**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

** **

**FORM 10-K/A**

**(Amendment No. 1)**

 

**(MarkOne)**

 

| **x**      | ** ** | **ANNUAL REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                                                        |
|------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                                                                                 |
| ** ** | ** ** | **For  the fiscal year ended June 30, 2008**                                                                                                                                                                                                                                                                                          |
| ** ** | ** ** |                                                                                                                                                                                                                                                                                                                                       |
| **o**      | ** ** | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                                                    |
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                                                                                 |
| ** ** | ** ** | **For  the transition period from                            to                         ** |

 

**Commission File No. 0-27206**

 

**SPACEHAB,Incorporated**

(Exact name of registrant asspecified in this charter)

 

| **Washington**                     | ** ** | **91-1273737**       |
|------------------------------------|------------|----------------------|
| (State  or other jurisdiction      |       | (I.R.S.  Employer    |
| of  incorporation or organization) |       | Identification  No.) |

 

**907 Gemini Street**

**Houston, Texas 77058**

(Address of principalexecutive offices)  (Zip code)

 

**(713) 558-5000**

(Registrant’s telephonenumber, including area code)

 

**SecuritiesRegistered pursuant to Section 12(b) of the Act:**

** **

| **Title of  each class** | ** **   | **Name of  each exchange  on which registered** |
|--------------------------|--------------|-------------------------------------------------|
| **Common Stock**         | *** *** | **NASDAQ Capital Market**                       |
| (no par value)           | ** **   |                                            |

 

**Securitiesregistered pursuant to Section 12(g) of the Act:**None

** **

Indicate by check mark if theregistrant is a well-known seasoned issuer, as defined in Rule 405 of theSecurities Act. YES o NO x

 

Indicate by check mark if theregistrant is not required to file reports pursuant to Section 13 or Section 15(d) ofthe Act. YES o NO x

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days.

YES x NO o

 

Indicate by check mark ifdisclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405of this chapter) is not contained herein, and will not be contained, to thebest of registrant’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K. o

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a small reporting company. See definition of “largeaccelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2of the Exchange Act. (Check one):

 

| Large accelerated filer o | Accelerated filer o | Non-accelerated filer o                        | Smaller reporting company x |
|---------------------------|---------------------|------------------------------------------------|-----------------------------|
|                      |                | (Do not check if a smaller  reporting company) |                        |

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).

YES o NO x

 

The aggregate market value ofthe registrants voting and non-voting common equity held by non-affiliates ofthe registrant, based upon the closing price of such stock on the NASDAQNational Market on such date of $1.56 was approximately $21,149,330 as of December 31,2007.

 

As of October 31, 2008,16,392,718 shares of the registrant’s Common Stock, no par value, wereoutstanding.

 

DOCUMENTS INCORPORATED BYREFERENCE:

 

Information called for in Part IIIof this Form 10-K is incorporated by reference to the registrant’sdefinitive Proxy Statement to be filed within 120 days after the end of theregistrant’s fiscal year in connection with the registrant’s annual meeting ofshareholders.

 

 

 

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** **

**EXPLANATORY NOTE**

** **

SPACEHAB,Incorporated, referred to herein as the “Company”, is amending its Fiscal Year2008 Form 10-K to add information required in PART III. The required PART IIIinformation was intended to be included in our definitive Proxy Statement forour 2008 Annual Meeting of Shareholders and was so referenced in Form 10-K.We have not yet filed our definitive Proxy Statement for our 2008 AnnualMeeting of Shareholders.

 

Note:  There are no other changes to the original Form 10-Kfiling other than those outlined in this document. This Form 10-K/A doesnot reflect events occurring after the filing of the original Form 10-K,or modify or update the disclosures therein in any way other than as requiredto reflect the amendment set forth below.

 

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**PART III**

 

# **Item10.  Directors, Executive Officers andCorporate Governance.**

#  

A Board ofseven directors was elected at the 2007 Annual Meeting. The Company’s Articlesof Incorporation authorize the Board of Directors from time to time todetermine the number of its members. Vacancies in unexpired terms and anyadditional director positions created by Board action may be filled by actionof the existing Board of Directors at that time, and any director who isappointed in this fashion will serve until the next Annual Meeting ofShareholders or until a successor is duly elected and qualified.

 

The followingtable shows information as of October 31, 2008 regarding members of theCompany’s Board of Directors:

 

| **Current Directors**         | ** ** | **Principal  Occupation**                                                                  | ** ** | **Age as  of   October 30,  2008** | ** ** | **Director  Since** |
|-------------------------------|------------|--------------------------------------------------------------------------------------------|------------|-----------------------------------------|------------|---------------------|
|                          |       |                                                                                       |       |                                    |       |                |
| Mark  Adams*                  |       | Founder,  President and CEO, Advocate MD Financial Group, Inc.                        |       | 47                                      |       | 2007                |
|                          |       |                                                                                       |       |                                    |       |                |
| General  (Ret.) Lance W. Lord |       | Chief  Executive Officer, Astrotech Space Operations; CEO, Lance Lord and  Associates, LLC |       | 62                                      |       | 2008                |
|                          |       |                                                                                       |       |                                    |       |                |
| R.  Scott Nieboer*            |       | Manager, Trace Management, LLC;Chief Manager,  Curtiswood Capital                          |       | 47                                      |       | 2008                |
|                          |       |                                                                                       |       |                                    |       |                |
| John  A. Oliva*               |       | Managing  Principal, Capital City Advisors, Inc.                                      |       | 53                                      |       | 2008                |
|                          |       |                                                                                       |       |                                    |       |                |
| Thomas  B. Pickens, III  |       | Chairman  and Chief Executive Officer of SPACEHAB, Inc.                               |       | 51                                      |       | 2004                |
|                          |       |                                                                                       |       |                                    |       |                |
| William  F. Readdy*           |       | Founder, Discovery Partners, International LLC                                             |       | 57                                      |       | 2008                |
|                          |       |                                                                                       |       |                                    |       |                |
| Barry  A. Williamson*         |       | Attorney; Executive Board Member of Austin Smiles                                          |       | 51                                      |       | 2004                |

 

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# ***Indicates an “independent director”**

 

# **CurrentDirectors**

#  

# **MarkAdams**

#  

Mr. Adamsfounded Advocate, MD Financial Group, Inc., a leading Texas-based medicalliability insurance holding company, in July 2003. Since July 2003, Mr. Adamshas served as its Chairman, President, and Chief Executive Officer. He is alsoa founding partner in several other companies including the EndowmentDevelopment Group, a Houston-based life insurance company specializing inplacing large multimillion dollar life insurance policies throughout the U.S.market. Mr. Adams founded Murphy Adams Restaurant Group in 2007. He ownsand operates Mama Fu’s Asian House restaurants throughout the southeast UnitedStates. In 2008, Mr. Adams founded Small Business United, LLC, a cuttingedge health insurance company for small businesses. Mr. Adams is thewinner of the 2008 Prestigious Ernst and Young Entrepreneur of the Year Awardfor Central Texas. After his career with global public companies such as Xeroxand Johnson & Johnson (1985-1988), beginning in 1988, Mr. Adamsthen spent the next 12 years at Bostik Adhesives where he served in seniormanagement, sales and strategic business roles for their worldwide markets inNorth America, Latin America, Asia, and Europe. In 1997, Mr. Adams thenserved as Global Sales Director for Bostik and General Manager of Nitta-FindleyCompany based in Osaka, Japan and later joined Ward Adhesives, Inc. as aminority owner, General Manager, and Vice President of Sales and Marketing.

 

# **ThomasB. Pickens, III**

#  

Mr. Pickenswas named SPACEHAB’s Chief Executive Officer in January 2007 and Chairmanin February 2008. In 1985, Mr. Pickens founded T.B. Pickens &Co., a company that provides consulting services to corporations, public 

 

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institutions,and start-up organizations, as well as the Managing Partner and Founder ofTactic Advisors, Inc., a company specializing in corporate turnarounds onbehalf of creditors and investors that have aggregated to over $20 billion invalue. Since 1985, Mr. Pickens has served as President of T.B. Pickens &Co. From 1991 to 2002, Mr. Pickens was the Founder and Chairman of U.S.Utilities, Inc., a company which operated 114 water and sewer utilities onbehalf of various companies affiliated with Mr. Pickens. From 1995 to1999, Mr. Pickens directed over 20 direct investments in various venturecapital investments and was Founder and Chairman of the Code Corporation. From1988 to 1993, Mr. Pickens was the Chairman of Catalyst Energy Corporationand was Chairman of United Thermal Corporation (NYSE). Mr. Pickens wasalso the President of Golden Bear Corporation, Slate Creek Corporation, EuryDam Corporation, Century Power Corporation, and Vidilia Hydroelectric Corporation.From 1982 to 1988, Mr. Pickens founded Beta Computer Systems, Inc.,and Sumpter Partners, and was the General Partner of Grace Pickens AcquisitionL.P.

 

# **General(Ret.) Lance W. Lord**

#  

Lance W. Lord,former Commander, Air Force Space Command, Peterson Air Force Base, Colorado,served in the Air Force from 1969 until his retirement in April 2006. Hewas responsible for the development, acquisition and operation of the Air Force’sspace and missile systems. The general oversaw a global network of satellitecommand and control, communications, missile warning and launch facilities, andensured the combat readiness of America’s intercontinental ballistic missileforce. He led more than 39,700 space professionals who provide combat forcesand capabilities to North American Aerospace Defense Command and U.S. StrategicCommand. Since his retirement in April 2006, Mr. Lord has been adefense policy and strategic planning consultant through his company, LanceLord and Associates, LLC. Mr. Lord also serves as a director on the boardof Carrier Access Corporation, Sutter Construction Company, CompudyneCorporation, and is on the board of trustees of Memorial Hospital in ColoradoSprings, Colorado. Mr. Lord has been the Chief Executive Officer of theCompany’s Astrotech subsidiary since June 2008.

 

Among severalmajor awards and decorations, Mr. Lord is the recipient of theDistinguished Service Medal with oak leaf cluster, the Legion of Merit with twooak leaf clusters, the Defense Meritorious Service Medal, Air ForceCommendation Medal with oak leaf cluster, the National Defense Service Medalwith two bronze stars, and the Humanitarian Service Medal. He was also therecipient of the Secretary of the Air Force Leadership Award, the SpaceChampion Award and the Order of the Sword, Air Force Space Command.

 

# **R.Scott Nieboer**

#  

Since 2002, Mr. Nieboerhas been a Manager of Trace Management, LLC, which manages Trace Partners, LP,an investment partnership.

 

From 2004 to2007, Mr. Nieboer served on the Board of Directors of American IronhorseMotorcycle Company serving as the Audit Committee Chair and on the GovernanceCommittee. Mr. Nieboer has been the Chief Executive Officer for 5th Market, Inc.,which specializes in electronic trading systems for institutional investors, from1998 to present.

 

Mr. Nieboerheld the position of trader of convertible securities and U.S. equities for tenyears, from 1988 to 1998, at J.C. Bradford & Co., aninvestment-banking firm located in Nashville, Tennessee. He also held the titleof Partner and was manager of the firm’s proprietary arbitrage tradingoperations during most of that time. Prior to J.C. Brandford & Co., Mr. Nieboerworked for two years for Merrill Lynch & Co., in New York in theMortgage Backed Securities and Asset Backed Securities departments.

 

# **JohnA. Oliva**

#  

John A. Olivahas 26 years of experience in the private equity, investment banking, capitalmarkets, branch management, and asset management sectors. Since 2002, Mr. Olivahas been the Managing Principal of Capital City Advisors Inc. (CCA), aNASD/FINRA registered broker/dealer and independent investment banking andadvisory firm. Since 2002, CCA has provided financial advisory services,including mergers/acquisitions and raising expansion capital to select mid-tiercompanies. Mr. Oliva also co-manages the Indo-American Growth Fund, aprivate equity fund specializing in private Indian companies, a position he hasheld since 2007.

 

Mr. Olivahas eight NASD/FINRA licenses including the Managing Principal and FinancialPrincipal licenses. Prior to joining CCA, he worked for Morgan Stanley &Co and served as an advisor to their Private Wealth Management group,developing, reviewing and implementing solutions for investment bankingclients, and was a group manager. Mr. Oliva was nationally recognized forachievements while at Morgan Stanley & Co and Shearson/Lehman 

 

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Brothers inthe asset management and investment banking sector. He performed similar keyroles at Interstate/Johnson Lane and The Robinson Humphrey Company. Mr. Olivaalso worked on the floor of the New York Stock Exchange.

 

# **WilliamF. Readdy**

#  

From 1974 to2005, William F. Readdy served the United States as a naval aviator, pilotastronaut, military officer, and civil service executive. In 2005, Mr. Readdyestablished Discovery Partners, International LLC, a consulting firm to providestrategic planning, risk management, safety and emerging technology solutionsto aerospace and high-tech industries.

