8-K

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549



                                    FORM 8-K

                                 CURRENT REPORT
                       PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                Date of Report (Date of earliest event reported):

                               September 18, 2001

                               eMagin Corporation
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             (Exact name of registrant as specified in its charter)

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              Delaware                                 000-24757                              88-0378451
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   (State or Other Jurisdiction of              (Commission File Number)            (I.R.S. Employer Identification
           Incorporation)                                                                       Number)


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                2070 Route 52, Hopewell Junction, New York 12533
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               (Address of principal executive offices) (zip code)

                                 (845) 892-1900
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              (Registrant's telephone number, including area code)






ITEM 5.  OTHER EVENTS.

On September 19, 2001, SK Corporation  ("SK"), an affiliate of SK Group of Korea
and eMagin Corporation  ("eMagin" or the "Company") announced SK's investment as
part  of  a  strategic   alliance  of  $3,000,000  in  eMagin  Corporation  (the
"Transaction") pursuant to a Securities Purchase Agreement between SK and eMagin
dated  as of  September  18,  2001  (the  "Closing  Date").  For its $3  million
investment  in eMagin,  SK received (i) the  Company's  4% Series A  Convertible
Debentures (the  "Debentures") in the aggregate  principal amount of $3,000,000,
and (ii) warrants  ("Warrants")  exercisable  for a period of three (3) years to
purchase  205,479  shares of common stock of eMagin.  Interest is payable on the
Debentures  at a rate of 4% per annum and, at the option of the Company,  may be
paid through the  delivery of shares of common stock of the Company  (registered
pursuant to the Registration Rights Agreement referred to below) in lieu of cash
interest  payments.  Subject  to  certain  limitations,  the  Debentures  may be
converted,  at the option of the holder, in whole or in part, into common shares
with a  conversion  price  equal to 105% of the volume  weighted  average of the
closing prices of the Company's  common shares as reported on The American Stock
Exchange for the ten (10) trading days  immediately  preceding the Closing Date.
The Debentures  also contain  certain  redemption  rights for the benefit of the
holder for a period  commencing  on September  19,  2002.  The  Debentures,  the
Warrants,  and the common stock issuable  thereon also contain  prohibitions  on
transfer for a period of one (1) year from the Closing Date.

In connection  with the  completion  of the  transactions  under the  Securities
Purchase  Agreement,  eMagin  and SK also  entered  into a  Registration  Rights
Agreement dated as of September 18, 2001, providing SK with certain registration
rights  under the  Securities  Act of 1933,  as  amended,  with  respect  to the
Company's  common stock issued or issuable in lieu of cash interest  payments on
the  Debentures,  upon  conversion  of the  Debentures  and/or  exercise  of the
Warrants.

The  foregoing  is not  intended to be a full and  complete  description  of the
transaction.  Terms of the transaction are more fully described in the copies of
the  Securities  Purchase  Agreement,  the  form  of  4%  Series  A  Convertible
Debenture,  the form of Stock  Purchase  Warrant,  and the  Registration  Rights
Agreement attached as exhibits to this Form 8-K.



ITEM 7.           EXHIBITS.

                  Exhibit
                  Number   Description

                    4.1  Securities Purchase Agreement dated as of September 18,
                         2001  by  and  between   eMagin   Corporation   and  SK
                         Corporation.

                    4.2  Form of 4% Series A Convertible Debenture due September
                         18, 2004.




                    4.3  Form of Stock  Purchase  Warrant  to  Purchase  205,479
                         shares of common stock of eMagin Corporation.

                    4.4  Registration Rights Agreement dated as of September 19,
                         2001  by  and  between   eMagin   Corporation   and  SK
                         Corporation.

                    99.1 Press release dated September 19, 2001.








                                   SIGNATURES

     Pursuant to the  requirements  of the  Securities and Exchange Act of 1934,
the  registrant  has duly  caused  this report to be signed on its behalf by the
undersigned hereunto duly authorized.



                                      EMAGIN CORPORATION



                                  By:         /s/  Gary W. Jones
                                       ----------------------------------------
                                      Name:   Gary W. Jones
                                      Title:  President and Chief Executive
                                              Officer

Dated: September 26, 2001

EX-4

                          SECURITIES PURCHASE AGREEMENT



          This SECURITIES PURCHASE AGREEMENT, dated as of September 18, 2001
(this "Agreement"), by and between eMagin Corporation, a Delaware corporation
with principal executive offices located at 2070 Route 52, Hopewell Junction, NY
12533 (the "Company"), and SK Corporation, a corporation organized under the
laws of the Republic of Korea with principal executive offices located at 99
Seorin-dong, Jongro-gu, Seoul 110-110, Korea ("Buyer").

          WHEREAS, Buyer desires to purchase from the Company, and the Company
desires to issue and sell to Buyer, upon the terms and subject to the conditions
of this Agreement, (i) the Company's 4% Convertible Debentures in the aggregate
principal amount of $3,000,000, in the form attached hereto as Exhibit A (the
"Debentures") and (ii) Common Stock Purchase Warrants in the form attached
hereto as Exhibit B to purchase 205,479 shares of Common Stock (as defined
below) (collectively, the "Warrants");

          WHEREAS, upon the terms and subject to the conditions set forth in the
Debentures, the Debentures are convertible into shares of the Company's common
stock, par value $.001 per share (the "Common Stock"); and

          WHEREAS, the Warrants, upon the terms and subject to the conditions
specified in the Warrants, will be exercisable for a period of three (3) years;

          NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:

I.        Purchase and Sale of the Debentures and Warrants

          A. Transaction. Buyer hereby agrees to purchase from the Company, and
the Company has offered and hereby agrees to issue and sell to Buyer in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act of 1933, as amended (the "Securities Act"), the Debentures
and the Warrants.

          B. Purchase Price; Form of Payment. The purchase and sale of the
Debentures and Warrants shall take place at the offices of SK Corporation, 110
East 55th Street, New York, New York, at 10:00 a.m., on September 18, 2001, or
at such other time and place as the Company and the Buyer mutually agree upon,
orally or in writing (which time and place are designated as the "Closing
Date"). On the Closing Date, the Company shall deliver to the Buyer a
certificate(s) representing (i) Three Million Dollars ($3,000,000) face amount
of the Debentures (the "Debentures") and (ii) the Warrants, such certificate(s)
entitling the Buyer to all rights and privileges assigned to such Debentures and
Warrants under this Agreement, in consideration for


the payment on the Closing Date by the Buyer to the Company of Three Million
Dollars ($3,000,000) (the "Purchase Price") by wire transfer to an account
designated by the Company.

          Concurrently with the execution of this Agreement, the parties hereto
shall have entered into the Registration Rights Agreement substantially in the
form of Exhibit C attached hereto (the "Registration Rights Agreement").

II.       Buyer's Representations and Warranties

          Buyer represents and warrants to and covenants and agrees with the
Company as follows:

          A. Buyer is purchasing the Debentures, the Warrants, the Common Stock
issuable upon exercise of the Warrants (the "Warrant Shares"), the Common Stock,
if any, issuable in payment of interest on the Debentures (the "Interest
Shares"), and the Common Stock issuable upon conversion of the Debentures (the
"Conversion Shares" and, collectively with the Debentures, the Warrants, the
Warrant Shares and the Interest Shares, the "Securities") for its own account,
for investment purposes only and not with a view towards or in connection with
the public sale or distribution thereof in violation of the Securities Act.

          B. Buyer (i) is an "accredited investor" within the meaning of Rule
501 of Regulation D under the Securities Act, (ii) is experienced in making
investments of the kind contemplated by this Agreement, (iii) has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Securities,
(iv) is capable, by reason of its business and financial experience, of
evaluating the relative merits and risks of an investment in the Securities, and
(v) is able to afford the loss of its investment in the Securities. Buyer
understands that its investment in the Securities involves a high degree of
risk.

          C. Buyer understands that the Securities are being offered and sold by
the Company in reliance on an exemption from the registration requirements of
the Securities Act and equivalent state securities and "blue sky" laws, and that
the Company is relying upon the accuracy of, and Buyer's compliance with,
Buyer's representations, warranties and covenants set forth in this Agreement to
determine the availability of such exemption and the eligibility of Buyer to
purchase the Securities;

          D. Buyer understands that the Securities have not been approved or
disapproved by the Securities and Exchange Commission (the "Commission") or any
state securities commission.

          E. This Agreement has been duly and validly authorized, executed and
delivered by Buyer and is a valid and binding agreement of Buyer enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally

                                       2

and except as rights to indemnity and contribution may be limited by federal or
state securities laws or the public policy underlying such laws.

          F. Neither Buyer nor its affiliates nor any person acting on its or
their behalf has the intention of entering, or will enter into any put option,
short position or other similar instrument or position with respect to the
Common Stock, and neither Buyer nor any of its affiliates nor any person acting
on its or their behalf will use at any time shares of Common Stock acquired
pursuant to this Agreement to settle any put option, short position or other
similar instrument or position that may have been entered into prior to the
execution of this Agreement.

          G. Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Securities which have been
requested by Buyer. Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company.

          H. Buyer understands that no United States federal or state agency or
any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities or the fairness or suitability
of the investment in the Securities nor have such authorities passed upon or
endorsed the merits of the offering of the Securities.

          I. Buyer understands that except as provided in the Registration
Rights Agreement: (i) the Securities have not been and are not being registered
under the 1933 Act or any state securities laws, and may not be offered for
sale, sold, assigned or transferred unless (A) subsequently registered
thereunder, (B) Buyer shall have delivered to the Company an opinion of counsel,
in form and substance reasonably acceptable to the Company to the effect that
such Securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration, or (C) Buyer
provides the Company with an assurance (which assurance shall be acceptable to
the Company in its reasonable discretion and shall include, without limitation,
an opinion of counsel in form and substance reasonably acceptable to the
Company) that such Securities could then be sold, assigned or transferred
pursuant to Rule 144 promulgated under the 1933 Act, as amended (or a successor
rule thereto) ("Rule 144"); (ii) any sale of the Securities made in reliance on
Rule 144 may be made only in accordance with the terms of Rule 144 and further,
if Rule 144 is not applicable, any resale of the Securities under circumstances
in which the seller (or the person through whom the sale is made) may be deemed
to be an underwriter (as that term is defined in the 1933 Act) may require
compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder.

          J. Buyer understands that as of the date of this Agreement, the
Securities are subject to a one-year holding period during which time the
Securities may not be sold, transferred or otherwise disposed without the
written consent of the Company.

          K. (a) To Buyer's knowledge, the execution, delivery and performance
by the Buyer of this Agreement and each of the other documents to which it is a
party contemplated

                                       3

hereby and the consummation of the transactions contemplated hereby and thereby
do not and will not contravene (x) any United States federal, state or local
law, statute, rule, regulation, order, writ, decree or permit of any
governmental authority and (y) any rule or listing requirement of The American
Stock Exchange, Inc. (collectively "Applicable Law"). To the Buyer's knowledge
the execution, delivery and performance by the Buyer of each of this Agreement
and each of the other documents to which it is a party contemplated hereby and
the consummation of the transactions contemplated hereby and thereby (i) will
not violate, result in a breach of or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under any contract to which the Buyer is party or
by which the Buyer is bound or to which any of its assets is subject, except for
any such violations, breaches or defaults that would not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the
ability of the Buyer to perform its obligations under this Agreement or the
other documents contemplated hereby, and (ii) will not conflict with or violate
any provision of the certificate of formation or operating agreement or other
governing documents of the Buyer.

          (b) No consent, authorization or order of, or filing or registration
with, any governmental authority or other person or entity is required to be
obtained or made by the Buyer for the execution, delivery and performance of any
of this Agreement and each of the other documents to which it is a party
contemplated hereby and the consummation of the transactions contemplated hereby
and thereby, except where the failure to obtain such consents, authorizations or
orders, or make such filings or registrations, would not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the
ability of the Buyer to perform its obligations under this Agreement and each of
the other documents to which it is a party contemplated hereby and to consummate
the transactions contemplated hereby and thereby.

          L. Buyer is not itself, and no part of the assets used or to be used
by it to purchase and/or hold the Securities, or any interest therein,
constitute assets of an employee benefit plan which is subject to Title I of the
Employee Retirement Income Security Act of 1974, as amended, or a plan which is
subject to Section 4975 of the Internal Revenue Code of 1986, as amended, or an
entity whose underlying assets include "plan assets" by reason of any such
employee benefit plan's or plan's investment in such entity.

          M. Buyer, and each subsequent holder of the Securities, covenants that
it will not transfer or dispose of the Securities to be purchased by it or any
interest therein to any Person unless such Person shall (a) make all warranties
and representations of Buyer contained in Section II hereof and (b) assume all
covenants of Buyer contained in this Section II.M. in a written instrument
delivered to and reasonably satisfactory to the Company, provided however that
the restrictions of this Section II.M. shall not apply to any public sale or
other transfer made through a national securities exchange, including without
limitation, the American Stock Exchange.


III.      The Company's Representations

          The Company represents and warrants to Buyer that:

                                       4

          A.       Capitalization.

          1. The authorized capital stock of the Company consists solely of: (x)
100,000,000 shares of Common Stock, of which 25,085,145 shares are issued and
outstanding on the date hereof; and (y) 10,000,000 shares of preferred stock,
none of which are issued and outstanding. As of the date hereof, the Company has
outstanding stock options to purchase 3,524,018 shares of Common Stock at an
average priced of $2.73, and warrants outstanding to purchase 749,896 shares of
Common Stock at an average priced of $3.35. All of the outstanding shares of
Common Stock have been duly authorized, fully paid and are nonassessable and
issued in compliance with all applicable federal securities laws.

          2. The Conversion Shares, the Interest Shares and the Warrant Shares
have been duly and validly authorized and reserved for issuance by the Company,
and] when issued by the Company upon conversion of, or in lieu of cash interest
on, the Debentures and on exercise of the Warrants will be duly and validly
issued, fully paid and nonassessable and will not subject the holder thereof to
personal liability by reason of being such holder.

          3. Except as disclosed in the reports, registration statements and
other filings, and all supplements and amendments thereto made by the Company
with the SEC under the 1933 Act or the Securities Exchange Act of 1934, as
amended (the "1934 Act") (the "SEC Filings") or on Schedule III.A.3. hereto,
there are no preemptive, subscription, "call," right of first refusal or other
similar rights to acquire any capital stock of the Company or any of its
Subsidiaries or other voting securities of the Company that have been issued or
granted to any person.

          4. Schedule III.A.4. hereto or the SEC Filings list all the
subsidiaries of the Company (the "Subsidiaries"). Except as disclosed on
Schedule III.A.4. hereto, in the SEC Filings or as would not reasonably be
expected to have a Material Adverse Effect (as defined below), the Company does
not own or control any interest in any other corporation, partnership, limited
liability company, unincorporated business organization, association, trust or
other business entity.

          B.       Organization; Reporting Company Status.

          1. Each of the Company and the Subsidiaries is a corporation duly
organized, and validly existing and in good standing under the laws of the state
or jurisdiction in which it is incorporated and is duly qualified as a foreign
corporation in all jurisdictions in which the failure so to qualify would
reasonably be expected to have a material adverse effect on the business,
results of operations or financial condition of the Company and the Subsidiaries
taken as a whole or on the consummation of the transactions contemplated by this
Agreement (a "Material Adverse Effect").

          2. The Company has registered the Common Stock pursuant to Section 12
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
Common Stock is listed and traded on the American Stock Exchange ("Amex") and,
except as set forth on Schedule III.B.2 or the SEC Filings, the Company has not
received any notice regarding, and to


                                       5

its knowledge there is no threat of, the termination or discontinuance of the
eligibility of the Common Stock for such listing.

          C. Authorization. The Company (i) has duly and validly authorized and
reserved for issuance 100,000,000 shares of Common Stock, which is a number
sufficient for the issuance of the Conversion Shares, Interest Shares and
Warrant Shares in full, and (ii) at all times from and after the date hereof
shall have a sufficient number of shares of Common Stock duly and validly
authorized and reserved for issuance of the Conversion Shares, Interest Shares
and Warrant in full. Schedule III.C. hereto and the SEC Filings set forth (i)
all issuances and sales by the Company since December 31, 2000 of its capital
stock, and other securities convertible into or exercisable or exchangeable for
capital stock of the Company, (ii) the amount of such securities sold, including
the amount of any underlying shares of capital stock, (iii) the purchaser
thereof, and (iv) the amount paid therefor.

          D. Authority; Validity and Enforceability. The Company has the
requisite corporate power and authority to perform its obligations under the
Debentures and the Warrants and to enter into the Documents (as hereinafter
defined) and to perform all of its obligations hereunder and thereunder
(including the issuance, sale and delivery to Buyer of the Securities). The
execution, delivery and performance by the Company of the Documents and the
consummation by the Company of the transactions contemplated hereby and thereby
have been duly and validly authorized by all necessary corporate action on the
part of the Company. Each of the Documents has been duly and validly executed
and delivered by the Company and each Document constitutes a valid and binding
obligation of the Company enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and except as rights to indemnity and contribution may be
limited by federal or state securities laws or the public policy underlying such
laws. The Securities have been duly and validly authorized for issuance by the
Company and, when executed and delivered by the Company, will be valid and
binding obligations of the Company enforceable against it in accordance with
their terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally. For purposes of this Agreement, the term
"Documents" means (i) this Agreement; (ii) the Registration Rights Agreement;
(iii) the Debentures; and (iv) the Warrants.

          E. Validity of Issuance of the Securities. The Debentures and Warrants
as of the Closing Date, and the Conversion Shares, the Interest Shares and the
Warrant Shares upon their issuance in accordance with the Debentures and the
Warrants, respectively, will be validly issued and outstanding, fully paid and
nonassessable, and, except as otherwise disclosed in the SEC Filings, not
subject to any preemptive rights, rights of first refusal, tag-along rights,
drag-along rights or other similar rights.

          F. Non-contravention. Except as set forth on Schedule III.F., the SEC
Filings or as would not reasonably be expected to have a Material Adverse
Effect, the execution and delivery by the Company of the Documents, the issuance
of the Securities, and the consummation by the Company of the other transactions
contemplated hereby and thereby do


                                       6

not, and compliance with the provisions of this Agreement and other Documents
will not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation, or result in the
creation of any Lien (as defined in Section III.T.) upon any of the material
properties or assets of the Company or any of its Subsidiaries under, or result
in the termination of, or require that any consent be obtained or any notice be
given with respect to, (i) the Certificate of Incorporation or By-Laws of the
Company or the comparable charter or organizational documents of any of its
Subsidiaries, (ii) any loan or credit agreement, note, bond, or other agreement,
instrument or permit applicable to the Company or any of its Subsidiaries or
their respective properties or assets, or (iii) any Applicable Law (as defined
in Section II.J.) applicable to, or any judgment, decree or order of any court
or government body having jurisdiction over, the Company or any of its
Subsidiaries or their respective properties or assets.

          G. Approvals. No authorization, approval or consent of any court or
public or governmental authority is required to be obtained by the Company for
the issuance and sale of the Debentures or the Warrants (or the Conversion
Shares, the Interest Shares or Warrant Shares) to Buyer as contemplated by this
Agreement, except such authorizations, approvals and consents as have been
obtained by the Company prior to the date hereof.

          H. Commission Filings. The Company has properly and timely filed with
the Commission all reports, proxy statements, forms and other documents required
to be filed with the Commission under the Securities Act and the Exchange Act
since July 1, 1998 (the "Commission Filings"). As of their respective dates, (i)
the Commission Filings complied in all material respects with the requirements
of the Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the Commission promulgated thereunder applicable to such
Commission Filings, and (ii) none of the Commission Filings contained at the
time of its filing any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not materially misleading. The financial statements of the Company included in
the Commission Filings, as of the dates of such documents, were true and
complete in all material respects and complied with applicable accounting
requirements and the published rules and regulations of the Commission with
respect thereto, were prepared in accordance with generally accepted accounting
principles in the United States ("GAAP") (except in the case of unaudited
statements permitted by Form 10-Q under the Exchange Act) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly presented the consolidated financial position of the
Company and its Subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit adjustments that
in the aggregate are not material and to any other adjustment described
therein).

          I. Absence of Litigation. Except as set forth on Schedule III.I. or as
would not reasonably be expected to have a Material Adverse Effect, there are
(i) no suits, actions or proceedings pending or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries, and (ii) no
judgments, decrees, injunctions or orders of any court or other governmental
entity or arbitrator outstanding against the Company or any Subsidiary.

                                       7

          J. Absence of Events of Default. Except as set forth in Schedule
III.J. or as would not reasonably be expected to have a Material Adverse Effect,
no "Event of Default" (as defined in any agreement or instrument to which the
Company is a party) and no event which, with notice, lapse of time or both,
would constitute an Event of Default (as so defined), has occurred and is
continuing.

          K. Financial Statements. Each of the Financial Statements is complete
and correct in all material respects, has been prepared in accordance with GAAP
(subject, in the case of the interim Financial Statements, to normal year end
adjustments and the absence of footnotes), and fairly presents the financial
position, results of operations and cash flows of the Company as at the dates
and for the periods indicated. For purposes hereof, December 31, 2000 is
hereinafter referred to as the "Balance Sheet Date". For the purposes of this
Section III.K., the term "Financial Statements" means (i) audited balance sheet
of the Company and the Subsidiaries as at December 31, 2000, 1999, and 1998,
respectively, and the related audited statements of income, changes in
stockholders' equity and cash flows for the three fiscal years ended December
31, 2000, 1999, and 1998 including the related notes and schedules thereto and
(ii) unaudited balance sheets of the Company and the Subsidiaries and the
statements of income, changes in stockholders' equity and cash flows as at the
end of and for each fiscal quarter ended since December 31, 2000 including the
related notes and schedules thereto and all management letters, if any, from the
Company's independent auditors relating to the dates and periods covered by the
Financial Statements.

          L. Compliance with Laws; Permits. Except as would not reasonably be
expected to have a Material Adverse Effect, each of the Company and its
Subsidiaries is in compliance with all laws, regulations, codes and statutes
(collectively, "Laws") applicable to it or to the conduct of its business. The
Company possesses all material permits, approvals, authorizations, licenses,
certificates and consents from all public and governmental authorities which are
necessary to conduct its business.

          M. Related Party Transactions. Except as set forth on Schedule III.M.
hereto or in the Commission Filings, neither the Company nor any of its
officers, directors or "Affiliates" (as such term is defined in Rule 12b-2 under
the Exchange Act) nor any family member of any officer, director or Affiliate of
the Company has borrowed any moneys from or has outstanding any indebtedness or
other similar obligations to the Company or any of the Subsidiaries. Except as
set forth on Schedule III.M. hereto or in the Commission Filings, neither the
Company nor any of its officers, directors or Affiliates nor any family member
of any officer, director or Affiliate of the Company (i) owns any direct or
indirect interest constituting more than a 1% equity (or similar profit
participation) interest in, or controls or is a director, officer, partner,
member or employee of, or consultant or lender to or borrower from, or has the
right to participate in the profits of, any person or entity which is (x) a
competitor, supplier, customer, landlord, tenant, creditor or debtor of the
Company or any Subsidiary, (y) engaged in a business related to the business of
the Company or any Subsidiary, or (z) a participant in any transaction to which
the Company or any Subsidiary is a party or (ii) is a party to any contract,
agreement, commitment or other arrangement with the Company or any Subsidiary.

