Document:

REGISTRATION RIGHTS AGREEMENT

 

REGISTRATION RIGHTS AGREEMENT
(the “Agreement”), dated as of the ___ day of February, 2012, executed and delivered by DOCUMENT SECURITY SYSTEMS,
INC., a New York corporation (the “Company”), and Holders (as defined below).

 

RECITALS

 

WHEREAS, simultaneously
with the execution and delivery of this Agreement, the Company, pursuant to terms and conditions set forth in the Subscription
Agreement, dated February __, 2012, including the exhibits thereto and any and all supplements thereof and amendments thereto,
and all documents incorporated by reference therein (collectively, the “Subscription Documents”) is offering for sale
(the “Offering”) up to a maximum of 30 units of the Company securities, at a price of $100,000 per unit (the “Units”),
each Unit consisting of (i) 32,258 (“Shares”) of its common Stock, par value $.02 per share (“Common Stock”)
and (ii) a warrant (“Warrant”) to purchase up to an aggregate of 16,129 Shares of Common Stock (the “Warrant
Shares”).

 

WHEREAS, the investor in
the Offering whose name appears on Exhibit A annexed hereto is the Holder in this Offering; and

 

WHEREAS, the terms and
conditions of the Offering provide for the execution and delivery of this Agreement.

 

NOW, THEREFORE, for good
and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Company, the Company hereby agrees
as follows:

 

1. Automatic Registration.

 

(a) The Company shall use
its best efforts to file a registration statement (“Registration Statement”) with the Securities and Exchange Commission
under the Securities Act of 1933 (the “Act”), on appropriate form, and such other documents, including a prospectus,
as may be necessary (in the opinion of counsel for the Company), in order to comply with the provisions of the Act, within 30 business
days after the final closing of the Offering, so as to allow for the resale under the Act by any Holder or combination of Holders
of all Registerable Shares (as defined in Section 2) held by all of the Holders, at the sole expense of the Company, so as to permit
the public resale by the Holder of the Registerable Shares pursuant thereto.

 

    	Reg. Rights Agreement	 	 

    	 

    
 

(b) If (i) a Registration
Statement covering the resale of all of the Registrable Shares (as defined below) required to be covered thereby and required to
be filed by the Company pursuant to this Agreement is (A) not filed with the SEC on or before the 30th calendar day
after the date hereof (a “Filing Failure”) or (B) not declared effective (the date such Registration Statement is declared
effective, the “Effective Date”) by the Securities and Exchange Commission (the “SEC”) on or before 60th
calendar day after the date hereof (or the 90th calendar day after the date hereof in the event that such Registration Statement
is subject to a full review by the SEC) (an “Effectiveness Failure”), (ii) other than during an Allowable Grace Period
(as defined below), on any day after the Effective Date of a Registration Statement sales of all of the Registrable Shares required
to be included on such Registration Statement cannot be made pursuant to such Registration Statement (including, without limitation,
because of a failure to keep such Registration Statement effective, a failure to disclose such information as is necessary for
sales to be made pursuant to such Registration Statement, a suspension or delisting of (or a failure to timely list) the shares
of Common Stock on the Principal Market (as defined in the Subscription Documents), or a failure to register a sufficient number
of shares of Common Stock or by reason of a stop order) or the prospectus contained therein is not available for use for any reason
(a “Maintenance Failure”), or (iii) if a Registration Statement is not effective for any reason or the prospectus contained
therein is not available for use for any reason, the Company fails to file with the SEC any required reports under Section 13 or
15(d) of the 1934 Act (as defined in the Subscription Documents) such that it is not in compliance with Rule 144(c)(1) (or Rule
144(i)(2), if applicable) of Act (as defined in the Subscription Documents”) (a “Current Public Information Failure”)
as a result of which any of the Holders are unable to sell Registrable Shares without restriction under Rule 144 of the Act (“Rule
144”)(including, without limitation, volume restrictions), then, as partial relief for the damages to any holder by reason
of any such delay in, or reduction of, its ability to sell the underlying shares of Common Stock (which remedy shall not be exclusive
of any other remedies available at law or in equity), the Company shall pay to each holder of Registrable Shares relating to such
Registration Statement an amount in cash equal to one percent (1.0%) of the aggregate Purchase Price (as such term is defined in
the Securities Purchase Agreement) of such Holder on each of the following dates: (1) on the date of such Filing Failure, Effectiveness
Failure, Maintenance Failure or Current Public Information Failure, as applicable, and (2) on every thirty (30) day anniversary
of (I) a Filing Failure until such Filing Failure is cured; (II) an Effectiveness Failure until such Effectiveness Failure is cured;
(III) a Maintenance Failure until such Maintenance Failure is cured; and (IV) a Current Public Information Failure until the earlier
of (i) the date such Current Public Information Failure is cured and (ii) such time that such public information is no longer required
pursuant to Rule 144 (in each case, pro rated for periods totaling less than thirty (30) days). The payments to which a holder
of Registrable Shares shall be entitled pursuant to this 1(b) are referred to herein as “Registration Delay Payments.”
Following the initial Registration Delay Payment for any particular event or failure (which shall be paid on the date of such event
or failure, as set forth above), without limiting the foregoing, if an event or failure giving rise to the Registration Delay Payments
is cured prior to any thirty (30) day anniversary of such event or failure, then such Registration Delay Payment shall be made
on the third (3rd) Business Day after such cure. In the event the Company fails to make Registration Delay Payments in a timely
manner in accordance with the foregoing, such Registration Delay Payments shall bear interest at the rate of one percent (1.0%)
per month (prorated for partial months) until paid in full. Notwithstanding the foregoing, no Registration Delay Payments shall
be owed to a Holder (other than with respect to a Maintenance Failure resulting from a suspension or delisting of (or a failure
to timely list) the shares of Common Stock on the Principal Market) with respect to any period during which all of such Holder’s
Registrable Shares may be sold by such Holder under Rule 144.

