Document:

COMMON
STOCK PURCHASE WARRANT

 

DOCUMENT
SECURITY SYSTEM, INC. 

 

	Warrant
    Shares: 200,000	Initial
    Exercise Date: December 29, 2016

 

THIS
COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, BMI Capital Partners International
Ltd. and its permitted assigns (the “Holder”) is entitled, upon the terms and subject to the conditions hereinafter
set forth, at any time on or after December 29, 2016 (the “Initial Exercise Date”) and on or prior to the close
of business on the three year anniversary of the Initial Exercise Date (the “Termination Date”) but not thereafter,
to subscribe for and purchase from DOCUMENT SECURITY SYSTEM, INC., a New York corporation
(the “Company”), up to 200,000 shares (as subject to adjustment hereunder, the “Warrant Shares”)
of the Company’s common stock, $0.02 par value (“Common Stock”). The purchase price of one share of Common
Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).

 

Section
1.Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that
certain Securities Purchase Agreement (the “Purchase Agreement”), dated December 29, 2016, among the Company
and the Holder.

 

Section
2.Exercise.

 

a)       Exercise
of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial
Exercise Date and on or before the Termination Date by delivery to the Company (or such other office or agency of the Company
as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company)
of a duly executed facsimile copy of the Notice of Exercise Form annexed hereto. Within three (3) Trading Days following the date
of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice
of Exercise by wire transfer or cashier’s check drawn on a United States bank. Notwithstanding anything herein to the contrary,
the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the
Warrant Shares available hereunder and the Warrant has been exercised in full, in which case the Holder shall surrender this Warrant
to the Company for cancellation within three (3) Trading Days of the date the final Notice of Exercise is delivered to the Company.
Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder
shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable
number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased
and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise Form within one (1) Business
Day of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason
of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant
Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.

 

    	 

    	 		 

    

 

b)       Exercise
Price. The exercise price per share of the Common Stock under this Warrant shall be $1.00, subject to adjustment hereunder
(the “Exercise Price”).

 

c)       Mechanics
of Exercise.

 

i.       Delivery
of Warrant Shares Upon Exercise. The Company will issue a stock certificate representing the Warrant Shares purchased hereunder
to the Holder by the date that is five (5) Trading Days after the latest of (A) the delivery to the Company of the Notice of Exercise,
(B) surrender of this Warrant (if required) and (C) payment of the aggregate Exercise Price as set forth above (such date, the
“Warrant Share Delivery Date”). The Warrant Shares shall be deemed to have been issued, and Holder or any other
person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as
of the date the Warrant has been exercised, with payment to the Company of the Exercise Price and all taxes required to be paid
by the Holder, if any, pursuant to Section 2(c)(v) prior to the issuance of such shares, having been paid. Any certificate issued
to Holder representing Warrant Shares shall contain the restrictive legend language specified in the Purchase Agreement.

 

ii.       Delivery
of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder
and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant
evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall
in all other respects be identical with this Warrant.

 

iii.       Rescission
Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to Section
2(c)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.

 

iv.       No
Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise
of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the
Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction
multiplied by the Exercise Price or round up to the next whole share.

 

v.       Charges,
Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or
other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the
Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the
Holder; provided, however, that in the event Warrant Shares are to be issued in a name other than the name of the
Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by
the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer
tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise.

 

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vi.       Closing
of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of
this Warrant, pursuant to the terms hereof.

 

Section
3.Certain Adjustments.

 

a)       Stock
Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise
makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable
in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon
exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including
by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification
of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding
immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately
after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that
the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become
effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

b)       Calculations.
All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be.
For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall
be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

 

c)       Notice
to Holder. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly
mail to the Holder a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number
of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.

 

Section
4.Transfer of Warrant.

 

a)       Transferability.
This Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in
part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment
of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient
to pay any transfer taxes payable upon the making of such transfer, provided, however, that such transfer is in compliance with
all applicable federal and state securities laws. Upon such surrender and, if required, such payment, the Company shall execute
and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations
specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant
not so assigned, and this Warrant shall promptly be cancelled. The Warrant, if properly assigned in accordance herewith, may be
exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

 

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b)       New
Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of
the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed
by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants
to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial
issuance date of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant
thereto.

 

c)       Warrant
Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant
Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered
Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder,
and for all other purposes, absent actual notice to the contrary.

 

Section
5.Miscellaneous.

