EMPLOYMENT AND NON-INTERFERENCE AGREEMENT

                              with Eugene A. Cernan

         This Employment and Non-Interference  Agreement (this "Agreement"),  is
dated as of July 1, 1998, by and between Eugene A. Cernan (the  "Executive") and
SPACEHAB, INCORPORATED, a Washington corporation (the "Company").

                                   WITNESSETH:

         WHEREAS, the Company wishes to retain the future services of Executive
for the Company;

         WHEREAS,  Executive is willing, upon the terms and conditions set forth
in this Agreement, to provide services hereunder; and

         WHEREAS,  the Company  wishes to secure  Executive's  non-interference,
upon the terms and conditions set forth in this Agreement.

         NOW,  THEREFORE,  in consideration of the mutual promises and covenants
contained herein,  and intending to be legally bound hereby,  the parties hereto
agree as follows:

         1.       Nature of Employment

         Subject  to  Section  3, the  Company  hereby  employs  Executive,  and
Executive  agrees to accept such  employment,  during the Term of Employment (as
defined in Section  3(a)),  as  Chairman  of the Board of  Directors  of JOHNSON
ENGINEERING  CORPORATION,  a wholly-owned  subsidiary of the Company.  Executive
will also  undertake  such  duties  and  responsibilities  as may be  reasonably
assigned to Executive from time to time by the President of the Company,  by the
Board of Directors of the Company, or by such other appropriately  authorized or
designated executive officer of the Company.

         2.       Extent of Employment

                  (a) During the Term of Employment, Executive shall perform his
obligations  hereunder  faithfully  and to the  best of his  ability  under  the
direction of the President of the Company,  by the Company's Board of Directors,
or by such other appropriately authorized or designated executive officer of the
Company,  and shall  abide by the rules,  customs  and usages  from time to time
established by the Company.

                  (b) During the Term of Employment,  Executive  shall devote up
to  fifteen   (15)   hours  per  week  to  the   performance   of  his   duties,
responsibilities and obligations under this
Agreement  (except for  vacation  periods and  reasonable  periods of illness or
other  incapacity),  consistent  with past  practices  and norms with respect to
similar positions.

                  (c) Nothing contained herein shall require Executive to follow
any  directive or to perform any act which would  violate any laws,  ordinances,
regulations or rules of any  governmental,  regulatory or  administrative  body,
agent or authority,  any court or judicial authority,  or any public, private or
industry regulatory authority.  Executive shall act in accordance with the laws,
ordinances,   regulations   or  rules  of  any   governmental,   regulatory   or
administrative body, agent or authority, any court or judicial authority, or any
public, private or industry regulatory authority.

         3.       Term of Employment, Termination

                  (a) The "Term of Employment" shall commence on the date hereof
and shall continue for a term ending July 1, 1999 (the "Initial Term"),  subject
to automatic  annual  renewal for one-year  terms  thereafter  (the  "Additional
Term"),  unless either the Company or Executive  notifies the other party of its
intent not to renew within ninety (90) days prior to the end of the Initial Term
or the Additional Term as the case may be. Should Executive's  employment by the
Company be earlier  terminated  pursuant to Section 3(b), the Term of Employment
shall end on the date of such earlier termination.

                  (b) Subject to the payments  contemplated by Section 3(d), the
Term of Employment may be terminated at any time by the Company:

                           (i)      upon the death of Executive;

                           (ii) in the event that  because of physical or mental
         disability,  Executive  is unable to perform  and does not  perform his
         duties  hereunder,   for  a  continuous  period  of  90  days,  and  an
         experienced,  recognized  physician  specializing in such  disabilities
         certifies as to the foregoing in writing;

                           (iii) for Cause or Material  Breach  (each as defined
in Section 3(d));

                           (iv)  upon  the  continuous   poor  or   unacceptable
         performance of Executive's duties to the Company,  in the sole judgment
         of the Board of Directors of the  Company,  which has remained  uncured
         for a period of 90 days after the  delivery of notice by the Company to
         the Executive of such dissatisfaction with Executive's performance; or

                           (v) for any other  reason not  referred to in clauses
         (i) through (iv), or for no reason,  such that this Agreement  shall be
         construed as terminable at will by the Company.  Executive acknowledges
         that no  representations  or  promises  have been made  concerning  the
         grounds  for  termination  or the  future  operation  of the  Company's
         business, and that nothing contained  herein or  otherwise  stated by 
         or on behalf of the Company modifies or amends the right of the Company
         to  terminate Executive at any time, with or without Material Breach or
         Cause.  Termination  shall become  effective  upon the delivery  by the
         Company to Executive of notice specifying such termination and the 
         reasons therefor, subject to the requirements for advance notice and an
         opportunity to cure provided in this Agreement, if and to the extent 
         applicable.

