Exhibit
10.77




EMAGIN
CORPORATION




AMENDED
AND RESTATED EMPLOYMENT AGREEMENT




This
Amendment No. 2 to the Employment Agreement (the "Agreement").made and entered
into this 30 day of January 2008, between eMagin Corporation, a Delaware Company
(the "Company") and Susan Jones, an individual residing in Newcastle, WA 98059
(the "Executive").




WITNESSETH:


WHEREAS,
on January 24, 2006 the Company and the Executive entered into an Employment
Agreement which was amended April 17, 2006 (collectively, the "Employment
Agreement"); and from time to time also entered into additional agreements or
provisions outlining rights or responsibilities, whether referenced or not in
said Employment Agreements, which shall also remain separately valid unless
encompassed herein.




WHEREAS,
the Company has determined that it is in the best interests of the Company and
its shareholders to assure that the Company will have the continued dedication
of the Executive,




WHEREAS,Executive has agreed to continue to serve as an Employee of Employer, and
Employer has agreed to continue to employee the Executive as such, pursuant to
the terms and conditions of this Amendment and Restated Employment Agreement
(the "Amended Employment Agreement")




NOW,
THEREFORE, to accomplish these objectives and 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 Employment
Agreement is hereby amended and restated as follows.




I .
EMPLOYMENT AGREEMENT




I. I
Employment; Duties and
Responsibilities.The Company hereby employs Executive as its Executive
Vice President, Chief Business Officer (or other equivalent C-level title), and
Secretary of the Board of Directors and Executive accepts such employment on the terms contained
in thisAgreement, Executive shall report to the Chief Executive Officer.
In any event that the Chief Executive Officer is no longer serving as such the
Executive shall report to the Chairman of the Board. Specifically for duties as
Secretary or as related to Governance for the Company, Executive will report to
the Chairman of the Board, if he is an Independent Director, and/or the Chairman
of the Governance committee if the Chairman not be an Independent
Director.




1.2
Duties and Responsibilities Employee shall have those duties and powers as
generally pertain to each of the positions of which she holds pursuant to
working titles of chief business officer, including managing (i) business
development including sales, marketing, development contracts and agreements,
government contracts, and government relations, (ii) intellectual property and
information technology, (iii) public relations including oversight of media,
press releases, and public presentations. Executive will also continue to record
the minutes of the meetings of the Board of Directors and its committees,
oversee stock issuance matters for Directors and other parties; oversee filings
with the Securities and Exchange Commission; provide oversight for corporate
governance matters, and undertake other duties, if and as requested by the
Chairman of the Board and mutually agreed to.




1.3 Term of Agreement.This Agreement, as amended and restated, shall be effective as of the
date first written above (the "Effective Date") and ending on the second
anniversary date thereof (such period, as it may be extended, the "Term"),
unless sooner terminated in accordance with this Amended Employment Agreement.
The Term shall be automatically renewed for successive one year terms (each such
renewal, a "Renewal Term"), unless either party provides the other party with
written notice no less than sixty (60) days prior to the end of the then current
Term or Renewal Term, of her or
itsintent notto
renew this Agreement; Notwithstanding the foregoing, the parties may
subsequently mutually agree, in writing, to reduce the term of this Agreement,
provided that any such reduction is agreed to in writing. Each of these terms
may be referenced herein as the "Employment Period."




1.4 Time and Effort.Executive shall use her best efforts to carry out the duties and
responsibilities that are consistent with her title(s) and devote the
substantial portion of her entire business time, attention, and energy
exclusively to the business and affairs of the Company. During Executive's
employment Executive shall not engage in any business activities outside those
of the Company to the extent that such activities would interfere with or
prejudice Executive's obligations to the Company. Executive may serve as a
member of the Board of Directors of other
organizations that do not directly and compete with the Company, and may
participate in other professional, civic, governmental organizations and
activities that do not materially affect her ability to carry out her
duties.






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1.5  Location.Unless
otherwise voluntarily agreed to, the locations at which Executive shall perform
services for the Company shall primarily be Bellevue, Washington with periodic
travel to Hopewell Junction, New York.




1.6 Other
Provisions.During the Employment Period and for three years
after the date of termination for any reason, Executive is to be covered under
Directors and Officers Insurance, and will be fully indemnified by the Company
against any action by creditors, investors, and other parties related to the
business and actions of the Company to the same level as any other senior
manager, Officer or Director.