 

He served as atest pilot and instructor between carrier deployments to the North Atlantic,Caribbean and Mediterranean in the late 1970s and early 1980s. Mr. Readdyjoined the National Aeronautics and Space Administration (NASA) in 1986 and in1987 became a member of the astronaut corps, but continued his military servicein the Naval Reserve, attaining the rank of captain before retiring in 2000.

 

Mr. Readdylogged more than 672 hours in space on three shuttle missions. He commanded histhird flight, docking space shuttle *Atlantis*at the Russian space station *Mir*in 1996 and oversaw the first exchange of American astronaut researchers livingaboard the Russian outpost.

 

In 2001, Mr. Readdywas appointed as NASA’s associate administrator for space operations and movedto Washington D.C. Following the loss of space shuttle *Columbia* in February 2003, Mr. Readdychaired NASA’s Space Flight Leadership Council, and oversaw the agency’srecovery from the accident and the shuttle’s successful return to flight in July 2005.

 

Mr. Readdywas honored as a Meritorious Rank Executive by President Bush in 2003 and in2005 was awarded NASA’s highest honor, the Distinguished Service Medal for thesecond time.  He has also been the recipient of NASA’s OutstandingLeadership Medal three times and the Exceptional Service Medal twice.  Inaddition he is the recipient of numerous national and international aviationand space awards, and has been recognized for his contributions to aerospacesafety.

 

# **BarryA. Williamson**

#  

Mr. Williamsonserved as SPACEHAB’s Chairman of the Board from 2006 to 2008, and has been amember of the Board since 2004. Mr. Williamson has been a practicingattorney since 1999. Since 2005, Mr. Williamson has also been a directorof Wilson Holdings, Inc. Mr. Williamson is an Executive Board Memberand past Chairman of the Board of Austin Smiles, a not-for-profit organizationthat provides reconstructive plastic surgery for children with complex birthdefects. During 2008, Mr. Williamson also served as CEO and a director ofOpal Energy Corp. (OPA.V). In 1988, he worked for the Reagan administration asthe principal advisor to the U.S. Secretary of Energy in the formulation of anational energy policy. During the administration of former President GeorgeH.W. Bush, Mr. Williamson served as Director of the Minerals ManagementService for the U.S. Department of Interior. In 1992, Mr. Williamson waselected to the Texas Railroad Commission and served as Chairman from 1994 to1995. Mr. Williamson advised the Board of Directors that he will not standfor re-election at SPACEHAB’s 2008 Annual Meeting of Shareholders.

 

# **ExecutiveOfficers and Key Employees of the Company who are Not Directors**

#  

Set forthbelow is a summary of the background and business experience of the executiveofficers of the Company who are not nominees of the Board of Directors:

 
| **Name**             | ** ** | **Position(s)**                                  | ** ** | **Age** | ** ** | **With  Company  Since** |
|----------------------|------------|--------------------------------------------------|------------|---------|------------|--------------------------|
|                 |       |                                             |       |    |       |                     |
| Brian  K. Harrington |       | Chief Financial Officer, Secretary and Treasurer |       | 62      |       | 2004                     |
|                 |       |                                             |       |    |       |                     |
| James  D. Royston    |       | President                                        |       | 44      |       | 2000                     |

 

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The executiveofficers and key employees named below will serve in such capacities until thenext annual meeting of the Company’s Board of Directors, or until theirrespective successors have been duly elected and have been qualified, or untiltheir earlier death, resignation, disqualification, or removal from office.

 

# **BrianK. Harrington**

#  

Mr. Harringtonjoined SPACEHAB in January 2004 and serves as the Company’s Senior VicePresident, Finance and Chief Financial Officer. Before joining the Company, hewas a financial consultant in private practice for six years. Prior to workingin private practice, he served from 1989 to 1998 as Chief Financial Officer andSenior Vice President of Kirby Corporation (NYSE:KEX). His corporate andconsulting experience includes acquisitions, bank financings, public andprivate placement of debt, public equity transactions, divestures, andrecapitalizations. A Certified Public Accountant, Mr. Harrington began hiscareer in the U.S Army, First Armored Division, where he served as DeputyDivision Finance Officer during the Viet Nam conflict.

 

# **JamesD. Royston**

#  

In June 2007,Mr. Royston was appointed to the position of President of SPACEHAB, Inc,responsible for advancing the company’s global space commerce initiatives. Mr. Roystonjoined SPACEHAB in 2000 and most recently served as Senior Vice President andGeneral Manager of Astrotech Space Operations. A former RWD Technologies Inc,executive (NASDAQ -RWDT), Mr. Royston served as the company’s e-LearningDirector, where he managed company operations, strategic planning, and growthstrategies. Mr. Royston also served as the Director of the InformationManagement Project Office for United Space Alliance at NASA’s Kennedy SpaceCenter (KSC). His aerospace experience also includes acting as the KSCOperations Director for Orbital Sciences Corporation, overseeing all contractand business development activities, as well as managing the InformationSystems for NASA’s Hubble Space Telescope Program. He also served as a ProgramManager at NASA Headquarters in Washington, D.C.

 

**Operations of the Board of Directors**

 

**Director Nomination Process**

 

SPACEHAB’sdirector nominees are approved by the Board after considering therecommendation of the Corporate Governance and Nominating Committee.

 

A Board ofseven directors will be elected at the Annual Meeting. The Company’s Articlesof Incorporation provide that, with respect to any vacancies or newly createddirectorships, the Board will nominate such individuals as may be specified bya majority vote of the then sitting directors.

 

Regardingnominations for directors, the Corporate Governance and Nominating Committeeidentifies nominees in various ways. The Corporate Governance and NominatingCommittee considers the current directors that have expressed interest in, andthat continue to satisfy, the criteria for serving on the Board as establishedby the Corporate Governance and Nominating Committee. Other nominees may beproposed by current directors, members of management, or by shareholders. Fromtime to time, the Corporate Governance and Nominating Committee may engage aprofessional firm to identify and evaluate potential director nominees, but hasnot paid any of such fees to date. The Corporate Governance and NominatingCommittee considers the Board at a strategic level looking for industry andprofessional experience that complements the Company’s goals and direction. TheCorporate Governance and Nominating Committee has established certain criteriait considers as guidelines in considering nominations for the Board ofDirectors. The criteria include:

 

·                  the candidate’sindependence;

·                  the candidate’sdepth of business experience;

·                  the candidate’savailability to serve;

·                  the candidate’sintegrity and personal and professional ethics;

·                  the balance ofthe business experience on the Board as a whole; and

·                  the need forspecific expertise on the Board.

 

The criteriaare not exhaustive and the Corporate Governance and Nominating Committee andthe Board of Directors may consider other qualifications and attributes whichthey believe are appropriate in evaluating the ability of an individual toserve as a member of the Board of Directors. The Corporate Governance andNominating Committee’s goal is to assemble a Board of Directors that brings tothe Company a variety of perspectives and skills derived from high qualitybusiness and professional experience. In order to ensure that the Boardconsists of 

 

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members with avariety of perspectives and skills, the Corporate Governance and NominatingCommittee has not set any minimum qualifications and also considers candidateswith appropriate non-business backgrounds. Other than ensuring that at leastone member of the Board is a financial expert and a majority of the Boardmembers meet all applicable independence requirements, the Corporate Governanceand Nominating Committee does not have any specific skills that it believes arenecessary for any individual director to possess. Instead, the CorporateGovernance and Nominating Committee evaluates potential nominees based on thecontribution such nominee’s background and skills could have upon the overallfunctioning of the Board.

 

**Committeesof the Board of Directors**

 

During fiscalyear 2008, the Board of Directors had three standing committees:  an Audit Committee, a Compensation Committeeand a Corporate Governance and Nominating Committee.  Each committee currently consists of threepersons and each member of the Audit, Compensation and Corporate Governance andNominating Committees are required at the minimum to meet the “independence”requirements of the Nasdaq Capital Market’s Marketplace Rules.

 

Each of theBoard committees has adopted a charter that governs its authority, responsibilitiesand operation.  The Company periodicallyreviews, both internally and with the Board, the provisions of theSarbanes-Oxley Act of 2002, and the rules of the SEC and NASDAQ regardingcorporate governance policies, processes and listing standards.  In conformity with the requirement of such rules andlisting standards, we have adopted a written Audit Committee Charter, aCompensation Committee Charter, and a Corporate Governance and NominatingCommittee Charter.  The Audit CommitteeCharter, as well as the charters of the Compensation Committee, and theCorporate Governance and Nominating Committee may all be found on the Company’sweb site at www.spacehab.com under “Investor Info” or by writing to SPACEHAB,Incorporated, 907 Gemini Street, Houston, Texas 77058, Attention “InvestorRelations” and requesting copies.

 

The Board ofDirectors has determined each of the following directors to be an “independentdirector” as such term is defined by Rule 4200(a)(15) of the NASDAQMarketplace Rules:  Mark Adams; R. ScottNieboer; John A. Oliva; William F. Readdy; and Barry A. Williamson.  The Board of Directors has also determinedthat each member of the Audit Committee and the Compensation Committee, and amajority of the members of the Corporate Governance and Nominating Committeeduring the past fiscal year met the independence requirements applicable tothose Committees prescribed by NASDAQ and SEC rules.

 

***The Corporate Governance and Nominating Committee***

 

The Corporate Governance and Nominating******Committee was created by theBoard of Directors on February 17, 2004. The Corporate Governance andNominating Committee’s charter was adopted by the Committee and approved by theBoard on May 13, 2004. The charter is available in the “Investor Info”section of the Company’s web site at www.spacehab.com.  The primary purpose of the CorporateGovernance and Nominating Committee is to provide oversight on the broad rangeof issues surrounding the composition and operation of the Board of Directors,including identifying individuals qualified to become Board members andrecommending to the Board director nominees for the next Annual Meeting ofShareholders. The majority of the directors who are members of the CorporateGovernance and Nominating Committee are independent directors that meet therequirements of NASDAQ and SEC rules. As of the end of fiscal year 2008 theCorporate Governance and Nominating Committee consisted of Mr. Mark Adams(Chairman), General (Ret.) Lance W. Lord, and Mr. Barry A. Williamson.During fiscal year 2008, the Corporate Governance and Nominating Committee metone time.

 

***The Audit Committee***

 

 TheAudit Committee is composed solely of independent directors that meetthe requirements of NASDAQ and SEC rules and operates under a writtencharter adopted by the Audit Committee and approved by the Board of Directorson May 13, 2004. The charter is available on the Company’s web site whichis www.spacehab.com. The Audit Committee is responsible for appointing andcompensating a firm of independent registered public accountants to audit theCompany’s financial statements, as well as oversight of the performance andreview of the scope of the audit performed by the Company’s independentregistered public accountants. The Audit Committee also reviews audit plans andprocedures, changes in accounting policies, and the use of the independentregistered public accountants for non-audit services. As of the end of fiscalyear 2008, the Audit Committee consisted of Mr. Oliva (Chairman), Mr. Adams,and Mr. Nieboer. During fiscal year 2008, the Audit Committee met fourtimes.  The Board of Directors hasdetermined that John A. Oliva met the qualification guidelines as an “auditcommittee financial expert” as such term is defined in Item 407(d)(5)(ii) ofRegulation S-K promulgated by the SEC.

 

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***The Compensation Committee***

 

The Compensation Committee is composed solely ofindependent directors that meet the requirements of NASDAQ and SEC rules andoperates under a written charter adopted by the Compensation Committee andapproved by the Board of Directors on May 13, 2004, and amended on May 12,2005. The charter is available on the Company’s web site which is www.spacehab.com.The Compensation Committee is responsible for determining the compensation andbenefits of the Chief Executive Officer and all executive officers of theCompany and establishing general policies relating to compensation and benefitsof employees of the Company. The Compensation Committee also administers theCompany’s 2008 Stock Incentive Plan, the 1994 Stock Incentive Plan, the 1995Directors’ Stock Option Plan, and the Employee Stock Purchase Plan inaccordance with the terms and conditions set forth in those plans. As of theend of fiscal year 2008 the Compensation Committee consisted of Mr. Adams(Chairman), Mr. Readdy, and Mr. Oliva. During fiscal year 2008, theCompensation Committee met four times.

 

# **Codeof Ethics and Business Conduct**

#  

The Company’sCode of Ethics and Business Conduct applies to all directors, officers, andemployees of SPACEHAB. The key principles of this code include acting legallyand ethically, speaking up, getting advice, and dealing fairly with the Company’sShareholders. The Code of Ethics and Business Conduct is available on theCompany’s web site at www.spacehab.com and is available to the Company’sShareholders upon request. The Code of Ethics and Business Conduct meets therequirements for a “Code of Conduct” under the National Association ofSecurities Dealers, Inc. (“NASD”) rules and the SEC rules forfinancial officers.

