AGREEMENT

     

    This
      Agreement (the “Agreement”) is executed on August 20, 2008 and made effective as
      of the Effective Date (as defined below), by and between Document Security
      Systems, Inc., a New York corporation (“DSS”), having an office at 28 East Main
      Street, Suite 1525, Rochester, New York 14614, and Trebuchet
      Capital Partners, LLC,
      a limited liability company formed under the laws of Delaware (“TREBUCHET”),
      having an office at 609-3
      Cantiague Rock Road, Westbury, New York 11590.
      DSS and TREBUCHET are together referred to herein as the “Parties” or either of
      them as the context makes clear is referred to as a “Party.” 

     

    RECITALS

     

    WHEREAS,
      DSS is the owner of a certain Patent (hereinafter defined);

    


    WHEREAS,
      DSS believes that multiple entities in Europe, including, without limitation,
      the European Central Bank (the “ECB”), have infringed upon the Patent with
      respect to the Euro and certain other world currencies;

    


    WHEREAS,
      on August 1, 2005, DSS initiated a patent infringement lawsuit against the
      ECB
      in the Court of First Instance, which lawsuit was dismissed on September 5,
      2007, for lack of jurisdiction;

    


    WHEREAS,
      in March 2006, the ECB initiated proceedings in nine European jurisdictions
      to
      invalidate the Patent (the “Validity Proceedings”), which has resulted in the
      Patent being declared valid in Germany and The Netherlands and invalid in the
      United Kingdom and France, and the determinations in Germany, The Netherlands
      and France are, as of the date of this Agreement, on appeal;

    


    WHEREAS,
      DSS has expended significant financial and management resources with respect
      to
      such infringement lawsuit and Validity Proceedings;

    


    WHEREAS,
      management and the Board of Directors of DSS (the “Board”) have determined that
      DSS does not currently have the required additional financial resources to
      effectively defend the Validity Proceedings and otherwise assert the Patent
      against all past, present and potential infringers, including but not limited
      to
      the ECB, on its own without raising funds on terms that may, and
      in the
      view of the Board likely would, not be acceptable to, or in the best interest
      of, DSS and its shareholders, taking into account all relevant factors,
      including without limitation, the potential for significant dilution to DSS
      shareholders;

    


    WHEREAS,
      DSS has determined that it has significant opportunities to expand its current
      operating businesses and that such expansion of business will consume
      significant amounts of management’s time and DSS’ resources; 

    


    
      
         

      

      
         

        
          

        

      

      
         

      

    

    WHEREAS,
      management and the Board have determined, based upon advice provided by legal
      counsel, that DSS has a strong legal basis to defend the Patent against validity
      challenges and to assert the Patent against infringers;

    


    WHEREAS,
      DSS has been advised by legal counsel that time is of the essence in order
      to
      effectively defend the Patent against validity challenges and to assert the
      Patent against infringers; 

    


    WHEREAS,
      TREBUCHET has expressed a desire to provide significant financial and management
      resources in order to defend the Patent against the Validity Proceedings and
      to
      assert the Patent against infringers, on the terms as provided herein;


    


    WHEREAS,
      TREBUCHET has conditioned its entering into this Agreement on TREBUCHET having
      an ownership interest in the Patent and the exclusive right and license to
      sue
      and recover, for the benefit of both TREBUCHET and DSS as separate owners of
      the
      Patent, for any and all past, present and future infringement of the Patent,
      along with a security interest in the Patent and in any and all past, present
      or
      future recoveries resulting from the assertion of the Patent, and the sole
      authority to make all decisions relating to the European Litigation and to
      the
      Patent, including, without limitation, the right to sublicense the Patent as
      warranted to resolve infringement claims, all as more specifically provided
      for
      herein;

    


    WHEREAS,
      management and the Board has determined, after taking into account, among other
      things, its limited financial resources to properly fund the defense of the
      Validity Proceedings and the assertion of the Patent, that it is in the best
      interest of DSS and its shareholders to enter into this Agreement with TREBUCHET
      pursuant to the terms and conditions contained herein; 

    


    WHEREAS,
      in consideration of such funding, TREBUCHET will have full authority to manage
      and resolve on behalf of DSS (and on its own behalf) the now existing and any
      future challenges to the validity of the Patent by the Persons identified in
      Schedule
      1
      and the contemplated future assertions of the Patent against the Persons
      identified in Schedule
      1
      (which Persons include the ECB), and will share equally in revenue derived
      as a
      result of such activities as more specifically provided herein, as
      well
      as have the sole right to reimbursement of its fees and costs associated
      therewith if awarded by the relevant Courts;
      and

     

    WHEREAS,
      the parties desire to formalize their respective rights and obligations as
      they
      relate generally to the exploitation of the rights in the Patent, including
      but
      not limited to the licensing thereof in connection with the now existing and
      contemplated proceedings, as they relate specifically to the defense of the
      validity of the Patent and to the assertion of the Patent, and to any and all
      related proceedings and appeals. 

     

    NOW,
      THEREFORE, in consideration of the mutual promises of the parties, and of other
      good and valuable consideration, the receipt and sufficiency of which is hereby
      acknowledged, it is agreed by and between the parties as follows: 

    


    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    


    


    ARTICLE
      1

    


    DEFINITIONS

     

    For
      the purpose of this Agreement the following capitalized terms are defined in
      this Article 1 and shall have the meaning specified herein:

    


    1.1
      APPLICABLE LAWS. “Applicable Laws” means any federal, state, local, municipal,
      foreign, international, multinational or other law, statute, constitution,
      principle of common law, resolution, ordinance, code, edict, decree, rule,
      regulation, ruling or requirement issued, enacted, adopted, promulgated,
      implemented or otherwise put into effect by or under the authority of any
      governmental authority or agency. 

    


    1.2
      CONTRACT. “Contract” means any written, oral or other agreement, contract,
      subcontract, lease, understanding, instrument, note, warranty, license,
      sublicense, insurance policy, benefit plan or legally binding commitment or
      undertaking of any nature, whether express or implied.

     

    1.3
      EFFECTIVE DATE. “Effective Date” means the date this Agreement was executed as
      noted in the Preamble of this Agreement.

    


    1.4
      EUROPEAN LITIGATION. The “European Litigation” means: 

     

    (a)
      patent invalidity proceedings filed by the ECB with respect to the Patent,
      and
      any appeals related thereto, which actions are identified in Schedule
      2,
      

     

    (b)
      patent assertion litigation currently pending and in the future to be filed
      against the ECB with respect to the Patent, which currently pending actions
      are
      identified in Schedule
      3,

    


    (c)
      future proceedings or litigations that may be brought by the ECB seeking a
      declaration of invalidity or non-infringement with respect to the Patent,


     

    (d)
      future proceedings or litigations that may be brought by Persons identified
      in
Schedule
      1
      (other than the ECB) alleging invalidity of the Patent and/or seeking a
      declaration of non-infringement with respect to the Patent, it being understood
      that TREBUCHET shall also have the right to defend against validity challenges
      brought by persons not identified in Schedule
      1, 

    


    (e)
      future proceedings or litigations that may be brought against the Persons
      identified in Schedule
      1
      (other than the ECB) alleging infringement by said Persons of the Patent,


     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    (f)
      future proceedings or litigations as the Parties may from time to time agree
      in
      writing. 

    


    It
      is understood that the term European Litigation includes facilitating
      non-litigious or other alternative means of resolving disputes against any
      Person or Persons identified in Schedule
      1
      (including the ECB), and thus does not necessarily mandate the commencement
      of
      an actual proceeding or litigation. 

     

    1.5
      MATERIAL ADVERSE EFFECT. “Material Adverse Effect” means any
      event, change or effect that is materially adverse to the condition (financial
      or otherwise), properties, assets, liabilities, business, operations or results
      of operations of DSS and its Subsidiaries, taken as a whole.

     

      1.6
      NON-DISCLOSURE AGREEMENT. “Non-Disclosure Agreement” means that certain Mutual
      Non-Disclosure Agreement entered into between TREBUCHET and DSS on July 11,
      2008
      and made effective as of the date stated therein.

    


    1.7
      PERSON(S). “Person(s)” means a natural person, a partnership, a corporation, a
      limited liability company, an association, a joint stock company, a trust,
      a
      joint venture, an unincorporated organization or a governmental entity or any
      department, agency or political subdivision thereof as otherwise indicated
      in
      this Agreement, or the affiliate of any such Person. “Affiliate” as used herein
      means a natural person, a partnership, a corporation, a limited liability
      company, an association, a joint stock company, a trust, a joint venture, an
      unincorporated organization or a governmental entity or any department, agency
      or political subdivision thereof as otherwise indicated in this Agreement
      controlled by, controlling or under the common control of the Person. The term
      “Control” as used herein means having the power to direct the affairs or the
      policies of the Person. 

    


    1.8
      SUBSIDIARIES. “Subsidiaries” means DSS’s subsidiaries listed on Schedule
      4.
      

    


    1.9
      THIRD PARTY LICENSEE. “Third Party Licensee” means any licensee of DSS and
      TREBUCHET with respect to the Patent under a Third Party License Agreement,
      whether or not such agreement was entered into after the Effective Date of
      this
      Agreement, with any Persons identified in Schedule
      1.
      

     

    1.10
      PATENT. The “Patent” means European Patent No. 0455750 and the patents that were
      designated therein in the national contracting states of the European Union,
      as
      more specifically identified in Schedule
      5.

    


    1.11
      TRANSACTION DOCUMENTS. “Transaction Documents” means this Agreement, the
      Non-Disclosure Agreement, any document which the Parties hereto may need to
      enter into to effectuate this Agreement including without limitation documents
      to confirm the assignment of an interest in the Patent and a security interest
      and/or lien in the remaining interest in Patent and proceeds thereof as herein
      provided.

    


    


    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    ARTICLE
      2

    


    COVENANTS

     

    2.1
      PATENT ASSIGNMENT AND RELATED COVENANTS

    


    In
      consideration for TREBUCHET’s agreement to fund the European Litigation as more
      specifically provided under this Agreement,

    


    
      	(a)  	
              DSS
                hereby transfers and assigns to TREBUCHET 49% (Forty Nine Percent)
                of all
                of its right, title and interest in the Patent and to the inventions
                described and claimed therein, such that both DSS and TREBUCHET shall
                each
                have a separate
                and distinct interest in and share of the Patent,
                along with the right to sue and recover in litigation, settlement
                or
                otherwise to collect royalties
                or
                other payments under or on account of the Patent and/or any of the
                foregoing,
                subject to the provisions for sharing any said recovery including
                royalties as provided in this Agreement, for all past, present and
                future
                causes of action including but not limited to actions asserting the
                infringement of the Patent. 