 

a)       No
Rights as Stockholder Until Exercise. This Warrant does not entitle the Holder to any voting rights, dividends or other rights
as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(c)(i).

 

b)       Loss,
Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant
Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case
of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate,
if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation,
in lieu of such Warrant or stock certificate.

 

c)       Saturdays,
Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required
or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding
Business Day.

 

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d)       Authorized
Shares.

 

The
Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights
under this Warrant. If at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect
in full the exercise of this Warrant, in addition to such other remedies as shall be available to the Holder, the Company will
promptly take such corporate action as may, in the opinion of its counsel, be necessary to increase the number of authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including without limitation,
using its best efforts to obtain the requisite shareholder approval necessary to increase the number of authorized shares of Common
Stock. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to execute and issue the necessary Warrant Shares upon the exercise of the
purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant
Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading
Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise
of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and
payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free
from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer
occurring contemporaneously with such issue).

 

e)       Jurisdiction.
All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law
thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions
contemplated by this Warrant (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders,
partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the State of
New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the State
of New York for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of this Warrant), and hereby irrevocably waives, and agrees
not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court,
that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably
waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect
for notices to it under this Warrant and agrees that such service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted
by law. If either party shall commence an action, suit or proceeding to enforce any provisions of this Warrant, then, the prevailing
party in such action, suit or proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other
costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.

 

f)       Nonwaiver
and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate
as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision
of this Warrant or the Purchase Agreement, if the Company willfully and knowingly fails to comply with any provision of this Warrant,
which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to
cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings,
incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.

 

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g)       Notices.
Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered
in accordance with the notice provisions of the Purchase Agreement.

 

h)       Limitation
of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase
Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder
for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company
or by creditors of the Company.

 

i)       Remedies.
The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled
to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation
for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert
the defense in any action for specific performance that a remedy at law would be adequate.

 

j)       Successors
and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure
to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns
of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and
shall be enforceable by the Holder or holder of Warrant Shares.

 

k)       Amendment.
This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

 

l)       Severability.
Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective
to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions
of this Warrant.

 

m)       Headings.
The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of
this Warrant.

 

********************

 

(Signature
Page Follows)

 

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IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed by its authorized signatory as of December 29, 2016.

 

	 	DOCUMENT SECURITY SYSTEMS, INC.
	 	 	 
	 	By: 	 
	 	Name: 	Jeffrey Ronaldi
    
	 	Title:	 Chief Executive
    Officer

 

[Signature Page to Common Stock Purchase Warrant]

 

    	 

    	 		 

    

 

NOTICE
OF EXERCISE

 

To:DOCUMENT
SECURITY SYSTEMS, INC. 

 

(1)              
The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant
(only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer
taxes, if any. 

 

Payment
in the form of lawful money of the United States in the amount of $__________ in payment of the aggregate Exercise Price will
be made by means of:

 

______
Check

 

______
Wire transfer

 

(2)              
Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:

 

 

 

[SIGNATURE
OF HOLDER]

 

	Name:
    	BMI
    Capital Partners International Ltd.	 
	 	 	 
	By:	 	 
	 	 	 
	Signature	 	 
	 	 	 
	Title	 	 
	 	 	 
	Date	 	 

 

    	 

    	 		 

    

 

ASSIGNMENT
FORM

 

(To
assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)

 

FOR
VALUE RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned
to

 

	 	  whose address
    is
	 
	 

 

Dated______________________,    _____________

 

	 	Holder’s
    Signature:  	 
	 	Holder’s
    Address  	 
	 	 	 

 

	Signature
    Guaranteed:	 

 

NOTE:
The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration
or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those
acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.SECURITIES
PURCHASE AGREEMENT

 

This
Securities Purchase Agreement (this “Agreement”) is dated as of December 29, 2016, between Document Security
Systems, Inc., a New York corporation (the “Company”), and the purchaser identified on the signature page hereto
(hereinafter referred to as the “Purchaser”).

 

WHEREAS,
subject to the terms and conditions set forth in this Agreement, and in reliance upon the provisions of Section 4(2) of the Securities
Act of 1933, as amended (the “Securities Act”) and Rule 144 promulgated under the Securities Act, the Company desires
to issue and sell to the Purchaser, and the Purchaser desires to purchase from the Company, securities of the Company as more
fully described in this Agreement.

 

NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration
the receipt and adequacy of which are hereby acknowledged, the Company and the Purchaser agree as follows:

 

ARTICLE
I.

