EXECUTION VERSION

AMENDED AND RESTATED AGREEMENT
 
This Amended and Restated Agreement (the "Agreement"), dated as of February 18,
2011, which amends and restates in its entirety that certain Agreement dated as
of December 31, 2010 by and between the parties hereto, is entered into by and
between Document Security Systems, Inc., a New York corporation (together with
its successors, the "Company"), and Fletcher International, Ltd., a company
domiciled in Bermuda (together with its successors, the "Purchaser").
 
The parties hereto agree as follows:
 
1.           Purchase and Sale.  In consideration of and upon the basis of the
representations, warranties and agreements and subject to the terms and
conditions set forth in this Agreement:
 
(a)           Subject to satisfaction or, if applicable, waiver of the relevant
conditions set forth in Sections 13 and 14 hereof on each of the following
dates, Purchaser agrees to purchase  from the Company, and the Company agrees to
issue and sell to Purchaser at 9:30 a.m. New York time on December 31, 2010 (the
"Initial Investment Closing Date") and at 9:30 a.m. New York time on February
18, 2011 or at such other date and time as Purchaser and the Company shall
mutually agree (such date, the "Supplemental Initial Investment Closing Date"),
in accordance with Section 3, Seven Hundred Fifty Six Thousand Two Hundred
Eighty Seven (756,287) shares of Common Stock in the aggregate at a price per
share equal to $5.38 (the "Initial Investment Price") for an aggregate purchase
price of Four Million Sixty Eight Thousand Eight Hundred Twenty Five Dollars
($4,068,825).  For the avoidance of doubt, each of the Company and Purchaser
acknowledges that on the Initial Investment Closing Date (i) Purchaser delivered
to the Company Four Million Dollars ($4,000,000) and (ii) Company delivered to
Purchaser Seven Hundred Fifty Six Thousand Two Hundred Eighty Seven (756,287)
shares of Common Stock (the "Initial Investment"), so the additional amount of
funds to be delivered to the Company on the Supplemental Initial Investment
Closing Date shall be Sixty Eight Thousand Eight Hundred Twenty Five Dollars
($68,825) (the "Supplemental Initial Investment").  Purchaser shall have the
rights with respect to such shares of Common Stock specified in this Agreement
and in the Warrants.
 
 
 

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(b)           Subject to satisfaction or, if applicable, waiver of the relevant
conditions set forth in Sections 13 and 14 hereof, Purchaser, in its sole
discretion, may elect to purchase from the Company, and the Company agrees to
issue and sell to Purchaser (each a "Later Investment"), from time to time, in
whole or in part, Seven Hundred Fifty Six Thousand Two Hundred Eighty Seven
(756,287) shares of Common Stock for an aggregate purchase price of up to Four
Million Sixty Eight Thousand Eight Hundred Twenty Five Dollars ($4,068,825) (the
"Aggregate Later Investment Amount") at a price per share equal to $5.38 (the
"Later Investment Price").  To effect any Later Investment, Purchaser shall
deliver a written notice substantially in the form attached hereto as Annex A (a
"Later Investment Notice") to the Company from time to time on or prior to July
2, 2011 (the "Later Investment Period").  Subject to satisfaction or, if
applicable, waiver of the relevant conditions set forth in Sections 13 and 14
hereof, the closing of each Later Investment (each, an "Later Investment
Closing" and together with the Initial Investment Closing (as defined below) and
the Supplemental Initial Investment Closing (as defined below), each a
"Closing") shall take place at 9:30 a.m. New York City time on the date that is
three (3) Business Days following and excluding the date of delivery of the
relevant Later Investment Notice or on such other date as Purchaser and the
Company shall mutually agree (each such date and time being referred to herein
as a "Later Investment Closing Date", and each Later Investment Closing Date
together with the Initial Investment Closing Date and the Supplemental Initial
Investment Closing Date, a "Closing Date").
 
(c)           The Later Investment Period shall be extended: by two (2) Business
Days for each Business Day:
 
(i)           that a Registration Failure shall exist; or
 
(ii)           occurring during the period (x) commencing on the earlier of the
day on which the Company restates or announces its intention to restate any
portion of the Company Financial Statements (as defined below), and (y) ending
on the date on which the Company files quarterly or annual financial statements
that constitute a Restatement (as defined below) on a Form 10-K, Form 10-Q, Form
8-K or any other filing with the SEC (and if the Company makes multiple filings
of a Restatement with the SEC, the last of such dates) (the "Restatement Filing
Date").
 
To the extent that (A) the Company restates or announces its intention to
restate any portion of the Company Financial Statements or (B) a Registration
Failure shall exist, in either case, within sixty-five (65) Business Days of the
expiration of the Later Investment Period, the Later Investment Period shall be
extended to a date that is at least sixty-five (65) Business Days after the
later of the Restatement Filing Date or the date on which no Registration
Failure shall exist.
 
 
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(d)           If any of the conditions set forth in Section 13 hereof are not
satisfied or waived on or prior to 9:30 a.m. New York City time on the relevant
Initial Investment Closing Date, Supplemental Initial Investment Closing Date or
Later Investment Closing Date or if the Company fails to perform its obligations
on any Initial Investment Closing Date, Supplemental Initial Investment Closing
Date or Later Investment Closing Date (including delivery of all shares of
Common Stock issuable on such date) for any reason other than the Purchaser's
failure to satisfy the conditions required by Section 14 hereof, then in
addition to all remedies available to the Purchaser at law or in equity, the
Purchaser may, at its sole discretion, and at any time, (i) withdraw the Later
Investment Notice by written notice to the Company regardless of whether such
condition has been satisfied or waived as of the withdrawal date and, after such
withdrawal, shall have no further obligations with respect to such Later
Investment Notice, but may in its sole discretion deliver a Later Investment
Notice to effect such withdrawn Later Investment in the Purchaser's sole
discretion and (ii) elect to consummate the Supplemental Initial Investment
Closing or not, in its sole discretion, on a later date specified in writing by
Purchaser to the Company.
 
(e)           In addition, the Company shall issue to Purchaser on the earlier
of (x) the Supplemental Initial Investment Closing Date, and (y) the first Later
Investment Closing Date, warrants in the form attached hereto as Annex B-1
(“Warrant A”) and Annex B-2 (“Warrant B”, and together with Warrant A, the
"Warrants") evidencing rights to purchase from the Company, subject to the terms
and conditions set forth in the Warrants, up to an aggregate amount of shares of
Common Stock as set forth therein.  Purchaser shall have the right to exercise
rights under each Warrant in the manner, and subject to the terms, specified in
such Warrant.
 
(f)           As used herein,
 
(i)           "Average Price" means, for any day, the average of the Daily
Market Prices for all of the Business Days in the preceding calendar month.  By
way of illustration, on May 15, the Average Price will be the average of the
Daily Market Prices for all of the Business Days in the month of April.
 
(ii)           "Business Day" means any day on which the Common Stock may be
traded on NYSE or, if not admitted for trading on NYSE, any day other than a
Saturday, Sunday or holiday on which banks in New York City are required or
permitted to be closed;
 
(iii)           "Cashless Exercise" means, with respect to the Warrants,
Cashless Exercise as defined therein, and with respect to this Agreement, a
Later Investment in which the Purchaser may elect to not make the cash payment
set forth in the Later Investment Notice and the Company shall sell and deliver
a reduced quantity of shares of Common Stock (the "Settlement Stock") equal to
"X" where:
 
X = [(N x D) – (N x P)] / P
 
N = the gross number of shares of Common Stock that would have been issuable on
the relevant Later Investment Closing Date if the Purchaser had not elected
Cashless Exercise
 
D = Daily Market Price on the third (3rd) Business Day before, and excluding,
the date of the Later Investment Notice
 
 
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P = Later Investment Price.
 
(iv)           "Common Shares" means the Common Stock issuable pursuant to
Section 1(a) and Section 1(b), upon exercise of any Warrant and all other shares
of Common Stock issuable under this Agreement or the Warrants, including shares
of Common Stock previously issued on the Initial Investment Closing Date.
 
(v)            "Common Stock" means the common stock of the Company, par value
$0.02, provided that after a change in control, it shall refer to the most
widely held class of equity of the Acquiring Person (as defined below).
 
(vi)           "Daily Market Price" means, on any date, the amount per share of
the Common Stock (or, for purposes of determining the Daily Market Price of the
common stock of an Acquiring Person, the common stock of such Acquiring Person),
equal to (i) the daily volume-weighted average price, calculated to the nearest
ten thousandth (i.e., four decimal places (.xxxx)), on NYSE or, if no sale takes
place on such date, the average of the closing bid and asked prices, calculated
to the nearest ten thousandth (i.e., four decimal places (.xxxx)), on NYSE
thereof on such date, in each case as reported by Bloomberg, L.P. (or by such
other Person (as defined below) as Purchaser and the Company may agree), or (ii)
if such Common Stock (or the common stock of an Acquiring Person) is not then
listed or admitted to trading on NYSE, the higher of (x) the book value per
share thereof as determined by any firm of independent public accountants of
recognized standing selected by Company and reasonably acceptable to Purchaser
as of the last calendar day of the most recent month ending before the date as
of which the determination is to be made and (y) the fair market value per share
thereof determined in good faith by an independent, nationally recognized
appraisal firm selected by Purchaser and reasonably acceptable to the Company
(whose fees and expenses shall be borne by the Company), subject in each case to
adjustment for stock splits, recombinations, stock dividends and the like.
 
(vii)          "Dividend Amount" means the aggregate per-share amount of
dividends and distributions, whether in cash, securities or otherwise, declared
or paid on any class of equity security of the Company on or after the date of
this Agreement and on or before the relevant Closing Date.
 
(viii)         "Investment Amount" means, with respect to the Initial Investment
or any Later Investment or any exercise of any Warrant, the aggregate amount
paid or to be paid by the Purchaser or by the Holder (as defined in such
Warrant) (or deemed to have been paid in the case of Cashless Exercise (as
defined herein and in such Warrant)) on the relevant Closing Date or exercise of
any Warrant.
 
 
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(ix)           "Material Adverse Effect" means any material adverse effect with
respect to (A) the business, properties, assets, operations, results of
operations, revenues, prospects or condition, financial or otherwise, of the
Company and its subsidiaries taken as a whole, (B) the legality, validity or
enforceability of the Agreement, the Warrants, Registration Statement or
Prospectus (as defined below), or (C) the Company's ability to perform fully on
a timely basis its obligations under the Agreement or the Warrants.  Without
limiting the foregoing, any breach of Section 5(m) hereof shall be deemed to
constitute a Material Adverse Effect.
 
(x)            "NYSE" means the NYSE Amex, but if the NYSE Amex is not then the
principal U.S. trading market for the Common Stock, then "NYSE" shall be deemed
to mean the principal U.S. national securities exchange registered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") on which the
Common Stock, or such other applicable common stock, is then traded, or if such
Common Stock, or such other applicable common stock, is not then listed or
admitted to trading on any national securities exchange, then the OTC Bulletin
Board.
 
(xi)           "Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, limited liability company,
joint venture, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
 
2.           Warrant Delivery.  The duly executed Warrants shall be delivered by
hand to Purchaser as Purchaser instructs in writing on the earlier to occur of
(x) the Supplemental Initial Investment Closing Date or (y) any Later Investment
Closing Date.  The delivery of the Warrants shall be deemed to occur
simultaneously with the deliveries on such Supplemental Initial Investment
Closing Date or Later Investment Closing Date, as the case may be, as part of a
single transaction, and no delivery shall be deemed to have been made until all
such deliveries have been made.  The parties acknowledge and agree that the
Company previously delivered certain warrants (the "Initial Warrants") to
Purchaser as instructed by Purchaser in connection with the Initial Investment
Closing.  Purchaser shall cause the Initial Warrants to be returned to the
Company, and the Company shall cancel such Initial Warrants, upon receipt of the
duly executed Warrants by Purchaser, or Purchaser's designated custodian.
 
