DOCUMENT SECURITY SYSTEMS, INC. (DSS) Files An 8-K Entry into a Material Definitive Agreement

Item 1.01 Entry into a Material Definitive Agreement.

On November 14, 2016, Document Security Systems, Inc. (the
Company) entered into a Proceeds Investment Agreement (the
Agreement) with Brickell Key Investments LP (BKI). to the
Agreement, BKI invested an aggregate of $13,500,000 (the
Financing Amount) in a patent purchase and monetization program
to be implemented and managed by the Company (the Financing). to
the Agreement, $9,000,000 of the Financing Amount is to be used
to cover the Companys purchase of a portfolio of U.S. and foreign
LED patents and a license from Intellectual Discovery Co., Ltd.,
a Korean Company (collectively, the LED Patent Portfolio), and to
cover attorneys fees and out-of-pocket expenses for legal
proceedings relating to enforcement of the LED Patent Portfolio.
In addition, the Company may use up to $4,500,000 of the
Financing Amount to fund the defense of Inter Partes
Review or other similar proceedings that may be filed from
time to time by defendants with the U.S. Patent Trademark Office
relating to the LED Patent Portfolio, and for its general working
capital needs.

In consideration of the Financing, the Company assigned to BKI
its rights to the Patent Asset Proceeds, defined as any and all
monetary recoveries (whether through damages, recoveries,
royalties, monies, lump-sum payments, up-front payments,
settlement amounts, distribution of property, cash value of
equities, license fees or other revenues or other assets or
amounts) paid by a defendant or defendants or a third-party to
the Company as a result of or in connection with the LED Patent
Portfolio, in an amount equal to the Minimum Return and the
Additional Return as hereinafter defined (the Assigned Rights).
Under the Assigned Rights, in addition to repayment in full of
the Financing Amount, the Company will pay BKI, solely from
realized Patent Asset Proceeds, a return equal to the sum of (A)
a certain multiple of the Financing Amount or a designated
annualized IRR Return on the Financing Amount, whichever is
greater (the Minimum Return), plus (B) an additional designated
percentage of the Patent Asset Proceeds net of the Minimum Return
(the Additional Return). Once the Minimum Return and Additional
Return to BKI are satisfied, Intellectual Discovery Co., Ltd.
will be entitled to a payment of a certain percentage of the
Patent Asset Proceeds with the remaining balance of Patent Asset
Proceeds to be retained by the Company.

In consideration of the Financing, the Company also issued to BKI
a five-year warrant to purchase up to 750,000 shares of the
Companys common stock at an exercise price of $1.00 per share
(the Warrant). The Company shall have no obligation to file a
registration statement with respect to the shares underlying the
Warrant (the Warrant Shares) for its next public or private
offering of common stock, regardless of when such offering may
occur; provided, however, that if at any time thereafter
during the term of the Warrant, the Company proposes to register
any of its common stock under the Securities Act of 1933, as
amended (the Act) in connection with an underwritten public
offering, the Warrant provides for piggy-back registration rights
of the Warrant Shares (the Piggy-Back Registration Rights),
provided, however, that the Piggy-Back Registration
Rights will not apply to any registration (1) on Form S-8 (or any
successor form), (2) of solely a dividend reinvestment plan, or
(3) for the sole purpose of offering registered securities to
another Person in connection with the acquisition of assets or
capital stock of such Person in connection with a merger,
consolidation, combination or similar transaction with such
Person.

Under the Agreement, the Company would be in default if it (1)
fails to pay over Patent Asset Proceeds it receives in accordance
with the terms of the payment waterfall when due, (2) makes a
material misrepresentation or breaches any other material
covenant or provision of the Agreement, or (3) incurs or
guarantees any additional indebtedness in the aggregate in excess
of $1,000,000 without BKIs consent. In the case of a non-payment
default resulting from the receipt of insufficient Patent Asset
Proceeds to satisfy the Minimum Return or Additional Return to
BKI, BKIs sole recourse shall be limited to realized Patent Asset
Proceeds and foreclosure of the LED Patent Portfolio. BKI will
have full recourse remedies for material breaches of the
Agreement other than for non-payment, and in the case of the
Companys willful misconduct, bad faith or gross negligence in
connection with performing its obligations under the Agreement.

The foregoing description is a summary only, does not purport to
set forth the complete terms of the Agreement or the Warrant, and
is qualified in its entirety by reference to each of the
Agreement and the Warrant, which the Company will file as
exhibits to its Annual Report on Form 10-K for year ending
December 31, 2016.

Item 3.02. Unregistered Sales of Equity
Securities.

The information set forth in the third paragraph under Item 1.01
is incorporated into this Item by reference. The issuance of the
Warrant was made to an exemption from registration under Section
4(a)(2) of the Act.

About DOCUMENT SECURITY SYSTEMS, INC. (DSS)