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 November 25,
2008 (i.e. five years from the first closing date of the Offering).


                          COMMON STOCK PURCHASE WARRANT

WARRANT NO. 2

                     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, FORDHAM FINANCIAL
MANAGEMENT, INC., 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"), identical in all respects except as to
the names of the holders thereof and the number of Common Shares purchasable
thereunder and issued pursuant to the Placement Agent Agreement.

         1. As used herein:

                  (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 5 hereof.

                  (b) "Warrant Price" shall be $4.80 which is subject to
adjustment pursuant to Section 4 hereof.

                  (c) "Placement Agent" shall refer to FORDHAM FINANCIAL
MANAGEMENT, INC.

                  (d) "Placement Agent Agreement" shall refer to the Placement
Agent Agreement dated October 29, 2003 between the Company and the Placement
Agent.

                                       1
<PAGE>


                  (e) "Warrants" or "Placement Agent Warrants" shall refer to
Warrants to purchase Common Shares issued to the Placement Agent or its
designees by the Company pursuant to the Placement Agent Agreement, as such may
be adjusted from time to time pursuant to the terms of Section 4 and including
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.

                  (f) "Underlying Securities" shall refer to and include the
Common Stock issuable or issued upon exercise of the Warrants.

                  (g) "Holders" shall mean the registered holder of such
Warrants or any issued Underlying Securities.

                  (h) "Memorandum" shall mean the Company's Confidential Private
Placement Memorandum dated October 29, 2003, as amended and supplemented, which
is being used (or was used) in connection with the private offering of Common
Stock and Series A Common Stock Purchase Warrants pursuant to the Placement
Agent Agreement.

                  (i) "Placement Agent Securities" shall refer and mean the
warrants and shares of Common Stock issued and/or issuable upon exercise of the
Warrants.

                  (j) "Offering" means the private offering of Common Stock and
Series ACommon 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 November 25, 2003 (the "Commencement Date") until
5:00 New York Time on November 25, 2008 (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 14
hereof), and upon payment by the Holder to the Company in cash, or by certified
check or bank draft of the Warrant Price for the Common Shares. At the option of
the Holder of this Warrant, the Warrant Price may be paid through a cashless
exercise of this Warrant. The purchase price of the Common Shares issuable
pursuant to the Warrants, shall be payable in cash, by certified bank check
and/or in lieu of cash, a warrant holder may exercise its Warrants through a
cashless exercise. In this respect, at any time prior to the Expiration Date,
the Holder may, at its option, exchange the Warrants, in whole or in part, into
the number of fully paid and non-assessable Common Shares determined in
accordance with this Section 2, by surrendering the Warrants which shall
represent the right to subscribe for and acquire the number of Common Shares
(rounded to the next highest integer) equal to (A) the number of Common Shares
specified by the Holder in its purchase form (the "Total Share Number") less (B)
the number of Warrant Shares equal to the quotient obtained by dividing (i) the
product of the Total Share Number and the current Warrant Price (initially $4.80
per share) per share by (ii) the Market Price of a share of Common Stock. The
Market Price of any shares of Common Stock to purchase shares so surrendered
shall be based upon the value of the Common Stock at the close of business on

                                       2
<PAGE>

the day before exercise based upon the following: (i) if the shares of Common
Stock are not listed and traded upon a recognized securities exchange and there
is no report of stock prices with respect to the shares of Common Stock
published by a recognized stock quotation service, on the basis of the most
recent purchases and sales of the shares of Common Stock by the Company in
arms-length transactions; or (ii) if the shares of Common Stock are not then
listed and traded upon a recognized securities exchange or quoted on the NASDAQ
Stock Market, and there are reports of stock prices by a recognized quotation
service, upon the basis of the last reported sale or transaction price of such
stock as reported by a recognized quotation service, or, if there is no last
reported sale or transaction price on the day before exercise, then upon the
basis of the mean of the last reported closing bid and closing asked prices for
such stock on the date nearest preceding that day; or (iii) if the shares of
Common Stock shall be then listed and traded upon a recognized securities
exchange or quoted on the NASDAQ Stock Market, upon the basis of the last
reported sale or transaction price at which shares of Common Stock were traded
on such recognized securities exchange or NASDAQ Stock Market or, if the shares
of Common Stock were not traded on the day before exercise, upon the basis of
the last reported sale or transaction price on the date nearest preceding that
date. In the event the Company is acquired for either stock, notes, securities,
cash or any combination thereof, the holders of the Warrants shall have the
option to use the value attached to the Company's Common Stock in the
transaction on a per share basis as the value of the Common stock. All
documentation and procedures to be followed in connection with such "cashless
exercise" shall be approved in advance by the Company, which approval shall be
expeditiously provided and not unreasonably withheld. 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 five (5) 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 9 hereof and Section 2
of the Placement Agent Agreement.

