Document:

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                                                                  Exhibit 10.113

                   EMPLOYMENT AND NON-INTERFERENCE AGREEMENT
                   -----------------------------------------

          This Employment and Non-Interference Agreement (this "Agreement"), is
                                                                ---------
dated as of January 1, 2001 by and between Michael Kearney (the "Executive") and
                                                                 ---------
Spacehab, Incorporated, a Washington corporation (the "Company").
                                                       -------

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

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

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

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

          1.  Nature of Employment
              --------------------

          Subject to Sections 3 and 4, the Company hereby employs Executive, and
                     ----------------
Executive agrees to accept such employment, during the Term of Employment (as
defined in Section 3) as President and Chief Operating Officer and to undertake
           ---------
such duties and responsibilities as may be reasonably assigned to Executive from
time to time by the Chief Executive Officer and the Board of Directors of the
Company.

          2.  Extent of Employment
              --------------------
          (a) During the Term of Employment, Executive shall perform his
obligations hereunder faithfully and to the best of his ability under the
direction of the Chief Executive Officer and Board of Directors of the Company
and shall abide by the rules, customs and usages from time to time established
by the Company.

          (b) During the Term of Employment, Executive shall devote all of his
business time, energy and skill as may be reasonably necessary for the
performance of his duties, responsibilities and obligations under this Agreement
(except for vacation periods and reasonable periods of illness or other
incapacity), consistent with past practices and norms with respect to similar
positions.

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

          The "Term of Employment" shall commence on January 1, 2001 and shall
               ------------------
continue through December 31, 2003 (the "Initial Term"), subject to automatic
                                         ------------
annual renewal for one-year terms thereafter (the "Additional Term"), unless
                                                   ---------------
either the Company or Executive notifies the other party of its intent not to
renew at least sixty (60) days prior to the end of the Initial Term or
Additional Term as the case may be.  Should Executive's employment by the
Company be earlier terminated pursuant to Section 4, the Term of Employment
                                          ---------
shall end on the date of such earlier termination.

          4.   Termination
               -----------
          (a)  Death. The Executive's employment with the Company will be
               -----
terminated upon the death of Executive.

          (b)  Disability. The Executive's employment with the Company will be
               ----------
terminated 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 (a "Disability").

          (c)  By the Company. The Company may terminate the Executive's
               --------------
employment with the Company:

             (i)  for Cause (as defined in Section 12); or
                                           ----------
            (ii)  for any other reason not referred to in clause (i), or for no
     reason, such that this Agreement shall be construed as terminable at will
     by the Company, subject to the consequences of such termination as set
     forth in this Agreement.

          (d)  By the Executive. The Executive may terminate the Executive's
               ----------------
employment with the Company:

             (i)  on account of Good Reason (as defined in Section 12); or
                                                           -----------
            (ii)  voluntarily or for any reason not referred to in clause (i),
     or for no reason, in each case after 60 days' prior written notice to the
     Company and its Board of Directors.

          (e) 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 Cause. Termination shall become
effective upon the delivery by the Company to Executive of notice specifying
such termination and the reasons therefor, subject to the requirements for
advance notice and an opportunity to cure provided in this Agreement, if and to
the extent applicable.

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          (f) Termination of the Term of Employment will not terminate Sections
                                                                       --------
5, and 9 through 23.
-      -         --

          5.  Compensation of Termination of Employment.
              ------------------------------------------

          (a)  In the event Executive's employment is terminated for reason of
death, Disability, by the Company other than for Cause or by Executive for Good
Reason, the Company will: (A) pay to Executive (or his estate or representative)
the full amounts to which the Executive would be entitled to under Sections 6
                                                                   ----------
(a) and (b) for the period from effectiveness of termination through the sixth
---     ---
month anniversary of termination; and (B) provide to Executive (or his estate or
representative) the benefits described in Section 8 through the sixth month
                                          ---------
anniversary of termination.

Notwithstanding the foregoing, the benefits described in Section 8 will be
                                                         ---------
provided to Executive only to the extent the continuation of such benefits is
permitted by the term of any plan and applicable law. Payment of the foregoing
amounts and provision of the benefits will be made in accordance with the
timetable and schedule for such payments contemplated therefor as if such
termination did not occur. If the Company makes the payments required by this
Section 5(a), 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.