                                       8

          N. Insurance. Each of the Company and the Subsidiaries maintains
property and casualty, general liability, workers' compensation, environmental
hazard, personal injury and other similar types of insurance that is adequate
and consistent with industry standards and the Company's historical claims
experience. None of the Company or the Subsidiaries has received notice from,
and none of them has knowledge of any claim by, any insurer (that has issued any
insurance policy to the Company or any Subsidiary) that such insurer intends to
deny coverage under or cancel, discontinue or not renew any insurance policy
presently in force.

          O. Securities Law Matters. Assuming the accuracy of the
representations and warranties of Buyer set forth in Article II hereof, the
offer and sale by the Company of the Securities is exempt from the registration
and prospectus delivery requirements of the Securities Act and the rules and
regulations of the Commission thereunder. No form of general solicitation or
advertising has been used or authorized by the Company or any of its officers,
directors or Affiliates in connection with the offer or sale of the Debentures
and the Warrants (and the Conversion Shares, the Interest Shares and the Warrant
Shares) as contemplated by this Agreement or any other agreement to which the
Company is a party.

          P. Environmental Matters. Except as set forth on Schedule III.P.
hereto, the Company is not in violation in any material respect of any
applicable statute, law or regulation relating to the environment or
occupational health and safety and to the best of its knowledge, no material
expenditures are or will be required in order to comply with any such existing
statute, law or regulation. The Company has not caused or contracted with any
party for, the generation, use, transportation, treatment, storage or disposal
of any Hazardous Substances (as defined below) in violation of any of the
material applicable Environmental Laws (as defined below) in connection with the
operation of its business or otherwise. For the purposes of this Agreement, the
term "Environmental Laws" shall mean any federal, state or local law or
ordinance or regulation pertaining to the protection of human health or the
environment, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Sections 9601, et seq., the
Emergency Planning and Community Right-to-Know Act, 42 U.S.C. Sections 11001, et
seq., and the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et
seq. For purposes of this Agreement, the term "Hazardous Substances" shall
include oil and petroleum products, asbestos, polychlorinated biphenyls, urea
formaldehyde and any other materials classified as hazardous or toxic under the
Environmental Laws.

          Q. Labor Matters. Except as reflected in the Commission Filings or
Schedule III.Q, neither the Company nor any of the Subsidiaries is party to any
labor or collective bargaining agreement, and there are no labor or collective
bargaining agreements which pertain to any employees of the Company or any
Subsidiary. Except as reflected in the Commission Filings no employees of the
Company or any of the Subsidiaries are represented by any labor organization and
none of such employees has made a pending demand for recognition, and there are
no representation proceedings or petitions seeking a representation proceeding
presently pending or, to the Company's knowledge, threatened to be brought or
filed, with the National Labor Relations Board or other labor relations
tribunal. Except as reflected in the Commission Filings, there are no (i)
strikes, work stoppages, lockouts or arbitrations or (ii) material

                                       9

grievances or other material labor disputes pending or, to the knowledge of the
Company, threatened against or involving the Company or any of the Subsidiaries.
Except as reflected in the Commission Filings, there are no unfair labor
practice charges, grievances or complaints pending or, to the knowledge of the
Company, threatened by or on behalf of any employee or group of employees of the
Company or any of the Subsidiaries.

          R. ERISA Matters. Except as reflected in the Commission Filings, all
Plans maintained by the Company or any of its Subsidiaries and ERISA Affiliates
are listed in Schedule III.R. and copies of all documentation relating to such
Plans (including, but not limited to, to the extent applicable, copies of
written Plans, summary plan descriptions, trust agreements, the three most
recent annual returns, and IRS determination letters) have been delivered to or
made available for review by the Buyer. Each Plan has at all times been
maintained and administered in all material respects in accordance with its
terms and the requirements of applicable law, including ERISA and the Code,
except for any failures to so maintain or administer a Plan that would not,
individually or in the Aggregate, reasonably be expected to result in a Material
Adverse Effect. Each Plan intended to qualify under section 401(a) of the Code
has received a favorable determination letter or opinion letter from the
Internal Revenue Service, or is within the remedial amendment period under
Section 401(b) of the Code for submitting an application for any such
determination letter, and nothing has occurred that would reasonably be expected
to adversely affect any such determination letter or opinion letter, since the
date thereof, or the refusal of the Internal Revenue Service to issue any such
determination letter. No Reportable Event has occurred, been waived or exists as
to which the Company or any of its Subsidiaries and ERISA Affiliates was
required to file a report with the PBGC that would reasonably be expected to
result in a Material Adverse Effect. The present value of all liabilities under
each Pension Plan (based on those assumptions used to fund such Plans) listed in
Schedule III.R. did not, as of the most recent annual valuation date applicable
thereto, exceed the value of the assets of such Pension Plan by an amount that
would reasonably be expected to result in a Material Adverse Effect. None of the
Company, its Subsidiaries and ERISA Affiliates has incurred, or reasonably
expects to incur, any Withdrawal Liability with respect to any Multi-employer
Plan that would reasonably be expected to result in a Material Adverse Effect.
None of the Company, its Subsidiaries and ERISA Affiliates has received any
notification that any Multi-employer Plan is in reorganization or has been
terminated within the meaning of Title IV of ERISA, and no Multi-employer Plan
is reasonably expected to be in reorganization or termination where such
reorganization or termination has resulted or would reasonably be expected to
result in increases to the contributions required to be made to such Plan by an
amount that would reasonably be expected to result in a Material Adverse Effect.
No direct, contingent or secondary liability has been incurred or is expected to
be incurred by the Company or any of its Subsidiaries under Title IV of ERISA to
any party with respect to any Plan, or with respect to any other Plan presently
or heretofore maintained or contributed to by any ERISA Affiliate. Neither the
Company nor any of its Subsidiaries and ERISA Affiliates has incurred any
liability for any tax imposed under sections 4971 through 4980B of the Code or
civil liability under section 502(i) or (l) of ERISA that would, individually or
in the aggregate reasonably be expected to result in a Material Adverse Effect.
No suit, action or other litigation or any other claim which would reasonably be
expected to result in a Material Adverse Effect (excluding claims for benefits
incurred in the ordinary course of plan activities) has been brought or, to the

                                       10

knowledge of the Company, threatened against or with respect to any Plan and
there are no facts or circumstances known to the Company or any of its
Subsidiaries or ERISA Affiliates that could reasonably be expected to give rise
to any such suit, action or other litigation. All contributions to Plans that
were required to be made prior to the date hereof under such Plans have been
made, and all benefits accrued under any unfunded Plan have been paid, accrued
or otherwise adequately reserved in accordance with GAAP, all of which accruals
under unfunded Plans are as disclosed in Schedule III.R.

          As used in this Agreement:

          "Code" means the Internal Revenue Code of 1986, as amended.

          "ERISA" means the Employee Retirement Income Security Act of 1974, or
any successor statute, together with the regulations thereunder, as the same may
be amended from time to time.

          "ERISA Affiliate" means any trade or business (whether or not
incorporated) that is a member of a group of which the Company is a member and
which is treated as a single employer under section 414 (a) and (b) of the Code.

          "Multi-employer Plan" means a multi-employer plan as defined in
section 4001(a)(3) of ERISA to which the Company or any ERISA Affiliate (other
than one considered an ERISA Affiliate only pursuant to subsection (m) or (o) of
section 414 of the Code) is making or accruing an obligation to make
contributions, or has within any of the preceding six plan years made or accrued
an obligation to make contributions.

          "PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.

          "Pension Plan" means any pension plan (other than a Multi-employer
Plan) subject to the provisions of Title IV of ERISA or section 412 of the Code
that is maintained for employees of the Company or any of its Subsidiaries, or
any ERISA Affiliate.

          "Plan" means any material bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock option,
stock ownership, stock appreciation rights, phantom stock, day or dependent
care, legal services, cafeteria, life, health, accident, disability, or other
insurance, severance, separation or other employee benefit plan, practice,
policy or arrangement or whether for the benefit of a single individual or more
than one individual including, but not limited to, any "employee benefit plan"
within the meaning of section 3(3) of ERISA, including any Pension Plan, but
excluding any Multi-employer Plan.

          "Reportable Event" means any reportable event as defined in section
4043(b) of ERISA or the regulations issued thereunder with respect to a Plan.

                                       11

          "Withdrawal Liability" means liability to a Multi-employer Plan as a
result of a complete or partial withdrawal from such Multi-employer Plan, as
such terms are defined in Part 1 of Subtitle E of Title IV of ERISA.

          S.       Tax Matters.

          1. The Company has filed all material Tax Returns which it is required
to file under applicable Laws; all such material Tax Returns are true and
accurate in all material respects and have been prepared in, in each case, in
all material respects, compliance with all applicable Laws; the Company has paid
all material Taxes due and owing by it (whether or not such Taxes are required
to be shown on a Tax Return) and has withheld and paid over to the appropriate
taxing authorities all material Taxes which it is required to withhold from
amounts paid or owing to any employee, stockholder, creditor or other third
parties; and since the Balance Sheet Date, the charges, accruals and reserves
for Taxes with respect to the Company (including any provisions for deferred
income taxes) reflected on the books of the Company are in the aggregate
adequate to cover any material Tax liabilities of the Company if its current tax
year were treated as ending on the date hereof.

          2. No material written claim has been made by a taxing authority in a
jurisdiction where the Company does not file tax returns that the Company is or
may be subject to taxation by such jurisdiction with respect to a taxable year
that remains open. There are no foreign, federal, state or local tax audits or
administrative or judicial proceedings pending or being conducted with respect
to the Company. The Company (A) has not executed or entered into a closing
agreement pursuant to section 7121 of the Code or any predecessor provision
thereof or any similar provision of state, local or foreign law; and (B) has not
agreed to or is required to make any adjustments pursuant to section 481(a) of
the Code or any similar provision of state, local or foreign law by reason of a
change in accounting method initiated by the Company or any of its subsidiaries
or has any knowledge that the IRS has proposed any such adjustment or change in
accounting method, or has any application pending with any taxing authority
requesting permission for any changes in accounting methods that relate to the
business or operations of the Company, in each case, with respect to a taxable
year or period for which any amount of taxes may remain due by the Company after
the Closing Date. The Company has not been a United States real property holding
corporation within the meaning of section 897(c)(2) of the Code during the
applicable period specified in section 897(c)(1)(A)(ii) of the Code.

          3. The Company is not liable for the Taxes of another person that is
not a subsidiary of the Company under Treas. Reg. Section 1.1502-6 (or
comparable provisions of state, local or foreign law). The Company is not a
party to any tax sharing agreement. The Company has not made any payments, is
not obligated to make payments and is not a party to an agreement that could
obligate it to make any payments that would not be deductible under section 280G
of the Code.

          As used in this Agreement:

          "IRS" means the United States Internal Revenue Service.

                                       12

          "Tax" or "Taxes" means federal, state, county, local, foreign, or
other income, gross receipts, ad valorem, franchise, profits, sales or use,
transfer, registration, excise, utility, environmental, communications, real or
personal property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.

          "Tax Return" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and including any
amendment thereof.

          T. Property. Except as set forth on Schedule III.T. or the Commission
Filings, or as would not reasonably be expected to have a Material Adverse
Effect, each of the Company and the Subsidiaries has good title to all of its
assets and properties material to the conduct of its business, free and clear of
any material liens, pledges, security interests, claims, encumbrances or other
restrictions (collectively, "Liens"). With respect to any assets or properties
it leases, each of the Company and its Subsidiaries holds a valid and subsisting
leasehold interest therein, free and clear of any Liens, is in compliance, in
all material respects, with the terms of the applicable lease, and enjoys
peaceful and undisturbed possession under such lease. All of the assets and
properties of the Company and its Subsidiaries that are material to the conduct
of business as presently conducted or as proposed to be conducted by it are in
good operating condition and repair.

          U. Intellectual Property. Except as would not have a Material Adverse
Effect, the Company owns or possesses adequate and enforceable rights to use all
patents, patent applications, trademarks, trademark applications, trade names,
service marks, copyrights, copyright applications, licenses, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) and other similar rights and
proprietary knowledge (collectively, "Intangibles") necessary for the conduct of
its business as now being conducted. Except as set forth on Schedule III.U. or
as would not reasonably be expected to have a Material Adverse Effect (and other
than "shrink-wrap" or "click-wrap" license agreements or license agreements
relating to "off-the-shelf" software), the Company has right, title and interest
in all of the Intangibles, free and clear of Liens. To the best knowledge of the
Company, the Company is not infringing upon or in conflict with any right of any
other person with respect to any Intangibles. Except as disclosed on Schedule
III.U. hereto or as would not reasonably be expected to have a Material Adverse
Effect, (i) to the best knowledge of the Company no claims have been asserted by
any individual, partnership, corporation, unincorporated organization or
association, limited liability company, trust or other entity (collectively, a
"Person") contesting the validity, enforceability, use or ownership of any owned
Intangibles, and (ii) neither the Company nor the Subsidiaries has any knowledge
of infringement or misappropriation of the owned Intangibles by any third party.
The Company has, and will continue to maintain and protect, its rights under the
Intangibles necessary to create, use, or commercialize micro-display related
technology as long as it is in the business of creating, using or
commercializing micro-display related technology.

          V. Contracts. All contracts, agreements, notes, instruments,
franchises, leases, licenses, commitments, arrangements or understandings,
written or oral (collectively,

                                       13

"Contracts") which are material to the business and operations of the Company
and the Subsidiaries are in full force and effect and constitute legal, valid
and binding obligations of the Company and the Subsidiaries and, to the
knowledge of the Company, the other parties thereto; the Company and the
Subsidiaries and, to the knowledge of the Company, each other party thereto,
have performed in all material respects all obligations required to be performed
by them under the Contracts, and no material violation or default exists in
respect thereof, nor any event that with notice or lapse of time, or both, would
constitute a default thereof, on the part of the Company and the Subsidiaries
or, to the knowledge of the Company, any other party thereto; and the validity
and effectiveness of all Contracts will not be materially adversely affected by
the transactions contemplated by this Agreement.

          W. Investment Company Act. Neither the Company nor any of the
Subsidiaries is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended (the "Investment Company Act"), nor is the
Company nor any of the Subsidiaries directly or indirectly controlled by or
acting on behalf of any Person which is an "investment company" within the
meaning of the Investment Company Act.

IV.       Certain Covenants and Acknowledgments

          A. Restrictive Legend. Buyer acknowledges and agrees that, upon
issuance pursuant to this Agreement, the Securities (including any Interest
Shares, Conversion Shares or the Warrant Shares) shall have endorsed thereon a
legend in substantially the following form (and a stop-transfer order may be
placed against transfer of the Interest Shares, the Warrant Shares and the
Conversion Shares until such legend has been removed):

     "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
     1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
     STATE, AND ARE BEING OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM THE
     REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THESE
     SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
     REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL,
     IN FORM AND SUBSTANCE ACCEPTABLE TO THE COMPANY THAT REGISTRATION IS NOT
     REQUIRED UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS.


     THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
     RESTRICTIONS UPON TRANSFER AS SET FORTH IN THAT CERTAIN SECURITIES PURCHASE
     AGREEMENT DATED SEPTEMBER __, 2001, BETWEEN THE ISSUER OF THE SECURITIES
     AND THE STOCKHOLDER A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
     ISSUER."

                                       14

          The legend set forth above shall be removed and the Company shall
issue a certificate without such legend to the holder of the Securities upon
which it is stamped, if, unless otherwise required by state securities laws, (i)
such Securities are registered for sale under the 1933 Act, (ii) in connection
with a sale transaction, such holder provides the Company with an opinion of
counsel, in form and substance reasonably acceptable to the Company, to the
effect that a public sale, assignment or transfer of the Securities may be made
without registration under the 1933 Act, or (iii) such holder provides the
Company with reasonable assurances (including, without limitation, an opinion of
counsel in form and substance reasonably acceptable to the Company) that the
Securities can be sold pursuant to Rule 144.

          B. Filings. The Company shall make all necessary Commission Filings
and "blue sky" filings required to be made by the Company in connection with the
sale of the Securities to Buyer as required by all Applicable Law, and shall
provide a copy thereof to Buyer promptly after such filing.

          C. Reporting Status. So long as Buyer beneficially owns any of the
Securities, the Company shall use its reasonable efforts to timely file all
reports required to be filed by it with the Commission pursuant to Section 13 or
15(d) of the Exchange Act.

          D. Listing. Except to the extent the Company lists its Common Stock on
another public exchange, including, without limitation The New York Stock
Exchange or The Nasdaq Stock Market, the Company shall use its commercially
reasonable efforts to maintain its listing of the Common Stock on Amex. If the
Common Stock is delisted from Amex, the Company will use its reasonable best
efforts to list the Common Stock on the most liquid national securities exchange
or quotation system that the Common Stock is qualified to be listed on.

          E. Reserved Conversion Shares. The Company at all times from and after
the date hereof shall have such number of shares of Common Stock duly and
validly authorized and reserved for issuance as shall be sufficient for the
conversion in full of, and the payment of interest on, the Debentures and the
exercise in full of the Warrants. The Company shall, not later than five (5)
Business Days after its receipt of the Conversion Notice (as defined in the
Debentures), issue and deliver the requisite shares of Common Stock Issued at
Conversion (as defined in the Debentures), according to the terms of the
Debentures.

          F. Information. Each of the parties hereto acknowledges and agrees
that Buyer shall not be provided with, nor be given access to, any material
non-public information relating to the Company or any of the Subsidiaries.

          G. Accounting and Reserves. The Company shall maintain a standard and
uniform system of accounting and shall keep proper books and records and
accounts in which full, true and correct entries shall be made of its
transactions, all in accordance with GAAP applied on a consistent basis through
all periods, and shall set aside on such books for each fiscal year all such
reserves for depreciation, obsolescence, amortization, bad debts and other
purposes in connection with its operations as are required by such principles so
applied.

                                       15

          H.       Adjustment.

          1. In the event that at any time on or prior to December 31, 2001, the
Company shall have entered into a binding agreement to issue and sell to an
Interested Third Party (as defined below) any debenture convertible into shares
of the Company's Common Stock or other securities convertible into shares of the
Company's Common Stock where (i) conversion price is lower than the Conversion
Price (as defined in the Debenture), (ii) interest rate is higher than 4%,
and/or (iii) the Interested Third Party receives terms and conditions equal to
or better than the Debenture, the Company shall inform Buyer of such terms and
shall offer to modify the Documents to provide the same terms to Buyer.

          2. For the purposes of this IV.H, an "Interested Third Party" shall
mean any third party with which the Company concludes a technology transfer
agreement in conjunction with the binding agreement referred to above.

V.        Delivery Instructions

          A. On or prior to the Closing Date, the Company shall deposit the
Debentures, fully executed by the Company, to the depository account # 202755 of
Korea Securities Depository with the Bank of New York, One Wall Street, New
York, New York 10256. On the Closing Date, the Company shall (i) provide
documentary evidence issued by the Bank of New York evidencing the receipt of
the Debentures and (ii) fully execute and deliver to Buyer the Warrants.

          B. On or prior to the Closing Date, Buyer shall deposit an amount
equal to the Purchase Price to an account with SK Securities Co. Ltd., 23-10,
Yoido-dong, Youngdungpo-gu, Seoul 150-010, Korea and instruct SK Securities Co.
Ltd. that such amount deposited by Buyer with SK Securities Co. Ltd. be
deposited to account number 085-80567-3 of the Company with HSBC Bank USA, 1941
Route 52, Hopewell Junction, New York12533 (ABA Routing Number 021001088) upon
the closing of the transactions contemplated by this Agreement and the
satisfaction by the Company of the conditions set forth herein. Buyer shall
confirm such instruction in writing to the Company and to White & Case LLP or to
them by facsimile to the facsimile numbers shown in XVII A. On the Closing Date,
Buyer shall fully execute and deliver to the Company this Agreement and the
Registration Rights Agreement.

          C. If for any reason the Company does not receive the Purchase Price
by the date set forth in VIII B., the Debentures shall be deemed nullified and
Buyer shall, upon the close of business in New York of such date, instruct the
Bank of New York to return the document evidencing the Debentures to the Company
within two days of such instruction.

                                       16

VI.       Conditions to the Company's Obligations

          Buyer understands that the Company's obligation to sell the Debentures
on the Closing Date to Buyer pursuant to this Agreement is (subject to the
Company's right to waive, in its sole discretion, any or all of the following
conditions) conditioned upon:

          A. Delivery by Buyer to the Company of the Purchase Price;

          B. Except as would not reasonably be expected to have a material
adverse effect on the consummation of the transactions contemplated by this
Agreement, the accuracy on the Closing Date of the representations and
warranties of Buyer contained in this Agreement as if made on the Closing Date
(except for representations and warranties which, by their express terms, speak
as of and relate to a specified date, in which case such accuracy shall be
measured as of such specified date) and the performance by Buyer in all material
respects on or before the Closing Date of all covenants and agreements of Buyer
required to be performed by it pursuant to this Agreement on or before the
Closing Date, all of which shall be confirmed to the Company by delivery of the
certificate of an officer of the Buyer to that effect; and

          C. There shall not be in effect any Applicable Law or order, ruling,
judgment or writ of any court or public or governmental authority restraining,
enjoining or otherwise prohibiting any of the transactions contemplated by this
Agreement.

VII.      Conditions to Buyer's Obligations

          The Company understands that Buyer's obligation to purchase the
Debentures and the Warrants on the Closing Date pursuant to this Agreement is
(subject to the Buyer's right to waive, in its sole discretion, any or all of
the following conditions) conditioned upon:

          A. Delivery by the Company to the Buyer of the Debentures and the
Warrant to be purchased by Buyer pursuant to this Agreement;

          B. Except as would not reasonably be expected to have a Material
Adverse Effect, the accuracy on the Closing Date of the representations and
warranties of the Company contained in this Agreement as if made on the Closing
Date (except for representations and warranties which, by their express terms,
speak as of and relate to a specified date, in which case such accuracy shall be
measured as of such specified date) and the performance by the Company in all
respects on or before the Closing Date of all covenants and agreements of the
Company required to be performed by it pursuant to this Agreement on or before
the Closing Date, all of which shall be confirmed to Buyer by delivery of the
certificate of the chief executive officer or chief financial officer of the
Company to that effect;

          C. Delivery by the Company of irrevocable instructions to the
Company's transfer agent to reserve 2,549,229 shares of Common Stock for
issuance of the Conversion Shares and the Warrant Shares and delivery to Buyer
on the Closing Date of a copy of such instructions ;

          D. There not having occurred since the date hereof any event or
development, and there being in existence no condition, having a Material
Adverse Effect;

                                       17

          E. There shall not be in effect any Applicable Law, order, ruling,
judgment or writ of any court or public or governmental authority restraining,
enjoining or otherwise prohibiting any of the transactions contemplated by this
Agreement; and

          F. The Company shall have obtained all material consents, approvals or
waivers from governmental authorities and third persons necessary for the
execution, delivery and performance of the Documents and the transactions
contemplated thereby.