3.           Initial Investment Closing.  The closing of the Initial Investment
(the "Initial Investment Closing") occurred via facsimile on the Initial
Investment Closing Date, and the closing of the Supplemental Initial Investment
(the "Supplemental Initial Investment Closing") shall be via facsimile on the
Supplemental Initial Investment Closing Date in the manner set forth below.  At
the Initial Investment Closing, the following deliveries were made:
 
 
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(a)           Common Stock.  The Company delivered to Purchaser, at the
Company's expense, 756,287 shares of Common Stock, duly executed by the Company
in definitive form, and registered such shares in the stockholder register of
the Company in the name of Purchaser or as instructed by Purchaser in writing.
 
(b)           Purchase Price.  Purchaser caused to be wire transferred to the
Company, in accordance with the wire instructions set forth in Annex F hereto,
$4,000,000 (Four Million Dollars) in immediately available United States funds.
 
(c)           Closing Documents.  The closing documents required by Sections 13
and 14 were delivered to Purchaser and the Company, respectively.
 
At the Supplemental Initial Investment Closing, the following deliveries shall
be made:
 
(d)           Purchase Price.  Purchaser shall cause to be wire transferred to
the Company, in accordance with the wire instructions set forth in Annex F
hereto, Sixty Eight Thousand Eight Hundred Twenty Five Dollars ($68,825) in
immediately available United States funds.
 
(e)           Closing Documents.  The closing documents required by Sections 13
and 14 shall be delivered to Purchaser and the Company, respectively.
 
The deliveries specified in this Section 3, and delivery of the Warrants shall
be deemed to occur simultaneously as part of a single transaction, and no
delivery shall be deemed to have been made until all such deliveries have been
made.  For the avoidance of doubt, each Closing may occur in any sequence in
time independent of each other Closing and each Closing shall constitute a
separate transaction and shall not be conditioned upon any other Closing
occurring.
 
4.           Later Investment Closings.  Each Later Investment Closing shall
take place initially via facsimile on each Later Investment Closing Date in the
manner set forth below.  At each Later Investment Closing, the following
deliveries shall be made:
 
(a)           Common Stock.  The Company shall deliver to Purchaser that number
of shares of Common Stock as set forth in the relevant Later Investment Notice,
at the Company's expense, at a price per share equal to the Later Investment
Price, duly executed by the Company in definitive form, and shall register such
shares in the stockholder register of the Company in the name of Purchaser or as
instructed by Purchaser in writing.
 
 
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(b)       Purchase Price.  Purchaser shall cause to be wire transferred to the
Company, in accordance with the wire instructions set forth in Annex F hereto,
the amount to be paid by Purchaser set forth in the Later Investment Notice in
immediately available United States funds; provided that if the Company no
longer satisfies the continued listing requirements of the NYSE Amex (with or
without the passage of time, the giving of notice or both) or a Registration
Failure shall exist as of the date of the Later Investment Notice or as of the
Later Investment Closing Date, then the Purchaser may elect a Cashless
Exercise.  Upon receipt by the Purchaser of Settlement Stock in connection with
any Cashless Exercise, (i) that amount of Common Stock that would have been
issuable on the relevant Later Investment Closing Date if the Purchaser had not
elected Cashless Exercise shall be deemed sold by the Company and purchased by
the Purchaser and (ii) that amount of cash that would have been paid by the
Purchaser on the relevant Later Investment Closing Date if the Purchaser had not
elected Cashless Exercise shall be deemed paid by the Purchaser and received by
the Company.
 
(c)           Dividend Payment.  The Company shall deliver to Purchaser the
Dividend Amount multiplied by the number of shares of Common Stock required to
be delivered under Section 4(a) (or, in the case of a Cashless Exercise, the
gross number of shares that would have been deliverable if Purchaser had not
elected Cashless Exercise) (the "Dividend Payment").  To the extent that the
Dividend Payment consists of cash, the Company may pay such amount (a) by wire
transfer of immediately available funds to the Purchaser or (b) if (x) the Daily
Market Price on the date the relevant Later Investment Notice is delivered is
greater than the Later Investment Price, (y) the Company satisfies all continued
listing criteria of the NYSE Amex on the date that the Common Stock is
delivered, and (z) the Common Stock may be immediately resold by Purchaser
pursuant to a Registration Statement (as defined below) or pursuant to an
applicable exemption from the registration requirements of the Securities Act of
1933, as amended (the "Securities Act") and any applicable state law, by
delivering shares of Common Stock equal to the cash portion of the Dividend
Payment divided by the Later Investment Price.  To the extent that the Dividend
Payment consists of securities or other non-cash property, the Company shall
deliver such securities or other non-cash property to Purchaser; provided that
if such securities or other non-cash property would have a reduced value if
delivery is so delayed (for example only and not by way of limitation, a
short-term right to purchase securities), then proper provision shall be made to
deliver to Purchaser the sum of (i) the fair value of such securities or other
non-cash property measured as of the distribution date and (ii) the
appreciation, if any, in value of such securities through the date of
delivery.  For example only and not by way of limitation, if the Company
distributes a short-term right to purchase securities to other equity holders,
it shall deliver to Purchaser the value Purchaser would have received had
Purchaser exercised such right plus the appreciation, if any, had the Purchaser
held the purchased securities through the date on which such fair value is
delivered to Purchaser.  In the event that Purchaser and the Company mutually
agree that it would be impractical for the Company to distribute identical
securities or other non-cash property to Purchaser, then Purchaser and the
Company shall work together in good faith to determine a fair and equivalently
valued substitute therefor.
 
 
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(d)           Closing Documents.  The closing documents required by Sections 13
and 14 shall be delivered to Purchaser and the Company, respectively.
 
The deliveries specified in this Section 4, and delivery of the Warrants, if not
previously delivered, shall be deemed to occur simultaneously as part of a
single transaction, and no delivery shall be deemed to have been made until all
such deliveries have been made.  For the avoidance of doubt, each Closing may
occur in any sequence in time independent of each other Closing and each Closing
shall constitute a separate transaction and shall not be conditioned upon any
other Closing occurring.
 
5.           Representations and Warranties of the Company.  The Company (which
for purposes of this Section 5 includes each of its direct and indirect
subsidiaries) hereby represents and warrants to Purchaser as of December 31,
2010, as of the date hereof, and as of each Closing Date and as of the
consummation of each Warrant exercise, as follows:
 
(a)           The Company has authorized the sale and issuance of all shares of
Common Stock issuable under this Agreement or under the Warrants (the
"Offering").
 
(b)           The Company has been duly incorporated and is validly existing in
good standing under the laws of the state of New York or, after the relevant
Closing Date, if another entity has succeeded the Company in accordance with the
terms hereof, under the laws of its jurisdiction of incorporation.
 
(c)           Except as otherwise contemplated by this Agreement, the execution,
delivery and performance of this Agreement and the Warrants (including the
authorization, sale, issuance and delivery of the shares of Common Stock
issuable hereunder and thereunder) have been duly authorized by all requisite
corporate action and no further consent or authorization of the Company, its
Board of Directors or its stockholders is required.
 
(d)           This Agreement has been duly executed and delivered by the Company
and, when this Agreement is duly authorized, executed and delivered by
Purchaser, will be a valid and binding agreement enforceable against the Company
in accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights generally and to general principles of equity.  The issuance
of the shares of Common Stock issuable hereunder and under the Warrants is not
and will not be subject to any preemptive right or rights of first refusal that
have not been properly waived or complied with and will not trigger any
antidilution or similar rights that have not been properly waived.
 
 
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(e)           The Company has full corporate power and authority necessary to
(i) own and operate its properties and assets, execute and deliver this
Agreement, (ii) perform its obligations hereunder and under the Warrants
(including, but not limited to, the issuance of the shares of Common Stock
issuable hereunder and under the Warrants) and (iii) carry on its business as
presently conducted and as presently proposed to be conducted.  The Company and
its subsidiaries are duly qualified and are authorized to do business and are in
good standing as foreign corporations in all jurisdictions in which the nature
of their activities and of their properties (both owned and leased) makes such
qualification necessary, except for those jurisdictions in which failure to do
so would not, individually or in the aggregate, be reasonably expected to have a
Material Adverse Effect on (i) the business affairs, assets, results of
operations or prospects of the Company or any of its subsidiaries, or (ii) the
transactions contemplated by, or the Company's ability to perform under, this
Agreement or the Warrants.
 
(f)           No consent, approval, authorization or order of any court,
governmental agency or other body is required for execution and delivery by the
Company of this Agreement or the performance by the Company of any of its
obligations hereunder and under each Warrant, except for such orders as may be
required under federal and state securities laws with respect to the Company’s
obligations under Section 6 of this Agreement.
 
(g)           Neither the execution and delivery by the Company of this
Agreement nor the performance by the Company of any of its obligations hereunder
and under each Warrant:
 
(i)           violates, conflicts with, results in a breach of, or constitutes a
default (or an event which with the giving of notice or the lapse of time or
both would be reasonably likely to constitute a default) or creates any rights
in respect of any Person under (A) the certificates of incorporation or by-laws
of the Company or any of its subsidiaries, (B) any decree, judgment, order, law,
treaty, rule, regulation or determination of any court, governmental agency or
body, or arbitrator having jurisdiction over the Company or any of its
subsidiaries or any of their respective properties or assets, (C) the terms of
any bond, debenture, indenture, credit agreement, note or any other evidence of
indebtedness, or any agreement, stock option or other similar plan, lease,
mortgage, deed of trust or other instrument to which the Company or any of its
subsidiaries is a party, by which the Company or any of its subsidiaries is
bound, or to which any of the properties or assets of the Company or any of its
subsidiaries is subject, (D) the terms of any "lock-up" or similar provision of
any underwriting or similar agreement to which the Company or any of its
subsidiaries is a party or (E) a any rule or regulation of the United States
Securities and Exchange Commission (the "SEC") or NYSE; or
 
(ii)           results in the creation or imposition of any lien, charge or
encumbrance upon any shares of Common Stock issuable hereunder or under the
Warrants or upon any of the properties or assets of the Company or any of its
subsidiaries.
 
 
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(h)           When issued to Purchaser against payment therefor, each share of
Common Stock issuable hereunder and each share of Common Stock issuable upon
exercise of each Warrant:
 
(i)             will have been duly and validly authorized, duly and validly
issued, fully paid and non-assessable;
 
(ii)            will be free and clear of any security interests, liens, claims
or other encumbrances; and
 
(iii)           will not have been issued or sold in violation of any preemptive
or other similar rights of the holders of any securities of the Company.
 
(i)           The Company satisfies all continued listing criteria of the NYSE
Amex or, if no longer listed on the NYSE Amex, the New York Stock Exchange, the
Nasdaq Global Select Market or the Nasdaq Global Market (each a "National
Exchange").  No present set of facts or circumstances will (with the passage of
time or the giving of notice or both or neither) cause any of the Common Stock
to be delisted from the NYSE Amex or, if no longer listed on the NYSE Amex, the
National Exchange on which the Company’s Common Stock is listed.  All of the
Common Shares will, when issued, be duly listed and admitted for trading on all
of the markets where shares of Common Stock are traded, including the NYSE Amex
or, if no longer listed on the NYSE Amex, including the National Exchange on
which the Company’s Common Stock is listed.
 
(j)           Other than as set forth on Schedule (j), there is no pending or,
to the best knowledge of the Company, threatened action, suit, proceeding or
investigation before any court, governmental agency or body, or arbitrator
having jurisdiction over the Company or any of its affiliates that would affect
the execution by the Company of, or the performance by the Company of its
obligations under, this Agreement or the Warrants.
 