         3. Subject to the provisions of Section 8 hereof, (i) this Warrant is
exchangeable at the option of the Holder at the aforesaid office of the Company
for other Warrants of different denominations entitling the Holder thereof to
purchase in the aggregate the same number of Common Shares as are purchasable
hereunder; and (ii) this Warrant may be divided or combined with other Warrants
which carry the same rights, in either case, upon presentation hereof at the
aforesaid office of the Company together with a written notice, signed by the
Holder hereof, specifying the names and denominations in which new Warrants are
to be issued, and the payment of any transfer tax due in connection therewith.

         4. Subject and pursuant to the provisions of this Section 4, 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
4.


                                       3
<PAGE>


                  (a) In case the Company shall sell or issue either any of its
Common Shares or any rights, options, warrants or obligations or securities
containing the right to subscribe for or purchase any Common Shares ("Options")
or exchangeable for or convertible into Common Shares ("Convertible
Securities"), at a price per share, as determined pursuant to Section 4(b), less
than the Warrant Price then in effect on the date of such sale or issuance, then
the number of Common Shares purchasable upon exercise of this Warrant shall be
determined by multiplying the number of Common Shares theretofore purchasable
upon exercise of this Warrant by a fraction, (a) the numerator of which shall be
the number of Common Shares outstanding on the date of issuance of such Common
Shares, Options or Convertible Securities and (b) the denominator of which shall
be the number of Common Shares outstanding on the date prior to the date of
issuance of such Common Shares or Convertible Securities plus the number of
Common Shares which the aggregate consideration received by the Company upon
such issuance would purchase on such date at the Warrant Price then in effect.

                  (b) The following provisions, in addition to other provisions
of this Section 4, shall be applicable in determining any adjustment under
Section 4(a):

                      (1) In case of the issuance or sale of Common Shares part
or all of which shall be for cash, the cash consideration received by the
Company therefor shall be deemed to be the amount of cash proceeds of such sale
of shares less any compensation paid or discount allowed in the sale,
underwriting or purchase thereof by underwriters or dealers or others performing
similar services or any expenses incurred in connection therewith, plus the
amounts, if any, determined as provided in Section 4(b)(2).

                      (2) In case of the issuance or sale of Common Shares
wholly or partly for a consideration other than cash, the amount of the
consideration other than cash received by the Company for such shares shall be
deemed to be the fair value of such consideration as determined by a resolution
adopted by the Board of Directors of the Company acting in good faith, less any
compensation paid or incurred by the Company for any Underwriting of, or
otherwise in connection with such issuance, provided, however, the amount of
such consideration other than cash shall in no event exceed the cost thereof as
recorded on the books of the Company. In case of the issuance or sale of Common
Shares (otherwise than upon conversion or exchange) together with other stock or
securities or other assets of the Company for a consideration which is received
for both such Common Shares and other securities or assets, the Board of
Directors of the Company acting in good faith shall determine what part of the
consideration so received is to be deemed to be the consideration for the
issuance of such Common Shares, less any compensation paid or incurred by the
Company for any underwriting of, or otherwise in connection with such issuance,
provided, however, the amount of such consideration other than cash shall in no
event exceed the cost thereof as recorded on the books of the Company. In case
at any time the Company shall declare a dividend or make any other distribution
upon any stock of the Company payable in Common Stock, then such common stock
issuable in payment of such dividend or distribution shall be deemed to have
been issued or sold without consideration.