 

(c) Notwithstanding anything
to the contrary herein (but subject to the last sentence of this Section 1(c)), at any time after the Effective Date of a particular
Registration Statement, the Company may delay the disclosure of material, non-public information concerning the Company or any
of its Subsidiaries the disclosure of which at the time is not, in the good faith opinion of the board of directors of the Company,
in the best interest of the Company and, upon the advice of counsel to the Company, otherwise required (a “Grace Period”),
provided that the Company shall promptly notify the Holders in writing of the (i) existence of material, non-public information
giving rise to a Grace Period (provided that in each such notice the Company shall not disclose the content of such material, non-public
information to any of the Holders) and the date on which such Grace Period will begin and (ii) date on which such Grace Period
ends, provided further that (I) no Grace Period shall exceed ten (10) consecutive days and during any three hundred sixty five
(365) day period all such Grace Periods shall not exceed an aggregate of thirty (30) days, (II) the first day of any Grace Period
must be at least five (5) trading days after the last day of any prior Grace Period and (III) no Grace Period may exist during
the sixty (60) trading day period immediately following the Effective Date of such Registration Statement (provided that such sixty
(60) trading day period shall be extended by the number of trading days during such period and any extension thereof contemplated
by this proviso during which such Registration Statement is not effective or the prospectus contained therein is not available
for use) (each, an “Allowable Grace Period”). For purposes of determining the length of a Grace Period above, such
Grace Period shall begin on and include the date the Holders receive the notice referred to in clause (i) above and shall end on
and include the later of the date the Holders receive the notice referred to in clause (ii) above and the date referred to in such
notice. Notwithstanding anything to the contrary contained in this Section 1(c), the Company shall cause its transfer agent to
deliver unlegended shares of Common Stock to a transferee of an Holder in accordance with the terms of the Securities Purchase
Agreement in connection with any sale of Registrable Shares with respect to which such Holder has entered into a contract for sale,
and delivered a copy of the prospectus included as part of the particular Registration Statement to the extent applicable, prior
to such Holder’s receipt of the notice of a Grace Period and for which the Holder has not yet settled.

 

    	Reg. Rights Agreement	- 2 -	 

    	 

    
 

2. Registerable Shares.
For purposes of this Agreement, the term “Registerable Shares” shall include (a) the shares purchased as a component
of the Units in the Offering; (b) any securities issued or issuable with respect to the Warrants; (c) Warrant Shares; or (d) any
other shares of Common Stock issued to the Holders by way of stock dividend or stock split or in connection with a combination
of shares, recapitalization, merger, consolidation or other reorganization or otherwise. Anything herein contained to the contrary
notwithstanding, the provisions of this Agreement shall not apply to, and the term “Registerable Shares” as used in
this Agreement shall not include, shares of Common Stock or Warrant Shares after they have been sold by a Holder pursuant to an
effective Registration Statement under the Act or sold pursuant to Rule 144.

 

3. Additional Covenants of the Company With
Respect to Registration.

 

The Company covenants and agrees as follows:

 

(a) In connection with
any registration under Section 1 above, the Company shall file the Registration Statement no later than 30 business days following
the final closing of the Offering, and use reasonable efforts to have such Registration Statement declared effective at the earliest
possible time.

 

(b) In connection with
any registration of Registerable Shares pursuant to Section 1 above, the Company shall furnish each Holder of Registerable Shares
included in a Registration Statement with such reasonable number of copies of such Registration Statement, related preliminary
prospectus and prospectus meeting the requirements of the Act, and other documents necessary or incidental to the registration
and public offering of such Registerable Shares, as shall be reasonably requested by the Holder to permit the Holder to make a
public distribution of such Registerable Shares.

 

(c) Once effective,
the Company covenants and agrees to use its best efforts to maintain the effectiveness of any Registration Statement until the
earlier of (i) a date which is two years from the final closing date of the Offering, or (ii) the date that the Holders of the
Registerable Shares receive an opinion of counsel to the Company that all of the Registerable Shares may be freely traded (without
limitation or restriction as to quantity or timing and without registration under the Act) pursuant to Rule 144 or otherwise; provided,
however, the Company may suspend the use of any Registration Statement for a period not to exceed 45 days in any 12-month period
for valid business reasons (not including avoidance of the Company’s obligations hereunder), including the acquisition or
divestiture of assets, public filings with the SEC, pending corporate developments and similar events.

 

(d) If any stop order
shall be issued by the SEC in connection with any Registration Statement filed pursuant to Section 1 above, the Company will use
its best efforts to obtain the removal of such order.

 

(e) The Company shall
pay all costs, fees, and expenses in connection with all Registration Statements filed pursuant to Section 1 above, including,
without limitation, the Company’s legal and accounting fees, printing expenses, and blue sky fees and expenses; provided,
however, that the Holder shall be solely responsible for the fees of any counsel retained by the Holders in connection with such
registration and any transfer taxes or underwriting discounts, commissions or fees applicable to the Registerable Shares sold by
the Holder pursuant thereto.

