**257
                  Park Avenue South**
                **New
                  York, NY 10010**
                **Tel
                  (212) 286-7000**
                **Fax
                  (212) 286-7010**




June
      11,
      2007








Mr.
      Patrick White


Chief
      Executive Officer


Document
      Security Systems, Inc.


28
      Main
      Street East


Suite
      #1525


Rochester,
      NY 14614





**Subject** :
      Letter
      Agreement for the Appointment of DSS as Non-Exclusive Licensee/Reseller of
      BTI
      Products in the United States




Dear
      Patrick,





This
      letter agreement (the “Letter Agreement”) sets forth the fundamental terms and
      conditions whereby Document Security Systems, Inc. (DSS) is authorized as a
      limited, non-exclusive distributor of International Barcode Corporation (d/b/a
      “BTI”) products as integrated components of DSS’ own products. This agreement is
      intended to be temporary in that we anticipate negotiating a Comprehensive
      License Agreement within sixty (60) days from the date herein that will
      supersede this Letter Agreement. However, the terms in this Letter Agreement
      shall be binding on both parties and, as applicable, shall be included in the
      Comprehensive Agreement.




**1** **Definitions**




1.1  " BTI
      End-User License Agreement **”** or **“** BTI
      EULA " **** shall
      mean the form of BTI’s agreement under which BTI directly grants to a DSS
      Customer a non-exclusive, limited license and right to use BTI Products as
      integrated components of Enhanced DSS Products.




1.2  “BTI
      Products” shall mean, but shall not necessarily be limited to, the
      following:




a)
            Photo
                In BarcodeTM — barcode superimposed on ID portrait to insure authenticity,
                and




b)
            RSS
                Barcode Generation Software - a customizable, value added commercially
                supported software package installed on network servers that dynamically
                generates barcode images for custom applications and uses






Page
          1


**257
                  Park Avenue South**
                **New
                  York, NY 10010**
                **Tel
                  (212) 286-7000**
                **Fax
                  (212) 286-7010**


1.3  “DSS
      Customers” shall mean third parties that have purchased Enhanced DSS Products
      for the third party’s own use (and not for redistribution, remarketing,
      timesharing, or service bureau use) within the Territory in accordance with
      the
      terms of the BTI EULA and this Letter Agreement.




1.4  “DSS
      Products” shall mean, but shall not necessarily be limited to, the
      following:




a)
            AuthentiGuard
                Blockout




b)
            AuthentiGuard
                Prism




c)
            AuthentiGuard
                Pantograph 5000




1.5  “Enhanced
      DSS Products” shall mean the combination of one or more BTI Product(s) with one
      or more DSS Product(s) that adds value to the DSS offering.




1.6  “Territory”
      shall mean the United States.




**2** **Term**


2.1  The term
      of this Letter Agreement will begin on the date of the last signature in the
      signature block below (“the Effective Date”) and shall be superseded by the
      Comprehensive Agreement which the Parties agree to work in good faith to
      negotiate and execute within sixty (60) days from the Effective
      Date.





2.2  The
      term
      of the grant of a license to distribute BTI Products under the Comprehensive
      Agreement will be for five (5) years commencing as of the Effective
      Date.




**3** **License
        Terms and Conditions**


3.1  BTI
      hereby grants to DSS, for the Term, a limited, non-exclusive, royalty-bearing,
      non-transferable license and right within the Territory to (a) combine and
      integrate BTI Products with DSS Products for the sole and exclusive purpose
      of
      creating, selling, and supporting Enhanced DSS Products; and (b) use BTI
      Trademarks, as agreed by the Parties, where in DSS’ business judgment such use
      will enhance DSS’ ability to market, promote and sell the Enhanced DSS Products
      (“the License”).




3.2  DSS
      Customers shall execute and return to BTI, either directly or through DSS,
      an
      executed BTI EULA as a precondition to receiving any license or right to receive
      or use the Enhanced DSS Products.




3.3  DSS
      shall
      not, and shall not permit others to, decompile, disassemble, translate, reverse
      engineer or otherwise attempt to discover or expose the trade secrets or other
      intellectual property imbedded in or associated with BTI Products without the
      express written consent of BTI in each instance.




