<PAGE>
Exhibit 10.38
OPTION AGREEMENT
THIS AGREEMENT made as of the 25th day of October, 1999
B E T W E E N:
LORAN NETWORK HOLDINGS CORPORATION INC., a corporation
incorporated under the laws of Canada
(hereinafter called the "COMPANY")
OF THE FIRST PART;
- and -
STEVEN DAUBER
(hereinafter called the "OPTIONEE")
OF THE SECOND PART.
WHEREAS the Company is a corporation incorporated under the laws of Canada;
AND WHEREAS the Optionee is an employee of the Company;
AND WHEREAS the Company and the Optionee wish to enter into this Agreement to
provide for the granting by the Company to the Optionee of certain options to
acquire shares in the capital of the Company;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of other good and
valuable consideration and the sum of ONE DOLLAR ($1.00) now paid by the
Optionee to the Company (the receipt and sufficiency of which are hereby
acknowledged by the Company), it is agreed by and between the parties hereto as
follows:
1. DEFINITIONS
a) "EFFECTIVE DATE" means the 25th day of October, 1999;
b) "EMPLOYEE" means:
(i) any officer, director or employee of the Company or
any subsidiary; and
(ii) any person or company engaged to provide ongoing
management or consulting services for the Company or
any subsidiary;
c) "EXERCISE PERIOD" means the period commencing on the effective
date and ending on the expiry date;
<PAGE>
- 2 -
d) "EXPIRY DATE" means the 25th day of October, 2006;
e) "SHARES" means the Class B common non-voting shares without
par value in the capital of the Company as constituted at the
date of this Agreement, each, a "share".
2. THE OPTION
The Company, as of the date hereof, grants to the Optionee, and the
Optionee hereby accepts, subject to the terms and conditions
hereinafter set out, an irrevocable option to purchase at the time or
times hereinafter set forth 650,000 shares (hereinafter referred, each,
as an "Optioned Share", collectively, as the "Optioned Shares"), at a
price of U.S.$1.64 per share (being the last established fair market
value of the shares, less a discount of 15%, referred to hereinafter as
the "Exercise Price") per Optioned Share.
3. ENTITLEMENT TO EXERCISE THE OPTION
a) Subject to section 6 hereof, no part of any option granted
hereunder shall be exercisable by the Optionee prior to the
first anniversary of the effective date hereunder. Thereafter,
and subject to the terms and conditions hereinafter set forth,
up to 33 1/3% of the original number of Optioned Shares may be
exercised by the Optionee on or after each anniversary date of
the effective date in each and every year and in any
particular year.
For greater certainty, the Optionee may, subject to and in
accordance with the terms contained herein, exercise the
within option for the following Optioned Shares on or after
the dates as set forth below:
<TABLE>
<CAPTION>
================================================================================
EXERCISE DATE (ON OR AFTER) CUMULATIVE NO. OF OPTIONED SHARES
WHICH MAY BE ACQUIRED
--------------------------------------------------------------------------------
<S> <C>
October 25, 2000 216,666
--------------------------------------------------------------------------------
October 25, 2001 216,667
--------------------------------------------------------------------------------
October 25, 2002 216,667
--------------------------------------------------------------------------------
TOTAL: 650,000
================================================================================
</TABLE>
Any options that are exercisable that are not exercised in any
particular year may be carried forward to succeeding years up
to and including the earlier of the expiry date or termination
as provided for herein.
b) The Optionee agrees that prior to and as a condition of the
exercise by him of any option granted pursuant to this
Agreement, the Optionee shall become a party to and be bound
as an "Employee Shareholder" by the terms and conditions of
the Unanimous Shareholders Agreement dated July 2 , 1999, as
amended from time to time, among all of the shareholders of
the Company and the Company.
<PAGE>
- 3 -
4. EXPIRY OF THE OPTION
Subject to the terms and conditions hereinafter set forth, the option
hereby granted shall remain in force from the effective date until the
expiry date. On the expiry date, the option hereby granted shall
forthwith expire and terminate and be of no further force or effect
whatsoever as to such of the Optioned Shares in respect of which the
option hereby granted has not then been exercised.
