Document:

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.
                ARW-

            	
              Right
                to Purchase __________ Shares of Common Stock of eMagin
                Corporation

            

    

    

    

    EMAGIN
      CORPORATION

    

    Amended
      and Restated

    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), 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. This Warrant amends
      and
      restates Common Stock Warrant No. W-___ issued by the Company pursuant to the
      Note Purchase Agreement, registered in the name of the Holder or the registered
      holder of the predecessor instrument of 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).

    

    “Amendment
      Agreement” means the Amendment Agreement, dated as of July 23, 2007, by and
      between the Company and the original Holder of the Common Stock Purchase Warrant
      that was amended and restated by this Warrant or its predecessor
      instrument.

    

    “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.

    

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    “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.

    

    “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 OTCBB, 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.

    

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    “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.

    

    “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 price of such
      security on such day on the Nasdaq or the Nasdaq Capital Market or the NYSE
      or
      the AMEX or the OTCBB, as applicable, or, if such security is not listed or
      admitted to trading on the Nasdaq, the Nasdaq Capital Market, the NYSE, the
      AMEX
      or the OTCBB, 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.

    

    
      
        
        

      

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

    

    “Newly
      Issued Shares” shall have the meaning provided in Section 8(a).

    

    “Note”
      means any of the Amended and Restated 8% Senior Secured Convertible Notes due
      2008 issued by the Company upon amendment and restatement of the Company’s 6%
      Senior Secured Convertible Notes due 2007-2008, as amended, originally issued
      by
      the Company pursuant to the Note Purchase Agreement and the Other Note Purchase
      Agreements.

    

    “Note
      Purchase Agreement” means the Note Purchase Agreement (including the Annexes,
      Schedules and Exhibits thereto), dated as of July 21, 2006, by
      and
      between the Company and the original Holder of this Warrant, as amended by
      the
      Amendment Agreement.

    

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

    

    “OTCBB”
      means the Over-The-Counter Bulletin Board.

    

    “Other
      Note Purchase Agreements” means the several Note Purchase Agreements, (including
      the Annexes, Schedules and Exhibits thereto), dated as of July 21, 2006, as
      amended, 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.

    

    “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.

    

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    “Purchase
      Price” means $1.03 [$0.48
      for Stillwater Amended Warrant], 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

    

    (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.

    

    “Series
      A
      Preferred Stock” means the shares of Series A Senior Secured Convertible
      Preferred Stock, $0.001 par value, of the Company.

    

    
      
        
        

      

      
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    “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, the OTCBB 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.

    

    “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.

    

    
      
        
        

      

      
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    (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

    

    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 (x) 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% [FOR
      RAINBOW GATE/STILLWATER /GINOLA WARRANTS ONLY: and
      (y)
      at any time and from time to time, to increase its Restricted Ownership
      Percentage unless the Holder shall have, by written instrument delivered to
      the
      Company, irrevocably waived its rights to so increase its Restricted Ownership
      Percentage].
      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.

    

    
      
        
        

      

      
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    (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.

    

    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.

    

    
      
        
        

      

      
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    (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.

    

    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,

    

    
      
        
        

      

      
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    (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.

    

    
      
        
        

      

      
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    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.

    

    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

    

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    (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.

    

    8. Adjustments
      for Certain Issuances of Newly Issued Shares.

    

    (a) In
      case
      at any time on or after the Issuance Date the Company shall issue shares of
      Common Stock or Common Stock Equivalents (collectively, the “Newly Issued
      Shares”) at a price below the Purchase Price in effect at the time of such
      issuance, then following such issuance of Newly Issued Shares the Purchase
      Price
      shall be reduced to the lower of (x) 138% of the lowest price per share of
      Common Stock reflected in the price at which such Newly Issued Shares are issued
      and (y) the exercise price of any warrants to purchase Common Stock issued
      in
      connection with such transaction, in either such case, if the same is lower
      than
      the Purchase Price in effect immediately prior to such issuance.

    

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    (b) If
      the
      Purchase Price is reduced in connection with the issuance of Newly Issued Shares
      as provided in Section 8(a), then the number of shares of Common Stock for
      which
      this Warrant may thereafter be exercised shall be increased at the time of
      such
      reduction in the Purchase Price to a number equal to the quotient obtained
      by
      dividing (x) the Aggregate Purchase Price in effect immediately prior to such
      issuance of Newly Issued Shares by
      (y) the
      Purchase Price in effect immediately after such issuance of Newly Issued Shares
      after such reduction in the Purchase Price pursuant to Section
      8(a).