 

# **Section 16(a) BeneficialOwnership Reporting Compliance**

#  

Section 16(a) ofthe Securities Exchange Act of 1934 requires the Company’s directors andexecutive officers and persons who beneficially own more than 10% of theCompany’s Common Stock to file reports of ownership and changes in ownershipwith the SEC. Such directors, executive officers, and greater than 10%Shareholders are required by SEC regulation to furnish to the Company copies ofall Section 16(a) forms they file. Due dates for the reports arespecified by those laws, and the Company is required to disclose in thisdocument any failure in the past fiscal year to file by the required dates.Based solely on written representations of the Company’s directors andexecutive officers and on copies of the reports that they have filed with theSEC, the Company’s belief is that all of SPACEHAB’s directors and executiveofficers complied with all filing requirements applicable to them with respectto transactions in the Company’s equity securities during fiscal year 2008.

 

# **Item11.  Executive Compensation**

#  

# **CompensationDiscussion and Analysis**

#  

# **Overview**

#  

SPACEHABprovides a range of products and services that focus on the needs of industry,governments and academia requiring access to, and utilization of the uniqueenvironment of space.  We own and operatespacecraft pre-launch facilities and provide supporting services at threedomestic launch sites.  We are adeveloper and operator of space flight hardware assets, a provider of mannedand unmanned payload processing services, and an innovator in space commerceand developing space utilization applications. In anticipation of the planned2010 space shuttle retirement, we began developing new products and serviceswithin our strategic focus on the commercial exploitations of space.

 

Achieving ourCompany’s aspirations requires a highly skilled and highly motivated employeeteam. Thus, our compensation system is designed to be highly competitive with thoseof other companies that compete for highly skilled technical employees andexecutives. Our performance-based compensation system is intended to includeincentives for innovation and entrepreneurial spirit.

 

# **GuidingPrinciples**

#  

TheCompensation Committee strives to achieve our strategic objectives by designingour compensation program to offer competitive base compensation to attract andretain experienced and highly qualified executives while offering incentives tofoster the innovation and entrepreneurial spirit necessary for executing ourbusiness strategy and rewards for successful achievement of performance goals.In designing our executive compensation program, we are guided by fiveprinciples:

 

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·                  Establish targetcompensation levels that are competitive within the industries and the marketsin which we compete for executive talent;

·                  Structureexecutive compensation so that our executives share in SPACEHAB’s successes andfailures by correlating compensation with target levels based upon businessperformance;

·                  Link pay toperformance by making a percentage of total executive compensation variable, or“at risk”, through an annual determination of performance-based incentivecompensation;

·                  Align a portionof executive pay with shareholder interests through equity awards; and

·                  Maintain acompany-wide entrepreneurial atmosphere by eliminating special “executive only”benefits or prerequisites.

 

# **Operationof the Compensation Committee**

#  

TheCompensation Committee of the Board of Directors administers our executivecompensation program. The Committee establishes and monitors the Company’soverall compensation strategy to ensure that executive compensation supportsthe Company’s business objectives. In carrying out its responsibilities, theCompensation Committee reviews and determines the compensation (includingsalary, short-term incentives, long-term incentives and other benefits) of theCompany’s Chief Executive Officer (“CEO”) and certain named executive officers(“NEOs”).

 

For a morecomplete discussion of the responsibilities of the Compensation Committee, seethe Operations of the Board of Directors – The Compensation Committee on page 8,and the charter for the Compensation Committee posted on our web site at www.spacehab.com.

 

# **TheCompensation Program**

#  

The keycomponents of our current compensation program for SPACEHAB executive officersare:

 

·                  Base salary;

·                  Short-term(annual) cash incentives;

·                  Long-termperformance-based and other equity awards; and

·                  Other benefits.

 

To remaincompetitive, the Committee periodically benchmarks our executive compensationprogram to determine how well actual compensation targets and levels compare toour overall philosophy and target markets. The primary focus of thebenchmarking process is on public companies in the aerospace, defense andgovernment contractor industries of similar or otherwise comparable size andcomplexity. Our benchmarking peer group consists of SpaceDev, Inc.;Integral Systems, Inc.; Axsys Technologies; Ceradyne Inc.; First AviationServices; Herley Industries, Inc.; Allied Defense Group; Sypris Solutions, Inc.;and Orbital Sciences Corporation. This benchmarking considers information fromproxy data for the peer group’s CEO and NEOs and was last updated and presentedto the Compensation Committee at its September 6, 2006 meeting. Given oursize and recent changes in our business and revenue mix, the actual companiesused in the benchmarking process may vary from year to year, but generally thecomparisons consider practices of other comparable companies with revenues thatgenerally, for Fiscal Year 2008, range from $10 million to $700 million.

 

TheCompensation Committee retained an outside consultant, Strategic CompensationResearch Associates (“SCRA”), to assist the Committee and to insure that thetotal compensation, not just base salaries, paid to its executive officers arefair and equitable and are determined in accordance with the Guiding Principlesdiscussed above. The Board of Directors, with the advice of the CompensationCommittee and its compensation consultant, met on March 22, 2007 toapprove the base salary for Mr. Pickens who assumed the role of CEO on January 1,2007. The Compensation Committee met on October 15, 2007, December 1,2007, January 30, 2007 and February 14, 2008 to consider furtherrecommendations of the compensation consultant, grant equity incentive awardsto certain officers and employees of the Company and to consider othercompensation matters.  The Board of Directorsmet on September 18, 2007, and May 22, 2008 to approve theappointment of other NEOs and to approve base salaries upon those appointments.

 

**ExecutiveCompensation through the Company’s Restructuring and Transition Period**

 

In January,2007, the Board of Directors of the Company initiated a comprehensiverestructuring and transition program to wind down the Company’s remainingcommitted space shuttle module missions, reassess the Company’s capitalstructure and reduce Company overhead through a transition period.  During this restructuring and transition 

 

9

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period theCompany’s CEO and certain other NEOs did not have employment agreements and theCompensation Committee suspended its annual stock option grant program andshort term cash incentive plan.  TheBoard of Directors recognized that the period of restructuring and transitionwas essentially completed as of the end of fiscal year 2008.  In recognition of the efforts of the Company’sCEO, NEOs and certain directors, the Compensation Committee, with theconcurrence of the Committee of Independent Directors of the Board ofDirectors, granted specific equity and cash awards on July 18, 2008.

 

# **OtherConsiderations in Determining Executive Compensation**

#  

We believethat our Executive Compensation Program, exclusive of the period ofrestructuring and transition discussed above, provides consistency andpredictability among our senior management that focuses and compensates them onthe overall goals of the Company. Each element of our Executive CompensationProgram is structured towards specific objectives and accordingly, individualawards are not influenced by gains realized in prior years or awards in othercomponents of Executive Compensation. In accordance with this philosophy,incentive objectives, once determined, are not adjusted for individualexecutives and stock options once granted, are not repriced except pursuant tothe terms of the plan. Unique individual situations, when deemed appropriate bythe Compensation Committee, are considered through terms of employmentagreements, bonus payments other than bonus pursuant to the Short Term CashIncentive Plan or individual grants of stock options.

 

# **Roleof the Compensation Committee and CEO in Determining Executive Compensation**

#  

For fiscalyear 2008, the Compensation Committee, at the initiative of our CEO, Mr. Pickens,held Base Salaries for our CEO and NEOs unchanged except for new appointments,recognizing the objectives of the Board of Directors for restructuring andtransitioning the Company. In July 2007, our CEO, Mr. Pickensprovided to the Compensation Committee his recommendations with respect topotential compensation for the NEOs who report to him. Mr. Pickens’recommendations recognized the successful completion of the period ofrestructuring and transition.  TheCompensation Committee reviewed and gave considerable weight to theserecommendations because of Mr. Pickens’ direct knowledge of the otherexecutives’ performance and contributions. The Compensation Committeeultimately used its collective judgment along with the advice of itscompensation consultant to determine the base salaries, grants of restrictedand unrestricted stock, and the size of each stock option grant, in each casefor the NEOs. Mr. Pickens, who became our CEO in January 2007 wasawarded his compensation based on the collective judgment of the CompensationCommittee and upon the advice and consultation of SCRA, the CompensationCommittee retained compensation consultant. Mr. Pickens was not presentduring any discussion or determination of his compensation by the CompensationCommittee.

 

# **BaseSalary**

#  

Base salary isdesigned to compensate our NEOs in part for their roles and responsibilities,and also to provide a stable and fixed level of compensation that serves as aretention tool throughout the executive’s career. As of October 30, 2008,the Company has employment agreements with its CEO and all of its NEOs thatprovide for a minimum base salary. These initial base salaries were setconsidering each executive’s roles and responsibilities at the time he or shejoined the Company or the agreements were later negotiated, considering theskills and future potential of the NEO with the Company, along with salarylevels for similar positions in our target market. Typically, the CompensationCommittee reviews the base salaries of each NEO annually. Adjustments are madebased on individual performance, changes in roles and responsibilities, andexternal market data for similar positions. Salaries are targeted atapproximately the 50th percentile for similar positions within our market,based on the Compensation Committee’s ongoing review of the benchmarkingresults.

 

In general,base salary has been the largest component of our overall compensation package.Short-term cash incentives, discussed below, are targeted at a fraction of basesalary amounts and are scaled in accordance with the achievement of performancegoals. Long-term equity incentives have had little value over recent years dueto the decline in the Company’s stock prices resulting from disruptions in thespace shuttle program. Due to the impact of these industry disruptions on ourshort-term cash incentives and long-term equity incentives, base salarycurrently plays a more substantial role in our overall executive compensationstructure than it is intended.

 

# **Short-termCash Incentives**

#  

We provideannual incentive awards under our Key Employee Incentive Bonus Plan (the “BonusPlan”) usually in cash. These short-term cash incentives are designed to rewardthe achievement of specific, pre-set financial results measured over the fiscalyear in which that compensation is earned. Generally, we compute the Bonus Planafter the

 

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end of eachfiscal year and make the cash awards during the first quarter of the nextfiscal year. The Bonus Plan encompasses all employees of the Company based uponmaximum award levels stated as a percentage of base salary (“Payout Percentage”).The maximum award levels are set within our salary-grade structure for eachsalary grade ranging from 5% for all employees below our “Director Level” (thesalary-grade level just below Vice President) and range from 25% for DirectorLevel to 50% for Chief Executive Officer.

 

The Companysuspended its Bonus Plan during the restructuring and transition period thatextended through fiscal year 2008.  Forfiscal year 2009, the Compensation Committee has reinstated the Bonus Planencompassing three equally weighted “Bonus Elements”, each based upon specific “BonusObjectives” set by the Compensation Committee at the beginning of the fiscalyear. The sum of the Payout Percentage for each of the Bonus Elements, then isapplied to the award levels, discussed in the preceding paragraph, for eachemployee to determine the Bonus Award. For fiscal year 2007, the CompensationCommittee had established the following three Bonus Elements:

 

·                  IndividualPerformance – A Payout Percentage of up to 33% is based upon the officer oremployee’s performance of his job responsibilities and achievement ofindividual goals as determined by his supervisor or, in the case of NEOs theCompensation Committee, through the annual performance review process.

 

·                  Business UnitPerformance – A Payout Percentage of up to 33% is to be awarded based upon financial performance of theofficer or employee’s Business Unit or Staff Department based upon businessunit net income, or staff department net expense, relative to the approvedbudget for the fiscal year.

 

·                  CorporatePerformance – A Payout Percentage of up to 33% is to be awarded based upon financial performance of theCompany, as measured equally by consolidated revenue compared to fiscal year2009 budgeted revenue, net income compared to fiscal year 2009 budgeted netincome; and fiscal year end 2009 backlog as compared to backlog at thebeginning of the fiscal year.

 

Given thevagaries of the marketplace and the possibility of unforeseen developments, theCompensation Committee has discretionary authority to adjust such awards toreflect actual performance in light of such developments or to make otherdiscretionary adjustments to the overall Payout Percentage or to individualemployee bonuses. Bonus maximum award levels range from 30% to 50% of base salariesfor our NEOs. On average, we target our short term cash incentives to compriseapproximately 15% of the total compensation package of our NEOs.

 

# **Long-term Non-cashIncentive Awards**

 

Our long-termincentive awards are used to link Company performance and increases inshareholder value to the total compensation for our NEOs. These awards are alsokey components of our ability to attract and retain our NEOs. The annualizedvalue of the awards to our NEOs is intended to be a significant component of theoverall compensation package. On average, and assuming performance is ontarget, these awards are targeted to represent up to 40% of the totalcompensation package, consistent with our emphasis on linking executive pay toShareholder value.

