Exhibit 10.1

 

SPACEHAB, Incorporated

 

DEALER MANAGER AGREEMENT

 

September 2, 2005

 

Jefferies & Company, Inc.

As Lead Dealer Manager,

c/o Jefferies & Company, Inc.

520 Madison Avenue, 12th Floor

New York, New York 10022

 

Sanders Morris Harris Inc.

As Co-Dealer Manager,

c/o Sanders Morris Harris Inc.

600 Travis, Suite 3100

Houston, Texas 77002

 

Ladies and Gentlemen:

 

SPACEHAB, Incorporated, a Washington corporation (the “Offeror”), plans to
(1) make an offer (such offer, as it may from time to time be amended and
supplemented, the “Exchange Offer”) for up to $63,250,000 principal amount of
its 8% Convertible Subordinated Notes due 2007 (the “Outstanding Notes”) in
exchange for up to $63,250,000 principal amount of its 5.50% Senior Convertible
Notes due 2010 (the “New Notes”), and (2) engage in a solicitation of consents
(the “Consent Solicitation” and, together with the Exchange Offer, the
“Transactions”) from registered holders (“Holders”) of the Outstanding Notes to
certain proposed amendments (the “Proposed Amendments”) to the indenture dated
as of October 15, 1997 between the Offeror and First Union National Bank, as
trustee (the “Indenture”) governing the Outstanding Notes, each on the terms and
subject to the conditions set forth in the exchange offer and consent
solicitation materials (collectively, as such items may be amended, modified or
supplemented from time to time in accordance with this Agreement, the
“Transaction Materials”) copies of which have been delivered to the Dealer
Managers, including:

 

(a) The Registration Statement (as defined in Section 4(a) hereof);

 

(b) The Prospectus (as defined in Section 4(a) hereof);

 

(c) The Schedule TO, dated July 21, 2005;

 

(d) The Form of Letter of Transmittal and Consent (the “Letter of Transmittal”)
to be used by holders tendering Outstanding Notes pursuant to the

 

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Exchange Offer and to deliver consents pursuant to the Consent Solicitation,
including guidelines for certification of Taxpayer Identification Number on
Substitute Form W-9;

 

(e) The form of supplemental indenture that will give effect to the Proposed
Amendments (the “Supplemental Indenture”); and

 

(f) The form of press release, dated September 6, 2005, and all other press
releases relating to the Transactions.

 

The Offeror also will be seeking approval from the holders of its outstanding
common and preferred stock to amend the Offeror’s articles of incorporation to
increase the authorized number of shares of common stock that the Offeror may
issue to 60 million shares of common stock and the issuance of the New Notes and
common stock of the Offeror issuable upon conversion of the New Notes (the
“Proxy Solicitation”) through a proxy statement and related materials (the
“Proxy Statement”) to be filed with the Commission (as defined below).

 

The Offeror hereby appoints Jefferies & Company, Inc., as lead dealer manager
(the “Lead Dealer Manager”), and Sanders Morris Harris Inc., as co-dealer
manager (the “Co-Dealer Manager” and, together with the Lead Dealer Manager, the
“Dealer Managers”), exclusively, and each Dealer Manager hereby accepts its
appointment, as a Dealer Manager in connection with the Transactions and
authorizes each Dealer Manager to act on its behalf in accordance with this
agreement (the “Agreement”) and the terms of the Transaction Materials, which
Transaction Materials have been prepared by, or with the approval of, the
Offeror and has been or will be filed with the Securities and Exchange
Commission (the “Commission”) pursuant to the requirements of the Securities Act
of 1933, as amended, and the rules and regulations promulgated thereunder (the
“Act”), and the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder (the “Exchange Act”). The Dealer Managers are
authorized to use the Transaction Materials in connection with the solicitation
of tenders and consents along with such other offering materials and information
as the Offeror may prepare or approve (“Other Material”). The Dealer Managers
agree to furnish no written material to holders in connection with the
Transactions other than the Transaction Materials and Other Material. It is
understood that nothing in this agreement nor the nature of the Dealer Managers’
services shall be deemed to create a fiduciary or agency relationship between
the Lead Dealer Manager and the Co-Dealer Manager or between the Dealer Managers
and the Offeror. The Offeror has obtained its own tax, accounting and legal
advisors and are not relying on either Dealer Manager or their respective
counsel for such matters. The Co-Dealer Manager authorizes the Lead Dealer
Manager to act as lead dealer manager in connection with the Transaction and
(i) to agree, on its behalf, to any addition to, change in, or waiver of any
provision of, of termination of, this Agreement (other than additions to or
changes in this paragraph, and other than a waiver of, or reduction in fees to
the Co-Dealer Manager under Section 3), (ii) to exercise in its discretion all
the authority vested in the Lead Dealer Manager under this Agreement, and
(iii) except as otherwise set forth in this paragraph, to take any other action
as may seem advisable to the Lead Dealer Manager in respect of the Transaction
(including, without limitation, actions and communications with the Commission,
stock exchanges, and other regulatory bodies and organizations). The Co-Dealer
Manager waives and releases the Lead Dealer Manager from and against any and all
claims, causes of action, or liabilities of any kind

 

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that the Co-Dealer Manager has or may have to the extent they arise out of, or
in connection with, the Lead Dealer Manager’s exercise of its rights and
obligations as Lead Dealer Manager under this Agreement and in connection with
the Transactions. This Agreement is in addition to, and supplements, but does
not amend, replace or supercede the letter agreement between the Offeror and the
Lead Dealer Manager , dated March 2, 2005 (the “General Engagement Letter”),
except and only to the extent that the General Engagement Letter is inconsistent
herewith.

 

1. Solicitation of Tenders and Consents. On the basis of the representations and
warranties and agreements of the Offeror set forth in this Agreement and subject
to the other terms and conditions hereof, each Dealer Manager agrees to use its
reasonable best efforts to solicit tenders of Outstanding Notes pursuant to the
Exchange Offer and consents pursuant to the Consent Solicitation. Neither of the
Dealer Managers nor any of the Dealer Managers’ respective affiliates, partners,
directors, officers, consultants, agents, employees or controlling persons (if
any) shall have any liability to the Offeror or any other person for any act or
omission on the part of any securities broker or dealer (other than yourselves),
commercial bank or trust company that solicits tenders or consents, and neither
of the Dealer Managers nor any of such other persons or entities referred to
above shall have any liability to the Offeror or any person asserting claims on
behalf of or in right of the Offeror in connection with or as a result of either
the engagement of the Dealer Managers hereunder or any matter referred to in
this Agreement except to the extent that such liability results from such Dealer
Manager’s gross negligence or bad faith (and such gross negligence or bad faith
shall be determined on a separate and not a joint basis) in performing the
services that are the subject of this Agreement. In soliciting tenders or
consents, no securities broker or dealer (other than yourselves), commercial
bank or trust company shall be deemed to act as your agent, and you, as Dealer
Managers, shall not be deemed the agent of any other securities broker or dealer
or of any commercial bank or trust company. The obligations of the Dealer
Managers hereunder are several and not joint. The Offeror authorizes each Dealer
Manager to communicate with CapitalBridge, in its capacity as the information
agent (the “Information Agent”), with the registrar for the Outstanding Notes,
in its capacity as registrar (the “Registrar”), and with the depositary, in its
capacity as depositary (the “Depositary”), retained by the Offeror with respect
to matters relating to the Exchange Offer and the Consent Solicitation.