          H.       Transfer Restriction.

          1. Until the first 1st anniversary of the Closing Date, the Buyer
agrees (i) not to directly or indirectly offer, sell, pledge, hypothecate or
purchase any right or option with respect to, or otherwise transfer any of the
Debentures, the Warrants or the Securities (collectively, the "Subject
Securities") or to enter into any transaction (including, without limitation,
any short sale or purchase or sale of any derivative security) which results in
the economic equivalent of a transfer of all or any part of the Subject
Securities (each a "Transfer"), and (ii) not to agree to Transfer any of the
Subject Securities. For the purposes of this Section V.H. of this Agreement, the
term "Subject Securities" shall be deemed to include all securities issued in
respect of the Subject Securities by way of dividend, merger, reclassification,
recapitalization, distribution or otherwise. Any attempted Transfer of any
Subject Securities in violation of this Section V.H. shall be null and void ab
initio and of no force and effect. The Buyer acknowledges that the Company may
refuse to Transfer any Subject Securities which are attempted to be Transferred
in violation of this Section V.H.

          2. Notwithstanding anything to the contrary set forth herein, the
Buyer may always Transfer the Subject Securities to a wholly owned subsidiary of
Buyer which agrees in writing for the benefit of the Company to become bound by
the provisions of this Section V.H.

VIII.     Termination


          A. Termination by Mutual Written Consent. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned, for any
reason and at any time prior to the Closing Date, by the mutual written consent
of the Company and Buyer.

          B. Termination by the Company or Buyer. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned by action
of the Company or Buyer if (i) the Closing shall not have occurred at or prior
to 5:00 p.m., New York City time, on September 30, 2001 (the "Latest Closing
Date"); provided, however, that the right to terminate this Agreement pursuant
to this Section VIII.B. shall not be available to any party whose failure to
fulfill any of its obligations under this Agreement has been the cause of or has
resulted in the failure of the Closing to occur at or before such time and date.

                                       18

          C. Termination by Buyer. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned by Buyer at any time prior to
the Closing Date, if (i) the Company shall have failed to comply in any material
respect with any of its covenants or agreements contained in this Agreement,
(ii) there shall have been a material breach by the Company of any
representation or warranty made by it in this Agreement, (iii) there shall have
occurred any event or development, or there shall be in existence any condition,
having a Material Adverse Effect, (iv) the Company shall have failed to satisfy
the conditions provided in Article VII hereof or (v) the Company shall have made
a general assignment for the benefit of creditors, or any proceeding shall be
instituted by or against the Company seeking to adjudicate it bankrupt or
insolvent, or seeking liquidation , winding up or reorganization, arrangement,
adjustment, protection, relief or composition of its debts under any law
relating to bankruptcy, insolvency or reorganization.

          D. Termination by the Company. This Agreement may be terminated and
the transactions contemplated hereby may be abandoned by the Company at any time
prior to the Closing Date, if (i) Buyer shall have failed to comply in any
material respect with any of its covenants or agreements contained in this
Agreement or (ii) there shall have been a material breach by Buyer of any
representation or warranty made by it in this Agreement.

          E. Effect of Termination. In the event of the termination of this
Agreement pursuant to this Article VIII, this Agreement shall thereafter become
void and have no effect, and no party hereto shall have any liability or
obligation to any other party hereto in respect of this Agreement, except that
the provisions of Articles [IX and] XVIII, and this Section VIII.E shall survive
any such termination; provided, however, that no party shall be released from
any liability hereunder if this Agreement is terminated and the transactions
contemplated hereby abandoned by reason of (i) willful failure of such party to
perform its obligations hereunder or (ii) any misrepresentation made by such
party of any matter set forth herein.

IX.       Survival; Indemnification

          A. For a period of one year from the date hereof, the representations,
warranties and covenants made by each of the Company and Buyer in this
Agreement, the annexes, schedules and exhibits hereto and in each instrument,
agreement and certificate entered into and delivered by them pursuant to this
Agreement shall survive the Closing and the consummation of the transactions
contemplated hereby. In the event of a breach or violation of any of such
representations, warranties or covenants, the party to whom such
representations, warranties or covenants have been made shall have all rights
and remedies for such breach or violation available to it under the provisions
of this Agreement or otherwise, whether at law or in equity, irrespective of any
investigation made by or on behalf of such party on or prior to the Closing
Date.

          B. The Company hereby agrees to indemnify and hold harmless Buyer, its
Affiliates and their respective officers, directors, partners and members
(collectively, the "Buyer Indemnitees") from and against any and all actual
losses, claims, damages, judgments, penalties, liabilities and deficiencies
(collectively, "Losses") and agrees to reimburse Buyer Indemnitees

                                       19

for all out of-pocket expenses (including the fees and expenses of legal
counsel), in each case promptly as incurred by Buyer Indemnitees and to the
extent arising out of or in connection with:

          1. any material misrepresentation, breach of any of the Company's
representations or warranties contained in this Agreement or the other
Documents, or the annexes, schedules or exhibits hereto or thereto; or

          2. any failure by the Company to perform in any material respect any
of its covenants, agreements, undertakings or obligations set forth in this
Agreement or the other Documents or any instrument, certificate or agreement
entered into or delivered by the Company pursuant to this Agreement or the other
Documents;

          provided, however that the Buyer Indemnitees shall bear the first
$50,000 of any Loss actually incurred, and, provided further, that to the extent
the amount of any Loss exceeds such amount, the Buyer Indemnitees shall be
entitled to recover only the amount in excess of that amount, and provided
further, that the Company shall under no circumstances be liable for any amount
over the net proceeds actually received by it pursuant to this Agreement.

          C. Buyer hereby agrees to indemnify and hold harmless the Company, its
Affiliates and their respective officers, directors, partners and members
(collectively, the "Company Indemnitees") from and against any and all actual
Losses, and agrees to reimburse the Company Indemnitees for all out-of-pocket
expenses (including the fees and expenses of legal counsel) in each case
promptly as incurred by the Company Indemnitees and to the extent arising out of
or in connection with:

          1. any material misrepresentation, omission of fact or breach of any
of Buyer's representations or warranties contained in this Agreement or the
other Documents, or the annexes, schedules or exhibits hereto or thereto or any
instrument, agreement or certificate entered into or delivered by Buyer pursuant
to this Agreement or the other Documents; or

          2. any failure by Buyer to perform in any material respect any of its
covenants, agreements, undertakings or obligations set forth in this Agreement
or the other Documents or any instrument, certificate or agreement entered into
or delivered by Buyer pursuant to this Agreement or the other Documents;

          provided, however that the Company Indemnitees shall bear the first
$50,000 of any Loss actually incurred, and, provided further, that to the extent
the amount of any Loss exceeds such amount, the Company Indemnitees shall be
entitled to recover only the amount in excess of that amount.

          D. Promptly after receipt by either party hereto seeking
indemnification pursuant to this Article IX (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to this
Article IX is being sought (the "Indemnifying Party") of the commencement

                                       20

thereof; but the omission so to notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party except
to the extent that the Indemnifying Party is materially prejudiced and forfeits
substantive rights or defenses by reason of such failure. In connection with any
Claim as to which both the Indemnifying Party and the Indemnified Party are
parties, the Indemnifying Party shall be entitled to assume the defense thereof.
Notwithstanding the assumption of the defense of any Claim by the Indemnifying
Party, the Indemnified Party shall have the right to employ separate legal
counsel and to participate in the defense of such Claim, and the Indemnifying
Party shall bear the reasonable fees, out-of-pocket costs and expenses of such
separate legal counsel to the Indemnified Party if (and only if): (x) the
Indemnifying Party shall have agreed to pay such fees, out-of-pocket costs and
expenses, (y) the Indemnified Party and the Indemnifying Party reasonably shall
have concluded that representation of the Indemnified Party and the Indemnifying
Party by the same legal counsel would not be appropriate due to actual or, as
reasonably determined by legal counsel to the Indemnified Party, potentially
differing interests between such parties in the conduct of the defense of such
Claim, or if there may be legal defenses available to the Indemnified Party that
are in addition to or disparate from those available to the Indemnifying Party,
or (z) the Indemnifying Party shall have failed to employ legal counsel
reasonably satisfactory to the Indemnified Party within a reasonable period of
time after notice of the commencement of such Claim. If the Indemnified Party
employs separate legal counsel in circumstances other than as described in
clauses (x), (y) or (z) above, the fees, costs and expenses of such legal
counsel shall be borne exclusively by the Indemnified Party. Except as provided
above, the Indemnifying Party shall not, in connection with any Claim in the
same jurisdiction, be liable for the fees and expenses of more than one firm of
legal counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnifying Party shall not, without the prior written consent of
the Indemnified Party (which consent shall not unreasonably be withheld), settle
or compromise any Claim or consent to the entry of any judgment that does not
include an unconditional release of the Indemnified Party from all liabilities
with respect to such Claim or judgment.

X.        Governing Law

          This Agreement shall be governed by and interpreted in accordance with
the laws of the State of New York, without regard to the conflicts of law
principles of such state.

XI.       Submission to Jurisdiction

          Each of the parties hereto consents to the non-exclusive jurisdiction
of the federal courts whose districts encompass any part of the City of New York
or the state courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement and the other
Documents. Each party hereto hereby irrevocably and unconditionally waives, to
the fullest extent it may effectively do so, any defense of an inconvenient
forum or improper venue to the maintenance of such action or proceeding in any
such court and any right of jurisdiction on account of its place of residence or
domicile. Each party hereto irrevocably and unconditionally consents to the
service of any and all process in any such action or proceeding in such courts
by the mailing of copies of such process by certified or registered airmail at
its address specified in Article XVII. Each party hereto agrees that a final
judgment in any such

                                       21

action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
The foregoing consents to jurisdiction and appointments of agents to receive
service of process shall not constitute general consents to service of process
in the State of New York for any purpose except as provided above and shall not
be deemed to confer rights on any person other than the respective parties to
this Agreement. The prevailing party or parties in any such litigation shall be
entitled to receive from the losing party or parties all costs and expenses,
including reasonable counsel fees, incurred by the prevailing party or parties.

XII.      Waiver of Jury Trial

          TO THE FULLEST EXTENT PERMITTED BY LAW, EACH OF THE PARTIES HERETO
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ITS RESPECTIVE RIGHTS TO
A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY OTHER DOCUMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE
SUBJECT MATTER OF THIS AGREEMENT AND OTHER DOCUMENTS. EACH PARTY HERETO (i)
CERTIFIES THAT NEITHER OF THEIR RESPECTIVE REPRESENTATIVES, AGENTS OR ATTORNEYS
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE EVENT
OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (ii) ACKNOWLEDGES THAT
IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS HEREIN.

XIII.     Counterparts; Execution

          This Agreement may be executed in any number of counterparts and by
the different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all the counterparts shall
together constitute one and the same instrument. A facsimile transmission of
this signed Agreement shall be legal and binding on all parties hereto.

XIV.      Headings

          The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.

XV.       Severability

          In the event any one or more of the provisions contained in this
Agreement or in the other Documents should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein or therein shall not in any way be
affected or impaired thereby. The parties shall endeavor in good-faith
negotiations to

                                       22

replace the invalid, illegal or unenforceable provisions with valid provisions
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.

XVI.      Entire Agreement; Remedies, Amendments and Waivers

          This Agreement and the Documents constitute the entire agreement among
the parties pertaining to the subject matter hereof and supersede all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties. No supplement, modification or waiver of this Agreement
shall be binding unless executed in writing by all parties. No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.

XVII.     Notices

          Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in writing
and shall be delivered personally or sent by certified mail, postage prepaid, or
by a nationally recognized overnight courier service, and shall be deemed given
when so delivered personally or by overnight courier service, or, if mailed,
three (3) days after the date of deposit in the United States mails, as follows:

          A.   if to the Company, to:

               eMagin Corporation
               2070 Route 52
               Hopewell Junction, NY  12533
               Attention:  Gary W. Jones
               (845) 892-1900
               (845) 892-1901 (Fax)

               with a copy to:

               White & Case LLP
               1155 Avenue of the Americas
               New York, NY  10036-2787
               Attention:  S. Ward Atterbury, Esq.
               (212) 819-8831
               (212) 354-8113 (Fax)

          B.   if to Buyer, to:

               SK Corporation
               99 Seorin-dong, Jongro-ku
               Seoul, 110-110, Korea
               Attention: Man Soo Kim
               (822) 2259-2288
               (822) 2259-2123 (Fax)

                                       23

               with a copy to:
               SK Corporation
               99 Seorin-dong, Jongro-ku
               Seoul, 110-110, Korea
               Attention: General Counsel
               (822) 2121-5770
               (822) 2121-5797 (Fax)

          The Company or Buyer may change the foregoing address by notice given
pursuant to this Article XVII.

XVIII.    Confidentiality

          Each of the Company and Buyer agrees to keep confidential and not to
disclose to or use for the benefit of any third party the terms of this
Agreement or any other information which at any time is communicated by the
other party as being confidential without the prior written approval of the
other party; provided, however, that this provision shall not apply to
information which, at the time of disclosure, is already part of the public
domain (except by breach of this Agreement) and information which is required to
be disclosed by law (including, without limitation, pursuant to Item 601(b)(10)
of Regulation S-K under the Securities Act and the Exchange Act).

XIX.      Assignment

          This Agreement shall not be assignable by either of the parties hereto
prior to the Closing without the prior written consent of the other party, and
any attempted assignment contrary to the provisions hereby shall be null and
void.

                                       24

XX.       Finder's Fees.

          Buyer agrees to indemnify and to hold harmless the Company from any
liability for any commission or compensation in the nature of a finders' or
broker's fee (and any asserted liability) for which Buyer or any of its
officers, partners, employees, or representatives is responsible. The Company
agrees to indemnify and hold harmless Buyer from any liability for any
commission or compensation in the nature of a finder's or broker's fee (and any
asserted liability) for which the Company or any of its officers, employees or
representatives is responsible




          IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement on the date first above written.


                               eMagin Corporation


                               By:
                                  ----------------------------------------------
                                  Name: Gary W. Jones
                                  Title:  Chief Executive Officer





                               SK Corporation


                               By:
                                  ----------------------------------------------
                                  Name:
                                  Title:

                                       25

                                    EXHIBIT A

                        [See Attached Form of Debenture]

                                       26

                                    EXHIBIT B

                  [See attached Form of Stock Purchase Warrant]

                                       27

                                    EXHIBIT C

                  [See attached Registration Rights Agreement]

                                       28

                                    SCHEDULES



SCHEDULE III.A.3:  Preemptive rights - None

SCHEDULE III.A.4: Subsidiaries - Virtual Vision, Inc. (Delaware).

SCHEDULE III.B.2: Listing Notices - None

SCHEDULE III.C: Issuances and sales of securities - In June 2001, the Company
issued 16,002 shares of common stock to Travelers Insurance Company upon
Travelers Insurance Company's exercise of warrants to purchase common shares.
The Company received gross proceeds of $27,523.44 to be used for general
operating capital.

SCHEDULE III.F: Contravention - None

SCHEDULE III.I: Litigation - None

SCHEDULE III.J: Events of Default - None

SCHEDULE III.M: Related Party Transactions: None

SCHEDULE III.P: Environmental Matters - None

SCHEDULE III.Q: Collective Bargaining Agreements: None

SCHEDULE III.R: Erisa Matters -  No additional Plans

SCHEDULE III.T: Exceptions to Good Title to Property - None

SCHEDULE III.U: Exceptions to Good Title to Intellectual Property - None

                                       30

EX-4

THIS  SECURITY HAS NOT BEEN  REGISTERED  UNDER THE  SECURITIES  ACT OF 1933,  AS
AMENDED (THE  "SECURITIES  ACT"),  OR THE SECURITIES  LAWS OF ANY STATE,  AND IS
BEING  OFFERED  AND  SOLD  PURSUANT  TO  AN  EXEMPTION  FROM  THE   REGISTRATION
REQUIREMENTS  OF THE SECURITIES ACT AND SUCH LAWS. THIS SECURITY MAY NOT BE SOLD
OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE  REGISTRATION STATEMENT UNDER THE
SECURITIES  ACT OR  PURSUANT TO AN  AVAILABLE  EXEMPTION  FROM THE  REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OR SUCH OTHER LAWS.

[THIS NOTE WILL BE CONSIDERED TO HAVE BEEN ISSUED WITH ORIGINAL  ISSUE  DISCOUNT
("OID") FOR PURPOSES OF SECTIONS  1271 ET. SEQ. OF THE INTERNAL  REVENUE CODE OF
1986,  AS  AMENDED.  THE ISSUE  DATE OF THIS NOTE IS  SEPTEMBER  18,  2001.  FOR
INFORMATION  REGARDING  THE ISSUE  PRICE,  AMOUNT OF OID PER $1,000 OF PRINCIPAL
AMOUNT AND YIELD TO MATURITY OF THIS NOTE FOR PURPOSES OF THE OID RULES,  PLEASE
CONTACT ANDREW P. SAVADELIS AT eMAGIN CORPORATION.




                        4% SERIES A CONVERTIBLE DEBENTURE
                             Due September 18, 2004

$3,000,000                                                    September 18, 2001

No. 1

          EMAGIN  CORPORATION,  a Delaware  corporation with principal executive
offices  located  at 2070  Route 52,  Hopewell  Junction,  NY  12533,  for value
received, hereby promises to pay to the Holder (as defined below), or such other
Person upon order of the Holder,  on September 18, 2004 (the  "Maturity  Date"),
the  principal  sum of Three Million  Dollars  ($3,000,000)  and to pay interest
thereon from the date of original  issuance (or the most recent interest payment
date to which  interest has been paid) upon,  with respect to all or any portion
of this  Debenture,  the  earlier  of the  date  of  prepayment,  conversion  or
redemption of all or such portion of this Debenture  (each an "Interest  Payment
Due Date" and collectively, the "Interest Payment Due Dates"), at the rate of 4%
per annum (the "Debenture  Interest  Rate"),  until all of the principal of this
Debenture  has  been  paid in full or duly and  irrevocably  provided  for.  The
interest payable on any Interest Payment Due Date shall be paid to the Holder at
the  close of  business  on the  applicable  Interest  Payment  Due Date and all
interest  payable on the Principal  Amount of this Debenture shall be calculated
on the basis of a 360-day  year for the actual  number of days  elapsed.  At the
option of the  Company,  interest  payable from time to time may be paid through
the  delivery  of duly  and  validly  authorized  and  issued,  fully  paid  and
non-assessable,  freely tradeable shares of Common Stock, valued at the Interest
Market Price.



The Common  Stock to be  delivered in lieu of cash  interest  payments  shall be
registered  for  resale  in  the  Registration  Statement  (as  defined  in  the
Registration Rights Agreement) to be filed by the Company to register the Common
Stock  deliverable  upon  conversion  of  the  Debenture,  as set  forth  in the
Registration  Rights  Agreement.   Notwithstanding  the  foregoing,  until  such
Registration  Statement has been declared  effective under the Securities Act by
the SEC, payment of interest on the Debenture shall be in cash.


                                    ARTICLE 1
                                   DEFINITIONS

          Section 1.1  Definitions.  The terms defined in this Article  whenever
used in this Debenture have the following respective meanings:

          (b)  "Affiliate"  has the meaning  ascribed to such term in Rule 12b-2
under the Securities Exchange Act of 1934, as amended.

          (c) "Amex" means the American Stock Exchange.

          (d) "Bankruptcy Code" means the United States Bankruptcy Code of 1986,
as amended (11 U.S.C.ss.ss. 101 et seq.).

          (e) "Business Day" means a day other than Saturday,  Sunday or any day
on which banks  located in the state of New York are  authorized or obligated to
close.

          (f) "Capital  Shares"  means the Common Shares and any other shares of
any other class or series of capital stock,  whether now or hereafter authorized
and however designated,  which have the right to participate in the distribution
of earnings and assets (upon  dissolution,  liquidation  or  winding-up)  of the
Company.

          (g)  "Closing  Date" means shall have the meaning set forth in Section
I.B of the Securities Purchase Agreement.

          (h)  "Common  Shares" or  "Common  Stock"  means  shares of the common
stock, par value $.001 per share, of the Company.

          (i)  "Common  Stock  Issued At  Redemption/Conversion"  when used with
reference to the securities issuable upon redemption or conversion,  as the case
may be, of this Debenture,  means all Common Shares now or hereafter Outstanding
and  securities of any other class or series into which the Debenture  hereafter
shall have been changed or  substituted,  whether now or  hereafter  created and
however designated.

          (j) "Company" means eMagin Corporation,  a Delaware  corporation,  and
any successor or resulting corporation by way of merger, consolidation,  sale or
exchange of all or substantially all of the Company's assets, or otherwise.

          (k) "Conversion" or "conversion" means the repayment by the Company of
the Principal  Amount of this  Debenture (and to the extent the Holder elects as
permitted  by

                                      -2-


Section 3.2  hereof,  accrued and unpaid  interest  thereon) by the  delivery of
Common  Stock on the terms  provided  in  Section  3.2  hereof,  and  "convert,"
"converted," "convertible" and like words shall have a corresponding meaning.

          (l) "Conversion Date" means any day on which all or any portion of the
Principal  Amount  of  this  Debenture  is  converted  in  accordance  with  the
provisions hereof.

          (m)  "Conversion  Price"  on  any  date  of  determination  means  the
applicable price for the conversion of this Debenture into Common Shares on such
day as set forth in Section 3.1.

          (n)  "Current  Market  Price" means on any date of  determination  the
closing  price  of a Common  Share in the  regular  day  session  on such day as
reported on Amex if quoted or listed or  admitted to trading on Amex;  provided,
if such  security is not listed or  admitted to trading on Amex,  as reported on
the  principal  national  security  exchange or  quotation  system on which such
security is quoted or listed or admitted to trading, or, if not quoted or listed
or admitted to trading on any national  securities exchange or quotation system,
the closing price of such security on the over-the-counter market in the regular
day session on the day in question  as  reported by  Bloomberg  LP, or a similar
generally accepted  reporting service,  as the case may be. If such security has
no quotes or listing as defined in this section 1.1 (n), then the Current Market
Price  shall be the  price  per  Common  Share on any date of  determination  as
determined by an independent  third party  appointed by mutual  agreement of the
Company and the Holder.

