Zalkind

Introduction

Ceradyne, Inc. (Ceradyne), entered into an asset purchase agreement (Asset Purchase Agreement) with Stanley Zalkind and Elizabeth Zalkind (the Zalkinds) and Quest Technology, LP (Quest), a limited partnership owned by the Zalkinds. Under the terms of the Asset Purchase Agreement, Ceradyne *1017 purchased all of Quest’s assets for a price of $2.44 million, of which $300,000 was paid in cash and the remainder paid with unregistered shares of Ceradyne stock.

The Zalkinds and Quest later sued Ceradyne, asserting a single cause of action for breach of contract. The Zalkinds and Quest alleged Ceradyne breached the Asset Purchase Agreement by not obtaining timely registration with the Securities and Exchange Commission (SEC) of the Ceradyne stock. Ceradyne filed a cross-complaint against the Zalkinds and Quest, asserting a single cause of action for securities fraud in violation of Corporations Code section 25401. Ceradyne alleged the Zalkinds made misrepresentations and omitted material facts to inflate the value of Quest’s assets.

Ceradyne moved for summary judgment on the complaint, and the Zalkinds and Quest moved for summary judgment on the cross-complaint.…