Exhibit 10.4


    Exhibit
      10.4

     

    
 

    PLEDGE
      AND SECURITY AGREEMENT

    


    THIS PLEDGE
      AND SECURITY AGREEMENT,
      dated
      as of July 21, 2006 (this “Agreement”), made by
      EMAGIN CORPORATION,
      a
      Delaware corporation (the “Grantor”), to ALEXANDRA
      GLOBAL MASTER FUND LTD.,
      a
      British Virgin Islands international business company, as collateral agent
      (in
      such capacity, the “Collateral Agent”) on behalf of the Holders (such
      capitalized term and all other capitalized terms used in this Agreement having
      the respective meanings provided in this Agreement).

    


    W I T N E S S E T H:

    


    WHEREAS,
      the
      Grantor and the several Buyers are parties to the several Note Purchase
      Agreements, pursuant to which, among other things, the Buyers have agreed to
      purchase up to $7,000,000 aggregate principal amount of Notes of the
      Grantor;

    


    WHEREAS,
      in
      connection with the transactions contemplated by the Note Purchase Agreements,
      the Grantor has agreed to grant to the Collateral Agent a security interest
      in
      certain of its property, assets and rights; 

    


    WHEREAS,
      it is a
      condition precedent to the several obligations of the Buyers to purchase their
      respective Notes and Warrants pursuant to the Note Purchase Agreements that
      the
      Grantor shall have executed and delivered this Agreement to the Collateral
      Agent
      for the ratable benefit of the Holders; 

    


    WHEREAS,
      contemporaneously with the execution and delivery of this Agreement the Company
      and the Collateral Agent are executing and delivering the Patent and Trademark
      Security Agreement and the Lockbox Agreement; and

    


    NOW,
      THEREFORE,
      in
      consideration of the premises and to induce the Buyers to purchase their
      respective Notes and Warrants, the Grantor hereby agrees with the Collateral
      Agent, for the ratable benefit of the Holders, as follows:

    


    1.
       Definitions.

    


    (a) As
      used
      in this Agreement, the terms “Agreement”, “Grantor” and “Collateral Agent” shall
      have the respective meanings assigned to such terms in the introductory
      paragraph of and the recitals to this Agreement.

    


    (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 Agreement.

    


    (c) Capitalized
      terms used herein without definition shall have the respective meanings assigned
      to such terms in the Notes.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (d) 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):

    


    “Accounts”
      means all rights to payment for goods sold or leased or for services rendered,
      whether or not such rights have been earned by performance.

    


    “Additional
      Note” means the Note issued pursuant to the Additional Note Purchase
      Agreement.

    


    “Additional
      Note Purchase Agreement” means the Note Purchase Agreement, dated as of July 21,
      2006, by and between the Grantor and Stillwater LLC, which by its terms
      contemplates the issuance of up to $500,000 aggregate principal amount of Notes
      on or after December 10, 2006.

    


    “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.

    


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

    


    “Buyer”
      means any of the several buyers party to a Note Purchase Agreement.

    


    “Chattel
      Paper” shall have the meaning assigned to such term under the Code.

    


    “Code”
      means the Uniform Commercial Code as from time to time in effect in the State
      of
      Delaware.

    


    “Collateral”
      means each of the following, whether now existing or hereafter
      arising:

    


    (1) all
      Accounts of the Grantor and, if the Collateral Agent exercises its rights under
      Section 3(b), the Lockbox and each and every General Intangible relating
      thereto;

    


    (2) all
      Inventory of the Grantor;

    


    (3) all
      Equipment of the Grantor;

    


    (4) all
      Proprietary Information owned or licensed by the Grantor, whether existing
      on
      the date hereof or developed or acquired hereafter;

    


    
      
        
        

      

      
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    (5) all
      of
      the Grantor’s right, title and interest in and to all Contracts, Documents,
      Chattel Paper, Instruments, Investment Property and General Intangibles, whether
      existing on the date hereof or hereafter arising;

    


    (6) all
      cash,
      securities, rights and other property at any time and from time to time
      received, receivable or otherwise distributed in respect of the Collateral,
      including, without limitation in respect of the cash or other property held
      in
      the Lockbox or the Collateral Account;

    


    (7) all
      Patents, Patent Licenses, Trademarks and Trademark Licenses;

    


    (8) all
      insurance policies to the extent they relate to items (1) through (7)
      above;

    


    (9) all
      books, ledgers, books of account, records, writings, databases, information
      and
      other property relating to, used or useful in connection with, evidencing,
      embodying, incorporating, or referring to any of the foregoing; and

    


    (10) to
      the
      extent not otherwise included, all Proceeds, products, rents, issues, profits
      and returns of and from any and all of the foregoing, which Proceeds may be
      in
      the form of Accounts, Chattel Paper, Inventory or otherwise.

    


    “Collateral
      Account” shall have the meaning provided in the Lockbox Agreement.

    


    “Contracts”
      shall have the meaning assigned to that term under the Code.

    


    “Documents”
      shall have the meaning assigned to such term under the Code.

    


    “Event
      of
      Default” means:

    


    (1) the
      failure by the Grantor to perform in any material respect any obligation of
      the
      Grantor under this Agreement as and when required by this Agreement;
      or

    


    (2) any
      representation or warranty made by the Grantor pursuant to this Agreement shall
      have been untrue in any material respect when made or deemed to have been made;
      or

    


    (3) the
      failure by the Grantor to perform in any material respect any obligation of
      the
      Grantor under the Patent and Trademark Security Agreement as and when required
      by the Patent and Trademark Security Agreement;

    


    (4) any
      representation or warranty made by the Grantor pursuant to the Patent and
      Trademark Security Agreement shall have been untrue in any material respect
      when
      made or deemed to have been made;

    


    
      
        
        

      

      
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    (5) the
      failure by the Grantor to perform in any material respect any obligation of
      the
      Grantor under the Lockbox Agreement as and when required by the Lockbox
      Agreement;

    


    (6) any
      representation or warranty made by the Grantor pursuant to the Lockbox Agreement
      shall have been untrue in any material respect when made or deemed to have
      been
      made; or

    


    (7) any
      Event
      of Default, as that term is defined in any of the Notes.

    


    “General
      Intangibles” shall have the meaning assigned to such term under the
      Code.

    


    “Holder”
      means any Buyer or any holder from time to time of any Note.

    


    “Indemnified
      Person” shall have the meaning provided in Section 5(j).

    


    “Inventory”
      shall have the meaning assigned to such term under the Code, and in any event,
      including, without limitation, all raw material, work-in process and finished
      goods, inventory, merchandise, goods and other personal property that are held
      by or on behalf of a Person for sale or lease or to be furnished under a
      contract of service or which give rise to any Account, including, without
      limitation, returned goods.

    


    “Issuance
      Date” means the date on which the Notes are initially issued.

    


    “Lien”
      shall mean any lien, mortgage, security interest, chattel mortgage, pledge
      or
      other encumbrance (statutory or otherwise) of any kind securing satisfaction
      or
      performance of an obligation, including any agreement to give any of the
      foregoing, any conditional sales or other title retention agreement, any lease
      in the nature thereof, and the filing of or the agreement to give any financing
      statement under the Code of any jurisdiction or similar evidence of any
      encumbrance, whether within or outside the United States.