 
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(k)           Since January 1, 2007, none of the Company's filings with the SEC
under the Securities Act or under Section 13 or 15(d) of the Exchange Act,
including the financial statements, schedules, exhibits and results of the
Company's operations and cash flow contained therein (each an "SEC Filing"),
contained any untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading.  Since January 1,
2007, there has not been any pending or, to the best knowledge of the Company,
threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company
or any of its subsidiaries that will or is reasonably likely to result in a
Material Adverse Effect except as disclosed in the Company's SEC Filings on or
before the date immediately prior to and excluding the date hereof.  Since the
date of the Company's most recent SEC Filing, there has not been, and the
Company is not aware of, any development or condition that is reasonably likely
to result in, any material change in the condition, financial or otherwise, or
in the business affairs, assets, revenues, operations or prospects of the
Company and its subsidiaries, whether or not arising in the ordinary course of
business.  The Company's SEC Filings made before and excluding the Closing Date
fully disclose all material information concerning the Company and its
subsidiaries.
 
(l)           The offer and sale of the Warrants and of the Common Shares to
Purchaser pursuant to this Agreement and the Warrants will, subject to the
accuracy of Purchaser's representations and warranties contained in Section 8
hereof, be made in accordance with an exemption from the registration
requirements of the Securities Act and any applicable state law.  Neither the
Company nor any agent on its behalf has solicited or will solicit any offers to
buy or has offered to sell or will offer to sell all or any part of the Common
Shares or the Warrants or any other securities to any Person or Persons so as to
bring the sale of such Common Shares or the Warrants by the Company within the
registration provisions of the Securities Act.
 
(m)           Immediately prior to the Closing Date, the authorized capital
stock of the Company consists of Two Hundred Million (200,000,000) shares of
Common Stock, par value $0.02 per share and no shares of preferred stock.  As of
December 30, 2010, (i) Eighteen Million Seven Hundred Twenty Thousand Thirty Two
(18,720,032) shares of Common Stock were issued and outstanding, and One Million
Nine Hundred Thirty Nine Thousand Three Hundred Forty Four (1,939,344) shares of
Common Stock were reserved and subject to issuance upon the exercise of
outstanding stock options, warrants or other convertible rights, (ii) no shares
of preferred stock were issued and outstanding, (iii) no convertible notes, or
similar securities, were issued and outstanding, and (iv) no shares of Common
Stock were held in the treasury of the Company.  All of the outstanding shares
of Common Stock are, and all shares of capital stock which may be issued
pursuant to outstanding stock options, warrants or other convertible rights will
be, when issued and paid for in accordance with the respective terms thereof,
duly authorized, validly issued, fully paid and non-assessable, free of any
preemptive rights in respect thereof and issued in compliance with all
applicable state and federal laws concerning issuance of securities.  As of the
date hereof, except as set forth above, and except for shares of Common Stock or
other securities issued upon conversion, exchange, exercise or purchase
associated with the securities, options, warrants, rights and other instruments
referenced above, no shares of capital stock or other voting securities of the
Company were outstanding, no equity equivalents, interests in the ownership or
earnings of the Company or other similar rights were outstanding, and, other
than as set forth in the Company's SEC Filings before and including the date
hereof, there were no existing options, warrants, calls, subscriptions or other
rights or agreements or commitments relating to the capital stock of the Company
or any of its subsidiaries or obligating the Company or any of its subsidiaries
to issue, transfer, sell or redeem any shares of capital stock, or other equity
interest in, the Company or any of its subsidiaries or obligating the Company or
any of its subsidiaries to grant, extend or enter into any such option, warrant,
call, subscription or other right, agreement or commitment.
 
 
11

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(n)           Solvency.  The sum of the assets of the Company, both at a fair
valuation and at present fair salable value, exceeds its liabilities, including
contingent liabilities.  The Company has sufficient capital or access to capital
with which to conduct its business as presently conducted and as proposed to be
conducted.  The Company has not incurred debt, and does not intend to incur
debt, beyond its ability to pay such debt as it matures.  For purposes of this
paragraph, "debt" means any liability on a claim, and "claim" means (x) a right
to payment, whether or not such right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured, or unsecured, or (y) a right to an equitable remedy
for breach of performance if such breach gives rise to a payment, whether or not
such right to an equitable remedy is reduced to judgment, fixed, contingent,
matured, unmatured, disputed, undisputed, secured, or unsecured.  With respect
to any such contingent liabilities, such liabilities are computed at the amount
which, in light of all the facts and circumstances existing at the time,
represents the amount which can reasonably be expected to become an actual or
matured liability.
 
(o)           Equivalent Value.  As of the Closing Date, the consideration that
the Company is receiving from Purchaser is substantially equivalent in value to
the consideration Purchaser is receiving from the Company pursuant to this
Agreement.  As of the Closing Date, under the terms of this Agreement, the
Company is receiving fair consideration from Purchaser for the agreements,
covenants, representations and warranties made by the Company to Purchaser.
 
(p)           No Non-Public Information.  Purchaser has not requested from the
Company, and the Company has not furnished to Purchaser, any material non-public
information concerning the Company or its subsidiaries.
 
(q)           Restatement Notices.  As of the date of each Closing, the Company
has provided Purchaser with all Restatement Notices (as defined below) required
to be delivered following a Restatement.
 
(r)           Application of Takeover Protections.  Except for Section 912 of
the New York Business Corporation Law, which the Company's board of directors
has rendered inapplicable to Purchaser, there is no control share acquisition,
business combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Company's charter
documents or the laws of its state of incorporation that is or would become
applicable to the Purchaser as a result of the Purchaser and the Company
fulfilling their obligations or exercising their rights under this Agreement and
the Warrants, including, without limitation, as a result of the Company's
issuance of the Common Stock issuable hereunder and under the Warrants and the
Purchaser's ownership of the Common Stock issuable hereunder and under the
Warrants.
 
 
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(s)           Backdating of Options.  The exercise price of each Company option
has been no less than the fair market value of a share of Common Stock as
determined on the date of grant of such Company option.  All grants of Company
options were validly issued and properly approved by the Board of Directors of
the Company (or a duly authorized committee or subcommittee thereof) in material
compliance with all applicable legal requirements and recorded on the Company's
financial statements in accordance with U.S. generally accepted accounting
principles, and no such grants involved any "back dating," "forward dating" or
similar practices with respect to the effective date of grant.
 
(t)           Finder's Fees.  Other than as set forth on Schedule 5(t), there is
no investment banker, broker, finder or other intermediary that has been
retained by or is authorized to act on behalf of the Company or any of its
affiliates who might be entitled to any fee or commission from the Company or
any of its affiliates in connection with the transactions contemplated hereby
 
(u)           No Integrated Offering.  Neither the Company, nor any Person
acting on its behalf, has, directly or indirectly, made any offers or sales of
any security or solicited any offers to buy any security, under circumstances
that would cause the Offering to be integrated with prior offerings by the
Company for purposes of the Securities Act or the rules and regulations of the
SEC or NYSE.
 
(v)           Absence of Certain Changes.  Since January 1, 2009, there has been
no Material Adverse Effect.
 
(w)           Regulatory Permits.  The Company possesses all certificates,
authorizations and permits issued by the appropriate federal, state or foreign
regulatory authorities necessary to conduct its business, except where the
failure to possess such certificates, authorizations or permits would not have a
Material Adverse Effect.  The Company is not in violation of any judgment,
decree or order or any statute, ordinance, rule or regulation applicable to it,
except for violations which would not have a Material Adverse Effect.
 
(x)           Foreign Corrupt Practices.  Neither the Company nor any director,
officer, agent, employee or other Person acting on behalf of the Company has, in
the course of its actions for, or on behalf of, the Company (i) used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; (iii) violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv)
made any unlawful bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or employee.
 
 
13

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(y)           Sarbanes-Oxley Act.  Other than as set forth in the Company's SEC
Filings made before and excluding December 30, 2010, the Company is in
compliance with any and all applicable requirements of the Sarbanes-Oxley Act of
2002 that are effective as of the date hereof, and any and all applicable rules
and regulations promulgated by the SEC thereunder that are effective as of the
date hereof, except where such noncompliance would not have a Material Adverse
Effect.
 
(z)           Transactions With Affiliates.  Except as disclosed in the
Company's SEC Filings before the date of this Agreement, and other than the
grant of stock options and restricted and non-restricted stock grants disclosed
that are required to be publicly disclosed, none of the officers, directors or
employees of the Company is presently a party to any transaction with the
Company (other than for ordinary course services as employees, officers or
directors) required to be disclosed pursuant to Regulation S-K Item 404,
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any such
officer, director or employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any such officer,
director, or employee has a substantial interest or is an officer, director,
trustee or partner, which such transaction would be required to be disclosed.
 
(aa)         Insurance.  The Company is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
are prudent and customary in the businesses in which the Company is engaged.
 
(bb)        Employee Relations.  The Company is not a party to any collective
bargaining agreement.  The Company is in compliance with all federal, state,
local and foreign laws and regulations respecting labor, employment and
employment practices and benefits, terms and conditions of employment and wages
and hours, except where failure to be in compliance would not reasonably be
expected to result in a Material Adverse Effect.
 
(cc)         Intellectual Property Rights.  Except as disclosed in the Company's
SEC Filings or press releases issued by the Company, in each case, publicly
available on or before December 30, 2010: (i) the Company owns or possesses
adequate rights or licenses to use all trademarks, trade names, service marks,
service mark registrations, service names, patents, patent rights, copyrights,
trade secrets and other intellectual property rights ("Intellectual Property
Rights") necessary to conduct its business as now conducted; (ii) the Company
does not have any knowledge of any infringement by the Company of Intellectual
Property Rights of others, nor does the Company have reason to believe that the
Company has infringed or would infringe on the Intellectual Property Rights of
others, the enforcement of which would result in a Material Adverse Effect on
financial conditions; (iii) there is no claim, action or proceeding against the
Company regarding its Intellectual Property Rights; (iv) the Company has no
knowledge of any infringement or improper use by any third party of any of the
Company's Intellectual Property Rights; (v) the Company has taken reasonable
security measures to protect the secrecy, confidentiality and value of all of
its Intellectual Property Rights; (vi) the Company shall own all right, title
and interest in all Intellectual Property Rights, which the Company owns as of
the date of this Agreement.
 
 
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(dd)        Environmental Laws.  The Company (i) is in compliance with any and
all Environmental Laws (as hereinafter defined), (ii) has received all permits,
licenses or other approvals required of it under applicable Environmental Laws
to conduct its respective businesses and (iii) is in compliance with all terms
and conditions of any such permit, license or approval where, in each of the
foregoing clauses (i), (ii) and (iii), the failure to so comply could be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect. The term "Environmental Laws" means all federal, state, local or
foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, "Hazardous Materials") into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
 
(ee)         Investment Company.  The Company is not, and is not an affiliate
of, an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
 
(ff)           Tax Status.  Except as would not have a Material Adverse Effect,
the Company (i) has made or filed all foreign, federal and state income and all
other tax returns, reports and declarations required by any jurisdiction to
which it is subject, (ii) has paid all taxes and other governmental assessments
and charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and (iii) has set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply.
 
 
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(gg)        Internal Accounting and Disclosure Controls.  The Company maintains
a system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset and liability
accountability, (iii) access to assets or incurrence of liabilities is permitted
only in accordance with management's general or specific authorization and (iv)
the recorded accountability for assets and liabilities is compared with the
existing assets and liabilities at reasonable intervals and appropriate action
is taken with respect to any difference.  The Company maintains disclosure
controls and procedures (as such term is defined in Rule 13a-15 under the
Exchange Act) that are effective in ensuring that information required to be
disclosed by the Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the rules and forms of the SEC, including, without
limitation, controls and procedures designed to ensure that information required
to be disclosed by the Company in the reports that it files or submits under the
Exchange Act is accumulated and communicated to the Company's management,
including its principal executive officer or officers and its principal
financial officer or officers, as appropriate, to allow timely decisions
regarding required disclosure.
 
(hh)        Off Balance Sheet Arrangements.  There is no transaction,
arrangement, or other relationship between the Company and an unconsolidated or
other off balance sheet entity that is required to be disclosed by the Company
in the Company's SEC Filings and is not so disclosed or that otherwise would
have a Material Adverse Effect.
 
