dmc10qsb063004ex102



  

   Exhibit 10.2 

  EMPLOYMENT AGREEMENT

              This EMPLOYMENT
    AGREEMENT (the "Agreement") is effective as of June 10 2004 
    (the "Effective Date"), between DOCUMENT SECURITY SYSTEMS,
    INC., a New York corporation with an office at 36 West Main Street, Rochester,
    New York 14614 ("Company") and PATRICK WHITE, who resides
    at 58 Bosworth Field, Mendon, New York   14506 ("Executive").

  R E C I T A L S :

              WHEREAS,
    Company is in the business of developing, licensing and selling anti- counterfeiting
    technology and products;

              WHEREAS,
    Executive has served as Company's Chief Executive Officer and President since
    approximately August 5, 2002; and

              WHEREAS,
    Company desires to continue the engagement of Executive as the Chief Executive
    Officer and President of Company and Executive wishes to continue serving
    in such capacity on the terms and conditions set forth below.

  P R O V I S I O N S :

              NOW,
    THEREFORE, in consideration of the mutual promises and covenants set forth
    herein, the parties agree as follows:

              1.        
    Employment; Duties.  Company hereby agrees to employ
    Executive as its Chief Executive Officer, President, Chairman of the Board
    and temporary Chief Financial Officer. The parties acknowledge and agree that
    it is the intention of the Company to hire and employ a new Chief Financial
    Officer within the next six months if possible.  The Executive hereby
    accepts such employment.  Executive will report to Company's Board of
    Directors and will perform those duties and have such authority and powers
    as are customarily associated with the positions of Chief Executive Officer
    and President of a company engaged in a business similar to the Business,
    including, without limitation, leading Company's management, overseeing and
    implementing Company's business development efforts, preparing business plans,
    raising capital, and such other duties and responsibilities as the Board of
    Directors may reasonably request.

              2.        
    Term.  The term of this Agreement shall commence
    on the Effective Date and shall continue for (5) five years from the Effective
    Date unless otherwise terminated as provided herein (together with any Renewal
    Term, as hereafter defined, shall be referred to as the "Term").
    This Agreement shall automatically be extended for successive one (1) year
    terms pursuant to the terms and conditions of this Agreement (each, a "Renewal
    Term"), unless otherwise terminated by written notice from one party
    to the other no less than sixty (60) days prior to the end of the Term or
    any subsequent Renewal Term.

              3.        
    Compensation. 

                         
    (a)        Annual Salary. 
    In consideration for the services rendered by Executive on behalf of Company
    during the Term of this Agreement, Company shall pay Executive, commencing
    on the Effective Date, an annual salary equal to One Hundred Fifty Thousand
    Dollars ($150,000.00), payable in accordance with Company's regular payroll
    practices.  Effective as of January 1 of each year during the Term, Executive's
    annual salary shall be increased as determined by Company's Board of Directors,
    but in no event less than ten percent (10%) annually from the prior year's
    annual salary.  All forms of compensation referred to in this Agreement
    are subject to reduction to reflect applicable withholding and payroll taxes.

                         
    (b)        Bonuses.  Executive
    shall be eligible to receive a cash bonus, based upon the Company's financial
    performance and as determined in the discretion of Company's Board of Directors.

                         
    (c)        Stock Options. 
    Company's Board of Directors has previously approved that certain Document
    Security Systems, Inc. 2003 Executive Stock Incentive Plan (the "Incentive
    Plan") pursuant to which 200,000 shares of Company's common stock
    (the "Company Option Shares") are available for grant to Company's
    employees.  Upon executing this Agreement, Executive shall receive incentive
    stock options to purchase an aggregate of 30,000 options, vesting in increments
    of 10,000 per year commencing on the date hereof with an exercise price based
    upon the closing price of the Company's Common Stock as of June 10, 2004 ("Executive's
    Stock Options") as reported on the American Stock Exchange. 
    These grants shall be subject to the terms and conditions of the Incentive
    Plan and applicable rules and regulations of the Internal Revenue Service.