3.4  DSS
      shall
      identify, in advance, any third party that DSS wishes to market, promote, or
      sell Enhanced DSS Products (the “Opportunity”). BTI has the right to approve or
      disapprove any Opportunity. BTI agrees to consider all Opportunities presented
      by DSS in good faith and to respond to any such DSS request in a timely manner.




Page
          2


**257
                  Park Avenue South**
                **New
                  York, NY 10010**
                **Tel
                  (212) 286-7000**
                **Fax
                  (212) 286-7010**




**4** **Royalties**


DSS
      shall
      pay to BTI a royalty (“Royalty”) on each sale of an Enhanced DSS Product an
      amount agreed to by the parties in each instance prior to any quotation to
      a
      third party. The Royalty shall be equal to either (a) twenty five percent (25%)
      of the Net Margin of such sale, or (b) a negotiated price between BTI and DSS.
      “Net margin” is defined as the sale price less the cost of other third party
      items included in the sale. All such Royalties shall be due to BTI promptly
      upon
      collection of the invoiced amount for such sales.




**5** **Amended
        Warrant**


As
      additional consideration for BTI’s grant of the Appointment, DSS agrees to take
      all necessary action to extend the Expiration Date of Warrant No. B-1, dated
      June 16, 2006, issued by DSS to BTI (the “Warrant”) pursuant to a 2006 Letter
      Agreement between BTI and DSS from “June 16, 2007” to “December 31, 2007.” ****




**6** **Rights
        in the BTI Products**


DSS
      acknowledges and agrees that BTI is the sole and exclusive owner of the BTI
      Products and BTI retains all rights, title and interest to the BTI Products
      and
      the trade secrets and intellectual property associated with the BTI Products
      (including any improvements thereto) as well as any current or future patents,
      trademarks, servicemarks, and copyrights pertaining to the BTI Products.




**7** **BTI
        Support to DSS Customers**


BTI
      may
      provide services and support to DSS Customers as needed to support the
      implementation solutions using the BTI component of the Enhanced DSS Products
      for a fee to be agreed to by the parties as well as reimbursement for any travel
      related expenses.




**8** **Miscellaneous**


8.1  DSS and
      BTI are separate and distinct corporate entities under this Letter Agreement
      and
      nothing in this Letter Agreement may be construed to create a partnership,
      joint
      venture, or agency relationship between the parties.




8.2  Neither
      Party may assign any rights nor obligations under this Letter Agreement to
      any
      third party without the prior express written approval of the non-assigning
      party .




8.3  Either
      party may terminate the License by providing sixty (60) days notice to the
      other
      Party in the event that a third party acquires all or substantially all of
      a
      Party’s assets.





Page
          3


**257
                  Park Avenue South**
                **New
                  York, NY 10010**
                **Tel
                  (212) 286-7000**
                **Fax
                  (212) 286-7010**




8.4  BTI
      hereby indemnifies and holds DSS harmless from any liability, cost, loss, or
      expense of any kind, and agrees to defend any suit or proceeding against BTI,
      to
      the extent arising out of or based on any claim, demand, or action alleging
      that
      the DSS Products or any portion thereof, infringes any third-party rights in
      copyrights, patents, trade secrets or intellectual property rights.




8.5  Any
      claim
      or dispute between the Parties pertaining to this Agreement shall be arbitrated
      in New York City before a single neutral arbitrator under the Commercial
      Arbitration Rules of the American Arbitration Association (the “AAA”). Any
      arbitration award may be entered as a judgment in any court of competent
      jurisdiction, or application may be made to such court for a judicial acceptance
      of the award and enforcement, as the law of such jurisdiction may require or
      allow.




8.6  This
      Letter Agreement shall be construed and interpreted in accordance with the
      laws
      of the State of New York without reference to principles of conflict of laws.







We
      agree
      that this Letter Agreement reflects our agreements on these matters, is to
      the
      mutual benefit of both DSS and BTI, and will have full force and effect until
      such time as the anticipated Comprehensive License Agreement referenced above
      is
      executed. If this meets your understanding, please sign below and return via
      fax
      to (585) 325- 2977.







Sincerely,







______________________


Cary
      Bunin


Chief
      Executive Officer





___________________________________________________________________________




Acknowledged
      and Agreed to :





**DOCUMENT
      SECURITY SYSTEMS, INC.**








______________________     _______________________


Patrick
      White       Date


Chief
      Executive Officer






Page
          4