(ii)           Transfer Taxes.  On the Closing Date, all stock transfer or other
taxes (other than income or similar taxes) which are required to be paid in
connection with the Offering will be, or will have been, fully paid or provided
for by the Company, and all laws imposing such taxes will be or will have been
complied with.
 
(jj)           Manipulation of Price.  The Company has not, and to its knowledge
no one acting on its behalf has, (i) taken, directly or indirectly, any action
designed to cause or to result in the stabilization or manipulation of the price
of any security of the Company to facilitate the Offering or (ii) sold, bid for,
purchased, or paid any compensation for soliciting purchases for the Offering.
 
(kk)           Subsidiaries.  As of each of the Initial Investment Closing Date
and the Supplemental Initial Investment Closing Date, the Company has no
directly held subsidiary other than those listed on Exhibit 21 to the Company's
annual report on Form 10−K for the year ended December 31, 2009.  The Company is
the beneficial owner (and the Company or a subsidiary is the record owner) of
all of the equity interests in the Company's subsidiaries and holds such equity
interests free and clear of all encumbrances except as are imposed by applicable
securities laws or pursuant to financing agreements disclosed before December
30, 2010 in the Company's SEC Filings.
 
 
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(ll)           Anti-dilution Provisions.  There is no anti-dilution provision
under any agreement to which the Company is party or to which any assets of the
Company are subject, including without limitation those documents set forth in
the Company's SEC Filings, that is or would become effective as a result of the
Purchaser and the Company fulfilling their obligations or exercising their
rights under this Agreement and the Warrants, including, without limitation, as
a result of the Company's issuance of the Common Stock issuable hereunder or
under the Warrants and the Purchaser's ownership of the Common Stock issuable
hereunder or under the Warrants.
 
6.           Registration Provisions
 
(a)           The Company shall, as promptly as practicable and in any event not
later than 5:00 p.m. Eastern Time on January 31, 2011, and at its own expense,
file a Registration Statement (as defined below) under the Securities Act
covering the resale of all of the Common Shares and shall use its best efforts
to cause such Registration Statement to be declared effective on or prior to
April 15, 2011.  Pursuant to the preceding sentence, the Company shall register
pursuant to such Registration Statement not less than the number of shares of
Common Stock equal to 1,555,543, provided that the Company shall file by no
later than 5:00 p.m. Eastern Time on the date that is ten (10) days after and
excluding the date hereof, an amendment to the Registration Statement filed on
January 28, 2011, which amendment will reflect any increase or decrease in the
number of outstanding shares of Common Stock between the Initial Investment
Closing Date and the Supplemental Investment Closing Date and any other changes
required to be made to such previously filed Registration Statement as a result
of the terms of this Agreement.  With respect to each of the first four (4)
Later Investments that occurs after the first Registration Statement has been
filed, the Company shall, not later than 5:00 p.m. on the date that is fifteen
(15) days after and excluding such Closing Date, file a new Registration
Statement so as to register the resale of the shares of Common Stock issued on
each such Closing Date and issuable in connection with any increase in the
Warrant Amount (as defined in the Warrants), and the Company shall use its best
efforts to cause each such new Registration Statement to be declared effective
on or prior to the date that is forty-five (45) days after and excluding such
Closing Date.  The Company shall provide prompt written notice to Purchaser if
the SEC elects to review any Registration Statement.  The obligations to have
any Registration Statement declared effective and to maintain such effectiveness
as provided in this Section 6 are referred to herein as the "Registration
Requirement."  The Company shall provide Purchaser with two (2) Business Days to
review and comment on any Registration Statement or amendment thereto prior to
filing, and the Company shall not file any Registration Statement that Purchaser
reasonably objects to.
 
(b)           Any registration statement filed or required to be filed under the
Securities Act in accordance with Section 6(a) hereof, along with any amendments
and additional registration statements, is referred to collectively as the
"Registration Statement".  The Company shall file any Registration Statement on
Form S-3, if available, otherwise on another available form and in the meantime
use its best efforts to file such Registration Statement on Form S-3 as soon as
it is available to the Company.  The Company shall provide prompt written notice
to Purchaser when the Registration Statement has been declared effective by the
SEC.
 
 
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(c)           The Company will: (A) use its best efforts to keep the
Registration Statement effective until the earlier of (x) the later of (i) the
first anniversary of the last Closing to occur and (ii) September 2, 2012 (such
later period, the "Registration Period"); (B) prepare and file with the SEC such
amendments and supplements to the Registration Statement and the prospectus used
in connection with the Registration Statement (as so amended and supplemented
from time to time, the "Prospectus") as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all Common
Shares by Purchaser or any of its affiliates with the prior written approval of
Purchaser and incorporate all such information relating to the plan of
distribution as Purchaser may reasonably request, and to use its best efforts to
cause such amendment or supplements to the Registration Statement and the
Prospectus to be declared effective as soon as practicable after filing; (C)
furnish such number of Prospectuses and other documents incident thereto,
including any amendment of or supplement to the Prospectus, including all
exhibits and financial statements, as Purchaser from time to time may reasonably
request; (D) cause all Common Shares to be listed on each securities exchange
and quoted on each quotation service on which similar securities issued by the
Company are then listed or quoted; (E) provide a transfer agent and registrar
for all Common Shares and a CUSIP number for all Common Shares; (F) otherwise
comply with all applicable rules and regulations of the SEC, the NYSE and any
other exchange or quotation service on which the Common Shares are obligated to
be listed or quoted under this Agreement; and (G) file the documents required of
the Company and otherwise obtain and maintain requisite blue sky clearance in
(x) New York and all other jurisdictions in which any of the shares of Common
Stock were originally sold and (y) all other states specified in writing by
Purchaser, provided, however, that as to this clause (y), the Company shall not
be required to qualify to do business or consent to service of process in any
state in which it is not now so qualified or has not so consented.  Purchaser
shall have the right to approve the description of the selling stockholder, plan
of distribution and all other references to Purchaser and its affiliates
contained in each Registration Statement and Prospectus.
 
(d)           The Company shall furnish to Purchaser upon request a reasonable
number of copies of a supplement to or an amendment of any Prospectus as may be
necessary in order to facilitate the public sale or other disposition of all or
any of the Common Shares by Purchaser or any of its affiliates pursuant to the
Registration Statement.
 
 
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(e)           With a view to making available to Purchaser and its affiliates
the benefits of Rule 144 under the Securities Act  ("Rule 144") and Form S-3
under the Securities Act, the Company covenants and agrees to:  (A) make and
keep available adequate current public information (within the meaning of Rule
144(c)) concerning the Company, until the earlier of (x) the first (1st)
anniversary of the issuance of the last Common Share to be issued hereunder and
under the Warrants and (y) such date as all of the Common Shares issued or
issuable hereunder and upon exercise of the Warrants shall have been resold by
Purchaser or any of its affiliates; and (B) furnish to Purchaser upon request,
as long as Purchaser owns any Common Shares, (x) a written statement by the
Company that it has complied with the reporting requirements of the Securities
Act and the Exchange Act, (y) a copy of the most recent annual or quarterly
report of the Company, and (z) such other information as may be reasonably
requested in order to avail Purchaser and its affiliates of Rule 144 or Form S-3
with respect to such Common Shares.
 
(f)           Notwithstanding anything else in this Section 6, if, at any time
during which a Prospectus is required to be delivered in connection with the
sale of any Common Share, the Company determines in good faith and upon the
advice of its outside counsel that a development has occurred or a condition
exists as a result of which the Registration Statement or the Prospectus
contains a material misstatement or omission, or that a material transaction in
which the Company is engaged or proposes to engage would require an immediate
amendment to the Registration Statement, a supplement to the Prospectus, or a
filing under the Exchange Act or other public disclosure of material information
and the disclosure of such transaction would be premature or injurious to the
consummation of the transaction, the Company will immediately notify Purchaser
thereof by telephone and in writing.  Upon receipt of such notification,
Purchaser and its affiliates will immediately suspend all offers and sales of
any Common Shares pursuant to the Registration Statement.  In such event, the
Company will amend or supplement the Registration Statement and the Prospectus
or make such filings or public disclosures as promptly as practicable and will
take such other steps as may be required to permit sales of the Common Shares
thereunder by Purchaser and its affiliates in accordance with applicable federal
and state securities laws.  The Company will promptly notify Purchaser after it
has determined in good faith that such sales have become permissible in such
manner and will promptly deliver copies of the Registration Statement and the
Prospectus (as so amended or supplemented, if applicable) to Purchaser in
accordance with paragraphs (c) and (d) of this Section 6.  Notwithstanding the
foregoing, (A) under no circumstances shall the Company be entitled to exercise
its right to suspend sales of any Common Shares as provided in this Section 6(f)
and pursuant to the Registration Statement more than twice in any twelve (12)
month period, (B) the period during which such sales may be suspended (each a
"Blackout Period") at any time shall not exceed thirty (30) calendar days, and
(C) no Blackout Period may commence less than thirty (30) calendar days after
the end of the preceding Blackout Period.
 
 
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(g)           Upon the commencement of a Blackout Period pursuant to this
Section 6, Purchaser will notify the Company of any contract to sell, assign,
deliver or otherwise transfer any Common Share (each a "Sales Contract") that
Purchaser or any of its affiliates has entered into prior to the commencement of
such Blackout Period and that would require delivery of such Common Shares
during such Blackout Period, which notice will contain the aggregate sale price
and quantity of Common Shares pursuant to such Sales Contract.  Upon receipt of
such notice, the Company will immediately notify Purchaser of its election
either to (i) terminate the Blackout Period and, as promptly as practicable,
amend or supplement the Registration Statement or the Prospectus in order to
correct the material misstatement or omission and deliver to Purchaser copies of
each amended or supplemented Registration Statement and Prospectus in accordance
with paragraphs (c) and (d) of this Section 6, or (ii) continue the Blackout
Period in accordance with this paragraph.  If the Company elects to continue the
Blackout Period (or the Company elects to terminate the Blackout Period, but the
Blackout Period is not terminated before the latest date that Purchaser may
consummate the transaction contemplated by the Sales Contract), and Purchaser or
any of its affiliates are therefore unable to consummate the sale of Common
Shares pursuant to the Sales Contract, the Company will promptly indemnify each
Purchaser Indemnified Party (as such term is defined in Section 17(a) below)
against any Proceeding (as such term is defined in Section 17(a) below) that
each Purchaser Indemnified Party may incur arising out of or in connection with
Purchaser's breach or alleged breach of any such Sales Contract, and the Company
shall reimburse each Purchaser Indemnified Party for any reasonable costs or
expenses (including legal fees) incurred by such party in investigating or
defending any such Proceeding.
 
(h)           In addition to any other remedies available to Purchaser under
this Agreement or at law or equity, if the Company fails to file any
Registration Statement by the dates set forth in Section 6(a), or any
Registration Statement has not been declared effective by the dates set forth in
Section 6(a), or such Registration Statement is not available with respect to
all Common Shares at any time on or after the effectiveness thereof (except
during a Blackout Period permitted under Section 6(f)) (each, a "Registration
Failure") the Company shall pay to Purchaser an amount equal to the Registration
Failure Percentage multiplied by the Registration Failure Amount with respect to
each thirty (30)-day period or part thereof during which a Registration Failure
shall have occurred or be continuing.  Separate payment shall be due for each
such thirty (30)-day period and no credit shall be given for any payment made in
any prior period.  The full amount of the payment for any thirty (30)-day period
described above shall become due if the Registration Failure continues on the
first day of each such thirty (30)-day period (i.e., for a Registration Failure
on day 1, 31, 61, 91, 121, etc.).  The Registration Failure shall be deemed to
be continuing unless and until timely payment has been made under this Section
6(h). The payments described above shall be made by wire transfer of immediately
available funds no later than five (5) days after and excluding the earlier of
(x) the date on which the Registration Failure shall have been cured and (y) the
last day of each thirty (30)-day period after the occurrence of a Registration
Failure.  For purposes of this Section 6(h), the term "Registration Failure
Percentage" means the amount set forth in the following table:
 
 
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Number of Days During Which
a Registration Failure Shall
Have Occurred or Been
Continuing
   
Registration Failure
Percentage
            1     1.25%             31     1.50%             61     1.75%      
      91     2.00%             121     2.25%             151     2.50%          
  181     2.75%             211     3.00%            
Thereafter
   
The registration failure
percentage shall increase by
0.25% upon each successive
30-day period (i.e., on days
241, 271, 301, etc.).
 

