Document:

/8NO
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 June 18, 2015.

      

      COMMON
STOCK PURCHASE WARRANT

      

      SERIES
D WARRANT NO. -

      

      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 $3.75 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.

      
        
           

        

        
          1

          
            

          

        

        
           

        

      

      (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 dated June 18,
2010, as amended and supplemented, which is being used (or was used) in
connection with the private offering of Common Stock and Series D Common Stock
Purchase Warrants.

      

      (g)           “Offering”
means the private offering of Common Stock and Series D 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 June 18, 2010 (the “Commencement Date”) until 5:00 New York
Time on June 18, 2015  (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.

      

      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.

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

      (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.

      

      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.

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

      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.”

      

      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.

      

      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.

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

      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 _______________, 2010.

      

      
        
          	
                  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

                  

          

        

      

      
        
           

        

        
          8Exhibit
10.1

     

    
      
        
          
            
              
                	
                        

                      	
                          

                      	
                        4
      West 4th
      Ave., Suite 400

                        San
      Mateo, CA 94402

                      	
                          

                      	
                        (650)
      458-2670 Tel.

                        (415)
      875-7075
Fax 

                      

              

            

          

        

      

    

    

    July 15,
2010

    

    Richard
Brewer

    5 Bird
Hill Lane

    Santa
Cruz, CA 95060

    

    Re: Employment Agreement

    

    Dear
Dick:

    

    Nile Therapeutics, Inc. (the “Company”) is pleased to offer
you the following agreement regarding your employment as Executive Chairman of
the Company (the “Agreement”).

     

    1.           Employment. The Company hereby
agrees to employ you and you hereby accept such employment upon the terms and
conditions set forth herein and agree to perform such duties as are commensurate
with your office as prescribed by the Board of Directors of the Company. Your
appointment to the Company’s Board of Directors at the inception of your
employment shall be a condition to your employment under this Agreement. This
Agreement shall become effective upon commencement of your employment with the
Company, which shall occur on or before August 1, 2010 (the “Effective Date”).

     

    2.           Duties. You shall render
services to the Company as its Executive Chairman and shall report to the
Company’s Board of Directors. The Chief Executive Officer of the Company shall”
report” to you in the normal course of activities, as you are the point person
for the board and management interface. As the Executive Chairman of the Board,
your duties and responsibilities will also include the following:

     

    
      	
               
      

            	
              ·

            	
              Serve
      as the leader of the Board of Directors, including setting the Board’s
      agenda (in consultation with the CEO, as well as other directors),
      presiding over meetings of the Board, and acting as a regular
      communication channel between the Board and
CEO.

            

    

    
      	
               
      

            	
              ·

            	
              Have
      overall responsibility for the development and the execution of the
      Company’s strategic objectives.

            

    

    
      	
               
      

            	
              ·

            	
              Assist
      the CEO to oversee operational aspects involved in running the Company,
      including assisting with planning, budgeting, evaluation of growth
      opportunities and implementation of Board
  directives.

            

    

    
      	
               
      

            	
              ·

            	
              As
      appropriate from time to time, meet with the Company’s key stockholders,
      investors, analysts, collaboration partners and other
      stakeholders.

            

    

     

    During
the term of your employment hereunder, you shall devote to the Company so much
of your business time, skill and attention as are reasonably required for the
performance of your duties. It is understood that the work- load as Chairman
will vary considerable. In general however, it is expected that two days per
week will be required, on average, to perform the duties contemplated in this
agreement.  The Company will permit you to continue to serve on the
boards of directors of other corporations, provided that such service does not
interfere with your duties to the Company as its Executive Chairman, or conflict
with your fiduciary obligations to the Company; and further provided, that the
Board of Directors may review the impact of your outside activities on your
duties to the Company at any time.

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    3.            Compensation.

     

    (a)   For
all services rendered and to be rendered hereunder, and for the other agreements
by you contained herein, the Company agrees to pay you, and you agree to accept
an initial annualized salary of $240,000.00, payable semi-monthly or otherwise
in accordance with the Company’s regular payroll practices in effect from time
to time. Such salary shall be subject to such deductions or withholdings as the
Company is required to make pursuant to law, or by further agreement with
you.