          (b)  In the event Executive's employment is terminated by the Company
for Cause or by Executive other than for Good Reason the Company will not be
obligated to pay any further amounts to Executive under this Agreement.

          (c)  In the event the Term of Employment is terminated and the
Company is obligated to make payments to Executive pursuant to Section 5(a),
                                                               -------------
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 5(a), 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 5(a).
                                                                  -------------
Moreover, in the event that Executive is employed by or engaged in a Competitive
Business as contemplated by Section 10(a)(i), then the Company
                            ----------------
will thereupon no longer be obligated to make payments under Section 5(a).
                                                             ------------
          (d)  In the event the Term of Employment is terminated and the
Company is obligated to make payments pursuant to Section 5(a), 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
and Executive hereby agrees to enter into a waiver and release of claims in a
form acceptable to the Company.

          6.  Compensation
              ------------
          During the Term of Employment, the Company shall pay to Executive:

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          (a)  As base compensation for his services hereunder, in semi-monthly
installments, a base salary at a rate of not less than $250,000 per annum. Such
amounts may be increased (but not decreased) annually at the discretion of the
Board of Directors or its Compensation Committee based upon an annual review by
the Board of Directors or its Compensation Committee of Executive's performance.

          (b)  An annual incentive bonus, if any, based on Executive's and/or
Company's performance as determined and approved by the Board of Directors or
its Compensation Committee.

          (c)  An annual stock option grant, if any, based on Executive's,
Company's and/or Company Stock performance as determined and approved by the
Board of Directors or its Compensation Committee.

          7.  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 the Chairman and Chief Executive Officer of the Company.

          8.  Benefits
              --------

          During the Term of Employment, Executive shall be entitled to benefits
(including health, disability, pension and life insurance benefits consistent
with Company policy, or as increased from time to time), in each case, in
accordance with guidelines or established from time to time, by the Board of
Directors for senior executives of the Company.

          9.  Confidential Information
              ------------------------

          (a) Executive acknowledges that his employment hereunder gives him
access to Confidential Information relating to the Companies and the Business
and its customers which must remain confidential. Executive acknowledges that
this information is valuable, special, and unique asset of the Companies and/or
Business, 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 12), 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

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perform the services or conduct the operations required or expected of them
in the Business (as defined in Section 12). Executive shall use his best
                               ----------
efforts to prevent the removal of any Confidential Information from the premises
of the Companies, except as required in the normal course of his 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 thereof is specifically required by law; provided, however, that in
                                                    --------  -------
the event disclosure is required by applicable law, Executive shall provide the
Company with prompt notice of such requirement, prior to making any disclosure,
so that the Company may seek an appropriate protective order. At the request of
the Company, Executive agrees to deliver to the Company, at any time during the
Term of Employment, or thereafter, all Confidential Information which he may
possess or control. Executive agrees that all Confidential Information of the
Companies (whether now or hereafter existing) conceived, discovered or made by
him during the Term of Employment exclusively belongs to the Companies (and not
to Executive). Executive will promptly disclose such Confidential Information to
the Company and perform all actions reasonably requested by the Company to
establish and confirm such exclusive ownership.

          (b)  In the event that Executive breaches his obligations in any
material respect under this Section 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.

          (c)  The terms of this Section 9 shall survive the termination of
                                 ---------
this Agreement regardless of who terminates this Agreement, or the reasons
therefor.

          10.  Non-Interference
               ----------------

          (a) Executive acknowledges that the services to be provided give him
the opportunity to have special knowledge of the Companies and the 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

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     to above occur or are performed within or without the Market or (C) whether
     Executive resides, or reports to an office, within or without the Market;
     provided, however, that (x) Executive may, anywhere in the Market, directly
     --------  -------
     or indirectly, in one or a series of transactions, own, invest or acquire
     an interest in up to five percent (5%) of the capital stock of a
     corporation whose capital stock is traded publicly, or that (y) Executive
     may accept employment with a successor company to the Company.

