Plaintiffs seek specific performance of a stock put (the Put),^[FN1] and, specifically, an order directing defendant to purchase plaintiffs' 1,000,000 shares of defendant's stock at $.75 per share, pursuant to a settlement agreement dated December 22, 2003 (the Agreement). In the alternative, in their complaint, plaintiffs allege that defendant breached its obligations under the [*2]Agreement and seek a declaration that defendant is in breach of the Agreement.

Plaintiffs move for summary judgment, in their favor, as described above, and for costs, interest, severance of their claim for attorneys' fees and an inquest (CPLR 3212). Plaintiffs also move to dismiss defendant's counterclaim for attorneys' fees (CPLR 3211). Defendant cross-moves for summary judgment on its counterclaim for attorneys' fees, and an inquest on attorneys' fees and costs (CPLR 3212). It also moves to dismiss the complaint (CPLR 3211).

Plaintiffs are investment funds that maintain offices in New York. Defendant is a Nevada corporation whose stock is publicly traded. The Agreement is governed by New York law.

According to plaintiffs, the parties entered into the Agreement after defendant defaulted on earlier stock purchase agreements. Pursuant to the Agreement, defendant agreed to issue to plaintiffs 1,000,000 shares of defendant's unregistered common stock (the Unregistered Shares) and to pay $1,000,000 in exchange for plaintiffs' surrender of certain securities (the Peak Shares) and other consideration.

At issue here is whether the plaintiffs properly exercised the Put on the Unregistered Shares. Regarding the Put, paragraph five of the Agreement provides:

"Thirteen months after Closing, the [plaintiffs] shall have the right to put the [Unregistered Shares] (as to the unsold balance of the 1,000,000 shares) to [defendant] at $.75 per share, on an all-or-none basis. The [plaintiffs] sha1l provide [defendant] with written notice if they wish to exercise the put, which must be received by [defendant] after thirteen months and prior to one year and two months after the Closing, at the expiration of which, this put right terminates. Closing on the put shall occur within ten (10) business days from receipt of notice of the put. The put cannot be withdrawn by the [plaintiffs] once exercised"

While the closing on the Put is described in paragraph five of the Agreement, the parties also closed on the transaction described in the Agreement (the Closing). Regarding the Closing, the Agreement provides:

"Upon receipt of the Subject Securities and the Payment Price, the Law Offices of Dan Brecher will notify [defendant] and the [plaintiffs], and as soon as practicable will forward the Subject Securities to [defendant], provided that the Subject Securities shall not be released to [defendant] until the delivery of $500,000, the $500,000 Promissory Note and 1,000,000 unregistered shares of Peak to the [plaintiffs] by delivery to the [plaintiffs'] designated agent for receipt of the Payment Price, Ballard Sphar Andrews & Ingersoll, LLP located at . . . . This shall constitute the "Closing" hereunder"

Paragraph 15 of the Agreement is a "notice" provision which provides:

"Any notice herein required or permitted to be given shall be in writing and sent by means of certified or registered mail, express mail, or other overnight delivery service, hand delivery confirmed by signed receipt or facsimile transmission (followed by prompt transmission of the original of such notice by any of the foregoing means) . . . to the Party at the address set forth on the signature page hereto"

The Agreement is governed by New York law. It provides for the recovery of reasonable attorneys' fees and costs by the prevailing party (Ribotsky Aff., Exh. A, ¶ 14).

On a summary judgment motion, the movant bears the initial burden of proving entitlement to summary judgment by eliminating material issues of fact "by tender of evidentiary proof in admissible form" (Zuckerman v City of New York, 49 NY2d 557, 562 [1980]; Winegrad v New York Univ. Med. Ctr., 64 NY2d 851 [1985]). If the moving party establishes a basis for the grant of summary judgment, to defeat the motion, the opposing party must present evidence that there is a triable material issue of fact (Zuckerman, 49 NY2d at 562).

