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Ciena series B convertible preferred stock (series B offering).
Pursuant to the 1994 PPA, Ciena was obligated to pay Ventures a
cash commission and warrants to purchase a number of shares
(i.e., based on the number of shares sold in the offering) of
series B convertible preferred stock. In addition, the agreement
provided:
In the event * * * [Ciena] does not, at its option,
proceed with the Offering on the terms set forth herein
* * * [Ciena] will issue to * * * [Ventures] a warrant,
exercisable for a period equal to the earlier of (x)
three years or (y) the occurrence of an initial public
offering, to purchase up to 150,000 shares of Series A
Preferred at a price of $1.00 per share.
Ciena subsequently decided not to use Ventures as the
placement agent for its series B offering. Instead, it sold its
series B stock through direct sales methods to institutional and
noninstitutional investors. In December 1994, Ciena sold
3,549,106 shares of series B stock for $1.50 per share and
received a subscription for another 1 million shares, and in
January and February 1995, sold an additional 2,804,986 shares of
series B stock for $1.50 per share. Ciena did not adhere to the
1994 PPA, and as a result, Ventures did not have the opportunity
to, and did not, perform any services for Ciena. Ciena asserted
that the only redress available to Ventures, for Ciena’s failure
to use Ventures as the placement agent for the series B offering,
was the damages determined pursuant to the liquidated damages
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