravity and life sciences space research and (ii) space support services such as space station logistics and resupply, ground operations and payload processing and training. Microgravity and Life Sciences Space Research In orbit, the forces of inertia and gravity counterbalance each other, thereby creating a condition of near weightlessness known as "microgravity." In a microgravity environment, materials and living matter behave in fundamentally different ways than they do on Earth. This phenomenon has stimulated worldwide interest from scientists and commercial researchers who are seeking improved ways to manipulate and process materials and to study biological processes that cannot otherwise be achieved in ground-based laboratories. The demand for access to a microgravity environment can be divided into two broad categories: scientific research and commercial applications. NASA and other U.S. and international government research organizations provide support for both basic scientific research and its commercial applications to determine the fundamental effects that gravity has on physical processes. Space Support Services and Training Space support services include providing logistics and payload processing support to NASA, other governments and commercial customers of the Space Shuttle and the ISS. Permanently orbiting facilities such as the Russian space station Mir and the planned ISS require reliable sources of logistics: food, clothing, equipment and supplies that sustain the astronauts and enable them to conduct research. NASA's current plans call for the Space Shuttle to be launched at least seven times per year for the foreseeable future. As currently planned, the ISS will require approximately five Space Shuttle logistics missions per year. In order to support the Space Shuttle and ISS operations, NASA requires ground operations and payload support services before and after each mission. Payload processing operations entail payload scheduling, mission planning, safety/certification analysis, physical integration of the payload into its carrier (such as SPACEHAB modules), the integration of the carriers into the Space Shuttle's cargo bay, flight operations, technical data gathering and synthesis, and launch and landing site activities. Space support services also involve the provision of specialized services and support near launch sites for commercial satellite manufacturers and launch services. These activities include mechanical assembly or re-assembly, electrical check, calibration, liquid propellant loading and related activities. A significant component of Space Support Services includes managing all training operations and facility engineering at the NBL. NASA also requires design and fabrication of full-scale mockups of the ISS elements used in NBL training and the development of hardware for the ISS crew living quarters that is 3 4 scheduled for launch in 2003. PRODUCTS AND SERVICES SPACEHAB Single Modules are aluminum cylinders, measuring 10 feet in length by 13.5 feet in diameter, that incorporate a patented design including a truncated top and flat-end caps. These fully instrumented modules provide experiment resources such as power, data management, thermal control and vacuum venting. SPACEHAB Single Modules are employed primarily for research missions. In fiscal 1996, the Company completed a development program and introduced the Logistics Double Module. This module was optimized to carry logistics and was used by NASA to carry vital supplies to the astronauts and cosmonauts who reside on the Russian space station Mir. SPACEHAB invested $12.5 million in the design, development, and production of the Logistics Double Module. During fiscal 1997, in an effort to anticipate the needs of customers, the Company began the full-scale development and construction of its Research Module with double module hardware, which when combined with a Single Module becomes the RDM. The RDM will be fully dedicated to microgravity research and is expected to be available in late 1999. Expenditures for the RDM through fiscal 1998 were $25.7 million. The Company anticipates additional expenditures of approximately $11.1 million to complete this asset and place it into service. The Company expects that the RDM will meet or exceed all of NASA's projected requirements for dedicated microgravity and life sciences research that had been performed by Spacelab, the U.S. government-owned habitable module, which was retired after its final mission in April 1998. As a result of the retirement of NASA's Spacelab, the Company believes that its flight-proven modules position SPACEHAB to become the sole provider of module based crew-tended microgravity research capabilities for the Space Shuttles. The RDM is currently under contract and is manifested to fly on its initial mission in September 2000. The Company also initiated preliminary development activities for the DDM, which could be used by NASA to maintain the ISS in the proper orbit while providing more flexible re-supply services to the ISS. SPACEHAB has addressed the need to carry unpressurized cargo to the ISS by designing and developing the ICC. The ICC will be used in combination with SPACEHAB Single or Double Modules to provide the optimum mix of pressurized and unpressurized cargo on a single mission to the ISS. The ICC is to be flown on the first resupply mission to the ISS, which is currently scheduled for May 1999. In 1998, the Company built on a foundation of existing microgravity research capabilities by establishing a "Microgravity Staircase" that offers researchers a broader array of services to tailor experiments to specific microgravity environments and budgets. The first step of the staircase provides 30 seconds of Microgravity aboard an airplane flying a parabolic arc. SPACEHAB and NOVESPACE signed a marketing agreement that enables SPACEHAB to market flights on the NOVESPACE Airbus-300. The next step provides approximately 12 minutes of Microgravity for small payloads using sub-orbital rockets. SPACEHAB and Daimler-Benz Aerospace AG signed a joint marketing agreement to develop the U.S. and Asian markets for industrial customers. The third step of the staircase involves the flight proven capability of SPACEHAB research modules. Up to 16 days of experimentation can be performed on the Space Shuttle using SPACEHAB research modules. The fourth step provides long-duration Microgravity using a robotics free-flying spacecraft, the Wake Shield Facility which can be deployed from the Space Shuttle or the ISS to perform research in the ultra-high vacuum of space. SPACEHAB acquired the rights to the Wake Shield Facility, a free flying spacecraft providing long duration access to micro-gravity developed by the University of Houston. The Company entered into a joint venture with Guigne' Technologies Ltd., to build the Space DRUMS (TM) facility, a facility that uses acoustic energy to position samples inside an experiment device for "containerless processing", which is scheduled to be the first commercial research facility on the ISS. The Astrotech payload processing business serves the commercial satellite manufacturing and launch services industries in Florida and at the Vandenberg Air Force Base in California. Although payload processing is generally associated with the final preparation of a satellite or other space payload for launch, it is also the first step in the launch process and requires specialized facilities and support 4 5 usually located at the launch site. Astrotech's payload processing activities provide the necessary resources for mechanical assembly or reassembly, electrical check, calibration, liquid propellant loading and numerous other related activities. Additionally, Astrotech's specialized facilities include, but are not limited to, clean rooms, airlock systems, overhead crane systems, hazard-proof work areas and environmentally controlled rooms. Astrotech recently completed expansion of its Florida facility to add a new encapsulation high bay that enables parallel processing activities in support of the new Atlas II and Delta III launch vehicle payloads. The expansion also will support the small and medium classes of the Air Force's new Evolved Expendable Launch Vehicle ("EELV"), which is scheduled to begin commercial payload launch activities in 2001. Astrotech also completed an expansion of its Vandenberg facility during 1998. Additional site improvements at Astrotech's facilities are being performed under a cost reimbursable contract to NASA. Expenditures for these expansions in fiscal 1998 were approximately $4.0 million. SPACEHAB's fundamental business strategy is based on carefully anticipating customer requirements, investing capital to develop space-flight assets, contracting with established aerospace companies for engineering and asset production while retaining ownership of these assets and then providing innovative, cost-effective solutions that meet customer requirements using fixed-price service contracts. This strategy has been successful in obtaining three significant contracts with NASA: a $184.2 million Commercial Middeck Augmentation Module contract (the "CMAM Contract") for five missions, a $91.5 million contract for four missions and three option missions to the Mir Space Station (the "Mir Contract") and a $44.9 million Research and Logistics Mission Support Contract (the "REALMS Contract") for three missions. The CMAM Contract, signed in November 1990, required SPACEHAB to furnish NASA with SPACEHAB module accommodations for experiments developed by the Centers for the Commercial Development of Space ("CCDS") on five Space Shuttle missions. The fifth and final CMAM mission was completed successfully during September 1996. The basic Mir Contract signed in July 1995, required the Company to provide Single and Double Module accommodations for the provision of logistics resupply to the Mir Space Station on four Space Shuttle missions. The fourth mission was completed successfully in May 1997. In late September 1996, the Company entered into agreements with the Japanese Space Agency ("NASDA") and the European Space Agency ("ESA") (collectively, the "NASDA/ESA Contract"). Pursuant to the NASDA/ESA Contract, SPACEHAB provided hardware and integration and operations for scientific microgravity experiments to NASDA and ESA aboard the Logistics Double Module on STS-84. This mission was completed in May 1997. In June 1997, NASA exercised all three options for additional missions for $39.0 million under the Mir Contract. The Mir Contract options called for two Logistics Double Module missions and one Single Module mission which were successfully completed in September 1997, January 1998 and June 1998, respectively. The REALMS Contract, signed in December 1997, requires that the Company provide a single and a double research module to support microgravity research payloads on two missions and a double logistics module to the ISS to support outfitting of the ISS. It is anticipated that these missions will take place in October 1998 (STS-95), May 1999 (STS-96) and September 2000 (STS-107). The REALMS Contract provided an opportunity for the Company to offer similar services to commercial customers on STS-95 and STS-107. During fiscal 1998, the Company entered into agreements with NASDA, the ESA, the Canadian Space Agency ("CSA") and the Japanese Broadcasting Agency ("NHK") (collectively, the "STS-95 Commercial Customers"). Pursuant to the agreements, with an aggregate value of $18.4 million, SPACEHAB will provide hardware and integration and operations for scientific microgravity experiments to the STS-95 Commercial Customers 5 6 aboard the Single Research Module on STS-95, planned for October 1998. The Company initiated integration and operations efforts for the STS-95 and STS-96 missions during fiscal 1998 reporting $14.3 million in revenue in fiscal 1998 for these missions under the percentage-of-completion revenue recognition policy. The Company continues to pursue new business opportunities by identifying customer requirements and creating and implementing innovative technical solutions. The Company believes that the demand for microgravity and life sciences research conducted on SPACEHAB Modules and demand for the use of its modules for logistics support will increase both during the assembly phase and after the planned ISS becomes operational. The ISS is the largest engineering and scientific project ever undertaken. More than a dozen nations, led by the United States, Russia, Japan and the European Community, have spent over $25 billion to date and will spend over $90 billion to develop, build, launch and operate the ISS. The ISS assembly is expected to begin in late 1998. The Company also believes that the increasing demand for satellites and the improvement in satellite technology will continue to provide opportunities in the satellite launch services field. Astrotech operates under exclusive multiyear agreements with Lockheed Martin to process all commercial Atlas payloads and with Boeing to process all Delta payloads and all Sea Launch program payloads at Boeing's facility in Long Beach, California. Astrotech also plans to pursue additional opportunities, including: (i) expanding its payload processing facilities to accommodate next generation EELVs; (ii) providing payload processing facilities and services to new U.S. Government customers in the defense and intelligence communities; (iii) supporting new space launch facilities and related payload processing functions internationally and (iv) expanding its services into microgravity research by developing research facilities and flight hardware to support space research programs on sounding rockets. On July 1, 1998, SPACEHAB broadened its core business by acquiring Johnson Engineering. JE performs a number of critical services for NASA including managing all training operations and facility engineering at the NBL. JE also builds full scale mockups of the ISS elements used in NBL training and is developing hardware for the ISS crew living quarters that is scheduled for launch in 2003. JE's ability to perform detailed design, fabrication, and operations, complements the Company's traditional strengths in conceptual design and program management. The acquisition of JE provides many of the critical skills and capabilities used to perform SPACEHAB services that currently are acquired through subcontracting relationships. COMPANY STRATEGY SPACEHAB's goal is to be recognized as a global market leader providing products and services supporting the human space flight, logistics and satellite launch industries. The Company seeks to achieve this goal through implementation of the following strategy: 1. Focusing on Quality of Service. SPACEHAB has had eleven missions to date, all of which have been completed successfully. The Company intends to maintain and enhance its reputation for product reliability, process innovation and performance excellence. 2. Expanding Scope of Business. SPACEHAB continuously evaluates opportunities to offer new products and services to its customer base and to develop assets and acquire complementary, attractively valued businesses. For example, the Company is in the process of constructing the Research Double Module and the Integrated Cargo Carrier and developing the Docking Double Module. Based on SPACEHAB's continuing involvement in microgravity research and logistics Space Shuttle missions, and its close interaction with NASA and other users of its SPACEHAB Module services, the Company is well positioned to anticipate emerging requirements for new services in the human space flight industry. In 1998, the Company built on its foundation of microgravity research services by establishing a "Microgravity Staircase." The Microgravity Staircase offers researchers a broader array of services to tailor 6 7 experiments to specific microgravity environments and budgets. The acquisition of JE on July 1, 1998, complements SPACEHAB's traditional strengths in conceptual design and program management while adding skills in engineering, design and training critical to NASA and the successful completion of the ISS. 3. Maintaining Position as Low-Cost Provider. The Company continues to offer its payload processing and logistics support services to NASA and other customers using SPACEHAB owned assets, on a fixed-price basis that the Company believes is significantly lower than the cost-plus basis used by traditional aerospace contractors. Through the focus and rigorous application of commercial best practices in the development and operation of its hardware and facilities, SPACEHAB substantially reduces the cost, time and complexity that burden conventional government contractors providing services under cost-plus contracts. JE performs services under a completion-form cost-plus contract for government services that is requested by and directed by NASA. This contract form provides for the lowest cost to the government by requiring a separate negotiation of the price for each task order, thereby allowing JE to implement commercial best practices to reduce cost. 4. Continuing Entrepreneurial Initiative. The Company continues to develop and offer innovative business arrangements to meet NASA and other customer requirements. The Company has repeatedly taken the initiative to improve its modules and payload processing services and to deploy new assets in anticipation of customer needs. By focusing on the quality, cost and responsiveness of its services, and by attracting and recruiting highly talented and experienced personnel into its distinctly entrepreneurial organization, SPACEHAB seeks to distinguish itself as an innovative and effective provider of commercial space services while achieving higher contract profit margins than are customary in traditional government aerospace contracts that provide services on a traditional cost-plus basis. 5. Leveraging International Strategic Alliances. The Company seeks to create and maintain strategic alliances with key international players in the space industry. Such relationships include Mitsubishi in Japan; Alenia Spazio, Daimler-Benz, and INTOSPACE in Europe; and RSC Energia in Russia. The Company believes these alliances have produced and will continue to produce business opportunities with these partners and the governments of their respective countries. Through the Company's contracts, it continues to implement its business strategy by identifying customer requirements, creating innovative technical solutions, raising private capital to develop assets and providing services pursuant to those contracts. DEPENDENCE ON A SINGLE CUSTOMER Approximately $43.5 million (or 68%) of the Company's fiscal 1998 revenue was generated from two NASA contracts - the Mir Contract and the REALMS Contract. While the acquisition of Astrotech, and the STS 95 Commercial Customer Contracts represent additional revenue sources, the Company anticipates that revenue from NASA will continue to account for a significant amount of the Company's revenue over the next several years. There are no assurances, however, that NASA will require the Company's module services in the future. Therefore, the Company's failure to execute new contracts with NASA would have a material adverse effect on the Company's financial condition and results of operations. Additionally, a significant portion of the revenue for JE is derived under contracts with NASA. Accordingly, the Company continues to focus its efforts on diversifying its customer base to include commercial companies, as evidenced by the Astrotech acquisition. 7 8 RESEARCH AND DEVELOPMENT The Company believes that the timely development of new products and enhancements to existing hardware are essential to maintaining its competitive position. In the past three fiscal years, the Company has spent an aggregate of approximately $4.0 million on research and development. Approximately $1.8 million of the Company's research and development funds for fiscal 1998 were spent on the design, development and qualification of the new SPACEHAB Universal Communications System ("SHUCS"). Beginning in fiscal 1996 and continuing throughout fiscal 1998, the Company has been working on the development of this new proprietary module communications system that will be independent of the Space Shuttle's existing data downlink. SPACEHAB began capital asset construction of SHUCS in the fourth quarter of fiscal 1998. Once implemented, it is expected that researchers with experiments on a SPACEHAB mission will be able to have 24-hour, real-time monitoring and control of their experiment hardware from their laboratories anywhere in the world. The Company also performed research and development activities to enhance the basic capabilities of its module systems with new features such as a video system switch, a digital television downlink capability, and an experiment data interface, which would result in time savings for astronauts while conducting experiments inside SPACEHAB Modules. The Company also completed its research and development activities on the ICC and began capital asset development for the ICC in fiscal 1998. Completion of this asset will expand the Company's product and service lines to meet market requirements for low-cost unpressurized carriers for research experiments and cargo. SPACEHAB is developing the ICC to carry unpressuried cargo to the ISS, based on SPACEHAB's pallet technology for which a patent is pending (the "Unpressurized Cargo Pallet" or "UCP"), that can be used independently or in tandem with the SPACEHAB Single or Double Modules. The ICC's design is such that it would be located in what is ordinarily unused volume in the front of the Space Shuttle's cargo bay. By expanding the capabilities of the Space Shuttle and by offering flexibility in the mix of pressurized and unpressurized cargo carried on each mission, the Company believes that the ICC could become the preferred method for providing logistics and utilization resupply to the ISS. COMPETITION Currently, there are no other companies that compete directly with SPACEHAB in providing pressurized module services that are carried aboard the Space Shuttles. NASA has a government-owned and operated system, Spacelab, which provides services similar to those provided by SPACEHAB modules. However, NASA has terminated the Spacelab program with its final mission in April 1998. The Company has commenced the design and construction of the Research Double Module under a contract with Boeing (formerly McDonnell Douglas Aerospace). The Research Double Module represents a commercial replacement for NASA's Spacelab. The Company believes that this module will significantly outperform Spacelab in terms of technology, capacity, functionality and cost-effectiveness. The Company's long-term strategy for growth is to provide research, logistics, infrastructure and payload processing services to NASA and others during the International Space Station era. This strategy could require the Company to compete with commercial companies such as Lockheed-Martin, Boeing and others who have existing NASA support contracts, greater financial resources and manufacturing capabilities, and larger marketing, sales and technical organizations than the Company. In fiscal 1997, SPACEHAB entered into an agreement with United Space Alliance ("USA"), a Boeing and Lockheed Martin joint venture, to expand the commercial use of the Space Shuttle fleet. Although this agreement has expired, SPACEHAB and USA are continuing to pursue joint business opportunities. SPACEHAB's existing strategic relationships with Boeing, Alenia Spazio S.p.A., Mitsubishi Corporation and Daimler-Benz A.G. may provide additional opportunities for teaming and partnerships that management believes will enable the Company to compete for market share. 8 9 The Italian Space Agency has contracted to build a mini pressurized logistics module ("MPLM") intended for use in connection with the ISS. Although the MPLM is intended to be competitive with SPACEHAB's Modules for ISS logistics missions, SPACEHAB believes that its Modules will be able to compete favorably for such missions because of the flexibility and late access capabilities of the SPACEHAB modules. Astrotech's payload processing facilities are located in Florida and California. At present, management believes that Astrotech's U.S. competition is limited to the California Vandenberg Air Force Base launch site where a competitor, California Commercial Spaceport, Inc. ("CCSI") is located. CCSI was established by obtaining surplus U.S. Air Force facilities at the VAFB launch complex before Astrotech established its facilities there and when no commercial alternative was available. To the Company's knowledge, CCSI has won several contracts to process NASA spacecraft for launch from VAFB. CCSI does not have payload processing facilities in Florida, where the majority of U.S. commercial satellite launches occur. BACKLOG A significant portion of the Company's revenue is currently generated from its contract with NASA that, similar to contracts with other agencies of the U.S. government, contain provisions for which NASA may terminate the contract "for convenience." The Company's contract with NASA is conditioned by its terms upon NASA receiving an adequate annual appropriation of funds from the U.S. Congress. Failure to receive funds from Congress or a withdrawal by Congress of prior appropriations would permit NASA to terminate its contracts with SPACEHAB "for convenience." For the government's fiscal year 1998, both the U.S. Senate and House of Representatives have authorized and approved an annual appropriation of $13.6 billion for NASA, including $2.4 billion for the ISS, indicating a commitment by the government to the space industry. However, there can be no assurance that the level of approved funding will be adequate for NASA to complete all of the initiatives including those relating to the contract with the Company. SPACEHAB anticipates that a portion of future revenue will be derived from contracts with entities other than agencies of the U.S. government that will not be subject to federal contract regulations such as termination "for convenience of the government" or federal government funding restrictions. However, to the extent that such contracts require the use of the Space Shuttle for transportation, these systems must be available. As of June 30, 1998, the Company's contract backlog is estimated to be approximately $58.5 million, of which $38.7 million represents U.S. government funded backlog and $19.8 million represents non-U.S government contracts. CERTAIN REGULATORY MATTERS The Company is subject to federal, state and local laws and regulations designed to protect the environment and to regulate the discharge of materials into the environment. The Company believes that its policies, practices and procedures are properly designed to prevent unreasonable risk of environmental damage and consequential financial liability to the Company. Compliance with environmental laws and regulations has not had in the past, and, the Company believes, will not have in the future, material effects on the capital expenditures, earnings or competitive position of the Company. EMPLOYEES As of June 30, 1998, the Company employed 83 regular employees, 25 of whom are employed by the Astrotech subsidiary. Of these 83 employees, 30 (approximately 36%) hold advanced degrees, including 5 (approximately 6%) who hold doctorate degrees. Additionally a significant number of the Company's employees have experience in both the space industry and/or governmental space agencies, 9 10 with a special expertise in commercial space and human space flight. None of the Company's employees are covered by collective bargaining agreements. Underlying all of SPACEHAB's efforts has been the dedication and skill of its personnel. The Company believes that the dedication of its employees is critical to its success and that its relations with its employees are excellent. ITEM 2. PROPERTIES The Company and its wholly-owned subsidiary, Astrotech, currently occupy six locations, with the corporate headquarters located at 1595 Spring Hill Road, Suite 360, Vienna, Virginia 22182. The corporate headquarters occupy approximately 9,700 square-feet of office space and house SPACEHAB's 27-person executive management team. The term of the present lease expires on March 7, 2001. The Company's 34-person flight systems development team is located at 1331 Gemini Avenue, Suites 300 & 310, Houston, Texas 77058. The Houston offices consist of approximately 7,800 square feet of non-contiguous office space located near the Johnson Space Center. In January 1998, the Company negotiated an agreement for one lease for the two office suites. The new lease is a five year term commencing March 1, 1998 and expiring February 28, 2003. The Company's payload processing facility is located near the Kennedy Space Center in Cape Canaveral, Florida. The facility is contained in an approximately 40,000 square-foot plant. The Company owns the building which houses the payload processing facility but leases the land upon which it is constructed. The payload processing facility has a prime work area of approximately 10,000 square-feet. This work area is designed to accommodate the SPACEHAB Single and Double Modules and includes 11 secure experiment/payload integration and work areas from 300 square-feet to 1,000 square-feet each, two off-line modification shops, a tool room, a stock room and a conference/training room. In July 1997, the Company negotiated a new agreement with the Canaveral Port Authority for the lease of the land. The term of the new lease is for a forty-three year period commencing August 28, 1997. Upon expiration of the land lease, all improvements on the property revert at no cost to the lessor. Astrotech occupies three locations. Its headquarters are located at 6305 Ivy Lane, Suite 520, Greenbelt, MD 20770. The headquarters occupy approximately 6,250 square-feet of leased office space at this site and house a six-person management and administrative team. The term of the present lease is a five-year period expiring on May 31, 2003. Astrotech's 12-person engineering and support team is located in a seven-building, owned facility at 1515 Chaffee Drive, Titusville, Florida 32780. This 88,000 square-foot facility supports non-hazardous and hazardous material processing, payload storage and customer offices. These buildings presently occupy one-third of the 37.5-acre property owned by Astrotech, with the remaining two-thirds available for expansion. Astrotech has a three-person technical staff located at the Vandenberg Air Force Base in Vandenberg, California. Astrotech presently rents a 60-acre site on the Air Force Base and owns four buildings comprising 16,500 square-feet, which are dedicated to the same functions provided at the Florida facility. The term of the present land lease expires on July 13, 2013. Upon expiration of the land lease, all improvements on the property revert at no cost to the lessor. JE occupies three locations. Its headquarters are located at 555 Forge River Road, Suite 150, Webster, Texas 77598. The headquarters houses JE's 197-person engineering team, within a 48,214 square-foot facility. This office lease will expire on June 30, 2003. JE has an 11-person fabrication shop located at 920 Gemini Avenue, Houston, Texas, 77027. This 17,920 square-foot facility is being leased for a three-year term that will expire on January 31, 2001. 10 11 JE occupies another facility in Houston Texas, which is located at 18100 Upper Bay Road. This is a 3,952 square-foot facility that contains a 19-person engineering and laboratory team. The lease will expire on February 28, 1999. Additionally, JE has more than 200 additional employees who are housed at various government facilities within the Houston area. The Company believes that its current facilities and equipment are generally well maintained and in good condition and are adequate for its present and foreseeable needs. ITEM 3. LITIGATION The Company is not currently involved in any material legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ( a ) The Annual meeting was held on October 21, 1997. ( b ) The existing Board of Directors stood for and were duly reelected at this Annual Meeting. The names of the directors are as follows: Hironori Aihara Robert A. Citron Dr. Edward E. David, Jr. Dr. Shelley Harrison Dr. Shi H. Huang Chester M. Lee Gordon S. Macklin Dr. Brad M. Meslin Dr. Udo Pollvogt Alvin L. Reeser James R. Tompson Prof. Ernesto Vallerani ( c ) The following matters were brought to a vote of the shareholders at the meeting: 1. To ratify the appointment of KPMG Peat Marwick LLP as the Company's independent auditors for fiscal year 1998. For 7,180,750 Against 1,105 Abstain 3,699 2. To approve the amendments to the Company's 1994 Stock Incentive Plan to increase the total number of shares reserved and available for distribution under the Plan to 2,750,000. For 2,896,691 Against 1,799,888 Abstain 13,040 3. To adopt the Company's 1997 Employee Stock Purchase Plan. For 3,156,386 Against 1,540,226 Abstain 13,007 4. To approve the amendments to the Company's 1995 Directors Stock Option Plan to increase the total number of shares reserved and available for distribution under the Plan to 500,000. For 3,916,733 Against 1,311,137 Abstain 15,048 All four items presented to the shareholders were approved and implemented. 11 12 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's common stock (the "Common Stock") trades on the NASDAQ National Market System under the symbol "SPAB". The Common Stock has been publicly traded since December 22, 1995, the date of the closing of the Company's initial public offering. The quarterly high and low stock prices for fiscal 1998, 1997 and 1996 are as follows:
Fiscal 1998: - ------------ High Low ---- --- 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 Fiscal 1997: - ------------ High Low ---- --- 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 Fiscal 1996: - ------------ High Low ---- --- First Quarter $12 1/4 $12 Second Quarter $15 1/4 $11 3/4 Third Quarter $16 $ 8 3/4
The Company has never paid cash dividends. It is the present policy of the Company to retain earnings to finance the growth and development of its business and, therefore, the Company does not anticipate paying cash dividends on its Common Stock in the foreseeable future. The Company has authorized 30,000,000 shares of Common Stock. At July 24, 1998, 11,168,161 shares of Common Stock were outstanding. The Company had approximately 280 shareholders of record and 1,743 beneficial shareholders of its Common Stock on June 30, 1998. SALES OF UNREGISTERED SECURITIES During fiscal 1998, the Company issued no unregistered securities. 12 13 ITEM 6. SELECTED FINANCIAL DATA The selected financial data presented below are derived from the audited consolidated financial statements of SPACEHAB. This selected financial information should be read in conjunction with the Consolidated Financial Statements of the Company and the notes thereto included elsewhere in this report.
Nine Months Year Year Ended Ended Ended Years Ended September 30, June 30, June 30, June 30, ---------------------------------------------------------- ------------- 1994 1995 1996(1) 1997 1998 ------------ ------------- -------------- ------------- ------------- (in thousands, except per share data) Statement of Operations Data: Revenue(2) $ 43,800 $ 46,059 $ 56,397 $ 56,601(3) $ 64,087 Costs of revenue 24,227 23,349 20,985 34,120 35,058 ------------ ------------- -------------- ------------- ------------- Gross profit 19,573 22,710 35,412 22,481 29,029 Marketing, general and administrative expenses 5,064 3,816 4,056 8,567 13,712 Research and development expenses - 1,600 100 1,252 2,620 ------------ ------------- -------------- ------------- ------------- Operating income 14,509 17,294 31,256 12,662 12,697 Interest expense, net of capitalized amounts 4,863 1,365 699 955 4,480 Net income 8,638(4) 15,809 29,829 13,832(5) 12,131 Net income per common share - diluted(6) $ 1.29 $ 2.36 $ 3.19 $ 1.24 $ 0.84 Shares used in computing net income per common share - diluted(6) 6,735 6,746 9,343 11,160 14,571 Other Data: Cash provided by (used for) operations $ 21,831 $ 26,838 $ 13,151 $ (5,995) $ 31,604 Capital expenditures 76 4,943 6,266 29,308(7) 23,113 Balance Sheet Data (at period end): Working capital (deficit) $(20,589) $ 7,192 $ 45,942 $ 3,159 $ 62,660 Total assets 95,261 86,701 129,709 114,450 220,604 Long-term debt, excluding current portion 22,884 24,886 17,318 12,725 85,322 Stockholders' equity (deficit) (21,184) (1,715) 71,596 86,622 96,408
- ------------------------------ (1) Effective October 1, 1995, the Company changed its fiscal year-end to June 30. (2) The Company recognized revenue upon the completion of each flight under the Mir and CMAM Contracts. For new contract awards for which the capability to successfully complete the contract can be demonstrated at contract inception, revenue recognition under the percentage-of-completion method is being reported based on costs incurred over the period of the contract. (3) Includes revenues of $2,860 generated by Astrotech subsequent to its acquisition on February 12, 1997. (4) Includes an extraordinary loss of $934, net of taxes, relating to the write-off of unamortized deferred debt issuance costs, in conjunction with a refinancing and retirement of debt on that date. (5) Includes an extraordinary gain of $3,274, net of taxes and legal fees, relating to the amendment and restatement of a credit agreement. (6) In December 1997, the Company adopted the provisions of Statement of Financial Accounting No. 128, Earnings Per Share, which establishes new guidelines for the calculations of earnings per share. Earnings per share for fiscal 1994 through fiscal 1997 have been restated to reflect the provisions of this new standard. (7) Includes $20,134 of consideration for the purchase of Astrotech. 13 14 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. GENERAL SPACEHAB was incorporated in 1984 to commercially develop space habitat modules to operate in the cargo bay of the Space Shuttles. During fiscal 1998 the Company operated under two contracts with NASA. First, the Mir Contract, with a total contract value of $91.5 million, including $39.0 million for three Mir option missions that were flown in fiscal 1998. Second, the REALMS Contract, with a total contract value of $44.9 million consisting of three missions to be flown in October 1998, May 1999 and September 2000. This contract also provides SPACEHAB an opportunity to have direct commercial relationships with other space agencies by providing them research space in the modules. In fact, on the October 1998 flight, most of the revenue recognized will come from customers other than NASA. The Company's revenues for fiscal 1998 were generated primarily from the Mir Contract, the REALMS Contract, and through the Company's commercial customer contracts. SPACEHAB generates revenue by providing a turnkey service that includes access to the modules and provides integration and operations support services to scientists and researchers responsible for the experiments and/or logistics supplies for module missions aboard the Space Shuttle System. Under the CMAM and Mir Contracts, the Company recognized revenue only at the completion of each Space Shuttle mission using Company assets. Accordingly, the Company's quarterly revenue and profits fluctuated dramatically based on NASA's launch schedule and will continue to do so for any contract for which revenue is recognized only upon completion of a mission. For the REALMS Contract and for new contract awards for which the capability to successfully complete the contract can be demonstrated at contract inception, revenue recognition under the percentage-of-completion method is being reported based on costs incurred over the period of the contract. The percentage-of-completion method results in the recognition of revenue over the period of contract performance, thereby decreasing the quarter-by-quarter fluctuations of reported revenue. In September 1996, SPACEHAB entered into the NASDA/ESA Contracts, pursuant to which SPACEHAB provided hardware and integration and operations services for scientific microgravity experiments aboard the SPACEHAB Logistics Double Module on STS-84. SPACEHAB began integration work on the NASDA/ESA Contracts during the first quarter of fiscal 1997 and recorded revenue under percentage of completion for these contracts. This mission was completed in May 1997, concurrently with the final mission under the basic Mir Contract. The expenses associated with the operations of SPACEHAB are recorded differently based on the type of expense. Costs of revenue include integration and operations expenses associated with the performance of two types of efforts: (i) sustaining engineering in support of all missions under a contract and (ii) mission specific support. Expenses associated with sustaining engineering are expensed as incurred. Mission specific expenses relating to the CMAM Contract and the Mir Contract were deferred as assets and not expensed until the specific Space Shuttle mission was flown and the related revenue was recognized. Costs associated with performance of the NASDA/ESA Contracts, the REALMS Contract and future contracts using the percentage-of-completion method of revenue recognition will be expensed as incurred. Other costs of revenue include depreciation expense and costs associated with the Astrotech payload processing facilities. Flight related insurance covering transportation of the SPACEHAB Modules from SPACEHAB's payload processing facility to the Space Shuttle, in-flight insurance and third-party liability insurance are also included in costs of revenue and are recorded as incurred. Marketing, general and administrative and interest and other expenses are recognized when incurred. Astrotech revenue is derived from various multi-year fixed-price contracts with satellite and launch vehicle manufacturers. The services and facilities Astrotech provides to its customers support the 14 15 final assembly, checkout and countdown functions associated with preparing a satellite for launch. This preparation includes: the final assembly and checkout of the satellite, installation of the solid rocket motors, loading of the liquid propellant, encapsulation of the satellite in the launch vehicle, transportation to the launch pad and command and control of the satellite during pre-launch countdown. Revenue provided by the Astrotech payload processing facilities is recognized ratably over the occupancy period of the satellites in the Astrotech facilities. RESULTS OF OPERATIONS In 1996, the Company elected to change its fiscal year end from September 30 to June 30. Financial information for fiscal 1996, therefore, reflects nine months of operations. Further, fiscal 1997 results include the operations of Astrotech subsequent to its acquisition on February 12, 1997. Due to the Company's rate of growth and its contract schedule, information for fiscal 1996 has not been annualized. Fiscal Year Ended June 30, 1998 as Compared to the Fiscal Year Ended June 30, 1997 Revenue. The Company's revenue increased approximately 13.3% to approximately $64.1 million for the year ended June 30, 1998 as compared to $56.6 million for the year ended June 30, 1997. Revenue for the year ended June 30, 1998 was from the Mir Contract ($39.0 million), the REALMS Contract and related STS 95 Commercial Customers ($14.3 million) and Astrotech ($10.8 million). Conversely, for the year ended June 30, 1997 the Company's revenue was attributable to the Mir Contract ($41.7 million), the CMAM contract ($8.0 million), the NASDA/ESA contract ($4.0 million), and Astrotech ($2.9 million). Costs of Revenue. Costs of revenue for the year ended June 30, 1998 increased 2.7% to $35.1 million, as compared to $34.1 million for the year ended June 30, 1997. The primary components of costs of revenue for the year ended June 30, 1998 include integration and operation costs under the Mir Contract ($18.3 million), the REALMS Contract and related STS Commercial Customers ($7.1 million), Astrotech ($4.4 million), and depreciation ($4.9 million). In contrast, the primary costs of revenue for the year ended June 30, 1997 included integration and operation costs under the Mir Contract ($18.5 million), the CMAM Contract ($1.0 million), the NASDA/ESA Contract ($3.5 million), Astrotech ($1.3 million), and depreciation ($9.8 million). The decrease in depreciation expense is attributable to the impact of extending the estimated useful lives of the Company's modules to 2012 effective July 1, 1997. This change in accounting estimate is treated prospectively and is based on current available information from NASA, which extends the estimated useful life of the Space Shuttle program to at least 2012. Operating Expenses. Operating expenses increased by 66.3% to approximately $16.3 million for the year ended June 30, 1998 as compared to approximately $9.8 million for the year ended June 30, 1997. This increase is due primarily to the Company's efforts to increase staff, adding strength in engineering, design and research and development capabilities. Research and development costs for the year ended June 30, 1998 were $2.6 million, as compared to $1.3 million for the year ended June 30, 1997. This increase is due to the Company's efforts to develop space related assets including the ICC and the SHUCS, which is being developed to provide reliable and Shuttle-independent data communication channels that are responsive to payload user requirements. Operating expenses related to Astrotech were approximately $1.6 million for the year ended June 30, 1998 as compared to $0.4 million for the year ended June 30, 1997, which included only expenses subsequent to the February 1997 acquisition. Interest Expense. Interest expense was approximately $6.4 million for the year ended June 30, 1998, as compared with approximately $1.3 million for the year ended June 30, 1997. The increase in interest expense was caused by the Company's issuance of its Subordinated Convertible Notes due 2007 and interest costs from the use of a term note. There was also approximately $1.9 million and $0.3 million of interest capitalized during the year ended June 30, 1998 and year ended June 30, 1997, respectively. Interest is capitalized based primarily on the construction of the Company's research double module and double module hardware. 15 16 Interest Income. Interest and other income was approximately $3.9 million and $1.8 million for the years ended June 30, 1998 and 1997, respectively. This increase is due to interest earned by the Company through the short-term investment of funds raised by the Company's financing activities. Net Income. Net income for the year ended June 30, 1998 was approximately $9.6 million, or $0.86 per share (basic EPS), on 11,154,271 shares as compared to $13.8 million, or $1.24 per share (basic EPS), for the year ended June 30, 1997, on 11,118,825 shares. Income tax expense for these periods was $2.5 million and $3.6 million for the years ended June 30, 1998 and 1997, respectively. As of June 30, 1998, the Company had approximately $7.9 million of available net operating loss carry-forwards expiring between 2006 and 2009 to offset future regular taxable income. Utilization of these net operating loss carry-forwards may be subject to limitations in the event of significant changes in the stock ownership of the Company. While there are no restrictions on transfers or sales of shares of Common Stock that would prevent such a change from occurring, there is no plan to initiate any such changes of ownership resulting in the loss of these carry-forwards. The effects of inflation and changing prices have not significantly impacted the Company's revenue or income from continuing operations during fiscal 1998 and 1997. Fiscal Year Ended June 30, 1997 as Compared to the Nine Months Ended June 30, 1996 Revenue. The Company recorded revenue of approximately $56.6 million and $56.4 million for the year ended June 30, 1997 and the nine months ended June 30, 1996, respectively. Revenue for the year ended June 30, 1997 was from the Mir Contract ($41.7 million), the CMAM contract ($8.0 million), the NASDA/ESA Contracts ($4.0 million), and Astrotech ($2.9 million). Conversely, for the nine months ended June 30, 1996 the Company's revenue was attributable to the Mir Contract ($10.8 million) and the CMAM contract ($45.6 million). Costs of Revenue. Costs of revenue for the year ended June 30, 1997 increased 62.4% to $34.1 million, as compared to $21.0 million for the nine months ended June 30, 1996. The primary components of costs of revenue for the year ended June 30, 1997 include integration and operation costs under the Mir Contract ($18.5 million), the CMAM Contract ($1.0 million), the NASDA/ESA Contracts ($3.5 million), Astrotech Operations ($1.3 million), and depreciation ($9.8 million). In contrast, the primary costs of revenue for the nine months ended June 30, 1996 included integration and operation costs under the Mir Contract ($7.7 million), the CMAM Contract ($7.0 million), and depreciation ($6.2 million). Operating Expenses. Operating expenses increased by 133.3% to approximately $9.8 million for the year ended June 30, 1997 as compared to approximately $4.2 million for the nine months ended June 30, 1996. This increase is due primarily to the Company's efforts to increase staff, adding strength in engineering, design and research and development capabilities. In addition, the increase reflects the additional costs of approximately $0.4 million for operating the Astrotech subsidiary, which was acquired in February 1997. Research and development costs for year ended June 30, 1997 were $1.3 million, as compared to $0.1 million for the nine months ended June 30, 1996. This increase is due to the Company's efforts to develop space related assets including the ICC and the SHUCS, which is being developed to provide reliable and Shuttle-independent data communication channels that are responsive to payload user requirements. Interest Expense. Interest expense was approximately $1.3 million for the year ended June 30, 1997, as compared with approximately $1.5 million for the nine months ended June 30, 1996. There was also approximately $0.3 million and $0.8 million of interest capitalized during the year ended June 30, 1997 and nine months ended June 30, 1996, respectively. Interest was capitalized based on the construction of the Company's research double module and double module hardware. 16 17 Interest Income. Interest and other income was approximately $1.8 million and $1.2 million for the year ended June 30, 1997 and the nine months ended June 30, 1996, respectively. This increase is due to the fact that there were three additional months of interest proceeds from short term, commercial paper and interest bearing cash accounts in fiscal 1997. Net Income. Net income for the year ended June 30, 1997 was approximately $13.8 million, or $1.24 per share (basic EPS), on 11,118,825 shares as compared to $29.8 million, or $3.26 per share (basic EPS), for the nine months ended June 30, 1996, on 9,139,465 shares. Income tax expense for these periods was $3.6 million and $1.9 million for the year ended June 30, 1997 and the nine months ended June 30, 1996, respectively, due to the Company's use of available net operating loss carry-forwards, offset by alternative minimum taxes. The effects of inflation and changing prices have not significantly impacted the Company's revenue or income from continuing operations during fiscal 1997 and 1996. LIQUIDITY AND CAPITAL RESOURCES The Company has historically financed its capital expenditures, research and development and working capital requirements with progress payments under its contracts, including the CMAM Contract, the Mir Contract, the NASDA/ESA Contracts and Astrotech's operations, as well as with proceeds received from private equity offerings and borrowings under credit facilities. During December 1995, SPACEHAB completed an initial public offering of common stock (the "Offering"), which provided the Company with net proceeds of approximately $43.3 million. In June 1997, the Company signed an agreement with a financial institution securing a $10.0 million revolving line of credit (the "Revolving Line of Credit") that the Company may use for working capital purposes. As of June 30, 1998, no amounts have ever been drawn on this line of credit. In July 1997, Astrotech obtained a five-year term loan (the "Term Loan Agreement"), which is guaranteed by SPACEHAB, and provides for draws of up to $15.0 million for general corporate purposes. As of June 30, 1998, the Company had cumulatively drawn $14.1 million on this loan and had an outstanding balance on that date of $12.0 million. Further, on October 21, 1997 the Company completed a private placement offering of convertible subordinated notes due 2007 (the "Notes Offering"), which provided the Company with net proceeds of approximately $59.9 million to be used for capital expenditures associated with the development and construction of space related assets and for general corporate purposes. Cash Flows From Operating Activities. Cash provided by (used for) operations for the nine months ended June 30, 1996 and the fiscal years ended June 30, 1997 and 1998 was $13.2 million, ($6.0) million and $31.6 million, respectively. The significant change was primarily caused by the timing of progress payments received by the Company under its contracts. Under the Mir Contract, the REALMS Contract and the NASDA/ESA Contracts progress payments are structured such that expenses incurred under these contracts are billed as incurred. Cash Flows Used in Investing Activities. For the nine months ended June 30, 1996 and the fiscal years ended June 30, 1997 and 1998, cash flows used in investing activities were $6.3 million, $29.3 million and $23.1 million, respectively. Expenditures during the nine months ended June 30, 1996 were for (i) the development and construction of a tunnel and an adapter ring to be used in conjunction with the Logistics Double Module and (ii) structural upgrade work performed on the SPACEHAB structural test article so that it can be attached to an existing Single Module to form a Logistics Double Module. The Company paid approximately $20.1 million for Astrotech during fiscal 1997. During fiscal 1997 the Company began the construction of its Research Double Module. The Company paid approximately $8.4 million and $17.2 million for construction costs during fiscal 1997 and 1998, respectively. The Company anticipates that it will spend approximately $36.8 million in the aggregate to complete this project. Additionally, the Company paid approximately $4.0 million for the construction of two buildings on the Astrotech properties. 17 18 The Company expects to continue funding any additional capital expenditures and working capital requirements from internally generated cash flow, draw-downs on existing credit facilities and through future debt and/or equity offerings. Cash Flows From Financing Activities. For the nine months ended June 30, 1996 and the fiscal years ended June 30, 1997 and 1998, cash flows provided by (used for) financing activities were $36.9 million, ($2.6) million and $71.0 million, respectively. During the year ended June 30, 1998, the Company received net proceeds of approximately $14.1 million and made payments of $2.1 million under the Term Loan Agreement. In October 1997, the Company received net proceeds after commissions and other expenses of approximately $59.9 million by completing an offering of $55.0 million of its 8% Convertible Subordinated Notes due 2007 as well as the underwriters' exercise of the over-allotment for an additional $8.3 million. The Company believes that cash flows from the Convertible Notes Offering, the Term Loan Agreement, and the Revolving Line of Credit will be sufficient to meet any cash flow requirements from operations and other funding requirements for capital asset construction and development for at least the next twelve months. RECENT ACCOUNTING PRONOUNCEMENTS In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income" (Statement 130). Statement 130 establishes standards for the reporting and display of comprehensive income and its components in the financial statements. The Company is required to adopt the provisions of Statement 130 for the year ended June 30, 1999. Earlier application is not permitted; however, upon adoption, the Company will be required to reclassify previously reported annual and interim financial statements. The Company believes that the disclosure of comprehensive income in accordance with the provisions of Statement 130 will not materially impact the manner of presentation of its financial statements as currently and previously reported. In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" (Statement 131). Statement 131 establishes new procedures and requirements for the (i) determination of business segments and (ii) presentation and disclosure of segment information. The Company is required to adopt the provisions of Statement 131 for the year ended June 30, 1999, and is currently evaluating the impact Statement 131 will have on its financial statements. YEAR 2000 CONSIDERATIONS The Year 2000 issue is the result of computer programs that were written using two digits rather than four to define the applicable year. Any computer programs that have date-sensitive software may recognize the date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculation causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices or engage in similar normal business activities. Based upon a recent initial assessment of its Year 2000 readiness, the Company has determined that the majority of its hardware and software is Year 2000 compliant. Accordingly, the Company believes that it will not be required to modify or replace significant portions of its software and hardware so that its computer systems will function properly with respect to dates in the Year 2000 and thereafter. Additionally, because the majority of the hardware and software in use by the Company is of the commercial off the shelf variety with minimal customization, the Company expects its efforts and costs to bring 100% of the hardware and software into compliance to be minimal. Final verification of this initial assessment, including assessment of the recently acquired Johnson Engineering, is currently underway and will result in specific plans to upgrade the remaining non-compliant hardware and software to Year 2000 compliance by the end of fiscal year 1999. The costs of bringing non-compliant hardware and software into compliance will be expensed as incurred. 18 19 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. INDEPENDENT AUDITORS' REPORT The Board of Directors: SPACEHAB, Incorporated and Subsidiary: We have audited the accompanying consolidated balance sheets of SPACEHAB, Incorporated and subsidiary (the Company) as of June 30, 1997 and 1998, and the related consolidated statements of income, stockholders' equity (deficit), and cash flows for the nine months ended June 30, 1996 and the years ended June 30, 1997 and 1998. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of SPACEHAB, Incorporated and subsidiary as of June 30, 1997 and 1998, and the results of their operations and their cash flows for the nine months ended June 30, 1996 and the years ended June 30, 1997 and 1998, in conformity with generally accepted accounting principles. /s/ KPMG PEAT MARWICK LLP ------------------------- KPMG Peat Marwick LLP McLean, Virginia August 31, 1998 19 20 CONSOLIDATED BALANCE SHEETS
June 30, ------------------------------------- (In thousands, except share data) 1997 1998 - ------------------------------------------------------------------------------------------------------------------------ ASSETS - ------------------------------------------------------------------------------------------------------------------------ Current assets: Cash and cash equivalents $ 12,887 $ 92,327 Accounts receivable (note 4) 5,176 5,979 Prepaid expenses and other current assets 199 550 - ------------------------------------------------------------------------------------------------------------------------ Total current assets 18,262 98,856 - ------------------------------------------------------------------------------------------------------------------------ Property and equipment: Flight modules 95,046 95,046 Module improvements in progress 13,013 33,829 Payload processing facilities 17,651 21,755 Furniture, fixtures and equipment 3,368 5,296 - ------------------------------------------------------------------------------------------------------------------------ 129,078 155,926 Less accumulated depreciation (38,116) (43,338) - ------------------------------------------------------------------------------------------------------------------------ Property and equipment, net 90,962 112,588 Goodwill, net of accumulated amortization of $56 and $230, respectively 3,395 3,224 Deferred mission costs 1,439 - Other assets, net 392 5,936 - ------------------------------------------------------------------------------------------------------------------------ Total assets $ 114,450 $ 220,604 ======================================================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------------------------------------------------------------------------------------------ Current liabilities: Loans payable under credit agreement, current portion (note 6) $ 500 $ 500 Loans payable, current portion (note 8) - 2,824 Accounts payable 682 1,075 Accrued expenses 1,762 5,129 Accrued subcontracting services 9,052 13,177 Deferred flight revenue 2,260 11,924 Advance billings 847 1,567 - ------------------------------------------------------------------------------------------------------------------------ Total current liabilities 15,103 36,196 - ------------------------------------------------------------------------------------------------------------------------ Loans payable under credit agreement, net of current portion (note 6) 1,500 1,000 Loans payable, net of current portion (note 8) - 9,177 Notes payable to shareholder (note 7) 11,225 11,895 Convertible subordinated notes payable (note 8) - 63,250 Deferred income taxes (note 13) - 2,678 - ------------------------------------------------------------------------------------------------------------------------ Total liabilities 27,828 124,196 - ------------------------------------------------------------------------------------------------------------------------ Commitments and contingencies (notes 1, 8, 13, 15 and 16) Stockholders' equity (notes 8, 11 and 12): Common stock, no par value, authorized 30,000,000 shares, issued and outstanding 11,146,237 and 11,168,161 shares, respectively 81,057 81,239 Additional paid-in capital 16 16 Retained earnings 5,549 15,153 - ------------------------------------------------------------------------------------------------------------------------ Total stockholders' equity 86,622 96,408 - ------------------------------------------------------------------------------------------------------------------------ Total liabilities and stockholders' equity $ 114,450 $ 220,604 ========================================================================================================================
See accompanying notes to consolidated financial statements. 20 21 CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data) Nine months ended Year ended Year ended June 30, 1996 June 30, 1997 June 30, 1998 - ----------------------------------------------------------------------------------------------------------------------------- Revenue $ 56,397 $ 56,601 $ 64,087 - ----------------------------------------------------------------------------------------------------------------------------- Costs of revenue: Integration, operations and transportation 14,220 23,726 25,762 Depreciation 6,192 9,825 4,923 Insurance and other direct costs 573 569 4,373 - ----------------------------------------------------------------------------------------------------------------------------- Total costs of revenue 20,985 34,120 35,058 - ----------------------------------------------------------------------------------------------------------------------------- Gross profit 35,412 22,481 29,029 - ----------------------------------------------------------------------------------------------------------------------------- Operating expenses: Marketing, general and administrative 4,056 8,567 13,712 Research and development 100 1,252 2,620 - ----------------------------------------------------------------------------------------------------------------------------- Total operating expenses 4,156 9,819 16,332 - ----------------------------------------------------------------------------------------------------------------------------- Income from operations 31,256 12,662 12,697 Interest expense, net of capitalized interest (note 3) (699) (955) (4,480) Interest and other income, net 1,184 1,822 3,914 - ----------------------------------------------------------------------------------------------------------------------------- Net income before income taxes and extraordinary item 31,741 13,529 12,131 Income tax expense (note 13) 1,912 2,971 2,527 - ----------------------------------------------------------------------------------------------------------------------------- Net income before extraordinary item 29,829 10,558 9,604 Extraordinary item -- gain on early retirement of debt, net of taxes and legal fees (note 6) - 3,274 - - ----------------------------------------------------------------------------------------------------------------------------- Net income $ 29,829 $ 13,832 $ 9,604 ============================================================================================================================= Basic earnings per share: Net income before extraordinary item $ 3.26 $ 0.95 $ 0.86 Extraordinary item - 0.29 - - ----------------------------------------------------------------------------------------------------------------------------- Net income per share - basic $ 3.26 $ 1.24 $ 0.86 ============================================================================================================================= Shares used in computing net income per share-basic 9,139,465 11,118,825 11,154,271 ============================================================================================================================= Diluted earnings per share: Net income before extraordinary item $ 3.19 $ 0.95 $ 0.84 Extraordinary item - 0.29 - - ----------------------------------------------------------------------------------------------------------------------------- Net income per share - diluted $ 3.19 $ 1.24 $ 0.84 ============================================================================================================================= Shares used in computing net income per share-diluted 9,343,018 11,160,322 14,571,278 =============================================================================================================================