 

    	Reg. Rights Agreement	- 3 -	 

    	 

    
 

4. Indemnification.

 

(a)
In the event any Registrable Shares are included in any Registration Statement under this Agreement, to the fullest extent
permitted by law, the Company will, and hereby does, indemnify, hold harmless and defend each Holder and each of its
directors, officers, shareholders, members, partners, employees, agents, advisors, representatives (and any other Persons (as
defined in the Subscription Documents) with a functionally equivalent role of a Person holding such titles notwithstanding
the lack of such title or any other title) and each Person, if any, who controls such Holder within the meaning of the Act or
the 1934 Act and each of the directors, officers, shareholders, members, partners, employees, agents, advisors,
representatives (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding
the lack of such title or any other title) of such controlling Persons (each, an “Indemnified Person”), against
any losses, obligations, claims, damages, liabilities, contingencies, judgments, fines, penalties, charges, costs (including,
without limitation, court costs, reasonable attorneys’ fees and costs of defense and investigation), amounts paid in
settlement or expenses, joint or several, (collectively, “Claims”) incurred in investigating, preparing or
defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any
court or governmental, administrative or other regulatory agency, body or the SEC, whether pending or threatened, whether or
not an indemnified party is or may be a party thereto (“Indemnified Damages”), to which any of them may become
subject insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon: (i) any untrue statement or alleged untrue statement of a material fact in a Registration Statement or any
post-effective amendment thereto or in any filing made in connection with the qualification of the offering under the
securities or other “blue sky” laws of any jurisdiction in which Registrable Shares are offered (“Blue
Sky Filing”), or the omission or alleged omission to state a material fact required to be stated therein or necessary
to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus if used prior to the effective date of such Registration Statement, or contained in
the final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the
SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in
light of the circumstances under which the statements therein were made, not misleading or (iii) any violation or alleged
violation by the Company of the Act, the 1934 Act, any other law, including, without limitation, any state securities law, or
any rule or regulation thereunder relating to the offer or sale of the Registrable Shares pursuant to a Registration
Statement (the matters in the foregoing clauses (i) through (iii) being, collectively, “Violations”). Subject to
Section 4(c), the Company shall reimburse the Indemnified Persons, promptly as such expenses are incurred and are due and
payable, for any legal fees or other reasonable expenses incurred by them in connection with investigating or defending any
such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this
Section 4(a): (i) shall not apply to a Claim by an Indemnified Person arising out of or based upon a Violation which occurs
in reliance upon and in conformity with information furnished in writing to the Company by such Indemnified Person for such
Indemnified Person expressly for use in connection with the preparation of such Registration Statement or any such amendment
thereof or supplement thereto and (ii) shall not be available to a particular Holder to the extent such Claim is based on a
failure of such Holder to deliver or to cause to be delivered the prospectus made available by the Company (to the extent
applicable), including, without limitation, a corrected prospectus, if such prospectus or corrected prospectus was timely
made available by the Company and then only if, and to the extent that, following the receipt of the corrected prospectus no
grounds for such Claim would have existed; and (iii) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld or
delayed. The indemnity and contribution agreements contained herein shall be in addition to (i) any cause of action or
similar right of the Indemnified Party or Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.

 

    	Reg. Rights Agreement	- 4 -	 

    	 

    

(b) In connection
with any Registration Statement in which an Holder is participating, such Holder agrees to severally and not jointly indemnify,
hold harmless and defend, to the same extent and in the same manner as is set forth in Section 4(a), the Company, each of its
directors, each of its officers who signs the Registration Statement and each Person, if any, who controls the Company within
the meaning of the Act or the 1934 Act (each, an “Indemnified Party”), against any Claim or Indemnified Damages to
which any of them may become subject, under the Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified Damages arise
out of or are based upon any Violation, in each case, to the extent, and only to the extent, that such Violation occurs in reliance
upon and in conformity with written information furnished to the Company by such Holder expressly for use in connection with such
Registration Statement; and, subject to Section 4(c) and the below provisos in this Section 4(b), such Holder will reimburse an
Indemnified Party any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or
defending any such Claim; provided, however, the indemnity agreement contained in this Section 4(b) and the agreement with respect
to contribution contained in Section 5 shall not apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of such Holder, which consent shall not be unreasonably withheld or delayed, provided further
that such Holder shall be liable under this Section 4(b) for only that amount of a Claim or Indemnified Damages as does not exceed
the net proceeds to such Holder as a result of the applicable sale of Registrable Shares pursuant to such Registration Statement.
Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified
Party and shall survive the transfer of any of the Registrable Shares by any of the Holders hereunder.

