DOCUMENT SECURITY SYSTEMS,
INC.
SUBSCRIPTION
AGREEMENT
NONE OF THE
SECURITIES OFFERED PURSUANT TO THIS SUBSCRIPTION AGREEMENT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“ACT”) OR THE SECURITIES LAWS OF ANY U.S. STATE OR ANY
FOREIGN JURISDICTION AND ARE BEING OFFERED AND SOLD IN RELIANCE ON
EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND SUCH
LAWS. SUCH UNITS, THE SHARES OF COMMON STOCK THAT
COMPRISE A PART OF THE UNITS, THE WARRANTS THAT COMPRISE A PART OF
THE UNITS AND THE SHARES ISSUABLE UPON EXERCISE OF SUCH WARRANTS
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED, PLEDGED OR
HYPOTHECATED TO ANY PERSON AT ANY TIME IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT COVERING SUCH SECURITIES UNDER THE
ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY TO THE
EFFECT THAT SUCH REGISTRATION IS NOT NECESSSARY.
INVESTMENT
IN THE COMPANY IS HIGHLY SPECULATIVE AND INVOLVES SUBSTANTIAL RISK,
INCLUDING, BUT NOT LIMITED TO THE RISKS SET FORTH IN THE SECTION
ENTITLED “RISK FACTORS” IN THE PRIVATE OFFERING
MEMORANDUM ATTACHED HERETO. YOU SHOULD READ THE PRIVATE OFFERING
MEMORANDUM CAREFULLY BEFORE INVESTING.
This
Subscription Agreement (this “ Subscription Agreement
”) is entered into on April ___, 2009, by and between
DOCUMENT SECURITY SYSTEMS, INC., a New York corporation (the
“ Company ”), and ________________________, an
individual or entity (“ Subscriber ”). As used
herein, the Company and Subscriber are individually and
respectively referred to as a “ Party ” and
collectively as the “ Parties. ” Terms not
otherwise defined herein shall have the meanings ascribed to them
in the Private Offering Memorandum Supplement No. 1 attached hereto
as Exhibit A (the “ Private Offering Memorandum
”).
Subscriber subscribes for and offers to
purchase, and the Company agrees to issue and sell, an equity
interest in the Company (the “ Units ”),
entitling Subscriber to the rights of Subscribers described in the
Private Offering Memorandum for a purchase price equal to the
amount set forth on the signature page below (the
“ Investment Amount ”), subject to the terms and
conditions set forth herein.
(a) Deliveries Upon Signing.
Simultaneous with the execution of this Subscription Agreement,
Subscriber shall execute and deliver to the Company:
(i) an Investor Questionnaire
substantially in the form of Exhibit B hereto (the “
Investor Questionnaire ”); and
(ii) the Registration Rights in the form of
Exhibit C hereto (“Registration Rights
Agreement ” and collectively with the Subscription
Agreement and Investor Questionnaire, the “ Subscription
Documents ”).
(b) Payment of Investment
Amount. Concurrent with the execution of this
Subscription Agreement, Subscriber shall transmit a wire transfer
or check to the Company in an amount equal to such
Subscriber’s Investment Amount. For purposes
of this Agreement, “ Payment ” shall mean
Subscriber’s implementation of such wire transfer or receipt
by the Company of the bank check. Subscriber funds will be
maintained separate and apart from funds of the
Company. The Parties hereby agree that Subscriber
shall not be deemed to have purchased the Units until the Company
shall have provided a Closing Notice (as defined
herein).
(c) Closing. At any time on or prior to
July 7, 2009, the Company, at the Company’s sole discretion,
may elect to accept the subscription of the Subscriber. The
Company’s acceptance of the subscription shall be effective
upon the Company’s transmitting a notice to the Subscriber
according to the notice information for the Subscriber set forth
herein informing the Subscriber of such acceptance (“
Closing Notice ”). The Company shall use
commercially reasonable efforts to effect a closing within 21 days
after the Company has obtained executed Subscription Documents with
an aggregate Investment Amount of at least $200,000 and thereafter
within 21 days after receiving executed Subscription Documents and
payment of the Investment Amount.
(d) Trigger for Return of Investment
Amount. If by July 7, 2009, the Company has failed
to obtain executed Subscription Documents with an aggregate
Investment Amount of at least $200,000, then the Company shall
return to the Subscriber an amount equal to the Subscriber’s
Investment Amount. In the event that the Company has provided a
Closing Notice to the Subscriber and is nonetheless obligated to
return funds to Subscriber pursuant to this Section 2(d), the
Subscriber shall be deemed to have authorized the Company to take
all steps necessary to terminate Subscriber’s Units in the
Company and Subscriber shall execute any documents provided by the
Company to effect such termination. If the Company does
not accept the subscription of the Subscriber within 45 days after
Subscriber’s Payment, Subscriber may, at Subscriber’s
sole discretion, provide written notice to the Company to return
Subscriber’s payment (the “ Return Notice
”). The Company shall, within 5 business days of
receipt of the Return Notice return the Subscriber’s Payment
to Subscriber.
Subscriber understands that the details of the
offering (the “ Offering ”) are set forth in the
Private Offering Memorandum, as may be amended or supplemented from
time to time. The Offering will terminate on, or prior to, July 7,
2009, subject to extension and/or modification in the sole
discretion of the Company, and may be extended or modified without
notice as described in the Private Offering Memorandum.