See accompanying notes to consolidated financial statements. 21 22 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(In thousands, except share data) Total Convertible preferred stock Common stock Additional Retained stockholders' ----------------------------- --------------------- paid-in earnings equity Shares Amount Shares Amount capital (deficit) (deficit) - -------------------------------------------------------------------------------------------------------------------------------- Balance at September 30, 1995 4,011,345 $ 2,311 5,083,427 $ 34,070 $ 16 $ (38,112) $ (1,715) Common stock issued upon stock option exercises - - 75,000 180 - - 180 Common stock issued in public offering, net of expenses (note 11) - - 4,014,500 43,302 - - 43,302 Common stock issued upon conversion of preferred stock (note 11) (4,011,345) (2,311) 1,671,312 2,311 - - - Common stock issued in private placement guarantee (note 11) - - 224,998 - - - - Net income - - - - - 29,829 29,829 - -------------------------------------------------------------------------------------------------------------------------------- Balance at June 30, 1996 - - 11,069,237 79,863 16 (8,283) 71,596 Common stock issued upon stock option exercises - - 2,000 24 - - 24 Common stock issued upon conversion of debt (note 8) - - 75,000 1,170 - - 1,170 Net income - - - - - 13,832 13,832 - -------------------------------------------------------------------------------------------------------------------------------- Balance at June 30, 1997 - - 11,146,237 81,057 16 5,549 86,622 Common stock issued upon stock option exercises - - 8,725 60 - - 60 Common stock issued under employee stock purchase plan - - 13,199 122 - - 122 Net income - - - - - 9,604 9,604 - -------------------------------------------------------------------------------------------------------------------------------- Balance at June 30, 1998 - $ - 11,168,161 $ 81,239 $ 16 $ 15,153 $ 96,408 ================================================================================================================================
See accompanying notes to consolidated financial statements. 22 23 CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) Nine months ended Year ended Year ended June 30, 1996 June 30, 1997 June 30, 1998 - ------------------------------------------------------------------------------------------------------------------------------ Cash flows from operating activities: Net income $ 29,829 $ 13,832 $ 9,604 Adjustments to reconcile net income to net cash provided by (used for) operating activities: Depreciation and amortization 6,387 10,185 5,587 Amortization of debt placement costs - - 226 Gain on early retirement of debt - (4,093) - Interest converted to notes payable 1,425 1,300 670 Changes in assets and liabilities: Decrease (increase) in accounts receivable 119 1,843 (803) Increase in prepaid expenses and other current assets (132) (15) (351) Decrease in deferred mission costs 445 1,267 1,439 Decrease (increase) in other assets 194 (258) (1,980) Increase (decrease) in deferred flight revenues (27,752) (28,051) 9,628 Increase (decrease) in accounts payable and accrued expenses 1,993 (968) 3,633 Increase (decrease) in advance billings - (239) 720 Increase (decrease) in accrued subcontracting services 643 (798) 533 Increase in deferred taxes - - 2,678 - ------------------------------------------------------------------------------------------------------------------------------ Net cash provided by (used for) operating activities 13,151 (5,995) 31,604 - ------------------------------------------------------------------------------------------------------------------------------ Cash flows from investing activities: Payments for modules under construction - (8,443) (17,245) Payments for building under construction - - (3,988) Purchase of Astrotech, net of cash acquired - (20,134) - Purchases of property and equipment (6,266) (731) (1,880) - ------------------------------------------------------------------------------------------------------------------------------ Net cash used for investing activities (6,266) (29,308) (23,113) - ------------------------------------------------------------------------------------------------------------------------------ Cash flows from financing activities: Payments of note payable to insurers (3,854) (2,520) (500) Payment of debt placement costs - - (3,984) Proceeds from issuance of convertible subordinated notes payable - - 63,250 Proceeds from note payable - - 14,119 Payments of note payable - - (2,118) Proceeds from note payable to shareholder 7,359 - - Payments of note payable to shareholder (10,117) - - Payments of legal fees on early retirement of debt - (110) - Proceeds from exercise of stock options 180 24 60 Proceeds from issuance of common stock, net of expenses 43,302 - 122 - ------------------------------------------------------------------------------------------------------------------------------ Net cash provided by (used for) financing activities 36,870 (2,606) 70,949 - ------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in cash and cash equivalents 43,755 (37,909) 79,440 Cash and cash equivalents at beginning of year 7,041 50,796 12,887 - ------------------------------------------------------------------------------------------------------------------------------ Cash and cash equivalents at end of year $ 50,796 $ 12,887 $ 92,327 ==============================================================================================================================
See accompanying notes to consolidated financial statements. 23 24 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1 9 9 8 (1) DESCRIPTION OF THE COMPANY SPACEHAB, Incorporated (the Company) is the first company to commercially develop, own and operate habitable modules that provide space-based laboratory research facilities and cargo services aboard the U.S. Space Shuttle system. The Company currently owns and operates three pressurized laboratory and logistics supply modules which significantly enhance the capabilities of the Space Shuttle fleet. The Company is currently constructing a new science module with associated double module hardware. The Company's modules are unique to the Space Shuttle fleet. To date, the Company has successfully completed eleven missions aboard the Space Shuttle and substantially all of the Company's revenue has been generated under fixed price contracts with NASA. The Company's contracts are subject to termination for convenience and periodic funding allocations by NASA. NASA's funding is dependent on receiving annual appropriations from the United States government. On February 12, 1997, the Company acquired the assets and certain of the liabilities of Astrotech Space Operations, L.P., a subsidiary of Northrop Grumman, a provider of commercial satellite launch processing services and payload processing facilities in the United States. These services are provided at the Astrotech facilities in Cape Canaveral, Florida and Vandenberg Air Force Base in California, and are provided to launch service providers on a fixed-price basis. Additionally, Astrotech provides management and consulting services to the Boeing Company for its Sea Launch program at the Boeing facility in Long Beach, California. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION The consolidated financial statements include the accounts of SPACEHAB, Incorporated and its wholly owned subsidiary, Astrotech Space Operations, Inc. (Astrotech). All significant intercompany transactions have been eliminated in consolidation. FISCAL YEAR Effective October 1, 1995, the Company changed its fiscal year-end from September 30 to June 30. Accordingly, the accompanying consolidated financial statements present the Company's results of operations for the nine months ended June 30, 1996 and the years ended June 30, 1997 and 1998. CASH AND CASH EQUIVALENTS For purposes of its consolidated statements of cash flows, the Company considers short-term investments with original maturities of three months or less to be cash equivalents. PROPERTY AND EQUIPMENT Property and equipment are stated at cost. All furniture, fixtures and equipment are depreciated using the straight-line method over the estimated useful lives of the respective assets, which is generally five years. The Company's payload processing facilities are depreciated using the straight-line method over their estimated useful lives ranging from sixteen to forty-three years. Through June 30, 1997, the Company's flight modules were depreciated over a ten-year period using the straight-line method. Effective July 1, 1997, the Company extended the estimated useful lives of its space modules through 2012. This change in accounting estimate is treated prospectively and is based on current available information from NASA, which has estimated the duration of the Space Shuttle Program through at least 2012. As a result of this change in estimate, the Company's net income increased by $4,145,000 for fiscal year 1998. During fiscal year 1997, SPACEHAB adopted Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed Of (Statement 121). Statement 121 requires that long-lived assets to be held and used, including goodwill, be reviewed by the Company for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss is recognized when the undiscounted net cash flows associated with the asset are less than the asset's carrying amount. Impairment losses, if any, are measured as 24 25 (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) the excess of the carrying amount of the asset over its estimated fair market value. The adoption of Statement 121 did not have an impact on the Company's consolidated results of operations for the years ended June 30, 1997 or 1998. GOODWILL The excess of the cost over the fair value of Astrotech's net tangible and identifiable intangible assets acquired has been assigned to goodwill. Goodwill is being amortized on a straight-line basis over twenty years. STOCK-BASED COMPENSATION During fiscal year 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, Accounting for Stock-based Compensation (Statement 123), which encourages, but does not require, the recognition of stock-based employee compensation at fair value. The Company has elected to continue to account for stock-based employee compensation using the intrinsic value method as prescribed in Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. Accordingly, compensation cost for options to purchase common stock granted to employees is measured as the excess, if any, of the fair value of common stock at the date of the grant over the exercise price an employee must pay to acquire the common stock. Warrants to purchase common stock granted to other than employees as consideration for goods or services rendered are recognized at fair market value. REVENUE RECOGNITION Revenue was recognized upon completion of each module flight for the CMAM and Mir contracts (note 10). Total contract price was allocated to each flight based on the amount of services the Company provided on the flight relative to the total services provided for all flights under contract. Obligations associated with a specific mission, e.g., integration services, were also recognized upon completion of the mission. Costs directly related to specific CMAM and Mir missions were deferred until the respective missions were completed. The CMAM contract was completed in October 1996 and the Mir contract was completed in June 1998. For all other contract awards for which the capability to successfully complete the contract can be reasonably assured and costs at completion can be reliably estimated at contract inception, revenue recognition under the percentage-of-completion method is being used based on costs incurred over the period of the contract. Revenue provided by Astrotech's payload processing services is recognized ratably over the occupancy period of the satellite while in the Astrotech facilities. Contract losses are recognized when they become known. RESEARCH AND DEVELOPMENT Research and development costs are expensed as incurred. INCOME TAXES The Company recognizes income taxes under the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. NET INCOME PER SHARE In December 1997, the Company adopted the provisions of Statement of Financial Accounting Standards No. 128, Earnings per Share, (Statement 128). Statement 128 supersedes Accounting Principles Board Opinion No. 15, Earnings per Share (APB 15) and its related interpretations, and promulgates new accounting standards for the computation and manner of presentation of the Company's earnings per share. The Company has restated previously reported annual earnings per share data in accordance with the provisions of Statement 128 (note 14). The Company does not believe that the adoption of Statement 128 had a material impact on the computation or manner of presentation of its earnings per share data as currently or previously presented under APB 15. Basic earnings per share is calculated by dividing net income by the weighted average number of common shares outstanding during the period. 25 26 (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The computation of diluted earnings per share includes all common stock options and warrants and other common stock, to the extent dilutive, that potentially may be issued as a result of conversion privileges, including the convertible subordinated notes payable (note 8). All computations of income per share include the effect of the 1 for 2.4 reverse split of common stock in December 1995 (note 11). ACCOUNTING ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reported periods. Actual results could differ from these estimates. RECLASSIFICATIONS Certain fiscal year 1996 and 1997 amounts have been reclassified to conform to the fiscal 1998 consolidated financial statement presentation. (3) STATEMENTS OF CASH FLOWS - SUPPLEMENTAL INFORMATION Cash paid for interest costs was approximately $264,000, $1,300,000 and $3,400,000 for the nine months ended June 30, 1996 and the years ended June 30, 1997 and 1998, respectively. The Company capitalized interest of approximately $766,000, $345,000 and $1,900,000 during the nine months ended June 30, 1996 and the years ended June 30, 1997 and 1998, respectively, related to the module improvements and building in progress. The Company paid income taxes of approximately $248,000, $2,385,000 and $18,500 for the nine months ended June 30, 1996 and the years ended June 30, 1997 and 1998, respectively. During fiscal year 1997, the Company's convertible note payable, with a carrying value of approximately $1,200,000, was converted into 75,000 shares of common stock (note 8). During fiscal year 1998, the Company entered into two capital leases for equipment with a carrying value of approximately $180,000. (4) ACCOUNTS RECEIVABLE At June 30, 1997 and 1998, accounts receivable consisted of (in thousands):
1997 1998 - -------------------------------------------------------------------- U.S. government contracts Billed $ - 452 Unbilled 3,521 3,202 - -------------------------------------------------------------------- Total U.S. government contracts 3,521 3,654 - -------------------------------------------------------------------- Commercial contracts Billed 1,344 2,277 Unbilled 311 48 - -------------------------------------------------------------------- Total commercial contracts 1,655 2,235 - -------------------------------------------------------------------- Total accounts receivable $ 5,176 5,979 ====================================================================
The Company anticipates collecting substantially all receivables within one year. (5) ACQUISITION OF ASTROTECH The Company paid $20,136,000, including transaction costs, to acquire substantially all of the assets and certain of the liabilities of Astrotech. The purchase was effective on February 12, 1997. The business combination has been accounted for using the purchase method. The purchase price has been allocated to the assets and liabilities acquired based on appraisals and other studies. The purchase price was allocated as follows (in thousands): Cash acquired $ 2 Receivables 1,573 Land 580 Buildings 13,389 Furniture, fixtures, and equipment 2,319 Goodwill 3,451 Other assets 49 Accounts payable (141) Advanced billings (1,086) - ------------------------------------------------------------------------- Total purchase price $ 20,136 =========================================================================
26 27 (5) ACQUISITION OF ASTROTECH (CONTINUED) The following represents pro forma combined results of operations for the prior two years as if the acquisition of Astrotech had occurred as of October 1, 1995 (in thousands, except per share data):
Nine months ended Year ended June 30, 1996 June 30, 1997 - ------------------------------------------------------------------------ Revenue $ 62,716 59,980 Gross profit 39,902 23,531 Income before extraordinary item 31,622 10,309 Net income 31,622 13,583 - ------------------------------------------------------------------------ Net income per common share - basic $ 3.46 1.22 ========================================================================
(6) LOANS PAYABLE UNDER CREDIT AGREEMENT Prior to an August 1996 amendment, the Company's credit agreement consisted of a $6,458,000 term loan bearing interest at 1 percent per month and a $5,495,000 noninterest-bearing term loan with several insurance companies. In addition, a revolving credit commitment with a subcontractor and former shareholder, provided a maximum outstanding balance of $6,000,000 and bore interest at a rate of 1 percent per month. In August 1996, the Company's credit agreement was amended. Under the amendment, the revolving credit commitment with a subcontractor and former shareholder was canceled. In exchange for the full satisfaction of the Company's term loans with the various insurance companies, the Company paid the insurance companies $2,500,000 and agreed to pay an additional $2,000,000 under a new noninterest-bearing term loan. The new term loan is due in installments of $500,000 on each of August 1, 1997 and 1998, and $334,000 on each of August 1, 1999, 2000 and 2001. As a result of this amended and restated agreement, the Company recognized an extraordinary gain of $3,274,000, net of income taxes and other related expenses of $819,000 and $110,000, respectively, during the year ended June 30, 1997. Aggregate interest cost incurred on the debts due under the various credit agreements was approximately $561,000 and $64,000 for the nine months ended June 30, 1996 and the year ended June 30, 1997. There was no interest incurred under these agreements during the year ended June 30, 1998. (7) NOTES PAYABLE TO SHAREHOLDER The Company issued subordinated notes for a portion of the amount due to Alenia Spazio S.p.A. (Alenia), a shareholder, under a previously completed construction contract for the Company's flight modules. Such notes had aggregate outstanding balances of $11,225,000 and $11,895,000 at June 30, 1997 and 1998, respectively. The notes bear interest at an annual rate of 12 percent. No amount of principal or accrued interest on the notes is due until all amounts under the amended and restated credit agreement due to the various insurance companies (note 6) are repaid. As such, all principal payments are due under these notes on August 1, 2001. However, during fiscal 1998, the Company began paying interest quarterly. The Company paid $357,000 of interest during the year ended June 30, 1998 and will continue to pay interest quarterly. Additionally, the Company has accrued interest of $357,000 as of June 30, 1998 included in accounts payable and accrued expenses. Interest cost converted on the notes to Alenia was approximately $846,000, $1,300,000, and $670,000 for the nine months ended June 30, 1996 and the years ended June 30, 1997 and 1998, respectively. (8) LONG-TERM DEBT CONVERTIBLE NOTE PAYABLE On August 12, 1992, the Company issued a subordinated promissory note to an investment bank in the amount of $900,000, carrying interest at LIBOR plus 3 percent, and maturing six months after the payment of all other indebtedness due under the amended and restated credit agreement and the subordinated notes to Alenia. Through June 30, 1996, the Company had elected to defer the payment of interest under the note, which accrued and was converted to additional outstanding principal. The note was convertible at the option of the holder into 75,000 shares of the Company's common stock at any time prior to maturity. On October 25, 1996, the investment bank exercised its option to convert the note into the Company's common stock. In accordance with the terms of the agreement, interest that accrued during fiscal year 1997 of approximately $25,000 through the date of conversion was waived. Interest cost incurred on this note was approximately $58,000 for the nine months ended June 30, 1996. 27 28 (8) LONG-TERM DEBT (CONTINUED) CREDIT FACILITIES On June 16, 1997, the Company entered into a $10,000,000 line of credit agreement with a financial institution. Outstanding balances on the line of credit accrue interest at either the lender's prime rate or a LIBO-based rate. This loan is collateralized by the Company's intangible assets, accounts receivable, and other property in which a lien is granted to the lender. The term of the agreement is through October 1998. Through June 30, 1998, the Company has not drawn against the line of credit. On July 14, 1997, the Company's subsidiary, Astrotech, entered into another credit facility for loans of up to $15,000,000 with a financial institution. The term of the agreement is through July 13, 2002. This loan is collateralized by the assets of Astrotech and certain other assets of the Company, and is guaranteed by the Company. Interest accrues at LIBOR plus three percent. Principal and interest are payable on a quarterly basis. Principal payments of $2,824,000 are due in fiscal year 1999, 2000, 2001, and 2002 and principal payments of $705,000 is due in fiscal year 2003. At June 30, 1998, the Company had outstanding debt of $12,001,000 under this credit facility and accrued interest of $330,000. CONVERTIBLE SUBORDINATED NOTES In October 1997, the Company completed a private placement offering for $63,250,000 of aggregate principal of unsecured 8% Convertible Subordinated Notes due 2007. Interest is payable semi-annually. The notes are convertible into the common stock of the Company at a rate of $13.625 per share. This offering provided the Company with net proceeds of approximately $59,910,000 to be used for capital expenditures associated with the development and construction of space related assets and for other general corporate purposes. (9) FAIR VALUE OF FINANCIAL INSTRUMENTS The following table presents the carrying amounts and estimated fair values of the Company's financial instruments as of June 30, 1997 and 1998 in accordance with Statement of Financial Accounting Standards No. 107, Disclosures about Fair Value of Financial Instruments (in thousands):
1997 1998 -------------------- ------------------- Carrying Fair Carrying Fair amount value amount value - ----------------------------------------------------------------------- Financial liabilities: Loans payable under credit agreement $ 2,000 1,630 1,500 1,279 Notes payable to shareholder 11,225 11,225 11,895 11,895 Loans payable under credit facility - - 12,001 12,001 Convertible notes payable - - 63,250 68,784 =======================================================================
The fair value of the Company's long-term debt is based on quoted market price or is estimated based on the current rates offered to the Company for debt of the same remaining maturities. The carrying amounts of cash and cash equivalents, receivables, and accounts payable and accrued expenses approximate their fair market value because of the relatively short duration of these instruments. (10) NASA CONTRACTS COMMERCIAL MIDDECK AUGMENTATION MODULE CONTRACT On November 30, 1990, NASA and the Company entered into the Commercial Middeck Augmentation Module contract (CMAM) to lease to NASA a portion of the middeck augmentation modules and related integration services at an aggregate firm fixed price of $184,236,000 over six missions. During the year ended September 30, 1994, the terms of the CMAM contract were amended to reduce the number of missions from six to five, although the total locker space leased by NASA and the contract value remained the same. During the nine months ended June 30, 1996, and the years ended June 30, 1997 and 1998, the Company recognized approximately $45,634,000, $7,963,000, and $0, respectively, of revenue under the CMAM contract. The CMAM contract was completed during fiscal year 1997. 28 29 (10) NASA CONTRACTS (CONTINUED) MIR SPACE STATION CONTRACT On July 14, 1995, NASA and the Company completed final negotiations to lease the Company's flight modules and provide related integration services over four missions to the Russian Space Station Mir during fiscal 1996 and 1997, at an aggregate firm fixed price of $53,980,000. During December 1995, the contract was amended whereby the contract price was reduced by $2,400,000 in exchange for the indemnification by NASA of certain damage to, or loss of, "the modules during flight and increased by $927,000 for additional services for a new contract value of $52,507,000. During fiscal 1998, the Company and NASA further amended the terms of the basic contract to provide for three additional missions for an additional $38,954,000. During the nine months ended June 30, 1996 and the years ended June 30, 1997 and 1998, the Company recognized $10,772,000, $41,735,000 and $38,954,000, respectively, of revenue under the Mir contract. The Mir contract, as amended, was completed with its final mission in June 1998. RESEARCH AND LOGISTICS MODULE SERVICES CONTRACT On December 21, 1997, the Company entered into the Research and Logistics Module Services (REALMS) Contract to lease to NASA its flight modules and provide related integration services over three missions at an aggregate fixed price of $44,860,000. This contract provides for NASA to use the flight modules for both science and logistical missions. This contract also enables the Company to provide similar services to commercial customers. During the year ended June 30, 1998, the Company recognized $14,274,000 of revenue under this contract and related commercial customer contracts. (11) STOCKHOLDERS' EQUITY INITIAL PUBLIC OFFERING In December 1995 and January 1996, the Company sold, through an underwritten initial public offering, an aggregate of 4,014,500 common shares at $12.00 per share, which resulted in net proceeds to the Company of $43,302,000 after associated commissions and discounts, and other expenses of the offering. CONVERTIBLE PREFERRED STOCK Pursuant to the initial public offering of the Company's common stock, all of the Company's preferred stock was automatically converted into common stock on a 1 for 1 basis in accordance with the terms of the preferred stock agreement. At which point, all shares of common stock were subject to the reverse stock split. REVERSE STOCK SPLIT Prior to the initial public offering, on December 11, 1995, the Company's Board of Directors effected a 1 for 2.4 reverse split of common stock whereby each 2.4 shares of existing common stock were exchanged for one share of common stock. All share and per share data appearing in the consolidated financial statements and notes thereto have been retroactively adjusted for this reverse split. PRIVATE EQUITY PLACEMENT During August 1995, the Company completed the sale of 150,000 shares of its common stock to five investors for an aggregate price of $3,600,000. The terms of sale included a guarantee by the Company that in the event of the completion of an initial public offering prior to December 31, 1996, the investors would realize no less than a 25 percent premium on their investment based on the initial offering price. Based on the initial public offering price, the Company issued an aggregate of 224,998 common shares to the investors in settlement of the guarantee. (12) COMMON STOCK OPTION AND STOCK PURCHASE PLANS NON-QUALIFIED OPTIONS Prior to the adoption of the 1994 Stock Incentive Plan (the 1994 Plan), stock options granted to the Company's officers and employees were part of their employment contract or offer. The number and price of the options granted was defined in the employment agreements and such options vest incrementally over a period of four years and generally expire within ten years of the date of grant. THE 1994 PLAN Under the terms of the 1994 Plan, the number and price of the options granted to employees is determined by the Board of Directors and such options vest, in most cases, incrementally over a period of four years and expire no more than ten years after the date of grant. 29 30 (12) COMMON STOCK OPTION AND STOCK PURCHASE PLANS (CONTINUED) THE DIRECTORS' STOCK OPTION PLAN Prior to an amendment on October 21, 1997, each nonemployee member of the Board of Directors was annually granted options to purchase 5,000 shares of common stock at exercise prices equal to the fair market value of the date of grant. Subsequent to the amendment, each nonemployee member of the Board of Directors received a one time grant of an option to purchase 10,000 shares of common stock. Further, each new nonemployee director after the amendment date shall receive a one-time grant of an option to purchase 10,000 shares. In addition, effective as of the date of each annual meeting of the Company's stockholders on or after the effective date, each nonemployee director who is elected or continues as a member of the Board of Directors of the Company shall be awarded an option to purchase 5,000 shares of common stock. Options under the Director's Plan vest after one year and expire seven years from the date of grant. 1997 EMPLOYEE STOCK PURCHASE PLAN During the year ended June 30, 1998, the Company adopted an employee stock purchase plan that permits eligible employees to purchase shares of common stock of the Company at prices no less than 85 percent of the current market price. Eligible employees may elect to participate in the plan by authorizing payroll deductions from one percent to ten percent of gross compensation for each payroll period. On the last day of each quarter, each participant's contribution account is used to purchase the maximum number of whole and fractional shares of common stock determined by dividing the contribution account's balance by the lesser of 85 percent of the price of a share of common stock on the first day of the quarter or the last day of a quarter. The maximum number of shares of common stock that may be purchased under the plan is 1,500,000. Through June 30, 1998, 13,199 shares have been issued under the plan. STOCK OPTION ACTIVITY SUMMARY The following table summarizes the Company's stock option plans:
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 - ---------------------------------------------------------------------------------------------------------------------- Outstanding at 9/30/95 933,852 $ 11.31 256,156 $ 12.00 - $ - Granted 8,133 24.00 744,582 13.85 - - Exercised 75,000 2.40 - - - - Forfeited 246,523 12.00 - - - - - ---------------------------------------------------------------------------------------------------------------------- Outstanding at 6/30/96 620,462 12.28 1,000,738 13.35 - - Granted 14,166 8.88 1,024,751 6.90 50,000 7.00 Exercised - - 2,000 12.00 - - Forfeited 194,642 12.00 790,266 13.14 - - - ---------------------------------------------------------------------------------------------------------------------- Outstanding at 6/30/97 439,986 12.01 1,233,223 8.20 50,000 7.00 Granted 10,000 10.13 257,338 11.00 145,000 10.92 Exercised - - 3,725 10.02 5,000 10.13 Forfeited 149,941 12.16 8,583 11.96 - - - ---------------------------------------------------------------------------------------------------------------------- Outstanding at 6/30/98 300,045 $ 12.33 1,478,253 $ 8.62 190,000 $ 9.99 - ---------------------------------------------------------------------------------------------------------------------- Options exercisable at: June 30, 1996 543,585 $ 12.07 58,247 $ 12.00 - $ - June 30, 1997 429,720 12.16 819,742 8.49 - - June 30, 1998 295,978 12.17 983,620 8.55 45,000 7.00 Weighted-average fair value at date of grant during the fiscal period ended: June 30, 1996 8,133 5.96 744,582 6.24 - - June 30, 1997 14,166 2.80 1,024,751 2.56 50,000 2.19 June 30, 1998 10,000 4.25 257,338 3.83 145,000 3.43 ======================================================================================================================
30 31 (12) COMMON STOCK OPTION AND STOCK PURCHASE PLANS (CONTINUED) The following table summarizes information about the Company's stock options outstanding at June 30, 1998:
Options outstanding Options exercisable -------------------------------------------- ------------------------- Weighted- average Weighted- Weighted- remaining average average Number contractual exercise Number exercise Range of exercise prices outstanding life (years) price exercisable price - ----------------------------------------------------------------------------------------------------------- $24.00 6,100 4.25 $ 24.0000 2,033 $ 24.0000 $9.875 - $14.88 917,197 3.90 12.0114 577,035 12.6270 $5.75 - $8.88 1,045,001 4.73 6.8653 745,530 6.6988 - ----------------------------------------------------------------------------------------------------------- $5.75 - $24.00 1,968,298 4.34 $ 9.3164 1,324,598 $ 9.3078 ===========================================================================================================
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):
Nine months Years ended ended June 30, ------------------------ 1996 1997 1998 - ------------------------------------------------------------------------ As reported $ 29,829 $ 10,558 9,604 Pro forma 29,257 8,964 8,772 ======================================================================== Net income per share - basic: As reported $ 3.26 $ 0.95 0.86 Pro forma 3.20 0.81 0.79 ========================================================================
The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants in fiscal years 1996, 1997 and 1998: 0.0 percent dividend growth; expected volatility ranging from 35 percent to 40 percent; risk-free interest rates ranging from 5.68 percent to 6.71 percent; and expected lives ranging from three to seven years. The effects of compensation cost as determined under Statement 123 on net income in fiscal year 1996, 1997 and 1998 may not be representative of the effects on pro forma net income in future periods. WARRANTS The Company also has 53,000 currently exercisable warrants outstanding to purchase the Company's common stock at $9.00 per share, with various expiration dates through June 2002. The fair market value of these warrants was recognized at issuance. (13) INCOME TAXES The components of income tax expense from continuing operations are as follows (in thousands):
Nine months ended Year ended Year ended June 30, 1996 June 30, 1997 June 30, 1998 - ------------------------------------------------------------------------- Current: Federal $ 1,912 2,706 - State and local - 85 - - ------------------------------------------------------------------------- 1,912 2,791 - - ------------------------------------------------------------------------- Deferred: Federal - - 2,148 State and local - - 379 - ------------------------------------------------------------------------- - - 2,527 - ------------------------------------------------------------------------- Income tax expense $ 1,912 2,791 2,527 =========================================================================
31 32 (13) INCOME TAXES (CONTINUED) During the year ended June 30, 1997, income tax expense of $819,000 was allocated to the extraordinary gain on early retirement of debt. A reconciliation of the expected amount of income tax expense, calculated by applying the statutory federal income tax rate of 34 percent in fiscal 1996 and 1997 and 35 percent in fiscal 1998 to income from continuing operations before taxes, to the actual amount of income tax expense recognized follows (in thousands):
Nine months ended Year ended Year ended June 30, 1996 June 30, 1997 June 30, 1998 - --------------------------------------------------------------------------- Expected expense $10,792 4,600 4,241 Change in valuation allowance (8,884) (2,640) (2,058) State income tax - 1,011 299 Other 4 - 45 - --------------------------------------------------------------------------- Income tax expense $ 1,912 2,971 2,527 ===========================================================================
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of June 30, 1997 and 1998 are presented below (in thousands):
1997 1998 - ------------------------------------------------------------------------ Deferred tax assets: Net operating loss carryforwards $ 1,504 3,140 General business credit carryforwards 2,189 2,189 Alternative minimum tax credit carryforwards 5,044 4,905 Capitalized research and development costs 4,223 452 Other 63 225 - ------------------------------------------------------------------------ Total gross deferred tax assets 13,023 10,911 Less - valuation allowance 2,058 - - ------------------------------------------------------------------------ Net deferred tax assets 10,965 10,911 - ------------------------------------------------------------------------ Deferred tax liabilities: Property and equipment, principally due to differences in depreciation 10,873 13,364 Other 92 74 - ------------------------------------------------------------------------ Total gross deferred tax liabilities 10,965 13,438 - ------------------------------------------------------------------------ Net deferred taxes $ - (2,527) ========================================================================
As of June 30, 1998, current deferred tax assets of $151,000 are included in prepaid expenses and other current assets in the accompanying balance sheet. The net changes in the total valuation allowance for the nine months ended June 30, 1996 and the years ended June 30, 1997 and 1998 were decreases of $10,144,000, $4,655,000, and $2,058,000, respectively. At June 30, 1998, the Company had accumulated net operating losses of $7,850,000 available to offset future regular taxable income. These operating loss carryforwards expire between the years 2006 and 2009. Utilization of these net operating losses may be subject to limitations in the event of significant changes in stock ownership of the Company. Additionally, the Company has approximately $2,189,000 and $4,905,000 of research and experimentation and alternative minimum tax credit carryforwards, respectively, available to offset future regular tax liabilities. The research and experimentation credits expire between the years 2001 and 2007; the alternative minimum tax credits carryforward indefinitely. In assessing the realizably of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets are realizable. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of projected future regular taxable income over the periods which the deferred tax assets are deductible, management believes that the Company will realize the benefits of these deductions. The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future regular taxable income during the carryforward period are reduced. 32 33 (14) NET INCOME PER SHARE In December 1997, the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share, which established new guidelines for the calculations of earnings per share. Earnings per share for all prior periods have been restated to reflect the provisions of this Statement. The following are reconciliations of the numerators and denominators of the basic and diluted earnings per share computations for "income before extraordinary item" and "extraordinary item" for the years ended June 30, 1998 and 1997 and the nine months ended June 30, 1996, respectively (in thousands, except share data):
Per common share Assuming dilution - --------------------------------------------------------------------------------------------------------------- 1998 Net income $ 9,604 $ 9,604 Assuming conversion of convertible subordinated notes - 2,625 - --------------------------------------------------------------------------------------------------------------- Net income, as adjusted $ 9,604 $ 12,229 =============================================================================================================== Outstanding common shares 11,154,271 11,154,271 Outstanding stock options - 269,898 Assuming conversion of convertible subordinated notes - 3,147,109 - --------------------------------------------------------------------------------------------------------------- Adjusted shares 11,154,271 14,571,278 =============================================================================================================== 1997 Net income before extraordinary item 10,558 10,558 Net income 13,832 13,832 - --------------------------------------------------------------------------------------------------------------- Outstanding common shares 11,118,825 11,118,825 Outstanding stock options - 14,168 Assuming conversion of convertible notes - 27,329 - --------------------------------------------------------------------------------------------------------------- Adjusted shares 11,118,825 11,160,322 =============================================================================================================== 1996 Net income $ 29,829 $ 29,829 Assuming conversion of convertible notes - 59 - --------------------------------------------------------------------------------------------------------------- Net income, as adjusted $ 29,829 $ 29,888 - --------------------------------------------------------------------------------------------------------------- Outstanding common shares 9,139,465 9,139,465 Outstanding stock options - 128,553 Assuming conversion of convertible notes - 75,000 - --------------------------------------------------------------------------------------------------------------- Adjusted shares 9,139,465 9,343,018 ===============================================================================================================
Options and warrants to purchase 561,132, 792,361 and 899,131 shares of common stock, at prices ranging from $7.50 to $24.00 per share were outstanding for the nine months ended June 30, 1996 and the years ended June 30, 1997 and 1998, respectively. These were not included in the computation of diluted earnings per share because the options' and warrants' exercise prices were greater than the average market price of the common shares during the nine months ended June 30, 1996 and the years ended June 30, 1997 and 1998. 33 34 (15) EMPLOYEE BENEFIT PLAN The Company has a defined contribution retirement plan which covers all employees and officers. For the nine months ended June 30, 1996 and the years ended June 30, 1997 and 1998, the Company contributed $0, $95,000 and $143,000, respectively, to the plan. The Company has the right, but not the obligation, to make contributions to the plan in future years at the discretion of the Company's Board of Directors. (16) COMMITMENTS INTEGRATION AND OPERATIONS CONTRACTS On August 13, 1997, the Company initiated a letter agreement with Boeing Corporation, a major subcontractor, for standard integration and operation services to the Company for future missions that were not already provided for under its contract for missions to the Mir Space Station. In August 1998, this letter agreement became a letter contract whereby Boeing Corporation will provide integration and operations services required to successfully complete four science missions (one single module mission and three double module missions) and two logistics double module missions. Additionally, there are several tasks that are separately priced to yield a committed letter contract value of $17,321,000, which provides funding through December 31, 1998. As of June 30, 1998, $4,553,000 has been incurred under this commitment. MODULE CONSTRUCTION CONTRACT During fiscal year 1997, the Company entered into a $36,800,000 cost-plus-fee contract with Boeing Corporation, to construct a new research module with associated double module hardware. The Company expects to take delivery of the module in the spring of 1999. The Company has incurred approximately $29,523,000 in construction costs through June 30, 1998. JOINT VENTURE During June 1998, the Company entered into a joint venture agreement with Guigne Technologies Limited for the purpose of developing, fabricating, marketing and sales of SpaceDRUMS(TM) services. In accordance with the joint venture agreement, the Company has agreed to contribute an aggregate of $2,000,000 of working capital to the joint venture at varying dates and amounts through October 1999. The Company's contributions will be in the form of an unsecured non-interest bearing note. Through June 30, 1998, the Company has made no contributions to the joint venture. LEASES The Company is obligated under capital leases for equipment and noncancelable operating leases for equipment, office space, storage space, and the land for a payload processing facility. Future minimum payments under these capital leases and noncancelable operating leases are as follows (in thousands):
Capital Operating Year ending June 30, leases leases - ------------------------------------------------------------------------ 1999 $ 68 828 2000 68 722 2001 39 639 2002 9 453 2003 and thereafter - 4,068 - ------------------------------------------------------------------------ 184 $ 6,710 Less: amount representing ========= interest between 9% and 12% (18) - ------------------------------------------------ Percent value of net minimum capital lease payment $ 166 - ------------------------------------------------
Rent expense for the nine months ended June 30, 1996 and the years ended June 30, 1997 and 1998, was approximately $183,000, $456,000, and $503,000, respectively. (17) SUBSEQUENT EVENT On July 1, 1998, the Company acquired the outstanding common stock of Johnson Engineering Corporation ("Johnson Engineering"), a privately held corporation, for $24,500,000. This acquisition was accounted for using the purchase method. Johnson Engineering has a contract with NASA to provide a number of human space flight associated services and products used on the Space Shuttle and International Space Station Programs. These services include program management support, engineering services, and the development and fabrication of training and flight crew equipment. 34 35 (18) SUMMARY OF SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) The following is a summary of selected quarterly financial data for the previous three fiscal periods (in thousands):
Three months ended --------------------------------------------------------- September 30 December 31 March 31 June 30 - ---------------------------------------------------------------------------------------------------------------- Year ended June 30, 1998 Revenue $ 2,537 17,756 18,997 24,797 Income (loss) from operations (5,685) 5,833 5,214 7,335 Net income (loss) (5,654) 5,727 4,891 4,640 Net income (loss) per share - basic (0.51) 0.51 0.44 0.42 Net income (loss) per share - diluted (0.51) 0.43 0.37 0.35 - ---------------------------------------------------------------------------------------------------------------- Year ended June 30, 1997 Revenue $ 113 22,992 15,031 18,465 Income (loss) from operations (6,171) 12,148 3,914 2,771 Net income (loss) before extraordinary item (7,074) 11,060 3,207 3,365 Net income (loss) (3,800) 11,060 3,207 3,365 Net income (loss) per share - basic (0.34) 1.00 0.29 0.30 Net income (loss) per share - diluted (0.34) 0.99 0.29 0.28 - ---------------------------------------------------------------------------------------------------------------- Period ended June 30, 1996 Revenue $ - - 56,397 Income (loss) from operations (5,003) (6,458) 42,717 Net income (loss) (5,274) (6,022) 41,125 - ---------------------------------------------------------------------------------------------------------------- Net income (loss) per share - basic (0.98) (0.55) 3.72 Net income (loss) per share - diluted (0.98) (0.55) 3.63 ================================================================================================================
35 36 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information concerning the Company's directors and executive officers; as well as with respect to Item 405 of Regulation S-K will be contained in the Company's definitive 1998 Proxy Statement in accordance with the Company's annual meeting of stockholders and is hereby incorporated by reference thereto. ITEM 11. EXECUTIVE COMPENSATION. The information required by this item will be contained in the Company's definitive 1998 Proxy Statement with respect to the Company's annual meeting of stockholders and is hereby incorporated by reference thereto. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required by this item will be contained in the Company's definitive 1998 Proxy Statement with respect to the Company's annual meeting of stockholders and is hereby incorporated by reference thereto. . ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information required by this item will be contained in the Company's definitive 1998 Proxy Statement with respect to the Company's annual meeting of stockholders and is hereby incorporated by reference thereto. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) The following documents are filed as part of the report: 1. Financial Statements. The following consolidated financial statements of SPACEHAB, Incorporated and subsidiary and related notes, together with the report thereon of KPMG Peat Marwick LLP, the Company's independent auditors, are set forth herein as indicated below.
PAGE Report of KPMG Peat Marwick LLP, Independent Public Accountants............................... 19 Consolidated Balance Sheets .................................................................. 20 Consolidated Statements of Income ............................................................ 21 Consolidated Statements of Stockholders' Equity (Deficit)..................................... 23 Consolidated Statements of Cash Flows......................................................... 23 Notes to Consolidated Financial Statements.................................................... 24
36 37 2. Financial Statement Schedules. All financial statement schedules required to be filed in Part IV, Item 14 (a) have been omitted because they are not applicable, not required, or because the required information is included in the financial statements or notes thereto. 3. Exhibits.
EXHIBIT NO. DESCRIPTION OF EXHIBIT 2.1 */ Asset Purchase Agreement, dated February 5, 1997, by and among Spacehab Acquisition Corp.; SPACEHAB, Incorporated; Astrotech Space Operations, L.P.; and Northrop Grumman Corporation. 2.2 */ Amendment No. 1 to Asset Purchase Agreement, dated as of February 12, 1997, by and among Spacehab Acquisition Corp; SPACEHAB, Incorporated; Astrotech Space Operations, L.P.; and Northrop Grumman Corporation. 3.1* Amended and Restated Articles of Incorporation of the Company. 3.2* Amended and Restated By-Laws of the Company. 10.1* NAS 9-18371, dated November 30, 1990, between the National Aeronautics and Space Administration ("NASA") and the Registrant (including the amendments thereto) (the "CMAM Contract"). 10.2* Cost Plus Incentive Fee Contract (Number SHB 1002), dated July 11, 1990, between the Registrant and McDonnell Douglas Corporation, McDonnell Douglas Aerospace-Huntsville Division ("McDonnell Douglas") (including the amendments thereto) (the "CMAM I/O Contract"). 10.3* Cost Plus Incentive Fee Contract (Number SHB 1009), dated November 23, 1994, between the Registrant and McDonnell Douglas (including the amendments thereto) (the "Mir I/O Contract"). 10.4* Cost Plus Incentive Fee Contract (Number SHB 1010), dated November 23, 1994, between the Registrant and McDonnell Douglas (including the amendments thereto) (the "Double Module Contract"). 10.5* NAS 9-19250, dated July 14, 1995, between NASA and the Registrant (including amendments thereto) (the "Mir Contract"). 10.6* Amended and Restated Representation Agreement, dated August 15, 1995, by and between the Registrant and Mitsubishi Corporation. 10.7* Letter Agreement dated August 15, 1995, by and between the Registrant and Mitsubishi Corporation. 10.8* Exclusive European Broker Agreement, dated February 15, 1989, by and between Intospace, GmbH and the Registrant.
37 38 10.9* Memorandum of Agreement, dated July 28, 1995, between the Registrant and McDonnell Douglas Corporation. 10.10* Amended and Restated Credit Agreement (the "Credit Agreement"), dated December 29, 1993, among the Registrant, the Insurers listed therein, McDonnell Douglas Corporation, the Chase Manhattan Bank (National Association), as agent. 10.11* Amendment No. 1 to the Credit Agreement, dated July 18, 1995. 10.12*** Amended and Restated Credit Agreement, dated August 20, 1996 among the Registrant, the Insurers listed therein and the Chase Manhattan Bank (National Association), as agent. 10.13* SPACEHAB, Incorporated Directors' Stock Option Plan. 10.14* SPACEHAB, Incorporated 1994 Stock Incentive Plan. 10.15*** Office Building Lease Agreement, dated November 30, 1995, between The Equitable Life Assurance Society of The United States and the Registrant (Vienna, Virginia headquarters lease). 10.16* Agreement of Sublease, dated April 9, 1991, by and between Eastern American Teak Corporation and the Registrant (land lease for Cape Canaveral, Florida facility). 10.17* Letter Agreement, dated March 24, 1995, between Alenia Spazio and the Registrant. 10.18* Consulting Agreement, dated August 7, 1995, by and between CSP Associates, Inc. and the Registrant. 10.19*** Extension of Consulting Agreement between CSP Associates, Inc. and the Registrant, dated February 21, 1996. 10.20*** Consulting Agreement, dated August 14, 1996, by and between Gordon S. Macklin and the Registrant. 10.21** Employment and Non-Interference Agreement, dated December 27, 1995, between the Company and Chester M. Lee. 10.22** Employment and Non-Interference Agreement, dated December 27, 1995, between the Company and David A. Rossi. 10.23** Employment and Non-Interference Agreement, dated December 27, 1995, between the Company and Nelda J. Wilbanks. 10.24** Employment and Non-Interference Agreement, dated December 27, 1995, between the Company and M. Dale Steffey. 10.25** Employment and Non-Interference Agreement, dated December 27, 1995, between the Company and Margaret E. Grayson. 10.26** Employment and Non-Interference Agreement, dated December 27, 1995, between the Company and Richard P. Hora.
38 39 10.27** Indemnification Agreement, dated December 27, 1995, between the Company and Dr. Shelley A. Harrison. 10.28** Indemnification Agreement, dated December 27, 1995, between the Company and Dr. Edward E. David, Jr. 10.29** Indemnification Agreement, dated December 27, 1995, between the Company and Richard P. Hora. 10.30** Indemnification Agreement, dated December 27, 1995, between the Company and Robert A. Citron. 10.31** Indemnification Agreement, dated December 27, 1995, between the Company and Alvin L. Reeser. 10.32** Indemnification Agreement, dated December 27, 1995, between the Company and James R. Thompson. 10.33** Indemnification Agreement, dated December 27, 1995, between the Company and Jeffrey Schuss. 10.34** Indemnification Agreement, dated December 27, 1995, between the Company and Dr. Brad S. Meslin. 10.35** Indemnification Agreement, dated December 27, 1995, between the Company and Chester M. Lee. 10.36** Indemnification Agreement, dated December 27, 1995, between the Company and David A. Rossi. 10.37** Indemnification Agreement, dated December 27, 1995, between the Company and Dr. Shi H. Huang. 10.38** Indemnification Agreement, dated December 27, 1995, between the Company and Nelda J. Wilbanks. 10.39** Indemnification Agreement, dated December 27, 1995, between the Company and M. Dale Steffey. 10.40** Indemnification Agreement, dated December 27, 1995, between the Company and Margaret E. Grayson. 10.41** Indemnification Agreement, dated December 27, 1995, between the Company and Dr. Udo Pollvogt. 10.42** Indemnification Agreement, dated December 27, 1995, between the Company and Ernesto Vallerani. 10.43** Indemnification Agreement, dated December 27, 1995, between the Company and Hironori Aihara. 10.44***** NASDA Contract, dated July 1996, between the Registrant and Mitsubishi Corporation (the "NASDA/ESA Contracts").
39 40 10.45***** ESA Contract, dated September 1996, between the Registrant and INTOSPACE GmbH (the "NASDA/ESA Contracts"). 10.46*// Amendment to the Agreement, dated as of August 27, 1996, between the Registrant and Mitsubishi Corporation. 10.47*// Letter Contract Number SHB 1014, dated August 13, 1997, between the Registrant and McDonnell Douglas Aerospace - Huntsville. 10.48*// Letter Agreement, dated July 23, 1997, between the Registrant and Daimler-Benz. 10.49*// Cost Plus Fee Contract (Number SHB 1013), dated July 31, 1997, between the Registrant and McDonnell Douglas Corporation, McDonnell Douglas Aerospace Huntsville Division (the "Research Double Module Contract"). 10.50*// Amendment dated March 8, 1996, to Office Building Lease Agreement, dated November 30, 1995, between The Equitable Life Assurance Society of the United States and the Registrant (Vienna, Virginia headquarters lease). 10.51*// Agreement of Sublease, dated February 26, 1996, by and between Barrios Technology, Inc. and the Registrant (Expansion of Houston Facility). 10.52*// Office Building Lease Agreement, dated October 6, 1993, between Astrotech and the Secretary of the Air Force (Lease number SPCVAN -2-94-0001). 10.53*// Office Building Lease Agreement, dated May 30, 1983, between Astrotech and Randolph Park Associates II Limited Partnership (Silver Spring, Maryland headquarters lease). 10.54*// Loan and Security Agreement, dated June 16, 1997, between the Registrant, Astrotech and Signet Bank. (the "Revolving Credit Agreement"). 10.55*// Loan and Security Agreement, dated July 14, 1997, between Astrotech and the CIT Group/Equipment Financing, Inc. (the "Term Loan Agreement"). 10.56*// Employment and Non-Interference Agreement, dated April 1, 1997, between the Company and Dr. Shelly A. Harrison. 10.57*// Employment and Non-Interference Agreement, dated April 10, 1997, between the Company and John M. Lounge. 10.58*// Indemnification Agreement, dated October 22, 1996, between the Company and John M. Lounge. 10.59*// Consulting Agreement, dated August 15, 1997, between Gordon S. Macklin and the Registrant. 10.60*// Extension of Consulting Agreement, dated August 18, 1997, between CSP Associates, Inc. and the Registrant. 10.61*// Consulting Agreement, dated October 24, 1996, between Harbor Securities and the Registrant. 10.62*// Teaming Agreement, dated May 29, 1997, between United Space Alliance, LLC (USA) and the Registrant.
40 41 10.63*// Letter Agreement, dated July 30, 1997, between RSC Energia (Energia) and the Registrant. 10.64*// Letter of Cancellation, dated June 10, 1997, of the Memorandum of Agreement, dated July 28, 1995, between McDonnell Douglas and the Registrant (with attachment thereto). 10.65*// Royalty Agreement, dated May 1, 1997, between the University of Maryland Biotechnical Institute (UMBI) and the Registrant. 10.66*// Agreement, dated July 15, 1997, between UAB Research Foundation on behalf of the University of Alabama at Birmingham, Center for Macromolecular Crystallography and the Registrant (including amendments thereto). 10.67*// Letter Agreement, dated April 26, 1996, between Pennsylvania State University, Center for Cell Research and the Registrant. 10.68*// SA42, dated July 16, 1997, between NASA and the Registrant (Amendment to the Mir Contract). 10.69*/// ESA Contract, Dated October 10, 1997, between the Registrant and INTOSPACE GmbH (the "ESA Contract") 10.70*//// NAS 9-97199, dated December 21, 1997, between the Registrant and NASA (the "REALMS Contract"). 10.71*//// Letter Contract Number SHB 1014, dated August 13, 1997, between the Registrant and McDonnell Douglas Aerospace-Huntsville (as amended). 10.72*//// Employment Agreement and Non-Interference Agreement dated January 15, 1998, between the Company and Chester M. Lee. 10.72*//// Employment Agreement and Non-Interference Agreement dated January 15, 1998, between the Company and David A. Rossi. 10.73*//// Amendment number 1 to Employment Agreement and Non-Interference Agreement dated April 1, 1997, between the Company and Shelley A. Harrison. 10.74*//// Amendment number 1 to Loan and Security Agreement dated December 31, 1997, between the Company and First Union National Bank. 10.75 STS-95 Agreement A, dated December 20, 1997, between the Registrant and Mitsubishi Corporation 10.76 STS-95 Agreement B, dated March 18, 1998, between the Registrant and Mitsubishi Corporation 10.77 NHK Contract, dated May 8, 1998, between the Registrant and Mitsubishi Corporation 10.78 SHB98001, dated January 31, 1998, between the Registrant and RSC Energia 10.79 SHB98002, dated February 11, 1998, between the Registrant and Daimler-Benz Aerospace, Space Infrastructure Division
41 42 10.80 CSA Contract, dated May 21, 1998, between the Registrant and the Canadian Space Agency 10.81 Gemini Office Building Lease Agreement, dated January 14, 1998, between the Registrant and Puget of Texas 10.82 SHB98006, dated July 8, 1998, between the Registrant and Daimler-Benz Aerospace AG, Raumfahrt-Infrastuktur 10.83 Modification No. 22 to SHB1014, dated July 22, 1998, between the Registrant and McDonnell Douglas Corporation, a Wholly-Owned Subsidiary of The Boeing Company 10.84 Capital Office Park Lease as amended, dated April 23, 1998, between Astrotech and Eleventh Springhill Lake Associates L.L.P. 11. Statement regarding Computation of Per Share Earnings. 21.*// Subsidiary of the Registrant. 23. Consent of KPMG Peat Marwick LLP. 27. Financial Data Schedule. * Incorporated by reference to the Registrant's Registration Statement on Form S-1 (File No. 33- 97812) and all amendments thereto, originally filed with the Securities and Exchange Commission on October 5, 1995. ** Incorporated by reference to the Registrant's Report on Form 10-Q for the quarter ended December 31, 1995, filed February 14, 1996. *** Incorporated by reference to the Registrant's Report on Form 10-K for the fiscal year ended June 30, 1996, filed with the Securities and Exchange Commission on September 17, 1996. **** Incorporated by reference to the Registrant's Annual Report on Form 10-K/A for the year ended June 30, 1996, filed with the Securities and Exchange Commission on December 20, 1996. ***** Incorporated by reference to the Registrant's Report on Form 10-Q/A for the quarter ended September 30, 1996, filed with the Securities and Exchange Commission on December 20, 1996. */ Incorporated by reference to the Registrant's Report on Form 8-K filed with the Securities and Exchange Commission on February 27, 1997. *// Incorporated by reference to the Registrant's Report on Form 10-K for the fiscal year ended June 30, 1997, filed with the Securities and Exchange Commission on September 12, 1997. */// Incorporated by reference to the Registrant's Report on Form 10-Q for the quarter ended September 30, 1997, filed November 6, 1997.
42 43 *//// Incorporated by reference to the Registrant's Report on Form 10-Q for the quarter ended December 31, 1997, filed February 5, 1998. (b) The following Reports on Form 8-K were filed by the Registrant during the period covered by this report. 1. Report on Form 8-K filed on October 29, 1997 disclosing the Registrant's completion of an offering of $55 million of its 8% Convertible Subordinated Notes due 2007 and the closing on an over-allotment option for an additional $8.250 million of its 8% Convertible Subordinated Notes due 2007. 2. Report on Form 8-K filed on January 21, 1998 disclosing the Registrant's retirement of Chester M. Lee as president and appointment of David A. Rossi, current senior Vice President of Business Development, to president, effective on January 14, 1998. 3. Report on Form 8-K was dated on July 1, 1998 and filed on July 13, 1998 announcing the Registrant's acquisition of all of the outstanding shares of capital stock of Johnson Engineering Corporation.
