Document:

EXHIBIT
      10.31

    

     

    

    

    DOCUMENT
      SECURITY SYSTEMS, INC.

    

    STOCK
      OPTION AGREEMENT 

    2004
      EMPLOYEE STOCK OPTION PLAN

     

    This
      STOCK OPTION AGREEMENT (this “Agreement”) is entered into as of «OPTION_DATE»,
      by and
      between Document Security Systems, Inc., a New York corporation (the “Company”),
      and «FIRSTNAME» «LASTNAME»
      (the
“Optionee”).

     

    WHEREAS,
      the Company desires to grant to the Optionee options to acquire an aggregate
      of
«NUMBER_OF_OPTIONS»
      shares
      of Common Stock of the Company, par value $.02 per share (the “Stock”), on the
      terms set forth herein.

     

    NOW,
      THEREFORE, the parties hereby agree as follows:

     

    1. Definitions.  Unless
      otherwise provided, capitalized terms are defined herein.

     

    2. Grant
      of Options.  The
      Optionee is hereby granted non-qualified stock options (the “Options”) to
      purchase an aggregate of «NUMBER_OF_OPTIONS»
      shares
      of Stock, pursuant to the terms of this Agreement.

     

    3. Term.  The
      term of the Options (the “Option Term”) shall be for five (5) years commencing
      on «OPTION_DATE»,
      and
      terminating on «TERMINATION_DATE»
      (the
“Expiration Date”).

     

    4. Option
      Price.  The
      initial exercise price per share of the Options shall be «OPTION_PRICE»,
      subject
      to adjustment as provided herein (the “Option Price”).

     

    5. Conditions
      to Exercisability.  The
      Options shall vest and become exercisable as follows: one-third on «OPTION_DATE»,
      one-third one year after «OPTION_DATE»
      and
      one-third two years after «OPTION_DATE»,
      in each
      case if the Optionee continues to be an Employee (as defined by the Plan) on
      such date or dates. 

     

    6. Method
      of Exercise.  

     

    (a) An
      Option
      may be exercised, as to any or all full shares of the Stock as to which the
      Options has become exercisable, by written notice of such exercise, signed
      by
      the person entitled to exercise the Options, has been delivered or transmitted
      by registered or certified mail, by overnight delivery or by hand, or by any
      other delivery method acceptable to the Company, to the administrator designated
      by the Company.

     

    (b) Said
      notice shall specify the number of Shares for which the Options are being
      exercised and shall be accompanied by (i) such documentation, if any, as may
      be
      required by the Company, including without limitation, as provided in
      subparagraph 12(b) of the Plan, and (ii) payment in full of the aggregate Option
      Price. 

     

    (c) Delivery
      of said notice shall constitute an irrevocable election to purchase the Shares
      specified in said notice, and the date on which the Company receives the last
      of
      said notice, documentation and the aggregate Option Price for all of the Shares
      covered by the notice shall, subject to the provisions of this Agreement and
      the
      Plan, be the date as of which the Shares so purchased shall be deemed to have
      been issued.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    7. Medium
      and Time of Payment.  The
      Option Price shall be paid in full, at the time of exercise, in cash or in
      the
      form of: (a) cash or a certified check (unless such certification is waived
      by
      the Company) payable to the order of the Company in the amount of the aggregate
      Option Price; (b) shares of the Stock (whether then owned by the Optionee or
      issuable upon exercise of the Option) having a fair market value equal to the
      aggregate Option Price; or (c) a combination of these methods of payment,
      including a cashless exercise procedure as approved by the Company; provided,
      however, that in the case of an Incentive Stock Option, the medium of payment
      shall be determined at the time of grant and set forth in the applicable option
      agreement

     

    For
      purposes of this Section 7, the fair market value per share of the Stock
      surrendered for exercise shall be: (i) if the Stock is traded on a national
      securities exchange or on the NASDAQ National Market System ("NMS"), the per
      share closing price of the Stock on the principal securities exchange on which
      they are listed or on NMS, as the case may be, on the date of exercise (or
      if
      there is no closing price for such date of exercise, then the last preceding
      business day on which there was a closing price); or (ii) if the Stock is traded
      in the over-the-counter market and quotations are published on the NASDAQ
      quotation system (but not on NMS), the closing bid price of the Stock on the
      date of exercise as reported by NASDAQ (or if there are no closing bid prices
      for such date of exercise, then the last preceding business day on which there
      was a closing bid price); or (iii) if the Stock is traded in the
      over-the-counter market but bid quotations are not published on NASDAQ, the
      closing bid price per share for the Stock as furnished by a broker-dealer which
      regularly furnishes price quotations for the Stock.

