Document:

NEITHER
THESE SECURITIES NOR THE SECURITIES FOR WHICH THESE SECURITIES ARE EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE
SECURITIES OR BLUE SKY LAWS.

     

    DOCUMENT
SECURITY SYSTEMS, INC.

     

    WARRANT

     

    Warrant
No. C-1

     

    Dated:
December 18, 2008

     

    Document
Security Systems, a New York corporation (the “Company”), hereby certifies
that, for value received, Baum Capital Investments Inc., or its registered
assigns (the “Holder”),
is entitled to purchase from the Company up to a total of 250,000 shares of the
common stock, par value $0.02 per share (the “Common Stock”) of the Company
(each such share, a “Warrant
Share” and all such shares, the “Warrant Shares”) at an
exercise price equal to:  $1.60 per share for 50,000 of the Warrant
Shares; $2.00 per share for 150,000 of the Warrant Shares and $2.40 per share
for 50,000 of the Warrant Shares (as adjusted as provided in Section 8, the
“Exercise Price”);
subject, however, to the provisions and upon the terms and conditions set forth
in this Warrant (the “Warrant”). This expires at
6.00 PM (Eastern Time) on December 17, 2013 (the “Expiration
Date”).

     

    1. Registration of
Warrant.  The Company shall register this Warrant, upon records
to be maintained by the Company for that purpose (the “Warrant Register”), in the
name of the record Holder hereof from time to time. The Company may deem and
treat the registered Holder of this Warrant as the absolute owner hereof for the
purpose of any exercise hereof or any distribution to the Holder, and for all
other purposes, absent actual notice to the contrary.

    

    2.
Registration of
Transfers. This Warrant may not be sold, transferred or assigned by the
Holder, without the prior written consent of the Company, which will not be
unreasonably withheld or delayed. The Company shall register any transfer of any
portion of this Warrant made in accordance with the terms hereof in the Warrant Register, upon
surrender of this Warrant, with the Form of Assignment attached hereto duly
completed and signed, to the Company (or to the warrant transfer agent for the
Company, if any) at its address specified herein. Upon any such permitted
registration of transfer, a new warrant to purchase Common Stock, in
substantially the form of this Warrant (any such new warrant, a “New Warrant”), evidencing the
portion of this Warrant so transferred shall be issued to the transferee and a
New Warrant evidencing the remaining portion of this Warrant not so transferred,
if any, shall be issued to the transferring Holder. The acceptance of the New
Warrant by the transferee thereof shall be deemed the acceptance by such
transferee of all of the rights and obligations of a holder of a
Warrant.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    3. Exercise and Duration of
Warrants.

     

    (a) This
Warrant shall become exercisable by the registered Holder with respect all of
the Warrant Shares sixty (60) days after the date on which the Company’s
acquisition, or a wholly owned subsidiary’s acquisition, of substantially all of
the assets of DPI of Rochester, LLC is consummated.  At 6:30 PM, New
York City time, on the Expiration Date, the portion of this Warrant not
exercised prior thereto shall be and become void and of no
value.   If the Company, or a wholly owned subsidiary, of the
Company does not acquire substantially all of the assets of DPI of Rochester,
LLC on or prior to November 1, 2009, this Warrant shall become void and of no
value.

    

    (b)
Holder may exercise this Warrant by delivering to the Company (i) an exercise
notice, in the form attached hereto (the “Exercise Notice”),
appropriately completed and duly signed, and (ii) payment of the Exercise Price
for the number of Warrant Shares as to which this Warrant is being exercised in
immediately available funds or bank check, and the date such items are sent to
the Company (as determined in accordance with the notice provisions hereof) is
an “Exercise Date.” The Holder shall not be required to deliver the original
Warrant in order to effect an exercise hereunder, provided, as a condition of
the Company effecting such exercise, Holder complies with any requests the
Company may make pursuant to Section 6 (relating to lost, stolen or destroyed
warrants) herein. Execution and giving of the Exercise Notice shall have the
same effect as cancellation of the original Warrant and issuance of a New
Warrant evidencing the right to purchase the remaining number of Warrant
Shares.

    

    4. Delivery of Warrant
Shares.

    

    (a) Upon
exercise of this Warrant, the Company shall promptly (but in no event later than
three Business Days after the Exercise Date) issue or cause to be issued and
cause to be delivered to or upon the written order of the Holder and in such
name or names as the Holder may designate, a certificate for the Warrant Shares
upon such exercise, free of restrictive legends unless a registration statement
covering the resale of the Warrant Shares and naming the Holder as a selling
stockholder thereunder is not then effective and the Warrant Shares are not
freely transferable without volume restrictions pursuant to Rule 144 under the
Securities Act and such issuance shall be promptly recorded in the Company's
share registry. The Holder, or any Person so designated by the Holder to receive
Warrant Shares, shall be deemed to have become holder of record of such Warrant
Shares as of the Exercise Date. For purposes of this Agreement, Business Days
shall mean any day on which Banks in New York State are open for
business.

     

    (b) Upon
surrender of this Warrant following one or more partial exercises, the Company
shall issue or cause to be issued, at its expense, a New Warrant evidencing the
right to purchase the remaining number of Warrant Shares.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (c) The
Company's obligations to issue and deliver Warrant Shares in accordance with the
terms hereof are absolute and unconditional, irrespective of recovery of any
judgment against any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the Holder or any other Person of any obligation to the Company,
excluding breach of this Warrant. Nothing herein shall limit a Holder's right to
pursue any other remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company's failure to timely deliver
certificates representing shares of Common Stock upon exercise of the Warrant as
required pursuant to the terms hereof.

    

    5. Charges, Taxes and
Expenses. Issuance and delivery of certificates for shares of Common
Stock upon exercise of this Warrant shall be made without charge to the Holder
for any issue or transfer tax, transfer agent fee or other incidental tax or
expense in respect of the issuance of such certificates, all of which taxes and
expenses shall be paid by the Company; provided, however, that the Company shall
not be required to pay any tax which may be payable in respect of any transfer
involved in the registration of any certificates for Warrant Shares or Warrants
in a name other than that of the Holder. The Holder shall be responsible for all
other tax liability that may arise as a result of holding or transferring this
Warrant or receiving Warrant Shares upon exercise hereof.

    

    6. Replacement of
Warrant. If this Warrant is mutilated, lost, stolen or destroyed, the
Company shall issue or cause to be issued in exchange and substitution for and
upon cancellation hereof, or in lieu of and substitution for this Warrant, a New
Warrant, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft, or destruction and customary and reasonable bond or
indemnity, if requested. Applicants for a New Warrant under such circumstances
shall also comply with such other reasonable regulations and procedures and pay
such other reasonable third-party costs as the Company may
prescribe.

    

    7. Reservation of Warrant
Shares. The Company covenants that it will at all times reserve and keep
available out of the aggregate of its authorized but unissued and otherwise
unreserved Common Stock, solely for the purpose of enabling it to issue Warrant
Shares upon exercise of this Warrant as herein provided, the number of Warrant
Shares which are then issuable and deliverable upon the exercise of this entire
Warrant, free from preemptive rights or any other contingent purchase rights of
persons other than the Holder (after giving effect to the adjustments and
restrictions of Section 8, if any). The Company covenants that all Warrant
Shares so issuable and deliverable shall, upon issuance and the payment of the
applicable Exercise Price in accordance with the terms hereof, be duly and
validly authorized, issued and fully paid and nonassessable. The Company will
take all such action as may be necessary to assure that such shares of Common
Stock may be issued as provided herein without violation of any applicable law
or regulation, or of any requirements of any securities exchange or automated
quotation system upon which the Common Stock may be listed.

    

    8. Certain Adjustments.
The Exercise Price and number of Warrant Shares upon exercise of this Warrant
are subject to adjustment from time to time as set forth in this Section
8.