                         
    (i)         Immediately prior to the
    consummation of any transaction constituting a "Change in Control" (as defined
    in Section 10(a) below) any Executive Stock Options that remain unvested shall
    immediately vest, and subject to any provisions in the Incentive Plan or applicable
    Internal Revenue Service ("IRS") regulations, the  Executive shall have
    a period equal to the greater of (i) one (1) year following the Change of
    Control or the unexpired term of the Executive's Stock Options to exercise
    his Executive Stock Options.

              4.        
    Benefits.  In addition to the compensation set forth
    above, Company shall provide Executive with the following benefits:

                         
    (a)        Executive and Executive's family,
    as applicable, shall be entitled to participate in all employee benefit plans
    and programs from time to time whenever sponsored by Company, including, without
    limitation, any group disability, life, major medical and accidental death
    and dismemberment insurance plans and/or benefits and profit sharing, retirement
    or pension plans to the full extent available to any of the Company's other
    employees through the Term of this Agreement.

                         
    (b)        Company will obtain, and maintain
    during the term of this Agreement, on Executive's life an additional term
    life insurance policy for his benefit, at Company's sole cost, in the amount
    of $800,000.  Executive shall designate a beneficiary or beneficiaries
    from time to time.  If Executive fails to designate a beneficiary, the
    beneficiary shall be Executive's estate.

                         
    (c)        Executive shall be entitled
    to four (4) weeks of vacation each year that he is employed hereunder during
    which vacation his annual salary shall be paid in full.  Any vacation
    not taken by Executive shall carryover into the succeeding year or in accordance
    with the Company's executive employee policies in effect from time to time. 
    All unused and accrued vacation shall be paid to Executive (or Executive's
    estate) upon Executive's termination of employment.

                         
    (d)        Company shall provide Executive
    with up to 5 days of paid sick leave each year; unused sick days shall not
    carryover into the succeeding year.  Company also shall provide Executive
    with holiday pay, as provided by Company to its other executives.

              5.        
    Expenses.  Executive will be entitled to be paid
    or reimbursed for all expenses incurred by Executive in connection with Executive's
    responsibilities to Company, including, without limitation, administrative,
    travel, lodging, food, and entertainment. 

              6.        
    Confidential Information. Executive shall not, during
    the Term, disclose, except as required or necessary in the course of his employment
    by Company or as otherwise authorized by Company, any Confidential Information
    (as defined herein).  "Confidential Information" shall
    mean any information existing as of the date of this Agreement, or thereafter
    developed, in which Company has a proprietary interest, including, but not
    limited to, information relating to its patents, technology, research and
    development, technical data, trade secrets, know-how, products, services,
    finances, operations, sales and marketing, customers and customer information,
    licenses, orders for the purchase or sale of products, personnel matters and/or
    other information relating to Company, whether communicated orally, electronically
    or in writing, or obtained by Executive as a result of his employment,
    or through observation or examination of the Business.  Company and Executive
    agree that the foregoing confidentiality obligations shall not apply to information
    that (i) was known to Executive prior to the receipt of such information,
    (ii) was publicly available at the time of disclosure or subsequently becomes
    available through no fault of Executive, or (iii) was disclosed to Executive
    by a third party who is under no obligation of confidentiality with Company.

              7.        
    Non-Competition Covenant; Non Solicitation Covenant    

                         
    (a)        During the term of his employment
    and for a period of the longer of (i) one year thereafter or (ii) the period
    of time that Executive is receiving any severance payments under Section 9(ii)
    hereof, Executive agrees that he will not directly or indirectly engage in
    any business, that sells develops software, manufactures or distributes products
    or provides services in the anti- counterfeiting and document security businesses
    or that are engaged in businesses that the same as those sold or provided
    by Company at such time.

