**LICENSE
        AND DISTRIBUTION AGREEMENT**
 
 This
        License and Distribution Agreement (this “ Agreement ”)
        is
        entered into as of this 8th day of November, 2006 (the “ Effective
        Date ”)
        by and
        between Document Security Systems, Inc., a corporation organized and existing
        under the laws of the State of New York (“ DSS ”),
        and
        PT Sekur Grafika, a company organized and existing under the laws of the
        Republic of Indonesia (“ Licensee ”).
 
 **RECITALS:**
 
 WHEREAS,
        DSS is engaged in the business of, among other things, developing and licensing
        anti-counterfeiting technology, processes and products providing protection
        against a wide range of document security threats, including forgery,
        counterfeiting and unauthorized copying, scanning and photo imaging;
 
 WHEREAS,
        Licensee is engaged in the business of, among other things, manufacturing,
        marketing, selling and distributing safety paper, security identification
        cards,
        labels, certificates, packaging and other secure printed documents;
        and
  WHEREAS,
        Licensee wishes to acquire, and DSS is willing to grant, an exclusive, limited
        license and right to represent DSS’ products (including, without limitation,
        safety/security paper, plastic cards, certificates and documents incorporating
        anti-counterfeiting features) and anti-counterfeiting and anti-forgery
        technology and solutions in the country of Indonesia.
  NOW,
        THEREFORE, for good and valuable consideration, the receipt and sufficiency
        of
        which is hereby acknowledged, the parties agree as follows:
  1.  Definitions .
        For
        purposes of this Agreement, the following capitalized terms shall have the
        meanings set forth below.
  “ Approved
        Third Parties ”
shall mean
        such
        reputable and qualified printers, security printers, and/or end users that
        have
        been pre-approved in writing by DSS, which approval may be given or withheld
        in
        DSS’ sole and absolute discretion.
  “ Decertified
        Technologies ”
shall
        mean all Technologies
        (as hereinafter defined) identified by DSS to Licensee in writing as being
        no
        longer effective when used for security printing and document
        anti-counterfeiting.
  “ DSS
        Products ”
shall
        mean those products specified on Schedule
        1 hereto.
  “ DSS
        Safety Paper ”
shall
        mean all Safety Paper (as hereinafter defined) manufactured by DSS.
  “ Force
        Majeure ”
means
        circumstances or events which: (i) could not be normally reasonably anticipated
        by the parties, (ii) are external to the parties, and (iii) could not be
        mitigated through commercially reasonable efforts. Such circumstances or
        events
        shall include, without limitation, strikes, lockouts, riots, insurrections,
        acts
        of terrorism, civil disturbances, sabotage, embargoes, blockades, acts of
        war,
        acts or failures to act of any governmental or regulatory body (whether civil
        or
        military, domestic or foreign), governmental regulations superimposed after
        the
        fact, power failures, fires, explosions, floods, accidents, epidemics,
        earthquakes or other natural or man-made disasters, and all occurrences similar
        to the foregoing.
  