                                       4
<PAGE>

                      (3) The price per share of any Common Shares sold or
issued by the Company (other than pursuant to Options or Convertible Securities)
shall be equal to a price calculated by dividing (A) the amount of the
consideration received by the Company, as determined pursuant to Sections
4(b)(1) and 4(b)(2), upon such sale of issuance by (B) the number of Common
Shares sold or issued.

                      (4) In case the Company shall at any time after the date
hereof issue any Options or Convertible Securities the following provisions
shall apply in making any adjustment pursuant to this Section 4:

                          (i) The price per share for which Common Stock is
issuable upon the exercise of the Options or upon conversion or exchange of the
Convertible Securities shall be determined by dividing (A) the total amount, if
any, received or receivable by the Company as consideration for the issuance of
such Options or Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the exercise of
such Options or the conversion or exchange of such Convertible Securities, by
(B) the aggregate maximum number of shares of Common Stock issuable upon the
exercise of such Option or upon the conversion or exchange of such Convertible
Securities.

                          (ii) In determining the price per share for which
Common Stock is issuable upon exercise of the Options or conversion or exchange
of the Convertible Securities as set forth in Section 4(b)(4)(i) and in
computing any adjustment pursuant to Section 4(a): (A) the aggregate maximum
number of shares of Common Stock issuable upon the exercise of such Convertible
Securities shall be considered to be outstanding at the time such Options or
Convertible Securities were issued and to have been issued for such price per
share as determined pursuant to Section 4(b)(4)(i) and (B) the consideration for
the issuance of such Options or Convertible Securities and the amount of
additional consideration payable to the Company upon exercise of such Options or
upon the conversion or exchange of such Convertible Securities shall be
determined in the same manner as the consideration received upon the issuance or
sale of Common Shares as provided in Sections 4(b)(1) and 4(b)(2).

                          (iii) On the expiration of such Options or the
termination of any right to convert or exchange any Convertible Securities, the
number of Common Shares subject to this Warrant shall forthwith be readjusted to
such number of Common Shares as would have obtained had the adjustments made
upon the issuance of such Options or Convertible Securities been made upon the
basis of the delivery of only the number of shares of Common Stock actually
delivered upon the exercise of such Options or upon conversion or exchange of
such Convertible Securities.

                          (iv) If the minimum purchase price per share of Common
Stock provided for in any Option or the rate at which any Convertible Securities
are convertible into or exchangeable for Common Stock shall change or a
different purchase price or rate shall become effective at any time or from time
to time (other than pursuant to any anti-dilution provisions of such Options or
Convertible Securities) then, upon such change becoming effective, the number of
Common Shares subject to this Warrant shall forthwith be increased or decreased
to such number of shares as would have been obtained had the adjustments made
upon the granting or issuance of such Options or Convertible Securities been
made upon the basis of (l) the issuance of the number of shares of Common Stock


                                       5
<PAGE>


theretofore actually delivered upon the exercise of such Options or upon the
conversion or exchange of such Convertible Securities, and the total
consideration received therefor, and (2) the granting or issuance at the time of
such change of any such Options or Convertible Securities then still outstanding
for the consideration, if any, received by the Company therefor and to be
received on the basis of such changed price or rate of exchange or conversion.

                      (5) Except as otherwise specifically provided herein the
date of issuance or sale of Common Stock shall be deemed to be the date the
Company is legally obligated to issue such Common Shares, or pursuant to
paragraph 4(b)(4), the date the Company is legally obligated to issue any Option
or Convertible Security. In case at any time the Company shall take a record
date for the purpose of determining the Holders of Common Stock entitled (i) to
receive a dividend or other distribution payable in Common Stock or in Options
or Convertible Securities or (ii) to subscribe for or purchase Common Stock,
Options or Convertible Securities then such record date shall be deemed to be
the date of issue or sale of the Common Shares, Options or Convertible
Securities deemed to have been issued or sold upon the declaration of such
dividend or the making of such distribution or the granting of such right of
subscription or purchase, as the case may be.

                      (6) The number of shares of Common Stock outstanding at
any given time shall not include treasury shares and the disposition of any such
treasury shares shall be considered an issue or sale of Common Stock for the
purposes of this Section 4.