For purposes of this Section 6(h), the term "Registration Failure Amount" means
the sum of the Initial Investment plus the Aggregate Later Investment Amount.
 
(i)           The Company shall not grant any right of registration under the
Securities Act relating to any of its securities to any Person other than
Purchaser if such rights conflict with the rights of Purchaser under this
Agreement.
 
7.           Limit on Shares Held or Shares Issuable.  The Company shall not
issue any Common Shares hereunder or upon exercise of any Warrant, and Purchaser
shall not have the right to receive any Common Shares hereunder or under any
Warrant, to the extent the number of shares of Common Shares beneficially owned
(calculated in accordance with Rule 13d-3 promulgated under the Exchange Act) by
Purchaser after giving effect to any such issuance would exceed nine and nine
tenths percent (9.90%) of the aggregate number of shares of Common Stock
outstanding (the "Maximum Number").  The Maximum Number shall automatically
increase or decrease as the number of shares of Common Stock outstanding
increases or decreases such that the Maximum Number shall continue to equal nine
and nine tenths percent (9.90%) of the aggregate number of shares of Common
Stock outstanding.  Unless expressly waived in writing by Purchaser, the Company
shall deliver to Purchaser on or before the tenth (10th) day of each calendar
month commencing January 10, 2011 a notice (an "Outstanding Share Notice")
stating the aggregate number of shares of Common Stock outstanding as of the
last day of the preceding month and the increase (an "Increase") or decrease (a
"Decrease"), if any, in the aggregate number of shares of Common Stock from the
number of shares reported on the preceding Outstanding Share Notice (or, in the
case of the first Outstanding Share Notice, the number of shares of Common Stock
outstanding as reported in Section 5(m)).  The Maximum Number shall also be
increased on the sixty-fifth (65th) day after Purchaser delivers a written
notice (a "65-Day Notice") to the Company designating a greater Maximum
Number.  A 65-Day Notice may be given by Purchaser at any time and from time to
time on one or more occurrences.  Any shares of Common Stock or other
consideration (in the form of cash, securities or other assets per share of
Common Stock issuable to a holder of shares of Common Stock in connection with a
Change of Control) that would have been issued to Purchaser under this Agreement
or upon exercise of the Warrants but for one or more of the limitations
contained in this Section 7 shall be deferred and shall be delivered to
Purchaser promptly and in any event no later than three (3) Business Days after
the date such limitations cease to restrict the issuance of such shares (whether
due to an increase in the Maximum Number so as to permit such issuance, the
disposition by Purchaser of shares of Common Stock or any other reason) unless
Purchaser has withdrawn the applicable Later Investment Notice or Warrant
Exercise Notice (as defined in the Warrants).
 
 
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8.           Representations and Warranties of Purchaser.  Purchaser hereby
represents and warrants to the Company on each Closing Date:
 
(a)           Purchaser has been duly incorporated and is validly existing under
the laws of Bermuda as of the date hereof.
 
(b)           The execution, delivery and performance of this Agreement by
Purchaser have been duly authorized by all requisite corporate action and no
further consent or authorization of Purchaser, its Board of Directors or its
stockholders is required.  This Agreement has been duly executed and delivered
by Purchaser and, when duly authorized, executed and delivered by the Company,
will be a valid and binding agreement enforceable against Purchaser in
accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights generally and to general principles of equity.
 
(c)           Purchaser understands that no United States federal or state
agency has passed on, reviewed or made any recommendation or endorsement of the
securities issuable hereunder.
 
(d)           Purchaser is an "accredited investor" as such term is defined in
Regulation D promulgated under the Securities Act.
 
(e)           Purchaser is purchasing the Warrants and the Common Shares for its
own account for investment only and not with a view to, or for resale in
connection with, the public sale or distribution thereof in the United States,
except pursuant to sales registered under the Securities Act or an exemption
therefrom.
 
 
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(f)           Purchaser understands that the Warrants and the Common Shares are
being or will be offered and sold to it in reliance on specific exemptions from
the registration requirements of United States federal and state securities laws
and that the Company is relying on the truth and accuracy of, and Purchaser's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of Purchaser set forth herein in order to determine the
availability of such exemptions and the eligibility of Purchaser to acquire the
Warrants and the Common Shares.
 
9.           Future Equity Issuances.
 
(a)           If the Company engages or participates in (or intends to engage or
participate in) any discussions with any Person regarding any sale or issuance
to any Person (other than Purchaser or its affiliates) of any shares of, or
securities convertible into, exercisable or exchangeable for, or whose value is
derived in whole or in part from, any shares of any class of the Company's
capital stock at a Later Issuance Price (as defined below) less than the Initial
Investment Price, Later Investment Price or Warrant Price (as defined in the
Warrant), as the case may be, subsequent to any Closing Date or the closing of
any exercise of any Warrant, other than an Excluded Issuance (a "Future Equity
Issuance"), the Company shall promptly notify Purchaser that the Company intends
to effect a Future Equity Issuance.  If, within two (2) Business Days after and
excluding the date of receipt of such notice, Purchaser notifies the Company in
writing that Purchaser would like to be informed of the terms and conditions of
such Future Equity Issuance, then the Company shall promptly provide Purchaser
with a written description of the terms and conditions of such proposed Future
Equity Issuance, including a description of the capital stock to be sold or
issued, the investor or investors in the Future Equity Issuance, the price, the
quantity and all other information reasonably necessary for Purchaser to make an
informed decision on whether it desires to participate in the Future Equity
Issuance (the "Future Equity Issuance Description ").  If Purchaser notifies the
Company in writing that Purchaser elects to purchase all or a portion of the
capital stock that the Company intends to sell or issue in the Future Equity
Issuance (which election shall include the number of shares of such capital
stock that Purchaser intends to purchase) by 11:59 p.m., New York City time, on
the fifth (5th) Business Day after and excluding the date of the Future Equity
Issuance Description, then the Company shall not consummate such Future Equity
Issuance without selling Purchaser the capital stock that it elected to purchase
at or prior to the consummation of such Future Equity Issuance or promptly
thereafter at a closing date and place established prior to such consummation,
which purchase shall be at the price and on the other terms and conditions of
the Future Equity Issuance.  If Purchaser does not elect to receive a Future
Equity Issuance Description with respect to a Future Equity Issuance, then
promptly, and no later than one (1) Business Day after and excluding, the date
of announcement of such Future Equity Issuance (or, if such Future Equity
Issuance is not required to be publicly announced, the date of closing of such
Future Equity Issuance), the Company shall provide Purchaser with a written
description of the material terms of such Future Equity Issuance.
 
 
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(b)           "Excluded Issuance" means any of the following: (A) issuances
pursuant to any stock split, dividend or distribution payable in additional
shares of capital stock to holders of Common Stock, (B) sales or issuances to
employees, consultants or directors of the Company directly or pursuant to a
stock option plan, employee stock purchase plan or restricted stock plan, or
other similar arrangements related to compensation for services in effect on the
date of this Agreement, (C) issuances upon the exercise of any options or
warrants to purchase capital stock outstanding on the date hereof, in each case
in accordance with the terms of such options, warrants or securities in effect
on the date hereof, (D) Common Shares issued or issuable pursuant to this
Agreement or the Warrants, or (E) issuances to the selling stockholders (and not
to third parties) of bona fide operating companies acquired by the Company for
strategic purposes through a merger or exchange offer, which issuances are made
for purposes of the acquisition and are not related in any way to equity
financing or capital-raising purposes.
 
(c)           "Later Issuance Price" means the lowest price per share of Common
Stock paid or payable by any Person in the Future Equity Issuance, including, in
the case of options, warrants, convertible preferred, convertible notes or other
securities convertible, exchangeable or exercisable into or for Common Stock,
the lowest price per share at which such conversion, exchange or exercise may
occur on any future date.
 
(d)           No Integrated Offering.  Notwithstanding the foregoing, the
Company shall ensure that no Person acting on its behalf shall sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect of any security
that may be integrated with the Offering for purposes of the Securities Act or
the rules and regulations of the SEC or NYSE Amex.
 
10.           Covenants of the Company.  The Company covenants and agrees with
Purchaser as follows:
 
(a)           While the Later Investment Period is in effect and for so long as
any Common Stock is issuable upon exercise of any Warrant and for a period of
one (1) year thereafter, the Company will (i) following the date on which the
Registration Statement has been declared effective, maintain the effectiveness
of the Registration Statement, (ii) maintain the eligibility of the Common Stock
for listing on the NYSE Amex or any National Exchange; (iii)  regain the
eligibility of the Common Stock for listing or quotation on all markets and
exchanges including the NYSE Amex in the event that the Common Stock is delisted
by the NYSE Amex or any other applicable market or exchange; (iv) obtain a
listing on a National Exchange if the Common Stock is delisted by the NYSE Amex;
and (v) cause the representations and warranties contained in Section 5 to be
and remain true and correct.
 
 
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(b)           If a Restatement occurs, the Company shall deliver to Purchaser a
Restatement Notice within three (3) Business Days of such Restatement.
 
(c)           The Company will provide Purchaser with a reasonable opportunity,
which shall not be less than two (2) full Business Days, to review and comment
on any public disclosure by the Company of information regarding this Agreement
and the transactions contemplated hereby, before such public disclosure.
 
(d)           The Company will make all filings required by law with respect to
the transactions contemplated hereby.
 
(e)           The Company will comply with the terms and conditions of the
Warrants as set forth in each Warrant.
 
(f)           For so long as Purchaser owns any shares of Common Stock or shares
of Common Stock issuable upon exercise of any Warrant, within five (5) Business
Days after the filing of each of its quarterly reports on Form 10-Q with the
SEC, the Company shall deliver to Purchaser an executed certificate in the form
of Annex C hereto.
 
(g)           The Company shall at all times reserve for issuance such number of
its shares of Common Stock as shall from time to time be sufficient to effect
the issuance of all Common Shares.
 
(h)           The Company shall, within one (1) Business Day after and excluding
any Closing Date, publicly distribute a press release disclosing the material
terms of such Closing and shall, within three (3) Business Days after and
excluding such event file a report with the SEC on Form 8-K with respect to the
same.
 
(i)           The Company shall use its commercially reasonable efforts to cause
the Common Shares to be eligible for book-entry transfer through The Depository
Trust Company (or any successor thereto) as soon as practicable after the date
of this Agreement and thereafter to use its commercially reasonable efforts to
maintain such eligibility.
 
 
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(j)           The Company shall cooperate promptly and in good faith to assist
with any assignment, pledge, hypothecation or transfer of the Common Shares or
the Warrants, including without limitation making its representatives available
for discussions with lenders and assignees and promptly processing requests to
retitle the Common Shares or the Warrants, including without limitation
providing any reasonably requested documentation or certifications.
 
11.           Change of Control.
 
(a)           If the Company is a party to any transaction which results in a
Change of Control, Purchaser and its assigns shall have the rights set forth in
the Warrants regarding Changes of Control in addition to the rights contained in
this Agreement.  The Company agrees that it will not enter into an agreement
with an Acquiring Person resulting in a Change of Control unless such agreement
expressly obligates the Acquiring Person to assume upon consummation of the
Change of Control all of the Company's obligations under this Agreement and the
Warrants including, but not limited to, the share issuance, registration and
other provisions regarding the Common Stock contained herein and therein.  From
and after the occurrence of a Change of Control and regardless of whether the
Acquiring Person expressly assumes the Company's obligations:
 
(i)           all references to the Company in this Agreement shall be
references to the Acquiring Person;
 
(ii)           all references to Common Stock in this Agreement shall be
references to the securities for which the Common Stock are exchanged in the
Change of Control (or if none, the most widely-held class of voting securities
of the Acquiring Person);
 
(iii)           all references to the Average Price shall be references to such
price with respect to the Acquiring Person;
 
(iv)           all references to the Later Investment Price in this Agreement
shall be references to the Stock Adjustment Measuring Price (as defined below);
and
 
(v)           Purchaser may deliver one or more Later Investment Notices to the
Acquiring Person.
 
