Free Motion to Dismiss - District Court of Connecticut - Connecticut

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» Case 3:03—cv—01014-JBA Document 40-7 Filed 11/26/2003 Page 2 of 4
GOODWENIPROCTER _ _
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February 10, 2003 l
‘ By Federal Express 0 p.
The Board of Directors A an
Reflexitc Corporation l `.._
_ 120 Darling Drive ` ‘
_ . Avon, Connecticut 06001
Re: Frank Family- Trust and H. Jonathan Frank .
n Dear Sirs: _
We represent the Frank Family 1996 Trust and H. Jonathan Frank (the "Franks"). As you know, I .·
the Frank Family Trust owns more than 250,000 shares of Reflexite Corporation ("Reflexite" or
_ the “Corporation"). It has come to our attention that certain directors and other insiders of the <
. Corporation appear to have engaged in seltiinterested transactions while acting in an oppressive ‘ i
manner toward the Franks with the intent to injure the liquidity of the Franks’ investment in
_ . Reflexite, and reduce the value of their shareholdings in the Corporation. The Corporation has _
_ ` also acted in manner intended to deny the Franks access to corporate irrforrnatiorr. These l
wrongful acts appear to have been undertaken by the Corporation as part of a plan to benefit p
certain members of the Corporation’s Board of Directors and other insiders at the expense ofthe _
Franks. The purpose of this letter is to alert you to the wrongful acts of the Corporation and its _ -
Directors, and to make a formal demand, pursuant to Connecticut General Statutes § 33—722, that Z-
2 the Board of Directors or Reflexite immediately investigate and remediate this wrongful conduct. _ .
` This will also constitute a demand pursuant to Connecticut General Statutes § 33-946 to inspect
and copy the records of the Corporation, including all records identified in Connecticut General
‘ Statutes § 33-945. ·
The F ranks’ Request for Information _A
We understand that the Corporation has rejected the Franks’ prior request for information and
. records concerning Reflexite’s business. For example, Morgan Frank, on behalf of the Frank
U Family Trust, previously demanded access to the Corporation’s records in his letter to Mr. Cecil
. Urspntng of September 16, 2002 — a letter that followed several communications between the
‘ Franks and executives and directors at Reflexite (including several requests to Arthur LoVetere,
the Chairman of the Board). The requested records included, among other things, documentation

Case 3:03—cv—01014-JBA Document 40-7 Filed 11/26/2003 Page 3 of 4 ”
GOODWINIPROCTER . g .
The Board of Directors of P
Retlexite Corporation
February 10, 2003 `
Page 2
concerning the Corporation’s ESOP plan, records concerning the Strategic Minority Investor l
Program and records concerning the Corporation’s repurchase of shares from its large
shareholders, including Board members and insiders. `
The Corporation wrongfully refused to provide the Frank Family Trust the information it has
requested. By letter dated November 8, 2002, Reflexite’s Chief Executive Officer, Cecil
Ursprung, indicated that Retlexite would not provide the requested information, or, incredibly, Q
that some of this information was not available to the Corporation. In oral communications with _,
" the Franks, Chairman Arthur LoVetere confirmed that the Corporation would provide no _ Q
information to the Franks. - if
The Franks’ requests were both reasonable and within their rights as shareholders of Reflexite.
We reiterate these requests for records, and we request all minutes of the meetings of the Board
of Directors and all accounting records of the Corporation concerning these issues, under ‘
_ Connecticut General Statutes §33-946. The Corporation’s continued refusal to provide the _ e
Franks access to the corporate records is detrimental to the rights of the Franks as shareholders, ‘
as well as a continuing violation of the Connecticut General Statutes, and by this letter we
? _ formally request that the Board immediately investigate and remediate this misconduct.-
l Se@Dealing Transactions and Prcfcrential Treatment of Insiders
We also understand that the Corporation has repurchased the shares of Board members and other _
insiders at terms favorable to those insiders while refusing to accord comparable treatment to the
. Franks or other non—insider shareholders. On occasion, the Corporation has undertaken debt and
financial risk in order to permit it to prefer its insiders and purchase their shares. For example,
I Reflexite’s financial statements state that the Corporation spent more than $3,000,000 of its cash ‘q
and borrowed $5,000,000 in October of 1997 in order to purchase 277,000 shares in Reflexite ‘ g
held by William Rowland, a founder and director of Reflexite, at a price of $30 per share. We I
believe that similar additional transactions have been conducted whereby the Corporation
purchased insiders’ equity stakes in the Corporation to the benefit of such insiders. ,
_ _ `While engaging in self-dealing transactions redounding to the economic benefit of Ref1exite’s
directors, executives and other insiders, Reflexite- has denied similar opportunities to the Franks, Q
and has wrongfully acted to limit the liquidity and value of the Franks’ investment in Reflexite. i
We are informed that President Cecil Ursprung, when asked about the Franks’ ability to sell
shares, said that the Franks "will never get liquid as long as I am President of Reflexite.” The
Corporation has thus consistently acted in a manner to favor the pecuniary self-interest of its I
p founders and directors, while denying comparable opportunities to its other shareholders. Such
oppressive and self—interested conduct constitutes a violation of the fiduciary duties of the self-

.. Case 3:03—cv—0101:4-JBA Document 40-7 Filed 11/26/2003 Page 4 of 4 i
GOODWINIPFQOCTER ii _
The Board of Directors of r ·
‘ . _ Reflexite Corporation l » _
February l0, 2003
Page 3
interested directors and officers ofthe Corporation, as well as a violation of the fiduciary duties i
of any Board members who endorsed or ratified such misconduct- _
We hope that by bringing these wrongful acts to the attention of the Board of Directors, the , l
_ . - disinterested members of the Board, if any, will cause the Corporation to take appropriate actions
to remedy this misconduct. While it is likely that this demand is futile in light of the self-‘ YQ
e interested directors’ control over the matters outlined herein, we nonetheless offer this demand __
letter in the hope that the Corporation and the Board can avoid incurring the expense and
disruption of legal proceedings. Pursuant to Connecticut General Statutes § 33-946, the
Corporation must provide access to the requested documents by February l9, 2003, five (5) ’
business days from receipt of this letter, and we will plan on being at the Corporation at 10:00
a.rn. on that day to inspect and copy the documents.
l If you require any additional information concerning this matter, please contact us. .
. ly yo as
i `chard M. ssberg Esq -
Jeffrey A. Si es, Esq.
_ cc: Jack Kennedy (counsel to Reflexite Corporation) · I i
` · Mr. H. Jonathan Frank . l _ ( Y
Mr. Morgan Frank
_ Frank Family 1996 Trust
LisNY12234060.2. i 0 -.