This section contains the nature of the case and procedural background.

Provident (P) was a personal holding company. In 1968, it decided to liquidate its dissolve. Foremost (D) emerged as a potential purchaser, and then negotiations began with P wanting cash and D wanting to exchange stock. Eventually, a deal was reached for $4.25 million in cash and $49.75 million in convertible subordinated debentures. The agreement also allowed D to register the securities in the amount of $25 million to sell the debentures to the public. At the closing on October 15, 1992, D delivered to P the cash and a $40 million debenture. That was exchanged for two debentures of $25 million and $15 million. Another $2.5-million-dollar debenture was delivered to an escrow agent, and the balance of $7.25 million was delivered on October 20. These debentures were immediately converted into more than 10% of D's outstanding stock. The underwriting agreements were executed on October 21 for the $25 million, and P distributed the $15 and 7.25 million dollar debentures to its stockholders reducing the amount of common stock to less than 10%. P's holdings on October 20 were large enough to make it a beneficial owner of D under section 16(b). P was faced with a suit from D under 16(b) and thus filed for a declaration that it was not liable under 16(b). The district court granted summary judgment for P, and the Court of Appeals affirmed.

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