NO SALE, OFFER
TO SELL OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS WARRANT
OR ANY INTEREST THEREIN SHALL BE MADE UNLESS A REGISTRATION
STATEMENT UNDER THE FEDERAL SECURITIES ACT OF 1933, AS AMENDED,
WITH RESPECT TO SUCH TRANSACTION IS THEN IN EFFECT, OR THE ISSUER
HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO IT THAT SUCH
TRANSFER DOES NOT REQUIRE REGISTRATION UNDER THAT ACT.
This Warrant
will be void after 5:00 p.m. New York time on April __, 2014 (i.e.
five years from the first closing date of the Offering).
COMMON STOCK PURCHASE
WARRANT
To Subscribe for and Purchase Shares
of
Document Security Systems,
Inc.
(Transferability Restricted as
Provided in Paragraph 2 Below)
THIS
CERTIFIES THAT , for
value received, ________, or registered assigns, is entitled to
subscribe for and purchase from Document Security Systems, Inc., a
corporation incorporated under the laws of the State of New
York (the “Company”) ___________
(________) fully paid and non-assessable shares of Common Stock of
the Company at the “Warrant Price” as hereinafter
defined and during the period hereinafter set forth, subject,
however, to the provisions and upon the terms and conditions
hereinafter set forth. This Warrant is one of an issue of the
Company’s Common Stock purchase warrants (herein called the
“Warrants”), issued in the Offering (as defined below)
identical in all respects except as to the names of the holders
thereof and the number of Common Shares purchasable
thereunder.
(a) “Common
Stock” or “Common Shares” shall initially refer
to the Company’s Common Stock, $0.02 par value, per share as
more fully set forth in Section 3 hereof.
(b) “Warrant
Price” shall be $2.00 per share, which is subject to
adjustment pursuant to Section 4 hereof.
(c) “Warrants”
shall include any Warrants represented by any certificate issued
from time to time in connection with the transfer, partial
exercise, exchange of any Warrants or in connection with a lost,
stolen, mutilated or destroyed Warrant certificate, if any, or to
reflect an adjusted number of Common Shares.
(d) “Underlying
Securities” shall refer to and include the Common Stock
issuable or issued upon exercise of the Warrants.
(e) “Holders”
shall mean the registered holder of such Warrants or any issued
Underlying Securities.
(f) “Memorandum”
shall mean the Company’s Confidential Private Offering
Memorandum Supplement No. 1 dated April 29, 2009, as amended and
supplemented, which is being used (or was used) in connection with
the private offering of Common Stock and Series C Common Stock
Purchase Warrants.
(g) “Registration
Rights Agreement” shall refer to that certain Registration
Rights Agreement dated April __, 2009, between the Company and the
Holders listed therein, as may be amended from time to time to add
Holders who purchase Common Stock and Warrants in the
Offering.
(h) “Offering”
means the private offering of Common Stock and Series C Common
Stock Purchase Warrants in accordance with the
Memorandum.
2. The
purchase rights represented by this Warrant may be exercised by the
holder hereof, in whole or in part at any time, and from time to
time, during the period commencing ______________, 2009 (the
“Commencement Date”) until 5:00 New York Time on
______________, 2014 (the “Expiration
Date”), by the presentation of this Warrant, with the
purchase form attached duly executed, at the Company’s office
(or such office or agency of the Company as it may designate in
writing to the Holder hereof by notice pursuant to Section 11
hereof), and upon payment by the Holder to the Company in cash or
by certified check of the Warrant Price for the Common
Shares. The purchase price of the Common Shares issuable
pursuant to the Warrants, shall be payable in cash and/or by
certified bank check. The Company agrees that the Holder
hereof shall be deemed the record owner of such Common Shares as of
the close of business on the date on which this Warrant shall have
been presented and payment made for such Common Shares as
aforesaid. Certificates for the Common Shares so purchased shall be
delivered to the Holder hereof within a reasonable time, not
exceeding ten (10) business days, after the rights represented by
this Warrant shall have been so exercised. If this Warrant shall be
exercised in part only, the Company shall, upon surrender of this
Warrant for cancellation, deliver a new Warrant evidencing the
rights of the Holder hereof to purchase the balance of the Common
Shares which such Holder is entitled to purchase
hereunder. Exercise in full of the rights represented by
this Warrant shall not extinguish the registration rights granted
under Section 8 hereof.
3. Subject
and pursuant to the provisions of this Section 3, the Warrant Price
and number of Common Shares subject to this Warrant shall be
subject to adjustment from time to time as set forth hereinafter in
this Section 3.
(a)
Dividends and Distributions . In case the Company
shall at any time after the date hereof pay a dividend in shares of
Common Stock or make a distribution in shares of Common Stock, then
upon such dividend or distribution, the Exercise Price in effect
immediately prior to such dividend or distribution shall be reduced
to a price determined by dividing an amount equal to the total
number of shares of Common Stock outstanding immediately prior to
such dividend or distribution multiplied by the Exercise Price in
effect immediately prior to such dividend or distribution, by the
total number of shares of Common Stock outstanding immediately
after such dividend or distribution. For purposes of any
computation to be made in accordance with the provisions of this
Section 3, the Common Stock issuable by way of dividend or
distribution shall be deemed to have been issued immediately after
the opening of business on the date following the date fixed for
determination of shareholders entitled to receive such dividend or
distribution.
(b)
Subdivision and Combination . In case the Company
shall at any time subdivide or combine the outstanding Common
Stock, the Exercise Price shall forthwith be proportionately
decreased in the case of subdivision or increased in the case of
combination.
(c)
Adjustment in Number of Warrant Shares . Upon each
adjustment of the Exercise Price pursuant to the provisions of this
Section 3, the number of Warrant Shares issuable upon the exercise
of each Warrant shall be adjusted to the nearest full shares of
Common Stock by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment by the number of
Warrant Shares issuable upon exercise of the Warrants immediately
prior to such adjustment and dividing the product so obtained by
the adjusted Exercise Price.
(d)
Reclassification, Consolidation, Merger, etc . In
case of any reclassification or change of the outstanding shares of
Common Stock (other than a change in par value, or from par value
to no par value, or from no par value to par value, or as a result
of a subdivision or combination), or in the case of any
consolidation of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger in which
the Company is the surviving corporation and whi