 

2. Covenants of the Offeror. The Offeror covenants and agrees with each Dealer
Manager that:

 

(a) The Offeror shall prepare the Transaction Materials in a form reasonably
approved by the Lead Dealer Manager and timely file the required Transaction
Materials with the Commission following its preparation. The Offeror shall not,
prior to expiration of the Transactions, make any amendment or supplement to the
Registration Statement, Prospectus or other Transaction Materials which shall be
reasonably disapproved by the Lead Dealer Manager promptly after reasonable
notice. The Offeror shall advise the Dealer Managers, promptly after it receives
notice thereof, of the time when any amendment to the Registration Statement has
been filed or becomes effective or when any supplement to the Prospectus or any
amended Prospectus has been filed and to furnish the Dealer Managers with copies
thereof; file promptly all reports and any definitive proxy or information
statements required to be filed by the Offeror with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act

 

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subsequent to the date of the Prospectus and for as long as the delivery of a
prospectus is required in connection with the offering or sale of the New Notes;
advise each Dealer Manager (and, if in writing, provide each Dealer Manager with
a copy), promptly after it receives notice thereof, of the issuance by the
Commission or any other governmental authority of any stop order or of any order
preventing or suspending any or all of the Transactions or the use of any
Transaction Materials, of the suspension of the Consent Solicitation or of the
qualification of the New Notes for offering or sale in any jurisdiction, of the
initiation or threat of any proceeding for any such purpose, or of any request
by the Commission or any other governmental authority for the amending or
supplementing of any Transaction Materials or for additional information; and,
in the event of the issuance of any stop order or of any order preventing or
suspending the use of any Transaction Materials or suspending the Consent
Solicitation or any such qualification, promptly use its best efforts to obtain
the withdrawal of such order.

 

(b) The Offeror will cause to be delivered to each registered holder of any
Outstanding Notes, as soon as practicable, a copy of the Prospectus and the
Letter of Transmittal, together with a return envelope, and other appropriate
Transaction Materials and Other Material. Thereafter, to the extent practicable
until the expiration of the Transactions, the Offeror will use its best efforts
to cause copies of such material and a return envelope to be mailed to each
person who becomes a registered holder of any Outstanding Notes.

 

(c) The Offeror agrees to furnish each Dealer Manager with copies of the
Transaction Materials and Other Material, including the Prospectus, in such
quantities as each such Dealer Manager may reasonably request for use by such
Dealer Manager in connection with the Transactions. The Offeror will not amend
or supplement Transaction Materials, or prepare or approve any Other Material
for use in connection with the Transactions, without the Lead Dealer Manager’s
prior approval.

 

(d) If the delivery of a prospectus is required at any time in connection with
the offering and sale of the New Notes or the solicitation of consents pursuant
to the Consent Solicitation and if at such time any event will have occurred as
a result of which the Prospectus as then amended or supplemented would include
an untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made when such Prospectus was delivered, not misleading or
necessary to correct any material statement in any earlier communication with
respect to the Transactions, or, if for any other reason it will be necessary
during such period to amend or supplement the Prospectus or to file under the
Exchange Act any document incorporated by reference in the Prospectus in order
to comply with the Act or the Exchange Act, to notify each Dealer Manager and to
file such document and to prepare and furnish without charge to either Dealer
Manager as many copies as each such Dealer Manager may from time to time
reasonably request of an amended Prospectus or a supplement to the Prospectus
which will correct such statement or omission or effect such compliance.

 

(e) The Offeror will use its best efforts to list for quotation the shares of
its common stock issuable upon conversion of the New Notes (the “New Conversion
Shares”) on the Nasdaq National Market (“NASDAQ”).

 

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(f) The Offeror will promptly from time to time take such action as the Lead
Dealer Manager may reasonably request to qualify the New Notes for offering and
sale, and to permit the solicitation of consents pursuant to the Consent
Solicitation, under the securities laws of such states of the United States as
the Lead Dealer Manager may reasonably request and to comply with such laws so
as to permit the continuance of sales and dealings therein in such jurisdictions
for so long as may be necessary to complete the Transactions; provided that in
connection therewith the Offeror will not be required to qualify as a foreign
corporation or file a general consent to service of process in any jurisdiction.

 

(g) The Offeror agrees to furnish to each Dealer Manager, or to cause the
Registrar to furnish to each Dealer Manager, cards or lists or copies thereof
showing the names and addresses of, and amounts of Outstanding Notes held by,
the beneficial holders of the Outstanding Notes as of a recent date, and will
use its best efforts to advise the Lead Dealer Manager, or will cause the
Registrar to advise the Lead Dealer Manager, from day to day during the period
of the Transactions as to any transfers of record of the Outstanding Notes and
to update or provide such other information from time to time as requested by
the Lead Dealer Manager during the term of this Agreement. Each Dealer Manager
agrees to use such information only in connection with the Transactions and not
to furnish such information to any other person except in connection with the
Transactions.

 

(h) The Offeror will arrange for the Exchange Agent named in the Letter of
Transmittal to inform the Lead Dealer Manager during each business day during
the Transactions (to be followed on a daily basis by written confirmation) as to
the amounts of Outstanding Notes that have been tendered pursuant to the
Exchange Offer and as the number of consents received pursuant to the Consent
Solicitation during the interval since its previous daily report to the Lead
Dealer Manager under this provision, and the names and addresses of any
registered holder tendering Outstanding Notes.

 

(i) During a period of two years from the effective date of the Registration
Statement, the Offeror will furnish to the Lead Dealer Manager copies of all
reports or other communications (financial or other) furnished to shareholders
generally, and deliver to the Lead Dealer Manager as soon as they are available,
copies of any reports and financial statements furnished to or filed with the
Commission or any national securities exchange on which any class of securities
of the Offeror is listed to the extent that such reports or financial statements
are not available publicly through the Commission’s EDGAR system.

 

(j) The Offeror will make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the effective
date of the Registration Statement (as defined in Rule 158(c) under the Act) an
earnings statement of the Offeror and its subsidiaries (which need not be
audited) complying with Section 11(a) of the Act (including, at the Offeror’s
option, Rule 158 thereunder).

