Katapult : files a Petition For Relief Under 8 Del. C. § 205

IN THE COURT OF CHANCERY FOR THE STATE OF DELAWARE

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IN RE KATAPULT HOLDINGS, INC. ) C.A. No. 2023-_____

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VERIFIED PETITION FOR RELIEF UNDER 8 DEL. C. § 205

Petitioner Katapult Holdings, Inc. ("Katapult" or the "Company") brings this petition (the "Petition") for relief under Section 205 of the Delaware General Corporation Law (the "DGCL"):

NATURE OF THE ACTION

1. The Company seeks to validate a Second Amended and Restated Certificate of Incorporation that it filed in Delaware on June 9, 2021 (the "Charter"), and to validate stock (and other securities convertible into or exercisable for stock) that the Company issued in reliance on the Charter. Ex. A.
2. The Company was initially a special purpose acquisition company (the "SPAC") formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. It adopted the Charter in connection with a business combination, which resulted in the Company becoming the holding company of the Katapult business, which provides point-of-salelease-purchase options to U.S. non-prime consumers through platform integrations with e- commerce platforms (the "Business Combination"). The Charter amended the

predecessor certificate of incorporation (the "Old Charter"), including an increase to the total number of shares of Class A Common Stock authorized for issuance. Ex.

1. Viewing its Class A Common Stock and Class B Common Stock as two series of the same class of stock, the Company (then under control of SPAC management) believed no class votes were required to adopt the Charter. The Company therefore only sought approval from the combined affirmative vote of a majority of the voting power of the Class A Common Stock and Class B Common Stock then outstanding, voting together as a single class.
   3. The Company's belief that a separate vote of the Class A and Class B Common Stock was not required has been called into question by the opinion in Garfield v. Boxed, Inc.1 Applying Boxed to the Old Charter, it is possible that the Charter had to be approved by separate class votes of each of the Class A Common Stock and Class B Common Stock in addition to the vote sought and obtained by the Company in connection with the adoption of the Charter. The Company therefore needs to resolve any doubts about the validity of the Charter. In addition, given the way Section 161 of the DGCL calculates the number of shares available for issuance (which requires sufficient shares be available to cover both issued shares and shares reserved for issuance to satisfy the exercise or conversion,

1 2022 WL 17959766 (Del. Ch. Dec. 27, 2022).

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as applicable, of stock options, warrants or other convertible securities), a number of shares of Class A Common Stock and other securities that may be convertible into shares of Class A Common Stock may be placed under a cloud of uncertainty, even though the Company's current number of outstanding shares of common stock is less than the number of authorized shares in the Original Charter. The Company wishes to clarify the validity of these securities as well.

4. The Company respectfully submits that relief under Section 205 is warranted. The Charter was adopted a year and a half ago. The stockholders of a then-unrelated entity (which owned the Katapult business acquired by the Company) relied on the Charter's provisions when they decided to approve the Business Combination. They knew the Company needed additional Class A Common Stock to finance its operations as an early-stage, growing company. Recourse under Section 204 of the DGCL is not practicable because it could not be accomplished quickly enough to prevent potential irreparable harm to the Company and its stockholders. Among other things, the Company is scheduled to announce earnings on March 9, 2023 and it is in the best interests of the Company and its stockholders that the Company file the Company's Annual Report on Form 10-K (the "Form 10- K") in close proximity to the Company's scheduled earnings date, March 9, 2023. Moreover, if the Company is unable to issue its financial statements, due to the cloud of uncertainty regarding the number of authorized shares under the Charter, and file

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the Form 10-K on or before March 31, 2023 or within the grace period provided by the rules and regulations of the U.S. Securities and Exchange Commission (the "SEC"), the Company will fail to meet the reporting requirements applicable to it under Section 13(a) of the Securities Exchange Act of 1934, as amended (the "1934 Act"), which would impair certain stockholders from trading in the Company's securities and would allow the SEC to suspend trading in the Company's stock and/or revoke the Company's registration under the 1934 Act. In addition, such a failure could constitute an event of default under the Company's credit facility and permit the lenders thereunder to declare all amounts due and payable immediately, among other remedies, which would be an existential threat to the Company. Accordingly, relief under Section 205 is the most timely and efficient, and perhaps only, recourse available to place the Company and its investors.

5. The Company also respectfully requests a prompt final hearing regarding this Petition. These issues regarding the Charter come at a singularly inopportune time. The Company is scheduled to announce its earnings on March 9, 2023 and it is in the best interests of the Company and its stockholders that the Company file the Form 10-K in close proximity to the Company's scheduled earnings date, March 9, 2023; however, absent a prompt final hearing regarding this Petition, the Company would remain subject to the cloud over its Charter and likely

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would be unable to issue its financial statements and file the Form 10-K in a timely manner.

BACKGROUND

1. SPAC Formation. The Company was incorporated on August 9, 2019 as a SPAC. The Company amended and restated its initial charter through a filing in Delaware on October 31, 2019.2 The October 31, 2019 amended and restated charter is the "Old Charter" that was in effect at the time the Company sought stockholder approval of the current Charter at issue in this Petition. See Ex. B.
2. Business Combination. The Company entered into the Business Combination with a third-party entity that owned the Katapult business operations ("Private Katapult"). The transaction structure was common for a so-called "de- SPAC." The Company's wholly-owned subsidiary was merged with and into Private Katapult, with Private Katapult surviving the merger as a wholly-owned subsidiary of the Company.
3. Charter Amendments. At the same special meeting of Company

stockholders called to approve the Business Combination, the Company's

2 The amendments are not material to this petition. 5