The opinion of the court was delivered by: CEDARBAUM
This action arises out of United States Banknote Corporation's purchase of Thomas De La Rue Grafica e Servicos Limitada ("Grafica"), a Brazilian subsidiary of Thomas De La Rue AG ("TDLR"). The transaction is memorialized in a Stock Purchase Agreement (the "Agreement") dated June 7, 1993, between Banknote and TDLR. Pursuant to the Agreement, Banknote paid $ 45 million to TDLR for Grafica, of which $ 38 million was in the form of cash and $ 7 million was in the form of unregistered Banknote common stock. In this action, TDLR sues Banknote for: (1) breach of a warranty in the Agreement stating that all documents filed with the Securities and Exchange Commission ("SEC") since July 25, 1990, complied in all material respects with the securities laws and contained no material misstatements or omissions; and (2) breach of a provision in the Agreement requiring Banknote to register the unregistered stock held by TDLR with the SEC "as expeditiously as possible" after receiving a written request from TDLR.
TDLR has moved for summary judgment on several grounds. At oral argument on November 15, 1996, I granted TDLR's motion for partial summary judgment on its first claim by ruling that TDLR is not required to prove scienter in order to prevail on its breach of warranty claim. At oral argument on June 13, 1997, TDLR withdrew its formal motion concerning the proper calculation of damages; that issue will be decided separately prior to trial. Accordingly, the only outstanding issue is whether TDLR's motion for summary judgment on the second claim, which alleges failure timely to register stock, should be granted. Because the question of whether Banknote acted "as expeditiously as possible" in registering the stock is a question of fact for the jury, the motion is denied.
Negotiations between Banknote and TDLR for the sale of Grafica began in late 1992. Morris Weissman, Chairman and Chief Executive Officer of Banknote, was the principal negotiator on Banknote's behalf. John White, a director and senior executive of De La Rue plc., TDLR's ultimate corporate parent, was the principal negotiator on behalf of TDLR. During the course of the negotiations, Banknote informed TDLR that the purchase price of Grafica would have to include some form of non-cash consideration. Ultimately, it was agreed that the compensation would include approximately $ 38 million in cash and approximately $ 7 million in unregistered Banknote common stock.
On May 24, 1993, a draft of the Stock Purchase Agreement was prepared that incorporated a stock registration requirement. Section 9.1 of the draft provided that within fifteen days after a lock-up period, Banknote would file a registration statement for all of the Banknote shares owned by TDLR. In addition, Section 9.3 of the draft agreement provided that if and when Banknote was required to effect registration, Banknote would prepare and file the registration statement "as expeditiously as possible" and would thereafter use its "best efforts" to cause the registration statement to become effective:-
Banknote objected to the fifteen-day limit in the May 24 draft. Accordingly, the final Stock Purchase Agreement, dated June 7, 1993, did not incorporate the fifteen-day limit and did not substitute any other specific time limit. The Agreement provided for a four-month lock-up period following the closing date during which TDLR could not sell its Banknote shares. At any time after the expiration of the lock-up period, TDLR could request in writing that Banknote register the shares. The Agreement retained the language that had been present in the May 24 draft providing that upon such request, Banknote would act "as expeditiously as possible" in filing the registration statement and would use its "best efforts" to cause the registration statement to be declared effective by the SEC.
The closing took place on June 23, 1993. During the subsequent four-month lock-up period, Banknote began to prepare the registration statement. The lock-up period ended on October 21, 1993, and on October 22, 1993, Banknote received a written request for registration from TDLR pursuant to the Agreement. By letter dated October 25, 1993, Harvey Kesner, Vice President and General Counsel of Banknote, acknowledged receipt of the request and stated that Banknote "has commenced taking the steps necessary to accomplish registration and intends to file within approximately 30 days." (Exh. 33 to Ueno Decl.) However, the registration statement was not filed until April 24, 1994, nearly six months after TDLR's written request for registration. The six-month delay in the filing of the registration statement was the result of two separate corporate events: first, the potential acquisition of a company called Video Lottery Technologies ("VLT") in late 1993 and early 1994, and second, a debt restructuring in early 1994.
Preliminary discussions concerning the possible acquisition of VLT commenced in August 1993. On October 15, 1993, Banknote entered into a confidentiality agreement with VLT, dated as of August 17, 1993. It provided that Banknote would not disclose the potential acquisition of VLT unless "advised by [its] outside counsel that disclosure must be made  in order that [Banknote] not commit a violation of law . . . ." On November 23, 1993, Banknote submitted a formal acquisition proposal to VLT. On or about December 1, 1993, Banknote determined in consultation with counsel that the contemplated transaction between Banknote and VLT would have to be disclosed in any registration statement filed with the SEC. Banknote contends that such disclosure was precluded by the terms of its confidentiality agreement with VLT and would have jeopardized the negotiations with VLT. (Def.'s 3(g) PP 33, 34.) On January 21, 1994, however, VLT rejected Banknote's acquisition offer and accepted an offer from a competing bidder.
Banknote contends that following VLT's rejection of its offer, it promptly resumed preparation of the registration statement. (Def.'s 3(g) P 44; Pl.'s Resp. to Def.'s 3(g) P 44.) In early February, 1994, however, Banknote again suspended its registration efforts.
According to Banknote, it could not file a registration statement until it had filed its 1993 Form 10-K with audited financial statements through the end of 1993. Banknote argues that any registration statement filed before the 1993 Form 10-K would be incomplete and misleading because that 10-K was the first to contain audited financial statements for its new Brazilian subsidiary. In addition, Banknote was involved in a debt restructuring which would have to be disclosed in any registration statement. (Def.'s 3(g) P 48.) Banknote contends that those circumstances permitted it to delay filing a registration statement. Ultimately, the registration statement was not filed until April 24, 1994. It was declared effective by the SEC on August 10, 1994.
The six-month time period between TDLR's request for registration and Banknote's filing of the registration statement covered a period during which the price of Banknote common stock fell dramatically. A large part of the decline occurred on January 6, 1994, following Banknote's announcement that it had not been awarded any new postage stamp printing contracts by the Postal Service under a competitive bidding process known as the Multi-Print Solicitation. On that date, the market price of Banknote common stock declined from $ 6 1/8 to $ 4 3/8. By August 10, 1994, the date on which the SEC declared the registration statement effective, the closing price of Banknote common stock was $ 2 7/8 per share. In this action, TDLR sues Banknote for the damages it incurred due to its inability to sell the Banknote stock prior to the decline in the stock price.
In this motion for partial summary judgment, TDLR seeks a determination as a matter of law that Banknote breached the provision of the Agreement requiring Banknote to register the stock "as expeditiously as possible" following TDLR's written request for registration. TDLR does not, however, seek a determination of the date on which the breach occurred or the date on which the stock would have been registered in the absence of a breach; TDLR contends that those are issues of fact for the jury. Banknote, in its opposition to the motion, ...