 

(k) The Offeror will advise each Dealer Manager promptly of (1) the occurrence
of any event or the discovery of any fact that could cause (i) the Offeror to
withdraw, rescind or modify the Exchange Offer or Consent Solicitation, (ii) any
representation or warranty contained in this Agreement to be untrue or
inaccurate or (iii) the Offeror to have the right not to complete the Exchange
Offer, Consent Solicitation or

 

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the Proxy Solicitation and (2) any litigation or governmental action with
respect to the Transactions.

 

(l) Neither the Offeror nor any entity controlled, directly or indirectly, by
the Offeror has taken, or will take, directly or indirectly, any action which is
designed to or which has constituted or which might reasonably be expected to
cause or result in stabilization or manipulation of the price of any security of
the Offeror to facilitate the sale or resale of the New Notes in connection with
the Exchange Offer.

 

(m) The Offeror shall execute the Supplemental Indenture as soon as practicable
after the termination of the Consent Solicitation if consents from the Holders
of a majority of the principal amount of the Outstanding Notes have been
received (and not revoked); provided, however, that the Proposed Amendments
shall not become operative until the events set forth in this clause are
satisfied.

 

(n) The Offeror will promptly pay all accrued interest on the tendered
Outstanding Notes in accordance with and subject to the conditions set forth in
the Transaction Materials.

 

3. Compensation and Expenses.

 

(a) The Offeror will pay to each Dealer Manager, as compensation for its
services to the Offeror hereunder, a fee calculated pursuant to the fee
arrangements set forth in the General Engagement Letter in connection with the
Transactions.

 

(b) Offeror will pay to each soliciting broker (as defined below) a solicitation
fee equal to 1.5% of the aggregate principal amount of any Outstanding Notes
validly tendered by any qualifying holder (as defined below) and accepted by the
Offeror in the Exchange Offer; provided, however, that if no solicitation fee is
paid to a soliciting broker in connection with any such Outstanding Notes
tendered by a qualifying holder, then such solicitation fee shall be paid to the
Lead Dealer Manager as soon as practicable (but no more than 5 days) following
the completion of the Exchange Offer and shall be in addition to any other
compensation to which the Lead Dealer Manager is otherwise entitled under this
Agreement. A “soliciting broker” is (1) a broker or dealer in securities,
including a Dealer Manager in its capacity as a dealer or broker, which is a
member of any national securities exchange or of the NASD; (2) a foreign broker
or dealer not eligible for membership in the NASD that agrees to conform to the
NASD’s Rules of Fair Practice in soliciting tenders outside the U.S. to the same
extent as though it were an NASD member; or (3) a bank or trust company, in each
case who is identified as the soliciting broker in the appropriate space in the
Letter of Transmittal. Furthermore, by accepting the solicitation fee, such
soliciting broker will be deemed to have represented that (A) it has complied
with the applicable requirements of the Exchange Act in connection with such
solicitation; (B) it is entitled to such compensation for such solicitation
under the terms and conditions of the Exchange Offer; (C) in soliciting tenders
of Outstanding Notes, it has used no soliciting materials other than the
Transaction Materials and the Other Materials; and (D) if it is a foreign broker
or dealer not eligible for membership in the NASD, it has agreed to conform to
the NASD’s Rules of Fair Practice in making solicitations. A “qualifying holder”
is a beneficial owner, other than the soliciting broker, of Outstanding Notes
who validly tenders $500,000 or less aggregate principal amount of Outstanding
Notes in the Exchange Offer. For avoidance

 

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of doubt, the parties agree that SMH Capital Advisors Inc. is not a “qualifying
holder” and, as such, that the Offeror shall not be obligated to pay the fee
described in this Section 3(b) with respect to any Outstanding Notes tendered by
SMH Capital Advisors Inc., whether on its own behalf or on behalf of its
clients. In addition, the Offeror will not pay a solicitation fee to any
soliciting broker if (1) such soliciting broker is required for any reason to
transfer the amount of such fee to a qualifying holder or (2) the tendered
Exchange Notes are for the soliciting broker’s own account. For the purposes
hereof, the term “solicit” shall be deemed to mean no more than “processing
Outstanding Notes tendered” or “forwarding to customers materials regarding the
Exchange Offer.”

 

(c) Whether or not any Outstanding Notes are acquired pursuant to the Exchange
Offer or any consents delivered pursuant to the Consent Solicitation and
notwithstanding anything in the General Engagement Letter to the contrary, the
Offeror shall reimburse the Lead Dealer Manager promptly upon its demand and
receipt of invoices for (i) an amount equal to 50% of the reasonable fees, costs
and expenses of its counsel, Skadden, Arps, Slate, Meagher & Flom LLP, in
connection with their representation of the Lead Dealer Manager in connection
herewith and with the Transactions (except for any fees and expenses of counsel
relating to matters covered under Section 6 of this Agreement, the reimbursement
of which shall be as set forth in such Section and shall not be subject to the
limitation set forth above) and (ii) all other fees, costs and out-of-pocket
expenses relating to or arising out of the Transactions. The Offeror also agrees
to pay all other fees, costs and expenses relating to or arising out of the
Transactions, the performance of its obligations under this Agreement and the
Transactions including, without limiting the generality of the foregoing, all
costs and expenses (i) incurred by brokers and dealers (including yourselves),
commercial banks, trust companies and nominees for their customary mailing and
handling expenses incurred in forwarding the Transaction Materials and any Other
Material to their customers, (ii) incident to the preparation, issuance,
execution and delivery of the New Notes to be delivered in connection with the
Exchange Offer, (iii) incident to the preparation, printing and filing under the
Act of the Registration Statement and the Prospectus and any other Transaction
Materials or Other Materials (including all exhibits, amendments and supplements
thereto), (iv) incurred in connection with the registration or qualification of
the New Notes under state securities laws as provided in Section 2(f) hereof,
including the fees and disbursements of the Lead Dealer Manager’s counsel in
connection with such qualification and in connection with the Blue Sky and legal
investment surveys, (v) in connection with the listing of the New Conversion
Shares on NASDAQ, (vi) related to the filing and registration of the New Notes
with the Commission and the National Association of Securities Dealers, Inc.,
(vii) in connection with the preparation and execution of the Supplemental
Indenture, (viii) in connection with the preparation and printing (including
word processing and duplication costs) and delivery of all Transaction Materials
and any Other Material (including this Agreement and any preliminary and
supplemental Blue Sky memoranda) including mailing and shipping, as herein
provided, and (viii) incident to the appointment of the Exchange Agent and the
Information Agent, including the fees and expenses of the Exchange Agent and the
Information Agent.