 “ Intellectual
        Property ” shall
        mean, but shall not be limited to, (i) all patents, trademarks, trade names,
        service marks, designs, logos, and copyrights, and all pending applications
        for
        registration thereof; (ii) know-how, inventions, improvements, methods,
        operation manuals and procedures, trade secrets, technical information,
        formulas; (iii) computer software and programs, and related documentation,
        updates, and data, whether in object or source code form, and (vi) all other
        similar proprietary and intellectual rights, whether or not
        registered.
  “ Licensee
        Products ”
shall
        mean those products specified on Schedule
        1 hereto.
  “ Person ”
shall
        mean any
        individual, corporation, partnership, limited liability company, association,
        trust or any other entity or organization of any kind or character, including
        a
        governmental authority or agency.
  “ Safety
        Paper ”
shall
        mean paper
        that is larger than 8 inches by 10 inches printed in a flat or graduated
        tint
        with or without patterns and containing hidden alert words or symbols such
        as
        "VOID," "COPY" or "UNAUTHORIZED COPY," or bar codes, logos or other images
        embedded in the background tint that appear when a handheld verifier is placed
        on the paper or when the document is copied, scanned, faxed or reproduced
        in any
        form utilizing industry standard copiers, desktop scanners or facsimile
        machines. The appearance of the hidden words after reproduction of the document
        is intended to alert document recipients that they are looking at a non-original
        document.
  “ Technologies ”
shall
        mean those certain DSS patent and/or patent-pending technologies specified
        on Schedule
        1 hereto.
  “ Technology
        Marks ”
shall
        mean DSS’ trademark and service marks (including, without limitation, the
        AuthentiGuardTM logo) that identify DSS as the source of the Technologies.
  “ Term ”
shall
        mean have the meaning set forth in Section 4.1 hereof.
  “ Territory ”
shall
        mean the geographical area specified on Schedule
        1 hereto.
  2.  License .
  2.1.  License
        Grant .
        Subject
        to the terms and conditions set forth herein, DSS hereby grants to Licensee,
        and
        Licensee accepts from DSS, for the Term, (i) an exclusive, limited, and
        non-transferable (except as otherwise expressly set forth herein), license
        to
        use, install and otherwise incorporate the Technologies into the Licensee
        Products to be manufactured, processed, prepared, displayed, offered for
        sale
        and sold by Licensee in the Territory; and (ii) a limited and non-transferable
        (except as otherwise expressly set forth herein) license to use the Technology
        Marks in accordance with the terms and conditions set forth herein or as
        otherwise approved in writing by DSS.
  2
 2.2.  License
        Fees and Payment Terms **.** In
        consideration of the license granted herein and services to be rendered by
        DSS,
        Licensee shall pay to DSS those fees (the “ License
        Fees ”)
        as set
        forth on Schedule
        1 hereto.
        All such License Fees shall be payable by Licensee to DSS as determined by
        DSS
        on a project by project basis. ****
  2.3.  Sublicense
        Rights .
        Notwithstanding anything herein to the contrary, Licensee shall have the
        right
        to sublicense to Approved Third Parties all license rights granted herein
        (except the right to further sub-license, which is explicitly not granted
        to
        Approved Third Parties) pursuant to sublicense agreements in form and substance
        acceptable to DSS in its sole and absolute discretion, which sublicense
        agreements shall include, without limitation, the Technologies being licensed,
        exclusions and restrictions, and pricing and payment terms. Without limiting
        the
        foregoing, and notwithstanding anything herein to the contrary, Licensee
        shall
        ensure that each sublicense agreement entered into with an Approved Third
        Party
        shall contain the following terms and provisions:
  2.3.1.  The
        sublicense is governed by the laws of the State of New York.
  2.3.2.  The
        Approved Third Party has no right to sublicense the Technology to any third
        party and has no proprietary rights to the Technology or any Improvements.
        The
        Approved Third party shall explicitly acknowledge that it is bound by terms
        substantially similar to the terms of Sections 4 and 11 of this Agreement.
  2.3.3.  DSS
        is
        explicitly deemed to be beneficiary of any such sublicense agreement, and
        shall
        have the right to bring suit directly against the Approved Third Party for
        damages, infringement, breach of its proprietary rights and non-payment of
        license fees.
  2.3.4.  The
        Approved Third Party has no right to manufacture, market or sell, directly
        or
        indirectly, or the right or power to license to any other person the right
        to
        manufacture, market or sell, directly or indirectly, blank safety paper which
        utilizes the Technology.
  2.3.5.  The
        Approved Third Party grants
        to DSS
        inspection and audit rights similar
        to those provided for under Section 10 of this Agreement.
  In
        the
        event Licensee desires to sublicense the license rights granted hereunder,
        Licensee shall provide written notice thereof to DSS, which notice shall
        state
        the name of the proposed sublicensee, the terms of the proposed sublicense
        and
        such other information as reasonably requested by DSS. Upon receipt, DSS
        may
        grant or withhold consent to the proposed sublicensee and/or the terms of
        sublicense in its sole and absolute discretion, and if consented to, shall
        provide to Licensee the required form of sublicense agreement. Licensee shall
        provide to DSS fully executed copies of all sublicense agreements entered
        into
        with Approved Third Parties and shall, on an annual basis, provide to DSS
        a list
        of all such sublicense agreements entered into by Licensee, which list shall
        be
        certified by an officer of Licensee.
  3
 2.4.  Exclusivity .
        During
        the Term, DSS shall not grant to any third party, directly or indirectly,
        any
        license to use, install, market and/or distribute the Technologies in the
        Territory.
  2.5.  Exclusions
        and Restrictions .
  2.5.1.  Licensee
        shall have no right to any software, technology, know-how or other Intellectual
        Property related to the Technologies or production of the Technologies, implied
        or express, and, except as otherwise expressly provided herein, Licensee
        shall
        have no right to sub-license, assign or otherwise transfer the right to use
        the
        Technologies.
  2.5.2.  The
        license right granted pursuant hereto shall be subject to any restrictions
        with
        respect to Licensee Products or volume that are set forth on Schedule
        1 .
        Without
        limiting the foregoing, Licensee shall have no right to manufacture, print,
        market or sell, directly or indirectly, and no right or power to license
        or
        sub-license to any other Person the right to manufacture, market or sell,
        directly or indirectly, Safety Paper other than DSS Safety Paper marketed
        using
        the “AuthentiGuard TM ”
        trademark. DSS hereby acknowledges and agrees that the foregoing restriction
        shall not in any way prohibit Licensee from manufacturing, printing, marketing
        or selling paper with a pantograph background in which words, symbols, borders,
        artwork or similar features are printed in a secondary visible color, which
        color is different and distinct from the color of the pantograph background.
  2.5.3.  The
        license right granted pursuant hereto does not include, and Licensee shall
        have
        no right hereunder, under any circumstances, to receive, use or make copies
        of
        the source/object code for the Technologies. Further, the license right granted
        pursuant hereto does not include the right to, and Licensee shall
        not (directly
        or indirectly) ,
        and
        shall not knowingly assist any third party to (i)
        copy, adapt, alter, modify, translate or create derivative works of the
        Technologies or other Intellectual Property owned by or under license to
        DSS;
        (ii) reverse engineer, decompile, disassemble, or otherwise attempt to
        reconstruct the source code for the Technologies or other Intellectual Property
        owned by or under license to DSS; (iii) reverse engineer, reconstruct or
        otherwise attempt to ascertain, or adapt, alter or modify, the proprietary
        protocols, programming interfaces, algorithms, internal instructions, and
        command sets used in the operation of the Technologies or other Intellectual
        Property owned by or under license to DSS; or (iv) produce,
        use, license, sell or otherwise distribute or exploit the Technologies or
        Intellectual Property derived therefrom or bypass or defeat protection methods
        for preventing unauthorized access to the Technologies.
  2.5.4.  Without
        limiting anything herein, Licensee may only sell Licensee Products incorporating
        the Technologies in the Territory. Licensee shall have no right or license,
        express or implied, to sell Licensee Products incorporating the Technologies
        outside of the Territory. **** The
        Licensee Products listed on Schedule
        1 hereto