                      (7) Anything hereinabove to the contrary notwithstanding,
no adjustment shall be made pursuant to Section 4(a) to the Warrant Price, or to
the number of Underlying Securities upon:

                          (i) The issuance or sale by the Company of any Common
Shares, Warrants, Options or Convertible Securities pursuant to (A) the
Placement Agent Warrants, (B) the Offering, (C) the Placement Agent Agreement,
(D) the conversion or exchange of any security which is outstanding on any
closing date of the Offering which is convertible or exchangable into shares of
Common Stock, (E) the exercise of any right, warrant or option which is
outstanding on any closing date of the Offering or (F) the Stock Option Plans of
the Company and its Subsidiaries as described in the Memorandum.

                          (ii) The issuance or sale of Common Shares pursuant to
the exercise of Options or conversion or exchange of Convertible Securities
hereinafter issued for which an adjustment has been made (or was not required to
be made) pursuant to the provisions of Section 4 hereof.

                          (iii) The increase in the number of Common Shares
subject to any Option or Convertible Security referred to in subsections (i) and
(ii) hereof pursuant to the provisions of such Option or Convertible Securities
designed to protect against dilution.


                                       6
<PAGE>


                  (c) If the Company shall at any time subdivide its outstanding
Common Shares by recapitalization, reclassification or split-up thereof, the
number of Common Shares subject to this Warrant immediately prior to such
subdivision shall be proportionately increased, and if the Company shall at any
time combine the outstanding Common Shares by recapitalization, reclassification
or combination thereof, the number of Common Shares subject to this Warrant
immediately prior to such combination shall be proportionately decreased. Any
such adjustment to the Warrant Price pursuant to this Section shall become
effective at the close of business on the record date for such recapitalization,
reclassification, subdivision or combination.

                  (d) If the Company after the date hereof shall distribute to
all of the holders of its Common Shares any securities or other assets (other
than a distribution of Common Shares or a cash distribution made as a dividend
payable out of earnings or out of any earned surplus legally available for
dividends under the laws of the State of New York), the Board of Directors of
the Company shall be required to make such equitable adjustment in the Warrant
Price in effect immediately prior to the record date of such distribution as may
be necessary to preserve to the Holder of this Warrant rights substantially
proportionate to those enjoyed hereunder by such Holder immediately prior to the
happening of such distribution. Any such adjustment made in good faith by the
Board of Directors shall be final and binding upon the Holders and shall become
effective as of the record date for such distribution.

                  (e) No adjustment in the number of Common Shares subject to
this Warrant shall be required under this Section 4 hereof unless such
adjustment would require an increase or decrease in such number of shares of at
least 1% of the then adjusted number of Common Shares issuable upon exercise of
this Warrant, provided, however, that any adjustments which by reason of the
foregoing are not required at the time to be made shall be carried forward and
taken into account and included in determining the amount of any subsequent
adjustment; and provided further, however, that in case the Company shall at any
time subdivide or combine the outstanding Common Shares or issue any additional
Common Shares as a dividend, said percentage shall forthwith be proportionately
increased in the case of a combination or decreased in the case of a subdivision
or dividend of Common Shares so as to appropriately reflect the same. If the
Company shall make a record of the Holders of its Common Shares for the purpose
of entitling them to receive any dividend or distribution and legally abandon
its plan to pay or deliver such dividend or distribution then no adjustment in
the number of Common Shares subject to the Warrant shall be required by reason
of the making of such record.

                  (f) Whenever the number of Common Shares purchasable upon the
exercise of this Warrant is adjusted, as provided in Section 4, the Warrant
Price shall be adjusted (to the nearest one tenth of a cent by multiplying such
Warrant Price immediately prior to such adjustment by a fraction, the numerator
of which shall be the number of Common Shares purchasable upon the exercise of
this Warrant immediately prior to such adjustment, and the denominator of which
shall be the number of Common Shares so purchasable immediately thereafter.