 

4. Certain Representations and Warranties by the Offeror. The Offeror represents
and warrants to and agrees with each Dealer Manager that as of the date hereof
and the commencement date of the Transactions, during the period of the

 

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Transactions, and until the expiration of the Transactions, and as of the date
of filing, publication and/or distribution:

 

(a) A registration statement on Form S-4 (Registration No. 333-126772) (as
amended, the “Initial Registration Statement”) in respect of the Transactions
has been filed with the Commission; the Offeror will use its best efforts to
have the Registration Statement declared effective as modified by appropriate
response to SEC comments or otherwise in each case in the form theretofore
delivered or made available to each Dealer Manager, and, excluding exhibits
thereto but including all documents incorporated by reference into the
prospectus contained therein. Other than amendments to the Initial Registration
Statement and filings by the Offeror under the Exchange Act, no other document
with respect to such registration statement or document incorporated by
reference therein has heretofore been filed with the Commission; and no stop
order suspending the effectiveness of the Initial Registration Statement or any
post-effective amendment thereto has been issued and no proceeding for that
purpose has been initiated or threatened by the Commission (any preliminary
prospectus included in the Initial Registration Statement or filed with the
Commission pursuant to Rule 424(a) of the rules and regulations of the
Commission under the Act is herein called a “Preliminary Prospectus”); the
various parts of the Initial Registration Statement and any post-effective
amendment thereto, including all exhibits, annexes and schedules thereto and
including (i) the information contained in the form of final prospectus filed
with the Commission pursuant to Rule 424(b) under the Act in accordance with
Section 2(a) hereof and (ii) the documents incorporated by reference into the
prospectus contained in the Initial Registration Statement as of the date
hereof, is herein collectively called the “Registration Statement”; such final
prospectus, in the form it will be first filed pursuant to Rule 424(b) under the
Act, is hereinafter called the “Prospectus”; any reference herein to any
Preliminary Prospectus or the Prospectus will be deemed to refer to and include
the documents incorporated by reference therein pursuant to Item 13 of Form S-4
under the Act, as of the date of such Preliminary Prospectus or Prospectus, as
the case may be; any reference to any amendment or supplement to any Preliminary
Prospectus or the Prospectus shall be deemed to refer to and include any
document filed after the date of such Preliminary Prospectus or Prospectus, as
the case may be, and prior to expiration of the Exchange Offer and Consent
Solicitation under the Exchange Act, and incorporated by reference into such
Preliminary Prospectus or Prospectus, as the case may be; and any reference to
any amendment to the Registration Statement shall be deemed to refer to and
include any annual report of the Offeror filed pursuant to Section 13(a) or
15(d) of the Exchange Act after the effective date of the Registration Statement
that is incorporated by reference into the Registration Statement on or prior to
the date hereof;

 

(b) No order preventing or suspending the use of any Preliminary Prospectus or,
after the effectiveness of the Registration Statement, the Prospectus has been
issued by the Commission, and each Preliminary Prospectus, at the time of filing
thereof, will conform in all material respects to the requirements of the Act,
and will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading or necessary to correct any material statement in any earlier
communication made with respect to the Transactions; provided, however, that
this representation and warranty will not apply to any statements or

 

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omissions made in reliance upon and in conformity with information furnished in
writing to the Offeror by you as Dealer Managers expressly for use therein;

 

(c) The documents incorporated by reference into the Preliminary Prospectus and
Prospectus, when they were filed with the Commission conformed in all material
respects to the requirements of the Act, the Exchange Act and the Trust
Indenture Act of 1939, as amended and the rules and regulations of the
Commission thereunder (the “TIA”), as applicable, and when read together with
the other information in the Preliminary Prospectus and Prospectus, none of such
documents contained an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; any further documents so filed and incorporated by reference into
the Prospectus or any further amendment or supplement thereto, when they become
effective or are filed with the Commission, as the case may be, will conform in
all material respects to the requirements of the Act, the Exchange Act and the
TIA, as applicable, and when read together with the other information in the
Prospectus and any such further amendment or supplement, none of such documents
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they are made, not misleading;
provided, however, that this representation and warranty will not apply to any
statements or omissions made in reliance upon and in conformity with information
furnished in writing to the Offeror by you as Dealer Managers expressly for use
therein;

 

(d) The Transaction Materials and Other Materials, including the Registration
Statement, the Preliminary Prospectus, the Prospectus, and any amendments or
supplements thereto, prior to the expiration of the Exchange Offer and Consent
Solicitation, each will conform, in all material respects to the requirements of
the Act, the Exchange Act and the TIA, as applicable, and do not and will not,
as of the applicable effective date as to the Registration Statement and any
amendment thereto, and as of the applicable filing date as to the Prospectus and
any amendment or supplement thereto, in any case prior to expiration of the
Exchange Offer and Consent Solicitation, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, in light of the
circumstances under which they are made; provided, however, that this
representation and warranty shall not apply to any statements or omissions made
in reliance upon and in conformity with information furnished in writing to the
Offeror by you as Dealer Managers expressly for use therein. The Proxy
Statement, and any amendments or supplements thereto, prior to the expiration of
the Proxy Solicitation, will conform, in all material respects to the
requirements of the Act and the Exchange Act, as applicable, and do not and will
not contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in light of the circumstances under which they are made;

 

(e) Neither the Offeror nor any of its subsidiaries has sustained since the date
of the latest audited financial statements included in, or incorporated by
reference into, the Preliminary Prospectus or, after the effective date of the
Registration Statement, the Prospectus any material loss or interference with
their business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute

 

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or court or governmental action, order or decree, otherwise than as set forth or
contemplated in the Preliminary Prospectus and Prospectus; and, since the dates
as of which information is given in the Preliminary Prospectus and Prospectus,
there has not been any change in the capital stock or long term debt of the
Offeror or any of its subsidiaries or any material adverse change, or any
development involving a prospective material adverse change, in or affecting the
general affairs, prospects, management, financial position, shareholders’ equity
or results of operations of the Offeror and its subsidiaries (“Material Adverse
Effect”), otherwise than as set forth in the Preliminary Prospectus or
Prospectus;

 

(f) The Offeror and its subsidiaries have good and marketable title in fee
simple to all real property owned by them and good and marketable title to all
personal property owned by them, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Preliminary
Prospectus or, after the effective date of the Registration Statement, the
Prospectus or such as do not materially affect the value of such property and do
not interfere with the use made and proposed to be made of such property by the
Offeror and its subsidiaries; and any real property and buildings held under
lease by the Offeror and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be made of such property and
buildings by the Offeror and its subsidiaries;

 

(g) The Offeror has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Washington, with the
corporate power and authority to own its properties and conduct its business and
the Transactions as described in the Transaction Materials, and has been duly
qualified as a foreign corporation for the transaction of business in, and is in
good standing under the laws of, each other jurisdiction in which it owns or
leases properties or conducts any business so as to require such qualification
except where the failure to be so qualified or in good standing would not result
in a Material Adverse Effect; and each subsidiary of the Offeror has been duly
organized and is validly existing as an entity in good standing under the laws
of its jurisdiction of organization except where the failure to be so qualified
or in good standing would not result in a Material Adverse Effect;

 

