EXECUTIVE SEPARATION AND CONSULTING AGREEMENT

This Executive Separation and Consulting Agreement (the "Agreement") made and
entered into as of the 11th day of January 2007, between eMagin Corporation, a
Delaware corporation (the "Company"), and Gary Jones (the "Executive").

WITNESSETH:

WHEREAS, the Company and the Executive entered into an Executive Employment
Agreement effective January 1, 2006 (“Agreement A”) and an Amendment No. 1 to
the Executive Employment Agreement dated April 17, 2006 (“Agreement B”),
cumulatively referred to as the “Employment Agreements”.

WHEREAS, by mutual agreement with the Company, the Executive will terminate
employment with the Company by the terms of this Agreement that will amend and,
to the extent provided herein, supersede all prior Employment agreements,
effective as of January 11, 2007 (the “Effective Date”), and provide for the
Executive to remain available as a consultant to advise the Company on M&A and
other matters as long as both the Executive and a majority of the Board of
Directors of the Company agree to continuing the consultancy.

NOW, THEREFORE, in consideration of and for the mutual promises and covenants
contained herein, and for other good and valuable consideration, the receipt of
which is hereby acknowledged, the Executive Employment Agreement is hereby
amended to incorporate terms as follows:

1. Consideration and Terms of Compensation

The Company hereby agrees to award the Executive certain payments in exchange
for the Executive’s agreement to terminate his employment with the Company in
accordance with this Agreement, as well as for amounts that are currently owed
to the Executive prior to the termination of employment.. In addition, to better
enable and encourage the Executive to assist the Company as a consultant,
certain post-termination arrangements are provided in this Agreement.

1.1 Cash Amounts owed to Executive at time of termination of Employment:
Executive will be paid the following in cash (or as a confirmation of a credit
against any withholding taxes owed by the employee) within 4 business days of
the Effective Date: (a) all salary accrued as of the Effective Date plus the
equivalent of 30 days of salary; (b) the equivalent of salary for all unused
sick, personal choice holidays, and personal days accrued as of the Effective
Date; (c) payment for accrued vacation equaling 360 hours of vacation time as of
the Effective Date. Any other amounts due the Executive on the Effective Date
will also be paid within 4 days (or as a confirmation of a credit against any
withholding taxes owed by the employee) of the Effective Date.

1.2 Tax overpayments previously paid by the Executive which have been or will be
refunded directly to the Company, per written notice received from the Company’s
tax accountant, will be paid to the Executive within 4 days of the Effective
Date.

1.3 Stock paid to Executive at time of termination of Employment
The Company agrees to grant Executive 500,000 registered shares of common stock
in eMagin Corporation from the Employee Stock Plan (“the Plan”) or other
unrestricted stock plan. Such shares shall be DWAC-wired to the broker
designated by the Executive on the Effective Date, 11:00AM EST. The Company will
arrange with the transfer agent to ensure compliance with this delivery date.

1.4 Executive will be granted a cash payment of $460,000 upon a change of
control event, whether occurring as a result of single or multiple events, such
as sale of the Company through the sale of stock or equivalent interest
representing a majority of the Company from the Effective Date, a sale or
transfer of all, or a majority of the Company’s assets reported by the Company
in a SEC filing or press release, equity or debt financing resulting in an
effective change of control in one or more steps (calculated as if fully
converted), or effective change of control by way of a sale or transfer of
rights to a substantial portion of the future product output or intellectual
property of the Company (e.g., providing another company an exclusivity for any
major markets or providing rights to another company to produce products using
the company’s OLED technology (collectively, a “Change of Control”). The
foregoing Change of Control payment shall be due and payable only if, and when,
such Change of Control of the Company results in the payment of the Company’s
senior secured debt, when such debt is converted to equity, or there is a
restructuring of the Company where the majority of the debt amounts due the
lenders is agreed to be restructured by the lenders all or in part.

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1.5 In addition, Executive agrees to reasonably pursue the general type Change
of Control transactions listed in Section 1.4 and to devote reasonable best
efforts, time and attention, unless otherwise mutually agreed by the Executive
and the Chairman of the Board of Directors of the Company, or if there is any
change in direction of the Company away from actively pursuing such a long term
or short term Change of Control as a primary effort. Any such effort by the
Executive requires reasonable support to the Executive by the Company,
attorneys, and bankers toward the pursuit of such a Change of Control. Moreover,
Executive shall provide the Board of Directors of the Company with weekly
reports describing Executive’s activities during the prior calendar week with
respect to his consulting efforts on behalf of the Company in accordance with
this Agreement.