To meet their summary judgment burden, plaintiffs provide the affidavit of Corey S. Ribotsky, who swears that he is the manager and decision maker for the investment activities of each of the plaintiffs. Ribotsky states, and defendant does not dispute, that on January 24, 2005, plaintiffs "telecopied" a letter dated January 10, 2005 to defendant (the January 10, 2005 Letter or the Letter), and also sent defendant a copy of the Letter by registered mail on January 28, 2005. Ribotsky further states that on January 27, 2005, the plaintiffs' attorney faxed a copy of the Letter to defendant's counsel, Dan Brecher.

The January 10, 2005 Letter states:

"Pursuant to Paragraph 5 of that certain Settlement Agreement and Release, dated as of December 22, 2003 by and between [Plaintiffs], and Peak Entertainment Holdings, Inc. . . . notice is hereby given that the undersigned exercise their put right with respect to all of the 1,000,000 shares of the Holders' Common Stock (as defined in the Agreement) to Peak at a purchase price of $.75 per share. Accordingly, please remit to the Holders the amounts set forth opposite such Holders' name on Schedule A hereto pursuant to wire transfer instructions provided by the Holders.

The manner in which an option must be exercised is a matter of contract and parties may specify in their agreement if they wish that an option be exercised not only by a certain time, but also in a particular manner (Urban Archaeology Ltd. v Dencorp Invs. Inc., 12 AD3d 96, 103-104 [1st Dept 2004]). Whether involving options to purchase real property, commercial contracts or executory contracts to buy and sell, as a basic principle, an optionee can only exercise an option [*4]in strict accordance with its terms (id.). "Not only is strict adherence to the terms of an option ordinarily required, but it is a broadly accepted principle that time is of the essence with this type of contractual provision" (id. at 103).

Plaintiffs contend that they sent the Letter between the thirteenth and fourteenth months after the date of the Agreement, which they state was the period between January 22, 2005 and February 22, 2005 (Pl. Memo. of Law, at 5). Plaintiffs argue that this demonstrates their compliance or substantial compliance with the Put notice requirements which, they argue, entitles them to summary judgment. Defendant does not dispute the validity of the Agreement or the Put, but argues that summary judgment should be denied because plaintiffs' moving papers are deficient in that plaintiffs have failed to allege that they exercised the Put thirteen months after the Closing or provide the date of the Closing.

Defendant also argues that the complaint should be dismissed because plaintiffs failed to exercise the Put in accordance with the terms of the Agreement. Specifically, defendant provides evidence to demonstrate that the Closing occurred on January 5, 2004, and argues that the January 10, 2005 Letter is of no effect because plaintiffs admit that they signed, dated and sent the Letter no later than January 28, 2005, which was prior to the time when the plaintiffs had the right to exercise the Put.

Paragraph 3 of the Agreement describes certain events that constituted the Closing (supra at 3). Defendant has demonstrated that these events took place on January 5, 2004, and it does not appear that plaintiffs dispute the occurrence of these events. Instead, plaintiffs point to paragraphs two and three of the Agreement,^[FN2] and assert that their interpretation and understanding thereof is that the Closing was a multi-step process that began on the date of the Agreement.^[FN3] The interpretation of the unambiguous Agreement, however, is a question of law [*5]for the court (Taussig v Clipper Group, L.P., 13 AD3d 166 [1st Dept 2004], lv denied 4 NY3d 707 [2005]), and plaintiffs' interpretation of the Agreement concerning the Closing simply does not comport with the Agreement's plain and unambiguous language.

Pursuant to the Agreement, plaintiffs obtained the right to put the entire unsold balance of the 1,000,000 Unregistered Shares for $.75 per share. In order to exercise the Put, plaintiffs were required to provide defendant with written notice and such notice had to be received by defendant on or after February 6, 2005, but before March 6, 2005 (the Relevant Time Period); that is, "after thirteen months and prior to one year and two months after the Closing" (Ribotsky Aff., Exh. A., ¶ 5). The Put right terminated at the end of this period. To support its claim for substantial compliance based on earlier dates, plaintiffs cite to real estate option cases, which have no significance in this context, where plaintiffs have not demonstrated unfair forfeiture of substantial improvements to property, or even the forfeiture they claim concerning the value of the shares.^[FN4]

