EMAN eMagin Corporation

Item 1.01 Entry into a Material Definitive Agreement.

Merger Agreement

On May 17, 2023, eMagin Corporation, a Delaware corporation (the “Company”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Samsung Display Co., Ltd., a Korean corporation (“Parent” or “Samsung Display”), Emerald Intermediate, Inc., a Delaware corporation and wholly owned subsidiary of Parent (“Silk USA”), and Emerald Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Silk USA (“Merger Sub”). Upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will be merged with and into the Company, with the Company continuing as the surviving corporation (the “Merger”).

Effect on Capital Stock

Upon the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger (the “Effective Time”), (i) each share of common stock, par value $0.001 per share, of the Company (“Company Common Stock”) issued and outstanding immediately prior to the Effective Time (other than shares of Company Common Stock held by stockholders who have properly and validly exercised their statutory rights of appraisal in respect of such shares (“Dissenting Shares”), but including warrants to purchase shares of Company Common Stock (each, a “Warrant”) that are designated shares of Company Common Stock) will be entitled to receive $2.08 in cash, without interest (the “Per Share Merger Price”) and (ii) holders of preferred stock, par value $0.001 per share, of the Company designated as “Series B Convertible Preferred Stock” (the “Company Series B Convertible Preferred Stock”) issued and outstanding immediately prior to the Effective Time (other than any Dissenting Shares), will be entitled to the right to receive cash, without interest, in an amount equal to (x) the total number of shares of Company Common Stock issuable upon conversion of the Company Series B Convertible Preferred Stock that are owned immediately prior to the Effective Time, multiplied by (y) the Per Share Merger Price, in each case other than such shares held by Parent or the Company, which shall be canceled without payment thereon.

Treatment of Equity Awards

Upon the terms and subject to the conditions set forth in the Merger Agreement, awards outstanding under the Company’s 2008 Incentive Stock Plan, 2011 Incentive Stock Plan, 2013 Incentive Stock Plan, 2017 Stock Option and Incentive Plan, 2019 Employee and Consultant Stock Option and Incentive Plan and 2019 Non-Employee Director Stock Option and Incentive Plan, each as amended (collectively, “Company Stock Plans”), as of the Effective Time will be treated as follows:

All amounts payable pursuant to the above shall be subject to appropriate withholding for taxes. As of the Effective Time, the Company Stock Plans will terminate and all rights under any other plan, program or arrangement providing for the issuance or grant of any other interest with respect to the shares of the Company or any subsidiary of the Company will be cancelled.

Closing Conditions

The closing of the Merger (the “Closing”) is subject to certain customary conditions, including (i) required approvals by the Company’s stockholders, (ii) the expiration or termination of any applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (iii) receipt of any other required governmental approvals or waivers thereof, including clearance from the Committee on Foreign Investment in the United States, and (iv) other customary conditions for a transaction of this type, such as the absence of any legal restraint prohibiting the consummation of the Merger, the bringing down of certain representations and warranties as of the Closing and the absence of any Company Material Adverse Effect (as defined in the Merger Agreement).

Certain Other Terms of the Merger Agreement

The Merger Agreement contains customary representations, warranties and covenants for transactions of this type, including covenants relating to obtaining the requisite approvals of the stockholders of the Company and the Company’s conduct of its business between the date of signing the Merger Agreement and the Closing. The Merger Agreement also contains representations, warranties and covenants unique to the Company’s assets and commercial activities.

In connection with the Merger, the Company will prepare and file a proxy statement to seek the approval of the Company’s stockholders with respect to certain actions, including the adoption of the Merger Agreement and the approval of the Merger (the “Company Stockholder Approval”).

The Company has agreed to customary restrictions on its ability to solicit alternative takeover proposals from third parties and engage in discussions or negotiations with third parties regarding takeover proposals. Notwithstanding these restrictions, the Company may under certain circumstances provide information to and participate in discussions or negotiations with third parties with respect to a bona fide, unsolicited takeover proposal that the Board of Directors of the Company (the “Board”) determines in good faith, after consultation with its outside legal advisor and financial advisor, that such takeover proposal constitutes, or would reasonably be expected to lead to, result in or constitute a Superior Proposal (as defined in the Merger Agreement), if failing to do so would be inconsistent with the Board’s fiduciary duties under applicable law.

The Merger Agreement contains certain customary termination rights for the Company and Parent, including (i) by mutual written consent of Parent and the Company, (ii) if the Merger has not occurred by the date that is twelve (12) months after the date of the Merger Agreement, as such date may be extended under the terms of the Merger Agreement (the “Outside Date”), (iii) if any judgment, law or order prohibiting the Merger has become final and non-appealable, (iv) at the Company’s stockholders’ meeting (including any adjournment or postponement thereof) where the Merger is voted upon, the Company Stockholder Approval shall not have been obtained and (v) for a breach of any representation, warranty or covenant made by the other party under the Merger Agreement (subject to certain procedures and materiality exceptions). The Merger Agreement also provides certain termination rights, including (A) by the Company, to enter into a definitive agreement with respect to a superior proposal under certain circumstances and in compliance with certain obligations under the Merger Agreement and (B) by Parent, if a Change in Company Board Recommendation (as defined in the Merger Agreement) has occurred. If the Merger Agreement is terminated under certain circumstances (including the termination by the Company in order to enter into a definitive agreement providing for a Superior Proposal), the Company would be required to pay Parent a termination fee of $9 million.