DEFINITIONS

 

1.1       Definitions.
In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms have the
meanings set forth in this Section 1.1:

 

“Acquiring
Person” shall have the meaning ascribed to such term in Section 4.4.

 

“Affiliate”
means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common
control with a Person as such terms are used in and construed under Rule 405 under the Securities Act.

 

“Board
of Directors” means the board of directors of the Company.

 

“Business
Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or
any day on which banking institutions in the State of New York are authorized or required by law or other governmental action
to close.

 

“Closing”
means the closing of the purchase and sale of Shares and Warrants pursuant to Section 2.1(a).

 

“Closing
Date” means the Trading Day on which all of the Transaction Documents required pursuant to Section 2.1(a) have been
executed and delivered by the applicable parties thereto, and all conditions precedent to (i) the Purchaser’s obligations
to pay his respective Subscription Amount for the Closing, and (ii) the Company’s obligations to deliver the Shares and
Warrants for the Closing, in each case, have been satisfied or waived, but in no event later than the third Trading Day following
the date hereof.

 

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“Commission”
means the United States Securities and Exchange Commission.

 

“Common
Stock” means the common stock of the Company, par value $0.02 per share, and any other class of securities into which
such securities may hereafter be reclassified or changed.

 

“Common
Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to
acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument
that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive,
Common Stock.

 

“Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“GAAP”
shall have the meaning ascribed to such term in Section 3.1(h).

 

“Intellectual
Property” shall have the meaning ascribed to such term in Section 3.1(l).

 

“Liens”
means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

 

“Material
Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).

 

“Material
Permits” shall have the meaning ascribed to such term in Section 3.1(j).

 

“Per
Share Purchase Price” equals $0.75, subject to adjustment for reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock that occur after the date of this Agreement but on or before the
Closing Date.

 

“Person”
means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

“Proceeding”
means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial
proceeding, such as a deposition), whether commenced or threatened.

 

“Required
Approvals” shall have the meaning ascribed to such term in Section 3.1(e).

 

“Rule
144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted
from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose
and effect as such Rule.

 

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“SEC
Reports” shall have the meaning ascribed to such term in Section 3.1(h).

 

“Securities
Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Shares”
means the shares of Common Stock issued to the Purchaser pursuant to this Agreement.

 

“Short
Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall
not be deemed to include the location and/or reservation of borrowable shares of Common Stock).

 

“Subscription
Amount” means the amount to be paid for Shares and Warrants purchased hereunder as specified below the Purchaser’s
name on the signature page of this Agreement and next to the heading “Subscription Amount”, in United States dollars
and in immediately available funds.

 

“Subsidiary”
means any subsidiary of the Company and shall, where applicable, also include any direct or indirect subsidiary of the Company
formed or acquired after the date hereof.

 

“Trading
Day” means a day on which the principal Trading Market is open for trading.

 

“Trading
Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on
the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the
New York Stock Exchange or the OTC Bulletin Board (or any successors to any of the foregoing).

 

“Transaction
Documents” means this Agreement and any other documents or agreements executed in connection with the transactions contemplated
hereunder.

 

“Transfer
Agent” means American Stock Transfer and Trust Company, LLC, the current transfer agent of the Company, and any successor
transfer agent of the Company.

 

“Warrants”
means the warrants to purchase up to 200,000 shares of Common Stock pursuant to this Agreement and the attached Warrant, with
a three-year term and an exercise price of $1.00 per share, in the form of Exhibit A attached hereto.

 

ARTICLE
II.

PURCHASE AND SALE

 

2.1       Closing.

 

(a)       Closing.
On the Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrent with the execution
and delivery of this Agreement by the parties hereto, the Company agrees to sell, and Purchaser agrees to purchase, that number
of Shares and Warrants equaling the Subscription Amount. Purchaser shall deliver to the Company, via wire transfer, immediately
available funds equal to Purchaser’s Subscription Amount as set forth on the signature page hereto executed by the Purchaser
and the Company shall deliver to Purchaser its Shares and Warrants, and the Company and Purchaser shall deliver the other items
set forth in Section 2.2 deliverable at Closing. Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and
2.3, the Closing shall occur at such location as the parties shall mutually agree, including the delivery to the Company of immediately
available funds comprising the aggregate Subscription Amount for the Closing.

 

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2.2       Deliveries.