            


    

    


    
      	(b)  	
              With
                respect to DSS’s remaining 51% (Fifty One Percent) interest in the Patent,
                DSS grants to TREBUCHET the exclusive right and license to sue in
                the name
                of DSS, and to recover in litigation, settlement or otherwise to
                collect
                royalties
                or
                other payments under or on account of the Patent and/or any of the
                foregoing,
                subject to the provisions for sharing any said recovery including
                royalties as provided in this Agreement, for all past, present and
                future
                causes of action including but not limited to actions asserting the
                infringement of the Patent. DSS also grants to TREBUCHET the exclusive
                right and license (even as against DSS) to grant sublicenses or other
                rights under the Patent in compromise of or to resolve all past,
                present
                and future causes of action as warranted including but not limited
                to
                actions asserting the infringement of the Patent subject to the
                limitations otherwise set forth in this Agreement in subparagraph
                2.2(b)
                below. With respect to the foregoing, it is understood that same
                does not
                prohibit DSS on its own account from practicing or using the
                Patent.

            


    

     

    
      	(c)  	
              DSS
                hereby agrees that it shall not hereinafter assign, transfer or license
                its remaining interest in the Patent or otherwise encumber its remaining
                interest the Patent in any way and acknowledges that any such assignment,
                transfer, license or encumbrance may materially impact the rights
                of
                TREBUCHET and would be a material breach of this Agreement. DSS further
                agrees that it shall not, without the written permission of TREBUCHET,
                grant any licenses of the Patent. 

            


    

     

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    The
      assignment of an interest in the Patent and the exclusive license of rights
      as
      provided hereinabove shall be recorded, as needed, by filing in the respective
      national European contracting states where the Patent is in force or where
      otherwise appropriate a confirmatory patent assignment in the form necessary
      to
      comport with the filing requirements of each national European contracting
      state
      where the Patent is in force in which the assignment may need to be officially
      recorded. 

    


    2.2
      MANAGEMENT AND COSTS. 

     

    (a)
      TREBUCHET shall have the sole and exclusive right (even as against DSS) and
      authority on behalf of DSS and in its own behalf as an owner of the Patent
      to
      control the management of the European Litigation, including, without
      limitation, the right to determine strategy including when to sue, where to
      sue,
      which Person or Persons identified in Schedule
      1
      to sue, hire or fire counsel, hire or fire experts, and otherwise make all
      decisions regarding the handling of any and all proceedings and litigations,
      including, without limitation, whether to commence proceedings or litigations
      identified in Schedule 8, whether to maintain or defend now existing proceedings
      and litigations identified in Schedule 8, and the resolution of the proceedings
      and litigations via settlement. TREBUCHET shall have the full authority to
      determine whether to seek review or appeal a determination in any such
      proceedings or litigations. TREBUCHET may in its discretion investigate the
      legal basis of the claims to be made, may investigate the capacity of the
      Persons identified in Schedule
      1 to
      meet any award or order made against them relating to the claims, may
      investigate the interest of the Persons identified in Schedule
      1
      to resolve the claims by non-litigious means and may investigate any other
      matters relevant to such claims. 

     

     (b)
      TREBUCHET may on behalf of DSS and on its own behalf consent to entry of any
      judgment or consent to enter into any settlement or to compromise any claim
      related to the Patent with respect to the Persons identified in Schedule
      1
      or to the European Litigation without DSS’ consent including without limitation
      granting rights under the Patent; provided
      that TREBUCHET
      shall obtain DSS’ prior consent if the effect of such judgment or settlement is
      to (i) permit any injunction, declaratory judgment, other order or other
      non-monetary relief to be entered, directly or indirectly, against DSS, (ii)
      require the payment by DSS of future royalties or any other payments in excess
      of $5,000 in the aggregate, (iii) require DSS to make any payment not fully
      indemnified under this Agreement (other than payments made or costs incurred
      by
      DSS pursuant to Article 5), (iv) require DSS to grant any rights other than
      in
      the Patent to any Person, including but not limited pursuant to a license to
      any
      of its intellectual property other than the Patent, or (v) otherwise affect
      the
      business, financial condition (including, but not by way of limitation, to
      require DSS to provide ECB or any Person with debt, convertible debt or equity
      in DSS) or operations of DSS or the rights of Third Party Licensees, in each
      case under this sub-clause (v) in a material way. 

     

    (c)
      TREBUCHET shall, as of the Effective Date, have received capital in the amount
      not less than * and TREBUCHET shall, within the first six months following
      the
      Effective Date after payment of the loan to Taiko III Corp. as provided in
      Article 2.2(d)2)(i), have completed its review of all pending and potential
      proceedings and claims related to the Patent against the Persons identified
      in
Schedule
      1
      and commenced its consideration with legal counsel of the manner to implement
      the strategy TREBUCHET adopts, in its sole discretion, to satisfy its
      undertakings under this Agreement.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    (d)
      Except as otherwise noted herein, beginning on the Effective Date, TREBUCHET
      shall bear all fees and expenses including without limitation attorneys’ fees,
      expert witness fees, court costs, translation fees, costs for the posting of
      bonds and all expenses associated with the posting of bonds which may be
      necessary for the commencement of, or otherwise related to, proceedings, and
      any
      outstanding and future orders to pay fees or costs related to the European
      Litigation (“Expenses”) that are or may be incurred. 

    


    1)
      DSS understands and agrees that the following shall not be included as Expenses:
      

    


    (i)
      the value of the time of DSS employees, consultants, and independent contractors
      spent or to be spent on the European Litigation, provided, however, that
      TREBUCHET shall be responsible for those future expenses that are associated
      with Dr. Robert Vasl as are set forth in Schedule
      6,
      and 

    


    (ii)
      any expenses associated with DSS’ hiring or use of its own independent counsel
      or other advisors for the European Litigation (i.e.,
      counsel different than the counsel selected and managed by TREBUCHET),
provided
      that
      this clause (ii) does not limit TREBUCHET’s undertakings under Sections 2.2 of
      this Agreement, and

    


    (iii)
      the ECB’s fees and expenses, including without limitation attorneys’ fees, with
      respect to the trial and appeal in the United Kingdom relating to the validity
      of the Patent or to the trial in France relating to the validity of the Patent,
      whether becoming the obligation of DSS as a result of a court order or
      otherwise; provided, however, that fees or expenses, including without
      limitation attorneys’ fees, that are paid or reimbursed to DSS or TREBUCHET
      related to the validity trial in Germany shall be solely for the account of
      DSS
      whether such fees and expenses are paid as a result of a court order or
      otherwise except pursuant to an agreement entered into after the date hereof
      by
      DSS without the prior written permission of Trebuchet.

    


    2)
      In no event shall TREBUCHET be obligated to reimburse DSS for or to pay any
      invoices for any fees or expenses incurred by DSS prior to the Effective Date
      and all such fees and expenses incurred before such date shall remain the
      obligation of DSS, provided, however, the Parties agree that Trebuchet shall,
      on
      the Effective Date: 

    


    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    (i)
      pay the full amount of $500,000, plus accrued interest thereon, owed by DSS
      to
      Taiko III Corp., thereby eliminating in full any and all indebtedness of DSS
      to
      Taiko III Corp and; 

    


    (ii)
      pay to DSS $400,000 in immediately available funds (the “ECB AP Amount”),
      representing substantially all of the accrued but unpaid fees and expenses
      previously incurred by DSS as indicated on Schedule
      7,
      which ECB AP Amount shall be used by DSS solely to pay and satisfy said accrued
      but unpaid fees and expenses identified in Schedule 7. In consideration of
      this
      subparagraph, DSS shall issue to TREBUCHET 100,000 shares of DSS common stock
      (the “DSS Shares”). Within
      four (4) business days after the Effective Date, DSS shall file all such
      necessary documents with the American Stock Exchange to authorize the listing
      of
      the DSS Shares on the American Stock Exchange, if such documents had not been
      filed prior to the Effective Date. Promptly after DSS has received the approval
      from the American Stock Exchange for the listing of the DSS Shares, but in
      no
      event prior to the Effective Date, DSS shall deliver or cause to be issued
      in
      the name of TREBUCHET one or more stock certificates evidencing the DSS Shares,
      registered in the name of TREBUCHET (the "Certificates"). DSS shall also provide
      TREBUCHET with proof of payment of the unpaid fees and expenses indicted in
      said
      schedule within 30 days after the Effective Date of this Agreement.

    


    3)
      TREBUCHET shall have no obligation to reimburse DSS for any costs or expenses
      incurred by DSS subsequent to the entry of this Agreement in connection with
      the
      European Litigation unless approved in advance in writing by TREBUCHET.


    


    4)
      In connection with all of the foregoing funding undertakings, TREBUCHET has
      relied on the informed assumptions made by DSS in Schedule
      8
      as to the anticipated Costs associated with funding the European Litigation,
      and
      consequently its undertakings herein are premised solely on DSS’ informed
      assumptions. TREBUCHET’s undertaking to fund any one or more of the Proposed
      Infringement Proceedings and pending Validity Proceedings identified in Schedule
      8 which in its sole and exclusive judgment it may determine to undertake and
      /
      or continue to defend is conditioned on the understanding that the assumptions
      made by DSS are reasonably accurate. TREBUCHET’s undertaking to fund any said
      proceedings if it so elects to undertake same shall not unreasonably exceed
      the
      estimates provided in said Schedule. 

    


    5)
      DSS shall be responsible for the payment of and shall pay all and any annuities,
      maintenance fees or other fees (collectively, the “Annuities”), however they are
      denominated, to keep the Patent in force in each of the national contracting
      states of the European Union where the Patent is in force as the Effective
      Date
      of the Agreement and where actions against the Persons listed in Schedule
      1
      are contemplated. TREBUCHET shall have the right but not the obligation to
      make
      those payments on behalf of DSS and deduct such Annuities from monies otherwise
      due DSS if requested by DSS.

    


    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    6)
      As a
      condition precedent to TREBUCHET’s funding undertakings herein, DSS shall take
      all steps necessary to ensure that the engagement letter with regard to the
      Validity Proceedings between McDermott, Will & Emery LLP (“MWE”) and DSS
      shall remain in effect and that MWE shall continue to zealously defend all
      Validity Proceedings against the Patent. As a further condition precedent to
      TREBUCHET’s funding undertakings herein, DSS shall deliver to TREBUCHET a letter
      from MWE acknowledging its ongoing obligations irrespective of this Agreement
      and its willingness to take direction in such Validity Proceedings from
      TREBUCHET.

