SECURITY
AGREEMENT

     

    SECURITY
AGREEMENT, dated December 18, 2008, made by SECUPRINT INC. (the “Borrower”), in
favor of BAUM CAPITAL INVESTMENTS INC. (“Lender”).

     

    WITNESSETH:

     

    WHEREAS,
pursuant to a Secured Promissory Note, dated as of the date hereof (the “Note”),
from the Borrower and Document Security Systems, Inc. (“DSSI”) in favor of the
Lender, the Lender has agreed to make certain a loan (the “Loan”) to the
Borrower in an aggregate principal amount of up to $1,000,000;
 

    


    WHEREAS,
the Borrower is a subsidiary of DSSI, and DSSI is executing the Note as an
additional borrower thereunder, with the Borrower using the proceeds of the
Loan;

     

    WHEREAS,
it is a condition precedent to the Lender making the Loan to the Borrower
pursuant to the Note, that the Borrower shall have executed and delivered to the
Lender a security agreement providing for the grant to Lender of a security
interest in all of the assets of the Company;

     

    NOW,
THEREFORE, in consideration of the premises and the agreements herein and in
order to induce the Lender to make and maintain the Loan pursuant to the Note,
the Company hereby jointly and severally agrees with the Lender as
follows:

     

    SECTION
1. Definitions.

     

    (a) Reference
is hereby made to the Note for a statement of the terms thereof. All terms used
in this Agreement and the recitals hereto which are defined in the Note or in
Article 9 of the Uniform Commercial Code (the “Code”) as in effect from time to
time in the State of New York and which are not otherwise defined herein shall
have the same meanings herein as set forth therein; provided that terms
used herein which are defined in the Code as in effect in the State of New York
on the date hereof shall continue to have the same meaning notwithstanding any
replacement or amendment of such statute except as Lender may otherwise
determine.

     

    (b) As
used in this Agreement, the following terms shall have the respective meanings
indicated below, such meanings to be applicable equally to both the singular and
plural forms of such terms:

     

    SECTION
2. Grant of
Security Interest. As collateral security for all of the Obligations (as
defined in Section 3 hereof), the Borrower hereby pledges and assigns to the
Lender, and grants to the Lender, a continuing security interest in all assets
of the Borrower now owned or existing or hereafter acquired or arising, wherever
located, including but not limited to: Accounts, Deposit Accounts, Investment
Property, Inventory, General Intangibles (including payment intangibles,
trademarks, service marks, tradenames, patents, copyrights, licenses and
franchises), Chattel Paper (including electronic chattel paper), Documents
(including documents of title), Money, Supporting Obligations, Instruments
(including promissory notes), Equipment (including machinery, vehicles and
furniture), and Fixtures, together with all proceeds of the foregoing and all
substitutions, additions, replacements and accessions therefor or thereto and
the proceeds thereof (collectively, the "Collateral").


    
      
         


      

      
         


        
          

        

      

      
         


      

    

    


    SECTION
3. Security for
Obligations. The security interest created hereby in the Collateral
constitutes continuing collateral security for all of the following obligations,
whether now existing or hereafter incurred (the “Obligations”):

     

    (a) the
prompt payment by the Company, as and when due and payable (by scheduled
maturity, required prepayment, acceleration, demand or otherwise), of all
amounts from time to time owing by it in respect of the Note and the other
Transaction Documents, including, without limitation, (i) principal of and
interest on the Loan (including, without limitation, all interest that accrues
after the commencement of any insolvency proceeding of the Company, whether or
not the payment of such interest is unenforceable or is not allowable due to the
existence of such insolvency proceeding), and (ii) all fees, commissions,
expense reimbursements, indemnifications and all other amounts due or to become
due under any Transaction Document;

     

    (b) the
due performance and observance by the Company of all of its other obligations
from time to time existing in respect of the Transaction Documents;
and

     

    (c) any
and all indebtedness or other obligations of Company to Lender in any capacity,
now existing or hereafter incurred, however created or evidenced, regardless of
kind, class or form, whether direct, indirect, absolute or contingent (including
obligations pursuant to any guaranty, endorsement, other assurance of payment or
otherwise), whether joint or several, whether from time to time reduced and
thereafter increased, or entirely extinguished and thereafter reincurred,
together with all extensions, renewals and replacements thereof, and all
interest, fees, charges, costs or expenses which accrue on or in connection with
the foregoing.

     

    SECTION
4. Representations and
Warranties. The Company represents and warrants as follows:

     

    (a) The
Company (i) is a corporation duly organized, validly existing and in good
standing under the laws of the state or jurisdiction of its organization,
(ii) has all requisite power and authority to execute, deliver and perform
this Agreement and each other Transaction Document to be executed and delivered
by it pursuant hereto and to consummate the transactions contemplated hereby and
thereby, and (iii) is duly qualified to do business and is in good standing
in each jurisdiction in which the character of the properties owned or leased by
it or in which the transaction of its business makes such qualification
necessary.


