EXHIBIT 10.2

INNOVATIVE SOFTWARE TECHNOLOGIES, INC.
2006 EQUITY INCENTIVE PLAN
STOCK OPTION AWARD

[Name]
[Address]
[Telephone]:

Dear [Name]:

You have been granted an option (the “Option”) to purchase shares of common
stock of Innovative Software Technologies, Inc., a California corporation (the
“Company”), under the Innovative Software Technologies, Inc. 2006 Equity
Incentive Plan (the “Plan”) with the following terms and conditions:

Grant Date: 
__________, 200__
Type of Option:
Incentive Stock Option to the extent permitted under “Tax Consequences” below
 
Number of Option Shares:
__________________
 
Exercise Price per Share:
U.S. $_____________
 
Expiration:
Close of business at the Company headquarters on the tenth (10th) anniversary of
the Grant Date, subject to earlier termination as described under “Termination
of Employment/Service”
Vesting:
[Your Option is fully vested on the Grant Date.]
 
[Your Option will vest on the _______________ (___) anniversary of the Grant
Date, provided you are employed by (or are providing services to) the Company or
an Affiliate on such date.]
 
[________% of your Option will vest on each of the first _____ anniversaries of
the Grant Date, provided you are employed by (or are providing services to) the
Company or an Affiliate on the applicable vesting date.]
 
Upon any termination of employment from, or cessation of services to, the
Company and its Affiliates, the unvested portion of the Option will immediately
terminate.
 

 
 

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Manner of Exercise:
You may exercise this Option only to the extent vested and only if the Option
has not expired or terminated. To exercise this Option, you must complete the
“Notice of Stock Option Exercise” form provided by the Company and return it to
the address indicated on the form. The form will be effective when it is
received by the Company. If someone else wants to exercise this Option after
your death, that person must contact the Company and prove to the Company’s
satisfaction that he or she is entitled to do so. Your ability to exercise the
Option may be restricted by the Company if required by applicable law.
 
Termination of Employment/Service:
If your employment or service with the Company or an Affiliate terminates, your
Option will terminate on the close of business at the Company headquarters as
follows:
 
·  If your employment/service terminates as a result of death or Disability (at
a time when you could not have been terminated for Cause), your Option will
terminate on the first (1st) anniversary of the date of your termination of
employment/service.
·  If your employment/service terminates for any other reason (other than Cause,
as defined below), your Option will terminate ninety (90) days after the date of
your termination of employment/service.
 
However, in no event will this Option be exercisable after its Expiration Date.
 
Your entire Option (whether vested or nonvested) is terminated immediately if
your employment or service is terminated for Cause. In addition, if you have
submitted a notice of exercise that has not yet been processed and you are
terminated for Cause, your notice of exercise will be rescinded and your
exercise price will be returned to you. For this purpose, (1) if you are subject
to an employment or consulting agreement with the Company or an Affiliate that
includes a definition of “Cause,” that definition shall apply for purposes
hereof, or (2) in any other case, “Cause” means any of the following: (a) your
conviction of a felony (or plea of nolo contendere thereto); (b) your willful
refusal to substantially perform your duties as an employee or consultant (other
than as a result of Disability or illness or an absence approved by the Board or
your supervisor); (c) your willful engagement in misconduct that is materially
injurious to the Company or an Affiliate; or (d) violation of the provisions of
any employment agreement, non-competition agreement, confidentiality agreement,
or similar agreement with the Company or an Affiliate, or any policy or code of
conduct of the Company or any Affiliate, as then in effect.
 
Transferability:
You may not transfer or assign this Option for any reason, other than under your
will upon death or as required by intestate laws. Any attempted transfer or
assignment will be null and void.
 

 

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Restrictions on Resale:
By accepting this Option, you agree not to sell any Shares acquired under this
Option at a time when applicable laws, Company policies or an agreement between
the Company and its underwriters prohibit a sale.
Tax Consequences:
If this Option is designated as a nonqualified stock option, the exercise of
this Option will result in taxable income to you.
 