     

    (e)
      TREBUCHET shall provide to DSS’ Board of Directors a monthly report in a form to
      be mutually agreed upon in good faith, or more frequently at TREBUCHET’s
      discretion, on the European Litigation. Without limiting the terms of Section
      2.1(a) above, TREBUCHET agrees to consult with DSS at its reasonable request.
      Without limiting the foregoing in this Section 2.1(c), immediately upon
      execution of any agreement or issuance of any court order relating to the
      Patent, TREBUCHET shall inform DSS of the material terms of the same and provide
      a true copy of any documents.

     

    (f)
      DSS acknowledges and agrees that TREBUCHET is capable of fulfilling the
      undertakings and responsibilities undertaken by it in this Article with respect
      to the control and management of the European Litigation and waives any and
      all
      rights, claims and remedies relating to the control and management of the
      European Litigation by TREBUCHET. DSS acknowledges and agrees that Robert
      Girards shall act on behalf of TREBUCHET to manage and control the European
      Litigation, and that his duties and activities on behalf of TREBUCHET do not
      and
      will not impinge on any duties he may have at DSS. 

     

    2.3
      COOPERATION 

     

    (a)
      Each Party shall cooperate fully with the other Party in connection with the
      European Litigation in a manner that will preserve any and all attorney-client
      or other privilege and attorney work product protection thereto, including
      the
      joint defense privilege, litigation privilege and/or common-interest privilege.
      DSS shall direct all present counsel in connection with the European Litigation
      to cooperate fully with TREBUCHET, to open their files to TREBUCHET, to fully
      inform TREBUCHET with respect to the issues to be addressed and decisions to
      be
      made in connection with the European Litigation, to respond to all inquires
      of
      TREBUCHET and otherwise provide information, documentation and assistance to
      TREBUCHET and to interface with TREBUCHET as if TREBUCHET had stepped into
      the
      shoes of DSS. DSS shall direct present counsel in connection with the European
      Litigation to take instructions from TREBUCHET.

     

    (b)
      In the event that either Party receives any notice or other communication in
      connection with the European Litigation that may affect the other Party’s rights
      and undertakings under this Agreement or in any proceeding in the European
      Litigation, such Party promptly but in no event less than two (2) business
      days,
      shall notify the other Party and provide a copy of such notice or communication
      or, if oral, information about such notice or communication in reasonable
      detail. 

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    (c)
      DSS agrees to afford to TREBUCHET and to all counsel in the European Litigation
      reasonable access to witnesses, including but not limited to access to inventors
      of the Patent who are employed by DSS, and to information and documents,
      including but not limited to patent file histories, prior art and studies
      conducted by counsel, that is reasonably required in connection with the
      European Litigation. The foregoing includes, but is not limited to, an
      obligation to provide witnesses and information as necessary for trial and
      other
      proceedings, and documents to support the assertions or defense, and/or to
      assist counsel in responding to discovery requests, as the case may be.
      TREBUCHET shall be solely responsible for, and shall promptly reimburse, all
      actual, out-of-pocket expenses incurred by DSS in its satisfaction of this
      Section 2.3(c), provided that any costs for which reimbursement hereafter may
      be
      claimed, if in excess of $500.00, shall have been approved in advance by
      Trebuchet in writing.

    


    (d)
      DSS agrees to be a named plaintiff in any Patent infringement action in the
      European Litigation and to cooperate fully with TREBUCHET’s counsel in the
      European Litigation as such counsel may request. DSS understands that it may
      be
      the sole plaintiff in the European Litigation or a co-plaintiff or that the
      action may be taken solely in the name of TREBUCHET, as warranted. 

    


    (e)
      The Parties will also execute all documents and do all things that either of
      them from time to time reasonably requires of the other to effect, perfect
      or
      complete the provisions of this Agreement and any transaction or proceedings
      contemplated thereby including but not limited to recording a confirmatory
      patent assignment and patent security agreement in each of the contacting states
      of the European Union if and where appropriate. 

    


    (f)
      *

    


    (g)
      At
      the
      reasonable request of TREBUCHET, DSS will execute and deliver such other
      instruments and do and perform such other lawful acts and things as may be
      necessary or desirable for effecting completely the consummation of the
      transactions contemplated hereby, including, without limitation, execution,
      acknowledgment, and recordation of other such papers, and using commercially
      reasonable efforts to obtain the same from the respective inventors, as
      necessary or desirable for fully perfecting and conveying unto TREBUCHET the
      benefit of the transactions contemplated hereby.

     

    2.4
      REVENUE GENERATED AND PAID 

     

    (a)
      To the extent that revenue is generated by the European Litigation or from
      the
      ECB and other Persons identified in Schedule
      1
      after the Effective Date of this Agreement either by way of settlement, be
      that
      lump sum payments, advances, royalties, and/or other payment structures,
      including but not limited to license revenue such as advances or future
      royalties paid over time as the case may be, as well as revenue specifically
      attributable to past infringement and interest (including amounts for
      infringements before the Effective Date of this Agreement and any interest
      attributable thereto), or as a consequence of a judgment in any action
      (“Revenue”), the parties shall share equally all such revenue generated
      notwithstanding their respective ownership interests in the Patent as set forth
      in Section 2.1 above, with 50% of the proceeds for the account of TREBUCHET
      and
      50% of the proceeds for the account of DSS, each to be distributed according
      the
      subparagraph 2.4(b) herein, except that, to the extent that a Court awards
      fees,
      expenses or other remuneration to either DSS or TREBUCHET or both as the case
      may be as the prevailing party or parties in any European Litigation, such
      fees
      and expenses shall be solely payable to and for the account of TREBUCHET. For
      all purposes of this Agreement, Revenue shall be calculated before, and without
      regard to, reduction of or be offset by, any expense incurred by either Party,
      including, but without limitation, any contingent legal or other fees expect
      as
      noted in the foregoing sentence. 

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    (b)
      Creation of Trust Account. Revenue shall be deposited into a Trust Account
      of
      TREBUCHET managed by a managing lawyer, or its designee, to be selected by
      TREBUCHET and such managing lawyer shall act at the instruction or direction
      of
      TREBUCHET (“Managing Lawyer”). 

    


    
      	1)  	
              The
                Parties agree that the Managing Lawyer will (and will be directed
                to)
                receive all Revenue from the European Litigation and will immediately
                place same into said Trust Account kept for that purpose. The Managing
                Lawyer will hold that part of the Revenue due DSS in the Trust Account
                and
                will dispense such Revenue due DSS to DSS at the direction of TREBUCHET.
                The Managing Lawyer will hold that part of the Revenue due under
                this
                Agreement to TREBUCHET in the Trust Account in trust for TREBUCHET
                and
                will dispense such Revenue due TREBUCHET to TREBUCHET in accordance
                with
                the directions of TREBUCHET. 

            


    

    


    
      	2)  	
              The
                Parties expect that funds held in the Trust Account will be dispensed
                simultaneously to each of the Parties. If DSS or TREBUCHET directly
                or
                indirectly receives any part of the Revenues due to the other Party,
                it
                shall immediately pay such Revenues over to the Managing Lawyer to
                be paid
                into the Trust Account and dealt with under the terms of this Agreement.
                

            


    

    


    
      	3)  	
              TREBUCHET
                shall account to DSS for funds owed to DSS, to be paid at least once
                quarterly as long as there are funds in the Trust Account that can
                be paid
                over to DSS. 

            


    

    


    
      	4)  	
              TREBUCHET
                shall be entitled to use monies due TREBUCHET held in the Trust Account
                to
                meet its funding undertakings under this Agreement as provided in
                Section
                2.2, but only after DSS has been paid its share of the Revenue due
                it.

            


    

     

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    
 

    
      	5)  	
              Each
                Party shall pay its own taxes. 

            


    

    


    
      	6)  	
              Unless
                otherwise agreed by the Parties hereto in writing, monies in the
                Trust
                Account that have been received as a result of a decision by a national
                Court which awards royalties, damages, attorney fees or costs etc.,
                shall
                not be distributed to either Party or to the Party to whom the money
                is
                due unless and until an appeal of any decision awarding such damages,
                attorney fees or costs is concluded and decided or the time for appeal
                has
                elapsed without appeal.

            


    

    


    ARTICLE
      3

    


    FUTURE
      CLAIMS

     

    In
      the event that the ECB or any other Person identified in Schedule
      1
      brings an invalidity action against the Patent or an action seeking a
      determination of non infringement with respect to the Patent subsequent to
      the
      Effective Date, TREBUCHET shall, in its sole discretion, undertake the defense
      of said action provided
      further that
      TREBUCHET is notified of the claim within twenty (20) business days of written
      notice to DSS. In the event that a validity proceeding is initiated by any
      Person not identified on Schedule
      1
      and /or a validity proceeding is brought in a European national state not listed
      in Schedule
      9,
      TREBUCHET shall have the right but not the obligation to defend such proceedings
      and if elects to do so, it shall pay the expenses associated therewith.


     

    ARTICLE
      4 

     

    SECURITY
      INTEREST IN PATENT AND IN PROCEEDS

    


    4.1
      IN THE PATENT. In consideration of the funding undertakings and management
      of
      TREBUCHET, and to secure the payments to TREBUCHET set out in Article 2.4
      herein, DSS hereby gives TREBUCHET a first priority security interest and/or
      lien in its 51% ownership interest in the Patent as of the Effective Date
      hereof. Such first priority security interest and/or lien in the Patent shall
      be
      recorded, as needed, by filing in the respective national European contracting
      states where the Patent is in force or where otherwise appropriate a
      confirmatory patent security agreement in the form necessary to comport with
      the
      filing requirements of each national European contracting state where the Patent
      is in force in which the security interest and/or lien may need to be officially
      recorded. TREBUCHET
      shall promptly reimburse DSS all actual, out-of-pocket expenses reasonably
      incurred by DSS in connection with it satisfying its obligations under this
      Section 4.1.

    


    4.2
      IN THE REVENUES. In consideration of the funding undertakings and management
      undertaken by TREBUCHET, DSS hereby gives TREBUCHET a first priority security
      interest and/or lien in any and all Revenues due DSS under Section 2.4 hereof
      and by virtue of any assertion of the Patent with respect to the Persons listed
      in Schedule
      1,
      including, without limitation, any Revenues resulting out of any future or
      retroactive licenses or other agreements concerning payment of past damages
      under the Patent with one or more such Persons, to secure any indebtedness,
      obligations and liabilities of DSS to TREBUCHET which now exist or may
      hereinafter arise. The Parties will cooperate to record and perfect as soon
      as
      reasonably practical such security interest and/or lien as appropriate, and
      will
      promptly enter into a separate security agreement if necessary to accomplish
      same. TREBUCHET shall promptly reimburse DSS all actual, out-of-pocket expenses
      reasonably incurred by DSS in connection with it satisfying its obligations
      under this Section 4.2.