    
      
         


      

      
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    (b) The
execution, delivery and performance by the Company of this Agreement and each
other Transaction Document to which the Company is a party or will be a party
(i) have been duly authorized by all necessary action, (ii) do not and will not
contravene its charter or by-laws, or any applicable law or any contractual
restriction binding on or otherwise materially affecting the Company, (iii) do
not and will not result in or require the creation of any Lien upon or with
respect to any of its properties and (iv) do not and will not result in any
default, noncompliance, suspension, revocation, impairment, forfeiture or
nonrenewal of any permit, license, authorization or approval applicable to it or
its operations or any of its properties.

     

    (c) This
Agreement is, and each other Transaction Document to which the Company is or
will be a party, when executed and delivered pursuant hereto, will be, a legal,
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws.

     

    (d) The
Company is and will be at all times the sole and exclusive owners of, or
otherwise have and will have adequate rights in, the Collateral free and clear
of any Lien except for (i) the Lien created by this Agreement and
(ii) the Permitted Liens. No effective financing statement or other
instrument similar in effect covering all or any part of the Collateral is on
file in any recording or filing office except (A) such as may have been
filed in favor of Lender relating to this Agreement and (B) such as may
have been filed to perfect or protect any security interests or Liens permitted
by the Note.

     

    (e) This
Agreement creates in favor of Lender a legal, valid and enforceable security
interest in the Collateral, as security for the Obligations.

     

    SECTION
5. Covenants as
to the Collateral. So long as any of the Obligations shall remain
outstanding and the Note and the other Transaction Documents shall not have
expired or terminated, unless Lender shall otherwise consent in
writing:

     

    (a) Further Assurances.
The Company will at its expense, at any time and from time to time, promptly
execute and deliver all further instruments and documents and take all further
action that may be necessary or desirable or that Lender may request in order to
(i) perfect and protect the security interest purported to be created
hereby; (ii) enable Lender to exercise and enforce its rights and remedies
hereunder in respect of the Collateral; or (iii) otherwise effect the
purposes of this Agreement.


    
      
         


      

      
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    (b) Transfers and Other
Liens.

     

    (i) Except
to the extent expressly permitted by the Note, the Company will not sell or
otherwise transfer (by operation of law or otherwise) any of the
Collateral.

     

    (ii) Except
to the extent expressly permitted by the Note, the Company will not create,
suffer to exist or grant any Lien upon or with respect to any
Collateral.

     

    SECTION
6. Additional
Provisions Concerning the Collateral.

     

    (a) The
Company hereby (i) authorizes Lender to file, one or more financing or
continuation statements, and amendments thereto, relating to the Collateral and
(ii) ratifies such authorization to the extent that Lender has filed any
such financing or continuation statements, or amendments thereto, prior to the
date hereof. A photocopy or other reproduction of this Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.

     

    (b) The
Company hereby irrevocably appoints Lender as its attorney-in-fact and proxy,
with full authority in the place and stead of the Company and in the name of the
Company or otherwise, from time to time in Lender’s discretion, to take any
action and to execute any instrument which Lender may deem necessary or
advisable to accomplish the purposes of this Agreement (subject to the rights of
the Company under Section 5 hereof), including, without limitation, to execute
assignments, licenses and other documents to enforce the rights of Lender and
the Lender with respect to any Collateral. This power is coupled with an
interest and is irrevocable until all of the Obligations are indefeasibly paid
in full after the termination of the Note and the other Transaction
Documents. 

     

    (c) The
powers conferred on Lender hereunder are solely to protect its interest in the
Collateral and shall not impose any duty upon it to exercise any such powers.
Except for the safe custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, Lender shall have no
duty as to any Collateral or as to the taking of any necessary steps to preserve
rights against prior parties or any other rights pertaining to any
Collateral.

     

    SECTION
7. Remedies Upon
Default. If any Event of Default shall have occurred and be
continuing:

     

    
      
         


      