    


    “Lockbox”
      shall have the meaning assigned to such term in the Lockbox Agreement.


    


    “Lockbox
      Agent” means the Person from time to time serving as Lockbox Agent under the
      Lockbox Agreement.

    


    “Lockbox
      Agreement” means that certain Lockbox Agreement dated as of the date hereof, by
      and between the Grantor and the Lockbox Agent.

    


    “Majority
      Holders” means at any time such of the holders of the Notes who hold Notes
      which, based on the outstanding principal amounts thereof, represent a majority
      of the aggregate outstanding principal amount of the Notes at such
      time.

    


    
      
        
        

      

      
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    “Note
      Purchase Agreements” means the several Note Purchase Agreements, dated as of
      July 21, 2006, by and between the Grantor and the respective Buyer party thereto
      pursuant to which the Grantor issued the Notes, including, without limitation,
      the Additional Note Purchase Agreement.

    


    “Notes”
      means the Grantor’s 6% Senior Secured Convertible Notes due 2007-2008 originally
      issued pursuant to the Note Purchase Agreements, including, without limitation,
      the Additional Note.

    


    “Obligations”
      means:

    


    (1) the
      full
      and prompt payment when due of all obligations and liabilities to the Holders,
      whether now existing or hereafter arising, under the Transaction Documents
      and
      the due performance and compliance with the terms of the Transaction
      Documents;

    


    (2) any
      and
      all sums advanced by the Collateral Agent or any Holder in order to preserve
      the
      Collateral or to preserve the Security Interest;

    


    (3) in
      the
      event of any proceeding for the collection or enforcement of any obligations
      or
      liabilities of the Grantor referred to in the immediately preceding clauses
      (1)
      and (2) in accordance with the terms of the Transaction Documents, the
      reasonable expenses of re-taking, holding, preparing for sale, selling or
      otherwise disposing of or realizing on the Collateral, or of any other exercise
      by the Collateral Agent of its rights hereunder, together with reasonable
      attorneys' fees and court costs; and

    


    (4) any
      amounts for which the Collateral Agent or any Holder is entitled to
      indemnification under Section 5(j).

    


    “Patent(s)”
      means all present and future patents, patent applications and patent disclosures
      which are presently, or in the future may be, owned, issued, acquired or used
      (whether pursuant to a license or otherwise) anywhere in the world by the
      Grantor, in whole or in part, and all of the Grantor's right, title and interest
      in and to all patentable inventions and to file applications for patents under
      patent laws of the United States or of any other jurisdiction, including,
      without limitation, any and all extensions, reissues, substitutes,
      continuations, continuations-in-part, divisional, patents of addition,
      re-examinations and renewals thereof, and patents issuing therefrom, and any
      other proprietary rights related to any of the foregoing (including, without
      limitation, remedies against infringements thereof and rights of protection
      of
      an interest therein under the laws of all jurisdictions) and any and all foreign
      counterparts of any of the foregoing.

    


    “Patent
      Licenses” means each license agreement relating to Patents granted to, used or
      acquired by the Grantor, in each case together with the right to use and rely
      upon the inventions and other intellectual property conveyed
      thereunder.

    


    
      
        
        

      

      
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    “Patent
      and Trademark Security Agreement” means that certain Patent and Trademark
      Security Agreement, dated as of July 21, 2006, between the Grantor and the
      Collateral Agent.

    


    “Permitted
      Liens” shall have the meaning assigned to such term in the Notes.

    


    “Person”
      means any natural person, corporation, partnership, limited liability company,
      trust, incorporated organization, unincorporated association or similar entity
      or any government, governmental agency or political subdivision.

    


    “Proceeds”
      shall have the meaning assigned to such term under the Code.

    


    “Proprietary
      Information” means information in whatever form generally unavailable to the
      public that has been created, discovered, developed or otherwise become known
      to
      the Grantor or in which property rights have been assigned or otherwise conveyed
      to the Grantor, which information has economic value or potential economic
      value
      to the creation, operation, use, modification, extension, upgrade, application,
      marketing, sale and distribution of the Grantor’s products and services.
      Proprietary Information shall include, but not be limited to, trade secrets,
      processes, formulas, writings, data, know-how, negative know-how, improvements,
      discoveries, developments, designs, inventions, techniques, technical data,
      customer and supplier lists, financial information, business plans or
      projections and modifications or enhancements to any of the above. Proprietary
      Information shall include all information existing on the date hereof and all
      information developed or acquired hereafter.

    


    “Security
      Interest” means the security interest granted in the Collateral pursuant to this
      Agreement.

    


    “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 Grantor.

    


    “Trademark
      License” means each license agreement relating to Trademarks used, adopted or
      acquired by the Grantor. 

    


    “Trademarks”
      means (a) all trademarks, trade names, corporate names, company names, business
      names, fictitious business names, trade styles, service marks, logos and other
      source or business identifiers of the Grantor adopted for use in conjunction
      with the Grantor’s business products and services, now existing anywhere in the
      world or hereinafter adopted or acquired, whether currently in use or not,
      and
      the goodwill associated therewith, all registrations and recordings thereof,
      and
      all applications in connection therewith, and (b) all renewals thereof by the
      Grantor.

    


    “Transaction
      Documents” means the Notes, the Note Purchase Agreements, this Agreement, the
      Patent and Trademark Security Agreement, the Lockbox Agreement, the Warrants,
      and the other agreements, instruments and documents contemplated hereby and
      thereby.

    


    
      
        
        

      

      
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    2. Grant
      of Security Interest.
      As
      collateral security for the prompt and complete payment and performance of
      the
      Obligations and for the other purposes provided in this Agreement, the Grantor
      hereby grants to the Collateral Agent for the ratable benefit of the Holders
      a
      first priority security interest in all of the Collateral. Such grant includes,
      without limitation, a grant of the security interest to secure the payment
      and
      performance of Obligations relating to the Additional Note upon the date of
      issuance of such Additional Note.

    


    3. Rights
      of Collateral Agent; Limitations on Collateral Agent's
      Obligations.

    


    (a) Grantor
      Remains Liable under Accounts and Contracts.
      Anything herein to the contrary notwithstanding, the Grantor shall remain liable
      under each of the Accounts and Contracts that constitute part of the Collateral
      to observe and perform all the conditions and obligations to be observed and
      performed by it thereunder, all in accordance with the terms of any agreement
      giving rise to each such Account and in accordance with and pursuant to the
      terms and provisions of each such Contract. The Collateral Agent shall not
      have
      any obligation or liability under any Account that constitutes part of the
      Collateral (or any agreement giving rise thereto) or under any Contract that
      constitutes part of the Collateral by reason of or arising out of this Agreement
      or the receipt by the Collateral Agent of any payment relating to such Account
      or Contract pursuant hereto, nor shall the Collateral Agent be obligated in
      any
      manner to perform any of the obligations of the Grantor under or pursuant to
      any
      such Account (or any agreement giving rise thereto) or under or pursuant to
      any
      such Contract, to make any payment, to make any inquiry as to the nature or
      the
      sufficiency of any payment received by it or as to the sufficiency of any
      performance by any party under any such Account (or any agreement giving rise
      thereto) or under any such Contract, to present or file any claim, to take
      any
      action to enforce any performance or to collect the payment of any amounts
      which
      may have been assigned to it or to which it may be entitled at any time or
      times. 

