REGISTRATION
      RIGHTS AGREEMENT

    


    REGISTRATION
      RIGHTS AGREEMENT (the “Agreement”), dated as of the 12th day of December, 2006,
      executed and delivered by DOCUMENT SECURITY SYSTEMS, INC., a New York
      corporation (the “Company”), and PERRIN, HOLDEN & DAVENPORT CAPITAL CORP.,
      as agent for and on behalf of, the Holders (as defined below).

    


    RECITALS

    


    WHEREAS,
      simultaneously with the execution and delivery of this Agreement, the Company,
      pursuant to terms and conditions set forth in the Confidential Private Offering
      Memorandum of the Company, dated December 12, 2006, including the exhibits
      thereto and any and all supplements thereof and amendments thereto, and all
      documents incorporated by reference therein (collectively, the (Memorandum”) is
      offering for sale (the “Offering”) up to 130 units (the “Units”), each Unit
      consisting of (i) 5,880 shares (“Shares”) of its Common Stock, par value $.02
      per share (“Common Stock”) and (ii) Series B Common Stock Warrants (the
“Warrants”) to purchase up to an aggregate of 2,940 shares (the
      “Warrant Shares”) of Common Stock;

    


    WHEREAS,
      Perrin, Holden & Davenport Capital Corp. (“Perrin”) is acting as placement
      agent in connection with the Offering, and in connection therewith the investors
      in the Offering whose names appear on Exhibit A annexed hereto as may be amended
      during the Offering (“Holders”); and

    


    WHEREAS,
      the terms and conditions of the Offering provide for the execution and delivery
      of this Agreement.

    


    NOW,
      THEREFORE, for good and valuable consideration, the receipt and sufficiency
      of
      which are hereby acknowledged by the Company, the Company hereby agrees as
      follows:

    


    1.     Automatic
      Registration.
      The
      Company shall use its best efforts to file a registration statement
      (“Registration Statement”) with the Securities and Exchange Commission under the
      Securities Act of 1933 (the “Act”), on appropriate form, and such other
      documents, including a prospectus, as may be necessary (in the opinion of
      counsel for the Company), in order to comply with the provisions of the Act,
      within 60 business days after the final closing of the Offering, so as to allow
      for the resale under the Act by any Holder or combination of Holders of all
      Registerable Shares (as defined in Section 2) held by all of the Holders, at
      the
      sole expense of the Company, so as to permit the public resale by the Holder
      of
      the Registerable Shares pursuant thereto.

    


    2.     Registerable
      Shares.
      For
      purposes of this Agreement, the term “Registerable Shares” shall include” (a)
      the Shares purchased as a component of the Units in the Offering; (b) any
      securities issued or issuable with respect to the Warrants; or (c) Warrant
      Shares; or (d) any other shares of Common Stock issued to the Holders by way
      of
      stock dividend or stock split or in connection with a combination of shares,
      recapitalization, merger, consolidation or other reorganization or otherwise.
      Anything herein contained to the contrary notwithstanding, the provisions of
      this Agreement shall not apply to, and the term “Registerable Shares” as used in
      this Agreement shall not include, Shares of Common Stock or Warrant Shares
      after
      they have been sold by a Holder pursuant to an effective Registration Statement
      under the Act or sold pursuant to Rule 144.

    


    3.     Additional
      Covenants of the Company With Respect to Registration.

    


    The
      Company covenants and agrees as follows:

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (a)    In
      connection with any registration under Section 1 above, the Company shall file
      the Registration Statement no event later than 60 business days following the
      final closing of the Offering, and use reasonable efforts to have such
      Registration Statement declared effective at the earliest possible
      time.

    


    (b)    In
      connection with any registration of Registerable Shares pursuant to Section
      1
      above, the Company shall furnish each Holder of Registerable Shares included
      in
      a Registration Statement with such reasonable number of copies of such
      Registration Statement, related preliminary prospectus and prospectus meeting
      the requirements of the Act, and other documents necessary or incidental to
      the
      registration and public offering of such Registerable Shares, as shall be
      reasonably requested by the Holder to permit the Holder to make a public
      distribution of such Registerable Shares.