2.
COMPENSATION DURING EMPLOYMENT PERIOD




2.1 Salary Compensation.As compensation for performing services for the Company, Executive shall
be entitled to compensation as of the date of this Agreement which is comprised
of each of a (i) fixed base salary and (ii) variable incentive which is based on
performance. The fixed base salary shall be $315,000 per annum, payable in
bi-weekly installments consistent with the Company's payroll practices. The
variable incentive shall be remuneration of I.% of total
cash resulting from sales of products and prototypes, services, non-recurring
engineering, and all classifications of research or development contracts, as
well as any other items defined as revenue as reported to the Securities and
Exchange commission (but not inclusive of revenue generated by sales of
intellectual property, or manufacturing equipment or materials) to be paid no
later than 2 business days after each quarterly report has been filed. For
Congressional plus-ups, 1/3 of the variable incentive shall be paid upon
enactment of the appropriations legislation, 1./3 upon commencement of the
related technical program with the service agency managing the technical
program, and the remainder upon receipt of the resultant revenue each quarter
for the term of this employment agreement, including, retroactively, any
plus-ups enacted during the period of negotiation of this Employment Agreement
from May 2007 to the Effective Date. Variable compensation shall be paid, at the
option of the Compensation committee, either by (a) 100% cash or (b) 50%
unrestricted stock and 50% cash. Taxes shall be deducted from the cash portion
and the stock payment shall be grossed up for taxes, via cash. The stock will be
priced using the 5 trading day weighted average pricing just prior to the date
the shares are issued to the Executive.




During
the Employment Period, the annual fixed base salary and variable incentive plan
will be reviewed on or before June 30 of each year by the Compensation Committee
to determine if such base salary or variable incentive basis should be increased
due to inflation or in recognition of Executive's services to the Company. The
Board or Compensation Committee of the Board may provide additional bonuses for
accomplishment of various objectives from time to time, at their
discretion.




Payment
of all previously unpaid amounts of the variable incentive due as of the
Effective Date of this Amended Employment Agreement shall be made by monthly
cash payments until all past due amounts are paid in full by no later than July
31, 2008 and will be treated as an unsecured loan to the company. All prior
deferred base salary will be paid back in full and continue to be paid out in
equal monthly installments as an unsecured loan to the company for a total of
twelve months from the execution date of the note restructuring, as already
initiated. The Executive will be provided with a detailed accounting of payment
of all deferred and past due payments on the fifth day following the end of each
month.




2.2 Employee Benefits.During Executive's employment, Executive shall be entitled to
participate, to the extent of Executive's eligibility, in each qualified or
non-qualified and supplemental employee benefit and perquisite plan, policy, or
arrangement of the Company applicable to the Company's employees.




2.3 Time Off.Executive
shall accrue personal time off for sick leave, personal reasons, and holidays
according to applicable company policy, except that Executive shall accrue
personal time off for vacation in accordance with the employee's accrual rate of
35 days per each calendar year, with up to 45 days of unused vacation brought
forward for each year to be additive to each new calendar year's fresh accrual.
Upon termination for any reason other than termination for cause, as defined
herein, the Company shall pay the Executive unused vacation accrual of no less
than 45 days plus any hours accrued which remain for the current year of the
termination, as well as unused sick and personal time, and any unused personal
choice holidays.




2.4 Business Expenses.Upon submission of itemized expense statements in the manner specified by
the Company, Executive shall be entitled to reimbursement for reasonable travel,
relocation, and other reasonable business expenses incurred by the Executive in
the performance of her duties under this Agreement. Each expense statement
submitted by Executive to the Chief Executive Officer (or to the Chairman of the
Board) shall be reviewed and approved,
including receipt of timely notification of any questions or errors identified
during internal reviews, no later than fifteen business days after submission by
Executive.






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Furthermore,
all expense reports submitted, or to be resubmitted, for previously unpaid
expenses, whether by reason of loss or misplacement, will be repaid on this
schedule once submitted or resubmitted, including re-creation of those shipped
from New York to Washington accounting department in past years. Any
disagreement on advances or reimbursement with accounting regarding policies
will be resolved by the Chairman. Any expense reimbursements shall be paid
within five (5) business days of the date of date of termination and any
expenses submitted within one hundred twenty (120) days of the date of
termination shall be reimbursed as provided for in Section 2.4.




2.5 Stock Options and Grants.Executive shall be eligible to participate in the Company's Stock Option
and Stock Purchase Plans, as determined in the sole discretion of the Board of
Directors. The Board or Compensation Committee of the Board may provide
additional awards of stock options or stock grants from time to time or on an
incentive plan as deemed appropriate.




3.
TERMINATION OF EMPLOYMENT




3.1 Voluntary.If
Executive voluntarily terminates Executive's employment with the Company, other
than for Good Reason as defined in Section 3.4 herein, Executive shall cease to
accrue fixed base salary, vacation, benefits and other compensation on the date
of voluntary termination except that, in consideration of her past contributions
to the Company and to her continuing obligations under Section 4 hereof, and to
encourage and compensate Executive to assist with transition requirements,
Executive shall be entitled to receive six months of base salary commencing upon
her termination date, payable either on regularly scheduled corporate payroll
dates or as a lump sum. Variable incentive compensation shall continue to accrue
through the end of the third sequential quarter following the date of
termination by Executive, payable upon the normal schedule when Executive was
employed. Executive shall receive other accrued benefits, if any, in accordance
with applicable employee benefit plan provisions, or as otherwise defined in the
Amended and Restated Agreement.




