Opinion ID: 783603
Heading Depth: 4
Heading Rank: 3

Heading: The Sorrento Private Placement

Text: 31 In early 2000, Phansalkar worked on a private placement of stock for Sorrento, an Osicom affiliate. That deal closed on March 1, 2000. AW invested $1.5 million in the private placement, half of which came from funds that belonged to AW partners and half of which came from funds borrowed by AW; the latter were personally guaranteed by Andersen and Weinroth. Phansalkar invested $60,000. AW also raised $6.5 million from outside investors through an entity AW created, Sorrento Holdings, LLC. 32 As a result of the Sorrento deal, AW received a fee of $1.95 million, which it chose to take in additional Sorrento stock, and a carried interest of 20% on the profit earned on the investment of Sorrento Holdings, LLC. AW also received warrants and/or options for identifying candidates to serve as officers and directors for Sorrento. Andersen was appointed to the Sorrento Board of Directors; Phansalkar was appointed to the Sorrento Advisory Board. 33 Andersen was granted 100,000 Sorrento options as a member of the Sorrento Board of Directors; Phansalkar was granted 300,000 Sorrento options as a member of the Sorrento Advisory Board (the Sorrento Options). The district court found that Andersen was aware of the grant to Phansalkar because (1) Andersen knew of the relevant option plan (he participated by telephone in a Sorrento Board meeting at which the Board approved the Sorrento Option Plan), and (2) Andersen received a copy of the Plan, which stated that Phansalkar would receive 300,000 options. See Phansalkar II, at , 2001 WL 1524479 at . The court also found that it was reasonable for Phansalkar to believe that Andersen knew that Phansalkar had been granted 300,000 Sorrento options. See id. 34 The district court made a specific finding that Phansalkar eventually received only 100,000 options from Sorrento, not the 300,000 options he was initially granted. See id. at , n.17, 2001 WL 1524479 at , n.17; Phansalkar III, at , 2002 WL 1402297 at -8.