Whether warrant agreements to purchase shares of stock must be adjusted to reflect the effect of a reverse stock split, where the corporation approved the reverse stock split after issuing the warrants and the warrant agreements did not contain any provisions for reverse stock split adjustments.

No. Where a corporation authorizes a reverse stock split subsequent to issuing warrant agreements to purchase shares of stock, no adjustment to the agreement's specified shares is required, nor will the Court supply an omitted provision for reverse stock split adjustments where the warrants contain all the material provisions and terms necessary for an enforceable contract.

In 1993, Plaintiffs received warrants to purchase shares of Defendant Rebot Corporation's common stock. The warrant agreements specified the number of shares and the exercise price per share, and they stated that the warrants would expire in 1998. However, the agreements did not specify whether a future reverse stock split would require an adjustment to the number of shares warranted. In 1996, Defendant executed a one-for-five reverse stock split, effectively increasing the value per share by a multiple of five. In 1998, Plaintiffs attempted to exercise their warrants for the total number of shares specified in the 1993 warrant agreements. Defendant refused to issue the shares without an adjustment to reflect the effect of the reverse stock split. Plaintiffs then brought suit, seeking declaratory judgment to exercise the exact number of shares specified in the agreements as well as an order to extend the warrants' expiration dates. The Supreme Court dismissed both causes of action. The Appellate Division modified and declared judgment for Defendant, finding it appropriate to add an adjustment provision to the warrant agreements. The Court of Appeals found that adjustment provisions should not be added, and remitted the case to the Supreme Court to reinstate only the first cause of action for declaratory relief, as Plaintiffs did not request reinstatement of the second cause of action.

The Court held that the original warrant agreements represented enforceable contracts, as they contained all material terms and provisions, and that the warrants should therefore be enforced according to the specified written terms. Citing Haines v. City of New York, 396 N.Y.S.2d. 155 (1977), the Court noted that it would not provide missing or omitted provisions to written contracts enforceable on their own terms in cases where it appears the parties have "foreseen the contingency at issue." Here, the Court found that the parties must have been aware of the possibility of future reverse stock splits since Defendant issued earlier warrant agreements containing reverse stock split adjustment provisions. The Court distinguished the case relied upon by the Appellate Division, Cofman v. Acton Corp., 958 F.2d 494 (1st Cir. 1992), where the Circuit Court supplied absent adjustment provisions for warrants issued prior to a forward stock split that diluted the value of the warrants. The Court noted that it does not necessarily follow from Cofman's protection of issuees that issuers should be protected from suffering "reverse dilution" following a reverse stock split, particularly in a case where Defendant issuer decided to approve the reverse stock split and where earlier warrant agreements indicated Defendant's anticipation of a split.