 

(a)       On
or prior to the Closing Date (except as otherwise required hereby), the Company shall deliver or cause to be delivered to Purchaser
the following:

 

(i)       this
Agreement and the Warrant duly executed by the Company;

 

(ii)       a
stock certificate representing the Shares purchased, within five (5) Trading Days following Closing.

 

(b)       On
or prior to the Closing Date, Purchaser shall deliver or cause to be delivered to the Company, the following:

 

(i)       this
Agreement duly executed by the Purchaser; and

 

(ii)       the
Purchaser’s Subscription Amount by wire transfer to the account specified in writing by the Company.

 

2.3       Closing
Conditions.

 

(a)       The
obligations of the Company hereunder in connection with each Closing are subject to the following conditions being met:

 

(i)       the
accuracy in all material respects on the Closing Date of the representations and warranties of the Purchaser contained herein
(unless as of a specific date therein in which case they shall be accurate as of such date);

 

(ii)       all
obligations, covenants and agreements of Purchaser required to be performed at or prior to the Closing Date shall have been performed;
and

 

(iii)       the
delivery by Purchaser of the items set forth in Section 2.2(b) of this Agreement.

 

(b)       The
obligations of Purchaser hereunder in connection with the Closing are subject to the following conditions being met:

 

(i)       the
accuracy in all material respects when made and on the Closing Date of the representations and warranties of the Company contained
herein (unless as of a specific date therein, in which case they shall be accurate as of such date);

 

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(ii)       all
obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been
performed;

 

(iii)       the
Shares shall have been approved for listing on the Trading Market;

 

(iv)       the
delivery by the Company of the items set forth in Section 2.2(a) of this Agreement; and

 

(v)       there
shall have been no Material Adverse Effect with respect to the Company since the date hereof.

 

ARTICLE
III.

REPRESENTATIONS AND WARRANTIES

 

3.1       Representations
and Warranties of the Company. Except as set forth in the Company’s previously filed SEC Reports, or in a disclosure
schedule delivered by the Company to Purchaser prior to the execution of this Agreement, which shall be deemed a part hereof and
shall qualify any representation or warranty otherwise made herein to the extent of the disclosure contained therein, the Company
hereby makes the following representations and warranties to Purchaser:

 

(a)      Subsidiaries.The
Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of
any Liens, and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid,
non-assessable and free of preemptive and similar rights to subscribe for or purchase securities.

 

(b)       Organization
and Qualification. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power
and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company
nor any Subsidiary is in violation or default of any of the provisions of its respective certificate or articles of incorporation,
bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business
and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted
or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity
or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business,
prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse
effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction
Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no Proceeding has been instituted in
any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

 

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(c)       Authorization;
Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions
contemplated by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder
and thereunder. The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company, the Board of Directors or the Company’s stockholders
in connection herewith or therewith other than in connection with the Required Approvals. This Agreement and each other Transaction
Document to which it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in
accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii)
as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii)
insofar as indemnification and contribution provisions may be limited by applicable law.

 

(d)       No
Conflicts. The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to
which it is a party, the issuance and sale of the Shares and Warrants and the consummation by it of the transactions contemplated
hereby and thereby do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s
certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute
a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any
Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary
is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required
Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction
of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities
laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case
of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.

 

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(e)       Filings,
Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice
to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other
Person in connection with the execution, delivery and performance by the Company of the Transaction Documents that has not been
obtained, other than: (i) the filings required pursuant to Section 4.3 of this Agreement, (ii) application(s) to each applicable
Trading Market for the listing of the Shares for trading thereon in the time and manner required thereby, and (iii) such filings
as may be required to be made under applicable state securities laws (collectively, the “Required Approvals”).

 

(f)       Issuance
of the Shares; Registration. The Shares are duly authorized and, when issued and paid for in accordance with the applicable
Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the
Company. The Company has reserved from its duly authorized capital stock the maximum number of shares of Common Stock issuable
pursuant to this Agreement and the exercise of the Warrants.

 

(g)       Capitalization.
The Company has not issued any capital stock since its most recently filed periodic report under the Exchange Act, other than
pursuant to the exercise of employee stock options under the Company’s stock option plans, the issuance of shares of Common
Stock to employees pursuant to the Company’s incentive stock plan and pursuant to the conversion and/or exercise of Common
Stock Equivalents outstanding as of the date of the most recently filed periodic report under the Exchange Act. No Person has
any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents except for any such rights that have been waived. The issuance and sale of the Shares
and Warrants will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Purchaser)
and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price
under any of such securities. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued,
fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding
shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. No further
approval or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Shares
and Warrants. There are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s
capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s
stockholders.