             (ii) During the Restricted Period (which shall not include any
     period of violation of this Agreement by Executive), Executive will not
     without the express prior written approval of the Board of Directors of the
     Company (A) directly or indirectly, in one or a series of transactions,
     recruit, solicit or otherwise induce or influence any proprietor, partner,
     stockholder, lender, director, officer, employee, sales agent, joint
     venturer, investor, lessor, supplier, customer, agent, representative or
     any other person which has a business relationship with the Company or had
     a business relationship with the Company within the twenty-four 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 10 are reasonable and
                                               ----------
     valid in geographical and temporal scope and in all other respects, are
     necessary in order to secure for the Company the benefits for which it has
     contracted hereunder and would not preclude the Executive from earning a
     living with an entity that is not a Competitive Business.

          (b)  The terms of this Section 10 shall survive termination of this
                                 ----------
Agreement regardless of who terminates this Agreement, or the reasons therefor.

          11.  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 (the "Works"), is in each case a "work made
for hire", as that phrase is defined in the Copyright Revision Act of 1976, as
amended, and under the applicable laws of all non-

                                       6
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U.S. jurisdictions. The Company shall therefore be deemed to be the sole and
original author and owner of any and all right, title and interest in the Works.
To the extent that any such Works do not qualify for any reason as works made
for hire in any jurisdictions, the Executive hereby assigns to the Company any
and all rights, title and interests in such Works, as well as any applicable
patent or registration rights with respect thereto. Each of the Works shall at
all times be promptly and fully disclosed by the Executive to the Company.
Executive shall, during the term of his employment with the Company and
thereafter without charge to the Company, but at the request and expense of the
Company, assist the Company in obtaining or vesting in itself patents upon such
improvements and inventions. All such inventions, improvements or discoveries
shall at all times become and remain the exclusive property of the Company.
Executive represents that he does not claim ownership of any inventions,
improvements, formulae or discoveries which are excluded from this Agreement.

          (b) In the event that Executive breaches his obligations in any
material respect under Sections 9, 10 or this Section 11, notwithstanding
                       ----------  --         ----------
anything in this Agreement to the contrary, 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.

          12.  Definitions
               -----------

          "Business" means (a) the creation, design, development and
           --------
commercialization of content related to the International Space Station, any
other aspect of programs operated or proposed to be operated by, or in
cooperation with, the National Aeronautic and Space Administration of United
States of America, or any similar program or activity, (b) those businesses and
activities as are described in the Annual Report on Form 10-K or Current Report
on Form 10-Q for SPACEHAB, Incorporated for the fiscal year, or (c) any similar,
incidental or related activity 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" means the occurrence of 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);

     (ii) Executive's conviction of fraud or embezzlement;

    (iii) 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 could reasonably be expected to materially
adversely affect the business, properties, assets, condition (financial or
other) or prospects of the Company;

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     (iv) Executive's willful, continual and material neglect or failure to
discharge the duties, responsibilities or obligations prescribed by Sections 1
                                                                    ----------
and 2 (other than arising solely due to physical or mental disability);
    -

     (v) Executive's habitual drunkenness or substance abuse which materially
interferes with Executive's ability to discharge the duties, responsibilities or
obligations prescribed by Sections 1 and 2;
                          ----------     -

     (vi) Executive's willful, continual or material breach of any
noncompetition or confidentiality agreement with the Company, including without
limitation, Sections 9 and 10 of this Agreement;
            ----------     --

     (vii) Executive's gross neglect of his duties and responsibilities, as
determined by the Company's Board of Directors; and

     (viii) the continuous poor or unacceptable performance of Executive's
duties to the Company, as determined in the sole judgment of the Board of
Directors of the Company.

     For purposes of this Agreement, in no event shall "Cause" be deemed to have
occurred unless and until Executive receives written notice from the Company
notifying the Executive of the termination of employment for Cause.

     "Companies" means the Company and any of its direct or indirect
      ---------
Subsidiaries or any entity of which the Company is a Subsidiary, whether now or
hereafter existing.

     "Company" means the entity defined in the first paragraph of this
      -------
Agreement or any successor thereto.

