Document:

SECURITY
      AGREEMENT

     

    SECURITY
      AGREEMENT, dated January 4, 2008, made by DOCUMENT SECURITY SYSTEMS, INC. (the
      “Borrower”), in favor of FAGENSON & CO., INC. (“Agent”).

     

    WITNESSETH:

     

    WHEREAS,
      the Agent and the Borrower are parties to a Credit Agreement, dated as of the
      date hereof (such agreement, as amended, restated or otherwise modified from
      time to time, being hereinafter referred to as the “Credit
      Agreement”);

     

    WHEREAS,
      pursuant
      to the Credit Agreement, the Agent has agreed to make certain term loans (each
      a
“Loan” and collectively, the “Loans”) on behalf of the Lenders (as
      defined in the Credit Agreement) to
      the
      Borrower
      in an
      aggregate principal amount at any one time outstanding not to exceed the Maximum
      Revolving Commitment (as defined in the Credit Agreement);  

     

    WHEREAS,
      it is a condition precedent to the Agent making any Loan to the Borrower
      pursuant to the Credit Agreement, that the Borrower shall have executed and
      delivered to the Agent a security agreement providing for the grant to Agent
      for
      the benefit of the Lenders of a security interest in all of the stock of the
      Company’s wholly owned subsidiary Plastic Printing Professionals,
      Inc.;

     

    NOW,
      THEREFORE, in consideration of the premises and the agreements herein and in
      order to induce the Agent to make and maintain the Loans pursuant to the Credit
      Agreement, the Company hereby jointly and severally agrees with the Agent as
      follows:

     

    SECTION
      1. Definitions.

     

    (a) Reference
      is hereby made to the Credit Agreement for a statement of the terms thereof.
      All
      terms used in this Agreement and the recitals hereto which are defined in the
      Credit Agreement 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 Agent
      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 Company hereby pledges and assigns to the Agent for the benefit of the
      Lenders, and grants to the Agent for the benefit of the Lenders, a continuing
      security interest in all of the stock of its wholly owned subsidiary Plastic
      Printing Professionals, Inc., whether now outstanding or issued at a future
      date
      (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 Credit Agreement and
      the
      other Loan Documents, including, without limitation, (i) principal of and
      interest on the Loans (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 Loan Document; and

     

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

     

    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 Loan 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.

     

    (b) The
      execution, delivery and performance by the Company of this Agreement and each
      other Loan 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 Loan 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 Agent relating to this Agreement and (B) such as may have
      been filed to perfect or protect any security interests or Liens permitted
      by
      the Credit Agreement.

     

    (e) This
      Agreement creates in favor of Agent 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 Credit Agreement
      and
      the other Loan Documents shall not have expired or terminated, unless Agent
      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 Agent may request in order to
      (i) perfect and protect the security interest purported to be created
      hereby; (ii) enable Agent to exercise and enforce its rights and remedies
      hereunder in respect of the Collateral; or (iii) otherwise effect the
      purposes of this Agreement.

     

    (b) Transfers
      and Other Liens.

     

    (i) Except
      to
      the extent expressly permitted by the Credit Agreement, the Company will not
      sell, assign (by operation of law or otherwise), lease, license, exchange or
      otherwise transfer or dispose of any of the Collateral.

     

    (ii) Except
      to
      the extent expressly permitted by the Credit Agreement, 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 Agent 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 Agent 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 Agent 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 Agent’s discretion, to take any
      action and to execute any instrument which Agent 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 Agent and
      the
      Agent 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 Credit Agreement and the other Loan
      Documents. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (c) The
      powers conferred on Agent 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, Agent 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:

     

    (a) Agent
      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 Agent’s name or
      into the name of its nominee or nominees (to the extent Agent has not
      theretofore done so) and thereafter receive, for the benefit of Agent, 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 Agent’s
      offices or elsewhere, for cash, on credit or for future delivery, and at such
      price or prices and upon such other terms as Agent may deem commercially
      reasonable. all
      Cash
      Proceeds received by Agent 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 Agent, be held by Agent as collateral for, and/or then or at any time
      thereafter applied (after payment of any amounts payable to Agent pursuant
      to
      Section 8 hereof) in whole or in part by Agent against, all or any part of
      the
      Obligations in such order as Agent shall elect, consistent with the provisions
      of the Credit Agreement and the Intercreditor Agreements. Any surplus of such
      cash or Cash Proceeds held by Agent and remaining after the indefeasible payment
      in full of all of the Obligations after the termination of the Credit Agreement
      and the other Loan 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 Agent and the Agent are legally
      entitled, the Company shall be liable for the deficiency, together with interest
      thereon at the highest rate specified in any applicable Loan 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 Agent
      to
      collect such deficiency.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (c) The
      Company hereby acknowledges that if Agent 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 Agent 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 Agent’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 Agent’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 Agent the amount of any and all costs and
      expenses, including the reasonable fees, costs, expenses and disbursements
      of
      counsel for Agent and of any experts and Agent (including, without limitation,
      any collateral trustee which may act as agent of Agent), which Agent 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 Agent
      hereunder, or (iv) the failure by the Company to perform or observe any of
      the provisions hereof.