43 44 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. SPACEHAB, Incorporated By: /s/ Dr. Shelley A. Harrison ----------------------------------- Dr. Shelley A. Harrison Chairman of the Board and Chief Executive Officer Date: September 16, 1998 By: /s/ Margaret E. Grayson ----------------------------------- Margaret E. Grayson Vice President of Finance, Treasurer and Assistant Secretary (Principal Accounting Officer and CFO) Date: September 16, 1998 Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of this registrant in the capacities and on the dates indicated. Director September 16, 1998 - ------------------------------- Hironori Aihara Director September 16, 1998 - ------------------------------- Robert A. Citron /s/ Dr. Edward A. David, Jr. Director September 16, 1998 - ------------------------------- Dr. Edward A. David, Jr. Director September 16, 1998 - ------------------------------- Dr. Shi H. Huang /s/ Chester M. Lee Director September 16, 1998 - ------------------------------- Chester M. Lee /s/ Dr. Brad M. Meslin Director September 16, 1998 - ------------------------------- Dr. Brad M. Meslin /s/ Gordon S. Macklin Director September 16, 1998 - ------------------------------- Gordon S. Macklin /s/ Dr. Udo Pollvogt Director September 16, 1998 - ------------------------------- Dr. Udo Pollvogt /s/ Alvin L. Reeser Director September 16, 1998 - ------------------------------- Alvin L. Reeser
44 45 /s/ James R. Thompson Director September 16, 1998 - ------------------------------- James R. Thompson Director September 16, 1998 - ------------------------------- Guiseppe Viriglio
45 EX-10.75 2 STS-95 AGREEMENT A 1 EXHIBIT 10.75 STS-95 USER CONTRACT (A) This STS-95 User Contract (A) ("Contract") is made this 20th day of December, 1997, between SPACEHAB, Incorporated ("SHI"), a Washington state corporation with its principal office located in Vienna, Virginia and Mitsubishi Corporation, with its principal office located in Tokyo, Japan ("MC"), as contractor to the National Space Development Agency of Japan ("NASDA", collectively "BUYER"). WHEREAS MC desires to procure SPACEHAB pressurized module services ("SPACEHAB" or "Module") and retain SHI to act as the carrier and interface between the U.S. National Aeronautics and Space Administration's ("NASA") Space Shuttle fleet and the experiments listed in Exhibit A aboard a SPACEHAB Module Mission currently manifested as STS-95. WHEREAS SHI desires to supply to MC such services and to act as the carrier and interface between the NASA Space Shuttle fleet and the experiments listed in Exhibit A aboard a SPACEHAB Module Mission currently manifested as STS-95 ("Mission"); and WHEREAS SHI must immediately begin to perform certain tasks associated with the analytical and physical integration of the Exhibit A experiments into the SPACEHAB Module in order to complete these tasks prior to the anticipated launch date; WHEREAS, the parties desire to perform their respective obligations necessary to fully achieve these desires pursuant to three sequential contracts (A, B and C); and WHEREAS MC, NASDA, and SPACEHAB have mutually agreed to the Experiment Chargeable Mass policy presented in the Exhibit B table. NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties agree as follows: 1. STATEMENT OF WORK SHI will provide, at the times and locations set forth therein and pursuant to the terms and conditions of this Contract, the supplies and services described in the Statement of Work ("SOW") in Exhibit C (a) for the payloads listed in Exhibit A (both exhibits incorporated herein by reference) as follows: VFEU (chargeable mass 215 kg), BRIC (chargeable mass 40 kg), OCC (chargeable mass 15 kg), Oceaneering/SPACEHAB Refrigerator/Freezer (OSRF) (chargeable mass 45 kg), and Camcorder/Microcam/StillCam (chargeable mass 10 kg). The OCC experiment support hardware includes the 3-Dimensional Microgravity Accelerometer (3-DMA) and the Japanese United States Thermal Sciences Acceleration Project (JUSTSAP) supplied by the University of Alabama - Huntsville, Consortium for Materials Development in Space. There is no charge to MC/NASDA for use of this hardware under this contract. 2. PRICE AND TERMS OF PAYMENT 2 MC shall pay SHI a fixed price of 1997 US$880,000 at the time set forth below. Included in this price is the lease of the OSRF and the associated integration and operations services performed by Oceaneering Space Systems of Houston, Texas. - 97US$ 880,000.00 upon execution of this Contract. Total $880,000.00
The actual Chargeable Mass (reference Exhibit B) for each experiment in Exhibit A and its supporting flight hardware shall be determined by SHI using a calibrated scale at the time of installation of each experiment into the module. Any upward adjustment in the total measured Chargeable Mass flown on the mission from the Chargeable Mass referred to in Section 1 above shall result in an upward price adjustment for that experiment at the rate of $28,000/kg. 3. PAYMENT TERMS AND CONDITIONS SHI shall send a Final Accounting/Billing to MC as promptly as possible after completion of the last service provided by SHI under this Contract. The Final Accounting/Billing will contain a final accounting under the Contract and address additional payment requirements, if any, from MC. If, as a result of final Accounting/Billing, an additional MC payment is required, such payment shall be due 60 days after the billing date of the Final Accounting/Billing. 4. MISSION DELAYS In the event STS-95 is delayed, suspended, or postponed, there may be additional charges to MC as specified in the following circumstances: a. Delay caused by NASA MC pays only additional service costs, if any, required/provided by NASA and/or SHI. b. Delay caused by SHI MC pays only additional service costs, if any, required/provided by NASA. c. Delay caused by MC or NASDA MC pays any additional NASA costs charged to SHI which may be required or caused by any delay, suspension or postponement of the launch in excess of the 72 hours allowable delay for which NASA does not charge. MC pays for any additional costs incurred by SHI for services provided by NASA and/or SHI. 5. OPTIONAL SERVICES There are currently no optional services priced under this Contract. Prices for any optional services will be negotiated on an individual basis and will be in addition to the price as set forth in Section 2 above. 6. APPLICABILITY OF NASA/SHI SPACE SHUTTLE CONTRACTS 3 SHI and MC acknowledge that performance of the services described in this Contract and the SOW depends upon the Contract(s) governing NASA's manifesting and use of the Module for STS-95 ("NASA Contracts"). Any changes to these NASA/SHI Contract(s) that are imposed by NASA and which prevent SHI from providing the services described herein shall not constitute a breach of this Contract by either SHI or MC. In the event of such changes by NASA, SHI and MC agree to negotiate an equitable adjustment to this Contract that satisfies both parties as well as NASA's new requirements. If there are any conflicts between this Contract and the requirements of the NASA Contracts applicable to this Contract, the NASA Contracts terms and conditions shall take precedence. 7. EXCHANGE OF DOCUMENTATION AND INFORMATION SHI and BUYER shall exchange all documents and information required for each party to fulfill its responsibilities under this Contract in accordance with the November 1997 SPACEHAB/NASDA/MC STS-95 Confidentiality & Nondisclosure Contract. 8. PERMITS AND LICENSES SHI shall obtain any permit or license that may be required to provide the services to be furnished under this Contract. MC will be responsible for obtaining any permit or license that may be required to perform an activity unique to the Exhibit A experiments that is not included in the foregoing, such as tests involving use of radioactive materials or particular requirements of MC's own government(s), or governmental authorities outside the United States. 9. ALLOCATION OF CERTAIN RISKS AND LIMITATION OF LIABILITY a. Insurance Coverage In Lieu of NASA FAR Supplement Cross-Waiver SHI agrees to purchase indemnification insurance covering participants who otherwise would have been covered by the cross waiver provisions set forth in the NASA FAR Supplement in the event MC or NASDA were materially damaged by one or more of such participants during the payload processing activities or STS Operations. b. Risk of Patent Infringement (i) SHI agrees to indemnify MC, its officers, employees and agents against any United States Patent infringement costs (including, but not limited to, any judgment against MC by a court of competent jurisdiction, reasonable administrative and litigation costs, and settlement payments made as a result of an administrative claim) incurred by MC which are attributable to products, processes or articles of manufacture used in the facilities and Services to be furnished to MC by SHI hereunder. (ii) MC agrees to indemnify SHI and NASA, their officers, employees and agents against any United States Patent infringement costs (including, but not limited to, judgment against SHI by a court of competent jurisdiction, reasonable administrative and litigation costs, and settlement payments made as a result of an administration claim) incurred by SHI and/or NASA which are attributable to products, processes or articles of manufacture used in Exhibit A experiments and any supporting equipment and facilities brought to the SHI SPPF by MC or MC's contractors or subcontractors and any activity performed at SHI or NASA facilities 4 by MC or MC's contractors or subcontractors and any activity performed at SHI or NASA facilities by MC or MC's contractors or subcontractors. c. Limitation of SHI and MC Liability Notwithstanding any other provisions herein, to the extent that a risk of damage is not dealt with expressly in this Contract, SHI's and MC's liability under this Contract, whether or not arising as a result of an alleged breach of this Contract, shall be limited to direct damages only and shall not include any loss of revenue, profits or other indirect or consequential damages. 10. ASSISTANCE WITH THIRD PARTY CLAIMS In the event a third party claim is asserted against SHI or MC as a result of patent infringement, use of proprietary data, or damage, including claims of their respective contractors or subcontractors, arising from or in connection with the Services provided by SHI under this Contract, SHI and MC each agree to give prompt notice to the other of any such claim and agree to provide each other with any assistance practicable in the defense against such claim. If a claim asserted against one party is a claim under this Contract, the party who has agreed to indemnify shall have the right to intervene and defend, the right to control litigation of, and the right to determine the appropriateness of any settlement related to such claim. 11. WARRANTIES SHI makes no warranties of any kind, express or implied, including any implied warranty of merchantability or fitness for a particular purpose. 12. PUBLICITY RELATING TO CONTRACT In cases where one Party intends to use results obtained from this Contract or advertise his role in this Contract, it shall first request the other Party for its prior written approval, which shall not be unreasonably withheld. 13. APPLICABLE LAW The Contract shall be governed by the laws of the State of Virginia. 14. ARBITRATION/DISPUTES Disputes arising out of the interpretation or execution of this Contract which cannot be resolved by negotiation shall, at the request of either Party, (after giving 30 days notice to the other Party) be submitted to arbitration. The arbitration tribunal shall sit in Washington DC. Disputes shall be finally settled in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce by one or more arbitrators designated in conformity with those Rules. The decision to submit a dispute shall not excuse either party from the timely performance of its obligations hereunder which are not the subject matter of the dispute. Further, if the lack of resolution of the matter in dispute will adversely impact the timely completion of preparation for launch activities, MC and SHI will perform the matter in dispute in the manner determined by SHI, within the framework of this Contract and without prejudice to the final resolution of the matter in dispute. 5 15. TERMINATION OF SERVICES Both parties have the right to terminate this Contract pursuant to the following conditions only: a. SHI may terminate this Contract: (i) In the event NASDA delivers any payload described in the SOW so late beyond the mutually agreed upon delivery date that SHI, in its sole reasonable judgment, is unable to process such payload in time to meet the launch schedule, SHI will terminate this Contract and shall retain all payments made by MC to the date of termination, and MC is further liable for all costs incurred by SHI as a result of such NASDA failure, or (ii) In the event of a material breach by MC which MC fails to cure within a reasonable time after written notice received from SHI (or immediately upon a non-curable breach), in which case SHI shall retain all payments made to the date of the termination, and MC is further liable for all costs incurred by SHI resulting from MC's breach of the Contract or, (iii) As a result of any actions or inactions by NASA which prevent the manifesting of the Exhibit A experiments on STS-95, in which case SHI shall be entitled to all payments hereunder received to the date of termination, plus the Integration and Optional Services (if any) actual costs incurred up to the time of termination, as well as all termination charges which may be imposed by third parties (such as NASA or SHI subcontractors). b. MC may terminate this Contract: (i) Without cause at any time before installation of the Exhibit A experiments into the SHI module upon sufficient written notification to SHI of such intent, in which case MC shall be liable for and SHI shall retain all payments hereunder received up to the date of termination, plus the Integration and Optional Services (if any) actual costs incurred up to the time of termination, as well as all termination charges which may be imposed by third parties (such as NASA or SHI subcontractors), or, (ii) In the event of material breach by SHI which SHI fails to cure in a reasonable time after written notice of such material breach is received from MC, in which case MC will be relieved from making any further payments to SHI subsequent to the material breach hereof. c. Termination In Special Cases: MC may terminate this Contract by giving written notice with immediate effect in any of the following events: (i) If SHI becomes insolvent or if its financial position is such that within the framework of its national law, legal action leading towards bankruptcy may be taken against it by its creditors; (ii) If SHI resorts to fraudulent practices in connection with the contract, especially by deceit concerning the nature, quality or quantity of the supplies, and the methods or 6 processes of manufacture employed or by the giving or offering of gifts or remuneration for the purpose of bribery to any person in the employ of NASDA or acting on its behalf, irrespective of whether such bribes or remuneration are made on the initiative of SHI or otherwise. 16. ASSIGNMENTS No party shall assign to another person or entity any part of its rights under this Agreement, including but not limited to rights for services related to scheduled launches, unless otherwise expressly agreed to by the other party in writing, or as may be required pursuant to law. 17. NOTICES All notices, requests, demands, and other communication hereunder shall be in writing and shall be either (1) personally delivered, (2) sent by mail or reputable overnight delivery service, or (3) transmitted by facsimile machine as follows: To SHI: Ms. Nelda Wilbanks Contracts Administrator SPACEHAB, Inc. 1595 Spring Hill Road, Suite 360 Vienna, VA 22182 USA To MC: Mr. Kazushi Ochi Manager, Space Systems Unit Mitsubishi Corporation 2-6-3 Marunouchi, Chiyoda-ku Tokyo, Japan 100-86 The effective date of each notice, demand, request or other communication shall be deemed to be: (1) the date of receipt if delivered personally or by mail or overnight delivery service, or (2) the date of transmission if by facsimile. Either party may change its address or designee for purposes hereof by informing the other party in writing of such action and the effective date of such change. 18. FORCE MAJEURE Neither party shall be liable for delays or breaches hereof resulting from events or acts beyond the control of such party, including but not limited to acts of God, strikes, lockouts, riots, acts of war, epidemics, governmental regulations, and natural disasters. Upon the occurrence of such event, the party whose performance is affected shall use reasonable efforts to notify the other party of the nature and extent of any such condition and negotiate its affects. 19. COMPLETE CONTRACT This Contract constitutes the complete Contract and understanding with respect to the subject matter hereof between the parties. Mitsubishi Corporation SPACEHAB, Inc. By:________________________ By:________________________ K. Ochi, Manager Nelda Wilbanks Space Systems Unit Contracts Administrator Aerospace Division 7 EXHIBIT A EXPERIMENT LIST 1. NASDA'S VESTIBULAR FUNCTION EXPERIMENT UNIT (VFEU) - CHARGEABLE MASS 215 KG 2. NASDA'S BIOLOGICAL RESEARCH IN A CANISTER (BRIC) - CHARGEABLE MASS 40 KG 3. NASDA'S ORGANIC CRYSTAL CHAMBER (OCC)* - CHARGEABLE MASS 15 KG 4. OCEANEERING/SPACEHAB REFRIGERATOR/FREEZER - CHARGEABLE MASS 45 KG 5. CAMCORDER/MICROCAM/STILLCAM - CHARGEABLE MASS 10 KG * THE OCC EXPERIMENT SUPPORT HARDWARE INCLUDES THE 3-DIMENSIONAL MICROGRAVITY ACCELEROMETER (3-DMA) AND THE JAPANESE UNITED STATES THERMAL SCIENCES ACCELERATION PROJECT (JUSTSAP). HOWEVER, THERE IS NO "CHARGEABLE MASS" ALLOCATED TO MC/NASDA FOR THE USE OF THIS HARDWARE, SUPPLIED BY THE UNIVERSITY OF ALABAMA - - HUNTSVILLE, CONSORTIUM FOR MATERIALS DEVELOPMENT IN SPACE. EX-10.76 3 STS-95 AGREEMENT B 1 EXHIBIT 10.76 STS-95 USER CONTRACT (B) This STS-95 User Contract (B) ("Contract") is made this 18th day of March, 1998, between SPACEHAB, Incorporated ("SHI"), a Washington state corporation with its principal office located in Vienna, Virginia and Mitsubishi Corporation, with its principal office located in Tokyo, Japan ("MC"), as contractor to the National Space Development Agency of Japan ("NASDA", collectively "BUYER"). WHEREAS MC desires to procure SPACEHAB pressurized module services ("SPACEHAB" or "Module") and retain SHI to act as the carrier and interface between the U.S. National Aeronautics and Space Administration's ("NASA") Space Shuttle fleet and the experiments listed in Exhibit A aboard a SPACEHAB Module Mission currently manifested as STS-95. WHEREAS SHI desires to supply to MC such services and to act as the carrier and interface between the NASA Space Shuttle fleet and the experiments listed in Exhibit A aboard a SPACEHAB Module Mission currently manifested as STS-95 ("Mission"); and WHEREAS SHI must immediately begin to perform certain tasks associated with the analytical and physical integration of the Exhibit A experiments into the SPACEHAB Module in order to complete these tasks prior to the anticipated launch date; WHEREAS, the parties desire to perform their respective obligations necessary to fully achieve these desires pursuant to two sequential contracts (A and B); and WHEREAS MC, NASDA, and SPACEHAB have mutually agreed to the Experiment Chargeable Mass policy presented in the Exhibit B table. NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties agree as follows: 1. STATEMENT OF WORK SHI will provide, at the times and locations set forth therein and pursuant to the terms and conditions of this Contract, the supplies and services described in the Statement of Work ("SOW") in Exhibit C (b) for the payloads listed in Exhibit A (both exhibits incorporated herein by reference) as follows: VFEU, BRIC, OCC, Oceaneering/SPACEHAB Refrigerator/Freezer (OSRF), and Camcorder/Microcam/StillCam. The OCC experiment support hardware will be co-located with the 3-Dimensional Microgravity Accelerometer (3-DMA) and the Japanese United States Thermal Sciences Acceleration Project (JUSTSAP) supplied by the University of Alabama - Huntsville, Consortium for Materials Development in Space. There is no charge to MC/NASDA for co-location of this hardware under this contract. 2. PRICE AND TERMS OF PAYMENT MC shall pay SHI a fixed price of 1997 US$7,620,000 at the time set forth below. Included in this price is the lease of the OSRF and the associated integration and operations services performed by Oceaneering Space Systems of Houston, Texas. 1 2 - 97US$ 7,620,000.00 March 31, 1998 Total $7,620,000.00
The total actual Chargeable Mass (reference Exhibit B) for all experiments in Exhibit A and any supporting flight hardware shall be fixed at 303.572 kg. 3. PAYMENT TERMS AND CONDITIONS Payment shall be made in accordance with Paragraph 2 above. In the event MC requests and receives services not specified as Standard Services in the Statement of Work, Exhibit C(b), SHI shall send a Final Billing to MC as promptly as possible after completion of the last service provided by SHI under this Contract. The Final Billing will address additional payment requirements, if any, from MC. If an additional MC payment is required, such payment shall be due 60 days after the billing date of the Final Billing. 4. MISSION DELAYS In the event STS-95 is delayed, suspended, or postponed, there may be additional charges to MC as specified in the following circumstances: a. Delay caused by NASA MC pays only additional service costs, if any, required/provided by NASA and/or SHI. b. Delay caused by SHI MC pays only additional service costs, if any, required/provided by NASA. c. Delay caused by MC or NASDA MC pays any additional NASA costs charged to SHI which may be required or caused by any delay, suspension or postponement of the launch in excess of the 72 hours allowable delay for which NASA does not charge. MC pays for any additional costs incurred by SHI for services provided by NASA and/or SHI. 5. OPTIONAL SERVICES There are currently no optional services priced under this Contract. Prices for any optional services will be negotiated on an individual basis and will be in addition to the price as set forth in Section 2 above. 6. APPLICABILITY OF NASA/SHI SPACE SHUTTLE CONTRACTS SHI and MC acknowledge that performance of the services described in this Contract and the SOW depends upon the Contract(s) governing NASA's manifesting and use of the Module for STS-95 ("NASA Contracts"). Any changes to these NASA/SHI Contract(s) that are imposed by NASA and which prevent SHI from providing the services described herein shall not constitute a breach of this Contract by either SHI or MC. In the event of such changes by NASA, SHI and MC agree to negotiate an equitable adjustment to this Contract that satisfies both parties as well as NASA's new requirements. If there are any conflicts between this Contract and the 2 3 requirements of the NASA Contracts applicable to this Contract, the NASA Contracts terms and conditions shall take precedence. 7. EXCHANGE OF DOCUMENTATION AND INFORMATION SHI and BUYER shall exchange all documents and information required for each party to fulfill its responsibilities under this Contract in accordance with the November 1997 SPACEHAB/NASDA/MC STS-95 Confidentiality & Nondisclosure Contract. 8. PERMITS AND LICENSES SHI shall obtain any permit or license that may be required to provide the services to be furnished under this Contract. MC will be responsible for obtaining any permit or license that may be required to perform an activity unique to the Exhibit A experiments that is not included in the foregoing, such as tests involving use of radioactive materials or particular requirements of MC's own government(s), or governmental authorities outside the United States. 9. ALLOCATION OF CERTAIN RISKS AND LIMITATION OF LIABILITY a. Insurance Coverage In Lieu of NASA FAR Supplement Cross-Waiver SHI agrees to purchase indemnification insurance covering participants who otherwise would have been covered by the cross waiver provisions set forth in the NASA FAR Supplement in the event MC or NASDA were materially damaged by one or more of such participants during the payload processing activities or STS Operations. b. Risk of Patent Infringement (i) SHI agrees to indemnify MC, its officers, employees and agents against any United States Patent infringement costs (including, but not limited to, any judgment against MC by a court of competent jurisdiction, reasonable administrative and litigation costs, and settlement payments made as a result of an administrative claim) incurred by MC which are attributable to products, processes or articles of manufacture used in the facilities and Services to be furnished to MC by SHI hereunder. (ii) MC agrees to indemnify SHI and NASA, their officers, employees and agents against any United States Patent infringement costs (including, but not limited to, judgment against SHI by a court of competent jurisdiction, reasonable administrative and litigation costs, and settlement payments made as a result of an administration claim) incurred by SHI and/or NASA which are attributable to products, processes or articles of manufacture used in Exhibit A experiments and any supporting equipment and facilities brought to the SHI SPPF by MC or MC's contractors or subcontractors and any activity performed at SHI or NASA facilities by MC or MC's contractors or subcontractors and any activity performed at SHI or NASA facilities by MC or MC's contractors or subcontractors. c. Limitation of SHI and MC Liability Notwithstanding any other provisions herein, to the extent that a risk of damage is not dealt with expressly in this Contract, SHI's and MC's liability under this Contract, whether or 3 4 not arising as a result of an alleged breach of this Contract, shall be limited to direct damages only and shall not include any loss of revenue, profits or other indirect or consequential damages. 10. ASSISTANCE WITH THIRD PARTY CLAIMS In the event a third party claim is asserted against SHI or MC as a result of patent infringement, use of proprietary data, or damage, including claims of their respective contractors or subcontractors, arising from or in connection with the Services provided by SHI under this Contract, SHI and MC each agree to give prompt notice to the other of any such claim and agree to provide each other with any assistance practicable in the defense against such claim. If a claim asserted against one party is a claim under this Contract, the party who has agreed to indemnify shall have the right to intervene and defend, the right to control litigation of, and the right to determine the appropriateness of any settlement related to such claim. 11. WARRANTIES SHI makes no warranties of any kind, express or implied, including any implied warranty of merchantability or fitness for a particular purpose. 12. PUBLICITY RELATING TO CONTRACT In cases where one Party intends to use results obtained from this Contract or advertise his role in this Contract, it shall first request the other Party for its prior written approval, which shall not be unreasonably withheld. 13. APPLICABLE LAW The Contract shall be governed by the laws of the State of Virginia. 14. ARBITRATION/DISPUTES Disputes arising out of the interpretation or execution of this Contract which cannot be resolved by negotiation shall, at the request of either Party, (after giving 30 days notice to the other Party) be submitted to arbitration. The arbitration tribunal shall sit in Washington, DC. Disputes shall be finally settled in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce by one or more arbitrators designated in conformity with those Rules. The decision to submit a dispute shall not excuse either party from the timely performance of its obligations hereunder which are not the subject matter of the dispute. Further, if the lack of resolution of the matter in dispute will adversely impact the timely completion of preparation for launch activities, MC and SHI will perform the matter in dispute in the manner determined by SHI, within the framework of this Contract and without prejudice to the final resolution of the matter in dispute. 15. TERMINATION OF SERVICES Both parties have the right to terminate this Contract pursuant to the following conditions only: a. SHI may terminate this Contract: 4 5 (i) In the event NASDA delivers any payload described in the SOW so late beyond the mutually agreed upon delivery date that SHI, in its sole reasonable judgment, is unable to process such payload in time to meet the launch schedule, SHI will terminate this Contract and shall retain all payments made by MC to the date of termination, and MC is further liable for all costs incurred by SHI as a result of such NASDA failure, or (ii) In the event of a material breach by MC which MC fails to cure within a reasonable time after written notice received from SHI (or immediately upon a non-curable breach), in which case SHI shall retain all payments made to the date of the termination, and MC is further liable for all costs incurred by SHI resulting from MC's breach of the Contract or, (iii) As a result of any actions or inactions by NASA which prevent the manifesting of the Exhibit A experiments on STS-95, in which case SHI shall be entitled to all payments hereunder received to the date of termination, plus the Integration and Optional Services (if any) actual costs incurred up to the time of termination, as well as all termination charges which may be imposed by third parties (such as NASA or SHI subcontractors). b. MC may terminate this Contract: (ii) Without cause at any time before installation of the Exhibit A experiments into the SHI module upon sufficient written notification to SHI of such intent, in which case MC shall be liable for and SHI shall retain all payments hereunder received up to the date of termination, plus the Integration and Optional Services (if any) actual costs incurred up to the time of termination, as well as all termination charges which may be imposed by third parties (such as NASA or SHI subcontractors), or, (ii) In the event of material breach by SHI which SHI fails to cure in a reasonable time after written notice of such material breach is received from MC, in which case MC will be relieved from making any further payments to SHI subsequent to the material breach hereof. c. Termination In Special Cases: MC may terminate this Contract by giving written notice with immediate effect in any of the following events: (i) If SHI becomes insolvent or if its financial position is such that within the framework of its national law, legal action leading towards bankruptcy may be taken against it by its creditors; (ii) If SHI resorts to fraudulent practices in connection with the contract, especially by deceit concerning the nature, quality or quantity of the supplies, and the methods or processes of manufacture employed or by the giving or offering of gifts or remuneration for the purpose of bribery to any person in the employ of NASDA or acting on its behalf, irrespective of whether such bribes or remuneration are made on the initiative of SHI or otherwise. 5 6 16. ASSIGNMENTS No party shall assign to another person or entity any part of its rights under this Agreement, including but not limited to rights for services related to scheduled launches, unless otherwise expressly agreed to by the other party in writing, or as may be required pursuant to law. 17. NOTICES All notices, requests, demands, and other communication hereunder shall be in writing and shall be either (1) personally delivered, (2) sent by mail or reputable overnight delivery service, or (3) transmitted by facsimile machine as follows: To SHI: Ms. Nelda Wilbanks Contracts Administrator SPACEHAB, Inc. 1595 Spring Hill Road, Suite 360 Vienna, VA 22182 USA To MC: Mr. Kazushi Ochi Manager, Space Systems Unit Mitsubishi Corporation 2-6-3 Marunouchi, Chiyoda-ku Tokyo, Japan 100-86 The effective date of each notice, demand, request or other communication shall be deemed to be: (1) the date of receipt if delivered personally or by mail or overnight delivery service, or (2) the date of transmission if by facsimile. Either party may change its address or designee for purposes hereof by informing the other party in writing of such action and the effective date of such change. 18. FORCE MAJEURE Neither party shall be liable for delays or breaches hereof resulting from events or acts beyond the control of such party, including but not limited to acts of God, strikes, lockouts, riots, acts of war, epidemics, governmental regulations, and natural disasters. Upon the occurrence of such event, the party whose performance is affected shall use reasonable efforts to notify the other party of the nature and extent of any such condition and negotiate its affects. 19. COMPLETE CONTRACT This Contract constitutes the complete Contract and understanding with respect to the subject matter hereof between the parties. Mitsubishi Corporation SPACEHAB, Inc. By: ________________________________ By: __________________________ Name: ______________________________ Name: Nelda Wilbanks ----------------------- Title: _____________________________ Title: Contracts Administrator ----------------------- 6 7 EXHIBIT A EXPERIMENT LIST 1. NASDA'S VESTIBULAR FUNCTION EXPERIMENT UNIT (VFEU) 2. NASDA'S BIOLOGICAL RESEARCH IN A CANISTER (BRIC) 3. NASDA'S ORGANIC CRYSTAL CHAMBER (OCC)* 4. OCEANEERING/SPACEHAB REFRIGERATOR/FREEZER 5. CAMCORDER/MICROCAM/STILLCAM * THE OCC EXPERIMENT SUPPORT HARDWARE IS CO-LOCATED WITH THE 3-DIMENSIONAL MICROGRAVITY ACCELEROMETER (3-DMA) AND THE JAPANESE UNITED STATES THERMAL SCIENCES ACCELERATION PROJECT (JUSTSAP). HOWEVER, THERE IS NO CHARGE TO MC/NASDA FOR THE USE OF THIS HARDWARE, SUPPLIED BY THE UNIVERSITY OF ALABAMA - HUNTSVILLE, CONSORTIUM FOR MATERIALS DEVELOPMENT IN SPACE. 7 EX-10.77 4 NHK CONTRACT 1 EXHIBIT 10.77 AGREEMENT This agreement ("Agreement") is made this 18th day of May, 1998, between SPACEHAB, Incorporated ("SHI"), a Washington state corporation with its principal office located in Vienna, Virginia and Mitsubishi Corporation, with its principal office located in Tokyo, Japan ("MITSUBISHI"), as contractor to the Japan Broadcasting Agency ("NHK") ("BUYER"). WHEREAS MITSUBISHI desires to procure SPACEHAB pressurized module services ("SPACEHAB" or "Module") and retain SHI to act as the carrier and interface between the U.S. National Aeronautics and Space Administration's ("NASA") Space Shuttle fleet and the NHK-provided camera hardware aboard a SPACEHAB Module Mission currently manifested as STS-95; WHEREAS SHI desires to supply to MITSUBISHI such services and to act as the carrier and interface between the NASA Space Shuttle fleet and the NHK-provided camera hardware aboard a SPACEHAB Module Mission currently manifested as STS-95 ("Mission"); WHEREAS SHI must immediately begin to perform certain tasks associated with the analytical and physical integration of the NHK-provided camera hardware into the SPACEHAB Module in order to complete these tasks prior to the anticipated launch date; and WHEREAS MITSUBISHI, NHK and SPACEHAB have mutually agreed to the Experiment Chargeable Mass policy presented in the Exhibit B table. NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties agree as follows: 1. STATEMENT OF WORK SHI will provide, at the times and locations set forth therein and pursuant to the terms and conditions of this Agreement, the supplies and services described in the Statement of Work ("SOW") in Exhibit C. NHK shall provide to SHI the camera (hand-held) and all of its associated support hardware to include, but not limited to, lenses, microphone and cables. 2. PRICE AND TERMS OF PAYMENT MITSUBISHI shall pay SHI a fixed price of 1998 US$280,000 for flight of all NHK-provided camera hardware and all SPACEHAB-provided NHK camera stowage hardware (chargeable mass 10 kg). - 98US$ 140,000.00 upon execution of this agreement - 98US$ 70,000.00 upon completion of the Interface Control Document 98US$ 40,000.00 upon delivery of the flight certified camera and associated support hardware to the SPPF 98US$ 28,000.00 STS-95 landing plus one month
1 2 Total $280,000.00
The actual Chargeable Mass for the NHK-provided camera hardware and its supporting flight hardware shall be determined by SHI using a calibrated scale at the time of installation of each experiment into the module. Any upward deviation in the total measured Chargeable Mass flown on the mission from the Chargeable Mass referred to in Section 1 above shall result in an upward price adjustment for that experiment at the rate of $28,000/kg. The cumulative total of all experiment upward price deviations, which shall not exceed $300,000, shall be paid to SHI at the time of final contract payment above, in addition to the final payment amount, also indicated above. 3. PAYMENT TERMS AND CONDITIONS SHI shall send a Final Accounting/Billing to MITSUBISHI as promptly as possible after completion of the last service provided by SHI under this Agreement. The Final Accounting/Billing will contain a final accounting under the Agreement and address additional payment requirements, if any, from MITSUBISHI. If, as a result of final Accounting/Billing, an additional MITSUBISHI payment is required, such payment shall be due 60 days after the billing date of the Final Accounting/Billing. 4. MISSION DELAYS In the event STS-95 is delayed, suspended, or postponed, there may be additional charges to MITSUBISHI as specified in the following circumstances: a. Delay caused by NASA MITSUBISHI pays only additional service costs, if any, required/provided by NASA and/or SHI. b. Delay caused by SHI MITSUBISHI pays only additional service costs, if any, required/provided by NASA. c. Delay caused by MITSUBISHI/NHK MITSUBISHI pays any additional NASA costs charged to SHI which may be required or caused by any delay, suspension or postponement of the launch in excess of the 72 hours allowable delay for which NASA does not charge. - MITSUBISHI pays for any additional costs incurred by SHI for services provided by NASA and/or SHI. 5. OPTIONAL SERVICES There are no defined optional services. 2 3 6. APPLICABILITY OF NASA/SHI SPACE SHUTTLE AGREEMENTS SHI and MITSUBISHI acknowledge that performance of the services described in this Agreement and the SOW depends upon the agreement(s) governing NASA's lease of the Module for STS-95 or any other missions covered herein ("NASA Contracts"). Any changes to these NASA/SHI agreement(s) that are imposed by NASA and which prevent SHI from providing the services described herein shall not constitute a breach of this Agreement by either SHI or MITSUBISHI. In the event of such changes by NASA, SHI, and MITSUBISHI agree to negotiate an equitable adjustment to this Agreement that satisfies both parties as well as NASA's new requirements. If there are any conflicts between this Agreement and the requirements of the NASA Contracts applicable to this Agreement, the NASA Contracts terms and conditions shall take precedence. 7. EXCHANGE OF DOCUMENTATION AND INFORMATION SHI and BUYER shall exchange all documents and information required for each party to fulfill its responsibilities under this Contract in accordance with the SPACEHAB/NASDA/NHK STS-95 Confidentiality & Nondisclosure Contract. 8. PERMITS AND LICENSES SHI shall obtain any permit or license that may be required to provide the services to be furnished under this Agreement. MITSUBISHI will be responsible for obtaining any permit or license that may be required to perform an activity unique to the NHK-provided camera that is not included in the foregoing, such as tests involving use of radioactive materials or particular requirements of MITSUBISHI's own government(s), or governmental authorities outside the United States. 9. ALLOCATION OF CERTAIN RISKS AND LIMITATION OF LIABILITY a. a. Inter-Party Waiver of Liability. In carrying out this Agreement, SHI, ESA/INTOSPACE, and NASA, will respectively utilize their property and employees in the SPACEHAB Payload Processing Facility ("SPPF"), NASA facilities, and during payload processing activities and STS Operations in close proximity to one another and to others. Furthermore, the parties recognize that all participants are engaged in the common goal of meaningful exploration, exploitation and utilization of outer space. In furtherance of this goal, the parties hereto agree to a no-fault, no-subrogation, inter-party waiver of liability pursuant to which each party agrees not to bring claims in arbitration or otherwise against or sue the other party or other customers of SHI, and agrees to absorb the financial and any other consequences arising out of damage to its own property and employees as a result of participation in the payload processing activities and STS Operations, irrespective of whether such damage is caused by SHI, ESA, INTOSPACE, other SHI customers, NASA, or other NASA customers participating in payload processing activities and STS Operations and regardless of whether such damage arises through negligence or otherwise. b. Extension of Inter-Party Waiver. 3 4 The parties agree that this common goal will also be advanced through extension of the inter-party waiver of liability to other participants in the payload processing activities and STS Operations. Accordingly, the parties agree to extend the waiver as set forth in Section 8a above to the other party's and NASA's contractors and subcontractors at every tier, as third party beneficiaries, whether or not such contractors or subcontractors causing damage bring property or employees to SHI's SPPF or retain title to other interest in property provided by them to be used, or otherwise involved, in the payload processing and Launch Activity. Specifically, the parties intend to protect these contractors and subcontractors from claims, including "products liability" claims, which might otherwise be pursued by the parties, or the contractors or subcontractors of the parties, or other customers of SHI or the contractors or subcontractors of such other customers. Moreover, it is the intent of the parties that each will take all necessary and reasonable steps to foreclose claims for damage by any participant in a payload processing and Launch Activity, under the same conditions and to the same extent as set forth in Section 8a above, except for claims between INTOSPACE and its contractors or subcontractors and claims between SHI and its contractors and subcontractors. c. Broad Construction of Inter-Party Waiver. The parties intend that the inter-party waiver of liability set forth above be broadly construed to achieve be intended objectives. d. Definitions of "payload processing activity" and "STS Operations". "Payload processing activity" means all activity conducted at the SPPF or a NASA facility associated with the preparation of the payload(s) (including but not limited to the Exhibit A experiments) for launch and SHI and/or NASA storage of all or a portion of the payload(s), and the handling and transportation of all or a portion of the payload(s) outside the confines of SHI's facility by SHI, NASA, or their contractors or subcontractors: "STS Operations" means: A. All Space Shuttle System Activity B. All payload operations C. Use of all tangible personal property (including ground support, test, training and simulation equipment related to A & B above). D. Research, design, development, test, manufacture, assembly, integration, transportation, or use of materials related to the above items, A, B & C. E. Performance of any activities related to A through D. e. The protection of cross waiver of liability for STS Operations herein agreed to shall cover a period of time during which STS Operations are being performed as follows: Beginning with the signature of an Agreement or Arrangement with NASA for Space Transportation System services and (i) when any employee, payload or property arrives at a United States Government Installation, or (ii) during transportation of such to the installation by a United States Government Conveyance, or (iii) at ingress of such into an 4 5 Orbiter, for the purpose of fulfilling such Agreement or Arrangement, or (iv) the commencement of extravehicular activities by the Shuttle Crew for the purpose of retrieval of the payload, whichever occurs first and Ending with regard to any employee, payload or property, when such employee, payload or property departs (i) a U.S. Government Installation, or (ii) the Orbiter if it lands at other than such Installation, or (iii) a U.S. Government conveyance which transports the employee and/or payload and related property from such Installation or Orbiter. f. Risk of Patent Infringement (i) SHI agrees to indemnify MITSUBISHI, its officers, employees and agents against any United States Patent infringement costs (including, but not limited to, any judgment against MITSUBISHI by a court of competent jurisdiction, reasonable administrative and litigation costs, and settlement payments made as a result of an administrative claim) incurred by MITSUBISHI which are attributable to products, processes or articles of manufacture used in the facilities and Services to be furnished to MITSUBISHI by SHI hereunder. (ii) MITSUBISHI agrees to indemnify SHI and NASA, their officers, employees and agents against any United States Patent infringement costs (including, but not limited to, judgment against SHI by a court of competent jurisdiction, reasonable administrative and litigation costs, and settlement payments made as a result of an administration claim) incurred by SHI and/or NASA which are attributable to products, processes or articles of manufacture used in Exhibit A experiments and any supporting equipment and facilities brought to the SHI SPPF by MITSUBISHI or MITSUBISHI's contractors or subcontractors and any activity performed at SHI or NASA facilities by MITSUBISHI or MITSUBISHI's contractors or subcontractors and any activity performed at SHI or NASA facilities by MITSUBISHI or MITSUBISHI's contractors or subcontractors. g. Limitation of SHI and MITSUBISHI Liability Notwithstanding any other provisions herein, to the extent that a risk of damage is not dealt with expressly in this Agreement, SHI's and MITSUBISHI's liability under this Agreement, whether or not arising as a result of an alleged breach of this Agreement, shall be limited to direct damages only and shall not include any loss of revenue, profits or other indirect or consequential damages. 10. ASSISTANCE WITH THIRD PARTY CLAIMS In the event a third party claim is asserted against SHI or MITSUBISHI as a result of patent infringement, use of proprietary data, or damage, including claims of their respective contractors or subcontractors, arising from or in connection with the Services provided by SHI under this Agreement, SHI and MITSUBISHI each agree to give prompt notice to the other of any such claim and agree to provide each other with any assistance practicable in the defense against such claim. If a claim asserted against one party is a claim under this Agreement, the party who has agreed to indemnify shall have the right to intervene and defend, the right to control litigation of, and the right to determine the appropriateness of any settlement related to such claim. 11. WARRANTIES 5 6 SHI makes no warranties of any kind, express or implied, including any implied warranty of merchantibility or fitness for a particular purpose. 12. PUBLICITY RELATING TO AGREEMENT In cases where one Party intends to use results obtained from this Agreement or advertise his role in this Agreement, it shall first request the other Party for its prior written approval, which shall not be unreasonably withheld. 13. APPLICABLE LAW The Agreement shall be governed by the law of the State of Virginia. 14. ARBITRATION/DISPUTES Disputes arising out of the interpretation or execution of this Agreement which cannot be resolved by negotiation shall, at the request of either Party, (after giving 30 days notice to the other Party) be submitted to arbitration. The arbitration tribunal shall sit in Hannover, Germany. Disputes shall be finally settled in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce by one or more arbitrators designated in conformity with those Rules. The decision to submit a dispute shall not excuse either party from the timely performance of its obligations hereunder which are not the subject matter of the dispute. Further, if the lack of resolution of the matter in dispute will adversely impact the timely completion of preparation for launch activities, MITSUBISHI and SHI will perform the matter in dispute in the manner determined by SHI, within the framework of this Agreement and without prejudice to the final resolution of the matter in dispute. 15. TERMINATION OF SERVICES Both parties have the right to terminate this Agreement pursuant to the following conditions only: a. SHI may terminate this Agreement: (i) In the event NHK delivers any payload described in the SOW so late beyond the mutually agreed upon delivery date that SHI, in its sole reasonable judgment, is unable to process such payload in time to meet the launch schedule, SHI will terminate this Agreement and shall retain all payments made by MITSUBISHI to the date of termination, and MITSUBISHI is further liable for all costs incurred by SHI as a result of such NHK failure, or (ii) in the event of a material breach by MITSUBISHI which MITSUBISHI fails to cure within a reasonable time after written notice received from SHI (or immediately upon a non-curable breach), in which case SHI shall retain all payments made to the date of the termination, and MITSUBISHI is further liable for all costs incurred by SHI resulting from MITSUBISHI's breach of the Agreement or, (iii) as a result of any actions or inactions by NASA which prevent the manifesting of the Exhibit A experiments on STS-95, in which case SHI shall be entitled to all applicable payments hereunder received, plus the Integration and Optional Services (if any) actual costs incurred up to the time of termination, as well 6 7 as all termination charges which may be imposed by third parties (such as NASA or SHI subcontractors). b. MITSUBISHI may terminate this Agreement: (i) without cause at any time before installation of the Exhibit A experiments into the SHI module upon sufficient written notification to SHI of such intent, in which case MITSUBISHI shall be liable for and SHI shall retain all applicable payments hereunder received, plus the Integration and Optional Services (if any) actual costs incurred up to the time of termination, as well as all termination charges which may be imposed by third parties (such as NASA or SHI subcontractors), or, (ii) in the event of material breach by SHI which SHI fails to cure in a reasonable time after written notice of such material breach is received from MITSUBISHI, in which case MITSUBISHI will be relieved from making any further payments to SHI subsequent to the material breach hereof. c. Termination In Special Cases: MITSUBISHI may at any time terminate this Agreement by giving written notice with immediate effect in any of the following events: (i) if SHI becomes insolvent or if its financial position is such that within the framework of its national law, legal action leading towards bankruptcy may be taken against it by its creditors; (ii) if SHI resorts to fraudulent practices in connection with the contract, especially by deceit concerning the nature, quality or quantity of the supplies, and the methods or processes of manufacture employed or by the giving or offering of gifts or remuneration for the purpose of bribery to any person in the employ of an NHK Member State or of NHK or acting on its behalf, irrespective of whether such bribes or remuneration are made on the initiative of SHI or otherwise. 16. ASSIGNMENTS No party shall assign to another person or entity any part of its rights under this Agreement, including but not limited to rights for services related to scheduled launches, unless otherwise expressly agreed to by the other party in writing, or as may be required pursuant to law. 17. NOTICES All notices, requests, demands, and other communication hereunder shall be in writing and shall be either (1) personally delivered, (2) sent by mail or reputable overnight delivery service, or (3) transmitted by facsimile machine as follows: To SHI: Nelda Wilbanks Contracts Administrator SPACEHAB, Inc. 1595 Spring Hill Road, Suite 360 Vienna, VA 22182 To MITSUBISHI: Kazushi Ochi Mitsubishi Corporation 7 8 2-6-3 Marunouchi, Chiyoda-ku Tokyo, Japan 100-86 The effective date of each notice, demand, request or other communication shall be deemed to be: (1) the date of receipt if delivered personally or by mail or overnight delivery service, or (2) the date of transmission if by facsimile. Either party may change its address or designee for purposes hereof by informing the other party in writing of such action and the effective date of such change. 18. FORCE MAJEURE Neither party shall be liable for delays or breaches hereof resulting from events or acts beyond the control of such party, including but not limited to acts of God, strikes, lockouts, riots, acts of war, epidemics, governmental regulations, and natural disasters. Upon the occurrence of such event, the party whose performance is affected shall use reasonable efforts to notify the other party of the nature and extent of any such condition and negotiate its affects. 8 9 19. COMPLETE AGREEMENT This Agreement constitutes the complete agreement and understanding with respect to the subject matter hereof between the parties. Mitsubishi Corporation SPACEHAB, Inc. BY: By: ------------------------- ----------------------- Name: Kazushi Ochi Name: Nelda Wilbanks ------------------------- ----------------------- General Manager Title: Space Systems Unit Title: Contracts Administrator ------------------------- ----------------------- 9 10 EXHIBIT A EXPERIMENT LIST 1. NHK CAMERA (HAND-HELD) AND ALL ASSOCIATED SUPPORT HARDWARE, INCLUDING, BUT NOT LIMITED TO, LENSES, CABLES AND MICROPHONE. 10 11 EXHIBIT C SHI-MITSUBISHI (NHK) STATEMENT OF WORK: I. GENERAL DESCRIPTION OF SHI INTEGRATION AND FLIGHT SERVICES SHI will provide and maintain a pressurized module ("SPACEHAB") that fits in the cargo bay of the National Aeronautics and Space Administration's ("NASA") Space Shuttle Orbiter ("Shuttle") to act as the carrier and interface between the Shuttle and the NHK-provided camera hardware. The camera will be analytically, physically and operationally integrated with other user payloads into the SPACEHAB. Standard SHI services will include launch into orbit, in-orbit operation by a trained flight crew, return to the launch site and to the SPACEHAB Payload Processing Facility (SPPF), deintegration, and return of camera hardware to NHK. No optional service requirements such as experiment hardware late access and early retrieval will be provided by SPACEHAB. II. RESPONSIBILITIES OF SPACEHAB, INC. (SHI) PROVISION OF STANDARD SERVICES In support of the flight of the NHK-provided camera aboard the SPACEHAB module on STS 95, SHI shall perform the following "standard" services. 1. SHI will negotiate and execute all agreements with NASA, which are required to manifest the camera aboard SPACEHAB on STS 95. 2. SHI will provide a primary point of contact (Payload Coordinator) to assist NHK in the provision of the required information and hardware to support STS-95 mission integration milestones and to facilitate all aspects of the mission integration process with NHK. 3. In cooperation with NHK, SHI will develop an Interface Control Document which defines all required technical and operational interfaces between the NHK camera and the SPACEHAB module. 4. SHI will integrate the NHK camera into the STS-95 mission operations timeline to accomplish all required video recording objectives. The camera will hand-held only, with all images recorded onboard for post-flight utilization (i.e., no real-time TV downlink will be baselined or provided). Note: SPACEHAB will continue to assess the technical feasibility of connecting the NHK TV camera to our video downlink system so that we may identify any issues should the flight crew desire to use the camera for real-time video at a later time. This will be a secondary objective only. 5. SHI will develop and publish flight procedures which enable the flight crew to perform all required mission objectives. The NHK camera will be flown as a "shared camcorder" and, consequently, may be used by the flight crew to document other experiment requirements (NASA and commercial) as required to support integrated mission objectives. Best efforts will be made by SPACEHAB to satisfy unique NHK video requirements which will be fully documented in the ICD. 11 12 6. SHI will physically prepare the NHK camera hardware for flight at the SPACEHAB Payload Processing facility and stow all camera hardware in a suitable containment compartment onboard the SPACEHAB module. 7. SHI will provide the required flight operations support to the NHK camera in-flight operations and work any issues with respect to flight crew schedule or hardware performance for the duration of the mission. 8. SHI will provide for the post-flight return of the NHK camera and all related hardware to NHK as soon as possible following the Shuttle landing. 9. SHI will designate a contract development and implementation manager who will be responsible for coordinating with a Mitsubishic counterpart all financial, scheduling, implementation progress reporting and policy matters related to this contract. III. RESPONSIBILITIES OF MITSUBISHI Mitsubishi will serve as NHK's administrative agent for establishing a contract relationship with SHI. Therefore, it is Mitsubishi's responsibility to establish and maintain this contract directly with SHI, on NHK's behalf, in order for NHK to obtain from SHI the necessary lease and integration services required for the successful flight of the camera in the SPACEHAB module. Acting in this capacity, Mitsubishi will: A. Facilitate NHK's completion of the following critical preparatory functions in support of the flight of the Experiments: 1. Timely delivery of the NHK-provided camera hardware and materials to the SPPF for preflight processing. 2. NHK support to meetings, teleconferences, flight crew training sessions, integrated mission simulations and real-time missions operations 3. Designation of NHK technical points of contact that will be responsible for coordinating with the SHI Payload Coordinator all technical activities to be performed under this Agreement B. Designation of an Mitsubishi Contract Development and Implementation Manager (CDIM) who will be responsible for coordinating with the SHI CDIM all financial, scheduling, implementation progress reporting and policy matters related to this contract. C. Establishment and maintenance of the required contract(s) with NHK to facilitate NHK sponsorship of the flight of the camera on STS 95. D. Establishment and maintenance of the required contract with SHI to obtain SHI lease and integration services necessary for the flight of the Experiments in SPACEHAB on STS 95. 12 13 E. Receipt of established contract milestone payments from NHK and provision of established contract milestone payments to SHI for performance of these required services. 13 EX-10.78 5 SHB98001 1 EXHIBIT 10.78 CONTRACT NUMBER SHB 98001 DATED JANUARY 31, 1998 FOR UNPRESSURIZED CARGO PALLETS DESIGN AND CONSTRUCTION BETWEEN SPACEHAB, INCORPORATED 1595 SPRING HILL ROAD SUITE 360 VIENNA, VIRGIANIA 22182 AND RSC-ENERGIA 4A LENIN STREET KOROLEV, MOSCOW REGION RUSSIA, 141070 2 This contract is entered into by and between SPACEHAB, Inc., with an address at 1595 Spring Hill Road, Suite 360, Vienna, Virginia 22182 (hereinafter referred to as "SPACEHAB") and RSC-Energia, with an address at 4A Lenin Street, Korolev, Moscow Region, Russia, 141070 (hereinafter referred to as "Energia"). The parties agree as follows: Article 1. Entire Agreement This contract, all exhibits, and other documents incorporated by reference, whether or not attached, constitute the complete and exclusive statement of the Contract between SPACEHAB and Energia. This contract supersedes any previous understanding or agreement between SPACEHAB and ENERGIA (oral or written) with respect to the subject matter of this contract. Article 2. Scope of Work Energia shall design, develop, manufacture, test, and deliver: - One Unpressurized Cargo Pallet (UCP) in accordance with requirements identified in the Prime Item Development Specification (Document No. ICC 97002, Revision 1) and the Statement of Work (SOW) attached as Exhibit A. (Task 1). - One UCP in compliance with SPACEHAB's requirements; such requirements to be presented in a revised SOW that will be agreed upon no later than December 31, 1998 and added to this Contract. (Task 2). Delivery of this second UCP shall be no later than December 31, 1999. In addition, this Contract has options for the design, development, manufacture, test and delivery of additional UCP's. These options may be exercised in an appropriate way by adding them to the existing Contract. Article 3. Period of Performance Energia shall perform the work called for under this contract as the continuation of the effort performed under the Letter Agreement dated December 25, 1997. Work shall continue through the Initial Integrated Cargo Carrier (IICC) system integrated acceptance fit check at SPACEHAB's ICC Processing Facility, as described in the SOW. The period of performance of this contract shall be from the date of contract signature through January 31, 1999 (Task 1), and through January 31, 2000 (Task 2). The period of performance of this contract may be extended by mutual agreement. Article 4. Contract Amount The fixed price to be paid to Energia for the products and services under this Contract shall be as follows: - $1.8 Million (U.S. Dollars) for the first UCP and associated products (Task 1). - $0.7 Million (U.S. Dollars) for the second UCP and associated products (Task 2), assuming there is no design change between the first and second UCP The fixed price paid to Energia for the products and services under the Letter Agreement dated December 25, 1997 shall be credited towards the $1.8 Million total price for the first flight UCP. In addition, a bonus payment will be made for early delivery of the first UCP as follows: 2 3 - $300,000 (U.S. Dollars) if the UCP is accepted by SPACEHAB per Article 16 by December 31, 1998. - $200,000 (U.S. Dollars) if the UCP is accepted by SPACEHAB per Article 16 by January 31, 1999). - $100,000 (U.S. Dollars) if the UCP is accepted by SPACEHAB per Article 16 by February 28, 1999). It is agreed that the following items will be excluded from this contract: - Transportation of the UCP hardware items - Personnel travel costs - Price of options It is also agreed that the following items are included in this contract: - Document translation costs - Customs costs in Russia Article 5. Reimbursement for Travel Expenses SPACEHAB shall reimburse RSC-Energia for actual pre-approved transportation and hotel expenses and on a per diem basis for meals and other expenses, for travel to SPACEHAB in the United States and to Daimler-Benz Aerospace ("DASA") in Germany. SPACEHAB shall provide local transportation to RSC Energia to and from work both at SPACEHAB and DASA. The per diem allowance in the United States shall be $58 and in Germany shall be at the rate of $70 (about 112 German marks) per day per existing Russian norms. Article 6. Payment Payments shall be made in compliance with the Production and Payment Schedule provided in Exhibit B. All payments shall be made against RSC Energia's invoices by wire transfer to the account indicated in the invoice and shall be completed within 30 days of written ratification of completion of the associated payment milestone by the SPACEHAB ICC Program Manager. The payment currency is in US Dollars. All payment shall be net without any deductions for wire transfer. Article 7. Program and Technical Direction SPACEHAB shall be the sole source of program direction to Energia. Program direction includes, but is not limited to, issues relating to contracts, schedule, and requirements. For technical issues relating to the design, development, and manufacture of the UCP flight hardware, GSE, and associated hardware, Energia shall take direction from SPACEHAB. For technical issues within the scope of work of the Exhibit A Statement of Work relating to the integration of ICC hardware elements between associate contractors, including but not limited to integrated testing, verification, and Shuttle integration, Energia shall take direction from the Mission Integration and Operations Support Contractor, DASA. If Energia is directed by DASA to perform work that is out of Energia's scope, then SPACEHAB shall provide contractual direction. Article 8. SPACEHAB Direction Energia shall accept direction from one of the following SPACEHAB individuals only: 3 4 - Prime Contact - Pete Gadsby, ICC Program Manager - Alternate Contact - Clark Thompson, Director, Technology Development Article 9. Provisions for Execution Energia and SPACEHAB shall execute two (2) copies of this contract in English and two (2) copies in Russian, one original in each language for each party. Article 10. Intellectual Property Rights All worldwide Intellectual Property rights (including but not limited to patents, copyrights, trademarks, service marks and trade secrets) created under this contract shall be the sole property of SPACEHAB. Energia agrees to reasonably assist SPACEHAB (at SPACEHAB's expense) in securing such rights through patent, copyright and trade name applications in various worldwide jurisdictions. All Intellectual Property utilized in the performance of this contract shall remain the exclusive property of the party(s) who had the rights in the IP prior to this contract. Article 11. Confidentiality SPACEHAB and Energia shall abide by the Nondisclosure Agreement between the parties dated December 23, 1997, which terms and conditions are incorporated herein by this reference. Article 12. Document Translation All textual documents provided by Energia shall be in English. Graphical documents (drawings) may be provided in Russian. Any textual document, fax, or letter, five (5) pages or less in size may be exchanged in native language. Article 13. Local Services To facilitate face-to-face meetings, the host party shall provide meeting facilities, interpreter services, and local transportation for the visiting contractors. Article 14. Packaging and Marking Packaging and marking for shipment of all items ordered under this contract shall be in accordance with good commercial practice, and adequate to ensure both acceptance by common carrier and safe transportation at the most economical rates. Article 15. Title and Delivery All hardware deliverables to be delivered per this Contract and listed in the SOW shall be delivered according to FCA Moscow (in compliance with Incoterms' 90). This means that RSC Energia's responsibility shall include clearing export customs in Russia and transfer of the hardware deliverables to a carrier identified to RSC Energia by SPACEHAB. Risk of loss or damage is with SPACEHAB after the deliverables have been transferred to the carrier. All document deliverables to SPACEHAB from RSC Energia shall be sent via Federal Express or other express carrier at SPACEHAB's expense. 4 5 Article 16. Inspection and Acceptance The place of final inspection and acceptance for the deliverable hardware called for under this contract shall be at Energia. The place of inspection and acceptance of all deliverable reports and documentation shall be at SPACEHAB, Houston, Texas, with a copy to SPACEHAB Cape Canaveral, Florida as specified by SPACEHAB. Article 17. Termination SPACEHAB may, at its sole discretion, terminate this contract. In the event of termination, SPACEHAB will pay actual costs, up to the total amount due through the next scheduled payment, for all completed work through the date of termination in accordance with Article 6, and reimburse expenses incurred up to the date of termination in accordance with Articles 4 and 5. In the event SPACEHAB terminates this contract, Energia shall provide the following items to SPACEHAB to determine proper restitution: - Detailed invoices of material expenditures including, but not limited to procurement of long-lead items. - Detailed list of all in-work and completed textual and graphic documents created in the scope of this Letter Agreement. - Detailed list of all other expenditures made with the payments made by SPACEHAB to Energia prior to termination of this Letter Agreement. Upon termination Energia will deliver to SHI all products, parts and documentation, started and completed, at the place designated for final inspection and acceptance in Article 16 above. Termination of this Contract does not terminate obligations of SPACEHAB and Energia to comply with Articles 10 and 11. Article 18. Changes SHI and Energia may at any time make mutually agreed upon changes to this contract. Article 19. Governing Laws The Commercial Law of Switzerland shall govern all provisions specified by and performed under this contract. Article 20. Dispute Resolution Any and all disputes hereunder shall be resolved by binding arbitration pursuant to the rules and procedures of the International Chamber of Commerce in Switzerland, taking into consideration the clauses of this Letter Agreement, without recourse to any courts. The contract clauses shall prevail over common rules and norms of Swiss arbitration in case of discrepancies. SPACEHAB, INC. RSC-ENERGIA By: By: ---------------------------------- --------------------------------- Typed Name: Nelda Wilbanks Typed Name: Y. P. Semenov -------------------------- ------------------------ Title Contracts Administrator Title: President -------------------------- ------------------------ Date: Date: -------------------------- ------------------------ 5 6 EXHIBIT A STATEMENT OF WORK 7 EXHIBIT B UCP #1 PAYMENT SCHEDULE ($US)