        represent the scope of products in which the Technologies may be incorporated
        by
        Licensee under this Agreement. Production or manufacture by Licensee of any
        products incorporating the Technologies not specifically identified on Schedule
        1 is
        prohibited, except with the express written consent of DSS, to be given or
        withheld in DSS’ sole and absolute discretion. All requests to incorporate the
        Technologies into products other than those specified on Schedule
        1 must be
        in writing.
  4
 3.  Sales
        and Distribution of DSS Products **.**
  3.1.  Sales
        and Distribution **.** In
        addition to the right to license and sublicense the Technologies pursuant
        to
        Section 2 above, subject to the terms and conditions set forth herein, DSS
        hereby grants to Licensee, and Licensee accepts from DSS, for the Term, an
        exclusive, non-transferable right to market, sell and distribute the DSS
        Products in the Territory through direct sales efforts, retail store outlets,
        office products wholesalers, on Licensee’s websites, and through such other
        venues or distribution outlets as Licensee deems necessary or desirable from
        time to time.
  3.2.  Pricing
        and Payment .
        The
        prices to be paid by Licensee to DSS for the DSS Products and the payment
        terms
        with respect thereto shall be as set forth on Schedule
        1 .
  3.3.  Packaging
        Terms .
        The
        parties shall, on a case by case basic, mutually agree upon packaging standards
        for the DSS Products. No changes in the packaging terms shall be made by
        Licensee without the prior written consent of DSS.
  4.  Term
        and Termination .
  4.1.  Term .
        The
        Initial Term of this Agreement (the “ Initial
        Term ”)
        shall
        commence on the Effective Date, and shall continue for the period of time
        set
        forth on Schedule
        1 hereto,
        unless earlier terminated pursuant to Section 4.2. For purposes hereof, the
        Initial Term, together with any extension or renewal terms, shall hereinafter
        be
        collectively referred to as the “ Term ”.
  4.2.  Termination **.**
  4.2.1.  Either
        party may terminate this Agreement: (i) upon thirty (30) days prior written
        notice of a material breach of the other party, if the breach has not been
        cured
        within such thirty (30) day period; or (ii) immediately upon written notice
        to
        the other party if: (a) the other party declares or a petition is filed in
        any
        court for insolvency or bankruptcy and such petition is not dismissed in
        sixty
        (60) days; (b) the other party reorganizes under the relevant bankruptcy
        act or
        any similar statute in such party’s jurisdiction of incorporation; (c) the other
        party consents to the appointment of a trustee in bankruptcy or a receiver
        or
        similar entity; or (d) if either party breaches the Intellectual Property
        rights
        contained herein of the other party. A material breach by Licensee shall
        include, but not be limited to, the failure by Licensee to pay when due any
        amount owed to DSS under this Agreement. In addition, and notwithstanding
        anything herein to the contrary, in the event that, as of the day preceding
        the
        second anniversary of the Effective Date, the total revenue generated by
        DSS
        from Licensee (with respect to both License Fees and payment for DSS Products)
        is less than Two Hundred Thousand and No/100 U.S. Dollars (U.S. $200,000.00),
        DSS may terminate this Agreement upon written notice to Licensee, and this
        Agreement will terminate immediately upon the date such notice is deemed
        effectively given pursuant to Section 13.9.
  5
 4.2.2.  Upon
        the
        expiration or termination of this Agreement (i) all licenses granted hereunder
        shall cease; (ii) Licensee shall cease all use of Technology Marks and
        promotional materials and return all sales, promotional and display or
        advertising materials that were furnished by DSS; and (iii) all amounts due
        to
        DSS by Licensee under the terms of this Agreement shall become immediately
        due
        and payable. Notwithstanding the foregoing, upon termination of this Agreement
        for the reasons specified in Sections 4.2.1(ii)(a) through (c) and for the
        reason specified in the last sentence in Section 4.2.1, Licensee shall be
        permitted a reasonable opportunity, not to exceed ninety (90) days, to sell
        its
        remaining inventory of finished Licensee Products, subject to the terms of
        this
        Agreement.
  4.2.3.  The
        provisions of Sections 4.2, 6, 9, 11, 12 and 13 shall survive the termination
        or
        expiration of this Agreement.
  5.  Payment .
  5.1.  Payment .
        All
        License Fees and other amounts payable hereunder shall be in U.S. Dollars,
        shall
        be non-refundable, and shall be made in full, without set-off or deduction
        of
        any kind, into an account or accounts of DSS, for which DSS shall provide
        wire
        transfer instructions to Licensee.
  5.2.  Late
        Fees .
        In the
        event Licensee shall fail to pay any amount owed to DSS under this Agreement
        when such amount is due and payable, Licensee shall pay to DSS interest on
        the
        amount of such under-payment or non-payment at the rate equal to three quarters
        of one percent (0.75%) per month, from the date due until paid. Any payments
        received from Licensee, when there is any amount overdue, shall be applied
        first
        to discharge any such accrued late charges.
  5.3.  Foreign
        Exchange **.** If
        applicable, all License Fees and other amounts payable hereunder shall be
        based
        on the exchange rate described on Schedule
        1 on the
        date on which payment is due, and Licensee shall provide detailed conversion
        calculations with every payment submitted hereunder. If, by reason of any
        governmental or fiscal restrictions affecting convertibility, payment cannot
        be
        made in U.S. funds, then Licensee shall take such reasonable actions with
        respect to such payments as DSS directs.
  6.  Proprietary
        Rights .
  6.1.  Subject
        to Licensee’s expressly granted rights under this Agreement, Licensee
        acknowledges and agrees that DSS shall own all right, title, and interest
        in and
        to the Technologies (including any Improvements), Technology Marks, or other
        Intellectual Property of DSS. Licensee agrees that it will not at any time
        (i)
        do or cause to be done any act or thing contesting or in any way impairing
        any
        part of such right, title and interest or (ii) represent, expressly or by
        implication that it has any right, title or interest in or to any of the
        foregoing other than as expressly set forth herein.
  6
 6.2.  Licensee
        acknowledges DSS’ claim of sole ownership of the Technology Marks and all
        associated goodwill. Nothing in this Agreement or in the performance thereof,
        or
        that might otherwise be implied by law, shall operate to grant Licensee any
        right, title, or interest in or to the Technology Marks, other than as specified
        in the limited license grant set forth herein. Licensee’s use of the Technology
        Marks shall inure solely to the benefit of DSS. Licensee hereby assigns and
        shall assign in the future to DSS all rights it may acquire by operation
        of law
        or otherwise in the Technology Marks, along with the goodwill associated
        therewith. DSS shall have the sole right to, and in its sole discretion may,
        commence, prosecute or defend, and control any action concerning the Technology
        Marks. Licensee shall not contest the validity of, by act or omission
        jeopardize, or take any action inconsistent with, DSS’ rights or goodwill in the
        Technology Marks, including attempted registration of the Technology Marks,
        or
        use or attempted registration of any mark similar thereto.
  7.  Licensee
        Obligations .
  7.1.  Exclusivity .
        During
        the Term, Licensee shall not (i) manufacture, distribute, sell, promote,
        license
        or sub-license any products manufactured using a technology that competes
        in any
        way, directly or indirectly, with the Intellectual Property of DSS, and/or
        (ii)
        enter into any marketing or distribution agreement or relationship with any
        other provider of products or services whereby Licensee will market, sell
        or
        distribute any products which are either directly or indirectly competitive
        to
        the DSS Products.
  7.2.  Decertified
        Technologies **.** During
        the Term, Licensee shall not use, install or otherwise incorporate any
        Decertified Technologies in connection with Licensee Products to be
        manufactured, processed, prepared, displayed, offered for sale and sold by
        Licensee.
  7.3.  Technology
        Marks .
        During
        the Term, Licensee agrees to use DSS’ Technology Marks in accordance with the
        usage guidelines attached hereto as Exhibit
        A .
        Licensee shall promptly, upon notice from DSS, correct and remedy any
        deficiencies in its use of the Technology Marks.
  7.4.  Advertising .
  7.4.1.  During
        the Term, Licensee shall use its best efforts to promote and market the sale
        of
        both Licensee Products containing the Technologies and DSS Products, which
        promotional efforts shall include, without limitation, attending and presenting
        at industry trade shows, preparing customer mailings and presentations,
        brochures or other promotional material, and including references to the
