Court of Appeal Upholds Contractual Limitations Period In Acquisition Agreement

Yesterday, the Fourth District Court of Appeal issued an opinion addressing two issues that should be of interest to the M&A community. Zalkind v. Ceradyne, Inc. involved a dispute concerning an asset purchase agreement. The Zalkinds (Stanley, Elizabeth and Quest Technology, LP, a limited partnership owned by them) agreed to sell all of Quest’s assets to Ceradyne, Inc. for cash and unregistered shares of Ceradyne’s stock. Although the Securities and Exchange Commission eventually declared the registration statement effective and the Zalkinds had sold their shares, they sued Ceradyne alleging breach of the registration requirements of the asset purchase agreement. The Zalkinds alleged that the delay in effectiveness prevented them from selling during a period in which Ceradyne’s stock price had spiked.

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