 

(c) Promptly after receipt by an Indemnified Person or Indemnified Party (as the case may be) under this Section 4 of notice
of the commencement of any action or proceeding (including, without limitation, any governmental action or proceeding) involving
a Claim, such Indemnified Person or Indemnified Party (as the case may be) shall, if a Claim in respect thereof is to be made against
any indemnifying party under this Section 4, deliver to the indemnifying party a written notice of the commencement thereof, and
the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with
any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to
the indemnifying party and the Indemnified Person or the Indemnified Party (as the case may be); provided, however, an Indemnified
Person or Indemnified Party (as the case may be) shall have the right to retain its own counsel with the fees and expenses of such
counsel to be paid by the indemnifying party if: (i) the indemnifying party has agreed in writing to pay such fees and expenses;
(ii) the indemnifying party shall have failed promptly to assume the defense of such Claim and to employ counsel reasonably satisfactory
to such Indemnified Person or Indemnified Party (as the case may be) in any such Claim; or (iii) the named parties to any such
Claim (including, without limitation, any impleaded parties) include both such Indemnified Person or Indemnified Party (as the
case may be) and the indemnifying party, and such Indemnified Person or such Indemnified Party (as the case may be) shall have
been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Person
or such Indemnified Party and the indemnifying party (in which case, if such Indemnified Person or such Indemnified Party (as the
case may be) notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying
party, then the indemnifying party shall not have the right to assume the defense thereof and such counsel shall be at the expense
of the Indemnifying Party, provided further that in the case of clause (iii) above the indemnifying party shall not be responsible
for the reasonable fees and expenses of more than one (1) separate legal counsel for such Indemnified Person or Indemnified Party
(as the case may be). The Indemnified Party or Indemnified Person (as the case may be) shall reasonably cooperate with the indemnifying
party in connection with any negotiation or defense of any such action or Claim by the indemnifying party and shall furnish to
the indemnifying party all information reasonably available to the Indemnified Party or Indemnified Person (as the case may be)
which relates to such action or Claim. The indemnifying party shall keep the Indemnified Party or Indemnified Person (as the case
may be) reasonably apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action, claim or proceeding effected without its prior written consent;
provided, however, the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the prior written consent of the Indemnified Party or Indemnified Person (as the case may be), consent to entry
of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnified Party or Indemnified Person (as the case may be) of a release from all liability
in respect to such Claim or litigation, and such settlement shall not include any admission as to fault on the part of the Indemnified
Party. Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Indemnified
Party or Indemnified Person (as the case may be) with respect to all third parties, firms or corporations relating to the matter
for which indemnification has been made. The failure to deliver written notice to the indemnifying party within a reasonable time
of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or
Indemnified Party (as the case may be) under this Section 4, except to the extent that the indemnifying party is materially and
adversely prejudiced in its ability to defend such action.

    	Reg. Rights Agreement	- 5 -	 

    	 

    
 

(d) No Person involved
in the sale of Registrable Shares who is guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
in connection with such sale shall be entitled to indemnification from any Person involved in such sale of Registrable Shares
who is not guilty of fraudulent misrepresentation.

(e) The
indemnification required by this Section 4 shall be made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or Indemnified Damages are incurred.

5.
Contribution.

To the extent any
indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Section 4 to the fullest extent permitted by law; provided,
however: (i) no contribution shall be made under circumstances where the maker would not have been liable for indemnification under
the fault standards set forth in Section 4 of this Agreement, (ii) no Person involved in the sale of Registrable Shares which Person
is guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) in connection with such sale shall be
entitled to contribution from any Person involved in such sale of Registrable Shares who was not guilty of fraudulent misrepresentation;
and (iii) contribution by any seller of Registrable Shares shall be limited in amount to the amount of net proceeds received by
such seller from the applicable sale of such Registrable Shares pursuant to such Registration Statement. Notwithstanding the provisions
of this Section 5, no Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the
net proceeds actually received by such Holder from the applicable sale of the Registrable Shares subject to the Claim exceeds the
amount of any damages that such Holder has otherwise been required to pay, or would otherwise be required to pay under Section
4(b), by reason of such untrue or alleged untrue statement or omission or alleged omission.

The provisions
of Section 4 shall remain in full force and effect regardless of any investigation made by or on behalf of any Holder or the
Company or any other persons who are entitled to indemnification pursuant to the provisions of  Section 4, and shall survive
the sale by a Holder of Registerable Shares pursuant to the Registration Statement.

 

    	Reg. Rights Agreement	- 6 -	 

    	 

    
 

6. Amendments. This
Agreement may not be amended, modified or supplemented, and waivers of or consents to departures from the provisions of this Agreement
may not be given, unless it would not have an adverse effect upon the rights of any of the Holders and the Company has obtained
the written consent of Holders then holding a majority of the Registerable Shares.

 

7. Notices. Except
as otherwise provided in this Agreement, all notices, requests and other communications (which shall include publication) to any
person provided for hereunder shall be in writing and shall be given by hand delivery, registered or certified mail or by any courier
providing overnight delivery (i) if to the Company, or the initial Holder, at the address set forth in the Subscription Agreement
and (ii) if to a subsequent Holder, to the address set forth on the books and records of the Company. All such notices, requests
or communications shall not be effective until received.

 

8. Assignment. This
Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto. In addition, and whether
or not any express assignment shall have been made, the provisions of this Agreement which are for the benefit of Holder shall
also be for the benefit of and enforceable by any subsequent holder of the Registerable Shares. Holder agrees, by accepting any
portion of the Registerable Shares after the date hereof, to the provisions of this Agreement.

 

9. Governing Law.

 

(a) THIS AGREEMENT
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF
NEW YORK WITHOUT REFERENCE TO THE PRINCIPLES OF CONFLICTS OF LAWS.

 

(b) Each of the
Company and Holder hereby irrevocably and unconditionally consents to submit to the exclusive jurisdiction of any State Court in
The City of New York, Borough of Manhattan and the United States District Court for the Southern District of New York (the “NY
Courts”) for any litigation arising out of or relating to this Agreement and the transactions contemplated hereby (and agrees
not to commence any litigation relating thereto except in such courts), waives any objection to the laying of venue of any such
litigation in the NY Courts and agrees not to plead or claim that such litigation brought in any NY Courts has been brought in
an inconvenient forum.