                  (c) Subject to the payments  contemplated by Section 3(d), the
Term of Employment may be terminated at any time by Executive:

                           (i)      upon the death of Executive;

                           (ii) in the event that  because of physical or mental
         disability,  Executive  is unable to perform  and does not  perform his
         duties  hereunder,   for  a  continuous  period  of  90  days,  and  an
         experienced,  recognized  physician  specializing in such  disabilities
         certifies as to the foregoing in writing;

                           (iii) as a result of the Company's material reduction
         in   Executive's   authority,    perquisites,    position,   title   or
         responsibilities (other than such a reduction by the Company because of
         a temporary illness or disability or such a reduction which affects all
         of  the  Company's  senior  executives  on  a  substantially  equal  or
         proportionate  basis  as a result  of  financial  results,  conditions,
         prospects,  reorganization,  workout  or  distressed  condition  of the
         Company),   or  the  Company's  willful,   material  violation  of  its
         obligations  under this Agreement,  in each case,  after 30 days' prior
         written  notice by  Executive to the Company and its Board of Directors
         and  the  Company's  failure  thereafter  to  cure  such  reduction  or
         violation within such 30 days; or

                           (iv) voluntarily or for any reason not referred to in
         clauses (i) through  (iii),  or for no reason,  in each case,  after 90
         days' prior written notice to the Company and its Board of Directors.

                  (d) For the purposes of this Section 3:

         "Cause" shall mean any of the following:  (i) Executive's conviction of
any crime or criminal  offense  involving  the unlawful  theft or  conversion of
substantial  monies or other property or any other felony (other than a criminal
offense arising solely under a statutory  provision  imposing criminal liability
on the Executive on a per se basis due to the offices held by the Executive); or
(ii) Executive's conviction of fraud or embezzlement.

         "Material Breach" shall mean any of the following: (i) Executive's 
breach of any of his fiduciary duties to the Company or its stockholders or 
making of a willful misrepresentation or
omission  which  breach,  misrepresentation  or  omission  would  reasonably  be
expected  to  materially  adversely  affect the  business,  properties,  assets,
condition  (financial  or other) or prospects of the Company;  (ii)  Executive's
willful,  continual  and material  neglect or failure to  discharge  his duties,
responsibilities  or  obligations  prescribed  by  Sections 1 and 2 (other  than
arising solely due to physical or mental disability); (iii) Executive's habitual
drunkenness or substance  abuse which  materially  interferes  with  Executive's
ability to discharge his duties,  responsibilities or obligations  prescribed by
Sections 1 and 2; (iv) Executive's willful, continual and material breach of any
non-competition or confidentiality agreement with the Company, including without
limitation,  those  set forth in  Sections  7 and 8 of this  Agreement;  and (v)
Executive's gross neglect of his duties and  responsibilities,  as determined by
the  Company's  Board of  Directors;  in each case,  for purposes of clauses (i)
through (v), after the Company or the Board of Directors has provided  Executive
with 30 days' written  notice of such  circumstances  and the  possibility  of a
Material  Breach,  and Executive fails to cure such  circumstances  and Material
Breach within those 30 days.

                           (i) In the event Executive's employment is terminated
         pursuant to Section 3(b)(i) [death],  3(b)(ii)  [disability] or 3(b)(v)
         [any  other  reason  or  no  reason]  or  3(c)(i)   [death],   3(c)(ii)
         [disability) or 3(c)(iii) [material  reduction],  the Company will: (A)
         pay to Executive (or his estate or representative)  the full amounts to
         which the  Executive  would be entitled to under  Section  4(a) for the
         period  from  effectiveness  of  termination  through  the sixth  month
         anniversary of termination;  and (B) pay to Executive (or his estate or
         representative)  the benefits  described in Section 6 through the sixth
         month anniversary of termination.