 

(h)       SEC
Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required
to be filed by the Company under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the twelve months
preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the
foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred
to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of filing
and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Exchange Act, and none of the SEC Reports, when filed, contained
any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Company has
never been an issuer subject to Rule 144(i) under the Securities Act. The financial statements of the Company included in the
SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission
with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with United
States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”),
except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements
may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company
and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods
then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.

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(i)       Compliance.
Except as previously disclosed in its SEC Reports, neither the Company nor any Subsidiary: (i) is in default under or in violation
of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by
the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under
or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party
or by which it or any of its properties is bound (whether or not such default or violation has been waived), or (ii) is or has
been in violation of any statute, rule, ordinance or regulation of any governmental authority, including without limitation all
foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product quality
and safety and employment and labor matters, except in each case as could not have or reasonably be expected to result in a Material
Adverse Effect.

 

(j)       Regulatory
Permits. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports,
except where the failure to possess such permits could not reasonably be expected to result in a Material Adverse Effect (“Material
Permits”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation
or modification of any Material Permit.

 

(k)       Title
to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them
and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries,
in each case free and clear of all Liens, except for (i) Liens as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries and (ii) Liens
for the payment of federal, state or other taxes, for which appropriate reserves have been made in accordance with GAAP and, the
payment of which is neither delinquent nor subject to penalties. Any real property and facilities held under lease by the Company
and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries
are in compliance.

 

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(l)       Intellectual
Property. The Company and its Subsidiaries own or possess adequate rights to use all patents, patent applications, patent
rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable proprietary
or confidential information, systems or procedures), trademarks, trademark registrations, service marks, service mark registrations,
trade names, mask work rights and other intellectual property necessary to carry on the business now operated by it or proposed
to be operated by it as described in the SEC Reports (collectively, “Intellectual Property”), except where
the lack of such ownership or rights to use would not have a Material Adverse Effect. The Company is not otherwise aware of any
infringement of or conflict with asserted rights of others with respect to any of the Company’s Intellectual Property or
the operation of the Company’s business. The Company and its subsidiaries have taken all steps necessary to perfect its
ownership of and interest in the Intellectual Property.

 

(m)       Insurance.
The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged, including,
but not limited to, directors and officers insurance coverage at least equal to $2,000,000. Neither the Company nor any Subsidiary
has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase
in cost.

 

(n)       Certain
Fees. No brokerage or finder’s fees or commissions are or will be payable by the Company or any Subsidiary to any broker,
financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions
contemplated by the Transaction Documents. The Purchaser shall have no obligation with respect to any fees or with respect to
any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection
with the transactions contemplated by the Transaction Documents.

 

(o)       Investment
Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Shares and Warrants,
will not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940,
as amended. The Company shall conduct its business in a manner so that it will not become an “investment company”
subject to registration under the Investment Company Act of 1940, as amended.

 

(p)       Listing
and Maintenance Requirements. The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the
Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration
of the Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating
terminating such registration. As disclosed in the Company’s SEC Reports, the Company has been notified by the NYSE MKT
that is not in compliance with certain of the NYSE MKT’s continued listing standards as of the Closing Date, and can make
no assurances that it will be able to maintain its current listing on that exchange.

 

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(q)       Disclosure.
Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company
confirms that neither it nor any other Person acting on its behalf has provided a Purchaser or its agents or counsel with any
information that it believes constitutes or might constitute material, non-public information which is not otherwise publicly
disclosed. The Company understands and confirms that Purchaser will rely on the foregoing representation in effecting transactions
in securities of the Company. All of the disclosure furnished by or on behalf of the Company to Purchaser regarding the Company
and its Subsidiaries, their respective businesses and the transactions contemplated hereby is true and correct and does not contain
any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading. The Company acknowledges and agrees that Purchaser does
not make and has not made any representations or warranties with respect to the transactions contemplated hereby other than those
specifically set forth in Section 3.2 hereof.

 

(r)       No
Integrated Offering. Assuming the accuracy of Purchaser’s representations and warranties set forth in Section 3.2, neither
the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers
or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the
Shares and Warrants to be integrated with prior offerings by the Company for purposes of any applicable shareholder approval provisions
of any Trading Market on which any of the securities of the Company are listed or designated.

