Exhibit 10.3


    Exhibit
      10.3

     

    
 

    NEITHER
      THIS WARRANT NOR THE SECURITIES INTO WHICH THIS WARRANT IS EXERCISABLE HAVE
      BEEN
      REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
      REGULATORS OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
      THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), AND, ACCORDINGLY, MAY
      NOT BE, NOR MAY ANY INTEREST THEREIN BE, OFFERED OR SOLD EXCEPT PURSUANT TO
      AN
      EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT OR PURSUANT TO AN AVAILABLE
      EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
      REQUIREMENTS OF THE 1933 ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
      LAWS AS EVIDENCED BY, SUBJECT TO CERTAIN EXCEPTIONS, A LEGAL OPINION OF COUNSEL
      TO THE TRANSFEROR TO SUCH EFFECT, IN FORM AND SUBSTANCE OF WHICH SHALL BE
      REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES MAY BE PLEDGED IN
      CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY SUCH
      SECURITIES.

    


    THIS
      WARRANT MAY NOT BE TRANSFERRED EXCEPT AS PROVIDED IN SECTION
      24.

    


    


    
      	
              No.
                W-

            	
                              Right
                to Purchase __________ Shares of Common Stock of eMagin
                Corporation

            


    

    


    


    EMAGIN
      CORPORATION

    


    Common
      Stock Purchase Warrant

    


    


    EMAGIN
      CORPORATION,
      a Delaware
      corporation, hereby certifies that, for value received, ______________________
      or
      registered assigns (the “Holder”), is entitled, subject to the terms set forth
      below, to purchase from the Company at any time or from time to time before
      5:00
      p.m., New York City time, on the Expiration Date (such capitalized term and
      all
      other capitalized terms used herein having the respective meanings provided
      herein), [BEFORE
      ISSUANCE INSERT AMOUNT OF SHARES EQUAL TO 70% OF THE NUMBER OF SHARES INITIALLY
      ISSUABLE UPON CONVERSION OF THE NOTE BEING ISSUED TO THE HOLDER OF THIS WARRANT,
      DETERMINED WITHOUT REGARD TO ANY LIMITATION ON CONVERSION] paid
      and
      nonassessable shares of Common Stock at a purchase price per share equal to
      the
      Purchase Price. The number of such shares of Common Stock and the Purchase
      Price
      are subject to adjustment as provided in this Warrant.

    


    1. Definitions.

    


    (a) As
      used
      in this Warrant, the term “Holder” shall have the meaning assigned to such term
      in the first paragraph of this Warrant.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
 

    (b) All
      the
      agreements or instruments herein defined shall mean such agreements or
      instruments as the same may from time to time be supplemented or amended or
      the
      terms thereof waived or modified to the extent permitted by, and in accordance
      with, the terms thereof and of this Warrant.

    


    (c) The
      following terms shall have the following meanings (such meanings to be equally
      applicable to both the singular and plural forms of the terms
      defined):

    


    “Affiliate”
      means, with respect to any Person, any other Person that directly, or indirectly
      through one or more intermediaries, controls, is controlled by or is under
      common control with the subject Person. For purposes of this definition,
“control” (including, with correlative meaning, the terms “controlled by” and
“under common control with”), as used with respect to any Person, shall mean the
      possession, directly or indirectly, of the power to direct or cause the
      direction of the management and policies of such Person, whether through the
      ownership of voting securities or by contract or otherwise.

    


    “Aggregate
      Purchase Price” means at any time an amount equal to the product obtained by
      multiplying (x) the Purchase Price times
      (y) the
      number of shares of Common Stock for which this Warrant may be exercised at
      such
      time, determined without regard to any limitations on exercise of this Warrant
      contained in Section 2(c).

    


    “Aggregation
      Parties” shall have the meaning provided in Section 2(c).

    


    “AMEX”
      means the American Stock Exchange, Inc.

    


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

    


    “Business
      Day” means any day other than a Saturday, Sunday or other day on which
      commercial banks in The City of New York are authorized or required by law
      or
      executive order to remain closed.

    


    “Common
      Stock” includes the Company's Common Stock, par value $0.001 per share, (and any
      purchase rights issued with respect to the Common Stock in the future) as
      authorized on the date hereof, and any other securities into which or for which
      the Common Stock (and any such rights issued with respect to the Common Stock)
      may be converted or exchanged pursuant to a plan of recapitalization,
      reorganization, merger, sale of assets or otherwise and any stock (other than
      Common Stock) and other securities of the Company or any other Person which
      the
      Holder at any time shall be entitled to receive, or shall have received, on
      the
      exercise of this Warrant, in lieu of or in addition to Common
      Stock.

    


    “Common
      Stock Equivalents” means any warrant, option, subscription or purchase right
      with respect to shares of Common Stock, any security convertible into,
      exchangeable for, or otherwise entitling the holder thereof to acquire, shares
      of Common Stock or any warrant, option, subscription or purchase right with
      respect to any such convertible, exchangeable or other security.

    


    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    “Company”
      shall include eMagin Corporation, a Delaware corporation, and any corporation
      that shall succeed to or assume the obligations of eMagin Corporation hereunder
      in accordance with the terms hereof.

    


    “Computed
      Market Price” shall
      mean the arithmetic average of the daily VWAPs for each of the three Trading
      Days immediately preceding the applicable Measurement Date (such VWAPs being
      appropriately and equitably adjusted for any stock splits, stock dividends,
      recapitalizations and the like occurring or for which the record date occurs
      during such three Trading Days).

    


    “Current
      Fair Market Value” means when used with respect to the Common Stock as of a
      specified date with respect to each share of Common Stock, the average of the
      closing prices of the Common Stock sold on all securities exchanges (including
      the NYSE, the AMEX, the Nasdaq and the Nasdaq Capital Market) on which the
      Common Stock may at the time be listed, or, if there have been no sales on
      any
      such exchange on such day, the average of the highest bid and lowest asked
      prices on all such exchanges at the end of regular trading on such day, or,
      if
      on such day the Common Stock is not so listed, the average of the representative
      bid and asked prices quoted in the Nasdaq System as of 4:00 p.m., New York
      City
      time, or, if on such day the Common Stock is not quoted in the Nasdaq System,
      the average of the highest bid and lowest asked price on such day in the
      domestic over-the-counter market as reported by Pink Sheets, LLC, or any similar
      successor organization, in each such case averaged over a period of five Trading
      Days consisting of the day as of which the Current Fair Market Value of Common
      Stock is being determined (or if such day is not a Trading Day, the Trading
      Day
      next preceding such day) and the four consecutive Trading Days prior to such
      day. If on the date for which Current Fair Market Value is to be determined
      the
      Common Stock is not listed on any securities exchange or quoted in the Nasdaq
      System or the over-the-counter market, the Current Fair Market Value of Common
      Stock shall be the highest price per share which the Company could then obtain
      from a willing buyer (not an employee or director of the Company at the time
      of
      determination) in an arms'-length transaction for shares of Common Stock sold
      by
      the Company, from authorized but unissued shares, as determined in good faith
      by
      the Board of Directors.

    


    “Designated
      Person” means any of Mr. John Atherly, Mr. Gary Jones and Ms. Susan
      Jones.

    


    “DTC”
      shall have the meaning provided in Section 2(c).

    


    “Event
      of
      Default” shall have the meaning provided in the Notes.

    


    “Excluded
      Shares” shall have the meaning provided in Section 2(c).