        Technologies on Licensee’s websites. During the Term, Licensee shall confer with
        DSS on a regular basis to review and plan joint promotional activities. Licensee
        may appoint sub-distributors, agents, or other representatives to market
        the DSS
        Products without the prior written consent of DSS provided Licensee shall
        ensure
        that such persons do not sell or market the DSS Products outside of the
        Territory or otherwise violate the terms of this Agreement.
  7
 7.4.2.  DSS
        hereby agrees to provide to Licensee an advertising/marketing rebate (the
        “ Marketing
        Rebate ”)
        in an
        amount equal to five percent (5%) of total revenue generated by Licensee
        under
        this Agreement during the Term (with respect to both License Fees payable
        to DSS
        and payment to DSS on behalf of the distribution and sale of DSS Products),
        up
        to a maximum total revenue of One Million and No/100 U.S. Dollars (U.S.
        $1,000,000.00). Such Marketing Rebate, or any portion thereof, shall be payable
        by DSS to Licensee within thirty (30) days of written request therefore,
        which
        request shall be certified by an officer of Licensee and shall set forth,
        in
        detail, all advertising and marketing activities upon which such request
        is
        based and all costs incurred in connection therewith. Notwithstanding the
        foregoing, upon the date hereof, DSS shall provide to Licensee an amount
        equal
        to Two Thousand Five Hundred and No/100 U.S. Dollars (U.S. $2,500.00) which
        shall represent the initial payment of the Marketing Rebate. In the event
        Licensee fails to provide evidence, reasonably acceptable to DSS, that such
        amount has been spent on advertising/marketing during the first six (6) months
        of the Term, such amount shall be refunded to DSS immediately upon request.
  7.5.  Quality
        Control .
        Throughout the Term, Licensee shall use commercially reasonable efforts,
        and
        cooperate with DSS, to ensure that the Technologies embedded in the Licensee
        Products are reliable, effective and in compliance with all minimum quality
        and
        output standards as determined in DSS’ reasonable discretion and that Licensee’s
        application thereof conforms with all applicable guidelines with respect
        thereto. To this end, Licensee shall, upon DSS’ reasonable request, make
        available to DSS samples of Licensee Products incorporating the Technologies.
        In
        the event DSS determines, in its reasonable discretion, that Licensee’s
        application of the Technologies fails to meet minimum quality and output
        standards, DSS may initiate troubleshooting procedures and request that Licensee
        make specific adjustments. Licensee’s failure to comply with DSS’ request shall
        be deemed a material breach under this Agreement.
  8.  Technical
        Support; Training and Technology Services .
  8.1.  General
        Support Services .
        DSS
        shall make available to Licensee and all Approved Third Parties, during DSS’
regular business hours, via telephone and electronic mail, trained personnel
        to
        assist Licensee with technical support related to the Technologies. **** If
        Licensee or any Approved Third Party desires to obtain on-site support from
        DSS’
authorized, trained personnel, Licensee shall send a written request to DSS
        and
        the parties shall mutually agree on the date and scope of the services to
        be
        provided. Licensee shall pay to DSS an additional fee in the amount set forth
        on Schedule
        1 for each
        authorized person provided on-site to perform the agreed upon services. Licensee
        shall also reimburse DSS for all such assigned service personnel’s reasonable
        out-of-pocket expenses incurred in providing support to Licensee and/or the
        Approved Third Party, including expenses incurred for travel, lodging and
        meals.
        All amounts due by Licensee hereunder shall be paid by Licensee within thirty
        (30) days of the date of the invoice thereof. If Licensee disputes the amount
        of
        an invoice submitted by DSS hereunder, Licensee shall notify DSS in writing
        within fifteen (15) days after Licensee’s receipt of the invoice.
  8.2.  Limitation
        on Liability for Support Services **.** Except
        in the event of gross negligence or willful misconduct, in no event shall
        DSS,
        or the technicians, employees or agents of DSS, be liable to Licensee for
        any
        damages or claims for damages that may occur as a result of the action or
        inaction of the technicians, employees or agents of DSS during the provision
        of
        support services.
  8
 9.  Confidentiality;
        Non-Disclosure .
        The
        parties acknowledge that they have entered into that certain Mutual
        Non-Disclosure dated as of November 6, 2006 (the “ NDA ”),
        a
        copy of which is attached hereto as Exhibit
        B .
        During
        the term of this Agreement and at all times thereafter, the parties shall
        be
        bound by all of the terms and conditions set forth in the NDA.
  10.  Maintenance
        of Books and Records; Sales Reports; Audit .
  10.1.  Maintenance
        of Books and Records; Sales Reports .
        During
        the Term, and for a period of three (3) years thereafter, Licensee agrees
        to
        keep and maintain proper records and books of account in accordance with
        generally accepted accounting practices, showing the sales upon which the
        License Fees are based, and all other information necessary to determine
        accurate payment thereof. Together with any License Fee payment, Licensee
        will
        deliver to DSS a detailed report showing the information on which the License
        Fee calculation was based.
  10.2.  Audit .
  10.2.1.  During
        the Term, and for one (1) year thereafter, DSS, together with its agents,
        consultants, accountants, attorneys and representatives, shall have access
        to
        Licensee’s and Licensee’s agents’ records, databases, and premises for the
        purposes of conducting an audit concerning Licensee’s compliance with Licensee’s
        obligations hereunder. All such audits shall be conducted during Licensee’s
        normal business hours, and on reasonable advance notice to Licensee, and
        at
        DSS’ expense, subject to Section 10.2.2.
  10.2.2.  If
        an
        audit reveals an underpayment by Licensee, Licensee shall promptly pay the
        amounts owing, plus interest thereon at the rate of three quarters of a percent
        (0.75%) per month until all underpaid amounts are paid in full. If such audit
        reveals an underpayment by an amount in excess of twenty percent (20%) for
        the
        period covered by the audit report then, without prejudice to any other rights
        or remedies of DSS, Licensee shall pay to DSS the out-of pocket costs of
        such
        audit, including, without limitation, attorneys fees, the amount underpaid,
        interest due thereon, and an additional payment of fifteen percent (15%)
        of the
        total amount due for the audited period.
  11.  Indemnification .
  11.1.  By
        DSS .
  11.1.1.  DSS
        shall
        indemnify, defend and hold Licensee and each of its shareholders, directors,
        officers, employees, agents, independent contractors, and representatives
        (“ Licensee
        Indemnified Parties ”)
        harmless for, from and against, any and all suits, actions and proceedings,
        claims, demands, liabilities, losses, damages, judgments, fines, expenses
        (including, without limitation, attorneys’ fees and expert witness fees) and
        costs (individually and collectively, “ Infringement
        Claims ”),
        made
        against a Licensee Indemnified Party by a third party arising from or in
        connection with any actual or alleged claims that marketing, manufacture
        or sale
        of DSS Products and/or Licensee Products incorporating the Technologies infringe
        any patent, trademark, copyright, trade secret or other property right of
        a
        third party. The indemnification provided by this Section 11.1 is contingent
        upon: (i) the Licensee Indemnified Parties promptly notifying DSS in writing
        of
        any known claim which may give rise to an Infringement Claim; (ii) DSS’ sole
        control of the defense and settlement of such Infringement Claims at DSS’
expense ( provided , however ,
        that
        any settlement shall be made only with the consent of Licensee or include,
        as an
        unconditional part thereof, a full release of the Licensee Indemnified Parties);
        and (iii) the Licensee Indemnified Parties’ cooperation with all reasonable
        requests of DSS (at DSS' sole expense) in defending or settling an Infringement
        Claim.
  9
 11.1.2.  In
        addition to the rights and obligations of the parties set forth in Section
        11.1.1, if an Infringement Claim is made or threatened, DSS, at its own expense
        and in its sole discretion, may exercise any of the following remedies: (i)
        obtain for Licensee the right to continue to use market, manufacture or sell
        the
        DSS Products and/or Licensee Products consistent with this Agreement; (ii)
        modify the Technologies incorporated into the Licensee Products and/or the
        DSS
        Products so they are non-infringing and comply in all material respects with
        this Agreement; (iii) replace the Technologies with non-infringing technology
        or
        information and/or materials, as the case may be, that comply in all material
        respects with this Agreement; or (iv) terminate this Agreement, in its sole