          (o)  "Debenture"  or  "Debentures"  means this 4% Series A Convertible
Debenture  due  September  18,  2004 of the  Company or such  other  convertible
subordinated  debentures or Debentures exchanged therefor as provided in Section
2.1.

          (q) "Debenture Interest Rate" has the meaning set forth in the opening
paragraph hereof.

          (o) "Default  Interest Rate" shall be equal to the Debenture  Interest
Rate plus an additional 2% per annum.

          (r) "Event of Default" has the meaning set forth in Section 6.1.

          (s) "Fixed Price" shall have the meaning assigned such term in Section
3.1.

          (t) "Holder"  means SK  Corporation,  any  successor  thereto,  or any
Person to whom this Debenture is subsequently transferred in accordance with the
provisions hereof.

          (u) "Interest Market Price" per Common Share means the volume weighted
average of the closing  prices of the Common  Shares as reported on Amex for the
ten (10) Trading Days on immediately  preceding the applicable  Interest Payment
Due Date if quoted or listed or admitted to trading on Amex;  provided  that, if
such  security  is not listed or  admitted to trading on the Amex as reported on
the principal national security exchange or quotation system (closing bid prices
in the case of a quotation system) on which such security is quoted or listed or
admitted to  trading,  or, if not quoted or listed or admitted to trading on any
national  securities  exchange or quotation system,  the average of such closing
prices on the  over-the-counter  market

                                      -3-


as reported by Bloomberg LP or a similar generally  accepted  reporting service,
as the case may be, for the ten (10)  Trading  Days  immediately  preceding  the
applicable  Interest Payment Due Date. If such security has no quotes or listing
as defined in this section 1.1 (u), then the Interest  Market Price shall be the
price  per  Common  Share  on any  date of  determination  as  determined  by an
independent  third party  appointed  by mutual  agreement of the Company and the
Holder.

          (v)  "Interest  Payment  Due  Date" has the  meaning  set forth in the
opening paragraph hereof.

          (w)  "liability" of any Person means (in each case,  whether with full
or limited recourse) any indebtedness,  liability,  obligation, covenant or duty
binding upon,  or any term or condition to be observed by or binding upon,  such
Person  or any of its  assets  of any kind,  nature  or  description,  direct or
indirect,  absolute or  contingent,  due or not due,  contractual  or  tortious,
liquidated or  unliquidated,  whether arising under contract,  applicable law or
otherwise,  whether  now  existing  or  hereafter  arising,  and whether for the
payment of money or the performance or non-performance of any act.

          (z) "Market Price" per Common Share means the volume weighted  average
of the closing  prices of the Common Shares as reported on Amex for the ten (10)
Trading  Days are  reported  during  any  Valuation  Period;  provided,  if such
security  is not  listed or  admitted  to trading on Amex,  as  reported  on the
principal  national security exchange or quotation system on which such security
is quoted  or listed or  admitted  to  trading,  or, if not  quoted or listed or
admitted to trading on any national securities exchange or quotation system, the
closing  price of such  security  on the  over-the-counter  market on the day in
question as reported by Bloomberg LP, or a similar generally  accepted reporting
service, for the ten (10) Trading Days are reported during any Valuation Period.
If such  security  has no quotes or listing as defined in this  section 1.1 (z),
then  the  Market  Price  shall be the  price  per  Common  Share on any date of
determination  as determined by an independent  third party  appointed by mutual
agreement of the Company and the Holder.

          (aa)"Maturity Date" has the meaning set forth in the opening paragraph
hereof.

          (bb)"Maximum Rate" has the meaning set forth in Section 6.3.

          (cc)"Optional  Prepayment Price" means, with respect to any redemption
of this  Debenture by the Company  pursuant to Section 3.5 prior to the Maturity
Date,  an amount equal to one hundred and five percent  (105%) of the  Principal
Amount of this Debenture being prepaid.

          (dd)  "Outstanding"  when used  with  reference  to  Common  Shares or
Capital Shares (collectively, "Shares") means, on any date of determination, all
issued and outstanding  Shares, and includes all such Shares issuable in respect
of outstanding scrip or any certificates  representing  fractional  interests in
such Shares;  provided,  however,  that any such Shares  directly or  indirectly
owned or held by or for the  account  of the  Company or any  Subsidiary  of the
Company shall not be deemed "Outstanding" for purposes hereof.

                                      -4-


          (ee)"Person"  means an individual,  a corporation,  a partnership,  an
association,   a  limited  liability   company,   an   unincorporated   business
organization,  a trust or other entity or  organization,  and any  government or
political subdivision or any agency or instrumentality thereof.

          (ff)"Principal  Amount"  means,  for  any  date  of  calculation,  the
principal sum set forth in the first  paragraph of this Debenture (but only such
principal  amount  as to  which  the  Holder  has not  theretofore  furnished  a
Redemption/Conversion Notice in compliance with Section 3.2).

          (gg)"Redemption" or "redemption" means the repayment by the Company of
the  Principal  Amount of this  Debenture  and any accrued  and unpaid  interest
thereon in cash in advance of the Maturity Date on the terms provided in Section
3.2 hereof, and "redeem,"  "redeemed,"  "redeemable" and like words shall have a
corresponding meaning.

          (hh)"Redemption Date" means any day on which all or any portion of the
Principal  Amount of this Debenture is converted or redeemed in accordance  with
the provisions hereof.

          (ii)"Redemption/Conversion   Notice"   means  a   written   notice  of
conversion or redemption substantially in the form annexed hereto as Exhibit A.

          (jj)"Registration  Rights  Agreement" means that certain  Registration
Rights  Agreement  dated  September  18,  2001,   between  the  Company  and  SK
Corporation, as the same may be amended from time to time.

          (kk)"SEC" means the United States Securities and Exchange Commission.

          (ll)  "Securities  Act" means the  Securities Act of 1933, as amended,
and the rules and  regulations  of the SEC  thereunder,  all as in effect at the
time.

          (mm)"Securities  Purchase  Agreement"  means that  certain  Securities
Purchase   Agreement  dated  September  18,  2001,  among  the  Company  and  SK
Corporation, as the same may be amended from time to time.

          (nn)"Stock  Purchase  Warrant"  means the warrant to  purchase  Common
Stock issued by the Company to the Holder  pursuant to the  Securities  Purchase
Agreement as the same may be amended from time to time.

          (oo)"Subsidiary"  means  any  entity  of  which  securities  or  other
ownership  interests  having  ordinary  voting  power to elect a majority of the
board of directors  or other  persons  performing  similar  functions  are owned
directly or indirectly by the Company.

          (pp)"Trading  Day" means any day on which (a)  purchases  and sales of
securities  authorized for quotation on Amex are reported thereon,  (b) no event
which  results in a material  suspension  or limitation of trading of the Common
Shares on Amex has  occurred  and (c) at least  one  trade of  Common  Shares is
reported on Amex.

                                      -5-


          (qq)"Valuation   Period"   means  the  ten  (10)  Trading  Day  period
immediately  preceding,  a Put Exercise or Redemption Date, the date a Notice of
Optional Prepayment is sent or the Interest Payment Due Date, as applicable.

          All  references  to "cash" or "$" herein  mean  currency of the United
States of America.


                                    ARTICLE 2
                             EXCHANGES AND TRANSFER

          Section 2.1 Exchange and  Registration of Transfer of Debentures.  The
Holder may, at its option,  surrender this Debenture at the principal  executive
offices  of the  Company  and  receive  in  exchange  therefor  a  Debenture  or
Debentures,  each in the  denomination  of $500,000  or an integral  multiple of
$100,000 in excess thereof,  dated as of the date of this Debenture (which shall
accrue  interest  from the most  recent  Interest  Payment  Due Date on which an
interest payment was made in full), and, subject to Section 4.2, payable to such
Person or order as may be  designated by such Holder.  The  aggregate  Principal
Amount of the Debenture or Debentures  exchanged in accordance with this Section
2.1 shall equal the aggregate  unpaid  Principal  Amount of this Debenture as of
the date of such surrender;  provided,  however, that upon any exchange pursuant
to this  Section  2.1 there shall be filed with the Company the name and address
for all purposes  hereof of the Holder or Holders of the Debenture or Debentures
delivered in such  exchange.  The debenture  exchanged in  accordance  with this
Section  2.1 shall be in  substantially  the same form as this  Debenture.  This
Debenture,  when  presented  for  registration  of transfer  or for  exchange or
conversion,  shall (if so  required  by the  Company)  be duly  endorsed,  or be
accompanied by a written instrument of transfer in form reasonably  satisfactory
to the  Company  duly  executed,  by the  Holder  duly  authorized  in  writing.
Notwithstanding  the above,  the Holder shall not transfer this Debenture or any
rights  hereunder to any person or entity which is engaged in a business that in
the reasonable judgment of the Company is in competition with the Company.

          Section 2.2 Loss,  Theft,  Destruction  of Debenture.  Upon receipt of
evidence  satisfactory  to  the  Company  of the  loss,  theft,  destruction  or
mutilation  of this  Debenture  and,  in the  case of any  such  loss,  theft or
destruction,  upon receipt of indemnity or security  reasonably  satisfactory to
the  Company,  or,  in the  case of any  such  mutilation,  upon  surrender  and
cancellation  of the entirety of this Debenture,  the Company shall make,  issue
and deliver, in lieu of such lost, stolen,  destroyed or mutilated Debenture,  a
new  Debenture  of like tenor and unpaid  Principal  Amount dated as of the date
hereof (which shall accrue  interest from the most recent  Interest  Payment Due
Date on which an interest  payment was made in full).  This  Debenture  shall be
held and owned upon the express  condition  that the  provisions of this Section
2.2 are exclusive  with respect to the  replacement  of a mutilated,  destroyed,
lost or  stolen  Debenture  and shall  preclude  any and all  other  rights  and
remedies notwithstanding any law or statute existing or hereafter enacted to the
contrary  with respect to the  replacement  of negotiable  instruments  or other
securities without the surrender thereof.

          Section 2.3 Who Deemed Absolute Owner. The Company may deem the Person
in whose name this Debenture  shall be registered upon the registry books of the
Company  to be,  and

                                      -6-


may treat it as,  the  absolute  owner of this  Debenture  (whether  or not this
Debenture  shall be  overdue)  for the  purpose  of  receiving  payment of or on
account of the Principal Amount of this Debenture or the interest  thereon,  for
the  conversion ,  redemption  or maturity of this  Debenture  and for all other
purposes,  and the Company  shall not be affected by any notice to the contrary.
All such  payments  and  such  conversions  or  redemptions  shall be valid  and
effectual to satisfy and  discharge  the  liability  upon this  Debenture to the
extent of the sum or sums so paid or the conversion,  conversions or redemptions
so made.

          Section 2.4 Repayment at Maturity.  At the Maturity  Date, the Company
shall repay the outstanding  Principal  Amount of this Debenture in whole at one
hundred  percent  (100%) of the  Principal  Amount  thereof,  together  with all
accrued and unpaid interest thereon, to the Maturity Date.


                                    ARTICLE 3
                             CONVERSION OF DEBENTURE

          Section 3.1 Conversion; Redemption by Holder. (a) At the option of the
Holder,  this Debenture may be converted,  either in whole or in part, up to the
full Principal  Amount hereof (in increments of $100,000 in Principal  Amount or
any  integral  multiple  of  $100,000  in excess  thereof)  into  Common  Shares
(calculated as to each such  conversion to the nearest  1/100th of a share),  at
any time and from time to time on any  Business  Day after the Closing Date (the
"Initial Conversion Date"),  subject to the limitations in the next sentence and
compliance  with  Section  3.2.  The  number of Common  Shares  into  which this
Debenture may be converted is equal to (x) the Principal Amount of the Debenture
being  converted at the Conversion Date (plus any accrued and unpaid interest on
the Debenture  being converted  through the Conversion  Date) divided by (y) the
Conversion  Price.  The "Conversion  Price" shall be equal to 105% of the volume
weighted  average of the closing prices of the Common Shares as reported on Amex
for the ten (10) Trading Days immediately preceding the Closing Date (the "Fixed
Price") (subject to adjustment for any stock-split or stock combination to occur
after the date  hereof).  At the  Company's  option,  the amount of accrued  and
unpaid interest as of the Conversion Date shall not be subject to conversion but
instead may be paid in cash as of the Conversion  Date; if the Company elects to
convert the amount of accrued and unpaid  interest at the  Conversion  Date into
Common  Stock,  the Common  Stock  issued to the  Holder  shall be valued at the
applicable Conversion Price.

          (b)  Notwithstanding  the  foregoing,  during  the  period  commencing
September 19, 2002 (the "Put Exercise Date"), the Holder shall have the right to
cause the Company to redeem this  Debenture  at a price in cash equal to 100% of
the principal  amount  thereof,  plus all accrued and unpaid  interest  thereon;
provided,  however,  that the Holder  shall only have the right to redeem 25% of
this  Debenture  pursuant  to this  paragraph  in any  ninety  (90)  consecutive
calendar  day  period;  provided,  further,  however,  that with  respect to any
Redemption  exercised  pursuant to this paragraph,  the Company may, at its sole
option,  elect to deliver to the Holder shares of Common Stock with an aggregate
Market Price equal to the redemption price specified above.  Notwithstanding the
foregoing, the Company agrees to take into consideration written request(s) from
the  Holder  to pay any  Redemption  in  cash.  Except  as  otherwise  expressly
specified in this

                                      -7-

paragraph,  all terms and conditions applicable to a redemption or conversion of
all or any  portion  of  this  Debenture  as  specified  in this  Article  3 and
otherwise herein,  shall apply to any redemption or conversion  pursuant to this
paragraph.

          Section 3.2 Exercise of Redemption or Conversion Privilege. Redemption
or conversion of this Debenture,  as the case may be, may be exercised, in whole
or in part,  on any  Business  Day by the Holder by  delivering  an executed and
completed  Redemption/Conversion  Notice to the Company along with the Debenture
or Debentures to be so redeemed or converted. The  Redemption/Conversion  Notice
shall  specify  whether the notice  relates to a redemption or conversion of the
Debentures  or both,  and the  aggregate  principal  amount of  Debentures to be
redeemed   or   converted,   as  the  case  may  be.   Each   date  on  which  a
Redemption/Conversion  Notice is delivered to the Company in accordance with the
provisions of this Section 3.2 shall  constitute a Redemption Date or Conversion
Date,  as the case may be. The Company shall convert the Debenture and issue the
Common Stock Issued At  Redemption/Conversion  in the manner  provided  below in
this Section 3.2, and all voting and other rights associated with the beneficial
ownership of the Common Stock  Issued At  Redemption/Conversion  shall vest with
the Holder,  effective as of the  Conversion  Date at the time  specified in the
applicable  Redemption/Conversion Notice. Upon receiving a Redemption/Conversion
Notice  properly  demanding a Redemption of all or a portion of this  Debenture,
the Company shall, within five (5) Business Days, determine whether it wishes to
exercise its right to redeem this  Debenture with shares of Common Stock in lieu
of cash.  If the  Company  elects to redeem this  Debenture  using the shares of
Common  Stock,  then the Company shall redeem the Debenture and issue the Common
Stock  Issued At  Redemption/Conversion  in the  manner  provided  below in this
Section  3.2,  and all voting and other rights  associated  with the  beneficial
ownership of the Common Stock  Issued At  Redemption/Conversion  shall vest with
the Holder,  effective as of the  Redemption  Date at the time  specified in the
applicable  Redemption/Conversion  Notice. The Redemption/Conversion Notice also
shall state the name or names (with  addresses) of the Persons who are to become
the  holders of the Common  Stock  Issued At  Redemption/Conversion,  if any, in
connection with such redemption or conversion.  Upon surrender for redemption or
conversion, this Debenture shall be accompanied by a proper assignment hereof to
the  Company or be  endorsed in blank.  As  promptly  as  practicable  after the
receipt of the  Redemption/Conversion  Notice as aforesaid, but in any event not
more  than  five (5)  Business  Days  after,  in the case of a  Conversion,  the
Company's  receipt  of  the  applicable  Redemption/Conversion  Notice  and  all
associated Debentures and, in the case of a Redemption, the Company's receipt of
the applicable  Redemption/Conversion  Notice and all associated  Debentures and
the  expiration  of the five (5) Business Day period during which the Company is
required to determine the form of the  consideration  to be paid in  redemption,
the Company shall (i) issue the Common Stock Issued At  Redemption/Conversion in
accordance  with the  provisions  of this Article 3, and (ii) cause to be mailed
for delivery by overnight courier or transmit to the Holder (x) a certificate or
certificate(s)  representing the number of whole Common Shares, if any, to which
the Holder is entitled by virtue of such redemption or conversion,  (y) cash, as
provided in Section 3.3, in respect of any  fraction of a Common Share  issuable
upon such conversion and (z) if, upon any Conversion, the Company chooses to pay
accrued and unpaid  interest  in cash,  cash in the amount of accrued and unpaid
interest on the  Debenture  being  converted  as of the  Conversion  Date.  Such
redemption  or  conversion  shall be deemed to have

                                      -8-

been effected at the time at which the Redemption/Conversion Notice indicates so
long as this  Debenture  shall have been  surrendered as aforesaid at such time,
and at such time the rights of the Holder of this Debenture,  as such (except if
and to the extent that any Principal Amount thereof remains unconverted),  shall
cease and the Person or Persons in whose name or names the Common Stock, if any,
Issued at  Redemption or  Conversion  shall be issuable  shall be deemed to have
become the holder or holders of record of the Common Shares represented thereby,
and all voting and other rights associated with the beneficial ownership of such
Common  Shares  shall at such  time  vest  with  such  Person  or  Persons.  The
Redemption/Conversion  Notice shall constitute a contract between the Holder and
the Company,  whereby the Holder shall be deemed to subscribe  for the number of
Common  Shares  which it will be entitled  to receive  upon such  conversion  or
redemption and, in payment and  satisfaction of such  subscription  (and for any
cash  adjustment to which it is entitled  pursuant to Section 3.4), to surrender
this Debenture and to release the Company from all liability  thereon (except if
and to the  extent  that any  Principal  Amount  thereof  remains  unconverted);
provided, that, in the case of any redemption in which the form of consideration
elected by the Company is cash, this sentence shall be deemed to be inoperative.
No cash payment aggregating less than $1.00 shall be required to be given.

          Section 3.3 Fractional  Shares.  No fractional  Common Shares or scrip
representing fractional Common Shares shall be delivered upon conversion of this
Debenture.  Instead of any  fractional  Common Shares which  otherwise  would be
delivered upon conversion or redemption of this Debenture, the Company shall pay
a cash  adjustment  in respect of such  fraction in an amount  equal to the same
fraction  multiplied by the Current Market Price on the Conversion Date. No cash
payment of less than $1.00 shall be required to be given.

          Section 3.4 Adjustments.

          (a) In case the Company shall  reorganize its capital,  reclassify its
capital  stock,  consolidate  or merge with or into  another  Person  (where the
Company is not the survivor or where there is a change in or  distribution  with
respect to the Common Stock of the Company), sell, convey, transfer or otherwise
dispose of all or substantially all its property,  assets or business to another
Person,  or effectuate a transaction or series of related  transactions in which
more than 50% of the  voting  power of the  Company  is  disposed  of  (each,  a
"Fundamental  Corporate  Change") and, pursuant to the terms of such Fundamental
Corporate  Change,  shares  of  common  stock  of  the  successor  or  acquiring
corporation, or any cash, shares of stock or other securities or property of any
nature whatsoever  (including warrants or other subscription or purchase rights)
in  addition  to or in  lieu of  common  stock  of the  successor  or  acquiring
corporation  ("Other  Property"),  are to be received by or  distributed  to the
holders of Common Stock of the Company,  then the Holder of this Debenture Stock
shall have the right thereafter,  at its sole option,  either (x) to receive the
number of shares of common stock of the successor or acquiring corporation or of
the  Company,  if it is the  surviving  corporation,  and Other  Property  as is
receivable upon or as a result of such Fundamental  Corporate Change by a holder
of the number of shares of Common Stock into which such the outstanding  portion
of the Debenture may be converted at the Conversion Price applicable immediately
prior to such Fundamental  Corporate Change or (y) require the Company,  or such
successor,  resulting or purchasing corporation, as the case may be, to, without
benefit of any additional  consideration therefor, to execute and deliver to the
Holder a  debenture  with  substantial  identical  rights,  privileges,  powers,

                                      -9-


restrictions  and other terms as this Debenture in an amount equal to the amount
this  Debenture  which is  outstanding  immediately  prior  to such  Fundamental
Corporate  Change.  For purposes of this Section  3.4(b),  "common  stock of the
successor or acquiring  corporation"  shall include stock of such corporation of
any class which is not  preferred as to dividends or assets over any other class
of stock of such  corporation  and which is not subject to prepayment  and shall
also include any evidences of indebtedness,  shares of stock or other securities
which  are  convertible  into  or  exchangeable  for  any  such  stock,   either
immediately  or upon the  arrival  of a  specified  date or the  happening  of a
specified  event and any warrants or other  rights to subscribe  for or purchase
any such stock. The foregoing  provisions of this Section 3.4(a) shall similarly
apply to successive Fundamental Corporate Changes.

          (b)  If  the  Company  shall  hereafter  pay  a  dividend  or  make  a
distribution to Holders of the  Outstanding  shares of Common Stock in shares of
Common Stock,  the Conversion  Price in effect at the opening of business on the
date following the date fixed for the determination of shareholders  entitled to
receive such dividend or other distribution shall be reduced by multiplying such
Conversion  Price by a fraction  of which the  numerator  shall be the number of
shares of Common Stock  Outstanding  at the close of business on the record date
fixed for such determination and the denominator shall be the sum of such number
of shares and the total  number of shares  constituting  such  dividend or other
distribution,  such reduction to become effective  immediately after the opening
of  business  on  the  day  following  such  record  date.  If any  dividend  or
distribution of the type described in this Section 3.4(b) is declared but not so
paid or made,  the  Conversion  Price shall again be adjusted to the  Conversion
Price which would then be in effect if such  dividend  or  distribution  had not
been declared;

          (c) If the  Outstanding  shares of Common Stock shall be subdivided or
reclassified  into a greater  number of shares of Common Stock,  the  Conversion
Price in effect at the  opening of business  on the day  following  the day upon
which such subdivision becomes effective shall be proportionately  reduced, and,
conversely,  if the Outstanding  shares of Common Stock shall be combined into a
smaller number of shares of Common Stock,  the Conversion Price in effect at the
opening of business  on the day  following  the day upon which such  combination
becomes  effective  shall  be  proportionately   increased,  such  reduction  or
increase,  as the case may be, to become effective immediately after the opening
of  business  on the day  following  the day  upon  which  such  subdivision  or
combination becomes effective

          Section 3.5 Optional Prepayment.  At any time after the Effective Date
and prior to the Maturity Date, the Company, upon notice delivered to the Holder
as provided in Section 3.6, may prepay this Debenture in whole or in part at the
Optional Prepayment Price, together with all accrued and unpaid interest thereon
to the date of prepayment.