    


    “Expiration
      Date” means July 21, 2011.

    


    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    “FAST”
      shall have the meaning provided in Section 2(c).

    


    “Issuance
      Date” means the date of original issuance of this Warrant or its predecessor
      instrument.

    


    “Market
      Price” means with respect to any security on any day the closing bid price of
      such security on such day on the Nasdaq or the Nasdaq Capital Market or the
      NYSE
      or the AMEX, as applicable, or, if such security is not listed or admitted
      to
      trading on the Nasdaq, the Nasdaq Capital Market, the NYSE or the AMEX, on
      the
      principal national securities exchange or quotation system on which such
      security is quoted or listed or admitted to trading, in any such case as
      reported by Bloomberg, L.P. or, if not quoted or listed or admitted to trading
      on any national securities exchange or quotation system, the average of the
      closing bid and asked prices of such security on the over-the-counter market
      on
      the day in question, as reported by the Pink Sheets, LLC, or a similar generally
      accepted reporting service, or if not so available, in such manner as furnished
      by any New York Stock Exchange member firm selected from time to time by the
      Board of Directors for that purpose, or a price determined in good faith by
      the
      Board of Directors.

    


    “Measurement
      Date” for any sale, transfer or disposition (but not including the cancellation
      or expiration) of Common Stock or Common Stock Equivalents by a Designated
      Person means the date that is three Trading Days after the earlier of (i) the
      date such Designated Person files a Form 4 with the SEC with respect to such
      sale, transfer or disposition and (ii) the date such Designated Person is
      required to file a Form 4 with the SEC with respect to such sale, transfer
      or
      disposition; provided,
      however,
      that if
      such Designated Person is not required, or is no longer required, to file a
      Form
      4 with respect to such sale, transfer or disposition, the Measurement Date
      shall
      be the date that is five Trading Days after the date of such sale, transfer
      or
      disposition.

    


    “Nasdaq”
      means the Nasdaq Global Market.

    


    “1934
      Act” means the Securities Exchange Act of 1934, as amended.

    


    “1933
      Act” means the Securities Act of 1933, as amended.

    


    “Note”
      means any of the 6% Senior Secured Convertible Notes due 2007-2008 issued by
      the
      Company pursuant to the Note Purchase Agreement and the Other Note Purchase
      Agreements.

    


    “Note
      Purchase Agreement” means the Note Purchase Agreement, dated as of July 21,
      2006, by and between the Company and the original Holder of this
      Warrant.

    


    “NYSE”
      means the New York Stock Exchange, Inc.

    


    “Other
      Note Purchase Agreements” means the several Note Purchase Agreements by and
      between the Company and the several buyers named therein in the form of the
      Note
      Purchase Agreement pursuant to which certain of the Notes are being or will
      be
      issued.

    


    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    “Other
      Securities” means any stock (other than Common Stock) and other securities of
      the Company or any other Person which the Holder at any time shall be entitled
      to receive, or shall have received, on the exercise of this Warrant, in lieu
      of
      or in addition to Common Stock, or which at any time shall be issuable or shall
      have been issued in exchange for or in replacement of Common Stock or Other
      Securities pursuant to Section 5.

    


    “Other
      Warrants” shall mean the Common Stock Purchase Warrants (other than this
      Warrant) issued or issuable pursuant to the Other Note Purchase
      Agreements.

    


    “Permitted
      Designated Person Sale” means a sale by John Atherly, occurring on or after
      January 1, 2007, of shares of Common Stock in an amount not to exceed 50,000
      shares in the aggregate in any fiscal quarter of the Company (such number of
      shares subject to equitable adjustments for stock splits, stock dividends,
      combinations, capital reorganizations and similar events relating to the Common
      Stock occurring after the Issuance Date).

    


    “Person”
      means an individual, corporation, partnership, limited liability company, trust,
      business trust, association, joint stock company, joint venture, pool,
      syndicate, sole proprietorship, unincorporated organization, governmental
      authority or any other form of entity not specifically listed
      herein.

    


    “Purchase
      Price” means $0.36, subject
      to adjustment as provided in this Warrant.

    


    “Registration
      Period” shall have the meaning provided in the Note Purchase
      Agreement.

    


    “Registration
      Statement” shall have the meaning provided in the Note Purchase
      Agreement.

    


    “Reorganization
      Event” means the occurrence of any one or more of the following events:


    


    (i) any
      consolidation, merger or similar transaction of the Company or any Subsidiary
      with or into another entity (other than a merger or consolidation or similar
      transaction of a Subsidiary into the Company or a wholly-owned Subsidiary in
      which there is no change in the outstanding Common Stock); or the sale or
      transfer of all or substantially all of the assets of the Company and the
      Subsidiaries in a single transaction or a series of related transactions;
      or

    


    (ii) the
      occurrence of any transaction or event in connection with which all or
      substantially all the Common Stock shall be exchanged for, converted into,
      acquired for or constitute the right to receive securities of any other Person
      (whether by means of a Tender Offer, liquidation, consolidation, merger, share
      exchange, combination, reclassification, recapitalization, or otherwise);
      or

    


    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    (iii) the
      acquisition by a Person or group of Persons acting in concert as a partnership,
      limited partnership, syndicate or group, as a result of a tender or exchange
      offer, open market purchases, privately negotiated purchases or otherwise,
      of
      beneficial ownership of securities of the Company representing 50% or more
      of
      the combined voting power of the outstanding voting securities of the Company
      ordinarily (and apart from rights accruing in special circumstances) having
      the
      right to vote in the election of directors.

    


    “Restricted
      Ownership Percentage” shall have the meaning provided in Section
      2(c).

    


    “Restricted
      Securities” means securities that are not eligible for resale pursuant to Rule
      144(k) under the 1933 Act (or any successor provision).

    


    “Rule
      144A” means Rule 144A as promulgated under the 1933 Act.

    


    “SEC”
      means the Securities and Exchange Commission.

    


    “Subsidiary”
      means any corporation or other entity of which a majority of the capital stock
      or other ownership interests having ordinary voting power to elect a majority
      of
      the board of directors or other Persons performing similar functions are at
      the
      time directly or indirectly owned by the Company.

    


    “Tender
      Offer” means a tender offer, exchange offer or other offer by the Company to
      repurchase outstanding shares of its capital stock.

    


    “Trading
      Day” means a day on whichever of the national securities exchange, the Nasdaq,
      the Nasdaq Capital Market or other securities market which then constitutes
      the
      principal securities market for the Common Stock is open for general trading
      of
      securities.

    


    “VWAP”
of
      any security on any Trading Day means the volume-weighted average price of
      such
      security on such Trading Day on the Principal Market, as reported by Bloomberg
      Financial, L.P., based on a Trading Day from 9:30 a.m., Eastern Time, to 4:00
      p.m., Eastern Time, using the AQR Function, for such Trading Day; provided,
      however,
      that
      during any period the VWAP is being determined, the VWAP shall be subject to
      equitable adjustments from time to time on terms consistent with Section 6.3
      of
      the Note and otherwise reasonably acceptable to the Holder for (i) stock splits,
      (ii) stock dividends, (iii) combinations, (iv) capital reorganizations, (v)
      issuance to all holders of Common Stock of rights or warrants to purchase shares
      of Common Stock, (vi) distribution by the Company to all holders of Common
      Stock
      of evidences of indebtedness of the Company or cash (other than regular
      quarterly cash dividends), and (vii) similar events relating to the Common
      Stock, in each case which occur, or with respect to which the “ex” date occurs,
      during such period.