 

10. Counterparts.
This Agreement may be executed by facsimile or e-mail PDF and may be signed simultaneously in any number of counterparts, each
of which shall be deemed an original, but all such counterparts shall together constitute one and the same instrument.

 

11. Entire Agreement.
This Agreement embodies the entire agreement of between the Company relating to the subject matter hereof and supersedes all prior
agreements and understandings relating to such subject matter.

 

12. Severability.
If any provision of this Agreement, or the application of such provisions to any person or circumstance, shall be held invalid,
the remainder of this Agreement, or the application of such provision to persons or circumstances other than those to which it
is held invalid, shall not be affected thereby.

 

13. Third Party Beneficiaries.
The Holders from time to time shall each be a third party beneficiary of the agreements of the Company contained herein.

 

    	Reg. Rights Agreement	- 7 -	 

    	 

    
 

14. Headings. The
headings which are contained in this Agreement are for the sole purpose of convenience of reference, and shall not limit or otherwise
affect the interpretation of any of the provisions hereof.

 

15. Further Assurances.
The Company will from time to time after the date hereof take any and all actions, and execute, acknowledge and deliver any and
all documents and instruments, at its cost and expense, as any Holder may from time to time reasonably request in order to more
fully perfect or protect the rights intended to be granted to it hereunder.

 

16. Interpretation.
As used in this Agreement, unless the context otherwise requires: words describing the singular number shall include the plural
and vice versa; words denoting any gender shall include all genders; words denoting natural persons shall include corporations,
partnerships and other entities, and vice versa; and the words “hereof”, “herein” and “hereunder”,
and words of similar import, shall refer to this Agreement as a whole, and not to any particular provision of this Agreement.

 

17. Waiver. The
failure of the Company or any Holder to at any time enforce any of the provisions of this Agreement shall not be deemed or construed
to be a waiver of any such provision, nor to in any way affect the validity of this Agreement or any provision hereof or the right
of the Company or any Holder to thereafter enforce each and every provision of this Agreement.

 

 

[signature page appears next]

 

    	Reg. Rights Agreement	- 8 -	 

    	 

    

 

IN WITNESS WHEREOF, the
undersigned has duly executed and delivered this Agreement effective as of the date first above written.

 

 

	 	DOCUMENT SECURITY SYSTEMS, INC.	 
	 	 	 	 
	 	 	 	 
	 	By:	 	 
	 	 	Name: Patrick White	 
	 	 	Title: Chief Executive Officer	 

 

 

	Accepted and Agreed
	Holders:
	 	 
	By:	 
	 	Name:
	 	 
	By:	 
	 	Name:
	 	 
	By:	 
	 	Name:

 

    	Reg. Rights Agreement	 	 

    	 

    

 

EXHIBIT A

LIST OF HOLDERS

 

(Attached)

 

    	Reg. Rights AgreementPalladium
Capital Advisors, LLC

230
Park Avenue, Suite 539

New
York, New York 10169

 

Tel (646)
485-7297 Fax (646) 390-6328 

 

 

 

February 13, 2012

 

Philip Jones, CFO

Document Security Systems, Inc.

28 Main Street, Suite 1525

Rochester, NY 14614

Tel. (585) 325-3610 ext. 102

Fax: (585) 325-2977

philip.jones@documentsecurity.com

 

		Re:	Placement Agent Agreement

 

Dear Mr. Jones:

 

This will confirm the understanding and agreement
(the “Agreement”) between palladium capital advisors, llc, a Delaware
limited liability company (“Palladium”), and Document Security Systems, Inc.,
a New York corporation (the “Company”), as follows:

 

1. The Company hereby engages Palladium on
a best efforts basis as its agent in the private placement or similar unregistered transaction of equity or equity-linked securities
of the Company (the “Securities”) to a limited number of institutional, accredited individual or strategic investors
(each an “Investor”) at a price and upon terms satisfactory to the Company (the “Transaction”). For purposes
hereof, the term “Securities” also includes a convertible loan or other type of investment convertible into or exchangeable
for or otherwise linked to the equity of the Company.

 

2. The appointment and authorization of Palladium
under Section 1 of this Agreement shall commence on the date hereof and shall expire 12 months after the date hereof (the “Term”).

 

3. The Company acknowledges and agrees that
Palladium will be using, and relying upon, the Company to furnish Palladium with written materials and information, including but
not limited to financial statements, to be provided to potential Investors (the “Materials”) describing the Company
and the Transaction (or Related Transaction, as defined below) concerning the Company’s business, operations, assets, liabilities
and receivables, and Palladium will be using, and relying upon, such Materials supplied by the Company, its officers, agents, and
others and any other publicly available information without any independent investigation or verification thereof or independent
appraisal by Palladium of the Company or its business or assets. Palladium does not assume responsibility for the accuracy or completeness
of the Materials, including but not limited to any disclosure materials related to the Transaction (or Related Transaction), except
for such information that is provided in writing by Palladium to the Company that is independently produced by Palladium and not
based on Materials provided by the Company or information available from generally recognized public sources. The Company shall
provide Palladium with access to the Company’s officers, directors, accountants, counsel and other advisors, and shall
keep Palladium fully informed of any events that might have a material effect on the
financial condition of the Company. The Company represents and warrants to Palladium that all information concerning the
Company, including, without limitation, all information contained in the Materials, will be true, complete and accurate in all
material respects and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order
to make the statements therein not misleading in light of the circumstances under which such statements are made. If at any time
prior to the completion of a Transaction (or Related Transaction) an event occurs which would cause the Materials (as supplemented
or amended) to contain an untrue statement of a material fact or to omit to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made, not misleading, the Company will notify Palladium
immediately of such event.