                                       7
<PAGE>


                  (g) In case of any reclassification of the outstanding Common
Shares (other than a change covered by Section 4(c) hereof or which solely
affects the par value of such Common Shares) or in the case of any merger or
consolidation of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the continuing corporation and
which does not result in any reclassification or capital reorganization of the
outstanding Common Shares), or in the case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially as an
entirety in connection with which the Company is dissolved, the Holder of this
Warrant shall have the right thereafter (until the expiration of the right of
exercise of this Warrant) to receive upon the exercise hereof, for the same
aggregate Warrant Price payable hereunder immediately prior to such event, the
kind and amount of shares of stock or other securities or property receivable
upon such reclassification, capital reorganization, merger or consolidation, or
upon the dissolution following any sale or other transfer, by a Holder of the
number of Common Shares of the Company obtainable upon the exercise of this
Warrant immediately prior to such event; and if any reclassification also
results in a change in Common Shares covered by Section 4(c), the such
adjustment shall be made pursuant to both this Section 4(g) and Section 4(c).
The provisions of this Section 4(g) shall similarly apply to successive
re-classifications, or capital reorganizations, mergers or consolidations, sales
or other transfers.

         If the Company after the date hereof shall issue or agree to issue the
Common Shares, Options or Convertible Securities, other than as described in
this Section 4, and such issuance or agreement would materially affect the
rights of the Holder of this Warrant, the Warrant Price and the number of Common
Shares obtainable upon exercise of this Warrant shall be adjusted in such
manner, if any, and at such time, as the Board of Directors of the Company, in
good faith, may determine to be equitable in the circumstances. The minutes or
unanimous consent approving such action shall set forth the Board's
determination as to whether an adjustment is warranted and the manner of such
adjustment. In the absence of such determination, any Holder may request in
writing that the Board make such determination. Any such determination made in
good faith by the directors shall be final and binding upon the Holders. If the
Board fails, however, to make such determination within sixty (60) days after
such request, such failure shall be deemed a determination that an adjustment is
required.

                  (h) (1) Upon occurrence of each event requiring an adjustment
of the Warrant Price and of the number of Common Shares obtainable upon exercise
of this Warrant in accordance with, and as required by, the terms of this
Section 4, the Company shall forthwith employ a firm of certified public
accountants (who may be the regular accountants for the Company) who shall
compute the adjusted Warrant Price and the adjusted number of Common Shares
purchasable at such adjusted Warrant Price by reason of such event in accordance
with the provisions of this Section 4. The Company shall mail forthwith to the
Holder of this Warrant a copy of such computation which shall be conclusive and
shall be binding upon such Holder unless contested by such Holder by written
notice to the Company within thirty (30) days after receipt thereof by such
Holder.

                          (2) In case the Company after the date hereof shall
propose (i) to pay any dividend payable in stock to the Holders of its Common
Shares or to make any other distribution (other than cash dividends) to the
Holders of its Common Shares rights to subscribe to or purchase any additional



                                       8
<PAGE>


shares of any class or any other rights or options, or (iii) to effect any
reclassification of Common Shares (other than a reclassification involving
merely the subdivision or combination of outstanding Common Shares) or (iv) any
capital reorganization or any consolidation or merger, or any sale, transfer or
other disposition of its property, assets and business substantially as an
entirety, or the liquidation, dissolution or winding up of the Company, then in
each such case, the Company shall obtain the computation described in Section
4(h)(1) hereof and if an adjustment to the Warrant Price is required under this
Section 4, the Company shall notify the registered Holder of this Warrant of
such proposed action, which shall specify the record date for any such action or
if no record date is established with respect thereto, the date on which such
action shall occur or commence, or the date of participation therein by the
Holders of Common Shares if any such date is to be fixed, and shall also set
forth such facts with respect thereto as shall be reasonably necessary to
indicate the effect of such action on the Warrant Price and the number, or kind,
or class of shares or other securities or property obtainable upon exercise of
this Warrant after giving affect to any adjustment which will be required as a
result of such action. Such notice shall be given at least twenty (20) days
prior to the record date for determining Holders of the Common Shares for
purposes of any such action, and in the case of any action for which a record
date is not established then such notice shall be mailed at least twenty (20)
days prior to the taking of such proposed action.

                          (3) Failure to file any certificate or notice or to
mail any notice, or any defect in any certificate or notice, or any defect in
any certificate or notice, pursuant to this Section 4(h), shall not effect the
legality or validity of the adjustment in the Warrant Price or in the number, or
kind, or class or shares or other securities or property obtainable upon
exercise of this Warrant or of any transaction giving rise thereto.