    


    “Warrant”
      means this instrument as originally executed or if later amended or supplemented
      in accordance with its terms, then as so amended or supplemented.

    


    
      
        
        

      

      
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    “Warrant
      Shares” means the shares of Common Stock issuable upon exercise of this
      Warrant.

    


    2. Exercise
      of Warrant.

    


    (a) Exercise.
      This
      Warrant may be exercised by the Holder in whole at any time or in part from
      time
      to time on or before the Expiration Date by (x) giving a subscription form
      in
      the form of Exhibit
      1
      to this
      Warrant (duly executed by the Holder) to the Company, (y) making payment, in
      cash or by certified or official bank check payable to the order of the Company,
      or by wire transfer of funds to the account of the Company, in any such case,
      in
      the amount obtained by multiplying (a) the number of shares of Common Stock
      designated by the Holder in the subscription form by (b) the Purchase Price
      then
      in effect and (z) surrendering this Warrant to the Company within three Trading
      Days after such submission of a subscription form. An exercise of this Warrant
      shall be deemed to have occurred on the date when the Holder shall have so
      given
      the subscription form and made such payment. On any partial exercise the Company
      will forthwith issue and deliver to or upon the order of the Holder a new
      Warrant or Warrants of like tenor, in the name of the Holder or as the Holder
      (upon payment by the Holder of any applicable transfer taxes) may request,
      providing in the aggregate on the face or faces thereof for the purchase of
      the
      number of shares of Common Stock for which such Warrant or Warrants may still
      be
      exercised. The subscription form may be surrendered by telephone line facsimile
      transmission to such telephone number for the Company as shall have been
      specified in writing to the Holder by the Company; provided,
      however,
      that if
      the subscription form is given to the Company by telephone line facsimile
      transmission the Holder shall send an original of such subscription form to
      the
      Company within ten Business Days after such subscription form is so given to
      the
      Company; provided
      further,
      however,
      that
      any failure or delay on the part of the Holder in giving such original of any
      subscription form shall not affect the validity or the date on which such
      subscription form is so given by telephone line facsimile
      transmission.

    


    (b) Net
      Exercise. Notwithstanding
      anything to the contrary contained in Section 2(a), if the Holder shall exercise
      this Warrant (1) during the period beginning one year after the Issuance Date
      and at a time when a Registration Statement covering the resale by the Holder
      of
      shares of Common Stock (or Other Securities) issuable upon exercise of this
      Warrant is not effective or is not available for use by the Holder or (2) an
      Event of Default shall have occurred and be continuing, then in either such
      case
      in the preceding clause (1) or (2) the Holder may elect to exercise this
      Warrant, in whole at any time or in part from time to time, by receiving upon
      each such exercise a number of shares of Common Stock as determined below,
      upon
      submission of the subscription form annexed hereto (duly executed by the Holder)
      to the Company (followed by surrender of this Warrant to the Company within
      three Trading Days after such submission of a subscription form), in which
      event
      the Company shall issue to the Holder a number of shares of Common Stock
      computed using the following formula:

    


    X
      =
Y
      x (A
      - B)

    A

    


     

    


    
      
        
        

      

      
        7

        
          

        

      

       

      where,

      
        
        

      

    

    
      	 	 	
              X
                =

            	
              the
                number of shares of Common Stock to be issued to the
                Holder

            


    

    


    
      	 	 	
              Y
                =

            	
              the
                number of shares of Common Stock as to which this Warrant is to be
                exercised

            


    

    


    
      	 	 	
              A
                =

            	
              the
                Current Fair Market Value of one share of Common Stock calculated
                as of
                the latest Trading Day immediately preceding the exercise of this
                Warrant

            


    

    


    
      	 	 	
              B
                =

            	
              the
                Purchase Price

            


    

    


    (c) 9.9%
      Limitation. 

    


    (1) Notwithstanding
      anything to the contrary contained herein, the number of shares of Common Stock
      that may be acquired by the Holder upon exercise pursuant to the terms hereof
      at
      any time shall not exceed a number that, when added to the total number of
      shares of Common Stock deemed beneficially owned by the Holder (other than
      by
      virtue of the ownership of securities or rights to acquire securities that
      have
      limitations on the Holder's right to convert, exercise or purchase similar
      to
      the limitation set forth herein (the “Excluded Shares”), together with all
      shares of Common Stock deemed beneficially owned at such time (other than by
      virtue of the ownership of the Excluded Shares) by Persons whose beneficial
      ownership of Common Stock would be aggregated with the beneficial ownership
      by
      the Holder for purposes of determining whether a group exists or for purposes
      of
      determining the Holder’s beneficial ownership (the “Aggregation Parties”), in
      either such case for purposes of Section 13(d) of the 1934 Act and Regulation
      13D-G thereunder (including, without limitation, as the same is made applicable
      to Section 16 of the 1934 Act and the rules promulgated thereunder), would
      result in beneficial ownership by the Holder or such group of more than 9.9%
      of
      the shares of Common Stock for purposes of Section 13(d) or Section 16 of the
      1934 Act and the rules promulgated thereunder (as the same may be modified
      by
      the Holder as provided herein, the “Restricted Ownership Percentage”). The
      Holder shall have the right at any time and from time to time to reduce its
      Restricted Ownership Percentage immediately upon notice to the Company in the
      event and only to the extent that Section 16 of the 1934 Act or the rules
      promulgated thereunder (or any successor statute or rules) is changed to reduce
      the beneficial ownership percentage threshold thereunder to a percentage less
      than 10%. If at any time the limits in this Section 2(c) make this Warrant
      unexercisable in whole or in part, the Company shall not by reason thereof
      be
      relieved of its obligation to issue shares of Common Stock at any time or from
      time to time thereafter but prior to the Expiration Date upon exercise of this
      Warrant as and when shares of Common Stock may be issued in compliance with
      such
      restrictions.

    


    (2) For
      purposes of this Section 2(c), in determining the number of outstanding shares
      of Common Stock at any time the Holder may rely on the number of outstanding
      shares of Common Stock as reflected in (1) the Company's then most recent Form
      10-Q, Form 10-K or other public filing with the SEC, as the case may be, (2)
      a
      public announcement by the Company that is later than any such filing referred
      to in the preceding clause (1) or (3) any other notice by the Company or its
      transfer agent setting forth the number shares of Common Stock outstanding
      and
      knowledge the Holder may have about the number of shares of Common Stock issued
      upon conversion or exercise of Common Stock Equivalents by any Person, including
      the Holder, which are not reflected in the preceding clauses (1) through (3).
      Upon the written request of the Holder, the Company shall within three Business
      Days confirm in writing to the Holder the number of shares of Common Stock
      then
      outstanding. In any case, the number of outstanding shares of Common Stock
      shall
      be determined after giving effect to the conversion or exercise of Common Stock
      Equivalents, including the Warrants, by the Holder or its Affiliates, in each
      such case subsequent to, the date as of which such number of outstanding shares
      of Common Stock was reported.