- -------------------------------------------------------------------------------------------------------------- DESCRIPTION OF WORK DATE PRICE NOTES - -------------------------------------------------------------------------------------------------------------- 1. Start of Work, Management 1/2/98 $ 180,000.00 - -------------------------------------------------------------------------------------------------------------- 2. Preparation for Production, Long-Lead 1/31/98 250,000.00 Procurement - -------------------------------------------------------------------------------------------------------------- 3. Issuance of Manufacturing Documents and 2/28/98 200,000.00 Drawings, CDR for the UCP and GSE - -------------------------------------------------------------------------------------------------------------- 4. Fabrication of Components and Sub-Assemblies, 5/31/98 150,000.00 Development/Production Interfaces (Phase I) - -------------------------------------------------------------------------------------------------------------- 5. Fabrication of Components and Sub-Assemblies, 7/17/98 250,000.00 Development/Production Interfaces (Phase II) - -------------------------------------------------------------------------------------------------------------- 6. Fabrication of Components and Sub-Assemblies, 8/1/98 270,000.00 Development/Production Interfaces (Phase III) - -------------------------------------------------------------------------------------------------------------- 7. Static Testing at RSC-Energia 9/30/98 110,000.00 - -------------------------------------------------------------------------------------------------------------- 8. Mockup Delivery to DASA 9/30/98 80,000.00 - -------------------------------------------------------------------------------------------------------------- 9. Participation in Integrated Testing at DASA 11/30/98 20,000.00 - -------------------------------------------------------------------------------------------------------------- 10. Modal Survey (Dynamic) Testing at Energia 11/30/98 110,000.00 - -------------------------------------------------------------------------------------------------------------- 11. Acceptance of the First Flight UCP 12/31/98 80,000.00 - -------------------------------------------------------------------------------------------------------------- 12. Acceptance of GSE 12/31/98 80,000.00 - -------------------------------------------------------------------------------------------------------------- 13. Participation in the UCP Setup at the ICC 1/15/99 20,000.00 Processing Facility - -------------------------------------------------------------------------------------------------------------- Total $1,800,000.00 - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- Bonus for Meeting Schedule 300,000.00 $200,000.00 for delivery in January; $100,000.00 for delivery in February. - --------------------------------------------------------------------------------------------------------------
UCP #2 payment schedule of $700,000.00 will be prepared after Energia receives SPACEHAB's order before December 31, 1998. EX-10.79 6 SHB98002 1 Exhibit 10.79 CONTRACT NUMBER SHB 98002 DATE 02/11/98 FOR KEEL YOKE AND ASSOCIATED MECHANISMS DESIGN AND CONSTRUCTION BETWEEN SPACEHAB, INCORPORATED 1595 SPRING HILL ROAD SUITE 360 VIENNA, VIRGINIA 22182 AND DAIMLER-BENZ AEROSPACE SPACE INFRASTRUCTURE DIVISION P.O. BOX 286156 D-28361 BREMEN GERMANY 2 TABLE OF CONTENTS Preamble ......................................................................... 3 Article 1. Entire Agreement ..................................................... 3 Article 2. Scope of Work ........................................................ 4 Article 3. Period of Performance ................................................ 4 Article 4. Contract Amount ...................................................... 5 Article 5. Reimbursement for Travel Expenses .................................... 5 Article 6. Payment .............................................................. 5 Article 7. Other Contractor and Customer Interface .............................. 6 Article 8. SPACEHAB Direction / Contractor Interface ............................ 7 Article 9. Changes .............................................................. 8 Article 10. Intellectual Property Rights ......................................... 9 Article 11. Confidentiality ...................................................... 9 Article 12. Document Translation ................................................. 9 Article 13. Local Services ....................................................... 9 Article 14. Packaging and Marking ................................................ 9 Article 15. Title and Delivery ................................................... 10 Article 16. Inspection and Acceptance ............................................ 10 Article 17. Items, Equipment, Property, Services to be Furnished by SPACEHAB, Inc. 10 Article 18. Warranty ............................................................. 11 Article 19. Termination .......................................................... 12 Article 20. Force Majeure ........................................................ 12 Article 21. Governing Laws ....................................................... 12 Article 22. Dispute Resolution ................................................... 13 Article 23. Provisions for Execution ............................................. 13 Exhibit A I - Statement of Work .................................................. 14 Exhibit A II - Prime Item Development Specification (PIDS) ....................... 15 Exhibit B - Wire Transfer Instructions ........................................... 16
3 This contract is entered into by and between SPACEHAB, Inc., with an address at 1595 SPRING HILL ROAD, SUITE 360, VIENNA, VIRGINIA 22182 (HEREINAFTER REFERRED TO AS "DASA-RE" OR " CONTRACTOR"). AND DAIMLER-BENZ AEROSPACE, SPACE INFRASTRUCTURE DIVISION WITH AN ADDRESS AT P.O. BOX 286156, D-28361 BREMEN, GERMANY (HEREINAFTER REFERRED TO AS "DASA-RI" OR "CONTRACTOR"). PREAMBLE It is recognized by both parties that: - Dasa-RI has had and continues to have marketing efforts in Europe to sell to the European Space Agency (ESA) and to national Space Agencies in Europe concepts using a cargo pallet in connection with the Intemational Space Station; - Nothing in the contract for "Keel Yoke and Associated Mechanisms Design and Constructions shall preclude Dasa-RI from investing in and procuring a cargo pallet of its own in order to be able to pursue the business opportunity described above. SPACEHAB would also grant Dasa-RI at conditions to be negotiated a license to build the Unpressurized Cargo Pallet (UCP) currently developed under SPACEHAB contract; - SPACEHAB will not unreasonably withhold the usage of its Keel Yoke Assembly (KYA) if the pallet procured by Dasa-RI fits technically. The KYA will be made available by SPACEHAB at reasonable commercial conditions which are in line with SPACEHAB's standard pricing policies towards NASA and other national customers. The parties agree as follows: ARTICLE 1. ENTIRE AGREEMENT This cone act ("Contract"), all exhibits, and other documents incorporated by reference, whether or not attached, constitute the complete and exclusive statement of the Contract between SPACEHAB and Dasa-RI This contract supersedes any previous understanding or agreement between SPACEHAB and Dasa RI (oral or written) with respect to the subject matter of this contract. 3 4 ARTICLE 2. SCOPE OF WORK 1. Dasa-RI shall design, develop, manufacture, test, and deliver the SPACEHAB ICC Keel Yoke and Associated Mechanisms in accordance with requirements identified in the Prime Item Development Specification (PIDS, Document No. ICC 97002), and the Statement of Work (SOW, Document No. SHE ICC-S1002) attached as Exhibit A. Furthermore Dasa-RI shall perform the task of generic integration of the ICC which is also described in the SOW. With respect to the coupled load analysis task it is agreed that up to CDR only one load case will be considered and after CDR this task is excluded from this Contract and covered under the l&O contract. In the event of conflict among referenced documents and unless otherwise specified in this contract, the order of precedence shall be as listed below: 1. This Contract terms and conditions 2. The Statement of Work (ICC S 1002) - Exhibit A II 3. The ICC Prime Item Development Specification (ICC 97002) - Exhibit A II 4. The specific sectors of the documents referenced in the SOW ICC S1002 2. Dasa-RI will make available its resources for post delivery support at conditions comparable to those contained in the present contract for a period of up to two years; such activities are not covered under the contract amount (Article 4 below) but are contemplated for the l&O contract. SPACEHAB confirms that Dasa-RI is the selected cone actors for future activities / procurements related to ICC with the exclusion of UCP related activities - and for ICC related follow-on projects and SH herewith grants to Dasa-RI the "right of first refusal" for future contracts related to system sustaining engineering and enhancement of functional capabilities of ICC. / ARTICLE 3. PERIOD OF PERFORMANCE Dasa-RI shall perform the work called for under this contract as the continuation of the PDR effort performed under the Letter Agreement dated July 28, 1997. Work shall continue through the Initial Integrated Cargo Carrier (IICC) fit check at the SPACEHAB Payload Processing Facility (SPPF), as described in the SOW. The period of performance of this contract shall be from the date of contract signature through January 31, 1999. The period of performance of this cone act may be extended by mutual agreement. 4 5 ARTICLE 4. CONTRACT AMOUNT 1. The fixed price to be paid to Dasa-RI for the products and services under this contract is $ 3.24 Million (in words: Three Million and Two Hundred Forty Thousand U.S. Dollars). 2. This amount excludes the amount previously agreed under the Letter Agreement and its No. 1 of $ 150.000 (in words: One Hundred Fifty Thousand U.S. Dollars) for work to be performed up to PDR and also excludes the amount of $ 260.000 (Two Hundred Sixty Thousand U.S. Dollars) for long lead item procurement. This amount does not include personnel travel costs which are dealt with under Article 5 below. In addition to the contract amount specified above SPACEHAB shall pay to Dasa-RI an amount of $ 400.000 (in words: Four Hundred Thousand U.S. Dollars) as a bonus if Dasa-RI delivers the KYA flight hardware at or before the agreed date for delivery. This bonus payment is reduced to 250.000 (in words: Three Hundred Thousand U.S. Dollars) if delivery is made within the month following the agreed date for delivery and further reduced to $ 150.000 (in words: One Hundred Fifty Thousand U.S. Dollars) if delivery is made within two month following the agreed date for delivery. The bonus payment shall also be due if Dasa-RI is unable to deliver on time because a SPACEHAB Inc. furnished item (see Article 17 below) is not available in due time. ARTICLE 5. REIMBURSEMENT FOR TRAVEL EXPENSES SPACEHAB shall reimburse Dasa-RI for actual pre-approved transportation and hotel expenses for travel to SPACEHAB in the United States and to RSC-Energia in Russia, and on a per diem basis for meals and other expenses. The per diem allowance in the United States and in Russia shall be at the rate of $ 58 per day. ARTICLE 6. PAYMENT Payment of the contract amount shall be made in four installments upon achievement of the following milestones: 0. Preliminary Design Review* 12/97 $ 410.000 U.S. 1. Critical Design Review 4/98 $ 640.000 U.S. 2. Modal Survey Test of KYAFM and UCP 9/98 $ 1.200.000 U.S. 3. KYAFM acceptance and consent to ship 11/98 $ 1.050.000 U.S. 4. Fit check and acceptance of generic 1/99 $ 350.000 U.S. integration task
* listed for reference only and paid for under the letter agreement 5 6 It is expressly agreed that the payments related to milestone No. 3.) and 4.) above shall be deferred until after the first flight of the MICC hardware; however, these payment shall be made no later than 12/99. In addition to the installments listed above SPACEHAB shall make a bonus payment of $ 400.000 ( in words: Four Hundred Thousand U.S. Dollars) in 12/98 upon delivery of the KYA flight hardware to the processing facility in Florida in accordance with article 4 section 2. All payments including bonus payments, if any, shall be made upon receipt of invoice by wire transfer to the account listed in Exhibit B attached hereto and shall be completed within 30 days of written ratification of completion of the associated payments milestone by the SPACEHAB ICC Program Manager. ARTICLE 7. OTHER CONTRACTOR AND CUSTOMER INTERFACE 1. All formal contacts on the subject matter with SPACEHAB, Incr.'s customer NASA, RSC-Energia, or other suppliers under contract to SPACEHAB, Inc. on the project shall be made through the SPACEHAB, Inc. ICC Project Manager. This restriction is not intended to inhibit technical interfaces and the contractor may, at any time, request action by SPACEHAB, Inc. to arrange exchanges of needed information or to provide data. It is expected that informal contact, technical discussion and information exchange between Dasa-RI, RSC-Energia and other suppliers on this project is mandatory, to ensure the timely resolution of interface and integration issues. A record of such discussions will be made and distributed to SPACEHAB, Incr.'s Project Manager. 2. SPACEHAB has contracted with RSC-Energia of Moscow, Russia, for production of the Unpressurized Cargo Pallet (UCP). Correspondingly all contractual aspects related to the UCP are dealt with exclusively between SPACEHAB and RSC-Energia. Any formal technical direction for the UCP including but not limited to development, production, transportation, integration and contract deliverables will be from SPACEHAB to RSC-Energia. The ICDs are generated by Dasa-RI and jointly agreed between SPACEHAB, RSC-Energia and Dasa-RI and SPACEHAB shall retain full responsibility for the timely availability of the UCP for integration into the ICC. 3. Dasa-RI shall perform the scope of work specified under Article 2. above. Dasa-RI is expected to work directly and informally with RSC-Energia engineers on the technical level in order to facilitate the activities related to integration of the UCP into the MICC system. A budget is contained in the contract amount for informal technical coordination with RSC-Energia. 6 7 ARTICLE 8. SPACEHAB DIRECTION / CONTRACTOR INTERFACE Dasa-RI shall accept direction from one of the following SPACEHAB individuals only: Technical and programmatic issues Prime Contact Pete Gadsby ICC Program Manager Ultimate Contact: Clark Thompson Director, Technology Development Contractual Issues: Mike Lounge Vice President of Flight System Development Nelda Wilbanks Contract Administrator SPACEHAB shall address all directors and other communication only to the following persons: Technical and programmatic issues Prime Contact Owe Pape ICC Program Manager Alternate Contact Dr. Ingo Retat ICC System Engineer Contractual Issues: Holger Voge ICC Contracts Officer 7 8 ARTICLE 9. CHANGES All changes to the contractual baseline defined in Article 2 above shall be made as follows: Both Parties shall agree to the revised wording in all or appendices or incorporated documents of this agreement necessary to implement the changes that they have agreed upon, and the total of all such revisions to be made at a single time shall be known as the "Amendments". The Amendment shall be approved or disapproved by an official of each Party who has the power and authority to bind his Party by approving Amendments to this agreement SPACEHAB and Dasa-RI agree that the representatives of each Party designated in accordance with the provisions of Article 8 above shall be the only officials who have this power and authority. These officials shall be known as the Amendment Officers" of each Party. The signing and dating of the Amendment by an Amendment Officer of the Party shall signify his Party's consent to be bound by the agreement as revised by the Amendment. Directed Chances SPACEHAB may at any time, by written order from its Program Manager, request changes within the general scope of this agreement in any one or more of the following: - - Drawings, designs, or specifications when the items to be furnished are to be specially manufactured for SPACEHAB in accordance with the drawings, designs or specifications. - - Method of shipment or packing. - - Place of delivery. - - Schedule of delivery. If any such change causes an increase or decrease in the cost of, or the time required for, performance of any part of the work under agreement, whether or not changed by the order, the parties shall agree to an equitable adjustment in the fixed price, the delivery schedule, or both, and shall modify the agreement. The contractor shall not be liable for implementing such changes until mutual written agreement regarding cost and schedule has been reached. Effective Date of Amendments. An Amendment which does not involve a directed change as set forth above by SPACEHAB shall not be effective and shall not be binding on either Party until the Amendment is signed and dated by an Amendment Officer of each Party, at which time this agreement, as revised by the Amendment, shall supersede and replace the terms of the previous agreement for all purposes. An Amendment involving a change directed by the SPACEHAB as set forth above shall be deemed binding and effective as of the date upon which the Amendment embodying such change is added to this agreement by the Amendment procedure contained in this article. 8 9 ARTICLE 10. INTELLECTUAL PROPERTY RIGHTS All worldwide Intellectual Property (IP) rights (including but not limited to patents, copyrights, trademarks, service marks and trade secrets) created under this contract shall be the sole property of SPACEHAB. Dasa-RI agrees to reasonably assist SPACEHAB in securing such rights through patent, copyright and trade name applications in various worldwide jurisdictions. All IP utilized in the performance of this contract shall remain the exclusive property of the partys) who had the rights in the IP prior to this contract. ARTICLE 11. CONFIDENTIALITY SPACEHAB and Dasa-RI shall abide by the Nondisclosure Agreement between the parties dated September 1996, which terms and conditions other than termination date are incorporated herein by this reference. The obligations of the agreement shall remain binding for the parties for a period of three (3) years following final acceptance under this Contract. ARTICLE 12. DOCUMENT TRANSLATION All textual documents provided by Dasa-RI shall be in English. ARTICLE 13. LOCAL SERVICES To facilitate face-to-face meetings, the host party shall provide meeting facilities, interpreter services, and local transportation for the visiting contractors. ARTICLE 14. PACKAGING AND MARKING Packaging and marking for shipment of all items ordered under this contract shall be in accordance with good commercial practice, and adequate to ensure both acceptance by common carrier and safe transportation at the most economical rates. 9 10 ARTICLE 15. TITLE AND DELIVERY The point of delivery for any hardware required shall be SPACEHAB, Inc.'s ICC Processing Facility, Florida. Hardware deliverable items are listed in section 2.2 of the SOW. The point of delivery for any data required shall be SPACEHAB, Ind., Houston, Texas. Data deliverable items are listed in section attachment DB of the SOW. Dasa-RI is responsible for transportation and insurance of all items deliverable under the present cone act and shall cover the corresponding expenses. It is expressly agreed that there is no such responsibility on Dasa-Rl's side with respect to the UCP. All taxes, customs and other duties connected with the performance of the present contract levied on the territory of the customer's country are home by the customer, and those levied on the territory of the contractors country are home by the contractor. Title to the deliverable hardware shall pass to SPACEHAB upon successful completion of the incoming inspection at the SPACEHAB, Inc.'s ICC Processing Facility in Florida. ARTICLE 16. INSPECTION AND ACCEPTANCE The place of final inspection and acceptance for the deliverable hardware called for under this cone act shall be Dasa's facility in Bremen. Acceptance of the generic integration task shall be after the acceptance fit check at SPACEHAB, Inc.'s ICC Processing Facility. The place of inspection and acceptance of all deliverable reports and documentation shall be at SPACEHAB, Houston, Texas, with a copy to SPACEHAB Cape Canaveral, Florida as specified by SPACEHAB. (Definition of inspection and acceptance section 4.2.7.3 of the SOW). ARTICLE 17. ITEMS, EQUIPMENT, PROPERTY, SERVICES TO BE FURNISHED BY SPACEHAB, INC. 1. SPACEHAB shall make available to Dasa-RI the UCP procured from RSC-Energia in compliance with the ICD ICC-RIBRE-ICD~01 and at the times specified in the verification plan ICC-RIBRE-PL-004. 2. SPACEHAB shall also make available all UCP and Payload related documentation, data, results of analysis, models (e.g. input to coupled loads and thermal analysis), etc. required to perform the generic integration task with precise dates being agreed at CDR. 3. SPACEHAB shall also make available facilities at SPACEHAB Inc. ICC processing facility to perform the fit-check. 10 11 ARTICLE 18. WARRANTY Dasa-RI warrants the KYA and Associated Mechanisms will be built in accordance with the SOW SHI-ICCS1002, and that the hardware furnished under this contract will meet the requirements of specification PIDS ICC 97002 and will be free from defects in materials furnished and workmanship performed by DasaRl. Dasa-RI will correct any defective services and, at Dasa's option, repair or replace with reasonable promptness any hardware items to be delivered under this contract which are actually defective and only if prompt notice of such defects in hardware items or services is given, and in no event later than 6 (six) months from the date of final acceptance of these hardware items or services. In the event Dasa-RI cannot repair or replace a defective hardware item in a reasonable time, Dasa-RI shall return the price of such hardware item to SPACEHAB. SPACEHAB shall notify Dasa-RI in writing of any defect, within ten (10) working days after discovery of such defect, and shall furnish relevant information with respect thereto. Repaired items, or services performed, shall be warranted only for the unexpired portion of the warranty applicable to the original item or service. Replaced items shall be warranted for 6 (six) months. Any other provision of this contract to the contrary notwithstanding, this warranty is in lieu of all other warranties, expressed or implied, including merchantability or fitness for any particular purpose, whether arising by law, custom, conduct or usage of trade, and the rights and remedies provided herein are exclusive and in lieu of any other rights or remedies. In no event shall Dasa-RI be liable for incidental or consequential damages arising out of a breach of this warranty. This warranty does not extend to any item which has been subject to misuse, neglect or accident after acceptance - unless caused by Dasa itself - nor does it extend to any item which has been repaired or altered by other than Dasa-RI personnel. Upon request, SPACEHAB shall furnish to Dasa-RI all information available that the defect arose from causes other than those contained in the preceding sentence. This warranty shall be null and void if the hardware items are handled, transported or stored under conditions outside of those specified in the recommended handle of procedures and the consequences cannot be resolved through subsequent testing and/or engineering analysis. 11 12 ARTICLE 19. TERMINATION SPACEHAB may, in case of major changes in the International Space Station Program which would preclude the use of the ICC, terminate this contract. In the event of termination, SPACEHAB will pay for completed work before this date as well as cost of all work in process in accordance with Article 6, and reimburse expenses incurred up to the date of termination in accordance with Articles 4 and 5 and to also pay the bonus payment mentioned in Article 4, section 2. In the event SPACEHAB terminates this contract, Dasa-RI shall provide the following items to SPACEHAB to determine proper restitution: - - Detailed invoices of material expenditures including, but not limited to procurement of long lead items. - - Detailed list of all in-work and completed textual and graphic documents created in the scope of this Contract. - - Detailed list of all other expenditures made with the payments made by SPACEHAB to Dasa-RI prior to termination of this Contract. Termination of this contract does not terminate obligations of SPACEHAB and Dasa-RI to comply with Articles 10 and 11. ARTICLE 20. FORCE MAJEURE The contractor shall be excused for delay in delivery and/or may suspend and to the extent of 'force majeure' which shall include the occurrence or existence of acts of god, war, the public enemy, mobilization, riot, strike, fire, flood, embargoes, the acts or orders of Goveernments or political subdivisions thereof, and other cases outside the cone actors responsibility and control which adversely and materially prevents the contractor from performing hereunder. As soon as cases of Force Majeure occur or come to the knowledge of the contractor, contractor shall notify SPACEHAB without delay, giving details of the cause, the possible effects, and how the situation could be improved. Contractor shall have no responsibility whatsover to SPACEHAB or its customer for any consequences arising out of a force Majeure event, unless such event was foreseeable. In no event shall cone actor be liable for incidental or consequential damages arising out of said event. ARTICLE 21. GOVERNING LAWS The laws of the Commonwealth of Virginia shall govern all provisions specified by and performed under this contract. 12 13 ARTICLE 22. DISPUTE RESOLUTION Any and all disputes hereunder shall be resolved by arbitration in the Washington, D.C. metropolitan area pursuant to the arbitration rules of the International Chamber of Commerce. The parties hereby agree that any arbitration findings hereunder may be enforced in any U.S. Federal Court in Washington D.C. or Virginia and the parties hereby consent to the jurisdiction of such courts for such purpose. ARTICLE 23. PROVISIONS FOR EXECUTION Dasa-RI and SPACEHAB shall execute two (2) copies of this contract in English, one for each parW. SPACEHAB, INC. By: ______________________ By: ______________________ Typed Name: ______________________ Typed Name: ______________________ Title: ______________________ Title: ______________________ Date: ______________________ Date: ______________________ EX-10.80 7 CSA CONTRACT 1 Exhibit 10.80
TITLE DATE PURCHASING OFFICE - BUREAU DES ACHATS OSTEOPOROSISI EXPERIMENTS IN ORBIT 21-May-98 Space Sciences and Communications Division/ Division des Sciences aerospatiales des CONTRACT NO. BUYER ID Communication 9F007 - 7- 6671- 6671/001/ST 003st 11 Laurier St./11, rue Laurie 11C1, Place du Portage Hull, Quebec K1A 0S5 CLIENT REFERENCE NO. 9F007 - 7- 6671 REQUISITION REFERENCE NO. DATE 9F007 -7-6671 21-May-98 FILE NO. 003st. 9F007-7-6671 CONTRACT - CONTRAT YOU ARE REQUESTED to sell to Her Majesty the Queen in right of Canada, in accordance with the terms and conditions set out herein, referred to herein or attached hereto, the supplies and/or services listed herein and on any attached sheets at the price or prices set out therefor. FINANCIAL CODE(S) 0301 5410 1434 2331 62602 NOUS VOUS DEMANDONS de vendre a Sa Majeste la Reine du chef du Canada, aux conditions enoncees ou incluses par reference dans les presentes, et aux annexes ci-jointes, les articles et/ou les services enumeres dans les presentes, et sur toute feu il le ci-annexee, au(x) prix indique(s). F.O.B. - F.A.B. Destination GST/HST-TPS/TVH DUTY- DROITS See Herein Included DESTINATION -OF GOODS AND SERVICES:
2 SPACE AGENCY RM 8 100 SUSSEX DR. OTTAWA Ontario K1A0R6 CANADA INVOICES - ORIGINAL AND TWO COPIES TO BE SENT TO: For complete Invoicing Instructions refer to the Method of Payment clause specified herein: ATTENTION: Rose Spirito ADDRESS ENQUIRIES TO: ROSE SPIRITO TELEPHONE NO FAX NO. (819) 956-1389 (819) 997-2229 TOTAL ESTIMATED COST- CURRENCY TYPE-DEVISE $570,000.00 USD FOR THE MINISTER - POUR LE MINISTRE The vendor hereby accepts/acknowledges this contract. Le Foumisseur accepts le present contract/en accuse reception. SIGNATURE DATE Name, tide of person authorized to sign (type or print) Nom et titre du signataire autorise (caractere d' impression) COMMENTS - COMMENTAIRES The Provision of Technical Support for STS-95 Osteoporosis Experiments in Orbit Vendor Name and Address Raison socials et adresse du fournisseur X2987 SpaceHab, Inc. 1331 Gemini Avenue Houston, Texas 77058 United States PURCHASING OFFICE: OSTEOPOROSISI EXPERIMENTS IN ORBIT 21-May-98 CONTRACT NO. BUYER ID 9F007 - 7- 6671/001/ST 003 st CLIENT REFERENCE NO. 9F007 - 7- 6671
3 REQUISITION REFERENCE NO. DATE 9F007 -7-6671 21 - May-98 FILE NO. 003st. 9F007-7-6671 FINANCIAL CODE(S) 0301 5410 1434 2331 62602 F.O.B. - F.A.B. Destination GST/HST-TPS/TVH DUTY- DROITS See Herein Included DESTINATION -OF GOODS AND SERVICES: CANADIAN SPACE AGENCY RM 8 100 SUSSEX DR. OTTAWA Ontario K1A0R6 CANADA INVOICES - ORIGINAL AND TWO COPIES TO BE SENT TO: For complete Invoicing Instructions refer to the Method of Payment clause specified herein: ATTENTION: Rose Spirito ADDRESS ENQUIRIES TO: ROSE SPIRITO TELEPHONE NO FAX NO. (819) 956-1389 (819) 997-2229 TOTAL ESTIMATED COST- CURRENCY TYPE-DEVISE $570,000.00 USD
FOR THE MINISTER - POUR LE MINISTRE Contract No. - N. du contest Amd. No. - N. de la modif. Buyer ID - ID de l'acheteur 9F007-7-6671/001/ST 003ST Client Ref. No File No. - N. du dossier CCC Client ref. No. - CCC N. de reef. du client 9F007-7-6671 003ST9F007-7-6671
CLAUSES AND CONDITIONS 4 SECTION A: INTRODUCTION SECTION B: REQUIREMENT SECTION C: AUTHORITIES SECTION D: PAYMENT SECTION E: OTHER TERMS AND CONDITIONS SECTION A: INTRODUCTION CONTRACT TITLE: The Provision of Technical Support for STS-95 OSTEOPOROSIS EXPERIMENTS IN ORBIT STANDARD INSTRUCTIONS AND CONDITIONS REVISION OF DEPARTMENTAL NAME Reference to the Minister of Supply and Services or to the Department of Supply and Services contained in any term, condition or clause of this contract shall be interpreted as a reference to the Minister of Public Works and Government Services or to the Department of Public Works and Government Services, as the case may be. STANDARD ACQUISITION CLAUSES AND CONDITIONS MANUAL All instructions, general terms, conditions and clauses identified herein by title, number and date are set out in the Standard Acquisition Clauses and Conditions (SACC) Manual, issued by the Department of Public Works and Government Services (DPWGS), bearing Catalogue No. P60-4/1-1991E and revised as of 16 February 1998. The SACC Manual may be obtained from the Government of Canada, Communication Co-ordination Services Branch, telephone (819) 9564800, and may also be viewed on the Government Electronic Tendering Service (GETS), provided by MERX, telephone: 1 - 800 - 964 - 6379, Internet Address: http : // www.merx. cebra.com. m e r x . c e b r a . c o m . 5 Contract No. - N. du contest Amd. No. - N. de la modif. Buyer ID - ID de l'acheteur 9F007-7-6671/001/ST 003ST Client Ref. No File No. - N. du dossier CCC Client ref. No. - CCC N. de reef. du client 9F007-7-6671 003ST9F007-7-6671
TERMS AND CONDITIONS OF CONTRACT 1. Pursuant to the Department of Public Works and Government Services Act, S.C.1996, c.16, (a) the general terms, conditions and clauses identified herein by title, number and date, are hereby incorporated by reference into and form part of this contract, as though expressly set out herein, subject to any other express terms and conditions herein contained. (b) the "Conditions" set out in part B of the Standard Instructions and Conditions DSS-MAS 9403-5 (09/97) Professional and Research and Development Services set out in the SACC Manual are hereby incorporated by reference into and form part of this Contract. GENERAL CONDITIONS. DSS-MAS 9624 General Conditions- Research and Development, DSS-MAS 9624(16/02/98), with the following modifications, SHALL APPLY TO AND FORM PART OF THIS CONTRACT. 1. K341 OD (04/01/94) CANADA TO OWN FOREGROUND INFORMATION 2. K001 7C (04/01/94) General Conditions- Research and Development, DSS-MAS 9624; and 3. SUPPLEMENTAL to articles 28 and 29 of General Conditions Research and Development, DSS-MAS 9624(16/02/98): 1) The Contractor may, by giving written notice to Canada, terminate this Contract: a) in the event Canada delivers any payload described in the Statement of Work so late beyond the mutually agreed upon delivery date that the Contractor is unable to process such payload in time to meet the launch schedule, or as a result of breach by Canada if Canada has not cured the breach within a reasonable time after written notice to Canada or immediately in the case of a non-curable breach; b) as a result of any action or inactions by NASA which prevents the manifesting of the Exhibit A experiment on STS-95 2) Subject to subsection 3, upon the giving of a notice provided for in paragraph (1) (a), the Contractor shall retain all payments made by Canada to the date of termination and Canada may be further liable for all costs incurred by the Contractor as a result of such failure or breach of the Contract. Subject to subsection 3, upon the giving of a notice provided for in paragraph (1)(b), the Contractor shall be entitled to all applicable payments hereunder received, plus the Integration and Optional Services (if any) actual costs incurred up to the time of termination, as well as termination charges which may be imposed by third parties, such as NASA or subcontractors. 3) Notwithstanding anything in subsection (2), the total of the amounts to which the Contractor is entitled under subsection (2), together with any amounts paid or due or becoming due to the Contractor under other provisions of the Contract, shall not exceed the Contract Price." 6 Contract No. - N. du contest Amd. No. - N. de la modif. Buyer ID - Id de l'acheteur 9F007-7-6671/001/ST 003ST Client Ref. No File No. - N. du dossier CCC Client ref. No. - CCC N. de reef. du client 9F007-7-6671 003ST9F007-7-6671
SECTION B: REQUIREMENT PRIORITY OF DOCUMENTS The documents specified below form part of and are incorporated into this Contract. If there is a discrepancy between the wording of any other document which appears on the list, the wording of the document which first appears shall prevail over the wording of any document which subsequently appears on the list: 1) these articles of agreement; 2) General Conditions- Research and Development, DSS-MAS 9624 (16102198); 3) Annex "A", Statement of Work 4) Annex "B", Disclosure Certification 5) Annex "C", Treasury Board Travel and Living Guidelines 6) Claim for Progress Payment, Form DSS 1111 (2/90) 7) The Contractor's proposal dated March 25, 1998 submitted to Public Works and Government Services Canada (PWGSC) in response to the Request for Proposal (RFP) dated March 18, 1998. PERIOD OF CONTRACT The Contract is in effect from (DATE OF AWARD PENDING PWGSC AUTHORIZATION) TO DECEMBER 31. 1998 OR 30 DAYS FOLLOWING THE STS-95 LANDING. WHICHEVER IS LATER inclusive. PRIOR RIGHTS AND OBLIGATIONS 1. The Work undertaken by the Contractor from the 22 DAY OF OCTOBER, 1997 to the date hereof shall be considered to have been undertaken solely in support of its obligations and undertakings herein contained, and the benefits of this Precontractual Work shall vest in and remain the property of Canada from the date of the Contract. All rights moral and otherwise, title, and interest in and to the technical data, intellectual property, patents and trademarks, inventions and acquisitions, except as otherwise provided in the Contract, shall be and are hereby transferred and assigned irrevocably to Canada. 2. In consideration of the foregoing, the Contractor shall be paid a sum for such Precontractual work calculated in accordance with the Basis of Payment herein 7 Contract No. - N. du contest Amd. No. - N. de la modif. Buyer ID - Id de l'acheteur 9F007-7-6671/001/ST 003ST Client Ref. No File No. - N. du dossier CCC Client ref. No. - CCC N. de reef. du client 9F007-7-6671 003ST9F007-7-6671
and the said sum shall form part of Canada's liability to the Contractor as set forth UNDER the Limitation of Expenditure. STATEMENT OF WORK The Contractor shall perform the Work as outlined in the Statement of Work attached hereto as Annex "A" and in accordance with the Contractor's technical and management portions of the Contractor's proposal dated March 25, 1998, and forming part of this Contract. DELIVERABLES: All deliverables must be received by the Scientific Authority on/before 31 DECEMBER 1998, OR 30 DAYS FOLLOWING THE STS-95 LANDING. WHICHEVER IS LATER The Contractor shall deliver to the Scientific Authority at the place and time designated hereunder the sunder as detailed in the Statement of Work attached hereto as Annex "A". DELIVERABLES DELIVERY DATE VARIOUS TASK REPORTS Dates as noted in Annex A (refer to the Statement of Work) POST FLIGHT REPORT - FINAL/PROJECT REPORT on or before 31 December 1998, or (see Item 1 hereunder) 30 DAYS FOLLOWING THE STS-95 LANDING, WHICHEVER IS LATER DISCLOSURE CERTIFICATION (see Item 2 hereunder) The Contractor shall notify the Science Contracting Officer. in writing. once these items have been delivered. 8 Contract No. - N. du contest Amd. No. - N. de la modif. Buyer ID - Id de l'acheteur 9F007-7-6671/001/ST 003ST Client Ref. No File No. - N. du dossier CCC Client ref. No. - CCC N. de reef. du client 9F007-7-6671 003ST9F007-7-6671
1. FINAL REPORT - (Post Flight Report) A final report in electronic format with five (5) hard copies shall be submitted to the Scientific AUTHORITY ON OR BEFORE 31 DECEMBER 1998, OR 30 DAYS FOLLOWING THE STS-95 LANDING, WHICHEVER IS LATER. It must be a comprehensive report on all facets of the Work and must include sufficient drawings, sketches, photographs and a discussion of problems and successes associated with the Work to facilitate a full and accurate evaluation of the Work by the Scientific Authority. The report will be prepared in accordance with good engineering/professional practices and will include, as a minimum, the following: a title page, a table of contents, an executive summary, an introduction, a technical discussion with conclusions and include, as applicable, supporting graphs, tables and figures. NOTE: One copy of the title page of the final report shall be submitted to the Science Contracting Officer. DISCLOSURE CERTIFICATION On completion of the Work under this Contract, the Contractor shall submit a certification to the Scientific Authority and to the Science Contracting Officer stating that all applicable disclosures were submitted or that there were no disclosures to submit under section 22 of General Conditions - Research and Development, DSS-MAS 9624. A copy of a Disclosures Certification is attached as ANNEX "B". 9 Contract No. - N. du contest Amd. No. - N. de la modif. Buyer ID - Id de l'acheteur 9F007-7-6671/001/ST 003ST Client Ref. No File No. - N. du dossier CCC Client ref. No. - CCC N. de reef. du client 9F007-7-6671 003ST9F007-7-6671
3. GOVERNMENT FURNISHED HARDWARE/INFORMATION - NON-CONSUMABLE EQUIPMENT AND MATERIAL (Cross- reference with Annex "A", Statement of Work, Section 3.0 entitled "CANADIAN SPACE AGENCY RESPONSIBLILITIES") The Crown will provide the Contractor with access to the appropriate equipment required in performance of the work for this contract as noted in Annex "A under item 3 "CANADIAN SPACE AGENCY RESPONSIBLILITIES". The Contractor shall take reasonable and proper care of all non-consumable equipment and material charged against this Contract while it is in the possession of the Contractor. Concurrently with the submission of the final report, the Contractor shall provide the Scientific Authority with a detailed list of all such equipment and material and request disposal instructions. A copy of the list shall also be forwarded to the Science Contracting Officer. THE CONTRACTOR SHALL NOTIFY THE SCIENCE CONTRACTING OFFICER, IN WRITING, ONCE THESE ITEMS HAVE BEEN DELIVERED. INSPECTION AND ACCEPTANCE: WORK PERFORMED UNDER THIS CONTRACT SHALL BE SUBJECT TO INSPECTION AND ACCEPTANCE BY THE SCIENTIFIC AUTHORITY DESIGNATED HEREIN. 10 Contract No. - N. du contest Amd. No. - N. de la modif. Buyer ID - Id de l'acheteur 9F007-7-6671/001/ST 003ST Client Ref. No File No. - N. du dossier CCC Client ref. No. - CCC N. de reef. du client 9F007-7-6671 003ST9F007-7-6671
provided that: (a) the Contractor submits a claim for payment on form DSS-MAS 1111, Claim for Progress Payment. A sample is attached as Annex "C"; (b) all of the certificates appearing on the said form are signed by the respective persons indicated thereon or their delegate; and (c) all reports required for the milestone claimed have been received and accepted by the Scientific Authority. 2. The claim must show the following: (a) amount currently claimed; (b) total of all previous claims against the Contract and the extensions of the total to date; Requisition Number (RN), Financial Code (FC), and Contract Number as shown on page 1 of this Contract. 3. The Contractor shall prepare and certify an original and four (4) copies of its claim on form DSS-MAS 1111. The claim will be forwarded to the ScienceContracting Officer who will certify the claim and forward it to the Scientific Authority for certification and payment. 4. The balance of the amount payable will be made following: (a) delivery and acceptance of all deliverable items; (b) the approval of the final claim by the Science Contracting Officer and by the Scientific Authority. 5. Payment by Canada to the Contractor for the Work shall be made: (a) In the case of a milestone payment other than the final payment, within thirty (30) days following the date of receipt of a duly completed milestone claim on form DSS-MAS 1111; (b) in the case of a final payment, within thirty (30) days following the date of receipt of a duly completed final milestone claim, on form DSS-MAS 1111, or within thirty (30) days following the date on which the Work is completed, whichever date is the later; 11 Contract No. - N. du contest Amd. No. - N. de la modif. Buyer ID - Id de l'acheteur 9F007-7-6671/001/ST 003ST Client Ref. No File No. - N. du dossier CCC Client ref. No. - CCC N. de reef. du client 9F007-7-6671 003ST9F007-7-6671
(c) if Canada has any objection to the form of the milestone claim, within fifteen (15) days of its receipt, Canada shall notify the Contractor of the nature of the objection. "Form of the claim" means a claim which contains or is accompanied by such substantiating documentation as Canada requires. Failure by Canada to act within fifteen (15) days will only result in the date specified in subparagraphs 5(a) and (b) of this clause applying for the sole purpose of calculating interest on overdue accounts. SECTION E: OTHER TERMS AND CONDITIONS WORK FORCE REDUCTION PROGRAMS 1. It is a term of this contract: (a) that the Contractor has declared to the Contracting Authority whether the Contractor has received a lump sum payment made pursuant to any work force reduction program, including but not limited to the Work Force Adjustment Directive, the Early Departure Incentive Program, the Early Retirement incentive Program or the Executive Employment Transition Program, which has been implemented to reduce the public service; (b) that the Contractor has informed the Contracting Authority of the terms and conditions of that work force reduction program, pursuant to which the Contractor was made a lump sum payment, including the termination date, the amount of the lump sum payment and the rate of pay on which the lump sum payment was based; and (c) that the Contractor has informed the Contracting Authority of any exemption in respect of the abatement of a contract fee received by the Contractor under the Early Departure Incentive Program Order or paragraph 4 of Policy Notice 1995-8, of July 28, 1995. 2. The Contractor represents and warrants that the information submitted with its bid is accurate and complete. The Contractor acknowledges that the Minister has relied upon such representation to enter into this Contract. Such representation may be verified in such manner as the Minister may reasonably require. 3. The Contractor acknowledges that in the event of a breach of such covenant. the Minister shall have the right to rescind the Contract. 4. Nothing in this clause shall be interpreted as limiting the rights and remedies which Canada or the Minister may otherwise have in relation to or pursuant to this Contract. 12 Contract No. - N. du contest Amd. No. - N. de la modif. Buyer ID - Id de l'acheteur 9F007-7-6671/001/ST 003ST Client Ref. No File No. - N. du dossier CCC Client ref. No. - CCC N. de reef. du client 9F007-7-6671 003ST9F007-7-6671
INTERNATIONAL SANCTIONS 1. Persons and companies in Canada are bound by economic sanctions imposed by Canada by regulations passed pursuant to the United Nations Act, R.S.C. 1985, c.U-2, the Special Economic Measures Act, S.C. 1992, c. 17 or the Export and Import Permits Act, R.S.C. 1985, c. E-19. As a result, the Government of Canada cannot accept delivery of goods or services that originate, either directly or indirectly, from the countries subject to economic sanctions. As of this date, the following regulations implement economic sanctions: (a) United Nations Iraq Regulations; (b) United Nations Libya Regulations; (c) United Nations Federal Republic of Yugoslavia (Serbia and Montenegro) Regulations. 2. It is a condition of this Standing Offer and of any ensuing call-ups, if any, that the Offeror not supply to the Government of Canada any goods or services which are subject to economic sanctions as described in paragraph 1 above. 3. During the performance of any call-up under the Standing Offer, should the addition of a country to the list of sanctioned countries or the addition of a good or service to the list of sanctioned goods and services prevent the Offeror from performing all or part of its obligations pursuant to a call-up made against this Standing Offer, the Offeror shall treat the situation as a force majeure. The Offeror shall forthwith inform Canada of the situation and follow the procedures applicable to force mature. APPLICABLE LAWS This Contract shall be interpreted and governed, and the relations between the Parties, determined by the laws in force in ONTARIO. C0101D 01/05/96 DISCRETIONARY AUDIT 13 ANNEX "A" PAGE 1 OF 9 STATEMENT OF WORK OSTEOPOROSIS EXPERIMENTS ORBIT 1.0 INTRODUCTION This project consists of a suite of three Canadian experiments examining the effects of the space environment on bone cell activity utilising a Canadian bone cell culture system (OSTEO). The hardware contractor, Millenium Biologix Inc., Kingston, Ontario, produces a commercial product that is being used to perform the cell culture experiments and has adapted their terrestrial procedure for spaceflight. As well, industry support has been attracted and Allelix Biopharmaceuticals Inc., Mississauga, Ontario, is supporting its own experiment and science team. For STS-95, SPACEHAB has been contracted as sole agent by the National Astronautics and Space Administration, NASA, to commercialize a portion of the SPACEHAB resources on the Space Shuttle to all international partners as well as others. This document defines the Statement of Work for the integration of the OSTEO hardware aboard the SPACEHAB mission STS-95 utilizing a MIDDECK locker, the launch and operation of the OSTEO hardware by trained crew during orbit, return of the hardware to the launch site and the de-integration of the OSTEO hardware and return of hardware to the Crown. SPACEHAB will provide, times, and locations set forth in the following document, the supplies, and services described in the Statement of Work for a payload chargeable mass not to exceed 35 kg. 2.0 TASKS 1. SPACEHAB SHALL PROVIDE THE NECESSARY FACILITIES, FUNCTIONS, AND DOCUMENTATION FOR THE OPERATION OF THE OSTEO EXPERIMENTS ON BOARD STS-95. SPACEHAB will negotiate and execute all agreements with NASA, which are required to manifest OSTEO onboard STS-95 in the MIDDECK. 2. PROVISION OF OSTEO INTERFACE DEFINITION AND ANALYTICAL INTEGRATION. SPACEHAB will assess the Crown-developed hardware data, performance analyses, and SPACEHAB subsystem resource requirements and perform the following experiment requirements and analysis tasks: 14 \ ANNEX "A" PAGE 2 OF 9 STATEMENT OF WORK OSTEOPOROSIS EXPERIMENTS IN ORBIT a) Development and maintenance of the core SPACEHAB/OSTEO Interface Control Documents (ICD); the respective ICD Appendix A (Ground Operations Interface Requirements); the respective ICD Appendix B (Safety Verification Requirements); and the respective ICD Appendix C (Flight Operations Interface Requirements). b) Development of OSTEO stowage requirements. c) Analysis of all OSTEO tesVanalytical data as they pertain to the physical (structural) interface with a MIDDECK locker d) Performance of OSTEO's mass/centre of gravity (c.g.) analysis: e) Performance of OSTEO's materials analysis. f) Performance of OSTEO's resource requirements assessment. 3. PROVISION OF MISSION ANALYTICAL INTEGRATION. Based upon OSTEO's data and operational requirements, provided by the Crown, SPACEHAB will locate OSTEO in a MIDDECK locker within the Shuttle/SPACEHAB pressurised volume (with a compatible complement of payloads), will integrate OSTEO's resource requirements and safety data with those of other payloads, and will develop flight procedures and timelines for operation of OSTEO in-orbit. Specifically, SPACEHAB will perform the following mission integration tasks for the Crown: a) Development of an integrated Mission Requirements and AllocationsDocument (MRAD) which incorporates the MIDDECK or SPACEHAB module and Shuttle mission resource requirements necessary for successful imlementation of all of OSTEO's objectives. b) Development and submittal to NASA of the required Shuttle programme documentation data as they pertain to OSTEO's requirements for Shuttle resources. 15 ANNEX "A" PAGE 3 0F 9 STATEMENT OF WORK OSTEOPOROSIS EXPERIMENTS IN ORBIT c) DEVELOPMENT AND IMPLEMENTATION OF AN INTEGRATED CREW TRAINING PLAN which includes documentation requirements for OSTEO's flight crew training, scheduling of all OSTEO's crew training sessions with the NASA Training Co-ordinator, Co-ordination of all OSTEO's training sessions with the Crown OSTEO PROJECT MANAGER, and direction of all integrated timeline training session at the SPACEHAB Payload Processing Facility (SPPF). d) Development and production of a flight-qualified Experiment Operation/ checklist (EOC) for onboard use by the flight crew. e) Development of OSTEO's crew activity timeline inputs for inclusion by NASA in the integrated Shuttle Crew Activity Plan. and production of a flight-qualified Experiment Operations Checklist (EOC) for onboard use by the flight crew. f) Integration of the Crown-provided OSTEO flight and ground safety data g) into mission safety packages for review by the NASA Flight and Ground Payload Safety Review Boards. h) Representation of the Crown and OSTEO to NASA at all NASA payload integration process forums and meetings, payload safety reviews. 4. PROVISION OF HARDWARE PHYSICAL INTEGRATION AND REINTEGRATION. This task involves the physical integration and Reintegration of the OSTEO MIDDECK locker to the Shuttle MIDDECK interface bulkhead. SPACEHAB will provide both the MIDDECK Locker and foam insert for the OSTEO MIDDECK Locker. (the Crown will integrate the OSTEO experiment components into the SPACEHAB-provided MIDDECK locker using SPACEHAB-provided foam.) The task also includes logistics and ground operations planning, ground procedures development, integrated schedule development, hardware physical installation and removal and the Crown personnel accommodation. The physical payload integration activities not performed by the Crown personnel in Canada associated with this function will be performed either within the SPPF at Cape 16 ANNEX "A PAGE 4 OF 9 STATEMENT OF WORK OSTEOPOROSIS EXPERIMENTS IN ORBIT Canaveral, Florida or on the Kennedy Space Centre grounds. Specifically, SPACEHAB will provide to the Crown the following services: a) DESIGN AND FABRICATION OF THE FOAM REQUIRED TO SAFELY SECURE THE OSTEO experiment inside a MIDDECK locker. b) Coordination of shipping and receiving of OSTEO training hardware to and from Canada to the SPPF, Marshall Space Flight Centre, or Johnson Space Centre (JSC), wherever training activities may occur. The Crown is responsible for shipping training hardware to the SPPF; SPACEHAB is responsible for returning the training hardware to the Crown. Customs coordination will be performed by SPACEHAB personnel. For training activities at Johnson Space Centre or Marshall Space Flight Centre, SPACEHAB personnel will arrange for transportation between the SPPF and the specific training site. However, the hardware must not be out the SPPF inventory for over 1 20 days. c) Coordination of shipping and receiving of OSTEO flight hardware from Canada to the Kennedy Space Centre, if the Crown is unable to perform flight preparation activities in Canada. The Crown is responsible for shipping flight hardware to and from the SPPF. Customs coordination will be performed by SPACEHAB personnel. d) Provision of a Customer Work Area at the SPPF, with the necessary security and administrative/laboratory equipment for the Crown to control, store, and prepare for flight all OSTEO parts, experiment materials and supporting equipment. This provision will only be required if the Crown is unable to perform flight preparation activities in e) Provision of a Customer Work Area during the mission for the maintenance by the Crown of the OSTEO ground control hardware and experiments. f) Provision at the SPPF or JSC for access to a high fidelity mockup of the MIDDECK or the SPACEHAB module for use in OSTEO interface checks and in integrated timeline training with the flight crew. 17 ANNEX "A" PAGE 5 OF 9 STATEMENT OF WORK OSTEOPOROSIS EXPERIMENTS IN ORBIT g) INTEGRATION OF OSTEO MIDDECK LOCKER INTO SHUTTLE MIDDECK AND performance of MIDDECK resource accommodations InterfaceVerification Test (IVT). 5. PROVISION FOR FLIGHT OPERATIONS SUPPORT For the Flight Phase, SPACEHAB will provide accommodations for the Crown management, technical, and scientific personnel in the Mission Control Centre (MCC) at NASA's JSC. The following services will be provided at the MCC: a) Physical accommodations, orientation, and training for personnel to monitor real-time operations during the Pre-launch, Flight, and Post-landing phases of the STS-95 mission. b) Voice and video data as required to monitor and control the progress of OSTEO operations throughout the duration of the mission. c) Provision of a Mission Console Handbook which provides administrative, technical, and logistics information about OSTEO and other experiments aboard the SPACEHAB module as well as about the cadre of NASA, the Crown, and SPACEHAB personnel supporting the mission. d) Administrative services for acquiring/copying and routing of mission-related data and correspondence to local and remote sites. 6. PROVISION OF SUPPORT TO POST-FLIGHT DATA ANALYSIS SPACEHAB will provide or coordinate the timely provision (not more than 30 days post-landing) of the required historical OSTEO flight data including MIDDECK or SPACEHAB module environmental data and as-flown timeline information in support of OSTEO post-flight analysis activities. 18 ANNEX "A" PAGE 6 OF 9 STATEMENT OF WORK OSTEOPOROSIS EXPERIMENTS IN ORBIT 7. PROVISION OF FURTHER SERVICES SPACEHAB will acquire from NASA the following services required by the Crown to achieve OSTEO's experimental objectives: a) SPACEHAB will negotiate with NASA to have the OSTEO payload stowed in a MIDDECK locker in the Orbiter MIDDECK. b) Provision by SPACEHAB to arrange pre-launch baggage and customs clearance for the Crown personnel at KSC. c) Perform OSTEO e.g. and weight assessment and evaluation of verification test documentation provided by the Crown personnel, at KSC. d) Provision by SPACEHAB of powered transport of the flight ready OSTEO for late installation into the Launch Vehicle. e) Provision by SPACEHAB of the installation of OSTEO into the MIDDECK during the latest allowable period prior to Shuttle launch. This includes the performance of an electrical Interface Verification Test after OSTEO is installed in the MIDDECK locker. f) Provision by SPACEHAB to perform an OSTEO experiment maintenance procedure in the event of a scrub and a decision by the Crown to maintain the OSTEO flight unit onboard the Launch Vehicle. g) Provision by SPACEHAB of support to all the required launch scrub/turnaround activities at the launch site. 8. PROVISION OF OSTEO PROJECT MANAGEMENT SPACEHAB will provide the following OSTEO project management personnel and methods to organize, schedule, and manage the provision of the services previously described: 19 ANNEX "A" PAGE 7 0F 9 STATEMENT OF WORK OSTEOPOROSIS EXPERIMENTS IN ORBIT a) SPACEHAB will designate a SPACEHAB Contract Development and Implementation Manager (CDIM) who will be responsible for coordinating with the Crown all financial, scheduling, implementation progress reporting and policy matters relating to this contract. The CDIM will: 1. Coordinate SPACEHAB inputs to the development and maintenance of this contract with the Crown personnel, as required. 2. Establish methods for communication of contract implementation activities between Spacehab and the Crown (teleconferences, email lists, key meetings). b) SPACEHAB will designate a SPACEHAB OSTEO Payload Coordinator (PC) for the OSTEO project. The PC will: 1. Be the principle SPACEHAB advocate for the successful flight of OSTEO. 2. Be responsible for coordinating with SPACEHAB, the Crown, and NASA, all technical points of contact and resources of all SPACEHAB support related to the technical and operations implementation of the services described above. 3. Be responsible for the identification and resolution of all technical and operational issues pertaining to the flight of the OSTEO payload. 9. PROVISION OF OSTEO PROJECT REPORTING In order to facilitate the routine exchange of mission integration and scheduling information and a team-oriented approach to problem identification and resolution, the following methods of communication will be established: a) The PC will hold weekly (or as required) teleconferences with key project participants to plan and/or assess status of integration activities and to solve issues. 20 ANNEX "A" PAGE 8 OF 9 STATEMENT OF WORK OSTEOPOROSIS EXPERIMENTS IN ORBIT b) The PC will develop and maintain a detailed, date specific OSTEO Integration Milestones Template, which identifies all key deliverables as well as all key mission preparation milestones. c) The SPACEHAB CDIM will provide regular reports (verbal or written as appropriate) to the Crown on the status of the OSTEO mission integration activities. 3.0 CANADIAN SPACE AGENCY RESPONSIBILITIES The Crown will provide, in a timely manner, (to be negotiated) the following: 1. Timely selection and identification of all OSTEO hardware and materials for flight. All OSTEO hardware and experiment materials shall conform to established NASA payload safety requirements documentation and will be subject to review and approval by the NASA Flight and Ground Safety Review Boards. 2. Identification of a the Crown OSTEO Project Manager who will provide timely coordination with the SPACEHAB PC in the development of the OSTEO Experiment Requirements Document, Functional Objectives and flight and ground operations protocols and procedures. 3. Timely delivery of the following Government Furnished Equipment a) flight-ready OSTEO hardware complete with documentation b) OSTEO hardware and materials to the SPPF for pre-flight processing. 4. Support to meetings, teleconferences, flight crew training sessions, integrated mission simulations and real-time mission operations. 5. Designation of the Crown technical points of contact that will be responsible for coordinating with SPACEHAB PC all technical activities to be performed under this contract. 21 ANNEX "A" PAGE 9 0F 9 STATEMENT OF WORK OSTEOPOROSIS EXPERIMENTS IN ORBIT 4.0 LIST OF DELIVERABLES The following are a list of deliverables required from SPACEHAB.
