## Facts

- Financial Performance Corporation issued two stock purchase warrants in 1993: one to Rebot Corporation (a creditor) and one to Marvin M. Reiss (a director).
- Rebot’s warrant allowed purchase of 1,198,904 shares at $0.10 per share for five years; it was issued in consideration of an unpaid loan.
- Reiss’s warrant allowed purchase of 500,000 shares at $0.10 per share for five years; it was issued as compensation for board service.
- Neither warrant contained a term addressing how a later reverse stock split would affect the number of shares purchasable or the per-share price.
- Financial had issued a separate warrant to another holder that was accompanied by an agreement expressly providing for reverse-split adjustments.
- In 1996, shareholders approved a one-for-five reverse stock split.
- In 1998, plaintiffs sought to exercise the warrants for the full share amounts stated at $0.10 per share without adjustment; Financial refused and asserted the warrants must be proportionally adjusted.
- Plaintiffs sued for a declaratory judgment enforcing the warrants without adjustment and sought to extend the expiration dates.

## Issues

1. Whether stock purchase warrants that specify shares, price, and duration but are silent on reverse stock splits must be judicially adjusted after a reverse split.
2. Whether a court may treat reverse-split adjustment as a “missing essential term” and supply it to reflect presumed intent or commercial reasonableness.

## Decision

- The Court of Appeals reversed the Appellate Division and declared in favor of plaintiffs.
- The court held the warrants were enforceable according to their express terms and could be exercised without a judicially implied reverse-split adjustment.
- The court rejected rewriting the warrants to add an adjustment clause the parties did not adopt.

## Legal Principles

- A duly executed stock warrant is a contract granting the right to purchase a specified number of shares at a specified price within a specified time period.
- Where a contract contains all material terms necessary for enforcement, courts may not add terms that alter the parties’ bargain.
- Silence on a later corporate event does not, by itself, authorize judicial reformation of an otherwise complete financial instrument.
- Evidence that an issuer included an adjustment clause in other warrants supports the inference that omission of such a clause in the disputed warrants was intentional.

## Conclusion

The court enforced the stock warrants as written and refused to imply a reverse-split adjustment term, holding that judicial gap-filling cannot be used to reform a complete contract simply because an omitted provision would appear commercially sensible after later events.


Reiss v. Fin. Performance Corp., 97 N.Y.2d 195, 764 N.E.2d 958 (N.Y. 2001)