    


    
      
        
        

      

      
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    3. Delivery
      of Stock Certificates, etc., on Exercise.
      (a) As
      soon as practicable after the exercise of this Warrant and in any event within
      three Trading Days thereafter, upon the terms and subject to the conditions
      of
      this Warrant, the Company at its expense (including the payment by it of any
      applicable issue or stamp taxes) will cause to be issued in the name of and
      delivered to the Holder, or as the Holder (upon payment by the Holder of any
      applicable transfer taxes) may direct, a certificate or certificates for the
      number of fully paid and nonassessable shares of Common Stock (or Other
      Securities) to which the Holder shall be entitled on such exercise, in such
      denominations as may be requested by the Holder, which certificate or
      certificates shall be free of restrictive and trading legends (except to the
      extent permitted under Section 5(b) of the Note Purchase Agreement), plus,
      in
      lieu of any fractional share to which the Holder would otherwise be entitled,
      cash equal to such fraction multiplied by the then Current Fair Market Value
      of
      one full share of Common Stock, together with any other stock or Other
      Securities or any property (including cash, where applicable) to which the
      Holder is entitled upon such exercise pursuant to Section 2 or otherwise.
 In
      lieu
      of delivering physical certificates for the shares of Common Stock or (Other
      Securities) issuable upon any exercise of this Warrant, provided the Company's
      transfer agent is participating in the Depository Trust Company (“DTC”) Fast
      Automated Securities Transfer (“FAST”) program, upon request of the Holder, the
      Company shall use commercially reasonable efforts to cause its transfer agent
      electronically to transmit such shares of Common Stock (or Other Securities)
      issuable upon conversion to the Holder (or its designee), by crediting the
      account of the Holder’s (or such designee’s) broker with DTC through its Deposit
      Withdrawal Agent Commission system (provided that the same time periods herein
      as for stock certificates shall apply). The Company shall pay any taxes and
      other governmental charges that may be imposed under the laws of the United
      States of America or any political subdivision or taxing authority thereof
      or
      therein in respect of the issue or delivery of shares of Common Stock (or Other
      Securities) or payment of cash upon exercise of this Warrant (other than income
      taxes imposed on the Holder). The Company shall not be required, however, to
      pay
      any tax or other charge imposed in connection with any transfer involved in
      the
      issue of any certificate for shares of Common Stock (or Other Securities)
      issuable upon exercise of this Warrant or payment of cash to any Person other
      than the Holder, and in case of such transfer or payment the Company shall
      not
      be required to deliver any certificate for shares of Common Stock (or Other
      Securities) upon such exercise or pay any cash until such tax or charge has
      been
      paid or it has been established to the Company's reasonable satisfaction that
      no
      such tax or charge is due.

    


    (b) If
      in any
      case the Company shall fail to issue and deliver or cause to be delivered the
      shares of Common Stock to the Holder within five Trading Days of a particular
      exercise of this Warrant, in addition to any other liabilities the Company
      may
      have hereunder, under the Note Purchase Agreement and under applicable law,
      (A)
      the Company shall pay or reimburse the Holder on demand for all out-of-pocket
      expenses, including, without limitation, reasonable fees and expenses of legal
      counsel, incurred by the Holder as a result of such failure; (B) if as a result
      of such failure the Holder shall suffer any direct damages or liabilities from
      such failure (including, without limitation, margin interest and the cost of
      purchasing securities to cover a sale (whether by the Holder or the Holder's
      securities broker) or borrowing of shares of Common Stock by the Holder for
      purposes of settling any trade involving a sale of shares of Common Stock made
      by the Holder during the period beginning on the Issuance Date and ending on
      the
      date the Company delivers or causes to be delivered to the Holder such shares
      of
      Common Stock), then, in addition to any amounts payable pursuant to Section
      3(a), the Company shall upon demand of the Holder pay to the Holder an amount
      equal to the actual, direct, demonstrable out-of-pocket damages and liabilities
      suffered by the Holder by reason thereof which the Holder documents, and (C)
      the
      Holder may by written notice (which may be given by mail, courier, personal
      service or telephone line facsimile transmission) or oral notice (promptly
      confirmed in writing), given at any time prior to delivery to the Holder of
      the
      shares of Common Stock issuable in connection with such exercise of the Holder's
      right, rescind such exercise and the subscription form relating thereto, in
      which case the Holder shall thereafter be entitled to exercise that portion
      of
      this Warrant as to which such exercise is so rescinded and to exercise its
      other
      rights and remedies with respect to such failure by the Company. Notwithstanding
      the foregoing the Company shall not be liable to the Holder under clauses (A)
      or
      (B) of the immediately preceding sentence to the extent the failure of the
      Company to deliver or to cause to be delivered such shares of Common Stock
      results from fire, flood, storm, earthquake, shipwreck, strike, war, acts of
      terrorism, crash involving facilities of a common carrier, acts of God, or
      any
      similar event outside the control of the Company (it being understood that
      the
      action or failure to act of the Company's Transfer Agent shall not be deemed
      an
      event outside the control of the Company except to the extent resulting from
      fire, flood, storm, earthquake, shipwreck, strike, war, acts of terrorism,
      crash
      involving facilities of a common carrier, acts of God, or any similar event
      outside the control of such Transfer Agent or the bankruptcy, liquidation or
      reorganization of such Transfer Agent under any bankruptcy, insolvency or other
      similar law). The Holder shall notify the Company in writing (or by telephone
      conversation, confirmed in writing) as promptly as practicable following the
      third Trading Day after the Holder exercises this Warrant if the Holder becomes
      aware that such shares of Common Stock so issuable have not been received as
      provided herein, but any failure so to give such notice shall not affect the
      Holder's rights under this Warrant or otherwise. In the case of the Company’s
      failure to issue and deliver or cause to be delivered the shares of Common
      Stock
      to the Holder within five Trading Days of a particular exercise of this Warrant,
      the amount payable by the Company pursuant to clause (B) of this Section 3(b)
      with respect to such exercise shall be reduced by the amount of payments
      previously paid by the Company to the Holder pursuant to Section 8(a)(4) of
      the
      Note Purchase Agreement with respect to such exercise.

    


    
      
        
        

      

      
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    4. Adjustment
      for Dividends in Other Stock, Property, etc.; Reclassification,
      etc.
      In case
      at any time or from time to time on or after the Issuance Date, all holders
      of
      Common Stock (or Other Securities) shall have received, or (on or after the
      record date fixed for the determination of stockholders eligible to receive)
      shall have become entitled to receive, without payment therefor,

    


    (a) other
      or
      additional stock, rights, warrants or other securities or property (other than
      cash) by way of dividend, or

    


    (b) any
      cash
      (excluding cash dividends payable solely out of earnings or earned surplus
      of
      the Company), or

    


    (c) other
      or
      additional stock, rights, warrants or other securities or property (including
      cash) by way of spin-off, split-up, reclassification, recapitalization,
      combination of shares or similar corporate rearrangement,

    


    other
      than (i) additional shares of Common Stock (or Other Securities) issued as
      a
      stock dividend or in a stock-split (adjustments in respect of which are provided
      for in Section 6) and (ii) rights or warrants to subscribe for Common Stock
      at
      less than the Current Fair Market Value (adjustments in respect of which are
      provided in Section 7), then and in each such case the Holder, on the exercise
      hereof as provided in Section 2, shall be entitled to receive the amount of
      stock, rights, warrants and Other Securities and property (including cash in
      the
      cases referred to in subdivisions (b) and (c) of this Section 4) which the
      Holder would hold on the date of such exercise if on the date of such action
      specified in the preceding clauses (a) through (c) (or the record date therefor)
      the Holder had been the holder of record of the number of shares of Common
      Stock
      called for on the face of this Warrant and had thereafter, during the period
      from the date thereof to and including the date of such exercise, retained
      such
      shares and all such other or additional stock, rights, warrants and Other
      Securities and property (including cash in the case referred to in subdivisions
      (b) and (c) of this Section 4) receivable by the Holder as aforesaid during
      such
      period, giving effect to all adjustments called for during such period by
      Section 5.