    

    (c) If
      the
      Newly Issued Shares are Common Stock Equivalents, then the price per share
      of
      Common Stock at which the Newly Issued Shares shall be deemed issued shall
      be
      the price per share of Common Stock at which the Newly Issued Shares are
      convertible into, exchangeable for, or otherwise entitle the stockholder to
      acquire, Common Stock.

    

    (d) Notwithstanding
      the foregoing, no adjustment shall be made under this Section 8 by reason
      of:

    

    (i) the
      issuance by the Company of shares of Common Stock pro rata to all holders of
      the
      Common Stock so long as (i) any adjustment required by Section 6 is made and
      (ii) the Company shall have given notice thereof to the Holder pursuant to
      Section 15;

    

    (ii) the
      issuance by the Company of the Notes or the Other Warrants or shares of Common
      Stock upon conversion of the Notes or upon exercise of this Warrant or the
      Other
      Warrants in accordance with the terms hereof and thereof; 

    

    (iii) the
      issuance by the Company of shares of Series A Preferred Stock upon conversion
      of
      the Notes or Common Stock upon conversion of the Series A Preferred Stock in
      accordance with the terms thereof;

    

    (iv) the
      issuance by the Company of Newly Issued Shares upon grant or exercise of options
      for employees, directors and consultants under the 2003 Stock Option Plan,
      2004
      Non-Employee Stock Compensation Plan and the 2005 Employee Stock Purchase Plan
      or any other stock compensation plan that has been duly adopted by the Board
      of
      Directors and duly approved by the Company’s stockholders;

    

    (v) the
      issuance by the Company of Newly Issued Shares upon conversion of Common Stock
      Equivalents that are outstanding on the Issuance Date in accordance with the
      terms of such Common Stock Equivalents in effect on the Issuance
      Date;

    

    (vi) the
      issuance by the Company for cash of Newly Issued Shares in connection with
      a
      strategic alliance, collaboration, joint venture, partnership or similar
      arrangement of the Company with another Person which strategic alliance,
      collaboration, joint venture, partnership or similar arrangement relates to
      the
      Company’s business as conducted immediately prior thereto and which Person is
      engaged in a business similar or related to the business of the Company so
      long
      as (x) the price per Newly Issued Share is not less than 85 percent of the
      Current Fair Market Value of the Common Stock on the date of issuance of such
      Newly Issued Shares and (y) the consideration other than cash which the Company
      receives in connection with such strategic alliance, collaboration, joint
      venture, partnership or similar arrangement has a value, as determined by the
      Board of Directors in its reasonable judgment, at least equal to the amount
      by
      which (i) the product of the Newly Issued Shares so issued times
      the
      Current Fair Market Value of the Common Stock on the date such Newly Issued
      Shares are issued exceeds (ii) the aggregate cash consideration received by
      the
      Company for such Newly Issued Shares at the time of issuance thereof and (z)
      such issuance has been duly approved by the Board of Directors.

    

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    

    9. Adjustment
      in Connection with 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. 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 24.

    

    10. 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 

    

    (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:

    

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    (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 10 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.

    

    (b) The
      above
      provisions of this Section 10 shall similarly apply to successive
      reclassifications, changes, consolidations, mergers, combinations, sales and
      conveyances.

    

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    (c) If
      this
      Section 10 applies to any event or occurrence, Section 5 shall not
      apply.

    

    11. Tax
      Adjustments. The
      Company may make such reductions in the Purchase Price, in addition to those
      required by Sections 4, 5, 6, 7, 8 and 9 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.

    

    12. 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 12 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.

    

    13. 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.

    

    14. 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.

    

    15. 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

    

    (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

    

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    (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.

    

    16. 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.

    

    17. 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.

    

    18. 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

        
          

        

      

      
        
        

      

    

    19. 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 17, 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.

    

    20. 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.

    

    21. 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 19, and replacing this Warrant
      pursuant to Section 20, 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.

    

    22. 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.

    

    23. 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.

    

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    24. 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 18.

    

    25. 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. 

    

    26. 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. 

    

    27. 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.

    

    28. 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. [TO
      BE DELETED IN [RAINBOW GATE][STILLWATER][GINOLA] WARRANTS
      ONLY:
      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.]

    

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    (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.

    

    29. 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.