                           Payment of the amounts and  provision of the benefits
         described  above  will be made in  accordance  with the  timetable  and
         schedule for such payments contemplated therefor as if such termination
         did not  occur,  and will be subject  to the other  provisions  of this
         Agreement,  including Section 3(g) and Sections 7 and 8. If the Company
         makes the payments required by this Section 3(d)(i), such payments will
         constitute  severance and liquidated damages,  and the Company will not
         be  obligated  to pay any  further  amounts  to  Executive  under  this
         Agreement or otherwise  be liable to Executive in  connection  with any
         termination.

                           (ii)  In  the   event   Executive's   employment   is
         terminated  pursuant to Section  3(b)(iii) [Cause or Material  Breach],
         3(b)(iv) [poor performance],  or 3(c)(iv) [voluntary], the Company will
         not be  obligated to pay any further  amounts to  Executive  under this
         Agreement.
                  (e) In the event the Term of Employment is terminated  and the
Company is obligated to make payments to Executive  pursuant to Section 3(d)(i),
Executive  shall have a duty to seek to obtain  alternative  employment;  and if
Executive  thereafter  obtains  alternative  employment,  the Company's  payment
obligations under Section 3(d)(i), including its obligation to provide
insurance  coverage,  if any, will be mitigated and reduced by and to the extent
of Executive's  compensation under such alternative employment during the period
for  which  payments  are  owed by the  Company  pursuant  to  Section  3(d)(i).
Moreover, in the event that Executive is employed by or engaged in a Competitive
Business as contemplated by Section 8(a)(i),  then the Company will thereupon no
longer be obligated to make payments under Section 3(d)(i).

                  (f) In the event the Term of Employment is terminated  and the
Company is obligated to make  payments  pursuant to Section  3(d)(i),  Executive
hereby  waives  any  and all  claims  against  the  Company  and its  respective
officers,  directors,  employees,  agents, or representatives,  stockholders and
affiliates relating to his employment during the term hereof and this Agreement.

                  (g)      Termination of the Term of Employment will not
terminate Sections 3(d), 3(f)and 7 through 22.
    

         4.       Compensation

                  During  the  Term of  Employment,  the  Company  shall  pay to
Executive:

                  (a) As  base  compensation  for  his  services  hereunder,  in
semi-monthly installments,  a base salary at a rate of not less than $36,000 per
annum.  Such  amounts  may be  increased  (but not  decreased)  annually  at the
discretion of the Compensation Committee of the Board of Directors based upon an
annual  review  by the  Compensation  Committee  of the  Board of  Directors  of
Executive's performance.

                  (b) An annual bonus, if any, based on Executive's  performance
as  determined  and  approved  by the  Compensation  Committee  of the  Board of
Directors.  Although  bonuses  are  entirely  discretionary,  it is agreed  that
Executive  shall be treated on the same basis as  executives  of the Company who
are employed at the level of Director for purposes of establishing  the range of
bonuses and benefits that may be awarded to Executive.

         5.       Reimbursement of Expenses

         During the Term of  Employment,  the  Company  shall pay all  expenses,
including without limitation,  transportation, lodging and food for Executive to
attend  conventions,  conferences  and meetings that the Company  determines are
necessary  or in the best  interest of the  Company,  and for any  ordinary  and
reasonable  expenses incurred by Executive in the conduct of the Business of the
Company. Travel outside the United States shall be subject to the prior approval
of an executive officer of the Company. Executive shall also be provided with an
office at Johnson Engineering  Corporation's  headquarters location and shall be
provided with the services of a secretary,  who shall, provided she continues to
be  employable  under  the  policies  of  Johnson  Engineering  Corporation,  be
Executive's current secretary.

         6.       Benefits

         During  the Term of  Employment,  Executive  shall be  entitled  to any
fringe or employee  benefits made available to executives of the Company who are
employed at the level of Director,  in each case, in accordance  with guidelines
or established from time to time, by the Board of Directors.