1.6 Section 16 Filings
The Company will provide the highest priority and conscientious support in
issuing all shares as specified in this Agreement, with all transfer and
registration costs borne by the Company. Unlimited registration rights are
provided for all stock granted to the Executive. The Company’s attorneys will,
at Company expense, provide prompt assistance to convert all Executive’s stock
to free trading status and to file the necessary Form 4 paperwork to complete
the stock issuances properly and fully assist the Executive with his Section 16
filing requirements consistent with the Company’s past practices.

1.7 Withholdings for Taxes:
Taxes will be withheld and paid in a standard manner for ordinary income in 2007
for all cash payments made pursuant to this Agreement consistent with the
Company’s past practices. Stock issuance withholdings will be based on a Moss
Adams report discount valuation of the market closing bid price as reported by
the American Stock Exchange on the day of issuance to take into account block
discount valuation reduction effects.

1.8 Voluntary Forfeiture of Executive’s Options
Upon the execution of this Agreement, Executive agrees to forfeit all of the
options currently held by the Executive in the Company. (Approximately 230,000
options).

2.0 Use of Office and Equipment

The Executive will retain use of his current Company offices and communications
pathways in both Hopewell Junction, NY and Bellevue, WA, including current
office and communications support, equipment, telephone access,
Company-supported land line or cell phones as has been done previously, and
other Executive support provided at Company expense by the Company, until the
earlier of (i) end of calendar year 2007, (ii) a change of control, or (iii)
when the Executive begins full-time employment elsewhere. The Executive will
furthermore retain use of all mobile and home based electronic and
communications equipment, data, media, and supplies provided by the company for
use primarily by the employee for up to 28 months from the Effective Date,
provided that Company data is copied for the Company’s use.

3.0 Provisions for Moving Personal Effects

The Company will provide up to $7,500 for reasonable packing of all of
Executive’s personal effects currently located in New York Company offices or
storage space and shipping such items to up to two locations within the general
area of the Company’s Bellevue Offices, to be specified by the Executive. All
personal effects and files on the premises or in storage will remain
confidential to the Executive. Travel associated with assisting in the clearing
out this space will also be a permissible expense to the Company or its
acquirer. To the extent the foregoing payment is deemed to constitute taxable
income to the Executive by a tax professional, the Company shall also pay to the
Executive the amount of any actual federal and State income taxes incurred by
the Executive in connection with this payment.

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4.0 Personal Benefits

Executive will be provided all insurance benefits as when previously employed
through the earlier of March 31, 2007, or the Sale of the Company or
substantially all of the Company’s assets, at Company expense free of any cost
or tax to the Executive. All medical, insurance, and dental benefits will be
covered during this period. Thereafter, Executive will be provided with right to
participate in full COBRA (or equivalent) Company insurance plans.

5.0 No Arbitration; Time is of the Essence

5.1 This Agreement is hereby agreed to and is not subject to arbitration to
negotiate the stated terms or validity. The Company agrees that payment of all
cash due to the Executive and payment of stock in DWAC or DTC form will be made
on the dates designated elsewhere in this Agreement, or within 2 days of the
Effective Date, whichever is later.

Time is of the essence for all payments due within 10 business days of the
Effective Date (namely, payments due under section 1.0) and no arbitration or
legal issues shall in any way be permitted to delay these required payments.
Financial compensation alone would not be sufficient compensation for breach of
the Company’s duty to make these payments.

Additionally, a 12% initial penalty on the 1st late business day a payment is
late plus an interest rate equal to the maximum fee and penalty limits of
Washington State law plus any other losses incurred by the Executive due to the
delayed payments due within 10 business days of the Effective Date. These fees
and penalties would apply to the entire value of any delayed cash or stock
payments due within 10 business days of the Effective Date, with the stock
pricing value being the most recent AMEX closing price as of the date of this
agreement or the date of each late assessment, whichever is higher based on the
most recent quoted closing price of the Company’s common stock quoted by the
American Stock Exchange or whatever exchange or quotation system the Company’s
common stock may then be listed or quoted on.

All late fees and penalties, including all costs of collection and legal costs,
arising from non-payment of the amounts due (either by direct payment or by way
of credit against the Executive’s liabilities at the time of the termination of
Executive’s employment, will be paid in cash immediately when due and any late
fees or penalties will accrue the same fees and penalties as other late payments
in this Agreement.