    


    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    4.3
      CONSENTS. DSS has obtained all consents required in connection with the granting
      of the security interests described in Sections 4.1 and 4.2 hereof including,
      without limitation, the consents of Fagenson & Co., Inc. and Patrick White,
      as required under certain Credit Agreements between either of them and DSS,
      dated January 4, 2008.

    


    4.4
      DEFAULT. Upon, and only upon, any event that is determined by agreement or
      by
      tribunal of competent jurisdiction to entitle TREBUCHET to terminate this
      Agreement as provided hereinafter in Article 9(b)(a), 9(b)(b) or 9(b)(c), DSS
      shall assign all its remaining right, title, and interest in the Patent and
      TREBUCHET shall be entitled to take sole title in the Patent, including but
      not
      limited to the right to enforce the Patent in its sole name and generate revenue
      for all past and future infringements, along with the right to such revenue
      as
      herein otherwise provided. Within 10 business days of the Effective Date, DSS
      shall execute a document assigning and conveying all of its remaining right,
      title and interest in the Patent to TREBUCHET, which document shall be effective
      immediately prior to the event referred to herein (but not before) and which
      document shall be held in escrow pending such event by the Managing Attorney.
      Upon termination of this Agreement in accordance with any of Article 9 (b)
      (a)-(c) herein, TREBUCHET shall be entitled to record the document as may be
      required to perfect its sole title in the Patent. Notwithstanding the foregoing,
      DSS shall be entitled to its share of the Revenue as otherwise provided herein
      subject to any claim for damages held by TREBUCHET. 

    


    ARTICLE
      5

    


    INDEMNIFICATION

    


    5.1
      INDEMNIFICATION BY TREBUCHET. TREBUCHET shall promptly indemnify and hold DSS
      and each of its officers, directors, employees, shareholders and agents harmless
      for and pay any and all liabilities, damages, securities, penalties and all
      other monetary relief awarded to the ECB and to those Persons against whom
      assertions are made and/or who file invalidity and/or non-infringement suits,
      however characterized, whether actual or enhanced, and any awards of costs,
      expenses and attorneys’ fees, but only as long as same pertain to the European
      Litigation. For the purposes of clarification and notwithstanding the foregoing,
      TREBUCHET assumes no liability for any assertions of the Patent or for any
      invalidity suits unless same involve the ECB or the Persons contemplated herein.
      TREBUCHET further assumes no liability for any infringement actions or
      infringement claims asserted against DSS, nor will it defend DSS in connection
      with any such claims, irrespective of who brings such actions or claims unless
      such actions or claims are initiated as a direct result solely of actions of
      TREBUCHET or in the name of DSS by virtue of TREBUCHET’s rights granted in this
      Agreement.

    


    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    5.2
      INDEMNIFICATION BY DSS. DSS shall promptly indemnify and hold TREBUCHET, and
      each of its officers, directors, employees, members and agents, harmless for
      and
      pay any and all liabilities, damages, securities, penalties and all other
      monetary relief from and against (including the reasonable costs of defending
      against) all claims, damages, liabilities as may arise from or out of its
      relationship with DSS including but not limited to any material
      misrepresentation of the representations and warranties contained in this
      Agreement including without limitation the schedules hereto and Article 6,
      except as to matters pertaining to the European Litigation arising from actions
      taken by TREBUCHET after the Effective Date; provided, however, that the
      provisions of this Section 5.2 shall not diminish TREBUCHET’s undertakings
      provided in this Agreement. 

    


    ARTICLE
      6

    


    REPRESENTATIONS
      AND WARRANTIES OF THE PARTIES TO EACH OTHER

    


    6.1
      REPRESENTATIONS AND WARRANTIES OF DSS. DSS represents and warrants to TREBUCHET
      that each of the following statements is true and correct as of the Effective
      Date:

    


    a.
      Accuracy
      of Schedules.
      All Schedules and Exhibits to this Agreement, including, without limitation,
      Schedule
      10,
      which provides the information of the European Litigation included in the PPM,
      are accurate, complete, and true in all material respects. 

    


    b.
      The entities listed in Schedule
      1
      are all of the Persons now known or deemed by DSS to, now or in the past,
      infringe or allegedly infringe the Patent. DSS does not have knowledge or reason
      to believe at this time that any other Persons are now infringing or have
      infringed the Patent.

    


    c.
      Patent
      Validity.
      Except as set forth in the Schedule
      10,
      the Patent is valid and subsisting, has not expired or lapsed, and has not
      been
      adjudicated invalid or unenforceable, in whole or in part. There is no decision
      adverse to DSS’ right to enforce the Patent and there is no proceeding involving
      such rights threatened or pending other than those set forth in Schedule
      10.
      

    


    d.
      Ownership
      of Patent.
      Except as specifically set forth in Schedule
      11
      and with respect to the assignment of a 49% interest in the Patent to TREBUCHET,
      as provided for in this Agreement, DSS is the sole and exclusive owner of the
      entire and unencumbered right, title and interest on and to the Patent, free
      and
      clear of any liens, charges and encumbrances, including without limitation
      licenses, immunities, privileges, pledges, claims, attachments, shop rights
      and
      covenants by DSS not to sue third persons, and to the best knowledge of DSS,
      none of the proprietary rights is subject of any claim in any applicable
      jurisdiction. DSS has the sole right to mortgage, pledge and assign the Patent
      and the sole and exclusive right to grant the assignment and security interest
      and liens granted herein. There is no decision adverse to DSS’ claim of
      ownership or claim of exclusive right to the Patent or DSS’ right to enforce the
      Patent, and there is no proceeding involving such rights threatened or pending.
      DSS has provided TREBUCHET with a copy of any and all opinions and other
      writings prepared by MWE concerning the ownership issues of the Patent which
      were identified in MWE’s retainer letter dated 2004, and if none are available,
      has otherwise disclosed the results of that undertaking and engagement to
      TREBUCHET. 

    


    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    e.
      European
      Law.
      European counsel identified in Schedule
      12
      have been made aware of the fact that the European Litigation will be funded,
      managed and controlled by TREBUCHET, and that TREBUCHET shall share in the
      proceeds of any Revenue generated from assertions of the Patent as, inter alia.,
      an owner of the Patent, and DSS represents and warrants that such European
      counsel, and each of them, have advised DSS that they know of no reason why,
      under the law of their respective applicable jurisdiction, TREBUCHET cannot
      so
      fund, manage and control the European Litigation and cannot share in the
      proceeds of any revenue generated from assertions of the Patent, and TREBUCHET,
      in doing so, will not run afoul of any European or national legislation, rules
      or practices that will have a material adverse effect on TREBUCHET.


     

    f.
      Organization,
      Standing and Power.
      Each of
      DSS and its Subsidiaries (all of which are listed on Schedule
      4)
      is a
      corporation or limited liability company duly organized, validly existing and
      in
      good standing, and no certificates of dissolution have been filed under the
      laws
      of its jurisdiction of organization. Each of DSS and its Subsidiaries has the
      power to own its properties and to carry on its business as now being conducted
      and as presently proposed to be conducted and is duly authorized and qualified
      to do business and is in good standing in each jurisdiction in which the failure
      to be so qualified and in good standing would have a Material Adverse Effect
      on
      DSS. Unless such have been filed as exhibits in the SEC Reports available on
      the
      SEC’s EDGAR system, DSS has delivered or made available to TREBUCHET a true and
      correct copy of its Certificate of Incorporation and By-laws, each as amended
      to
      date. DSS is not in violation of any of the provisions of its Certificate of
      Incorporation or By-laws. DSS is the direct or indirect owner of all outstanding
      shares of capital stock of each of its Subsidiaries and all such shares are
      duly
      authorized, validly issued, fully paid and nonassessable. All of the outstanding
      shares of capital stock of each such Subsidiary are owned by DSS free and clear
      of all liens, charges, claims or encumbrances or rights of others, other than
      a
      security interest in the common stock of Plastic Printing Professionals, Inc.
      in
      favor of Fagenson & Co., Inc., as agent, pursuant to that certain Credit
      Agreement, dated January 4, 2008, between Fagenson & Co., Inc. and DSS.


    


    g.
      Authority;
      Binding Nature of Agreement. DSS
      has
      all necessary corporate power and authority to enter into and to perform its
      obligations under this Agreement and the other Transaction Documents, and the
      execution, delivery and performance by DSS of the Transaction Documents have
      been duly authorized by all necessary action on the part of DSS and its board
      of
      directors and stockholders, as applicable. Each of the Transaction Documents
      to
      which DSS is a party constitutes the legal, valid and binding obligation of
      DSS,
      enforceable against DSS in accordance with its terms, subject to: (i) laws
      of
      general application relating to bankruptcy, insolvency and the relief of
      debtors; and (ii) rules of law governing specific performance, injunctive relief
      and other equitable remedies.

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    h.
      SEC
      Reports; Financial Statements.
      DSS has
      filed all reports required to be filed by it under the Securities Act and the
      Exchange Act, including pursuant to Section 13(a) or 15(d) thereof (the
      foregoing materials being collectively referred to herein as the “SEC Reports”)
      on a timely basis or has received a valid extension of such time of filing
      and
      has filed any such SEC Reports prior to the expiration of any such extension.
      DSS has delivered or otherwise made available to TREBUCHET via the EDGAR website
      copies of all SEC Reports filed within the 10 days preceding the date hereof.
      Except as set forth in Schedule
      13,
      as
      of
      their respective dates, the SEC Reports complied in all material respects with
      the requirements of the Securities Act and the Exchange Act and the rules and
      regulations of the Commission promulgated thereunder, and none of the SEC
      Reports, when filed, contained any untrue statement of a material fact or
      omitted to state a material fact required to be stated therein or necessary
      in
      order to make the statements therein, in light of the circumstances under which
      they were made, not misleading. Except as set forth in Schedule
      13,
      the
      financial statements of DSS included in the SEC Reports (the “Financial
      Statements”) comply in all material respects with applicable accounting
      requirements and the rules and regulations of the Commission with respect
      thereto as in effect at the time of filing. The Financial Statements have been
      prepared in accordance with GAAP, except as may be otherwise specified in the
      Financial Statements or the notes thereto, and fairly present in all material
      respects the assets, liabilities, financial position and results of operations
      of DSS as of and for the dates thereof and the results of operations and cash
      flows for the periods then ended, subject, in the case of unaudited statements,
      to normal, immaterial, year-end audit adjustments. The books and records of
      DSS
      are true, accurate and complete in all material respects. All material
      agreements to which DSS is a party or to which the property or assets of DSS
      are
      subject are included as part of or specifically identified in the SEC
      Reports.