     

    (a) Stock Dividends and
Splits. If the Company, at any time while this Warrant is outstanding,
(i) pays a stock dividend on its Common Stock or otherwise makes a distribution
on any class of capital stock that is payable in shares of Common Stock, (ii)
subdivides outstanding shares of Common Stock into a larger number of shares, or
(iii) combines outstanding shares of Common Stock into a smaller number of
shares, then in each such case the Exercise Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common Stock
outstanding immediately before such event and of which the denominator shall be
the number of shares of Common Stock outstanding immediately after such event.
Any adjustment made pursuant to clause (i) of this paragraph shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution, and any
adjustment pursuant to clause (ii) or (iii) of this paragraph shall become
effective immediately after the effective date of such subdivision or
combination.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (b) Fundamental
Transactions. If, at any time while this Warrant is outstanding the
Company effects any reclassification of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property (other than as a result of a
subdivision or combination of shares of Common Stock covered by Section 8(a)
above) (a “Fundamental Transaction”), then the Holder shall have the right
thereafter to receive, upon exercise of this Warrant, the same amount and kind
of securities, cash or property as it would have been entitled to receive upon
the occurrence of such Fundamental Transaction if it had been, immediately prior
to such Fundamental Transaction, the holder of the number of Warrant Shares then
issuable upon exercise in full of this Warrant (the “Alternate Consideration”).
The aggregate Exercise Price for this Warrant will not be affected by any such
Fundamental Transaction, but the Company shall apportion such aggregate Exercise
Price among the Alternate Consideration in a reasonable manner reflecting the
relative value of any different components of the Alternate Consideration. If
holders of Common Stock are given any choice as to the securities, cash or
property to be received in a Fundamental Transaction, then the Holder shall be
given the same choice as to the Alternate Consideration it receives upon any
exercise of this Warrant following such Fundamental Transaction.

    

    (c) Number of Warrant
Shares. Simultaneously with any adjustments to the Exercise Price
pursuant to paragraphs (a) or (b) of this Section, the number of Warrant Shares
that may be purchased upon exercise of this Warrant shall be increased or
decreased proportionately, so that after such adjustment the aggregate Exercise
Price payable hereunder for the increased or decreased number of Warrant Shares
shall be the same as the aggregate Exercise Price in effect immediately prior to
such adjustment.

    

    (d) Calculations. All
calculations under this Section 8 shall be made to the nearest cent or the
nearest 1/100th of a share, as applicable. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock. The number of shares of Common
Stock outstanding at any given time shall in addition to issued and outstanding
shares of Common Stock include all shares of Common Stock issuable upon
exercise, conversion or exchange of any Convertible Securities. In calculating
the offering price in connection with Convertible Securities, the price per
share of Common Stock issuable upon conversion or exchange shall be determined
by dividing (x) the total amount received by the Company as consideration for
the issue or sale of such Convertible Securities, plus the aggregate amount of
consideration, if any, payable to the Company upon the conversion or exchange
thereof, by (y) the total number of shares of Common Stock upon the conversion
or exchange of all such Convertible Securities.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (e) Notice of
Adjustments. Upon the occurrence of each adjustment pursuant to this
Section 8, the Company at its expense will promptly compute such adjustment in
accordance with the terms of this Warrant and prepare a certificate setting
forth such adjustment, including a statement of the adjusted Exercise Price and
adjusted number or type of Warrant Shares or other securities upon exercise of
this Warrant (as applicable), describing the transactions giving rise to such
adjustments and showing in detail the facts upon which such adjustment is
based.

     

    (g) Fractional Shares.
The Company shall not be required to issue or cause to be issued fractional
Warrant Shares on the exercise of this Warrant. If any fraction of a Warrant
Share would, except for the provisions of this Section, be issuable upon
exercise of this Warrant, the number of Warrant Shares to be issued will be
rounded up to the nearest whole share.

     

    10. Notices. Any and all
notices or other communications or deliveries required or permitted to be
provided hereunder (including without limitation any Exercise Notice) shall be
in writing and shall be deemed given and effective on the earliest of (a) the
date of transmission, if such notice or communication is delivered via facsimile
at the facsimile number specified in this Section prior to 6:30 p.m. (local time
of the recipient) on a Business Day, (b) the next Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in tlns Section on a day that is not a Business Day
or later than 6:30 p.m. (local time of the recipient) on any Business Day, (c)
the Business Day (or second Business Day in the case of a recipient outside the
United States) following the date of deposit with a nationally recognized
overnight courier service, or (d) upon actual receipt by the party to whom such
notice is required to be given. The addresses for such notices or communications
shall be:

     

    
      
        	
                Document
      Security Systems, Inc.

                28
      East Main. Street, Suite 1525

                Rochester,
      NY 14614

                Attn:  Chief
      Executive Officer

              	
                Baum
      Capital Investments Inc.

                C/o
      Stafford Higgins Industries

                11
      Willard Road

                Norwalk,
      CT  06851

                Attn:  Walter
      Baum

              

      

    

     

    11. No Voting or Dividend
Right. Except as otherwise expressly provided herein, nothing contained
in this Warrant shall be construed as conferring upon Holder the right to vote
or consent or to receive notice as a shareholder of the Company or any other
matters or any rights whatsoever as a shareholder of the Company.

     

    12. Break-Up
Fee.  The Company agrees and acknowledges that the Holder is
entitled to twenty-five percent (25%) of any break-up fee received by the
Company or any of its subsidiaries pursuant to Section 6.04 of that certain
Asset Purchase Agreement between the Secuprint Inc., a wholly owned subsidiary
of the Company, and DPI of Rochester, LLC.

     

    13. Miscellaneous.

     

    (a)
Nothing in this Warrant shall be construed to give to any Person other than the
Company and the Holder any legal or equitable right, remedy or cause of action
under this Warrant. This Warrant may be amended only in writing signed by the
Company and the Holder and their successors and assigns.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (b) The
Company will not, by amendment of its governing documents or  through
any reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Holder against impairment. Without limiting the
generality of the foregoing, the Company (i) will not increase the par value of
any Warrant Shares above the amount payable therefor on such exercise, (ii) will
take all such action as may be reasonably necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable Warrant
Shares on the exercise of this Warrant, and (iii) will not close its shareholder
books or records in any manner which interferes with the timely exercise of this
Warrant.

     

    (c)
Governing Law: Venue; Waiver of Trial. All questions concerning the
construction, validity, enforcement and interpretation of this warrant shall be
governed by and construed and enforced in accordance with the laws of the state
of New York. Each party hereby irrevocably submits to the exclusive jurisdiction
of the state and federal courts sitting in the city of Rochester, New York for
the adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the transaction documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court. Each
party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
The parties hereby waive all rights to a trial by jury.

     

    (d) The
headings herein are for convenience only, do not constitute a part of this
Warrant and shall not be deemed to limit or affect any of the provisions
hereof.

     

    (e) In
case any one or more of the provisions of this Warrant shall be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Warrant shall not in any way be affected or
impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.

    

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BLANK, SIGNATURE PAGE FOLLOWS]

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    IN
WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its
authorized officer as of the date first indicated above.

     

    
      
        	
                DOCUMENT
      SECURITY SYSTEMS, INC.

              
	 
      	 
      
	
                By:

              	
                /s/ Patrick White

              
	 
      	
                Name:
      Patrick White

              
	 
      	
                Title:
      Chief Executive Officer

              

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    FORM OF EXERCISE
NOTICE

     

    (To be
executed by the Holder to exercise the right to purchase shares of Common Stock
under the foregoing Warrant)

     

    To:  Document
Security Systems, Inc.

     

    The
undersigned is the Holder of Warrant No. _______ (the “Warrant”) issued by Document
Security Systems, Inc., a New York corporation (the “Company”).  Capitalized
terms used herein and not otherwise defined have the respective meanings set
forth in the Warrant.

     

    
      	
              1.

            	
              The
      Warrant is currently exercisable to purchase a total of ______________
      Warrant Shares.