 

Our Shareholder-approvedincentive plans allow for the granting of stock options based upon SPACEHAB’sstock prices in the public markets. Stock options are granted with an exerciseprice not less than the market price of our common stock on the grant date.Options generally vest over a period of four years with 25% becomingexercisable on each anniversary of the grant date as long as the recipient isstill employed by the Company on the date of vesting, and generally expireafter ten years. Stock options only have value if the Company’s stock priceappreciates after the options are granted

 

Although theCompany did not make awards of stock options under its Key Employee EquityAward Plan during fiscal year 2008, stock options are generally grantedannually at about the same time as awards of the Key Employee Incentive BonusPlan. Awards are generally made to all employees, including NEOs, at theDirector Level or higher. The target awards are set for NEOs and otheremployees of the Company based upon salary-grade levels within our compensationsystem and range from 10,000 shares for Director Level to 41,000 shares for theChief Executive Officer. The Company’s NEOs, other than the Chief ExecutiveOfficer receive 30,000 shares.

 

In July, 2008,the Compensation Committee made special one-time, equity based incentive awardsto our CEO and other NEOs reflecting the successful completion of the Company’srestructuring and transition process. These awards consisted of grants of 1,100,000 shares of common stock and100,000 stock options to our CEO and grants of 150,000 shares of common stockto Mr. Mark Adams, a director and 200,000 shares to Mr. BarryWilliamson, a director along with cash bonuses of $350,000; $27,500; and$36,200 respectively.  The CompensationCommittee on July 18, 2008 also awarded 200,000 shares of restricted stockand 75,000 stock options to Mr. Royston, 150,000 

 

11

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shares ofrestricted stock and 50,000 stock options to Mr. Harrington and 50,000shares of restricted stock and 87,500 stock options to Mr. Lord, eachbeing NEOs of the Company.  The stockoptions granted to NEOs in this special one-time equity based award weregranted with a term of 2 years and with full vesting on January 15,2009.  The restricted stock grants vest50% on January 15, 2009, 25% on January 15, 2010 and 25% on January 15,2011.

 

Stock awards,restricted stock grants and Stock option awards were made in July, 2008 inamounts for our NEOs as set forth in the table labeled Fiscal Year 2008 Grantsof Plan-Based Awards on page 14.

 

# **Benefits**

 

Our benefitprograms are established based upon an assessment of competitive market factorsand a determination of what is needed to attract and retain high caliberexecutives. SPACEHAB’s primary benefits for executives include participation inthe Company’s broad-based plans: the 401(k) Plan, the Company’s health,dental and vision plans and term life and disability insurance plans. TheCompany also provides certain executives, including some NEOs, withsupplemental disability insurance. This plan offers additional incomeprotection to Senior Vice Presidents and above and is provided to supplementthe monthly benefit amounts that are capped in the general disability policy.The Company provides 1.5 times the NEO’s annual base salary to a maximum of$300,000 in term life insurance and pays the premium for such insurance. Thefair value of premiums paid in excess of IRS limitations are included as otherincome reported for the NEO.

 

# **Indemnification Agreements**

 

The Companyhas entered into indemnification agreements with each of its NEOs. Theagreements provide that the Company shall indemnify and hold harmless eachindemnitee from liabilities incurred as a result of such indemnitee’s status asan officer, or employee of the Company, subject to certain limitations.

 

# **Post-TerminationCompensation**

 

TheCompensation Committee believes that severance benefits and change of controlbenefits are necessary in order to attract and retain the caliber and quality ofexecutive that the Company needs in its most senior positions. These benefitsare particularly important in an industry subject to rapid technical change andinfluenced by changes in political priorities, providing for continuity ofsenior management and helping executives focus on results and strategicinitiatives.

 

Subsequent tothe end of fiscal year 2008, each of our NEOs, with the exception of Mr. Lordwho has not yet executed an employment agreement, have entered into employmentagreements with the Company that provide for severance payments and benefits iftermination occurs without “cause” or if the executive leaves for “good reason”.There is also additional compensation provided in circumstances following suchtermination after a “Change in Control,” as defined in the employmentagreement.  Additional informationregarding the severance and change in control payments, including a definitionof key terms and a quantification of benefits that would have been received byour NEOs had termination occurred on June 30, 2008 and assuming suchemployment agreements were in effect at such time, is found under PotentialPayments upon Termination or Change in Control beginning on page 17.

 

# **Stock OwnershipGuidelines**

 

The Companyhas not established stock ownership guidelines.

 

# **Tax DeductibilityPolicy**

 

TheCompensation Committee considers the deductibility of compensation for federalincome tax purposes in the design of the Company’s compensation programs. Webelieve that all of the incentive compensation paid to our NEOs for fiscal year2008 qualifies as “performance-based compensation” and thus, is fullydeductible by the Company for federal income tax purposes. While we generallyseek to ensure the deductibility of the incentive compensation paid to our NEOs,the Compensation Committee intends to retain the flexibility necessary toprovide cash and equity compensation in line with competitive practice, ourcompensation philosophy, and the best interest of our shareholders even ifthese amounts are not fully tax deductible. The employment agreements between the Company and its CEO and other NEOsprovide for interpretation, operation and administration consistent with theintent of Section 409A of the Internal Revenue Code, to the extentapplicable.

 

# **Composition of theCompensation Committee**

#  

The Company’sCompensation Committee consists of Mr. Mark Adams (Chairman), Mr. WilliamF. Readdy and Mr. R. Scott Nieboer. Mr. Barry A. Williamson served asChairman of the Compensation Committee until February, 

 

12

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2008.  Mr. Adams is President and ChiefExecutive Officer of Advocate MD Financial Group, Inc. (“Advocate”). Mr. Pickensserves on the Board of Directors of Advocate; however, Mr. Pickens is nota member of the Compensation Committee of Advocate.

 

Tejas, Inc.,a company related to the Company by Mr. Williamson as a member of theBoard of Directors, has owned significant common stock holdings of the Companyfrom time to time. Tejas, Inc. does not currently have beneficialownership of five percent or more of the Company’s common stock. PMB HelinDonovan LLP, the Company’s independent auditor also audits Tejas, Inc.

 

# **CompensationCommittee Report**

 

SPACEHAB,Incorporated’s Compensation Committee has reviewed and discussed withmanagement the Compensation Discussion and Analysis required by item 402(b) ofRegulation S-K and, based on such review and discussion, has recommended to theBoard of Directors that such Compensation Discussion and Analysis be includedin Form 10-K for fiscal year ended June 30, 2008.

 

TheCompensation Committee:

 

Mark Adams(Chairman)

John A. Oliva

William F.Readdy

 

November 25,2008

 

# **ExecutiveCompensation**

 

The SummaryCompensation Table provides compensation information about SPACEHAB’s principalexecutive officer, principal financial officer and the most highly compensatedexecutive officers other than the principal executive officer and principalfinancial officer. Additionally, the table also lists the Company’s formerprincipal operating officer who served as an executive officer during part offiscal year 2008, but who was not an executive officer at fiscal year-end andwhose total compensation earned for the portion of the year served wouldotherwise make such former executive one of the three most highly compensatedexecutives for fiscal year 2008.

 

# **Summary CompensationTable**

 
| **Name and Principal Position** | ** ** | **Year** | ** ** | **Salary ($)** | ** ** | **Bonus ($)(1)** | ** ** | **Stock Awards($)(2)** | ** ** | **Option  Awards ($)** | ** ** | **All Other  Compensation  ($)(3)** | ** ** | **Total ($)** | ** ** |
|------------------------------------------------|------------|----------|------------|---------------------|------------|-----------------------|------------|-----------------------------|------------|-----------------------------|------------|------------------------------------------|------------|--------------------|------------|
| Thomas B. Pickens, III                    |       | 2008     |       | 360,000             |       | 350,000               |       | 495,000                     |       | 100,000                     |       | 10,070                                   |       | 1,215,070          |       |
| Chief Executive Officer                        |       | 2007     |       | 178,615             |       | 0                     |       | 0                           |       | 0                           |       | 0                                        |       | 178,615            |       |
|                                           |       |     |       |                |       |                  |       |                        |       |                        |       |                                     |       |               |       |
| Brian K. Harrington                            |       | 2008     |       | 225,000             |       | 0                     |       | 150,000                     |       | 50,000                      |       | 11,280                                   |       | 236,280            |       |
| Chief Financial Officer                        |       | 2007     |       | 225,000             |       | 0                     |       | 0                           |       | 23,000                      |       | 11,280                                   |       | 259,280            |       |
|                                           |       |     |       |                |       |                  |       |                        |       |                        |       |                                     |       |               |       |
| James D. Royston                               |       | 2008     |       | 180,000             |       | 0                     |       | 200,000                     |       | 75,000                      |       | 810                                      |       | 180,810            |       |
| President                                      |       | 2007     |       | 183,649             |       | 0                     |       | 0                           |       | 23,000                      |       | 2,578                                    |       | 209,227            |       |
|                                           |       |     |       |                |       |                  |       |                        |       |                        |       |                                     |       |               |       |
| Lance W. Lord(4)                               |       | 2008     |       | 13,462              |       | 0                     |       | 50,000                      |       | 87,500                      |       | 0                                        |       | 13,462             |       |
| Chief Executive Officer,  Astrotech            |       |     |       |                |       |                  |       |                        |       |                        |       |                                     |       |               |       |
|                                           |       |     |       |                |       |                  |       |                        |       |                        |       |                                     |       |               |       |
| Michael Bowker(5)                              |       | 2008     |       | 178,000             |       | 0                     |       | 0                           |       | 0                           |       | 10,013                                   |       | 188,013            |       |
| Chief Operating Officer                        |       | 2007     |       | 6,846               |       | 0                     |       | 0                           |       | 0                           |       | 342                                      |       | 7,188              |       |

 

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| (1) |   | See narrative on Short Term  Cash Incentives. Bonus was awarded on July 18, 2008, reflecting fiscal  year 2008.                                                                                                                      |
|-----|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) |   | See narrative on Long Term  Incentive Awards. Includes 1,100,000 shares of common stock granted to  Mr. Pickens on July 18, 2008, valued at $0.45 per share. Also  includes restricted stock awards made on July 18, 2008. |
| (3) |   | See Schedule of All Other  Compensation.                                                                                                                                                                                                  |
| (4) |   | Mr. Lord was appointed  Chief Executive Officer of the Company’s Astrotech subsidiary on June 4,  2008. Prior to that time Mr. Lord was a member of the Board of  Directors.                                          |
| (5) |   | Mr. Bowker resigned on  May 23, 2008.                                                                                                                                                                                           |

 

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**Schedule of All Other Compensation for Fiscal Year 2008**

** **
| **Named Executive Officer** | ** ** | **401(K) Plan Company  Matching Contributions  ($)** | ** ** | **Supplemental  Disability Insurance  Premium  ($)** | ** ** | **Total  ($)** | ** ** |
|---------------------------------------|------------|---------------------------------------------------------------------|------------|-----------------------------------------------------------|------------|----------------|------------|
| Thomas B. Pickens, III           |       | 8,723                                                               |       | 1,347                                                     |       | 10,070         |       |
| Brian K. Harrington                   |       | 10,000                                                              |       | 1,280                                                     |       | 11,280         |       |
| James D. Royston                      |       | 69                                                                  |       | 741                                                       |       | 810            |       |
| Lance W. Lord                         |       | 0                                                                   |       | 0                                                         |       | 0              |       |
| Michael Bowker                        |       | 8,900                                                               |       | 1,113                                                     |       | 10,013         |       |

 

# **Fiscal Year 2008Grants of Plan-Based Awards**

 

The followingtable shows additional information regarding: (i) the target and maximumlevel of annual cash incentive awards for the Company’s executive officers forperformance during fiscal year 2008, as established by the CompensationCommittee in July 2008 under the Company’s Key Employee Incentive BonusPlan; and (ii) stock option awards granted in July 2008 that wereawarded to help retain the NEOs and focus their attention on buildingShareholder value. The actual amount of the annual cash incentive awardreceived by each NEO for performance during fiscal year 2008 is shown in theFiscal Year 2008 Summary Compensation Table.

 
| ** **                  | ** ** | ** **          | ** ** | **Estimated Future  Payouts Under Non-  Equity Incentive Plan  Awards** | ** ** | **All Other Stock  Awards:  Number of  Shares of** | ** ** | **All Other Option  Awards: Number  of Securities** | ** ** | ** **                 | ** ** | **Grant Date Fair  Value of Stock** | ** ** |
|-----------------------------|------------|---------------------|------------|--------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------|------------|-------------------------------------------------------------------------|------------|----------------------------|------------|---------------------------------------------------------|------------|
| **Name**                    | ** ** | **Grant Date** | ** ** | **Target  ($)(1)**                                                                               | ** ** | **Maximum  ($)(1)**                                                    | ** ** | **Stock or Units  (#)(4)**                                    | ** ** | **Underlying  Options(3)** | ** ** | **Exercise  Price**                                     | ** ** | **and Option  Awards** | ** ** |
| Thomas B. Pickens, III |       | July 18, 2008  |       | 90,000                                                                                           |       | 180,000                                                                |       | 1,100,000                                                               |       | 100,000                    |       | $                                                       | 0.45       |   | $ | 495,000 |   |
| Brian K. Harrington         |       | July 18, 2008  |       | 33,750                                                                                           |       | 67,500                                                                 |       | 150,000                                                                 |       | 50,000                     |       | $                                                       | 0.45       |   | $ | 67,500 |   |
| James D. Royston            |       | July 18, 2008  |       | 31,500                                                                                           |       | 63,000                                                                 |       | 200,000                                                                 |       | 75,000                     |       | $                                                       | 0.45       |   | $ | 90,000 |   |
| Lance W. Lord               |       | July 18, 2008  |       | 26,250                                                                                           |       | 52,500                                                                 |       | 50,000                                                                  |       | 87,500                     |       | $                                                       | 0.45       |   | $ | 22,500 |   |
| Michael Bowker(5)           |       | July 18, 2008  |       | —                                                                                           |       | —                                                                 |       | —                                                                  |       | —                     |       | —                                                  |       | — |   |