Defendant argues that the notice does not comply with the Agreement because the Letter was not signed, dated or sent within the Relevant Time Period. This argument is unpersuasive because the Agreement does not contain these requirements. Moreover, unless otherwise provided, "an acceptance under an option contract is not operative until received by the offeror" (Restatement [Second] of Contracts § 63 [b]). In this case, the Agreement contains a provision specifically addressing and requiring receipt of the notice within a specified time period. This language is consistent with the language of the remainder of the Agreement's provision regarding the Put, which states that "Closing on the put shall occur within ten (10) business days from receipt of notice of the put" (Ribotsky Aff., Exh. A., ¶ 5).^[FN5]

Plaintiffs have provided documentary evidence that they sent the January 10, 2005 Letter to defendant at the appropriate address, by one of the methods of delivery specified in the [*6]Agreement, and the sufficiency of the Letter's content is unchallenged. As movants, however, plaintiffs must demonstrate that the Put was properly exercised within the Relevant Time Period "by tender of evidentiary proof in admissible form" (Zuckerman, 49 NY2d at 562; Friends of Animals, Inc. v Associated Fur Mfrs., Inc., 46 NY2d 1065, 1067 [1979]).

To meet this burden, plaintiffs submit an affidavit of its counsel, who swears that he has been in contact with Great Britain's postal service, Royal Mail Group, and has received a response to his inquiry about the date the January 10, 2005 Letter was delivered. Attached to the attorney affidavit is a copy of an e-mail message, dated September 26, 2005, to plaintiffs' counsel from the Royal Mail Group, in which one of its customer services advisors writes to confirm that the Letter "was delivered and signed on 14 February. I hope this information is of use and informative" (Rivlin Aff., Exh. A). While I note that plaintiffs provided the e-mail message after the motion submission deadline, because it constitutes inadmissible hearsay on that ground it is not considered.^[FN6] Evidence that would not be admissible at trial may, in certain instances, suffice to oppose summary judgment, although it may not be used in support of such a motion (Zuckerman, 49 NY2d 557, supra; Friends of Animals, Inc., 46 NY2d 1065, supra). Accordingly, plaintiffs have not eliminated a material issue of fact, with admissible evidence, concerning the exercise of the Put and, consequently, have not met their burden on summary judgment. In addition, plaintiffs have provided only bare bones moving papers, which do not address events after plaintiffs sent the Letter.

Finally, defendant argues that the complaint should be dismissed, pursuant to Business Corporation Law § 513 (BCL § 513), because the corporation lacked surplus for repurchase of the shares. "[T]he burden is on the corporation to establish that, at the time payments were required to be made under the contract, it lacked the necessary surplus to make the payments called for by the contract" (2 White, New York Business Entities ¶ B513.02, at 5-194 [14th ed]; Vowteras v Argo Compressor Serv. Corp., 83 AD2d 834, 835 [2d Dept 1981] lv denied 55 NY2d 605 [1982]). A foreign corporation may be subject to BCL § 513 where it is doing business in New York "unless (1) its shares are listed on a national securities exchange, or (2) less than one-half of its business income for the preceding three fiscal years was allocable to New York for New York Franchise tax purposes" (New York Business Entities at 5-191-5-192). Even if defendant's showing to support its claim that it did not have the surplus to repurchase its shares were sufficient to meet the requirements of the statute, defendant, a foreign corporation, has failed to demonstrate, or even discuss, whether it is subject to BCL § 513.

Therefore, defendant's cross motion for summary judgment to dismiss the complaint is denied, as is plaintiffs' motion for summary judgment on the complaint and to dismiss the counterclaim. Accordingly, plaintiffs' and defendant's respective applications for an inquest, attorneys' fees, interests and costs are also denied. Further, as discovery was stayed pending resolution of this motion, the stay is lifted.

Accordingly, it is [*7]

ORDERED that plaintiffs' motion is denied; and it is further

ORDERED that defendant's cross motion is denied; and it is further

ORDERED that the stay of discovery is lifted; and it is further

ORDERED that a conference is set for March 21, 2006, at 9:30 a.m., in Part 60, at courtroom 540.

Dated: ________________

Enter:

__________________________

J.S.C.