 

(s)       Tax
Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect, the Company and its Subsidiaries each (i) has made or filed all United States federal, state and local
income and all foreign income and franchise tax returns, reports and declarations required by any jurisdiction to which it is
subject, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined
to be due on such returns, reports and declarations, and (iii) has set aside on its books provision reasonably adequate for the
payment of all material taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There
are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of
the Company or of any Subsidiary know of no basis for any such claim.

 

(t)      Accountants.
To the knowledge and belief of the Company, the Company’s accounting firm (i) is a registered public accounting firm as
required by the Exchange Act, and (ii) has expressed, in the Company’s most recent Form 10-K, its opinion with respect to
the financial statements included in the Company’s Annual Report for the fiscal year ended December 31, 2015.

 

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(u)       
Acknowledgment Regarding Purchaser’s Purchase of Shares and Warrants. The Company acknowledges and agrees that Purchaser
is acting solely in the capacity of an arm’s length Purchaser with respect to the Transaction Documents and the transactions
contemplated thereby. The Company further acknowledges that Purchaser is not acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any
advice given by Purchaser or any of its representatives or agents in connection with the Transaction Documents and the transactions
contemplated thereby is merely incidental to Purchaser’s purchase of the Shares and Warrants. The Company further represents
to Purchaser that the Company’s decision to enter into this Agreement and the other Transaction Documents has been based
solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.

 

(v)       Regulation
M Compliance. The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly,
any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Shares or Warrants, (ii) sold, bid for, purchased, or, paid any compensation for soliciting
purchases of, any of the Shares or Warrants, or (iii) paid or agreed to pay to any Person any compensation for soliciting another
to purchase any other securities of the Company.

 

3.2
Representations and Warranties of Purchaser. Purchaser hereby represents and warrants as of the date hereof and as of the
Closing Date to the Company as follows (unless as of a specific date therein):

 

(a)       Organization;
Authority. The Purchaser is an entity duly incorporated or formed, validly existing and in good standing under the laws of
the jurisdiction of its incorporation or formation, with full right, corporate, partnership, limited liability company or similar
power and authority to enter into and to consummate the transactions contemplated by this Agreement and the other Transaction
Documents and otherwise to carry out his obligations hereunder and thereunder. The execution and delivery of this Agreement and
performance by the Purchaser of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate,
partnership, limited liability company or similar action, as applicable, on the part of the Purchaser. Each Transaction Document
to which it is a party has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms
hereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its
terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification
and contribution provisions may be limited by applicable law.

 

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(b)       Understandings
or Arrangements. The Purchaser is acquiring the Shares and Warrants as principal for its own account and has no direct or
indirect arrangement or understandings with any other Person to distribute or regarding the distribution of such Shares and Warrants.
The Purchaser is acquiring the Shares and Warrants hereunder in the ordinary course of its business.

 

(c)       Purchaser
Status. At the time the Purchaser was offered the Shares and Warrants, it (and its principals) was, and as of the applicable
Closing Date, it (and its principals) will be an “accredited investor” as defined in Rule 501(a) under the Securities
Act.

 

(d)       Experience
of the Purchaser. The Purchaser, either alone or together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment
in the Shares and Warrants, and has so evaluated the merits and risks of such investment. The Purchaser is able to bear the economic
risk of an investment in the Shares and Warrants and is able to afford a complete loss of such investment.

 

(e)       Certain
Transactions and Confidentiality. Other than consummating the transactions contemplated hereunder, the Purchaser has not,
nor has any Person acting on behalf of or pursuant to any understanding with the Purchaser, directly or indirectly executed any
purchases or sales, including Short Sales, of the securities of the Company during the period commencing as of the time that the
Purchaser first received a term sheet (written or oral) from the Company or any other Person representing the Company setting
forth the material terms of the transactions contemplated hereunder and ending immediately prior to the execution hereof. Other
than to other Persons party to this Agreement, the Purchaser has maintained the confidentiality of all disclosures made to it
in connection with this transaction (including the existence and terms of this transaction). Notwithstanding the foregoing, for
avoidance of doubt, nothing contained herein shall constitute a representation or warranty, or preclude any actions, with respect
to the identification of the availability of, or securing of, available shares to borrow in order to effect Short Sales or similar
transactions in the future.

 

(f)       Access
to Information. The Purchaser acknowledges that it and its authorized representatives has had the opportunity to review the
Transaction Documents (including all exhibits and schedules thereto) and the SEC Reports and has been afforded (i) the opportunity
to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the
terms and conditions of the offering of the Shares and Warrants and the merits and risks of investing in the Shares and Warrants;
(ii) access to information about the Company and its financial condition, results of operations, business, properties, management
and prospects sufficient to enable it to evaluate the investment; and (iii) the opportunity to obtain such additional information
that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment
decision with respect to the investment.