    


    5. Exercise
      upon a Reorganization Event.
      In case
      of any Reorganization Event the Company shall, as a condition precedent to
      the
      consummation of the transactions constituting, or announced as, such
      Reorganization Event, cause effective provisions to be made so that the Holder
      shall have the right thereafter, by exercising this Warrant (in lieu of the
      shares of Common Stock of the Company and Other Securities or property
      purchasable and receivable upon exercise of the rights represented hereby
      immediately prior to such Reorganization Event) to purchase the kind and amount
      of shares of stock and Other Securities and property (including cash) receivable
      upon such Reorganization Event by a holder of the number of shares of Common
      Stock that might have been received upon exercise of this Warrant immediately
      prior to such Reorganization Event. Any such provision shall include provisions
      for adjustments in respect of such shares of stock and Other Securities and
      property that shall be as nearly equivalent as may be practicable to the
      adjustments provided for in this Warrant. The provisions of this Section 5
      shall
      apply to successive Reorganization Events.

    


    6. Adjustment
      for Certain Extraordinary Events.
      If on or
      after the Issuance Date the Company shall (i) issue additional shares of the
      Common Stock as a dividend or other distribution on outstanding Common Stock,
      (ii) subdivide or reclassify its outstanding shares of Common Stock, or (iii)
      combine its outstanding shares of Common Stock into a smaller number of shares
      of Common Stock, then, in each such event, the Purchase Price shall,
      simultaneously with the happening of such event, be adjusted by multiplying
      the
      Purchase Price in effect immediately prior to such event by a fraction, the
      numerator of which shall be the number of shares of Common Stock outstanding
      immediately prior to such event and the denominator of which shall be the number
      of shares of Common Stock outstanding immediately after such event, and the
      product so obtained shall thereafter be the Purchase Price then in effect.
      The
      Purchase Price, as so adjusted, shall be readjusted in the same manner upon
      the
      happening of any successive event or events described herein in this Section
      6.
      The Holder shall thereafter, on the exercise hereof as provided in Section
      2, be
      entitled to receive that number of shares of Common Stock determined by
      multiplying the number of shares of Common Stock which would be issuable on
      such
      exercise immediately prior to such issuance, subdivision or combination, as
      the
      case may be, by a fraction of which (i) the numerator is the Purchase Price
      in
      effect immediately prior to such issuance and (ii) the denominator is the
      Purchase Price in effect on the date of such exercise.

    


    
      
        
        

      

      
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    7. Issuance
      of Rights or Warrants to Common Stockholders at less than Current Fair Market
      Value.
      If the
      Company shall on or after the Issuance Date issue rights or warrants to all
      holders of its outstanding shares of Common Stock entitling them to subscribe
      for or purchase shares of Common Stock at a price per share less than the
      Current Fair Market Value on the record date fixed for the determination of
      stockholders entitled to receive such rights or warrants, then

    


    (a) the
      Purchase Price shall be adjusted so that the same shall equal the price
      determined by multiplying the Purchase Price in effect at the opening of
      business on the day after such record date by a fraction of which the numerator
      shall be the number of shares of Common Stock outstanding at the close of
      business on such record date plus the number of shares which the aggregate
      offering price of the total number of shares so offered would purchase at such
      Current Fair Market Value, and the denominator shall be the number of shares
      of
      Common Stock outstanding on the close of business on such record date plus
      the
      total number of additional shares of Common Stock so offered for subscription
      or
      purchase; and

    


    (b) the
      number of shares of Common Stock which the Holder may thereafter purchase upon
      exercise of this Warrant at the opening of business on the day after such record
      date shall be increased to a number equal to the quotient obtained by dividing
      (x) the Aggregate Purchase Price in effect immediately prior to such adjustment
      in the Purchase Price pursuant to clause (a) of this Section 7 by
      (y) the
      Purchase Price in effect immediately after such adjustment in the Purchase
      Price
      pursuant to clause (a) of this Section 7.

    


    Such
      adjustment shall become effective immediately after the opening of business
      on
      the day following the record date fixed for determination of stockholders
      entitled to receive such rights or warrants. To the extent that shares of Common
      Stock are not delivered pursuant to such rights or warrants, upon the expiration
      or termination of such rights or warrants, the Purchase Price shall be
      readjusted to the Purchase Price which would then be in effect had the
      adjustments made upon the issuance of such rights or warrants been made on
      the
      basis of delivery of only the number of shares of Common Stock actually
      delivered and the number of shares of Common Stock for which this Warrant may
      thereafter be exercised shall be readjusted (subject to proportionate adjustment
      for any intervening exercises of this Warrant) to the number which would then
      be
      in effect had the adjustments made upon the issuance of such rights or warrants
      been made on the basis of delivery of only the number of shares of Common Stock
      actually delivered. In the event that such rights or warrants are not so issued,
      the Purchase Price shall again be adjusted to be the Purchase Price which would
      then be in effect if such record date had not been fixed and the number of
      shares of Common Stock for which this Warrant may thereafter be exercised shall
      again be adjusted (subject to proportionate adjustment for any intervening
      exercises of this Warrant) to be the number which would then be in effect if
      such record date had not been fixed. In determining whether any rights or
      warrants entitle the Holder to subscribe for or purchase shares of Common Stock
      at less than such Current Fair Market Value, and in determining the aggregate
      offering price of such shares of Common Stock, there shall be taken into account
      any consideration received for such rights or warrants, the value of such
      consideration, if other than cash, to be determined by the Board of Directors.
      Notwithstanding the foregoing, if any of the adjustments to the Purchase Price
      as set forth in this Section 7 will require the Company to seek stockholder
      approval pursuant to Rule 713 of the AMEX and such stockholder approval has
      not
      yet been obtained, then the adjustment shall not take effect until such
      stockholder approval is obtained. The Company shall use its commercially
      reasonable best efforts to obtain, as promptly as practicable, but in no event
      later than 90 days thereafter, the stockholder approval that is necessary under
      the rules of the AMEX.

    


    
      
        
        

      

      
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    8. Adjustment
      in Connection Sales by a Designated Person. So
      long
      as any Note is outstanding, if at any time on or after the Issuance Date any
      Designated Person, directly or indirectly, sells, transfers or disposes of
      shares of Common Stock or Common Stock Equivalents other than a Permitted
      Designated Person Sale and on the Measurement Date for such sale, transfer
      or
      disposition the Purchase Price in effect on such Measurement Date is greater
      than the Computed Market Price on such Measurement Date, then, subject to the
      next succeeding sentence, the Purchase
      Price shall be reduced to such Computed Market Price,
      such
      adjustment to become effective immediately after the opening of business on
      the
      day following the Measurement Date. If a reduction of the Purchase Price to
      such
      Computed Market Price pursuant to the immediately preceding sentence would
      require the Company to seek stockholder approval of the transactions
      contemplated by the Note Purchase Agreement pursuant to Rule 713 of the AMEX
      and
      the Stockholder Approval has not yet been obtained, then the Purchase Price
      shall be reduced to a price equal to the Conversion Price (as defined in the
      Note) then in effect until such time as the Stockholder Approval is obtained
      at
      which time the Purchase Price shall be reduced to such Computed Market Price.
      The Company shall inform the Holder immediately by phone and electronic
      transmission upon becoming aware of any sale, transfer or disposition of any
      shares of Common Stock or Common Stock Equivalents by any Designated Person
      and
      will follow up with formal written notice to the Holder pursuant to Section
      23.