         7.       Confidential Information

                  (a) Executive acknowledges that his employment hereunder gives
him access to Confidential Information relating to the Business of the Companies
and their customers which must remain confidential.  Executive acknowledges that
this information is valuable, special, and a unique asset of the Business of the
Companies,  and  that it has  been and will be  developed  by the  Companies  at
considerable  effort and expense,  and if it were to be known and used by others
engaged in a Competitive  Business,  it would be harmful and  detrimental to the
interests of the Companies. In consideration of the foregoing,  Executive hereby
agrees and covenants  that,  during and after the Term of Employment,  Executive
will not, directly or indirectly in one or a series of transactions, disclose to
any person,  or use or otherwise  exploit for Executive's own benefit or for the
benefit of anyone other than the Companies, Confidential Information (as defined
in Section 10), whether prepared by Executive or not;  provided,  however,  that
any  Confidential  Information  may be disclosed  to officers,  representatives,
employees  and  agents  of the  Companies  who  need to know  such  Confidential
Information in order to perform the services or conduct the operations  required
or expected of them in the Business (as defined in Section 10).  Executive shall
use his best efforts to prevent the removal of any Confidential Information from
the  premises  of the  Companies,  except as  required  in his normal  course of
employment  by the  Company.  Executive  shall use his best efforts to cause all
persons or entities to whom any Confidential  Information  shall be disclosed by
him  hereunder  to observe the terms and  conditions  set forth herein as though
each such person or entity was bound hereby.  Executive shall have no obligation
hereunder to keep confidential any Confidential Information if and to the extent
disclosure of any thereof is specifically  required by law;  provided,  however,
that in the event  disclosure is required by  applicable  law,  Executive  shall
provide the Company with prompt notice of such requirement,  prior to making any
disclosure,  so that the Companies may seek an appropriate  protective order. At
the request of the Company,  Executive agrees to deliver to the Company,  at any
time during the Term of Employment, or thereafter,  all Confidential Information
which  he may  possess  or  control.  Executive  agrees  that  all  Confidential
Information  of the  Companies  (whether now or hereafter  existing)  conceived,
discovered or made by him during the Term of Employment  exclusively  belongs to
the Companies  (and not to  Executive).  Executive  will promptly  disclose such
Confidential  Information  to the Company  and  perform  all actions  reasonably
requested by the Company to establish and confirm such exclusive ownership.

                  (b) In the event that  Executive  breaches his  obligations in
any material respect under this Section 7, the Company,  in addition to pursuing
all available  remedies under this Agreement,  at law or otherwise,  and without
limiting  its right to pursue the same shall  cease all  payments  to  Executive
under this Agreement.

                  (c) The terms of this Section 7 shall survive the  termination
of this Agreement  regardless of who terminates this  Agreement,  or the reasons
therefor.

         8.       Non-Interference and Non-Competition

                  (a)  Executive  acknowledges  that the services to be provided
give him the  opportunity  to have special  knowledge of the Companies and their
Confidential  Information  and the  capabilities  of individuals  employed by or
affiliated  with the Companies,  and that  interference  in these  relationships
would  cause  irreparable  injury to the  Companies.  In  consideration  of this
Agreement, Executive covenants and agrees that:

                           (i) During the  Restricted  Period  (which  shall not
         include any period of  violation of this  Agreement by the  Executive),
         Executive will not,  without the express written  approval of the Board
         of  Directors  of the  Company,  anywhere  in the  Market,  directly or
         indirectly,  in one or a series of transactions,  own, manage, operate,
         control,  invest or  acquire an  interest  in, or  otherwise  engage or
         participate in, whether as a proprietor, partner, stockholder,  lender,
         director,   officer,   employee,  joint  venturer,   investor,  lessor,
         supplier,  customer, agent, representative or other participant, in any
         Competitive  Business  without  regard to (A) whether  the  Competitive
         Business has its office,  manufacturing  or other  business  facilities
         within or without the Market,  (B)  whether  any of the  activities  of
         Executive  referred to above occur or are  performed  within or without
         the Market or (C) whether Executive  resides,  or reports to an office,
         within or without the Market;  provided,  however,  that (x)  Executive
         may, anywhere in the Market, directly or indirectly, in one or a series
         of  transactions,  own,  invest or  acquire an  interest  in up to five
         percent (5%) of the capital stock of a corporation  whose capital stock
         is traded publicly,  or that (y) Executive may accept employment with a
         successor company to the Company.