          Section  3.6  Notice  of  Prepayment.  Notice of  optional  prepayment
pursuant to Section 3.5 ("Notice of Optional  Prepayment")  shall be provided by
the Company to the Holder in writing at the Holder's  last address  appearing in
the Company's security registry not less than thirty (30) Business Days prior to
the prepayment  date and no more than forty five (45) Business Days prior to the
prepayment date,  which notice shall be in  substantially  the form of Exhibit B
hereto,  specify  the  prepayment  date and refer to Section  3.5  (including  a
statement of the prepayment  price), and this Section 3.6.  Notwithstanding  any
sending of a Notice of Optional

                                      -10-

Prepayment, the Holder shall have the right to convert all or any portion of the
Debentures pursuant to Section 3.2 until the applicable prepayment date.

          Section 3.7 Surrender of Debentures. Upon any redemption or prepayment
of this Debenture pursuant to Sections 3.2, or 3.5, or upon maturity pursuant to
Section  2.4, the Holder  shall  either  deliver  this  Debenture by hand to the
Company at its principal  executive offices or surrender the same to the Company
at such  address by  nationally  recognized  overnight  courier.  Payment of the
redemption or prepayment  price  pursuant to Sections 3.2, or 3.5, or the amount
due on maturity  specified in Section  2.4,  shall be made by the Company to the
Holder  against  receipt of this  Debenture (as provided in this Section 3.7) by
wire transfer of immediately  available  funds to such  account(s) as the Holder
shall specify by written  notice to the Company.  If payment of such  prepayment
price is not made in full by the prepayment  date, or the amount due on maturity
is not paid in full by the Maturity  Date, the Holder shall again have the right
to convert this Debenture as provided in Article 3 hereof or to declare an Event
of Default.

          Section 3.8 Mandatory Early  Conversion at Request of Company.  During
the  period  commencing  after the date on which  the  Commission  declares  the
Registration  Statement  effective (the "Effective Date") and until the Maturity
Date,  in the  event  (i)  the  Registration  Statement  shall  continuously  be
effective  uninterrupted  from the Effective  Date and (ii) the fifteen (15) day
volume weighted average closing price (as reported on the Principal  Exchange on
which the Common Stock of the Company trades),  of the Common Stock exceeds 210%
of the Conversion  Price,  at the option of the Company,  exercisable by written
notice to the Holder on the trading day on which the closing price of the Common
Stock exceeds the  Conversion  Price by 210%, the Company may convert all or any
portion  of this  Debenture  into  Common  Stock at the  Conversion  Price  (and
otherwise subject to the terms and conditions specified in Section 3.1 hereof).


                                    ARTICLE 4
                        STATUS; RESTRICTIONS ON TRANSFER

          Section  4.1  Status of  Debenture.  This  Debenture  is an  unsecured
obligation of the Company, and constitutes a legal, valid and binding obligation
of the  Company,  enforceable  in  accordance  with  its  terms  subject,  as to
enforceability, to general principles of equity and to principles of bankruptcy,
insolvency,  reorganization  and other  similar  laws of  general  applicability
relating to or affecting creditors' rights and remedies generally.

          Section 4.2 Restrictions on Transfer.  This Debenture,  and any Common
Shares  deliverable upon the conversion  hereof,  have not been registered under
the  Securities  Act. The Holder by  accepting  this  Debenture  agrees that the
Debenture  and the shares of Common Stock to be acquired as interest on and upon
conversion of this Debenture may not be assigned or otherwise transferred unless
and until (i) the  Company  has  received  the opinion of counsel for the Holder
that the  Debenture  or such shares may be sold  pursuant to an  exemption  from
registration under the Securities Act or (ii) a registration  statement relating
to the  Debenture  or such  shares has been filed by the  Company  and  declared
effective by the SEC.

                                      -11-

          Each  certificate  for shares of Common  Stock  deliverable  hereunder
shall bear a legend as follows unless and until such  securities  have been sold
pursuant to an effective registration statement under the Securities Act:

          "The  securities   represented  by  this  certificate  have  not  been
          registered  under  the  Securities  Act  of  1933  (the  "Act").   The
          securities may not be offered for sale, sold or otherwise  transferred
          except (i) pursuant to an effective  registration  statement under the
          Act or (ii) pursuant to an exemption from  registration  under the Act
          in respect of which the issuer of this  certificate  has  received  an
          opinion of counsel  satisfactory to the issuer of this  certificate to
          such effect. Copies of the agreement covering both the purchase of the
          securities and  restricting  their transfer may be obtained at no cost
          by written request made by the holder of record of this certificate to
          the  Secretary  of the  issuer of this  certificate  at the  principal
          executive offices of the issuer of this certificate."

          This note will be considered  to have been issued with Original  Issue
          Discount  ("OID")  for  purposes  of  sections  1271 et.  seq.  of the
          Internal Revenue Code of 1986, as amended. The issue date of this note
          is September  18, 2001.  For  information  regarding  the issue price,
          amount of OID per $1,000 of principal  amount and yield to maturity of
          this note for  purposes  of the OID rules,  please  contact  Andrew P.
          Savadelis at eMagin Corporation.

          Notwithstanding   the  above,  the  Holder  shall  not  transfer  this
Debenture or any Common Shares  issueable or any rights  hereunder to any person
or entity which is engaged in a business that in the reasonable  judgment of the
Company is in competition with the Company.


                                    ARTICLE 5
                                    COVENANTS

          Section 5.1 Notice of Default.  If any one or more events  occur which
constitute or which,  with notice,  lapse of time, or both,  would constitute an
Event of Default, or if the Holder shall demand the delivery of Common Shares or
take any  other  action  permitted  upon  the  occurrence  of any such  Event of
Default,  the Company shall forthwith give notice to the Holder,  specifying the
nature and status of the Event of  Default or other  event or of such  demand or
action, as the case may be.

          Section 5.2 Payment of Obligations. So long as this Debenture shall be
outstanding,  the Company shall pay, extend, or discharge at or before maturity,
all its respective  material  obligations and  liabilities,  including,  without
limitation,  tax  liabilities,  except  where the same may be  contested in good
faith by appropriate proceedings.

          Section 5.3 Compliance  with Laws. So long as this Debenture  shall be
outstanding,  the Company  shall comply with all  applicable  laws,  ordinances,
rules,  regulations,  and

                                      -12-


requirements of governmental  authorities,  except for such noncompliance  which
would not have a material adverse effect on the business, properties, prospects,
condition (financial or otherwise) or results of operations of the Company.

          Section 5.4 Inspection of Property, Books and Records. So long as this
Debenture  shall be  outstanding,  the Company shall keep proper books of record
and  account  in which  full,  true  and  correct  entries  shall be made of all
material  dealings and  transactions  in relation to its business and activities
and shall permit  representatives of the Holder at the Holder's expense to visit
and inspect any of its respective properties, to examine and make abstracts from
any of its respective books and records,  not reasonably deemed  confidential by
the Company,  and to discuss its respective affairs,  finances and accounts with
its  respective  officers  and  independent  public  accountants,  all  at  such
reasonable times and as often as may reasonably be desired.

          Section  5.5 No Short  Sales.  The  Holder  by its  acceptance  hereof
covenants and agrees that, so long as this Debenture shall be outstanding,  none
of the Holder,  its  affiliates and any Person acting on its or their behalf (i)
has the  intention  of entering  in, or will enter into,  any put option,  short
position or other similar instrument or position or other derivative  instrument
for which the Common Stock is an underlying  Security with respect to the Common
Stock,   (ii)  will  use  at  any  time  shares  of  Common   Stock   Issued  At
Redemption/Conversion  to settle any put option, short position or other similar
instrument or position or other derivative instrument for which the Common Stock
is an underlying Security that may have been entered into prior to the execution
of this  Debenture or (iii) has the intention of engaging in, or will engage in,
any short sale of the Common  Stock Issued At  Redemption/Conversion;  provided,
however,  that nothing in this Section 5.5 shall operate to forbid the Holder or
any of its  affiliates or any Person acting on its or their behalf from selling,
or  entering  into any other  transaction  with  respect  to, the  Common  Stock
contemporaneously  with or following such date and time as the Person or Persons
in whose name or names the Common Stock Issued At Redemption/Conversion shall be
issuable  shall be deemed to have  become the holder or holders of record of the
Common  Shares  represented  thereby and all voting and other rights  associated
with the beneficial  ownership of such Common Shares shall have vested with such
Person or Persons.


                                    ARTICLE 6
                                    REMEDIES

          Section 6.1 Events of Default. "Event of Default" wherever used herein
means any one of the following events:

          (a) the  Company  shall  default  in the  payment of  principal  of or
interest on this Debenture as and when the same shall be due and payable and, in
the case of an interest  payment  default,  such default shall continue for five
(5) Business Days after the date such  interest  payment was due, or the Company
shall fail to perform or observe in any  material  respect  any other  covenant,
agreement, term, provision,  undertaking or commitment under this Debenture, the
Securities  Purchase  Agreement,  the Stock Purchase Warrant or the Registration
Rights  Agreement  and such default  shall  continue for a period of twenty (20)
Business  Days after the  delivery  to the  Company of written  notice  that the
Company is in default hereunder; or

                                      -13-

          (b) any of the  representations  or  warranties  made  by the  Company
herein, in the Securities Purchase Agreement, the Registration Rights Agreement,
the Stock Purchase  Warrant or in any  certificate or financial or other written
statements  heretofore or hereafter  furnished by or on behalf of the Company in
connection  with the execution and delivery of this  Debenture,  the  Securities
Purchase  Agreement,  the Stock  Purchase  Warrant  or the  Registration  Rights
Agreement  shall be false or misleading  in any material  respect on the Closing
Date; or

          (c) the entry of a decree or order by a court having  jurisdiction  in
the premises adjudging the Company or any Subsidiary a bankrupt or insolvent, or
approving  as properly  filed a petition  seeking  reorganization,  arrangement,
adjustment or  composition  of or in respect of the Company under the Bankruptcy
Code or any other  applicable  Federal or state law, or  appointing  a receiver,
liquidator, assignee, trustee or sequestrator (or other similar official) of the
Company or of any substantial  part of its property,  or ordering the winding-up
or  liquidation  of its affairs,  and any such decree or order  continues and is
unstayed and in effect for a period of 60 calendar days; or

          (d) the institution by the Company or any Subsidiary of proceedings to
be adjudicated a bankrupt or insolvent,  or the consent by it to the institution
of  bankruptcy or  insolvency  proceedings  against it, or the filing by it of a
petition  or answer  or  consent  seeking  reorganization  or  relief  under the
Bankruptcy Code or any other applicable  federal or state law, or the consent by
it to the  filing of any such  petition  or to the  appointment  of a  receiver,
liquidator, assignee, trustee or sequestrator (or other similar official) of the
Company  of any  substantial  part of its  property,  or the  making by it of an
assignment  for the benefit of  creditors,  or the admission by it in writing of
its  inability  to pay its debts  generally  as and when they become due, or the
taking of corporate action by the Company in furtherance of any such action; or

          (e) a final judgment or final judgments for the payment of money shall
have been entered by any court or courts of competent  jurisdiction  against the
Company and remains  undischarged  for a period (during which execution shall be
effectively  stayed) of thirty (30) days,  provided that the aggregate amount of
all such  judgments  at any time  outstanding  (to the  extent not paid or to be
paid, as evidenced by a written communication to that effect from the applicable
insurer, by insurance) exceeds $1,000,000; or

          (f) it becomes  unlawful for the Company to perform or comply with its
obligations under this Debenture,  the Securities Purchase Agreement,  the Stock
Purchase Warrant or the Registration  Rights Agreement in any material  respect;
or

          (g) the Company shall default  (giving effect to any applicable  grace
period)  in the  payment of  principal  or  interest  as and when the same shall
become  due and  payable,  under  any  indebtedness,  individually  of more than
$1,000,000.

          Section 6.2 Acceleration of Maturity;  Rescission and Annulment. If an
Event of  Default  occurs  and is  continuing,  then and in every  such case any
Holder  may  rescind  any  outstanding  Redemption/Conversion  Notice and obtain
payment  for the entire  outstanding  Principal  Amount of the  Debenture  which
remains  unconverted,  by a notice in writing to the Company,  and upon any such
declaration  the entire  Principal  Amount of this  Debenture,  plus

                                      -14-

accrued but unpaid interest,  shall become immediately due and payable by virtue
of such  rescission;  provided,  however,  in the case of any  Event of  Default
described in paragraphs (c) or (d) above, the entire then outstanding  Principal
Amount of this Debenture, together with all accrued and unpaid interest thereon,
automatically  shall become immediately due and payable without the necessity of
any notice or declaration as aforesaid.

          Section 6.3 Default  Interest Rate. If any portion of the principal of
or interest on the  Debenture  shall not be paid when due (whether at the stated
maturity,  by  acceleration  or otherwise) such principal of and interest on the
Debenture  which is due and  owing  but not paid  shall,  without  limiting  the
Holder's rights under this Debenture, bear interest at the Default Interest Rate
until paid in full.

          Notwithstanding  anything  herein to the contrary,  if at any time the
applicable  interest rate as provided for herein shall exceed the maximum lawful
rate which may be contracted  for,  charged,  taken or received by the Lender in
accordance with  applicable laws of the State of New York (the "Maximum  Rate"),
the rate of interest applicable to the Debenture shall be limited to the Maximum
Rate.

          Section  6.4  Remedies  Not Waived.  No course of dealing  between the
Company and the Holder or any delay in  exercising  any rights  hereunder  shall
operate as a waiver by the Holder.


                                    ARTICLE 7
                                  MISCELLANEOUS

          Section 7.1 Notice of Certain Events. In the case of the occurrence of
any event described in Section 3.4 of this Debenture, the Company shall cause to
be mailed to the Holder of this  Debenture  at its last address as it appears in
the  Company's  security  registry,  at  least  twenty  (20)  days  prior to the
applicable  record,  effective or expiration date hereinafter  specified (or, if
such twenty (20) days' notice is not  possible,  at the earliest  possible  date
prior to any such  record,  effective or  expiration  date),  a notice  thereof,
including, if applicable, a statement of (x) the date on which a record is to be
taken for the purpose of such  dividend,  distribution,  issuance or granting of
rights,  options or warrants,  or if a record is not to be taken, the date as of
which the holders of record of Common  Stock to be  entitled  to such  dividend,
distribution,  issuance  or granting  of rights,  options or warrants  are to be
determined  or (y)  the  date on  which  such  reclassification,  consolidation,
merger,  sale, transfer,  dissolution,  liquidation or winding-up is expected to
become effective, and the date as of which it is expected that holders of record
of Common Stock will be entitled to exchange their shares for  securities,  cash
or other property deliverable upon such reclassification, consolidation, merger,
sale transfer, dissolution, liquidation or winding-up.

          Section 7.2 Register. The Company shall keep at its principal office a
register  in which  the  Company  shall  provide  for the  registration  of this
Debenture. Upon any transfer of this Debenture in accordance with Articles 2 and
3 hereof, the Company shall register such transfer on the Debenture register.

                                      -15-



          Section 7.3 Withholding. To the extent required by applicable law, the
Company may withhold amounts for or on account of any taxes imposed or levied by
or on behalf of any taxing  authority in the United States  having  jurisdiction
over the Company from any payments made pursuant to this Debenture.

          Section  7.4  Transmittal  of  Notices.  Except  as may  be  otherwise
provided  herein,  any notice or other  communication  or  delivery  required or
permitted  hereunder  shall be in writing and shall be delivered  personally  or
transmitted  by telecopy or sent by certified  mail,  postage  prepaid,  or by a
nationally  recognized overnight courier service, and shall be deemed given when
so delivered  personally or by telecopy or by overnight courier service,  or, if
mailed,  four (4) days after the date of deposit in the United States mails,  as
follows:


          (l) if to the Company, to:

              eMagin Corporation
              2070 Route 52
              Hopewell Junction, NY 12533
              Attention:  Gary Jones, CEO
              Tel: (845) 892-1900
              Fax: (845) 892-1901

              with a copy to:

              White & Case LLP
              1155 Avenue of the Americas
              New York, New York  10036
              Attention:  S. Ward Atterbury
              Tel:  (212) 819-8200
              Fax:  (212) 354-8113

          (2) if to the  Holder,  to the  address of such Holder as shown on the
books of the Company.

Each of the Holder or the  Company  may change the  foregoing  address by notice
given pursuant to this Section 7.4.

          Section 7.5 Governing  Law. THIS  DEBENTURE  SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE  WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING
EFFECT TO CONFLICTS  OF LAWS  PRINCIPLES).  WITH RESPECT TO ANY SUIT,  ACTION OR
PROCEEDINGS  RELATING TO THIS DEBENTURE,  THE COMPANY IRREVOCABLY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED
STATES  DISTRICT  COURT  LOCATED IN THE BOROUGH OF  MANHATTAN IN THE CITY OF NEW
YORK AND HEREBY WAIVES,  TO THE FULLEST EXTENT  PERMITTED BY APPLICABLE LAW, ANY
CLAIM  THAT  ANY  SUCH  SUIT,  ACTION  OR  PROCEEDING  HAS  BEEN  BROUGHT  IN AN
INCONVENIENT  FORUM.

                                      -16-


SUBJECT TO APPLICABLE LAW, THE COMPANY AGREES THAT FINAL JUDGMENT  AGAINST IT IN
ANY LEGAL  ACTION OR  PROCEEDING  ARISING OUT OF OR  RELATING TO THIS  DEBENTURE
SHALL BE  CONCLUSIVE  AND MAY BE  ENFORCED IN ANY OTHER  JURISDICTION  WITHIN OR
OUTSIDE THE UNITED  STATES BY SUIT ON THE  JUDGMENT,  A CERTIFIED  COPY OF WHICH
JUDGMENT   SHALL  BE  CONCLUSIVE   EVIDENCE   THEREOF  AND  THE  AMOUNT  OF  ITS
INDEBTEDNESS, OR BY SUCH OTHER MEANS PROVIDED BY LAW.

          Section 7.6  Headings.  The  headings of the  Articles and Sections of
this Debenture are inserted for convenience only and do not constitute a part of
this Debenture.

          Section 7.7 Recovery. Each of the Holder and the Company hereby agrees
that to the extent that it recovers  damages for a breach under this  Debenture,
such party shall not be entitled  to recover  damages for the same breach  under
the Securities Purchase Agreement or the Registration Rights Agreement.

          Section 7.8 Payment Dates. Whenever any payment hereunder shall be due
on a day other  than a  Business  Day,  such  payment  shall be made on the next
succeeding Business Day.

          Section 7.9 Binding  Effect.  Each Holder by accepting  this Debenture
agrees  to be  bound  by and  comply  with  the  terms  and  provisions  of this
Debenture.

          Section  7.10 No  Stockholder  Rights.  Except as  otherwise  provided
herein,  this  Debenture  shall not entitle the Holder to any of the rights of a
stockholder of the Company, including, without limitation, the right to vote, to
receive  dividends and other  distributions,  or to receive any notice of, or to
attend, meetings of stockholders or any other proceedings of the Company, unless
and to the extent  converted into shares of Common Stock in accordance  with the
terms hereof.

              [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]




          IN WITNESS WHEREOF, the Company has caused this Debenture to be signed
by its duly authorized officer on the date of this Debenture.


                               EMAGIN CORPORATION



                               By:  ____________________________________________
                                    Name:  Gary W. Jones
                                    Title:  Chief Executive Officer


                                                                       EXHIBIT A

                     [FORM OF REDEMPTION/CONVERSION NOTICE]


TO:      eMagin Corporation
         2070 Route 52
         Hopewell Junction, NY 12533
         Attn:

          The  undersigned  owner of this 4%  Convertible  Debenture due July 6,
2004 (the  "Debenture")  issued by eMagin  Corporation  (the  "Company")  hereby
irrevocably  exercises  its  option  to  [redeem /  convert]  $_________________
Principal Amount of the Debenture and accrued and unpaid interest thereon to the
date of this Notice into shares of the common  stock,  par value $.001 per share
("Common Stock"),  of the Company in accordance with the terms of the Debenture.
The undersigned  hereby  instructs the Company to [redeem / convert] the portion
of the  Debenture  specified  above  into  shares  of  Common  Stock  Issued  At
Redemption/Conversion  in  accordance  with the  provisions  of Article 3 of the
Debenture.  The  undersigned  directs  that the  Common  Stock and  certificates
therefor   deliverable   upon   [redemption   /   conversion],   the   Debenture
recertificated  in the Principal Amount not being  surrendered for [redemption /
conversion] hereby, plus accrued and unpaid interest thereon to the date of this
Notice,  together  with any check in payment for  fractional  Common  Stock,  be
registered  in the name of and delivered to the  undersigned  unless a different
name has been indicated below. All capitalized terms used and not defined herein
have the respective meanings assigned to them in the Debenture.  The [redemption
/ conversion]  pursuant hereto shall be deemed to have been effected at the date
and time specified  below,  and at such time the rights of the  undersigned as a
Holder of the Principal  Amount of the Debenture set forth above shall cease and
the  Person or Persons in whose  name or names the  Common  Stock  Delivered  at
Conversion  shall be  registered  shall be deemed to have  become  the holder or
holders of record of the Common  Shares  represented  thereby and all voting and
other rights  associated  with the  beneficial  ownership of such Common  Shares
shall at such time vest with such Person or Persons.


Date and time:  _______________________


                                       _________________________________________
                                       Signature

          Fill in for registration of Debenture:

Please print name and address
(including ZIP code number):

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                                      A-1


                                                                       EXHIBIT B



                       [FORM OF COMPANY PREPAYMENT NOTICE]


Dated:______________

TO:      [Holder]
         [Address]

          eMagin  Corporation (the "Company") hereby  irrevocably  exercises its
option to prepay  $__________  Principal Amount of the 4% Convertible  Debenture
due July 6, 2004 issued by the Company (the "Debenture"),  at a prepayment price
of $_________ and of accrued and unpaid interest thereon, in accordance with the
terms of the Debenture. The undersigned hereby instructs the Holder to surrender
the portion of the Debenture  specified  above in accordance with the provisions
of  Sections  3.5 and 3.6 of the  Debenture.  Upon  receipt of such  surrendered
Debenture,  the  Company  shall  deliver  the  Debenture  recertificated  in the
Principal Amount, if any, not being called for prepayment hereby,  together with
the check in payment of the prepayment  price and for  fractional  Common Stock,
such recertificated  Debenture to be issued in your name and delivered to you or
issued in the name of such other Person as you may  designate  and  delivered to
such other Person.  All  capitalized  terms used and not defined herein have the
respective meanings assigned to them in the Debenture.