5. TERMINATION OF EMPLOYMENT OR DEATH
a) In the event of the termination by the Company without cause
of the Optionee's employment with the Company, this option may
be exercised for a period of 60 days after the date of such
termination, after which period any portion of any options
which remain unexercised shall terminate immediately and be of
no force or effect. The number of Optioned Shares against
which the option may be exercised pursuant to this Section
5(a) shall be that number of Optioned Shares in respect of
which the Optionee would have been entitle to exercise his
option at the end of the then-current calendar year.
b) If the Optionee is terminated for cause, the Optionee's
entitlement to exercise options hereunder shall cease after a
period of 14 days and the employee's entitlements with respect
to any Optioned Shares for which his or her rights have not
previously been exercised shall terminate after a period of 14
days and shall thereafter be of no further force and effect.
c) In the event of the death of the Optionee, any options granted
to such Optionee may be exercised by the legal representatives
of such Optionee for a period of 60 days from the date of
death of such Optionee, after which period any portion of any
options which remain unexercised shall terminate immediately
and be of no force or effect.
6. SALE OF SHARES OR ASSETS; CHANGE OF CONTROL
a) If at any time when an option granted under this Agreement
remains unexercised with respect to any Optioned Shares:
(i) a bona fide offer to purchase all of the issued
shares of the Company is made by a third party;
(ii) the Company proposes to sell all or substantially all
of its assets and undertaking or to merge, amalgamate
or be absorbed by or into any other company (save and
except for a subsidiary or subsidiaries of the
Company) under any circumstances which involve or may
involve or require the liquidation of the Company, a
distribution of its assets among its shareholders, or
the termination of its corporate existence; or
(iii) in the event of a change in control. A change in
control shall mean the acquisition by a person of 51%
or more of the issued and outstanding voting
<PAGE>
- 4 -
shares of the Company. For further certainty, change
of control shall not include an acquisition of shares
from treasury by one or more financial purchasers;
(in each case a "Subject Transaction") all of theOptioned
Shares shall become exercisable immediately prior to (and
conditional upon the occurence of) the closing of the Subject
Transaction. The Company shall use its best efforts to provide
the Optionee with at least 21 days' notice of the closing of a
Subject Transaction.
b) In the event that the Company concludes a Qualified IPO (as
defined below) before the Optionee's right to purchase all of
the Optioned Shares has vested pursuant to Section 3 hereof,
then 50% of the then-remaining unvested Optioned Shares shall
become exercisable immediately prior to (and conditional upon
the occurence of) the closing of the Qualified IPO. "Qualifed
IPO", for the purposes hereof, means an initial public
offering of the Company's common shares by way of a prospectus
or registration statement, together with a listing of such
shares on The Toronto Stock Exchange, NASDAQ or the New York
Stock Exchange, which is made at a valuation of the Company
(after closing the Qualified IPO) of at least
U.S.$150,000,000.
7. METHOD OF EXERCISE
Subject to the provisions of this section 7 and sections 3, 5 and 6
hereof, options granted under this Agreement will be exercisable in
whole or in part, and from time to time, by the Optionee giving a
notice in writing addressed to the Company at its principal office in
the City of Ottawa, Canada, and delivered to the C.E.O. of the Company,
which notice shall specify therein the number of Optioned Shares in
respect of which such notice is being exercised and shall be
accompanied by payment (by certified cheque or banker's draft made
payable to or to the order of the Company) in full of the exercise
price for such number of Optioned Shares so specified therein. Upon any
such exercise of option as aforesaid, the Company shall forthwith
deliver to the Optionee (or as the Optionee may otherwise direct in a
notice of exercise of option) within ten (10) days following receipt by
the Company of any such notice of exercise of option a certificate or
certificates in the name of the Optionee representing in the aggregate
such number of Optioned Shares as the Optionee shall have then paid
for.
8. NECESSARY APPROVALS
The obligation of the Company to issue and deliver the Optioned Shares
in accordance with this Agreement and the option herein is subject to
the approval of any regulatory authority (including but not limited to
applicable stock exchanges and securities commission) having
jurisdiction over the securities of the Company. If any or all of the
Optioned Shares cannot be issued to the Optionee for any reason
whatsoever, the obligation of the Company to issue such Optioned Shares
shall terminate and any exercise price paid under the option granted
pursuant to this Agreement to the Company will be returned by the
Company to the Optionee. The Company agrees to make commercially
reasonable efforts to ensure that Optioned Shares can be issued.
<PAGE>
- 5 -
The Company shall not be obligated to file any prospectus, offering
memorandum, registration statement or other offering document with
securities regulatory authorities in any jurisdiction in respect the
option granted hereby in order to qualify for distribution to the
Optionee of the Optioned Shares.
9. GOVERNING LAW
This Agreement shall be construed in accordance with and governed by
the laws of the Province of Ontario and the laws of Canada applicable
therein and shall be deemed to have been made in Ontario.