                  (i) The Company shall not be required to issue fractional
Common Shares upon any exercise of this Warrant. As to any final fraction of a
Common Share which the Holder of this Warrant would otherwise be entitled to
purchase upon such exercise, the Company shall pay the Holder the cash
equivalent of such fraction of a Common Share.

                  (j) Irrespective of any adjustments pursuant to this Section 4
in the Warrant Price or in the number, or kind, or class of shares or other
securities or other property obtainable upon exercise of this Warrant, this
Warrant may continue to express the Warrant Price and the number of Common
Shares obtainable upon exercise at the same price and number of Common Shares as
are stated herein.

         5. For the purposes of this Warrant, the terms "Common Shares" or
"Common Stock" or "Warrant Shares" shall mean (i) the class of stock designated
as the common stock, $0.02 par value, of the Company on the date set forth on
the first page hereof or (ii) any other class of stock resulting from successive
changes or re-classifications of such Common Stock consisting solely of changes
in par value, or from no par value to par value, or from par value to no par
value. If at any time, as a result of an adjustment made pursuant to Section 4,
the securities or other property obtainable upon exercise of this Warrant shall
include shares or other securities of the Company other than Common Shares or
securities of another corporation or other property, thereafter, the number of


                                       9
<PAGE>


such other shares or other securities or property so obtainable shall be subject
to adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Shares contained in
Section 4 and all other provisions of this Warrant with respect to Common Shares
shall apply on like terms to any such other shares or other securities or
property. Subject to the foregoing, and unless the context requires otherwise,
all references herein to Common Shares shall, in the event of an adjustment
pursuant to Section 4, be deemed to refer also to any other securities or
property then obtainable as a result of such adjustments.

         6. The Company covenants and agrees that:

                  (a) During the period within which the rights represented by
the Warrant may be exercised, the Company shall, at all times, reserve and keep
available out of its authorized capital stock, solely for the purposes of
issuance upon exercise of this Warrant, such number of its Common Shares as
shall be issuable upon the exercise of this Warrant; and if at any time the
number of authorized Common Shares shall not be sufficient to effect the
exercise of this Warrant, the Company will take such corporate action as may be
necessary to increase its authorized but unissued Common Shares to such number
of shares as shall be sufficient for such purpose; the Company shall have
analogous obligations with respect to any other securities or property issuable
upon exercise of this Warrant;

                  (b) All Common Shares which may be issued upon exercise of the
rights represented by this Warrant will, upon issuance be validly issued, fully
paid, nonassessable and free from all taxes, liens and charges with respect to
the issuance thereof; and

                  (c) All original issue taxes payable in respect of the
issuance of Common Shares upon the exercise of the rights represented by this
Warrant shall be borne by the Company but in no event shall the Company be
responsible or liable for income taxes or transfer taxes upon the transfer of
any Warrants.

         7. Until exercised, this Warrant shall not entitle the Holder hereof to
any voting rights or other rights as a stockholder of the Company, except that
the Holder of this Warrant shall be deemed to be a stockholder of this Company
for the purpose of bringing suit on the ground that the issuance of shares of
stock of the Company is improper under the New York Business Corporation Law.

         8. In no event shall this Warrant be sold, transferred, assigned or
hypothecated except in conformity with the applicable provisions of the
Securities Act of 1933, as amended and as then in force (the "Act"), or any
similar Federal statute then in force, and all applicable "Blue Sky" laws.

         9. The Holder of this Warrant, by acceptance hereof, agrees that, prior
to the disposition of this Warrant or of any Common Shares theretofore purchased
upon the exercise hereof, under circumstances that might require registration of
such securities under the Act, or any similar Federal statute then in force,
such Holder will give written notice to the Company expressing such Holder's
intention of effecting such disposition, and describing briefly such Holder's


                                       10
<PAGE>


intention as to the disposition to be made of this Warrant and/or the securities
theretofore issued upon exercise hereof. Promptly upon receiving such notice,
the Company shall present copies thereof to its counsel and the provisions of
the following subdivisions shall apply:

                  (a) If, in the opinion of such counsel, the proposed
disposition does not require registration under the Act or qualification
pursuant to Regulation A promulgated under the Act, or any similar Federal
statute then in force, of this Warrant and/or the securities issuable or issued
upon the exercise of this Warrant, the Company shall, as promptly as
practicable, notify the Holder hereof of such opinion, whereupon such Holder
shall be entitled to dispose of this Warrant and/or such Common Shares
theretofore issued upon the exercise hereof, all in accordance with the terms of
the notice delivered by such Holder to the Company.