                           (ii) During the  Restricted  Period  (which shall not
         include  any  period of  violation  of this  Agreement  by  Executive),
         Executive  will not without the express prior  written  approval of the
         Board of Directors of the Company (A) directly or indirectly, in one or
         a series of  transactions,  recruit,  solicit  or  otherwise  induce or
         influence  any  proprietor,  partner,  stockholder,  lender,  director,
         officer,  employee,  sales agent,  joint  venturer,  investor,  lessor,
         supplier, customer, agent, representative or any other person which has
         a business  relationship  with any of the  Companies  or had a business
         relationship  with the  Companies  within  the  twenty-four  (24) month
         period preceding the date of the incident in question,  to discontinue,
         reduce or modify such employment,  agency or business relationship with
         the Companies, or (B)employ or seek to employ or cause any Competitive
         Business  to employ or seek to employ  any  person or agent who is then
         (or was at any time within six months  prior to the date  Executive  or
         the  Competitive  Business  employs  or seeks to  employ  such  person)
         employed or retained by the Companies.  Notwithstanding  the foregoing,
         nothing  herein  shall  prevent  Executive  from  providing a letter of
         recommendation  to an  employee  with  respect  to a future  employment
         opportunity.

                           (iii) The scope and term of this  Section 8 would not
         preclude  him  from  earning  a  living  with an  entity  that is not a
         Competitive Business.

                  (b) The terms of this Section 8 shall survive  termination  of
this  Agreement  regardless of who  terminates  this  Agreement,  or the reasons
therefor.

         9.       Inventions

                  (a) Each invention, improvement or discovery made or conceived
by  Executive,  either  individually  or with  others,  during  the  term of his
employment  with the  Company,  which  invention,  improvement  or  discovery is
related to any of the lines of business or work of the Companies,  any projected
or potential  activities  which the Companies have  investigated  or hereinafter
investigates,  or which result from or are suggested by any service performed by
Executive  for the Company,  whether  patentable  or not,  shall be promptly and
fully  disclosed  by  Executive  to the  Company.  Executive  assigns  each such
invention,  improvement  or  discovery,  and the  patents  thereof,  or  related
thereto, to the Company. Executive shall, during the term of his employment with
the Company and thereafter without charge to the Company, but at the request and
expense of the  Company,  assist the Company in  obtaining  or vesting in itself
patents upon such improvements and inventions. All such inventions, improvements
or discovery shall at all times become and remain the exclusive  property of the
Company.   Executive  represents  that  he  does  not  claim  ownership  of  any
inventions,  improvements,  formulae or discoveries which are excluded from this
Agreement.

                  (b) In the event that  Executive  breaches his  obligations in
any material  respect  under  Sections 7, 8 or this  Section 9, the Company,  in
addition to pursuing all  available  remedies  under this  Agreement,  at law or
otherwise,  and  without  limiting  its right to pursue the same shall cease all
payments to Executive under this Agreement.

         10.      Definitions

         "Business"  means (a) the design,  manufacture,  lease and operation of
pressurized  habitable space modules,  unpressurized space logistics and science
hardware,  including  unpressurized  pallets,  and those  other  businesses  and
activities  that are  described in the  Company's  Form 10-K for the fiscal year
ended June 30, 1998, or (b) the provision of services  relating to communication
satellite launch processing and integration, as performed by ASTROTECH SPACE 
OPERATIONS, INC., a wholly-owned subsidiary of the Company, or (c) the provision
of engineering services to the National Aeronautics and Space Administration, as
performed by JOHNSON ENGINEERING  CORPORATION,  a wholly-owned subsidiary of the
Company, or (d) any similar, incidental or related business conducted or pursued
by, or engaged in, or proposed to be  conducted  or pursued by or engaged in, by
the  Companies  prior  to the date  hereof  or at any  time  during  the Term of
Employment.

         "Cause" is defined in Section 3(d).

         "Companies"   means  the  Company,   any  of  its  direct  or  indirect
subsidiaries  and  affiliates  and any other entity  identified  by the Board of
Directors in its sole discretion, whether now existing or hereafter existing.