     

    (b)   Upon
the Effective Date, you will be granted a 10-year option to purchase 450,000
shares of the Company’s Common Stock (the “Initial
Option”).  The exercise price for the Initial Option shall be
equal to the fair market value of the Common Stock at the time of grant as
determined by the Company’s Board of Directors. The Initial Option shall be
fully vested and immediately exercisable upon the date of grant. Subject to the
foregoing, the Initial Option will be subject to the terms and conditions of the
Company’s Amended & Restated 2005 Stock Option Plan (the “Plan”) in effect at the time
of grant, and a stock option agreement between you and the Company in the
Company’s standard form for use under the Plan.

     

    (c)    In
addition to the Initial Option, at the first meeting of the Company’s Board of
Directors following both the Effective Date and the date the Company’s
stockholders approve an amendment to the Plan increasing the number of shares of
Common Stock authorized for issuance thereunder to 9,500,000 shares, you will be
entitled to a 10-year stock option to purchase 900,000 shares of Common Stock
(the “Additional
Option,” and together with the Initial Option, the “Stock
Options”).  The exercise price for the Additional Option shall
be equal to the fair market value of the Common Stock at the time of the grant,
as determined by the Company’s Board of Directors. The right to purchase the
shares subject to the Additional Option shall vest and become exercisable in
eight equal quarterly installments beginning on September 30, 2011 and
continuing on the last day of each calendar quarter thereafter until
fully-vested; provided, however, that the
vesting of the Additional Option shall accelerate and become immediately vested
and exercisable in its entirety upon a “change of control” of the Company (as
such term is define in the Plan). Subject to the foregoing, the Additional
Option will be subject to the terms and conditions of the Plan in effect at the
time of grant, and a stock option agreement between you and the Company in the
Company’s standard form for use under the Plan.

     

    (d)    Subject
to and in accordance with Company policy in effect from time to time, you will
be reimbursed for all of your out-of-pocket expenses incurred in connection with
the Company’s business.  You agree to provide reasonable documentation
of these expenses.

     

    (e)    You
will also be eligible to participate in the Company’s benefit plans based on the
eligibility criteria for each of those plans as they become available, which
plans will remain subject to change from time to time at the Company’s
discretion; provided, that you and the Company have agreed that you will
maintain your own health insurance for yourself and your dependents and that you
will not participate in any Company-provided or sponsored health insurance
plan.

     

    (f)     In
addition to the compensation terms set forth above, the Board, in its sole and
absolute discretion, may from time to time grant or establish such other
compensation plans or awards as it determines are appropriate under the
circumstances.

     

    4.            Termination.  Subject
to the terms and conditions of this letter agreement, you and the Company each
acknowledge that your employment relationship with the Company is at-will and
that either party has the right to terminate your employment with the Company at
any time for any reason whatsoever, with or without cause, upon thirty (30) days
advance notice. In the event of such termination, you agree to tender your
resignation as a director of the Company.  Nothing in this Agreement
alters the at-will nature of your employment relationship with the Company. Any
contrary representations or agreements, which may have been made to you, are
superseded by this Agreement.

     

    5.            Other
Agreements.  Your employment will be further subject to all
Company policies, manuals and guidelines in effect from time to
time.  In addition, you will be required to sign a confidentiality,
invention assignment and non-solicitation agreement in the Company’s standard
form.

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    6.           Miscellaneous.  Except
as specifically set forth herein, this Agreement constitutes the complete, final
and exclusive embodiment of the entire agreement between you and the Company
with regard to your employment terms. This Agreement, the agreements evidencing
the Stock Options and the confidentiality, invention assignment and
non-solicitation agreement are entered into without reliance on any promise or
representation, written or oral, or other than those expressly contained herein
and therein, and supersede any other such promises, warranties or
representations. This Agreement may not be modified or amended except in writing
signed by you and a duly authorized officer of the Company. This Agreement will
be deemed to have been entered into and will be construed and enforced in
accordance with the laws of the State of California as applied to contracts made
and to be performed entirely within California.

     

    Please sign below to indicate your
understanding and acceptance of this Agreement and return the signed original to
me at your earliest convenience.

     

    
      
        	 
      	
                Very
      truly yours,

              
	 
      	 
      
	 
      	
                Nile
      Therapeutics, Inc.

              
	 
      	 
      
	 
      	
                /s/ Joshua A. Kazam

              
	 
      	
                Joshua
      A. Kazam

              
	 
      	
                Chief
      Executive Officer

              

      

    

    

    Acknowledged
and agreed to

    This
16th
day of July, 2010:

    

    
      
        	
                /s/ Richard Brewer

              	 
      
	
                Richard
      Brewer

              	 
      

      

    

    
      
         

      

      
        3

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