    

    30. 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]

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    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: 	By:  	/s/ 
	 	
              

            
	 	Title 

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    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)

            	 

    

     

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

    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)

            

    

    

    

      

    

    24Exhibit 10.4

    Exhibit
      10.4

     

    

      AMENDMENT
        NO. 1 TO PATENT AND TRADEMARK SECURITY AGREEMENT

      

      THIS
        AMENDMENT NO. 1 TO PATENT AND TRADEMARK SECURITY AGREEMENT,
        dated as
        of July 23, 2007 (this “Agreement”), by and between 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 herein having the
        respective meanings provided herein), amends the PATENT
        AND TRADEMARK SECURITY AGREEMENT,
        dated
        as of July 21, 2006 (the “Patent and Trademark Security Agreement”), made
        by the
        Grantor to the Collateral Agent.

      

      W I T N E S S E T H:

      

      WHEREAS,
        the
        Grantor and the Collateral Agent are parties to the Patent and Trademark
        Security Agreement;

      

      WHEREAS,
        the
        Grantor and the Collateral Agent wish to amend the Patent and Trademark Security
        Agreement as provided in this Agreement; and

      

      NOW
        THEREFORE, in
        consideration of the premises and the mutual covenants made herein and for
        other
        good and valuable consideration, the receipt and sufficiency of which are
        hereby
        acknowledged, the parties hereto agree as follows:

      

      1. Definitions. 

      

      1.1 As
        used
        in this Agreement, the terms “Agreement”, “Grantor”, “Collateral Agent” and
“Patent and Trademark Security Agreement” shall have the respective meanings
        assigned to such terms in the introductory paragraph of this
        Agreement.

      

      1.2 Capitalized
        terms used in this Agreement and not defined in this Agreement shall have
        the
        respective meanings provided in the Patent and Trademark Security
        Agreement.

      

      1.3 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.

      

      1.4 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):

      

      “Amended
        Lockbox Agreement” means the Lockbox Agreement, dated as of July 21, 2006, by
        and between the Grantor, the Lockbox Agent and the Collateral Agent, as amended
        by Amendment No. 1 to Lockbox Agreement, dated as of July 23, 2007, by and
        between the Grantor and the Collateral Agent.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      “Amended
        Notes” means the Amended and Restated 8% Senior Secured Convertible Notes due
        2008 issued by the Grantor upon amendment and restatement of the
        Notes.

      

      “Amended
        Patent and Trademark Security Agreement” means the Patent and Trademark Security
        Agreement as amended by this Agreement.

      

      “Amended
        Pledge and Security Agreement” means the Pledge and Security Agreement, dated as
        of July 21, 2006, by and between the Grantor and the Collateral Agent, as
        amended by Amendment No. 1 to the Pledge and Security Agreement, dated as
        of
        July 23, 2007 by and between the Grantor and the Collateral Agent.

      

      “Amendment
        Agreements” means the several Amendment Agreements, dated as of July 23, 2007 by
        and between the Company and the Holders. 

      

      “Amendment
        Transaction Documents” means the Amended Notes, the Amended Warrants, the
        Certificate Designations, the Amended Patent and Trademark Security Agreement,
        the Amended Pledge and Security Agreement, the Amended Lockbox
        Agreement and
        the
        other agreements, instruments and documents contemplated hereby and
        thereby.

      

      “Certificate
        of Designations” means the Certificate of Designations of Series A Senior
        Secured Convertible Preferred Stock of the Grantor as filed with the Secretary
        of State of the State of Delaware.

      

      “Effective
        Date” shall have the meaning provided in Section 4.

      

      “Effective
        Time” shall have the meaning provided in the Amendment Agreements.

      

      “Holders”
        means with respect to any time prior to the Effective Time on the Effective
        Date
        the holders of Notes and with respect to any time after the Effective Time
        on
        the Effective Date, the holders from time to time of any Amended Notes or
        shares
        of Series A Preferred Stock.

      

      “Series
        A
        Preferred Stock” means the Series A Senior Secured Convertible Preferred Stock,
        par value $0.001 per share, of the Grantor.

      

      2. Amendments.

       

      2.1 Amendments
        to Patent and Trademark Security Agreement. Upon
        the
        terms and subject to the conditions of this Agreement, the Patent and Trademark
        Security Agreement is hereby amended as follows:

      

      (a) Amendment
        of Certain Definitions.
        Section
        1(d) of the Patent and Trademark Security Agreement shall be amended by deleting
        the terms “Additional Note Purchase Agreement”, “Event of Default”, “Holder”,
“Note Purchase Agreements”, “Majority Holders”, “Notes”, “Obligations” and
“Transaction Documents” and the accompanying definitions thereof and
        substituting in lieu thereof in their respective alphabetical order the
        following:

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      “Additional
        Note Purchase Agreement” means the Note Purchase Agreement, dated as of July 21,
        2006, as amended on March 28, 2007, by and between the Company and Stillwater
        LLC, as amended by the Amendment Agreement, pursuant to which the Company
        issued
        the Additional Note.