         "Company" is defined in the introduction.

         "Competitive  Business" means any business which competes,  directly or
indirectly, with the Business in the Market.

         "Confidential Information" means any trade secret,  confidential study,
data, calculations,  software storage media or other compilation of information,
patent,  patent  application,  copyright,  trademark,  trade name, service mark,
service name,  "know-how",  trade secrets,  customer lists, details of client or
consultant   contracts,   pricing  policies,   sales  techniques,   confidential
information  relating  to  suppliers,  information  relating  to the special and
particular  needs of the Companies'  customers  operational  methods,  marketing
plans or strategies,  products and formulae,  product development  techniques or
plans,  business  acquisition plans or any portion or phase of any scientific or
technical information, ideas, discoveries, designs, computer programs (including
source of object  codes),  processes,  procedures,  research or technical  data,
improvements  or other  proprietary or  intellectual  property of the Companies,
whether or not in written or tangible form, and whether or not  registered,  and
including all files, records,  manuals,  books,  catalogues,  memoranda,  notes,
summaries,  plans, reports,  records,  documents and other evidence thereof. The
term  "Confidential  Information"  does  not  include,  and  there  shall  be no
obligation  hereunder with respect to,  information that is or becomes generally
available to the public other than as a result of a disclosure by Executive.

         "Executive"  means the individual  identified in the first paragraph of
this Agreement, or his or her estate, if deceased.

         "Market"  means any  county in the United  States of  America  and each
similar jurisdiction in any other country in which the Business was conducted or
pursued by, engaged in by the Companies
prior to the date  hereof  or is  conducted  or  engaged  in or  pursued,  or is
proposed to be conducted or engaged in or pursued,  by the Companies at any time
during the Term of Employment.

         "Material Breach" is defined in Section 3(d).

         "Non-Interference  Period"  means the period  commencing on the date of
this  Agreement  and  continuing  through the twelfth month  anniversary  of the
termination of the Term of Employment.

         "Prior Employment Agreement" is defined in Section 12(a).

         "Restricted  Period"  means the period  commencing  on the date of this
Agreement and continuing  through the sixth month anniversary of the termination
of the Term of Employment.

         "Subsidiary" means any corporation,  limited liability  company,  joint
venture,  limited and general partnership,  joint stock company,  association or
any other type of  business  entity  over which the  Company  owns,  directly or
indirectly through one or more intermediaries,  more than fifty percent (50%) of
the voting securities at the time of determination.

         "Term of Employment" is defined in Section 3(a).

         11.      Notice

         Any  notice,   request,  demand  or  other  communication  required  or
permitted  to be given  under this  Agreement  shall be given in writing  and if
delivered  personally,  or sent by certified or registered mail,  return receipt
requested,  as follows  (or to such other  addressee  or address as shall be set
forth in a notice given in the same manner):

         If to Executive:                   Eugene A. Cernan
                                             c/o Johnson Engineering Corporation
                                                     555 Forge River Road
                                                     Webster, Texas 77598

         with a copy to:                    McDade, Fogler, Maines and Lohse
                                                     909 Fannin, Suite 1800
                                                     Houston, Texas 77010
                                                     Attn: Thomas R. McDade

         If to Company:                     Johnson Engineering Corporation
                                               SPACEHAB, Incorporated
                                               1595 Spring Hill Road, Suite 360
                                               Vienna, Virginia 22182
                                               Attention: President

         with a copy to:                    Frank E. Morgan II
                                               Dewey Ballantine, LLP
                                               1301 Avenue of the Americas
                                               New York, New York 10019-6092

         Any such  notices  shall be deemed  to be given on the date  personally
delivered or such return receipt is issued.

         12.      Previous Agreements; Executive's Representation

                  (a) Attached hereto as Annex A are all previous  employment or
severance agreements by and between Executive and the Company (collectively, the
"Prior Employment  Agreements").  Executive and the Company hereby cancel,  void
and render  without force and effect all Prior  Employment  Agreements,  and the
Executive  releases and discharges  the Company from any further  obligations or
liabilities thereunder.