(h) The Offeror has an authorized capitalization as set forth under the caption
“Capitalization” in the Preliminary Prospectus or, after the effective date of
the Registration Statement, the Prospectus, and all of the issued shares of
capital stock of the Offeror have been duly and validly authorized and issued,
and are fully paid and nonassessable and all of the issued shares of capital
stock of each subsidiary of the Offeror have been duly and validly authorized
and issued, are fully paid and nonasessable and are owned directly or indirectly
by the Offeror, free and clear of all liens, encumbrances, equities or claims.
The New Conversion Shares will conform to the descriptions of the Common Stock
contained in, or incorporated by reference into, the Preliminary Prospectus or,
after the effective date of the Registration Statement, the Prospectus and the
New Conversion Shares, when issued and delivered by the Offeror upon conversion
of the New Notes, will be duly and validly authorized and issued, fully paid and
nonassessable and not subject to any preemptive or similar rights;

 

(i) The New Notes, upon issuance, will have been duly authorized by the Offeror
and, when authenticated, issued and delivered in the manner provided in the

 

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indenture applicable to the New Notes (the “New Indenture”) and delivered upon
valid tender and acceptance of the Outstanding Notes pursuant to the Exchange
Offer, will be legal, valid and binding obligations of the Offeror, and such New
Notes will be enforceable against the Offeror in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and similar laws affecting creditors’ rights and
remedies generally and to general principals of equity (regardless of whether
enforcement is sought in proceeding at law or in equity), and except to the
extent that a waiver of rights under any usury laws may be unenforceable, and
the New Notes will conform in all material respects to the description set forth
under the caption “Description of the Exchange Notes” in the Prospectus;

 

(j) Upon the termination of the Exchange Offer and Consent Solicitation and the
execution and delivery of the Supplemental Indenture, the Outstanding Notes, if
any, that are not exchanged for New Notes in connection with the Exchange Offer
will constitute valid and binding obligations of the Offeror, entitled to the
benefits of the Supplemental Indenture, and enforceable against the Offeror in
accordance with their terms;

 

(k) The execution and delivery of this Agreement by the Offeror and the
compliance by the Offeror with all of the provisions of this Agreement and the
consummation of the transactions contemplated herein and in the Transaction
Materials do not and will not conflict with or result in a breach or violation
of any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Offeror or any of its subsidiaries is a party or by
which the Offeror or any of its subsidiaries is bound or to which any of the
property or assets of the Offeror or any of its subsidiaries is subject, nor
will such action result in any violation of (A) the provisions of the Articles
of Incorporation or Bylaws of the Offeror, (B) any agreement to which Offeror is
a party or (C) any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Offeror or any of its
subsidiaries or any of their properties; and no consent, approval,
authorization, order, registration or qualification of or with any such court or
governmental agency or body is required for the execution and delivery by the
Offeror of this Agreement or the consummation by the Offeror of the
Transactions, including, but not limited to, the issuance and delivery of the
New Notes by the Offeror, except for (i) such consents, approvals,
authorizations, orders, registrations or qualifications as may have already been
obtained or will be solicited by the Offeror pursuant to the Proxy Solicitation,
(ii) review by the staff of the Commission of the Transaction Materials and
Other Material without, after response by the Offeror to any comments by such
staff, continuing objection, (iii) declaration by the Commission of the
effectiveness of the Registration Statement, (iv) qualification of the New
Indenture under the TIA, (v) approval by NASDAQ of the listing of the New
Conversion Shares, and (vi) such consents, approvals, authorizations,
registrations or qualifications as may be required under state or foreign
securities or Blue Sky laws in connection with the distribution of the New Notes
pursuant to the Exchange Offer;

 

(l) Neither the Offeror nor any of its subsidiaries is (i) in violation of its
charter or bylaws or similar governing documents; (ii) in default, and no event
has occurred that, with notice or lapse of time or both, would constitute such a
default, in the performance or observance of any obligation, agreement, covenant
or condition contained in any indenture, mortgage, deed of trust, loan
agreement, lease or other

 

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agreement or instrument to which it is a party or by which it or any of its
properties may be bound; or (iii) in violation of any law or statute or any
judgment, order, rule or regulation of any court or arbitrator or governmental
or regulatory authority, except, in the case of clauses (ii) and (iii) above,
for any such defaults as would not result in a Material Adverse Effect;

 

(m) The statements set forth in the Preliminary Prospectus under the caption
“Description of the Exchange Notes”, insofar as they purport to constitute a
summary of the terms of the Exchange Notes, and under the caption “The Exchange
Offer and Consent Solicitation” (other than, in each case, statements made under
such captions solely in reliance upon and in conformity with information
furnished in writing to the Offeror by the Dealer Managers expressly for such
use therein), insofar as they purport to describe the provisions of the laws and
documents referred to therein, are accurate, complete and fair in all material
respects;

 

(n) Although the discussion set forth in the Preliminary Prospectus under the
caption “Certain Material U.S. Federal Income Tax Considerations” does not
purport to discuss all possible United States federal income tax consequences of
the Exchange Offer, such discussion constitutes, in all material respects, an
accurate summary of the United States federal income tax consequences of the
Exchange Offer, based upon current United States federal income tax law;

 

(o) The Offeror is not and, after giving effect to the offering and sale of the
New Notes and the consummation of the Exchange Offer, will not be an “investment
company” or an entity “controlled” by an “investment company” as such terms are
defined under the Investment Company Act of 1940, as amended (the “Investment
Company Act”);

 

(p) Other than as set forth or contemplated in the Preliminary Prospectus, there
are no legal or governmental proceedings pending or to the knowledge of the
Offeror, threatened, to which the Offeror or any of its subsidiaries is a party
or of which any property of the Offeror or any of its subsidiaries is the
subject which, if determined adversely to the Offeror or any of its
subsidiaries, would, individually or in the aggregate, have a Material Adverse
Effect or could have a material adverse affect upon any of the Transactions;

 

(q) The Offeror and its subsidiaries have insurance covering their respective
properties, operations, personnel and businesses, including business
interruption insurance, which insurance is in amounts and insures against such
losses and risks as are adequate to protect the Offeror and its subsidiaries and
their respective businesses; and neither the Offeror nor any of its subsidiaries
has any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage at reasonable cost from similar insurers as may be necessary to
continue its business;

 

(r) The Offeror has duly taken all necessary corporate action to authorize the
making and consummation of the Exchange Offer, the Consent Solicitation and the
Proxy Solicitation; the execution, delivery and performance of this Agreement,
the New Indenture and the Supplemental Indenture; and this Agreement has been,
and each of the New Indenture and the Supplemental Indenture will be, duly
executed and delivered

 

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by, and constitutes, or will constitute, as the case may be, a valid and binding
agreement of, the Offeror enforceable against the Offeror in accordance with its
terms. The Supplemental Indenture may be entered into upon the consent of the
Holders of a majority of the aggregate outstanding principal amount of the
Outstanding Notes pursuant to the provisions of the Indenture and, along with
the consents and Consent Solicitation, complies in all material respects with
the requirements of the Indenture which it supplements and of the TIA. The
Supplemental Indenture will conform in all material respects to the description
thereof contained in the Transaction Materials;

 

(s) The Offeror and its subsidiaries maintain a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management’s general or specific authorizations;
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is permitted only in
accordance with management’s general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.