3.2 For Cause.Notwithstanding anything herein to the contrary, the Company may
terminate its employment of Executive under this Agreement for cause without
liability (other than for base salary and other compensation provided in Section
2 accrued to the date of termination, or previously earned but not paid by the
date of termination) at any time by written notice to Executive. For purposes of
this Agreement, the term "cause" for termination by Employer shall be (a) a
conviction of or plea of guilty or nolo contendereby Executive to a felony, or any crime involving fraud or embezzlement;
(b) the willful and persistent refusal by Executive to perform her material
duties and obligations hereunder (other than any such failure resulting from
Executive's incapacity due to physical or mental illness); (c) Executive's
willful and intentional misconduct in the performance of her material duties and
obligations. For purposes of this Section 3.2, no act, or failure to act, on
Executive's part shall be deemed "willful" unless done, or omitted to be done,
by Executive not in good faith. The written notice given hereunder by Company to
Executive shall specify in reasonable detail the cause for termination and the
manner in which the Board believes that Executive has not substantially or
properly performed her duties. In the case of a termination for the causes
described in (a) above, such termination shall be effective upon receipt of the
written notice. In the case of the causes described in (b) and (c) above, such
termination notice shall not be effective until sixty (60) days after
Executive's receipt of notice, during which time Executive shall be provided an
opportunity to present evidence to a majority of the Independent Directors at
the Company's offices or other mutually agreeable location on a date and time
mutually convenient to the Board and Executive, no sooner than two and not later
than six weeks after the foregoing notice, to refute the claim of Cause, and/or
shall have the right to respond to the Company's notice and cure the breach or
other event giving rise to the termination.




3.3 Termination of Executive
without Cause.In the event that Executive is terminated
without cause, Executive shall be paid as provided herein.




The
Company may terminate the employment of Executive either by non-renewal of this
Agreement (as provided for in Section 1.3) or failure to elect or re-elect
Executive to office (as specified in Section 1.1) at any election held during
the Employment Period, or at any time without cause (as defined in Section 3.2)
by a written notice stating that such termination is without just cause. In such
event, Executive shall be entitled to receive the compensation and benefits set
forth in (i) through (v): (i) fixed base salary until the end of this
Agreement's full term or eighteen ( l 8) months, whichever is greater, based on
Executive's highest monthly rate of base salary during the twelve (12) months
prior to the date of such termination, (ii) variable incentive compensation that
otherwise would be payable during the full term of this Agreement, or eighteen
(18) months, whichever is greater; (iii) payment of any bonus amounts that the
Executive had previously earned from the Company, but which may not yet have
been paid as of the date of termination; (iv) payment for unused time off, as
provided for in Section 2.3, (v) payment for health coverage benefits equivalent
to medical and dental benefits provided during Executive's full time employment
for twenty-four (24) months after the date of termination. Any additional
health-related coverages the Executive had at termination, including dependent
coverage, will also be continued for such period on the same terms. Any costs
the Executive was paying for such coverages at the time of termination shall be
paid by the Executive by separate check payable to the Company each month in
advance. If the terms of any benefit plan referred to in this paragraph do not
permit continued participation by the Executive the Company shall provide
Executive with substantially equivalent coverage through other sources or will
provide Executive with a lump sum payment in such amount that, after all income
and all taxes on that amount have been paid, shall be equal to the Executive's
costs of providing herself and her dependents with such benefit coverage. At the
termination of the benefits coverage provided herein, Executive and dependents
shall be entitled to continuation coverage pursuant to SectiOn 49980B of the
Code, Section 601-608 of the Employee Retirement Income Security Act of 1974, as
amended, and under any other applicable law, to the extent required by such
laws, as if Executive had termination employment with the Company on the date
such benefits coverage terminates.








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Unless
otherwise provided for herein, Company shall pay all amounts due in one payment
within thirty (30) days following the effective date of termination and shall
pay variable incentive compensation on the dates on which they would have
normally occurred throughout the full term of this agreement. In addition, the
Company shall provide payment of any outstanding expense reimbursements within
five (5) business days following the effective date of termination.




Additional
expense reports submitted by Executive within one hundred twenty (120) calendar
days following the effective date of termination shall be repaid as provided in
Section 2.4