 

    	 	 	 

    	 

    
 

4.
The Company agrees to pay Palladium the following compensation upon the culmination of a sale of Securities to Investors (the “Closing”):
(a) 7% of the aggregate consideration raised in the private placement to such Investors, payable in cash by wire transfer at the
time of the Closing, and (b) warrants to purchase such number of shares of the common stock of the Company equal to 6% of the aggregate
number of shares as are received by Investors taking into consideration any increase in shares under a ratchet or similar provision
pursuant to which the number of shares initially purchased is subsequently increased (the “Warrants”). In addition,
the Company agrees to pay Palladium, upon the exercise of any warrants by Investors, 3% of the aggregate consideration raised pursuant
to such exercise.

 

The Warrants will have
a five-year exercise period with an exercise price per share equal to the effective per share price paid by the Investors for the
Securities with respect to a Transaction. The terms of the Warrants shall be set forth in one or more agreements (the “Warrant
Agreements”) in form and substance reasonably satisfactory to Palladium. The Warrant Agreements shall contain customary terms,
including, without limitation, provisions for “cashless” exercise, change of control, weighted average based anti-dilution,
and customary demand and piggyback registration rights.

 

In the event the Company
executes a letter of intent or binding agreement to enter into a merger, spinoff, share exchange, stock swap, business combination
or reorganization, acquisition of some or all of the stock or assets of another company, purchase or sale of some or all of the
stock or assets of the Company, joint venture, licensing agreement, royalty agreement, distribution agreement or any similar transaction
or combination thereof (any such transaction being referred to herein as a “Related Transaction”), at any time during
the Term with an entity introduced to the Company by Palladium, then the Company shall pay Palladium a fee of 2% in cash and 2%
in Company common stock of the aggregate consideration (per Section 5 below) received by the Company and its security holders in
connection with such Related Transaction.

 

The foregoing fees are
payable for any sale of Securities that occurs during the Term or within 24 months thereafter with respect to Investors identified
by Palladium.

 

    	 	- 2 -	 

    	 

    
 

5. For purposes of this Agreement:

 

(a) Aggregate consideration
shall mean the total consideration (stock, cash, assets and all other property (real or personal, tangible or intangible) plus
debt and liabilities assumed (including, without limitation, loans, indebtedness for borrowed money, pension liabilities and guarantees),
funding, advances, license fees, royalty fees, joint venture interests or other property, obligations or services) exchanged or
received, or to be exchanged or received, directly or indirectly by the Company or any of its security holders in connection with
any Transaction or Related Transaction, including, without limitation, any amounts paid or received, or to be paid or received,
pursuant to any employment agreement, consulting agreement, loan agreement, covenant not to compete, option, warrant, escrow payment
or any amount payable in the future when such funds are paid to the Company, earn-out or contingent payment right or similar arrangement,
agreement or understanding, whether oral or written, associated with such Transaction or Related Transaction.

 

(b) In the event consideration
is to be paid in whole or in part by installment payments, the portion of Palladium’s fee relating thereto shall be calculated
and paid when and as such installment payments are made.

 

(c) Consideration received
by the Company paid in whole or in part in the form of securities or other noncash consideration will be valued at its fair market
value, as reasonably determined by an independent third party to be mutually agreed upon by the Company and Palladium, as of the
day prior to the Closing (or later date on which a contingent payment is made), provided, however, that if such consideration consists
of securities with an existing trading market, such securities will be valued at the average of the last sales price for such securities
on the five trading days prior to the date of the Closing (or later date on which a contingent payment is made).

 

6. The Company shall reimburse Palladium periodically
for its reasonable and customary out-of-pocket and incidental expenses incurred during the term of its engagement hereunder, including
the fees and expenses of its legal counsel and those of any advisor retained by Palladium. 

 

7. The Company agrees to provide indemnification
as set forth in Annex A attached hereto and made a part hereof.

 

8. Upon a Closing, the Company agrees that
Palladium has the right to place notices and/or advertisements in financial and other newspapers and journals (whether in print
or on the internet), and to publicize on its own website and/or marketing materials, at its own expense, describing its services
to the Company hereunder.

 

9. The provisions of Sections 4, 6, and 7 (including,
without limitation, the provisions of indemnification referred to in Section 7) shall survive the expiration or termination of
this Agreement.

 

10. The Company represents to Palladium that
there is no other person or entity that is or will be entitled to a finder's fee or any type of brokerage commission in connection
with the transactions contemplated by this Agreement as a result of any agreement or understanding with it.

 

11. Nothing contained in this Agreement shall
limit or restrict the right of Palladium or of any member, employee, agent or representative of Palladium, to be a shareholder,
member, partner, director, officer, employee, agent or representative of, or to engage in, any other business, whether of a similar
nature or not, nor to limit or restrict the right of Palladium to render services of any kind to any other corporation, company,
firm, individual or association.

