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

    


    WARRANT
NO. C-____

    


    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.

    


    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 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.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    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 which does not result in any reclassification or
change of the outstanding shares of Common Stock, except a change as a result of
a subdivision or combination of such shares or a change in nominal value, as
aforesaid), or in the case of a sale or conveyance to another corporation of the
property of the Company as an entirety, the Holder shall thereafter have the
right to purchase the kind and number of shares of stock and other securities
and property receivable upon such reclassification, change, consolidation,
merger, sale or conveyance as if the Holder were the owner of the Warrant Shares
issuable upon exercise of the Warrants immediately prior to any such events at a
price equal to the product of (x) the number of Warrant Shares issuable upon
exercise of the Warrants and (y) the Exercise Price in effect immediately prior
to the record date for such reclassification, change, consolidation, merger,
sale or conveyance as if such Holder had exercised the Warrants.

    


    (e)           Determination of Outstanding
Shares.  The number of shares of Common Stock at any one time
outstanding shall include the aggregate number of shares issued or issuable upon
the exercise of outstanding options, rights, warrants and upon the conversion or
exchange of outstanding convertible or exchangeable securities.

    


    (f)           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.  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 (ii)
to subscribe for or purchase Common Stock, then such record date shall be deemed
to be the date of issue or sale of the Common Shares, 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.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    4.           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 3, 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
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 3 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 3, be deemed to refer also to any other securities or
property then obtainable as a result of such adjustments.

    


    5.           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.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    6.           Until
exercised, this Warrant shall not entitle the Holder hereof to any voting rights
or other rights as a stockholder of the Company.

    


    7.           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.

    


    8.           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
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.  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.  Certificates representing the Underlying Securities shall
bear the following legend:

    


    “THESE SECURITIES HAVE NOT BEEN
REGISTERED OR OTHERWISE QUALIFIED UNDER THE SECURITIES ACT OF 1933 (THE
“SECURITIES
ACT“) OR UNDER THE
APPLICABLE SECURITIES LAWS OF ANY STATE. NEITHER THESE SECURITIES NOR ANY
INTEREST THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE
SECURITIES LAWS OF ANY STATE, UNLESS PURSUANT TO EXEMPTIONS
THEREFROM.”

    


    The holder of this Warrant shall be
entitled to the registration rights with respect to the Underlying Securities as
stated in the Registration Rights Agreement.

    


    9.           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.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    10.           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.

    


    11.           All
notices required hereunder shall be given by first-class mail, postage prepaid;
if given by the holder hereof, addressed to the Company at 28 Main Street East,
Suite 1525, 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.

    


    12.           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.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    IN WITNESS WHEREOF, Document Security
Systems, Inc. has caused this Warrant to be signed by its duly authorized
officers to be dated _______________, 2009.

     

     

    
      
        	 	DOCUMENT
      SECURITY SYSTEMS, INC.	 
	 	 	 	 
	
                 

              	
                By:
      

              	 	 
	 	 	Name: Patrick
      White	 
	 	 	Title: Chief
      Executive Officer	 
	 	 	 	 


      

    

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    PURCHASE
FORM

    To Be
Executed

    Upon
Exercise of Warrant

    


    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: ,
      ______	      
                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

                  

                


        

      

       

      
        
           

        

        
          8