     

    i.
      Binding
      Agreement.
      This Agreement is legal, valid, and binding upon the DSS, enforceable against
      DSS in accordance with its terms, except to the extent limited by bankruptcy,
      insolvency, moratorium, and other laws of general application relating to or
      affecting the enforcement of creditors’ rights and general equity
      principles.

     

    j.
      Compliance
      with Applicable Laws. DSS
      has
      maintained the Patent in compliance with all Applicable Laws. DSS has never
      received any notice or other communication from any person regarding any actual
      or possible violation of, or failure to comply with, any Applicable Laws with
      respect to the Patent. DSS has obtained all material permits, certificates
      and
      licenses required by any Applicable Laws for the conduct of its business and
      the
      ownership of its assets. DSS is not in violation of any such permit, certificate
      or license, and no legal proceedings or other actions are pending or, to the
      knowledge of DSS, threatened to revoke or limit any such permit, certificate
      or
      license. DSS has maintained the Patent in force and paid all Annuities due
      on
      the Patent through the date of this Agreement.

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    k.
      Conflict
      with Other Agreements.
      The execution, delivery, and performance of this Agreement does not conflict
      with, constitute a default under, or violate any provision of (i) the
      Certificate of Incorporation of DSS, (ii) the By-laws of DSS, or (iii) any
      instrument or agreement to which DSS is a party or under which DSS or any Patent
      is bound. DSS further warrants that no award, citation, code, decree, edict,
      injunction, judgment, law, order, ordinance, rule, regulation, or writ or
      including but not limited to, those of federal, state and local governments,
      agencies of those governments, courts or arbitration panels, have been issued
      or
      are now pending against DSS or the Patent that would prohibit the consummation
      of this transaction. DSS will not execute or otherwise enter into any agreement
      in conflict with the rights granted to TREBUCHET under this Agreement without
      TREBUCHET’S prior written permission. 

     

    l.
      Consideration
      for Assignment and Security Interest in /Lien on Patent.
      The consideration to be delivered to DSS for the conveyance of an interest
      in
      the Patent and a security interest in and/or lien on its remaining interest
      in
      the Patent pursuant to this Agreement constitutes reasonably equivalent value
      for TREBUCHET’s undertakings set forth in this Agreement. DSS has not been sued
      or threatened with suit by any creditor before the execution of this Agreement,
      and DSS has not concealed the Patent from any of its creditors.

    


    m.
      Contracts.
      There are no existing Contracts between DSS and any third party that (a) affect
      the Patent, other than as disclosed in Schedule
      11,
      or (b) will bind or obligate TREBUCHET.

    


    n.
      Disclosure.
      No representation or warranty made by DSS in this Agreement, nor any statement
      or certificate furnished or to be furnished to TREBUCHET pursuant hereto or
      in
      connection with the transactions contemplated hereby, contains or shall contain
      any untrue statement of a material fact or omit to state a material fact
      necessary in order to make the statements contained herein or therein not
      misleading.

    


    o.
      Liabilities.  DSS
      has no material commitments, indebtedness, liabilities, or obligations of any
      nature, whether absolute or contingent (“Liabilities”), except
      for (i) Liabilities reflected on the Financial Statements, (ii) accounts payable
      incurred in the ordinary course of business since the date of the last balance
      sheet reflected in the Financial Statements, (iii) Liabilities under any
      contracts, (iv) Liabilities incurred in connection with the negotiation of
      the
      Transaction Documents and the transactions contemplated thereby and (v)
      liabilities incurred in the ordinary course of business. In addition, DSS does
      not have any Liabilities that
      would adversely impact the transactions contemplated under this Agreement or
      any
      of the other Transaction Documents.

    


    p.
      Litigation.
      Other than as set forth in the SEC Reports or on any of the Schedules to this
      Agreement, DSS has no knowledge of any claims, actions, suits, proceedings,
      arbitrations, or investigations, pending or threatened, in any court,
      arbitration panel, Governmental Agency, or otherwise, against, by or affecting
      the Patent, or which would prevent the performance of this Agreement or any
      of
      the transactions contemplated hereby or declare the same unlawful or cause
      the
      rescission thereof.

    


    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    q.
      Taxes.
      DSS has, in the past, properly prepared in all material respects and has filed,
      all federal, state, local and other tax returns and reports required to be
      filed
      pursuant to all applicable laws, regulations, and statutes; DSS is not a party
      to any action for collection of taxes; DSS does not know of any grounds
      supporting any contemplated action concerning same.

    


    r.
      Non-Infringement.
      The technology disclosed in the Patent does not interfere with, infringe upon,
      misappropriate, or violate any material intellectual property right or rights
      (including, without limitation, patent, trademark, trade dress, trade secrets
      or
      copyright) of any third party. 

    


    s. No
      Contravention.
      Neither the execution and the delivery of this Agreement, nor the consummation
      of the transactions contemplated hereby will (i) violate any constitution,
      statute, regulation, rule, injunction, judgment, order, decree, ruling, charge,
      or other restriction of any government, governmental agency, or court to which
      DSS is subject or any provision of its charter or bylaws or (ii) conflict with,
      result in a breach of, constitute a default under, result in the acceleration
      of, create in any party the right to accelerate, terminate, modify, or cancel,
      or require any notice under any agreement, contract, lease, license, instrument,
      or other arrangement to which DSS is a party or by which it is bound or to
      which
      it Patent is subject. 

    


    t.
      Funding. Schedule
      8 lists
      all current pending and proposed actions and provides an informed estimate
      of
      the future costs and expenses which TREBUCHET may incur as a consequence of
      any
      undertakings it determines to take with respect to the European Litigation.
      DSS
      warrants and represents that Schedule
      8
      is accurate and complete. DSS acknowledges that TREBUCHET has entered into
      this
      Agreement with the understanding that its costs and expenses will not in any
      case unreasonably exceed the estimates provided in said Schedule. DSS further
      acknowledges that TREBUCHET’S ability to raise capital is premised on the
      accuracy and completeness of disclosures made in Schedule
      8.
      

    


    u.
      Broker.
      Neither DSS nor any entity directly or indirectly controlling DSS has incurred
      any liability or obligation to any agent, broker, or finder for any brokerage
      fees, commissions, finder’s fees, or other compensation with respect to the
      transactions contemplated by this Agreement. DSS acknowledges that the services
      performed by Robert Girards, individually, do not constitute the acts of an
      agent, broker, or finder for the purposes of this Agreement.

    


    6.2
      REPRESENTATIONS AND WARRANTIES OF TREBUCHET. TREBUCHET represents and warrants
      to DSS that each of the following statements is true and correct as of the
      Effective Date:

    


    a.
      TREBUCHET represents and warrants that it shall comply with the undertakings
      of
      Article 3. If TREBUCHET does not pay, or arrange for any payment, as required
      under Article 3 above, or otherwise satisfy on time and in full its undertakings
      with respect to the European Litigation, if DSS shall have such funds available
      to it on terms that are reasonable in the sole discretion of DSS, then DSS
      promptly shall pay to ECB or any other Person the full amount required under
      Article 3 above which remains outstanding on such date. Such payment by DSS
      shall not limit the undertakings of TREBUCHET set forth above in Article 3
      and,
      to the extent DSS pays any money or other damages to ECB or any other Person
      pursuant to this Article 3, TREBUCHET immediately shall reimburse DSS therefore.
      DSS shall also be entitled to recover from TREBUCHET interest on any unpaid
      principal balance from the date due until the date paid at the lesser of ten
      percent (10%) per year or the maximum rate permitted by law. 

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    LIMITATION
      OF LIABILITY. THE FOREGOING STATES TREBUCHET’S ENTIRE LIABILITY TO DSS ARISING
      OUT OF OR RELATED TO THE EUROPEAN LITIGATION. IN NO EVENT SHALL TREBUCHET BE
      LIABLE TO DSS FOR ANY INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE
      DAMAGES ARISING OUT OF OR RELATED TO ANY BREACH OF THIS AGREEMENT; PROVIDED,
      THAT THIS LIMITATION SHALL NOT LIMIT TREBUCHET’S UNDERTAKINGS EXPRESSLY ASSUMED
      IN THIS AGREEMENT. NOR SHALL TREBUCHET BE LIABLE FOR ANY CLAIMS BY DSS THAT
      IT
      MISMANAGED THE EUROPEAN LITIGATION, OR THAT ITS ACTIONS OR NON-ACTIONS RESULTED
      NEGLIGENTLY IN A LOSS OF PATENT RIGHTS.

     

    b.
      Authority; Binding Nature of Agreement. TREBUCHET
      has all necessary corporate power and authority to enter into and to perform
      its
      undertakings under this Agreement and the other Transaction Documents, and
      the
      execution, delivery and performance by TREBUCHET of the Transaction Documents
      have been duly authorized by all necessary action on the part of TREBUCHET
      and
      its Managing Member, as applicable. Each of the Transaction Documents to which
      TREBUCHET is a party constitutes the legal, valid and binding obligation of
      TREBUCHET, enforceable against TREBUCHET in accordance with its terms, subject
      to: (i) laws of general application relating to bankruptcy, insolvency and
      the
      relief of debtors; and (ii) rules of law governing specific performance,
      injunctive relief and other equitable remedies.

     

    c.
      Binding Agreement.
      This Agreement is legal, valid, and binding upon the DSS, enforceable against
      TREBUCHET in accordance with its terms, except to the extent limited by
      bankruptcy, insolvency, moratorium, and other laws of general application
      relating to or affecting the enforcement of creditors’ rights and general equity
      principles.

     

    d
      Conflict
      with Other Agreements.
      The execution, delivery, and performance of this Agreement does not conflict
      with, constitute a default under, or violate any provision of the articles
      of
      organization of TREBUCHET or any instrument or agreement to which TREBUCHET
      is a
      party or under which TREBUCHET is bound. TREBUCHET further warrants that no
      award, citation, code, decree, edict, injunction, judgment, law, order,
      ordinance, rule, regulation, or writ or including but not limited to, those
      of
      federal, state and local governments, agencies of those governments, courts
      or
      arbitration panels, have been issued or are now pending against TREBUCHET that
      would prohibit the consummation of this transaction. TREBUCHET will not execute
      or otherwise enter into any agreement in conflict with the rights granted to
      DSS
      under this Agreement without DSS’ prior written permission.