The foregoing description of the Merger Agreement and the Merger is only a summary, does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of the Merger Agreement, which is attached as Exhibit 2.1 to this report and incorporated by reference herein. The Merger Agreement and the above description have been included to provide investors and security holders with information regarding the terms of the Merger Agreement. They are not intended to provide any other factual information about the Company, Parent, Silk USA or Merger Sub. The representations, warranties and covenants contained in the Merger Agreement were made only for purposes of that agreement and as of specific dates; were solely for the benefit of the parties to the Merger Agreement; and may be subject to limitations agreed upon by the parties, including being qualified by confidential disclosures made by each contracting party to the other for the purposes of allocating contractual risk between them. Investors should be aware that the representations, warranties and covenants or any description thereof may not reflect the actual state of facts or condition of the Company or Parent and such investors should not rely on such representations, warranties or covenants as characterizations of the actual state of facts or conditions of the Company or Parent. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the Merger Agreement. Further, investors should read the Merger Agreement not in isolation, but only in conjunction with the other information that the respective companies include in reports, statements and other filings they make with the U.S. Securities and Exchange Commission (the “SEC”).

Support Agreement

In connection with the execution of the Merger Agreement, Parent entered into a voting and support agreement (the “Support Agreement”) with certain stockholders, who collectively hold approximately 5,236 shares of Company Series B Convertible Preferred Stock, convertible into 17,326,274 shares of Company Common Stock, representing approximately 98% of the total voting power of the outstanding shares of Company Series B Convertible Preferred Stock and 21% of the total voting power of the outstanding shares of Company Common Stock. Subject to its terms, the Support Agreement provides that each of the stockholders party thereto will, among other things, vote the shares of Company Series B Convertible Preferred Stock beneficially owned by such stockholder in favor of the adoption of the Merger Agreement, against any Acquisition Proposal (as defined in the Merger Agreement) and, subject to certain exceptions, not transfer any shares of Company Series B Convertible Preferred Stock prior to the termination of the Support Agreement.

The foregoing description of the Support Agreement is only a summary, does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of the form of the Support Agreement, which is attached as Exhibit 10.1 to this report and incorporated by reference herein.

Loan and Security Agreement

Concurrently with the execution and delivery of the Merger Agreement, Parent and Silk USA entered into a Loan and Security Agreement with the Company, dated as of May 17, 2023 (the “Loan and Security Agreement”). Subject to the terms and conditions of the Loan and Security Agreement, Silk USA shall lend to the Company the following (the “Loan”): (i) on the effective date of the Loan and Security Agreement (the “Loan Agreement Effective Date”) (or as soon thereafter as certain conditions to such borrowings under the Loan and Security Agreement are satisfied), an amount not to exceed $5,000,000 (the “First Advance”), (ii) from the first business day after the two-month anniversary of the Loan Agreement Effective Date until the six-month anniversary of the date of the First Advance and thereafter, an amount not to exceed $5,000,000 (the “Second Advance”), and (iii) on any business day after the earlier of (x) the five-month anniversary of the date of the Second Advance and (y) the seventh-month anniversary of the Loan Agreement Effective Date, an amount not to exceed $3,000,000 (or such greater amount reasonably agreed by Silk USA and the Company after good faith discussions, taking into consideration the actual cash needs of the Company for the Proceeds Purpose (as defined in the Loan and Security Agreement) and Collateral (as defined in the Loan and Security Agreement) coverage, among other things, but which shall not in any event exceed $5,000,000). The Company shall pay to Silk USA in cash the entire outstanding principal amount of the Loan plus all accrued and unpaid interest and all other outstanding obligations on the date that is the earlier of (i) five years after the Merger Agreement is terminated pursuant to the terms thereof and (ii) five years after the Outside Date. Pursuant to the Loan and Security Agreement, the Company can voluntarily prepay the Loan.

The outstanding principal amount of the Loan and all interest not paid in cash when required to be paid in cash thereunder shall accrue interest at the rate per annum equal to the prime rate as published in the Wall Street Journal (or if not, available, such other source reasonably selected by Silk USA; provided, however, that in no event shall the prime rate be less than 0.0%) to be set on the first day of each semi-annual interest period. Interest shall be paid semi-annually on May 17 and November 17, with the first interest payment date being November 17, 2023. The Company shall have the option to either pay all accrued and unpaid interest either in cash or in kind by adding to the aggregate outstanding principal amount of the Loan on each semi-annual interest payment date an amount equal to the amount of interest accrued and unpaid as of such date. Immediately upon the occurrence and during the continuance of an event of default, the Company shall pay interest on overdue amounts at a rate per annum equal to 2.0% plus the rate that is otherwise applicable thereto.

Pursuant to the Loan and Security Agreement, the Company granted Silk USA, to secure the payment and performance in full of all of the obligations under the Loan and Security Agreement, a continuing security interest in certain collateral, including a second lien on all receivables, property and the proceeds thereof, credit insurance policies and other insurance relating to the collateral, books, records and other general intangibles, inventory and equipment, proceeds of the collateral and accounts, instruments, chattel paper, and documents (but excluding all rights in intellectual property). The Loan and Security Agreement contains customary representations and warranties, affirmative and negative covenants, events of default and termination provisions.

The foregoing description of the Loan and Security Agreement is only a summary, does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of the form of the Loan and Security Agreement, which is attached as Exhibit 10.2 to this report and incorporated by reference herein.