**Exhibit10.5**

 

 

**VIRTUALFUND.COM,INC.**

** **

**DIRECTOR’SNON-QUALIFIED STOCK OPTION AGREEMENT**

 

 

 

| **OPTIONEE:**                |   | [Name of Optionee]                                                                   |
|------------------------------|--------|--------------------------------------------------------------------------------------|
|                         |   |                                                                                 |
| **GRANT DATE:**              |   |                                                                                 |
|                         |   |                                                                                 |
| **NUMBER OF OPTION SHARES:** |   |  Shares                                                                         |
|                         |   |                                                                                 |
| **OPTION PRICE PER SHARE:**  |   | $              per Share |
|                         |   |                                                                                 |
| **EXPIRATION DATE:**         |   |                                                                                 |

 

 

**THISAGREEMENT** is madeas of the Grant Date stated above, by and between VirtualFund.com, Inc., aMinnesota corporation (the “Company”), and the Optionee named above (the“Optionee”).  The Optionee is a directorof the Company.

 

TheCompany is granting this option to give the Optionee an opportunity to purchaseshares of the Company’s Common Stock, par value $.01 per share (the “CommonStock”), on the terms and conditions set forth in this Agreement.

 

**NOW,THEREFORE,** theCompany and the Optionee agree as follows:

 

**1.             Grant of Option.** The Company hereby grants to the Optionee the right and option (the“Option”) to purchase all or part of the aggregate number of shares of CommonStock stated above (the “Option Shares”) on the terms and conditions set forthin this Agreement.  The number of OptionShares is subject to adjustment as provided in paragraph 12 of thisAgreement.

 

**2.             Nature of Option.** This Option is not intended to be an “incentive stock option”within the meaning of Section 422 of the Internal Revenue Code of 1986, asamended.

 

**3.             Purchase Price.** The purchase price of the Option Shares shall be the Option Price pershare stated above.  The Option Price issubject to adjustment as provided in paragraph 12 of this Agreement.

 

**4.             Duration of Option.** This Option shall be in effect for the period commencing on the GrantDate stated above and ending on the Expiration Date stated above.  All rights of the Optionee under this Optionshall terminate and be forfeited to the extent this Option has not beenexercised at the date this Option expires.

 

**5.             Vesting of Option.** This Option is fully vested and exercisable in full as of the Grant Datestated above.

 

 

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**6.             Manner of Exercise of Option.**

 

(a)           Time of Exercise.  This Option may be exercised at any time,and at one or more times, before it expires. This Option, when exercised, may be exercised for some or all of theOption Shares, and any Option Shares that are not purchased at that date ofexercise may be purchased at a subsequent date of exercise.  The exercise of this Option at each date ofexercise shall be subject to all of the terms and conditions of this Agreement,including but not limited to the provisions of paragraphs 6 and 7 of thisAgreement.

 

(b)           Exercise Only by Optionee or OtherProper Party.  During the lifetimeof the Optionee, the Optionee is the only person who may exercise this Option,except that, ­if the Optionee shall be incapacitated, the Optionee’s guardianor other legal representative may exercise this Option on behalf of theOptionee.  If the Optionee shall die,this Option may be exercised only by the personal representatives, executors oradministrators of the Optionee’s estate or by the person or persons to whom theOptionee’s rights under this Option shall pass by the Optionee’s will or thelaws of descent and distribu­tion.

 

(c)           Notice of Exercise.  To exercise this Option, the Optionee (orother proper party in the event of the Optionee’s incapacity or death) shalldeliver a written notice of exercise (the “Notice of Exercise”) to the Companyat its principal executive office.  TheNotice of Exercise shall state the number of Option Shares with respect towhich this Option is being exercised and shall be accompanied by payment in fullof the aggregate Option Price for all Option Shares designated in the Notice ofExercise.  If required by the Company,in its sole discretion, the Notice of Exercise shall also include otherrepresentations and agreements as to the purchaser’s investment intent withrespect to the Option Shares.  TheNotice of Exercise shall be signed by the Optionee (or other proper party inthe event of the Optionee’s incapacity or death) and must be delivered to theCompany prior to the expiration of this Option.

 

(d)           Payment of Option Price.  The aggregate Option Price for all OptionShares designated in the Notice of Exercise shall be paid (i) in cash(including check, bank draft or money order), (ii) by tendering shares ofCommon Stock that are already owned by the Optionee having an aggregate fairmarket value on the date of exercise which is not less than the aggregateOption Price, or (iii) by a combination of such methods.

