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Business Organizations Keyed to Chasalow, 3rd Ed.
Foremost-McKesson, Inc. v. Provident Securities Co.
Citation:
423 U.S. 232, 96 S. Ct. 508, 46 L.Ed.2d 464 (1976)Facts
In 1969, Provident Securities Co., a personal holding company planning to liquidate, agreed to sell two-thirds of its assets to Foremost-McKesson for $4.25 million in cash and $49.75 million in Foremost convertible subordinated debentures. On October 15, 1969, Foremost delivered to Provident a $40 million debenture (later exchanged for $25 million and $15 million debentures) and a $2.5 million debenture to an escrow agent. On October 20, Foremost delivered a $7.25 million debenture to Provident. These debentures were immediately convertible into more than 10% of Foremost’s outstanding common stock, making Provident a beneficial owner under Section 16. On October 21, Provident, Foremost, and underwriters executed an agreement for the sale of the $25 million debenture, which closed on October 28. On October 24, Provident distributed the $15 million and $7.25 million debentures to its stockholders, reducing its holdings below 10%. Provident subsequently distributed the cash proceeds from the sale of the debenture to its stockholders and dissolved.
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