Subscriber understands that this Subscription
Agreement is not binding upon the Company unless and until such
time as (i) payment of the Investment Amount is received by the
Company, and (ii) the Company accepts Subscriber’s
subscription in writing (the “ Closing Date
”).
Subscriber acknowledges that the Company
reserves the right, in its sole discretion, to accept or reject any
Subscription Agreement.
Subscriber acknowledges that Subscriber has
received, read, understands and is familiar with this Subscription
Agreement, any attachments, including but not limited to the
Private Offering Memorandum, as may be amended or supplemented from
time to time, and together with any other filed regulatory
documents (collectively “ Offering Material ”),
and Subscriber further acknowledges that Subscriber has not relied
upon any information concerning the Offering, written or oral,
other than those contained in this Subscription Agreement and the
Offering Material. Subscriber further understands that
any other information or literature, regardless of whether
distributed prior to, simultaneously with, or subsequent to, the
date of this Subscription Agreement shall not be relied upon by
Subscriber in determining whether to make an investment in the
Units and Subscriber expressly acknowledges, agrees and affirms
that Subscriber has not relied upon any such information or
literature in making Subscriber’s determination to make an
investment in the Units and that Subscriber understands that,
except as otherwise provided herein, the Company is under no
obligation to (and that Subscriber does not expect it to) update,
revise, amend or add to any of the information heretofore furnished
to Subscriber.
4. Representations and Warranties of
Subscriber.
(a) In order to induce the Company to accept
Subscriber’s subscription, Subscriber further represents and
warrants to the Company, its Affiliates, as defined in the
Securities Act of 1933 (the “ Securities Act ”),
and counsel to the Company (the “ Company’s
Counsel” ), and their respective agents and
representatives as follows:
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SUBSCRIBER
HAS READ THE PRIVATE OFFERING MEMORANDUM AND EXAMINED THE RISK
FACTORS SET FORTH THEREIN, AND UNDERSTANDS THE SPECULATIVE NATURE
OF AND SUBSTANTIAL RISK INVOLVED IN INVESTMENT IN THE
COMPANY.
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If Subscriber
has chosen to do so, Subscriber has been represented by such legal
and tax counsel and other professionals, each of whom has been
personally selected by Subscriber, as Subscriber has found
necessary to consult concerning the purchase of the Units, and such
representation has included an examination of all applicable
documents and an analysis of all tax, financial, and securities law
aspects thereof deemed to be necessary. Subscriber, together with
Subscriber’s counsel, Subscriber’s advisors, and such
other persons, if any, with whom Subscriber has found it necessary
or advisable to consult, have sufficient knowledge and experience
in business and financial matters to evaluate the information set
forth in this Subscription Agreement and in the Offering Material
and the risks of the investment and to make an informed investment
decision with respect thereto. Further, Subscriber has been given
the opportunity for a reasonable time period prior to the date
hereof to ask questions of, and receive answers from, the Company
or its representatives concerning the terms and conditions of the
Offering and other matters pertaining to this investment and has
been given the opportunity for a reasonable time period prior to
the date hereof to verify the accuracy of the Company’s
information.
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With respect to
the United States federal, state and foreign tax aspects of
Subscriber’s investment, Subscriber is relying solely upon
the advice of Subscriber’s own tax advisors, and/or upon
Subscriber’s own knowledge with respect thereto.
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Subscriber has
not relied, and will not rely upon, any information with respect to
this offering other than the information contained herein and in
the Offering Material.
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Subscriber
understands that no person has been authorized to make
representations or to give any information or literature with
respect to this offering that is inconsistent with the information
that is set forth herein and in the Offering Material.
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Subscriber
understands that, other than as provided herein and in the Offering
Materials, no covenants, representations, or warranties have been
authorized by or will be binding upon the Company, with regard to
this Subscription Agreement, the performance of the Company or any
expectation of investment returns, including any representations,
warranties or agreements contained or made in any written document
or oral communication received from or had with the Company, its
Affiliates, Company Counsel or any of their respective
representatives or agents. Subscriber has not relied upon any
information or representation that may be or have been made or
given except as permitted under this paragraph.
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Subscriber
understands that the Offering has not been, and it is not
anticipated that the same will be, registered under the Securities
Act, or pursuant to the provisions of the securities or other laws
of any other applicable jurisdictions, but is being made in
reliance upon the provisions of Section 4(2) and/or 4(6) of the
Securities Act and/or Regulation D and the other rules and
regulations promulgated thereunder, and/or upon such other
exemption from the registration requirements of the Securities Act
as may be available with respect to any or all of the investments
in securities to be made hereunder. Subscriber is fully aware that
the Units subscribed for by Subscriber are to be sold to Subscriber
in reliance upon such safe harbor based upon Subscriber’s
representations, warranties, and agreements as set forth herein.
Subscriber is fully aware of the restrictions on sale,
transferability and assignment of the Units (including the shares
of Common Stock and the Warrants that comprise the Units, and the
shares of Common Stock issuable upon exercise of such Warrants),
and that Subscriber must bear the economic risk of
Subscriber’s investment herein for an indefinite period of
time because the offering has not been registered under the
Securities Act and, therefore, the Securities cannot be offered or
sold unless such offer is subsequently registered under the
Securities Act or an exemption from such registration is available
to Subscriber .
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Subscriber is
an “accredited investor” (as defined in Rule 501 of
Regulation D promulgated under the Securities Act).
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Subscriber’s execution and delivery of
this Subscription Agreement
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