 

**7.             Restrictions on Exercise of Option.**

 

(a)           This Option may not be exercised fora fraction of a share.

 

(b)           The issuance of Option Shares uponthe exercise of this Option shall be subject to all applicable laws, rules, andregulations.  If the Company determinesat any date of exercise that the issuance of the Option Shares requires thelisting, registration or qualification of the Option Shares on any securitiesexchange or under any federal or state law, or the consent or approval of anyregulatory body, this Option shall not be exercisable and the Option Sharesshall not be issued unless and until such requirements are fulfilled in amanner satisfactory to the Company.

 

 

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**8.             Taxation Upon Exercise of Option.** The Optionee understands that the exercise of this Option will cause theOptionee to recognize income for tax purposes.  The amount of taxable income will be equal to the amount by whichthe Fair Market Value of the Option Shares that are purchased on the date ofexercise exceeds the aggregate Option Price for such Option Shares.

 

**9.             Nontransferability of Option.** This Option shall not be transferable by the Optionee, other than bywill or the laws of descent and distribution.

 

**10.          Rights as Shareholder.** The Optionee (or any other party claiming rights through the Optionee)shall not be, or be deemed to be, a holder of any Option Shares for any purposeunless and until certificates for such shares are issued to the Optionee (orother proper party in the event of the Optionee’s incapacity or death) underthe terms of the Plan.

 

**11.          No Promise of Continued Service.** This Option does not constitute an express or implied promise that theCompany will continue to retain the Optionee’s services as a director of theCompany, nor shall this Option interfere in any way with the Company’s right toterminate the Optionee’s service as a director at any time.

 

**12.          Adjustments.** In the event of any change in the outstanding shares of Common Stock byreason of any stock dividend, recapitalization, reorganization, merger,consolidation, split-up, combination or exchange of shares, or rights offeringto purchase Common Stock at a price substantially below fair market value, orother similar change affecting the Common Stock, while any portion of thisOption is outstanding and unexercised, the Board of Directors shall make suchadjustments in the number of Option Shares and in the Option Price as shall beequitable and appropriate in order to prevent substantial dilution orenlargement of the rights granted to, or available for, the Optionee.  No adjustment shall be made in connectionwith the issuance by the Company of any warrants, rights, or options to acquireadditional shares of Common Stock or of securities convertible into CommonStock at a price that is not substantially below the fair market value of theCommon Stock at the date such warrants, rights or options are issued.

 

**13.          Interpretation.** The interpretation and construction of any provision of this Optionshall be made by the Board of Directors and shall be final, conclusive andbinding on the Optionee and all other persons.

 

**INWITNESS WHEREOF,**the Company has caused this Agreement to be executed in its corporate name byits duly author­ized officer, and the Optionee has executed this Agreement asof the Grant Date stated above.

 
| **COMPANY:**          |   | **OPTIONEE:** |
|-----------------------|--------|---------------|
| VirtualFund.com, Inc. |   |          |
|                  |   |          |
| By                    |   |          |   |
| Its                   |   |          | [Name of Optionee] |

 

 

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**Schedule of Director’s Non-Qualified Stock Options**

 

Options in the form set forth above have been granted to the directorsof the Company as follows:

 
| **Name**       |   | **Number of  Options** |   | **Grant Date** |   | **Exercise  Price** |   |
|----------------|--------|------------------------|--------|----------------|--------|---------------------|--------|
| Edward Adams   |   | 250,000                |   | June 1, 2001   |   | $                   | 0.15   | * |
| Edward Adams   |   | 100,000                |   | July 17, 2002  |   | $                   | 0.15   |   |
| John Cavanaugh |   | 50,000                 |   | June 1, 2001   |   | $                   | 0.16   |   |
| John Cavanaugh |   | 100,000                |   | July 17, 2002  |   | $                   | 0.05   |   |
| Timothy Duoos  |   | 250,000                |   | June 1, 2001   |   | $                   | 0.15   | * |
| Timothy Duoos  |   | 100,000                |   | July 17, 2002  |   | $                   | 0.15   |   |
| Steve Fisher   |   | 100,000                |   | July 17, 2002  |   | $                   | 0.05   |   |
| Kelly Johnson  |   | 100,000                |   | July 17, 2002  |   | $                   | 0.05   |   |

 

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*                 Originally granted at an exercise price of $0.16 pershare, and repriced to $0.15 per share on July 10, 2001.

 

 

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