ITEM QUANTITY DUE DATE 1. Jointly signed agreement, COMMERCIAL REQUIREMENTS DOCUMENT, between NASA and SPACEHAB to provide OSTEO Space Shuttle Transportation on STS-95 2. SPACEHAB/OSTEO Interface Control Documents 3 copies March 31, 1998 3. Integrated Mission Requirements and Allocations Documents 4. MISSION TRAINING PLAN 5. Flight-qualified Experiment Operations Checklist 6. Integration hardware as may be required for OSTEO interfaces with MIDDECK locker. (i.e. foam packaging) 7. Customer Work Area at the SPPF. 8. Access to a high fidelity mockup of MIDDECK locker 9. Report on the Interface Verification Test. 10. Accommodation and orientation for the CROWN personnel in the JSC MCC 11. Voice and video data required to monitor OSTEO operations. 12. Historical OSTEO flight data including environmental data from the MIDDECK locker location. 13. Mission Console Handbook. 5 copies 14. POST FLIGHT REPORT- Landing + 30 days. 5 copies
5.0 SCHEDULE See SPACEHAB/OSTEO - INTEGRATED CONTROL DOCUMENTS (ICD) 22 ANNEX "B" INTELLECTUAL PROPERTY DISCLOSURE CERTIFICATION This form is to be completed and signed by the Contractor upon completion of the contract and returned to: ROSE SPIRITO, Science Contracting Officer Science Directorate, Public Works and Government Services Canada Place du Portage, Phase III, floor 11C1 11 Laurier Street, Hull, Quebec K1A 0S5 Contract Title: The Provision of Technical Support for STS-95 OSTEOPOROSIS EXPERIMENTS IN ORBIT" Contract Number: 9F007-7-6671/001/ST the Crown-Client Reference Number: 9F007-7-6671 It is a term of the referenced contract that, regardless of its ownership, all Foreground Information' that could be Inventions' and all other Foreground Information, shall be promptly and fully disclosed to Canada. defined in the General Conditions identified in the Contract CONSEQUENTLY, THE UNDERSIGNED, BEING A DULY AUTHORIZED OFFICER OF THE CONTRACTOR, CERTIFIES THAT DURING THE TENURE OF THE CONTRACT (MARK APPROPRIATE BOX): [ ] No Foreground Information was conceived, developed or produced as part of the Work and, therefore the Contractor has nothing to disclose. [ ] All Foreground Information which was conceived, developed or produced as part of the Work was fully disclosed and documented in the technical reports delivered by the Contractor to the Technical Authority designated in the Contract, and the Contractor has nothing further to disclose. [ ] All Foreground Information conceived, developed or produced as part of the Work by the Contractor is hereby fully disclosed in the attached document. Signature: -------------------------------- Print Name: ------------------------------- Title: ---------------------------- COMPANY/CONTRACTOR NAME: SPACEHAB INC. Date: ----------------------------------- EX-10.81 8 GEMINI OFFICE BUILDING LEASE AGREEMENT 1 Exhibit 10.81 GEMINI OFFICE BUILDING LEASE AGREEMENT THIS LEASE is made and entered into this 14th day of January 1998, by and between PUGET OF TEXAS, INC., a Texas corporation (the "Landlord"), and SPACEHAB, a Texas corporation (the "Tenant"). W I T N E S S E T H ARTICLE 1 1.01 PREMISES. Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, for the rent and subject to the provisions of this Lease, the space (the "Premises") reflected on the floor plan(s) attached hereto as Exhibit "A", which shall be designated as Suite 300, located on floor three of the building known as the Gemini Office Building (the "Buildings), located at 1331 Gemini Street, Clear Lake City, Harris County, Texas (such Building, any parking areas and garages, the land on which such improvements are located, and any present or future associated underground or elevated pedestrian tunnels or walkways being hereinafter collectively referred to as the "Project"). The legal description of the land on which the Building is situated is attached hereto marked as Exhibit "D" and incorporated herein by this reference. Landlord and Tenant hereby agree that the Premises contains 14,642.66 square feet of net rentable area. Landlord and Tenant hereby stipulate to the foregoing definition of the rentable area whether the same shall be more or less as a result of minor variations resulting from the actual construction and completion of the Premises for occupancy. The rentable area includes the floor area in the Building available for the exclusive use of Tenant, and a proportional allocation of the floor area of the Building and other Building areas available for the non-exclusive use of Tenant together with other tenants in the Building including, without limitation, entrance lobbies, fire-rated exit corridors, elevator lobbies and mechanical rooms. ARTICLE 2 2.01 TERM. Subject to the other provisions hereof, this Lease shall be for a term of five 15) years commencing on March 1, 1998 (the "Commencement Date") and expiring on February 28, 2003 (the "Expiration Date"). Such term, as it may be modified, is herein called the "Term". 2.02 COMMENCEMENT. Subject to Article 2.03 hereof, if on the Commencement Date any of the work described in Exhibit "B" attached hereto and made a part hereof for all purposes, that is required to be performed by Landlord at Landlord's expense has not been substantially completed, or if Landlord is unable to tender possession of the Premises to Tenant on such specified date due to any other reason beyond the reasonable control of Landlord, then the Commencement Date shall be postponed until such work is substantially completed and Landlord has tendered possession of the Premises, and the Experation Date shall be extended so that the Term shall continue for the full number of years set forth in Article 2.01, and Landlord shall not be liable for any claims or damages in connection with such failure to complete construction or tender possession on the Commencement Date. 2.03 LATE POSSESSION. No delay in the completion of the Premises resulting from delay or failure on the part of Tenant or Tenant's agents, employees or contractors in furnishing information, work or other matters required in Exhibit "B" shall delay the Commencement Date or Expiration Date. 2.04 EARLY POSSESSION. If prior to the Commencement Date, Tenant shall enter into possession of all or any part of the Premises, such 2 possession shall be subject to all the provisions of this Lease, and the Term and the payment of all rent shall commence, with respect to all or such part of the Premises as are so occupied by Tenant, on the date of such entry, and that total amount of all Rent due hereunder shall be increased accordingly, provided that no such early entry shall operate to change the Expiration Date provided herein. ARTICLE 3 3.01 BASE RENT. Tenant, in consideration for this Lease, agrees to pay to Landlord a base rental ("Base Rent") for the first three (3) years of Twelve and 38/100 Dollars ($12.38) per year and years four (4) and five (5) at Thirteen and 637100 Dollars ($13.63) per year for each of the square feet of rentable area agreed by Landlord and Tenant to be within the Premises, in equal monthly installments for years one (l) through three (3) at Fifteen Thousand One Hundred Six and 34/100 Dollars($15,106.34) and years four (4) and five (5) at Sixteen Thousand Six Hundred Thirty-One and 62/100 Dollars ($16,631.62) payable at Landlord's address herein provided in legal tender of the United States of America, without notice, demand, set-off or abatement, in advance on the first day of each calendar month throughout the Term, except that the first such monthly installment is due upon the date of execution of this Lease by Tenant. All rental payments shall be made in full. Payment or receipt of a rental payment of less than the amount stated in the Lease shall be deemed to be nothing more than partial payment. Under no circumstances shall owner's acceptance constitute accord and satisfaction. Nor will owner's acceptance of a partial payment forfeit owner's right to collect the balance on the account, despite any endorsement, stipulation, or other statement on any check. 3.02 RENTAL ADJUSTMENT. "Tenant's Pro Rata Share" of all Operating Expenses (hereinafter defined) for purposes of rental adjustment shall be equal to the ratio that the square feet of rentable area of the Premises bears to the total net rentable area of the Building, which is agreed to be 62,044 square feet. In accordance with the foregoing, it is agreed that Tenant's Pro Rata Share of all Operating Expenses is Twenty-Three and 60/100 percent (23.60%). On or before the Commencement Date and thereafter on or before the first day of each calendar year of the Term Landlord shall provide to Tenant the Estimated Operating Expense Increase (defined in Article 3.03) for the upcoming year. shall receive a credit equivalent to such excess which shall be deducted by Landlord from the next monthly installment(s) of Tenant's Pro Rata Share of the Estimated Operating Increase, unless this Lease shall be terminated before such installments become due in which case Landlord shall refund such difference to Tenant. Otherwise, within thirty (30) days after Landlord furnishes such statement to Tenant, Tenant shall make a lump sum payment to Landlord equal to Tenant's Pro Rata Share of the positive difference between the Actual Operating Expense Increase and the Estimated Operating Expense Increase theretofore paid by Tenant, such obligation to survive the termination of this Lease and/or the expiration of the Term. As used in this Lease the term "Rent" shall refer collectively to the Base Rent and all rental adjustments. If the Term commences on a day other than the first day of the month or calendar year, or terminates on a day other than the last day of a month or calendar year, then Tenant shall be required to pay only a pro rata portion of the installments and adjustments of Rent due for such month or year. 3.03 OPERATING EXPENSES. "Operating Expenses" shall mean and include all amounts, expenses, and costs of whatsoever nature incurred directly related to the ownership, management, operation repair and maintenance of the Project, all additional operating facilities which may be added to the Project, and Landlord's personal property which may be utilized in connection therewith; with said Operating Expenses including, but not being limited to, the following: 3 (a) wages and salaries of all employees directly engaged in the operation, maintenance or security of the Project, including taxes, insurance and benefits relating thereto; (b) all supplies and materials used in the operation and maintenance of the Project; (c) cost of all utilities for the Project including the cost of water and power for heating, lighting, air-conditioning and ventilating (excluding those costs billed to specific tenants); (d) cost of all maintenance and service agreements for the Project and the equipment therein, including security service, window cleaning, elevator maintenance and janitorial service; (e) cost of all insurance relating to the Project, including, but not limited to, the cost of casualty, rental loss and liability insurance applicable to the Property and Landlord's personal property used in connection therewith; (f) all taxes, assessments and governmental charges, whether federal, state, county or municipal and whether they are assessed by taxing districts or authorities presently taxing the Project or by other subsequently created or otherwise, and any other taxes and assessments attributable to the Project or their operation, excluding however, federal and state taxes on income, death taxes, excess profit taxes, franchise taxes, or any taxes imposed or measured on or by income of Landlord from the operation of the Project. It is agreed that Tenant will be responsible for the payment of all ad valorem taxes on its personal property and on the value of the leasehold improvements in the leased premises to shall receive a credit equivalent to such excess which shall be deducted by Landlord from the next monthly installment(s) of Tenant's Pro Rata Share of the Estimated Operating Increase, unless this Lease shall be terminated before such installments become due in which case Landlord shall refund such difference to Tenant. Otherwise, within thirty (30) days after Landlord furnishes such statement to Tenant, Tenant shall make a lump sum payment to Landlord equal to Tenant's Pro Rata Share of the positive difference between the Actual Operating Expense Increase and the Estimated Operating Expense Increase theretofore paid by Tenant, such obligation to survive the termination of this Lease and/or the expiration of the Term. As used in this Lease the term "Rent" shall refer collectively to the Base Rent and all rental adjustments. If the Term commences on a day other than the first day of the month or calendar year, or terminates on a day other than the last day of a month or calendar year, then Tenant shall be required to pay only a pro rata portion of the installments and adjustments of Rent due for such month or year. 3.03 OPERATING EXPENSES. "Operating EXPENSES" shall mean and include all amounts, expenses, and costs of whatsoever nature incurred directly related the ownership, management, operation repair and maintenance of the Project, all additional operating facilities which may be added to the Project, and Landlord's personal property which may be utilized in connection therewith; with said Operating Expenses including, but not being limited to, the following: (a) wages and salaries of all employees directly engaged in the operation, maintenance or security of the Project, including taxes, insurance and benefits relating thereto; (b) all supplies and materials used in the operation and maintenance of the Project; 4 (c) cost of all utilities for the Project including the cost of water and power for heating, lighting, air-conditioning and ventilating (excluding those costs billed to specific tenants); (d) cost of all maintenance and service agreements for the Project and the equipment therein, including security service, window cleaning, elevator maintenance and janitorial service; (e) cost of all insurance relating to the Project, including, but not limited to, the cost of casualty, rental loss and liability insurance applicable to the Property and Landlord's personal property used in connection therewith; (f) all taxes, assessments and governmental charges, whether federal, state, county or municipal and whether they are assessed by taxing districts or authorities presently taxing the Project or by other subsequently created or otherwise, and any other taxes and assessments attributable to the Project or their operation, excluding however, federal and state taxes on income, death taxes, excess profit taxes, franchise taxes, or any taxes imposed or measured on or by income of Landlord from the operation of the Project or imposed in connection with any change of ownership of the Project. It is agreed that Tenant will be responsible for the payment of all ad velorem taxes on its personal property and on the value of the leasehold improvements in the leased premises to the extent that the same exceed building standard allowances and to such extent, said ad valorem taxes on Tenant's personal property and leasehold improvements in excess of the building standard improvements will not be considered herein; (g) cost of repairs and general maintenance (excluding repairs and general maintenance paid by proceeds of insurance or by Tenant or third parties, and alterations attributable solely to Tenants of the Project other than Tenant); (h) a reasonable amortization charge on account of any capital expenditure incurred to effect a reduction in the operating expenses of the Project, or which relates to a capital item installed pursuant to governmental law, rule or order; (i) allocation of Landlord's central office costs incurred in managing the Project, which allocation shall not exceed five percent (5%) of the gross rentals of the Building; and (j) cost, fees, and expenses charged to Landlord in connection with any contract for the management of the Project. Operating Expenses shall not include capital improvements (except as indicated above), depreciation, interest and principle payments on mortgage and other non-operating debts of Landlord, and specific costs for special items or services billed to and paid by specific tenants. Operating Expenses shall be determined on an accrual basis in accordance with generally accepted accounting principles consistently applied. The Base Operating Expense for the Project shall equal the actual Operating Expenses for the Project for the calendar year 1998. The "Estimated Operating Expense Increase" shall equal the positive difference between the Landlord's estimate of Operating Expenses for the applicable calendar year less the Base Operating Expense. Landlord's statement of the Estimated Operating Expense Increase shall control for the year specified in such statement and for each succeeding year during the Term until Landlord provides a new statement of the Estimated Operating Expense Increase. The "Actual Operating Expense Increase" shall equal the positive difference of the actual Operating Expenses for the applicable calendar year less the Base Operating Expense. Notwithstanding any provision contained herein to the contrary, if less than ninety-five percent (95%) of the total rental area in the Building is occupied by tenant(s) or Landlord is not supplying services to 95% of 5 the total rentable area of the Building at any time during any calendar year, Operating Expenses for such calendar year, including the Base Operating Expense year, shall be determined to be an amount equal to the like expense which would normally be expected to be incurred had such occupancy been 95% of the Building's total rentable area and had Landlord been supplying services to 95% of the Building's total rentable area throughout such calendar year. 3.04 AUDIT OF BOOKS AND RECORDS BY TENANT. Tenant, at its expense, shall have the right once each calendar year during the Term, at a reasonable time, to audit Landlord's books and records relating to the Operation Expenses for the previous calendar year if additional rental payments became due during such previous calendar year pursuant to one provisions of Article 3.02 hereof; provided, however, if the statement of Actual Operating Expense Increase for the previous calendar year is overstated by more than five percent (5%) of the total amount of actual Operating Expenses for such calendar year reflected by the books and records, Landlord shall pay for the reasonable costs of such audit. 3.05 SECURITY DEPOSIT. ARTICLE 4 4.01 USE. Tenant shall use and occupy the Premises only for office purposes and Computer lab, and for no other purposes. Tenant shall not do or permit anything to be done in or about the Premises nor bring or keep anything therein which will in any way increase the existing rate of or affect any fire or other insurance upon the Project or any of its contents, or cause the cancellation of any commercially reasonable insurance policy covering the Project or any part thereof or any of its contents. Tenant shall not do or permit anything to be done in or about the Premises which will in any way obstruct or interfere with the rights of other tenants or occupants of the Project or injure them. Tenant shall not permit any nuisance in, on or about the Premises. Tenant shall not commit or suffer to be committed any waste in or upon the Premises. Tenant shall not use the Premises or permit anything to be done in or about the Premises which will in any way conflict with any private restrictive covenant, law, statute, ordinance or any rule or regulation of Landlord or any governmental or quasi-governmental authority now in force or which may hereafter be enacted or promulgated. ARTICLE 5 5.01 LANDLORD'S SERVICES. Provided Tenant is not in default hereunder, Landlord shall, at Landlord's expense, except as provided to the contrary in this Lease, furnish to Tenant the following services: (a) air-conditioning and central heat, shall be supplied in sufficient quantities for the Premises and all public areas by Landlord at Landlord's expense during Building hours, in order to maintain a temperature in the Premises, in the range of 65(Degree) to 75(Degree) Fahrenheit, drybulb, and a maximum relative humidity of 60% in season, Normal Building hours, are presently scheduled to be 7:30 a.m. through 5:30 p.m. on weekdays and 7:30 a.m. through 1:00 p.m. on Saturdays, exclusive of normal business holidays. Normal business holidays for purposes of this Lease, shall be New Year's Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day; (b) janitorial services in the Premises and public portions of the Building, in accordance with Exhibit "_" at no extra charge, for all days except Saturdays, Sundays, and normal business holidays; (c) water at those points of supply provided for drinking, toilet, and lavatory purposes; (d) normal and customary routine maintenance of all public, structural, and exterior portions of the Project according to Landlord's standards; 6 (e) electric lighting service for all public portions of the Project; (f) automatic passenger elevator service at all times for access to and egress from the Premises. Freight elevator service, in common with other tenants, shall be provided during reasonable business hours as prescribed by Landlord, exclusive of Saturdays, Sundays, and normal business holidays; (g) electric energy that Tenant shall require for normal office equipment such as typewriters, desktop personal computers, usual office duplicating equipment, dictation machines, calculators, other machines of similar low electrical consumption, and building standard lighting in the premises. Without Landlord's prior written consent, Tenant shall not be entitled to employ lighting on the Premises which consumes electrical current in excess of building standard nor utilize any office equipment that consumes more than 0.5 kilowatts per hour at rated capacity or requires a voltage other than 120 volts single phase; and (h) replacement of fluorescent light bulbs in any fluorescent light fixtures which are located in the Premises and which contain the building standard light fixture. 5.02 ADDITIONAL SERVICE COST. Tenant shall pay Landlord, upon demand, such additional amounts as are necessary to recover additional costs incurred by Landlord in performing or providing janitorial, maintenance, security, or other services or requirements of Tenant (and in paying additional taxes) as to any non-building standard installations in the Premises. Tenant shall pay Landlord, upon demand, reasonable costs incurred by Landlord for providing off-hour and non-standard air-conditioning, heating and electricity; provided, however, that Tenant's excessive use or consumption of heating, air-conditioning and/or electrical services in violation of Article 5.01 above, without Landlord's consent, shall constitute a default under this Lease. 5.03 SERVICE INTERRUPTION. Landlord shall not be liable for any damages, losses. Expenses, and costs directly or indirectly resulting from, nor shall any Rent be abated by reason of the installation, use or interruption of use of any equipment in connection with the furnishing of any of the foregoing services, or failure to furnish, or delay in furnishing any such service when such failure of delay is caused by accident or any other occurrence or condition beyond the reasonable control of Landlord or by the making of necessary repairs or improvements to the Premises or to the Building. The failure to furnish any of such services shall not be construed as an eviction of Tenant or relieve Tenant from the duty of observing and performing any of its obligations under this Lease unless such failure substantially handicaps, impedes or impairs the normal use of the Premises by Tenant for the purposes authorized in this Lease and within a reasonable time after delivery to Landlord by Tenant a written notice setting forth in reasonable detail a description of the services not so furnished, Landlord fails to commence curing any such failure or thereafter fails to continue the curing thereof with appropriate diligence and speed under the circumstances until cured. The obligations of Landlord to provide services and utilities herein provided for shall be subject to governmental regulation thereof (i.e. rationing, temperature control, et cetera) and any such regulation which requires Landlord to provide such services or utilities other than as herein provided shall not constitute a default hereunder but rather compliance with such regulations shall be deemed to be compliance with the obligations and agreements of Landlord hereunder. ARTICLE 6 7 6.01 ALTERATIONS. Tenant shall make no alterations, installations, additions or improvements in or to the Premises without Landlord's prior written consent, which consent shall not be unreasonably withheld. All alterations, installations, additions, or improvements, other than movable furniture and trade fixtures, made by Tenant to the Premises shall remain upon and be surrendered with the Premises and become the property of Landlord at the expiration or termination of this Lease or the termination of Tenant's right to possession of the Premises; provided, however, that Landlord may require Tenant, at Tenant's cost, to remove any or all of such items that are not building standard upon the expiration or termination of this Lease or the termination of Tenant's right to possession of the Premises, provided Landlord notified Tenant of such removal requirement at the time of Landlord's written consent torch alteration or addition. Tenant, at its sole cost and prior to the expiration or termination of this Lease, shall remove all of Tenant's property from the Premises and make, or reimburse Landlord for the cost of all repairs to the Premises and/or Project for damage resulting from such removal. All work shall be completed promptly and in a good and workmanlike manner and shall be performed in such a manner that no mechanic's, materialmen's or other similar liens shall attach to Tenant's leasehold estate and in no event shall Tenant permit, or be authorized to permit, any such liens or other claims to be asserted against Landlord or Landlord's rights, estate and interests with respect to the Project or this Lease. Landlord may require, at Tenant's sole cost and expense, a lien and completion bond in an amount equal to the estimated cost of any improvements, additions or alterations in the Premises. 6.02 TENANT REPAIRS. By taking possession of the Premises, Tenant shall be deemed to have accepted the Premises as being in good, sanitary order, condition and repair. Tenant shall, at Tenant's sole cost and expense, keep the Premises in good condition and repair, damage thereto from causes beyond the reasonable control of Tenant and ordinary wear and tear excepted. Tenant shall, upon the expiration or sooner termination of this Lease, surrender the Premises to the Landlord in good condition, ordinary wear and tear damage from causes beyond the reasonable control of Tenant excepted. Any injury or damage to the Premises or Project, or the appurtenances or fixtures thereof, caused by or resulting from the act, omission or neglect of Tenant or Tenant's employees, servants, agents, invitees, assignees, or subtenants shall be repaired or replaced by Tenant, or at Landlord's option by Landlord, at the expense of Tenant. If Tenant fails to maintain the Premises or fails to repair or replace any damage to the Premises or Project resulting from the negligence or intentional act of Tenant, its employees, servants, agents, invitees, assignees or subtenants, Landlord may, but shall not be obligated to, cause such maintenance, repair or replacement to be done, as Landlord deems necessary, and Tenant shall immediately pay to Landlord all costs related thereto plus a charge for overhead of ten percent (10~) of such costs. 6.03 LANDLORD REPAIRS. Landlord shall repair and maintain the structural portions of the Project, including the basic plumbing, air-conditioning, heating, elevator, and electrical systems installed or furnished by Landlord, and all areas of the Project available for the common, non-exclusive use of all tenants in the Project, unless such maintenance and repairs are caused in part or in whole by the act, neglect, or omission of any duty by the Tenant, its agents, servants, employees or invitees, or unless such maintenance or repairs are otherwise herein provided to be made by Tenant. Landlord shall not be liable for any failure to make such repairs or to perform any maintenance unless such failure shall persist for thirty (30) days after written notice of the need of such repairs or maintenance is given to Landlord by Tenant. Landlord shall not be liable for any damages, compensations or claims for loss of the use of the whole or any part of the Premises or Tenant's personal 8 property, or any inconvenience, loss of business, or annoyance arising from any such repair and/or maintenance performed by Landlord hereunder, except for damage resulting from Landlord's gross negligence or willful misconduct. ARTICLE 7 7.01 LANDLORD INSURANCE. Landlord shall insure the Project and shall maintain fire and extended casualty liability and other insurance in such amounts as Landlord, in its sole discretion, may deem appropriate. Such insurance shall be an "Operating Expense" as defined in Article 3.03 above. Such insurance shall be for the sole benefit of Landlord and, if required, Landlord's mortgagee. 7.02 TENANT INSURANCE. Tenant shall, at Tenant's expense, fully insure its property located in the Premises, against fire and other casualty and shall maintain comprehensive general public liability insurance with broad form endorsement insuring Landlord and Tenant against any liability arising out of ownership, use, occupancy or maintenance of the Premises and all areas appurtenant thereto, including contractual liability insurance (with respect to Article 7.04 hereof), and with limits of liability of at least $1,000,000 with respect to death of or injuries to one or more persons, and at least $1,000,000 with respect to loss of or damage to property. A copy of the certificate of insurance, shall be delivered to Landlord. Furthermore, in the event this Lease is hereafter modified or amended in any manner which will cause all or any portion of the Premises not to be covered by the comprehensive public liability insurance to include all portions of the Premises. 7.03 WAIVERS OF RECOVERY AND SUBROGATION. Landlord and Tenant hereby waive any rights of recovery, claim, action or cause of action each may have against the other on account of any loss or damage occasioned to Landlord or Tenant arising from any risk covered by the fire and extended casualty insurance covering the Project or the general public liability insurance with broad form endorsement covering the Premises or any other property used or occupied by Tenant pursuant to the terms of this Lease or otherwise and which is maintained hereunder. Landlord and Tenant, on behalf of their insurance company or companies insuring the Project and/or the Premises and any property located thereon or any other property used or occupied by Tenant pursuant to the terms of this Lease or otherwise, waive any right of recovery and/or subrogation that they may have one against the other. Because this paragraph will preclude the assignment of any claim mentioned in it by way of subrogation or otherwise to an insurance company or any other person, each party to this Lease agrees immediately to give to each insurance company which has issued to it policies of insurance covering all risk of direct physical loss, written notice of the terms of the mutual waivers contained in this paragraph, and to have the insurance policies properly endorsed, if necessary, to prevent the invalidation of the insurance coverage by reason of the mutual waivers contained in this paragraph. 7.04 INDEMNITY. Tenant hereby indemnifies and holds harmless Landlord's and Landlord hereby indemnifies and holds harmless Tenant's agents, directors, officers, employees, invitees, successors, assigns, and contractors, from all claims, losses, costs, damages, or expenses (including but not limited to attorney's fees) resulting or arising from any and all injuries or death of any person or damage to any property caused by an act, omission, or negligence of Tenant, or any parties contracting with Tenant relating to the Premises. Landlord shall not be liable for any damage of any kind or for any damage to property, death or injury to persons from any cause whatsoever by reason of the use and occupancy of the Premises by Tenant. Landlord shall not be liable to Tenant and Tenant hereby waives all claims against Landlord or 9 Landlord's directors, officers, employees, or agents for any indirect damages or loss of profits, business interruption, and for any damage to property, death or injury to persons from any cause whatsoever including, but not limited to, acts of other tenants, vandalism, loss of trade secrets or other confidential information, any damage, loss or injury caused by defect in the Premises or the Building, pipes, air-conditioning, heating, plumbing or by water leakage of any kind from the roof, walls, windows, basement or other portion of the Premises or the Building, or caused by electricity, gas, oil, fire or any cause whatsoever in, on, or about the Premises, Building or Project or any part thereof, unless caused by the willful misconduct or gross negligence of Landlord. ARTICLE 8 8.01 CASUALTY. If the Premises or Project, or any portion of either, shall be damaged by fire or other casualty covered by the insurance carried by Landlord hereunder and the cost of repairing such damage shall not be greater than eighty percent (80%) of the then full replacement cost thereof, then, subject to the following provisions of this Article 8, Landlord shall proceed with due diligence to repair the Premises and/or Project. If the Premises or Project shall be damaged (a) by fire or other casualty not covered by insurance carried by Landlord hereunder, or (b) to an extent greater than eighty percent (80%) of the then full replacement cost thereof, then Landlord shall have the option (i) to repair or reconstruct the same to substantially the same condition as immediately prior to such fire or other casualty, or (ii) terminate this Lease by so notifying Tenant within one louvered, twenty (10) thirty (30) days after the date of such fire or others casualty, such termination to be effective as of the date of such fire or other casualty. Failure to give notice of Landlord's decision within such thirty (30): one hundred twenty (1~0) day period, notwithstanding the foregoing, if such destruction results in the premises being untenable in whole, or insubstantial part, for a period reasonably estimated by the responsible contractor selected by Landlord to be six (6) months or longer after the date of casualty or in the event of total or substantial damage or destruction of the building from any cause of which the period to restore is reasonably estimated by the aforesaid contractor to be six (6) months or longer after the casualty (and irrespective whether or not the Premises are damaged), then Tenant or Landlord may terminate this Lease within thirty (30) days after the date of Landlord's notice described below and all rentals owed up to the time of such destruction or termination must be paid by Tenant (it being understood that Tenant must pay rentals on all tenable space until termination of this Lease). Landlord will give Tenant written notice thirty (30) days after any such damage or destruction. Any such termination, either by Landlord or Tenant, will not relieve Tenant of its obligations and liability (whether under this Section 8.01 or elsewhere in this Lease) which are expressly provided to survive the expiration or earlier termination of this Lease. If Landlord elects not to rebuild, then Landlord will be entitled to retain all of the insurance proceeds of the fire, and casualty insurance maintained by it and its interest in Tenant's insurance which Tenant is required to maintain pursuant to Section 7.02 above. Notwithstanding anything contained in this Section 8.01, Landlord will be obligated to restore or rebuild only the damaged and/or affected portions of the Premises to the same condition, excepting reasonable wear and tear installed by Landlord at the commencement of the Lease pursuant to the approved Plans attached as Exhibit "-". 8.02 END OF TERM CASUALTY. Notwithstanding anything to the contrary in this Article 8, Landlord shall not have any obligation whatsoever to repair, reconstruct or restore the Premises or the Project when the damage resulting from any casualty covered under this Article 8 occurs during the last twelve (12) months of the Term or any extension thereof. 10 ARTICLE 9 9.01 TAKING. If all or any part of or interest in the Premises shall be taken as a result of the exercise of the power of eminent domain, this Lease shall terminate as to the part so taken as of the date of taking. If only a part of or interest in the Premises or if a substantial portion of the Building is so taken, either Landlord or Tenant shall have the right to terminate as to the part so taken as of the date of taking. If only a part of or interest in the Premises or if a substantial portion of the Building is taken, either Landlord or Tenant shall have the right to terminate this Lease as to the balance of the Premises by written notice to the other within thirty (30) days after the date of taking, provided, however, that a condition to the exercise by Tenant of such right to terminate shall be that the portion of the Premises or Building taken shall be of such extent and nature as to materially handicap, impede or impair Tenant's use of the Premises or the balance of the Premises remaining. In the event of any taking, Landlord shall be entitled to any and all compensation, damages, income, rent and awards with respect thereto except for an award, if any, specified by the condemning authority for any property that Tenant has the right to remove upon termination of this Lease. Tenant shall have no claim against Landlord for the value of any unexpired Term. In the event of a partial taking of the Premises which does not result in a termination of this Lease, the Rent thereafter to be paid shall be equitably reduced. ARTICLE 10 10.01 ENTRY. Landlord, its agents, employees and representatives, shall have the right to enter the Premises at any time upon reasonable notice to Tenant (which notice may be oral and not in compliance with Article 15.08 hereof, but no notice shall be required in the case of routine maintenance or an emergency) for any purpose which Landlord may reasonably deem necessary for the operation and maintenance of the Project, subject to the safety and security regulations of Tenant and the Government of the United States of America. Tenant hereby waives any claim for damages or for any injury or inconvenience to or interference with Tenant's business, any loss of occupancy or quiet enjoyment of the Premises, and any other loss occasioned thereby. For each of the aforesaid purposes, Landlord shall at all times have and retain a key with which to unlock all of the doors in, upon and about the Premises, excluding Tenant's vaults, safes and files, and Landlord shallhavethe right to use any and all means which Landlord may deem proper to open said doors in an emergency, in order to obtain entry to the Premises without liability to Tenant except for any failure to exercise due care for Tenant's property. ARTICLE 11 11.01 SUBORDINATION. The rights and interest of Tenant under this Lease and in and to the Premises shall be subject and subordinate to all deeds of trust, mortgages, and other security instruments and to all renewals, modifications, consolidation, replacements, and extensions thereof (the "Security Documents") heretofore or hereafter executed by Landlord and/or any subsequent purchaser, grantee or assignee covering the Premises, and/or the Project, or any parts thereof to the same extent as if the Security Documents had been executed, delivered and recorded prior to the execution of this Lease. After the delivery to Tenant of a notice from Landlord that it has entered into one or more Security Documents, then during the term of such Security Documents, Tenant shall deliver to the holder or holders of all Security Documents a copy of all notices to Landlord and shall grant to such holder or holders the right to cure all defaults, if any, of Landlord hereunder within the same time period provided in this Lease for curing such defaults by Landlord and, except with the prior written consent of the holder of the Security Documents, shall not (i) amend this Lease, (ii) surrender or terminate this Lease except pursuant to a right to terminate expressly set forth in this Lease, or (iii) pay any Rent more than one (1) month in advance or pay any Rent or other amounts payable hereunder other than in strict accordance with the terms hereof. The 11 provisions of this subsection shall be self-operative and shall not require further agreement by Tenant; however, at the request of Landlord, Tenant shall execute such further documents as may be required to evidence and set forth for the benefit of the holder of any Security Documents the obligations of Tenant hereunder including, but not limited to, the Tenant's obligation to subordinate Tenant's interest in this Lease to any such Security Documents as may be desired by Landlord and/or the mortgagee or trustee, provided however, that any such instruments shall not effect Tenant's rights and privileges under this Lease, or alter the business or legal terms of this Lease. At any time and from time to time upon not less than ten (10) days prior notice by Landlord, Tenant shall execute, acknowledge and deliver to the Landlord a statement of the Tenant in writing certifying that this Lease is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as modified and stating the modifications, if any), and stating whether or not to the best knowledge of Tenant the Landlord is in default in the keeping, observance or performance of any covenant, agreements, term, provision or condition contained in this Lease and, if so, specifying each default of which Tenant may have knowledge, it being intended that any such statement may be relied upon by any prospective purchaser, tenant, mortgagee or assignee of any mortgage of the Building or land or of Landlord's interest therein. Notwithstanding the above, with respect to any present of future mortgagee and /or beneficiary of any Deed of Trust or other lien covering the property, or Lessor underground lease (collectively "Landlord's Mortgagee") during the term of this Lease or any extension thereof. Landlord will secure and deliver to Tenant a non-disturbance agreement form executed by Landlord's Mortgagee for the benefit of Tenant whereby Tenant will not be disturbed in its possession of he lease Premises or its rights under the Lease modified or terminated so long as an event of default by Tenant is not continuing under the terms of this lease. 11.02 QUIET ENJOYMENT. Tenant, on paying the Rent and keeping and performing the conditions and covenants herein contained, shall and may peaceably and quietly enjoy the Premises for the Term, subject to the aforesaid underlying leases and mortgages, all applicable laws and other governmental and legal requirements, applicable insurance requirements and regulations, and the provisions of this Lease. ARTICLE 12 12.01 ASSIGNMENT AND SUBLETTING. Tenant shall not, voluntarily, by operation of law, or otherwise, assign, transfer, mortgage, pledge, or encumber this Lease or sublease the Premises or any part thereof, or suffer any person other than Tenant, its employees, agents, servants and invitees to occupy or use the Premises or any portion thereof, without the express prior written consent of Landlord which consent shall not be unreasonably withheld or delayed. If Tenant so requests Landlord's consent, Landlord may, (a) deny such request and continue to enforce the terms and conditions of this Lease as to Tenant; (b) grant such consent subject to Landlord's approval of the assignee, transferee, subtenant, or mortgagee; or (c) elect to terminate this Lease with respect to the Premises or any portion thereof to be affected by such assignment, sublease or other event specified above. In no event may Tenant assign this Lease or sublease the Premises or any portion thereof to any party whose operations in the Project would not be in keeping with, or would detract from the operations of other tenants in the Project. If Tenant is not a public company that is registered on a national stock exchange or that is required to register its stock with the Securities and Exchange Commission under Section 12(g) of the Securities and Exchange Act of 1934, then any change in a majority of the voting rights or other controlling rights or interests of Tenant shall be deemed an assignment for the purposes hereof. 12 12.02 CONTINUED LIABILITY. Tenant shall, despite any permitted assignment or sublease, remain directly and primarily liable for the performance of all of the covenants, duties, and obligations of Tenant hereunder and Landlord shall be permitted to enforce the provisions of this Lease against Tenant or any assignee or sublessee without demand upon or proceeding in any way against any other person. 12.03 CONSENT. Consent by Landlord to a particular assignment or sublease shall not be deemed a consent to any subsequent assignment or sublease. If this Lease is assigned or if the Premises are subleased without the permission of Landlord, then Landlord may nevertheless collect rent from the assignee or sublessee and apply the net amount collected to the Rent payable hereunder, but no such transaction or collection of rent or application thereof by Landlord shall be deemed a waiver of any provision hereof, a release of Tenant from the performance of the obligations of the Tenant hereunder or of any remedy of Landlord under this Lease. 12.04 PROCEEDS. All cash or other proceeds of any assignment, sale or sublease of Tenant's interest in this Lease, whether consented to by Landlord or not, shall be paid to Landlord notwithstanding the fact that such proceeds exceed the Rent called for hereunder, and Tenant hereby assigns all rights it might have or ever acquire in any such proceeds to Landlord, less Tenant's upfront costs of such assignment or sublease. 13.01 DEFAULT. Each of the following shall constitute a "Default" by Tenant: Each of the following shall constitute a (a) the failure of Tenant to pay the Rent or any part thereof when due; (a) Tenant shall become insolvent or unable to pay its debts as they become due, or Tenant notifies Landlord that it anticipates either condition; (b) the making by Tenant of a general assignment for the benefit of its creditors; (d) Tenant takes any action to, or notifies Landlord that Tenant intends to file a petition under any section or chapter of the United States Bankruptcy Code, as amended from time to time, or under any similar law or statute of the United States or any state thereof; or a petition shall be filed against Tenant under any such statute or Tenant notifies Landlord that it knows such a petition will be filed; or the appointment of a receiver or trustee to take possession of substantially all of Tenant's assets located at the Premises or of Tenant's interest in this Lease or the attachment, execution or other judicial seizure of substantially all of Tenant's assets located at the Premises or of Tenant's interest in this Lease; (e) the failure of Tenant to discharge or appeal any judgment for Landlord and against Tenant within sixty (60) days after such judgment becomes final; (f) Tenant shall fail to fulfill or perform, in whole or in part, any of its obligations under this Lease (other than the payment of Rent) and such failure or non-performance shall continue for a period of thirty (30) Ad days after written received notice thereof has been given by Landlord to Tenant; (g) Tenant shall vacate or abandon the Premises or any significant portion thereof unless Tenant continues to pay all of its rental obligations as defined herein; or 13 (h) Tenant shall fail to take possession of the Premises when Landlord notifies Tenant that the same are ready for occupancy. 13.02 RIGHTS UPON DEFAULT. If a Default occurs, then at any time thereafter prior to the curing thereof, with notice or demand and without waiving any additional or remaining rights herein available to Landlord, Landlord may exercise any and all rights and remedies available to Landlord under this Lease, at law, or in equity, including, without limitation, termination of this Lease and termination of Tenant's right to possession without terminating the Lease. In the event of a Default, Landlord may, without additional notice and without court proceedings, re-enter and repossess the Premises and remove all persons and property therefrom and said Tenant hereby agrees to surrender possession of the Premises and waives any claim arising by reason thereof or by reason of issuance of any distress warrant or writ of sequestration and agrees to hold Landlord harmless from any such claims. If Landlord elects to terminate this Lease, it may treat the Default as an entire breach of this Lease and Tenant shall immediately become liable to Landlord for damages equal to the total of: (i) the reasonable cost of recovering, reletting (including, without limitation, the cost of lease commission attributable to the unexpired portion of the Term of this Lease), and remodeling the Premises per building standards; (ii) all unpaid Rent and other amounts earned or due through such termination; plus, (iii) the total Rent and other amounts to be paid by Tenant hereunder for the remainder of the full Term. If Landlord elects to terminate Tenant's right to possession of the Premises without terminating the Lease, Landlord shall make commercially reasonable efforts to rent the Premises or any part thereof for the account of Tenant to any person or persons for such rent and for such terms and conditions as Landlord deems appropriate, and Tenant shall be liable to Landlord for the amount, if any, by which the Rent for the unexpired balance of the Term exceeds the net amount, if any, received by Landlord from such reletting, (such amount received by Landlord being the gross amount so received by Landlord less the reasonable costs of repossession, reletting, remodeling, and other expenses incurred by Landlord). Such sum or sums shall be paid by Tenant in monthly installments on the first day of each month of the Term. In no case shall Landlord be liable for failure to relet the Premises or to collect the rent due under such reletting, and in no event shall Tenant be entitled to any excess rents received by Landlord. All rights and remedies of Landlord shall be cumulative and not exclusive. 13.03 COSTS. If Landlord elects to terminate Tenant's right to possession without terminating the Lease, Landlord shall have the right at any time thereafter to terminate this Lease, whereupon the foregoing provisions with respect to termination will thereafter apply. If any Act of Default occurs or in case of any holding over or possession by Tenant of the Premises after the expiration or termination of this Lease, Tenant shall reimburse Landlord on demand for all costs incurred by Landlord in connection therewith including, but not limited to, reasonable attorney's fees, court costs, and related costs plus interest thereon at the rate of ten percent (10%) per annum from the date such costs are paid by Landlord. 13.04 INTEREST. All late payments of Rent, costs or other amounts due from Tenant under this Lease shall bear interest from the date due until paid at the rate of ten percent (10%) per annum. 13.05 NON-WAIVER. The failure of Landlord or Tenant to seek redress for violation of, or to insist upon the strict performance of, any covenant or condition of this Lease shall not prevent a subsequent act or omission that would have originally constituted a violation of this Lease from having all the force and effect of an original violation. The receipt by Landlord of Rent with or without knowledge of the breach of any provision of this Lease shall not be deemed a waiver of such breach, shall not reinstate this Lease or Tenant's right of possession if either or both have been terminated, and shall not otherwise affect any notice, election, action, or suit by Landlord. No provision of this Lease shall be deemed to have been waived 14 by Landlord unless such waiver shall be in writing signed by Landlord. No act or thing done by Landlord during the Term shall be deemed an acceptance of surrender of the Premises and no agreement to accept such surrender shall be valid, unless expressly acknowledged and in writing and signed by Landlord. ARTICLE 14 14.01 LIMITATION OF WARRANTIES. LANDLORD AND TENANT AGREE THAT THERE ARE AND WERE NO VERBAL REPRESENTATIONS, WARRANTIES, UNDERSTANDINGS, STIPULATIONS, AGREEMENTS OR PROMISES PERTAINING TO THIS LEASE OR THE EXPRESSLY MENTIONED WRITTEN EXTRINSIC DOCUMENTS NOT INCORPORATED IN WRITING IN THIS LEASE. LANDLORD AND TENANT EXPRESSLY AGREE THAT THERE ARE AND SHALL BE NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY, HABITABILITY, SUITABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OF ANY OTHER KIND ARISING OUT OF THIS LEASE AND TENANT HEREBY WAIVES ANY AND ALL CLAIMS AGAINST LANDLORD IN THIS REGARD. TENANT HAS ITSELF INSPECTED THE PROPERTY AND AGREES TO ACCEPT THE SAME AS IS, WHERE IS AND WITH ALL FAULTS, IF ANY. ARTICLE 15 15.01 AMENDMENT. Any agreement hereafter made between Landlord and Tenant shall be ineffective to modify, release, or otherwise affect this Lease, in whole or in part, unless such agreement is in writing and signed by the party to be bound thereby. 15.02 SEVERABILITY. If any term or provision of this Lease shall, to any extent, be held invalid or unenforceable by a final judgment of a court of competent jurisdiction, the remainder of this Lease shall not be affected thereby. 15.03 ESTOPPEL LETTERS. Tenant shall promptly, upon request from Landlord, execute and acknowledge a certificate containing such information as may be reasonably requested for the benefit of Landlord, and prospective purchaser or any current or prospective mortgagee of all or any portion of the Project. Such Estoppel Letters will be limited to no more than three (3) a year. 15.04 LANDLORD'S LIABILITY AND AUTHORITY. The liability of Landlord to Tenant for any default by Landlord under the terms of this Lease or in the event Landlord expressly or impliedly agrees to any other liability under the terms of this Lease for any actions of Landlord or its directors, officers, employees, agents or contractors shall be limited to the interest of Landlord in the Project, it being intended that Landlord shall not be personally liable for any judgment or deficiency. 15.05 HOLDOVER. If Tenant shall remain in possession of the Premises after the Expiration /date or earlier termination of this Lease, then Tenant shall be deemed a tenant-at-sufferance, terminable at any time, at one and one-half the Rent in effect on the date of such termination or expiration, but otherwise shall be subject to all of the obligations of Tenant under this Lease. Additionally, Tenant shall pay to Landlord all damages sustained by Landlord on account of such holding over by Tenant including, but not limited to, reasonable attorney's fees. 15.06 SURRENDER. Upon the expiration or earlier termination of the Term, Tenant shall peaceably quit and surrender the Premises in good order and condition, excepting ordinary wear and tear, but subject to Article 6.01 and Article 6.02 hereof. All obligations of Tenant for the period of time prior to the expiration or earlier termination of the Term shall survive such expiration or termination. 15.07 PARTIES AND SUCCESSORS. Subject to the limitations and conditions set forth elsewhere herein, this Lease shall bind and inure to the benefit of the respective heirs, legal representatives, successors, and permitted Assigns and/or subleases of the parties hereto. The term "Landlord", as used in this Lease, so far as the 15 performance of any covenants or obligations on the part of Landlord under this Lease are concerned, shall mean only the owner of the Project at the time in question, so that in the event of any transfer of title to the Project, the party by whom any such transfer is made shall be relieved of all liability and obligations of the Landlord arising under this Lease from and after the date of such transfer. 15.08 NOTICE. Except as otherwise provided herein, any statement, notice or other communication which Landlord or Tenant is required to give to the other in writing shall be deemed sufficiently given or rendered if hand delivered, or if sent by registered or certified mail, return receipt requested, postage prepaid and addressed to the other as follows: If to Landlord: 691 Sleater-Kinney Road S.E., Suite 100 P.O. Box 3487 Lacey, Washington 98503 If to Tenant: The Premises or --------------------------------------- --------------------------------------- --------------------------------------- or at such other addressees) as the other party shall from time to time designate by prior written notice, and such notice shall be effective when the same is received or mailed as herein provided. 15.09 RULES AND REGULATIONS. Tenant, its servants, employees, agents, visitors, invitees, and licensees shall observe faithfully and comply strictly with the Rules and Regulations set forth in Exhibit "C" hereto, and shall abide by and conform to such further rules and regulations as Landlord may from time to time reasonably make or adopt after Tenant receives a copy thereof. 15.10 CAPTIONS. The captions in this Lease are inserted only as a matter of convenience and for reference and they in no way define, limit, or describe the scope of this Lease or the intent of any provision hereof. 15.11 NUMBER AND GENDER. All genders used in this Lease shall include other genders, the singular shall include the plural, and the plural shall include the singular, whenever and as often as may be appropriate. 15.12 GOVERNING LAW. This Lease shall be governed by and construed in accordance with the laws of the State of Texas and all obligations hereunder are performable in Harris County, Texas. 15.13 INABILITY TO PERFORM. Notwithstanding Article 15.18 below, whenever a period of time is herein prescribed for the taking of any action by Landlord or Tenant, Landlord or Tenant, shall not be liable or responsible for, and there shall be excluded from the computation of such period of time, any delays due to strikes, riots, Act of God, shortages of labor or materials, war, governmental laws, regulations or restrictions, or any other cause whatsoever beyond the control of Landlord or Tenant, and such nonperformance or delay in performance by Landlord shall not constitute a breach or default by Landlord under this Lease nor give rise to any claim against Landlord for damages or constitute a total or partial eviction, constructive or otherwise. 15.14 USE OF NAME. Tenant shall not, except to designate Tenant's business address (and then only in a conventional manner and without emphasis or display) use the name or mark Gemini for any 16 purpose whatsoever. Spacehab, at Tenant's expense, shall be the highlighted name on all building signs including current "Tombstone." 15.15 BROKER. Tenant represents and warrants that Tenant has dealt with, and only with Lisa Cole-Gross as broker(s) in connection with this Lease and that, insofar as Tenant knows, no other broker(s) negotiated this Lease or are entitled to any commission in connection herewith. Landlord shall pay such broker its commission of 4% of the total rent relating to this Lease equaling $37,719.49. Payment shall be made upon execution of lease document, and payment of rent. Tenant shall indemnify and hold harmless Landlord from and against all claims (and costs of defending against and investigating such claims) of any other broker(s) or similar parties claiming under Tenant in connection with this Lease. 15.16 MEMORANDUM OF LEASE. Without the prior written consent of Landlord, which may not be unreasonably withheld, Tenant shall not record this Lease or a memorandum or other instrument with respect to this Lease. 15.17 ENTIRE AGREEMENT. This Lease, including all Exhibits attached hereto (which Exhibits are hereby incorporated herein and shall constitute a portion hereof), contains the entire agreement between Landlord and Tenant with respect to the subject matter hereof. Tenant hereby acknowledges and agrees that neither Landlord nor Landlord's agents or representatives have made any representations, warranties, or promises with respect to the Project, the Premises, Landlord's services, or any other matter or thing except as herein expressly set forth, and no rights, easements, or licenses are acquired by Tenant by implication or otherwise except as expressly set forth in the provisions of this Lease. 15.18 TIME OF ESSENCE. Time is of the essence of this Lease and each and all of its provisions in which performance is a factor. 15.19 PARKING. Landlord hereby reserves the right to make, modify and enforce rules and regulations relating to the parking of cars, and Tenant will abide by such rules and regulations, and will ensure the compliance with such rules by its employees, agents, guests and invitees. Landlord further agrees to designate the prior Barrios parking places for Tenant's exclusive use. Tenant shall pay, or cause to be paid, before delinquency, any and all taxes levied or assessed and which become payable during the term hereof upon all of Tenant's leasehold improvements, equipment, furniture, fixtures and personal property located in the Premises except that which has been paid for by Landlord or is the standard of the Building. 17 IN WITNESS THEREOF, Landlord and Tenant have here unto executed this Lease as of the day and year first above written. LANDLORD TENANT PUGET OF TEXAS INC., SPACEHAB, INC. a Texas corporation a Washington corporation By: /s/R. Blume BY: /s/John M. Lounge ----------------- -------------------- Title: President/CEO Title: Vice-President/GM ----------------- STATE OF WASHINGTON ) ) THURSTON COUNTY ) I certify that I know or have satisfactory evidence that Robert L. Blume is the person who appeared before me, and said person acknowledged that he signed this instrument, on oath stated that he was authorized to execute the instrument and acknowledged it as the President/C of Puget of Texas, Inc., a Texas corporation to be thee and voluntary act of such party for the uses and purposes mentioned in the instrument. Dated: 2/4/98 Sandra Ellen Burnes ---------------------------- Notary Public in and for the State of Washington Residing at Olympia ---------------- My Commission expires: 11/19/99 -------- STATE OF TEXAS ) ) COUNTY OF Harris ) This instrument was acknowledged before me on the 29th day of January, 1998, by John Lounge, of SPACEHAB, a _________________________ corporation, on behalf of said corporation. My commission expires: 8-23-98 /S/Ann Houston ---------------------------- Notary Public in and for the State of Texas S/Ann Houston ------------------------ (Printed Name of Notary) 18 DIAGRAM FLOOR PLAN LAYOUT 21 19 EXHIBIT B 1. Landlord grants Tenant a two 12) year option to renew at the then prevailing rate, to be exercised in writing, no less than six (6) months prior to expiration date. 2. Tenant will retain a firm expansion option on any and all then available unencumbered space on the third floor of the building. Should Tenant desire to expand into such areas, Tenant will give Landlord thirty (30) days written notice of its intention to expand. The terms of the expansion space shall be the same terms and conditions of the master lease. 3. Tenant hereby agrees to indemnify and hold Landlord and its agents, successors and assigns harmless against all injury, loss, costs, expenses, claims and damages to any person or property arising from Tenant's negligence or misconduct. 4. Tenant accepts space in an "As Is" condition. 5. Spacehab shall assume Barrios' primary identity to the building. 20 EXHIBIT C BUILDING RULES AND REGULATIONS 1. Directories will be placed by Lessor, at its own expense, in conspicuous places in the Building. No other directories shall be permitted unless previously consented to by Lessor in writing. 2. Lessee will refer all contractors, contractor's representatives, and installation technicians, rendering any service to Lessee, to Lessor for Lessor's supervision, approval and control before performance of any contractual service. This provision shall apply to all work performed in the Building including installations of telephones, telegraph equipment, electrical devices and attachments, and installations of any nature affecting floors, walls, woodwork, trim, windows, ceilings, equipment or any other physical portion of the Building. 3. Movement in or out of the Building of furniture or office equipment, or dispatch or receipt by Lessee of any merchandise or materials which require use of elevators or stairways, or movement through Building entrances or lobby shall be restricted to hours designated by Lessor. All such movement shall be under supervision of Lessor and in the manner agreed between Lessee and Lessor by prearrangement before performance, subject to Lessor's decision and control as to the time, method and routing of movement and as to limitations imposed for safety or other concerns which may prohibit any article, equipment or any other item from being brought into the Building. Lessee is to assume all risk as to damage to articles moved and injury to persons or public engaged or not engaged in such movement, including equipment, property and personnel of Lessor if damaged or injured as a result of acts in connection with carrying out services for Lessee, from time of entering property to completion of work, and Lessor shall not be liable for acts of any person engaged in or any damage or loss to any of said property or persons resulting from any act in connection with such service performed for Lessee. 4. No signs, advertisements or notices shall be painted or allowed on or to any window(s) or door(s), or other parts of the Building, except of color, size and style and in such places, as shall be first approved in writing by Lessor. No nails, hooks or screws shall be driven or inserted in any part of the Building, except by the Building maintenance personnel, nor shall any part be defaced by Lessee. All signs will be contracted for by Lessor at the rate fixed by Lessor from time to time, and Lessee will be billed and pay for such service accordingly. 5. No portion of Lessee's area or any other part of the Building shall at any time be used or occupied as sleeping or lodging quarters. 6. Lessee shall not place, install or operate in the Premises or in any part of the Building, any engine or machinery, or maintain, use or keep any inflammable, explosive, or hazardous material without the prior written consent of Lessor. 7. No birds or animals shall be brought into or kept in or about the Building (except seeing eye dogs for the handicapped). 8. Employees of Lessor shall not receive or carry messages for or to Lessee or other persons, nor contract with or render free or paid services to Lessee's agents, employees, or invitees. 9. Lessor will not permit entrance to Lessee's office(s) by use of pass keys controlled by Lessor to any person at any time without written 21 permission by Lessee, except employees, contractors, or service personnel directly supervised by Lessor. 10. The entries, passages, doors, elevators, elevator doors, hallways or stairways shall not be blocked or obstructed, no rubbish, litter, trash or material of any nature shall be placed, emptied or thrown into these areas and such areas shall not be used at any time except for ingress or egress by Lessee, Lessee's agents, employees, invitees or visitors to or from the Premises. 11. Plumbing fixtures and appliances shall be used only for purposes for which constructed, and no sweepings, rubbish, rags or other unsuitable material shall be thrown or placed therein. Damage resulting to any such fixtures or appliances from misuse by Lessee shall be repaired and/or replaced at Lessee's sole cost and expense, and Lessor shall not in any case be responsible therefor. 12. Lessee shall not do, or permit anything to be done in or about the Building, or bring or keep anything therein, that will in any way increase the rate of fire or other insurance on the Building or on property kept therein, or obstruct or interfere with the right of, or otherwise injure or annoy other tenants, or do anything in conflict with the valid pertinent laws, rules or regulations of any governmental authority. 