 

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| (1) |   | Estimated target bonus  percentage is 50% of maximum amount available within individual’s bonus  bracket. Excludes special cash bonus of $350,000 paid to Mr. Pickens.                    |
|-----|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) |   | Mr. Pickens’ bonus is  computed at a maximum of 50% of base salary. Bonus for Mr. Harrington,  Mr. Royston, and Mr. Lord are computed at a maximum of 30% of base  salary. |
| (3) |   | Stock option awards granted  in July 2008 for successful completion of the restructuring and  transition process in fiscal year 2008.                                                          |
| (4) |   | Includes stock grant of  1,100,000 shares to Mr. Pickens and restricted stock awards to  Mr. Harrington, Mr. Royston and Mr. Lord made on July 18,  2008.                  |
| (4) |   | Mr. Bowker resigned  prior to the end of fiscal year 2008.                                                                                                                                     |

 

# **EmploymentAgreements**

 

Subsequent tothe close of fiscal year 2008, the Company entered into employments agreementswith Mr. Pickens, Mr. Harrington, and Mr. Royston. The Companyand Mr. Lord have also agreed upon terms of an employment agreement,however, a written agreement has not been executed as of the date of thisreport. Mr. Bowker had an employment agreement at the time of histermination of employment. Each employment agreement and the terms of agreementwith Mr. Lord sets forth, among other things, the NEO’s minimum basesalary, bonus opportunities and provisions with respect to certain payments andother benefits upon termination of employment under certain circumstances (suchas without “Cause” or leaving employment for “Good Reason,” as defined in theagreements) or, in certain agreements, after a change in control of theCompany. Please see Potential Payments Upon Termination or Change in Controlbeginning on page 17 for a description of such provisions and for adescription of post separation payments paid to Mr. Bowker.

 

14

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The minimumbase salary set in the employment agreement for Mr. Pickens is $360,000, Mr. Lordis $175,000, Mr. Harrington is $225,000, and for Mr. Royston is$210,000. Mr. Bowker was paid his salary pro rata through the date of hisresignation from the Company on May 23, 2008.

 

The NEOsparticipate in the Key Employee Incentive Bonus Plan in accordance with theterms of the plan which includes all employees of the Director Level and above.In accordance with that Plan, Mr. Pickens receives a maximum bonus of 50%,Mr. Lord 30%, Mr. Harrington 30%, and Mr. Royston 30%. Inaccordance with the plan, Mr. Bowker was eligible to receive up to 35%.

 

# **Awards**

 

In August 2006the Compensation Committee last awarded stock options to the Company’s NEOs inaccordance with the Annual Stock Option Grant Program. The CompensationCommittee also awarded bonuses to employees other than NEOs under the KeyEmployee Incentive Bonus Plan for fiscal year 2006. The Company since failed toachieve any of the Bonus Objectives in the Key Employee Incentive Bonus Planfor fiscal year 2007 and, accordingly, no bonuses were awarded. The Board ofDirectors suspended the Key Employee Incentive Bonus Plan during fiscal year2008.  The Compensation Committee alsodid not award stock option grants under the Annual Stock Option Grant Programfor fiscal years 2007 and 2008.

 

# **Salary and Bonus inProportion to Total Compensation**

 

As noted inthe Compensation Discussion and Analysis beginning on page 8, we believethat a substantial portion of each NEO’s compensation should be in the form ofperformance based awards, including stock option awards. During fiscal year2008, the Company suspended its Key Employee Incentive Bonus Plan and,accordingly, no Incentive Bonus Awards were made. Total compensation of ourNEOs, was substantially all in the form of base salary and benefits. TheCompensation Committee believes that our current compensation program is out ofline with the changing industry environment of the space industry and therequired entrepreneurial commitment of its NEOs and has engaged itscompensation consultant to assist the committee in developing a new equityincentive based compensation structure for fiscal year 2009 and later years.

 

# **Outstanding EquityAwards at Fiscal Year 2008 End**

 

The followingtable shows certain information about unexercised options at June 30,2008.

 

**Schedule of Outstanding Equity Awards**

 
| ** **                  | ** ** | **Option Awards**                                                                                | ** ** |
|-----------------------------|------------|-------------------------------------------------------------------------------------------------------|------------|
| **Name**                    | ** ** | **Number of Securities  Underlying Unexercised  Options (#) Exercisable(1)** | ** ** | **Number of Securities  Underlying Unexercised  Options (#) Unexercisable(2)** | ** ** | **Option  Exercise Price  ($)** | ** ** | **Option  Expiration Date** | ** ** |
| Thomas B. Pickens, III |       | 1,000  500  500                                                                                       |       | —  —  — |   | 20.80 7.70 7.20 |   | 12/1/2011  12/1/2012  12/12/2013 |   |
| Brian K. Harrington         |       | 2,000  2,000  1,500  1,000                                                                            |       | —  — 500 1,000 |   | 17.50  24.10  14.30  11.50 |   | 1/6/2014  8/16/2014  8/3/2015   8/9/2016 |   |
| James D. Royston            |       | 1,000  900  1,200  400  400                                                                           |       | 1,000  300  0  0  0 |   | 7.00  10.20  24.10  14.30  11.50 |   | 9/17/2012   8/7/2013   8/16/2014   8/3/2015   8/9/2016 |   |
| Lance W. Lord               |       | 0                                                                                                     |       | 0 |   | 0 |   | 0 |   |

 

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| (1) |   | All exercisable options  will expire 90 days after the date of an employee’s termination.                                                                                                                    |
|-----|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) |   | Options vest ratable over a  four year period. The following table provides information with respect to  the vesting of each NEO’s outstanding unexercisable options that are set  forth in the above table: |

 

15

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#  

# **Scheduleof Vesting of Stock Option Grants**

 
| **Name**            | ** ** | **Award Type** | ** ** | **8/3/2009** | ** ** | **8/9/2009** | ** ** | **8/9/2010** | ** ** |
|---------------------|------------|---------------------|------------|--------------|------------|--------------|------------|--------------|------------|
| Thomas B. Pickens   |       | None                |       | —       |       | —       |       | —       |       |
| Brian K. Harrington |       | Stock Options       |       | 500          |       | 500          |       | 500          |       |
| James D. Royston    |       | Stock Options       |       | 300          |       | 500          |       | 500          |       |
| Lance W. Lord       |       | Stock Options       |       | —       |       | —       |       | —       |       |

#  

# **2008Option Exercises and Stock Vested**

#  

During fiscalyear 2008 there were no stock options exercised or stock awards realized.  On July 18, 2008, the CompensationCommittee made equity and cash awards to its CEO and NEOs reflective of theircontributions to the Restructuring and Transition Period.  The following table sets forth the number andcorresponding value realized during fiscal year 2008 and reflecting the grantsmade on July 18, 2008 with respect to common stock grants, stock optionsthat were exercised and restricted shares that became unrestricted during suchperiod for each NEO.

 
| ** **               | ** ** | **Option Awards**                                     | ** ** | **Stock Awards**                     | ** ** |
|--------------------------|------------|------------------------------------------------------------|------------|-------------------------------------------|------------|
| **Name**                 | ** ** | **Number of Shares  Acquired on  Exercise** | ** ** | **Value Realized on  Exercise** | ** ** | **Number of Shares  Acquired on  Exercise or Grant** | ** ** | **Value Realized on  Vesting or Grant** | ** ** |
| Thomas B. Pickens III(1) |       | 0                                                          |       | —                                    |       | 1,100,000 |   | $ | 495,000 |   |
| Brian K. Harrington(2)   |       | 0                                                          |       | —                                    |       | 150,000 |   | 67,500 |   |
| James D. Royston(2)      |       | 0                                                          |       | —                                    |       | 200,000 |   | 90,000 |   |
| Lance W. Lord(2)         |       | 0                                                          |       | —                                    |       | 50,000 |   | 22,500 |   |
|                          |            |                                                            |            |                                           |            |  |  |  |  |  |

 

----

(1) Includes award of1,100,000 shares of common stock made to Mr. Pickens and awards ofrestricted stock made on July 18, 2008.

(2) Awards of restrictedstock vesting 50% on January 15, 2009, 25% on January 15, 2010, and25% on January 15, 2011.

 

# **PensionBenefits**

#  

All employeesof the Company, including NEOs are eligible to participate in the SPACEHAB 401(k) plan.In accordance with this plan, employees are eligible to contribute up to 25% oftheir base salary subject to Internal Revenue Service limitations into the planwith all such contributions being fully vested upon contribution. The Companywill match, dollar for dollar, up to 5% of the employee’s contributions.Employer contributions into the plan vest pro-rata after 3 years of vestingservice and are fully vested thereafter. The Company has no additional PensionBenefits for its NEOs.

 

The Companyhas no Nonqualified Deferred Compensation Plans and none of the NEOs haveaccrued any benefits or rights to payments other than the SPACEHAB 401(k) Planand potential payments upon termination discussed below.

 

# **PotentialPayments Upon Termination or Change in Control**

#  

As noted underCompensation Discussion and Analysis – Post-Termination Compensation on page 12,the Company has entered into employments agreements with all of the NEOs thatprovide for payments and other benefits in connection with the officer’stermination for a qualifying event or circumstance and for enhanced payments inconnection with such termination after a Change in Control (as defined in theapplicable agreement). A description of the terms with respect to each of thesetypes of terminations follows.

 

# **TerminationOther Than After a Change in Control**

#  

The employmentagreements provide for payments of certain benefits upon the termination of theemployment of the NEO. The NEO’s rights upon termination of his or heremployment depend upon the circumstances of the termination. Central to anunderstanding of the rights of each NEO under the employment agreements is anunderstanding of the definitions of “Cause” and “Good Reason” that are used inthose agreements. For purposes of the employment agreements, the Term ofEmployment may be terminated at any time by the Company upon the following:

 

16

----

 

·                  Death of theNEO;

·                  In the event ofphysical or mental disability where the NEO is unable to perform his/herduties;

·                  For Cause orMaterial Breach where Cause is defined as conviction of certain crimes and/orfelonies, and Material Breach is defined to include certain specified failuresto perform duties or uphold fiduciary responsibilities; or

·                  Otherwise at thediscretion of the Company and subject to the termination obligations set forthin the employment agreement.

 

The NEO mayterminate the Term of Employment at any time upon the following:

 

·                  Upon the deathof the NEO;

·                  In the event ofphysical or mental disability where the NEO is unable to perform his/herduties;

·                  Upon the Company’smaterial reduction in the NEO’s authority, perquisites, position, title orresponsibilities or other actions that would give the NEO to resign for “GoodReason;” or

·                  Otherwise at thediscretion of the NEO and subject to the termination obligations set forth inthe employment agreement.

 

The benefitsto be provided to the NEO in each of these situations are described in thetables below, which assume that the termination had taken place on June 30,2008, the last day of our most recent fiscal year.

 

# **Terminationafter a Change in Control**

#  

The provisionsin each of the employment agreements with respect to a termination after aChange in Control function in a similar manner to the severance provisionsdescribed above, except that the NEO becomes entitled to benefits under theseprovisions only if his employment is terminated within twelve months followinga Change in Control. A Change in Control for this purpose is defined to mean (i) theacquisition by any person or entity of the beneficial ownership of securitiesrepresenting 50% or more of the outstanding securities of the Company havingthe right under ordinary circumstances to vote at an election of the Board ofDirectors of the Company; (ii) the date on which the majority of themembers of the Board of Directors of the Company consists of persons other thandirectors nominated by a majority of the directors on the Board of Directors atthe time of their election; and (iii) the consummation of certain types oftransactions, including mergers and the sale or other disposition of all, orsubstantially all, of the Company’s assets.

 

As with theseverance provisions described above, the rights to which the NEO is entitledunder the Change in Control provision upon a termination of employment aredependent on the circumstances of the termination. The definitions of Cause andother reasons for termination are the same in this termination scenario as in atermination other than after a Change in Control.

 

# **PaymentObligations Under Employment Agreements Upon Termination of Employment of NEO**

#  

The followingtables set forth SPACEHAB’s payment obligations under the employment agreementsunder the circumstances specified upon a termination of the employment of ourNEOs. Unless otherwise noted, the descriptions of the payments below areapplicable to all of the tables relating to potential payments upon terminationor a Change in Control.