    


    9. Effect
      of Reclassification, Consolidation, Merger or Sale. 

    


    (a) If
      any of
      the following events occur, namely:

    


    (i)
       any
      reclassification or change of the outstanding shares of Common Stock (other
      than
      a change in par value, or from par value to no par value, or from no par value
      to par value, or as a result of a subdivision or combination), 

    


    (ii)
       any
      consolidation, merger statutory exchange or combination of the Company with
      another corporation as a result of which holders of Common Stock shall be
      entitled to receive stock, securities or other property or assets (including
      cash) with respect to or in exchange for such Common Stock, or 

    


    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    (iii)
       any
      sale
      or conveyance of the properties and assets of the Company as, or substantially
      as, an entirety to any other Person as a result of which holders of Common
      Stock
      shall be entitled to receive stock, securities or other property or assets
      (including cash) with respect to or in exchange for such Common Stock,


    


    then
      the
      Company or the successor or purchasing Person, as the case may be, shall execute
      with the Holder a written agreement providing that:

    


    (x)
       this
      Warrant shall thereafter entitle the Holder to purchase the kind and amount
      of
      shares of stock and Other Securities or property or assets (including cash)
      receivable upon such reclassification, change, consolidation, merger, statutory
      exchange, combination, sale or conveyance by the holder of a number of shares
      of
      Common Stock issuable upon exercise of this Warrant (assuming, for such
      purposes, a sufficient number of authorized shares of Common Stock available
      to
      exercise this Warrant) immediately prior to such reclassification, change,
      consolidation, merger, statutory exchange, combination, sale or conveyance
      assuming such holder of Common Stock did not exercise such holder's rights
      of
      election, if any, as to the kind or amount of securities, cash or other property
      receivable upon such consolidation, merger, statutory exchange, combination,
      sale or conveyance (provided
      that, if
      the kind or amount of securities, cash or other property receivable upon such
      consolidation, merger, statutory exchange, sale or conveyance is not the same
      for each share of Common Stock in respect of which such rights of election
      shall
      not have been exercised (“non-electing share”), then for the purposes of this
      Section 8 the kind and amount of securities, cash or other property receivable
      upon such consolidation, merger, statutory exchange, sale or conveyance for
      each
      non-electing share shall be deemed to be the kind and amount so receivable
      per
      share by a plurality of the non-electing shares), 

    


    (y) in
      the
      case of any such successor or purchasing Person, upon such consolidation,
      merger, statutory exchange, combination, sale or conveyance such successor
      or
      purchasing Person shall be jointly and severally liable with the Company for
      the
      performance of all of the Company's obligations under this Warrant and the
      Note
      Purchase Agreement and 

    


    (z) if
      registration or qualification is required under the 1933 Act or applicable
      state
      law for the public resale by the Holder of such shares of stock and Other
      Securities so issuable upon exercise of this Warrant, such registration or
      qualification shall be completed prior to such reclassification, change,
      consolidation, merger, statutory exchange, combination or sale. 

    


    Such
      written agreement shall provide for adjustments which shall be as nearly
      equivalent as may be practicable to the adjustments provided for in this
      Warrant. If, in the case of any such reclassification, change, consolidation,
      merger, statutory exchange, combination, sale or conveyance, the stock or other
      securities or other property or assets receivable thereupon by a holder of
      shares of Common Stock includes shares of stock, other securities, other
      property or assets of a Person other than the Company or any such successor
      or
      purchasing Person, as the case may be, in such reclassification, change,
      consolidation, merger, statutory exchange, combination, sale or conveyance,
      then
      such written agreement shall also be executed by such other Person and shall
      contain such additional provisions to protect the interests of the Holder as
      the
      Board of Directors shall reasonably consider necessary by reason of the
      foregoing.

    


    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    (b) The
      above
      provisions of this Section 9 shall similarly apply to successive
      reclassifications, changes, consolidations, mergers, combinations, sales and
      conveyances.

    


    (c) If
      this
      Section 9 applies to any event or occurrence, Section 5 shall not
      apply.

    


    10. Tax
      Adjustments. The
      Company may make such reductions in the Purchase Price, in addition to those
      required by Sections 4, 5, 6, 7 and 8 as the Board of Directors considers to
      be
      advisable to avoid or diminish any income tax to holders of Common Stock or
      rights to purchase Common Stock resulting from any dividend or distribution
      of
      stock (or rights to acquire stock) or from any event treated as such for income
      tax purposes.

    


    11. Minimum
      Adjustment.
      (a) No
      adjustment in the Purchase Price (and no related adjustment in the number of
      shares of Common Stock which may thereafter be purchased upon exercise of this
      Warrant) shall be required unless such adjustment would require an increase
      or
      decrease of at least 1% in the Purchase Price; provided,
      however, that
      any
      adjustments which by reason of this Section 11 are not required to be made
      shall
      be carried forward and taken into account in any subsequent adjustment. All
      such
      calculations under this Warrant shall be made by the Company and shall be made
      to the nearest cent or to the nearest one hundredth of a share, as the case
      may
      be.

    


    (b) No
      adjustment need be made for a change in the par value of the Common Stock or
      from par value to no par value or from no par value to par value.

    


    12. Notice
      of Adjustments.
      Whenever
      the Purchase Price is adjusted as herein provided, the Company shall promptly,
      but in no event later than five Trading Days thereafter, give a notice to the
      Holder setting forth the Purchase Price and number of shares of Common Stock
      which may be purchased upon exercise of this Warrant after such adjustment
      and
      setting forth a brief statement of the facts requiring such adjustment but
      which
      such statement shall not include any information which would be material
      non-public information for purposes of the 1934 Act. Failure to deliver such
      notice shall not affect the legality or validity of any such
      adjustment.

    


    13. Further
      Assurances.
      The
      Company will take all action that may be necessary or appropriate in order
      that
      the Company may validly and legally issue fully paid and nonassessable shares
      of
      stock, free from all taxes, liens and charges with respect to the issue thereof,
      on the exercise of all or any portion of this Warrant from time to time
      outstanding.

    


    14. Notice
      to Holder Prior to Certain Actions. In
      case
      on or after the Issuance Date:

    


    (a) the
      Company shall declare a dividend (or any other distribution) on its Common
      Stock
      (other than in cash out of retained earnings); or

    


    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    (b) the
      Company shall authorize the granting to the holders of its Common Stock of
      rights or warrants to subscribe for or purchase any share of any class or any
      other rights or warrants; or

    


    (c) the
      Board
      of Directors shall authorize any reclassification of the Common Stock (other
      than a subdivision or combination of its outstanding Common Stock, or a change
      in par value, or from par value to no par value, or from no par value to par
      value), or any consolidation or merger or other business combination transaction
      to which the Company is a party and for which approval of any stockholders
      of
      the Company is required, or the sale or transfer of all or substantially all
      of
      the assets of the Company; or

    


    (d) there
      shall be pending the voluntary or involuntary dissolution, liquidation or
      winding-up of the Company;

    


    the
      Company shall give the Holder, as promptly as possible but in any event at
      least
      ten Trading Days prior to the applicable date hereinafter specified, a notice
      stating (x) the date on which a record is to be taken for the purpose of such
      dividend, distribution or rights or warrants, or, if a record is not to be
      taken, the date as of which the holders of Common Stock of record to be entitled
      to such dividend, distribution or rights are to be determined, or (y) the date
      on which such reclassification, consolidation, merger, other business
      combination transaction, sale, transfer, dissolution, liquidation or winding-up
      is expected to become effective or occur, and the date as of which it is
      expected that holders of Common Stock of record who shall be entitled to
      exchange their Common Stock for securities or other property deliverable upon
      such reclassification, consolidation, merger, other business combination
      transaction, sale, transfer, dissolution, liquidation or winding-up shall be
      determined. Such notice shall not include any information which would be
      material non-public information for purposes of the 1934 Act. Failure to give
      such notice, or any defect therein, shall not affect the legality or validity
      of
      such dividend, distribution, reclassification, consolidation, merger, sale,
      transfer, dissolution, liquidation or winding-up. In the case of any such action
      of which the Company gives such notice to the Holder or is required to give
      such
      notice to the Holder, the Holder shall be entitled to give a subscription form
      to exercise this Warrant in whole or in part that is contingent on the
      completion of such action.