3.4 Termination by Executive for
Good Reason.Executive may terminate this Agreement for Good Reason at
any time upon 30 days written notice to the Company. In this Amended Employment
Agreement, "Good Reason" means, without Employee's prior written consent, the
occurrence of any of the following events, unless Employer shall have fully
cured all grounds for such termination within thirty (30) days after Employee
gives notice thereof: If Executive terminates employment with the Company for
Good Reason (as hereinafter defined), such termination will be considered to be
effectively the same as termination without just cause; she shall be entitled to
the severance benefits including those set forth in Section 3.3 and
stock-related provisions set forth in Section 3.8 as if terminated by the
Company without just cause. For purposes of this Agreement, "Good Reason" shall
mean the occurrence of any one or more of the following events without
Executive's prior written consent: (i) failure to renew this Agreement or any
failure to appoint, elect or reelect her to the positions of Executive Vice
President and Secretary of the Board of Directors, and her working titles as of
the Effective Date, unless such change is mutually agreed to; the removal of her
from such position; or any changes in the reporting structure so that Employee
reports to someone other than the Board of Directors, or the Chief Executive
Officer of the Company; (ii) the assignment to Executive of any duties which, in
Executive's reasonable judgment, are adversely inconsistent with the position in
the Company as defined herein, or a significant adverse alteration in the nature
or status of Executive's responsibilities, including reporting status, or any
other action by the Company that results in a material diminution in Executive's
position, authority, duties or responsibilities; (iii) reduction of Executive's
annual base salary or incentive compensation or bonus opportunity, each as in
effect on the date hereof or as the same may be increased from time to time;
(iv) the relocation of the Company's offices at which Executive are principally
employed such that Executive's one-way daily commute from Executive's principal
residence to the Company's offices at which Executive are principally employed
is increased by more than twenty (20) miles; (v) the Company's failure to pay to
Executive any portion of Executive's then current compensation, whether base
salary, incentive compensation, expense reimbursement, or bonus, or any portion
of an installment of deferred compensation, in each case within seven (7)
business days of the date such compensation is due, or any material failure to
timely grant, or timely honor, any equity or long-term incentive award, unless
other mutually agreeable arrangements are made; (vi) the Company's failure to
continue in effect compensation and benefit plans which provide Executive with
benefits which are no less favorable on an aggregate basis, both in terms of the
amount of benefits provided and the level of Executive's participation relative
to other participants, to the benefits provided to under the Company's
compensation and benefit plans and practices as of the Effective Date; (vii) the
Company's failure to. obtain a satisfactory agreement from any successor to
assume and agree to perform this Agreement, or to enter into a new employment
agreement with the Executive mutually acceptable to the Company or its successor
and the Executive in lieu of this Agreement; (viii) the continuation or
repetition, after written notice of objection from Executive, of harassing or
denigrating treatment of Executive which is inconsistent with Executive's
position with the Company; (ix) a determination by Executive made ingood faith that, as a result of a change of control or other material
change, as defined herein, she is unable to effectively carry out the authority,
powers, functions or duties attached to her position with the Company as
referred to in Section 1 hereof, and the situation is not remedied within thirty
(30) calendar days after receipt by the Company of written notice from Executive
of such determination; (x) the voluntary or involuntary dissolution of the
Company, the filing of a petition in bankruptcy by the Company or upon an
assignment for the benefit of creditors of the assets of the Company; (ix)
Change of Control or Other Material Change as defined below or (x) any material
breach by the Company of this Agreement which is not cured within fifteen (15)
days after written notice is provided by Executive to Company




An
election by Executive to terminate her employment under the provision of this
Section 3.4 shall not be deemed a voluntary termination of employment by
Executive for the purpose of interpreting the provisions of any of the Company's
employee benefit plans, program or policies. Executive's right to terminate her
employment pursuant to this Section 3.4 shallnot be affected by Executive's incapacity due to physical or mental
illness. Executive's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstance constituting Good Reason
hereunder.








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3.5 Change of Control or Other
Material Change.In the event of termination of Executive's employment
with the Company for Good Reason or Change of Control, Executive shall be
entitled to receive the compensation and benefits set forth in (i) through (v):
(i) fixed base salary until the end of this Agreement's full term or eighteen
(18) months, whichever is greater, based on Executive's highest monthly rate of
base salary during the twelve (12) months prior to the date of such termination,
(ii) variable incentive compensation that otherwise would be payable during the
full term of this Agreement, or eighteen (18) months, whichever is greater, in
the event that the change of control results in intentional cessation or
diminution of the relevant base revenue or contracts, then 3.5(ii) shall be
calculated based on four times either the highest quarterly revenue recorded
during the twelve months prior to date of termination, or the most current
quarter, whichever amount is higher; (iii) payment of any bonus amounts that the
Executive had previously earned from the Company, but which may not yet have
been paid as of the date of termination; (iv) payment for unused time off, as
provided for in Section 2.3, (v) payment for health coverage benefits equivalent
to medical and dental benefits provided during Executive's full time employment
for twenty-four (24) months after the date of termination. Any additional
health-related coverages the Executive had at termination, including dependent
coverage, will also be continued for such period on the same terms. Any costs
the Executive was paying for such coverages at the time of termination shall be
paid by the Executive by separate check payable to the Company each month in
advance. If the terms of any benefit plan referred to in this paragraph do not
permit continued participation by the Executive the Company shall provide
Executive with substantially equivalent coverage through other sources or will
provide Executive with a lump sum payment in such amount that, after all income
and employment taxes on that amount have been paid, shall be equal to the
Executive's costs of providing herself and her dependents with such benefit
coverage. At the termination of the benefits coverage provided herein, Executive
and dependents shall be entitled to continuation coverage pursuant to Section
49980B of the Code, Section 601-608 of the Employee Retirement income Security
Act of 1974, as amended, and under any other applicable law, to the extent
required by such laws, as if Executive had termination employment with the
Company on the date such benefits coverage terminates.