10. ASSIGNMENTS
This Agreement shall enure to the benefit of and be binding upon the
Company, its successors and assigns, and the Optionee and his legal
representatives to the extent provided in section 5 hereof. This
Agreement shall not be transferable or assignable by the Optionee or
his legal representatives.
11. ENTIRE AGREEMENT
This Agreement, and the Unanimous Shareholder Agreement, constitute the
entire agreement between the parties hereto with respect to the subject
matter hereof and cancels and supersedes any prior understandings and
agreements between the parties hereto with respect thereto. There are
no representations, warranties, terms, conditions, undertakings or
collateral agreements, express, implied or statutory, between the
parties other than as expressly set forth in this Agreement.
12. AMENDMENTS AND WAIVERS
No amendments to this Agreement shall be valid or binding unless made
in writing by each of the parties hereto. No waiver of any breach of
this Agreement shall be effective or binding unless made in writing and
signed by the party purporting to give the same and, unless otherwise
provided in the written waiver, a waiver of any breach of this
Agreement shall be limited to the specific breach waived.
13. FURTHER ASSURANCES
Each of the parties to this Agreement hereby covenants and agrees that
is and its respective heirs, executors, administrators, successors and
permitted assigns and nominees shall execute and deliver such further
and other instruments, agreements and writings and do and cause to be
done such other acts and things as may be necessary or desirable in
order to give full effect to this Agreement.
14. SEVERABILITY
If any provision of this Agreement is determined to be invalid or
unenforceable in whole or in part, such invalidity or unenforceability
shall attach only to such provision or part
<PAGE>
- 6 -
thereof and the remaining part of such provision and all other
provisions hereof shall continue in full force and effect.
15. COUNTERPARTS AND FACSIMILE EXECUTION
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original and all of which together shall
constitute the same agreement. This Agreement may be executed and
delivered by telecopier, provided that actual executed copies of this
Agreement shall be substituted forthwith after execution for the copies
executed by telecopier.
16. TIME OF THE ESSENCE
Time shall be of the essence of this Agreement.
17. NUMBER AND GENDER
Words importing the singular include the plural and vice versa; and
words importing gender include all genders.
IN WITNESS WHEREOF the Company and the Optionee have executed this Agreement.
LORAN NETWORK HOLDINGS CORPORATION INC.
Per: /s/ LEIGHTON POWELL
----------------------------------
Name:
Title:
/s/ L. OESTREICH /s/ STEVEN DAUBER
----------------------------- ----------------------------------
Witness Steven Dauber
<PAGE>
- 7 -
ADDENDUM
TO THE OPTION AGREEMENT BETWEEN
LORAN NETWORK HOLDING CORPORATION INC.
AND THE UNDERSIGNED OPTIONEE OF
LORAN NETWORK HOLDING CORPORATION INC.
WHEREAS Loran Network Holding Corporation Inc. (the "Company") and the
undersigned optionee of the Company (the "Optionee") entered into an agreement
dated October 25, 1999 providing for the issuance to the Optionee of certain
options to purchase Class B non-voting common shares in the capital of the
Company (the "Agreement");
AND WHEREAS in order to be fully effective in accordance with the terms
of the Amended and Restated Unanimous Shareholders Agreement of the Company in
effect as at the date hereof (the "USA"), the grant of options contemplated by
the Agreement had to be made in accordance with the terms of the share option
plan of the Company (the "Plan"), a copy of which is attached hereto as schedule
"A";
AND WHEREAS the Optionee and the Company have agreed to enter into this
Addendum to the Agreement to clarify that the grant of options under the
Agreement was made under, and subject to the terms and conditions of, the Plan;
NOW THEREFORE, in consideration of the grant of options contained in
the Agreement and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Optionee and the Company agree
as follows:
1. The Optionee and the Company agree that (i) the Agreement shall be read
and construed as being made in accordance with, and subject to the
terms and conditions of, the Plan and (ii) the grant of options
contemplated by the Agreement shall for all purposes be construed as a
grant of options under, and subject to the terms and conditions of, the
Plan.
2. The Optionee and the Company agree that, to the extent of any conflict
between the terms of the Agreement and the terms of the Plan, the terms
of the Plan shall govern and take precedence over the terms of the
Agreement.
3. This Addendum is governed by the laws of Ontario.
Dated this ________ day of __________________ , 2000.
LORAN NETWORK HOLDINGS CORPORATION INC.
/s/ STEVEN DAUBER /s/ LEIGHTON POWELL
------------------------------ ---------------------------------------
Steven Dauber Leighton Powell
C.E.O.
/s/ L. OESTREICH
------------------------------
Witness