            

    

     

    
      	
              2.

            	
              The
      undersigned Holder hereby exercises its right to purchase
      _________________ Warrant Shares pursuant to the
  Warrant.

            

    

     

    
      	
              3.

            	
              The
      Holder shall pay the sum of $___________ to the Company in accordance with
      the terms of this Warrant.

            

    

     

    
      	
              4.

            	
              Pursuant
      to this exercise, the Company shall deliver to the holder _______________
      Warrant Shares in accordance with the terms of the
  Warrant.

            

    

     

    
      	
              5.

            	
              Following
      this exercise, the Warrant shall be exercisable to purchase a total of
      ______________ Warrant Shares.

            

    

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              	
                                                      Dated:
      __________________

                                                    	 
      	
                                                      Name
      of Holder:

                                                    	 
	 
      	 
      	 
      	 
      	 
	 
      	 
      	
                                                      (Print)

                                                    	 
      	 
	 
      	 
      	 
      	 
      	 
	 
      	 
      	
                                                      By:

                                                    	 
      	 
	 
      	
                                                           

                                                    	
                                                      Name:  

                                                    	 
      	 
	 
      	 
      	
                                                      Title:

                                                    	 
      	 
	 
      	 
      	 
      	 
      	 
	 
      	 
      	
                                                      (Signature
      must conform in all respects to name of holder 

                                                      as
      specified on the face of the
Warrant)

                                                    

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    FORM OF
ASSIGNMENT

     

    [To be
completed and signed only upon transfer of Warrant]

     

    FOR VALUE
RECEIVED, the undersigned hereby sells, assigns and transfers unto
________________________________ the right represented by the within Warrant to
purchase  ____________ shares of Common Stock of Document Security
Systems, Inc. to which the within Warrant relates and appoints ________________
attorney to transfer said right on the books of  Document Security
Systems, Inc. with full power of substitution in the premises.

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  	
                                          Dated:
      ________________, __

                                        	 	 
      	 
	 
      	 	 
      	 
	 
      	 	 
      	 
	 
      	 	
                                          (Signature
      must conform in all respects to name of holder 

                                          as
      specified on the face of the Warrant)

                                        
	 
      	 	 
      	 
	 
      	 	 
      	 
	 
      	 	
                                          Address
      of Transferee

                                        
	 
      	 	 
      	 
	 
      	 	 
      	 
	 
      	 	 
      	 
	 
      	 	 
      	 
	 
      	 	 
      	 
	
                                          In
      the presence of:ASSET
PURCHASE AGREEMENT

    

    THIS AGREEMENT is made by and
among DPI of Rochester,
LLC, a  New York limited liability company with an address at
1560 Emerson Street, Rochester, New York  14606 ("Seller"); James Stanley, an individual
residing in the State of New York (“Stanley”); Matthew Kellman, an individual
residing in the State of New York (“Kellman”); and Secuprint Inc., a New York
corporation with an address at 28 East Main Street, Rochester, New
York  14614 ("Buyer"), a subsidiary of Document Security Systems,
Inc.  The Seller, Stanley, Kellman and the Buyer and are
collectively referred to as the “Parties” and individually as a
“Party.”

     

    RECITALS:

    

    I.             
Seller is engaged in the business of commercial printing (the "Business");
and

    

    II.            
Seller desires to sell certain assets, properties and rights now owned and held
by it and used or usable in connection with the operation of the Business;
and

    

    III.           Buyer
desires to purchase certain Business assets, properties and rights of Seller
upon the terms and conditions hereinafter set forth, and to continue the
Business; and

    

    IV.           The
Parties acknowledge that Seller intends to file a voluntary petition for relief
(the “Bankruptcy Case”) under Chapter 11 of Title 11 of the United States Code,
11 U.S.C. §§101, et seq. (the “Bankruptcy Code”) in the United States Bankruptcy
Court for the Western District of New York (the “Bankruptcy
Court”).

    

    V.          
 Stanley and Kellman (“Members”) are the only members of the Seller, and
execute this agreement only to confirm the representations, warranties and
covenants in Articles II and III, and to specifically indicate their assent to
the provisions of Paragraph 3.09 of this Agreement.

    

    NOW, THEREFORE, in
consideration of the foregoing premises and the mutual covenants hereinafter
contained, the Parties hereto agree as follows:

     

    
      
        
        

      

      
        - 1
-

        
          

        

      

      
        
        

      

    

     

    ARTICLE
I

    PURCHASE AND
SALE

    

    1.01           Purchase of
Assets.  On the Closing Date set forth in Article V, Seller
agrees to sell and Buyer agrees to purchase, subject to the terms and conditions
of this Agreement, the assets, properties and rights of Seller relating to the
Business (the "Assets"), free and clear of all liens, claims, charges, and
encumbrances of any kind or nature whatsoever except as provided herein, as
follows:

    

    A.           All
of Seller's inventory relating to the Business as the same shall exist on the
Closing Date and which is usable and saleable in the ordinary course of
business, including but not limited to the items listed and described on
Schedule 1.01A hereto;

    

    B.           All
of Seller's furniture, fixtures, machinery, equipment, tools, supplies and
leasehold improvements relating to the Business as the same shall exist on the
Closing Date, including but not limited to the items listed and described in
Schedule 1.01B hereto;

    

    C.           All
Seller’s personal property leases for equipment listed on Schedule 1.01C
attached hereto (the “Personal Property Leases”);

    

    D.           All
accounts receivable owned by Seller and existing as of the Closing Date;
and

    

    E.           All
of Seller's trademarks, tradenames (including "DPI"), goodwill, intangible
assets and records relating to the Business, including, but not limited to,
Seller's telephone numbers, internet addresses, websites, customer lists,
mailing lists, sales and purchasing correspondence and records, computer
software, data processing records and all of the operational books, records and
data used by Seller in connection with the Business, except as hereafter set
forth.

    

    It is the intention of the parties
hereto that the Assets shall include all of Seller's assets, used or usable in
the conduct of the Business, whether or not specifically listed in the Schedules
attached hereto and made a part hereof; PROVIDED, however, that there is
specifically excluded from the Assets the items listed on Schedule
1.01C.

    

    1.02           Liabilities.  Except
as set forth in Schedule 1.02, it is expressly understood and agreed that Buyer
does not, nor will it assume or become liable for, any of Seller's liabilities
of any kind or nature at any time existing or asserted, whether fixed,
contingent or otherwise, including without limitation, accounts, notes and taxes
payable, workers compensation claims, liability claims, lease obligations
accrued prior to the Closing Date, salaries, wages, commissions, severance or
separation pay, or vacation, profit sharing, retirement, pension, bonus,
hospitalization, medical, health or other employee benefits or any unemployment
or other benefit taxes relating to any of Seller's employees.

     

    
      
        
        

      

      
        - 2
-

        
          

        

      

      
        
        

      

    

    

    1.03           Purchase
Price.  The aggregate purchase price to be paid by Buyer to
Seller for the Assets and the Covenant Not to Compete (the "Purchase Price")
shall be calculated as the lesser of:  (A) the sum of:  (i)
ninety percent (90%) of the value of Seller’s net (non-contra) accounts
receivable less than 90 days old (as adjusted pursuant to Paragraph 1.04); plus (ii) fifty
percent (50%) of the value of Seller’s inventory (as adjusted pursuant to
Paragraph 1.04); plus (iii) Fifty
Thousand Dollars ($50,000.00); or (B) One Million Dollars
($1,000,00.00).  The Purchase Price shall be allocated to the various
portions of the Assets, and to the Covenants Not-To-Compete established by
Paragraph 3.09 hereof, as set forth in Schedule 1.03.  Such allocation
shall be used by the parties for all tax purposes and filings, including without
limitation, IRS Form 8594.