        discretion, immediately without further liability to Licensee or DSS provided
        that in such event DSS shall be required to promptly refund to Licensee,
        on a
        pro-rata basis, any prepaid License Fees or payments on behalf of DSS Products.
        DSS will have no obligation to indemnify Licensee Indemnified Parties for
        claims
        that the Technologies infringe the intellectual property rights of a third
        party
        to the extent such claims arise as a result of Licensee's modification of
        the
        Technologies by anyone other than DSS’ agents or subcontractors or any Person
        authorized in writing by DSS.
  11.1.3.  The
        foregoing represents DSS’ entire obligation, and Licensee’s entire remedy, with
        respect to Infringement Claims.
  11.2.  By
        Licensee .
        Licensee shall, at its own expense, indemnify, defend and hold harmless DSS,
        its
        shareholders, directors, officers, employees, agents, independent contractors
        and representatives (each a “ DSS
        Indemnified Party ”)
        from
        and against
        all suits, actions and proceedings, claims, demands, liabilities, losses,
        damages, judgments, fines, expenses (including, without limitation, attorneys’
fees and expert witness fees) and costs, made against a DSS Indemnified Party
        by
        a third party to the extent arising from Licensee’s (or its officers, directors,
        employees, agents, independent contractors and representatives’) improper or
        unauthorized use of the Technologies, the Technology Marks and/or the DSS
        Products. Licensee
        shall have the right to control the defense of all such claims, lawsuits
        and
        other proceedings. In no event shall DSS settle any such claim, lawsuit or
        proceeding without Licensee's prior written approval.
  10
 12.  Limited
        Warranties; Limitation of Liability .
  12.1.  Power
        and Authority .
        Each
        party represents and warrants that it has the right, power and authority
        to
        enter into this Agreement and that the signatory on behalf of such party
        to this
        Agreement has full authority to enter into and bind the party to the obligations
        set forth in this Agreement.
  12.2.  Right
        to Technology .
        DSS
        represents and warrants to Licensee that (i) the Technologies and the Technology
        Marks are the sole and exclusive property of DSS; (ii) DSS has all right,
        title
        and interest in the Technologies and the Technology Marks to grant to Licensee
        the rights provided in this Agreement; (iii) nothing contained in this Agreement
        conflicts with any other obligation or agreement of DSS; and (iv), to DSS’
knowledge, no liens, claims or other obligations exist that will affect
        Licensee’s use or rights to any Technologies and/or Technology Marks granted
        under this Agreement.
  12.3.  DISCLAIMER
        OF WARRANTIES .
        EXCEPT
        AS OTHERWISE EXPRESSLY PROVIDED HEREIN, THE TECHNOLOGIES IS PROVIDED STRICTLY
        “AS IS” AND DSS MAKES NO WARRANTIES HEREUNDER, EXPRESS OR IMPLIED, AND ALL OTHER
        WARRANTIES, INCLUDING, WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY
        AND
        FITNESS FOR A PARTICULAR PURPOSE ARE HEREBY DISCLAIMED.
  12.4.  LIMITATION
        OF LIABILITY .
        EXCEPT
        FOR CLAIMS ARISING OUT OF A BREACH BY ONE PARTY OF THE OTHER PARTY’S
        INTELLECTUAL PROPERTY RIGHTS OR CLAIMS ARISING UNDER A PARTY’S INDEMNIFICATION
        OBLIGATIONS HEREUNDER, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER
        PARTY FOR ANY INDIRECT, CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES
        WHATSOEVER, INCLUDING WITHOUT LIMITATION, DAMAGES FOR LOSS OF BUSINESS PROFITS,
        BUSINESS INTERRUPTION, LOSS OF BUSINESS INFORMATION AND THE LIKE, ARISING
        OUT OF
        THE USE OF OR INABILITY TO USE THE TECHNOLOGIES OR ANY PRODUCTS OR SERVICES
        PROVIDED HEREUNDER, REGARDLESS OF THE FORM OF ACTION, WHETHER IN CONTRACT,
        TORT,
        STRICT LIABILITY OR OTHERWISE, EVEN IF THE OTHER PARTY HAS BEEN ADVISED OF
        THE
        POSSIBILITY OF SUCH DAMAGES. BECAUSE SOME JURISDICTIONS DO NOT ALLOW THE
        EXCLUSION OR LIMITATION OF LIABILITY FOR CONSEQUENTIAL OR INCIDENTAL DAMAGES,
        THE ABOVE LIMITATION MAY NOT APPLY. IN NO EVENT SHALL DSS’ LIABILITY UNDER THIS
        AGREEMENT EXCEED THE TOTAL AMOUNT PAID BY LICENSEE TO DSS UNDER THIS AGREEMENT.
  12.5.  Nothing
        contained herein shall be deemed to require that DSS shall be under any
        obligation to maintain any of its patents. The parties hereby agree that
        the
        grant of rights under this Agreement does not imply any warranty concerning
        the
        validity or scope of the patents or any rights held by a third party or any
        warranty against unauthorized use of the patents and/or know-how. Further,
        this
        Agreement imposes no obligation for DSS to enforce any of its patents against
        third party infringers and imposes no obligation on the Licensee should a
        patent
        be so enforced by DSS.
  11
 13.  Miscellaneous .
  13.1.  Applicable
        Taxes :
        Licensee shall be responsible for all local, state, sales, use, service,
        excise,
        or other similar taxes or duties, and any other taxes payable on any amounts
        payable pursuant to this Agreement.
  13.2.  Assignment .
        Neither
        party may assign this Agreement, nor its rights and obligations hereunder,
        to
        any third party without the prior express written approval of the other party.
        Any purported assignment without the consent of such other party shall be
        void.
        The provisions of this Agreement shall be binding upon, and shall inure to,
        the
        benefit of the parties, their legal representatives, permitted successors
        and
        permitted assigns.
  13.3.  Remedies
        Cumulative; Waiver .
        The
        rights and remedies provided in this Agreement, and all other rights and
        remedies available to either party at law or in equity, are, to the extent
        permitted by law, cumulative and not exclusive of any other right or remedy
        now
        or hereafter available at law or in equity. A party’s failure to assert any
        right or remedy shall not constitute a waiver of that right or remedy. No
        waiver
        by either party of any default shall be deemed as a waiver of prior or
        subsequent default of the same or other provisions of this
        Agreement.
  13.4.  Severability .
        In the
        event that a court of competent jurisdiction finds any provision of this
        Agreement to be illegal, invalid or unenforceable, it is the intention of
        the
        parties that such court shall modify such provision as necessary so that
        it
        shall be legal, valid and enforceable. The illegality, invalidity or
        unenforceability of any provision of this Agreement shall not affect the
        legality, validity or enforceability of any other provision of this
        Agreement.
  13.5.  Relationship
        of the Parties .
        Nothing
        in this Agreement shall be construed as creating a partnership, joint venture
        or
        agency relationship between the parties, or as authorizing either party to
        act
        as agent for the other.
  13.6.  Amendments .
        No
        modifications or amendments may be made to this Agreement except as expressed
        in
        writing and signed by both parties.
  13.7.  Irreparable
        Damage .
        The
        parties acknowledge and agree that any violation of this Agreement would
        subject
        the other to irreparable injury for which monetary damages will not be an
        adequate remedy. Therefore, in addition to any remedies otherwise available,
        the
        non-breaching party will be entitled to any injunctive relief and specific
        performance to enforce the terms of this Agreement. The breaching party shall
        pay all reasonable attorney's fees and court costs, arbitration cost, and/or
        appeal costs incurred by the non-breaching party should it be necessary for
        the
        non-breaching party to enforce the terms of this Agreement.
  13.8.  No
        Construction against the Drafter; Headings .
        The
        parties acknowledge that they have reviewed this Agreement, have either been
        represented by counsel or had the opportunity to be represented by counsel,
        and
        have negotiated its terms. Accordingly, this Agreement shall be construed
        without regard to the party or parties responsible for its preparation, and
        shall be deemed to have been prepared jointly by the parties. Headings contained
        in this Agreement are not intended to be full and accurate descriptions of
        the
        contents of this Agreement and shall not affect the meaning or interpretation
        of
        this Agreement.
  12
 13.9.  Notice .
        All
        notices sent under this Agreement shall be in writing and shall be deemed
        effectively given (i)
        upon
        personal delivery to the party to be notified; (ii) when sent by confirmed
        facsimile if sent during normal business hours of the recipient, if not,
        then on
        the next business day; (iii) three (3) days after having been sent by registered
        or certified mail, return receipt requested, postage prepaid; or (iv) two
        (2)
        days after deposit with an internationally recognized overnight courier,
        specifying two (2) day delivery, with written verification of
        receipt. Notices
        shall be sent to the Parties at the following addresses or fax numbers or
        such
        other addresses or fax numbers as the parties subsequently may provide in
        accordance with this Section 13.9:
  If
                  to DSS:
                