                  (b) Executive hereby warrants and presents to the Company that
Executive has  carefully  reviewed  this  Agreement and has consulted  with such
advisors as Executive  considers  appropriate in connection with this Agreement,
is not subject to any covenants,  agreements or restrictions,  including without
limitation any covenants,  agreements or restrictions arising out of Executive's
prior employment,  which would be breached or violated by Executive's  execution
of this Agreement or by Executive's performance of his duties hereunder.

         13.      Other Matters

         Executive  agrees  and  acknowledges   that  the  obligations  owed  to
Executive  under this Agreement are solely the  obligations of the Company,  and
that  none of the  Companies'  stockholders,  directors,  officers,  affiliates,
representatives,  agents or lenders will have any  obligations or liabilities in
respect of this Agreement and the subject matter hereof.

         14.      Validity

         If, for any reason,  any  provision  hereof shall be  determined  to be
invalid or unenforceable, the validity and effect of the other provisions hereof
shall not be affected thereby.

         15.      Severability

         Whenever possible, each provision of this Agreement will be interpreted
in such manner as to be  effective  and valid under  applicable  law, but if any
provision of this Agreement is held to be invalid,  illegal or  unenforceable in
any  respect  under  any  applicable  law  or  rule  in any  jurisdiction,  such
invalidity,  illegality or unenforceability  will not affect any other provision
or any other  jurisdiction,  but this Agreement will be reformed,  construed and
enforced  in such  jurisdiction  as if such  invalid,  illegal or  unenforceable
provision had never been  contained  herein.  If any court  determines  that any
provision of Section 8 or any other provision hereof is unenforceable because of
the power to reduce the scope or duration of such provision,  as the case may be
and, in its reduced form, such provision shall then be enforceable.

         16.      Waiver of Breach, Specific Performance

         The waiver by the Company or Executive of a breach of any  provision of
this  Agreement by the other party shall not operate or be construed as a waiver
of any other  breach of such other  party.  Each of the parties (and third party
beneficiaries)  to this  Agreement  will be entitled to enforce its rights under
this breach of any provision of this  Agreement and to exercise all other rights
existing  in its favor.  The parties  hereto  agree and  acknowledge  that money
damages  may not be an  adequate  remedy  for any  breach of the  provisions  of
Sections  7, 8 and 9 of this  Agreement  and that any  party  (and  third  party
beneficiaries) may in its sole discretion apply to any court of law or equity of
competent  jurisdiction  for  specific  performance  and/or  injunctive  relief,
including temporary  restraining orders,  preliminary  injunctions and permanent
injunctions  in order to enforce or prevent any  violations of the provisions of
this  Agreement.  In the event either party takes legal action to enforce any of
the terms or provisions  of this  Agreement  against the other party,  the party
against  whom  judgement  is rendered in such  action  shall pay the  prevailing
party's  costs and  expenses,  including  but not limited to,  attorneys'  fees,
incurred in such action.




<PAGE>




         17.      Assignment; Third Parties

         Neither  Executive  nor  the  Company  may  assign,  transfer,  pledge,
hypothecate,  encumber or otherwise  dispose of this  Agreement or any of his or
its  respective  rights or  obligations  hereunder,  without  the prior  written
consent  of the  other.  The  parties  agree  and  acknowledge  that each of the
Companies and the  stockholders  and investors  therein are intended to be third
party beneficiaries of, and have rights and interests in respect of, Executive's
agreements set forth in Sections 7, 8 and 9.

         18.      Amendment; Entire Agreement

         This  Agreement  may not be changed  orally but only by an agreement in
writing agreed to by the party against whom  enforcement of any waiver,  change,
modification,  extension  or discharge is sought.  This  Agreement  embodies the
entire  agreement  and  understanding  of the  parties  hereto in respect of the
subject  matter  of this  Agreement,  and  supersedes  and  replaces  all  prior
Agreements, understandings and commitments with respect to such subject matter.