 
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(b)           On or before the date an agreement is entered into with an
Acquiring Person resulting in a Change of Control, the Company shall deliver to
Purchaser written notice that the Acquiring Person has assumed such
obligations.  The Company shall provide Purchaser and each Holder (as defined in
each Warrant) with written notice (a "Change of Control Notice") of any proposed
transaction resulting in a Change of Control as soon as the existence of such
proposed transaction is made public by any Person.  Thereafter, the Company
shall notify Purchaser promptly of any material developments with respect to
such transaction, including advance notice at least ten (10) Business Days
before the date such transaction is expected to become effective.
 
(c)           From and after the date a Change of Control Notice is delivered
(or an event shall have occurred that would require the delivery of a Change of
Control Notice), the Purchaser shall continue to have the right to submit to the
Company a Later Investment Notice and consummate any Later Investment, in the
Purchaser's sole discretion, in accordance with the terms and conditions of this
Agreement.  In addition, the Purchaser at its sole option may elect to submit to
the Company a special notice (a "Contingent Later Investment Notice") to effect
a Later Investment in connection with such Change of Control in which case,
notwithstanding the provisions of Section 4:
 
(i)             the effectiveness of such contingent exercise shall be
conditional upon the effectiveness of the Change of Control;
 
(ii)            the Purchaser shall have the right to deliver a notice to
withdraw such Contingent Later Investment Notice until the effective date of
such Change of Control; and
 
(iii)           if such Contingent Later Investment Notice shall not have been
withdrawn, then subject to clause (iv) hereof, on the effective date of such
Change of Control, the Purchaser shall receive, upon payment of the price
designated in the Contingent Later Investment Notice, the same consideration, in
the form of cash, securities or other assets (the "Acquisition Consideration")
per share of Common Stock issuable to any other holder of shares of Common Stock
in connection with such Change of Control based upon the number of shares of
Common Stock which the Purchaser would have held if the Purchaser had
consummated such Later Investment on the Business Day immediately preceding the
date on which such Change of Control occurs and in addition shall receive the
Dividend Payment specified in Section 4(c). If the Acquisition Consideration is
in the form of cash, the Purchaser shall not be required to tender the price
specified in the Contingent Later Investment Notice, but shall receive an amount
in connection with such Change of Control equal to the Acquisition Consideration
applicable to the Purchaser based on the number of shares of Common Stock the
Purchaser would have held had it consummated the Later Investment on the
Business Day immediately preceding the date on which such Change of Control
occurs, less the price specified in such Contingent Later Investment Notice.
 
 
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(iv)           Purchaser may, in its sole discretion, elect to effect such Later
Investment described in any such Contingent Later Investment Notice on any date
prior to the effective date of such Change of Control, but in any event no later
than the Business Day immediately preceding the effective date of such Change of
Control, which date shall be determined in Purchaser’s sole discretion and
specified in a notice delivered by Purchaser to the Company three (3) Business
Days prior to such Later Investment Closing Date, in which case, Purchaser shall
receive Common Shares in accordance with the terms of this Agreement.
 
(d)           "Change of Control" means (i) acquisition of the Company by means
of merger or other form of corporate reorganization in which outstanding shares
of the Company are exchanged for securities or other consideration issued, or
caused to be issued, by the Acquiring Person or its Parent, Subsidiary or
Affiliate (each as defined in Rule 12b-2 of the Exchange Act), restructuring by
the Company where outstanding shares of the Company are exchanged for shares of
the Acquiring Person on a one-for-one basis and, immediately following the
exchange, former stockholders of the Company own all of the outstanding shares,
(ii) a sale of all or substantially all of the assets of the Company (on a
consolidated basis) in a single transaction or series of related transactions,
(iii) any tender offer, exchange offer, stock purchase or other transaction or
series of related transactions by the Company in which the power to cast the
majority of the eligible votes at a meeting of the Company's stockholders at
which directors are elected is transferred to a single entity or group acting in
concert, or (iv) a capital reorganization or reclassification of the Common
Stock.  Notwithstanding anything contained herein to the contrary, the change in
the state of incorporation of the Company shall not in and of itself constitute
a Change of Control.
 
(e)           "Acquiring Person" means, in connection with any Change of
Control, (i) the continuing or surviving Person of a consolidation or merger
with the Company (if other than the Company), (ii) the transferee of all or
substantially all of the properties or assets of the Company, (iii) the
corporation consolidating with or merging into the Company in a consolidation or
merger in connection with which the Common Stock is changed into or exchanged
for stock or other securities of any other Person or cash or any other property,
(iv) the entity or group acting in concert acquiring or possessing the power to
cast the majority of the eligible votes at a meeting of the Company's
stockholders at which directors are elected, or, (v) in the case of a capital
reorganization or reclassification, the Company, or (vi) at Purchaser's
election, any Person that (A) controls the Acquiring Person directly or
indirectly through one or more intermediaries, (B) is required to include the
Acquiring Person in the consolidated financial statements contained in such
Person's annual report on Form 10-K (if such Person is required to file such a
report) or would be required to so include the Acquiring Person in such Person's
consolidated financial statements if they were prepared in accordance with U.S.
generally accepted accounting principles and (C) is not itself included in the
consolidated financial statements of any other Person (other than its
consolidated subsidiaries).
 
 
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(f)           “Stock Adjustment Measuring Price” means the lower of (i) and (ii)
below:
 
(i)           an amount equal to the Later Investment Price multiplied by a
fraction,
 
(1)       the numerator of which is the volume-weighted average price,
calculated to the nearest ten thousandth (i.e., four decimal places (.xxxx)), of
the securities for which Common Stock is exchanged in the Change of Control (or
if none, the most widely-held class of voting securities of the Acquiring
Person); and
 
(2)       the denominator of which is the Daily Market Price, in the case of (1)
and (2) determined as of the Business Day immediately preceding and excluding
the date on which the Change of Control is consummated; and
 
(ii)           the Average Price with respect to such Acquiring Person set forth
in the first Later Investment Notice delivered to the Acquiring Person.
 
12.           Restatements.
 
(a)           If a Restatement occurs at any time following any Closing Date or
the closing of any exercise of a Warrant, the Company shall deliver to Purchaser
and each Holder (as defined in each such Warrant) a written notice in the form
attached hereto as Annex D (a "Restatement Notice") within three (3) Business
Days of each Restatement, stating the date on which a Restatement has occurred
and including the documents in which the Restatement was publicly disclosed.
 
(b)           "Restatement" means the earlier of (x) the announcement by the
Company of its intention to restate any portion of the Company Financial
Statements and (y) the actual restatement by the Company of any portion of the
Company Financial Statements.
 
(c)           "Company Financial Statements" means all financial statements
(including the notes thereto) and earnings releases filed by the Company with
(or furnished by the Company to) the SEC or publicly announced by the Company.
 
13.           Conditions Precedent to Purchaser's Obligations.  The obligations
of Purchaser hereunder are subject to the performance by the Company of its
obligations hereunder and to the satisfaction of the following additional
conditions precedent, unless expressly waived in writing by Purchaser (which
waiver may be made or not made in Purchaser's sole discretion, and any waiver
shall apply solely to the Closing or Closings specified by Purchaser and shall
not obligate Purchaser to make or not make any subsequent waiver):
 
 
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(a)           From and after December 31, 2010 through and including each
Closing Date, the representations and warranties made by the Company in this
Agreement shall be, and have been, true and correct, except those
representations and warranties which address matters only as of a particular
date, which shall be true and correct as of such date.
 
(b)           From and after December 31, 2010 through and including each
Closing Date, the Company shall be, and have been, in compliance in all material
respects with all of the covenants and agreements in this Agreement.
 
(c)           On each Closing Date, the Company shall not possess any negative,
material non-public information other than as shall have been filed with the SEC
at least five (5) Business Days prior to and excluding such Closing Date.
 
(d)           On each Closing Date, Purchaser shall have received on each
Closing Date a certificate of the Chief Executive Officer and the Chief
Financial Officer of the Company dated such date and certifying the matters set
forth in paragraphs (a), (b) and (c) of this Section 13.
 
(e)           On each Closing Date, the Company shall have delivered to
Purchaser an opinion of counsel, in form and substance reasonably satisfactory
to Purchaser, dated the date of delivery, confirming in substance the matters
covered by paragraphs (a), (b), (c), (d), (e), (f), (g), (h), (k), (m), (r) and
(ll) of Section 5 hereof.
 
(f)           On each Closing Date, Purchaser shall have received from the
Company the report of the independent auditor of the Company (together with the
accompanying consolidated balance sheet, financial statement and schedules of
the Company and results of the Company's operations and cash flows) that was
included in the most recent Form 10-K filed by the Company with the SEC.
 
(g)           From and after December 31, 2010 through and including each
Closing Date, all Common Shares issued and issuable hereunder and under any
Warrant shall be, and have been, duly listed and admitted for trading on the
NYSE Amex.
 
(h)           No Registration Failure shall exist.
 
 
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(i)           From and after December 31, 2010 through and including each Later
Investment Closing Date, there shall not have been a Restatement.
 
14.           Conditions Precedent to the Company's Obligations.
 
The obligations of the Company hereunder are subject to the performance by
Purchaser of its obligations hereunder and to the satisfaction unless expressly
waived in writing by the Company (which waiver may be made or not made in the
Company's sole discretion, and any waiver shall apply solely to the Closing or
Closings specified by the Company and shall not obligate the Company to make or
not make any subsequent waiver) of the additional conditions precedent that:
 
(a)           From and after December 31, 2010 through and including each
Closing Date, the representations and warranties made by Purchaser in this
Agreement shall be, and have been, true and correct;
 
(b)           From and after December 31, 2010 through and including each
Closing Date, Purchaser shall be, and have been, in compliance in all material
respects with all the covenants and agreements in this Agreement; and
 
(c)           Purchaser shall have delivered to the Company on each Closing Date
a certificate of an appropriate officer of Purchaser dated such date and to such
effect.
 
15.           Fees and Expenses.  Each of Purchaser and the Company agrees to
pay its own expenses incident to the performance of its obligations hereunder,
including, but not limited to, the fees, expenses and disbursements of such
party's counsel, except as is otherwise expressly provided in this
Agreement.  Notwithstanding the foregoing, the Company shall pay all fees and
expenses associated with the Registration Statement, including, without
limitation, all fees and expenses associated with any filing with NYSE Amex, if
applicable.
 
16.           Non-Performance.
 
If the Company, at any time, shall fail to deliver the shares of Common Stock to
the Purchaser required to be delivered pursuant to this Agreement or upon the
exercise of any Warrant, in accordance with the terms and conditions of this
Agreement or the Warrants, as the case may be, for any reason other than the
failure of any condition precedent to the Company's obligations hereunder or the
failure by Purchaser to comply with its obligations hereunder, then the Company
shall (without limitation to Purchaser's other remedies at law or in equity):
 
(a)           indemnify and hold Purchaser harmless against any loss, claim or
damage arising from or as a result of such failure by the Company (regardless of
whether any of the foregoing results from a third-party claim or otherwise); and
 
 
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(b)           reimburse Purchaser for all of its reasonable out-of-pocket
expenses, including fees and disbursements of its counsel, incurred by Purchaser
in connection with this Agreement, the Warrants and the transactions
contemplated herein and therein (regardless of whether any of the foregoing
results from a third-party claim or otherwise).
 