    

    1.04           Adjustment of Account
Receivables/Inventory.  For the purposes of calculating the
Purchase Price pursuant to Paragraph 1.03, the actual value of the inventory on
the Closing Date shall be determined by a physical inventory conducted jointly
by Seller and Buyer following the close of business on the day preceding the
Closing Date, with each item of inventory to be valued at the lower of cost or
market.  Similarly, net (non-contra) accounts receivable shall be
valued as reflected on the Seller’s books and records after properly crediting
all payments made against accounts receivable on the Closing Date.

    

    1.05           Payment of Purchase
Price.  The Purchase Price, net of offset under Section 1.06,
shall be paid at the Closing to Seller in the form of a wire transfer to an
account specified by Seller

    

    1.06           Credit for DIP
Financing.  Subject to the approval of the Bankruptcy Court, it
is anticipated that Buyer or an affiliate might provide financing to Seller, as
a debtor in possession (“DIP”), in connection with the Bankruptcy
Case.  Buyer may, at its option, use part or all of any amounts due
from Seller pursuant to the terms of the DIP credit facilities extended to
Seller by Buyer or its affiliate to apply against or satisfy any of Buyer’s
obligations to pay the Purchase Price.

     

    
      
        
        

      

      
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    ARTICLE
II

    REPRESENTATIONS AND
WARRANTIES OF SELLER AND MEMBERS

    

    Seller and the Members, to the best of
their knowledge, jointly and severally represent and warrant to Buyer as
follows:

    

    2.01           Authority.  Seller
is a limited liability company, duly organized, validly existing and in good
standing under the laws of the State of New York.  Subject to the
authority of the Bankruptcy Court and any orders of such court in the Bankruptcy
Case (specifically including, without limitation, the Sale Order described in
Article 6), Seller has full power and authority to own the Assets, to carry on
the Business as currently conducted, to enter into this Agreement and to sell,
transfer and deliver the Assets.  Subject to the authority of the
Bankruptcy Court and any orders in the Bankruptcy Case (specifically including,
without limitation, the Sale Order described in Article 6), Seller has taken all
such actions as may be necessary or advisable and proper to authorize this
Agreement, the execution and delivery thereof, the consummation of the
transactions contemplated hereby and the execution and delivery of each of the
documents required to be delivered hereunder.

    

    2.02           Absence of
Restrictions.  Except as specifically set forth in Schedule
2.03, and the Bankruptcy Case, Seller has made no other agreement with any other
party with respect to the sale or encumbrance of the Assets.  Except
for the Bankruptcy Case and the consent of Seller's landlord with respect to the
negotiation of a new lease of the Business premises located at 1560 Emerson
Street, Rochester, New York (the “Business Premises”), the execution and
delivery of this Agreement, and the consummation of the transactions provided
hereunder, do not require any third party consent and do not violate, conflict
with, result in the breach of, or cause the acceleration of or default under any
provision of any obligation, mortgage, lien, lease, agreement, instrument, law,
order, arbitration award, judgment, decree or any other restriction to which
Seller is a party or by which Seller is subject or bound.

     

    
      
        
        

      

      
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    2.03           Title to
Assets.  Except as set forth in Schedule 2.03, Seller is in
possession of the Assets and has good, marketable and indefeasible title to all
of the Assets, free and clear of all liabilities, mortgages, conditional sales
agreements, security interests, leases, liens, pledges, encumbrances,
restrictions, charges, claims or imperfections of title whatsoever.

    

    2.04           Condition of
Property.  All of Seller's tangible personal property and
equipment included in the Assets in good working order so as to be fit for use
in the ordinary course of the Business.

    

    2.05           Inventory.  All
of Seller's inventory included in the Assets is located on the Business
Premises, is usable and saleable in the ordinary course of the Business and is
of a quality suitable for sale in the ordinary course of such
Business.

    

    2.06           Contracts.  Other
than the Bankruptcy Case, Seller has no contracts or commitments of any kind or
nature which would materially and adversely affect the Business, the Assets or
the continuation of the Business by Buyer.

     

    2.07           Litigation and
Claims.  Other than the Bankruptcy Case, there is no
litigation, proceeding, suit, action, controversy or claim in law or in equity
(including proceedings by or before any governmental board or agency) existing,
pending or, to the best of Seller's and Members' knowledge, threatened against
Seller which might materially adversely affect the Business or the Assets, and
there is no fact known to Seller and Members which could form the basis for any
such litigation, proceeding, suit, action, controversy or
claim.  Seller has complied with all laws, regulations and orders
applicable to the Business, specifically including all orders of the Bankruptcy
Court, all applicable zoning and environmental regulations and
orders.  Other than the Bankruptcy Case, there are no judgments,
orders, or notices, whether or not filed, against Seller which might materially
adversely affect the Assets and the continuation of the Business as now
conducted by Seller.

    

    2.08           Taxes.  Except
as set forth in Schedule 2.08, Seller has filed returns for and paid in full all
of its federal, state and local taxes, including New York State sales and
franchise taxes, to the extent such filings and payments are required or due
prior to the date of this Agreement.  All such returns were true and
correct when filed.

    

    2.09           Environmental
Compliance.  At all times in the conduct of the Business,
Seller has complied in all material respects with all environmental laws and
regulations, including, but not limited to, those laws and regulations relating
to the use, storage, transport, and disposal of any hazardous substances, wastes
or other materials and any related documentation, labeling or
records.

     

    
      
        
        

      

      
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    2.10           Financial
Statements.  The reviewed financial statements of the Seller
as, at and for the periods ended December 31, 2006, December 31, 2007, and
September 30, 2008, annexed hereto as Schedule 3.05, (a) are in accordance with
the books and records of the Seller (b) present fully, fairly and accurately the
consolidated financial position of the Seller as of said dates and the
operational results of the Seller for the periods represented thereby and (c)
have been prepared in accordance with GAAP.  Such financial statements
set forth all of the liabilities and obligations of the Seller, direct and
indirect, contingent and accrued, of any nature whatsoever, whether arising out
of contract, tort, statute or otherwise, except: (a) where not required to be
included in such financial statements pursuant to GAAP, (b) liabilities and
obligations set forth in the contracts, leases and commitments listed and
described in the attached Schedules, and (c) liabilities and obligations
incurred in the ordinary course of the Business subsequent to the respective
dates thereof.

    

    2.11           Labor
Relations.  Except as set forth in Schedule 2.11(a) hereto, the
Seller has complied in all material respects with all applicable agreements,
laws, rules and regulations relating to the employment of labor, including those
related to wages, hours and payroll taxes.  The Seller has withheld
and remitted to the proper Governmental Authorities all amounts required by law
or agreement to be withheld from wages or salaries of its employees and is not
liable for any arrearage of wages or any taxes or penalties for failure to
comply with any of the foregoing.    The Seller has no labor
troubles in the sense that within the last 12 months there have been no strikes,
work stoppages, slowdowns, threatened unfair labor practice charges or other
material controversies pending or threatened by any of its employees; and the
Seller has not entered into any collective bargaining agreement and no union
represents, or in the past twelve (12) months has demanded or requested to
represent or is currently attempting to represent, any of the employees of the
Seller.  Except as set forth in Schedule 2.11(b)
hereto,  the Seller has not promulgated any policy or entered into any
agreement relating to the payment of any medical insurance premium, retirement
pay, severance pay, vacation pay or sick leave to any present or former
employees of the Seller.   Schedule 2.11(b) will reflect all
vacation accrued as of the Closing and set forth the names of any employees of
the Seller who are currently on a leave of absence for any reason including
military duty, sickness, injury or disability and the reasons for and other
details of such leave(s).  All of the employees of the Seller and
their current wage rates, none of which has been increased in the past thirty
(30) days, are listed in Schedule 2.11(b).  True, correct and complete
copies of all written employment policies and all employee manuals which are
still in effect for any present or former employee of the Seller have heretofore
been delivered to Buyer.

