WAIVER AGREEMENT

     WAIVER AGREEMENT (this  "Agreement"),  dated as of January 14, 2002, by and
among eMAGIN CORPORATION,  a Delaware  corporation (the "Company"),  and each of
Mr.  Mortimer  D.A.  Sackler,  Rainbow  Gate  Corporation,  and Mr.  Jack Rivkin
(collectively,  the "Investors"), each such person a party as "Investors" to the
Note  Purchase  Agreement  (defined  below) and  current  holders of (i) secured
convertible promissory notes issued thereunder (the "Notes"), and (ii) the three
year warrants issued  thereunder (the  "Warrants").  All capitalized  terms used
herein and not  otherwise  defined  herein  shall have the  respective  meanings
provided to such terms in the Note Purchase Agreement.

                              W I T N E S S E T H :

     WHEREAS,  the  Company and each of the  Investors  are parties to a Secured
Note  Purchase  Agreement,  dated as of November  27,  2001 (the "Note  Purchase
Agreement")  and each Investor is the holder of the Notes and Warrants as issued
thereunder;

     WHEREAS,  pursuant to an Event of Default under Section 8(k) of each of the
Notes issued at the Initial Closing,  such Notes have become immediately due and
payable, automatically and without presentment;

     WHEREAS, the Company has requested and each of the Investors have agreed to
the waivers and consents  provided  herein on the terms and conditions  provided
herein;

     NOW,  THEREFORE,  in  consideration  of the  forgoing  and  other  benefits
accruing to the Company and to the Investors, including, without limitation, the
mutual covenants set forth herein and other good and valuable consideration, the
receipt and  sufficiency of which are hereby  acknowledged,  the parties hereto,
intending to be legally bound, hereby agree as follows:

     1. Waiver of Event of Default.  Each  Investor  hereby waives (the "Default
Waiver") any Event of Default (as defined in the Notes) that has arisen,  or may
arise  as a  result  of  the  Company  failing  to be  in  compliance  with  the
requirements of Section 8(k) of any Note and such waiver shall be deemed to be a
continuing waiver of such Event of Default.  The preceding Default Waiver is not
a waiver of compliance  with any other provision of Section 8 or any other Event
of Default  (as defined in the Notes) and such  waiver is  expressly  subject to
satisfaction of the condition set forth in Section 3 of this Agreement.

     2.  Condition  to Waivers.  The Default  Waiver set forth  herein  shall be
contingent  upon the  closing  of one or more  additional  subscriptions  by Mr.
Mortimer  D. A.  Sackler  or his  designees  for  additional  Notes with a total
aggregate principal amount of not less than One Million Dollars  ($1,000,000) on
or before 4:00 p.m. (New York time) on January 15, 2002.

     3. Governing Law. This Waiver  Agreement and the rights and  obligations of
the parties  hereunder  shall be construed in accordance with and be governed by
the law of the State of New York,  without  regard to its principles of conflict
of laws.

     4.  Counterparts.   This  Agreement  may  be  executed  in  any  number  of
counterparts and by the different parties hereto on separate counterparts,  each



of which counterparts when executed and delivered  (including delivery by way of
facsimile) shall be an original,  but all of which shall together constitute one
and the same instrument. A complete set of counterparts shall be lodged with the
Company.

     5. Effect of  Waiver.This  Agreement is limited as specified  and shall not
constitute  a  modification,  amendment,  acceptance  or  waiver  of  any  other
provision  of the Note  Purchase  Agreement  or any  other  document  referenced
therein.

     6. Further Assurances.  From and after the date of this Agreement, upon the
request of the Investors on the one hand, or the Company on the other hand, each
of the Company and the  Investors  shall  execute and deliver such  instruments,
documents  and other  writings as may be  reasonably  necessary  or desirable to
confirm and carry out and to  effectuate  fully the intent and  purposes of this
Agreement.

                                    * * * * *

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     IN WITNESS WHEREOF, the parties hereto have caused this Waiver Agreement to
be duly executed as of the date first above written.

                                EMAGIN CORPORATION

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

                                INVESTORS:

                                RAINBOW GATE CORPORATION

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

                                MORTIMER D.A. SACKLER

                                ------------------------------------------------
                                Mortimer D. A. Sackler

                                JACK RIVKIN

                                ------------------------------------------------
                                Mr. Jack Rivkin

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