Unless
otherwise provided for herein, Company shall pay all amounts due in one payment
within thirty (30) days following the effective date of termination and shall
pay variable incentive compensation on the dates on which they would have
normally occurred throughout the full term of this agreement. In addition, the
Company shall provide payment of any outstanding expense reimbursements within
five (5) business days following the effective date of termination and
stock-related provisions set forth in Section 3.8 as if terminated by the
Company without just cause, Additional expense reports submitted by Executive
within one hundred twenty (120) calendar days following the effective date of
termination shall be repaid as provided in Section 2.4




Neither
this Agreement nor its incorporated terms may be invalidated or deleted or
altered as part of the terms of any Change of Control actions. The Company's
rights and obligations under this Agreement will inure to the benefit and be
binding upon the Company's successors and assignees.




For the
purpose of this Agreement, Change of Control shall mean any one or more of the
following: (i) a sale, lease or other disposition of all or substantially all of
the assets of the Company, (ii) a sale by the stockholders of the Company
of the voting stock of the Company to another Company and/or its subsidiaries
that results in the ownership by such Company and/or its subsidiaries of forty
percent (40%) or more of the combined voting power of all classes of the voting
stock of the Company entitled to vote; (iii) a merger or consolidation in which
the Company is not the surviving Company, (iv) a reverse merger in which the
Company is the surviving Company but the shares of Common Stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise; (v) if,
for any reason, during the Period of Employment the persons who were Independent
members of the Company's Board of Directors as of January 1, 2007 cease to
constitute a majority of the Company's Board of Directors..






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3.6 Disability.The
Company may terminate this Agreement without liability if Executive shall be
permanently prevented from properly performing her essential duties with
reasonable accommodation by reason of illness or other physical or mental
incapacity for a period of more than six consecutive months. In such event,
unless the Company provides long term disability events providing at least the
equivalent of six months base salary, the Executive shall be entitled to
receive, and the Company agrees to continue to pay, in accordance with the
normal pay dates of the Company, the salary of Executive provided by Section 2.1
(i) and (ii) and the additional benefits, if any, provided by in each instance
for a period of six (6) month following the date of termination of Executive.
Upon such termination, Executive shall be entitled to all accrued but unpaid
Base Salary, accrued incentive compensation, bonus (if any), and accrued
vacation in accordance with Section 2.3 . In the event Executive's employment
terminates under this Section 3.6, Executive may pursue long term disability
benefits, if eligible, under any plan which the Company has provided for
Executive.




3.7 Death.In the event
of the death of Executive during the Employment Period, this Agreement and the
employment of Executive hereunder shall terminate on the date of the death of
Executive. The estate of Executive (or such person(s) as Executive shall
designate in writing) shall be entitled to receive, and the Company agrees to
continue to pay, in accordance with the normal pay dates of the Company, the
salary of Executive provided by Section 2.1 (i) and (ii) and the additional
benefits, if any, provided by in each instance for a period of six (6) month
following the date of death of Executive. Within 15 days the Company shall pay
to Executive's heirs (or such person(s) as Executive shall designate in writing)
Executive's Base Salary accrued to the date of Executive's death and accrued
vacation as provided for in Section 2.3 in its entirety. This Agreement shall
inure to the benefit of and be enforceable by Executive and Executive's personal
or legal representative, executors, administrators, successors, heirs, and
legatees. If Executive should die while any amount would still be payable to
Executive hereunder had Executive continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Executive's devises, legatee or other designee or, if there is no
such designee, to Executive's estate.




3.8 Effect of Termination
without Just Cause on Employee Stock Options and Stock.The Company
hereby irrevocably offers to amend any stock options granted to Executive to
permit the full exercise thereof following termination of Executive's employment
without Cause (as defined in Section 3.3) or because of death or disability. The
Company hereby also irrevocably offers to amend any stock options granted to
Executive to permit the immediate full vesting and exercise thereof at any time
after termination of Executive's employment without Cause or because of death or
Disability to the same extent as if Executive's employment had not terminated.
Executive or Executive's personal representative may accept either or both of
such offers at any time before such options otherwise expire by giving written
notice to the Company. To the extent that any options held by Executive are not
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code, Executive hereby accepts both such offers. In addition, the
Executive shall have three (3) months from the date of termination to exercise
her rights to purchase stock in the Company pursuant to any vested but
unexercised option or warrant agreements. Furthermore, shares of any of the
Executive's stock subject to any lockups will be immediately released from such
restrictions and registered by the Company within 30 days of termination without
just cause. If, for any reason, registered and unrestricted shares are not
available to immediately allow exercise of options, then the three month
exercise period will begin when the options can be exercised into unrestricted
registered shares.




3.9 Other Provisions After
Termination.Upon termination without Good Cause or for Good Reason, the
Executive is authorized to retain use of her current Company offices, and
confidential use of 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, paid parking, and other Executive support provided at Company
expense by the Company, until the earlier of (i) six months after date of
termination, (ii) the Company's loss of lease rights for one or both location,
or (iii) if 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, software, and supplies provided by the Company for use
primarily by Executive for up to 24 months following the Executive's termination
date. No later than the end of such period, Executive will be provided ninety
(90) days to complete removal of personal items from each of her offices and
storage areas. Travel, packing, shipping expenses not to exceed $7500 will be
allocated to Executive for removal of items and shipment to a location
designated by Executive. Under no circumstances will mail addressed to Executive
be "returned to sender" without consulting with Executive on each item and
providing the Executive with this mail or shipment.