    


    (b) Notice
      to Account Debtors and Contracting Parties.
      Upon
      the direction of the Collateral Agent at any time that an Event of Default
      has
      occurred and is continuing, the
      Grantor shall promptly, but in no event later than five Business Days, after
      such direction is given, notify all the account debtors on the Accounts that
      constitute part of the Collateral and parties to the Contracts that constitute
      part of the Collateral that such Accounts and such Contracts have been assigned
      to the Collateral Agent for the ratable benefit of the Holders and that payments
      in respect thereof shall be made directly to the Collateral Agent or as the
      Collateral Agent shall direct in accordance with the Lockbox Agreement.


    


    (c) Verification
      and Analysis of Accounts.
      If an
      Event of Default has occurred and the Collateral Agent shall have directed
      the
      Grantor to notify the account debtors on the Accounts and parties to the
      Contracts in accordance with Section 3(b), in addition to its rights pursuant
      to
      clause (1) of this Section 3(c) the Collateral Agent shall have the right in
      its
      own name or in the name of others to communicate with account debtors on the
      Accounts that constitute part of the Collateral and parties to the Contracts
      that constitute part of the Collateral to verify with them to its satisfaction
      the existence, amount and terms of any such Accounts or Contracts and to make
      test verifications of such Accounts in any manner and through any medium that
      it
      reasonably considers advisable, and the Grantor shall furnish all such
      assistance and information as the Collateral Agent may require in connection
      therewith. At any time and from time to time, upon the Collateral Agent's
      reasonable request and at the expense of the Grantor, the Grantor shall cause
      independent public accountants or others satisfactory to the Collateral Agent
      to
      furnish to the Collateral Agent reports showing reconciliations, aging and
      test
      verifications of, and trial balances for, such Accounts.

    


    
      
        
        

      

      
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    4. Representations
      and Warranties.
      The
      Grantor hereby represents and warrants that: 

    


    (a) Title;
      No Other Liens.
      Except
      for the Lien granted to the Collateral Agent for the ratable benefit of the
      Holders pursuant to this Agreement, the Patent and Trademark Security Agreement,
      the Lockbox Agreement and the Lien granted to the Collateral Agent for the
      ratable benefit of the Holders pursuant to the Patent and Trademark Security
      Agreement, the Grantor owns and has good and marketable title to each item
      of
      the Collateral free and clear of any and all Liens or claims of others except
      Permitted Liens. No security agreement, financing statement or other public
      notice with respect to all or any part of the Collateral is on file or of record
      in any public office, except such as may have been filed in favor of the
      Collateral Agent, for the ratable benefit of the Holders, pursuant to this
      Agreement or pursuant to the Patent and Trademark Security
      Agreement.

    


    (b) Perfected
      First Priority Liens.
      The
      Liens granted pursuant to this Agreement will constitute upon the completion
      of
      all the filings or notices listed in Schedule
      I
      hereto,
      perfected Liens on all Collateral in favor of the Collateral Agent for the
      benefit of the Holders, which are prior to all other Liens (except Permitted
      Liens, if any) on such Collateral and which are enforceable as such against
      all
      Persons.

    


    (c) Accounts.
      No
      amount payable to the Grantor under or in connection with any Account that
      constitutes part of the Collateral is evidenced by any Instrument (other than
      checks in the ordinary course of business) or Chattel Paper which has not been
      delivered to the Collateral Agent. The place where the Grantor keeps its records
      concerning the Accounts that constitute part of the Collateral is set forth
      on
Schedule
      II
      hereto.

    


    (d) Consents
      under Contracts.
      No
      consent (other than consents that have been obtained) of any party (other than
      the Grantor), to any Contract that constitutes part of the Collateral is
      required, or purports to be required, in connection with the execution, delivery
      and performance of this Agreement or the exercise of the Collateral Agent's
      rights and remedies provided herein or at law.

    


    (e) Inventory.
      The
      items of Inventory that constitute part of the Collateral are, as of the
      Issuance Date, kept at the locations listed on Schedule
      III
      hereto
      and have not been kept at any other location within the six-month period ending
      on the Issuance Date.

    


    (f) Chief
      Executive Office.
      The
      Grantor's chief executive office and chief place of business is located at
      10500
      N.E. 8th
      Street,
      Suite 1400, Bellevue,
      WA 98004.

    


    
      
        
        

      

      
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    (g) Power
      and Authority.
      The
      Grantor has full power, authority and legal right to grant the Collateral Agent
      the Lien on the Collateral pursuant to this Agreement.

    


    (h) Approvals,
      Filings, Etc.
      No
      authorization, approval or consent of, or filing, registration, recording or
      other action with, any United States or foreign court, governmental body,
      regulatory agency, self-regulatory organization, or stock exchange or market,
      the stockholders of the Grantor or any other Person, is required to be obtained
      or made by the Grantor or any Subsidiary (x) for the grant by the Grantor of
      the
      Security Interest in the Collateral pursuant to this Agreement, (y) to perfect
      the Security Interest purported to be created by this Agreement, or (z) for
      the
      exercise of the Collateral Agent's rights and remedies provided herein or at
      law, in each case except as has been obtained or made.

    


    5. Covenants.
      The
      Grantor covenants and agrees with the Collateral Agent that from and after
      the
      date of this Agreement until the payment or performance in full by the Grantor
      of all of the Obligations:

    


    (a) Further
      Documentation; Pledge of Instruments and Chattel Paper.
      At any
      time and from time to time, upon the written request of the Collateral Agent,
      and at the sole expense of the Grantor, the Grantor will promptly and duly
      execute and deliver such further instruments and documents and take such further
      action as the Collateral Agent may reasonably request for the purpose of
      obtaining or preserving the full benefits of this Agreement and of the rights
      and powers herein granted, including, without limitation, the filing of any
      financing or continuation statements under the Code or similar laws in effect
      in
      any such jurisdiction with respect to the Liens created hereby. The Grantor
      also
      hereby authorizes the Collateral Agent to file any such financing or
      continuation statement without the signature of the Grantor to the extent
      permitted by applicable law. A carbon, photographic or other reproduction of
      this Agreement shall be sufficient as a financing statement for filing in any
      jurisdiction. If any amount payable under or in connection with any of the
      Collateral shall be or become evidenced by any Instrument or Chattel Paper,
      such
      Instrument or Chattel Paper shall be immediately delivered to the Collateral
      Agent, duly endorsed in a manner satisfactory to the Collateral Agent, to be
      held as Collateral pursuant to this Agreement.

    


    (b) Maintenance
      of Records.
       The
      Grantor will keep and maintain at its own cost and expense satisfactory and
      complete records of the Collateral, including, without limitation, a record
      of
      all payments received and all credits granted with respect to any Accounts
      that
      may constitute part of the Collateral. For the further security of the
      Collateral Agent, the Grantor hereby grants to the Collateral Agent a security
      interest in all of the Grantor's books and records pertaining to the Collateral,
      and the Grantor shall turn over any such books and records for inspection at
      the
      office of the Grantor to the Collateral Agent or to its representatives during
      normal business hours at the request of the Collateral Agent.