     "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, calculation, software storage media or other compilation of information,
patent, patent application, copyright, trademark, trade name, service mark,
service name, application for the protection of any name or mark, "know-how",
technical information, customer list, detail of a client or consultant contract,
price information, pricing policy, sales technique, confidential information
relating to suppliers, information relating to the special and particular needs
of the Companies' customers operational methods, marketing plan or strategy,
financial information, cost-related information, supplier information, vendor
information, product information or formula, product development technique or
plan, other technique, system, invention, model, concept, current or future or
contemplated project, business or marketing plan, strategy or opportunity,
business acquisition plan or any portion or phase of any scientific or technical
information, specification, technique, idea, discovery, design, computer program
(including source or object code), process, procedure, research or technical
data, improvement or other proprietary or intellectual property of the
Companies, whether or not in written or

                                       8
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tangible form, and whether or not registered, and including all files, records,
manuals, books, catalogues, memoranda, notes, summaries, plans, drawings,
reports, records, documents and other evidence thereof. The term "Confidential
                                                                  ------------
Information" does not include, and there shall be no obligation hereunder with
-----------
respect to, information that is or becomes generally available to the public
other than as a result of a disclosure by Executive not permissible hereunder.

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

     "Good Reason" shall mean the occurrence of any of the following:
      -----------

          (i)  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

          (ii) the Company's willful, material violation of its obligations
under this Agreement.

          For purposes of this Agreement, in no event shall "Good Reason" be
deemed to have occurred unless and until 30 days' prior written notice is given
by Executive to the Company and its Board of Directors identifying in reasonable
detail the acts or omissions constituting such "Good Reason" and the Company's
failure thereafter to cure such acts or omissions within such 30 day period.

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

          "Prior Employment Agreement" is defined in Section 14(a).
           --------------------------                -------------

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

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

          "Term of Employment" is defined in Section 3.
           ------------------                ---------

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          13.  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:

          If to Company:  Spacehab, Incorporated
                          300 D Street, S.W.
                          Washington, D.C.  20024

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

          14.  Previous Agreements; Executive's Representation
               -----------------------------------------------
          (a)  Attached hereto as Annex A are all previous employment or
                                  -------
severance agreements, if any, by and between Executive and the Company
(collectively, the "Prior Employment Agreements"). Executive and the
                    ---------------------------
Company hereby cancel, void and render without force and effect all Prior
Employment Agreements, and the Executive releases and discharges the Company
from any further obligations or liabilities thereunder. Notwithstanding the
foregoing, the terms and provisions in any Prior Employment Agreement relating
to any grants of stock options or other derivative securities for the purchase
of the Company's common stock (no par value per share) shall remain in full
force and effect and shall not be amended in any manner as a result of the
execution of this Agreement.

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

          15.  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.

                                       10
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          16.  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.

          17.  Severability
               ------------

          Whenever possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.  If any
court determines that any provision of Section 10 or any other provision hereof
                                       ----------
is unenforceable because of the scope or duration of such provision, the scope
or duration of such provision shall be reduced to the extent necessary to be
enforceable in the applicable jurisdiction.

          18.  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 9, 10 and 11 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 judgment 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.

          19.  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
covenants set forth in Sections 9, 10 and 11.
                       --------------     --

                                       11
<PAGE>

          20.  Amendment; Entire Agreement
               ---------------------------

          This Agreement may not be changed orally but only by an agreement in
writing agreed to by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought.  This Agreement 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.

          21.  Litigation
               ----------

          This Agreement shall be governed by, construed, applied and enforced
in accordance with the laws of the District of Columbia, except that no doctrine
of choice of law shall be used to apply any law other than that of the District
of Columbia, and no defense, counterclaim or right of set-off given or allowed
by the laws of any other state or jurisdiction, or arising out of the enactment,
modification or repeal of any law, regulation, ordinance or decree of any
foreign jurisdiction, be interposed in any action hereon.  Subject to Section
                                                                      -------
22, Executive and the Company agree that any action or proceeding to enforce or
--
arising out of this agreement may be commenced in the courts of the Washington,
D.C. or the United States District Courts in the District of Columbia.
Executive and the Company consent to such jurisdiction, agree that venue will be
proper in such courts and waive any objections based upon forum non conveniens.
                                                          --------------------
The choice of forum set forth in this Section 21 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.