     

    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 Agent, to it at
      its
      address specified in the Credit Agreement; 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 Agent, 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 Agent, 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 Agent to exercise, and no delay in exercising, any right
      hereunder or under any other Loan 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 Agent or any Agent provided herein and in the other Loan Documents
      are cumulative and are in addition to, and not exclusive of, any rights or
      remedies provided by law. The rights of Agent or any Agent under any Loan
      Document against any party thereto are not conditional or contingent on any
      attempt by such Person to exercise any of its rights under any other Loan
      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.

     

    (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
      Credit Agreement and the other Loan 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 Agent and the Agent hereunder, to the benefit of Agent and the
      Agent
      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, Agent and the Agent may assign or otherwise
      transfer their rights and obligations under this Agreement and any other Loan
      Document, to any other Person and such other Person shall thereupon become
      vested with all of the benefits in respect thereof granted to Agent and the
      Agent herein or otherwise. Upon any such assignment or transfer, all references
      in this Agreement to Agent or any such Agent shall mean the assignee of Agent
      or
      such Agent. None of the rights or obligations of the Company hereunder may
      be
      assigned or otherwise transferred without the prior written consent of Agent,
      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 Credit
      Agreement and the other Loan 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) Agent 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.

     

    h) THE
      COMPANY AND (BY ITS ACCEPTANCE OF THE BENEFITS OF THIS AGREEMENT) AGENT 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 Agent 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. Agent 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, Agent 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. 

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    [REMAINDER
      OF THIS PAGE INTENTIONALLY LEFT BLANK]

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    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.

     

    
      	 	 	 
	 	
              DOCUMENT
                SECURITY SYSTEMS, INC.

            
	 
 	 
 	 
 
	 	By:  	/s/ Patrick White
	 	
              

              Name:
                Patrick White

              Title:
                Chief Executive OfficerTHIS
      NOTE
      HAS NOT BEEN REGISTERED UNDER THE
      UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
      ACT”),
      OR
      ANY APPLICABLE STATE LAW, AND MAY NOT BE SOLD, OFFERED FOR SALE, DISTRIBUTED,
      ASSIGNED, OFFERED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS (A) THERE IS AN
      EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE, OR FOREIGN
      SECURITIES LAWS COVERING ANY SUCH TRANSACTION OR (B) SUCH TRANSACTION IS EXEMPT
      FROM REGISTRATION.

     

    SECURED
      PROMISSORY NOTE

     

    
      	
              $[_____]

            	
              January
                [__], 2008

            
	
               

            	
              Rochester,
                New York

            

    

     

    FOR
      VALUE
      RECEIVED, DOCUMENT SECURITY SYSTEMS, INC. (the “Borrower”), promises to pay to
      FAGENSON & CO., INC. (the “Agent”) on behalf of the Lenders (as defined in
      that certain Credit Agreement, dated January 4, 2008, between the Agent and
      the
      Borrower), or to its order, the principal sum of ____________ U.S. DOLLARS
      ($______________) (the “Principal Amount”), together with interest in arrears on
      the unpaid principal balance from time to time outstanding from the date hereof
      until the entire principal amount due hereunder is paid in full at the rate(s)
      provided below.

     

    This
      Secured Promissory Note (this “Note”) is one of a series of Secured Promissory
      Notes in the aggregate principal of up to $3,000,000 containing substantially
      identical terms and conditions (the “Notes”) issued by the Borrower to the Agent
      on behalf of the Lenders. The Notes are pari
      passu
      such
      that all Notes are ranked equally, and no payments shall be made by the Borrower
      under any of the Notes unless a pro rata payment is simultaneously made under
      all other Notes. Terms not defined herein shall have the meaning ascribed to
      them in that certain Credit Agreement, dated January 4, 2008, between the Agent
      and the Borrower.

     

    Subject
      to applicable law, the Notes will be senior in all respects (including the
      right
      of payment) to all other indebtedness of the Borrower now existing or hereafter
      incurred.

     

    1. Maturity.
      The
      aggregate Principal Amount, together with all accrued interest thereon and
      expenses incurred by the Agent in connection herewith (cumulatively, the
“Outstanding
      Amount”),
      shall
      be due and payable in full on the earliest to occur of (the earliest of such
      events, the “Maturity
      Date”):
      (i)
      January 4, 2010 (the “Scheduled Maturity Date”) and (ii) the acceleration of
      this Note upon the occurrence of an Event of Default. Unless payment is made
      following a demand therefor by the Agent, the Borrower shall provide the Agent
      with not less than five (5) business days’ prior written notice of its intent to
      repay the amounts outstanding hereunder.