     

    
      
        
        

      

      
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    2.12           ERISA
Matters.  Seller does not maintain or contribute to any
"employee benefit plans" as defined in Paragraph 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), (including any "multiemployer
plans" as defined in Paragraph 3(37) of ERISA), or any other material bonus,
deferred compensation or other fringe benefits plan or arrangement for the
benefit of employees of Seller which are subject to the minimum funding
standards contained in Section 302 of ERISA.  Set forth on Schedule
2.12 is a list and description of each bonus, deferred compensation or other
fringe benefit plan or arrangement for the benefit of employees of
Seller.

    

    2.13           Accounts
Receivable.  All of the Accounts Receivable owned by Seller and
existing as of Closing: (a)  arose in the ordinary course of Seller's
business; and (b) to the best of Seller’s and Members’ information as of the
date of this Agreement, will be free and clear of all defenses and claims,
including claims of offset, of any nature whatever,

    

    2.14           General
Warranty.  No representation or warranty contained in this
Agreement, nor any Schedule, statement or certificate furnished to or to be
furnished by Seller to Buyer pursuant to the terms hereof, or in connection with
the transactions contemplated hereby, contains or will contain any untrue
statement of a material fact, or fails or will fail to state a material fact
necessary to make the statements contained or incorporated therein or herein not
misleading.

    

    ARTICLE
III

    COVENANTS OF SELLER AND
MEMBERS

    

    Seller and the Members jointly and
severally covenant and agree as follows:

     

    
      
        
        

      

      
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    3.01           Conduct of the
Business.  Except as required in connection with the Bankruptcy
Case, to conduct the Business pending the Closing in the normal and usual manner
consistent with the successful operation thereof and, without the prior approval
of Buyer, not to make any change in the policies affecting the operation and
conduct of the Business nor to commence negotiations for, or enter into, any
material or unusual contracts or agreements affecting the Business or the
Assets, or extending beyond the Closing.

    

    3.02           Retention of
Business.  To use and exert best efforts between the date
hereof and Closing to keep and retain the Business as a going business for the
benefit of Buyer and to provide such assistance and cooperation as may be
reasonably requested by Buyer as necessary to assure the orderly transfer of the
Business to Buyer and the continuation thereof by Buyer subsequent to the
Closing.

    

    3.03           Changes.  Between
the date hereof and the Closing, to notify Buyer of any unusual changes,
problems or developments with respect to the Business and the status of Seller's
liabilities, obligations and relationship with its creditors, customers and
suppliers, to endeavor to obtain an uninterrupted and efficient transfer of the
ownership of the Business.

    

    3.04           Liabilities.  To
the extent authorized by the Bankruptcy Court, to pay and discharge, or to make
adequate provision satisfactory to Buyer for the payment and discharge of, all
of Seller's liabilities, indebtedness, obligations, claims and losses arising
out of, or by reason of, the operation of the Business prior to the Closing
Date.

    

    3.05           Access.  To
allow the authorized personnel and agents of Buyer, upon reasonable notice,
access to any and all of the records and premises of Seller concerning the
Business at reasonable times as agreed to by the Parties between the date hereof
and the Closing; and to furnish Buyer with all information concerning Seller's
affairs as the same pertain to the Business as Buyer may reasonably request; and
to permit Buyer to make extracts from, and copies of, all of Seller's tax
returns and related canceled checks, books, records, appraisals, files, purchase
orders, sales orders and other records as the same pertain to the
Business.

    

    3.06           Indemnification.

    

    A.           The
Members shall jointly and severally fully indemnify and hold harmless Buyer, its
officers, directors, agents, employees, advisors, successors and assigns, as
applicable, from and against and in respect of any and all liabilities,
obligations, damages, losses and expenses, including claims of every kind and
nature, whether accrued, absolute, contingent or otherwise, and reasonable
attorneys' fees and the costs of defense, incurred by any of them as a result
(the “Buyer’s Losses”), or by reason, of the breach, falsity or failure of any
of Seller's representations, warranties, covenants or undertakings contained in
this Agreement; it being agreed by the Parties hereto that the provisions of
this indemnification shall survive the Closing Date for a period of five (5)
years.  In particular, this indemnity shall include any claim against
or losses or damages Buyer may suffer as a result of any violation by Seller of
any environmental laws or regulations, failure to pay any taxes or related
interest or penalties, or Seller's failure to satisfy any claims of
creditors.

     

    
      
        
        

      

      
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    Notwithstanding any provision of this
Section 3.06A, the Seller or any Member will have no liability
(indemnification or otherwise) with respect to an inaccuracy or breach of any
representation, warranty or covenant set forth in this Agreement or any exhibit,
schedule or certificate until the Buyer’s Losses shall exceed $10,000 in the
aggregate (the “Seller’s Basket”) and then the Seller and the Members shall have
liability only for such amount in excess of the Seller’s Basket.  In
no event shall the aggregate liability of the Seller or Members with respect to
any Buyer’s Losses exceed $100,000.

    

    B.           The
Buyer shall  fully indemnify and hold harmless the Seller and its
Members or employees, as applicable, from and against and in respect of any
liabilities, obligations, damages, losses and expenses, including claims of
every kind and nature, whether accrued, absolute, contingent or otherwise, and
reasonable attorneys’ fees and the costs of defense, incurred by any of them as
a result, or by reason of the breach, falsity or failure of any of Buyer’s
representations, warranties, covenants or undertakings contained in this
Agreement (“the Seller’s Losses”); it being agreed by the Parties hereto that
the provisions of this indemnification shall survive the Closing Date for a
period of five (5) years.

     

    Notwithstanding any provision of this
Section 3.06B, the Buyer will have no liability (indemnification or
otherwise) with respect to an inaccuracy or breach of any representation,
warranty or covenant set forth in this Agreement or any exhibit, schedule or
certificate until the Seller’s Losses shall exceed $10,000 in the aggregate (the
“Buyer’s Basket”) and then the Buyer shall have liability only for such amount
in excess of the Buyer’s Basket.  In no event shall the aggregate
liability of the Buyer with respect to any Seller’s Losses exceed
$100,000.  Further, in no event shall this indemnification extend to
any members’ liability under any equipment lease guaranty, mortgage guaranty, or
other monetary obligation of the Members.

     

    
      
        
        

      

      
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    3.07           Cooperation.  To
execute, acknowledge and deliver to Buyer on demand, both prior and subsequent
to the Closing, all such instruments, consents, authorizations, certifications,
books, records and data, and to take all other action, as previously agreed or
as may be reasonably necessary or advisable in the opinion of
Buyer:  (i) to satisfy the Conditions to Closing contained in Article
V hereof, (ii) to effect the provisions and intent of this Agreement, or (iii)
to facilitate the transfer and conveyance of title to and possession of the
Assets to Buyer; and further to assist and cooperate with Buyer in connection
with any litigation or other claims of third parties involving the Business or
the Assets.

    

    3.08           Sales Tax
Notification.  To cooperate with Buyer in its preparation and
filing of form AU-196.10 with the Sales Tax Bureau of the New York State
Department of Taxation and Finance.

    

    3.09           Non-competition.  For
a period of five (5) years from and after the Closing Date, Seller and Members
each hereby severally agrees not to engage or compete, directly or indirectly,
as a principal, on his/her/its own account, or as a shareholder, member,
officer, director, employee, consultant, advisor, partner or joint venturer in
any corporation or other business entity, as the case may be, in any business
engaged in the sale, distribution or provision of products or services
previously sold, distributed or provided by Seller with respect to the Business,
or which is otherwise in competition with the Business, in the geographical area
in Seller’s products were distributed.  If any of these restrictions
on post-closing competitive activities contained in this Paragraph shall for any
reason be held by a court of competent jurisdiction to be excessively broad as
to duration, geographical scope, activity or subject, such restrictions shall be
construed so as to be limited or reduced to be enforceable to the extent
compatible with the applicable law as it shall then appear; it being understood
that by the execution of this Agreement the parties hereto regard the
restrictions herein as reasonable and compatible with their respective
rights.