 

(t) Neither the Offeror, any subsidiary nor any of their respective directors or
officers, in their capacities as such, is in material breach or violation or any
provision of the Sarbanes Oxley Act of 2002 and the rules and regulations
promulgated in connection therewith (the “Sarbanes Oxley Act”), including
Section 402 related to loans and Sections 302 and 906 related to certifications.

 

(u) Ernst and Young, LLP and Grant Thornton LLP, each of whom have certified
certain financial statements of the Offeror and its subsidiaries, each are
independent public accountants as required by the Act;

 

(v) The Offeror has made or will make appropriate arrangements with The
Depository Trust Company and any other “qualified” registered securities
depository to allow for the book-entry transfer of tendered Outstanding Notes
between depository participants and the Exchange Agent;

 

(w) The Offeror has or upon consummation of the Transactions will have
sufficient funds available, and has or will have sufficient authority to use
such funds under applicable law, to enable it to pay and the Offeror will pay in
accordance with the terms of the Transactions: (i) the accrued and unpaid
interest payable with respect to all properly tendered and not withdrawn
Outstanding Notes as described in the Transaction Materials and (ii) the fees
and expenses payable pursuant to this Agreement; and

 

(x) The Offeror is not, nor will it be, after giving effect to the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby and the Transactions, (i) insolvent,
(ii) possessed of or (after giving effect to such issuance) left with
unreasonably small capital with which to engage in its anticipated businesses,
(iii) incurring debts beyond its ability to pay such debts as they mature or
(iv) having a judgment or judgments for monetary damages, docketed against it or
its subsidiaries, which judgment or judgments, after final judgment, are
unsatisfied.

 

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(y) Except as would not have a Material Adverse Effect or otherwise require
disclosure in the Registration Statement, (i) the Offeror is not in violation of
any federal, state or local laws and regulations relating to pollution or
protection of human health or the environment or the use, treatment, storage,
disposal, transport or handling, emission, discharge, release or threatened
release of toxic or hazardous substances, materials or wastes, petroleum and
petroleum products (“Materials of Environmental Concern”) (collectively,
“Environmental Laws”), including, without limitation, noncompliance with or lack
of any permits or other environmental authorizations; (ii) to the Offeror’s
knowledge, there are no past, present or reasonably foreseeable circumstances
that may lead to any such violation in the future; (iii) the Offeror has not
received any written or, to the Offeror’s knowledge, oral communication from any
person or entity alleging any such violation; (iv) there is no pending or, to
the Offeror’s knowledge, threatened claim, action, investigation or notice by
any person or entity against the Offeror or, to the Offeror’s knowledge, against
any person or entity for whose acts or omissions the Offeror is or may
reasonably be expected to be liable, either contractually or by operation of
law, alleging liability for investigatory, cleanup, or other response costs,
natural resources or property damages, personal injuries, attorney’s fees or
penalties relating to any Materials of Environmental Concern or any violation or
potential violation, of any Environmental Law (collectively, “Environmental
Claims”), and (v) to the Offeror’s knowledge, there are no actions, activities,
circumstances, conditions, events or incidents that could form the basis of any
such Environmental Claim or result in any other costs or liabilities under
Environmental Laws.

 

5. Conditions of Obligation. Your obligations to act as Dealer Managers
hereunder will at all times be subject, in your discretion, to the conditions
that:

 

(a) All representations, warranties and other statements of the Offeror
contained herein are, as of the date of this Agreement, and, at all times prior
to the expiration of the Exchange Offer and Consent Solicitation, will be true
and correct in all material respects.

 

(b) The Offeror at all times during the Transactions will have performed all of
its obligations hereunder theretofore to be performed.

 

(c) The Prospectus will have been either (i) filed with the Commission pursuant
to Rule 424(b) within the applicable time period prescribed for such filing by
the rules and regulations under the Act in accordance with Section 2(a) hereof
or (ii) included in the Registration Statement; no stop order suspending the
effectiveness of the Registration Statement or any part thereof will have been
issued and no proceeding for that purpose will have been initiated or threatened
by the Commission; and all requests for additional information on the part of
the Commission will have been complied with to the Lead Dealer Manager’s
reasonable satisfaction.

 

(d) On or prior to the Exchange Date, the Proxy Solicitation shall have
terminated and the shareholders of the Offeror shall have approved the increase
in the Offeror’s authorized capital stock as contemplated by the Proxy
Statement.

 

(e) On the date on which the Offeror accepts for payment or exchange Outstanding
Notes tendered pursuant to the Exchange Offer or consents delivered pursuant to
the Consent Solicitation (“Exchange Date”), Skadden, Arps, Slate, Meagher

 

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& Flom LLP, counsel to Jefferies & Company, Inc., will have furnished to
Jefferies & Company, Inc., an opinion or opinions, reasonably acceptable to
Jefferies & Company, Inc.

 

(f) On the Exchange Date, Haynes and Boone LLP, counsel to the Offeror, will
have furnished to each Dealer Manager, an opinion or opinions dated the
respective date of delivery thereof substantially in the form of Annex A hereto.

 

(g) On each of the days on which the Exchange Offer and Consent Solicitation
commences (the “Commencement Date”) and the Exchange Date and Grant Thornton
LLP, independent public accountants, each will have furnished to each Dealer
Manager a letter or letters, dated the respective date of delivery thereof, in
form and substance satisfactory to it, to the effect set forth in Annex B
hereto.

 

(h) The Offeror will have furnished or caused to be furnished to the Dealer
Managers, on each of the Commencement Date and the Exchange Date, a certificate
or certificates of officers of the Offeror satisfactory to it as to the accuracy
of the representations and warranties of the Offeror at and as of such dates, as
to the performance by the Offeror of all of its obligations hereunder to be
performed at or prior to such date, as to the matters set forth in subsections
(c) and (h) of this Section and as to such other matters as the Lead Dealer
Manager may reasonably request.

 

(i) (A) Neither the Offeror nor any of its subsidiaries will have sustained
since the date of the latest audited financial statements included in, or
incorporated by reference into, the Prospectus any loss or interference with
their business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court of governmental action,
order or decree, otherwise than as set forth or contemplated in the Prospectus,
and (B) since the latest date as of which information is given in the Prospectus
there will not have been any change in the capital stock or long-term debt of
the Offeror or any of its subsidiaries or any change, or any development
involving a prospective change, in or affecting the general affairs, management,
financial position, shareholders’ equity or results of operations of the Offeror
and its subsidiaries, otherwise than as set forth or contemplated in the
Prospectus, the effect of which, in any such case described in clause (A) or
(B), is, in the judgment of the Dealer Manager, so material and adverse as to
make it impracticable or inadvisable to proceed with the Exchange Offer or the
delivery of the New Notes on the terms and in the manner contemplated in the
Transaction Material.