      

      “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) the
        failure by the Grantor to pay the Optional Redemption Price or the Mandatory
        Redemption Price; or

      

      (3) the
        breach by the Grantor of any other material covenant or other term or condition
        of the Certificate of Designations; or

      

      (4) 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

      

      (5) 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;

      

      (6) 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;

      

      (7) 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;

      

      (8) 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

      

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

      

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

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      “Majority
        Holders” means at any time (i) such of the holders of 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,
        and
        (ii) such of the holders of Preferred Shares which shares constitute a majority
        of the outstanding Preferred Shares at such time.

      

      “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, as amended by the Amendment Agreement, pursuant to which the Grantor
        issued the Notes, including, without limitation, the Additional Note Purchase
        Agreement.

      

      “Notes”
        means the Amended and Restated 8% Senior Secured Convertible Notes due 2008
        issued by the Grantor upon amendment and restatement of the Grantor’s 6% Senior
        Secured Convertible Notes due 2007-2008, as amended, 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) the
        full
        and prompt payment when due of all obligations and liabilities of the Grantor
        to
        pay the Optional Redemption Price and Mandatory Redemption Price pursuant
        to the
        Preferred Shares and the due performance and compliance with the terms of
        the
        Certificate of Designations;

      

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

      

      (4) 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

      

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

       

      (b) Additional
        Defined Terms. Section
        1(d) of the Patent and Trademark Security Agreement shall be amended by adding
        new defined terms and definitions thereof, in the places constituting their
        respective alphabetical orders, as follows:

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      “Amendment
        Agreement” means the several Amendment Agreements, dated as of July 23, 2007, by
        and between the Grantor and the Holders.

      

      “Certificate
        of Designations” means the Certificate of Designations of Series A Senior
        Secured Convertible Preferred Stock of the Grantor as filed with the Secretary
        of State of the State of Delaware.

      

      “Mandatory
        Redemption Price” shall have the meaning assigned to such term in the
        Certificate of Designations.

      

      “Optional
        Redemption Price” shall have the meaning assigned to such term in the
        Certificate of Designations.

      

      “Preferred
        Shares” means shares of Series A Senior Secured Convertible Preferred Stock
        issued by the Grantor.

      

      3. Effect
        of Amendment; Confirmation.

      

      (a) From
        and
        after the Effective Date, the rights and obligations of the Grantor, the
        Collateral Agent and the Holders under the Patent and Trademark Security
        Agreement and the Transaction Documents and all other agreements, documents
        and
        instruments contemplated hereby and thereby shall apply with full force and
        effect to the Patent and Trademark Security Agreement, as amended by this
        Agreement, and each reference to the Patent and Trademark Security Agreement
        in
        the Transaction Documents shall be deemed to be a reference to the Patent
        and
        Trademark Security Agreement, as amended by this Agreement and each reference
        in
        the Patent and Trademark Security Agreement to “this Agreement,” “hereunder,”
“hereof,” “herein,” or words of like import shall mean and be a reference to the
        Patent and Trademark Security Agreement as amended hereby, and this Agreement
        and the Patent and Trademark Security Agreement shall be read together and
        construed as a single instrument.

      

      (b) Except
        as
        amended by this Agreement, the Patent and Trademark Security Agreement shall
        remain in full force and effect in accordance with its respective
        terms.

      

      (c) The
        execution, delivery and effectiveness of this Agreement shall not, except
        as
        expressly provided herein, operate as a waiver of any right, power or remedy
        of
        the Collateral Agent, the Grantor or the Holders under the Patent and Trademark
        Security Agreement or any of the Transaction Documents, nor constitute a
        waiver
        or amendment of any other provision of the Patent and Trademark Security
        Agreement or any of the Transaction Documents or for any purpose except as
        expressly set forth herein.

      

      (d) Nothing
        in this Agreement or in connection with the transactions contemplated by
        this
        Agreement or otherwise shall be construed, directly or indirectly, by
        implication or otherwise to impair the validity, enforceability, priority,
        perfection or other attributes of the security interest granted pursuant
        to the
        Patent and Trademark Security Agreement.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      4. Effectiveness.

      

      The
        amendment of the Patent and Trademark Security Agreement pursuant to this
        Agreement shall become effective on the date (the “Effective Date”) when all of
        the following conditions are satisfied:

      

      (a) The
        Collateral Agent shall have received Acknowledgement and Consents, in the
        form
        attached hereto as Exhibit
        A,
        from
        the Majority Holders; and

      

      (b) On
        the
        Effective Date the Effective Time under all of the Amendment Agreements shall
        have occurred.

