Exhibit 99.1
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN RE BUTTERFLY NETWORK, INC. ) C.A. No. 2023-____-___
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VERIFIED PETITION FOR RELIEF PURSUANT TO 8 DEL. C. § 205
Petitioner Butterfly Network, Inc. (f/k/a Longview Acquisition Corp.) (“Butterfly” or the “Company”), by and through its undersigned counsel, brings this petition pursuant to 8 Del. C. § 205, seeking to have this Court validate a potentially defective corporate act as follows:
NATURE OF THE ACTION
“high vote” Class B Common Stock. While a majority of the outstanding shares of Class A Common Stock and Class B Common Stock entitled to vote on the New
Certificate of Incorporation collectively voted in favor of the adoption of the New
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Certificate of Incorporation, a separate vote of holders of Class A Common Stock was not expressly sought in connection with the adoption of the New Certificate of Incorporation, and this Court’s decision in Garfield v. Boxed, Inc. creates uncertainty as to the validity of the New Certificate of Incorporation, threatening the Company with irreparable harm as described more fully herein.
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Amendment”). The 2021 Proxy Statement stated that approval of the Charter Amendment “requires the affirmative vote of the holders of (i) at least a majority of the outstanding shares of Longview Class B common stock, voting separately as a single class, and (ii) a majority of the outstanding shares of Longview common stock entitled to vote thereon, voting together as a single class.” Id. at 8. On the record date for determining stockholders entitled to vote on the Charter Amendment, January 15, 2021, there were 41,400,000 shares of Class A Common Stock outstanding and 10,350,000 shares of Class B Common Stock outstanding. The
Charter Amendment was approved at a special meeting of stockholders held on February 12, 2021 (“Special Meeting”), where 30,506,581 shares of Common Stock were present. At the meeting, a total of 27,759,911 shares of Common Stock voted in favor of the adoption of the Charter Amendment, including all shares of Class B Common Stock outstanding and entitled to vote thereon (viewed separately) as well as a majority of the outstanding shares of Class A Common Stock and Class B Common Stock (viewed together) entitled to vote thereon.
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The holders of the outstanding shares of a class shall be entitled to vote as a class upon a proposed amendment, whether or not entitled to vote thereon by the certificate of incorporation, if the amendment would increase or decrease the aggregate number of authorized shares of such class . . . . The number of authorized shares of any such class or classes of stock may be increased or decreased . . . by the affirmative vote of the holders of a majority of the stock of the corporation entitled to vote irrespective of this subsection, if so provided in the . . . certificate of incorporation . . . .
Section 242(b)(2) thus provides that an amendment to change the number of authorized shares of a class of stock requires a separate vote of such class unless the certificate of incorporation contains a so-called “Section 242(b)(2) opt-out” provision. Despite not having a “Section 242(b)(2) opt-out” provision, the Company believed that the Charter Amendment, including the increase to the number of authorized shares of Class A Common Stock, was effective because under the
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unambiguous language of the Old Certificate of Incorporation, the Class A Common Stock was not a separate class of Common Stock, but was instead a series of the class of Common Stock.
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Court thus held, in the context of a fee application, that the plaintiff’s claim that Section 242(b)(2) required a separate vote of the Class A common stock for the amendment was meritorious when filed. Id.
Class A Common Stock, Class B Common Stock, and Preferred Stock, and (iii) Section 4.2 of the Old Certificate of Incorporation vests the Board with authority to provide for the issuance of “one or more series” of Preferred Stock and to establish “the number of shares to be included in each such series” by resolution, whereas no such provision is made with respect to the Common Stock. While the Court’s discussion of the merits in Boxed, Inc. is not a final ruling on the merits and the Company believes that the conclusion in Boxed, Inc. that the Class A Common Stock was a separate class and not a series of the class of Common Stock is incorrect, the decision suggests that the Court would view the Company’s Class A Common Stock
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as a separate class of capital stock. Therefore, the Company further believes that this Court would require a separate vote of the Class A Common Stock to validly approve the Charter Amendment.
FACTUAL ALLEGATIONS
Longview. Following this merger, Longview changed its name to “Butterfly Network, Inc.” As merger consideration, the Company agreed to issue Legacy
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Butterfly stockholders 1.0383 shares of the Company’s Class A Common Stock for each Class A share of Legacy Butterfly common stock and 1.0383 shares of the Company’s Butterfly Class B common stock for each share of Legacy Butterfly Series A preferred stock, rounded down to the nearest whole number of shares.
Class A Common Stock in a private placement PIPE financing. Following the Company’s de-SPAC acquisition of Legacy Butterfly on February 12, 2021, the Company, now named Butterfly Network Inc., is an innovative digital health business with a mission of democratizing healthcare by making medical imaging more accessible to everyone around the world.
The Proxy Statement
Stock.
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[T]he greater number of authorized shares of capital stock is desirable for New Butterfly to have sufficient shares to complete the Business Combination and have additional authorized shares for financing its business, for acquiring other businesses, for forming strategic partnerships and alliances and for stock dividends and splits.
Ex. B at 145.