    


    (c) Limitation
      on Liens on Collateral.
      The
      Grantor (x) will not create, incur or permit to exist, will defend the
      Collateral against, and will take such other action as is necessary to remove,
      any Lien or claim on or to the Collateral, other than the Security Interest
      created hereby and Liens created by the Patent and Trademark Security Agreement,
      and (y) will defend the right, title and interest of the Collateral Agent in
      and
      to any of the Collateral against the claims and demands of all
      Persons.

    


    
      
        
        

      

      
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    (d) Limitations
      on Dispositions of Collateral.
      The
      Grantor will not sell, transfer, lease, assign, grant any participation or
      interest in, or otherwise dispose of, any of the Collateral to any Person,
      including, without limitation, any Subsidiary or Affiliate of the Grantor,
      or
      attempt, offer or contract to do so. 

    


    (e) Performance
      of Contracts and Agreements Giving Rise to Accounts.
      The
      Grantor shall (i) exercise promptly and diligently each and every material
      right
      and perform each material obligation which it may have under each Contract
      that
      constitutes part of the Collateral and each agreement giving rise to an Account
      that constitutes part of the Collateral (other than any right of termination)
      and (ii) deliver to the Collateral Agent, upon request, a copy of each material
      demand, notice or document received by it relating in any way to any Contract
      that constitutes part of the Collateral or any agreement giving rise to an
      Account that constitutes part of the Collateral. The Grantor shall not amend
      or
      modify the terms of, or waive any rights under, any Contracts, in a manner
      which
      would materially adversely affect the Security Interest or the value of such
      Contracts.

    


    (f) Further
      Identification of Collateral.
      The
      Grantor shall furnish to the Collateral Agent from time to time, upon the
      request of the Collateral Agent, statements and schedules further identifying
      and describing the Collateral and such other reports in connection with the
      Collateral as the Collateral Agent may reasonably request, all in reasonable
      detail.

    


    (g) Notices.
      The
      Grantor will advise the Collateral Agent within two Business Days of the
      occurrence thereof, in reasonable detail, at its address in accordance with
      Section 16, (i) of any Lien (other than Liens permitted hereunder) on, or claim
      asserted against, any of the Collateral, (ii) of any Event of Default or any
      event which, with notice or the lapse of time, or both, would become an Event
      of
      Default and (iii) of the occurrence of any other event which could reasonably
      be
      expected to have a material adverse effect on the Collateral, the Security
      Interest or the rights of the Collateral Agent hereunder.

    


    (h) Changes
      in Locations, Name, Etc. The
      Grantor will not 

    


    (1) change
      the location of its chief executive office/chief place of business from that
      specified in Section 4(f) or remove its books and records from the location
      specified in Section 4(c), or

    


    (2) change
      its name, identity or corporate structure to such an extent that any financing
      statement filed in connection with this Agreement and naming the Collateral
      Agent as secured party would become misleading or invalid, or

    


    (3) change
      the location at which any item of Inventory that constitutes Collateral is
      kept
      from the locations specified in Section 4(e),

    


    unless
      in
      any such case it shall have given the Collateral Agent at least 30 days prior
      written notice thereof and, prior to such action or event, shall have taken
      appropriate action satisfactory to the Collateral Agent to preserve and protect
      the Collateral Agent's security interest under this Agreement.

    


    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    (i) Subsidiaries.
      This
      Agreement is entered into on behalf of and for the benefit of the Grantor.
      The
      Subsidiaries and the Affiliates of the Grantor have no ownership or other rights
      in the Collateral. The Grantor will not permit any Subsidiary or any Affiliate
      of the Grantor to have any ownership or other rights in or to exercise any
      control over the Collateral.

    


    (j) Indemnification.
      The
      Grantor agrees to indemnify and hold harmless the Collateral Agent and each
      Holder and their respective officers, directors, Affiliates, agents, members,
      shareholders and investment advisors (each, an “Indemnified Person”) from and
      against any and all claims, demands, losses, judgments and liabilities
      (including liabilities for penalties) of whatsoever kind or nature, and to
      reimburse the Collateral Agent and each Holder for all costs and expenses,
      including reasonable attorneys’ fees and expenses, arising out of or resulting
      from this Agreement, including any breach hereof or Event of Default hereunder,
      or the exercise by the Collateral Agent or any Holder, as the case may be,
      of
      any right or remedy granted to it hereunder or under the other Transaction
      Documents under applicable law; provided,
      however,
      that the
      Grantor shall not be required to indemnify a particular Indemnified Person
      to
      the extent any claim, demand, loss, judgment, liability, cost or expense is
      determined by final judgment (not subject to further appeal) of a court of
      competent jurisdiction to have arisen primarily from the gross negligence or
      willful misconduct of such Indemnified Person. In no event shall any Indemnified
      Person other than the Collateral Agent have any liability or obligation to
      the
      Grantor under this Agreement or applicable law (liability under which the
      Grantor hereby waives) for any matter or thing in connection with this
      Agreement, and in no event shall the Collateral Agent be liable, in the absence
      of a determination of gross negligence or willful misconduct on its part by
      final judgment (not subject to further appeal) of a court of competent
      jurisdiction, for any matter or thing in connection with this Agreement other
      than to account for moneys actually received by it in accordance with the terms
      hereof. If and to the extent that the obligations of the Grantor under this
      Section 4(j) are unenforceable for any reason, the Grantor hereby agrees to
      make
      the maximum contribution to the payment and satisfaction of such obligations
      which is permissible under applicable law. 

    


    6. Collateral
      Agent's Powers.

    


    (a) Powers.
      The
      Grantor hereby irrevocably constitutes and appoints the Collateral Agent and
      any
      officer or agent thereof or investment advisor thereto, with full power of
      substitution, as its true and lawful attorney-in-fact with full irrevocable
      power and authority in the place and stead of the Grantor and in the name of
      the
      Grantor or in its own name, from time to time in the Collateral Agent's
      discretion, during any period in which an Event of Default is continuing, for
      the purpose of carrying out the terms of this Agreement, to take any and all
      appropriate action and to execute any and all documents and instruments which
      may be necessary or desirable to accomplish the purposes of this Agreement,
      and,
      without limiting the generality of the foregoing, the Grantor hereby gives
      the
      Collateral Agent and each such officer, agent and investment advisor the power
      and right, on behalf of the Grantor, without notice to or assent by the Grantor,
      except any notice required by law, to do the following:

    


    (i) to
      take
      possession of and endorse and collect any checks, drafts, notes, acceptances
      or
      other instruments for the payment of moneys due under or with respect to any
      Collateral and to file any claim or to take any other action or proceeding
      in
      any court of law or equity or otherwise deemed appropriate by the Collateral
      Agent for the purpose of collecting any and all such moneys due under or with
      respect to any such Collateral whenever payable, in each case in the name of
      the
      Grantor or its own name, or otherwise;

    


    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    (ii) to
      pay or
      discharge taxes and liens levied or placed on or threatened against the
      Collateral and to pay all or any part of the premiums therefor and the costs
      thereof; and

    