     

    
      
        
        

      

      
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    ARTICLE
IV

    REPRESENTATIONS AND
WARRANTIES OF BUYER

    

    Buyer represents and warrants to the
Seller and Members as follows:

    

    4.01           Corporate
Standing.  Buyer is a business entity duly organized, validly
existing and in good standing under the laws of the State of New
York.  Buyer has full corporate power and authority to own its
properties and to carry on its business as currently conducted.

    

    4.02           Corporate
Authority.  Buyer has full corporate power and authority to
enter into this Agreement and to purchase the Assets.  Buyer has taken
all such corporate action as may be necessary or advisable and proper to
authorize this Agreement, the execution and delivery thereof, the consummation
of the transactions contemplated hereby and the execution and delivery of each
of the documents required to be delivered hereunder, so that Buyer will have
full right, power and authority to purchase the Assets from the Seller and to
perform all of its obligations under this Agreement at the Closing.

    

    4.03           Consents.  Neither
the execution of this Agreement nor the consummation of the transactions
contemplated hereby on the part of Buyer requires the consent of any third
party.

    

    ARTICLE
V

    CLOSING

    

    Closing (the “Closing”) shall take
place at the offices of Underberg & Kessler LLP, 300 Bausch & Lomb
Place, Rochester, New York within 10 days of the last date upon which the Sale
Order and/or Assignment Order required pursuant to Article 6 of this Agreement
shall become Final Orders, as defined in Paragraph 6.03 of this Agreement (“the
Closing Date”).

    

    ARTICLE
VI

    BANKRUPTCY CONDITIONS TO
CLOSING

    

    Seller has advised Buyer, and Buyer
acknowledges that Seller has advised it, that Seller is contemplating and is
expected to seek protection from its creditors under the Bankruptcy
Code.  This Agreement, and the obligations of each party performed
hereunder, shall be subject to the fulfillment or wavier of each of the
following conditions (any one or more of which may be waived in writing in whole
or in part by the written consent of Seller and Buyer, as the case may
be):

     

    
      
        
        

      

      
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    6.01           Seller
obtaining an order from the Bankruptcy Court in a form reasonably satisfactory
to Seller and Buyer which shall have been entered upon appropriate notice to
appropriate parties in interest entitled thereto, in the Bankruptcy Case (“the
Sale Order”): (i) approving this Agreement and the transaction contemplated
hereby; (ii) authorizing Seller to transfer and assign to Buyer all of its
rights, title and interest in and to the Assets under  Section 363 of
the Bankruptcy Code, free and clear of any mortgage, pledge, claim, lien,
charge, encumbrances or security interests with such mortgage, pledge, claims,
liens, charges, encumbrances and security interests, if any, to attach to the
proceeds of the sale with the same validity, priority, enforceability and to the
same extent as such liens previously attached to the Assets; (iii) all of the
requirements of Section 363 of the Bankruptcy Code have been satisfied; (iv)
notice of the hearing on the transactions completed by this Agreement (1) was
given in accordance with the applicable provisions of the Bankruptcy Code ad the
Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”) and (2)
constitutes such notice as is appropriate under the particular circumstances and
in accordance with the Bankruptcy Code and applicable law; (v) finding that the
Buyer is a “good faith” purchaser as that term is used in Section 363(m) of the
Bankruptcy Code; and (vi) provisions for the Bankruptcy Court’s retention of
jurisdiction over matters arising out of or related to this Agreement and the
transactions contemplated hereby.  Buyer shall have a reasonable
opportunity to review and approve any proposed Sale Order prior to its
submission to the Bankruptcy Court.

    

    6.02           As
to the assigned Executory Contract(s) (as defined in Schedule 6.02 attached
hereto), Seller obtaining entry of an order (the “Assignment Order”) of the
Bankruptcy Court (which order may also be the Sale Order), in form reasonably
acceptable to Seller and Buyer, on notice other parties to such agreement(s) and
subject to the consent of such other parties if necessary, authorizing and
providing for (a) the assumption of the assigned Executory Contract(s) by the
Seller; and (b) the valid assignment of the assigned Executory Contract(s) to
Buyer.  Buyer shall be responsible for satisfying the conditions of
Section 365(b)(1)(A) – (C) of the Bankruptcy Code to the extent necessary to
permit the assumption by Seller and the assignment to Buyer of the assigned
Executory Contract(s) (all such obligations, including without limitation any
payments required to be made, the “Cure Obligations”).  Buyer shall
have a reasonable opportunity to review and approve any proposed Assignment
Order prior to its submission to the Bankruptcy Court.

     

    
      
        
        

      

      
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    6.03           The
Sale Order and the Assignment Order shall have become a Final Order (as defined
in this paragraph); provided, however, that this
condition may be waived in writing by the parties.  “Final Order”
shall mean an order or judgment of the Bankruptcy Court (a) which is not the
subject of a pending appeal, petition for certiorari, or other proceeding for
review, rehearing or reargument accompanied by a stay of the transactions
contemplated hereby, (b) which has not been reversed, stayed, modified, or
amended and (c) respecting which the time to appeal from or petition for
certiorari or to seek review, rehearing or reargument of such order shall have
expired, as a result of which such order shall have become final in accordance
with Rule 8002 of the Bankruptcy Rules and other applicable law, and there shall
not be in effect any preliminary or permanent injunction, stay or order, or
decree or ruling, by a court of competent jurisdiction or by a governmental
regulatory or administrative agency preventing performance of the transactions
contemplated by this Agreement.

    

    6.04           In
the absence of such Sale Order and the Assignment Order, this Agreement shall be
deemed null and void and neither Party shall have any claim against the other by
virtue of this Agreement; provided, however that the
Buyer shall be entitled to a break-up fee in the amount of One Hundred
Twenty-five Thousand Dollars ($125,000.00) if, prior to the termination of the
Agreement in accordance with its terms, the Bankruptcy Court approves an
Alternative Transaction (as defined in this paragraph) and such Alternative
Transaction is consummated; provided further, however, that the
Seller’s obligation to pay such break-up fee, and the amount of such break-up
fee, are subject to the Bankruptcy Court’s approval.  For the purposes
of this Agreement, an “Alternative Transaction” shall mean any one of the
following transactions with or by any person or group other than the
Buyer:  (a) a merger, consolidation or similar transaction involving
the Seller, or (b) a sale, lease or other disposition directly or indirectly by
merger, consolidation tender offer, share exchange or otherwise of some or all
of the Assets.

     

    
      
        
        

      

      
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    ARTICLE
VII

    OTHER CONDITIONS OF CLOSING
BY BUYER

    

    The obligation of Buyer to consummate
the transactions contemplated by this Agreement shall be subject, at Buyer's
sole discretion, to the satisfaction of the following conditions
precedent:

    

    7.01           Representations.  All
of the representations and warranties of Seller herein contained shall be true
and correct as of the date of this Agreement, and as of the Closing Date as if
expressly made on and as of the Closing Date.

    

    7.02           Performance of
Covenants.  All of the covenants to be performed and all of the
conditions to be satisfied by Seller prior to the Closing Date shall have been
performed or satisfied on or before the Closing.

    

    7.03           Books and
Records.  Seller shall have delivered to Buyer on or before the
Closing Date all of Seller's operational books, records, data and materials used
by Seller in the conduct of the Business which are or would be necessary or
useful to Buyer in the continuation thereof.

    

    7.04           Condition of
Property.  All of the Assets shall be in the same condition on
the Closing Date as the same are as of the date hereof, ordinary wear and tear
alone excepted.

    

    7.05           Employment of
Members.  Buyer shall have entered into employment agreements
with both Stanley and Kellman, on terms acceptable to Buyer which shall include
those set forth in Schedule 7.05.

