SPACEHAB Files Claim for Research Double Module Lost on STS-107 Space Shuttle Mission

Press Release From: Spacehab
Posted: Tuesday, January 20, 2004

SPACEHAB, Incorporated, a leading provider of commercial space services, today announced that it has filed a formal claim against NASA in the amount of $87.7 million for the value of its Research Double Module (RDM) and related equipment that was destroyed during the STS-107 Space Shuttle Columbia accident.

In July 2003 SPACEHAB submitted a detailed claim in draft to NASA for recovery of its RDM investment in the amount of $87.0 million. The claim has since been revised and re-filed with NASA to incorporate the findings of the Columbia Accident Investigation Board report. NASA has sixty days to respond to the claim or request an extension period.

SPACEHAB's contract with NASA included an indemnification provision providing for any loss of, or damage to, the Company's flight hardware up to $8.0 million. SPACEHAB's final claim in the amount of $87.7 million includes a separately filed claim for the $8.0 million contractually-stipulated provision plus losses in addition to those contractually specified. The Company believes that such additional amounts are justified and substantiated. Any amounts paid by NASA in support of the $8.0 million contract provision will be deducted from the total claim amount.

"We believe that the Company is entitled to recovery of the loss from NASA but there can be no assurances as to the timing or the amount, if any, to be received from the claim," said Brian K. Harrington, SPACEHAB Senior Vice President and Chief Financial Officer. "Upon resolution of the claim, any proceeds from NASA would be recorded in the period in which the claim is resolved," added Harrington.

SPACEHAB is pursuing discussions with NASA with the goal of settling the claim as soon as possible. As a result of the RDM loss, the Company was required to write off the entire book value of the module net of the commercial insurance recovery. This loss resulted in a material reduction in property, plant, and equipment assets as of March 2003.

In February 2003 SPACEHAB received $17.7 million from the proceeds of its commercial insurance policy. In January 2004 SPACEHAB received a complaint from Lloyd's of London, the Company's insurer for the RDM, demanding return of the $17.7 million paid SPACEHAB alleging that the Company, among other things, breached the contracts of insurance by demanding and receiving the insurance proceeds before NASA had paid, or agreed to pay, the contractually obligated $8.0 million loss proceeds. SPACEHAB believes that Lloyd's complaint is without merit and will respond to the Lloyd's complaint accordingly.

About SPACEHAB, Incorporated

SPACEHAB, Incorporated ( ) is a leading provider of commercial and government space services with three primary business units. The Flight Services business unit develops, owns, and operates habitat and laboratory modules and cargo carriers aboard NASA's Space Shuttles for Space Station resupply and research purposes. SPACEHAB's Astrotech subsidiary provides payload processing support services for both commercial and government customers at company-owned facilities in Florida and California. The Company's Government Services business unit supports NASA's Johnson Space Center providing configuration management, product engineering, and support services for both the Space Station and Space Shuttle programs. Additionally, through The Space Store, Space Media provides space merchandise to the public and space enthusiasts worldwide ( ).

The statements in this document may contain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in the statements. In addition to those risks and uncertainties discussed herein, such risks and uncertainties include, but are not limited to, whether the Company will fully realize the economic benefits under its U.S. National Aeronautics and Space Administration ("NASA") and other customer contracts, whether NASA and other customers will continue to utilize the Company's habitat modules and related commercial space assets, whether plans to complete the International Space Station ("ISS") are fulfilled, continued availability and use of the U.S. Space Shuttle system, technological difficulties, product demand and market acceptance risks, the effect of economic conditions, uncertainty in government funding, the impact of competition, delays and uncertainties in future space shuttle and ISS programs, resolution of the Company's indemnification claim with NASA arising from the loss of the Columbia orbiter and its crew during the STS-107 mission, and other risks described in reports filed by the Company with the Securities and Exchange Commission. The Company assumes no obligation to update these forward-looking statements.

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