                                         Very truly yours,


                                         eMagin Corporation


                                         By:
                                            ------------------------------------
                                            Name:
                                            Title:

                                      B-1

EX-4

NEITHER  THIS WARRANT NOR THE SHARES  ISSUABLE  UPON  EXERCISE  HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE  "SECURITIES  ACT")
OR ANY  OTHER  APPLICABLE  SECURITIES  LAWS.  THIS  WARRANT  HAS BEEN  ISSUED IN
RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION  REQUIREMENTS OF THE SECURITIES
ACT AND SUCH OTHER SECURITIES LAWS. NEITHER THIS WARRANT NOR THE SHARES ISSUABLE
UPON EXERCISE HEREOF MAY BE SOLD, PLEDGED, TRANSFERRED,  ENCUMBERED OR OTHERWISE
DISPOSED OF EXCEPT  PURSUANT TO AN EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE
SECURITIES ACT OR IN A TRANSACTION WHICH IS EXEMPT FROM  REGISTRATION  UNDER THE
PROVISIONS OF THE SECURITIES ACT AND ANY APPLICABLE STATE LAWS.



                             STOCK PURCHASE WARRANT
                               September 18, 2001

                  To Purchase 205,479 Shares of Common Stock of

                               eMAGIN CORPORATION

          THIS CERTIFIES that, for value received, SK Corporation, a corporation
organized under the laws of the Republic of Korea (the  "Holder"),  is entitled,
upon the terms and subject to the  limitations  on exercise  and the  conditions
hereinafter  set forth, at any time on or after September 18, 2001 (the "Initial
Exercise  Date") and on or prior to the close of business on September  18, 2004
(the "Termination Date") but not thereafter,  to subscribe for and purchase from
eMagin  Corporation,  a corporation  incorporated  in the State of Delaware (the
"Company"),  up to 205,479 shares (the "Warrant Shares") of Common Stock,  $.001
par value per share, of the Company (the "Common Stock").  The purchase price of
one share of Common Stock (the  "Exercise  Price")  under this Warrant  shall be
$1.46. The Exercise Price and the number of Warrant Shares for which the Warrant
is exercisable  shall be subject to adjustment as provided herein.  In the event
of any conflict  between the terms of this Warrant and the  Securities  Purchase
Agreement dated as of September 18, 2001 pursuant to which this Warrant has been
issued  (the  "Purchase  Agreement"),  the  Purchase  Agreement  shall  control.
Capitalized  terms used and not otherwise defined herein shall have the meanings
set forth for such terms in the Purchase Agreement.

                                       1

          1. Title to  Warrant.  Prior to the  Termination  Date and  subject to
compliance  with  applicable  laws,  this Warrant and all rights  hereunder  are
transferable, in whole or in part, at the office or agency of the Company by the
Holder in person or by duly authorized attorney,  upon surrender of this Warrant
together with the Assignment Form annexed hereto properly endorsed.

          2.  Authorization  of Shares.  The Company  covenants that all Warrant
Shares which may be issued upon the exercise of the purchase rights  represented
by this Warrant will, upon exercise of the purchase  rights  represented by this
Warrant,  be duly authorized,  validly issued,  fully paid and nonassessable and
free from all taxes,  liens and charges in respect of the issue  thereof  (other
than (x) taxes in respect of any transfer occurring  contemporaneously with such
issue) and (y) liens and  charges  created by the  then-current  Holder,  or any
former Holder of this Warrant).

          3. Exercise of Warrant.

               (a)  Except as  provided  in  Section 4 herein,  exercise  of the
     purchase  rights  represented  by this  Warrant  may be made at any time or
     times on or after the Initial  Exercise  Date and on or before the close of
     business on the  Termination  Date by the surrender of this Warrant and the
     Notice of Exercise Form annexed hereto duly executed,  at the office of the
     Company (or such other office or agency of the Company as it may  designate
     by notice in writing to the registered Holder at the address of such Holder
     appearing  on the books of the  Company)  and upon payment on or before the
     Termination  Date of the Exercise Price of the shares thereby  purchased by
     wire transfer or cashier's check drawn on a United States bank, or by means
     of a  cashless  exercise,  the  Holder  shall  be  entitled  to  receive  a
     certificate for the number of Warrant Shares so purchased. Certificates for
     shares  purchased  hereunder  shall be delivered to the Holder within three
     (3)  Trading  Days  after the date on which  this  Warrant  shall have been
     exercised as aforesaid. This Warrant shall be deemed to have been exercised
     and such  certificate or certificates  shall be deemed to have been issued,
     and Holder or any other person so  designated  to be named therein shall be
     deemed to have become a holder of record of such  shares for all  purposes,
     as of the date the Warrant has been  exercised by payment to the Company of
     the Exercise Price and all taxes required to be paid by the Holder, if any,
     pursuant to Section 5 prior to the issuance of such shares, have been paid.

               (b) If this  Warrant  shall  have  been  exercised  in part,  the
     Company shall,  at the time of delivery of the  certificate or certificates
     representing Warrant Shares, deliver to Holder a new Warrant evidencing the
     rights of Holder to purchase the  unpurchased  Warrant Shares called for by
     this Warrant,  which new Warrant  shall in all other  respects be identical
     with this Warrant.

               (c)  This  Warrant  shall  also  be  exercisable  by  means  of a
     "cashless  exercise"  in which the Holder  shall be  entitled  to receive a
     certificate for the number of Warrant Shares equal to the quotient obtained
     by dividing [(A-B) (X)] by (A), where:

                                       2

               (A) = the closing price per share of Common Stock (as reported by
               the American Stock Exchange (or principal market)) on the Trading
               Day  preceding  the date of such  election on the American  Stock
               Exchange,  or if the Common  Stock is not traded on the  American
               Stock Exchange, then the Principal Market in terms of volume;

               (B) = the Exercise Price of this Warrant; and

               (X) = the number of Warrant Shares issuable upon exercise of this
               Warrant  in  accordance  with the terms of this  Warrant  and the
               Notice of Exercise.


          4. No  Fractional  Shares  or  Scrip.  No  fractional  shares or scrip
representing  fractional  shares  shall  be  issued  upon the  exercise  of this
Warrant.  As to any fraction of a share which Holder would otherwise be entitled
to purchase  upon such  exercise,  the Company  shall pay a cash  adjustment  in
respect of such final fraction in an amount equal to such fraction multiplied by
the Exercise Price.

          5. Charges,  Taxes and Expenses.  Issuance of certificates for Warrant
Shares shall be made without  charge to the Holder for any issue or transfer tax
or other incidental expense in respect of the issuance of such certificate,  all
of which taxes and expenses shall be paid by the Company,  and such certificates
shall be  issued  in the name of the  Holder  or in such name or names as may be
directed by the Holder;  provided,  however,  that in the event certificates for
Warrant  Shares are to be issued in a name  other  than the name of the  Holder,
this  Warrant  when  surrendered  for  exercise  shall  be  accompanied  by  the
Assignment Form attached hereto duly executed by the Holder; and the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.

          6. [Reserved].

          7. Transfer, Division and Combination.

               (a) Subject to compliance  with any applicable  securities  laws,
     transfer  of this  Warrant and all rights  hereunder,  in whole or in part,
     shall be registered  on the books of the Company to be maintained  for such
     purpose,  upon  surrender  of this Warrant at the  principal  office of the
     Company,  together with a written assignment of this Warrant  substantially
     in the form  attached  hereto  duly  executed by the Holder or its agent or
     attorney and funds  sufficient  to pay any transfer  taxes payable upon the
     making of such transfer.  In the event that the Holder wishes to transfer a
     portion of this Warrant,  the Holder shall  transfer at least 25,000 shares
     underlying this Warrant to any such transferee. Upon such surrender and, if
     required, such payment, the Company shall execute and deliver a new Warrant
     or  Warrants  in  the  name  of  the  assignee  or  assignees  and  in  the
     denomination or  denominations  specified in such instrument of assignment,
     and shall  issue to the  assignor a new Warrant  evidencing  the portion of
     this Warrant not so assigned, and this Warrant shall promptly be cancelled.
     A Warrant,  if properly assigned,  may be exercised by a new holder for the
     purchase  of  Warrant  Shares   without

                                       3

     having a new Warrant issued.  Notwithstanding  the above,  the Holder shall
     not transfer  this warrant or any rights  hereunder to any person or entity
     which is engaged in a business  that is in the  reasonable  judgment of the
     Company is in competition with the Company.

               (b) This Warrant may be divided or combined  with other  Warrants
     upon presentation  hereof at the aforesaid office of the Company,  together
     with a written notice  specifying the names and  denominations in which new
     Warrants  are to be issued,  signed by the Holder or its agent or attorney.
     Subject to compliance  with Section  7(a), as to any transfer  which may be
     involved in such  division or  combination,  the Company  shall execute and
     deliver a new Warrant or  Warrants in exchange  for the Warrant or Warrants
     to be divided or combined in accordance with such notice.

               (c) The  Company  shall  prepare,  issue and  deliver  at its own
     expense (other than transfer  taxes) the new Warrant or Warrants under this
     Section 7.

               (d) The Company  agrees to  maintain,  at its  aforesaid  office,
     books  for  the  registration  and  the  registration  of  transfer  of the
     Warrants.

          8. No Rights as  Shareholder  until  Exercise.  This  Warrant does not
entitle the Holder to any voting rights or other rights as a shareholder  of the
Company prior to the exercise hereof. Upon the surrender of this Warrant and the
payment of the aggregate Exercise Price or by means of a cashless exercise,  the
Warrant  Shares so purchased  shall be and be deemed to be issued to such Holder
as the record  owner of such  shares as of the close of business on the later of
the date of such surrender or payment.

          9. Loss,  Theft,  Destruction  or Mutilation  of Warrant.  The Company
covenants that upon receipt by the Company of evidence  reasonably  satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant or any stock
certificate  relating  to the  Warrant  Shares,  and in case of  loss,  theft or
destruction, of indemnity or security reasonably satisfactory to it (which shall
not include the posting of any bond),  and upon  surrender and  cancellation  of
such  Warrant or stock  certificate,  if  mutilated,  the Company  will make and
deliver a new  Warrant or stock  certificate  of like tenor and dated as of such
cancellation, in lieu of such Warrant or stock certificate.

          10. Saturdays,  Sundays,  Holidays,  etc. If the last or appointed day
for the taking of any action or the  expiration of any right required or granted
herein shall be a Saturday,  Sunday or a legal holiday,  then such action may be
taken or such right may be exercised on the next  succeeding day not a Saturday,
Sunday or legal holiday.

          11.  Adjustments  of Exercise  Price and Number of Warrant  Shares for
Stock  Splits,  etc.  The number  and kind of  securities  purchasable  upon the
exercise of this Warrant and the Exercise  Price shall be subject to  adjustment
from  time to time  upon  the  happening  of any of the  following.  In case the
Company  shall  (i)  pay a  dividend  in  shares  of  Common  Stock  or  make  a
distribution  in shares of Common  Stock to  holders of its  outstanding  Common
Stock,  (ii)  subdivide  its  outstanding  shares of Common Stock into a greater
number of shares,  (iii) combine its  outstanding  shares of Common Stock into a
smaller  number  of  shares of Common  Stock,  or

                                       4

(iv) issue any shares of its capital stock in a  reclassification  of the Common
Stock,  then the number of Warrant  Shares  purchasable  upon  exercise  of this
Warrant  immediately prior thereto shall be adjusted so that the Holder shall be
entitled to receive the kind and number of Warrant Shares or other securities of
the Company  which it would have owned or have been entitled to receive had such
Warrant been exercised in advance thereof. Upon each such adjustment of the kind
and  number of  Warrant  Shares or other  securities  of the  Company  which are
purchasable  hereunder,  the Holder shall thereafter be entitled to purchase the
number of Warrant Shares or other  securities  resulting from such adjustment at
an Exercise  Price per Warrant Share or other  security  obtained by multiplying
the Exercise Price in effect  immediately prior to such adjustment by the number
of  Warrant  Shares  purchasable  pursuant  hereto  immediately  prior  to  such
adjustment and dividing by the number of Warrant  Shares or other  securities of
the Company resulting from such adjustment.  An adjustment made pursuant to this
paragraph shall become  effective  immediately  after the effective date of such
event retroactive to the record date, if any, for such event.

          12.  Reorganization,   Reclassification,   Merger,   Consolidation  or
Disposition  of  Assets.  In case the  Company  shall  reorganize  its  capital,
reclassify  its  capital  stock,  consolidate  or  merge  with or  into  another
corporation  (where the Company is not the surviving  corporation or where there
is a change in or distribution with respect to the Common Stock of the Company),
or sell, transfer or otherwise dispose of all or substantially all its property,
assets or business  to another  corporation  and,  pursuant to the terms of such
reorganization,   reclassification,  merger,  consolidation  or  disposition  of
assets, shares of common stock of the successor or acquiring corporation, or any
cash,  shares of stock or other securities or property of any nature  whatsoever
(including  warrants or other subscription or purchase rights) in addition to or
in lieu of  common  stock of the  successor  or  acquiring  corporation  ("Other
Property"),  are to be received by or distributed to the holders of Common Stock
of the  Company,  then the Holder  shall have the right  thereafter  to elect to
receive,  (i) upon exercise of this Warrant at the Exercise Price written herein
and  consummation of the applicable  event, the number of shares of Common Stock
of the  successor  or  acquiring  corporation  or of the  Company,  if it is the
surviving corporation, and Other Property receivable upon or as a result of such
reorganization, reclassification, merger, consolidation or disposition of assets
by a Holder of the number of shares of Common  Stock for which  this  Warrant is
exercisable  immediately prior to such event, or (ii) cash equal to the value of
this Warrant as determined in accordance with the  Black-Scholes  option pricing
formula.  In  case  of  any  such  reorganization,   reclassification,   merger,
consolidation or disposition of assets,  the successor or acquiring  corporation
(if  other  than  the  Company)  shall  expressly  assume  the due and  punctual
observance  and  performance  of each and every  covenant and  condition of this
Warrant to be performed and observed by the Company and all the  obligations and
liabilities   hereunder,   subject  to  such  modifications  as  may  be  deemed
appropriate (as determined in good faith by resolution of the Board of Directors
of the Company) in order to provide for  adjustments of Warrant Shares for which
this Warrant is exercisable  which shall be as nearly  equivalent as practicable
to the adjustments provided for in this Section 12. For purposes of this Section
12, "common stock of the successor or acquiring corporation" shall include stock
of such  corporation  of any class which is not  preferred  as to  dividends  or
assets  over any  other  class of stock  of such  corporation  and  which is not
subject to  redemption  and shall also include any  evidences  of  indebtedness,
shares of stock or other  securities  which are convertible into or

                                       5

exchangeable  for any such stock,  either  immediately  or upon the arrival of a
specified  date or the happening of a specified  event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing  provisions of
this  Section  12  shall   similarly   apply  to   successive   reorganizations,
reclassifications, mergers, consolidations or disposition of assets.

          13. Voluntary  Adjustment by the Company.  The Company may at any time
during the term of this Warrant  reduce the then current  Exercise  Price to any
amount and for any period of time deemed  appropriate  by the Board of Directors
of the Company.

          14.  Notice of  Adjustment.  Whenever the number of Warrant  Shares or
number or kind of securities or other property  purchasable upon the exercise of
this Warrant or the Exercise Price is adjusted, as herein provided,  the Company
shall promptly mail by registered or certified mail,  return receipt  requested,
to the Holder notice of such adjustment or adjustments  setting forth the number
of Warrant  Shares  (and other  securities  or  property)  purchasable  upon the
exercise of this  Warrant and the  Exercise  Price of such  Warrant  Shares (and
other  securities  or property)  after such  adjustment,  setting  forth a brief
statement  of  the  facts  requiring  such  adjustment  and  setting  forth  the
computation by which such  adjustment was made.  Such notice,  in the absence of
manifest  error,  shall  be  conclusive  evidence  of the  correctness  of  such
adjustment.

          15. Notice of Corporate Action. If at any time:

               (a) the Company  shall take a record of the holders of its Common
     Stock for the  purpose of  entitling  them to  receive a dividend  or other
     distribution,  or any right to subscribe  for or purchase any  evidences of
     its indebtedness,  any shares of stock of any class or any other securities
     or property, or to receive any other right, or

               (b) there shall be any capital reorganization of the Company, any
     reclassification or recapitalization of the capital stock of the Company or
     any  consolidation or merger of the Company with, or any sale,  transfer or
     other  disposition  of all or  substantially  all the  property,  assets or
     business of the Company to, another corporation or,

               (c)  there  shall  be a  voluntary  or  involuntary  dissolution,
     liquidation or winding up of the Company;

then,  in any one or more of such cases,  the Company  shall give to Holder,  if
lawful and  practicable  to do so, (i) at least 10 days' prior written notice of
the  date  on  which  a  record  date  shall  be  selected  for  such  dividend,
distribution or right or for  determining  rights to vote in respect of any such
reorganization,   reclassification,   merger,  consolidation,   sale,  transfer,
disposition,  liquidation  or  winding  up,  and  (ii) in the  case of any  such
reorganization,   reclassification,   merger,  consolidation,   sale,  transfer,
disposition,  dissolution,  liquidation  or winding  up, at least 10 days' prior
written  notice of the date  when the same  shall  take  place.  Such  notice in
accordance  with the  foregoing  clause also shall specify (i) the date on which
any such record is to be taken for the purpose of such dividend, distribution or
right,  the date on which the  holders of Common  Stock shall be entitled to any
such dividend, distribution or right,

                                       6

and the  amount  and  character  thereof,  and (ii)  the date on which  any such
reorganization,   reclassification,   merger,  consolidation,   sale,  transfer,
disposition,  dissolution,  liquidation  or  winding up is to take place and the
time,  if any such time is to be fixed,  as of which the holders of Common Stock
shall be entitled to  exchange  their  Warrant  Shares for  securities  or other
property deliverable upon such disposition,  dissolution, liquidation or winding
up. Each such written notice shall be sufficiently  given if addressed to Holder
at the  last  address  of  Holder  appearing  on the  books of the  Company  and
delivered in accordance with Section 17(d).

          16.  Authorized  Shares.  The Company covenants that during the period
the Warrant is  outstanding,  it will reserve from its  authorized  and unissued
Common  Stock a  sufficient  number of shares to provide for the issuance of the
Warrant Shares upon the exercise of any purchase rights under this Warrant.  The
Company  represents  that its issuance of this  Warrant  shall  constitute  full
authority  to its  officers  who are charged  with the duty of  executing  stock
certificates  to execute and issue the  necessary  certificates  for the Warrant
Shares upon the exercise of the purchase rights under this Warrant.  The Company
will take all such  reasonable  action as may be  necessary  to assure that such
Warrant  Shares  may be issued  as  provided  herein  without  violation  of any
applicable law or regulation,  or of any  requirements  of the Principal  Market
upon which the Common Stock may be listed.

          The Company shall not by any action,  including,  without  limitation,
amending  its  certificate  of  incorporation  or  through  any  reorganization,
transfer  of  assets,  consolidation,  merger,  dissolution,  issue  or  sale of
securities or any other voluntary action,  avoid or seek to avoid the observance
or  performance  of any of the terms of this  Warrant,  but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or  appropriate to protect the rights of Holder
against  impairment.  Without  limiting the  generality  of the  foregoing,  the
Company  will (a) not  increase  the par value of any Warrant  Shares  above the
amount payable therefor upon such exercise immediately prior to such increase in
par value,  (b) use commercially  reasonable  efforts to take all such action as
may be  necessary  or  appropriate  in order that the  Company  may  validly and
legally issue fully paid and  nonassessable  Warrant Shares upon the exercise of
this Warrant,  and (c) use  commercially  reasonable  efforts to obtain all such
authorizations,  exemptions or consents from any public  regulatory  body having
jurisdiction  thereof as may be  necessary  to enable the Company to perform its
obligations under this Warrant.

          Before  taking any action which would result in an  adjustment  in the
number of  Warrant  Shares  for which  this  Warrant  is  exercisable  or in the
Exercise Price, the Company shall obtain all such  authorizations  or exemptions
thereof,  or consents  thereto,  as may be necessary from any public  regulatory
body or bodies having jurisdiction thereof.

          17. Miscellaneous.

               (a) Jurisdiction.  This Warrant shall constitute a contract under
     the laws of New York, without regard to its conflict of law,  principles or
     rules, and be subject to arbitration pursuant to the terms set forth in the
     Purchase Agreement.

                                       7

               (b) Restrictions. The Holder acknowledges that the Warrant Shares
     acquired upon the exercise of this Warrant,  if not  registered,  will have
     restrictions upon resale imposed by state and federal securities laws.

               (c) Nonwaiver and Expenses.  No course of dealing or any delay or
     failure to exercise any right hereunder on the part of Holder shall operate
     as a waiver of such right or otherwise prejudice Holder's rights, powers or
     remedies, notwithstanding all rights hereunder terminate on the Termination
     Date.  If the  Company  willfully  and  knowingly  fails to comply with any
     provision of this  Warrant,  which  results in any material  damages to the
     Holder, the Company shall pay to Holder such amounts as shall be sufficient
     to cover any costs and expenses  including,  but not limited to, reasonable
     attorneys'  fees,  including  those of appellate  proceedings,  incurred by
     Holder in  collecting  any  amounts  due  pursuant  hereto or in  otherwise
     enforcing any of its rights, powers or remedies hereunder.

               (d) Notices.  Any notice,  request or other document  required or
     permitted to be given or  delivered  to the Holder by the Company  shall be
     delivered  in  accordance  with  the  notice  provisions  of  the  Purchase
     Agreement.

               (e) Limitation of Liability.  No provision hereof, in the absence
     of  affirmative  action  by  Holder  to  purchase  Warrant  Shares,  and no
     enumeration  herein of the rights or privileges of Holder,  shall give rise
     to any liability of Holder for the purchase price of any Common Stock or as
     a  stockholder  of the Company,  whether such  liability is asserted by the
     Company or by creditors of the Company.

               (f) Remedies.  Holder,  in addition to being entitled to exercise
     all rights granted by law, including recovery of damages,  will be entitled
     to  specific  performance  of its rights  under this  Warrant.  The Company
     agrees that  monetary  damages would not be adequate  compensation  for any
     loss incurred by reason of a breach by it of the provisions of this Warrant
     and  hereby  agrees  to  waive  the  defense  in any  action  for  specific
     performance that a remedy at law would be adequate.

               (g) Successors and Assigns. Subject to applicable securities laws
     and the  provisions  of this  Warrant,  this  Warrant  and the  rights  and
     obligations  evidenced  hereby shall inure to the benefit of and be binding
     upon the successors of the Company and the successors and permitted assigns
     of Holder.  The  provisions  of this  Warrant  are  intended  to be for the
     benefit  of all  Holders  from  time to time of this  Warrant  and shall be
     enforceable by any such Holder or holder of Warrant Shares.