          22.  Arbitration
               -----------

          Executive and the Company agree that any dispute between or among the
parties to this Agreement relating to or in respect of this Agreement, its
negotiation, execution, performance, subject matter, or any course of conduct or
dealing or actions under or in respect of this Agreement, shall be submitted to,
and resolved exclusively pursuant to arbitration in accordance with the
commercial arbitration rules of the American Arbitration Association.  Such
arbitration shall take place in Washington, D.C., and shall be subject to the
substantive law of the District of Columbia.  Decisions pursuant to such
arbitration shall be final, conclusive and binding on the parties.  Upon the
conclusion of arbitration, Executive or the Company may apply to any court of
the type described in Section 21 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.

                                       12
<PAGE>

          23.  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.

          24.  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.

             [The remainder of this page intentionally left blank.]

                                       13
<PAGE>

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

                              EXECUTIVE:

                              /s/  Michael Kearney
                              ------------------------------------------
                              Michael Kearney

                              SPACEHAB, INCORPORATED

                              /s/   Shelley A. Harrison, Ph.D.
                              ------------------------------------------
                              Shelley A. Harrison, Ph.D.
                              Chairman and Chief Executive Officer

                                       14AMBI                                             AMBI Inc.
                                                 4 Manhattanville Road
                                                 Purchase, New York 10577-2197
                                                 Telephone 914 701-4500
                                                 Facsimile   914 696-0860

                                                 ------------------------------
January 10, 2001
                                                 Benjamin T. Sporn
                                                 Senior Vice President,
                                                 General Counsel and Secretary
                                                 Direct Dial 914 701-4503

Ms. Gail Montgomery
94 Seminary Road
Bedford, NY 10506

Dear Gail:

This Letter Agreement  ("Agreement") dated as of October 16, 2000 is between you
and AMBI Inc.  ("AMBI" or the  "Company")  regarding  your  current  position as
President  and  Chief  Executive  Officer  of AMBI  reporting  to the  Board  of
Directors,  and is for the period  commencing  October 1, 2000 through September
30,  2002  (the  "Contract  Period").  You will also be  required  to serve as a
Director on the AMBI Board during this same period of time.

This offer is contingent upon the following terms and conditions:

GENERAL

You agree  that your  employment  by AMBI  shall be full time and that you shall
engage in no other business nor employment,  other than supervising your passive
investments.  You represent that you are under no  restrictions  or obligations,
which would prevent you from serving as President and Chief  Executive  Officer.
You may serve as a non-executive director on Boards of other companies only with
the written permission of the AMBI Board.

PROMOTIONAL AWARD

You will receive a promotional award of $25,000, effective October 16, 2000.

COMPENSATION

Your direct annualized base compensation will be $275,000  (effective October 1,
2000) paid bi-weekly,  as a non-union,  full-time employee,  and is fixed during
the  Contract  Period.  All  compensation  shall be subject to  withholding  and
similar deductions.

                                       19

<PAGE>

ANNUAL PERFORMANCE BONUS

You will be granted an annual performance bonus for each of AMBI's 2001 and 2002
year-end fiscal  accounting  years based upon the attainment of targets (each, a
"Target") which will be established by agreement  between the Board of Directors
and you,  and will be set forth in a Fiscal  Year Budget Plan for that year (the
"BP"). The Target will be based primarily on after-tax earnings from operations,
but the parties may agree that gross  revenues  from  operations  will also be a
factor in the Target.

If you achieve less than 85% of the Target for the 2001 fiscal  year,  any bonus
for that year is in the sole discretion of the Board.

If you  achieve at least 85% of the Target for the 2001  fiscal  year,  you will
receive $233,750 (85% of base compensation with the remaining 15% of base at the
discretion of the Board) as a performance  cash bonus.  In that event,  you will
also receive a number of stock  options in  accordance  with AMBI's Stock Option
Plan in effect  at time of grant  ("Options"),  equal to the sum of (1)  400,000
plus (2) that percentage of 100,000 which is equal to the percentage (if any) by
which your Excess is of 15.  "Excess"  means the number of percentage  points of
the Target that you achieve in excess of 85%. For example, if you achieve 90% of
the  Target,  you will be  granted  400,000,  plus 5/15 of 100,000  Options,  or
433,333  Options.  No more than  500,000  Options  will be  granted  under  this
paragraph.