 

EquityAcceleration – The Company’s employment agreements include provisions toaccelerate the vesting of outstanding equity awards upon termination, includingtermination pursuant to a Change in Control. The Compensation Committeeoversees the Executive Stock Option Plan and is charged with the responsibilityof reviewing and granting exceptions to previously issued equity grants on acase by case basis.

 

Health CareBenefits – The employment agreements generally provide that, after resignationfor Good Reason or termination without Cause, our Company will continueproviding medical, dental, and vision coverage to the NEO and the NEO’sdependents at least equal to that which would have been provided if the NEO’semployment had not terminated, if such coverage continues to be available toour Company, until the earlier of (a) the date the NEO becomes eligiblefor any comparable medical, dental, or vision coverage provided by any otheremployer of (b) the end date of an enumerated period following the NEO’sdate of termination.

 

17

----

#  

# **ThomasB. Pickens III**

 
| **Benefits and Payments Upon Termination** | ** ** | **Resignation for  Good Reason or  Termination  Without Cause (1)** | ** ** | **Termination for  Other Than  Good Reason  or Termination  With Cause** | ** ** | **Resignation for  Good Reason  or Termination  Without Cause  After Change-  in-Control(2)** | ** ** | **Disability** | ** ** | **Death**  | ** ** |
|----------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------|------------|----------------|------------|------------|------------|
| **Compensation: Pickens**                                      |       |                                                                                         |       |                                                                                              |       |                                                                                                                   |       |           |       |       |       |
| Base Salary                                                    |       | 360,000                                                                                      |       | —                                                                                            |       | 540,000                                                                                                                |       | 360,000        |       | 360,000    |       |
| Bonus (4)                                                      |       | 90,000                                                                                       |       | —                                                                                            |       | 120,000                                                                                                                |       | 90,000         |       | 90,000     |       |
|                                                           |       |                                                                                         |       |                                                                                              |       |                                                                                                                   |       |           |       |       |       |
| **Equity:**                                                    | ** ** | ** **                                                                                   | ** ** | ** **                                                                                        | ** ** | ** **                                                                                                             | ** ** | ** **     | ** ** | ** ** | ** ** |
| Options                                                        |       | —                                                                                       |       | —                                                                                            |       | —                                                                                                                 |       | —         |       | —     |       |
|                                                           |       |                                                                                         |       |                                                                                              |       |                                                                                                                   |       |           |       |       |       |
| **Benefits and Perquisites:**                                  | ** ** | ** **                                                                                   | ** ** | ** **                                                                                        | ** ** | ** **                                                                                                             | ** ** | ** **     | ** ** | ** ** | ** ** |
| Post-Termination Health Care                                   |       | 17,232                                                                                       |       | —                                                                                            |       | 25,849                                                                                                                 |       | 17,232         |       | 17,232     |       |
| Life Insurance Premiums                                        |       | —                                                                                       |       | —                                                                                            |       | —                                                                                                                 |       | —         |       | —     |       |
| Accrued Vacation Pay(3)                                        |       | 34,615                                                                                       |       | 34,615                                                                                            |       | 34,615                                                                                                                 |       | 34,615         |       | 34,615     |       |
|                                                           |       |                                                                                         |       |                                                                                              |       |                                                                                                                   |       |           |       |       |       |
| **Total:**                                                     | ** ** | 501,847                                                                                      |       | 34,615                                                                                            |       | 720,464                                                                                                                |       | 501,847        |       | 501,847    |       |

 

----

(1)          Assumes twelve months of base salary and benefits after termination.

(2)          Provision on change in control provides for 18 months salary ifterminated.

(3)          Assumes 5 weeks of accrued vacation upon termination.

(4)          Bonus estimated at 50% of maximum bonus of 50% of base salary.

 

# **BrianK. Harrington**

 
| **Benefits and Payments Upon Termination** | ** ** | **Resignation for   Good Reason or  Termination  Without Cause (1)** | ** ** | **Termination for  Other Than  Good Reason  or Termination  With Cause** | ** ** | **Resignation for  Good Reason  or Termination  Without Cause  After Change-  in-Control(2)** | ** ** | **Disability** | ** ** | **Death**  | ** ** |
|----------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------|------------|----------------|------------|------------|------------|
| **Compensation: Harrington**                                   | ** ** | ** **                                                                                         | ** ** | ** **                                                                                        | ** ** | ** **                                                                                                             | ** ** | ** **     | ** ** | ** ** | ** ** |
| Base Salary                                                    |       | 112,500                                                                                            |       | —                                                                                            |       | 168,750                                                                                                                |       | 112,500        |       | 112,500    |       |
| Bonus(6)                                                       |       | 16,875                                                                                             |       | —                                                                                            |       | 25,313                                                                                                                 |       | 16,875         |       | 16,875     |       |
| Long Term Incentive Grant                                      |       | 15,000                                                                                             |       |                                                                                              |       | 15,000                                                                                                                 |       | 15,000         |       | 15,000     |       |
|                                                           |       |                                                                                               |       |                                                                                              |       |                                                                                                                   |       |           |       |       |       |
| **Equity:**                                                    | ** ** | ** **                                                                                         | ** ** | ** **                                                                                        | ** ** | ** **                                                                                                             | ** ** | ** **     | ** ** | ** ** | ** ** |
| Options(5)                                                     |       | —                                                                                             |       | —                                                                                            |       | —                                                                                                                 |       | —         |       | —     |       |
|                                                           |       |                                                                                               |       |                                                                                              |       |                                                                                                                   |       |           |       |       |       |
| **Benefits and Perquisites:**                                  | ** ** | ** **                                                                                         | ** ** | ** **                                                                                        | ** ** | ** **                                                                                                             | ** ** | ** **     | ** ** | ** ** | ** ** |
| Post-Termination Health Care                                   |       | 6,034                                                                                              |       | —                                                                                            |       | 9,050                                                                                                                  |       | 6,034          |       | 6,034      |       |
| Life Insurance Premiums                                        |       | —                                                                                             |       | —                                                                                            |       | —                                                                                                                 |       | —         |       | —     |       |
| Accrued Vacation Pay(3)                                        |       | 21,635                                                                                             |       | 21,635                                                                                            |       | 21,635                                                                                                                 |       | 21,635         |       | 21,635     |       |
|                                                           |       |                                                                                               |       |                                                                                              |       |                                                                                                                   |       |           |       |       |       |
| **Total:**                                                     |       | 172,044                                                                                            |       | 21,635                                                                                            |       | 239,748                                                                                                                |       | 172,044        |       | 172,044    |       |

 

----

(1)          Assumes six months of base salary and benefits after termination.

(2)          Assumes nine months of base salary, three-eighths average cash bonusfrom three prior years and nine months of benefits in such a termination.

(3)          Assumes five weeks of accrued vacation upon termination.

(4)          Long Term Incentive Grant of $15,000 payable upon termination except forcause or voluntary.

(5)          Unvested stock options valued below exercised price as of June 30,2008.

(6)          Bonus estimated at 50% of maximum bonus of 30% of base salary.

 

18

----

#  

# **JamesD. Royston**

 
| **Benefits and Payments Upon Termination** | ** ** | **Resignation for  Good Reason or  Termination  Without Cause (1)** | ** ** | **Termination for  Other Than  Good Reason  or Termination  With Cause** | ** ** | **Resignation for  Good Reason  or Termination  Without Cause  After Change-  in-Control(2)** | ** ** | **Disability** | ** ** | **Death** | ** ** |
|--------------------------------------------|------------|---------------------------------------------------------------------|------------|--------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------|------------|----------------|------------|-----------|------------|
| **Compensation: Royston**                  |       |                                                                |       |                                                                     |       |                                                                                          |       |           |       |      |       |
| Base Salary                                |       | 157,500                                                             |       | —                                                                   |       | 210,000                                                                                       |       | 157,500        |       | 157,500   |       |
| Bonus(6)                                   |       | 23,625                                                              |       | —                                                                   |       | 31,500                                                                                        |       | 23,625         |       | 23,625    |       |
| Long Term Incentive Grant(4)               |       | 18,000                                                              |       | —                                                                   |       | 18,000                                                                                        |       | 18,000         |       | 18,000    |       |
|                                       |       |                                                                |       |                                                                     |       |                                                                                          |       |           |       |      |       |
| **Equity:**                                |       |                                                                |       |                                                                     |       |                                                                                          |       |           |       |      |       |
| Options(5)                                 |       | —                                                              |       | —                                                                   |       | —                                                                                        |       | —         |       | —    |       |
|                                       |       |                                                                |       |                                                                     |       |                                                                                          |       |           |       |      |       |
| **Benefits and Perquisites:**              |       |                                                                |       |                                                                     |       |                                                                                          |       |           |       |      |       |
| Post-Termination Health Care               |       | 6,402                                                               |       | —                                                                   |       | 8,536                                                                                         |       | 6,402          |       | 6,402     |       |
| Life Insurance Premiums                    |       | —                                                              |       | —                                                                   |       | —                                                                                        |       | —         |       | —    |       |
| Accrued Vacation Pay(3)                    |       | 20,192                                                              |       | 20,192                                                                   |       | 20,192                                                                                        |       | 20,192         |       | 20,192    |       |
|                                       |       |                                                                |       |                                                                     |       |                                                                                          |       |           |       |      |       |
| **Total:**                                 |       | 225,719                                                             |       | 20,192                                                                   |       | 288,228                                                                                       |       | 225,719        |       | 225,719   |       |

 

----

(1)          Assumes nine months of base salary and benefits after termination.

(2)          Assumes 12 months of base salary, 1/2 of average cash bonus from 3 prioryears, and 12 months of benefits in such a termination.

(3)          Assumes 5 weeks of accrued vacation upon termination.

(4)          Long Term Incentive Grant of $18,000 payable upon termination except forcause or voluntary.

(5)          Unvested stock options valued below exercise price as of June 30,2008.

(6)          Bonus estimated at 50% of maximum bonus of 30% of base salary.

 

# **LanceW. Lord**

 
| **Benefits and Payments Upon Termination** | ** ** | **Resignation for  Good Reason or  Termination  Without Cause (1)** | ** ** | **Termination for  Other Than  Good Reason  or Termination  With Cause** | ** ** | **Resignation for  Good Reason  or Termination  Without Cause  After Change-  in-Control(2)** | ** ** | **Disability** | ** ** | **Death** | ** ** |
|----------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------|------------|----------------|------------|-----------|------------|
| **Compensation: Lord**                                         |       |                                                                                         |       |                                                                                              |       |                                                                                                                   |       |           |       |      |       |
| Base Salary                                                    |       | 131,250                                                                                      |       | —                                                                                            |       | 175,000                                                                                                                |       | 131,250        |       | 131,250   |       |
| Bonus(5)                                                       |       | 19,688                                                                                       |       |                                                                                              |       | 26,250                                                                                                                 |       | 19,688         |       | 19,688    |       |
|                                                           |       |                                                                                         |       |                                                                                              |       |                                                                                                                   |       |           |       |      |       |
| **Equity:**                                                    |       |                                                                                         |       |                                                                                              |       |                                                                                                                   |       |           |       |      |       |
| Options(4)                                                     |       | —                                                                                       |       | —                                                                                            |       | —                                                                                                                 |       | —         |       | —    |       |
|                                                           |       |                                                                                         |       |                                                                                              |       |                                                                                                                   |       |           |       |      |       |
| **Benefits and Perquisites:**                                  |       |                                                                                         |       |                                                                                              |       |                                                                                                                   |       |           |       |      |       |
| Post-Termination Health Care                                   |       | —                                                                                       |       | —                                                                                            |       | —                                                                                                                 |       | —         |       | —    |       |
| Life Insurance Premiums                                        |       | —                                                                                       |       | —                                                                                            |       | —                                                                                                                 |       | —         |       | —    |       |
| Accrued Vacation Pay(3)                                        |       | 16,827                                                                                       |       | 16,827                                                                                            |       | 16,827                                                                                                                 |       | 16,827         |       | 16,827    |       |
|                                                           |       |                                                                                         |       |                                                                                              |       |                                                                                                                   |       |           |       |      |       |
| **Total:**                                                     |       | 167,765                                                                                      |       | 16,827                                                                                            |       | 218,077                                                                                                                |       | 167,765        |       | 167,765   |       |

 

----

(1)          Assumes six months of base salary and benefits after termination.

(2)          Assumes nine months of base salary, three-eights of average cash bonusfrom three prior years, and nine months of benefits in such a termination.

(3)          Assumes 5 weeks of accrued vacation upon termination.

(4)          Mr. Lord has no unvested stock options as of June 30, 2008.

(5)          Bonus estimated at 50% of maximum bonus of 30% of base salary.