 

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The
Company acknowledges and agrees that the representations contained in Section 3.2 shall not modify, amend or affect Purchaser’s
right to rely on the Company’s representations and warranties contained in this Agreement or any representations and warranties
contained in any other Transaction Document or any other document or instrument executed and/or delivered in connection with this
Agreement or the consummation of the transactions contemplated hereby.

 

ARTICLE
IV.

OTHER AGREEMENTS OF THE PARTIES

 

4.1       Furnishing
of Information. Until the time that the Purchaser owns no Shares, the Company covenants to timely file (or obtain extensions
in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date
hereof pursuant to the Exchange Act.

 

4.2       Integration.
The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined
in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Shares and Warrants for purposes of
the rules and regulations of any Trading Market such that it would require shareholder approval prior to the closing of such other
transaction unless shareholder approval is obtained before the closing of such subsequent transaction.

 

4.3       Securities
Laws Disclosure; Publicity. The Company shall file a Current Report on Form 8-K, including descriptions of the Transaction
Documents or including the form Transaction Documents as exhibits thereto, with the Commission within the time required by the
Exchange Act.

 

4.4       Shareholder
Rights Plan. No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that
Purchaser is an “Acquiring Person” under any control share acquisition, business combination, poison pill (including
any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted by the
Company, or that Purchaser could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving Shares
and Warrants under the Transaction Documents or under any other agreement between the Company and Purchaser.

 

4.5       Non-Public
Information. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction
Documents, the Company covenants and agrees that neither it, nor any other Person acting on its behalf will provide Purchaser
or its agents or counsel with any information that the Company believes constitutes material non-public information, unless prior
thereto Purchaser shall have entered into a written agreement with the Company regarding the confidentiality and use of such information.
The Company understands and confirms that Purchaser shall be relying on the foregoing covenant in effecting transactions in securities
of the Company.

 

4.6       Use
of Proceeds. The Company shall use the net proceeds from the sale of the Shares hereunder for working capital purposes and
shall not use such proceeds: (a) for the satisfaction of any portion of the Company’s debt (other than payment of trade
payables in the ordinary course of the Company’s business and prior practices), (b) for the redemption of any Common Stock
or Common Stock Equivalents, or (c) for the settlement of any outstanding litigation.

 

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4.7       Reservation
of Common Stock. As of the date hereof, the Company has reserved and the Company shall continue to reserve and keep available
at all times, free of preemptive rights, a sufficient number of shares of Common Stock for the purpose of enabling the Company
to issue Shares pursuant to this Agreement and the issuance of shares of Common Stock upon the exercise of the Warrants.

 

4.8       Listing
of Common Stock. The Company hereby agrees to use best efforts to maintain the listing or quotation of the Common Stock on
the Trading Market on which it is currently listed. The Company further agrees, if the Company applies to have the Common Stock
traded on any other Trading Market, it will then use best efforts to include in such application all of the Shares (including
shares of Common Stock issuable upon the exercise of the Warrants), and will take such other action as is necessary to cause all
of the Shares to be listed or quoted on such other Trading Market as promptly as possible. The Company will then take all action
reasonably necessary to continue the listing and trading of its Common Stock on a Trading Market and will comply in all respects
with the Company’s reporting, filing and other obligations under the bylaws or rules of the Trading Market. As previously
disclosed in its SEC Reports, the Company is not in compliance with certain listing standards of the NYSE MKT as of the Closing
Date of this Agreement, and can provide no assurances that it will be successful in maintaining its current listing on that exchange.

 

4.9       
Certain Transactions and Confidentiality. Purchaser covenants that until such time as the transactions contemplated by
this Agreement are publicly disclosed by the Company, Purchaser will maintain the confidentiality of the existence and terms of
this transaction.

 

4.10       Restrictive
Legend. Purchaser understands that the Shares will be issued pursuant to an exemption from registration or qualification under
the Securities Act and applicable state securities laws and, as such, any stock certificate representing the issuance of Shares
under this Agreement or later pursuant to the exercise of the Warrant shall bear the following required restrictive legend:

 

“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER APPLICABLE
STATE LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER, IN A FORM
REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD
PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.”

 

ARTICLE
V.