 

    	 	- 3 -	 

    	 

    
 

12. The failure or neglect of the parties hereto
to insist, in any one or more instances, upon the strict performance of any of the terms or conditions of this Agreement, or their
waiver of strict performance of any of the terms or conditions of this Agreement, shall not be construed as a waiver or relinquishment
in the future of such term or condition, but the same shall continue in full force and effect.

 

13. Any notices hereunder shall be in writing,
and shall be sent to the Company and to Palladium at their respective addresses set forth above. Any notice shall be given by registered
or certified mail, postage prepaid, and shall be deemed to have been given when deposited in the United States mail. Either party
may designate any other address to which notice shall be given by giving written notice to the other party of such change of address
in the manner herein provided.

 

14. This Agreement shall inure to the benefit
of and be binding upon the respective, Affiliates, successors and assigns of the parties hereto. The term “Affiliates”
shall mean, with respect to any person or entity, any other person or entity who, directly or indirectly, through one or more intermediaries
controls, is controlled by, or is under common control with such person or entity and any spouse, parent or issue of any such person;
“control” means the power, directly or indirectly, to direct or cause the direction of the management and policies
of a person or entity whether through ownership of voting securities, by contract or otherwise.

 

15. Any dispute arising
under or relating to this Agreement or the parties' respective rights and duties hereunder shall be resolved by binding arbitration
to be held in New York, New York under the Simplified Rules of the Judicial Arbitration and Mediation Service (JAMS). Judgment
upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. Any party may commence arbitration
under this provision by the delivery to the other party of a written dispute notice setting forth a brief description of the matter
to be resolved (the “Dispute Notice”).

 

Subject to the foregoing,
this Agreement has been made in the State of New York and shall be construed and governed in accordance with the laws thereof without
giving effect to principles governing conflicts of law. The parties irrevocably agree that any legal action or proceeding under,
arising out of or in any manner relating to this Agreement shall be brought exclusively in any court of competent jurisdiction
in the County of New York, State of New York. Each of the parties, by its execution and delivery of this Agreement, expressly and
irrevocably assents and submits to the jurisdiction of any of such courts in any such action or proceeding. The parties further
irrevocably consent to the service of any complaint, summons, notice or other process relating to any such action or proceeding
by delivery thereof to such party by hand or by registered or certified mail in the manner prescribed in Section 13 hereof. The
parties further irrevocably consent that any judgment rendered by such court in the State of New York may be entered in other court
having competent jurisdiction thereof.

 

16. This Agreement contains the entire agreement
between the parties, may not be altered or modified, except in writing and signed by the party to be charged thereby, and supersedes
any and all previous agreements between the parties relating to the subject matter hereof.

 

    	 	- 4 -	 

    	 

    
 

17. Palladium will not have any rights or obligations
in connection with the sale and purchase of the Securities contemplated by this Agreement except as expressly provided in this
Agreement. In no event will Palladium be obligated to purchase the Securities for its own account or for the accounts of its customers.
Palladium will have the right, but not the obligation, however, to determine the allocation of the Securities among potential purchasers
introduced by Palladium, provided that such allocation is reasonably acceptable to the Company.

 

18. Palladium is acting as financial advisor
and is not an expert on, and cannot render opinions regarding, legal, accounting, regulatory, or tax matters. The Company should
consult with its other professional advisors concerning these matters before undertaking any Transaction or Related Transaction.
All services, advice and information and reports provided by Palladium to the Company in connection with this assignment shall
be for the sole benefit of the Company and shall not be relied upon by any other person.

 

Palladium is delighted to accept this engagement
and looks forward to working with you on this assignment. Please confirm that the foregoing correctly sets forth our understanding
by signing the enclosed duplicate of this letter in the space provided and returning it, whereupon this letter shall constitute
a binding agreement as of the date first above written.

 

	 	Very truly yours,	 
	 	 	 	 
	 	PALLADIUM CAPITAL ADVISORS, LLC	 
	 	 	 	 
	 	 	 	 
	 	By:	/s/ Joel Padowitz 	 
	 	 	Joel Padowitz, Chief Executive Officer	 

 

	ACCEPTED AND AGREED	 	 
	AS OF THE DATE FIRST	 	 
	ABOVE WRITTEN:	 	 
	 	 	 	 
	Document Security Systems, Inc.	 	 
	 	 	 	 
	 	 	 	 
	By:	/s/ Philip Jones	 	 
	 	Philip Jones, Chief Financial Officer	 	 

 

 

[Annex
A follows]

 

 

    	 	- 5 -	 

    	 

    
 

Annex A

 

Indemnification Provisions

 

 

 

In connection with the engagement of Palladium
by the Company pursuant to the Agreement, the Company hereby agrees as follows:

 

		1.	The Company shall indemnify and hold harmless Palladium, its directors, officers, employees and
agents and each person (each an “Indemnified Party”), if any, who controls Palladium within the meaning of Section
15 of the Securities Act or Section 20 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”),
from and against any and all losses, claims, liabilities, expenses and damages, joint or several, (including any and all investigative,
legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding
or any claim asserted), to which it, or any of them, may become subject under the Securities Act or other federal or state statutory
law or regulation, at common law or otherwise (collectively, a “Claim”), insofar as such losses, claims, liabilities,
expenses or damages arise out of or are based on any untrue statement or alleged untrue statement of any material fact contained
in the Materials or arises out of or is based upon the omission or alleged omission to state in any Materials, a material fact
required to be stated in any Materials or necessary to make the statements in any Materials, in light of the circumstances in which
they were made, not misleading; provided, however, that the Company will not be liable to the extent that such loss, claim, liability,
expense or damage arises from the sale of the Warrants and is based solely on an untrue statement or omission or alleged untrue
statement or omission made by the Company or included in the Materials. This indemnity agreement will be in addition to any liability
which the Company may otherwise have to Palladium.