    

    7.06           Lease for Business
Premises.  Buyer and Seller’s landlord shall have entered into
a lease for the Business Premises.  Said lease shall be upon such
terms as are acceptable to Buyer, but shall include: (i) an initial term of five
(5) years; (ii) a five (5) year option to renew, exercisable by Buyer; (iii) an
option to purchase the real property during the term or any renewal of the lease
for fair market value, so long as the landlord has not sold the property to a
bona fide arm’s length purchaser; (iv) a right of first refusal to purchase the
property during the term of the lease, or any renewal thereof, on the same terms
as contained in any bona fide arm’s length offer to purchase received by the
landlord, provided, however, that Buyer’s
exercise of that right of first refusal shall require Buyer to pay landlord
Twenty-five Thousand Dollars ($25,000) more than said bona fide arm’s length
offer (Buyer’s failure to exercise the right of first refusal within thirty (3)
days of notice of a bona fide offer shall terminate Buyer’s option to purchase
upon the closing of landlord’s sale of the property to another party); and (v)
the rent payable under such lease shall be “triple net,” with an annual base
rent of $80,000 (payable in monthly installments) for the first year, and shall
increase by five percent (5%) per year during the term or any renewal
thereof.

     

    
      
        
        

      

      
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    7.07           Additional
Contingencies.  This Agreement is contingent upon (i) Buyer’s
obtaining a commitment for financing in an amount and upon terms satisfactory to
Buyer in its sole discretion; and (ii) Buyer's obtaining any required
governmental permits, approvals or consents relating to the operation of the
Business.

    

    7.08           Delivery of
Documents.  Buyer shall have received all such documents,
certificates, opinions and papers required of Seller pursuant to the terms of
this Agreement, or which shall have been reasonably requested by Buyer in
connection therewith, in form and substance as approved prior to the Closing by
Underberg & Kessler LLP, attorneys for Buyer, including but not limited to
the following:

    

      
A.          A duly executed
warranty Bill of Sale to the Assets.

    

      
B.           A new lease
for the Business Premises has been executed and received by Buyer.

    

      
C.           A certified
copy of the Sale Order and Assignment Order, accompanied by a certification by
Seller’s counsel that they constitute Final Orders as herein
defined.

    

      
D.           A
certificate jointly from Seller and Members dated as of the Closing Date, to the
effect that, as of the Closing Date, all of the representations and warranties
of Seller contained in this Agreement and the Schedules hereto are true and
correct and that all of the covenants and conditions contained in this Agreement
to be performed or satisfied by Seller prior to the Closing have been performed
or satisfied.

     

    
      
        
        

      

      
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    ARTICLE
VIII

    OTHER CONDITIONS OF CLOSING
BY SELLER

    

    The obligation of Seller to consummate
the transactions contemplated by this Agreement shall be subject, at Seller’s
sole option, to the satisfaction of the following conditions
precedent:

    

    8.01           Representations.  All
of the representations and warranties of Buyer herein contained shall be true
and correct as of the date of this Agreement, and as of the Closing Date as if
made on and as of the Closing Date.

    

    8.02           Covenants and
Conditions.  All of the covenants to be performed and all of
the conditions to be satisfied by Buyer prior to the Closing Date shall have
been performed or satisfied on or before the Closing.

    

    8.03           Members’ Equipment Lease
Guarantees.  The lessors on any and all Personal Property
Leases assigned to Buyer shall have released any guarantees by which the Members
secured payment of such leases by the Seller.

    

    8.04           Deliveries.  Seller
shall have received all such documents, payments, certificates, notes,
instruments, opinions and papers required of Buyer pursuant to the terms of this
Agreement,  in form and substance as approved prior to the Closing by
Seller's Attorney, including expressly, but not limited to, the
following:

    

      
A.           Payment of
the Purchase Price to the extent and in the manner set forth in Paragraph 1.05
hereof.

    

      
B.           A
certificate of resolutions adopted by Buyer's Board of Directors or Executive
Committee thereof authorizing the execution of this Agreement, the consummation
of the transactions contemplated hereby and the execution and delivery of the
documents required to be delivered hereunder, appropriately certified by Buyer's
corporate Secretary.

    

      
C.           A
certificate of Buyer, dated as of the Closing Date, to the effect that, as of
the Closing Date, all of the representations and warranties of Buyer contained
in this Agreement are true and correct and that all of the covenants and
conditions contained in this Agreement to be performed or met by Buyer prior to
Closing have been performed or met, such certificate to be executed by Buyer's
President.

    

      
D.           Bankruptcy
Court approval of this Agreement.

     

    
      
        
        

      

      
        - 16
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    ARTICLE
IX

    CONTINGENT FINANCIAL
MATTERS

    

    9.01           Tax Status and
Effect.  It is understood and agreed that neither Seller nor
Buyer has made any representations to the other as to the tax status or tax
effect of the transactions contemplated by this Agreement, and each of the
Parties hereto is therefore separately taking counsel as to such matters and
each is assuming, subject only to the express and specific provisions of this
Agreement, the tax, if any, which may be incurred by reason of the carrying out
of the terms and provisions hereof.

    

    9.02           Sales or Use
Tax.  In the event that any sales or use tax shall be due to
any state or local governmental authority by reason of the sale of the Assets,
such tax shall be borne by Buyer; provided, however,
that Seller shall be solely responsible for any sales taxes arising out of the
operation of the Business prior to Closing.

    

    9.03           Brokerage
Commissions.  Seller and Buyer represent and warrant, each to
the other, that this Agreement and the transactions contemplated hereunder were
brought about without the assistance of any broker, person or firm, and that no
one is entitled to a commission, fee or payment of any kind relative to this
Agreement or the transactions contemplated hereby.

    

    9.04           Risk of
Loss.  All risk of loss to the Assets shall remain on Seller
until completion of the Closing.

    

    9.05           Expenses of
Parties.  All expenses involved in the preparation,
authorization and consummation of this Agreement, including, without limitation,
all fees and expenses of agents, representatives, counsel and accountants, shall
be borne solely by the Party which shall have incurred the same, and the other
Parties shall have no liability with respect thereto.

     

    
      
        
        

      

      
        - 17
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    ARTICLE
X

    TERMINATION

    

    This
Agreement may be terminated, and the transactions contemplated hereby may be
abandoned, by written notice promptly given to the other parties hereto, at any
time prior to the Closing Date:

    

    10.01         By
mutual written consent of the Seller and Buyer;

    

    10.02         By
either Seller or Buyer if any permanent injunction or other order of a court or
competent authority or governmental agency which prevents the consummation of
the transaction shall have become final and not appealable;

    

    10.03         By
either Seller or Buyer upon ten (10) days written notice of such termination to
the other parties, if the Closing shall not have occurred on or prior to
__________;
provided that the failure of the Closing to occur by such date is not due
in whole or in part to a material breach of the terminating party of such
party’s representations, warranties or covenants under this
Agreement;

    

    10.04         By
either Seller or Buyer if either (A) the Sale Order or the Assignment Order is
not entered by _______; or (B) the Sale Order or the Assignment Order is not a
Final Order by ________ (or if the Sale Order or the Assignment Order was
entered in the ten (10) days prior to such date and no appeal has been
perfected, eleven (11) days after the date of the Sale Order or Assignment Order
was entered; or (C) the Bankruptcy Court shall have denied the Sale order or the
Assignment Order;

    

    10.05         By
either Seller or Buyer if the Closing has not occurred by the date which is
thirty days after the last to occur of the date of the Sale Order and the date
of the Assignment Order;

    

    10.06         Automatically,
without further action by either Party, if the Bankruptcy Court approves an
Alternative Transaction, as defined in Paragraph 6.04;

    

    10.07         By
Buyer if there has been a breach by Seller of any of its representations,
warranties or covenants that would result in the condition set forth in Article
VII not being met, which breach is not curable, or if curable, is not cured
within thirty (30) days after notice of such breach is given by Buyer to Seller;
or by Seller if there has been a breach by Buyer of any of its representations,
warranties or covenants that would result in the condition set forth in Article
VIII not being met, which breach is not curable, or if curable, is not cured
within thirty (30) days after notice of such breach is given by Seller to
Buyer.