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3.10
Notice and Date of
Termination.Any purported termination of Executive's employment by the
Company orby the Executive (other than termination due to Executive's death, which
shall terminate Executive's employment automatically) shall be communicated by a
written Notice of Termination to the other party hereto. For purposes of this
Agreement, "Notice of Termination" shall mean a notice that shall indicate the
specific termination provision to this Agreement (if any) relied upon and shall
set forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of Executive's employment under the provision so
indicated.




4. NON
COMPETITION, NON SOLICITATION, BANKRUPTCY; COOPERATION




4.1 Non-Compete and
Non-Solicitation.The Executive hereby agrees that for a period of one
year following the date of this Amended Employment Agreement for any reason, the
Executive will not, without the prior written consent of the Company, have any
direct interest in any person, firm, Company or business competing with the
Company in the Covered Area. For purposes of this Section 4.1 (i) "Competing
Business" means any company engaging directly in the manufacturing of OLED on
single crystal silicon microdisplays. For purposes of this Section 4.1 (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. Furthermore, Executive hereby
agrees that, for the one (1) year period immediately following the Date of
Termination, 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, (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 (iii) any such employee that responds to a general advertisement
and other similar broad forms of solicitation. Any violation of any part of this
Amended and Restated Agreement, including any delay in specified payments by the
Company to the Executive, will void the provisions of this Section
4.1.




4.2 Bankruptcy.In the
event that the Company voluntarily or involuntarily files for bankruptcy under
the Bankruptcy Code during the Employment Period, the Executive shall use her
best reasonable efforts in assisting the Company emerge from bankruptcy as a
reorganized entity as long as the Executive is compensated as specified by this
Agreement, unless the Company is liquidated. All payments due and unpaid to the
Executive due to this Agreement or other obligations of the Company to the
Executive will be treated as unpaid employment compensation and as unsecured
debt, as determined by the bankruptcy court with jurisdiction in the case, with
the most favorable arrangement to the Executive being requested. If reasonable
security of payment is not available at any time during this process, or in the
event of voluntary bankruptcy proceedings of the Company, the Executive will be
considered to have terminated for Good Reason or without just cause, and
entitled to payment as described herein.




4.3 Cooperation in Future
Matters.Executive hereby agrees that, for a period of two (two) years
following the date of her termination from employment for whatever reason, she
shall cooperate with the Company's reasonable requests relating to matters that
pertain to Executive's employment by the Company including providing information
of limited consultation as to such matters, participating in legal proceedings,
investigations or audits on behalf of the Company, or otherwise making herself
reasonably available to the Company for other related purposes Any such
cooperation shall be performed at times scheduled taking into consideration
Executive's other commitment, and Executive shall be compensated at a reasonable
hourly or per diem rate to be agreed by the parties to the extent such
cooperation is required on more than an occasional and limited basis. This rate
will be based on the most senior level consulting rates of SRI in the flat panel
display field. Executive shall also be reimbursed for all travel and reasonable
out of pocket expenses, grossed up for taxes. Executive shall not be required to
perform such


cooperation
to the extent it conflicts with any requirement of exclusivity of service for
another employer or otherwise not in any manner that in the good faith belief of
Executive would conflict with her right under or ability to enforce this
Agreement.








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5.
ASSIGNMENT OF INVENTIONS




Executive
has executed a Confidential Information and Invention Assignment Agreement. The
obligations under such Confidential and Invention Assignment Agreement shall
survive the termination of this Agreement for any reason. Following the
termination of Executive's employment with the Company, Executive shall make
herself available to the Company in the defense of any patent owned by the
Company in which she assisted, provided, however, that the Company shall allow
Executive to fulfill any other obligations she may have at such time and that
the Company shall pay the Executive compensation as an "expert," as well as her
incurred expenses in assisting in such defense.




6.
CONFIRMATION OF DISCLOSURES REQUIRED UNDER SECURITIES LAWS




Since
January 1, 2000, Executive has not: (a) filed, or has had filed against
Executive, nor is Executive not presently contemplating a filing of, nor is
Executive aware that anyone else is presently contemplating a filing against
Executive, of a petition under the federal bankruptcy laws or any state
insolvency laws, nor has Executive had a receiver, fiscal agent, or similar
officer appointed by a court for the business or property of Executive, or any
partnership of which Executive was a general partner at or within two years
before the time of such filing, or of any corporation or business association of
which Executive was an executive officer at or within two years prior to such
filing;(b) been convicted
in a criminal proceeding or been named as a subject of a pending criminal
proceeding (excluding traffic violations and other minor offenses); (c) been
subject to any order, judgment, or decree (not subsequently reversed, suspended
or vacated) of any court of competent jurisdiction permanently or temporarily
enjoining Executive from, or otherwise imposing limits or conditions on
Executive's engaging in any securities, investment advisory, banking, insurance
or other type of business or acting as an officer or director of a public
company; or (d) been found by a court of competent jurisdiction in a civil
action or by the Securities and Exchange Commission or the Commodity Futures
Trading Commission to have violated any federal or state commodities, securities
or unfair trade practices law, which such judgment or finding has not been
subsequently reversed, suspended, or vacated.