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    e.
      Disclosure.
      No representation or warranty made by TREBUCHET in this Agreement, nor any
      statement or certificate furnished or to be furnished to DSS pursuant hereto
      or
      in connection with the transactions contemplated hereby, contains or shall
      contain any untrue statement of a material fact or omit to state a material
      fact
      necessary in order to make the statements contained herein or therein not
      misleading.

     

    f.
      No
      Contravention.
      Neither the execution and the delivery of this Agreement, nor the consummation
      of the transactions contemplated hereby (including the Assignment and Assumption
      referred to in Section 1.2 above), will (i) violate any constitution, statute,
      regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
      restriction of any government, governmental agency, or court to which DSS is
      subject or any provision of its charter or bylaws or (ii) conflict with, result
      in a breach of, constitute a default under, result in the acceleration of,
      create in any party the right to accelerate, terminate, modify, or cancel,
      or
      require any notice under any agreement, contract, lease, license, instrument,
      or
      other arrangement to which DSS is a party or by which it is bound or to which
      it
      Patent is subject. 

     

    g.
      Broker.
      Neither TREBUCHET nor any entity directly or indirectly controlling TREBUCHET
      has incurred any liability or obligation to any agent, broker, or finder for
      any
      brokerage fees, commissions, finder’s fees, or other compensation with respect
      to the transactions contemplated by this Agreement. TREBUCHET acknowledges
      that
      the services performed by Robert Girards, individually, do not constitute the
      acts of an agent, broker, or finder for the purposes of this
      Agreement.

    


      

    ARTICLE
      7

    


    EXCLUSIONS;
      OTHER OBLIGATIONS

     

    OBLIGATIONS
      TO THIRD PARTY LICENSEES. Notwithstanding its ownership interest in the Patent,
      TREBUCHET assumes no responsibility for obligations to Third Party Licensees
      under any Third Party License Agreements which it may enter into with respect
      of
      the Patent, whether such agreements be entered in settlement of the European
      Litigation or otherwise, other than those obligations specifically assumed
      by
      TREBUCHET in this Agreement, including, by way of example and without
      limitation, any obligations of DSS to, at DSS’ expense, indemnify such licensees
      for any third party infringement claims and to provide infringement remedies,
      such as providing non-infringing substitute products, conducting product
      recalls, modifying current products to avoid further infringement or procuring
      applicable licenses, all as my be set forth in such Third Party License
      Agreements. 

    


    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    ARTICLE
      8

    


    CONFIDENTIALITY

     

    The
      terms of the Confidential Disclosure Agreement between the parties shall apply
      to any Confidential Information (as defined therein) that pertains to this
      Agreement. 

     

    ARTICLE
      9

    


    TERMINATION

    


    (a) This
      Agreement shall remain in full force and effect unless and until terminated
      by a
      mutual written agreement of the parties. Each Party acknowledges and agrees
      that
      its remedy for breach by the other Party of this Agreement shall be, subject
      to
      the requirements of Article 10, to bring a claim to recover damages subject
      to
      the limitations of this Agreement and to seek any appropriate equitable relief,
      other than the termination of this Agreement. 

    


    (b) TREBUCHET
      shall have the right to terminate this Agreement and all of its undertakings
      of
      the Agreement effective immediately upon written notice to DSS: 

     

    a)
      in the
      event that DSS shall i) apply for or consent to the appointment of, or the
      taking of possession by, a receiver, custodian, trustee or liquidator of itself
      or of all or a substantial part of its property or assets, (ii) make a general
      assignment for the benefit of its creditors, (iii) commence a voluntary case
      under the United States Bankruptcy Code (as now or hereafter in effect) or
      under
      the comparable laws of any jurisdiction (foreign or domestic), (iv) file a
      petition seeking to take advantage of any bankruptcy, insolvency, moratorium,
      reorganization or other similar law affecting the enforcement of creditors’
rights generally, (v) acquiesce in writing to any petition filed against it
      in an involuntary case under United States Bankruptcy Code (as now or hereafter
      in effect) or under the comparable laws of any jurisdiction (foreign or
      domestic), (vi) issue a notice of bankruptcy or winding down of its operations
      or issue a press release announcing same, or (vii) take any action under the
      laws of any jurisdiction (foreign or domestic) analogous to any of the
      foregoing; or 

     

    b) 
      in
      the
      event that a proceeding or case shall be commenced in respect of DSS, without
      its application or consent, in any court of competent jurisdiction, seeking
      (i)
      the liquidation, reorganization, moratorium, dissolution, winding up, or
      composition or readjustment of its debts, (ii) the appointment of a trustee,
      receiver, custodian, liquidator or the like of it or of all or any substantial
      part of its assets in connection with the liquidation or dissolution of DSS
      or (iii) similar relief in respect of it under any law providing for the
      relief of debtors, and such proceeding or case described in clause (i), (ii)
      or
      (iii) shall continue undismissed, or unstayed and in effect, for a period of
      thirty (30) days or any order for relief shall be entered in an involuntary
      case
      under United States Bankruptcy Code (as now or hereafter in effect) or under
      the
      comparable laws of any jurisdiction (foreign or domestic) against DSS or
      action under the laws of any jurisdiction (foreign or domestic) analogous to
      any
      of the foregoing shall be taken with respect to DSS and shall continue
      undismissed, or unstayed and in effect for a period of thirty (30) days; or
      

     

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

    c)
      in the
      event of a Material Adverse Effect as that term is defined herein; or


     

    d)
      in the
      event of a material misrepresentation of the representations and warranties
      of
      DSS contained in this Agreement including without limitation the schedules
      hereto and Article 6 above and such misrepresentation has adversely affected
      the
      rights of TREBUCHET under the Agreement; or

     

    e)
      *

     

    f)
      in the
      event that the Patent is not held valid after exhausting appeals in at least
      one
      national contracting state of the European Union in which national contracting
      state infringement proceedings can be brought against a Person or Persons
      identified in Schedule
      1.

     

    Notwithstanding
      any such termination for the reasons provided hereinabove (a) - (e), or any
      Dispute as that term is defined in Article 10 below arises, TREBUCHET shall
      retain and maintain its equity interest in the Patent as an owner and be
      entitled to any benefits to be derived as such including but not limited to
      the
      right to any recoveries for past infringement, provided however that TREBUCHET’s
      rights and interest following termination shall not exceed in scope or nature
      its rights or interest prior to termination. Notwithstanding its right to do
      so,
      in the case of a bankruptcy of DSS, TREBUCHET may elect to retain its
      exclusivity in the intellectual property rights of DSS herein conveyed as
      provided in 11 U.S.C. Section 365(n), providing however that TREBUCHET shall
      continue to account and pay over to DSS revenue generated from the activities
      related to the European Litigation and the Patent, including but not limited
      to
      royalties, as specifically provided hereinabove in subparagraph 2.4. Nothing
      in
      this Article 9 shall entitle TREBUCHET the right to reimbursement from DSS
      of
      costs incurred by TREBUCHET pursuant to this Agreement, including, without
      limitation, Section 2.2(d)(2) hereof.

     

    


    ARTICLE
      10

    


    DISPUTE
      RESOLUTION

    


    10.1
      MEDIATION. If a dispute, controversy or claim (“Dispute”) arises between the
      parties relating to the interpretation or performance of this Agreement,
      appropriate senior executives (e.g. director or vice president level) of each
      Party who shall have the authority to resolve the matter shall meet to attempt
      in good faith to negotiate a resolution of the Dispute prior to pursuing other
      available remedies. The initial meeting between the appropriate senior
      executives shall be referred to herein as the “Dispute Resolution Commencement
      Date.” Discussions and correspondence relating to trying to resolve such Dispute
      shall be treated as confidential information developed for the purpose of
      settlement and shall be exempt from discovery or production and shall not be
      admissible in any proceeding concerning the Dispute. If the senior executives
      are unable to resolve the Dispute within thirty (30) days from the Dispute
      Resolution Commencement Date, and either Party wishes to pursue its rights
      relating to such Dispute, then the Dispute will be mediated by a mutually
      acceptable mediator appointed pursuant to the mediation rules of JAMS/Endispute
      within thirty (30) days after written notice by one Party to the other demanding
      non-binding mediation. Neither Party may unreasonably withhold consent to the
      selection of a mediator or the location of the mediation. Both parties will
      share the costs of the mediation equally, except that each Party shall bear
      its
      own costs and expenses, including attorney’s fees, witness fees, travel
      expenses, and preparation costs. The parties may also agree to replace mediation
      with some other form of non-binding or binding Alternative Dispute Resolution
      (“ADR”). 

     

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

    10.2
      ARBITRATION. Any Dispute which the parties cannot resolve through mediation
      within ninety (90) days of the Dispute Resolution Commencement Date, unless
      otherwise mutually agreed, shall be submitted to final and binding arbitration
      under the then current Commercial Arbitration Rules of the American Arbitration
      Association (“AAA”), by three (3) arbitrators in New York City, New York. Such
      arbitrators shall be selected by the mutual agreement of the parties or, failing
      such agreement, shall be selected according to the aforesaid AAA rules. The
      arbitrators will be instructed to prepare and deliver a written, reasoned
      opinion stating their decision within thirty (30) days of the completion of
      the
      arbitration. The prevailing Party in such arbitration shall be entitled to
      expenses, including costs and reasonable attorneys’ and other professional fees,
      incurred in connection with the arbitration (but excluding any costs and fees
      associated with prior negotiation or mediation). The decision of the arbitrator
      shall be final and non-appealable and may be enforced in any court of competent
      jurisdiction. The use of any ADR procedures will not be construed under the
      doctrine of laches, waiver or estoppel to adversely affect the rights of either
      Party. 

     

    10.3
      COURT ACTION. Any Dispute regarding the following is not required to be
      negotiated, mediated or arbitrated prior to seeking relief from a court of
      competent jurisdiction: breach of any obligation of confidentiality;
      infringement, misappropriation, or misuse of any intellectual property right
      owned by one Party by the other Party; any other claim where interim relief
      from
      the court is sought to prevent serious and irreparable injury to one of the
      parties or to others. However, the parties to the Dispute shall make a good
      faith effort to negotiate and mediate such Dispute, according to the above
      procedures, while such court action is pending. 

     

    10.4
      CONTINUITY OF PERFORMANCE. Unless otherwise mutually agreed in writing, the
      parties will continue to honor all other commitments under this Agreement and
      related agreements during the course of any dispute. 

    


    ARTICLE
      11

    


    MISCELLANEOUS
      PROVISIONS

     

    11.1
      ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the
      parties with respect to the European Litigation and supersedes all terms in
      any
      other prior written and oral and all contemporaneous oral agreements and
      understandings with respect to the European Litigation. 