     

    2. Interest.
      This
      Note shall bear interest at
      a rate
      of two percent (2%) in excess of the then in effect one-year LIBOR rate per
      annum. Interest shall be calculated on the basis of a year of 360 days for
      the
      actual number of days elapsed.
      All
      accrued interest on this Note shall be due and payable on
      the
      first day of each calendar quarter commencing with the first calendar quarter
      following the disbursement of any Revolving Credit Loan.
      From
      and after the occurrence of an Event of Default, the unpaid principal balance
      of
      this Note and, to the extent permitted by law, overdue interest shall bear
      interest at a rate per annum equal to four
      (4%)
      percent over the then applicable interest rate due under each Loan (the “Default
      Rate”).

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3. Payment;
      Usury.
      All
      payments by the Borrower under this Note shall be made in United States Dollars
      without deduction, set-off or counterclaim and shall be free and clear and
      without any deduction or withholding for any taxes or fees of any nature
      whatever, unless the obligation to make such deduction or withholding is
      required by law. Payment shall be credited first to the accrued interest then
      due and payable and the remainder applied to principal. Unless otherwise
      expressly provided in this Note, the Borrower, to the extent permitted by
      applicable law, waives presentment for payment, protest, and demand, and notice
      of protest, demand, and/or dishonor and nonpayment of this Note, notice of
      any
      Event of Default under this Note, and all other notices or demands otherwise
      required by law that the Borrower may lawfully waive. All agreements between
      the
      Borrower and the Agent are hereby expressly limited so that in no contingency
      or
      event whatsoever, whether by reason of acceleration of maturity of the
      indebtedness evidenced hereby or otherwise, shall the amount paid or agreed
      to
      be paid to the Agent for the use, forbearance, or detention of the indebtedness
      evidenced hereby exceed the maximum permissible amount under applicable law.
      If,
      from any circumstance whatsoever, fulfillment of any provision hereof at the
      time performance of such provision shall be due shall involve transcending
      the
      limit of validity prescribed by law, the obligation to be fulfilled shall
      automatically be reduced to the limit of such validity, and if from any
      circumstances the Agent should ever receive as interest an amount which would
      exceed the highest lawful rate, such amount which would be excessive interest
      shall be applied to the reduction of the principal balance evidenced hereby
      and
      not to the payment of interest, and, if the principal amount of this Note has
      been paid in full, shall be refunded to the Borrower.

     

    Immediately
      upon full repayment or conversion of the Outstanding Amount in accordance with
      the terms hereof, the Borrower shall be released from the repayment obligation
      or the conversion obligation set forth in this Note, the pledge and security
      interest shall be terminated, and the Agent shall execute releases of financing
      statements.

     

    4. Security
      Interest and Collateral.
      This
      Note is secured by a first priority security interest on the Collateral pursuant
      to the terms of the Security Agreement, of even date hereof, made by the
      Borrower in favor of the Agent (the “Security Agreement”). 

     

    5. Replacement
      of Note.
      If this
      Note is mutilated, lost, stolen or destroyed, the Borrower shall issue or cause
      to be issued in exchange and substitution for and upon cancellation hereof,
      or
      in lieu of and substitution for this Note, a new Note, but only upon receipt
      of
      evidence reasonably satisfactory to the Borrower of such loss, theft or
      destruction and customary and reasonable bond or indemnity, if
      requested.

     

    6. Miscellaneous.

     

    (a) Authority
      and Enforceability; Etc.
      The
      Borrower hereby represents and warrants to the Agent that:

     

    (i)
      it
      has full power and authority and has taken or shall take all required corporate
      and other action necessary to permit it to execute, deliver, and perform all
      of
      its obligations contained in this Note, the Security Agreement, and any other
      documents or instruments delivered in connection herewith, and to borrow
      hereunder, and such actions to the best of its knowledge will not violate any
      provision of law applicable to, or the organizational documents of, the
      Borrower, or result in the breach of or constitute a default under any material
      agreement or instrument to which the Borrower is a party or by which it is
      bound, which default has not been waived in writing on or prior to the date
      hereof;

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (ii)
      this
      Note has been duly authorized and validly executed by and is the valid and
      binding obligation of the Borrower enforceable in accordance with its terms,
      except as enforceability may be limited by bankruptcy, insolvency,
      reorganization, or other laws affecting creditors’ rights and remedies
      generally, and by general principles of equity (regardless of whether
      enforceability is considered in a proceeding in equity or at law);

     

    (iii)
      neither the execution and delivery by the Borrower of this Note, nor the
      performance by the Borrower of its obligations hereunder, requires the consent,
      approval or authorization of any person or governmental authority, which
      consent, approval, or authorization has not been obtained; and

     

    (b) Notices.
      All
      notices to any party required or permitted hereunder shall be in writing and
      shall be sent to the address or facsimile number set forth for such party as
      follows:

     

    (i) If
      to the
      Agent:

     

    FAGENSON
      & CO., INC.