                Document
                  Security Systems, Inc.
                28
                  Main Street East, Suite 1525
                Rochester,
                  New York 14614
                USA
                Fax:
                  585-325-2977
                Attention:
                  Chief Executive Officer
              With
                  a copy to:
                
                Law
                  Offices of Michael T. Hughes, Esq.
                60
                  East 42nd Street, Suite 1812
                New
                  York, New York 10165
                USA
                Fax:
                  (212) 697-3969
                Attention:
                  MichaelT.
                  Hughes,
                  Esq.If
                  to Licensee:
                
                PT
                  Sekur Grafika
                Mega
                  Arvia Building, 4thFloor
                Jalan
                  Sultan Iskandar Muda No. 29
                Jakarta
                  12240
                Indonesia
              With
                  a copy to:
                
                Law
                  Firm Wintama & Co.
                Jalan
                  Tebet Barat Dalam VII No. 8
                Jakarta
                  12830
                Indonesia
 13.10.  Force
        Majeure .
        Notwithstanding any provision herein, the parties may be discharged from
        all
        liabilities if the failure to perform or improper performance of this Agreement
        is the result of Force Majeure, provided that the party subject to the Force
        Majeure provides notice of such Force Majeure, as soon as possible after
        such
        party became subject to such Force Majeure.
  13.11.  Governing
        Law; Jurisdiction .
        This
        Agreement shall be governed in accordance with the laws of the State of New
        York
        without regard to conflict of laws principles. Each of the parties hereby
        (i)
        consents to the exclusive jurisdiction of and venue in the appropriate state
        or
        federal courts located in the City of Rochester, State of New York, (ii)
        agrees
        to accept service of process by mail, and (iii) waives any jurisdictional,
        lack
        of venue, or forum defenses otherwise available to it with respect to actions
        brought in such courts.
  13
 13.12.  Foreign
        Taxes and Governmental Approvals *.* Licensee
        agrees, at its sole cost and expense, to obtain all governmental approvals
        and
        registrations required under the laws of the Territory in connection with
        this
        Agreement, and to pay any taxes or fees required (including withholding taxes)
        that may be levied on the fees payable by Licensee under this Agreement.
        Licensee agrees to provide DSS with certificates and receipts indicating
        that
        such taxes have been duly paid.
  13.13.  Entire
        Agreement . This
        Agreement and the Schedules and Exhibits hereto contain the entire agreement
        between the parties with respect to the transactions described herein, and
        supersede all prior agreements, written or oral, with respect thereto, provided , however ,
        that
        notwithstanding any provision herein, the NDA ** shall
        remain in full force and effect.
  13.14.  Counterparts;
        Facsimile Signatures .
        This
        Agreement may be executed in counterparts, each of which shall be deemed
        to be
        original but all of which together shall constitute a single instrument.
        The
        signatures required for execution may be transmitted to the other Party via
        facsimile and such signatures shall be deemed a duplicate original.
  