If this Option is designated as an incentive stock option, you understand that
for the favorable tax treatment afforded to incentive stock options to apply:
 
·  You must hold the shares acquired upon exercise for a period of one (1) year
from the date of exercise and two (2) years from the Grant Date.
·  The Exercise Price Per Share must equal at least the fair market value of a
Share on the Grant Date. While the Committee has made a good faith determination
of the fair market value of a Share in this regard, neither the Committee, the
Board nor the Company can guarantee that such determination will be considered
fair market value, nor will you or any other individual be entitled to any
indemnification for any failure of the Committee to have made such a
determination.
·  If Shares with a fair market value (as determined on the Grant Date) in
excess of $100,000 become exercisable (vested) for the first time in any
calendar year (including for this purpose option shares granted under all other
incentive stock options granted to you by the Company and its Subsidiaries), the
number of Shares with a fair market value in excess of such $100,000 limit will
be considered issued under a nonqualified stock option.
·  You must exercise this Option within ninety (90) days after termination of
employment for any reason other than Disability or death. Accordingly, if you
exercise this Option more than ninety (90) days after such termination (if
otherwise permitted by this Option), you will be treated as exercising a
nonqualified stock option. For this purpose, if you transfer to the employment
of an Affiliate that is not a Subsidiary, you will be treated as terminated from
employment on the date of such transfer, or if you are employed by a Subsidiary,
you will be treated as terminated from employment on the date such entity ceases
to meet the requirements of Code Section 422. In addition, you will be
considered to have terminated employment for purposes of these rules on the
ninety-first (91st) day of a military leave, sick leave or other bona fide leave
of absence unless your rights to return to active employment are guaranteed by
law or contract.
·  The excess of the Fair Market Value of the Shares at the time of exercise
over the amount you pay for such Shares may be an item of adjustment for
alternative minimum tax (AMT) purposes on your personal tax return.

 
 

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Notice of Sale:
If this Option is designated as an incentive stock option, you must report to
the Secretary of the Company any disposition of the Shares acquired under this
Option that is made within two (2) years from the Grant Date or within twelve
(12) months from the date you acquired the Shares (the “Notice Period”). In
addition, the Company may, at any time during the Notice Period, place a legend
or legends on any certificate(s) for the Option Shares requesting the Company’s
transfer agent to notify the Company of any transfer of the Shares.
Public Offering:
You agree that in the event of an underwritten public offering of stock made by
the Company under the Securities Act of 1933, as amended, you will not offer,
sell, contract to sell, pledge, hypothecate, grant any option to purchase or
make any short sale of, or otherwise dispose of any shares of stock of the
Company (including but not limited to shares issued to you upon the exercise of
this Option) or any rights to acquire stock of the Company for such period of
time as may be established by the underwriter for such public offering (but not
to exceed 180 days following the initial public offering plus any additional
customary period for which the underwriter may have the right to extend such
180-day period as a result of an earnings announcement or material news
announcement by the Company at or around the time of the expiration of the
period).
Miscellaneous:
·  The existence of this Award shall not affect in any way the right or power of
the Company or its shareholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company’s capital
structure or its business, or any merger or consolidation of the Company, or any
issuance of bonds, debentures, preferred or prior preference stock senior to or
affecting the common stock or the rights thereof, or dissolution or liquidation
of the Company, or any sale or transfer of all or any part of the Company’s
assets or business or any other corporate act or proceeding, whether of a
similar character or otherwise.
·  As a condition of the granting of this Award, you agree, for yourself and
your legal representatives or guardians, that this Agreement shall be
interpreted by the Committee and that any interpretation by the Committee of the
terms of this Agreement and any determination made by the Committee pursuant to
this Agreement shall be final, binding and conclusive.
·  This Agreement may be executed in counterparts.

 

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This Option is granted under and governed by the terms and conditions of the
Plan. Additional provisions regarding your Option and definitions of capitalized
terms used and not defined in this Option can be found in the Plan.

BY SIGNING BELOW AND ACCEPTING THIS STOCK OPTION AWARD, YOU AGREE TO
ALL OF THE TERMS AND CONDITIONS DESCRIBED HEREIN AND IN THE PLAN. YOU
ALSO ACKNOWLEDGE RECEIPT OF THE PLAN.

____________________________    ________________________________  Authorized
Officer    Optionee             

 
 
 

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