         19.      Litigation

         THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED, APPLIED AND ENFORCED IN
ACCORDANCE  WITH THE LAWS OF THE STATE OF  VIRGINIA,  EXCEPT THAT NO DOCTRINE OF
CHOICE OF LAW SHALL BE USED TO APPLY ANY LAW OTHER THAN THAT OF VIRGINIA, AND NO
DEFENSE,  COUNTERCLAIM  OR RIGHT OF SET-OFF  GIVEN OR ALLOWED BY THE LAWS OF ANY
OTHER STATE OR  JURISDICTION,  OR ARISING OUT OF THE ENACTMENT,  MODIFICATION OR
REPEAL OF ANY LAW, REGULATION,  ORDINANCE OR DECREE OF ANY FOREIGN JURISDICTION,
BE INTERPOSED  IN ANY ACTION  HEREON.  SUBJECT TO SECTION 20,  EXECUTIVE AND THE
COMPANY  AGREE THAT ANY ACTION OR  PROCEEDING  TO ENFORCE OR ARISING OUT OF THIS
AGREEMENT  MAY BE COMMENCED IN THE COURTS OF THE STATE OF VIRGINIA OR THE UNITED
STATES DISTRICT COURTS IN ARLINGTON, VIRGINIA. EXECUTIVE AND THE COMPANY CONSENT
TO SUCH  JURISDICTION,  AGREE THAT VENUE WILL BE PROPER IN SUCH COURTS AND WAIVE
ANY OBJECTIONS BASED UPON FORUM NON CONVENIENS. THE CHOICE OF FORUM SET FORTH IN
TIES SECTION 19 SHALL NOT BE DEEMED TO PRECLUDE THE  ENFORCEMENT OF ANY JUDGMENT
OBTAINED  IN SUCH  FORUM OR THE TAKING OF ANY ACTION  UNDER  THIS  AGREEMENT  TO
ENFORCE SAME IN ANY OTHER JURISDICTION.

         20.      Arbitration

         EXCEPT AS DESCRIBED IN SECTION 16, EXECUTIVE AND THE COMPANY
AGREE THAT ANY DISPUTE BETWEEN OR AMONG THE PARTIES TO THIS
AGREEMENT  RELATING  TO  OR IN  RESPECT  OF  THIS  AGREEMENT,  ITS  NEGOTIATION,
EXECUTION,  PERFORMANCE,  SUBJECT MATTER, OR ANY COURSE OF CONDUCT OR DEALING OR
ACTIONS  UNDER OR IN  RESPECT  OF THIS  AGREEMENT,  SHALL BE  SUBMITTED  TO, AND
RESOLVED  EXCLUSIVELY  PURSUANT TO ARBITRATION IN ACCORDANCE WITH THE COMMERCIAL
ARBITRATION  RULES OF THE AMERICAN  ARBITRATION  ASSOCIATION.  SUCH  ARBITRATION
SHALL TAKE PLACE IN ARLINGTON, VIRGINIA, AND SHALL BE SUBJECT TO THE SUBSTANTIVE
LAW OF THE STATE OF VIRGINIA.  DECISIONS  PURSUANT TO SUCH ARBITRATION  SHALL BE
FINAL,   CONCLUSIVE  AND  BINDING  ON  THE  PARTIES.   UPON  THE  CONCLUSION  OF
ARBITRATION,  EXECUTIVE  OR THE  COMPANY  MAY  APPLY  TO ANY  COURT  OF THE TYPE
DESCRIBED IN SECTION 19 TO ENFORCE THE DECISION PURSUANT TO SUCH ARBITRATION. IN
CONNECTION  WITH THE  FOREGOING,  THE PARTIES  HEREBY WAIVE ANY RIGHTS TO A JURY
TRIAL TO RESOLVE  ANY  DISPUTES  OR CLAIMS  RELATING  TO THIS  AGREEMENT  OR ITS
SUBJECT MATTER.

21.      Further Action

         Executive  and the Company  agree to perform  any  further  acts and to
execute and  deliver  any  documents  which may be  reasonable  to carry out the
provisions hereof.

         22.      Counterparts

         This Agreement may be executed in counterparts,  each of which shall be
deemed an original,  but all of which together shall constitute one and the same
instrument.

         IN WITNESS  WHEREOF,  the parties hereto have set their hands as of the
day and year first written above.

                                   EXECUTIVE:


                                   /s/ Eugene A. Cernan
                                   Eugene A. Cernan


                                   SPACEHAB, INCORPORATED


                                   By:    /s/ David A. Rossi                   
                                   Name:   David A. Rossi
                                   Title:  President