                         
    (b)        Notwithstanding anything herein
    to the contrary, Executive shall not be prevented or limited from (i) investing
    in the stock or other securities of any corporation whose stock or securities
    are publicly owned and regularly traded on any public exchange, (ii) serving
    as a director, officer or member of professional, trade, charitable and civic
    organizations, or (iii) passively investing (not to exceed being a beneficial
    owner of more than 3% of the outstanding Common Stock)  his assets in
    such a form and manner as will not conflict with the terms of this Agreement
    and will not require services on the part of Executive in the operation of
    the business of the entities in which such investments are made.

                         
    (c)  In furtherance of the foregoing, Executive shall not, during the
    aforesaid period of non-competition, directly or indirectly, in connection
    with any business involved in the manufacture, development and/or distribution
    of anti-counterfeiting technology and document security businesses, or any
    business similar to the business in which the Company was engaged, or in the
    process of developing during Executive's tenure with the Company, solicit
    any customer or employee of the Company who was a customer or employee of
    the Company during the tenure of his employment.

                         
    (d) If any court shall hold that the duration of non-competition or any other
    restriction contained in this Section 7 is unenforceable, it is our intention
    that same shall not thereby be terminated but shall be deemed amended to delete
    therefrom such provision or portion adjudicated to be invalid or unenforceable
    or, in the alternative, such judicially substituted term may be substituted
    therefor.

              8.        
    Termination of Agreement

                         
    (a)        This Agreement shall terminate
    upon Executive's death.

                         
    (b)        Company may terminate this Agreement
    upon Executive's "total disability" ("Disability"), which shall mean his incapacity
    due to physical or mental illness or disability, which renders him absent,
    or unable to perform, his duties hereunder on a full time basis for a period
    of six (6) months, whether consecutive or cumulative, within any twelve (12)
    month period.

                         
    (c)        Company may terminate this Agreement
    for "Good Cause" as defined below upon thirty (30) days prior written notice
    to Executive, which notice shall specify the reason(s) for termination. 
    For purposes of this Agreement, "Good Cause" means (i) willful
    disobedience by the Executive of a material and lawful instruction of the
    Board of Directors of the Company; (ii) conviction of the Executive of any
    misdemeanor involving fraud or embezzlement or similar crime or any felony;
    (iii) an order is entered by the Securities and Exchange Commission, a state
    regulatory agency  or an exchange on which the Company's securities are
    traded finding that Executive has violated the securities laws; (iv) 
    breach by the Employee of any material term, condition or covenant of this
    Agreement; (v)  fraud or  gross negligence in the performance of
    his duties to the Company; or (vi)  excessive absences from work, other
    than for illness or Disability, in the case of breach which is capable of
    being cured, is not cured within thirty (30) days after Company has provided
    Executive with written notice thereof.

                         
    (d)        Executive may terminate this
    Agreement upon sixty (60) days prior written notice to the Company.

                         
    (e)        Executive may terminate this
    Agreement at any time, on 30 days advance written notice to Company, for "Good
    Reason" which shall mean the occurrence of one or more of the following
    events without Executive's prior written consent:

                                     
    (i)         a Change in Control occurs
    with respect to Company;

                                     
    (ii)        excluding the role or title
    of Chief Financial Officer which the Parties expect to occur,  any change
    in Executive's status, title, authorities or responsibilities (including reporting
    responsibilities) which represents a demotion from Executive's status, title,
    position or responsibilities (including reporting responsibilities) as of
    the date of this Agreement ); or any removal of Executive from, any of such
    positions, except in the event of Executive's death or Disability;

                                     
    (iii)       the failure by Company to continue
    in effect any incentive, bonus or other compensation plan in which Executive
    participates, unless an equitable arrangement (embodied in an ongoing substitute
    or alternative plan) has been made with respect to the failure to continue
    such plan, or the failure by Company to continue Executive's participation
    therein, or any action by Company which would directly or indirectly materially
    reduce his participation therein or reward opportunities thereunder;

                                     
    (iv)       the failure of Company to obtain
    a satisfactory agreement from any successor or assignee of the Company to
    fully assume and agree to perform this Agreement; or

                                     
    (v)        any breach by Company of any
    material term, condition or covenant of this Agreement, which is not cured
    within thirty (30) days after Executive has provided Company with notice thereof.