If you achieve less than 90% of the Target for the 2002 fiscal  year,  any bonus
for that year is in the sole discretion of the Board.

If you  achieve at least 90% of the Target for the 2002  fiscal  year,  you will
receive  $275,000 (100% of base  compensation)  as a performance  cash bonus and
500,000 Options.

For each of the 2001 and 2002  fiscal  years in which  you  achieve  100% of the
Target,  you will receive an additional  performance cash bonus for that year or
years of not less than $27,500 (10% of base compensation) and 100,000 additional
Options.

For each of the  2001 and 2002  fiscal  years in which  you  exceed  100% of the
Target,  the Board of Directors  shall have the discretion to determine the cash
and stock option  performance awards on the basis of the amount by which 100% of
the Target has been exceeded.

All Options  referred to in the preceding  paragraphs  will have a 10-year term,
will be Incentive  Stock Options to the maximum extent  permitted under law, and
will vest one-half in one year,  and an  additional  1/4 on each of the next two
anniversaries,  so long as you are  employed by the Company on each vesting date
unless there is a change of control  event (as defined  under  AMBI's  Change of
Control Policy) while you are employed by the Company.

                                       20

<PAGE>

OTHER BENEFITS

AMBI  shall  furnish  and/or  reimburse  you for all  reasonable  and  customary
business  requirements  including a car allowance or  equivalent.  Coverage from
group insurance, i.e. medical, dental, life insurance, AD&D, Short and Long Term
Disability.  Business  Travel  Insurance,  etc.  as well as the  AMBI  sponsored
pension plan and savings plan will be provided in accordance  with the terms and
conditions of each plan.

STOCK OPTIONS

You were granted  150,000  Options as of October 16, 2000 @ $1.3125 share.  Such
Options shall vest 50% on October 16, 2001 and 50% on October 16, 2002, but only
if you are employed by the Company on these anniversary unless there is a change
of control event (as defined  under AMBI's  Change of Control  Policy) while you
are employed by the Company.  These options will expire in 2005, and are subject
to the terms of a Stock Option Award Agreement to be signed by AMBI and you.

VACATION

Annual paid vacation and holidays will accrue in accordance with AMBI's vacation
policy and shall be paid upon any change in your employment  status as President
and CEO.

PERIOD OF EMPLOYMENT

Your  employment  with AMBI shall be for a two-year term, but AMBI may terminate
your  employment  earlier for cause or without  cause as  determined  by written
notice from the Board of  Directors.  If AMBI fails to perform  and/or  mitigate
within  a  reasonable  period  of time  any term or  condition  herein,  you can
terminate your employment upon written notice to the Board of Directors.

For purposes of this  Agreement,  "cause" shall be defined as follows:  (1) your
conviction  (including a plea of guilty to nolo  contendere)  of a felony or any
crime of theft,  dishonesty  or moral  turpitude  or (2) your gross  omission or
gross dereliction of any statutory or common law duty to the Company or (3) your
gross violation of the Company's written policies and guidelines.

TERMINATION

Upon written notice of termination  of your  employment,  you hereby resign your
Board membership on the Boards of AMBI and its subsidiaries.

In the event that AMBI's Board of Directors  terminates your employment  without
cause,  or if you resign because the Company has  diminished  your authority and
responsibility as President and CEO (other than any such diminution which is for
cause or which is in connection  with a

                                       21
<PAGE>

change in ownership),  you will receive:  1) a continuation  of your salary,  in
ordinary  payroll  installments,  for one year,  2)  immediate  vesting  of your
Options and 3) a  continuation  of your other  benefits as defined herein for 12
months (but only to the maximum extent  permitted under law or by agreement with
third parties),  or, if earlier,  until you obtain other employment.  Should the
parties  seek mutual  general  releases  after any such  termination,  the terms
thereof, and any additional  consideration to be afforded to either party, shall
be as they may determine by mutual written agreement.

In the event you resign for any other reason or if your employment is terminated
with cause, you shall be entitled to no salary or benefit continuation, and your
Options will be vested only to the extent vested prior to termination.