      
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    (a) Lender
may exercise in respect of the Collateral, in addition to any other rights and
remedies provided for herein or otherwise available to it, all of the rights and
remedies of a secured party upon default under the Code (whether or not the Code
applies to the affected Collateral), and also may (i) take absolute control
of the Collateral, including, without limitation, transfer into Lender’s name or
into the name of its nominee or nominees (to the extent Lender has not
theretofore done so) and thereafter receive, for the benefit of Lender, all
payments made thereon, give all consents, waivers and ratifications in respect
thereof and otherwise act with respect thereto as though it were the outright
owner thereof, (ii) without notice except as specified below and without
any obligation to prepare or process the Collateral for sale, sell the
Collateral or any
part thereof in one or more parcels at public or private sale, at any of
Lender’s offices or elsewhere, for cash, on credit or for future delivery, and
at such price or prices and upon such other terms as Lender may deem
commercially reasonable. all Cash Proceeds received by Lender in respect of any
sale of or collection from, or other realization upon, all or any part of the
Collateral may, in the discretion of Lender, be held by Lender as collateral
for, and/or then or at any time thereafter applied (after payment of any amounts
payable to Lender pursuant to Section 8 hereof) in whole or in part by Lender
against, all or any part of the Obligations in such order as Lender shall elect,
consistent with the provisions of the Note and the Transaction Documents. Any
surplus of such cash or Cash Proceeds held by Lender and remaining after the
indefeasible payment in full of all of the Obligations after the termination of
the Note and the other Transaction Documents shall be paid over to whomsoever
shall be lawfully entitled to receive the same or as a court of competent
jurisdiction shall direct.

     

    (b) In
the event that the proceeds of any such sale, collection or realization are
insufficient to pay all amounts to which Lender is legally entitled, the Company
shall be liable for the deficiency, together with interest thereon at the
highest rate specified in any applicable Transaction Document for interest on
overdue principal thereof or such other rate as shall be fixed by applicable
law, together with the costs of collection and the reasonable fees, costs,
expenses and other client charges of any attorneys employed by Lender to collect
such deficiency.

     

    (c) The
Company hereby acknowledges that if Lender complies with any applicable state or
federal law requirements in connection with a disposition of the Collateral,
such compliance will not adversely effect the commercial reasonableness of any
sale or other disposition of the Collateral.

     

    SECTION
8. Indemnity and
Expenses.

     

    (a) The
Company agrees to defend, protect, indemnify and hold Lender harmless from and
against any and all claims, damages, losses, liabilities, obligations,
penalties, fees, costs and expenses (including, without limitation, reasonable
legal fees, costs, expenses, and disbursements of Lender’s counsel) to the
extent that they arise out of or otherwise result from this Agreement
(including, without limitation, enforcement of this Agreement), except claims,
losses or liabilities resulting solely and directly from Lender’s gross
negligence or willful misconduct, as determined by a final judgment of a court
of competent jurisdiction.

     

    (b) The
Company will upon demand pay to Lender the amount of any and all costs and
expenses, including the reasonable fees, costs, expenses and disbursements of
counsel for Lender and of any experts of Lender (including, without limitation,
any collateral trustee which may act as agent of Lender), which Lender may incur
in connection with (i) the preparation, negotiation, execution, delivery,
recordation, administration, amendment, waiver or other modification or
termination of this Agreement, (ii) the custody, preservation, use or
operation of, or the sale of, collection from, or other realization upon, any
Collateral, (iii) the exercise or enforcement of any of the rights of
Lender hereunder, or (iv) the failure by the Company to perform or observe
any of the provisions hereof.


    
      
         


      

      
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    SECTION
9. Notices,
Etc. All notices and other communications provided for hereunder shall be
in writing and shall be mailed (by certified mail, postage prepaid and return
receipt requested), telecopied or delivered, if to the Company or to Lender, to
it at its address specified in the Note; or as to any such Person, at such other
address as shall be designated by such Person in a written notice to such other
Person complying as to delivery with the terms of this Section 9. All such
notices and other communications shall be effective (i) if mailed (by
certified mail, postage prepaid and return receipt requested), when received or
three (3) Business Days after deposited in the mails, whichever occurs first,
(ii) if telecopied, when transmitted and confirmation is received, provided
same is on a Business Day and, if not, on the next Business Day; or
(iii) if delivered, upon delivery, provided same is on a Business Day and,
if not, on the next Business Day.

     

    SECTION
10. Miscellaneous.

     

    (a) No
amendment of any provision of this Agreement shall be effective unless it is in
writing and signed by the Company and Lender, and no waiver of any provision of
this Agreement, and no consent to any departure by the Company therefrom, shall
be effective unless it is in writing and signed by Lender, and then such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given.

     

    (b) No
failure on the part of Lender to exercise, and no delay in exercising, any right
hereunder or under any other Transaction Document shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right preclude any
other or further exercise thereof or the exercise of any other right. The rights
and remedies of Lender in the other Transaction Documents are cumulative and are
in addition to, and not exclusive of, any rights or remedies provided by law.
The rights of Lender against any party thereto are not conditional or contingent
on any attempt by such Person to exercise any of its rights under any other
Transaction Document against such party or against any other Person, including
but not limited to, the Company.

     

    (c) Any
provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining portions
hereof or thereof or affecting the validity or enforceability of such provision
in any other jurisdiction.