     

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

    11.2
      GOVERNING LAW. This Agreement shall be construed in accordance with and all
      Disputes hereunder shall be governed by the laws of the State of New York,
      excluding its conflict of law rules. The Supreme Court of the State of New
      York
      and/or the United States District Court for the Southern District of New York
      shall have jurisdiction and venue over all Disputes between the parties that
      are
      permitted to be brought in a court of law pursuant to Article 10 above.


     

    11.3
      DESCRIPTIVE HEADINGS. The headings contained in this Agreement are for reference
      purposes only and shall not affect in any way the meaning or interpretation
      of
      this Agreement. When a reference is made in this Agreement to an Article or
      a
      Section, such reference shall be to an Article or Section of this Agreement
      unless otherwise indicated. 

     

    11.4
      NOTICES. Notices, offers, requests or other communications required or permitted
      to be given by either Party pursuant to the terms of this Agreement shall be
      given in writing to the respective parties to the following addresses:


     

    If
      to TREBUCHET: 

    Trebuchet
      Capital Partners, LLC 

    609-3
      Cantiague Rock Road

    Westbury,
      New York 11590

    Attention:
      Managing Member

    


    With
      a copy to: 

    Trebuchet
      Capital Partners, LLC

    PO
      Box
      7866

    Hicksville,
      New York 11802-7866

     

     If
      to DSS: 

     

    Document
      Security Systems, Inc. 

    28
      East Main Street

    Suite
      1525

    Rochester,
      NY 14614

    Attention:
      Chief Executive Officer

     

    or
      to such other address as the Party to whom notice is given may have previously
      furnished to the other in writing as provided herein. Any notice involving
      non-performance, termination, or renewal shall be sent by hand delivery,
      recognized overnight courier or, within the United States, may also be sent
      via
      certified mail, return receipt requested. All other notices may also be sent
      by
      fax, confirmed by first class mail. All notices shall be deemed to have been
      given and received on the earlier of actual delivery or three (3) days from
      the
      date of postmark. 

     

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

    11.5
      NONASSIGNABILITY. Neither Party may, directly or indirectly, in whole or in
      part, whether by operation of law or otherwise, assign or transfer this
      Agreement without the other Party’s prior written consent, and any attempted
      assignment, transfer or delegation without such prior written consent shall
      be
      voidable at the sole option of such other Party. Without limiting the foregoing,
      this Agreement will be binding upon and inure to the benefit of the Parties
      and
      their permitted successors and assigns, including any person that becomes party
      to this Agreement by reason of merger, consolidation or sale of substantially
      all of the assets or business of DSS. 

     

    11.6
      SEVERABILITY. If any term or other provision of this Agreement is determined
      by
      a court, administrative agency or arbitrator to be 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
      so long as the economic or legal substance of the transactions contemplated
      hereby is not affected in any manner materially adverse to either Party. 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 an acceptable manner to the end that transactions
      contemplated hereby are fulfilled to the fullest extent possible. 

     

    11.7
      FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure or delay
      on
      the part of either Party hereto in the exercise of any right hereunder shall
      impair such right or be construed to be a waiver of, or acquiescence in, any
      breach of any representation, warranty or agreement herein, nor shall any single
      or partial exercise of any such right preclude other or further exercise thereof
      or of any other right. All rights and remedies existing under this Agreement
      or
      the Schedules attached hereto are cumulative to, and not exclusive of, any
      rights or remedies otherwise available. 

     

    11.8
      AMENDMENT. No change or amendment will be made to this Agreement except by
      an
      instrument in writing signed on behalf of each of the parties to such agreement.
      

     

    11.9
      COUNTERPARTS. This Agreement may be executed in counterparts, each of which
      shall be deemed to be an original but all of which shall constitute one and
      the
      same agreement. 

    


    WHEREFORE,
      the parties have signed this Agreement effective as of the Effective Date.
      

     

    
      	
              Trebuchet
                Capital Partners, LLC

            	
               

            	
               

            	
               

            	
              Document
                Security Systems, Inc.

            
	 	 	 	 	 
	
              By:

            	
               

            	
              /s/
                Robert T. Girards

            	
               

            	
               

            	
               

            	
              By:

            	
               

            	
               /s/
                Patrick White

            
	
              Name:

            	
               

            	
              Robert
                T. Girards

            	
               

            	
               

            	
               

            	
              Name:

            	
               

            	
              Patrick
                White

            
	
              Title:

            	
               

            	
              Manager

            	
               

            	
               

            	
               

            	
              Title:

            	
               

            	
              Chief
                Executive Officer

            


    

    



    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    


    SCHEDULE
      1

    


    


    ECB
      in Germany

    Bundesbank
      in Germany

    Bundesdruckerei
      in Germany

    Giesecke
      & Devrient
      in Germany

    ECB
      in France if DSS is successful at appeal

    Banque
      de France if DSS is successful at appeal

    François-Charles
      Oberthur Fiduciaire, French Security Printers if DSS is successful at
      appeal

    ECB
      in the Netherlands

    De
      Nederlandsche Bank

    Joh.
      Enschedé the Dutch security printers

    ECB
      in Spain

    Banco
      de España

    Fábrica
      Nacional de Moneda y Timbre,
      the Spanish security printers

    ECB
      in Austria

    Österreichische
      Nationalbank

    Österreichische
      Banknoten und Sicherheitsdruck
      the Austrian security printers

    Jura,
      the Austrian Hungarian document security software company

    ECB
      in Belgium

    Nationale
      Bank van België/Banque Nationale de Belgique

    Agfa
      the Belgian document security software company

    ECB
      in Italy

    Banca
      d’Italia

    Istituto
      Poligrafico e Zecca dello Stato
      the Italian security printers

    ECB
      in Luxembourg

    Banque
      centrale du Luxembourg

    Orell
      Füssli Security Printing Ltd the Swiss security printers

    Danish
      National Bank and security printers

    Swedish
      National Bank and security printers


    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    


     

    SCHEDULE
      2

    


    United
      Kingdom:
      First instance and appeal, both lost to ECB

    France:
      First instance lost to ECB, DSS appealed

    Germany:
      First instance DSS won, ECB appealing

    The
      Netherlands:
      First instance DSS won, ECB appealing

    Spain:
      First instance trial is complete; awaiting judgment, which is expected in the
      second half of 2008

    Italy:
      First instance trial is expected in the first half of 2009

    Austria:
      First instance trial is expected in the first half of 2009

    Belgium:
      First instance trial is expected in February 2009

    Luxembourg:
      ECB twice filed in the wrong court; *.


    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    


     

    SCHEDULE
      3

    


    DSS
      has technically commenced assertion against the ECB in Belgium, with such action
      currently stayed during validity proceedings 


    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    


    SCHEDULE
      4

    


    Document
      Security Consultants, Inc. (New York) (100% owned)

    Thomas
      M. Wicker Enterprises, Inc. (New York) (100% owned)

    Lester
      Levin, Inc. (New York) (100% owned)

    Secured
      Document Systems, Inc. (New York) (100% owned)

    Plastic
      Printing Professionals, Inc. (New York) (100% owned)


    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    


     

    SCHEDULE
      5

    


    
      	
              Country

            	
              Patent
                Number

            
	
              Europe

            	
              455750

            
	
              Austria

            	
              455750

            
	
              Belgium

            	
              455750

            
	
              Switzerland

            	
              455750

            
	
              Germany

            	
              69033363

            
	
              Denmark

            	
              455750

            
	
              Spain

            	
              455750

            
	
              France
                (Currently Revoked)

            	
              455750

            
	
              United
                Kingdom (Currently Revoked)

            	
              455750

            
	
              Italy

            	
              455750

            
	
              Liechtenstein

            	
              455750

            
	
              Luxembourg

            	
              455750

            
	
              Netherlands

            	
              455750

            
	
              Sweden

            	
              455750

            


    

    



    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    


    SCHEDULE
      6

     

    *


    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    


    SCHEDULE
      7

     

    *


    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    


    SCHEDULE
      8

     

    *

     

    



    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    


    SCHEDULE
      9

     

    


     

    United
      Kingdom

     

    Luxembourg
      

     

    Netherlands

     

    Belgium

     

    Italy

     

    France

     

    Spain

     

    Germany
      

     

    Austria.

     

    Switzerland

     

    Sweeden


    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    


     

    SCHEDULE
      10

     

    


    Summary
      of European Litigation

    


    Explanatory
      Note

    


    Although
      we refer to the DSS Patent as one patent, there is no single patent that covers
      the entire European continent. When granted, a European patent is actually
      a
      collection of individual national patents, each of which is limited in its
      coverage to the relevant national jurisdiction. National courts have exclusive
      jurisdiction to determine the validity of national patents. The coverage of
      any
      European patent is determined by the states of the European Patent Convention
      (“EPC”) that are designated by the applicant prior to grant. Because these are
      national rights, there is no single court, even at the appeal levels, that
      can
      rule in respect of the entire European continent.

    


    The
      law of each of the signatory states to the EPC is built on the same foundations
      governed by the EPC itself. For example, the provisions of novelty, inventive
      step, insufficiency, added subject matter and claim construction are laid out
      in
      the EPC. However, national courts can (and do) differ in their interpretation
      and application of these laws. There are also “optional” provisions (e.g.
      compulsory licensing) which differ between jurisdictions and substantive
      procedural differences (e.g. whether exclusive licensees can sue).

    


    Since
      the underlying principles are the same, most national courts will consider
      decisions rendered by other national courts relating to the same patent. The
      amount and type of consideration given to earlier decisions differs between
      jurisdictions. However, earlier decisions are not binding in any way on actions
      brought in other jurisdictions. 

    


    Infringement
      Claim brought by DSSI in Luxembourg 

    


    On
      August
      1, 2005, DSS commenced a lawsuit against the European Central Bank (“ECB”) in
      the European Court of First Instance in Luxembourg (the “European Court of First
      Instance”) alleging infringement by the ECB of the DSS Patent. In its complaint
      DSS claimed that the ECB was circulating Euro banknotes incorporating certain
      anti-counterfeiting technology, which protects against forgeries by digital
      scanning and copying devices, and that the use of such technology infringes
      the
      DSS Patent.
      On September 5, 2007, the European Court of First Instance informed the parties
      that it did not have jurisdiction to rule on this patent infringement claim.
      Additionally, the European Court of First Instance instructed DSS to pay the
      ECB’s attorneys’ fees and court fees with respect to such suit. The ECB
      has formally
      requested DSS to pay attorneys fees and court fees in the aggregate amount
      of
€93,752 (US$137,815 based on the applicable exchange rate on August 15, 2008).
      If DSS does not pay that amount or if DSS contests the amount payable, this
      will
      be subject to an assessment procedure that will not likely be concluded prior
      to
      the end of this year. DSS has disclosed this amount as a contingent liability
      but will not record it until the actual amount is known upon final
      assessment.