    


    15. Reservation
      of Stock, etc., Issuable on Exercise of Warrants.
      The
      Company will at all times reserve and keep available out of its authorized
      but
      unissued shares of capital stock, solely for issuance and delivery on the
      exercise of this Warrant, a sufficient number of shares of Common Stock (or
      Other Securities) to effect the full exercise of this Warrant and the exercise,
      conversion or exchange of all other Common Stock Equivalents from time to time
      outstanding (or Other Securities), and if at any time the number of authorized
      but unissued shares of Common Stock (or Other Securities) shall not be
      sufficient to effect such exercise, conversion or exchange, the Company shall
      take such action as may be necessary to increase its authorized but unissued
      shares of Common Stock (or Other Securities) to such number as shall be
      sufficient for such purposes.

    


    16. Transfer
      of Warrant.
      This
      Warrant shall inure to the benefit of the successors to and assigns of the
      Holder. This Warrant and all rights hereunder, in whole or in part, are
      registrable at the office or agency of the Company referred to below by the
      Holder in person or by his duly authorized attorney, upon surrender of this
      Warrant properly endorsed accompanied by an assignment form in the form
      attached to
      this
      Warrant, or other customary form, duly executed by the transferring
      Holder.

    


    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    17. Register
      of Warrants.
      The
      Company shall maintain, at the principal office of the Company (or such other
      office as it may designate by notice to the Holder), a register in which the
      Company shall record the name and address of the Person in whose name this
      Warrant has been issued, as well as the name and address of each successor
      and
      prior owner of such Warrant. The Company shall be entitled to treat the Person
      in whose name this Warrant is so registered as the sole and absolute owner
      of
      this Warrant for all purposes.

    


    18. Exchange
      of Warrant.
      This
      Warrant is exchangeable, upon the surrender hereof by the Holder at the office
      or agency of the Company referred to in Section 16, for one or more new Warrants
      of like tenor representing in the aggregate the right to subscribe for and
      purchase the number of shares of Common Stock which may be subscribed for and
      purchased hereunder, each of such new Warrants to represent the right to
      subscribe for and purchase such number of shares as shall be designated by
      the
      Holder at the time of such surrender.

    


    19. Replacement
      of Warrant.
      On
      receipt by the Company of evidence reasonably satisfactory to it of the
      ownership of and the loss, theft, destruction or mutilation of this Warrant
      and
      (a) in the case of loss, theft or destruction, of indemnity from the Holder
      reasonably satisfactory in form to the Company (and without the requirement
      to
      post any bond or other security), or (b) in the case of mutilation, upon
      surrender and cancellation of this Warrant, the Company will execute and deliver
      to the Holder a new Warrant of like tenor without charge to the
      Holder.

    


    20. Warrant
      Agent.
      The
      Company may, by written notice to the Holder, appoint the transfer agent and
      registrar for the Common Stock as the Company's agent for the purpose of issuing
      Common Stock (or Other Securities) on the exercise of this Warrant pursuant
      to
      Section 2, and the Company may, by written notice to the Holder, appoint an
      agent having an office in the United States of America for the purpose of
      exchanging this Warrant pursuant to Section 18, and replacing this Warrant
      pursuant to Section 19, or any of the foregoing, and thereafter any such
      exchange or replacement, as the case may be, shall be made at such office by
      such agent.

    


    21. Remedies. 
      The
      Company stipulates that the remedies at law of the Holder in the event of any
      default or threatened default by the Company in the performance of or compliance
      with any of the terms of this Warrant are not and will not be adequate, and
      that
      such terms may be specifically enforced (x) by a decree for the specific
      performance of any agreement contained herein, including, without limitation,
      a
      decree for issuance of the shares of Common Stock (or Other Securities) issuable
      upon exercise of this Warrant or (y) by an injunction against a violation of
      any
      of the terms hereof or (z) otherwise.

    


    22. No
      Rights or Liabilities as a Stockholder.
      This
      Warrant shall not entitle the Holder to any voting rights or other rights as
      a
      stockholder of the Company. Nothing contained in this Warrant shall be construed
      as conferring upon the Holder the right to vote or to consent or to receive
      notice as a stockholder of the Company on any matters or with respect to any
      rights whatsoever as a stockholder of the Company. No dividends or interest
      shall be payable or accrued in respect of this Warrant or the interest
      represented hereby or the Common Stock (or Other Securities) purchasable
      hereunder until, and only to the extent that, this Warrant shall have been
      exercised in accordance with its terms.

    


    
      
        
        

      

      
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    23. Notices,
      etc.
      All
      notices and other communications from the Company to the Holder shall be in
      writing and delivered personally, by confirmed facsimile, by a nationally
      recognized overnight courier service or mailed by first class certified mail,
      postage prepaid, at such facsimile telephone number or address as may have
      been
      furnished to the Company in writing by the Holder or at such facsimile telephone
      number or the address shown for the Holder on the register of Warrants referred
      to in Section 17.

    


    24. Transfer
      Restrictions.
      This
      Warrant has not been and is not being registered under the provisions of the
      1933 Act or any state securities laws and this Warrant may not be transferred
      prior to the end of the holding period applicable to sales hereof under Rule
      144(k) unless (1) the transferee is an “accredited investor” (as defined in
      Regulation D under the 1933 Act) and (2) the Holder shall have delivered to
      the
      Company an opinion of counsel, reasonably satisfactory in form, scope and
      substance to the Company, to the effect that this Warrant may be sold or
      transferred without registration under the 1933 Act. Prior to any such transfer,
      such transferee shall have represented in writing to the Company that such
      transferee has requested and received from the Company all information relating
      to the business, properties, operations, condition (financial or other), results
      of operations or prospects of the Company deemed relevant by such transferee;
      that such transferee has been afforded the opportunity to ask questions of
      the
      Company concerning the foregoing and has had the opportunity to obtain and
      review the Registration Statement and the prospectus related thereto, each
      as
      amended or supplemented to the date of transfer to such transferee, and the
      reports and other information concerning the Company which at the time of such
      transfer have been filed by the Company with the SEC pursuant to the 1934 Act
      and which are incorporated by reference in such prospectus as of the date of
      such transfer. If such transfer is intended to assign the rights and obligations
      of the Holder under Section 5,8,9 and 10 of the Note Purchase Agreement, such
      transfer shall otherwise be made in compliance with the applicable provisions
      of
      the Note Purchase Agreement. 