              (f)        
    This Agreement may be terminated upon the mutual agreement of Company and
    Executive.

              9.        
    Obligations Following Termination of Agreement.

                         
    (a)        If this Agreement is terminated
    pursuant to Section 8(a), (b), (c), (d) or (f), Company shall have no obligation
    to pay any Severance Pay (as defined below) or benefits to Executive; provided,
    however, Company shall be obligated to pay Executive (or in the case of his
    death, his spouse, estate or representative) all unpaid salary, earned bonuses,
    vacation and other benefits accrued through the date of termination of this
    Agreement and shall provide such other benefits, such as health insurance
    continuation coverage under COBRA, as may be required by law.

                         
    (b)        If this Agreement is terminated
    pursuant to Section 8(e) or otherwise by Company without "Good Cause":

                                     
    (i)         Executive shall be paid
    all unpaid salary, earned bonuses, vacation and other benefits accrued through
    the date of termination and shall receive such other benefits, such as health
    insurance continuation coverage under COBRA, as may be required by law;

                                     
    (ii)        Executive shall receive as
    severance payment an amount equal to eighteen (18) months of Executive's annual
    salary at the rate in effect as of the date of Executive's termination, payable
    at Executive's sole discretion in either a lump sum at the time of termination
    or on normal pay dates in accordance with the Company's pay policies in effect
    prior to the termination date.  In addition, for the eighteen (18) month
    period immediately after the termination of this Agreement, Company shall
    continue to provide and pay the premium for the health insurance provided
    to Executive (and his family, if applicable) immediately prior to the termination
    of this Agreement;

                                     
    (iii)       Executive shall not be required
    to mitigate damages of the amount of any salary continuation payments provided
    for under this Section by seeking other employment or otherwise, nor shall
    the amount of any payments provided for under this Section be reduced by any
    compensation earned by Executive as the result of employment by another employer
    or by any self employment after the date of termination;

                                     
    (iv)       All options for Company capital stock
    granted to Executive pursuant to the Incentive Plan including, without limitation,
    Executive's Stock Options, or otherwise, that remain unvested shall immediately
    vest, and Executive shall have a period of one (1) year following termination
    to exercise his vested options, subject to the provisions of the Incentive
    Plan and applicable IRS regulations.

                         
    (c)        Upon the termination of this
    Agreement for any reason, any and all restrictions (other than restrictions
    which are the result of applicable federal securities laws and regulations
    and those restrictions which Executive has entered into with a third party
    on a contractual basis) on the transfer of shares of Company's capital stock
    then owned by Executive (which shall include any and all option shares unvested
    at the time of the termination) shall be terminated as of the date of termination
    of this Agreement.

                         
    (d)        Company represents and warrants
    to Executive that this Agreement (including the Severance Compensation) have
    been duly approved and authorized by Company's Board of Directors and, therefore,
    the payments to be made hereunder shall not under any circumstances be subject
    to Section 4999 of the Code. Should, however, any of the payments, singly,
    in any combination or in the aggregate, that are provided for hereunder to
    be paid to or for the benefit of Executive be determined or alleged to be
    subject to an excise or similar purpose tax pursuant to Section 4999 of the
    Code, or any successor or other comparable federal, state or local tax law
    by reason of being a "parachute payment" (within the meaning of Section 280G
    of the Code), Company shall pay to Executive such additional compensation
    as is necessary (after taking into account all federal, state and local taxes
    payable by Executive as a result of the receipt of such additional compensation)
    to place Executive in the same after-tax position (including federal, state
    and local taxes) he would have been in had no such excise or similar purpose
    tax (or interest or penalties thereon) been paid or incurred.  Without
    limiting the obligation of Company hereunder, Executive agrees to negotiate
    with Company in good faith (at Company's sole cost and expense including attorney's
    fees) with respect to procedures reasonably requested by Company which would
    afford Company the ability to contest the imposition of such excise or similar
    purpose tax.