    (iii) (A)
      to
      direct any party liable for any payment under any of the Collateral to make
      payment of any and all moneys due or to become due thereunder directly to the
      Collateral Agent or as the Collateral Agent shall direct; (B) to ask or demand
      for, collect, receive payment of and receipt for, any and all moneys, claims
      and
      other amounts due or to become due at any time in respect of or arising out
      of
      any Collateral; (C) to sign and endorse any invoices, freight or express bills,
      bills of lading, storage or warehouse receipts, drafts against debtors,
      assignments, verifications, notices and other documents in connection with
      any
      of the Collateral; (D) to commence and prosecute any suits, actions or
      proceedings at law or in equity in any court of competent jurisdiction to
      collect the Collateral or any thereof and to enforce any other right in respect
      of any Collateral; (E) to defend any suit, action or proceeding brought against
      the Grantor with respect to any Collateral; (F) to settle, compromise or adjust
      any suit, action or proceeding described in clause (E) above and, in connection
      therewith, to give such discharges or releases as the Collateral Agent may
      deem
      appropriate; and (G) generally, to sell, transfer, pledge and make any agreement
      with respect to or otherwise deal with any of the Collateral as fully and
      completely as though the Collateral Agent were the absolute owner thereof for
      all purposes, and to do, at the Collateral Agent's option and the Grantor's
      expense, at any time, or from time to time, all acts and things which the
      Collateral Agent deems necessary to protect, preserve or realize upon the
      Collateral and the Collateral Agent's Liens thereon and to effect the intent
      of
      this Agreement, all as fully and effectively as the Grantor might
      do.

    


    The
      Grantor hereby ratifies all that said attorneys shall lawfully do or cause
      to be
      done by virtue hereof. This power of attorney is a power coupled with an
      interest and shall be irrevocable until the Grantor shall have paid and
      performed in full all of the Obligations.

    


    (b) Other
      Powers.
      The
      Grantor also authorizes the Collateral Agent, from time to time during any
      period in which an Event of Default is continuing, to
      execute, in connection with the sale provided for herein, any endorsements,
      assignments or other instruments of conveyance or transfer with respect to
      the
      Collateral.

    


    (c) No
      Duty on Collateral Agent's Part.
      The
      powers conferred on the Collateral Agent hereunder are solely to protect the
      Collateral Agent's interests in the Collateral for the pro
      rata
      benefit
      of the Holders and shall not impose any duty upon the Collateral Agent to
      exercise any such powers. The Collateral Agent shall be accountable only for
      amounts that it actually receives as a result of the exercise of such powers,
      and neither it nor any of its officers, directors, employees or agents shall
      be
      responsible to the Grantor for any act or failure to act hereunder, except
      for
      their own gross negligence or willful misconduct.

    


    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    7. Performance
      by Collateral Agent of Grantor's Obligations. If
      the
      Grantor fails to perform or comply with any of its agreements contained herein
      and the Collateral Agent, as provided for by the terms of this Agreement and
      following reasonable notice to the Grantor, may itself perform or comply, or
      otherwise cause performance or compliance, with such agreement, and the expenses
      of the Collateral Agent incurred in connection with such performance or
      compliance shall be payable by the Grantor to the Collateral Agent on demand
      and
      shall constitute Obligations secured hereby.

    


    8. Remedies
      in General.
      If an
      Event of Default has occurred and is continuing, the Collateral Agent may
      exercise, in addition to all other rights and remedies granted to it in this
      Agreement and in any other instrument or agreement securing, evidencing or
      relating to the Obligations, all rights and remedies of a secured party under
      the Code. Without limiting the generality of the foregoing, if an Event of
      Default has occurred and is continuing, the Collateral Agent, without demand
      of
      performance or other demand, presentment, protest, advertisement or notice
      of
      any kind (except any notice required by law referred to below or expressly
      provided for) to or upon the Grantor or any other Person (all and each of which
      demands, defenses, advertisements and notices are, to the extent permitted
      by
      applicable law, hereby waived), may in such circumstances forthwith collect,
      receive, appropriate and realize upon the Collateral, or any part thereof,
      and/or may forthwith sell, license, assign, give option or options to purchase,
      or otherwise dispose of and deliver the Collateral or any part thereof (or
      contract to do any of the foregoing), at public or private sale or sales, at
      any
      exchange, broker's board or office of the Collateral Agent or elsewhere upon
      such terms and conditions as it may deem advisable and at such prices as it
      may
      deem best, for cash or on credit or for future delivery without assumption
      of
      any credit risk. The Collateral Agent shall have the right upon any such public
      sale or sales, and, to the extent permitted by law, upon any such private sale
      or sales, to purchase the whole or any part of the Collateral so sold, free
      of
      any right or equity of redemption in the Grantor, which right or equity is
      hereby waived, to the extent permitted by applicable law, or released.


    


    The
      Grantor further agrees that, if an Event of Default has occurred and is
      continuing, at
      the
      Collateral Agent's request, to assemble the Collateral and make it available
      to
      the Collateral Agent at places which the Collateral Agent shall reasonably
      select, whether at the Grantor's premises or elsewhere. The Collateral Agent
      shall apply the net proceeds of any such collection, recovery, receipt,
      appropriation, realization or sale, after deducting all reasonable costs and
      expenses of every kind incurred therein or incidental to the care or safekeeping
      of any of the Collateral or in any way relating to the Collateral or the rights
      of the Collateral Agent hereunder, including, without limitation, reasonable
      attorneys' fees and disbursements, to the payment in whole or in part of the
      Obligations, in such order as the Collateral Agent may elect, and only after
      such application and after the payment by the Collateral Agent of any other
      amount required by any provision of law, need the Collateral Agent account
      for
      the surplus, if any, to the Grantor. To the extent permitted by applicable
      law,
      the Grantor waives all claims, damages and demands it may acquire against the
      Collateral Agent arising out of the exercise by it of any rights hereunder,
      provided,
      that
      nothing contained in this Section 8 shall relieve the Collateral Agent from
      liability arising solely from its gross negligence or willful misconduct. If
      any
      notice of a proposed sale or other disposition of Collateral shall be required
      by law, such notice shall be deemed reasonable and proper if given at least
      ten
      days before such sale or other disposition. The Grantor shall remain liable
      for
      any deficiency if the proceeds of any sale or other disposition of the
      Collateral are insufficient to pay the Obligations and the fees and
      disbursements of any attorneys employed by the Collateral Agent to collect
      such
      deficiency.

    


    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    9. Limitation
      on Duties Regarding Preservation of Collateral.
      The
      Collateral Agent's sole duty with respect to the custody, safekeeping and
      physical preservation of the Collateral in its possession, under the Code or
      otherwise, shall be to deal with it in the same manner as the Collateral Agent
      deals with similar property for its own account. Neither the Collateral Agent
      nor any of its directors, officers, employees or agents shall be liable for
      failure to demand, collect or realize upon all or any part of the Collateral
      or
      for any delay in doing so or shall be under any obligation to sell or otherwise
      dispose of any Collateral upon the request of the Grantor or
      otherwise.

    


    10. Powers
      Coupled with an Interest.
      All
      authorizations and agencies herein contained with respect to the Collateral
      are
      irrevocable and powers coupled with an interest until the Grantor has paid
      and
      performed in full all of its obligations under the Transaction
      Documents.

    


    11. Severability.
      Any
      provision of this Agreement which is prohibited or unenforceable in any
      jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
      such prohibition or unenforceability without invalidating the remaining
      provisions hereof, and any such prohibition or unenforceability in any
      jurisdiction shall not invalidate or render unenforceable such provision in
      any
      other jurisdiction.