 

		2.	Palladium will indemnify and hold harmless the Company and, each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, but only insofar as losses, claims,
liabilities, expenses or damages arise out of or are based on any untrue statement or omission or alleged untrue statement or omission
made in reliance on and in conformity with Materials relating to Palladium furnished in writing to the Company by Palladium expressly
for use in the Materials. This indemnity agreement will be in addition to any liability that Palladium might otherwise have to
the Company. The Company acknowledges that, for all purposes under this Agreement, the name of Palladium and any Materials relating
to Placement Agent' fees and reimbursement of expenses constitute the only Materials relating to Palladium furnished in writing
to the Company by Palladium expressly for inclusion in the Materials. The Company also agrees that no Indemnified Party shall have
any liability (whether direct or indirect, in contract or tort or otherwise) to the Company or its partners, security holders or
creditors related to or arising out of the engagement of Palladium pursuant to, or the performance by Palladium of the services
contemplated by, this Agreement except to the extent that any loss, claim, damage or liability is determined in a final judgment
(not subject to further appeal) by a court to have resulted solely from willful misconduct or gross negligence of Palladium.

 

		3.	An Indemnified Party shall have the right to retain separate legal counsel of its own choice to
conduct the defense and all related matters in connection with any Claim. The Company shall pay the reasonable fees and expenses
of such legal counsel, and such counsel shall to the fullest extent, consistent with its professional responsibilities, cooperate
with the Company and any legal counsel designated by the Company.

 

    	 	- 6 -	 

    	 

    
 

		4.	The Company will not, without the prior written consent of each Indemnified Party, settle, compromise
or consent to the entry of any judgment in any pending or threatened Claim in respect of which indemnification may be reasonably
sought hereunder (whether or not any Indemnified Person is an actual or potential party to such Claim), unless such settlement,
compromise or consent includes an unconditional, irrevocable release of each Indemnified Person against whom such Claim may be
brought hereunder from any and all liability arising out of such Claim.

 

		5.	In the event the indemnity provided for in paragraphs 1, 2, and 3 of this Annex A is unavailable
or insufficient to hold any Indemnified Party harmless, then the Company shall contribute to amounts paid or payable by an Indemnified
Party in respect of such Indemnified Party’s losses, claims, damages and liabilities as to which the indemnity provided for
in paragraphs 1, 2, and 3 of this Annex A is unavailable or insufficient (i) in such portion as appropriately reflects the relative
benefits received by the Company, on the one hand, and the Indemnified Party, on the other hand, in connection with the matters
as to which losses, claims, damages or liabilities relate, or (ii) if the allocation provided by (i) above is not permitted by
applicable law, in such proportion as appropriately reflects not only the relative benefits referred to in clause (i) but also
the relative fault of the Company, on the one hand, and the Indemnified Parties, on the other hand, as well as any other equitable
considerations. The amounts paid or payable by a party in respect of losses, claims, damages and liabilities referred to above
shall be deemed to include any reasonable legal or other out-of-pocket fees and expenses incurred in defending any litigation,
proceeding or other action or claim. Notwithstanding the provisions hereof, Palladium’s share of the liability hereunder
shall not be in excess of the amount of fees actually received by Palladium under the Agreement (excluding any amounts received
as reimbursement of expenses by Palladium).

 

		6.	In the event any Indemnified Party is requested or required to appear as a witness in any action,
suit or proceeding brought by or on behalf of or against the Company or any affiliate or any participant in a Transaction (or Related
Transaction) covered hereby in which such Indemnified Party is not named as a defendant, the Company agrees to reimburse Palladium
and such Indemnified Party for all reasonable disbursements incurred by them in connection with such Indemnified Party’s
appearing and preparing to appear as a witness, including, without limitation, the fees and disbursements of their legal counsel,
and to compensate Palladium and such Indemnified Party in an amount to be mutually agreed upon.

 

		7.	All amounts due under the Indemnification Provisions of this Annex A shall be payable within ten
(10) days after written notice of such event giving rise to the indemnification obligations, and if not paid within such 10-day
period, such amounts shall bear interest at a rate of 1.5% per month or at the highest rate permitted under the laws of the State
of New York, whichever rate is lower.

 

		8.	These Indemnification Provisions shall remain in full force and effect in connection with the transactions
contemplated by the Agreement whether or not consummated, and shall survive the expiration or termination of the Agreement, and
shall be in addition to any liability that the Company might otherwise have to any Indemnified Party under the Agreement or otherwise.

 

    	 	- 7 -	 

    	 

    
 

		9.	Each party hereto consents to personal jurisdiction and service of process and venue in any court
in the State of New York in which any claim for indemnity is brought by any Indemnified Person.

 

 

	PALLADIUM CAPITAL ADVISORS, LLC	 	DOCUMENT SECURITY SYSTEMS, INC. 
	 	 	 	 	 
	By:	/s/ Joel Padowitz	 	By:	/s/ Philip Jones
	 	Joel Padowitz	 	 	Philip Jones
	 	Chief Executive Officer	 	 	Chief Financial Officer

 

    	 	- 8 -

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00199-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00199-of-00352.parquet"}]]