7.
AMENDMENT AND WAIVER




This
Agreement shall not be changed except in a writing signed by the parties. No
waiver shall be binding unless executed in writing by the party making the
waiver. No waiver shall be deemed a waiver of any other provision or constitute
a continuing waiver. Any consent under this Agreement shall be in writing and
shall be effective only to the extent specifically set forth in such writing.
The consent of the Company may only be manifested by a resolution of the
Compensation Committee of the eMagin Corporation Board of Directors or by the
Chairman of the Board or by signature of an officer to whom authority to modify
this Agreement has been delegated.




8.
ARBITRATION




8.1  No Automatic Arbitration;
Time of Essence.All terms of this Amended and Restated Agreement are
hereby agreed to and are not subject to arbitration to negotiate the stated
terms or validity. Payments of any amounts due to Executive will be required
within thirty (30) days of the Date of Termination and/or dates of submission
request for payment. The Company agrees that time is of the essence for all
payments and no arbitration or other issues shall in any way be permitted to
delay these required payments. The parties shall use reasonable good faith
efforts to resolve any dispute relating to the subject matter of this Agreement
or otherwise by negotiations or mediation. If there is any dispute regarding the
specific amounts due to Executive, the Company shall provide to Executive any
and all data and documentation which supports or explains the Company's opinion
if not in agreement with Executive




8.2  Compensation During Dispute.Executive's compensation during any disagreement, dispute, controversy,
claim, suit, action, or proceeding (collectively, a "Dispute") arising out of or
relating to this Agreement or the interpretation of this Agreement shall be as
follows: If there is a termination of Executive' employment with the Company
followed by a Dispute as to whether Executive is entitled to the payment and
other benefits provided under this Agreement, then, during the period of that
Dispute the Company shall pay Executive eight percent (80%) of any amounts under
Dispute and the Company shall provide Executive with all other benefits provided
in this Agreement, if, but only if, Executive agrees in writing that if the
Dispute is resolved against Executive, Executive shall promptly refund to the
Company all payments Executive received under Section 3 of this Agreement. If
the Dispute
is resolved in Executive's favor, promptly after resolution of the Dispute the
Company shall pay Executive all amounts which were withheld during the period of
the Dispute. All collection effort expenses, including accounting, collection,
or legal fees, required to be undertaken by the Executive will be fully paid by
the Company.






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8.3 Arbitration as Last Resort.Only if good faith direct negotiations fail between the Executive and the
Company and/or between legal counsel for each party, any party may submit any
dispute concerning this Agreement to final and binding arbitration pursuant to
the commercial rules of the American Arbitration Association. At the request of
any party, the arbitrators, attorneys, parties to the arbitration, witnesses,
experts, court reporters, or other persons present at the arbitration shall
agree in writing to maintain the strict confidentiality of the arbitration
proceedings. Arbitration shall be conducted by a single, neutral arbitrator
appointed in accordance with the rules of the American Arbitration Association.
Judgment upon the award rendered may be entered in any court with
jurisdiction.




8.4 Alternate Payment
Negotiation.The Executive may agree to alternate forms of compensation
such as registered Company Stock instead of cash, but only if mutually agreed
and deemed by the Executive to be of equal or higher final worst case estimated
liquid cash value than the total amounts due to the Executive.




To the
extent any of the foregoing insurance or expense reimbursement payments are
deemed to potentially 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 Executive in connection with
such payment.




9. LEGAL
PEES AND PENALTIES




The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal and accounting fees and other expenses which Executive may reasonably
incur as a result of any contest (regardless of the outcome thereof) by the
Company, Executive or others of the validity or enforceability of, or liability
under, any provision of this Agreement or any guarantee of performance thereof
(including as a result of any contest by Executive about the amount of payment
pursuant to this Agreement), plus in each case interest on each and any delayed
payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of
the Code, or other Section of the Code as appropriate. These amounts will be
grossed up for taxes by the company.




10.
ENTIRE AGREEMENT; OTHER PROVISIONS




10.1
Miscellaneous.No provision of this Agreement may be modified, waived, or discharged
unless such waiver, modification, or discharge is agreed to in writing and
signed by Executive and such Director or Officer as may be specifically
designated by the Compensation Committee of the Board. No waiver by either party
hereto at anytime of any breach by the other party hereto of or compliance with,
any condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provision or conditions at the
same or at any prior or subsequent time. No agreements or representations, oral
or otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
All references to sections of Exchange Act or the Code shall be deemed also to
refer to any successor or provisions to such sections. The obligations of the
Company shall survive the expiration of the term of this Agreement.