    


    12. Paragraph
      Headings, Captions, Etc.
      The
      paragraph headings, the captions and the footers used in this Agreement are
      for
      convenience of reference only and are not to affect the construction hereof
      or
      be taken into consideration in the interpretation hereof.

    


    13. No
      Waiver; Cumulative Remedies.
      The
      Collateral Agent shall not by any act, delay, indulgence, omission or otherwise
      be deemed to have waived any right or remedy hereunder or to have acquiesced
      in
      any Event of Default or in any breach of any of the terms and conditions hereof.
      No failure to exercise, nor any delay in exercising, on the part of the
      Collateral Agent, any right, power or privilege hereunder shall operate as
      a
      waiver thereof. No single or partial exercise of any right, power or privilege
      hereunder shall preclude any other or further exercise thereof or the exercise
      of any other right, power or privilege. A waiver by the Collateral Agent of
      any
      right or remedy hereunder on any one occasion shall not be construed as a bar
      to
      any right or remedy which the Collateral Agent would otherwise have on any
      future occasion. The rights and remedies herein and in the Notes and the other
      Transaction Documents are cumulative, may be exercised singly or concurrently
      and are not exclusive of any rights or remedies provided by law or in equity
      or
      by statute.

    


    14. Waivers
      and Amendments; Successors and Assigns.
      None of
      the terms or provisions of this Agreement may be waived, amended, supplemented
      or otherwise modified except by a written instrument executed by the party
      to be
      charged with enforcement; provided,
      however, that
      any
      provision of this Agreement may be waived, amended, supplemented or otherwise
      modified by the Collateral Agent only with the prior written approval of the
      Majority Holders. This Agreement shall be binding upon the successors and
      permitted assigns of the Grantor and shall inure to the benefit of the
      Collateral Agent and its successors and assigns. The Grantor may not assign
      its
      rights or obligations under this Agreement without the prior written consent
      of
      the Collateral Agent, which the Collateral Agent may withhold in the sole
      discretion of the Majority Holders. The requirements for resignation, and
      appointment of a successor to, the Collateral Agent are established by
Schedule
      IV
      hereto
      and not by this Agreement.

    


    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    15. Termination
      of Security Interest; Release of Collateral.  

    


    (a) Upon
      the
      payment in full of all principal of and premium, if any, and interest on the
      Notes and the payment in full of all other amounts for Obligations that are
      due
      and payable at such time, and if no claims for payment by the Company of any
      Obligations are at the time pending, the Security Interest shall terminate
      and
      all rights to the Collateral shall revert to the Grantor. 

    


    (b) If
      an
      Event of Default shall have occurred and be continuing, the Collateral Agent
      shall disburse the funds held by it pursuant to this Agreement as
      follows:

    


    (i) First,
      to
      pay any amounts payable to the Collateral Agent pursuant to Section 17 that
      have
      not been paid by the Grantor;

    


    (ii) Second,
      to pay each Holder on a pro rata basis the amount of all accrued and unpaid
      interest (and interest, if any, thereon at the Default Rate) then due each
      Holder in accordance with the terms of their respective Notes through the most
      recent Interest Payment Date;

    


    (iii) Third,
      to
      pay each Holder on a pro rata basis the amount, if any, of unpaid principal
      then
      due on the Maturity Date of any installment of principal of such Holder’s Notes;


    


    (iv) Fourth,
      to pay each Holder, on a pro rata basis, the amount then due upon acceleration,
      if any, pursuant to Section 4 of such Holder’s Note(s); and then

    


    (v) Fifth,
      to
      pay each Holder who has exercised its repurchase rights under Section 5 of
      the
      Notes, on a pro rata basis, all of the applicable unpaid Repurchase Price for
      each of the Notes or portions thereof required to be repurchased; and
      then

    


    (vi) Sixth,
      to
      pay each Holder any other amount due and payable to such Holder under the
      Transaction Documents; and then

    


    (vii) Seventh,
      the remaining amount, if any, to the Grantor.

    


    provided,
      however,
      that if
      the amount of funds held by the Collateral Agent is insufficient to pay all
      amounts due to the Holders pursuant to clauses (ii) and (iv) above, then the
      amount paid to the Holders pursuant to this Section 15(b) shall be prorated
      among the Holders in proportion to the respective amounts due each Holder
      pursuant to the particular such clause or clauses for which such funds are
      insufficient.

    


    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    (c) At
      any
      time and from time to time prior to termination of the Security Interest
      pursuant to Section 15(a), the Collateral Agent shall release any of the
      Collateral only with the prior written consent of the Majority Holders.


    


    (d) Upon
      any
      such termination of the Security Interest or release of all the Collateral,
      the
      Collateral Agent will, at the expense of the Grantor, execute and deliver to
      the
      Grantor such documents and take such other actions as the Grantor shall
      reasonably request to evidence the termination of the Security Interest and
      deliver to the Grantor all Collateral so released then in its
      possession.

    


    16. Notices.
      Any
      notices required or permitted to be given under the terms of this Agreement
      shall be in writing and shall be sent by mail, personal delivery, telephone
      line
      facsimile transmission or courier and shall be effective five days after being
      placed in the mail, if mailed, or upon receipt, if delivered personally, by
      telephone line facsimile transmission or by courier, in each case addressed
      to a
      party at such party's address (or telephone line facsimile transmission number)
      shown below or such other address (or telephone line facsimile transmission
      number) as a party shall have provided by notice to the other party in
      accordance with this provision. In the case of any notice to the Grantor, such
      notice shall be addressed to the Grantor at 10500 N.E. 8th
      Street,
      Suite 1400,Bellevue, WA 98004, Attention: Chief Financial Officer (telephone
      line facsimile number (425) 749-3601), with a copy to Sichenzia Ross Friedman
      Ference LLP, 1065 Avenue of the Americas, 21st
      Floor,
      New York, New York 10018, Attention: Richard A. Friedman, Esq. (telephone line
      facsimile number (212) 930-9725) and in the case of any notice to the Collateral
      Agent, such notice shall be addressed to the Collateral Agent at c/o Alexandra
      Investment Management, LLC, 767 Third Avenue, 39th
      Floor,
      New York, New York 10017 (telephone line facsimile number (212) 301-1810),
      with
      a copy to Law Offices of Brian W Pusch, Penthouse Suite, 29 West 57th
      Street,
      New York, New York (telephone line facsimile number (212)
      980-7055).

    


    17. Fees
      and Expenses.
      The
      Grantor agrees to pay the fees of the Collateral Agent in performing its
      services under this Agreement and all expenses (including but not limited to
      reasonable attorneys' fees and costs for legal services, costs of insurance
      and
      payments of taxes or other charges) of, or incidental to, the custody, care,
      sale or realization on any of the Collateral or in any way relating to the
      performance of the obligations or the enforcement or protection of the rights
      of
      the Collateral Agent hereunder. 

    


    18. Concerning
      Collateral Agent.
      The
      Grantor acknowledges that the rights and responsibilities of the Collateral
      Agent under this Agreement with respect to any action taken by the Collateral
      Agent or the exercise or nonexercise by the Collateral Agent of any option,
      right, request, judgment or other right or remedy provided for herein or
      resulting or arising out of this Agreement shall, as between the Collateral
      Agent and the Holders, be governed by Schedule
      IV hereto
      and by such other agreements with respect thereto as may exist from time to
      time
      among them, but, as between the Collateral Agent and the Grantor, except as
      expressly provided in Sections 14 and 15, the Collateral Agent shall be
      conclusively presumed to be acting as agent for the Holders with full and valid
      authority so to act or refrain from acting, and the Grantor shall not be under
      any obligation to make any inquiry respecting such authority. The Collateral
      Agent hereby waives for the benefit of the Holders any claim, right or lien
      of
      the Collateral Agent against the Collateral arising under applicable law or
      arising from any business or transaction between the Collateral Agent and the
      Grantor other than pursuant to this Agreement or any of the other Transaction
      Documents.