OTHER MATTERS

Notwithstanding  anything to the  contrary  herein,  the total number of Options
granted to you under this Agreement,  including  Options  previously  granted to
you, shall not exceed 1,100,000 Options.

All  vested  Options  shall be  exercisable  for one year after  termination  of
employment if the Company  terminated your employment  without cause, and for 90
days after  termination  of employment for all other  terminations.  The Options
shall thereafter expire.

This Agreement incorporates by reference the AMBI Change of Control Policy dated
6/29/99 and is attached hereto. The Policy provides, among other things, that on
a change of  control  (as  defined in the  Policy) in any fiscal  year you would
receive among other things a bonus equal to your bonus in the prior fiscal year.
Should there be a change of control  during the 2001 fiscal year,  the bonus for
the prior  fiscal year for the purpose of this  calculation  shall be deemed the
greater of (1) $100,000,  or (2) Annual  Performance  Bonus granted for the 2001
fiscal  year  based  upon  the  attainment  of  Targets  (defined  under  Annual
Performance  Bonus  paragraph  herein) up to the  closing  date of the change of
control transaction. In the event the closing of a change of control transaction
occurs  any time prior to the  twelve-month  period for 2001  fiscal  year,  the
Annual  Performance  Bonus for 2001, but only for the purpose of calculating the
bonus for the 2000 fiscal year under the preceding sentence, shall be based upon
the percentage of the Target achieved for that specific period of time and shall
be calculated as follows:  For example, if a change of control occurs at the end
of the third  quarter of 2001 fiscal year and the Target has been  achieved  for
the first nine months of the 2001 fiscal year BP, then the  percentage of Target
achieved for 2001 fiscal year (only for the purpose of calculating the bonus for
the 2000  fiscal  year) will be 100% of Target for 2001  fiscal year BP, not 75%
(9/12) of the 2001 fiscal year BP.

You agree that during and after termination of your employment and for a one (1)
year period following  termination,  you will not directly or indirectly compete
with AMBI or engage in or  participate  in any business  (in whatever  capacity,
whether as owner, consultant,  adviser,  employee or otherwise),  which competes
with the business of AMBI. This paragraph may be enforced by injunction (without
posting bond or other  security),  as well as by other  remedies.  The preceding
sentence  does not  prohibit  you from  passively  owning up to 2% of the voting
securities of any entity that files public reports under the Securities Exchange
Act of 1934.  Both  during  and after your  employment,  you will  maintain  the
confidentiality  of the  Company's  confidential

                                       22
<PAGE>

information,  and you will not disclose or use such  information  other than for
the benefit of the Company  during your  employment.  Any  controversy  or claim
arising  out of or relating to this  Agreement,  or any breach or default  under
this  Agreement,  shall,  with respect to all actions at law  pertaining to such
controversy,  claim,  breach,  or  default  (excepting  herefrom  any action for
equitable  relief with respect  thereto),  be settled by arbitration in the city
and state where AMBI's  principal  place of business is then  located,  before a
single  arbitrator in accordance  with the  then-prevailing  Rules of Commercial
Arbitration of the American  Arbitration  Association.  The arbitrator shall not
contravene  or  vary in any  respect  any of the  terms  or  provisions  of this
Agreement.  The  award of the  arbitrator  shall be final and  binding  upon the
parties hereto,  and judgment upon such award may be entered in any court having
jurisdiction thereof.

You  certify  that  you  have  not  been  debarred  by the  U.S.  Food  and Drug
Administration under 231. U.S.C. 335a (Federal Food, Drug and Cosmetic Act 306).

This  employment  Agreement is the only  employment  Agreement in effect between
AMBI and you.

If you accept this offer of continued  employment  and the  conditions  outlined
above.  Would you please sign the original of this letter and initial each page.
Please retain the duplicate for your records.

Yours sincerely,

/s/ BENJAMIN T. SPORN
-------------------------------
Benjamin T. Sporn
Senior Vice President

I accept this offer of continued employment and the conditions outlined above.

Signed: /s/ GAIL MONTGOMERY
        --------------------------
        Gail Montgomery

Date:   January 10, 2001

                                       23

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