     

    If
      notice
      of the exercise of this Option is given by a person or persons other than the
      Optionee, the Company may require, as a condition to the exercise of an Option,
      the submission to the Company of appropriate proof of the right of such person
      or persons to exercise such Option.

    

    8. Termination.  

     

    (a) Except
      as
      provided in this Section 8 and in Section 9 hereof, an Option may not be
      exercised unless the Optionee is then an Employee (as defined by the Plan),
      and
      unless the Optionee has remained continuously an Employee (as determined by
      the
      Board (as defined by the Plan) in its sole discretion) since the date of grant
      of the Options. Except as set forth in Section 9 hereof, if an Optionee shall
      voluntarily or involuntarily terminate his service as an Employee, the Options
      shall terminate upon the date which is the earlier of (i) three months after
      the
      date on which the Optionee ceased to be an Employee or (ii) the Expiration
      Date.

     

    (b) Notwithstanding
      anything to the contrary herein, if the termination of the Optionee’s service as
      an Employee is for “cause” as determined in good faith by the Board, then the
      Options shall be deemed cancelled and terminated in full on the date of
      termination. For purposes hereof, the term “cause” shall mean any of the
      following: (i) a violation of a Company policy regarding insider trading or
      other violations related to the state or federal securities laws or regulations;
      (ii) any act of fraud or dishonesty related to the Optionee’s employment or
      consultancy; (iii) a violation of any Company policy or federal or state law
      or
      regulation related to sexual or racial or age discrimination or sexual or racial
      harassment; or (iv) conviction by the court of law of a felony, whether or
      not
      related to the Optionee’s employment or consultancy.

     

    9. Death,
      Disability or Retirement of Optionee.  

     

    (a) 
      If the
      termination of the Optionee’s service as an Employee is due to retirement (as
      defined by the Board in its sole discretion), the holder may exercise the
      Options if the holder could have exercised the Options on such when the Optionee
      ceased to be an Employee; provided, however, that such exercise must be
      accomplished on or prior to the earlier of (i) three (3) months after the first
      date of the Optionee’s retirement or (ii) the Expiration Date.

     

    (b) If
      the
      termination of the Optionee’s service as an Employee is due to disability (to an
      extent and in a manner as shall be determined by the Board), the holder may
      exercise the Options if the holder could have exercised the Options on such
      when
      the Optionee ceased to be an Employee; provided, however, that such exercise
      must be accomplished on or prior to the earlier of (i) one (1) year after the
      date upon which the Optionee ceased to be an Employee or (ii) the Expiration
      Date.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (c) If
      the
      termination of the Optionee’s service as an Employee is due to the death of the
      Optionee, the duly appointed executor or administrator of his estate shall
      have
      the privilege at any time of exercising any Option that the holder could have
      exercised on the date of the Optionee’s death; provided, however, that such
      exercise must be accomplished on or prior to the earlier of (i) one (1) year
      after the Optionee’s death or (ii) the Expiration Date.

     

    10. Withholding
      Taxes.  No
      later than the date of exercise of an Option, the Optionee will pay to the
      Company or make arrangements satisfactory to the Company regarding payment
      of
      any federal, state or local taxes of any kind required by law to be withheld
      upon the exercise of an Option. Alternatively, solely to the extent permitted
      or
      required by law, the Company may in its sole discretion deduct the amount of
      any
      federal, state or local taxes of any kind required by law to be withheld upon
      the exercise of an Option from any payment of any kind due to the Optionee.
      The
      withholding obligation may be satisfied by the withholding or delivery of an
      appropriate number of shares of the Stock.

     

    11. Terms
      Incorporated by Reference Herein.  EACH
      OF THE TERMS OF THE COMPANY’S 2004 EMPLOYEE STOCK OPTION PLAN, AS AMENDED AND
      RESTATED (THE “PLAN”), AS IN EFFECT AS OF THE DATE HEREOF, SHALL BE DEEMED TO
      GOVERN THE OPTIONS GRANTED HEREUNDER. To the extent that there is any
      inconsistency between the terms of this Agreement and the terms of the Plan,
      the
      terms of this Agreement shall govern.