  [REMAINDER
        OF PAGE INTENTIONALLY LEFT BLANK]
 14
  IN
        WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
        by
        their respective duly authorized officers as of the date first set forth
        above.
  
  Document
                  Security Systems, Inc.
                
                By:/s/
                  Patrick
                  White
                Name:
                  Patrick White
                Title:
                  Chairman and CEO
              PT
                  Sekur Grafika
                
                By:/s/
                  Danny
                  Rachmat
                Name:
                  Danny Rachmat
                Title:
                  President; Director
                
                By:/s/
                  Tong Hing
                  Wai
                Name:
                  Tong Hing Wai
                Title:
                  Director
 
 15
  **SCHEDULE
        1**
 **SCHEDULE
        OF TERMS AND CONDITIONS**
 
 
 1.
              Technologies:
                  AuthentiGuardTM Pantograph 4000, AuthentiGuardTM Prism, AuthentiGuardTM Block
                  Out, AuthentiGuardTM Phantom, and AuthentiGuardTM On-Line as may be agreed
                  upon by the parties from time to time in writing. Notwithstanding
                  anything
                  in the Agreement to the contrary,DSS
                  reserves the right to restrict and limit use of one or more of
                  the
                  Technologies with respect to specific applications by Licensee
                  and/or
                  Approved Third Parties.
 