13. The Lessor desires to maintain the highest standards of environmental comfort and convenience for the tenantry. It will be appreciated if any undesirable conditions or lacks of courtesy or attention are reported directly to the management. 14. The work of the janitor or cleaning personnel shall not be hindered by Lessee after 5:30 p.m. Windows, doors and fixtures may be cleaned at any time. Lessee shall provide adequate waste and rubbish receptacles, cabinets, book cases, map cases, etc. necessary to prevent unreasonable hardship to Lessor in discharging its obligation regarding cleaning service. 15. Lessor shall have the right to determine and prescribe the weight and proper position of any unusually heavy equipment including safes, large files, etc. that are to be placed in the Building, and only those which in the opinion of Lessor might not with reasonable probability do damage to the floors, structure and or freight elevator may be moved into said Building. Any damage occasioned in connection with the moving or installing of such aforementioned articles in said Building or the existence of same in said Building shall be paid for by Lessee, unless otherwise covered by insurance. 16. Lessor shall have the right to prohibit the use of the name of the Building or any other publicity by Lessee which in Lessor's opinion tends to impair the reputation of the Building or its desirability for the executive offices of Lessor or of other lessees, and, upon written notice from Lessor, Lessee will refrain from or discontinue such publicity. 17. The leased Premises shall not be used for lodging, sleeping or cooking or any immoral or illegal purpose or for any purpose that will damage the Premises or the reputation thereof, or for any purpose other than that specified in the Lease covering the Premises. - 18. Lessee and its employees shall at all times during the term of the Lease park in the parking area located adjacent to the Building or in the undesignated parking spaces contiguous to the parking area at the rear of the Building. At no time shall Lessee and its employees park in the parking area located at the front of the Building unless specific provisions in the Lease allow for designated parking spaces to the Lessee. Should Lessee or its employees not abide by this Building rule and regulation, Lessor shall tow Lessee's or its employees vehicles at Lessee's or its employees sole expense. 22 19. Lessee and its employees shall provide Lessor with automobile license plate numbers. Should said automobile license plate numbers change, Lessee and its employees shall provide Lessor with updated information. the Harris County Official Public Records of Real Property and being the Northwest corner of this tract; THENCE South 66 deg. 46 min. 00 sec. East, 55.50 feet to a 5/8 inch iron rod found for a corner in the South line of said 3.7381 acres of land and being a corner in the North line of this tract; THENCE South 23 deg. 14 min. 00 sec. West, 186.18 feet (called 186.19 feet) to an "X" cut in concrete found for the most Southerly Southwest corner of said 3.7381 acres of land and being a corner in the North line of this tract; THENCE South 66 deg. 46 min. 00 sec. East, 301.16 feet to a 5/8 inch iron rod found for the Southeast corner of said 3.7381 acres of land and being the Northeast corner of this tract and also being in the West right-of-way line of Gemini Avenue, based on 80 feet in width; THENCE 32.52 feet, with the arc of a curve to the right in the West right-of-way line of said Gemini Avenue whose chord bears South 22 deg. 39 min. 00 sec. West, 32.52 feet and having a central angle of 01 deg. 00 min. 00 sec. and a radius of 1,597.02 feet, to a 5/8 inch iron rod found for the end of the curve; THENCE South 23 deg. 14 min. 00 sec. West, 492.78 feet, with the West right-of-way line of said Gemini Avenue, to an "X" cut in concrete found for the most Northerly East corner of said 0.8259 acre tract and being the Southeast corner of this tract; THENCE North 66 deg. 46 min. 00 sec. West, 56.00 feet to an "X" cut in concrete found for a corner in the North line of said 0.8259 acre tract, and being a corner in the South line of this tract; THENCE North 23 deg. 14 min. 00 sec. East, 87.50 feet to an "X" cut in concrete found for the most Easterly North corner of said 0.8259 acre tract and being a corner in the South line of this tract; THENCE North 66 deg. 46 min. 00 sec. West, 230.00 feet to an "X" cut in concrete found for the most Westerly North corner of said 0.8259 acre tract and being a corner in the South line of this tract; THENCE South 23 deg. 14 min. 00 sec. West, 57.00 feet to an "X" cut in concrete found for a corner in the North line of said 0.8259 acre tract, and being a corner in the South line of this tract; THENCE North 66 deg. 46 min. 00 sec. West, 56.00 feet to an "X" cut in concrete found for a corner in the North line of said 0.8259 acre tract, and being a corner in the South line of this tract; THENCE South 23 deg. 14 min. 00 sec. West, 30.50 feet to an "X" cut in concrete found for a corner in the North line of said 0.8259 acre tract, and being a corner in the South line of this tract. THENCE North 66 deg. 46 min. 00 sec. West, 68.00 feet to the PLACE OF BEGINNING and containing 4.517 acres (196,761 square feet) of land. EX-10.82 9 SHB98006 1 Exhibit 10.82 COST PLUS INCENTIVE CONTRACT NUMBER SHB 98006 7/06/98 FOR INTEGRATED CARGO CARRIER (ICC) INTEGRATION AND OPERATION (I&O) SUPPORT BETWEEN DAIMLER-BENZ AEROSPACE AG RAUMFAHRT-INFRASTRUKTUR POSTFACH 10 59 09 28059 BREMEN AND SPACEHAB, INCORPORATED 1595 SPRING HILL ROAD SUITE 360 VIENNA, VIRIGINIA 22182 2 TABLE OF CONTENTS Article 1 - Entire Agreement...............................................1 Article 2 - Definitions....................................................1 Article 3 - Scope of Work..................................................1 Article 4 - Period of Performance..........................................2 Article 5 - Contract Amount................................................2 Article 6 - Payment........................................................3 Article 7 - Limitation of Funds............................................4 Article 8 - Supplies/Services and Delivery Schedule........................4 Article 9 - Title and Delivery.............................................5 Article 10 - Packaging and Marking..........................................5 Article 11 - Inspection and Acceptance......................................5 Article 12 - Place of Performance...........................................5 Article 13 - Items, Equipment, Property, Services to be Furnished by SPACEHAB, Inc. And/or the Government on a "No Charge" Basis...................5 Article 14 - Exchange of Technical Information..............................6 Article 15 - Excusable Delays...............................................7 Article 16 - Changes........................................................7 Article 17 - Amendments.....................................................8 Article 18 - Stop Work Orders...............................................8 Article 19 - Notices........................................................8 Article 20 - Key Personnel..................................................9 Article 21 - Termination...................................................10 Article 22 - Governing Law.................................................10 Article 23 - Arbitration/Disputes..........................................10 Article 24 - Audit.........................................................11 Article 25 - Indemnity Against Patent Infringement.........................11 Article 26 - Limitation of Liability.......................................11 Article 27 - Insurance and Indemnification.................................11 Article 28 - DASA Employee Injury..........................................11 Article 29 - Warranty......................................................12 Article 30 - Relationship of Parties.......................................13 Article 31 - Manned Space Flight Item......................................13 i 3 Article 32 - Order of Precedence...........................................13 Article 33 - Technical Data................................................13 Article 34 - Intellectual Property Rights..................................14 Exhibit A: Statement of Work (SOW) for the SPACEHAB Integrated Cargo Carrier (ICC) Integration and Operation Exhibit B: SPACEHAB Furnished Equipment (SFE) ii 4 THIS CONTRACT is by and between SPACEHAB, Inc. with an address at 1595 Spring Hill Road, Suite 360, Vienna, Virginia 22182, (hereinafter referred to as "SPACEHAB, Inc." or "SHI") and Daimler-Benz Aerospace AG, Raumfahrt-Infrastruktur, Postfach 10 59 09, 28059 Bremen (hereinafter referred to as "DASA"). The parties hereby agree as follows: Article 1 - Entire Agreement This Contract, all exhibits and other documents incorporated herein by reference, whether or not attached hereto, constitute the complete and exclusive statement of the Contract between the parties hereto. This Contract supersedes any previous understanding or agreement between SHI and DASA (oral or written) with respect to the subject matter hereof. Further, this Contract constitutes a definitization of Letter Contract SHB98006 dated 17 April 1998. Article 2 - Definitions A. The term "DASA" shall mean Daimler-Benz Aerospace AG - Space Infrastructure - . B. The terms "General Agreement," "Basic Agreement," "Basic Terms and Conditions," "Agreement" and "Contract" shall mean this Contract and shall be deemed to include all exhibits, specifications, drawings, or other documents incorporated herein by reference. Article 3 - Scope of Work A. Mission STS-96 DASA is the prime Contractor responsible for performance of all work set forth in this Contract, including work to be performed by any subcontractor. DASA shall perform the work identified in Exhibit A, "SPACEHAB Integrated Cargo Carrier (ICC) Integration and Operations Contract Statement of Work (SOW)" as far as relevant for STS-96, enclosed herein and made a part hereof. B. Future Missions In accordance with the Statement of Work requirements herein, it is intended that DASA will under separate contracts perform the Integration and Operations of up to nine additional option missions of the SPACEHAB ICC aboard the Space Shuttle through the year 2003. These options may include active payloads, as well as I&O for a deployed version of the Unpressurized Cargo Pallet (UCP) for operations onboard the International Space Station (ISS). DASA's role as preferred provider of ICC I&O services for future missions is dependent on NASA approval and satisfactory performance of the I&O task for the mission STS 96. 1 5 Article 4 - Period of Performance DASA shall perform the work called for under this Contract in accordance with the agreed to Statement of Work as specified in Article 3 herein, including preparation and submission of all reports, during the period of performance beginning 11 February 1998, and continuing through 30 June 1999, and as may be extended by mutual agreement. Article 5 - Contract Amount A. Mission STS-96 1. General. This is a Cost Plus Incentive Contract. The following estimated cost and nominal fee is established for the effort required by the Contract for services as specified in Statement of Work defined in Article 3.A. above: *Total Cost: $ 2,117,765 Nominal Fee: $ 168,816 Total Contract Price: $ 2,286,581
2. Cost and Nominal Fee: The Cost and Nominal Fee of 10% specified in section 1. above are subject to adjustment if the contract is modified in accordance with Article 16 below. The *Total Cost includes an amount of $249,608 for travel expenses plus 5% overhead. Dasa will charge only economy class for travel. Also included is an amount of $180,000 for services provided by ASI. This amount includes a fixed fee and is not subject to the incentive scheme. Dasa does not charge overhead or profit on this amount. 3. Incentive Scheme. If the Actual Cost incurred under this contract is higher (overrun) or lower (under-run) than the Total Cost as agreed in accordance with section 1 and 2 here above, then the Seller shares the cost of any overrun or under-run as follows: a. In the case of a cost overrun, the Seller shall get reimbursement of only fifty (50) percent of the cost above Total Cost until the nominal fee is reduced to an actual fee of two (2) percent of the Total Cost. In case of a cost overrun above this limit, the Seller is entitled to full reimbursement of the cost for any additional effort but with no fee. b. In the case of a cost under-run, the Seller is entitled to an additional fee representing fifty (50) percent of the difference between Actual Cost incurred and Total Cost as agreed until the nominal fee is increased up to sixteen (16) percent of the Total Cost. 4. Fees Payable. The Buyer will pay the nominal fee of ten (10) percent based on the monthly invoices of Seller, except for travel cost and ASI activities, until the amount of Total Cost is reached or the contract work completed with cost under-run. Any adjustment of the fee in accordance with the incentive schedule (see section 3. above) will be made thereafter. 2 6 B. Future Missions. For future missions, the contract price will be determined as follows: 1. In case the complexity of the integration & operations task for an executed option mission is the same as for the STS-96 mission, and, similar to the STS-96 mission, the executed option mission is the only DASA ICC integration activity on-going during the period of performance, the same contract price, excluding any costs and fees allocated to process development, will apply. 2. In case an option mission is added which results in overlapping of integration schedules and therefore sharing of fixed costs between mission integration and operations efforts, the contract price for the additional mission will be reduced accordingly. 3. In case the complexity of the integration of operations task for an executed option mission is increased, the additional required effort will be agreed between Buyer and Seller and the contract price will be increased accordingly. 4. In any case, an adjustment will be made to the reference price of mission STS-96 which reflects the rate and overhead structure of DASA valid for the period of performance of the I&O task for the respective mission. 5. The incentive scheme agreed for mission STS-96 will be valid also for the future missions. Article 6 - Payment A. DASA shall submit invoices monthly for the payment of actual costs incurred plus the Nominal Fee of 10%. Invoices shall segregate costs into the following categories: Sustaining - Labor - Material and Sub-contracted Services - Travel Mission-unique (for each individual mission) - Labor - Material and Sub-contracted Services - Travel Process Development - Labor - Capital Equipment Such invoices shall be submitted to SHI at: SPACEHAB, Inc. 1595 Spring Hill Road, Suite 360 Vienna, VA 22182 3 7 Payment will be made by or on behalf of SPACEHAB, Inc. to: Exhibit B - Wire Transfer Instructions Account of Daimler Benz Aerospace-RI Account No. 1435264741 At Bremer Landesbank BLZ 290 500 00 Such invoices shall be due and payable by SHI, 30 days after receipt of an invoice. If any such invoice remains unpaid 45 days after receipt of such invoice, DASA shall have the right to stop work under this Contract. If such invoice continues to remain unpaid 60 days after receipt of such invoice, DASA may at its option, consider SHI to have breached this Contract and may pursue remedies as provided by law. Article 7 - Limitation of Funds A. The sum of $ 2,286,581 is presently available for payment and is allotted to this contract covering the period of performance through 30 June 1999. B. DASA agrees to use reasonable efforts to perform, or have performed, the work on this contract up to the point at which the total amount paid and payable by SHI under the contract approximates but does not exceed the amount specified in paragraph (A). Unless otherwise agreed in writing, SHI shall not be obligated to reimburse DASA for costs incurred in excess of the total amount allotted by SHI to this contract during the stated period of performance. C. Upon expenditure of 85% of allotted funds set forth in paragraph (A), DASA shall notify SHI in writing as to the estimated amount of additional funds required for the timely performance of the contract. Such notice shall specify any additional funds and period of performance required. D. If, after the notification called for in Paragraph (C) above, additional funds are not allotted to this contract, DASA may request that this contract be terminated, in accordance with the provisions of the Terminations Clause of this contract, and SHI shall comply. E. DASA is not obligated to continue performance under this contract (including actions under the Termination clause of this contract) or otherwise incur costs, which when added to the applicable fee would be in excess of the amount then allotted to the contract by SHI until SHI notifies DASA in writing that the amount allotted has been increased. Article 8 - Supplies/Services and Delivery Schedule A. The scope of work to be performed under this Contract shall include, the provision of all labor, materials, services, and equipment necessary to perform the work as set forth in Exhibit A, SPACEHAB Integrated Cargo Carrier Integration and Operations Contract Statement of Work. B. In addition to invoicing, the Seller shall submit a cost compliance report each month describing any obligations incurred during the month prior and segregating those obligations into cost categories identical to those appearing on invoices. In order to provide timely reporting of actual expenditures, the cost compliance report may be manual and unofficial. Any significant discrepancies between cost compliance reports and actual invoices should be explained either on the invoice when billed, or on the cost compliance report for the month corresponding to the invoice in which the discrepancy becomes apparent. 4 8 Significant discrepancies between the manual cost compliance report and any request for payment must be clarified before the payment will be issued. Along with or in addition to the cost compliance report, Seller shall submit each month to the SPACEHAB project manager a name-list of those persons who performed chargeable work to this contract in the month prior. The list shall include each individual's name, phone number and task or function. Article 9 - Title and Delivery The point of delivery for any hardware required shall be Titusville, Florida USA. The point of delivery for any data required shall be SPACEHAB, Inc., Vienna, VA. Article 10 - Packaging and Marking Packaging and marking for shipment of all items ordered hereunder shall be in accordance with good commercial practice, and adequate to ensure both acceptance by common carrier and safe transportation at the most economical rate(s). Article 11 - Inspection and Acceptance The place of final inspection and acceptance for the services and deliverable hardware called for under this Contract shall be SHI's facility at Titusville, Florida, or other designated place(s) of performance. The place of inspection and acceptance of all deliverable reports and documentation shall be at SHI, Vienna, VA with copy to SHI Houston, Texas and SHI Cape Canaveral, FL as specified by SHI. Article 12 - Place of Performance DASA shall perform the work under this contract at its facility located in Bremen, Germany, at SHI's facility located in Houston, Texas or Titusville, Florida, and at any other locations within the USA or Germany as may be required. Article 13 - Items, Equipment, Property, Services to be Furnished by SPACEHAB, Inc. and/or the Government on a "No Charge" Basis A. SHI and/or the Government shall furnish to DASA, for use in connection with and under the terms of this contract on a "no-charge" basis, the SHI and/or Government owned equipment, property, items, services, etc. which are suitable for the intended use. SPACEHAB Furnished Equipment (SFE) to be provided is identified in Exhibit B. B. Out of tolerance conditions, inadequacies, and delivery delays in SHI and/or Government supplied items identified herein will be the basis for a DASA Contract Change proposal and subsequent Contract amendment reflecting the cost, fee, schedule, and technical impact of defective or late delivery of SHI and/or Government supplied items. 5 9 C. The applicability of NASA FAR 52.245-5 Government Property is agreed to apply to Government furnished or owned equipment only and does not apply to purchases under this Contract since it is understood that title to all items provided under this Contract would vest with SPACEHAB, Inc. D. SPACEHAB Furnished Equipment as identified in Exhibit B will include the following information: - Functional capabilities - Interface definition - Environmental constraints - Mechanical characteristics (dimensions, weight, c.g., etc...) - Electrical power requirements (peak, start-up/in-rush, profile, ...) - Special requirements (commanding, downlink,...) - Verification data (including safety data) - Operations requirements and procedures Maintenance/repair of SFE that was designed and built by SHI will be the responsibility of SHI. DASA shall be responsible to report hardware failures immediately to SHI via Material Review Record (MRR). To do this, DASA will perform trouble shooting to locate problem to, but not within, the SFE component. DASA support to SHI for trouble shooting within the SFE component and shipping or repairing the component will be authorized by task directive and where necessary funded under a contract change. DASA shall maintain configuration control of the SFE. At turnover to DASA, SFE hardware and corresponding documentation shall be identified by part number including revision level (and serial number when appropriate). Documentation shall be placed under DASA documentation control. Changes/revisions post turnover (to DASA) shall be accompanied by the appropriate revised documentation. Article 14 - Exchange of Technical Information During the term of this Contract, SHI and DASA, to the extent of their right to do so, agree to exchange all such technical and management information as may reasonably be required for each to perform its obligations hereunder. To the extent that proprietary information of either party is disclosed, such information or data which is (i) submitted in writing, must be designated by an appropriate stamp, marking or legend thereon to be of proprietary or confidential nature, or (ii) orally submitted, must be identified as proprietary or confidential prior to disclosure and the disclosing party notifies the receiving party, in writing, specifically identifying any such proprietary or confidential information so orally submitted within thirty days after such oral submission. Notwithstanding termination or expiration of this Contract, each party will keep in confidence and prevent the disclosure of all such proprietary information and data, whether technical or commercial, to any third party. Neither party shall be liable for disclosure of any such proprietary information or data, if such information: A. Was in the public domain at the time it was disclosed, or later becomes part of the public domain other than throughout the action of the party receiving it; or B. Was known to the party receiving it at the time of disclosure; or C. Is disclosed with the prior written approval of the other party; or 6 10 D. Is disclosed by the party providing the same, to others, on a non-restricted basis; or E. Is disclosed inadvertently despite the exercise of the same degree of care that the receiving party takes to preserve or safeguard its own proprietary information; or F. Becomes known to the receiving party from a source other than the disclosing party without breach of this Section by the receiving party; or G. Is disclosed one (1) year after expiration or termination of this Contract; or H. Is disclosed to a government agency for certification or export license purposes, taking all reasonable precautions to prevent further disclosure by such agency. Article 15 - Excusable Delays Except for default of subcontractors at any tier, either party shall not be in default because of any failure to perform this Contract under its terms if the failure arises from causes beyond the control and without the fault or negligence of DASA. Examples of these causes include but are not limited to are (1) acts of God or of the public enemy, (2) acts of Government in either its sovereign or contractual capacity, (3) fires, (4) floods, (5) epidemics, (6) quarantine restrictions, (7) strikes, (8) freight embargoes, and (9) unusually severe weather. In each instance, the failure to perform must be beyond the control and without the fault or negligence of DASA. "Default" includes failure to make progress in the work so as to endanger performance. DASA shall not be in default, if the failure to perform is caused by the failure of a subcontractor at any tier to perform or make progress, and if the cause of the failure was beyond the control of both DASA and subcontractor, and without fault or negligence of either, unless (1) DASA knew of other sources to obtain the subcontracted supplies or services from to meet schedule; (2) SHI ordered DASA in writing to purchase these supplies or services from the other source; and (3) DASA failed to comply reasonably with this order. If SHI determined that any failure to perform results from one or more of the causes above, the delivery schedule shall be revised, subject to the rights of SHI under the Termination Clause of this Contract. Article 16 - Changes A. Wherever in the SOW an activity is specified "as required", "as necessary" or "if required", the amount of work actually to be performed will be agreed between the SHI and Dasa-RI mission manager on a case by case basis. If the amount of work actually to be performed exceeds the effort allocated to that activity in the staffing profile, a formal change of the contract is required in accordance with the procedure agreed here below. B. SHI may at any time, by written order, and with such concurrence to not be unreasonably withheld from DASA, make changes within the general scope of this Contract in any one or more of the following: (1) Description of services to be performed. (2) Time of performance (i.e., hours of the day, days of the week, etc.). 7 11 (3) Place of performance of the services. (4) Drawings, designs, or specifications. (5) Method of shipment or packing of supplies. (6) Place of delivery. (7) Types and amounts of SHI and/or Government-Furnished Property to be provided. C. If any such change causes an increase or decrease in the estimated cost of, or the time required for, performance of any part of the work under this contract, whether or not changed by the order, or otherwise affects any other terms and conditions of this contract, SHI shall make an equitable adjustment in the (1) estimated cost, delivery or completion schedule, or both; (2) amount of fee; and (3) other affected terms and shall modify the contract accordingly. D. DASA shall assert its right to an adjustment under this clause within 60 days from the date of receipt of the written order. However, if SHI decides that the facts justify it, SHI may receive and act upon a proposal submitted before final payment of the contract. E. Failure to agree to any adjustment shall be a dispute under the Disputes Clause. However, nothing in this clause shall excuse DASA from proceeding with the contract as changed. F. Notwithstanding the terms and conditions of paragraphs (a) and (b) above, the estimated cost of this contract and, if this contract is incrementally funded, the funds allotted for the performance of this contract, shall not be increased or considered to be increased except by specific written modification of the contract indicating the new contract estimated cost and, if this contract is incrementally funded, the new amount allotted to the contract. Until this modification is made, DASA shall not be obligated to continue performance or incur costs beyond the point established in the Limitation of Funds Clause of this Contract. Article 17 - Amendments Neither this Contract, nor any term or condition thereof, shall be amended or changed in any manner except by an instrument in writing hereto, executed by both parties acting through their duly authorized representatives. Article 18 - Stop Work Orders SHI may, at any time, by written order to DASA, require DASA to stop all, or any part, of the work called for by this contract for a period of up to 90 days after the order is delivered to DASA, and for any further period to which the parties may agree. The order shall be specifically identified as a stop-work order issued under this clause. Upon receipt of the order, DASA shall immediately comply with its terms and take all reasonable steps to minimize the incurrence of costs allocable to the work covered by the order during the period of work stoppage. 8 12 Article 19 - Notices A. Except as herein specifically provided otherwise, all notices, reports, and other communications hereunder shall be given in writing either by personal delivery, by first class mail, or by electronic transmission, addressed to the respective parties as specified herein below. B. The date upon which any such communication is personally delivered or, if such communication is transmitted by mail or by electronic transmission, the date upon which it is received by the addressee, shall be deemed to be the effective date of such communication. C. Each party shall promptly advise the other in the event of any change in their respective addresses. D. The SHI personnel authorized to issue written orders, in accordance with the Changes Clause, are W.S. Dawson or Nelda Wilbanks. The SHI personnel authorized to give technical direction are M. E. Bain, or M. Dale Steffey. E. The DASA personnel authorized to accept writtten orders, negotiate changes or sign amendments are: - Holger Voge for contractual matters and - Uwe Pape for technical and programatical matters F. The addresses of SHI and DASA, for the purpose of paragraph A above, are as follows: FOR COMMUNICATION TO SPACEHAB, INC. SPACEHAB, Inc. 1595 Spring Hill Road, Suite 360 Vienna, VA 22182 Attention: Nelda Wilbanks with copies to M.E. Bain. When transmitted by mail: Same as above When transmitted by electronic transmission: Fax Number: (703) 821-3070 FOR COMMUNICATION TO DASA Daimler-Benz Aerospace AG - Space Infrastructure - Postfach 10 59 09 D-28059 Bremen Attention: Holger Voge with copies to Uwe Pape When transmitted by mail: Same as above When transmitted by electronic transmission: Fax Number: (0421) 539-4137
9 13 Article 20 - Key Personnel The personnel listed below are considered essential to the work being performed under this contract. Before removing, replacing, or diverting any of the listed personnel, DASA shall notify SHI in advance, and shall provide rationale including identification and qualifications of candidate replacement, and shall not remove, replace or divert such personnel without SHI's written consent, which shall not be unreasonably withheld. In such event, the list of personnel shall then be amended accordingly. Key Personnel Title/Position - ------------- -------------- H.J. Zachrau Mission Manager M. Ott Bremen Team Lead C. Schepker Mission Analytical Integration and Payload Coordination Article 21 - Termination A. SHI may terminate this Contract at any time by written notice, in whole or in part, if SPACEHAB, in its sole discretion, determines that a termination is in its own best interest. SHI shall terminate by delivering to the Contractor a Notice of Termination specifying the extent of termination and the effective date. B. In the event of a termination, SHI will reimburse DASA for all costs incurred, including applicable fee and termination costs. For purposes of the Termination Clause, incurred costs includes all outstanding commitments not yet paid and for delivery of all hardware, software and services, whether complete or incomplete, identified herein, to SHI. Termination costs are those actual and reasonable costs incurred in terminating the Contract including usual and customary severance pay and other labor costs in the ordinary course of business or as otherwise required by law, storage and protection costs, and costs of settlement and termination of subcontracts. C. SHI may terminate this contract if DASA fails to deliver the goods or perform the services required by this contract within the time specified and any extension thereto granted by SHI. D. The minimum value of the subcontract with ASI is $180,000. In the event that this task, or the entire contract, is terminated by SHI, without default of ASI, DASA will be entitled to the remainder (minimum contract value minus the actual payments to date of termination). Article 22 - Governing Law This agreement shall be governed by and interpreted in accordance with the law of the Commonwealth of Virginia. Article 23 - Arbitration/Disputes Disputes arising out of the interpretation or execution of this contract which cannot be resolved by negotiation shall, at the request of either Party, (after giving 30 days notice to the other Party) be submitted to arbitration. The arbitration tribunal shall sit in Vienna, VA. Disputes shall be finally settled pursuant to the arbitration rules of the International Chamber of Commerce. The parties hereby agree that any arbitration findings hereunder may be enforced in any U.S. Federal Court in Washington, D.C. or 10 14 Virginia and the parties hereby consent to the jurisdiction of such courts for such purpose. The decision to submit a dispute shall not excuse either party from the timely performance of its obligations hereunder which are not the subject matter of the dispute. Further, if the lack of resolution of the matter in dispute will adversely impact the timely completion of preparation for launch activities, DASA and SHI will perform the matter in dispute in the manner determined by SHI, within the framework of this Contract and without prejudice to the final resolution of the matter in dispute. Article 24 - Audit A. DASA will maintain accurate records of labor hours expended, subcontract billings and travel costs incurred by Cost Charge Number. Such records shall be made available for inspection by an independent certified public accountant retained by SHI during normal business hours for a period of three (3) years after completion of this Contract. B. DASA's books, records, documents and other supporting data shall be made available to the independent certified public accountant responsible for auditing DASA on behalf of DASA and ESA (Price Auditing Office of the City of Bremen) for inspection and audit as reasonably required in conjunction with the negotiation of any changes hereunder, including termination claims. C. In case of any dispute, the parties agree to continue Contract performance pending resolution. Article 25 - Indemnity Against Patent Infringement A. DASA shall indemnify SHI against any liabilities or losses which SHI may be required to pay in the case of any actual or alleged infringement of any United States patent or any negotiation or litigation based thereon, with respect to any products purchased pursuant to the terms of this Contract unless such products are made to a specific and detail design furnished by SHI which is not a modification of a DASA design. Such liabilities or losses (i) include: (a) counsel fees, (b) cost of replacing any infringing product with a suitable non-infringing substitute or of otherwise curing any infringement, but (ii) do not include any losses by SHI due to loss of use, at any time, of equipment or component utilizing any of said products which are the subject of any actual infringement. B. With respect to any such actual or alleged patent infringement for which DASA is obligated to indemnify SHI: (i) DASA shall, as soon as practicable, report to SHI promptly an din reasonable written detail, each notice of claim against DASA of patent infringement; and (ii) SHI will notify DASA as soon as practicable after receipt by SHI of appropriate notice of any charge of infringement or commencement of any suit or action for infringement against SHI in either case, DASA shall have the option to (a) conduct negotiations with the party or parties charging infringement or (b) assume, conduct and control the defense of any suit or action of infringement against DASA or SHI. In the event DASA does not pursue either option, then SHI shall have the option to conduct such negotiations and defense without expense or liability to SHI as provided under Paragraph A. above. Article 26 - Limitation of Liability In no event, shall DASA be liable under any legal or equitable theory (including but not limited to contract, tort, negligence, or strict liability) for any incidental or consequential damages, including but not limited to damages for lost profits, lost sales, or loss of use of property. 11 15 Article 27 - Insurance and Indemnification Upon delivery and final acceptance by SHI of an Integrated Cargo Carrier, SHI shall indemnify and save harmless DASA, its subcontractors and any officers, directors, employees, and agents of any of them form any liability and expense on account of loss of damage to the property of third parties (including the US Government) or bodily injury to any persons, including death, caused by or resulting from the use of the goods furnished hereunder and/or arising from the provision of services under this Contract excepting only such loss, damage, or injury caused by the indemnities willful misconduct, and SHI shall defend any suits or other proceedings brought against DASA and its subcontractors and the officers, directors, employees, and agents of any of them on account thereof an shall pay all expenses and satisfy all judgments which may be incurred or rendered against them or any of them in connection therewith. DASA shall give SHI prompt written notice of any claim of such loss, damage, or injury and shall cooperate with SHI and its insurers in every reasonable way in defending against such claim. SHI shall obtain insurance, naming DASA as an additional named insured, against such liabilities to third parties as are referred to in this paragraph. DASA shall indemnify SHI against any liability, loss, claim, and/or proceeding in respect of personal injury to and/or death of any person, or loss or damage to property, arising out of the performance of the Contract; but only if the same is due to the negligent acts or omission of DASA, its employees or agents; or any subcontractor, its employees or agents. Article 28 - DASA Employee Injury DASA shall indemnify and hold harmless SHI, its officers, agents, and employees from any liability, loss or damage they may suffer as a result of death or injury to any DASA employees connected with or related to the performance of Contract work whether or not on SHI's premises, and which results wholly or partly from the negligence of DASA, its officers, agents, or employees. SHI shall indemnify DASA against any liability, loss, claim, and/or proceeding in respect of personal injury to and/or death of any person, or loss or damage to property, arising out of the performance of the Contract; but only if the same is due to the negligent acts or omission of SHI, its employees or agents; or any subcontractor, its employees or agents. Article 29 - Warranty A. DASA hereby warrants to SHI that all deliverables furnished under this contract shall be free from defects in workmanship for a period of one (1) year from the date of their acceptance. The cost of and associated fees for remedies of any defects shall be paid pursuant to the payment provisions of this contract. SHI shall notify DASA in writing, via fax or any equivalent means within 48 hours of any defects found after acceptance of the products. DASA's liability under this clause shall not extend: 1. to defects arising form the misuse of the items after acceptance. 2. to defects in materials, assemblies or other supplies issued by SHI for incorporation therein, provided always that DASA shall have properly exercised its duties as custodian of such issues and shall have incorporated them in accordance with the requirements of the contract. 12 16 B. Where defects in items are remedied by repair under this warranty, the repaired item shall be warranted for the remainder of the unexpired warranty. Where defective items are replace by new ones the full guarantee period stipulated in the Contract shall apply to such replacement items form the date of their acceptance. Article 30 - Relationship of Parties This Contract is not intended by the parties to constitute or create a joint venture, partnership or formal business organization of any kind. The rights and obligations of the parties shall be only those expressly set forth herein. The relationship established by this Contract is exclusively that of seller and buyer. Article 31 - Manned Space Flight Item DASA shall include the following statement in all subcontracts and purchase orders placed by it in support of this Contract, without exception as to amount or subcontractual level: For use in manned space flight; materials, manufacturing, and workmanship of highest quality standards are essential to astronaut safety. If you are able to supply the desired item with a higher quality than that of the items specified or proposed, you are requested to bring this fact to the immediate attention of the purchaser. Article 32 - Order of Precedence In the event of any conflict between Contract and the Statement of Work, the contract shall take precedence. Article 33 - Technical Data All technical data produced and paid for, of whatever type or kind, under this Contract shall be the property of SHI. 13 17 Article 34 - Intellectual Property Rights All worldwide Intellectual Property (IP) rights (including but not limited to patents, copyrights, trademarks, service marks and trade secrets) created and paid for under this contract shall be the sole property of SPACEHAB. DASA-RI agrees to reasonably assist SPACEHAB in securing such rights through patent, copyright and trade name applications in various worldwide jurisdictions. All intellectual property (IP) utilized in the performance of this contract shall remain the exclusive property of the party(s) who had the rights in the IP prior to this contract. IN WITNESS WHEREOF, the parties have caused their duly authorized representative to execute this Contract in duplicate. DAIMLER-BENZ AEROSPACE AG SPACEHAB, INC. - - SPACE INFRASTRUCTURE - By: By: ------------------------------- -------------------------------- Name: U. Pape H. Voge Name: Nelda Wilbanks ------------------------------- -------------------------------- Title: Project Mgr. Contracts Mgr. Title: Contracts Administrator ------------------------------- -------------------------------- Date: 30 June 1998 Date: 30 June 1998 ------------------------------- -------------------------------- 14 18 EXHIBIT B I. SPACEHAB FURNISHED EQUIPMENT (SFE), DATA AND SERVICES 1. SPACEHAB - ASTROTECH Payload Processing Facility - Environmental Controlled Integration Area - Logistics Support by ASTROTECH, customs clearance, transport arrangement, transports - Standard Facility Handling Equipment - Support Personnel assisting in crane operations and facility support tasks - Adequate Storage areas for flight hardware and GSE 2. UCP - Unpressurized Cargo Pallet (UCP) including GSE 3. Keel Yoke Assembly (KYA) including GSE and Transport Container 4. Strela - ICC Mounting Hardware 5. SPACEHAB - OCEANEERING SPACE SYSTEMS TRANSIT CONTAINER (SHOSS-TC) and associated GSE - SHOSS Geometry - Verified Models - Phase II Safety Data* - Payload Mass Properties - Training Mock-up incl. ICC Standard Interface Plates - Phase III Safety Data* - SHOSS Transit Container - SHOSS - TC Attach Hardware 6. Fully operational ICC Transport GSE 15 19 II. GOVERNMENT FURNISHED EQUIPMENT & DATA (GFE) 1. Strela Crane (including operator post, FGB adapter, safety ring, boom and Strela adapter plates) and associated GSE - Structural/Thermal Math Models - Phase II Safety Data* - Design Mass Properties - Design Documentation - Training Mock-up (Strela on adapter plates) - Test Verified Loads Models - Phase III Safety Data* - Strela Flight Hardware - Strela-ICC Mounting Hardware attached to UCP 2. ORU Transfer Device (OTD) and associated GSE - Payload Geometry - Verified Models - Phase II Safety Data* - Training Mock-up incl. Payload-Unique ICC Interface Plates - Phase III Safety Data* - OTD & Transition Plate - Payload-unique ICC Interface Plates 3. EVA Support Equipment/ Trainer - EVA-MSE - ICC-STIPLs (EVAS attach hardware) - Fully configured ICC Training Mock-up (including Cargo Mock-ups) * (ISS formatted data packages) All SFE/GFE is expected to be made available at or before the date(s) specified in the latest agreed to ICC I&O Master Schedule. 16 EX-10.83 10 MODIFICATION NO. 22 TO SHB1014 1 Exhibit 10.83 Letter Contract No. SHB 1014 Modification No. 21 Date: July 22, 1998 To: From: The Boeing Company SPACEHAB, Inc. 499 Boeing Blvd. 1595 Spring Hill Road P. O. Box 24002 Suite 360 Huntsville, AL 35824-6402 Vienna, VA 22182 Attn: Doyle McBride Senior Contracts Administrator Dear Mr. McBride: Letter Contract No. 1014 is hereby amended as follows: 1. Paragraph 1 is deleted in its entirety and replaced with the following: "1. SPACEHAB, Inc. ("SPACEHAB"), hereby commercially contracts with McDonnell Douglas Aerospace - Huntsville (hereinafter referred to as "MDA-Huntsville" or "Seller"), a division of the McDonnell Douglas Corporation, a wholly-owned subsidiary of the Boeing Company, for the following: a. The performance of all integration and operations tasks required to successfully complete 4 SPACEHAB science missions (1 single module mission and 3 double module missions) and 2 SPACEHAB cargo double module missions (Multiple Mission Integration and Operations (MM I/O Tasks)). The definitized contract will include options for 3 additional cargo double module missions that may be executed in accordance with the definitized schedule. For ISS logistics missions, NASA has requested that equipment stowed in soft stowage bags be transferred in the bags to the appropriate location onboard the ISS for stowage. NASA's preferred bag is similar to the Collapsible Transfer Bags (CTB) currently used for Mir resupply missions. SPACEHAB, Inc. (SHI) has agreed to transfer bags (including existing bags, if appropriate) to the ISS and to provide the new CTB-like bags for use on ISS logistics missions. Accordingly, SHI will provide the new bags to Boeing Huntsville for inclusion in the SH inventory in accordance with the provisions for SHI Furnished Equipment 2 Letter Contract No. SHB1014 Modification No. 21 22 July 1998 (SFE) to be included in the new Multiple Mission Integration and Operations Contract (MMIOC). Boeing Huntsville is requested and authorized to modify mission planning for the STS-96 mission to include maximum use of the new bags (half, single, and double MLVE sizes). Assume bags in each size are available in sufficient quantity to meet the optimum packing arrangement. Additionally, the contents of each bag are to be grouped as much as possible, in accordance with their destination location on the ISS. b. Initiation of effort to enhance cargo carrying capability of the SPACEHAB module consistent with capabilities presented to SHI on 28 August 1997 as follows: i) Ceiling stowage system is desired for use on STS-95 (2 bags are required). Use best efforts for partial system capability (2 bags) for use on STS-91. Provide a firm quotation for 1 set of ceiling enhancement hardware within 150 days from the date of Modification 01 to this Letter Agreement and ii) Rack front stowage system (along with ceiling system) is required for use on STS-96. Provide a firm quotation for 3 sets of rack enhancement hardware within 180 days from the date of Modification 01 to this Letter Agreement. c. (i) Stop work on all effort in support of initiation of effort to design, develop, build, and certify a roof-top stowage adapter plate system, as described to SHI on 6 November 1997 as directed by Modification No. 03 dated 19 November 1997 and provide a status of contract change effort through the date of this Modification No. 07. (ii)(a) Develop requirements, preliminary interface definition, and a list of technical questions for the Strella payload. These requirements are to be transmitted to SPACEHAB, Inc. for use in their technical interchange meetings with the Russians. (b) Design, analyze, fabricate, and install the necessary rooftop adaptive structure for the Strella payload on STS-96 as determined based on the above noted requirements and subsequent technical interchange meetings with Boeing, SPACEHAB, Inc., NASA and the Russian Strella payload representatives. Provide a firm quotation for this effort by 3 April 1998. d. Initiation of effort to design, develop, build, and certify the necessary hardware to accommodate the Experiment Water Pump Package in a SPACEHAB double rack. This capability is required for STS-95. Provide a firm quotation with prices for 1, 2, or 3 sets of this within 90 days of the date of Modification 03 to this Letter Agreement. e. Initiation of effort to design, develop, build, and certify new MGSE for the 27.14 inch tunnel as described to SHI on 7 November 1997. This equipment is required to process STS-95. Provide a firm quotation for this 3 Letter Contract No. SHB1014 Modification No. 21 22 July 1998 effort within 90 days of the date of Modification 03 to this Letter Agreement. f. Initiation of the effort to perform the following tasks under WBS 9.1.9.5.2 Flight Systems: (i) 9.1.9.5.2.1 Logistics Double Module Enhancements. This element contains the labor effort necessary to identify, evaluate, and recommend ways to enhance the cargo carrying capability of the Logistics Double Module. (ii) 9.1.9.5.2.2 Research Double Module Enhancements. This element contains the labor effort necessary to identify, evaluate, and recommend ways to enhance the capability of the Research Double module to accommodate new payloads and improve accommodations for existing payloads. (iii) 9.1.9.5.2.3 Integrated Cargo Services. This element contains the labor effort necessary to evaluate future storage/cargo requirements associated with the International Space Station and determine proposed solutions considering all SPACEHAB assets. This element includes studies, evaluations, and support of the new SPACEHAB provided Integrated Cargo Carrier assets. g. Initiation of effort to provide payload optional services for STS-95 including the design and development of a triple mounting plate for BioBox and the design and development of a double mounting plate for MGBX. Provide a firm quotation for this effort within 90 days of this modification. h. Initiation of effort to upgrade the existing engineering prototype SCU unit for use as flight spare on STS-95 and provide a firm quotation for this effort within 90 days of this modification. i. Initiation of effort to perform a GTS Win NT upgrade as proposed in Supplement No. 1. j. Initiation of the effort to perform the following tasks under WBS 9.1.9.5.3 Microgravity and Life Sciences: (i) Microgravity and Life Sciences Payload Assessments. This element contains the effort necessary to identify and characterize potential new internal and external microgravity and life sciences payload customers and requirements for the International Space Station (ISS) and the Space Shuttle Program (SSP). This effort includes experiment integration assessments with respect to safety and unique integration hardware and attendant experiment hardware modifications. Assessments may include development of payload accommodation requirements, performance of payload resource utilization analyses, and development of ROM estimates for unique hardware modifications and integration elements. k. Initiation of the effort to perform the following task under WBS 9.1.9.3.4: 4 Letter Contract No. SHB1014 Modification No. 21 22 July 1998 (i) Procure critical long lead material for the Docking Double Module. This effort includes the procurement of 2 aluminum ingots from Alenia's European supplier to protect the critical path raw material required to produce the DDM FU-5 end ring forgings. The period of performance of this effort is 6 February 1998 through 30 June 1998. The NTE for this effort is $170,000. l. Initiation of effort under WBS 9.1.9.3.1 to support training in Germany for the FAST experiment on STS-95. Labor for training is considered in scope to WBS 9.1.9.2.1. This modification authorizes the travel costs of Boeing personnel. Provide a firm quotation for this effort within 60 days of the date of this modification. The NTE for this effort is $25,000. m. Initiation of effort under WBS 9.1.9.3.1 to perform the additional task of preparing Phase III Flight Safety Data Packages for the SSD-MOMO and APCF experiments. The experimenter organizations will furnish supporting data as requested by Boeing in a timely manner for enabling this activity. Provide a firm quotation for this effort within 60 days of this modification. The NTE for this effort is $15,000. n. Initiation of effort under WBS 9.1.9.3.4 to provide the additional experiment transportation containers required to meet STS-95 requirements. Provide a firm quotation for this effort within 60 days of this modification. The NTE for this effort is $20,000. o. Initiation of effort under WBS 9.1.9.3.4 to upgrade the SPACEHAB crew trainer module assembly at the SPPF. The upgrades are to be in accordance with the plan reviewed with SPACEHAB on 26 March 1997. It is highly desirable that the modifications be completed prior to the STS-95 crew training scheduled in July 1998. Please provide a firm quotation for this effort within 60 days of this modification. The NTE for this effort is $50,000. p. Initiation of effort under WBS 9.1.9.1 to provide 40 new experiment battery packs and 4 chargers. Labor for this effort is considered in scope to WBS 9.1.9.1. This modification authorizes materials and procurement. The new batteries are required to support the STS-95 processing schedule. Please provide a firm quotation for this effort within 60 days of this modification. The NTE for this effort is $50,000. q. Initiate effort under WBS 9.1.9.3.3 to integrate the LeRC Combustion Module (CM) experiment in STS-107. Please provide a firm quotation for this effort within 90 days of this modification. The NTE for this 90 day effort is $100,000. r. Initiate effort under WBS 9.1.9.3.3 to integrate the MSFC Volatile Removal Assembly/Vapor Compression Distillation (VRA/VCD) experiment in STS-107. Please provide a firm quotation for this effort within 90 days of this modification. The NTE for this 90 day effort is $100,000. 5 Letter Contract No. SHB1014 Modification No. 21 22 July 1998 s. Initiate effort under WBS 9.1.9.3.3 to integrate the rack mounted and aft module subfloor pallet mounted ISS ORUs as defined in the baselined STS-96 MRAD. Please provide a firm quotation for this effort within 90 days of this modification. The NTE for this 90 day effort is $100,000. t. Initiate effort to provide all program sustaining labor, travel, materials, vendor services, and other sustaining services under this contract beginning 1 June 1998. Provide a firm quotation for the impact of this modification within 60 days of the date of this modification. u. Initiate effort under WBS 9.1.9.3.4 to upgrade the current SPACEHAB EGSE at the SPPF to enable the system to function past the year 2000. The initial efforts are to include refinement of the EGSE system upgrade concept; definition of physical configuration and cable modification requirements; draft changes to system requirements documentation; and identification and procurement of software development tools. Provide a firm quotation for the EGSE upgrade effort within 90 days of this modification. The NTE for this 90 day effort is $80,000. v. Initiate effort under WBS 9.1.9.3.4 to provide a new tunnel configuration for STS-96. This new configuration results from the addition of existing tunnel segment(s) to move the module further aft in the cargo bay and is intended to eliminate planned ballast and provide additional payload capability to the ICC. Perform detailed engineering assessment of the new tunnel structural compatibility to include stress analysis of struts, trunnions, tunnel cylinder, and rings. Evaluate Orbiter compatibility of tunnel and ICC sharing payload bridges, including assessment of compatibility of the tunnel and ICC fittings with the orbiter latches. Evaluate rotation of 27.51 tunnel segment to disable existing duct/plenums and the addition of drag-on ducts. Determine modifications required, including any structural modifications, outfitting changes, and new MLI sections. Verification of the structural compatibility is required ASAP for use in STS-96 mission planning. Provide a detailed schedule and firm quotation and firm quotation to support the STS-96 mission within 60 days of this modification. The NTE for this 60 day effort is $30,000. w. Initiate effort under WBS 9.1.9.3.2 to support NASDA's BRIC in-module plant growth activities (test planning and test execution) in the SPPF beginning Thursday, June 25 and completing no later than midnight Saturday, June 27, 1998. The NTE for this effort is $11,000. x. Initiation of the effort to perform the following tasks under WBS 9.1.9.5.1 Operations: (i) 9.1.9.5.1.2 Payload Development. This element contains effort necessary to support SHI in the development of new payload customers. This includes identification of potential new customers, development of their requirements and accommodation studies. 6 Letter Contract No. SHB1014 Modification No. 21 22 July 1998 y. Under WBS 9.1.9.2, Mission Recurring, perform STS-107 pre-mission integration efforts as follows: (i) Develop mini-MRAD based on the commercial payloads identified to date. Provide a firm quotation within 90 days. The NTE for this 90 day effort is $50,000. z. Initiate the effort to accommodate Spacelab equipment provided by NASA. This initial effort consists of the following tasks: (i) Coordinate the shipping/receiving of hardware from NASA with SPACEHAB, Inc, NASA-KSC, and NASA REALMS program office; (ii) determine what NASA has delivered to the SPPF by part number and quantity; (iii) Determine if any hardware items are not to be kept by SPACEHAB (returned to NASA or scrapped/sold). Implement return to NASA or scrap as necessary; (iv) Enter the hardware in a tracking database; (v) Place retained hardware in appropriate storage; (vi) Determine documentation required for proper use of retained hardware (ADP, handling/constraints, operations manuals, etc...). Provide a firm quotation for this effort within 60 days of this modification. The NTE for this effort is $15,000. aa. Proceed with the repair of PPRV #1 (s/n 2665-0001-13) and return it to inventory as soon as possible. Provide a firm quotation for this effort within 60 days of this modification. The NTE for this effort is $18,000. bb. Initiate effort to modify the VFEU experiment water loop plumbing to increase the VFEU inlet water temperature to within the range of 10(Degree) - 25(Degree)C. Provide a firm quotation for this effort within 90 days of this modification. The NTE for this total effort is $45,000. cc. Proceed with the effort to perform the tasks under WBS 9.1.9.5.2 Flight Systems for the period 1 July 1998 through 31 June 1999. dd. Initiate effort to provide new tools for two additional RDM cable building workstations. Please provide a firm quotation for this effort within 30 days of this modification. The NTE for this 30 day effort is $18,000." Paragraph 3 is deleted in its entirety and replaced with the following. "3. The maximum amount (including, but not limited to, a reasonable amount for termination costs and for 12 percent fee) for which SPACEHAB shall be liable under this letter contract is $13,769,507.00 for the effort described in Paragraph 1.a; $235,000.00 for the effort described in Paragraph 1.b; $90,000.00 for the effort described in Paragraph 1.c.; $45,000.00 for the effort described in Paragraph 1.d.; $60,000.00 for the effort described in Paragraph 1.e.; $25,000.00 for the effort described in Paragraph 1.f.(i); $100,000.00 for the effort described in Paragraph 1.f.(ii); $630,000.00 for the effort described in Paragraph 1.f.(iii); $45,000 for the effort described in Paragraph 1.g.; $15,000.00 for the effort described in Paragraph 1.h.; $20,700 for the effort described in Paragraph 1.i.; $75,000 for 7 Letter Contract No. SHB1014 Modification No. 21 22 July 1998 the effort described in Paragraph 1.j.(i); $170,000 for the effort described in Paragraph 1.k.; $25,000 for the effort described in Paragraph 1.l; $15,000 for the effort described in Paragraph 1.m; $20,000 for the effort described in Paragraph 1.n.; $50,000 for the effort described in Paragraph 1.o.; $50,000 for the effort described in Paragraph 1.p.; $100,000 for the effort described in Paragraph 1.q.; $100,000 for the effort described in Paragraph 1.r.;$100,000 for the effort described in Paragraph 1.s.; $600,000 for the effort described in Paragraph 1.t.; $80,000 for the effort described in Paragraph 1.u.; $30,000 for the effort described in Paragraph 1.v.; $11,000 for the effort described in Paragraph 1.w.; $225,000 for the effort described in Paragraph 1.x.(i); $50,000 for the effort described in Paragraph 1.y.; $15,000 for the effort described in Paragraph 1.z; $18,000 for the effort described in Paragraph 1.aa; $45,000 for the effort described in Paragraph 1.bb; $155,000 for the effort described in Paragraph 1.cc. and $18,000 for the effort described in Paragraph 1.dd." Except as hereby modified, all conditions of said contract as heretofore modified, remain unchanged and in full force and effect. Contractor is directed to account for costs in such a manner as to allow visibility into the costs of effort authorized in this change order. Please acknowledge receipt of this Change Notice by returning the acknowledgment copy (within l0 days of receipt) signed with date of receipt indicated. - ------------------ ---------------------------------- Nelda Wilbanks McDonnell Douglas Corporation, SPACEHAB, Inc. A Wholly-Owned Subsidiary of The Boeing Company EX-10.84 11 CAPITAL OFFICE PARK LEASE 1 Exhibit 10.84 COMMERCIAL A DIVISION of COMMUNITY REALTY COMPANY, INC. April 24, 1998 VIA CERTIFIED MAIL RETURN RECEIPT REQUESTED Mr. George D. Baker Astrotech Space Operations, Inc. 12510 Prosperity Drive, Suite 100 Silver Spring, Maryland 20904 Dear Mr. Baker: I am pleased to enclose one (1) fully executed original counterpart of the Lease and First Amendment To Lease for approximately 6,250 square feet of office space at Capital Office Park, 6305 Ivy Lane, Suite 520, Greenbelt, Maryland. If I may be of further assistance, please do not hesitate to call. Sincerely, CRC COMMERCIAL Lauren Weiss Assistant Director Commercial Leasing and Sales LW/bjm Enclosures COMMERCIAL LEASING . SALES . PROPERTY MANAGEMENT 6301 IVY LANE . SUITE 400 . GREENBELT, MARYLAND 20770-1407 . 301/441/3434 . FAX: 301/474-2064 2 FIRST AMENDMENT TO LEASE THIS FIRST AMENDMENT TO LEASE is made as of the 23rd day of April, 1998, by and between ELEVENTH SPRINGHILL LAKE ASSOCIATS L.L.L.P., a Maryland limited liability limited partnership ("Landlord", and ASTROTECH SPACE OPERATIONS, INC., a Delaware corporation "Tenant"). RECITALS. A. Pursuant to Lease dated 23rd day of April, 1998 the ("Lease"), Landlord has leased to tenant Suit described (the "demised premises" or the "premises") on the 5th Floor of the building known as Capital Office Park Building III with street address of 6305 Ivy Lane, Greenbelt, Maryland. B. The parties desire hereby to amend the Lease, in order to confirm certain understandings concerning payments for the I costs of Landlord's Work to be performed by Landlord or its contractor pursuant to Section 29 of the Lease. All terms and I phrases in this Amendment shall have the meanings defined for same in the Lease, unless otherwise expressly stated in this Amendment. The provisions of this Amendment shall prevail over contrary hereof contained in the Lease. I NOW, THEREFORE, for $1.00 and other valuable consideration l paid by each party to the other, the receipt and sufficiency of | which are acknowledged, and intending to be legally bound, the/parties hereby agree that the Lease is amended as follows: 1. Payments for Landlord's Work. With respect to the Landlord's Work shown on Exhibit KEY to the Lease, to be performed by Landlord or its contractor pursuant to Lease Section 29(A), the parties agree as follows: (a) Landlord has obtained from its contractor a final bid for the total coats of Landlord's Work shown on Lease Exhibit UK", said total costs being in the amount of $109,913.00 (the "Total CostsH). Landlord and Tenant hereby approve of said Total Costs figure. (b) The amount of the one-time Work Allowance, comprising the portion of the of the Total Costs of Landlord's Work which Landlord has agreed to pay pursuant to Lease Section 29(A), is hereby changed to be up to and including but not exceeding $94,913.00 (the Work Allowance@), instead of the $87,500.00 originally specified in Lease Section 29(A) as constituting the Work Allowance. (c) Accordingly, it is agreed that Tenant is obligated and hereby agrees to pay, as the Tenant's Portion of the Total Costs of Landlord's Work, $15,000 (herein, and for all purposes of the Lease, referred to as the Tenant's Portions). (d) Tenant agrees to pay to Landlord, simultaneously with the execution of this Amendment, the entire aforesaid $15,000 Tenant's Portion of the Total Costs of Landlord's Work; such payment to be made by good check subject to collection payable to the order of Community Realty Company, Inc., Landlord's management agent. Time is of the essence of said payment. 1 3 (e) Landlord will apply the aforesaid $15,000 Work Allowance on account of payment to its contractor of the balance of the Total Costs of Landlord's Work. (f) The $94,913.00 Work Allowance described in Paragraph l(b) of this Amendment supersedes and fully replaces (and is in lieu of) the original $87,500 Work Allowance described in Section 29(A) of the Lease. (2) Cost Work. This Amendment does not modify nor other wise alter or affect Tenant's obligation for payment of all costs of any Additional Work, Change Orders and Cost Work, as required under Section 29 of Lease. (3) Continuing Force. Except as hereby amended, the Lease shall be and remain in full force and effect. This Amendment contains the entire agreements of the parties concerning the matters covered hereby, and cannot be modified except by written instrument executed by Landlord, and Tenant. WITNESS the execution hereof by the parties as of the date first above written. LANDLORD: COMMUNITY RELATY CO., INC. Agent for: ELEVENTH SPRINGHILL LAKE ASSOCIATES L.L.L.P. - ----------------------------- Witness By: (SEAL) ------------------------ President ATTEST: TENANT: - ----------------------------- John B. Satrom ASTROTECH SPACE OPERATIONS INC. By: ---------------------------- Name: -------------------------- Title: ------------------------- 2 4 CAPITAL OFFICE PARK LEASE BETWEEN ELEVENTH SPRINGHILL LAKE ASSOCIATES L.L.L.P. ("LANDLORD") AND ASTROTECH SPACE OPERATIONS, INC. ("TENANT"), SUITE NO. 520 AT 6305 IVY LANE GREENBELT, MARYLAND TABLE OF CONTENTS ARTICLE PAGE 1. Premises; Term; Basic ....................................................1 2. Possessionon..............................................................2 3. Use.......................................................................3 4. Upkeep of Premises........................................................4 5. Assignment and Subletting ................................................5 6. Compliance with Governmental requirement..................................6 7. Alterations...............................................................7 8. Signs and Other Agreements of Tenant......................................8 9. Tenant's Electrical Equipment ............................................9 10. Equipment ...............................................................10 11. Landlord's Access........................................................10 12. Illegal Use..............................................................11 13. Rules and Regulations....................................................11 14. Damage...................................................................11 15. Personal Property .......................................................11 16. Liability................................................................12 17. Public Liability Insurance...............................................13 18. Service..................................................................13 19. Estoppel Certificates....................................................14 20. Bankruptcy...............................................................15 21. Defaults and Remedies....................................................17 22. Damage by Fire or Casualty...............................................18 23. Subordination............................................................20 24. Eminent Domain...........................................................21 5 25. Successors...............................................................22 26. Tenant Holdover..........................................................22 27. Mutual Waiver of Claims..................................................23 28. Tenant Access............................................................23 29. Landlord's Work..........................................................23 30. Pronouns.................................................................25 31. Jury Trial Waiver........................................................25 32. Notices..................................................................26 33. Security Deposit.........................................................26 34. Lien for Rent............................................................26 35. Landlord's Liability.....................................................27 36. Entire Agreement.........................................................27 37. Fire Insurance Increases.................................................27 38. Miscellaneous............................................................28 39. Quiet Enjoyment..........................................................30 40. Automobile Parking Areas.................................................30 41. Lender Requirments.......................................................30 42. Garage Parking ..........................................................31 6 EXHIBIT "A": Drawing showing demised premises (See Section 1 of Lease). EXHIBIT "B": Declaration by Landlord and Tenant as to Date of Delivery and Acceptance of possession of Leased Premises (See Section 2 of Lease). EXHIBIT "C": Rules and Regulations (See Section 13 of Lease). EXHIBIT "D": Tenant Estoppel Certificate (See Section 19 of Lease). EXHIBIT "E": Preliminary Plan for Landlord's Work (See Section 29 of Lease). 7 THIS AGREEMENT OF LEASE made the 23rd day of April, 1998, by and between ELEVENTH SPRINGHILL LAKE 't ASSOCIATES L.L.L.P., a Maryland limited liability limited partnership (hereinafter called "Landlord") and ASTROTECH SPACE OPERATIONS, INC., a corporation organized and existing under the laws of the State of Delaware (hereinafter called "Tenant"). WITNESSETH: 1. Premises; Term; Basic Rental. (a) That Landlord, in consideration of the covenants and agreements herein set forth and the rents herein reserved and agreed to be paid by Tenant, doe" hereby lease and demise unto Tenant, and Tenant does hereby lease and hire as tenant Or the Landlord, at the rental and upon the terms, covenants and conditions herein set forth, the space described as follows: Suite No. 520 on the Fifth Floor, said demised space (hereinafter called the "demised premises" or the "premises" or the Premises), containing an agreed upon area of approximately 6, 250 square feet of rentable floor area and being as outlined on the drawing attached hereto as Exhibit "A" and made a part hereof, in the building known by street address as 6305 Ivy Lane, Greenbelt, Prince George's County, Maryland (herein called the "building" or the "Building"), said building being one of a group of office buildings now known as "Capital Office Park" (which under said name or any change therein is herein called the "Office Park"), for the term of rive (5) years or until such term shall sooner cease and expire as hereinafter provided, commencing on June 1, 1998 (the "Lease Commencement Date") and ending on the 31st day of May, 2003, both dates inclusive. Tenant hereby covenants and agrees to pay as rent during each lease year of the original term of this Lease, a basic annual rental during the respective lease year, payable in equal monthly installments, as set forth in the following table, namely:
