- 12 -
10/26/77 32,500
178,873
Modern Globe paid no dividends on its common stock for at
least 5 years prior to Mr. de St. Aubin's death and at
least 3 years prior to the execution of his will. Prior to
Mr. de St. Aubin's death, Modern Globe was experiencing
financial difficulties. At the time he executed his
will, a bank loan agreement prohibited Modern Globe from
paying dividends without prior written bank consent.
In the late 1970's and early 1980's, Modern Globe's
fortunes greatly improved. Modern Globe's board of
directors chose to reinvest earnings in the corporation
in order to satisfy existing debt and to avoid incurring
additional debt during an anticipated expansion of the
business. To those ends, Modern Globe retained earnings
of approximately $12.8 million in 1978, which increased
to approximately $23.5 million in 1984.
During the administration of Mr. de St. Aubin's
estate, after the estate gained control of Modern Globe and
Pohatcong Investors, the two corporations regularly lent
money to the estate, often interest free. The principal
amount of the loans to the estate was more than $2 million.
In addition, Modern Globe guaranteed lines of credit to the
estate in the amounts of $500,000 in 1974, $1 million in
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