               (h)  Amendment.  This  Warrant  may be modified or amended or the
     provisions  hereof  waived with the written  consent of the Company and the
     Holder.

               (i)  Severability.  Wherever  possible,  each  provision  of this
     Warrant  shall be  interpreted  in such manner as to be effective and valid
     under  applicable  law,  but if any  provision  of this  Warrant  shall  be
     prohibited by or invalid under  applicable  law,  such  provision  shall be
     ineffective  to the  extent  of such  prohibition  or  invalidity,  without
     invalidating  the remainder of such provisions or the remaining  provisions
     of this Warrant.

                                       8

               (j)  Headings.  The  headings  used in this  Warrant  are for the
     convenience of reference  only and shall not, for any purpose,  be deemed a
     part of this Warrant.

                                       9

          IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized.


Dated: September 18, 2001
                                  eMAGIN CORPORATION



                                  By:
                                     -------------------------------------------
                                     Name:  Gary W. Jones
                                     Title: Chief Executive Officer

                                       10

                               NOTICE OF EXERCISE

To:      eMagin Corporation


          (1) The undersigned  hereby elects to purchase ________ Warrant Shares
(the  "Common  Stock"),  of  eMagin  Corporation  pursuant  to the  terms of the
attached  Warrant,  and tenders  herewith payment of the exercise price in full,
together with all applicable transfer taxes, if any.

          (2) Please  issue a  certificate  or  certificates  representing  said
Warrant  Shares  in the  name of the  undersigned  or in such  other  name as is
specified below:


                  ----------------------------------------


The Warrant Shares shall be delivered to the following:


                  ----------------------------------------

                  ----------------------------------------

                  ----------------------------------------



                                  [PURCHASER]


                                  By:
                                     -------------------------------------------
                                     Name:
                                     Title:

                                  Dated:
                                        ----------------------------------------

                   NOTICE OF EXERCISE OF COMMON STOCK WARRANT
                    PURSUANT TO CASHLESS EXERCISE PROVISIONS




To: eMagin Corporation

Aggregate Price of Warrant Before Exercise:  $
                                              ------------------
Aggregate Price Being Exercised:  $
                                   ------
Exercise Price:  $       per share
                  ------

Number of Shares of Common Stock to be Issued Under this Notice:
                                                                  --------
Remaining Aggregate Price (if any) After Issuance:  $
                                                     -------


Gentlemen:

The undersigned,  registered  Holder of the Warrant delivered  herewith,  hereby
irrevocably exercises such Warrant for, and purchases thereunder,  shares of the
Common Stock of eMagin Corporation,  a Delaware corporation,  as provided below.
Capitalized terms used herein,  unless otherwise defined herein,  shall have the
meanings  given in the  Warrant.  Holder  hereby  exercises  this Warrant for an
aggregate  of  __________  shares,  leaving  __________  shares  remaining to be
exercised.  Such exercise shall be pursuant to the cashless exercise  provisions
of Section 3 of the Warrant; therefore, Holder makes no payment with this Notice
of Exercise and  authorizes the Company to reduce the number of shares of Common
Stock  to be  delivered  pursuant  to  the  immediately  preceding  sentence  in
accordance  with  Section  3.  Holder  requests  that the  certificates  for the
purchased    shares   of    Common    Stock   be   issued   in   the   name   of
_________________________ and delivered to ____________________________________.
To the extent the foregoing  exercise is for less than the full Aggregate  Price
of  the  Warrant,  a  replacement  Warrant  representing  the  remainder  of the
Aggregate  Price  (and  otherwise  of like  form,  tenor  and  effect)  shall be
delivered to Holder along with the share certificate evidencing the Common Stock
issued in response to this Notice of Exercise.

                                  [Purchaser]


                                  By:
                                     -------------------------------------------
                                     Name:
                                     Title:

                                  Date:


                                      NOTE

          The  execution  to the  foregoing  Notice  of  Exercise  must  exactly
correspond to the name of the Holder on the Warrant


                                 ASSIGNMENT FORM

                    (To assign the foregoing warrant, execute
                   this form and supply required information.
                      Do not use this form to exercise the
                                   warrant.)



          FOR VALUE  RECEIVED,  the foregoing  Warrant and all rights  evidenced
thereby are hereby assigned to


                                                whose address is
-----------------------------------------------


---------------------------------------------------------------.


---------------------------------------------------------------

                                                 Dated:
                                                         --------------, -------


                           Holder's Signature:
                                              ----------------------------------

                           Holder's Address:
                                            ------------------------------------

                                            ------------------------------------


Signature Guaranteed:
                     -----------------------------------------------------------




NOTE: The signature to this  Assignment Form must correspond with the name as it
appears on the face of the Warrant,  without  alteration or  enlargement  or any
change whatsoever,  and must be guaranteed by a bank or trust company.  Officers
of  corporations  and  those  acting  in an  fiduciary  or other  representative
capacity  should  file  proper  evidence of  authority  to assign the  foregoing
Warrant.

EX-4

                          REGISTRATION RIGHTS AGREEMENT

          This  REGISTRATION  RIGHTS  AGREEMENT,  dated as of September 18, 2001
(this "Agreement"),  by and between eMagin Corporation,  a Delaware corporation,
with principal executive offices located at 2070 Route 52, Hopewell Junction, NY
12533 (the "Company"),  and SK Corporation,  a [corporation  organized under the
laws of the Republic of Korea],  with principal  executive offices located at 99
Seorin-dong, Jongro-gu, Seoul 110-110, Korea (the "Initial Investor").

          WHEREAS,  upon  the  terms  and  subject  to  the  conditions  of  the
Securities Purchase Agreement dated as of September 18, 2001, by and between the
Initial  Investor and the Company (the  "Securities  Purchase  Agreement"),  the
Company has agreed to issue and sell to the Initial  Investor (i) the  Company's
4% Convertible  Debentures in an aggregate  principal amount of up to $3,000,000
(the "Debentures"), which, upon the terms and subject to the conditions thereof,
are convertible  into shares of the Company's  common stock, par value $.001 per
share (the  "Common  Stock"),  and (ii)  Common  Stock  Purchase  Warrants  (the
"Warrants") to purchase shares of Common Stock; and

          WHEREAS,  to induce the  Initial  Investor  to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide with respect to
the Common  Stock  issued or issuable in lieu of cash  interest  payments on the
Debentures,  upon  conversion of the Debentures  and/or exercise of the Warrants
certain registration rights under the Securities Act;

          NOW,  THEREFORE,  in  consideration  of the  premises  and the  mutual
covenants  contained herein, the parties hereto,  intending to be legally bound,
hereby agree as follows:

          1. Definitions

          (a) As used in this  Agreement,  the  following  terms  shall have the
meanings:

               (i)  "Affiliate," of any specified  Person means any other Person
     who  directly,  or  indirectly  through one or more  intermediaries,  is in
     control  of,  is  controlled  by, or is under  common  control  with,  such
     specified  Person.  For  purposes of this  definition,  control of a Person
     means the power,  directly or indirectly,  to direct or cause the direction
     of the  management  and  policies  of  such  Person  whether  by  contract,
     securities,  ownership  or  otherwise;  and  the  terms  "controlling"  and
     "controlled" have the respective meanings correlative to the foregoing.

               (ii)  "Closing  Date" means the date and time of the issuance and
     sale of the Debentures and the Warrants.

               (iii) "Commission" means the Securities and Exchange Commission.


               (iv) "Current  Market Price" on any date of  determination  means
     the closing price of a share of the Common Stock in the regular day session
     on such day as reported on the American Stock Exchange ("Amex");  provided,
     if such  security  is not listed or  admitted  to  trading on the Amex,  as
     reported on the principal national security exchange or quotation system on
     which such security is quoted or listed or admitted to trading,  or, if not
     quoted or listed or admitted to trading on any national securities exchange
     or  quotation   system,   the  closing   price  of  such  security  on  the
     over-the-counter  market in the  regular day session on the day in question
     as reported by  Bloomberg  LP, or a similar  generally  accepted  reporting
     service, as the case may be. . If such security has no quotes or listing as
     defined in this section 1 (iv),  then the Current Market Price shall be the
     price per Common Share on any date of  determination  as  determined  by an
     independent  third party  appointed by mutual  agreement of the Company and
     the Holder.

               (v) "Exchange Act" means the Securities  Exchange Act of 1934, as
     amended, and the rules and regulations of the Commission thereunder, or any
     similar successor statute.

               (vi)  "Investor"  means  each  of the  Initial  Investor  and any
     transferee  or assignee of  Registrable  Securities  which agrees to become
     bound by all of the terms and  provisions  of this  Agreement in accordance
     with Section 9 hereof.

               (vii) "Person" means any  individual,  partnership,  corporation,
     limited  liability  company,  joint  stock  company,  association,   trust,
     unincorporated  organization,  or  a  government  or  agency  or  political
     subdivision thereof.

               (viii)  "Prospectus"  means the  prospectus  (including,  without
     limitation,  any  preliminary  prospectus  and any final  prospectus  filed
     pursuant to Rule 424(b) under the Securities Act,  including any prospectus
     that discloses  information  previously  omitted from a prospectus filed as
     part of an effective  registration statement in reliance on Rule 430A under
     the Securities Act) included in the Registration  Statement,  as amended or
     supplemented by any prospectus  supplement with respect to the terms of the
     offering  of any  portion  of the  Registrable  Securities  covered  by the
     Registration  Statement and by all other amendments and supplements to such
     prospectus,  including  all  material  incorporated  by  reference  in such
     prospectus and all documents filed after the date of such prospectus by the
     Company under the Exchange Act and incorporated by reference therein.

               (ix)  "Public  Offering"  means  an  offer  registered  with  the
     Commission and the appropriate state securities  commissions by the Company
     of its Common Stock and made pursuant to the Securities Act.

               (x)  "Registrable  Securities"  means the Common  Stock issued or
     issuable (i) in lieu of cash interest payments on the Debentures, (ii) upon
     conversion,  redemption  or  prepayment  of the  Debentures  or (iii)  upon
     exercise of the Warrants;

                                       2

     provided,  however, a share of Common Stock shall cease to be a Registrable
     Security for purposes of this  Agreement  when it no longer is a Restricted
     Security.

               (xi) "Registration  Statement" means a registration  statement of
     the Company filed on an appropriate form under the Securities Act providing
     for the  registration  of, and the sale on a continuous or delayed basis by
     the  holders  of, all of the  Registrable  Securities  pursuant to Rule 415
     under the Securities Act,  including the Prospectus  contained  therein and
     forming a part thereof,  any amendments to such registration  statement and
     supplements  to such  Prospectus,  and all  exhibits to and other  material
     incorporated by reference in such registration statement and Prospectus.

               (xii)  "Restricted  Security"  means any  share of  Common  Stock
     converted,  issued or  issuable  in lieu of cash  interest  payments on the
     Debentures, upon conversion,  redemption or prepayment of the Debentures or
     exercise of the Warrants except any such share that (i) has been registered
     pursuant to an effective  registration  statement  under the Securities Act
     and  sold in a  manner  contemplated  by the  prospectus  included  in such
     registration  statement,  (ii) has been  transferred in compliance with the
     resale  provisions of Rule 144 under the  Securities  Act (or any successor
     provision thereto) or is transferable pursuant to paragraph (k) of Rule 144
     under the Securities  Act (or any successor  provision  thereto),  or (iii)
     otherwise has been  transferred and a new share of Common Stock not subject
     to transfer  restrictions under the Securities Act has been delivered by or
     on behalf of the Company.

               (xiii)  "Securities  Act" means the  Securities  Act of 1933,  as
     amended, and the rules and regulations of the Commission thereunder, or any
     similar successor statute.

          (b) All  capitalized  terms  used  and not  defined  herein  have  the
respective meaning assigned to them in the Securities Purchase Agreement.

          2. Registration

          (a) Filing and  Effectiveness of Registration  Statement.  The Company
shall use its  reasonable  best efforts to prepare and file with the  Commission
not later  than 270 days  after  the  Closing  Date,  a  Registration  Statement
relating to the offer and sale of the  Registrable  Securities and shall use its
reasonable  best efforts to cause the  Commission  to declare such  Registration
Statement  effective  under the Securities Act as promptly as practicable but in
no event  later than one (1) year after the  Closing  Date.  The  Company  shall
promptly  (and, in any event,  no more than 48 hours after it receives  comments
from the  Commission),  notify the Initial  Investor when and if it receives any
comments from the Commission on the Registration  Statement and promptly forward
a copy of such  comments,  if they  are in  writing,  to the  Buyer  or  Initial
Investor  as the case may be. At such time after the filing of the  Registration
Statement  pursuant to this Section  2(a) as the  Commission  indicates,  either
orally or in  writing,  that it has no  further  comments  with  respect to such
Registration  Statement or that it is willing to entertain  appropriate requests
for acceleration of effectiveness of such  Registration  Statement,  the Company
shall  promptly,  and in no event later than five (5) days after receipt of such
indication  from  the

                                       3

Commission,  request that the  effectiveness of such  Registration  Statement be
accelerated  within 48 hours of the  Commission's  receipt of such request.  The
Company  shall  notify  the  Initial   Investor  by  written  notice  that  such
Registration  Statement has been declared  effective by the Commission within 24
hours of such declaration by the Commission.

          (b)  Eligibility  for Use of Form S-3. The Company agrees that at such
time as it meets all the requirements for the use of Securities Act Registration
Statement  on Form S-3 it shall  use its  reasonable  best  efforts  to file all
reports  and  information  required to be filed by it with the  Commission  in a
timely manner and take all such other action so as to maintain such  eligibility
for the use of such form.

          3. Obligations of the Company

          In connection with the registration of the Registrable Securities, the
Company shall subject to the Investors assistance and cooperation, as reasonably
required:

          (a) (i) Use its  reasonable  best efforts to prepare and file with the
Commission  such  amendments  (including   post-effective   amendments)  to  the
Registration  Statement and supplements to the Prospectus as may be necessary to
keep the Registration  Statement  continuously  effective and in compliance with
the  provisions of the  Securities  Act  applicable  thereto so as to permit the
Prospectus  forming  part  thereof to be current  and useable by  Investors  for
resales of the  Registrable  Securities for a period of three (3) years from the
date on which the  Registration  Statement  is first  declared  effective by the
Commission  (the  "Effective  Time") or such shorter  period that will terminate
upon the earlier of there ceasing to be any Registrable  Securities  outstanding
or when all the Registrable  Securities  covered by the  Registration  Statement
have been sold  pursuant  thereto in  accordance  with the plan of  distribution
provided  in  the  Prospectus,  transferred  pursuant  to  Rule  144  under  the
Securities Act or otherwise transferred in a manner that results in the delivery
of new securities not subject to transfer  restrictions under the Securities Act
(the  "Registration  Period") and (ii) take all lawful  action such that each of
(A) the  Registration  Statement  and any  amendment  thereto does not,  when it
becomes  effective,  contain an untrue  statement of a material  fact or omit to
state a material  fact  required to be stated  therein or  necessary to make the
statements  therein,  not misleading and (B) the Prospectus  forming part of the
Registration Statement, and any amendment or supplement thereto, does not at any
time during the  Registration  Period include an untrue  statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements  therein,  in light of the circumstances under which they
were made, not misleading.

          (b) During the Registration Period, use its reasonable best efforts to
comply with the provisions of the Securities Act with respect to the Registrable
Securities of the Company covered by the Registration  Statement until such time
as all of such  Registrable  Securities have been disposed of in accordance with
the  intended  methods  of  disposition  by the  Investors  as set  forth in the
Prospectus forming part of the Registration Statement;

          (c) (i) Prior to the filing with the  Commission  of any  Registration
Statement (including any amendments thereto) and the distribution or delivery of
any Prospectus  (including any  supplements  thereto),  provide (A) draft copies
thereof to the Investors and give reasonable

                                       4

consideration  to  all  such  comments  as the  Investors  (and  their  counsel)
reasonably  may  propose  and (B) to the  Investors  a copy of the  accountant's
consent  letter to be included in the filing and (ii)  furnish to each  Investor
whose Registrable  Securities are included in the Registration Statement and its
legal counsel identified to the Company, (A) promptly after the same is prepared
and publicly distributed, filed with the Commission, or received by the Company,
one copy of the Registration Statement,  each Prospectus,  and each amendment or
supplement  thereto,  and (B) such  number of copies of the  Prospectus  and all
amendments and supplements  thereto and such other  documents,  as such Investor
may reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such Investor;

          (d) (i) Use its  reasonable  best  efforts to  register or qualify the
Registrable   Securities  covered  by  the  Registration  Statement  under  such
securities or "blue sky" laws of such  jurisdictions as the Investors who hold a
majority-in-interest  of the  Registrable  Securities  being offered  reasonably
request,  (ii) prepare and file in such jurisdictions such amendments (including
post-effective   amendments)   and   supplements  to  such   registrations   and
qualifications as may be necessary to maintain the effectiveness  thereof at all
times during the Registration  Period,  (iii) take all such other lawful actions
as may be necessary to maintain such  registrations and qualifications in effect
at all times during the Registration Period, and (iv) take all such other lawful
actions reasonably necessary or advisable to qualify the Registrable  Securities
for sale in such jurisdictions; provided, however, that the Company shall not be
required in connection  therewith or as a condition thereto to (A) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(d),  (B) subject  itself to general  taxation in any such
jurisdiction  or (C) file a general  consent  to  service of process in any such
jurisdiction;

          (e) As promptly as  practicable  after  becoming  aware of such event,
notify each Investor of the  occurrence  of any event,  as a result of which the
Prospectus included in the Registration  Statement,  as then in effect, includes
an  untrue  statement  of a  material  fact or omits to  state a  material  fact
required to be stated  therein or necessary to make the statements  therein,  in
light of the  circumstances  under  which they were made,  not  misleading,  and
promptly  prepare an amendment to the  Registration  Statement and supplement to
the  Prospectus  to correct such untrue  statement  or  omission,  and deliver a
number of copies of such  supplement  and  amendment  to each  Investor  as such
Investor may reasonably request;

          (f) As promptly as  practicable  after  becoming  aware of such event,
notify each  Investor who holds  Registrable  Securities  being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance by
the Commission of any stop order or other suspension of the effectiveness of the
Registration  Statement at the earliest possible time and take all lawful action
to effect  the  withdrawal,  recession  or  removal  of such stop order or other
suspension;

          (g) Use its  reasonable  best  efforts  to cause  all the  Registrable
Securities  covered by the Registration  Statement to be listed on the principal
national securities exchange,  and included in an inter-dealer  quotation system
of a registered  national securities  association,  on or in which securities of
the same class or series issued by the Company are then listed or included;

                                       5

          (h) Use its  reasonable  best efforts to maintain a transfer agent and
registrar,  which may be a single  entity,  for the  Registrable  Securities not
later than the effective date of the Registration Statement;

          (i) Use its  reasonable  best  efforts to take all such  other  lawful
actions  reasonably  necessary to expedite and facilitate the disposition by the
Investors  of their  Registrable  Securities  in  accordance  with the  intended
methods  therefor  provided  in the  Prospectus  which are  customary  under the
circumstances;

          (j)  Make  generally  available  to its  security  holders  as soon as
practicable,  but in any event not later  than  three (3)  months  after (i) the
effective  date (as  defined in Rule  158(c)  under the  Securities  Act) of the
Registration  Statement,  and (ii)  the  effective  date of each  post-effective
amendment  to the  Registration  Statement,  as the  case  may be,  an  earnings
statement of the Company and its  subsidiaries  complying  with Section 11(a) of
the  Securities Act and the rules and  regulations of the Commission  thereunder
(including, at the option of the Company, Rule 158); and

          (k) (i) Make reasonably available for inspection by Investors, and any
attorney,  accountant  or other agent  retained by such  Investors  all relevant
financial and other records, pertinent corporate documents and properties of the
Company and its subsidiaries,  and (ii) use reasonable best efforts to cause the
Company's officers, directors and employees to supply all information reasonably
requested  by such  Investors  or any  such  attorney,  accountant  or  agent in
connection with the  Registration  Statement,  in each case, as is customary for
similar  due  diligence  examinations;  provided,  however,  that  all  records,
information and documents that are designated in writing by the Company, in good
faith,  as  confidential,  proprietary  or  containing  any  material  nonpublic
information  shall be kept confidential by such Investors and any such attorney,
accountant or agent (pursuant to an appropriate confidentiality agreement in the
case of any such holder or agent),  unless such  disclosure  is made pursuant to
judicial  process in a court  proceeding  (after  first  giving  the  Company an
opportunity  promptly to seek a protective order or otherwise limit the scope of
the information  sought to be disclosed) or is required by law, or such records,
information or documents  become  available to the public generally or through a
third party not in violation of an accompanying  obligation of  confidentiality;
and  provided,  further,  that,  if the  foregoing  inspection  and  information
gathering would otherwise  disrupt the Company's  conduct of its business,  such
inspection and information  gathering shall, to the maximum extent possible,  be
coordinated on behalf of the Investors and the other parties entitled thereto by
one firm of counsel  designed  by and on behalf of the  majority  in interest of
Investors and other parties.

          4. Obligations of the Investors

          In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:

          (a) It  shall  be a  condition  precedent  to the  obligations  of the
Company to complete the registration  pursuant to this Agreement with respect to
the  Registrable  Securities of a particular  Investor that such Investor  shall
furnish to the  Company  such  information  regarding

                                       6


itself,  the  Registrable  Securities  held by it and  the  intended  method  of
disposition  of the  Registrable  Securities  held by it as shall be  reasonably
required to effect the  registration  of such  Registrable  Securities and shall
execute such documents in connection  with such  registration as the Company may
reasonably  request.  As least seven days prior to the first anticipated  filing
date of the  Registration  Statement,  the Company shall notify each Investor of
the  information  the Company  reasonably  requires from each such Investor (the
"Requested  Information") if such Investor elects to have any of its Registrable
Securities included in the Registration Statement. If at least two business days
prior to the anticipated  filing date the Company has not received the Requested
Information from an Investor (a "Non-Responsive Investor"), then the Company may
file the Registration Statement without including Registrable Securities of such
Non-Responsive  Investor and have no further  obligations to the  Non-Responsive
Investor;

          (b) Each  Investor by its  acceptance  of the  Registrable  Securities
agrees to cooperate  with the Company in  connection  with the  preparation  and
filing  of the  Registration  Statement  hereunder,  unless  such  Investor  has
notified  the  Company  in  writing  of  its  election  to  exclude  all  of its
Registrable Securities from the Registration Statement; and

          (c) Each  Investor  agrees  that,  upon receipt of any notice from the
Company of the  occurrence of any event of the kind described in Section 3(e) or
3(f), it shall immediately discontinue its disposition of Registrable Securities
pursuant to the  Registration  Statement  covering such  Registrable  Securities
until  such  Investor's  receipt of the  copies of the  supplemented  or amended
Prospectus contemplated by Section 3(e) and, if so directed by the Company, such
Investor shall deliver to the Company (at the expense of the Company) or destroy
(and deliver to the Company a  certificate  of  destruction)  all copies in such
Investor's  possession,  of the Prospectus covering such Registrable  Securities
current at the time of receipt of such notice.