     

    
      
        
        

      

      
        - 18
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    ARTICLE
XI

    MISCELLANEOUS
PROVISIONS

    

    11.01         Survival of Representations
and Warranties.  All representations and warranties of the
Seller and the Members contained in this Agreement shall survive the execution
and delivery of this Agreement, the consummation of the transactions
contemplated hereby and the trans­fer and conveyance of the
Assets.

    

    11.02         Buyer's
Liability.  It is understood and agreed that all of Buyer's
obligations and responsibilities hereunder are solely those of Secuprint Inc.,
and that Document Security Systems, Inc., has, and shall have, no personal
liability with respect thereto.

    

    11.03         Binding Effect;
Assignment.  This Agreement shall be binding upon and inure to
the benefit of the Parties hereto and their respective personal representatives,
successors and assigns.

    

    11.04         Entire
Agreement.  This Agreement contains the entire understanding
and agreement among the Parties hereto and supersedes any prior understandings,
memoranda or other written or oral agreements between or among any of them
respecting the within subject matter.  There are no representations,
agreements, arrangements or understandings, oral or written, between or among
any of the Parties relating to the subject matter of this Agreement which are
not fully expressed herein.

    

    11.05         Modifications;
Waiver.  No modification or waiver of this Agreement or any
part hereof shall be valid or effective unless in writing and signed by the
Party or Parties sought to be charged therewith, no waiver of any breach or
condition of this Agreement shall be deemed to be a waiver of any other
subsequent breach or condition, whether of like or different nature, and no
waiver of any breach of this Agreement by any Members shall be deemed to be a
waiver of any other Members for the same breach or any subsequent breach,
whether of like or different nature.  No course of dealing between or
among any of the Parties hereto will be deemed effective to modify, amend or
discharge any part of this Agreement or the rights or obligations of any Party
hereunder.

     

    
      
        
        

      

      
        - 19
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    11.06         Partial
Invalidity.  If any provision of this Agreement shall be held
by a court of competent jurisdiction to be invalid or unenforceable, such
provision shall be construed so as to be limited or reduced to be enforceable to
the maximum extent compatible with the law as it shall then
appear.   The total invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof and this Agreement shall be construed in all respects as if such invalid
or unenforceable provision were omitted.

    

    11.07         No Third Party
Beneficiary.  None of the provisions of this Agreement shall be
for the benefit of, or enforceable by, any person or entity which is not a Party
hereto.

    

    11.08         Notices.  Any
notice or other communication required or permitted under this Agreement shall
be in writing and shall be deemed to have been duly given (i) upon hand
delivery, or (ii) on the third day following delivery to the U.S. Postal Service
as certified or registered mail, return receipt requested and postage prepaid,
or (iii) on the first day following delivery to a nationally recognized United
States overnight courier service, fee prepaid, return receipt or other
confirmation of delivery requested or (iv) when telecopied or sent by facsimile
transmission if an additional notice is also given under (i), (ii) or (iii)
above within three days thereafter.  Any such notice or communication
shall be directed to a Party at its address set forth below or at such other
address as may be designated by a party in a notice given to all other Parties
hereto in accordance with the provisions of this Paragraph.

    

    
      
        	
                Notice
      to Buyer shall

              	
                Secuprint,
      Inc.

              
	
                be
      shall be sent to:

              	
                28
      East Main Street

              
	 
      	
                Rochester,
      New York  14614

              
	 
      	
                Attn.:  Patrick
      White

              

      

    

    

    
      
        	
                with
      a copy to:

              	
                Underberg
      & Kessler LLP

              
	 
      	
                300
      Bausch & Lomb Place

              
	 
      	
                Rochester,
      New York  14604

              
	 
      	
                Attn:  Michael
      J. Beyma

              

      

    

    

    
      
        	
                Notice
      to Seller

              	
                DPI
      of Rochester, Inc.

              
	
                shall
      be sent to:

              	
                1560
      Emerson Street

              
	 
      	
                Rochester,
      New York  14606

              
	 
      	
                Attn.:  James
      Stanley

              

      

    

     

    
      
        
        

      

      
        - 20
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                with a copy to:

              	
                Lacy
      Katzen, LLP

              
	 
      	
                140
      East Main Street

              
	 
      	
                Rochester,
      New York  14614

              
	 
      	
                Attn.:  David
      D. MacKnight

              

      

    

    

    11.09         Governing
Law.  This Agreement shall be governed by and construed in
accordance with the laws of the State of New York pertaining to contracts made
and to be wholly performed within such state, without taking into account
conflicts of laws principles.

    

    11.10         Jurisdiction and
Venue.  DURING THE PENDENCY OF THE BANKRUPTCY CASE, THE
BANKRUPTCY COURT WILL HAVE JURISDICTION OVER ANY AND ALL DISPUTES BETWEEN OR
AMONG THE PARTIES, WHETHER IN LAW OR IN EQUITY, ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY AGREEMENT CONPTEMPLATED HEREBY; PROVIDED, HOWEVER, THAT IF
THE BANKRUPTCY COURT IS UNWILLING OR UNABLE TO HEAR SUCH DISPUTE:

    

      
(i)           the courts
of the State of New York and/or the United States Federal Courts located in the
State of New York shall have exclusive jurisdiction over each of the Parties and
such proceedings; and

    

      
(ii)           the venue
of any such action shall be in Monroe County, New York and/or the United States
District Court for the Western District of New York.

    

    11.11         Headings.  The
headings contained in this Agreement are inserted for convenience only and do
not constitute a part of this Agreement.

    

    11.12         Gender.  Whenever
the context may require, any pronoun used herein shall include the corresponding
masculine, feminine or neuter forms and the singular of nouns, pronouns and
verbs shall include the plural and vice versa.

    

    11.13         Fair
Meaning.  This Agreement shall be construed according to its
fair meaning, the language used shall be deemed the language chosen by the
Parties hereto to express their mutual intent, and no presumption or rule of
strict construction should be applied against any Party hereto.

    

    11.14         Counterparts.  This
Agreement may be executed in several counterparts, each of which shall be deemed
an original, and all of said counterparts shall together constitute but one and
the same instrument which may be sufficiently evidenced by one
counterpart.

     

    
      
        
        

      

      
        - 21
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    IN WITNESS WHEREOF, the Parties
hereunto have duly executed this Agreement on November 6, 2008.

     

    
      
        
          
            
              
                
                  	 
      	
                          BUYER:
      SECUPRINT,
      INC.

                        	 
      
	 
      	 
      	 
      	 
      
	 
      	
                           By:

                        	
                          /s/
      Patrick White

                        	 
      
	 
      	 
      	
                          Patrick
      White, President

                        	 
      
	 
      	 
      	 
      	 
      
	 
      	
                          SELLER:
      DPI OF ROCHESTER,
      INC.

                        	 
      
	 
      	 
      	 
      	 
      
	 
      	
                           By:

                        	
                          /s/
      James Stanley

                        	 
      
	 
      	 
      	
                          James
      Stanley, President

                        	 
      

                

              

            

          

        

      

    

    

    
      
        
          
            
              	 
      	
                      JAMES
      W. STANLEY:

                    	 
      
	 
      	 
      	 
      
	 
      	
                      /s/
      James W. Stanley

                    	 
      
	 
      	
                      (a
      Member, per Recital V)

                    	 
      
	 
      	 
      	 
      
	 
      	
                      MATTHEW
      KELLMAN:

                    	 
      
	 
      	 
      	 
      
	 
      	
                      /s/
      Matthew Kellman

                    	 
      
	 
      	
                      (a
      Member, per Recital V)

                    	 
      

            

          

        

      

    

    

    
      
        
        

      

      
        - 22
-

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