    


    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    19. Survival.
      All
      representations, warranties, covenants and agreements of the Grantor and of
      the
      Collateral Agent contained herein will survive the execution and delivery hereof
      and the release of any Collateral pursuant hereto and shall remain operative
      and
      in full force and effect regardless of any investigation made by or on behalf
      of
      the Collateral Agent or the Grantor or any person who controls the Collateral
      Agent or the Grantor.

    


    20. Grantor’s
      Obligations Absolute, Etc. The
      obligations of the Grantor under this Agreement shall be absolute and
      unconditional and shall remain in full force and effect without regard to,
      and
      shall not be released, suspended, discharged, terminated or otherwise affected
      by, any circumstance or occurrence whatsoever, including, without limitation:
      (a) any renewal, extension, amendment or modification of or addition or
      supplement to or deletion from any of the Transaction Documents or any other
      agreement or instrument referred to therein, or any assignment or transfer
      of
      any thereof; (b) any waiver, consent, extension, indulgence or other action
      or
      inaction under or in respect of any such Transaction Document or other agreement
      or instrument; (c) any furnishing of any additional security to the Collateral
      Agent or its assignees or any acceptance thereof or any release of any security
      by the Collateral Agent or its assignees; (d) any limitation on any party’s
      liability or obligations under any such Transaction Document or other agreement
      or instrument or any invalidity or unenforceability, in whole or in part, of
      any
      such Transaction Document or other agreement or instrument or any term thereof;
      or (e) any bankruptcy, insolvency, reorganization, composition, adjustment,
      dissolution, liquidation or other like proceeding relating to the Grantor,
      or
      any action taken with respect to this Agreement by any trustee or receiver,
      or
      by any court, in any such proceeding, whether or not the Grantor shall have
      notice or knowledge of any of the foregoing.

    


    21. Integration.
      This
      Agreement represents the entire agreement of the Grantor and the Collateral
      Agent with respect to the subject matter hereof, and there are no promises,
      undertakings, representations or warranties by the parties relative to the
      subject matter hereof not expressly set forth or referred to herein or
      therein.

    


    22. Governing
      Law.
      This
      Agreement and the rights and obligations of the Grantor under this Agreement
      shall be governed by, and construed and interpreted in accordance with, the
      law
      of the State of New York, except to the extent that under the New York Uniform
      Commercial Code the laws of another jurisdiction govern matters of perfection
      and the effect of perfection or non-perfection of any security interest granted
      hereunder.

    


    23. Counterparts;
      Execution.
      This
      Agreement may be executed in any number of counterparts and by the parties
      hereto on separate counterparts, but all the counterparts taken together shall
      be deemed to constitute one and the same instrument. This Agreement, once
      executed by a party, may be delivered to the other party hereto by telephone
      line facsimile transmission of a copy of this Agreement bearing the signature
      of
      the party so delivering this Agreement.

    


    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    24. Construction.
      The
      language used in this Agreement will be deemed to be the language chosen by
      the
      parties to express their mutual intent, and no rules of strict construction
      will
      be applied against any party.

    


    


    [Signature
      page follows]


    
      
         

        
        

      

      
        18

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF,
      the
      Grantor and the Collateral Agent have caused this Agreement to be duly executed
      and delivered by their respective officers or other representatives thereunto
      duly authorized as of the date first above written.

     

     

    
      	 	 	 
	 	EMAGIN
              CORPORATION
	 
 	 
 	 
 
	 	By:  	/s/ Gary
              W.
              Jones
	 	
              
Name:
              Gary W. Jones
	 	Title: Chief
              Executive Officer



      	 	 	 
	 	
              ALEXANDRA
                GLOBAL MASTER FUND
                LTD., as Collateral Agent

            
	 
 	 
 	
               

               

              ALEXANDRA
                INVESTMENT MANAGEMENT, LLC, as Investment
                Advisor
 

               

            
	 	By:  	/s/ Mikhail
              Filimonov 
	 	
              
Name:
              Mikhail Filimonov
	 	Title: Chairman
              and Chief Executive Officer




    



    
      
        
           

        

        
        

      

      
        19

        
          

        

      

      
        
        

        
          


        

      

    



    SCHEDULE
      I

    


    Filings
      Required to Perfect Security Interest

    


    1. Secretary
      of State of the State of Delaware

    


    2. Department
      of State of the State of New York

    



    
      
        
           

        

        
        

      

      
        I-1

        
          

        

      

      
        
        

        
          


        

      

    



    SCHEDULE
      II

    


    Location
      of Records Concerning Accounts

    


    


    eMagin
      Corporation

    10500
      NE
      8th
      Street,
      Suite 1400

    Bellevue,
      WA. 98004


    
      
        
           

        

        
        

      

      
        II-2

        
          

        

      

      
        
        

        
          


        

      

    



    SCHEDULE
      III

    


    Inventory
      Locations

    


    eMagin
      Corporation

    2070
      Route 52

    Hopewell
      Junction, NY 12533

    


    eMagin
      Corporation 

    10500
      NE
      8th
      Street,
      Suite 1400

    Bellevue,
      WA. 98004

    Asteria
      Manufacturing and Brimal Holding (same address):

    


    Wisma
      AIC

    Lot
      3

    Persiaran
      Kemajuan

    Seksyen
      16

    40200
      Shah Alam

    Selangor
      Darul Ehsan

    Malaysia

    



    
      
        
           

        

        
        

      

      
        III-1

        
          

        

      

      
        
        

        
          


        

      

    



    SCHEDULE
      IV

    


    The
      Collateral Agent

    


    1. Appointment. The
      Holders (all capitalized terms used in this Schedule
      IV
      and
      not  otherwise  defined shall have the respective meanings provided
      in  the  Security agreement to which this Schedule
      IV
      is
      attached (the “Agreement”)), by their acceptance of the benefits of the
      Agreement, hereby irrevocably designate Alexandra Global Master Fund Ltd.,
      as
      Collateral Agent, to act as specified herein and in the Agreement. Each Buyer
      hereby irrevocably authorizes, and each other Holder of any Note by the
      acceptance of such Note shall be deemed irrevocably to authorize, the Collateral
      Agent to take such action on its behalf under the provisions of the Agreement
      and any other instruments and agreements referred to herein or therein and
      to
      exercise such powers and to perform such duties hereunder and thereunder as
      are
      specifically delegated to or required of the Collateral Agent by the terms
      hereof and thereof and such other powers as are reasonably incidental thereto.
      The Collateral Agent may perform any of its duties hereunder by or through
      its
      agents or employees.