10.2
Entire Agreement.This Agreement sets forth the entire of the parties hereto in respect of
the subject matter contained herein and supersedes the terms of any prior or
contemporaneous employment or other offer, oral or written, with the exception
of separately issued bonus or incentive plans which shall remain in effect
during the full term of this Agreement, or which may be added at a later date.
Any of Executive's rights hereunder shall be in addition to any rights Executive
may otherwise have under benefit plans or agreements of the Company to which
Executive is a party or in which Executive is a participant, including , but not
limited to, any Company sponsored employee benefit plans and stock option plans.
The provisions of this Agreement shall not in any way abrogate Executive's
rights under such other plans and agreements. This Agreement may only be
formally modified when a modification is duly executed in writing by Executive,
and the Compensation Committee and/or the Chairman of the Board of Directors of
the Company, or their duly appointed representatives.




I0.3.Severability.The invalidity or uneriforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect. If any term of this
Agreement is found by any court having jurisdiction to be too broad, then and in
that case, such term shall nevertheless remain effective, but shall be
considered amended (as to the time or area or otherwise, as the case may be) to
a point considered by said court as reasonable, and as so amended shall be fully
enforceable.








9







10.4
Successors., Binding Agreement.The Company will use its best efforts to require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform if no such succession had
taken place. Unless expressly provided otherwise, "Company" as used herein shall
mean the Company as defined in this Agreement and any successor to its business
and/or assets as aforesaid. Failure of the Company to obtain such assumption and
agreement prior to the effective of any such succession shall be deemed to be a
termination without Cause for purposed of this Employment Agreement. For
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be the date of termination.




10.5
Notices.Any
notice required or permitted under this Agreement shall be given in writing and
shall be deemed to have been effectively made or given if personally to the
address as may be given by one party to the other.




10.6
Withholding.Any payments provided for hereunder shall be paid net of any applicable
withholding required under federal, state or local law, or as otherwise grossed
up to cover tax payments or otherwise provided herein.




10.7
Governing Law.The validity, interpretation, construction, and performance of this
Agreement shall be governed by the laws of the State of Washington without
regard to its conflicts of law principles.




10.8
Failure to Enforce.The failure of either party hereto at any time, or for any period of
time, to enforce any of the provisions of this Agreement shall not be construed
as a waiver of such provision(s) or of the right of such party hereafter to
enforce each and every such provision.




10.9
.Headers and
Interpretations.The section headings contained in this Agreement are for
convenience only and shall not affect the interpretation of this Agreement. On
and after the date of this agreement, each reference in the Agreement to the
"Agreement", "the Agreement, as amended and restated," "hereinafter", "herein",
''hereunder", "hereof', or words of like import shall mean and be a reference to
the Agreement as a whole as amended by this agreement. Unless otherwise
provided, "date" shall refer to calendar date.




10.10
Independent Legal and
Accounting Advice.The Company has obtained legal advice concerning this
Agreement and has requested that Executive obtain independent legal advice with
respect to same before executing this Amended Employment Agreement. The Company
shall provide up to $20,000 to Executive for such legal review, if requested.
These legal service expenses will be fully grossed up for taxes by the
company.




10.11  Confidentiality.The
Executive and the Company each agree that neither the Executive or any
representative of the Company will discuss Executive's employment and
resignation or termination (including terms of this Agreement) with any
representatives of the media, either directly or indirectly, without the prior
written consent and approval of the other party. Executive shall not, in any
manner, for any reasons, either directly or indirectly, divulge or communicate
to any person, firm or corporation, any confidential information concerning any
the Company not generally known i otherwise made public by Company which affects
or relates to Company's business, finances, marketing and/or operations,
research, development, inventions, products, designs, plans, procedures, or
other data (collectively, "Confidential Information") except in the ordinary
course of business or as required by applicable law. Without regard to whether
any item of Confidential Information is deemed or considered confidential,
material, or important, the parties hereto stipulate that as between them, to
the extent such item is not generally known in to the public such item is
important, material, and confidential and affects the successful conduct of
Company's business and goodwill, and that any breach of the terms of this
Section shall be a material and incurable breach of this Agreement. Confidential
Information shall not include: (i) information obtained or which became known to
Executive other than through his employment by Company (ii) information in the
,public domain at the time of the disclosure of such information by the
Executive; (iii) information that the Executive can document was independently
developed by Executive ; (iv) information that is disclosed by Executive with
the prior written consent of Company and (v) information that is disclosed by
Executive as required by law, governmental regulation or court
order.




10.12  Counterparts and Execution.The Agreement may be executed in one of more counterparts, each of which
shall be deemed an original and all of which taken together shall constitute a
single Amendment. The Agreement may be deemed as executed upon receipt of email
affirmation, to be followed by execution of physically signed documents within
ten (10) business days.








10








IN
WITNESS WHEREOF, the undersigned have executed this Executive Employment
Agreement as of the date first referenced above.






"EXECUTIVE"/s/
      Susan K. Jones
                      
                      
                      1/31/2008Susan
      K. Jones
                      
                      
                      Date




/s/
      Thomas Paulsen
                  
                  
                  1/31/2008Thomas
      Paulsen
                  
                  
                  DateChair,
      Compensation Committee




















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