                  (b) If, in the opinion of either such counsel, such proposed
disposition requires such registration or qualification under the Act, or
similar Federal statute then in effect, of this Warrant and/or the Common Shares
issuable or issued upon the exercise of this Warrant, the Company shall promptly
give written notice to all then Holders of the Warrants, at the respective
addresses thereof shown on the books of the Company.

         The Placement Agent Agreement provides for the following registration
rights:

         "The Placement Agent Warrants shall also contain a demand registration
right after the expiration of one year from the completion of the minimum
offering and "piggy-back" registration rights until the expiration date(s) of
the Placement Agent Warrants. These registration rights if exercised by the
Placement Agent or the holders of the Placement Agent Warrants and/or underlying
securities shall be at the sole expense of the Company except that the Company
shall not be responsible for the sales commissions relating to the sale of the
shares underlying the Placement Agent Warrants. The foregoing registration
rights shall not apply in the event counsel to the Company indicates in writing
to the Placement Agent that the resale of the shares of Common Stock issuable
upon exercise of the Placement Agent Warrants will tack its holding period
pursuant to Rule 144(d) back to the original date(s) of issuance of the
Placement Agent Warrants in the event the holders exercise the Placement Agent
Warrants exclusively through the cashless exercise provisions contained
therein."

         10. The Company agrees to indemnify and hold harmless the holder of
this Warrant, or of Underlying Securities issuable or issued upon the exercise
hereof, from and against any claims and liabilities caused by any untrue
statement of a material fact, or omission to state a material fact required to
be stated, in any such registration statement, prospectus, notification or
offering circular under Regulation A, except insofar as such claims or
liabilities are caused by any such untrue statement or omission based on
information furnished in writing to the Company by such holder, or by any other
such holder affiliated with the holder who seeks indemnification, as to which
the holder hereof, by acceptance hereof, agrees to indemnify and hold harmless
the Company.

         11. If this Warrant, or any of the Underlying Securities issuable
pursuant hereto, require qualification or registration with, or approval of, any



                                       11
<PAGE>

governmental official or authority (other than registration under the Act, or
any similar Federal statute at the time in force), before such shares may be
issued on the exercise hereof, the Company, at its expense, will take all
requisite action in connection with such qualification, and will use its best
efforts to cause such securities to be duly registered or approved, as may be
required.

         12. This Warrant is exchangeable, upon its surrender by the registered
holder at such office or agency of the Company as may be designated by the
Company, for new Warrants of like tenor, representing, in the aggregate, the
right to subscribe for and purchase the number of Common Shares that may be
subscribed for and purchased hereunder, each of such new Warrants to represent
the right to subscribe for and purchase such number of Common Shares as shall be
designated by the registered holder at the time of such surrender. Upon receipt
of evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant, and, in the case of any such loss, theft or
destruction, upon delivery of a bond of indemnity satisfactory to the Company,
or in the case of such mutilation, upon surrender or cancellation of this
Warrant, the Company will issue to the registered holder a new Warrant of like
tenor, in lieu of this Warrant, representing the right to subscribe for and
purchase the number of Common Shares that may be subscribed for and purchased
hereunder. Nothing herein is intended to authorize the transfer of this Warrant
except as permitted by applicable law.

         13. Every Holder hereof, by accepting the same, agrees with any
subsequent Holder hereof and with the Company that this Warrant and all rights
hereunder are issued and shall be held subject to all of the terms, conditions,
limitations and provisions set forth in this Warrant, and further agrees that
the Company and its transfer agent may deem and treat the registered Holder of
this Warrant as the absolute owner hereof for all purposes and shall not be
affected by any notice to the contrary.