17.           Indemnification.
 
(a)           General Indemnification Obligation.  The Company hereby agrees to
indemnify Purchaser and each of its officers, directors, employees, consultants,
agents, attorneys, accountants and affiliates and each Person that controls
(within the meaning of Section 20 of the Exchange Act) any of the foregoing
Persons (each a "Purchaser Indemnified Party") against any claim, demand,
action, liability, damages, loss, cost or expense (including, without
limitation, reasonable legal fees and expenses incurred by such Purchaser
Indemnified Party in investigating or litigating any such proceeding) regardless
of whether any of the foregoing results from a third-party claim or otherwise
(all of the foregoing, including associated costs and expenses being referred to
herein as a "Proceeding"), that it may incur in connection with any of the
transactions contemplated hereby arising out of or based upon:
 
(i)             any untrue or alleged untrue statement of a material fact in a
SEC Filing by the Company or any of its affiliates or any Person acting on its
or their behalf or omission or alleged omission to state therein any material
fact necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading by the Company or any
of its affiliates or any Person acting on its or their behalf;
 
(ii)            any of the representations or warranties made by the Company
herein being untrue or incorrect at the time such representation or warranty was
made;
 
(iii)           any breach or non-performance by the Company of any of its
covenants, agreements or obligations under this Agreement or the Warrants; and
 
(iv)           any failure to deliver the Common Shares to Purchaser required to
be delivered pursuant to this Agreement or upon exercise of the Warrants, in
accordance with the terms and conditions of this Agreement and the Warrants, as
the case may be, or failure to deliver the Warrants, in accordance with the
terms and conditions of this Agreement, for any reason other than the failure of
any condition precedent to the Company's obligations hereunder or thereunder,
which condition has not been waived by the Company, or the failure by Purchaser
to comply with its obligations hereunder or thereunder, which failure has not
been waived by the Company.
 
 
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(b)           Conduct of Claims.
 
(i)           Whenever a claim for indemnification shall arise under this
Section 17 as a result of a third-party claim, the party seeking indemnification
(the  "Indemnified Party"), shall notify the party from whom such
indemnification is sought (the "Indemnifying Party") in writing of the
Proceeding and the facts constituting the basis for such claim in reasonable
detail;
 
(ii)          Such Indemnifying Party shall have the right to retain the counsel
of its choice in connection with such Proceeding and to participate at its own
expense in the defense of any such Proceeding; provided, however, that counsel
to the Indemnifying Party shall not (except with the consent of the relevant
Indemnified Party) also be counsel to such Indemnified Party.  In no event shall
the Indemnifying Party be liable for fees and expenses of more than one counsel
(in addition to any local counsel) separate from its own counsel for all
Indemnified Parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances; and
 
(iii)         No Indemnifying Party shall, without the prior written consent of
the Indemnified Parties (which consent shall not be unreasonably withheld),
settle or compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification could be sought under this Section 17 unless such settlement,
compromise or consent (A) includes an unconditional release of each Indemnified
Party from all liability arising out of such litigation, investigation,
proceeding or claim and (B) does not include a statement as to or an admission
of fault, culpability or a failure to act by or on behalf of any Indemnified
Party.
 
18.          Survival of the Representations, Warranties, etc.  The respective
representations, warranties, and agreements made herein by or on behalf of the
parties hereto shall remain in full force and effect, regardless of any
investigation made by or on behalf of the other party to this Agreement or any
officer, director or employee of, or Person controlling or under common control
with, such party and will survive delivery of and payment for any shares of
Common Stock issuable hereunder.
 
 
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19.          Notices.  All communications hereunder shall be in writing and
delivered as set forth below.
 
(a)          If sent to Purchaser, all communications will be deemed delivered:
if delivered by hand, on the day received by Purchaser; if sent by reputable
overnight courier, on the next Business Day; and if transmitted by facsimile to
Purchaser, on the date transmitted (provided such facsimile is later confirmed),
in each case to the address set forth in Annex E hereto (unless otherwise
notified in writing of a substitute address).
 
(b)          If sent to the Company, all communications will be deemed
delivered: if delivered by hand, on the day received by the Company; if sent by
reputable overnight courier, on the next Business Day; and if transmitted by
facsimile to the Company, on the date transmitted (provided such facsimile is
later confirmed), in each case to the following address (unless otherwise
notified in writing of a substitute address):
 
Document Security Systems, Inc.
28 East Main Street, Suite 1525
Rochester, NY 14614

 
Attention: 
Philip Jones

 
Telephone: 
(585) 325-3610

 
Facsimile: 
(585) 325-2977

 
with a copy to (which copy shall not constitute notice):
 
Law Office of Gary A. Agron
5445 DTC Pkwy., Suite 520
Greenwood Village, CO 80111

 
Telephone: 
(303) 770-7254

 
Facsimile: 
(303) 770-7257

 
(c)          To the extent that any funds shall be delivered to the Company by
wire transfer, unless otherwise instructed by the Company, such funds should be
delivered in accordance with the wire instructions set forth in Annex F.
 
(d)          If the Company does not agree and acknowledge or object to the
delivery of any Later Investment Notice or Warrant Exercise Notice (as defined
in each Warrant), in each case by 5:00 PM, New York time, on the Business Day
following the date of delivery of such notice, such non-response by the Company
shall be deemed to be agreement and acknowledgment by the Company with the terms
of such notice.
 
 
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20.          Miscellaneous.
 
(a)           The parties may execute and deliver this Agreement as a single
document or in any number of counterparts, manually, by facsimile or by other
electronic means, including contemporaneous xerographic or electronic
reproduction by each party's respective attorneys.  Each counterpart shall be an
original, but a single document or all counterparts together shall constitute
one instrument that shall be the agreement.
 
(b)           This Agreement will inure to the benefit of and be binding upon
the parties hereto, their respective successors and assigns and, with respect to
Section 17 hereof, will inure to the benefit of their respective officers,
directors, employees, consultants, agents, attorneys, accountants and affiliates
and each Person that controls (within the meaning of Section 20 of the Exchange
Act) any of the foregoing Persons, and no other Person will have any right or
obligation hereunder.  The Company may not assign this
Agreement.  Notwithstanding anything to the contrary in this Agreement,
Purchaser may assign, pledge, hypothecate or transfer any of the rights and
associated obligations contemplated by this Agreement (including, but not
limited to, the shares of Common Stock), in whole or in part, at its sole
discretion (including, but not limited to, assignments, pledges, hypothecations
and transfers in connection with financing, derivative or hedging transactions
with respect to this Agreement and the shares of Common Stock), provided, that,
any such assignment, pledge, hypothecation or transfer must comply with
applicable federal and state securities laws.  No Person acquiring Common Stock
from Purchaser pursuant to a public market purchase will thereby obtain any of
the rights contained in this Agreement.  This Agreement, together with the
Warrants, constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, between the parties hereto with
respect to the subject matter of this Agreement.  Except as provided in this
Section 20(b), this Agreement is not intended to confer upon any Person other
than the parties hereto any rights or remedies hereunder.
 
(c)           This Agreement shall be governed by, and construed in accordance
with, the internal laws of the State of New York, and each of the parties hereto
hereby submits to the exclusive jurisdiction of any state or federal court in
the Southern District of New York and any court hearing any appeal therefrom,
over any suit, action or proceeding against it arising out of or based upon this
Agreement (a "Related Proceeding").  Each of the parties hereto hereby waives
any objection to any Related Proceeding in such courts whether on the grounds of
venue, residence or domicile or on the ground that the Related Proceeding has
been brought in an inconvenient forum.
 
(d)           Each party represents and acknowledges that, in the negotiation
and drafting of this Agreement and the other instruments and documents required
or contemplated hereby, it has been represented by and relied upon the advice of
counsel of its choice.  Each party hereby affirms that its counsel has had a
substantial role in the drafting and negotiation of this Agreement and such
other instruments and documents.  Therefore, each party agrees that no rule of
construction to the effect that any ambiguities are to be resolved against the
drafter shall be employed in the interpretation of this Agreement and such other
instruments and documents.
 
 
35

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(e)           Without prejudice to other rights or remedies hereunder (including
any specified interest rate), and except as otherwise expressly set forth
herein, interest shall be due on any amount that is due pursuant to this
Agreement and has not been paid when due, calculated for the period from and
including the due date to but excluding the date on which such amount is paid at
the greater of (i) twelve percent (12%) or (ii) the prime rate of U.S. money
center banks as published in The Wall Street Journal (or if The Wall Street
Journal does not exist or publish such information, then the average of the
prime rates of three (3) U.S. money center banks agreed to by the parties) plus
nine percent (9%) or such lesser amount as is permitted under applicable usury
or other law.
 
(f)            Purchaser and the Company stipulate that the remedies at law of
the parties hereto in the event of any default or threatened default by either
party in the performance of or compliance with any of the terms of this
Agreement and the Warrants are not and will not be adequate and that, to the
fullest extent permitted by law, such terms may be specifically enforced by a
decree for the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.
 
(g)           Any and all remedies set forth in this Agreement or the
Warrants:  (i) shall be in addition to any and all other remedies Purchaser or
the Company may have at law or in equity, (ii) shall be cumulative, and (iii)
may be pursued successively or concurrently as each of Purchaser and the Company
may elect.  The exercise of any remedy by Purchaser or the Company shall not be
deemed an election of remedies or preclude Purchaser or the Company,
respectively, from exercising any other remedies in the future.
 
(h)           The Company agrees that the parties have negotiated in good faith
and at arms' length concerning the transactions contemplated herein, and that
Purchaser would not have agreed to the terms of this Agreement without each and
every of the terms, conditions, protections and remedies provided herein and the
Warrants.  Except as specifically provided otherwise in this Agreement and the
Warrants, the Company's obligations to indemnify and hold Purchaser harmless in
accordance with Section 17 of this Agreement are obligations of the Company that
the Company promises to pay to Purchaser when and if they become due.  The
Company shall record any such obligations on its books and records in accordance
with U.S. generally accepted accounting principles.
 
(i)            This Agreement may be amended, modified or supplemented in any
and all respects, but only by a written instrument signed by Purchaser and the
Company expressly stating that such instrument is intended to amend, modify or
supplement this Agreement.
 
 
36

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(j)            Each of the parties will cooperate with the others and use its
best efforts to prepare all necessary documentation, to effect all necessary
filings, and to obtain all necessary permits, consents, approvals and
authorizations of all governmental bodies and other third-parties necessary to
consummate the transactions contemplated by this Agreement.
 
(k)           For purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires:  (i) the terms defined in
this Agreement have the meanings assigned to them in this Agreement and include
the plural as well as the singular, and the use of any gender herein shall be
deemed to include the other gender and neuter gender of such term; (ii)
accounting terms not otherwise defined herein have the meanings assigned to them
in accordance with U.S. generally accepted accounting principles; (iii)
references herein to "Articles", "Sections", "Subsections", "Paragraphs" and
other subdivisions without reference to a document are to designated Articles,
Sections, Subsections, Paragraphs and other subdivisions of this Agreement,
unless the context shall otherwise require; (iv) a reference to a Subsection
without further reference to a Section is a reference to such Subsection as
contained in the same Section in which the reference appears, and this rule
shall also apply to Paragraphs and other subdivisions; (v) the words "herein",
"hereof", "hereunder" and other words of similar import refer to this Agreement
as a whole and not to any particular provision; (vi) the term "include" or
"including" shall mean without limitation; (vii) the table of contents to this
Agreement and all section titles or captions contained in this Agreement or in
any Schedule or Annex hereto or referred to herein are for convenience only and
shall not be deemed a part of this Agreement and shall not affect the meaning or
interpretation of this Agreement; (viii) any agreement, instrument or statute
defined or referred to herein means such agreement, instrument or statute as
from time to time amended, modified or supplemented, including (in the case of
agreements or instruments) by waiver or consent and (in the case of statutes) by
succession of comparable successor statues and references to all attachments
thereto and instruments incorporated therein; and (ix) references to a Person
are also to its permitted successors and assigns and, in the case of an
individual, to his or her heirs and estate, as applicable.
 
