Opinion ID: 6189
Heading Depth: 2
Heading Rank: 5

Heading: The Breakdown of Negotiations

Text: 18 On July 18, 1990, Scisco met with Cortes, John Gohres, Sr., one of Omnitech's principal shareholders, and Steve Hill (Hill) of Hill and Associates, an independent marketing consultant retained by Omnitech, to inform them that Clorox would not be in a position to make any commitments to Omnitech until it had time to assess the impact of the Combat acquisition. The next day, Tony Biebl (Biebl) of Clorox informed the Omnitech representatives that Clorox would not be going forward with any purchase, claiming that Omnitech did not fit into Clorox' plan. Biebl apparently represented that this decision resulted from its investigation of Dr. X and Omnitech. Clorox claims that the following findings and determinations were the basis for the decision: (1) a manufacturing run of Dr. X resulted in the cans substantially leaking; (2) Omnitech did not have the in-house capability to provide the necessary stability data, quality control, and efficacy tests required by Clorox' due diligence investigation; (3) Omnitech did not have the technological expertise to create an insecticide that would not be easily duplicated by competitors; and (4) Dr. X was a weak product with no track record. 19 Clorox offered to continue its guaranty of the Wachovia line of credit in accordance with the letter of intent and to assist Omnitech in completing the STM, which would require approximately $100,000 to $150,000 to complete. Omnitech rejected both offers and filed the instant action against Clorox on August 13, 1990, less than one month after Clorox announced that it would not go forward. 20 After communications broke down, Clorox contacted Wachovia to inform the banking officers of the deterioration of the parties' relationship. By then, Omnitech had drawn down the line of credit almost $800,000. At that time, Clorox learned that Omnitech had had difficulties in payment of the amounts due under the note. On September 19, 1990, Clorox purchased the Omnitech note from Wachovia and subsequently made demand upon Omnitech for repayment.