         14. All notices required hereunder shall be given by first-class mail,
postage prepaid; if given by the holder hereof, addressed to the Company at 36
W. Main Street, Suite 710, Rochester, NY 14614 or such other address as the
Company may designate in writing to the holder hereof; and if given by the
Company, addressed to the holder at the address of the holder shown on the books
of the Company.

         15. The Company will not merge or consolidate with or into any other
corporation, or sell or otherwise transfer its property assets and business
substantially as an entirety to another corporation, unless the corporation
resulting from such merger or consolidation (if not the Company), or such
transferee corporation, as the case may be, shall expressly assume, by
supplemental agreement satisfactory in form to the Placement Agent, the due and
punctual performance and observance of each and even covenant and condition of
this Warrant to be performed and observed by the Company.

         16. The validity, construction and enforcement of this Warrant shall be
governed by the laws of the State of New York and jurisdiction is hereby vested
in the Courts of said State in the event of the institution of any legal action
under this Warrant.


                                       12
<PAGE>



         IN WITNESS WHEREOF, DOCUMENT SECURITY SYSTEMS, INC. has caused this
Warrant to be signed by its duly authorized officers under its corporate seal,
to be dated December 29, 2003.

                                   DOCUMENT SECURITY SYSTEMS, INC.


                                   By:
                                      -------------------------
                                       Patrick White, President

Witness:

-----------------------
 Brian Daughney, Esq.

(Corporate Seal)



                                       13
<PAGE>


                                  PURCHASE FORM
                                 To Be Executed
             Upon Exercise of Warrant, except for Cashless Exercise

The undersigned hereby exercises the right to purchase _______ Common Shares
evidenced by the within Warrant, according to the terms and conditions thereof,
and herewith makes payment of the purchase price in full. The undersigned
requests that certificates for such shares shall be issued in the name set forth
below.

Dated:                      , 200
      ----------------------     ---
                                           Signature

                                           -------------------------
                                           Print Name of Signatory



                                           Name to whom certificates are to
                                           be issued if different from above

                                           Address:
                                                   -------------------------
                                                   -------------------------

                                           ---------------------------------
                                           Social Security No.
                                           or other identifying number

         If said number of shares shall not be all the shares purchasable under
the within Warrant, the undersigned requests that a new Warrant for the
unexercised portion shall be registered in the name of :

                                            ---------------------------
                                                    (Please Print)

                                            Address:
                                                   -------------------------

                                                   -------------------------

                                           ---------------------------------
                                           Social Security No.
                                           or other identifying number

                                           ---------------------------------
                                           Signature


                                       14
<PAGE>


                                  PURCHASE FORM
                               To Be Executed Upon
                        Cashless Exercise of this Warrant

         The undersigned hereby exercises the right to purchase _______ Common
Shares evidenced by the within Warrant No. __ according to the terms and
conditions thereof and the undersigned hereby submits warrants to purchase
________ Common Shares as evidenced by the within Warrant No. ___ to be in full
payment of the _______ Common Shares exercised and purchased herein. The
undersigned represents that certificates for such purchased shares shall be
issued in the name set forth below:


Dated:                    , 200
       -------------------     ----
                                             Signature
                                             --------------------------------
                                             Print Name of Signatory

                                             Name to whom certificates are to
                                             be issued if different from above

                                             Address:
                                             --------------------------------

                                             --------------------------------
                                             Social Security No.
                                             or other identifying number

         If said number of shares shall not be all the shares purchasable under
the within Warrant, the undersigned requests that a new Warrant for the
unexercised portion shall be registered in the name of :

                                             ---------------------------
                                                   (Please Print)

                                             Address:
                                             ---------------------------

                                             ---------------------------

                                             ---------------------------
                                             Social Security No.
                                             or other identifying number


                                             ---------------------------
                                                     Signature


                                       15
<PAGE>

                               FORM OF ASSIGNMENT


         FOR VALUE RECEIVED                                   , hereby
sells assigns and transfers to                      , Soc. Sec. No.

[ ] the within Warrant, together with all rights, title and interest therein,
and does hereby irrevocably constitute and appoint attorney to transfer such
Warrant on the register of the within named Company, with full power of
substitution.

                                             --------------------------
                                                      Signature

Dated:                             , 200
      -----------------------------     ----

Signature Guaranteed:

-----------------------







                                       16
<PAGE>