 

(j) On or after either the Commencement Date or the Exchange Date there shall
not have occurred any of the following: (i) a suspension or material limitation
in trading in securities generally on NASDAQ; (ii) a suspension or material
limitation in trading in the Offeror’s securities on NASDAQ; (iii) a general
moratorium on commercial banking activities declared by either Federal or New
York or Texas State authorities or a material disruption in commercial banking
or securities settlement or clearance services in the United States; (iv) the
outbreak or escalation of hostilities involving the United States or the
declaration by the United States of a national emergency or war or (v) the
occurrence of any other calamity or crisis or any change in financial, political
or economic conditions in the United States or elsewhere, if the effect of any
such event specified in clause (iv) or (v) in the judgment of the Lead Dealer
Manager makes it

 

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impracticable or inadvisable to proceed with the Transactions on the terms and
in the manner contemplated in the Transaction Materials.

 

(k) On the Exchange Date, each Dealer Manager shall have received copies of the
opinions of counsel and other documents that are delivered to the Trustee in
connection with the Supplemental Indenture.

 

(l) On or promptly after the Exchange Date, each of the Supplemental Indenture
shall have been executed by the Offeror and the Trustee and will be effective.

 

6. Indemnity.

 

(a) The Offeror agrees: (i) to indemnify and hold each Dealer Manager harmless
against any losses, damages, liabilities or claims (or actions in respect
thereof) to which any such Dealer Manager may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities to which any
such Dealer Manager may become subject, under the Act, the Exchange Act or
otherwise (A) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in the Transaction Materials or
any Other Material, including any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any of the documents incorporated by reference
therein, or in any amendment or supplement to any of the foregoing, or in any
press release issued or authorized by the Offeror, or arise out of or are based
upon the omission or alleged omission to state therein a material fact necessary
to make the statements therein not misleading (provided, however, that this
clause (A) shall not apply to any statements or omissions made in reliance upon
and in conformity with information furnished in writing to the Offeror by such
Dealer Manager, as a Dealer Manager, expressly for use in any such document,
which information the parties acknowledge consists solely of the following
information in the Prospectus under the captions “The Exchange Offer and Consent
Solicitation—Co-Dealer Managers” and “The Exchange Offer and Consent
Solicitation—Soliciting Dealer Fees” but only to the extent that such
information is applicable to such Dealer Manager), (B) arise out of or are based
upon any breach by the Offeror of any representations or warranties or failure
by the Offeror to comply with any of its obligations set forth herein, or
(C) that arise out of or are based upon a withdrawal, rescission, termination or
modification of or a failure to make or consummate the Exchange Offer, the
Consent Solicitation or any of the other Transactions; (ii) to indemnify and
hold each Dealer Manager harmless against any and all other losses, damages,
liabilities or claims (or actions in respect thereof) that otherwise arise out
of or are based upon or asserted against such Dealer Manager by any person,
including shareholders of the Offeror, in connection with or as a result of a
Dealer Manager acting as a Dealer Manager in connection with the Exchange Offer
or rendering financial advisory services to the Offeror or that arise in
connection with any other matter referred to in this Agreement, except to the
extent any such losses, damages, liabilities or claims referred to in this
clause (ii) result from such Dealer Manager’s gross negligence or bad faith (and
such gross negligence or bad faith shall be determined on a separate and not a
joint basis) in performing the services that are the subject of this Agreement.
Except as otherwise provided herein, in the event that a Dealer Manager becomes
involved in any capacity in any action, proceeding or investigation brought by
or against any person, including shareholders of the Offeror, in connection with
any matter referred to in this Agreement, the Offeror also agrees periodically
to reimburse such Dealer Manager for its reasonable legal and other

 

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expenses (including the cost of any investigation and preparation) incurred in
connection therewith. The Offeror shall be entitled to participate in any such
action, proceeding or investigation, and, to the extent that it wishes, to
assume the defense thereof with counsel reasonably satisfactory to such Dealer
Manager. After notice from the Offeror to such Dealer Manager of its election to
assume the defense of such claim or action, the Offeror shall not be liable to
such Dealer Manager for any legal or other expenses subsequently incurred by it
in connection with the defense thereof other than reasonable costs of
investigation; provided, that each such Dealer Manager shall have the right to
employ separate counsel to represent it to the extent it may be subject to
liability arising out of any claim in respect of which indemnity may be sought
against the Offeror, but the fees and expenses of such counsel shall be for such
Dealer Manager’s own account unless (i) such Dealer Manager and the Offeror
shall have mutually agreed to the retention of such counsel; (ii) at the advice
of such Dealer Manager’s counsel, representation of both the Offeror, such
Dealer Manager and/or the other Dealer Manager by the same counsel would be
inappropriate due to actual or potential conflicts of interest between such
Dealer Manager, the Offeror and/or the other Dealer Manager or (iii) the Offeror
has not selected counsel reasonably satisfactory to such Dealer Manager within a
reasonable time after notice of commencement of the action, in each of which
cases the fees and expenses of such Dealer Manager’s counsel shall be at the
Offeror’s expense, it being understood, however, that the Offeror shall not, in
connection with any one such claim or action or separate but substantially
similar or related claims or actions in the same jurisdiction arising out of the
same general allegations or circumstances, be liable for the fees and expenses
of more than one separate firm of attorneys (together with appropriate local
counsel) for such Dealer Manager at any time. Whether or not the defense of any
claim or action is assumed by the Offeror, the Offeror will not be subject to
any liability for any settlement made without its consent, which consent will
not be unreasonably withheld; provided, however, that Offeror shall be liable
for such settlement if it is entered into more than 30 days after a Dealer
Manager’s notice to the Offeror requesting reimbursement of fees and expenses of
its counsel and the Offeror has not reimbursed such Dealer Manager for such fees
and expenses prior to such settlement. The Offeror also agrees that neither
Dealer Manager nor any of its affiliates, nor any partners, directors, officers,
consultants, agents, employees or controlling persons (if any), as the case may
be, of any Dealer Manager or any such affiliates, shall have any liability to
the Offeror or any person asserting claims on behalf of or in right of the
Offeror for or in connection with any matter referred to in this Agreement
except to the extent that any loss, damage, expense, liability or claim incurred
by the Offeror results from such Dealer Manager’s gross negligence or bad faith
(and such gross negligence or bad faith shall be determined on a separate and
not a joint basis) in performing the services that are the subject of this
Agreement. In no event, however, shall the Offeror be liable for indirect,
incidental, consequential or special damages of any kind unless a Dealer Manager
is required to pay any such damages to a third party.