(l)            If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law or public policy all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect.  If the final judgment of a court of competent
jurisdiction or other authority declares that any term or provision hereof is
invalid, void or unenforceable, the parties agree that the court making such
determination shall have the power to reduce the scope, duration, area or
applicability of the term or provision, to delete specific words or phrases, or
to replace any invalid, void or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision.  Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the transactions
contemplated hereby be consummated as originally contemplated to the fullest
extent possible.
 
 
37

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(m)           Time shall be of the essence in this Agreement.
 
(n)           All dollar ($) amounts set forth herein and in the Warrants refer
to United States dollars.  All payments hereunder and thereunder will be made in
lawful currency of the United States of America.
 
(o)           Notwithstanding anything herein to the contrary, all measurements
and references related to share prices and share numbers herein will be, in each
instance, appropriately adjusted for stock splits, recombinations, stock
dividends and the like.
 
[SIGNATURE PAGE FOLLOWS]
 
 
38

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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this
Agreement, all as of the date first set forth above.
 

 
DOCUMENT SECURITY SYSTEMS, INC.
         
By:
/s/ Patrick White
   
Name:
Patrick White
   
Title:
CEO
           
FLETCHER INTERNATIONAL, LTD.,
 
by its duly authorized investment advisor,
 
FLETCHER ASSET MANAGEMENT, INC.
         
By:
/s/ Stewart Turner
   
Name:
Stewart Turner
   
Title:
Authorized Signatory
           
By:
/s/ Moez Kaba
   
Name:
Moez Kaba
   
Title:
Authorized Signatory
 

[Signature Page To Amended and Restated Agreement]
 
 
 

--------------------------------------------------------------------------------

 
 
TABLE OF CONTENTS
 

   
Page
     
1.
PURCHASE AND SALE
1
     
2.
WARRANT DELIVERY
5
     
3.
INITIAL INVESTMENT CLOSING
5
     
4.
LATER INVESTMENT CLOSINGS
6
     
5.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
8
     
6.
REGISTRATION PROVISIONS
17
     
7.
LIMIT ON SHARES HELD OR SHARES ISSUABLE
21
     
8.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
22
     
9.
FUTURE EQUITY ISSUANCES
23
     
10.
COVENANTS OF THE COMPANY
24
     
11.
CHANGE OF CONTROL
26
     
12.
RESTATEMENTS
29
     
13.
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
29
     
14.
CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS
31
     
15.
FEES AND EXPENSES
31
     
16.
NON-PERFORMANCE
31
     
17.
INDEMNIFICATION
32
     
18.
SURVIVAL OF THE REPRESENTATIONS, WARRANTIES, ETC
33
     
19.
NOTICES
34
     
20.
MISCELLANEOUS
35

 
 
i

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INDEX OF DEFINED TERMS
 

 
Page
65-Day Notice
21
Acquiring Person
28
Acquisition Consideration
27
Aggregate Later Investment Amount
2
Agreement
1
Average Price
 
Blackout Period
19
Business Day
3
Cashless Exercise
3
Change of Control
28
Change of Control Notice
27
claim
12
Closing
2
Common Shares
4
Common Stock
4
Company
1
Company Financial Statements
29
Contingent Later Investment Notice
27
Daily Market Price
4
debt
12
Decrease
21
Dividend Amount
4
Dividend Payment
7
Environmental Laws
15
Exchange Act
5
Excluded Issuance
24
Future Equity Issuance
23
Future Equity Issuance Description
23
Hazardous Materials
15
Increase
21
Indemnified Party
33
Indemnifying Party
33
Initial Investment
1
Initial Investment Closing
5
Initial Investment Closing Date
1
Initial Investment Price
1
Intellectual Property Rights
14

 
 
i

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Investment Amount
 
Later Investment
2
Later Investment Closing
2
Later Investment Notice
2
Later Investment Period
2
Later Investment Price
2
Later Issuance Price
23
Material Adverse Effect
5
Maximum Number
21
NYSE
5
Offering
8
Outstanding Share Notice
21
Person
5
Proceeding
32
Prospectus
18
Purchaser
1
Purchaser Indemnified Party
32
Registration Failure
20
Registration Period
17
Registration Requirement
17
Registration Statement
17
Related Proceeding
35
Restatement
29
Restatement Filing Date
2
Restatement Notice
29
Rule 144
19
Sales Contract
20
SEC
9
SEC Filing
11
Securities Act
7
Settlement Stock
3
Supplemental Initial Investment
1
Supplemental Initial Investment Closing
5
Supplemental Initial Investment Closing Date
1
Warrants
3

 
 
 

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ANNEX INDEX

ANNEX A 
FORM OF LATER INVESTMENT NOTICE

ANNEX B-1 
FORM OF WARRANT

 
ANNEX B-2 
FORM OF WARRANT

ANNEX C 
FORM OF FINANCIAL STATEMENT OFFICERS' CERTIFICATE

ANNEX D 
FORM OF RESTATEMENT NOTICE

ANNEX E 
CLOSING DELIVERY ADDRESS

ANNEX F 
WIRE INSTRUCTIONS

 
SCHEDULE INDEX

SCHEDULE 5(J) 
LITIGATION

SCHEDULE 5(T) 
FINDER'S FEES

 
 
 

--------------------------------------------------------------------------------

 
 
ANNEX A
 
[FORM OF LATER INVESTMENT NOTICE]

 
_____________, ____

Document Security Systems, Inc.
28 East Main Street, Suite 1525
Rochester, NY  14614
Attention: 
Philip Jones

Telephone: 
(585) 325-3610

Facsimile: 
(585) 325-2977

Ladies and Gentlemen:

Reference is made to the Amended and Restated Agreement (the "Agreement") dated
as of February 18, 2011 by and between Document Security Systems, Inc. (the
"Company") and Fletcher International, Ltd. ("Purchaser").  Capitalized terms
not otherwise defined herein shall have the meanings ascribed thereto in the
Agreement. Purchaser hereby elects to make a Later Investment on the date, at a
price per share and in the amount set forth below.
 
In accordance with the terms of the Agreement, Purchaser will make a Later
Investment with respect to [____] shares of Common Stock [Cashless Exercise:
without payment of any additional consideration by Purchaser] [at a price equal
to the Later Investment Price], and the Later Investment Closing Date shall be
[__________].  The Investment Amount for this Later Investment shall be
[____________].
 
On the Later Investment Closing Date, the Company shall deliver the shares of
Common Stock described above to Purchaser [in uncertificated form by book-entry
transfer][in certificated form at the address specified below:
 
[Custodian]
[Address]
Attention:    [______________]
Telephone:  [____________]1]
 

 
FLETCHER INTERNATIONAL, LTD., by its
 
duly authorized investment advisor,
 
FLETCHER ASSET MANAGEMENT, INC.
     
By:
   
Name:
   
Title:
 

 

--------------------------------------------------------------------------------

1 Fletcher to provide custodian information.
 
 
A-1

--------------------------------------------------------------------------------

 
 

 
By:
   
Name:
   
Title:
 

AGREED AND ACKNOWLEDGED:
 
DOCUMENT SECURITY SYSTEMS, INC.
     
By:
   
Name:
   
Title:
   

 
 
A-2

--------------------------------------------------------------------------------

 
 
ANNEX B-1

[FORM OF WARRANT]
 
 
B-1-1

--------------------------------------------------------------------------------

 
 
ANNEX B-2

[FORM OF WARRANT]
 
 
B-2-1

--------------------------------------------------------------------------------

 
 
ANNEX C
 
[FORM OF FINANCIAL STATEMENT OFFICERS' CERTIFICATE]
 
DOCUMENT SECURITY SYSTEMS, INC.
 
Officers’ Certificate
 
Reference is made to the Amended and Restated Agreement between Document
Security Systems, Inc., a New York corporation (the “Company”) and Fletcher
International, Ltd., a company domiciled in Bermuda (“Purchaser”) dated as of
February 18, 2011 (the “Agreement”) in connection with the issuance and sale of
shares of the Company’s Common Stock and Warrants as described therein.  Each
capitalized term used but not defined herein shall have the meaning ascribed
thereto in the Agreement.
 
The undersigned, Patrick White, Chief Executive Officer of the Company, and
Philip Jones, Chief Financial Officer of the Company, do hereby certify, on
behalf of the Company, pursuant to Section 10(f) of the Agreement, that based on
their knowledge:  the final consolidated unaudited financial statements
including the footnotes thereto contained in the Company’s Quarterly Report on
Form 10-Q for the quarter ended [·] fairly present in all material respects the
financial condition in conformity with accounting principles generally accepted
in the United States, results of operations and cash flows of the Company as of
and for the periods presented therein.
 
IN WITNESS WHEREOF, we have executed this Certificate of the Company on this __
day of ___________, 20__.
 

     
Name:
Patrick White
 
Name:
Philip Jones
Title:
Chief Executive Officer
 
Title:
Chief Financial Officer

 
 
C-1

--------------------------------------------------------------------------------

 
 
ANNEX D

[FORM OF RESTATEMENT NOTICE]
 

  [date]

 
Fletcher International, Ltd.
c/o Appleby Services (Bermuda) Ltd.
Canon's Court
22 Victoria Street
PO Box HM 1179
Hamilton HM EX
Bermuda
Attention:            Julia Trippitt, Corporate Administrator
Telephone:           +1 441 295 2244 (Main)
Telephone:           +1 441 298 3235 (Direct)

Ladies and Gentlemen:

Reference is made to the Amended and Restated Agreement (the "Agreement") dated
as of February 18, 2011 by and between Document Security Systems, Inc. (the
"Company") and Fletcher International, Ltd. ("Purchaser").  Capitalized terms
not otherwise defined herein shall have the meanings ascribed thereto in the
Agreement.
 
In accordance with Section 12(a)(i) of the Agreement, the Company hereby gives
notice to Purchaser that a Restatement has occurred on [DATE], as described in
the enclosed [DOCUMENT IN WHICH RESTATEMENT WAS PUBLICLY DISCLOSED].
 

 
DOCUMENT SECURITY SYSTEMS, INC.
       
By:
   
Name:
   
Title:
 

 
 
D-1

--------------------------------------------------------------------------------

 
 
With copies to:

Fletcher International, Ltd.
c/o Fletcher Asset Management, Inc.
48 Wall Street
New York, NY  10005
Attention: 
Peter Zayfert

Telephone: 
212-284-4801

Skadden, Arps, Slate, Meagher & Flom LLP
525 University Avenue
Palo Alto, CA  94301
Attention: 
Leif King

Telephone: 
650-470-4662

Facsimile: 
650-470-4570

 
 
D-2

--------------------------------------------------------------------------------

 
 
ANNEX E

NOTICE ADDRESS

Fletcher International, Ltd.
c/o Appleby Services (Bermuda) Ltd.
Canon's Court
22 Victoria Street
PO Box HM 1179
Hamilton HM EX
Bermuda

 
Attention: 
Julia Trippitt, Corporate Administrator

 
Telephone: 
+1 441 295 2244 (Main)

 
Telephone: 
+1 441 298 3235 (Direct)

with copies to (which copies shall not constitute notice):

Fletcher International, Ltd.
c/o Fletcher Asset Management, Inc.
48 Wall Street
New York, NY  10005

 
Attention: 
Peter Zayfert

 
Telephone: 
212-284-4801

Skadden, Arps, Slate, Meagher & Flom LLP
525 University Avenue
Palo Alto, CA  94301

 
Attention: 
Leif King

 
Telephone: 
650-470-4662

 
Facsimile: 
650-470-4570

 
 
E-1

--------------------------------------------------------------------------------

 
 
ANNEX F
 
DOCUMENT SECURITY SYSTEMS, INC. WIRE INSTRUCTIONS

Document Security Systems, Inc.
Rochester, NY 14614

 
Account Number: 
4009651031

 
ABA Number: 
021313103

 
Bank: 
Citizens Bank,

Riverside, RI 02915

 
Account Name: 
Document Security Systems

 
SWIFT: 
CTZIUS33

 
 
F-1

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