MISCELLANEOUS

 

5.1       Fees
and Expenses. Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident
to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall pay all Transfer Agent
fees (including, without limitation, any fees required for same-day processing of any instruction letter delivered by the Company),
stamp taxes and other taxes and duties levied in connection with the delivery of any Shares or Warrants to Purchaser.

 

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5.2       Entire
Agreement. The Transaction Documents, together with any exhibits and schedules thereto, contain the entire understanding of
the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, oral
or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.

 

5.3       Notices.
Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and
shall be deemed given and effective on the earliest of: (a) the date of transmission, if such notice or communication is delivered
via facsimile or e-mail, with confirmation of delivery, at the facsimile number or e-mail address set forth on the signature pages
attached hereto at or prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission,
if such notice or communication is delivered via facsimile, with confirmation of delivery, at the facsimile number set forth on
the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day, (c) upon delivery if sent by U.S. nationally recognized overnight courier service, or (d) upon actual receipt by the party
to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature
pages attached hereto.

 

5.4       Amendments;
Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed,
in the case of an amendment, by the Company and Purchaser or, in the case of a waiver, by the party against whom enforcement of
any such waived provision is sought. No waiver of any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any
manner impair the exercise of any such right.

 

5.5       Headings.
The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.

 

5.6       Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors
and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written
consent of Purchaser (other than by merger). Purchaser may assign any or all of his rights under this Agreement to any Person
to whom the Purchaser assigns or transfers any Shares or Warrants, provided that such transferee agrees in writing to be bound,
with respect to the transferred Shares or Warrants, by the provisions of the Transaction Documents that apply to Purchaser.

 

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5.7       No
Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto, and their respective successors
and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

 

5.8       Governing
Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall
be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in the State of New York. Each party hereby irrevocably submits
to the exclusive jurisdiction of the state and federal courts sitting in the State of New York for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action
or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding
is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process
and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of process and notice thereof, effective upon receipt.
Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

 

5.9       Execution.
This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being
understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission
or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of
the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf”
signature page were an original thereof.

 

5.10       Severability.
If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain
in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.

 

    	16

    	 		 

    

 

5.11       Replacement
of Shares or Warrants. If any certificate or instrument evidencing any Shares or Warrants is mutilated, lost, stolen or destroyed,
the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation),
or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory
to the Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances
shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement
Shares or Warrants.

 

5.12       Remedies.
In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, Purchaser
and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages
may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents
and hereby agree to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy
at law would be adequate.

 

5.13Saturdays,
Sundays, Holidays, etc.If the last or appointed day for the taking of any action or the expiration of any right required
or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding
Business Day.

 

5.14       Construction.
The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, each and
every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse
and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after
the date of this Agreement.

 

5.15       WAIVER
OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ONE PARTY AGAINST THE OTHER PARTY, THE PARTIES
EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY
AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY. 

 

[SIGNATURE
PAGES FOLLOW]

 

    	17

    	 		 

    

 

IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.

 

	DOCUMENT
    SECURITY SYSTEMS, INC.	 	Address
    for Notice:
	 	 	 	200
    Canal View Blvd., Suite 300
	 	 	 	Rochester,
    NY 14623
	 	 	 	 
	By:	 	 	Fax:
    (585) 325-2977
	Name:	Jeffrey
    Ronaldi	 	 
	Title:	Chief
    Executive Officer	 	 

 

[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK;

SIGNATURE
PAGE FOR PURCHASER FOLLOWS]

 

    	18

    	 		 

    

 

[PURCHASER
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]

 

IN
WITNESS WHEREOF, the undersigned has caused this Securities Purchase Agreement to be duly executed by its respective authorized
signatory as of the date first indicated above.

 

Name
of Purchaser: BMI Capital Partners International Ltd.

 

	By:	 	 
	 	 	 
	Title:	 	 

 

Signature
of Purchaser: _________________________________

 

Email
Address of Purchaser: _________________________________________

 

Facsimile
Number of Purchaser: __________________________________________

 

Address
for Notice to Purchaser:

 

Unit
B, 17th Floor, Greatmany Centre, 109-111 Queen’s Road East, Wan Chai, Hong Kong

 

Address
for Delivery of Shares and Warrants to Purchaser (if not same as address for notice):

 

Subscription
Amount: $225,000

 

Shares:
300,000

 

Warrants:
200,000

 

    	19

    	 		 

    

 

EXHIBIT
A

 

Form
of Warrant

 

    	20

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