    


    (c)    Once
      effective, the Company covenants and agrees to use its best efforts to maintain
      the effectiveness of any Registration Statement until the earlier of (i) a
      date
      which is two years from the final closing date of the Offering, or (ii) the
      date
      that the Holders of the Registerable Shares receive an opinion of counsel to
      the
      Company that all of the Registerable Shares may be freely traded (without
      limitation or restriction as to quantity or timing and without registration
      under the Act) pursuant to Rule 144 or otherwise; provided, however, the Company
      may suspend the use of any Registration Statement for a period not to exceed
      45
      days in any 12-month period for valid business reasons (not including avoidance
      of the Company’s obligations hereunder), including the acquisition or
      divestiture of assets, public filings with the SEC, pending corporate
      developments and similar events.

     

    (d)    If
      any
      stop order shall be issued by the SEC in connection with any Registration
      Statement filed pursuant to Sections 1 above, the Company will use its best
      efforts to obtain the removal of such order.

    


    (e)    The
      Company shall pay all costs, fees, and expenses in connection with all
      Registration Statements filed pursuant to Section 1 above, including, without
      limitation, the Company’s legal and accounting fees, printing expenses, and blue
      sky fees and expenses; provided, however, that the Holders shall be solely
      responsible for the fees of any counsel retained by the Holders in connection
      with such registration and any transfer taxes or underwriting discounts,
      commissions or fees applicable to the Registerable Shares sold by the Holders
      pursuant thereto.

    


    4.    Indemnification.

    


    (a)    In
      the
      event of any registration of any the Registerable Shares under the Act, the
      Company shall indemnify and hold harmless each Holder, the affiliates of each
      such Holder, the directors, partners, officers, employees and agents of each
      such Holder and any person who controls any such Holder within the meaning
      of
      the Act or the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
      against any and all losses, claims, damages or liabilities, joint or several,
      to
      which they or any of them may become subject under the Act, the Exchange Act
      or
      other Federal or State statutory law or regulation, at common law or otherwise,
      insofar as such losses, claims, damages or liabilities (or actions in respect
      thereof) caused by, arising out of or based on any untrue statement or alleged
      untrue statement of a material fact contained in any registration statement
      under which such securities were registered under the Act, any preliminary
      prospectus, final prospectus or summary prospectus contained therein, or any
      amendment or supplement thereto, or arise out of or are based upon any omission
      or alleged omission to state therein a material fact required to be stated
      therein or necessary to make the statements therein not misleading, and agrees
      to reimburse each such indemnified party, as incurred, for any legal or other
      expenses reasonably incurred by them in connection with investigating or
      defending any such loss, claim, damage, liability or action; provided, however,
      that (i) the Company will not be liable in any case to the extent that any
      such
      loss, claim, damage or liability arises out of or is based upon any such untrue
      statement or alleged untrue statement or omission or alleged omission made
      therein in reliance upon and in conformity with written information furnished
      to
      the Company by or on behalf of any such Holder specifically for inclusion
      therein, (ii) the Company will not be liable to any indemnified party under
      this
      indemnity agreement with respect to any Registration Statement or Prospectus
      to
      the extent that any such loss, claim, damage or liability of such indemnified
      party results from the use of the Prospectus during a period when the use of
      the
      Prospectus has been suspended in accordance with Section 3(c) hereof, provided
      that the Holders received prior notice of such suspension; and (iii) the Company
      shall not be liable to any indemnified party with respect to any preliminary
      Prospectus to the extent that any such loss, claim, damage or liability of
      such
      indemnified party results from the fact that such indemnified party sold
      Registerable Securities to a person as to whom there was not sent or given,
      at
      or prior to the written confirmation of such sale, a copy of the Prospectus
      or
      of the Prospectus as then amended or supplemented in any case where such
      delivery is required by the Act, if the loss, claim, damage or liability of
      such
      indemnified party results from an untrue statement or omission of a material
      fact contained in the preliminary Prospectus which was corrected in the
      Prospectus or in the Prospectus as then amended or supplemented. 