              10.      
    Change in Control. 

                         
    (a)        For purposes of this Agreement,
    a "Change in Control" will be deemed to have occurred with respect
    to Company if:

                                     
    (i)         the Board of Directors
    of the Company approves of (A) any merger, consolidation, reorganization or
    other business combination of Company where the pre transaction shareholders
    of the Company do not continue to own 50.1% of the post transaction outstanding
    shares of Common Stock  having the right to vote in an election of Company's
    Board of Directors, (B) the sale, exchange, transfer or other disposition
    of all or substantially all of the assets of Company (in one transaction or
    a series of transactions contemplated by any party as a single plan), or (C)
    any plan or proposal for the liquidation or dissolution of Company; or

                                     
    (ii)        any person or entity, together
    with all "affiliates" and "associates" (as defined in Rule 12b-2 of the Securities
    Exchange Act of 1934 (the "Exchange Act")) of such person or
    entity, shall become the "beneficial owner" (as defined in Rule 13d-3 of the
    Exchange Act), directly or indirectly, of securities of Company representing
    50.1% or more of either (A) the combined voting power of Company's then outstanding
    securities having the right to vote in an election of Company's Board of Directors
    ("Voting Securities") or (B) the then outstanding shares of
    all classes of stock of Company.               

              11.      
    Personal Guaranty of Indebtedness.  Company and
    Executive acknowledge that Executive has personally guaranteed the following
    Company indebtedness: (a) Line of Credit with Fleet Bank in the amount of
    approximately $80,000; (b) a business loan from CIT, in the principal amount
    of $215,000; and (c) equipment leases with outstanding amounts of approximately
    $78,000 (collectively, the "Personally Guaranteed Debts"). 
    Company covenants and agrees to use its best efforts to obtain the release
    of Executive from all of the Personally Guaranteed Debts as soon as practicable. 
    If prior to or after the release of the Personally Guaranteed Debts, Executive
    incurs any liability as a result of the Personally Guaranteed Debts, Company
    shall defend, hold harmless and indemnify Executive (or Executive's estate)
    from any and all liability, cost or expense incurred or which will likely
    be incurred by Executive, including, without limitation, principal, interest,
    late fees and attorneys' fees.

              12.      
    Indemnification. Company shall, to the maximum extent
    permitted by law, indemnify Executive against all expenses, including, without
    limitation, reasonable attorneys' fees, judgments, fines, settlements, and
    other amounts actually and reasonably incurred in connection with any proceeding
    arising by reason of Executive's employment by Company.  Company shall,
    to the maximum extent permitted by law, advance to Executive any expenses
    incurred in defending any such proceeding.  Company agrees to obtain
    Directors and Officers Liability insurance, and to include Executive in the
    coverage of this policy.  In addition, Company agrees to amend its Certificate
    of Incorporation, as necessary, to authorize Company to indemnify Executive
    as set forth in this Section 12.