The Special Meeting
10,350,000 shares of Class B Common Stock. Id. As disclosed in the Company’s Amended Form 8-K, dated February 16, 2021 (Exhibit D), the Charter Amendment received the affirmative vote of 27,759,911 shares, a majority of the 51.7 million shares outstanding and entitled to vote thereon. Ex. D at 1. As a result of this affirmative vote, the Company believed that the Charter Amendment had received the requisite stockholder approval.
“Merger Closing Form 8-K”), the Company proceeded to file the New Certificate of Incorporation with the Delaware Secretary of State and to consummate its acquisition of Legacy Butterfly on February 12, 2021. At the effective time of the
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acquisition, each share of Class B Common Stock issued and outstanding prior to the acquisition automatically converted on a one-for-one basis into a share of Class A Common Stock. In connection with the acquisition, the Company issued shares of its Class A Common Stock and new “high vote” Class B Common Stock to the holders of Legacy Butterfly. As a result of the acquisition and other transactions contemplated thereby, immediately following the acquisition, the Company’s outstanding capital stock consisted of 164,862,472 shares of outstanding Class A
Common Stock, 26,426,937 shares of the new “high vote” Class B Common Stock, 20,653,333 warrants each exercisable for one share of Class A Common Stock, options to purchase 22,132,558 shares of Class A Common Stock and restricted stock units to purchase 3,348,518 shares of Class A Common Stock. Id. at 4.
Common Stock issued and outstanding and 26,426,937 shares of Class B Common Stock issued and outstanding. The number of shares of Class A Common Stock issued and outstanding immediately following the de-SPAC transaction was and at all times through the date hereof has remained less than the 200 million authorized shares of Class A Common Stock originally provided for under the Old Certificate of Incorporation. However, if all warrants, stock options, and restricted stock units were exercised, the Company would have approximately 211 million shares of Class
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A Common Stock outstanding—a number that would exceed the authorized number of shares of Class A Common Stock set forth in the Old Certificate of Incorporation.
Harm to the Company
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results.
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Consideration of Statutory Validation Factors under Section 205(d)
21. Section 205(d) sets forth certain factors that the Court may consider when determining whether to ratify and validate a defective corporate act:
In connection with the resolution of matters pursuant to subsections (a) and (b) of this section, the Court of Chancery may consider the following:
8 Del. C. § 205(d).
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Form 8-K, the Company disclosed that the Charter Amendment had been approved by the stockholders and the de-SPAC transaction was closed on the same day in reliance on that approval. On February 12, 2021, the New Certificate of Incorporation was filed with the Delaware Secretary of State and the de-SPAC transaction was consummated based on the belief that the Charter Amendment was validly approved. Since then, the Company has repeatedly represented that it is authorized to issue more than 200 million shares of Class A Common Stock. See, e.g., the Company’s Form 10-Q, filed with the SEC on November 3, 2022; the
Company’s Form 8-K, filed with the SEC on November 3, 2022; the Company’s Form 10-Q, filed with the SEC on August 3, 2022. These actions clearly demonstrate that the Charter Amendment was originally approved and effectuated with the belief that the approval and effectuation was in compliance with the provisions of the DGCL and the Old Certificate of Incorporation.
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205(d)(5), at least two “other factors” support granting the relief requested in this Petition.
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Form 10-K being filed. In addition, calling a meeting of stockholders to approve the ratification is a process that would take at least three months. Given the Company’s inability to trace which of its shares are valid, it would be impossible to determine precisely which shares are entitled to vote in a ratification under Section 204, leaving the Section 204 ratification open to challenge for at least 120 days following the time a meeting could be held. In addition, under the self-help method of Section 204, whether approved solely by the Board or by the stockholders as well, the Company would be required to file a certificate of validation with the Delaware Secretary of
State to effectively ratify the New Certificate of Incorporation. 8 Del. C. § 204(e)(3) (requiring the filing of a certificate of validation in circumstances where the defective act ratified relates to a certificate previously filed with the Delaware Secretary of State). The Company understands that processing times for certificates of validation can take as long as 3-4 months, and that while a certificate of validation is being processed by the Delaware Secretary of State, the Company would not be able to obtain certificates of good standing, pay its annual franchise taxes or make any other filings with the Delaware Secretary of State. So, even if the Company could mail a proxy statement, the time to complete a ratification process under Section 204 could be as long as 6-8 months. The additional months of uncertainty regarding the Company’s capital structure would be devastating to the Company and can be avoided if the Court grants the current relief requested by the Petitioner.
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COUNT ONE
(Validation of Corporate Act Under 8 Del. C. § 205)
effectuated the Charter Amendment with the good faith belief that they were adopted in compliance with Delaware law.
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Certificate of Incorporation and treated all acts in reliance on the New Certificate of Incorporation as valid.
PRAYER FOR RELIEF
WHEREFORE, the Company respectfully requests that this Court enter an order as follows:
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Dated: February 21, 2023 /s/ Kevin M. Gallagher
Kevin M. Gallagher (#5337) Nicholas F. Mastria (#7085) Richards, Layton & Finger, P.A.
920 North King Street
Wilmington, Delaware 19801
(302) 651-7700
Attorneys for Petitioner Butterfly Network, Inc.
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