 

(b) Promptly after receipt by a Dealer Manager of notice of its involvement in
any action, proceeding or investigation, such Dealer Manager shall notify the
other Dealer Manager and, if a claim in respect thereof is to be made against
the Offeror under subsection (a) of this Section 6, shall notify the Offeror in
writing of such involvement, but the failure so to notify the Offeror shall not
relieve it from any liability which it may otherwise have to such Dealer Manager
under subsection (a) of this Section 6 except to the extent that the Offeror
suffers actual prejudice as a result of such

 

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failure, and in no such event shall such failure relieve the Offeror from any
obligation to provide reimbursement and contribution to the Dealer Managers.

 

(c) If for any reason the indemnification provided for in subsection (a) of this
Section 6 is unavailable or insufficient to hold any Dealer Manager harmless,
then the Offeror shall contribute to the amount paid or payable by such Dealer
Manager as a result of such loss, damage, expense, liability or claim (or action
in respect thereof) referred to therein in such proportion as is appropriate to
reflect the relative benefits of the Offeror and its shareholders on the one
hand and such Dealer Manager on the other hand in the matters contemplated by
this Agreement as well as the relative fault of the Offeror and such Dealer
Manager with respect to such loss, damage, expense, liability or claim (or
action in respect thereof) and any other relevant equitable considerations. The
relative benefits of the Offeror and its shareholders on the one hand and such
Dealer Manager on the other hand in the matters contemplated by this Agreement
shall be deemed to be in the same proportion as the maximum aggregate value of
the consideration proposed to be paid by the Offeror to acquire Outstanding
Notes pursuant to the Exchange Offer bears to the maximum aggregate fee proposed
to be paid to such Dealer Manager pursuant to Section 4(a) and (b) of this
agreement as a result of such acquisition of Outstanding Notes. The relative
fault of the Offeror on the one hand and such Dealer Manager on the other shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by, or relating to, the Offeror
and its affiliates or such Dealer Manager and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Offeror and the Dealer Managers agree that it would
not be just and equitable if contribution pursuant to this subsection (c) were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in this
subsection (c).

 

(d) The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to in this Section 6 shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim.

 

(e) The reimbursement, indemnity and contribution obligations of the Offeror
under this Section 6 shall be in addition to any liability that the Offeror may
otherwise have, shall extend upon the same terms and conditions to each Dealer
Manager’s affiliates and the partners, directors, officers, consultants, agents,
employees and controlling persons (if any), as the case may be, of each Dealer
Manager and any such affiliate, and shall be binding upon and inure to the
benefit of any successors, assigns, heirs and personal representatives of the
Offeror, each Dealer Manager, any such affiliate and any such other person
referred to above. If upon succession or assignment, the obligations of the
Offeror set forth in this Section 6 are not assumed by operation of law or by
contract by a party or parties satisfactory to the Dealer Managers, the Offeror
agrees to arrange alternative means of providing for such obligations, including
providing insurance or creating an escrow, in each case in an amount and upon
terms and conditions satisfactory to the Dealer Managers.

 

7. Miscellaneous.

 

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(a) This Agreement is made solely for the benefit of the Dealer Managers, the
Offeror and any partner, director, officer, agent, employee, affiliate or
controlling person referred to in Section 6 hereof, and their respective
successors, assigns, heirs and legal representatives, and no other person will
acquire or have any right under or by virtue of this Agreement.

 

(b) In the event that any provision hereof will be determined to be invalid or
unenforceable in any respect, such determination will not affect such provision
in any other respect or any other provision hereof, which will remain in full
force and effect.

 

(c) The agreements contained in Sections 2, 3, 6 and 7 and the representations
and warranties of the Offeror set forth in Section 4 hereof shall survive any
termination or cancellation of this Agreement, any completion of the engagement
provided by this Agreement, any investigation made by or on behalf of the Dealer
Managers, any of the Dealer Managers’ officers or partners or any person
controlling a Dealer Manager, any termination or expiration of the Exchange
Offer or Consent Solicitation and any acquisition of Outstanding Notes or
acceptance of consents, whether pursuant to the Exchange Offer, Consent
Solicitation or otherwise.

 

(d) This Agreement may be terminated by the Lead Dealer Manager at any time upon
notice to the Offeror if any of the conditions specified in Section 5 hereof
shall not have been fulfilled at the time they are required to be fulfilled by
such Section 5.

 

(e) Except as otherwise expressly provided in this Agreement, whenever notice is
required by the provisions of this Agreement to be given to: (i) the Offeror,
such notice will be in writing addressed to the Offeror at its address set forth
in the Registration Statement, Attention: Secretary, with a copy to Haynes and
Boone LLP, at its address set forth in the Registration Statement, Attention:
Arthur S. Berner, Esq.; (ii) the Lead Dealer Manager, such notice will be in
writing addressed to the Lead Dealer Manager, at Jefferies & Company, Inc., 520
Madison Avenue, 12th Floor, New York, NY 10022, Attention: Hyonwoo Shin and
(iii) the Co-Dealer Manager, such notice will be in writing and addressed to the
Co-Dealer Manager, at Sanders Morris Harris Inc., 600 Travis, Suite 3100,
Houston, Texas 77002, Attention: Will Page.

 

(f) This Agreement, together with the General Engagement Letter, contains the
entire understanding of the parties with respect to your acting as Dealer
Managers of the Exchange Offer and Consent Solicitation to the Offeror,
superseding all other prior agreements, understandings and negotiations with
respect to such activities by each Dealer Manager. This Agreement may be
executed in any number of separate counterparts, each of which will be an
original, but all such counterparts will together constitute one and the same
agreement.

 

(g) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, INCLUDING, WITHOUT LIMITATION, SECTION 5-1401 OF
THE NEW YORK GENERAL OBLIGATIONS LAW. Any right to trial by jury with respect to
any action or proceeding arising in connection with or as a result of either the
engagement of the Dealer Managers hereunder or any matter referred to in this
Agreement is hereby waived by the parties hereto. The Offeror agrees that any
suit or proceeding arising in respect of this

 

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Agreement or our engagement will be tried exclusively in the U.S. District Court
for the Southern District of New York or, if that court does not have subject
matter jurisdiction, in any state court located in The City of New York and the
Offeror agrees to submit to the jurisdiction of, and to venue in, such courts.

 

(h) Time will be of the essence of this Agreement. As used herein, the term
“business day” will mean any day when the Commission’s office in Washington,
D.C. is open for business.

 

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Please sign and return to us a duplicate of this letter, whereupon it will
become a binding agreement.

 

Very truly yours,

 

SPACEHAB, Incorporated

By:    

Name:

   

Title:

   

 

The undersigned hereby confirms that the foregoing letter agreement, as of the
date thereof, correctly sets forth the agreement between the Offeror and the
undersigned.

 

JEFFERIES & COMPANY, INC.

By:    

Name:

   

Title:

   

 

SANDERS MORRIS HARRIS INC.

By:    

Name:

   

Title:

   

 

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