 

19

----

#  

# **DirectorCompensation**

#  

# **Overview**

#  

SPACEHAB’sdirector compensation program consists of cash-based as well as equity-basedcompensation. The Board of Directors recognizes that cash compensation is anintegral part of the compensation program and has instituted a fixed andvariable fee structure to provide compensation relative to the required timecommitment of each director. The equity component of SPACEHAB’s directorcompensation program is designed to build an ownership stake in the Companywhile conveying an incentive to directors relative to the returns recognized byour shareholders.

 

# **Cash-BasedCompensation**

#  

Companydirectors, other than the Chairman of the Audit Committee and Chairman of theCompensation Committee, receive an annual stipend of $30,000 paid upon theannual election of each non-employee director or upon joining the Board ofDirectors. The Chairman of the Audit Committee receives an annual stipend of$40,000 and the Chairman of the Compensation Committee receives an annualstipend of $35,000, recognizing the additional duties and responsibilities ofthose roles. In addition, each non-employee director receives a meeting fee of$3,000 for each meeting of the Board of Directors attended in person and $1,000for each such meeting attended by conference call and $500.00 for eachcommittee meeting attended, except that members of the Audit Committee arecompensated at $750.00 per meeting. All directors are reimbursed ordinary and reasonableexpenses incurred in exercising their responsibilities in accordance theCompany’s Travel and Entertainment Expense Reimbursement policy applicable toall employees of the Company.

 

On October 17,2007, Barry A. Williamson, Chairman of the Board of Directors since December 12,2006, was awarded cash based compensation of $60,000 for his services uponcompletion of a review and recommendation of an appropriate compensationpackage by the compensation consultant engaged by the Compensation Committee. Mr. Williamson’scompensation as Chairman of the Board terminated on February 15, 2008.

 

On July 18,2008, the Compensation Committee, with the concurrence of the Committee ofIndependent Directors, approved grants of unrestricted common stock of 200,000shares to Mr. Williamson and 150,000 shares to Mr. Adams along withcash bonuses of $36,200 and $27,500 respectively reflecting the extraordinaryservices of such directors during the period of the Company’s Restructuring andTransition.

 

# **Equity-BasedCompensation**

#  

Underprovisions adopted by the Board of Directors, each non-employee directorreceives 25,000 shares of restricted common stock issued upon his firstelection to the Board of Directors and an option to purchase an additional20,000 shares of common stock upon each annual re-election to the Board ofDirectors.  Stock options granted underthe plan are priced at the closing market price of the Company’s stock on theday of grant.  Restricted stock and stockoptions granted under the plan vest 25% annually, beginning after 1 year,terminate in 10 years and do not expire upon termination of the director’s termon the Board of Directors.

 

# **Pensionand Benefits**

#  

Thenon-employee directors are not eligible to participate in the Company’sbenefits plans, including the 401(k) plan.

 

# **IndemnificationAgreements**

#  

The Company isparty to indemnification agreements with each of its directors that requiresthe Company to indemnify the directors to the fullest extent permitted byWashington state law. The Company’s certificate of incorporation also requiresthe Company to indemnify both the directors and officers of the Company to thefullest extent permitted by Washington state law.

 

20

----

 

# **FiscalYear 2008 Non-Employee Director Compensation Table**

 
| **Name**                                               | ** ** | **Fees Earned or Paid  in Cash  ($)** | ** ** | **Restricted Stock(2)  Awards  ($)** | ** ** | **All Other(3)  Compensation  ($)** | ** ** | **Total  ($)** | ** ** |
|--------------------------------------------------------|------------|------------------------------------------------------|------------|-------------------------------------------|------------|------------------------------------------|------------|----------------|------------|
| Barry A. Williamson(1)                                 |       | 92,000                                               |       | 16,500                                    |       | 126,200                                  |       | 234,700        |       |
| Mark Adams                                             |       | 51,500                                               |       | 16,500                                    |       | 95,000                                   |       | 163,000        |       |
| Myron J. Goins (Resigned  October 16, 2007)       |       | 3,250                                                |       | —                                    |       | —                                   |       | 3,250          |       |
| Dr. Edward David (Resigned  July 30, 2007)   |       | —                                               |       | —                                    |       | —                                   |       | —         |       |
| Dr. Stefan Graul (Resigned  August 28, 2007) |       | —                                               |       | —                                    |       | —                                   |       | —         |       |
| General (Ret.) Lance W. Lord                           |       | 34,000                                               |       | 16,500                                    |       | —                                   |       | 50,500         |       |
| John A. Oliva                                          |       | 45,750                                               |       | 16,500                                    |       | —                                   |       | 62,250         |       |
| R. Scott Nieboer                                       |       | 35,000                                               |       | 16,500                                    |       | —                                   |       | 51,500         |       |
| William F. Readdy                                      |       | 35,000                                               |       | 16,500                                    |       | —                                   |       | 51,500         |       |
|                                                   |       |                                                 |       |                                      |       |                                     |       |           |       |
| Total                                                  |       | 296,500                                              |       | 99,000                                    |       | 221,200                                  |       | 616,700        |       |

 

----

(1)       Mr. Williamson waived meeting fees after his election as Chairmanand until the election of Mr. Pickens as Chairman.

(2)       25,000shares of restricted stock vesting 25% annually beginning March 27, 2008,was granted to each non-employee director as of March 27, 2008. Restrictedstock valued at $0.66 per share as of March 27, 2008, the date such shareswere granted.

(3)       Includesspecial grant of 200,000 unrestricted shares of common stock to Mr. Williamsonand 150,000 unrestricted shares of common stock to Mr. Adams with cashbonuses of $36,200 and $27,500, respectively made on July 18, 2008, inrecognition of performance during fiscal year 2008. The unrestricted commonstock is valued in this table at $0.45 per share, the closing bid price as of July 18,2008, the date such shares were granted.

 

# **Item12.  Security Ownership of CertainBeneficial Owners and Management and Related Stockholder Matters.**

#  

The followingtable sets forth as of October 31, 2008, certain information regarding thebeneficial ownership of the Company’s outstanding common stock held by (i) eachperson known by the Company to be a beneficial owner of more than five percentof any outstanding class of the Company’s capital stock, (ii) each of theCompany’s directors, (iii) the Company’s Chief Executive Officer and fourmost highly compensated executive officers at the end of the Company’s lastcompleted fiscal year, and (iv) all directors and executive officers ofthe Company as a group. Unless otherwise described below, each of the personslisted in the table below has sole voting and investment power with respect tothe shares indicated as beneficially owned by such party.

 

21

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| **Name and Address of Beneficial Owners**                       | ** ** | **Amount  and Nature  of  Beneficial  Ownership#** | ** ** | **Shares  Subject to  Options** | ** ** | **Total** | ** ** | **Percentage  of  Class(1)** | ** ** |
|------------------------------------------------------------------------------------------|------------|---------------------------------------------------------|------------|--------------------------------------|------------|-----------|------------|------------------------------|------------|
| ***Common Stock***                                                                       |       |                                                    |       |                                 |       |      |       |                         |       |
| SMH Capital Advisors, Inc.(2)                                                       |       | 5,189,000                                               |       | —                               |       | 5,189,000 |       | 31.7                         | %          |
| Lanphier Capital Management, Inc.(3)                                                |       | 2,209,920                                               |       | —                               |       | 2,209,920 |       | 13.5                         | %          |
| Bruce & Co., Inc.(4)                                                       |       | 1,344,073                                               |       | —                               |       | 1,344,073 |       | 8.2                          | %          |
| Astrium GmbH (5)                                                                         |       | 1,099,243                                               |       | —                               |       | 1,099,243 |       | 6.7                          | %          |
|                                                                                     |       |                                                    |       |                                 |       |      |       |                         |       |
| **Non-Employee Directors:**                                                              |       |                                                    |       |                                 |       |      |       |                         |       |
| Mark Adams(6)                                                                            |       | 175,000                                                 |       | 1,000                                |       | 176,000   |       | 1.1                          | %          |
| Robert Scott Nieboer(7)                                                                  |       | 1,488,830                                               |       | —                               |       | 1,488,830 |       | 9.1                          | %          |
| John A. Oliva(8)                                                                         |       | 25,000                                                  |       | —                               |       | 25,000    |       | *                            |       |
| William F. Readdy(9)                                                                     |       | 25,000                                                  |       | —                               |       | 25,000    |       | *                            |       |
| Barry A. Williamson(10)                                                                  |       | 225,000                                                 |       | 2,000                                |       | 227,000   |       | 1.4                          | %          |
|                                                                                     |       |                                                    |       |                                 |       |      |       |                         |       |
| **Named Executive Officers:**                                                            |       |                                                    |       |                                 |       |      |       |                         |       |
| Thomas B. Pickens, III(11)                                                          |       | 1,100,000                                               |       | 2,000                                |       | 1,102,000 |       | 6.7                          | %          |
| Brian K. Harrington(12)                                                                  |       | 152,213                                                 |       | 6,500                                |       | 158,713   |       | 1.0                          | %          |
| James D. Royston (13)                                                                    |       | 200,000                                                 |       | 3,800                                |       | 203,800   |       | 1.2                          | %          |
| General (Ret.) Lance W. Lord(14)                                                         |       | 75,000                                                  |       | —                               |       | 75,000    |       | *                            |       |
|                                                                                     |       |                                                    |       |                                 |       |      |       |                         |       |
| **All Directors, Director Nominees, and  Executive Officers as a Group (9 persons)(15)** |       | 3,466,043                                               |       | 15,300                               |       | 3,481,343 |       | 20.5                         | %          |

 

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*          Indicatesbeneficial ownership of less than 1% of the outstanding shares of common stock.

#          Includes unvested restricted stock grants.

 

(1)       Calculated pursuant to Rule 13d-3(d) ofthe Securities Exchange Act of 1934. Under Rule 13d-3(d), shares notoutstanding which are subject to options, warrants, rights or conversionprivileges exercisable within 60 days are deemed outstanding for the purpose ofcalculating the number and percentage owned by a person, but not deemedoutstanding for the purpose of calculating the number and percentage owned byany other person listed. As of October 31, 2008, we had 16,392,718 sharesof common stock outstanding.

(2)       Held by SMH Capital Advisors, Inc. indiscretionary accounts for the benefit of its clients. SMH Capital Advisors hasshared voting power and sole investment power with respect to theseshares.  This holder disclaims beneficialownership of all shares of common stock it holds. This holder’s address is 600Travis, Suite 3100, Houston, Texas 77002. Includes information from Form 13Gfiled by SMH Capital Advisors, Inc. on February 1, 2008.

(3)       Held by Lanphier Capital Management Inc. indiscretionary accounts for the benefit of its clients. The holder’s address is4175 Kamaliani Lane, Princeville, HI 96722.

(4)       Bruce & Co., Inc., is theinvestment manager for Bruce Fund, Inc., a Maryland registered investmentcompany with its principle business conducted at 20 North Wacker Dr., Suite 2414,Chicago, IL 60606. The information provided in this table is based on aSchedule 13G filed with the Securities and Exchange Commission on December 31,2007 by Bruce & Co., Inc. on behalf of Bruce Fund, Inc.

(5)       Astrium GmbH’s address is Hünefeldstraße 1-5,Postfach 105909, D-28059 Bremen, Germany. The information provided in this table is based on Amendment No. 1to a Schedule 13D filed with the Securities and Exchange Commission on October 27,1999 by DaimlerChrysler Aerospace AG.

(6)       Includes options to purchase 1,000 shares ofour common stock and 25,000 shares of unvested restricted stock.

(7)       Includes 25,000 shares of unvested restrictedstock.

(8)       Includes 25,000 shares of unvested restrictedstock.

(9)       Includes 25,000 shares of unvested restrictedstock.

(10)     Includes options to purchase 2,000 shares ofour common stock and 25,000 shares of unvested restricted stock.

(11)     Includes options to purchase 2,000 shares ofour common stock.

(12)     Includes 713 shares of common stock held inour 1997 Employee Stock Purchase Plan, options to purchase 6,500 shares of ourcommon stock, 1,500 shares of common stock beneficially owned, and 150,000shares of unvested restricted stock.

(13)     Includes options to purchase 3,800 shares ofour common stock and 200,000 shares of unvested restricted stock.

(14)     Includes 75,000 shares of unvested restrictedstock.

(15)     Includes 550,000 shares of unvested restrictedstock and options to purchase within 60 days of the date hereof 15,300 sharesof our common stock.