 2.
              Licensee
                  Products:
                  Checks, labels, documents, brand packaging, government issued
                  identification cards, licenses, certificates, and such other products
                  as
                  may be agreed upon by the parties from time to time in writing.
 
 3.
              License
                  Fees:
                  Such royalty fees and other fees as shall be agreed upon by the
                  parties in
                  writing on a project by project basis.
 
 4.
              DSS
                  Products:
                  Safety/security paper (stock and custom), plastic cards, certificates
                  and
                  documents, labels, and other printed items incorporating the
                  Technology.
 
 5.
              Prices
                  for DSS Products:
                  Such prices as shall be determined by DSS on a case by case basis
                  upon
                  Licensee’s written request, based on the requested product specifications
                  and quantity, the geographic area in which the DSS Products will
                  be sold,
                  and the customers to whom the DSS Products will be sold, discounted
                  so as
                  to allow for mark-ups by Licensee. All such prices shall be set
                  forth on a
                  price list and provided to Licensee within ten (10) days of written
                  request therefor.
 
 6.
              Payment
                  Terms With Respect to DSS Products:
                  Payments to be made thirty (30) days after receipt of a written
                  invoice by
                  Licensee, subject to available credit by Licensee. For purposes
                  hereof,
                  Licensee is granted an initial credit limit in the amount of One
                  Hundred
                  Thousand and No/100 U.S. Dollars (U.S. $100,000.00). Additional
                  credit is
                  subject to approval by DSS, in its sole and absolute discretion,
                  using
                  standard business credit verification terms.
 
 7.
              Territory:
                  The Republic of Indonesia.
 
 8.
              Applicable
                  Exchange Rate.
                  The exchange rate for conversion of the currency into U.S. Dollars
                  shall
                  be calculated on the day payment is made, or the preceding business
                  day if
                  payment is not made on a business day, according to the dollar
                  exchange
                  rate for such currency published in the Wall Street Journal or
                  such other
                  exchange rate to which the parties
                  agree.
 
 9.
              Rate
                  for Additional Support.
                  Such amounts as shall be agreed upon by the parties in writing
                  on a
                  project by project basis.
 
 
  10.
                Term.
  a.
              Initial
                  Term:
                  Five (5) years (the “Initial
                  Term”).
 
 b.
              Renewal
                  Term:Provided
                  (i) the Agreement shall be in full force and effect as of the expiration
                  date of the Initial Term, (ii) Licensee shall not then be in default
                  under
                  the terms of the Agreement, and (iii) the total revenue generated
                  by DSS
                  from Licensee under this Agreement during the Initial Term (with
                  respect
                  to both License Fees and payment for DSS Products) is equal to
                  or greater
                  than Five Hundred Fifty Thousand and No/100 U.S. Dollars (U.S.
                  $550,000.00), the Agreement shall automatically renew for an additional
                  period of five (5) years (the “Renewal Term”). Such Renewal Term shall be
                  upon the same terms and conditions as the Initial Term, except
                  that
                  Licensee shall have no option to renew at the end of the Renewal
                  Term.
                  Notwithstanding the foregoing, in the event that, as of the day
                  preceding
                  the seventh (7th)
                  anniversary of the Effective Date, the total revenue generated
                  by DSS from
                  Licensee (with respect to both License Fees and payment for DSS
                  Products)
                  is less than Seven Hundred Fifty Thousand and No/100 U.S. Dollars
                  ($750,000.00), DSS may terminate this Agreement immediately upon
                  written
                  notice to Licensee.
 b.
 II
  **EXHIBIT
        A**
 **USAGE
        GUIDELINES FOR TECHNOLOGY MARKS**
 
  1.
              Licensee
                  agrees to use the appropriate trademark, product descriptor and
                  trademark
                  symbol (either “(TM)” or “(R)” in a superscript), and clearly indicate
                  DSS’ ownership of its trademark(s) whenever the Technology name is
                  mentioned in any advertisement, brochure or in any other manner
                  in
                  connection with Licensee Products or DSS Products. Licensee further
                  agrees
                  to reproduce and include all copyright, patent and other confidential
                  or
                  proprietary rights notices on any copies of any DSS property it
                  makes.
 
 2.
              Licensee
                  shall, upon request, provide DSS with samples of all of Licensee’s
                  promotional, packaging and other written materials which use the
                  Technology name and the Technology Marks.
 
 3.
              Licensee
                  shall not adopt or use a product name, trademark or service mark
                  in
                  conjunction with the advertising, packaging, promotion or sale
                  of Licensed
                  Products or DSS Products which includes all or part of any Technology
                  Marks or any term that is similar to the Technology Marks.
 
 4.
              Licensee
                  agrees not to remove, obliterate or alter any Technology Marks
                  or any
                  copyright, patent, trademark or other confidential or proprietary
                  rights
                  notice of DSS which appear on any Intellectual Property provided
                  by DSS or
                  the DSS Products, nor shall it affix to the same any other notice
                  or mark.
 
 5.
                Licensee
                    may use Technology Marks on web pages, and in related advertising,
                    marketing, and collateral materials, solely as approved by DSS
                    in writing,
                    and insofar as the use is consistent with this
                    Agreement.
 
 6.
              Technology
                  Marks may not be altered in any manner and may never be used in
                  a sentence
                  or phrase, nor may it be joined or used as a design element with
                  any other
                  logo.
 
 7.
              Technology
                  Marks may only be presented in the form attached hereto, as previously
                  provided to Licensee.
 
  **EXHIBIT
        B**
 **CONFIDENTIALITY/NON-DISCLOSURE
        AGREEMENT**
 
 Attached