    
      
         


      

      
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    (d) This
Agreement shall create a continuing security interest in the Collateral and
shall (i) remain in full force and effect until the later of (A) the
indefeasible payment in full of the Obligations and (B) the termination of the
Note and the other Transaction Documents and (ii) be binding on the Company and
all other Persons who become bound as debtor to this Agreement in accordance
with Section 9-203(d) of the Code and shall inure, together with all rights and
remedies of Lender and the Lender hereunder, to the benefit of Lender and the
Lender and their respective permitted successors, transferees and assigns.
Without limiting the generality of clause (ii) of the immediately preceding
sentence, without notice to the Company, Lender may assign or otherwise transfer
their rights and obligations under this Agreement and any other Transaction
Document, to any other Person and such other Person shall thereupon become
vested with all of the benefits in respect thereof granted to Lender and the
Lender herein or otherwise. Upon any such assignment or transfer, all references
in this Agreement to Lender shall mean the assignee of Lender. None of the
rights or obligations of the Company hereunder may be assigned or otherwise
transferred without the prior written consent of Lender, and any such assignment
or transfer shall be null and void.

     

    (e) Upon
the satisfaction in full of the Obligations and the termination of the Note and
the other Transaction Documents, (i) this Agreement and the security interests
created hereby shall terminate and all rights to the Collateral shall revert to
the Company and (ii) Lender will, upon the Company’s request and at the
Company’s expense, (A) return to the Company such of the Collateral as shall not
have been sold or otherwise disposed of or applied pursuant to the terms hereof
and (B) execute and deliver to the Company such documents as the Company shall
reasonably request to evidence such termination, all without any representation,
warranty or recourse whatsoever.

     

    (f) THIS AGREEMENT SHALL BE GOVERNED BY,
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT
THE VALIDITY AND PERFECTION OR THE PERFECTION AND THE EFFECT OF PERFECTION OR
NON-PERFECTION OF THE SECURITY INTEREST CREATED HEREBY, OR REMEDIES HEREUNDER,
IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAW OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK.

     

    (g) ANY LEGAL ACTION, SUIT OR PROCEEDING
WITH RESPECT TO THIS AGREEMENT OR ANY DOCUMENT RELATED THERETO MAY BE BROUGHT IN
THE COURTS OF THE STATE OF NEW YORK IN THE COUNTY OF MONROE, AND, BY EXECUTION
AND DELIVERY OF THIS AGREEMENT, THE COMPANY HEREBY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS. THE COMPANY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING, WITHOUT LIMITATION,
ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE
TO THE BRINGING OF ANY SUCH ACTION, SUIT OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS
IS DEEMED APPROPRIATE BY THE COURT.


    
      
         


      

      
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    (h) THE COMPANY AND (BY ITS ACCEPTANCE OF
THE BENEFITS OF THIS AGREEMENT) LENDER WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY
JURY IN RESPECT OF ANY LITIGATION BASED ON, ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, VERBAL OR WRITTEN STATEMENT OR OTHER ACTION OF THE
PARTIES HERETO.

     

    (i) The
Company irrevocably consents to the service of process of any of the aforesaid
courts in any such action, suit or proceeding by the mailing of copies thereof
by registered or certified mail (or any substantially similar form of mail),
postage prepaid, to the Company at its address provided herein, such service to
become effective 10 days after such mailing.

     

    (j) Nothing
contained herein shall affect the right of Lender to serve process in any other
manner permitted by law or commence legal proceedings or otherwise proceed
against the Company or any property of the Company in any other
jurisdiction.

     

    (k) The
Company irrevocably and unconditionally waives any right it may have to claim or
recover in any legal action, suit or proceeding referred to in this Section any
special, exemplary, punitive or consequential damages.

     

    (l) Section
headings herein are included for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.

     

    (m) This
Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which shall be deemed to be an
original, but all of which taken together constitute one in the same
Agreement.

     

    (n) All
of the obligations of the Company hereunder are joint and several. Lender may,
in its sole and absolute discretion, enforce the provisions hereof against any
of the Company and shall not be required to proceed against the Company or seek
payment from the Company. In addition, Lender may, in its sole and absolute
discretion, select the Collateral of any one or more of the Company for sale or
application to the Obligations, without regard to the ownership of such
Collateral, and shall not be required to make such selection ratably from the
Collateral owned by all of the Company. 

     

    
      
         

      

      
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    IN
WITNESS WHEREOF, the Company has caused this Agreement to be executed and
delivered by its officer thereunto duly authorized, as of the date first above
written.

     

    
      
        
          
            	 
      	
                    SECUPRINT
      INC.

                  
	 
      	 
      	 
      
	 
      	
                    By:  

                  	
                    /s/
      Patrick White

                  
	 
      	
                    Name:
      Patrick White

                    Title:
      Chief Executive
Officer

                  


          

        

      

    

     

    
      
         


      

      
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