 

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#  

# **SecuritiesAuthorized for Issuance Under Equity Compensation Plans.**

 

**Equity Compensation Plan Information**

 
| **Plan Name**                                                   | ** ** | **Type**                                                              | ** ** | **Options   Authorized** | ** ** | **(a)  Number of  securities to be  issued upon  exercise of   outstanding  options,  warrants and  rights** | ** ** | **(b)  Weighted-  average  exercise price  of outstanding  options,  warrants and  rights** | ** ** | **(c)  Number of  securities  remaining  available at June   30, 2008 for  future issuance  under equity  compensation  plans (excluding  securities  reflected in  column (a)** | ** ** |
|----------------------------------------------------------------------|------------|-----------------------------------------------------------------------|------------|-------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| ** **                                                           |       |                                                                  |       |                          |       |                                                                                                                                            |       |                                                                                                       |       |
| **Plans  Previously Approved by Security Holders**                   |       |                                                                  |       |                          |       |                                                                                                                                            |       |                                                                                                       |       |
|                                                                 |       |                                                                  |       |                          |       |                                                                                                                                            |       |                                                                                                       |       |                                                                                                                                                                                                                                    |       |   |
| 1     The  1994 Plan(1)                     |       | Common Stock Options Incentive or Non-Qualified                       |       | 395,000                       |       | 59,400                                                                                                                                          |       | $                                                                                                          | 30.94      |                                                                                                                                                                                                                                    | 151,869    |   |
|                                                                 |       |                                                                  |       |                          |       |                                                                                                                                            |       |                                                                                                       |       |                                                                                                                                                                                                                                    |       |   |
| 2     Directors  Stock Option Plan(2)       |       | Non-Qualified Common Stock Options                                    |       | 50,000                        |       | 24,500                                                                                                                                          |       | $                                                                                                          | 16.50      |                                                                                                                                                                                                                                    | 20,500     |   |
|                                                                 |       |                                                                  |       |                          |       |                                                                                                                                            |       |                                                                                                       |       |                                                                                                                                                                                                                                    |       |   |
| 3     1997  Employee Stock Purchase Plan(3) |       | Common Stock                                                          |       | 150,000                       |       | 0                                                                                                                                               |       | N/A                                                                                                        |       | 1,785                                                                                                                                                                                                                                   |       |
|                                                                 |       |                                                                  |       |                          |       |                                                                                                                                            |       |                                                                                                       |       |                                                                                                                                                                                                                                    |       |
| 4     2008  Stock Incentive Plan(4)         |       | Common options, restricted stock, stock units and other equity awards |       | 5,500,000                     |       | 816,708                                                                                                                                         |       | $                                                                                                          | 0.45       |                                                                                                                                                                                                                                    | 2,408,292  |   |

 

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(1)   Under the terms of the 1994 Plan, the number and price of the optionsgranted to employees is determined by the Board of Directors and such optionsvest, in most cases, incrementally over a period of four years and expire nomore than ten years after the date of grant.

(2)   Under the terms of the Directors’ Stock Option Plan, each newnon-employee director received a one-time grant of an option to purchase 1,000shares of Common Stock at an exercise price equal to the fair market value onthe date of grant. In addition, effective as of the date of each annual meetingof the Company’s stockholders, each non-employee director who is elected orcontinues as a member of the Board of Directors of the Company shall be awardedan option to purchase 500 shares of Common Stock. Options under the Directors’Plan vest after one year and expire seven years from the date of grant.

(3)   We adopted an Employee Stock Purchase Plan that permits eligibleemployees to purchase shares of Common Stock of the Company at prices no lessthan 85% of the current market price. Eligible employees may elect toparticipate in the plan by authorizing payroll deductions from 1% to 10% of grosscompensation for each payroll period. On the last day of each quarter, eachparticipant’s contribution account is used to purchase the maximum number ofwhole and fractional shares of Common Stock determined by dividing thecontribution account’s balance by the lesser of 85% of the price of a share ofCommon Stock on the first day of the quarter or the last day of a quarter. TheCompany discontinued employee purchases of common stock under this plan in thefourth quarter of fiscal year 2007.

(4)   The 2008 Stock Incentive Plan authorizes the award of stock grants,restricted stock and stock options.  Thenumber and price of the awards granted to employees is determined by the Boardof Directors and such options vest, in most cases, incrementally over a periodof four years and expire no more than ten years after the date of grant.

 

For adescription of the Company’s equity compensation plan, also please see thediscussion under Item 11 above.

 

# **Item13.  Certain Relationships and RelatedTransactions and Director Independence.**

#  

# **RelatedParty Transactions**

#  

We engaged incertain transactions with directors and executive officers during the threemonths ended September 30, 2008 and September 30, 2007. Following isa description of these transactions:

 

# **AstriumGmbH**

#  

Dr. Graul,a member of SPACEHAB’s Board of Directors until his resignation in August 2007,is the Executive Vice President for Astrium GmbH (“Astrium”). Astrium providesunpressurized payload and integration efforts to SPACEHAB on a fixed-pricebasis in addition to providing engineering services as required. For the threemonths ended September 30, 2007, Astrium’s payload and integrationservices included in cost of revenue were approximately $1.0 million. Astriumdid not provide such services to the Company during the quarter ended

 

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September 30,2008. In August 2007 SPACEHAB terminated its ICC/VCC lease agreements withAstrium North America. We agreed to reimburse Astrium North America $1.4million upon termination of these leases and agreed to provide certainfacilities for Astrium’s use without cost to Astrium through December 2008.

 

# **ExecutiveCredit Cards**

#  

Certain NamedExecutive Officers of the Company have company paid credit cards for ordinary businessexpenses. Although the Company pays the amounts on the credit cards, theexecutive officer is obligated to substantiate the charges and reimburse theCompany for any non-business related charges. As of September 30, 2008 theCompany had no outstanding receivables on such executive credit cards.

 

# **R.Scott Nieboer**

#  

On May 22,2008, Mr. R. Scott Nieboer, a director of the Company, purchased throughTrace Management LLC, an entity through which he has beneficial ownership,400,000 shares of the Company’s common stock on the open market and 1,063,828shares of common stock through a private placement with the Company. Thepurchases were made at $0.45 and $0.47 per share, respectively.

 

On October 31,2008, (see Note 14) Curtiswood Capital LLC sold $1,750,000 principal amount ofthe Company’s 5.5% convertible notes due October 2010 to the Company for$1,085,000 plus accrued interest. Mr. Nieboer was a beneficial owner ofthe notes.

 

# **DirectorIndependence**

#  

The Board ofDirectors has determined each of the following directors to be an “independentdirector” as such term is defined by Rule 4200(a)(15) of the NASD:

 

Mark E. Adams

R. ScottNieboer

John A. Oliva

William F.Readdy

Barry A.Williamson

 

The Board ofDirectors has also determined that each member of the Audit Committee, and themajority of members of the Compensation Committee and the Corporate Governanceand Nominating Committee during the past fiscal year meets the independencerequirements applicable to those Committees prescribed by NASD and SEC rules.

 

# **Item14.  Principal Accounting Fees andServices.**

#  

# **TheCompany’s Independent Registered Public Accounting Firm**

#  

On January 12,2007, the Board of Directors appointed PMB Helin Donovan LLP as the newindependent registered public accounting firm to audit the Company’s financialstatements. There were no discussions between the Company and PMB Helin DonovanLLP regarding the application of accounting principles to specific completed orcontemplated transactions, or the type of audit opinion that might be renderedon the Company’s financial statements. Furthermore, no written or oral advicewas provided by PMB Helin Donovan LLP that was an important factor consideredby the Company in reaching a decision as to any accounting, auditing orfinancial reporting issue. The Company has not consulted with PMB Helin DonovanLLP regarding any matter that was either the subject of a disagreement (asdefined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K and therelated instructions to this item) or a reportable event (as described inparagraph (a)(1)(v) of Item 304 of Regulation S-K).

 

The firm Hein &Associates LLP has been engaged by the Company to perform tax and other relatedwork for the fiscal years ended June 30, 2008 and 2007 for which thesummary of fees are set forth below. The Company also engaged Jefferson WellsConsulting in 2007 and Mahoney Cohen Consulting in 2008 to assess the Company’sinternal controls, policies and procedures in an effort to prepare for SarbanesOxley compliance.

 

The followingtable presents fees paid or to be paid for professional audit services renderedby PMB Helin Donovan LLP for the audit of the Company’s annual financialstatements during the years ended June 30, 2008 and 2007, and fees billedto date for other services rendered by Hein & Associates LLP,Jefferson Wells Consulting, and Mahoney Cohen Consulting:

 

24

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| ** **                           | ** ** | **Fiscal 2008** | ** ** | **Fiscal 2007** | ** ** |
|--------------------------------------|------------|----------------------|------------|----------------------|------------|
| Grant Thornton LLP Audit Fees  (1)   |       | $                    | —     |                 | $          | 194,200 |   |
| PMB Helin Donovan LLP Audit  Fees(1) |       | 146,020              |       | 54,947               |       |
| Tax Fees                             |       | 56,448               |       | 92,697               |       |
| All Other Fees                       |       | 30,000               |       | 16,965               |       |
| Total All Fees                       |       | $                    | 232,468    |                 | $          | 358,809 |   |

 

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(1)   Audit Fees consisted of fees billed for professional services renderedfor the audit of the Company’s annual financial statements and review of theinterim financial statements included in quarterly reports.

 

# **AuditCommittee Pre-Approval Policy**

#  

The AuditCommittee is responsible for appointing, setting compensation for, andoverseeing the work of PMB Helin Donovan LLP, the Company’s independentregistered public accountants. The Audit Committee has established a policyrequiring its pre-approval of all audit and permissible non-audit services tobe provided by independent registered public accountants in order to assurethat the provision of such services does not impair the auditors’ independence.The policy, as amended, provides for the general pre-approval of specific typesof services and gives detailed guidance to management as to the specific audit,audit-related, and tax services that are eligible for general pre-approval. Thepolicy requires specific pre-approval of the annual audit engagement, moststatutory or subsidiary audits, and all permissible non-audit services forwhich no general pre-approval exists. For both audit and non-auditpre-approvals, the Audit Committee will consider whether such services areconsistent with applicable law and SEC rules and regulations concerningauditor independence.

 

The policydelegates to the Chairman the authority to grant certain specificpre-approvals; provided, however, that the Chairman is required to report thegranting of any pre-approvals to the Audit Committee at its next regularlyscheduled meeting. The policy prohibits the Audit Committee from delegating tomanagement the committee’s responsibility to pre-approve services performed bythe independent registered public accountants.

 

Requests forpre-approval of services must be detailed as to the particular servicesproposed to be provided and are to be submitted by the CFO. In addition, eachsuch request generally must include a detailed description of the type andscope of services, proposed staffing, a budget of the proposed fees for suchservices, and a general timetable for the performance of such services.

 

25

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| **Exhibit No.** | ** ** | ** ** | ** ** | **Description of Exhibit**                                                                                                                                                                                                                       |
|----------------------|------------|------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **           | ** ** | ** ** | ** ** | ** **                                                                                                                                                                                                                                       |
| **(31)**             | ** ** | ** ** | ** ** | **Rule 13a-14(a) Certifications**                                                                                                                                                                                                      |
| ** **           | ** ** | ** ** | ** ** | ** **                                                                                                                                                                                                                                       |
|                 |       | 31.1       |       | Certification  of Thomas B. Pickens, III, the Company’s Chief Executive Officer,  pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302  of the Sarbanes-Oxley Act of 2002, file herewith                        |
|                 |       |       |       |                                                                                                                                                                                                                                             |
|                 |       | 31.2       |       | Certification  of Brian K. Harrington, the Company’s Senior Vice President and Chief  Financial Officer, pursuant to 18 U.S.C. Section 1350, as Adopted  Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, file herewith |
|                 |       |       |       |                                                                                                                                                                                                                                             |
| **(32)**             | ** ** | ** ** | ** ** | **Section 1350  Certifications**                                                                                                                                                                                                            |
| ** **           | ** ** | ** ** | ** ** | ** **                                                                                                                                                                                                                                       |
|                 |       | 32.1       |       | Certification  of Thomas B. Pickens, III, the Company’s Chief Executive Officer,  pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906  of the Sarbanes-Oxley Act of 2002, file herewith                        |
|                 |       |       |       |                                                                                                                                                                                                                                             |
|                 |       | 32.2       |       | Certification  of Brian K. Harrington, the Company’s Senior Vice President and Chief  Financial Officer, pursuant to 18 U.S.C. Section 1350, as Adopted  Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, file herewith |

 

26

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** **

**SIGNATURES**

** **

Pursuant tothe requirements of Section 13 or 15(d) of the Securities ExchangeAct of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized.

 
| SPACEHAB,  Incorporated      |   |                                  |
|------------------------------|--------|---------------------------------------|
|                         |   |                                  |
|                         | By:    | /s/Thomas B. Pickens, III        |
|                         |   | Thomas B.  Pickens, III          |
|                         |   | Chief  Executive Officer and Director |
|                         |   |                                  |
| Date:  December 2, 2008 |   |                                  |
|                         |   |                                  |
|                         | By:    | /s/Brian K. Harrington                |
|                         |   | Brian K.  Harrington                  |
|                         |   | Senior Vice  President and            |
|                         |   | Chief  Financial Officer              |
|                         |   |                                  |
| Date:  December 2, 2008 |   |                                  |

 

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