     

    
      
         

      

      
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    (b)   Promptly
      after receipt by an indemnified party of notice of the commencement of any
      action or proceeding involving a claim referred to in the preceding subdivisions
      of this Section 4, such indemnified party will, if a claim in respect thereof
      is
      to be made against an indemnifying party, give written notice to the latter
      of
      the commencement of such action, provided that the failure of any indemnified
      party to give notice as provided herein shall not relieve the indemnifying
      party
      of its obligations under the preceding subdivisions of this Section 4, except
      to
      the extent that the indemnifying party is materially prejudiced by such failure
      to give notice. In case any such action is brought against an indemnified party,
      unless in such indemnified party’s reasonable judgment a conflict of interest
      between such indemnified and indemnifying parties may exist in respect of such
      claim, the indemnifying party shall be entitled to participate in and to assume
      the defense thereof, jointly with any other indemnifying party similarly
      notified, to the extent that the indemnifying party may wish, with counsel
      reasonably satisfactory to such indemnified party, and after notice from the
      indemnifying party to such indemnified party of its election so to assume the
      defense thereof, the indemnifying party shall not be liable to such indemnified
      party for any legal or other expenses subsequently incurred by the latter in
      connection with the defense thereof other than reasonable costs of
      investigation. Notwithstanding the indemnifying party’s election to appoint
      counsel to represent the indemnified party in an action, the indemnified party
      shall have the right to employ separate counsel (including local counsel),
      and
      the indemnifying party shall bear the reasonable fees, costs and expenses of
      such separate counsel (and local counsel) if (i) the use of counsel chosen
      by
      the indemnifying party to represent the indemnified party would present such
      counsel with a conflict of interest, (ii) the actual or potential defendants
      in,
      or targets of, any such action include both the indemnified party and the
      indemnifying party and the indemnified party shall have reasonably concluded
      that there may be legal defenses available to it and/or other indemnified
      parties which are different from or additional to those available to the
      indemnifying party, (iii) the indemnifying party shall not have employed counsel
      satisfactory to the indemnified party to represent the indemnified party within
      a reasonable time after notice of the institution of such action or (iv) the
      indemnifying party shall authorize the indemnified party to employ separate
      counsel at the expense of the indemnifying party. An indemnified party shall
      not
      settle or compromise any action for which it seeks indemnification or
      contribution hereunder without the prior written consent of the indemnifying
      party, which consent shall not be unreasonably withheld. An indemnifying party
      will not, without the prior written consent of the indemnified parties, settle
      or compromise or consent to the entry of any judgment with respect to any
      pending or threatened claim, action, suit or proceeding in respect of which
      indemnification or contribution may be sought hereunder (whether or not the
      indemnified parties are actual or potential parties to such claim or action)
      unless such settlement, compromise or consent includes an unconditional release
      of each indemnified party from all liability arising out of such claim, action,
      suit or proceeding.

     

    
      
         

      

      
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    (c)    The
      provisions of this Section 4 shall remain in full force and effect regardless
      of
      any investigation made by or on behalf of any Holder or the Company or any
      other
      persons who are entitled to indemnification pursuant to the provisions of this
      Section 4, and shall survive the sale by a Holder of Registerable Shares
      pursuant to the Registration Statement.

    


    5.     Amendments.
      This
      Agreement may not be amended, modified or supplemented, and waivers of or
      consents to departures from the provisions of this Agreement may not be given,
      unless it would not have an adverse effect upon the rights of any of the Holders
      and the Company has obtained the written consent of Holders then holding a
      majority of the Registerable Shares.

    


    6.     Notices.
      Except
      as otherwise provided in this Agreement, all notices, requests and other
      communications (which shall include publication) to any person provided for
      hereunder shall be in writing and shall be given by hand delivery, registered
      or
      certified mail or by any courier providing overnight delivery (i) if to the
      Company, Perrin or the initial Holder, at the address set forth in the
      Subscription Agreement and (ii) if to a subsequent Holder, to the address set
      forth on the books and records of the Company. All such notices, requests or
      communications shall not be effective until received.