    


    
      
         

      

      
        35

        
          

        

      

      
         

      

    

    Patent
      Invalidity Challenges

    


    On
      March 24, 2006, DSS was served with notice that the ECB filed separate claims
      in
      the United Kingdom and Luxembourg courts seeking the invalidation of the
      DSS Patent. Proceedings were commenced before the national courts seeking
      revocation and declarations of invalidity
      of the DSS Patent in each of the Netherlands, Belgium, Italy, France, Spain,
      Germany and Austria.

    


    Invalidity
      Challenge by the ECB in the United Kingdom

    


    On
      March 26, 2007, the High Court of Justice, Chancery Division, Patents Court
      in
      London, England (the “English Court”) ruled that the DSS Patent was invalid in
      the United Kingdom. The English High Court rejected the ECB’s allegations of
      invalidity based on lack of novelty, lack of inventive step and insufficiency,
      but held that the patent was invalid for added subject matter. That is, the
      English Court determined that language added to a patent claim at the appellate
      level of registration was not supported by the earlier disclosure in the
      specification and therefore was deemed “new matter,” rendering the patent
      invalid. Pursuant to the English Court’s decision, on March 30, 2007, the
      English Court awarded the ECB 30%
      of their costs
      (including legal fees) of the proceedings before the High Court.
      On
      April 19, 2007, DSS paid the ECB £90,000 (US$182,000 based on the applicable
      exchange rate on that date). DSS anticipates that it will be required to pay
      an
      additional approximately £90,000 (US$168,300 based on the applicable exchange
      rate on August 15, 2008) to reimburse the ECB for costs incurred by it in the
      English High Court proceedings. If the amount payable by DSS is not agreed,
      then
      the amount will be determined by separate assessment proceedings that can take
      up to about one year to complete. 

    


    In
      July 2007, the Company also posted a bond in the amount of £87,500 (US$177,000
      based on the applicable exchange rate on that date), as collateral for the
      payment of any costs payable to the ECB in connection with DSS’s appeal of the
      English High Court decision. On March 19, 2008, the decision of the English
      High
      Court, including the award of the ECB’s costs, was
      upheld by the English Court of Appeal on appeal. The English Court of Appeal
      also ordered DSS to pay the ECB’s costs of the English appeal proceedings
      (including legal fees).

    


    On
      June 19, 2008, the Company paid £87,500 ($177,000 based on the applicable
      exchange rate on that date) towards the ECB’s costs of the English appeal The
      ECB has informally quantified its total costs of the appeal to be €271,635.02
      (US$399,303 based on the applicable exchange rate on August 15, 2008). In such
      circumstances, a paying party would normally expect to pay from 66% to 75%
      (€181,089 to €203,726 (US$266,201 to US$299,407 based on the applicable exchange
      rate on August 15, 2008)) of the total costs incurred.
      Unless
      the amounts are agreed by the parties, they will be subject to an assessment
      procedure that will not likely be concluded earlier than the first quarter
      of
      2009.
      

    


    
      
         

      

      
        36

        
          

        

      

      
         

      

    

    The
      costs (including legal fees) of the assessment procedure are normally paid
      by
      the party from whom costs are due. Interest normally accrues at 8% per annum
      simple rate on unpaid costs from the date of the order giving rise to the
      payment (i.e. March 30, 2007 in respect of High Court proceedings, March 19,
      2008 in respect of appeal costs).

    


    The
      determination of invalidity of the DSS Patent by the English Court does not
      determine the validity of the DSS Patent in other European
      countries.

     

    Invalidity
      Challenge by the ECB in Germany

    


    On
      March
      27, 2007 the Bundespatentgericht of the Federal Republic of Germany ruled that
      the DSS Patent was valid. The court considered the English Court’s decision but,
      unlike the English Court, determined that the added language in the claim was
      supported by the specification. As
      a result of this ruling, DSS expects to be awarded its costs in an amount of
      €44,692
      (US$65,697 based on the applicable exchange rate on August 15, 2008.
      On September 3, 2007 the
      ECB
      filed an appeal in the German Federal Supreme Court in an attempt to reverse
      the
      decision of the Bundespatentgericht. The results of this appeal are not expected
      until 2010. 

    


    Invalidity
      Challenge by the ECB in France

    


    On
      January 9, 2008 the Tribunal de Grande Instance de Paris (the
      “French Court”) held that the DSS Patent was invalid in France, based on the
      same reasoning as the English Court relating to the added subject matter. The
      French Court did not make any findings on any other aspects of the case. The
      French Court awarded the ECB attorneys’ fees of less than $3,000 with respect to
      the invalidity action filed with the French Court. On May 7, 2008, DSS filed
      an
      appeal of the French Court decision. A decision on this appeal is expected
      in or
      around August 2009.

    


    Invalidity
      Challenge by the ECB in the Netherlands

     

    On
      March
      12, 2008 the District Court of the Hague (the “Dutch Court”), having considered
      the decisions of the English Court, the German Court and the French Court ruled
      that the DSS Patent is valid in the Netherlands. The ECB filed an appeal of
      the
      Dutch Court decision on March 27, 2008. A decision on this appeal is not
      expected until in or around August 2009.

    


    
      
         

      

      
        37

        
          

        

      

      
         

      

    

    Invalidity
      Challenge by the ECB in Luxembourg

    


    The
      ECB
      has twice withdrawn its case in Luxembourg due to procedural irregularities.
      On
      the second occasion, the Court awarded DSS €1,000 in compensation for costs
      incurred in withdrawal of the suit. There are currently no proceedings in
      Luxembourg.

     

    Invalidity
      Challenge by the ECB in Spain

    


    The
      Commercial Court of Madrid (“the Spanish Court”) ordered, in accordance with
      mandatory procedure, that a report be prepared and submitted by an examiner
      of
      the Spanish Patent Office. That report was filed and recorded the examiner’s
      opinion that the DSS Patent was invalid for lack of inventive step. The
      examiner’s opinion did not address any other alleged ground of invalidity,
      including on the ground of “added matter,” which was the grounds cited by the
      English Court and the France Court in their determination of invalidity of
      the
      DSS Patent. A validity trial was held in the Spanish Court in early June 2008
      with final oral and written arguments made in July 2008. The Spanish Court’s
      decision on the validity of the DSS Patent is expected in the second half of
      2008.

     

    Invalidity
      Challenge by the ECB in Austria

     

    Administrative
      proceedings for the revocation of the DSS Patent were commenced by the ECB
      in
      the Austrian Patent Office. Each of the parties has filed several written
      briefs. A hearing date has not been set, and is not expected before the end
      of
      2008. 

    


    Invalidity
      Challenge by the ECB in Italy

    


    Proceedings
      were commenced by the ECB in the District Court of Turin, Intellectual Property
      Specialist Division (the “Italian Court”). The parties have each submitted four
“technical briefs” prepared by party-appointed technical (patent attorney)
      experts to a Court-appointed technical expert. The Court appointed expert has
      given his opinion in April 2008 that the patent is invalid for added matter.
      The
      expert reviewed the English, German and French decisions, but did not take
      into
      account the Netherlands decision. A hearing in May 2008 was held at which DSS
      sought to re-open the technical submissions to the court-appointed expert on
      the
      grounds that he should also consider the reasoning of the Netherlands decision.
      A decision on that issue is expected in mid-September 2008.

    


     

    Invalidity
      Challenge in Belgium

    


    The
      ECB
      brought proceedings in the Brussels Court of First Instance (“the Belgian
      Court”). On December 29, 2006, DSS filed a provisional infringement claim in
      order to protect itself with respect to the 5-year limitation period in Belgium.
      DSS cited the pending European Court of First Instance case and stated that
      it
      did not intend to proceed with its infringement claim in Belgium pending
      determination of the European Court of First Instance proceedings.

    


    Extensive
      briefs (including technical expert reports) were filed in October 2006, December
      2006 and April 2007. In October 2007, the ECB supplemented its arguments with
      further technical expert reports and (following the rejection of jurisdiction
      by
      the European Court of First Instance) requested that the invalidity and
      infringement cases be heard together at trial. DSS opposed the hearing of
      validity and infringement together. In June 2008, the Court decided that it
      would hear only validity arguments at the trial to be held on February 12-13,
      2009. A further brief from DSS on invalidity is due to be submitted in
      mid-September 2008 and a final brief in January 2009. No timetable for the
      infringement action has been set, although it is unlikely that the trial will
      begin before March or April 2010. It is expected that DSS will need to formally
      plead its infringement case (and provide evidence) in February or March
      2009.

    


    
      
         

      

      
        38

        
          

        

      

      
         

      

    

    Plan
      for Future Infringement Claims

    


    Other
      than the suit filed by DSS in the European Court of First Instance in
      Luxembourg, DSS has not yet initiated infringement actions, with respect to
      the
      DSS Patent, in any jurisdiction covered by the DSS Patent. Prospective
      defendants and jurisdictions for future infringement actions have been
      determined and are identified in a schedule to the Litigation Agreement.
      Identified defendants include, among others, certain non-governmental entities.
      In addition to the jurisdictions where the validity of the DSS Patent is either
      currently under consideration or where either DSS or the ECB is appealing
      decisions, we have also identified ___________, __________ and __________ as
      jurisdictions where infringement suits may be initiated. Our Manager, in
      furtherance of our responsibilities under the Litigation Agreement, will
      determine which defendants to file infringement suits against, the nature of
      those suits and the jurisdictions where those suits will be filed. We anticipate
      that such decisions will be based on, among other things: (i) the extent of
      the
      infringement by a prospective defendant; (ii) the location of the infringing
      action; (iii) whether a prospective defendant is a governmental entity or a
      private enterprise; and (iv) the patent infringement laws of the applicable
      jurisdictions (i.e. choice of jurisdictions that are more plaintiff friendly).
      


    
      
        
        

      

      
        39

        
          

        

      

      
        
        

      

    


     

    SCHEDULE
      11

    


    *
      

    



    
      
        
        

      

      
        40

        
          

        

      

      
        
        

      

    


     

    SCHEDULE
      12

     

    *


    
      
        
        

      

      
        41

        
          

        

      

      
        
        

      

    


     

    SCHEDULE
      13

     

    


     

    SEC
      Comment Letters addressed to DSS, dated April 11, 2008, June 6, 2008, July
      11,
      2008 and August 13, 2008, and DSS’ responses thereto. DSS has not yet responded
      to the SEC Comment Letter dated August 13, 2008.

     

    


     

    


    
      
         

      

      
        42