     

    12. Transferability
      of Options.  
      The Options may not be sold, pledged, assigned, hypothecated, transferred or
      disposed of in any manner other than as provided for under the
      Plan.

     

    13. Entire
      Agreement.  This
      Agreement (including the Plan) contains all of the understandings between the
      parties hereto pertaining to the matters referred to herein, and supersedes
      all
      undertakings and agreements, whether oral or in writing, previously entered
      into
      by them with respect thereto. The Optionee represents that, in executing this
      Agreement, he does not rely and has not relied upon any representation or
      statement not set forth herein made by the Company with regard to the subject
      matter of this Agreement or otherwise.

     

    14. Amendment
      or Modification, Waiver.  No
      provision of this Agreement may be amended or waived unless such amendment
      or
      waiver is agreed to in writing, signed by the Optionee and by a duly authorized
      officer of the Company. No waiver by any party hereto of any breach by another
      party hereto of any condition or provision of this Agreement to be performed
      by
      such other party shall be deemed a waiver of a similar of dissimilar condition
      or provision at the same time, any prior time or any subsequent
      time.

     

    15. Notices.  Each
      notice relating to this Agreement shall be in writing and delivered in person
      or
      by certified mail to the proper address. All notices to the Company shall be
      addressed to it at:

     

    Document
      Security Systems, Inc.

    First
      Federal Plaza

    Suite
      1525

    28
      East
      Main Street

    Rochester,
      NY 14614

    Attention:
      Options Administrator

     

    All
      notices to the Optionee or other person or persons then entitled to exercise
      the
      Options shall be addressed to the Optionee or such other person or persons
      at:

     

    
      

    

    
      

      
 

    Anyone
      to
      whom a notice may be given under this Agreement may designate a new address
      by
      notice to such effect.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    16. Severability.  If
      any provision of this Agreement or the application of any such provision to
      any
      party or circumstances shall be determined by any court of competent
      jurisdiction to be invalid and unenforceable to any extent, the remainder of
      this Agreement or the application of such provision to such person or
      circumstances other than those to which it is so determined to be invalid and
      unenforceable, shall not be affected thereby, and each provision hereof shall
      be
      validated and shall be enforced to the fullest extent permitted by
      law.

     

    17. Governing
      Law.  This
      Agreement shall be construed and governed in accordance with the laws of the
      state of New York, without regard to principles of conflicts of
      laws.

     

    18. Headings.  All
      descriptive headings of sections and paragraphs in this Agreement are intended
      solely for convenience, and no provision of this Agreement is to be construed
      by
      reference to the heading of any section or paragraph.

     

    19. Counterparts.  This
      Agreement may be executed in counterparts, each of which shall be deemed to
      be
      an original but both of which together shall constitute one and the same
      instrument.

     

    [Signature
      Page Follows]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the Company has caused this Agreement to be executed by an
      authorized officer and the Optionee has hereunto set his hand all as of the
      date
      first above written.

     

    

    DOCUMENT
      SECURITY SYSTEMS, INC.

    

    
      	 	 	 	 
	By:	 	 	 
	
              

            	 	 	
            
	
              Name: Patrick
                White
Title: Chief
                Executive Officer

            	 	 	

     

    _____________________________

    Optionee:
      «FIRSTNAME» «LASTNAME»Exhibit
      10.1

    Consent
      of Independent Registered Public Accounting Firm

     

    We
      consent to the incorporation by reference in the Registration Statements on
      Form
      S-8 (Registration No. 333-12586, 333-13786, 333-14142, 333-83914, 333-104070
      and
      333-121229) of our report dated March 27, 2006, with respect to the consolidated
      financial statements of Alvarion Ltd. included in this annual report on Form
      20-F for year ended December 31, 2005.

     

    

    
      	 	
              /s/
                KOST, FORER GABBAY &
                KASIERER

            
	
              Tel-Aviv,
                Israel

            	
              A
                Member of Ernst & Young Global

            
	 	 
	 	 
	
              11
                May, 2006

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