    


    7.    Assignment.
      This
      Agreement shall be binding upon and inure to the benefit of and be enforceable
      by the parties hereto. In addition, and whether or not any express assignment
      shall have been made, the provisions of this Agreement which are for the benefit
      of Holder shall also be for the benefit of and enforceable by any subsequent
      holder of the Registerable Shares. Holder agrees, by accepting any portion
      of
      the Registerable Shares after the date hereof, to the provisions of this
      Agreement.

    


    8.     Governing
      Law.

    


    (a)     THIS
      AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS
      OF
      THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK WITHOUT
      REFERENCE TO THE PRINCIPLES OF CONFLICTS OF LAWS.

    


    (b)    Each
      of
      the Company and Holder hereby irrevocably and unconditionally consents to submit
      to the exclusive jurisdiction of any State Court in New York County, New York
      and the United States District Court for the Southern District of New York
      (the
“NY Courts”) for any litigation arising out of or relating to this Agreement and
      the transactions contemplated hereby (and agrees not to commence any litigation
      relating thereto except in such courts), waives any objection to the laying
      of
      venue of any such litigation in the NY Courts and agrees not to plead or claim
      that such litigation brought in any NY Courts has been brought in an
      inconvenient forum.

    


    9.    Counterparts.
      This
      Agreement may be executed by facsimile and may be signed simultaneously in
      any
      number of counterparts, each of which shall be deemed an original, but all
      such
      counterparts shall together constitute one and the same instrument.

    


    10.   Entire
      Agreement.
      This
      Agreement embodies the entire agreement of between the Company relating to
      the
      subject matter hereof and supersedes all prior agreements and understandings
      relating to such subject matter.

     

    11.   Severability.
      If any
      provision of this Agreement, or the application of such provisions to any person
      or circumstance, shall be held invalid, the remainder of this Agreement, or
      the
      application of such provision to persons or circumstances other than those
      to
      which it is held invalid, shall not be affected thereby.

     

    
      
         

      

      
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    12.    Third
      Party Beneficiaries.
      The
      Holders from time to time shall each be a third party beneficiary of the
      agreements of the Company contained herein.

    


    13.    Headings.
      The
      headings which are contained in this Agreement are for the sole purpose of
      convenience of reference, and shall not limit or otherwise affect the
      interpretation of any of the provisions hereof.

    


    14.    Further
      Assurances.
      The
      Company will from time to time after the date hereof take any and all actions,
      and execute, acknowledge and deliver any and all documents and instruments,
      at
      its cost and expense, as any Holder may from time to time reasonably request
      in
      order to more fully perfect or protect the rights intended to be granted to
      it
      hereunder.

    


    15.    Interpretation.
      As used
      in this Agreement, unless the context otherwise requires: words describing
      the
      singular number shall include the plural and vice versa; words denoting any
      gender shall include all genders; words denoting natural persons shall include
      corporations, partnerships and other entities, and vice versa; and the words
      “hereof”, “herein” and “hereunder”, and words of similar import, shall refer to
      this Agreement as a whole, and not to any particular provision of this
      Agreement.

    


    16.    Waiver.
      The
      failure of the Company or any Holder to at any time enforce any of the
      provisions of this Agreement shall not be deemed or construed to be a waiver
      of
      any such provision, nor to in any way affect the validity of this Agreement
      or
      any provision hereof or the right of the Company or any Holder to thereafter
      enforce each and every provision of this Agreement.

    


    


    [signature
      page appears next]

    


    
      
         

      

      
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    IN
      WITNESS WHEREOF, the undersigned has duly executed and delivered this Agreement
      as of the date first above written.

     

    
      	 	 	 
	 	DOCUMENT
              SECURITY SYSTEMS, INC.
	 
 	 
 	 
 
	 	By:  	 
              
	 	
              
Name:
              Patrick White
              Title:
                Chief Executive Officer

            
	 	 


    

    


    Accepted
      and Agreed

    As
      Agent
      on Behalf of the Holders:

    


    


    PERRIN,
      HOLDEN & DAVENPORT CAPITAL CORP.

    


    


    By:                                                                                   


    Name:
      

    Title:
      

    


    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    EXHIBIT
      A

    LIST
      OF HOLDERS