6.0 Non-Competition and Non-Solicitation

6.1 The following modification replaces and supersedes Section 4.1 of Agreement
A. The Executive hereby agrees that for a period of one year following the
Effective Date, the Executive will not, without the prior written consent of the
Company, have any direct interest in any person, firm, corporation or business
competing with the Company in the Covered Area. For purposes of this Section 6.1
(i)“Competing Business” means any company engaging directly in the manufacturing
of OLED on single crystal silicon microdisplays. For purposes of this Section
7.1 (ii) “Covered Area” means all geographical areas of the United States, and
other foreign jurisdictions where the Company has offices or manufactures OLED
microdisplays. The Executive will not be restricted in participating in
businesses that may purchase, utilize, design products, sell or resell any types
of displays or related products, nor will the Executive be restricted in any
technology areas other than directly in OLED microdisplay manufacturing. The
Executive will also not be restricted in investing in or managing investments in
any display, lighting, or imaging companies of any kind. Furthermore, for a
period of one (1) year following the Effective Date, Executive will not,
directly solicit for employment any officer, director or senior level employee
of the Company except that Executive shall not be precluded from hiring (i) any
such employee who has been terminated by the Company or the employee prior to
commencement of employment discussions between Executive and such employee, (ii)
any such employee who contacts Executive on his or her own initiative without
any direct or indirect solicitation by or encouragement from Executive or (ii)
any such employee that responds to a general advertisement and other similar
broad forms of solicitation (including solicitations by a recruiting firm hired
by Executive).

7.0 Release by the Executive

In consideration for the promises and undertakings of the Company under this
Agreement, the Executive hereby unconditionally releases and forever discharges
the Company from any and all claims, demands, causes of action, suits, damages,
remedies, obligations, debts and liabilities whatsoever, whether known or
unknown, suspected or unsuspected, both at law and in equity, except for any
claim which arises out of or is in any way related to this Agreement, which the
Executive now has, has ever had or may hereafter have against the Company
arising contemporaneously with or prior to the Effective Date or on account of
or arising out of any matter, cause or event occurring contemporaneously with or
prior to the Effective Date.

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8.0 Publicity

The Company and Executive agree that all publicity or other public statements
related to Executive will be mutually approved by both the Executive and the
Chairman of the Board of the Company prior to issuance; provided, however, that
the Company shall be entitled to make all public statements and disclosures it
reasonably determines is necessary to comply with all applicable laws.

9. Other Provisions

9.1 The parties acknowledge that while the Executive will be acting following
the termination of his employment as a consultant to the Company, he will serve
as an independent advisor and not in any other capacity including as a
fiduciary, except to the extent of fiduciary duties arising from the Executive’s
duties (if any) as a Director of the Company. Neither this Agreement nor the
delivery of any advice in connection with this engagement is intended to confer
rights upon any persons not a party hereto (including security holders,
employees or creditors of the Company) as against the Executive or the Company.
The Company agrees to indemnify the Executive against any claims related to the
Company and the Company’s actions, other than claims of gross negligence or
willful misconduct specifically by the Executive.

10. Entire Agreement and Other Provisions

This is the entire agreement, this Agreement supersedes all prior agreements
related to this matter, and this Agreement may only be formally modified when a
modification is duly executed by the Executive, and the Board of Directors of
the Company, or such employees, agents or representatives that the Board shall
have appointed to make such modifications. The parties hereby acknowledge and
agree that the Confidential Information and Invention Assignment Agreement
executed by the Executive in favor of the Company shall remain in full force and
effect after the Effective Date for one year.

This Agreement is governed by the laws of the Washington, U.S.A. without regard
to conflicts of law principles. The Company and the Executive agree to waive
trial by jury in any action, proceeding or counterclaim brought by or on behalf
of either party with respect to any matter whatsoever relating to or arising out
of any actual or proposed transaction or the engagement of or performance by the
Executive hereunder. With respect to all matters relating to this Agreement, the
Company hereby irrevocably (a) submits to the non-exclusive jurisdiction of any
Washington State or Federal Court sitting in the State of Washington, County of
King, U.S.A.; (b) agrees that all claims related hereto may be heard and
determined in such courts; (c) waives the defense of an inconvenient forum; (d)
agrees that a final judgment of such courts shall be conclusive and may be
enforced in another jurisdiction by suit on the judgment or in any other manner
provided by law; and (e) waives any immunity (sovereign or otherwise) from
jurisdiction of any court or from any legal process that it or its properties or
assets has or may acquire.

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This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original and all of which taken together shall constitute a single
agreement. The Agreement may be deemed as executed upon receipt of email
affirmation, to be followed by execution of physically signed documents within
five (5) business days.

IN WITNESS WHEREOF, the parties hereto have executed this agreement as of the
date first stated above.

“EXECUTIVE”

By /s/ Gary Jones

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Gary Jones

“COMPANY”
eMagin Corporation

By /s/ Thomas Paulsen

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Thomas Paulsen
Chairman of the Board and Chairman of the Compensation Committee

By /s/ Jack Goldman

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Jack Goldman
Compensation Committee

By /s/ David Gottfried

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David Gottfried
Compensation Committee
 
 
 
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