LEASE YEAR BASIC ANNUAL RENT BASIC MONTHLY RENT ---------- ----------------- ------------------ 1st $128,124.96 $10,677.08 2nd $131,968.68 $10,997.39 3rd $135,927.72 $11,327.31 4th $140,005.56 $11,667.13 5th $144,205.68 $12,017.14
Upon execution of this Lease, Tenant shall pay to Landlord (in addition to the security deposit described in Section 33 below) the first installment of basic monthly rent in the amount Of $10,677.08, the same to be applied on account of basic monthly rent for the first month Or the term hereof. Each subsequent installment of basic monthly rent, in the applicable amount shown above during a given lease year, shall be due and payable in advance without deduction, setoff or demand on the first (1st) day of each calendar month during the term hereof, commencing for the first such payment on the first day of the second calendar month of the term hereof. All rentals and other amounts payable by Tenant hereunder shall be pro-rated and paid on a per diem bests, for any fraction of a calendar month at the beginning and end of the term hereof, and such pro-rated sums shall be paid by Tenant to Landlord within five (5) days after billed to Tenant. All rentals and other sums payable by Tenant hereunder shall be paid by good check (subject to collection) made payable to the order of: 8 Community Realty Co., Inc. (unless otherwise directed in writing by Landlord), and shall be delivered to Landlord at the office of its management agent, Community Realty Co., Inc. at 6305 Ivy Lane, Suite 210, Greenbelt, Maryland 20770, or at such other address as Landlord may from time to time designate to Tenant in writing. All sums, which Tenant is required to pay to Landlord under this Lease, (which are in addition to the aforesaid basic monthly rent), shall be deemed to be additional rentals payable hereunder. If Tenant is in default in any payments of basic and/or additional rental hereunder more than twice during the term hereof, then in such event Landlord at its option may require that all future payments Of basic and additional rentals and other sums thereafter payable by Tenant be made by certified or cashier's check (in addition to and not in limitation of any other remedies available to Landlord under this Lease). (b) Real Estate Tax and Operating Expense Increases. In addition to the basic monthly rent herein above specified, Tenant shall pay to Landlord as further and additional rental hereunder, the amounts determined as set forth below in this Paragraph l(b). DEFINITIONS. As used in this Lease, the terms listed below shall have the meanings indicated therefor, namely: (1) "Calendar Year" shall mean each consecutive twelve (12) months' period from January 1st through the succeeding December 31st of any year in which this Lease is in force and effect. (2) "Tenant's Proportionate Share" shall be five and 577/1000 of one percent (5.577%), representing the approximate and mutually agreed upon ratio that the rentable area of the demised premises bears to the total rentable area of all space contained in the building. (3) "Taxes" shall mean all taxes, rates and assessments, general and special (including, without limitation, annual benefit charges of Washington Suburban Sanitary Commission), and including also all increases in tax rate and/or in assessed valuation, which are now or at any time(s) hereafter levied, assessed or imposed upon or with respect to the building and all lands upon which the building is erected or which are appurtenant or related to the operation of the building and its fixtures and equipment and other related facilities, and/or upon Landlord's leasehold interest (if applicable) in the said lands, and including also without limitation real estate taxes, personal property taxes and assessments of any and every kind and nature whatsoever, and all unincorporated and other business license and franchise taxes, and any taxes, assessments or other levies which may at any time be imposed and/or collected by any federal, state, county, municipal, quasi-governmental or corporate entity in respect of bus, subway or other public transportation facilities operating in the metropolitan area of the jurisdiction wherein the building is located, and including also any tax assessment or other charges in the nature of sales, use or other tax upon the Landlord, the demised premises, the building, the land and/or the rents payable hereunder (except net income taxes, estate or inheritance taxes Of the Landlord). The phrase Taxes shall also include all costs and expenses including but not limited to accountants' and attorneys' fees and court costs, incurred by Landlord to contest-or appeal Taxes, if Landlord elects to do so. If the system of real estate taxation shall be altered or varied and any new tax or levy shall be levied or imposed on the building and/or land and/or Landlord, in addition to or in 9 substitution for real estate taxes and/or personal property taxes presently levied or imposed on immovables in the State of Maryland, and including also without limitation any taxes on rents, then any such new tax or levy shall be included within the term "Taxes". If any such tax is levied or assessed in such manner that the amount thereof required to be paid by Tenant hereunder in respect of the Tenant's Proportionate Share of the aforesaid Taxes is not ascertainable because such tax relates to more than the demised premises or to more than the rents payable hereunder, then the proportionate share of said items to be paid by Tenant as part of said Taxes shall be determined by Landlord in the Landlord's reasonable discretion. (4) "Operating Expenses" shall mean any and all expenses incurred by Landlord in connection with the operation, maintenance, servicing and repair of the building and its appurtenances. By way of example, but without limitation, Operating Expenses shall include any and all of the following: All building personnel costs including but not limited to salaries, wages, medical, surgical and other fringe benefits and general welfare benefits (including also premiums, coats and expenses for group medical and other types Or health, disability and tire insurance and workmen's compensation insurance) and pension payments, for employees of Landlord engaged in the operation, maintenance, servicing or repair Or the building; and all other direct and indirect costs of engineers, superintendents, watchmen, porters and all other building personnel; payroll taxes; license fees; repairs and maintenance; utility taxes; water and sewer charges; gas (if any); electricity; oil and other fuels; all other utility charges (including also surcharges) of whatever nature; and all premiums, costs and expenses for rent interruption insurance, casualty, liability and other insurance of any kind; accounting and auditing fees in connection with preparation of operating statements; security and access control services and equipment; char and cleaning services including also but not limited to all costs of complying with any present or future federal, state, county and municipal governmental laws, orders or regulations concerning collection, sorting, separation, recycling or removal of trash, garbage, refuse or wastes (collectively herein referred to as "recycling laws"); building and cleaning supplies; uniforms and dry cleaning and laundering; window cleaning; snow removal; repair. Maintenance and cleaning of the sidewalks, driveways, parking facilities, roadways and grounds; service or management contracts with independent contractors; accounting and legal fees; all costs, charges and payments under contracts for services, maintenance, repairs and/or replacements of any kind, including but not limited to chillers, boilers, controls, elevators, mail chutes, window cleaning, janitorial and general cleaning, and security services; all payments made under any management contracts or agreements, including without limitation management commissions and fees and out-of-pocket reimbursements; advertising costs; all other maintenance and repair expenses and supplies which are deducted by Landlord in computing its federal income tax liability; the costs of any additional services not provided to the building at the date the initial term of this Lease commences but thereafter provided by Landlord in the prudent management of the building, as determined by Landlord in its exclusive discretion; telephone, telegraph, postage, stationery, supplies and other materials and expenses required for the operation of the building; and any and all other expenses or charges of any nature whatsoever, whether or not herein mentioned, which are incurred by Landlord in connection with the servicing, operation, management, maintenance, repair and protection of the building and related interior or exterior appurtenances, and all other expenses and charges of any 10 Nature, which would be included in operating expenses in accordance with generally, accepted accounting and management principles with respect to operation of first-class office buildings in the Washington, DC, Metropolitan Area. For purposes hereof, the phrase Operating Expenses shall not include any Of the following: expenses for capital improvements, except those for equipment, systems or materials installed to reduce operating expenses; painting or decorating areas of the building other than public area; interest and principal amortization on mortgages; ground rents (if any); depreciation of the building (except for depreciation of equipment, systems, or materials installed to reduce operating expenses); and commissions paid to officers and executives of Landlord for leasing fees. PAYMENTS OF INCREASES IN TAXES AND OPERATING EXPENSES. (i) Tenant hereby covenants and agrees to pay to Landlord, during the entire initial term and any renewal or extension term of this Lease and any holdover term, in addition to the basic monthly rent and other charges and sums payable by Tenant under this Lease, and as additional rental hereunder, the Tenant's Proportionate Share Of any and all Taxes and Operating Expenses for a given fiscal year of the building that exceed an amount therein referred to as the DBase Amounts) equal to the aggregate amount of all Taxes and Operating Expenses for the entire calendar year 1998 as determined by Landlord, such payments to be made by Tenant for each fiscal year of the building and for each traction of a building fiscal year during the term hereof and during any renewal, extended and holdover term. The payments called for in the preceding sentence are herein sometimes called the "Adjustment Rent"; and any such payments of the Adjustment Rent due from Tenant hereunder shall be adjusted and pro-rated (as calculated and determined by Landlord) and shall be paid by Tenant for any fraction of a building fiscal year at the commencement and at the expiration of the term of this lease. The payments Of said Adjustment Rent shall be computed by Landlord on the basis Or each fiscal year Of the building during the initial term Of this Lease and any renewal, extended and holdover term thereof (which building fiscal year may be on a calendar year basis or such other fiscal year as Landlord may determine from time to time in its exclusive discretion), and shall be paid by Tenant at the times and in the manner specified hereinbelow. Tenant shall pay to Landlord the amounts of said Adjustment Rent within thirty (30) days after each and every request therefor from Landlord. Copies of the appropriate government-issued real estate tax bills or assessment notices, and copies of Landlord's annual statements Of Operating Expenses Of the building prepared by Landlord or Landlord's accountants, covering said Adjustment Rent shall be furnished to Tenant as soon as is reasonably practicable after Tenant's written request following Landlord's billing Of such Adjustment Rent under this Subparagraph l(b)(i), and shall be deemed conclusive and binding on the parties. Tenant's obligation to make the payments of Adjustment Rent under this Subparagraph l(b)(i) shall survive the expiration or any termination of this Lease, regards payments thereof covering any part or the term hereof at the expiration or termination of this Lease. (ii) At the option and exclusive discretion of Landlord, the Landlord may from time to time during the term hereof deliver to Tenant a written estimate by Landlord Of the amount Or annual Adjustment Rent which Landlord may estimate and determine will be payable by Tenant during an ensuing building fiscal year (such estimated sum being hereinafter called the "Estimated 11 Adjustment Rent"). Commencing with the first monthly installment of rent becoming due and payable hereunder after the date of any such statement of Estimated Adjustment Rent, and with each successive monthly installment during the then ensuing building fiscal year, the Tenant shall pay to t: Landlord (in addition to the basic monthly rent, and as additional rental) a sum as specified by Landlord which is equal to one-twelfth (l/12th) of said Estimated Adjustment Rent, such payments to continue to be due and payable until further notice from Landlord. In addition, Tenant shall pay to Landlord within thirty (30) days after request any accumulated unpaid monthly installments of such Estimated Adjustment Rent for the fiscal year covered by an estimate delivered after the beginning of such year. Landlord shall furnish to Tenant, as soon as practicable after the end of each building fiscal year, an annual statement setting Forth the actual amount of the annual Adjustment Rent due and payable for such immediately preceding and expired building fiscal year in which such monthly installments of Estimated Adjustment Rent were paid pertinent to this Paragraph l(b)(ii), and the partioa shall then make an appropriate adjustment (either by Tenant's payment to Landlord of any deficiency within thirty (30) days after Landlord's request therefor, or at Landlord's option by Landlord's refund to Tenant or credit toward future installments of basic monthly rent in case of overpayment by Tenant) of said Estimated Adjustment Rent paid by Tenant for the then expired building fiscal year. (iii) For purposes of this Lease, the phrase "Lease year" shall mean each period of twelve (32) consecutive months, commencing for the first lease year on the "Lease Commencement Date", and with each succeeding lease year to commence on each anniversary Or the Lease Commencement Date. (c) Any additional rental on account of increases aforesaid due and payable for a partial lease year at the end of the term shall be equitably pro-rated, based upon the number of months remaining until expiration of the term of this Lease, and the amount or amounts found to be owing by the Tenant shall be paid within ten (10) days after Landlord's demand. If the term of this Lease is extended, the provisions of this subparagraph (d) shall apply only to the last year of the extended term. 2. Possession. If Landlord shall be unable to tender to Tenant possession Or the demised premises on the Lease Commencement Date by reason of the fact that Landlord's Work (if any) described in Section 29 hereof has not been substantially completed, or because a certificate of occupancy has not been provided (if legally necessary), or by reason of the holding over or retention of possession of any prior lessee or occupant of the demised premises, or for any other reason whatsoever, then and in any such event Landlord shall not be subject to any liability for failure to tender to Tenant possession of the demised premises on the Lease Commencement Date. Under such circumstances, the basic monthly rent payable under Section l(a) hereof shall be abated and shall not commence to be due and payable until the date possession of the demised premises is tendered to Tenant with Landlord's Work (if any) therefor substantially COMPLETED AS DEFINED IN SECTION 29 (THE "Tender Date"), as such Tender Date is established by written notice from Landlord to Tenant. No such failure of Landlord to deliver to Tenant possession on the Lease Commencement Date shall affect the validity Or this Lease or the obligations of Tenant hereunder, except that in such event the Lease Commencement Date shall be postponed to be the Tender Date, and the expiration date of the term hereof shall be the last day of the sixtieth (60th) full calendar month after the 12 tender Date. However, if delay in Landlord's tender of possession of the premises or in substantial completion of Landlord 'a Work is caused by any act, omission or default of Tenant, its employees or contractors (a "Tenant Delays or "Tenant Delays"), then the term hereof and Tenant's ': obligation to pay rent and other sums hereunder shall commence on such earlier date (as determined by Landlord's contractor) when Landlord's Work could have been substantially completed absent such Tenant Delay. On the date when possession of the demised premises is delivered to Tenant, Landlord and Tenant shall jointly execute a Declaration, in the form attached as Exhibit "Be annexed hereto, setting forth the date on which possession has been delivered to the Tenant, and the commencement date and expiration date of the term of this Lease as determined hereunder, and the other matters shown on Exhibit "B" with all blanks therein properly completed. If permission is given to Tenant to enter into possession of the demised premises prior to the date specified as the Lease Commencement Date, Tenant covenants and agrees that such occupancy shall be deemed to be under all the terms, covenants, conditions and provisions of this lease. 3. D86. The Tenant shall use and occupy the demised premises only as executive offices; subject to Tenant's compliance at its own expense with all federal, state, county and municipal laws, codes, orders, rules and regulations applicable at any time to the conduct and operation of such use at the demised premises; but for no other purpose whatsoever without the prior written consent of Landlord. Tenant shall promptly comply with all laws, ordinances, rules, orders and regulations of all government authorities and Of the Board of Fire Underwriters (and any successor thereto) at any time promulgated and in force, and with all requirements of Landlord's insurance companies, concerning the use or manner of use or occupancy by Tenant of the demised premises, or any part thereof. 4. Upkeep of Premises. The Tenant agrees that it will, at its own expense, keep the demised premises and the fixtures therein in good order and condition and will, at the expiration or other termination of the term hereof surrender and deliver up the same broom clean and in like good order and condition as the same is in at the commencement of the initial term hereof, ordinary wear and tear excepted, and free of subleases and occupants and with all personal property owned by Tenant, its sublease's and assignees removed from the building. 5. Assignment and Subletting. Tenant will not assign, transfer, mortgage or otherwise encumber this Lease nor sublet or rent the premises, or any part thereof or any desk space or other space, without obtaining the prior written consent of Landlord, nor shall any assignment or transfer of this Lease or the right of occupancy hereunder be effectuated by operation of law or otherwise without the prior written consent of Landlord; which consent of Landlord in all instances aforesaid may be granted or refused in the exclusive and arbitrary discretion of Landlord. The consent by Landlord to any assignment or subletting shall not be construed as a waiver or release of Tenant from the terms of any covenant or obligation under this Lease, nor shall the collection or acceptance of rent from any such assignee, subtenant or occupant constitute a waiver or release of Tenant from any covenant or obligation contained in this lease, nor shall any such assignment or subletting be construed to relieve Tenant from obtaining the prior written consent of Landlord to any further assignment or subletting. In the event that Tenant defaults hereunder, Tenant hereby assigns to Landlord the rent due from any subtenant of Tenant and hereby authorizes each such 13 subtenant to pay said rent directly to Landlord. In the event the Tenant desires to sublet all or a portion of the demised premises, Tenant shall give to the Landlord at least thirty (30) days' prior written notice of Tenant's intention so to do. Within thirty (30) days after its receipt of amid notice, Landlord shall have the right at its option and exclusive discretion, (a) if the Tenant desires to sublet a portion of the space, to sublet that portion of space from the Tenant at a rental equal to a percentage of the rental stipulated herein, said percentage being the percentage the sublet portion of space bears to all of the demised premises; or (b) if the Tenant desires to sublet all of the demised premises, Landlord shall have the right at its option and exclusive discretion to either sublet the demised premises from the Tenant at the same rental stipulated herein, or to terminate this Lease on a date to be specified by Landlord. In the event Landlord has not exercised its right to sublet the demised premises or to terminate this Lease as provided above in this Paragraph, Tenant may sublet the demised premises after obtaining the written consent of the Landlord. In no event shall Tenant attempt or be entitled to sublet all or any part of the demised premises to, or assign this Lease to, any party or parties who are then lessees or prospective lessees (i.e., parties with whom Landlord or its affiliated owners of buildings in the Office Park are then negotiating or considering negotiating a lease) of space in the building, and/or in any of the buildings within the Office Park; nor shall Landlord be obliged to entertain any request for such subletting or assignment or to consent thereto; it being expressly agreed that Landlord shall be entitled to all legal and equitable remedies for any breach by Tenant of this understanding. Furthermore, Landlord shall be entitled to receive from Tenant on demand the amount of any sub-rentals or other payments received by Tenant from any subleases or assignee of Tenant, with respect to this Lease or the premises, which are in excess of the rentals payable hereunder for the space involved in such assignment or sublease. Tenant shall pay to Landlord upon request the administrative expenses and reasonable attorneys' and accountants' fees incurred by Landlord in review of any proposed assignment or subletting, and in preparing or reviewing any documents, financial data or other information concerning a proposed assignment or subletting by Tenant. The exercise of any powers of approval or consent conferred on Landlord under this paragraph shall not be subject to any requirement of reasonableness, and may be withheld or granted in Landlord's exclusive and arbitrary discretion. 6. Compliance with Governmental Requirements. Tenant shall, at its own cost and expense, properly and promptly comply with all laws, orders, ordinances, rules, regulations and requirements, as the same now exist or may hereafter be enacted, amended or promulgated, of any federal, municipal, state, county or other governmental authorities and/or any department or agency thereof, and of the Board of Fire Underwriters or any similar organization having jurisdiction and all present and future recycling laws concerning separation and recycling of garbage, wastes, refuse, trash and rubbish (collectively herein called "Governmental Requirements") relating to Tenant's use and occupancy of the demised premises or to the conduct and operation of Tenant's business therein. Nothing contained in this Paragraph, or in Section 13 or any other provisions of this Lease, shall obligate Landlord to enforce the provisions hereof for the benefit of any other lessee or occupant of space in the building; it-being expressly understood and agreed that all such provisions are included herein solely for Landlord's benefit and for its enforcement at its exclusive option and discretion. Similarly, Tenant shall have no right to require Landlord to enforce such-or 14 similar provisions in other leases for the benefit of Tenant; any such enforcement being solely in Landlord's discretion. Tenant at its own expense agrees to fully and timely comply with all federal, state, county and municipal laws, regulations and requirements now or hereafter in force involving handicapped persons, which pertain to the demised premises, any alterations thereof or the use and occupancy of the premises or conduct of business therein or any facilities of, or to means of access within, or to any other elements of the demised premises, including also any path of travel requirements affected by any alterations to the premises. Tenant agrees to indemnify, defend and hold Landlord harmless from all liability, expense, fines and claims resulting from any breach of Tenant's obligations under this paragraph. 7. Alterations. Tenant will not make any alterations, installations, changes, replacements, additions or improvements (structur41 or otherwise) in or to the demised premises or any part thereof, without the prior written consent of the Landlord in each instance. The exercise by Landlord of any powers of approval or consent, and the refusal or granting thereof or any conditions of approval, shall not constitute a representation or assurance by Landlord as to the legality, safety, compliance with laws, codes or regulations, or any other aspects of the matters involved; such powers and the exercise thereof and conditions imposed by Landlord being solely for its own benefit and protection. If Landlord consents to any alterations, changes, replacements, additions, improvements or other work which Tenant desires to perform, then such work shall be done by Tenant at its own expense, using contractors approved in writing by Landlord, and in compliance with all applicable laws, codes, regulations and requirements of governmental authorities, the Board of Fire Underwriters and Landlord's insurers, free of damage to the building and free of mechanic's and other liens (such damage to be repaired and such liens to be removed promptly by and at the expense of Tenant), and in strict compliance with plans and specifications therefor approved in writing by Landlord. Tenant shall at its own expense keep in force, during the course and until completion of such work, builder's risk, worker's compensation and such other insurance in amounts and forms as Landlord may reasonably require, and Tenant will furnish to Landlord copies or certificates of the insurance policies within five (5) days after Landlord's request. No equipment or other items installed by or work performed by or for Tenant or through its contractors shall require any changes in the utility lines and/or mechanical systems of the building, unless Landlord expressly agrees in writing to such changes (Tenant to pay to Landlord all costs of any such changes, on demand, and to comply at its own expense with all conditions imposed by Landlord in granting such consent). It is distinctly understood that all alterations, installations, changes, replacements, additions to or improvements of the demised premises, whether made by or at the expense of Landlord or Tenant, and including without limitation wall papers and coverings, floor tile, ceiling light fixtures, window blinds, and wall to wall carpeting (whether made with ore without the Landlord's consent), shall at the election of the Landlord remain upon and be surrendered with the demised premises at the expiration of this lease without disturbance, molestation or injury. However, Landlord at its option and discretion may require that Tenant, at Tenant's expense, remove at the expiration or any termination of this Lease any or all alterations to the demised premises made by Tenant, and restore the premises to the condition thereof prior to such alterations, and that Tenant repair any damage to the demised premises or building caused by such removal; and Tenant will promptly comply With 15 such directions. In addition to all legal, equitable and other rights and remedies available to Landlord, it is agreed that if Tenant does not comply with its obligations under this Paragraph or any other provisions of this Lease, the Landlord shall have the right (but not the obligation)' to perform or cause to be performed Tenant's obligations, duties and covenants, in which event Tenant shall reimburse to Landlord within five (5) days after demand all costs incurred by Landlord plus a sum equal to fifteen percent tl5%) of such costs representing overhead and administrative expenses of Landlord in such matters. 8. Signs and Other Agreements of Tenants (A) Tenant further agrees that no sign, advertisement or notice shall be inscribed, painted or affixed on any part of the outside or inside of the demised premises or building, except on the directories and doors of offices, and then only in such size, color and style as the Landlord shall approve. No sign, notice or advertisement of any kind shall be affixed to, inscribed on or placed so as to be visible outside of any windows, or on any glass or other doors or sidelights at the premises so as to be visible outside the premises. Landlord shall have the right to prohibit any advertisement of Tenant which includes the name of Landlord and/or of the Office Park and/or the name or address of the building, and which in the Landlord's opinion tends to impair the reputation of the building or its desirability as a building for offices or for financial, insurance or other institutions and bnainQsses of like nature, and upon written notice from the Landlord, Tenant shall refrain from and discontinue such advertisement. The Landlord shall have the right to prescribe the weight, and method of installation and position of safes and other heavy fixtures or equipment, and Tenant will not install in the demised premises any fixtures, equipment or machinery that will place a load upon any floor exceeding the floor load per square foot area which such floor was designed to carry. All damage done to the building by taking in or removing a safe or any other article of Tenant's office equipment, or due to its being in the demised premises, shall be repaired at the expense of the Tenant. No freight, furniture or other bulky matter of any description will be received into the building or carried in the elevators except when and as approved by the Landlord. All moving of furniture, material and equipment shall be under the direct control and supervision of the Landlord, who shall, however, not be responsible for any damage to or charges for moving same. Tenant agrees promptly to remove from the public area adjacent to said building any of Tenant's merchandise there delivered or deposited. (B) Notwithstanding the preceding provisions of this Section 8, it is agreed that upon Landlord's tender to Tenant of possession of the premises, Tenant at its own expense may install its three-dimensional artwork comprising only Tenant's corporate name and logo, mounted on a wall within the reception area of the demised premises. Such sign installation shall be performed by Tenant in compliance with all provisions of this Lease, including without limitation the provisions of Sections 6, 7-and 10. By not later than the expiration or termination of this Lease, Tenant at its own expense shall remove the aforesaid artwork and sign and shall repair any damage to the promises caused by installation and removal thereof. Tenant shall keep said sign in good appearance and condition. Said sign shall not include any blinking, flashing or neon or other bright lighting of any kind. (C) Tenant desires to install in the demised premises two (2) Mosler safes, each of which weighs seven hundred (700) pounds (the "Safes"). 16 Prior to bringing the Safes into the Building or installing the Safes in the demised premises, Tenant shall consult with Landlord's management agent and Tenant shall pay to Landlord within five (5) days from receipt of invoices therefor all costs of any work Landlord deems ~ necessary to accommodate the moving and installation of the Safes, including but not limited to any special handling and installation of any special structural or other supports to prevent the Safes from damaging or adversely affecting the structural integrity or other elements of the Building. The Safes shall be maintained in good condition by Tenant. The Safes shall be removed from the demised premises and from the Building and from the Office Park by Tenant at its own expense in a manner acceptable to Landlord (with any damage to the Building caused thereby to be repaired by and at the sole expense of Tenant) by not later than expiration or termination of this Lease. The Safes shall be installed only at a location in the premises approved in writing in advance by Landlord, and shall not be relocated within the premises nor moved without Landlord's prior written consent. All powers of approval and consent conferred on or exercised by Landlord are solely for its own protection, and shall not be deemed a warranty of any kind from Landlord or its agents. 9. Tenant's Electrical Equipment. The Tenant will not install or operate in the demised premises any electrically operated equipment or other machinery, other than typewriters, adding machines, and such other electrically operated office machinery and equipment normally used by office tenants in modern office buildings (provided that no such electrical equipment shall require electrical power that exceeds building standard electric service and systems or that requires special or dedicated circuitry), without obtaining the prior written consent of the Landlord. Landlord may condition such consent upon the payment by the Tenant of additional rent as compensation for such excess consumption of water and/or electricity and other utilities as may be occasioned by the operation of said equipment or machinery. Tenant shall not install any equipment of any kind or nature whatsoever which will or may necessitate any changes, replacements or additions to, or require the use of, the water system, plumbing system, heating system, air conditioning system or the electrical system of the demised premises or of the building, without the prior written consent of the Landlord, in accordance with the provisions of Section 7 hereof. 10. Equipment. Maintenance and repair of equipment such as kitchen fixtures, separate air conditioning equipment, or any other type of special equipment, whether installed by Tenant or by Landlord on behalf of Tenant, shall be the sole responsibility of Tenant; and Landlord shall have no obligation in connection therewith. However, the foregoing provisions of this Section 10 as well as Section 7 hereof, shall not be deemed to permit Tenant to perform any work on or affecting the building utility lines or equipment without Landlord's prior written consent. 11. Landlord's Access. (A) Tenant further agrees that it will allow the Landlord, its agents and employees, to enter the demised premises at all times, to examine, inspect or to protect the same or prevent damage or injury to the same, or to make such alterations and repairs to the demised premises or other premises as the Landlord may deem necessary; and Tenant will permit Landlord and Landlord 'a mortgagees, prospective purchasers of the building and the representatives of any such parties to enter and inspect the demised premises at all times, and will permit-Landlord to exhibit the same to prospective tenants during the last one hundred eighty (180) days of the term of this lease. 17 (B) Landlord shall give Tenant at least two (2) days advance written or oral notice of Landlord's desire for access to the demised premises for the purposes described in this Section 11; except that no advance notice shall be required of Landlord in emergencies. 12. Illegal Use. The Tenant will not use or permit the demised premises or any part thereof to be used for any disorderly, unlawful or extra hazardous purpose nor for any other purpose than hereinbefore specified; and will not manufacture any commodity therein, without the prior written consent of the Landlord. 13. Rules and Regulations. Tenant, its agents, employees, invitees, licensees, customers, clients, family members and guests shall at all times abide by and observe the rules and regulations attached hereto as Exhibit "C" and made a part hereof. In addition, Tenant, its agents, employees, invitees, licensees, customers, clients, family members and guests shall abide by and observe such other rules or regulations as may be promulgated from time to time by Landlord with a copy sent to Tenant, for the operation and maintenance of the building, provided, however, that the same are necessary in Landlord's reasonable judgment for the general well being, safety, care or cleanliness of the building or its appurtenances. Nothing contained in this Lease shall be construed to impose upon Landlord any duty or obligation to enforce such rules and regulations, or the terms, conditions or covenants contained in any other lease, as against any other tenant, and Landlord shall not be liable to Tenant for violations of the same by any other tenant, its employees, agents, business invitees, licensees, customers, clients, family members or guests. If there is any inconsistency between this Lease and the Rules and Regulations set forth in Exhibit ~c", this Lease shall govern. 14. Damage. (A) All injury to the demised premises or the building caused by moving the property of Tenant into, within or out of, the building or the demised premises, and all breakage done by Tenant, or the agents, servants, employees and visitors of Tenant, shall be repaired by and at the expense of the Tenant. In the event that the Tenant shall fail to do so, then the Landlord shall have the right to make such necessary repairs, alterations and replacements (structural, non-structural or otherwise) and any charge or cost so incurred by the Landlord shall be paid by the Tenant with the right on the part of the Landlord to elect in its discretion, to regard the same as additional rent, in which event such cost or charge shall become additional rent payable with the installment of rent next becoming due or thereafter falling due under the terms of this Lease. This provision shall be construed as an additional remedy granted to the Landlord and not in limitation of any other rights and remedies that the Landlord has or may have in said circumstances. (B) The provisions of Section 14(A) hereof shall not apply to normal reasonable wear and tear. 15. Personal Property. (A) All personal property of the Tenant in the demised premises or in the building of which the demised premises is a part shall be maintained therein at the sole risk of the Tenant. The Landlord shall not be liable for any accident to or damage to property of Tenant resulting from the use or operation of elevators or of the heating, cooling, electrical or plumbing apparatus. Landlord shall not, in any event, be liable for damages to property resulting from water, steam or other causes. Tenant hereby 18 expressly releases Landlord from any liability incurred or claimed by reason of damage to Tenant's property. Landlord shall not be liable in damages, nor shall this lease be affected for conditions arising or resulting, and which may affect the building of which the demised premises is a pact, due to construction on contiguous parcels of land. The provisions Or this paragraph shall not relieve Landlord from liability for damage to Tenant's property in the demised premises, if and to the extent ouch damage is caused by gross negligence or willful misconduct of Landlord (except as otherwise provided in Section 27 of this Lease, the provisions of which shall control in all events). (B) All fixtures, equipment, leasehold improvements and other improvements and installations attached to, or built into, the demised premise. At the commencement of or during the term of this Lease shall be and remain part of the demised premises and be deemed the property of Landlord. Notwithstanding the foregoing, any movable personal property installed by and at the sole expense of Tenant ("Tenant's Property") shall be deemed to be the property of Tenant and, except for any of Tenant's Property comprising a part of the Layout Work (i.e., property affixed to the demised premises) or unless Tenant is in default, shall be removed by Tenant prior to the expiration of the term of this Lease or before any earlier termination thereof. Tenant shall repair, or shall reimburse Landlord immediately upon demand for the cost of repairing, any damage to the demised premises or the building occasioned by such removal. Any of Tenant's Property which shall not be removed as aforesaid shall be deemed to have been abandoned by Tenant. If Landlord removes any of Tenant's Property not timely removed by Tenant, Landlord shall have the right to immediate reimbursement from Tenant for all charges incurred. All such obligations of Tenant to make any reimbursements or payments to Landlord under this Paragraph 15(B) or elsewhere in this Lease shall survive any termination or expiration of this Lease. If Tenant is in default, it shall not remove any of Tenant's Property without Landlord's prior written consent; provided, however, that as long as Tenant's personal property is encumbered by any equipment financing or equipment leasing, the rights of Tenant's equipment lender or equipment lessor in and to Tenant's personal property under equipment financing or leasing agreements between Tenant and such parties shall prevail over the rights of Landlord to any lien on Tenant's personal property in the demised premises. Further, the rights of The CIT Group/Equipment Financing, Incorporated in and to Tenant's personal property under any loan agreement which predates this Lease shall prevail over the rights of Landlord to any lien on Tenant's personal property in the demised premises. However, the rights of such equipment lender or equipment lessor shall not subject Landlord or it. Partners or agents to any liability or expense, nor delay or inhibit the exercise by Landlord of any of its rights and remedies against Tenant, its subleases, successors or assigns for any default of Tenant under this Lease, nor confer on any such equipment lessor or equipment lender any rights under this Lease or in the demised premises. 16. Liabiltiy. The Landlord assumes no liability or responsibility whatsoever with respect to the conduct-and operation of the business to be conducted in the demised premises. The Landlord shall not be liable for any accident or injury to any person(s) or property in or about the demised premises which are caused by the conduct and operation of said business, or by virtue of equipment or property of the Tenant in the demised premises. The Tenant agrees to hold the Landlord harmless against all such claims. Furthermore, Tenant shall and hereby does defend, 19 Indemnify and save harmless Landlord and Landlord's partners, officers, directors, agents and employees (collectively, "Indemnitees") from and against all liability (statutory or otherwise), claims, suits, causes of action' demands, judgments, costs, interest and expenses (including also counsel fees and disbursements incurred in the defense thereof) to which any Indemnities may (except insofar as it arises out of the fault or neglect of such Indemnitees) be subject or suffer, whether by reason of any claim for, any injury to, or death of, any person(s) or damage to or loss of property (including also any loss of use thereof) or otherwise, and arising from or in connection with the use by Tenant of, or from any work or anything whatsoever done by Tenant (or any of its officers, directors, agents, contractors, employees, licensees or invitees) in, at or about any part of the demised premises or the building during the term of this Lease or during the period of time, if any, prior to the term commencement date with respect to such part that Tenant may have been given access to for the purpose of occupancy or doing work, or arising from any condition of the demised premises or the building due to or resulting from any default by Tenant in the keeping, observance or performance of any covenant or agreement contained in this Lease or from any fault or neglect of Tenant or any of its officers, directors, agents, contractors, employees, licensees or invitees. The provisions of this paragraph shall not relieve Landlord from liability for damage to Tenant's property in the demised premises, if and to the extent such damage is caused by gross negligence or willful misconduct of Landlord (except as otherwise provided in Section 27 of this Lease, the provisions of which shall control in all events). 17. Public Liability Insurance. Tenant shall obtain and maintain in effect at all times during the term of this Lease, a policy of comprehensive public liability insurance, naming Landlord its management agent and all mortgagees of Landlord as additional insurers, protecting Landlord, Tenant and all such mortgagees against any liability for bodily injury, death or property damage occurring upon, in or about any part of the demised premises arising from any act against which Tenant is required to indemnify Landlord, with such policies to afford protection in a combined single limit of not less than ONE MILLION' DOLLARS ($1,000,000) as concerns death or injury to one (1) or more person(s) in any one occurrence, and not less than One Hundred Thousand Dollars ($100,000) with respect to damage to property. Such insurance policies shall be issued by responsible insurance companies licensed to do business in the State of Maryland. Neither the issuance of any insurance policy required under this Lease, nor the minimum limits specified herein with respect to Tenant's insurance coverage, shall be deemed to limit or restrict in any way Tenant's liability arising under or out of this Lease. Copies and certificates of said policies with evidence of premiums paid, will be delivered to Landlord at commencement of the term hereof, and renewal certificates will be delivered to Landlord at least ten (10) days before expiration of any such policy. Each such policy shall require at least fifteen (15) days prior written notice to Landlord and Tenant for any cancellation or amendment thereof. The provisions of this Section 17 shall not limit any liability of Tenant under Section 16 hereof. 18. Service. The Landlord shall furnish reasonably adequate electric current (subject to Section 9 hereof), water, lavatory supplies, lighting, fluorescent tube replacement (limited, however, to building standard ceiling fluorescent tubes, it being agreed that Tenant at its own expense will furnish or reimburse Landlord on demand the costs of all other light fixtures, bulbs and tubes, and also 20 all replacements of light tubes, bulbs and related equipment for non-building standard lighting fixtures for the premises), and automatically operated elevator service, during normal hours of operation of the building, and normal and usual cleaning and char service (after 6:00 P.M. Mondays to Fridays only, both inclusive, except on holidays) without additional cost to the Tenant, except for Tenant's payments under Section l(b) and Section 9 hereof. The Landlord further agrees to furnish heat and air conditioning from the building's central systems during the appropriate seasons of the year, during the normal hours of operation of the building. Landlord shall have the right to remove elevators from service as the same shall be required for moving freight, or for servicing or maintaining the elevators and/or the building, provided, however that at least one elevator shall be in operation on a twenty-four hour basis, seven days a week. The normal hours of operation of the Building are 8:00 A.M. to 6:00 P.M., Monday through Friday (except holidays) and 8:00 A.M. to 1:00 P.M. Saturday (except holidays). There are no normal hours of operation of the Building on Sundays or holidays, and Landlord shall not be obligated to maintain or operate the Building or to furnish services thereto on such excluded days or outside the normal hours of operation aforesaid, unless special arrangements are made by Tenant and approved in writing by Landlord. Landlord will furnish all services and utilities required by this Lease only during the normal hours of operation of the building, unless otherwise specified herein. It is also agreed that if Tenant desires air-conditioning, heat, electricity or other building services beyond the normal hours of operation set forth herein and provided arrangements are made therefor with the Landlord's management agent (with such advance written notice of such desire as Landlord or its management agent may require from time to time), the Landlord will furnish such air-conditioning, heat, electricity or other building services outside of normal hours of operation of the building and the Tenant agrees to pay for the same with the next monthly installment of rent or at such other time(s) as Landlord may require, in accordance with the then current schedule of coats and assessments therefor, which such schedules shall be established from time to time by Landlord and furnished to Tenant on its request. It is understood and agreed that Landlord shall not be liable for failure to furnish or for delay or suspension in furnishing, any of the utilities or services required to be performed by Landlord caused by breakdown, maintenance, repairs, strikes, shortage of or limitations upon the consumption or use of public utilities, shortage or unavailability of labor or materials, acts of God or from any other cause whatsoever. Tenant shall fully and timely comply with all governmental and utility company restrictions imposed from time to time on temperature settings and U8Q of electricity and other utilities in the demised premises ("Utility Regulations"). Tenant agrees that it shall not be entitled to any reduction in rent or other sums nor to terminate or otherwise adversely affect this Lease or Landlord's rights hereunder as a result of any such Utility Regulations or Tenant's obligation to comply therewith. 19. Estoppel Certificates. Tenant agrees, at any time and from time to time, within five (5) days after written request from Landlord, to execute, acknowledge and deliver to Landlord a statement in writing in the form attached hereto as Exhibit Act certifying. (i) that this Lease is unmodified and in full force and effect (or if there have been modifications, that the Lease is in full force and effect as modified and stating the modifications), (ii) the date to which the rent and other charges hereunder have been paid by Tenant, (iii) whether or not to the best knowledge of Tenant; Landlord is in default in the 21 performance of any covenant, agreement or condition contained in this Lease, and if so, specifying each such default of which Tenant may have knowledge, (iv) the address to which notices to Tenant should be sent, and tv) such other matters as are shown on Exhibit ~D" or which Landlord may request. Any such statement delivered pursuant hereto may be relied upon by any owner of the building, any prospective purchaser of the building, any mortgagee or prospective mortgagee of the building or of Landlord's interest, or any prospective assignee of any such mortgagee. 20. Bankruptcy. (A) Events of Bankruptcy. For purposes of this Lease, the following shall be deemed "Events of Bankruptcy" of Tenant: (i) if Tenant becomes "insolvent", as defined in Title 11 of the United States Code, entitled "Bankruptcy", 11 U.S.C. Section 101 et seq. (the "Bankruptcy Code"), or under the insolvency laws of any state, district, commonwealth or territory of the United States of America ("Insolvency Laws"); or (ii) if a receiver or custodian is appointed for any or all of Tenant's property or assets, or if there is instituted a foreclosure action on any of Tenant's property; or (iii) if Tenant files a voluntary petition under the Bankruptcy Code or Insolvency Laws; or (iv) if there is filed an involuntary petition against Tenant as the subject debtor under the Bankruptcy Code or Insolvency Laws, which is not dismissed within sixty (60) days of filing, or results in issuance of an order for relief against the debtor; or (v) if Tenant makes or consents to an assignment of its assets, in whole or in part, for the benefit of creditors, or a common law composition of creditors. (B) Landlords Option to Terminate Lease. Upon the occurrence of an Event of Bankruptcy, or if Tenant takes advantage of any Insolvency Laws, then in any such event Landlord at its option and sole discretion may terminate this Lease by written notice to Tenant (subject, however, to applicable provisions of the Bankruptcy Code or Insolvency Laws during the pendency of any action thereunder involving Tenant as the subject debtor). If this Lease is terminated under this Paragraph, Tenant shall immediately surrender possession of and vacate the demised premises, waives all statutory or other notice to quit, and agrees that Landlord's obligations under this Lease shall cease from such termination date, and Landlord may recover possession by process of law or in any other lawful manner. Furthermore, if this Lease is terminated under this Paragraph, Landlord shall have all rights and remedies against Tenant provided in case of defaults of Tenant in payment of rent (subject, however, to applicable provisions Or the Bankruptcy Code or Insolvency Laws). (C) Assumption of Lease. If Tenant becomes the subject debtor in a case pending under the Bankruptcy Code, Landlord's right to terminate this Lease under this paragraph shall be subject to the applicable rights (if any) of the trustee in bankruptcy to assume or reject this Lease as then provided for in the Bankruptcy Code. However, the Trustee in Bankruptcy must give to Landlord and Landlord must receive proper written notice of the Trustee's assumption or rejection of this Lease, within sixty (60) days after the date Or the Trustee's appointment or such other period provided by applicable bankruptcy law (the Assumption or Rejection Period"); it being agreed that the failure of the Trustee to give notice of such assumption hereof within the Assumption or Rejection Period shall conclusively and irrevocably constitute the Trustee's rejection of this Lease and waiver of any rights of the Trustee to assume or assign this Lease. The Trustee shall 22 not have the right to assume or assign this Lease unless said Trustee (i) promptly and fully cures all defaults under this Lease, (ii) promptly and fully compensates Landlord for all monetary damages incurred as a result of such default, and (iii) provides to Landlord "adequate assurance of future performances (as defined hereinbelow). Landlord and Tenant hereby agree in advance that "adequate assurance of future performances, as used in this paragraph, shall mean that all of the following minimum criteria must be met: (a) the Tenant or the Trustee must pay to Landlord, at the time the next payment of rent is then due under this Lease, in addition to such payment of rent, an amount equal to the next Four (4) months rent due under this Lease, said amount to be held by Landlord in escrow until either the Trustee or Tenant defaults in its payment of rent or other obligations under this Lease (whereupon Landlord shall have the right to draw on such escrowed funds) or until the expiration of this Lease (whereupon the funds shall be returned to the Trustee or Tenant if no Event of Default exists, less any amounts thereof applied to cure Tenant's defaults); (b) the Tenant or Trustee must agree in a writing delivered to Landlord to pay to Landlord, at any time the Landlord is authorized to and does draw on the funds escrowed pursuant to clause (a) of this Paragraph 20(C)(iii), the amount necessary to restore such escrow account to the original level required by said provision; (c) Tenant must pay to Landlord all rentals and other sums payable by Tenant hereunder including also therein its share (as estimated by Landlord) of the coat of all services if any provided by Landlord (whether directly or through agents or contractors, and whether or not the cost of such services is to be passed through to Tenant), in advance of the performance or provision of such services, and (d) the Tenant must agree (by writing delivered to Landlord) that the Tenant's business shall be conducted in a first class manner, and that no liquidating sales, auctions, or other non-first class business operations shall be conducted on the demised premises, and that the U8Q of the demised premises as stated in this Lease will remain unchanged, and that the assumption or assignment of this Lease will not violate or affect the rights of any other lessees in the building. In the event Tenant is unable to: (i) cure its defaults, (ii) reimburse Landlord for its monetary damages, (iii) pay the rents due under this Lease or any other payments required of Tenant under this Lease on time, or (iv) meet the criteria and obligations imposed by (a) through (d) above of this Subparagraph 20(C), then in any such event Tenant hereby agrees in advance that it has not met its burden to provide adequate assurance of future performance, and this Lease may be terminated by Landlord in accordance with Paragraph 20(B). (D) Damages. It is further stipulated and agreed that, in the event of the termination of the term of this Lease by the happening of any such event described in this Article 20, Landlord shall forthwith, upon such termination, and any other provisions of this Lease to the contrary notwithstanding, become entitled to recover as and for the damages caused by such breach of the provisions of this Lease all such claims as are permitted by applicable laws and court decisions. (E) Consent to Lift Stay, In the event-that this Lease is terminated by notice and the Tenant shall thereafter seek protection under the Bankruptcy Code or any equivalent state Insolvency Laws or regulations, then the Tenant (if a debtor-in-possession) agrees to consent to any application by the Landlord to terminate the automatic stay provisions of the Bankruptcy Code or any Insolvency Laws one the grounds that there is no equity in the Lease as a result of the pre-petition termination notice. 23 21. Defaults and Remedies. (A) It is agreed that if Tenant shall fail to pay the rent or any installment thereof or any additional rent or other amounts when and as the same become due end t payable under this Lease, whether or not any demand shall have been made for such payment, or if the Tenant shall violate or fail or neglect to keep and perform any of the other covenants, conditions and agreements herein contained on the part of the Tenant to be kept and performed, or if the Premises shall become abandoned, vacant or deserted, or if Tenant's estate hereby created shall be taken upon execution or other process of law; then, and in each and every such event from henceforth, and at-all times thereafter, at the option and exclusive discretion of the Landlord (and in addition to and not in limitation of Landlord's right to distrain for rent, and other remedies), this Lease and the Tenant 'a right Or possession shall thereupon cease and terminate, and the Landlord shall be entitled to the possession Or the demised premises and to re-enter the same and remove all persons and property therefrom, without demand of rent or demand of possession of said demised premises, and may forthwith proceed to recover possession of the demised premises with or without process of law, any statutory or other notice to quit or of intention to re-enter the same being hereby expressly waived by the Tenant. In the event of such re-entry by process Or law or otherwise, the Tenant nevertheless agrees to remain answerable for any and all damages, deficiency and lose of rent which the Landlord may sustain by such re-entry, including also reasonable attorneys' fees and court costs; and in such case, the Landlord reserves full power, which is hereby acceded to by the Tenant, to relet the demised premises at the risk and expense of the Tenant. Any such re-lettings may be of all or any part of the demised premises, and may be for a term or terms lass than or greater than the then remaining portion of the term of this Lease, all at Landlord's exclusive discretion. Such relettings shall be on such terms, rental and conditions as Landlord may determine. Whether or not Landlord elects to terminate this Lease under this Section 21, Tenant shall remain liable for all damages, deficiencies, loss, coats and expenses Landlord may sustain, including without limitation deficiency in rent, reasonable attorneys' fees, court costs, brokerage commissions, and expenses incurred in preparing the demised premises for re-letting (including any necessary alterations, none of which shall be deemed to release Tenant from liability hereunder). Tenant shall have no right to any rents collected by Landlord in such re-lettings, whether or not such rents exceed the rentals payable hereunder. Landlord shall not be liable for failure to re-let or to collect rentals under re-lettings, nor shall Tenant be released from liability by reason thereof. Any damage or loss of rent sustained by Landlord may be recovered from Tenant, at Landlord's option, at time of re-letting, or in separate actions as said damages become determinable from re-lettings, or in a single action deferred until expiration of the term hereof (in which last event the cause of action shall not accrue until the stated expiration date hereof), or in single action prior to the re-letting or termination or expiration hereof. Nothing herein shall prevent Landlord from proving in full damages for rent accrued prior to termination hereof and not paid, and from proving under any applicable laws any amounts allowed thereby, and recovering such sums. It is further agreed that if under the provisions hereof, applicable summary process shall be: served, and a compromise or settlement thereof shall be made, such compromise or settlement shall not constituted waiver of any breach of any covenant, condition or agreement herein contained, and that no waiver by Landlord of any breach of any covenant, condition or agreement-herein 24 contained shall operate as a waiver Of the covenant, condition or agreement itself, or of any subsequent breach thereof. No provision of this Lease shall be deemed to have been waived by Landlord unless such waiver shall be in writing signed by Landlord. No payment by Tenant or receipt by Landlord of a lesser amount than the monthly installments of rent herein stipulated shall be deemed to be other than on account Or the earliest stipulated rent, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction, and the Landlord may accept such check or payment without prejudice to the Landlord's right to recover the balance of such rent or pursue any other remedy in this Lease provided. In the event Tenant defaults in payment of any installment or installments of rent or any other sums, and if such default is not corrected within five (5j days after the due date of such payment, the Tenant shall pay to the Landlord, in addition to the rental or other sums so in default, a "late charge" in an amount equal to ten cents ($0.10) for each one dollar t$1.00) so in default. Regarding all of Tenant's covenants and obligations under this Lease, time is of the essence. Any installments of rental or other sums not paid in full within ten (10) days from the date due thereof shall, in addition to the aforesaid late charges, bear interest from the date due payable by Tenant to Landlord on demand at the rate Of fourteen percent (14%) per annum until fully paid. (B) In addition to and not in limitation of the other remedies in this Lease provided, the Landlord shall be entitled to the restraint by injunction of any violation or attempted or threatened violation of any of the terms, covenants, conditions, provisions or agreements of this Lease. (C) The remedies of Landlord provided for in this Lease are cumulative and are not intended to be exclusive of any other remedies to which Landlord may be lawfully entitled. The exercise by Landlord of any remedy to which it is entitled shall not preclude or hinder the exercise of any other remedy, nor constitute an election of remedies. (D) If Tenant is in default under this Lease beyond the applicable notice and cure period, then in addition to but not in limitation of any other available remedies, Landlord shall have the right (but not the obligation) to take such action as may be necessary to cure such default, in which event Tenant shall reimburse to Landlord within fifteen (15) days after demand all costs incurred by Landlord plus administrative expenses equal to ten percent (FOR) of such costs. Any such action taken by Landlord under this paragraph shall not be deemed to release Tenant of liability for the default nor to waive any of Landlord's rights or remedies or any of Tenant's obligations under this Lease. (E) Tenant hereby expressly waives any provision of law now in force or which hereafter may be enacted giving Tenant the right under any condition after default to the redemption and repossession Of the demised premises or any part thereof. 