    60
      Broad
      Street

    39TH
      Floor

    New
      York,
      NY 10004

    Attention:
      Robert Fagenson

     

    (ii) If
      to
      Company:

    

    DOCUMENT
      SECURITY SYSTEMS, INC.

    28
      East
      Main Street

    Suite
      1525 

    Rochester,
      NY 14614

    Attention: Chief
      Executive Officer 

    

    Any
      such
      notice shall be deemed effectively given (i) upon personal delivery to the
      party
      to be notified; (ii) when sent by confirmed facsimile if sent during normal
      business hours of the recipient, if not, then on the next business day; (iii)
      three days after having been sent by registered or certified mail, return
      receipt requested, postage prepaid; or (iv) one day after deposit with a
      recognized national overnight courier, specifying next day delivery, or two
      days
      after deposit with a recognized international overnight courier, specifying
      two
      day delivery, in each case with written verification of receipt.

    

    (c) Waiver.
      No
      failure to exercise, and no delay in exercising, on the part of the Agent,
      any
      right, power, or privilege hereunder shall operate as a waiver thereof; nor
      shall any single or partial exercise of any right, power, or privilege hereunder
      preclude any other or further exercise thereof or the exercise of any other
      right, power, or privilege. The rights and remedies herein provided are
      cumulative and not exclusive of any rights or remedies provided by
      law.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (d) Amendments.
      Any
      term, covenant, or condition of this Note may be amended or waived only by
      written consent of the Borrower and the Agent. 

     

    (e) Expenses.
      Any
      reasonable expense incurred by the Agent (including, without limitation,
      reasonable attorneys’ fees and disbursements) in connection with the
      administration, or enforcement of this Note and any other document executed
      by
      the Borrower in connection with the obligations of Borrower hereunder or any
      amendment hereto or thereto, or the exercise of any right or remedy upon the
      occurrence of an Event of Default, including, without limitation, the recording
      and filing fees to perfect the liens granted under the Security Agreement and
      the costs of collection and reasonable attorneys’ fees and expenses, shall be
      paid by the Borrower within 15 days of receiving written notice thereof from
      the
      Agent. Any such expense incurred by the Agent and not timely paid by the
      Borrower shall be added to the other obligations hereunder and shall earn
      interest at the same rate per annum as the principal hereunder. 

     

    (f) Governing
      Law.
      This
      Note shall be governed by and construed in accordance with the laws of the
      State
      of New York without giving effect to any conflict or choice of laws
      principles.

     

    (g) Transfer;
      Successors and Assigns.
      The
      terms and conditions of this Note shall inure to the benefit of and be binding
      upon the respective successors and assigns of the parties. This Note shall
      not
      be assignable by any Agent without the prior written consent of the Borrower,
      provided that the Agent may assign or transfer any of its rights, privileges,
      or
      obligations set forth in, arising under, or created by this Agreement to any
      entity controlled by, controlling or under common control with the Agent. The
      Borrower may not assign this Note without prior written consent of the Agent,
      provided that the Borrower may assign this Note to any successor of all or
      substantially all of its assets or business, or any entity surviving the merger,
      combination or consolidation with the Borrower.

     

    (h) Entire
      Agreement.
      This
      Note and any other agreement or instrument entered into in connection herewith
      contains the entire agreement of the Borrower and the Agent with respect to
      the
      subject matter hereof.

     

    (i) Confidentiality.
      In
      addition to separate confidentiality agreement, if any, each Agent will at
      all
      times keep confidential and not divulge, use or make accessible to anyone the
      terms and conditions of this Agreement and the transactions described herein,
      and any non-public material information concerning or relating to the business
      or financial affairs of the Borrower to which such party has been or will become
      privy relating to this Agreement, except to its employees and advisors in such
      capacity, as required to perform its obligations hereunder, if required by
      law
      or rules of a stock exchange on which its or its parent’s securities are listed,
      or with the prior written consent of the Borrower. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    IN
      WITNESS WHEREOF, the Borrower has caused this Note to be executed by its duly
      authorized representative as of the day and year first above
      written.

     

    
      	 	 	 
	 	DOCUMENT
              SECURITY SYSTEMS, INC.
	 
 	 
 	 
 
	 	By:  	
            
	 	
              

              Name:
                Patrick White

              Title:
                Chief Executive Officer

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00139-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00139-of-00352.parquet"}]]