    


    25. Rule
      144A Information Requirement. Within
      the period prior to the expiration of the holding period applicable to sales
      hereof under Rule 144(k) under the 1933 Act (or any successor provision), the
      Company covenants and agrees that it shall, during any period in which it is
      not
      subject to Section 13 or 15(d) under the 1934 Act, make available to the Holder
      and the holder of any shares of Common Stock issued upon exercise of this
      Warrant which continue to be Restricted Securities in connection with any sale
      thereof and any prospective purchaser of this Warrant from the Holder, the
      information required pursuant to Rule 144A(d)(4) under the 1933 Act upon the
      request of the Holder and it will take such further action as the Holder may
      reasonably request, all to the extent required from time to time to enable
      the
      Holder to sell this Warrant without registration under the 1933 Act within
      the
      limitation of the exemption provided by Rule 144A, as Rule 144A may be
      amended from time to time. Upon the request of the Holder, the Company will
      deliver to the Holder a written statement as to whether it has complied with
      such requirements. 

    


    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    26. Legend.
      The
      provisions of Section 5(b) of the Note Purchase Agreement and the related
      definitions of capitalized terms used therein and defined in the Note Purchase
      Agreement are by this reference incorporated herein as if set forth in full
      at
      this place.

    


    27. Amendment;
      Waiver.
      (a) This
      Warrant and any terms hereof may be changed, modified or amended only by an
      instrument in writing signed by the party against which enforcement of such
      change, modification or amendment is sought. Notwithstanding anything to the
      contrary contained herein, no amendment or waiver shall increase or eliminate
      the Restricted Ownership Percentage, whether permanently or temporarily, unless,
      in addition to complying with the other requirements of this Warrant, such
      amendment or waiver shall have been approved in accordance with the General
      Corporation Law of the State of Delaware and the Company's By-laws by holders
      of
      the outstanding shares of Common Stock entitled to vote at a meeting or by
      written consent in lieu of such meeting.

    


    (b) Any
      term
      or condition of this Warrant may be waived by the Holder or Company at any
      time
      if the waiving party is entitled to the benefit thereof, but no such waiver
      will
      be effective unless set forth in a written instrument duly executed by or on
      behalf of the party waiving such term or condition. No waiver by any party
      of
      any term or condition of this Warrant, in any one or more instances, will be
      deemed to be or construed as a waiver of the same or any other term or condition
      of this Warrant on any future occasion.

    


    28. Miscellaneous.
      This
      Warrant shall be construed and enforced in accordance with and governed by
      the
      internal laws of the State of New York. The headings, captions and footers
      in
      this Warrant are for purposes of reference only, and shall not limit or
      otherwise affect any of the terms hereof. The invalidity or unenforceability
      of
      any provision hereof shall in no way affect the validity or enforceability
      of
      any other provision.

    


    29. Attorneys'
      Fees.
      In any
      litigation, arbitration or court proceeding between the Company and Holder
      relating hereto, the prevailing party shall be entitled to attorneys’ fees and
      expenses and all costs of proceedings incurred in enforcing this
      Warrant.

    


    


    [Signature
      Page Follows]


    
      
         

        
        

      

      
        18

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF,
      the
      Company has caused this Warrant to be duly executed on its behalf by one of
      its
      officers thereunto duly authorized.

     

     

     

    
      	 	 	 
	 	EMAGIN
              CORPORATION
	 
 	 
 	 
 
	Date: July
              21, 2006	By:  	/s/ Gary
              W.
              Jones
	 	
              
Name:
              Gary W. Jones
	 	Title:
              Chief Executive Officer 


    


    
      
        
           

        

        
        

      

      
        19

        
          

        

      

      
        
        

        
        

      

    



    ASSIGNMENT

    


    For
      value
                               
      hereby
      sell(s), assign(s) and transfer(s) unto                                
      (Please
      insert social security or other Taxpayer Identification Number of assignee:
                                     )
      the
      attached original, executed Warrant to purchase                          
      share of
      Common Stock of eMagin Corporation, a Delaware corporation (the “Company”), and
      hereby irrevocably constitutes and appoints                                
      attorney
      to transfer the Warrant on the books of the Company, with full power of
      substitution in the premises.

    


    In
      connection with any transfer of the Warrant within the period prior to the
      expiration of the holding period applicable to sales thereof under Rule 144(k)
      under the 1933 Act (or any successor provision) (other than any transfer
      pursuant to a registration statement that has been declared effective under
      the
      1933 Act), the undersigned confirms that such Warrant is being
      transferred:

    


    [ ] To
      the
      Company or a Subsidiary; or

    


    [ ] To
      an
“accredited investor” (as defined in Regulation D under the 1933 Act) pursuant
      to and in compliance with the 1933 Act; or 

    


    [ ] Pursuant
      to and in compliance with Rule 144 under the 1933 Act;

    


    and
      unless the box below is checked, the undersigned confirms that, to the knowledge
      of the undersigned, such Warrant is not being transferred to an “affiliate” (as
      defined in Rule 144 under the 1933 Act) of the Company.

    


    [ ] The
      transferee is an affiliate of the Company.

     

    Capitalized
      terms used in this Assignment and not defined in this Assignment shall have
      the
      respective meanings provided in the Warrant.

    


     

    
 

    
      	 Dated:
              ____________________________________	 NAME:____________________________________________
	 	 
	 	 ____________________________________________________________
	 	
               Signature(s)

            
	 	 


    

     

    
      
        
           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
          


        

      

    



    Exhibit
      1

    


    FORM
      OF SUBSCRIPTION

    


    EMAGIN
      CORPORATION

    


    (To
      be
      signed only on exercise of Warrant)

    


    
      
        	 TO:	 eMagin Corporation
	
                 

              	 10500 N.E. 8th
                Street, Suite 1400 
	 	 Bellevue,
                WA 98004


      

    

     

        

    


    Attention:
      Chief Financial Officer

    


    Facsimile
      No.: (425) 749-3601

    


    1. The
      undersigned Holder of the attached original, executed Warrant hereby elects
      to
      exercise its purchase right under such Warrant with respect to                             
      shares
      (the “Exercise Shares”) of Common Stock, as defined in the Warrant, of eMagin
      Corporation, a Delaware corporation (the “Company”).

    


    2. The
      undersigned Holder (check one):

    


    q    (a) elects
      to
      pay the Aggregate Purchase Price for such shares of Common Stock (i) in lawful
      money of the United States or by the enclosed certified or official bank check
      payable in United States dollars to the order of the Company in the amount
      of
      $                          ,
      or (ii)
      by wire transfer of United States funds to the account of the Company in the
      amount of $                            ,
      which
      transfer has been made before or simultaneously with the delivery of this Form
      of Subscription pursuant to the instructions of the Company;


     

    or


     

    q    (b) elects
      to
      receive shares of Common Stock having a value equal to the value of the Warrant
      calculated in accordance with Section 2(b) of the Warrant.

     

    


    3. Please
      issue a stock certificate or certificates representing the appropriate number
      of
      shares of Common Stock in the name of the undersigned or in such other name(s)
      as is specified below:

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Name:_________________________________________________________________

    


    Address_______________________________________________________________

    


     

    


    Social
      Security or Tax Identification Number (if any):

     

    ____________________________________________________________


     

    


    


    


    Dated:                                                        ________________________________________________________   

    (Signature
      must conform to name of Holder as 

    specified
      on the face of the Warrant)

    


    ________________________________________________________ 


    (Address)