22. Damage by Fire or Casualty. In the event Ordamage to or destruction of the demised premises by fire or any other casualty, this Lease shall not terminate (except as otherwlae expressly herein provided), but the demised premises shall be promptly and fully repaired and restored as the case may be by the Landlord at its own expense, subject, however, to the following terms and conditions. Landlord's obligation to repair and restore the demised 25 premises shall be limited and conditioned, at Landlord 's option and absolute discretion, to its receipt of sufficient insurance proceeds to cover all costs of such repairs and restoration including any related or attendant work. Any such repairs and restoration to be performed by Landlord under this Section 22 shall be limited to work originally done by Landlord in construction Of the demised premises, and in no event shall Landlord be obligated to make any repairs or restoration Or Tenant's equipment, furniture, furnishings, decorations or other property of Tenant (Tenant to do so at its own cost and expense and at no coat to Landlord and without interfering with Landlord 'a repairs). Landlord reserves the right to elect not to repair, and instead to terminate this Lease, if the demised premises are substantially damaged or if a major portion of the building, as determined by Landlord (and whether or not including the demised premises) is damaged. Within forty-five (45) days after the occurrence of any fire or other casualty damage to the demised premises, Landlord shall notify Tenant in writing as to whether or not Landlord elects to repair such damage or to terminate this Lease. If Landlord elects to make any such repairs or restoration under this Paragraph, then due allowance shall be given for reasonable time required for adjustment and settlement Or insurance claims, time required to obtain licenses and permits for the work, and for such other delays as may result from government restrictions and controls on construction, if any, and for strikes, national emergencies and other conditions beyond the reasonable control of the Landlord. It is agreed that in any Or the aforesaid events, if Landlord does not elect to terminate this Lease pursuant to this Paragraph, this Lease shall continue in full force and effect, but if the condition is such as to make the entire demised premises untenantable, then all rentals which the Tenant is obligated to pay hereunder shall abate as of the date of the damage until the Landlord has substantially completed the repairs and restoration work to be performed by it under this Paragraph. Any unpaid or prepaid rent for the month in which such damage to the demised premises occurs shall be pro-rated to the date of the damage. If the demised premises are partially damaged or destroyed, then during the period that Tenant is deprived of the use of the damaged portion of the demised premises, Tenant shall be required to pay rental covering only that part of the demised premises that it is able to occupy, based on that portion of the total rent which the amount of square foot area remaining that can be occupied bears to the total square foot area of all the demised premises covered by this Lease. In the event the demised premises are substantially or totally destroyed by fire or other casualty so as to be entirely untenantable and it shall require more than one hundred twenty (120) days for the Landlord to restore same, then Landlord upon written notice to the Tenant may terminate this Lease, in which case the rent shall be apportioned and paid to the date of said fire or other casualty. No compensation, or claim, or diminution of rent will be allowed or paid by Landlord by reason of inconvenience, annoyance, or loss of or injury to business arising from the necessity of or any delays in repairing the demised premises or any portion of the building, however the necessity may occur. Tenant shall notify Landlord of any damage to the demised premises promptly upon occurrence thereof. Despite anything to the contrary in this Paragraph, if the damage is caused by any act, negligence or omission of Tenant, its employees, agents or contractors, then rent shall not be abated as aforesaid, and Tenant shall reimburse to Landlord within five (5) days after request all costs of repairs, replacements and restoration in excess of the insurance proceeds made available to Landlord to pay for such 26 work. In no event shall Landlord be liable in damages or otherwise for any delay in or failure to restore the damaged premises. 23.Subordination. This Lease and all rights Or Tenant hereunder are subject and subordinate to all mortgages and deeds Of trust, and to all ground or underlying leases (if any), which may now or hereafter affect the real property Of which the demised premises form a part, and to all renewals, modifications, consolidations, re-castings, replacements and extensions thereof. It is the intention of the parties that this clause shall be self-operative and that no further instrument of subordination shall be necessary to effectuate such subordination of this Lease. However, in confirmation of such subordination's, Tenant shall execute and deliver within seven (7) days after any request of Landlord or its mortgagees any certificate that the Landlord or its mortgagees may request confirming such subordination's. Despite the foregoing, the party secured by any such mortgage or deed Or trust or purchaser at foreclosure thereof shall have the right at it" option and discretion to recognize this Lease and, in the event of any foreclosure sale under such mortgage or deed of trust, such party secured or purchaser at foreclosure sale may at its option require that this Lease remain in force thereafter; and in such event, the Tenant agrees that, in the event of any foreclosure of any such mortgage or deed of trust or conveyance in lieu of foreclosure, the Tenant will attorn to and recognize the purchaser at any such sale as its landlord under this Lease, and will execute, acknowledge and deliver promptly upon request Or Landlord or such mortgagee or any purchaser at or prior to foreclosure, any instrument which in the opinion of such party aforesaid requesting same is necessary or appropriate to evidence such attornment by Tenant and/or the subordination of such mortgage or deed of trust to this Lease. The Tenant hereby waives the provisions of any statute or rule of law, now or hereafter existing, which may give or purport to give Tenant any right to terminate or otherwise adversely affect this Lease and Tenants obligations hereunder in the event of any such foreclosure or conveyance in lieu of foreclosure. At the option Of any lessor under any ground or underlying lease to which this Lease is now or may hereafter become subject or subordinate, Tenant agrees that neither the cancellation nor termination of such ground or underlying lease shall by operation of law or otherwise result in cancellation or termination of this Lease or the obligations Or Tenant hereunder, and Tenant will attorn to such ground lessor or to any successor to Landlord's interest in such ground or underlying lease, and in such event this Lease shall continue as a direct lease between Tenant and such ground lessor or its successor. Any mortgagee or purchaser at foreclosure, and any such ground lessor or its successor under any such ground or underlying lease who requests such attornment shall not (a) be bound by any prepayment of rent or additional rent for more than thirty (30) days in advance Or the due date Or such rent or which Tenant might have paid for more than the current month to any prior lessor (including Landlord); (so that rent shall be payable after such deed of trust or mortgage foreclosure or termination of the ground or underlying lease, as the case may be, in case of a requested attornment as aforesaid, in accordance with the terms of this Lease as if such prepayment Of rent for more than one month in advance had not been made), nor (b) be bound by any amendment or modification to this Lease or: by any waiver or forbearance on the part of any prior lessor (including Landlord) made or given without the prior written consent of Landlord's mortgagees and (if any) ground lessor; nor (c) be liable for any act or omission of any prior lessor (including the Landlord); nor (d) be subject to any 27 offsets or defenses which Tenant might have against any prior lessor (including Landlord); nor (e) be bound by nor subject to any provisions of this Lease which confer on Tenant any rights or options to lease additional space, or which grant Tenant any indemnification from Landlord; and furthermore, Landlord 'a mortgagees shall be discharged Or any responsibility hereunder to Tenant which may have arisen (by reason of the mortgagee becoming a mortgagee in possession, a lessor or otherwise) after such mortgagee disposes of its interest in the building of which the demised premises forms a part. Tenant hereby agrees not to look to Landlord's mortgagees, as mortgagees, mortgagees in possession, or successor in title to the building or to any leasehold interest in the land for accountability for any security deposit required or held by Landlord hereunder, unless and to the extent that such sums have actually been received by said mortgagees as security for Tenant's performance of or under this Lease. 24. Eminent Domain. (A) In the event that the whole of the building shall be lawfully condemned or taken in any manner for any public or quasi-public use, this Lease and the term and estate hereby granted shall forthwith cease and terminate as of the later to occur of the date of vesting of title in such condemnation or taking or the date of taking of possession by the condemning authority (such later date, whether with reference to a complete or partial taking of the building, being referred to hereinafter as the "taking date.), and the Tenant shall have no claim against Landlord. In the event that only a part of the building shall be so condemned or taken, then (a) if substantial alteration or reconstruction of the building shall, in the opinion of Landlord, be necessary or desirable as a result of such condemnation or taking (whether or not the demised premises are affected thereby), this Lease and the term and estate hereby granted may be terminated, effective as of the taking date, by and at the exclusive option of Landlord by giving notice of such termination to Tenant on or before the date which is sixty (60) days following the taking date, and (b) if such condemnation or taking shall be Of a substantial part Of the demised premises or Of a substantial part Of all means of access thereto, this Lease and the term and estate hereby granted may be terminated by Tenant, effective as of the taking date, by its giving notice of such termination to Landlord on or before the date which is thirty (30) days after the taking date, or (c) if neither Landlord nor Tenant elects to terminate this Lease, as aforesaid, this Lease shall be and remain unaffected by such condemnation or taking, except that this Lease and the term and estate hereby granted with respect to the part of the demised premises (if any) so condemned or taken shall expire on the taking date, and except that the fixed rent payable hereunder shall be appropriately reduced after the taking date in proportion to the area of the demised premises so taken or condemned. In the event that only a part of the demised premises shall be so condemned or taken and this. Lease and the term and estate hereby granted with respect to the remaining portion of the demised premises are not terminated as hereinbefore provided, Landlord shall proceed with reasonable diligence to restore the remaining portion of the demised premises (other than Tenant's personal property or any Or Tenant's goods, furniture or furnishings, Tenant at its own expense to repair same) as nearly as practicable to it's condition prior to such condemnation or taking. (B) In the event of any condemnation or taking of all or a part of the building, Landlord shall not be liable to Tenant in damages or otherwise, and Landlord shall be entitled to receive the entire award in the condemnation proceeding, including also any award made for the value of the estate vested by this Lease in Tenant, and Tenant hereby assigns to Landlord any and all right, title and interest of 21 28 Tenant now or hereafter arising in or to any such award or any part thereof, and Tenant shall be entitled to receive no part of such award. However, nothing herein contained shall preclude Tenant at its own expense in a separate action from Landlord's condemnation proceedings, from claiming against the condemning authority any compensation to which Tenant may otherwise lawfully be entitled in such case in respect of Tenant's personal property or for moving to a new location, provided that such claims Of and award to Tenant do not reduce or adversely affect Landlord's claims or award for the taking of Landlord's fee simple or leasehold interest in the demised premises and the building, the land or Landlord 'a interest in this Lease. 25. Successors. It is agreed that all rights, remedies and liabilities herein given to or imposed upon either of the parties hereto, shall extend to their respective heirs, executors, administrators, successors and (subject to Paragraph 5 hereof) assigns. 26. Tenant Holdover. If the Tenant shall, with the knowledge and consent of the Landlord, continue to remain in the demised premises after the expiration of the term of this Lease, then and in that event, Tenant shall, by virtue Of this Lease become a tenant by the month at the greater Of (i) the monthly rental payable in the last month of the immediately preceding expired term hereof, or (ii) the then prevailing rental rate, as determined from time-to-time in the sole and absolute discretion of Landlord (the "hold over rents). Said monthly tenancy shall commence with the first day next after the end of the term above demised; and said Tenant shall give to the Landlord at least thirty (30) days' prior written notice of any intention to quit the demised premises, and Tenant shall be entitled to thirty (30) days' written notice to quit the demised premises, except in the event Of nonpayment of rent in advance or the breach Or any other covenant by the said Tenant, in which event Tenant shall not be entitled to any notice to quit, the statutory thirty (30) days' notice and all other notices to quit being hereby expressly waived by Tenant. However, if Tenant shall hold over after the expiration of the term hereby created, and if the Landlord shall desire to regain possession of the demised premises promptly at the expiration of the term aforesaid, then at any time prior to Landlord's acceptance of rent from the Tenant as a monthly tenant hereunder, the Landlord, at Landlord's option, may forthwith re-enter and take possession of the demised premises without process, or by any legal process in force; and Tenant's failure to timely surrender possession at the expiration hereof shall be a default by it under this Lease and entitle Landlord to exercise any or all available remedies. Furthermore, notwithstanding the foregoing, in the event Tenant shall wrongfully hold over subsequent to the expiration of the term of this Lease, Landlord shall in lieu of rent be entitled to demand and receive from Tenant monthly use and occupancy payments for each month in which Tenant shall wrongfully hold over subsequent to the expiration of the term of this Lease, such payments to be in an amount equal to twice the monthly rental payable in the last month of the immediately preceding expired term Of this Lease. Each such use and occupancy payment shall be due on or before the first day of each calendar month in which Tenant shall wrongfully hold over hereunder. In no event shall Landlord's demand or acceptance of such use and occupancy payments be considered to constitute an acquiescence by Landlord to the extension of the term hereof, and Landlord shall be entitled to obtain immediate possession of the demised premises, irrespective of any such demand or acceptance. In the event Tenant shall pay monthly use and occupancy payments for 29 any calendar month following expiration of the term hereof, such payment shall be prorated on a per diem basis upon Tenant's surrender of full and exclusive possession of the premises to the Landlord, free of all subtenants and any other parties claiming by, through or under the Tenant. Tenant hereby expressly and irrevocably waives the right to any notice required to be given by Landlord pursuant to Section 8-402 of the Real Property Article of the Annotated Code of Maryland, as amended. 27. Mutual Waiver of Claims. Anything herein contained to the contrary notwithstanding, the Landlord and Tenant do each hereby release the other from any and all liability for any lose or damage to their respective properties caused by fire or any of the other casualties covered by the risks included in extended coverage insurance. This limited mutual release is given notwithstanding that such fire or other casualty shall have resulted from the act, omission or negligence of Landlord or Tenant or their respective agents, employees, licensees or contractors. Landlord and Tenant agree to cause their respective insurance policies covering the building and/or the demised premises and contents thereof to contain an appropriate endorsement whereby the insurer agrees that the insurance policy and coverage will not be invalidated by reason Of the foregoing waiver of the right of recovery against Landlord or Tenant, respectively, for loss occurring to the properties covered by such policies, and whereby such insurers also waive any right of subrogation against the Landlord and Tenant (as the case may be); and each party will, upon request, deliver to the other a certificate evidencing such waiver of subrogation by the insurer. However, the provisions of this Section 27 shall not be operative during any period of time when such "waiver of subrogation" feature is not available from insurance companies licensed to do business in the State of Maryland. 28. Tenant Ad. After Landlord tenders to Tenant possession of the demised premises, Tenant and its staff during the term hereof shall have access to the demised premises on a twenty-four (24) hours per day, seven (7) days per week basis by means of a computerized card access control system or such other access control system as Landlord shall determine from time to time; subject, however, to all of the terms and provisions of this Lease. 29. Landlord's Work. (A) Attached hereto as Exhibit "E" is a preliminary plan which contains a complete description, mutually approved by Landlord and Tenant, of all partition, electrical, telephone and other work and requirements which shall comprise the work ("Landlord's Work") to be performed for the demised premises by Landlord or Landlord's contractor. Landlord shall not be required to perform any work for the demised premises, other than the Landlord's Work described on Exhibit "E". The costs of Landlord's Work shall be paid as follows: (i) Landlord shall pay up to and including (but not exceeding) the first Eighty-seven Thousand Five Hundred Dollars ($87,500.00) of the costs Of Landlord's Work (said amount herein called the Work Allowances); and (ii) Tenant shall pay to Landlord, in accordance with Section 29(C) hereof, all costs Of Landlord's Work that exceed the Work Allowance (such amounts to be paid by Tenant being herein called the Tenant Portion.). Tenant also shall pay the entire coats of all Change Orders and of all Additional Work, in accordance with Section 29(C) hereof. Landlord shall perform the Landlord's Work, or shall cause same to be performed by Landlord's contractor, as selected by Landlord. It is further agreed that all costs to perform, and all costs of designs, plans and 30 specifications and working drawings for, any work in excess of the Landlord's Work called for on Exhibit "E" and which Tenant may at any time request Landlord to perform and which Landlord may approve (the "Additional Work"), shall be paid by Tenant to Landlord as called for Section 29(C) hereof. Exhibit "E" has been prepared and furnished by Tenant and is herein sometimes referred to as the "Preliminary Plans", same being hereby approved by Landlord and Tenant; from which Landlord shall cause its architect to prepare working drawings for Landlord's Work. Tenant will cooperate in and will approve within five (5) days after Landlord's request, any request from Landlord for such revisions of the Preliminary Plans as Landlord's architect may deem necessary in order to facilitate preparation of the working drawings for Landlord's Work or to comply with applicable building codes or to meet any special requirements of the building. (B) Tenant will meet with and fully cooperate with (and will cause its space planner to do so) Landlord's space planner/designer for development of the working drawings for Landlord's Work, whenever requested to do so by Landlord. Within five (5) days after Landlord's submission of working drawings for Landlord's Work, the Tenant shall note its approval thereon and sign or initial same and return same to Landlord (such working drawings as mutually approved by Landlord and Tenant being herein called the Approved Working Drawings"). If Tenant fails to comply with any of Tenant's obligations, duties or agreements specified in this Section 29 by the date stated or within the time specified, then any delays in the substantial completion of Landlord's Work shall not in any manner postpone or otherwise affect the Lease Commencement Date or Tender Date specified in this Lease, or the Tenant's liability for the payment of rent from such Lease Commencement Date, and under such circumstances Landlord agrees to make the demised premises ready for Tenant's occupancy not later than the Lease Commencement Date, plus the number of days' delay resulting from Tenant's failure to comply with the provisions of this Section 29. If any work performed or to be performed by Tenant's contractors delays Landlord's Work or delays Tenant's occupancy by the Lease Commencement Date, or if any Change Orders or requests by Tenant therefor or any acts, omissions or defaults Of Tenant or its agents, employees or contractors or the inclusion of any Special Items in Landlord's Work delays Landlord's Work or the acquisition Or permits for Landlord's Work or a certificate Of use and occupancy for the premises, all as determined by Landlord (any or all such events being collectively included as "Tenant Delays"), then in any such event Tenant shall nevertheless remain liable for the payment Of rent and all other sums and for performance of all other obligations Of Tenant hereunder from the date (the "Assumed Tender Date") when Landlord could have substantially completed Landlord's Work absent any Tenant Delays, as determined by Landlord. (C) Tenant shall pay to Landlord all costs Of any "Change Orders" (defined below) and all costs of all Additional Work, and the Tenant Portion of the costs Of Landlord's Work as mentioned in Section 29(A) hereof (all such costs being collectively herein referred to as the "Coat Works), in accordance with this Section 29(C). Landlord shall not be required to commence performance of said Cost Work unless Tenant agrees to make payment of the costs thereof in a manner and within a specific time acceptable to the Landlord. Such undertaking by the Tenant for payment of the Cost Work shall be Set forth in a separate memorandum agreement (or by an addendum or amendment to this Lease) and/or in a promissory note, as 31 designated by the Landlord. Tenant agrees to execute and deliver such instruments to Landlord (the "Costs document") within five (5) days after Landlord's request, and Tenant agrees to make timely and full payments of said amounts when and as therein required. (D) For all purposes of this Lease, it is agreed that Landlord's Work for the demised premises shall be deemed completed when Landlord certifies to Tenant that such work has been "substantially completed". The phrase "substantially completed", or words of similar import as used in this Lease, shall mean that the Landlord's Work has been performed "excluding any portion thereof which is delayed due to the inclusion in Landlord's Work of any (and excluding the incomplete or unperformed status of any) "Special Items" or "Change Orders", and excluding "Punch List Items"), to the extent reasonably necessary to enable the Tenant to install its furniture and office equipment in the premises; all as determined by Landlord. The Tenant agrees to fully cooperate and assist Landlord on request in efforts to obtain a certificate of occupancy for the premises. For purposes hereof, (a) "Special Items" means any elements of Landlord's Work which are not readily available in adequate quantities in the Washington, D.C., Metropolitan Area, as determined by Landlord's contractor; and (b) "Change Orders" means any changes in the Landlord's Work requested by Tenant, from the work shown on the Exhibit "E" Preliminary Plans or requested by Tenant after Landlord receives the Approved Working Drawings; and (c) "Punch List Items" means minor incomplete elements of Landlord's Work which do not materially interfere with use or occupancy of the demised premises for the purposes permitted in the Lease, as determined by Landlord. If any Tenant Delays delay Landlord's Work, then Landlord's Work shall be deemed substantially completed when same could have been completed absent such Tenant Delays, as determined by Landlord. (E) Tenant covenants and agrees that Tenant and its contractors shall not commence or perform any decoration or other work in the demised premises or installation of its furniture, decorations, cabling, wiring, equipment or other property therein, nor apply for any permits for any such work, until notified by Landlord that Tenant may do so. Tenant shall not use any labor in the performance of its work which conflicts with the type of labor engaged by Landlord to perform Landlord's Work hereunder or any other work in the building, and Tenant shall immediately cease the use of any conflicting labor upon Landlord's request. If any work done by Tenant causes any delay in Landlord's Work, then rental shall not abate nor shall the term hereof be extended by the period of any such delays. Any breach by Tenant or its contractors under this paragraph, and any delay in substantial completion-of Landlord's Work or acquisition of permits therefor or a certificate of occupancy for the premises, shall be deemed Tenant Delays for all purposes of this Lease. Tenant agrees to immediately withdraw any permit application filed by or for it in violation of this paragraph. 30. Pronouns. Feminine or neuter pronouns shall be substituted for those of the masculine form, and the plural shall be substituted for the singular number, in any place or places herein in which the context may require any such substitutions. The Landlord herein for convenience has been sometimes referred to in neuter form. 31. Jury Trial Waiver. Landlord and Tenant hereby waive trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other on or in respect of any matter whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord and 32 Tenant hereunder, Tenant 'a use or occupancy of the demised premises, and/or claim of injury or damage. 32. Notices. All notices required or desired to be given hereunder by either party to the other shall be given in writing by first class registered or certified mail, return receipt requested, with proper postage prepaid, or by hand delivery with dated receipt therefor obtained. Notices to the respective parties shall be addressed as follows: if to Landlord; c/o Community Realty Co., Inc. 6305 Ivy Lane, Suite 210 Greenbelt, Maryland 20770 If to Tenant: Prior to the Lease Commencement Date: 12510 Prosperity Drive Suite 100 Silver Spring, Maryland 20904 After the Lease Commencement Date: At the demised premises Either party may by like notice given at least seven (7) days in advance of the date such change becomes effective, designate a new address to which notices shall be directed to it. 33. Security Deposit. Simultaneously with the execution of this Lease, Tenant shall deposit with Landlord, in addition to the first monthly installment of basic monthly rent, an additional Ten Thousand Six Hundred Seventy-seven and 08/lOO Dollars ($10,677.08) as a security deposit. Such security deposit (which shall not bear interest to Tenant) shall be considered as security for the payment and performance by Tenant of all of Tenant's obligations, covenants, conditions and agreements under this Lease. Within twenty (20) days after the expiration of the term hereof, Landlord shall (provided that Tenant is not in default under the terms hereof) refund such security deposit to Tenant, less such portion thereof as Landlord shall have applied to make good any default by Tenant with respect to any of Tenant's obligations, covenants, conditions or agreements under this Lease. In the event of any default by Tenant hereunder, Landlord shall have the right, but shall not be obligated, to apply all or any portion of the security deposit to cure such default, in which event Tenant shall be obligated to and will, within five (5) days after request from Landlord, deposit with Landlord the amount necessary to restore the security deposit to its original amount aforesaid at all times. The use of said security deposit by Landlord, as aforesaid, shall not excuse Tenant's liability for defaults hereunder nor limit Landlord's remedies. In the event of the sale or transfer of Landlord's interest in the building, Landlord shall transfer the security deposit to such purchaser or transferee, in which event Tenant shall look only to the new landlord for the return of the security deposit, and Landlord shall thereupon be released from all liability to Tenant for the return of such security deposit. Tenant agrees that it will not look to any mortgagee, as mortgagee, mortgagee in possession, or successor in title to the building, for accountability for any security deposit or related sums held by Landlord or its successor lessors hereunder, unless and only to the extent such sums have actually been received by said mortgagee. 33 34. Lien for Rent. In consideration of the mutual benefits arising under this Lease, the Tenant hereby grants to Landlord a lien on all property of the Tenant in or on the demised premises (except such part of any property that may be exchanged, replaced or sold from time to time in the ordinary course of business operation of the Tenant while not in default under this Lease), and such property shall be and remain subject to the lion of Landlord for the payment of all rental and other sums agreed to be paid by the Tenant herein. Said lien shall be in addition to any lien provided to the Landlord by law. 35. Landlord's Liability. It is expressly hereby agreed that the obligations of the undersigned Landlord shall only bind the party or parties from time to time owning the building during either respective periods of ownership thereof; so that Landlord and its successors in interest respectively shall cease to have any liability hereunder after they respectively cease to own the building, and such liability shall pass to and bind only the owner from time to time of the building as landlord hereunder. Further, the liability of Landlord hereunder shall be limited solely to Landlord's interest in the building, and in no event shall Tenant be entitled to obtain a deficiency judgment against any partner, agent, officer, director or stockholder of Landlord, nor shall Tenant have recourse to any assets or property of Landlord or of any partners in Landlord (other than Landlord's interest in the building) for enforcement of any obligations of Landlord under this Lease. Landlord and Tenant shall not be deemed by virtue of this Lease to be partners or joint venturers, and their relationship hereby established is deemed to be only that of lessor and lessee, respectively. 36. Entire Aqreement. This Lease, together with the exhibits referenced herein, attached hereto and made a part hereof, and any Addendum annexed hereto and executed by Landlord and Tenant, contain and embody the entire agreement of the parties hereto, and no representations, inducements or agreements, oral or otherwise between the parties not contained and embodied in this Lease and said exhibits hereto, shall be of any force or effect. This Lease may not be modified or changed in whole or in part in any manner other than by an agreement in writing duly signed by all parties hereto or their successors in interest. 37. Fire Insurance Increases. Tenant will not carry on any activity in or about the demised premises, nor abutting said premises nor in or about the building, nor do or cause anything to be done thereat, which is contrary to any Governmental Requirements; and Tenant shall not permit nor do anything which would increase the basic rate of the fire insurance or any other insurance carried by Landlord, as established by the appropriate agency having jurisdiction. For purposes of definition herein, the "basic rate" shall be such rate as is published by the said appropriate agency, exclusive, however, of any excess or surcharges appended thereon by virtue of or attributable to so-called faults of management. If Tenant's use of or activities or occupancy at the demised premises causes an increase in the Landlord's insurance premiums or rate for the demised premises over and above the basic premiums and/or rate for construction of its type occupied for the purposes permitted hereunder, then Tenant, upon written notice from Landlord, shall immediately take all necessary steps to eliminate the excess charge attributable to such faults of management. Should Tenant refuse or fail to take such action as may be necessary to eliminate the cause for said excess charges, Tenant shall pay to Landlord on demand in addition to all other rentals and other sums payable hereunder, that portion of the aforesaid fire and extended coverage and other insurance premiums caused by such excess charge on all 34 outstanding insurance carried on the demised premises and on the building of which they form a part. 38. Miscellaneous. (A) Governing Law. This Lease shall be governed by and construed in accordance with the laws of the State of Maryland. (B) Severability. If any covenant or agreement of this Lease or the application thereof to any person or circumstance shall be held to be invalid or unenforceable, then and in each such event the remainder of this Lease or the application of such covenant or agreement to any other person or any other circumstance shall not be thereby affected, and each covenant and agreement hereof shall remain valid and enforceable to the fullest extent permitted by law. (C) Mechanics Liens. The Tenant shall not do or suffer anything to be done whereby the land and/or building of which the demised premises are a part may be encumbered by any mechanic's or material men's lien. Tenant shall, whenever and as often as any mechanic's or materialmen's lien is filed against the said land and/or building purporting to be for labor or material furnished or to be furnished to the Tenant, discharge such liens of record within ten (10) days after the date of filing thereof. Notice is hereby given that the Landlord shall not be liable for any labor or materials furnished or to be furnished to the Tenant upon credit, and that no mechanic's or material men's or other lien for any such labor or materials shall attach to or affect the reversionary or other estate or interest of the Landlord in and to the land and building of which the demised premises are a part. Tenant shall indemnify, defend and save harmless Landlord and Landlord's mortgagees and (if any) ground lessors from any such liens and all claims, costs and expenses relating thereto. (D) Captions. The paragraph captions and headings throughout this Lease are for convenience of reference only, and the words contained in such captions shall in no way be held or deemed to define, limit, describe, explain, modify, amplify or add to the interpretation, construction or meaning of any provision of this Lease. (E) Broker. Landlord hereby recognizes Community Realty Company, Inc. (CRC) representing Landlord and Spaulding and Slye representing (Tenant together herein sometimes referred to as the brokers), as the only real estate brokers involved in the procuring and negotiation of this Lease. Landlord has agreed to pay said Brokers for their services in procuring this Lease a leasing commission in an amount and upon terms agreed upon between Landlord and said Brokers by separate written agreement. Tenant covenants and agrees to indemnify, defend and hold Landlord and CRC harmless from all obligations to pay any leasing brokerage commission to any broker (other than said two Brokers), engaged by Tenant in connection with this Lease. Tenant further represents that it has dealt with no broker in connection with this Lease other than the two (2) aforenamed Brokers, and Tenant shall hold Landlord and CRC harmless from and against any and all liability, 1088, damage, expense, claims, actions, demands, suits and obligations arising out of or relating to a breach by Tenant of its representations in this paragraph. (F) No Liability. Landlord shall not be liable to Tenant, its employees, agents, business invitees, licensees, customers, clients, family members or guests for any damages, compensation or claim arising from the necessity of repairing any areas of the premises or the building, the interruption of 35 the use or occupancy of the premises, any accident or damage resulting from the use or operation (by Landlord, Tenant, or any other person or persons whatsoever) of elevators or heating, cooling, electrical or plumbing equipment or apparatus; or the termination of the Lease by reason of the destruction of the premises; or from any fire, robbery, theft, mysterious ~: DISAPPEARANCE and/or any other casualty or from any leakage in all or any part of the premises or the building, or from water, rain or snow that may leak into or flow from any part of the premises or the building, or from drains, pipes, or plumbing work in the building, or from any other cause whatsoever. Any goods, property or personal effects, stored or placed by the Tenant or its employees in or about the premises or building, shall be there at the risk of the Tenant; it being agreed that Landlord shall not in any manner be held responsible therefor. The employees of the Landlord are prohibited from receiving any packages or other articles delivered to the building or Tenant, and if any such employee receives any such package or articles, such employee shall be the agent of the Tenant for such purposes and not the agent of the Landlord. (G) Tenant's Equipment. Business machines and mechanical equipment belonging to Tenant which cause noise or vibration that may be transmitted to the structure of the building or to any space therein to such a degree as to be objectionable to Landlord or to any other tenant in the building shall be installed and maintained by Tenant, at Tenant's expense, on vibration eliminators or other devices sufficient to eliminate such noise and vibration. (H) Intentionally Deleted. (I) Reserved Rights. Landlord reserves the right at any time and from time to time, as often as Landlord deems desirable, without the same constituting an actual or constructive eviction and without incurring any liability to Tenant or otherwise affecting Tenant's obligations under this Lease, to make changes, alterations, additions, improvements, repairs, relocations or replacements in or to the building and the fixtures and equipment thereof, as well as in or to the street entrances, halls, passages, stairways and other common facilities thereof, and to change the name by which the building is commonly known and/or the building's address. Landlord reserves the right from time to time to install, use, maintain, repair and replace pipes, ducts, conduits, wires and appurtenant meters and equipment for service to other parts of the building, above the ceiling surfaces, below the floor surfaces, within the walls and in the central core areas of the demised premises, and to relocate any pipes, ducts, conduits, wires and appurtenant meters and equipment included in the demised premises which are located in the demised premises or located elsewhere outside the demised premises. Landlord further reserves the right at any time to alter, expand or reduce the parking facilities, to change the means of ingress thereto and egress therefrom, and to impose charges for parking in such facilities. Nothing contained herein shall be deemed to relieve Tenant of any duty, obligation or liability with respect to making any repair, replacement or improvement or complying with any law, order or requirement of any government or other authority; and nothing contained herein shall be deemed or construed to impose upon Landlord any obligation, responsibility or liability whatsoever, for the care, supervision or repair of the building, or any part thereof, other than as expressly provided in this Lease. Landlord shall exercise reasonable efforts to minimize any interference with Tenant's use and enjoyment of the demised premises and reasonable means of access to the premises, in exercising Landlord 'a rights under this Section 38(I). 36 (J) Rules of Construction. The parties acknowledge that each party and its counsel have reviewed and revised this Lease, and the parties hereby agree that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Lease or any amendments thereto.(X) Draft Not Binding. Submission of this Lease in any number of drafts unexecuted by Landlord and Tenant shall not constitute, nor shall any negotiations between Landlord and Tenant constitute, a legally binding obligation of Landlord and Tenant of any kind; it being agreed that this Lease shall only be binding upon Landlord and Tenant when fully executed by Landlord and Tenant with a counterpart fully executed original hereof received by each of said parties. 39. Ouiet Enjoyment. Provided that Tenant is not in default under this Lease, Tenant shall be entitled to use and occupy the demised premises during the term hereof for the purposes herein permitted and subject to the terms and conditions herein contained, without molestation or interference by Landlord. 40. Automobile Parking Areas. Any exterior parking areas adjacent to the building which may be Set aside by Landlord for the parking of automobiles of lessees in the building may be used by Tenant and Tenant's employees, visitors and invitees (on an unreserved basis), without payment by Tenant of any parking space rentals therefor, during the term of this Lease while engaged in business in the building, for the parking of their automobiles, in common with like use by other lessees of space in the building. The use of acid automobile parking areas by Tenant and Tenant's employees, visitors and invitees shall be at their sole risk and expense, and in no event shall Landlord have any liability for personal injury to Tenant or its employees, staff or invitees, or for damage to, theft or lose of property of the Tenant or of Tenant 'a employees, visitors or invitees suffered or sustained in or about said parking areas. Said parking areas shall be under the exclusive control of Landlord or its management agent or parking operator, who shall have the right to establish rules and regulations governing the use of said parking areas, and the right to change such rules and regulations from time to time. Tenant agrees to keep, observe and comply with all such rules and regulations so established by Landlord or its management agent or parking operator, and will direct and require its employees, visitors and invitees to comply therewith. No employee of Landlord is authorized to accept possession of any vehicle from the Tenant or from Tenant's employees, visitors or invitees, nor to accept custody of any articles from Tenant. Upon expiration or termination of this Lease, Tenant will cause its automobiles and those of its personnel to be removed from the parking arena. 41. Lender Requirements. In the event that Landlord's lender(s) providing deed of trust financing for the building require(s) as a condition of such financing, that modifications to this Lease be made, and provided that such modifications (i) do not adversely affect Tenant's use of or access to the demised premises as herein permitted, (ii) do not increase the rent and other sums required to be paid by Tenant hereunder, and (iii) do not materially adversely affect Tenant's rights under this Lease, then Landlord may submit to Tenant a written amendment to this Lease incorporating such required modifications, and Tenant shall execute and return to Landlord such written amendment within ten (10) days after the same has been submitted to Tenant. 37 42. Garage Parking. (A) Subject to the terms and conditions of this Section 42, Tenant shall have the right during the term of this Lease, while it occupies the entire demised premises but ending upon the expiration of or any termination of this Lease, to lease from Landlord or its garage operator three (3) reserved parking spaces in the garage of the building for use by Tenant's staff (the "Reserved Spaces") at locations in the garage as determined by Landlord, upon payment of garage rent for said Reserved Spaces at the monthly rate in force from time to time as determined by Landlord or its garage operator (which rental rate is now S50.00 per month per garage space leased, and is subject to increases as determined by Landlord or its garage operator) plus all parking taxes which may be levied from time to time by governmental authorities. Landlord reserves and shall have the right to relocate the Reserved Spaces from time to time as necessary for the safety, protection or security of the building, or as necessary for the leasing of space in the building or for operation of any of the building's equipment; all as determined by Landlord. (B) Tenant shall execute and deliver to Landlord or its garage operator, within five (5) days after request, such parking space rental agreement as Landlord may from time to time require covering the Reserved Spaces; and Tenant shall pay to Landlord the garage rent plus all parking taxes for said Reserved Spaces when and as required in the parking space rental agreement. Tenant shall comply, and shall cause its staff using such garage spaces to comply, with the rules and regulations established from time to time by Landlord or its garage operator for the use of and access to the said Reserved Spaces. Upon any termination or expiration of this Lease, Tenant will cause its or its staff's automobiles to be removed from the garage, and said parking space rental agreement held by Tenant shall terminate. Such parking shall be self-parking (not valet parking), unless otherwise determined from time to time by Landlord or its garage operator. (c) If Tenant does not timely execute and deliver to Landlord the parking space rental agreement covering the Reserved Spaces, then such Reserved Spaces may be leased by Landlord or its garage operator to others, and Tenant's rights under this Section 42 to lease the Reserved Spaces so leased to others shall be subject to such Reserved Spaces again becoming available for leasing to Tenant only after expiration of the leasing thereof (including all renewals of such leases) by Landlord to such other parties. Tenant's rights under this Section 42 shall not be assignable. IN WITNESS WHEREOF, Landlord has caused these presents to be signed and sealed by its undersigned Agent, and the Tenant has hereunto set his hand and seal (or the Tenant has caused these presents to be signed in its 38 corporate name by its duly authorized officer and its corporate seal to be hereto affixed and duly attested by its Secretary), all done as of the date first above written. LANDLORD COMMUNITY REALTY CO., INC., Agent for: ELEVENTH SPRINGHILL LAKE ASSOCIATES L.L.L.P. By: (SEAL) - ------------------------- ---------------------------- WITNESS President TENANT: ASTROTECH SPACE OPERATIONS, INC. ATTEST: By: ---------------------------- Name: - ------------------------- -------------------------- Title: ------------------------- 39 EXHIBIT "B" DECLARATION BY LANDLORD AND TENANT AS TO DATE OF DELIVERY AND ACCEPTANCE OF POSSESSION OF LEASED PREMISES ATTACHED to and made a part of the Lease dated THE __________ DAY OF , 19 (THE "LEASE"), entered into by and between ELEVENTH SPRINGHILL LAKE ASSOCIATES L.L.L.P., a Maryland limited liability limited partnership as Landlord, and ASTROTECH SPACE OPERATIONS, INC., a corporation organized and existing under the laws of the State of Delaware, as Tenant, covering Suite No. 520 (the "leased premises") in the office building having street address of 6305 Ivy Lane, Greenbelt, Prince George's County, Maryland (the "Building"). The undersigned Landlord and Tenant do hereby declare that possession of the leased premises with Landlord's Work (as defined in the Lease) substantially completed by Landlord and accepted by Tenant was delivered to and accepted by Tenant on the ______ day of ______ 19 ____ , the Lease is now in full force and effect, and for the purpose of this Declaration and said Lease, the Lease Commencement Date is established as being the _______ day of ________ 19 ____,and the Lease expiration date is the day of ________ , 19 ____, and, as of the date hereof, there is no right to set-off against rents claimed by Tenant against Landlord. The "lease year", as that phrase is used in the Lease, commences on the ________ day of each month of ________ and ends on the last day of the succeeding month of. LANDLORD COMMUNITY REALTY CO., INC. Agent for: ELEVENTH SPRINGHILL LAKE ASSOCIATES L.L.L.P. By: ______________________ President TENANT: ASTROTECH SPACE OPERATIONS,INC. By: ____________________ Name: __________________ Title: ____________________ 40 EXHIBIT "C" RULES AND REGULATIONS Reference is made to the foregoing and annexed Lease of even date attached herewith (the "LEASE") to which these Rules and Regulations are made a part. Definition of terms are set forth in the Lease. The following rules and regulations have been formulated for the safety and well-being of all tenants of the Building and to insure compliance with all municipal and other requirements. Strict adherence to these rules and regulations is necessary to guarantee that each and every tenant will enjoy a safe and unannoyed occupancy in the Building in accordance with the Lease. Any continuing violation of these rules and regulations by Tenant, after notice from Landlord, shall be sufficient cause for termination of the Lease, at the option of Landlord. Landlord may, upon request by any tenant, waive the compliance by such tenant with any of these rules and regulations, provided that (i) no waiver shall be effective unless signed by Landlord or Landlord's authorized agent, (ii) any such waiver shall not relieve such tenant from the obligation to comply with such rule or regulation in the future unless expressly consented to by Landlord, (iii) no waiver granted to any tenant shall relieve any other tenant from the obligation of complying with the rules and regulations unless such other tenant has received a similar waiver in writing from the Landlord, and (iv) any such waiver by Landlord shall not relieve Tenant from any obligation or liability of Tenant to Landlord pursuant to the Lease for any loss or damage occasioned as a result of Tenant's failure to comply with any such rule or regulation. 1. The sidewalks, entrances, passages, courts, elevators, vestibules, stairways, corridors or halls or other parts of the Building not occupied by any tenant shall not be obstructed or encumbered by any tenant or used for any purpose other than ingress and egress to and from the premises and if the premise" are situated on the ground floor of the Building, the tenant thereof shall, at said tenant's own expense, keep the sidewalks and curb directly in front of premises clean and free from ice and snow. Landlord shall have the right to control and operate the public portions of the Building, and the facilities furnished for common USE of the tenants, in such manner as Landlord deems best for the benefit of the tenants generally. No tenant shall permit the visit to the premises of persona in such numbers or under such conditions as to interfere with the use and enjoyment by other tenants of the entrances, corridors, elevators and other common or public portions or facilities of the Building. 2. No awning or other projections shall be attached to the outside walls of the Building without the prior written consent of Landlord. No drapes, blinds, shades, or screens shall be attached to or hung in or used in connection with any window or door of the premises, without the prior written consent of Landlord. Such awnings, projections, curtains, blinds, shades, screens or other fixtures must be of a quality, type, design and color, and attached in a manner approved by Landlord. 3. No showcases or other articles shall be put in front of or affixed to any part of the exterior of the Building, nor placed in the halls, corridors or vestibules without the prior written consent of Landlord. 41 Page 2 4. The water and wash closets and other plumbing fixtures shall not be used for any purposes other than those for which they were constructed, and no sweepings, rubbish, rags, or other substances shall be thrown therein. All damages resulting from any misuse of the fixtures shall be borne by the tenant who, or whose servants, employees, agents, invitees or licensee shall have caused, the same. 5. There shall be no marking, painting, drilling into or in any way defacing the Building or any part of the premises. Tenant shall not construct, maintain, use or operate within the premises any electrical device, wiring or apparatus in connection with a loud speaker system or other sound system, except as reasonably required for its communication system and approved prior to the installation thereof in writing by Landlord. No such loud speaker or sound system shall be constructed, maintained, used or operated outside of the premises. 6. No bicycles, vehicles or animals, birds or pets of any kind shall be brought into or kept in or about the premises, and no cooking (except for micro-wave oven or hot-plate cooking by Tenant's employees for their own consumption, the location and equipment of which is first approved by Landlord) shall be done or permitted by any tenant on the premises. No tenant shall cause or permit any unusual or objectionable odors, vapors, or other substances to be produced upon or permeate from the premises. 7. No space in the Building shall be used for manufacturing of goods for sale in the ordinary course of business, for the storage of merchandise for sale in the ordinary course of business, or for the sale at auction of merchandise, goods or property of any kind. Furthermore, the use of the premises by each tenant as stated in its Lease was approved by Landlord prior to execution of the Lease and such use may not be changed without the prior approval of Landlord. 8. No tenant shall make any unseemly or disturbing noises or disturb or interfere with occupants of this or neighboring buildings or premises or those having business with them whether by the use of any musical instrument, radio, talking machine, unmusical noise, WHISTLING, MUSIC, dancing, singing, or in any other way. No tenant shall throw anything out of the doors or windows or down the corridors or stairs. 9. No inflammable, combustible or explosive fluid, chemical or substance shall be brought or kept upon the premises. 10. No additional locks or bolts of any kind shall be placed upon any of the doors or windows by any tenant, nor shall any changes be made in existing locks or the mechanism thereof. The doors leading to the corridors or main halls shall be kept closed during business hours except as they may be used for ingress or ogress. Each tenant shall, upon the termination of his tenancy, return to the Landlord all keys of stores, offices, storage and toilet rooms either furnished to, or otherwise procured by, such tenant, and in the event of the loss of any keys so furnished, such tenant shall pay to Landlord the loss thereof. Tenant's key system shall be separate from that for the rest of the Building. 42 Page 3 11. Landlord reserves the right to inspect all freight to be brought into the Building and to exclude from the Building all freight which violates any of these rules and regulations or the Lease. 12. No tenants shall pay any employees on the premises, except those actually working for such tenant on the premises. 13. Landlord reserves the right to exclude from the Building at all times any person who is not known or coos not properly identify himself to the Building management or watchman on duty. Landlord may, at its option, require all persons admitted to or leaving the Building between the hours of 6:00 PM and 8:00 AM, Monday through Friday, and at any hour, Saturdays, Sundays and legal holidays, to register. Each tenant shall be responsible for all persons for whom he authorizes entry into or exit out of the Building, and shall be liable to Landlord for all acts or omissions of such persons. 14. The premises shall not, at any time, be used for lodging or sleeping or for any immoral or illegal purpose. 15. Each tenant, before closing and leaving the premises at any time, shall see that all windows are closed and all lights turned off. 16. Landlord's employees shall not perform any work or do anything outside of their regular duties, unless under special instruction from the management of the Building. The requirements of the tenants will be attended to only upon application to Landlord and any such special requirements shall be billed to Tenant (and paid with the next installment of rent due) at the schedule of charges maintained by Landlord from time to time or at such charge as is agreed upon in advance by Landlord and Tenant. 17. Canvassing, soliciting and peddling in the Building is prohibited and each tenant shall cooperate to prevent the same. 18. There shall not be used in any space, or in the public halls of the Building, either by any tenant or by Jobbers or others, in the delivery or receipt of merchandise, any hand trucks, except those equipped with rubber tires and aide guards and Tenant shall be responsible to Landlord for any loss or damage resulting From any deliveries of Tenant's to the Building. 19. Mats, trash or other objects shall not be placed in the public corridors or stairways. 20. Landlord does not maintain suite finishes which are non-standard, such as kitchens, bathrooms, wallpaper, special lights, etc. However, should the need for repairs of items not maintained by Landlord arise, Landlord may elect to arrange for the work to be done at Tenant's expense. 43 Page 4 21. Drapes and blinds installed by Landlord or Tenant, which are visible from the exterior of the Building, must be cleaned by Tenant at roast once a year, without notice, at Tenant's own expense. 22. All office machines shall be installed upon proper insulation or pads, to prevent vibration from such machines damaging this Building or annoying other occupants. 44 EXHIBIT "D" TENANT ESTOPPED CrRTIFICATE This Certification made this _______________________________ day of _______________________ 19_______, by _______ ___________________ ________ . WITNESSETH: WHEREAS, by Lease Agreement dated (hereinafter referred to as "Lease") between ELEVENTH SPRINGHILL LAKE ASSOCIATES L.L.L.P., a Maryland limited liability limited partnership as Landlord (hereinafter referred to as "Landlord") and ASTROTECH SPACE OPERATIONS, INC., a corporation organized and existing under the laws of the State of Delaware, as Tenant (hereinafter referred to as "Tenant"), Landlord leased to Tenant certain space known as Suite No. ~e (the "leased premises") in an ~20 office building known by street address 6305 Ivy Lane, Greenbelt, Prince George's County, Maryland (the "Building"), for a term and upon the terms and conditions set forth in said Lesser and WHEREAS (hereinafter called "Lender") is about to disburse or has disbursed a mortgage loan to Landlord secured or to be secured by a Deed of Trust covering said office building and related improvements; and WHEREAS, Lender, as a condition to making said loan, requires confirmation of lease forms and provisions by Tenant. NOW, THEREFORE, Tenant knowing that Lender will rely on this Certification, and intending to be legally bound hereby, certifies to Lender as follows: 1. That the above mentioned Lease has not been changed, modified, amended or assigned by Tenant, and that said Lease is in full force and effect, and neither Landlord nor Tenant is in default thereunder. 2. That Tenant has accepted and taken possession of the leased premises demised to it pursuant to said Lease; has commenced payment of rental at the rate and upon the terms called for in said Lease, and certifies that the Lease term commenced on the day of 19 , and subject to option(s) to renew, the original term of the Lease will terminate on the day of 19 3. That all improvements for the leased premises have been fully completed by Landlord in accordance with plans and specifications approved by Tenant, and Tenant is in full and complete possession and occupancy thereof, and Tenant is paying rent under said Lease on a current basis. 4. That the Tenant has made no advances of funds for or on behalf of the Landlord for which it has the right to deduct from or offset against future rentals as of the date of this Certification. 45 EXHIBIT "D" Page 2 5. That the Tenant has not paid rent for more than the current month during which this Certificate is made. 6. That there are no rental offsets or claims, defenses or other offsets against or to enforcement of the Lease by Landlord. IN WITNESS WHEREOF, the undersigned has executed this Certification the day and year first above written. ATTEST/WITNESS TENANT: __________________________ ___________________________ 46 ~ PERKINS INTERIOR CONSTRUCTION, INC. 4041 POWDERMILL ROAD - SUITE 400 ~ CALVERION' MARYLAND 20705 ~ PHONE (301) 572-2863 - FAX: (301) 572-6901 Astrotech Space Operations COP 3 -5TH FLOOR 6,250 SQ. FT. Take-Off Dated 3/30/98 Revised for Tenant Drawing 3/30/98 Rev. 4/16/98 DEMOLITION: 413 Lft. Interior Partition 14 Interior Doors - 9-R.H; 5-L.H. 1 Pr. Double Suite Entry Doors 6 Pr. Bifold Doors - (1) 6'-0"; (3} 5'-0"; (2) 4'-0" 24 Duplex Outlets 3 Dedicated Duplex 10 Quad. Outlets 11 Computer Outlets 16 Telephone Outlets 6 Heat Pumps -removed and capped off 37 LR Rod &Shelf 560 Sq. Ft. VCT 591 Sq. Yds. Carpet Demo Ex. 2 x 4 Ceiling Tile Cleaning, Labor, Trash Removal 47 EXHIBIT E Perkins Interior Construction, Inc. 16 Apr. 98 - Page 2 of 3 Astrotech Space Operations COP 3-5th FLOOR 6,250 SQ. FT. Take-Of Dated 3/30/98 revised for Tenant Drawing 3/30/98 (Excl. Drywall Ceiling ) Rev. 4/16/98 NEW CONSTRUCTION: 420 Lft. Interior Partition 11 Interior Doors - 5L.H.; 6-R.H. - reuse 1 Pr. Doiuble Interior door w/glass inserts 5 Pr. Bifold Doors-(4) 4'-0", (1) 5'-0" 2 heat Pumps (relocated ) 16 Lft. Rod & Shelf (3 closets) 50 Lft. Fixed Shelving - 24" D; 10 Shelves - 5'-o" W.pt. grade plywd 1 PANTRY: 26Lft. P.L. Counter Top & Wall Cabinets; 17'6" Lft. Base Cabinet, Sink, Ultra-Hot, Disposal R.I., Permits, (2) Cold Water Line & Connections 610 Sq. Yds. 30oz. Cut Pile Carpet (L.L. Selection) w/ Vinyl Base throughout 750 Sq. Ft. V.C. T. @ File Rm, Equip. Rm & Pantry Paint & Point Up Replace 6,250 +/-Sq. Ft. Ceiling Tile Point up and Paint Ex. Ceiling Grid Relocate (69) 2x4 Light Fixtures Furnish & Install (11) new 2x4 Light Fixtures Furnish & Install (12) new Wall Washers (L.L. Selection) Furnish & Install (1) Downlight (L.L. Selection) NEW CONSTRUC11Oh": 420 48 11 1 s 2 16 ~0 1 Lit. Anterior Partition Astrotech Space Operations COP 3 -5TH FLOOR 6,250 SQ. FT/ Take-Off Dated 3/30/98 Revised for Tenant Drawing 3/30/98 (Excl. Drywall Ceiling ) Rev. 4/16/98 NEW CONSTRUCTION(CONT'D): Furnish & Install (1) 1 x 4 Surface Mounted Light (L.L. Selection) Electrical / Tel Mechanical at Ceiling Relocate / Modify Sprinkler Add/Relocate Fire Flashers, Speakers Reswitch & Recircuit Lights Cleaning, Labor, Trash Removal, Permits (1) Note: Per tenant drying dated 3/30/98 (2) Note: Existing slot diffusers and returns; to be relocated as required (3) ID Note: Scope of Landlord work does not include separate A/C unit and my work associated with A/C installation EX-11 12 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11 SPACEHAB, INCORPORATED AND SUBSIDIARY COMPUTATION OF EARNINGS PER COMMON SHARE
NINE MONTHS YEAR YEAR ENDED ENDED ENDED JUNE 30, JUNE 30, JUNE 30, --------------- ---------------- ----------------- 1996 1997 1998 --------------- ---------------- ----------------- Net Income and Adjusted Earnings: Net income applicable to common shareholders used for primary computations $29,828,743 $13,831,625 $ 9,604,465 ----------- ----------- ----------- Fully diluted adjustments: Savings in convertible note payable interest expense, net of tax 59,017 - 2,624,875 ----------- ----------- ----------- Adjusted net income applicable to common shareholders assuming full dilution $29,887,760 $13,831,625 $12,229,340 =========== =========== =========== Average number of shares of common stock used for basic computation 9,139,465 11,118,825 11,154,271 ----------- ----------- ----------- Diluted adjustments (1): Weighted Average Shares and Share Equivalents Outstanding: Stock options assumed exercised at ending fair market value 128,553 14,168 269,898 Assumed conversion of convertible debt 75,000 27,329 3,147,109 ----------- ----------- ----------- Total number of shares assumed to be Outstanding assuming full dilution 9,343,018 11,186,886 14,571,278 ----------- ----------- ----------- Earnings Common Per Share: Income per common share: Income before extraordinary item $ 3.26 $ 0.95 $ 0.86 Extraordinary item - 0.29 - ----------- ----------- ----------- Basic $ 3.26 $ 1.24 $ 0.86 =========== =========== =========== Income before extraordinary item $ 3.19 $ 0.95 $ 0.84 Extraordinary item - 0.29 - ----------- ----------- ----------- Diluted (1): $ 3.19 $ 1.24 $ 0.84 ----------- ----------- -----------
(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). EX-23 13 CONSENT OF KPMG PEAT MARWICK LLP 1 EXHIBIT 23 ACCOUNTANTS' CONSENT The Board of Directors SPACEHAB, Incorporated: We consent to incorporation by reference in the registration statements (Nos. 333-3634, 333-36779, 333-43159, and 333-43181) on Form S-8 and the registration statement (No. 333-43221) on Form S-3 of SPACEHAB, Incorporated of our report dated August 31, 1998, relating to the consolidated balance sheets of SPACEHAB, Incorporated and subsidiary as of June 30, 1997 and 1998, and the related consolidated statements of income, stockholders' equity (deficit), and cash flows for the nine months ended June 30, 1996 and the years ended June 30, 1997 and 1998, which report appears in the June 30, 1998, annual report on Form 10-K of SPACEHAB, Incorporated. /s/ KPMG PEAT MARWICK LLP KPMG PEAT MARWICK LLP McLean, VA September 17, 1998 EX-27 14 FINANCIAL DATA SCHEDULE
5 0001001907 SPACEHAB, INC. YEAR JUN-30-1998 JUN-30-1998 92,327,099 0 5,978,709 0 0 98,856,212 155,925,259 43,338,132 220,604,091 36,195,616 0 0 0 81,238,925 16,299 220,604,091 64,087,401 64,087,401 35,058,041 35,058,041 16,331,727 0 4,479,787 12,131,388 2,526,923 9,604,465 0 0 0 9,604,465 .86 .84
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