              13.      
    Work-for Hire.  Except as otherwise may be agreed
    by the Company in writing, in consideration of the employment of Employee
    by the Company, and free of any additional obligations of the Company to make
    additional payment to Employee, Employee agrees to irrevocably assign to the
    Company any and all inventions, software, manuscripts, documentation, improvements
    or other intellectual property whether or not protectible by any state or
    federal laws relating to the protection of intellectual property, relating
    to the present or future business of the Company that are developed by Employee
    prior to the termination of his/her employment with the Company, either alone
    or jointly with others, and whether or not developed during normal business
    hours or arising within the scope of his/her duties of employment.  Employee
    agrees that all such inventions, software, manuscripts, documentation, improvement
    or other intellectual property shall be and remain the sole and exclusive
    property of the Company and shall be deemed the product of work for hire. 
    Employee hereby agrees to execute such assignments and other documents as
    the Company may consider appropriate to vest all right, title and interest
    therein to the Company and hereby appoints the Company Employee's attorney-in-fact
    with full powers to execute such document itself in the event employee fails
    or is unable to provide the Company with such signed documents.  This
    provision does not apply to an invention for which no equipment, supplies,
    facility, or trade secret information of the Company was used and which was
    developed entirely on Employee's own time, unless (a) the invention relates
    (i) to the business of the Company, or (ii) to the Company's actual or demonstrably
    anticipated research or development, or (b) the invention results from any
    work performed by Employee for the Company.

              14.      
    Miscellaneous.

                         
    (a)        This Agreement:

                                     
    (i)         shall constitute the entire
    agreement between the parties hereto and supersedes all prior agreements,
    written or oral, concerning the subject matter herein and there are no oral
    understandings, statements or stipulations bearing upon the effect of this
    Agreement which have not been incorporated herein.

                                     
    (ii)        may be modified or amended
    only by a written instrument signed by each of the parties hereto.

                                     
    (iii)       shall bind and inure to the benefit
    of the parties hereto and their respective heirs, successors and assigns.

                                     
    (iv)       may not be assigned by either party
    without a written agreement signed by all parties hereto.  Any assignment
    not signed by all parties is null and void.

                         
    (b)        If any provision of this Agreement
    shall be held invalid or unenforceable by competent authority, such provision
    shall be construed so as to be limited or reduced to be enforceable to the
    maximum extent compatible with the law as it shall then appear.  The
    total invalidity or unenforceability of any particular provision of this Agreement
    shall not affect the other provisions hereof and this Agreement shall be construed
    in all respects as if such invalid or unenforceable provision were omitted.

                         
    (c)        This Agreement shall be construed
    in accordance with and governed by the laws of the State of New York without
    reference to conflict of laws principles.  Any litigation involving this
    Agreement shall be adjudicated in a court with jurisdiction located in Monroe
    County, New York and the parties irrevocably consent to the personal jurisdiction
    and venue of such court.

  (d)        All notices and other communications
    under this Agreement must be in writing and must be given by personal delivery
    or first class mail, certified or registered with return receipt requested,
    and will be deemed to have been duly given upon receipt if personally delivered,
    five (5) days after mailing, if mailed, to the respective persons named below:

                                     
    If to Executive:

  Mr. Patrick White

    58 Bosworth Field

    Mendon, New York 14506     

  Any party may change such party's address for notices by notice duly given
    pursuant to this Section.

                         
    (e)        In the event of litigation to
    enforce the terms and conditions of this Agreement, the losing party agrees
    to pay the substantially prevailing party's costs and expenses incurred including,
    without limitation, reasonable attorneys' fees.

                         
    (f)         Company agrees that it
    will indemnify and hold Executive harmless to the fullest extent permitted
    by applicable law from and against any loss, cost, expense or liability resulting
    from or by reason of Executive's employment hereunder, whether as an officer,
    executive, agent, fiduciary, director or other official of Company, except
    to the extent of any expenses, costs, judgments, fines or settlement amounts
    which result from conduct which is determined by a court of competent jurisdiction
    to be knowingly fraudulent or to constitute some other type of willful misconduct.

                         
    (g)        This Agreement may be executed
    simultaneously in one or more counterparts, each one of which shall be deemed
    an original, but all of which together shall constitute one and the same instrument.

  [SIGNATURE PAGE FOLLOWS]

  

  [Signature Page to Employment Agreement]

              IN
    WITNESS WHEREOF, the parties have executed this Agreement on the day and
    year first above written.

  COMPANY:   Document Security Systems, Inc.

  By:                                                               

  Name: Alan Harrison

    Title: Chairman of Compensation Committee

  Executive:

  Patrick White