    


    2. Nature
      of Duties.
      The
      Collateral Agent shall have no duties or responsibilities except those expressly
      set forth in the Agreement. Neither the Collateral Agent nor any of its
      officers, directors, employees or agents shall be liable for any action taken
      or
      omitted by it as such under the Agreement or hereunder or in connection herewith
      or therewith, unless caused by its or their gross negligence or willful
      misconduct. The duties of the Collateral Agent shall be mechanical and
      administrative in nature; the Collateral Agent shall not have by reason of
      the
      Agreement or any other Transaction Document a fiduciary relationship in respect
      of any Holder; and nothing in the Agreement, expressed or implied, is intended
      to or shall be so construed as to impose upon the Collateral Agent any
      obligations in respect of the Agreement except as expressly set forth herein.
      The Collateral Agent shall not take any material action or exercise any material
      right or power pursuant to Section 5, 6 or 7 of this Agreement without the
      authorization or direction of the Majority Holders; provided,
      however,
      that if
      the Collateral Agent determines that it is unable to contact the Majority
      Holders for purposes of seeking such authorization or direction or time will
      not
      permit the Collateral Agent to so contact the Majority Holders prior to such
      time as detriment may occur to the rights of the Collateral Agent or the Holders
      from any failure of the Collateral Agent to act or exercise such right, then
      in
      any such case the Collateral Agent may take such action or exercise such right
      without specific authorization or direction from the Majority
      Holders.

    


    The
      Collateral Agent shall not be liable for any act it may do or omit to do while
      acting in good faith and in the exercise of its own best judgment. Any act
      done
      or omitted by the Collateral Agent on the advice of its own attorneys shall
      be
      deemed conclusively to have been done or omitted in good faith. The Collateral
      Agent shall have the right at any time to consult with counsel on any question
      arising under the Agreement. The Collateral Agent shall incur no liability
      for
      any delay reasonably required to obtain the advice of counsel.

    


    3. Lack
      of Reliance on the Collateral Agent.
      Independently and without reliance upon the Collateral Agent, each Holder,
      to
      the extent it deems appropriate, has made and shall continue to make (i) its
      own
      independent investigation of the financial condition and affairs of the Grantor
      and its subsidiaries in connection with the making and the continuance of the
      Obligations and the taking or not taking of any action in connection therewith,
      and (ii) its own appraisal of the creditworthiness of the Grantor and its
      subsidiaries, and the Collateral Agent shall have no duty or responsibility,
      either initially or on a continuing basis, to provide any Holder with any credit
      or other information with respect thereto, whether coming into its possession
      before any Obligation arises or the purchase of any Note, or at any time or
      times thereafter. The Collateral Agent shall not be responsible to any Holder
      for any recitals, statements, information, representations or warranties herein
      or in any document, certificate or other writing delivered in connection
      herewith or for the execution, effectiveness, genuineness, validity,
      enforceability, perfection, collectibility, priority or sufficiency of the
      Agreement or the financial condition of the Grantor or be required to make
      any
      inquiry concerning either the performance or observance of any of the terms,
      provisions or conditions of the Agreement, or the financial condition of the
      Grantor, or the existence or possible existence of any Event of
      Default.

    


    
      
        
        

      

      
        IV-1

        
          

        

      

      
        
        

      

    

    4. Certain
      Rights of the Collateral Agent. 
      No
      Holder shall have the right to cause the Collateral Agent to take any action
      with respect to the Collateral, with only the Majority Holders having the right
      to direct the Collateral Agent to take any such action. If the Collateral Agent
      shall request instructions from the Majority Holders with respect to any act
      or
      action (including failure to act) in connection with the Agreement, the
      Collateral Agent shall be entitled to refrain from such act or taking such
      action unless and until it shall have received instructions from the Majority
      Holders, and to the extent requested, appropriate indemnification in respect
      of
      actions to be taken by the Collateral Agent; and the Collateral Agent shall
      not
      incur liability to any person by reason of so refraining. Without limiting
      the
      foregoing, no Holder shall have any right of action whatsoever against the
      Collateral Agent as a result of the Collateral Agent acting or refraining from
      acting hereunder in accordance with the instructions of the Majority Holders
      or
      as otherwise specifically provided in the Agreement.

    


    5. Reliance.
      The
      Collateral Agent shall be entitled to rely, and shall be fully protected in
      relying, upon any note, writing, resolution, notice, statement, certificate,
      telex, teletype or telecopier message, cablegram, radiogram, order or other
      document or telephone message signed, sent or made by the proper person or
      entity, and, with respect to all legal matters pertaining to the Agreement
      and
      its duties thereunder, upon advice of counsel selected by it.

    


    6. Limitation
      of Holder Liability. 
      The
      Holders shall not be liable for any liabilities, obligations, losses, damages,
      penalties, actions, judgments, suits, costs, expenses or disbursements of any
      kind or nature whatsoever which may be imposed on, incurred by or asserted
      against the Collateral Agent in performing its duties hereunder or under the
      Agreement, or in any way relating to or arising out of the
      Agreement.

    


    7. The
      Collateral Agent in its Individual Capacity. 
      The
      Collateral Agent and its affiliates may lend money to, purchase, sell and trade
      in securities of and generally engage in any kind of business with the Grantor
      or any affiliate or subsidiary of the Grantor as if it were not performing
      the
      duties specified herein, otherwise without having to account for the same to
      the
      Holders; provided,
      however,
      that the
      Collateral Agent on behalf of itself and such affiliates, hereby waives any
      claim, right or lien against the Collateral in any way arising from or relating
      to any such loan, securities transaction or business with the Grantor.


    


    
      
        
        

      

      
        IV-2

        
          

        

      

      
        
        

      

    

    8. Holders.
      The
      Collateral Agent may deem and treat the holder of record of any Note as the
      owner thereof for all purposes hereof unless and until a written notice of
      the
      assignment or transfer thereof, as the case may be, shall have been filed with
      the Collateral Agent. Any request, authority or consent of any person or entity
      who, at the time of making such request or giving such authority or consent,
      is
      the holder of record of any Note shall be conclusive and binding on any
      subsequent holder, transferee or assignee, as the case may be, of such Note
      or
      of any Note(s) issued in exchange therefor.

    


    9. Resignation
      by the Collateral Agent. 
      (a) The
      Collateral Agent may resign from the performance of all its functions and duties
      under the Agreement at any time by giving 60 days' prior written notice (as
      provided in the Agreement) to the Grantor and the Holders. Such resignation
      shall take effect upon the appointment of a successor Collateral Agent pursuant
      to clauses (b) and (c) below.

    


    (b) Upon
      any
      such notice of resignation, the Majority Holders shall appoint a successor
      Collateral Agent hereunder.

    


    (c) If
      a
      successor Collateral Agent shall not have been so appointed within said 60-day
      period, the Collateral Agent shall then appoint a successor Collateral Agent
      who
      shall serve as Collateral Agent hereunder or thereunder until such time, if
      any,
      as the Majority Holders appoint a successor Collateral Agent as provided above.
      If a successor Collateral Agent has not been appointed within such 60-day
      period, the Collateral Agent may petition any court of competent jurisdiction
      or
      may interplead the Grantor and Holders in a proceeding for the appointment
      of a
      successor Collateral Agent, and all fees, including but not limited to
      extraordinary fees associated with the filing of interpleader, and expenses
      associated therewith shall be payable by the Grantor.

    


    (d) The
      fees
      of any successor Collateral Agent for its services as such shall be payable
      by
      the Grantor.

     

     

    IV-3