          5. Right to Suspend Registration Statement

          The Company shall have the right for up to 120 days in any consecutive
360 period to suspend any  Registration  Statement in the event that the Company
determines,  in good faith,  that it is in the best  interest of the Company for
the Company to proceed with its own offering of equity  securities.  The Company
may so proceed by delivering  written notice of such intention to the Investors.
The Company may  exercise  the right to suspend a  Registration  Statement  only
twice in any 360-day period.

          6. Expenses of Registration

          All expenses,  other than  underwriting  discounts and  commissions or
similar  fees,   incurred  in   connection   with   registrations,   filings  or
qualifications  pursuant to Section 3, but including,  without  limitation,  all
registration,  listing,  and qualifications  fees,  printing and engraving fees,
accounting fees, and the fees and  disbursements of counsel for the Company (but
not of the Investors) shall be borne by the Company.

                                       7

          7. Indemnification and Contribution

          (a) The Company  shall  indemnify  and hold harmless each Investor and
each of their  respective  officers and  directors  and each person who controls
such Investor  within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act (each such person being sometimes hereinafter referred to
as an  "Indemnified  Person")  from and against any losses,  claims,  damages or
liabilities,  joint or  several,  to which  such  Indemnified  Person may become
subject under the Securities Act or otherwise,  insofar as such losses,  claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an  untrue  statement  or  alleged  untrue  statement  of a  material  fact
contained in any  Registration  Statement or an omission or alleged  omission to
state therein a material fact required to be stated therein or necessary to make
the statements  therein,  not  misleading,  or arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Prospectus  or an omission or alleged  omission to state therein a material fact
required to be stated  therein or necessary to make the statements  therein,  in
the light of the circumstances  under which they were made, not misleading;  and
the  Company  hereby  agrees  to  reimburse  such  Indemnified  Person  for  all
reasonable  legal  and  other  expenses  incurred  by  them in  connection  with
investigating  or defending  any such action or claim as and when such  expenses
are  incurred;  provided,  however,  that the Company shall not be liable to any
such  Indemnified  Person in any such  case to the  extent  that any such  loss,
claim,  damage  or  liability  arises  out of or is  based  upon  (i) an  untrue
statement  or  alleged  untrue  statement  made in, or an  omission  or  alleged
omission from, such Registration Statement or Prospectus in reliance upon and in
conformity with written information furnished to the Company by such Indemnified
Person  expressly  for use therein or (ii) in the case of the  occurrence  of an
event of the type specified in Section 3(e), the use by the  Indemnified  Person
of an outdated or  defective  Prospectus  after the Company has provided to such
Indemnified  Person an updated  Prospectus  correcting  the untrue  statement or
alleged  untrue  statement or omission or alleged  omission  giving rise to such
loss, claim, damage or liability.

          (b)  Indemnification  by the  Investors.  Each Investor  agrees,  as a
consequence  of  the  inclusion  of  any  of  its  Registrable  Securities  in a
Registration  Statement,  to (i) indemnify  and hold  harmless the Company,  its
directors  (including  any person who, with his or her consent,  is named in the
Registration  Statement as a director nominee of the Company),  its officers who
sign any  Registration  Statement  and each  person,  if any,  who  controls the
Company within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act,  against any losses,  claims,  damages or liabilities to
which the Company or such other persons may become subject, under the Securities
Act or otherwise,  insofar as such losses,  claims,  damages or liabilities  (or
actions in respect  thereof) arise out of or are based upon an untrue  statement
or alleged untrue  statement of a material fact  contained in such  Registration
Statement  or  Prospectus  or arise out of or are  based  upon the  omission  or
alleged  omission to state therein a material fact required to be stated therein
or necessary to make the statements therein (in light of the circumstances under
which they were made, in the case of the  Prospectus),  not misleading,  in each
case to the  extent,  but only to the  extent,  that such  untrue  statement  or
alleged  untrue  statement or omission or alleged  omission was made in reliance
upon and in conformity with written  information  furnished to the Company by or
on behalf of such holder or  underwriter  expressly  for use therein;  provided,
however,  that absent fraud, no Investor shall be liable under this Section 7(b)
for any amount in excess of the net proceeds paid to such Investor in respect of

                                       8

shares  sold by it,  and  (ii)  reimburse  the  Company  for any  legal or other
expenses  incurred by the Company in connection with  investigating or defending
any such action or claim as such expenses are incurred.

          (c) Notice of Claims,  etc.  Promptly after receipt by a party seeking
indemnification  pursuant to this Section 7 (an "Indemnified  Party") of written
notice of any  investigation,  claim,  proceeding  or other action in respect of
which  indemnification is being sought (each, a "Claim"),  the Indemnified Party
promptly  shall notify the party against whom  indemnification  pursuant to this
Section  7 is  being  sought  (the  "Indemnifying  Party")  of the  commencement
thereof;  but the omission to so notify the Indemnifying Party shall not relieve
it from any  liability  that it  otherwise  may have to the  Indemnified  Party,
except to the extent  that the  Indemnifying  Party is  actually  prejudiced  by
reason  of such  failure.  In  connection  with any  Claim as to which  both the
Indemnifying Party and the Indemnified Party are parties, the Indemnifying Party
shall be entitled to assume the defense thereof.  Notwithstanding the assumption
of the defense of any Claim by the  Indemnifying  Party,  the Indemnified  Party
shall have the right to employ  separate legal counsel and to participate in the
defense of such Claim,  and the  Indemnifying  Party  shall bear the  reasonable
fees,  out-of-pocket  costs and expenses of one such separate  legal counsel for
all  Indemnified  Parties  in  connection  with  any one  action  or  series  of
substantially related actions if (and only if): (x) the Indemnifying Party shall
have  agreed in  writing  to pay such fees,  costs and  expenses,  (y) the named
parties to any such action  (including any impleaded  parties)  include both the
Indemnified  Party and the  Indemnifying  Party and the Indemnified  Party shall
have been advised by such counsel in writing that there may be one or more legal
defenses  available to the Indemnifying party different from or in conflict with
any legal  defenses  which may be available to the  Indemnified  Party (in which
case the  Indemnifying  party  shall not have the right to assume the defense of
such action on behalf of the Indemnified  party, or (z) the  Indemnifying  Party
shall  have  failed to  employ  legal  counsel  reasonably  satisfactory  to the
Indemnified  Party  within a  reasonable  period  of time  after  notice  of the
commencement  of such Claim.  If the  Indemnified  Party employs  separate legal
counsel in  circumstances  other than as  described  in clauses  (x), (y) or (z)
above,  the fees,  costs  and  expenses  of such  legal  counsel  shall be borne
exclusively by the Indemnified Party. Except as provided above, the Indemnifying
Party  shall not,  in  connection  with any Claim in the same  jurisdiction,  be
liable  for the fees and  expenses  of more  than  one firm of  counsel  for the
Indemnified  Party (together with  appropriate  local counsel).  The Indemnified
Party shall not,  without the prior written  consent of the  Indemnifying  Party
(which  consent shall not  unreasonably  be withheld),  settle or compromise any
Claim or  consent  to the  entry  of any  judgment  that  does  not  include  an
unconditional  release  of the  Indemnifying  Party  from all  liabilities  with
respect to such Claim or judgment.

          (d) Contribution.  If the indemnification provided for in this Section
7 is unavailable to or insufficient to hold harmless an Indemnified Person under
subsection  (a) or (b)  above in  respect  of any  losses,  claims,  damages  or
liabilities  (or actions in respect  thereof)  referred  to  therein,  then each
Indemnifying  Party  shall  contribute  to the  amount  paid or  payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities (or
actions in respect  thereof) in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and the Indemnified Party in connection
with the statements or omissions

                                       9

which resulted in such losses,  claims,  damages or  liabilities  (or actions in
respect thereof),  as well as any other relevant equitable  considerations.  The
relative  fault  of such  Indemnifying  Party  and  Indemnified  Party  shall be
determined by reference  to, among other  things,  whether the untrue or alleged
untrue  statement of a material fact or omission or alleged  omission to state a
material fact relates to information  supplied by such Indemnifying  Party or by
such Indemnified Party, and the parties' relative intent,  knowledge,  access to
information  and  opportunity  to correct or prevent such statement or omission.
The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 7(d) were  determined by pro rata  allocation  (even if
the  Investors  were  treated as one entity  for such  purpose)  or by any other
method of allocation which does not take account of the equitable considerations
referred to in this Section 7(d).  The amount paid or payable by an  Indemnified
Party as a result of the losses,  claims,  damages or liabilities (or actions in
respect thereof) referred to above shall be deemed to include any legal or other
fees or expenses  reasonably  incurred by such  Indemnified  Party in connection
with  investigating  or defending any such action or claim.  No person guilty of
fraudulent  misrepresentation  (within  the  meaning  of  Section  11(f)  of the
Securities  Act) shall be entitled to  contribution  from any person who was not
guilty of such fraudulent misrepresentation.

          (e) Notwithstanding any other provision of this Section 7, in no event
shall any Investor be required to  undertake  liability to any person under this
Section 7 for any amounts in excess of the dollar  amount of the  proceeds to be
received  by  such  Investor  from  the  sale  of  such  Investor's  Registrable
Securities  pursuant to any Registration  Statement under which such Registrable
Securities are to be registered under the Securities Act.

          (f) The  obligations  of the Company  under this Section 7 shall be in
addition  to  any  liability  which  the  Company  may  otherwise  have  to  any
Indemnified  Person and the  obligations  of any  Indemnified  Person under this
Section 7 shall be in addition to any liability  which such  Indemnified  Person
may otherwise have to the Company.  The remedies  provided in this Section 7 are
not exclusive and shall not limit any rights or remedies  which may otherwise be
available to an indemnified party at law or in equity.

          8. Rule 144

          With a view to making  available to the Investors the benefits of Rule
144 under the  Securities  Act or any other  similar rule or  regulation  of the
Commission  that may at any time permit the Investors to sell  securities of the
Company to the public without  registration  ("Rule 144"), the Company agrees to
use its reasonable best efforts to:

          (a) comply with the provisions of paragraph (c) (1) of Rule 144; and

          (b) file with the  Commission in a timely manner all reports and other
documents  required to be filed by the  Company  pursuant to Section 13 or 15(d)
under the  Exchange  Act;  and,  if at any time it is not  required to file such
reports but in the past had been required to or did file such reports,  it will,
upon the request of any Investor,  make available other  information as required
by, and so long as  necessary  to permit  sales of, its  Registrable  Securities
pursuant to Rule 144.

                                       10

          9. Assignment

          The  rights  to  have  the  Company  register  Registrable  Securities
pursuant to this Agreement shall be  automatically  assigned by the Investors to
any permitted  transferee of all or a portion (which portion shall exceed 10% of
the  Registrable  Securities  on an  as-converted  basis)  of  such  Registrable
Securities  (or  all  or a  portion  (which  portion  shall  exceed  10%  of the
Registrable Securities on an as-converted basis) of any Debentures or Warrant of
the Company which is convertible into such securities) only if: (a) the Investor
agrees in writing with the  transferee or assignee to assign such rights,  and a
copy of such  agreement  is furnished  to the Company  within a reasonable  time
after such assignment, (b) the Company is, within ten (10) Business Days of such
transfer  or  assignment,  furnished  with  written  notice  of (i) the name and
address of such  transferee or assignee and (ii) the securities  with respect to
which  such  registration   rights  are  being  transferred  or  assigned,   (c)
immediately following such transfer or assignment, the securities so transferred
or assigned to the transferee or assignee constitute Restricted Securities,  and
(d) at or before the time the Company  receives the written notice  contemplated
by clause (b) of this sentence the transferee or assignee agrees in writing with
the Company to be bound by all of the provisions contained herein.

          10. Amendment and Waiver

          Any  provision  of this  Agreement  may be amended and the  observance
thereof may be waived (either  generally or in a particular  instance and either
retroactively  or  prospectively),  only with the written consent of the Company
and Investors who hold a majority-in-interest of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon each Investor and the Company.

          11. Changes in Common Stock

          If, and as often as,  there are any changes in the Common Stock by way
of stock split, stock dividend,  reverse split, combination or reclassification,
or through merger, consolidation,  reorganization or recapitalization, or by any
other means,  appropriate  adjustment shall be made in the provisions hereof, as
may be required, so that the rights and privileges granted hereby shall continue
with respect to the Common Stock as so changed.

          12. Miscellaneous

          (a) A person or entity  shall be deemed to be a holder of  Registrable
Securities  whenever  such  person or entity  owns of  record  such  Registrable
Securities.  If  the  Company  receives  conflicting  instructions,  notices  or
elections  from  two or more  persons  or  entities  with  respect  to the  same
Registrable  Securities,  the Company shall act upon the basis of  instructions,
notice  or  election  received  from the  registered  owner of such  Registrable
Securities.

          (b) If,  after the date hereof and prior to the  Commission  declaring
the Registration  Statement to be filed pursuant to Section 2(a) effective under
the  Securities  Act, the Company grants to any Person any  registration  rights
with respect to any Company  securities  which are more  favorable to such other
Person than those provided in this Agreement,  then the Company

                                       11

forthwith  shall grant (by means of an amendment to this Agreement or otherwise)
identical registration rights to all Investors hereunder.

          (c) Except as may be otherwise  provided  herein,  any notice or other
communication  or delivery  required or permitted  hereunder shall be in writing
and shall be delivered personally or sent by certified mail, postage prepaid, or
by a nationally  recognized overnight courier service, and shall be deemed given
when so delivered  personally or by overnight  courier  service,  or, if mailed,
three days after the date of deposit in the United States mails, as follows:

          (i)      if to the Company, to:

                   eMagin Corporation
                   2070 Route 52
                   Hopewell Junction, NY 12533
                   Attention:  Gary W. Jones
                   (845) 892-1900
                   (845) 892-1901 (Fax)

                   with a copy to:

                   White & Case LLP
                   1155 Avenue of the Americas
                   New York, NY  10021
                   Attention:  S. Ward Atterbury
                   Tel:  (212) 819-8200
                   Fax:  (212) 354-8113

          (ii)     if to the Initial Investor, to:

                   SK Corporation
                   99 Seorin-dong
                   Jongro-gu
                   Seoul 110-110, Korea

                   with a copy to:

                   SK Corporation
                   99 Seorin-dong
                   Jongro-gu
                   Seoul 110-110, Korea
                   Attention:  General Counsel
                   (822) 2121-5770
                   (822) 2121-5797

                                       13

               (iii) if to any other Investor,  at such address as such Investor
     shall have provided in writing to the Company.

The  Company,  the Initial  Investor or any  Investor  may change the  foregoing
address by notice given pursuant to this Section 12(c).

          (d)  Failure of any party to exercise  any right or remedy  under this
Agreement or otherwise,  or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.

          (e) This Agreement  shall be governed by and interpreted in accordance
with the laws of the  State of New York.  Each of the  parties  consents  to the
jurisdiction  of the federal  courts whose  districts  encompass any part of the
City of New York or the state  courts of the  State of New York  sitting  in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives,  to the maximum extent permitted by law, any objection  including
any  objection  based on  forum  non  conveniens,  to the  bringing  of any such
proceeding in such jurisdictions.

          (f) The remedies  provided in this  Agreement are  cumulative  and not
exclusive of any remedies provided by law. If any term,  provision,  covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants  and  restrictions  set forth  herein  shall  remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an  alternative  means to
achieve the same or substantially  the same result as that  contemplated by such
term, provision,  covenant or restriction.  It is hereby stipulated and declared
to be the  intention of the parties that they would have  executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.

          (g) The Company shall not enter into any agreement with respect to its
securities  that is  inconsistent  with the  rights  granted  to the  holders of
Registrable  Securities  in this  Agreement  or  otherwise  conflicts  with  the
provisions hereof.

          (h) This Agreement,  the Securities Purchase Agreement, the Debentures
and the Warrants  constitute the entire  agreement among the parties hereto with
respect to the  subject  matter  hereof.  There are no  restrictions,  promises,
warranties  or  undertakings,  other than those set forth or referred to herein.
This  Agreement,  the  Securities  Purchase  Agreement,  the  Debentures and the
Warrants  supersede  all prior  agreements  and  undertakings  among the parties
hereto with respect to the subject matter hereof.

                                       13

          (i) Subject to the  requirements  of Section 9 hereof,  this Agreement
shall inure to the benefit of and be binding upon the  successors and assigns of
each of the parties hereto.

          (j) All pronouns and any  variations  thereof refer to the  masculine,
feminine or neuter, singular or plural, as the context may require.

          (k) The headings in this  Agreement are for  convenience  of reference
only and shall not limit or otherwise affect the meaning thereof.

          (l) This Agreement may be executed in two or more  counterparts,  each
of which shall be deemed an original but all of which shall  constitute  one and
the same agreement.  A facsimile  transmission of this signed Agreement shall be
legal and binding on all parties hereto.

                            [SIGNATURE PAGE FOLLOWS.]

                                       14

          In witness whereof,  the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.


                                  EMAGIN CORPORATION



                                  By:
                                     -------------------------------------------
                                     Name:  Gary W. Jones
                                     Title:  Chief Executive Officer






                                  SK CORPORATION



                                  By:
                                     -------------------------------------------
                                     Name:
                                     Title:

                                       15

EX-99

Exhibit 99.1

eMagin Announces Strategic Investment by SK Corporation
South Korean Industrial Leader Invests $3 Million in eMagin Corporation

HOPEWELL JUNCTION, N.Y., and SEOUL, South Korea, Sept. 19 /PRNewswire/ -- eMagin
Corporation  (Amex:EMA),  the leading  developer of organic light emitting diode
(OLED) on  silicon  microdisplay  technology,  and SK  Corporation,  a  flagship
company of SK Group,  Korea's  third  largest  conglomerate,  today  announced a
strategic  investment  by SK  Corporation  in eMagin.  Under the  agreement,  SK
Corporation  invested an initial $3,000,000 in eMagin in the form of convertible
notes and other  securities  issued by eMagin.  SK is  considering  a  follow-on
investment  in eMagin of  $7,000,000,  based on certain  target events and final
negotiation of terms.

Dr. J.S. Lee, vice president of SK Corporation,  said, "We are delighted to be a
strategic  partner  of  eMagin,  the  world  leader in  OLED-based  microdisplay
products. We believe that eMagin has the most advanced OLED technology among its
peers,   and  is  also  well  positioned  with  excellent  human  resources  and
technologies.   We  look  forward  to  partnering  with  eMagin  Corporation  to
accelerate the creation of new and improved portable electronic data and imaging
products."  Gary  Jones,   eMagin's   president  and  chief  executive  officer,
commented,  "We are very pleased that SK Corporation has recognized the benefits
of  eMagin's   proprietary  OLED  technology,   including  natural   temperature
insensitivity,  image  stability,  and the  potential for low cost and low power
consumption  while  retaining  high  performance.  We look forward to a long and
successful  relationship with SK that should accelerate the introduction of next
generation information technology into global markets."

About SK Corporation

SK Corporation is a flagship  company of SK Group,  one of the leading  business
organizations  in  Asia,  which  also  operates   finance,   construction,   and
telecommunications  units.  As the largest oil importer and refiner in Korea, SK
Corporation has more than a 35 percent share of the Korean domestic  market.  In
addition,  the  company  has more than a 40 percent  market  share in the Korean
liquefied  petroleum  gas  market  and is  also a  major  chemical  producer.  A
vertically  integrated  company,  SK  Corporation  supports  a  number  of major
research  and  development   initiatives  to  bring   innovative   products  and
technologies  to  market.  This  activity  is  fostering  new  technology-driven
business lines for the company, many with high growth potential.  SK Corporation
also has an e-commerce operation that offers diverse online shopping services to
retail buyers, with products ranging from cars and travel services to music CDs.

About eMagin

A leading developer of virtual imaging  technology,  eMagin combines  integrated
circuits,  microdisplays,  and optics to create a virtual  image  similar to the
real  image  of  a  computer  monitor  or  large  screen  TV.  These  miniature,
high-performance  modules  provide access to  information-rich  text,  data, and
video which can facilitate the opening of new mass markets for wearable personal
computers, wireless Internet appliances, portable DVD-viewers,  digital cameras,
and other emerging  applications.  eMagin's  intellectual  property portfolio of
more  than 100  patents  issued  or filed is  leveraged  by key OLED  technology
licensed from Eastman Kodak and joint development  programs with IBM and Covion,
among others.  OLEDs are emissive devices (i.e.,  they create light), as opposed
to liquid crystal  displays  (LCDs) that require a separate  light source.  OLED
devices use less power and are capable of high brightness and color. Because the
light they emit appears equally bright from all  directions,  they are ideal for
near to the eye  applications  since a small movement in the eye does not change
the image.  According to Stanford  Resources,  a leading  market  research  firm
focusing on the global  electronic  display  industry,  the worldwide market for
OLED displays will grow to $1.6 billion in 2007, or 63% a year over that period.
eMagin's corporate headquarters and microdisplay  operations are co-located with
IBM  on  its  campus  in  East  Fishkill,  N.Y.  Wearable  and  mobile  computer
headset/viewer system design and full-custom  microdisplay system facilities are
located at its wholly owned subsidiary,  Virtual Vision,  Inc., in Redmond,  WA.
The company has marketing offices in Santa Clara, CA. Further  information about
eMagin and its virtual imaging solutions can be accessed at www.emagin.com.

Forward Looking Statements

This release contains  forward-looking  statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934.  These  statements  relate to future  events  or our  future  financial
performance.  In some cases,  you can  identify  forward-looking  statements  by
terminology such as "may," "will,"  "should,"  "expect,"  "plan,"  "anticipate,"
"believe,"  "estimate,"  "predict,"  "potential" or "continue,"  the negative of
such  terms,  or  other  comparable  terminology.   These  statements  are  only
predictions.  Actual events or results may differ  materially  from those in the
forward-looking  statements as a result of various important factors,  including
those  described in the Company's most recent filings with the SEC.  Although we
believe that the expectations  reflected in the  forward-looking  statements are
reasonable,  such statements  should not be regarded as a representation  by the
Company,  or any other  person,  that such  forward-looking  statements  will be
achieved.  The business and operations of the Company are subject to substantial
risks which increase the uncertainty inherent in forward-looking  statements. We
undertake no duty to update any of the forward-looking statements,  whether as a
result  of  new  information,  future  events  or  otherwise.  In  light  of the
foregoing,   readers  are  cautioned  not  to  place  undue   reliance  on  such
forward-looking statements.

SOURCE: eMagin Corporation