      

      5. Miscellaneous. 

      

      5.1 Waiver
        and Amendments; Successors and Assigns.

      The
        provisions of Section 13 of the Patent and Trademark Security Agreement shall
        be
        applicable to this Agreement as if this Agreement were the “Agreement” referred
        to in Section 13 of the Patent and Trademark Security Agreement.

      

      5.2 Counterparts.

      This
        Agreement may be executed in two or more counterparts, each of which shall
        be
        deemed an original, but all of which together shall constitute one and the
        same
        instrument.

      

      5.3 Titles
        and Subtitles.

      The
        titles and subtitles used in this Agreement are used for convenience only
        and
        are not to be considered in construing or interpreting this
        Agreement.

      

      5.4 Notices.

      Any
        notice required or permitted under this Agreement shall be given as provided
        in
        the Patent and Trademark Security Agreement.

      

      5.5 Severability.

      If
        one or
        more provisions of this Agreement are held to be unenforceable under applicable
        law, such provision shall be excluded from this Agreement and the balance
        of
        this Agreement shall be interpreted as if such provision were so excluded
        and
        shall be enforceable in accordance with its terms.

      

      5.6 Entire
        Agreement.

      This
        Agreement and the other Amendment Transaction Documents and other documents
        contemplated hereby and thereby constitute the entire agreement among the
        parties hereof with respect to the subject matter hereof and thereof and
        supersede all prior agreements and understandings, both oral and written,
        between the parties with respect to the subject matter hereof and
        thereof.

      

      5.7 Further
        Assurances.

      The
        parties shall execute and deliver all such further instruments and documents
        and
        take all such other actions as may reasonably be required to carry out the
        transactions contemplated hereby and to evidence the fulfillment of the
        agreements herein contained.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      5.8 Applicable
        Law.

      This
        Agreement shall be governed by, and construed in accordance with, the laws
        of
        the State of New York without regard to principles of conflicts of laws,
        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 under the Patent and
        Trademark Security Agreement, as amended by this Agreement.

      

      5.9 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 electronic
        or
        telephone line facsimile transmission of a copy of this Agreement bearing
        the
        signature of the party so delivering this Agreement.

      

      5.10 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
        Pages Follow]

      
        
           

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      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/ 
	 	
                

                Name:
                  

                Title:
                  

              
	 	 

      

      
        	 	 	 
	 	
                ALEXANDRA GLOBAL MASTER FUND LTD.,
                  as Collateral
                  Agent

                 

                By: ALEXANDRA
                  INVESTMENT MANAGEMENT, LLC,
                  
                  as
                    Investment Advisor

                

              
	 
 	 
 	 
 
	
              	By:  	
                /s/ 

              
	 	
                
                  

                

                Name:
                  

                Title:
                  

              
	 	 

      

      
 

      
        
           

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      EXHIBIT
        A

      

      ACKNOWLEDGEMENT
        AND CONSENT

      

      To:
        ALEXANDRA GLOBAL MASTER FUND LTD.,

      As
        Collateral Agent

       

      c/o
        Alexandra Investment Management, LLC

      767
        Third
        Avenue, 39th
        Floor

      New
        York,
        New York 10017

      

      Re:
        eMagin Corporation

      

      Reference
        is made to the Patent and Trademark Security Agreement, dated as of July
        21,
        2006 (as amended, supplemented or otherwise modified from time to time, the
        “Patent and Trademark Security Agreement”) by and between 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. Capitalized
        terms used herein and not otherwise defined herein are used herein as defined
        in
        the Patent and Trademark Security Agreement.

      

      The
        Grantor has requested that the Holders consent to an Amendment to the Patent
        and
        Trademark Security Agreement on the terms described in that certain Amendment
        No. 1 to the Patent and Trademark Security Agreement (“Amendment No. 1 to Patent
        and Trademark Security Agreement”), the form of which is attached
        hereto.

      

      Pursuant
        to Section 13 of the Patent and Trademark Security Agreement, the undersigned
        Holder hereby consents to the terms of Amendment No. 1 to Patent and Trademark
        Security Agreement and authorizes the Collateral Agent to execute and deliver
        Amendment No. 1 to Patent and Trademark Security Agreement on its
        behalf.

       

       

      
        	 	 	 
	 	
                Very
                  truly yours,

                

                NAME
                  OF HOLDER:

                ______________________________

              
	 
 	 
 	 
 
	Dated
                as
                of July 23, 2007	By:  	/s/ 
	 	
                
                  

                

                Name:

                Title:

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