Free Memorandum in Support of Motion - District Court of Connecticut - Connecticut

Case 3:03-cv-01014-JBA Document 138-2 Filed 10/11/2005 Page 1 014
EXHIBIT A

‘00 9.*., Case 30:03-cv-0101421] A 0 Document 138-2 Filed 1/2005 9 Page 2 of 4
. ‘ _ 9 91_ _; - 1. ’
0 0 ,GOODWlN[PR©0CTER 9_ _
9 9 Richard M, Strassberg Goodwin Procter tra
9 0 212_g13_B859 Counsellors at Law
. 599 L ‘ gt A .
9 9 9 9 gjtgrgggéggit 9 New $$2, Si rI3%'§`§°
‘ . ‘ T; 212.a1a.aaco 9
I 9 gOOdWll'|p|'OCtEf.CO|'H F; 2121355-3333
00 February 10, 2003 9 9 9 9 0 0 i
9 9 0 . By Federal Express 0 0 p 9 0 9 0 _
0 0 The Board of Directors 0 ‘0 00 0 0 9 _ 9 9
0 9 Reflexite Corporation A 9- 9 9 0
9 0· p. 120 Darling Drive ·_9r 9 _ 9 _ 0 9 _9 _
9 9 Avon, Connecticut 06001 t 0 - 0 9 0 _ 9
0 00 0 Re: Frank Family Trust and H. Jonatl1a0n Frank _. _ 0 0
Dear0Sirs; -0 ‘ 0 0 0
0 0 9 9We represent the Family 1996 Trust and 9H. Jonathan Frank (the “Franks"). As you know, 09 0 ·9
9 the-Frank Family Trust owns more than 250,000 shares of Reflexite Corporation ("Reflexite" or
9- 0 the "Corporation"). It has come to_ our attention that certain directors and otherinsiders ofthe 0
‘ · Corporation appear to have engaged in self-interested transactions while acting in an oppressive
9 manner toward the Franks with the intent to injure the liquidity of the Franks’ investment in p y
Retlexite, and reduce the value of their shareholdings in the Corporation. The Corporation has w
also acted in manner intended to deny the Franks access to corporate information. 0 These
9 f" _ wrongful acts appearto have been undertakenby the Corporation as part of a plan to beneiit
certain members of the Corporatiorfs Board of Directors and other insiders at the expense of the 9
_0_9 Franks. The purpose of this `letter is to0alert’you to the ivrongiiil actsof the Corporation and its
Directors, and to make a formal demand, pursuant to Connecticut Genera1_Statutes § 33-722, that 0
9 the Board of Directors or Reflexite immediately investigate arrdremediate this wrongful conduct.
9 This will also constitute a demand pursuant to0Connecticut General Statutes § 33-946 to inspect p 9
L 9 and copy the records ofthe Corporation, including all records identified in Connecticut General 0
_ 9 9 Statutes §p33-945. p . , - 9, 0 0 y 90
0 9 _ 0 The Franks’Req¢kesrfor Information 0 0 p 9 0 90
9 00 0We understand that the Corporation has rejected the Franks’ prior request for infomation and 9
records concerning Reflexite’s business,. For example, Morgan Frank, on behalf of the Frank
9 p Family Trust, previously demanded access to the Corporation’s records in his letter to Mr. Cecil -
. 9. Ursprung of September 16, 2002 —— a letter that followed several communications between the
- 9 Franks and executives and directors at Retlexite (including several requests to Arthur Lo\/etere, ·
the Chairman of the Board). The requested records included, among other things, documentation _
9 9 9 9 9 9 ` 9 9 ct 900379 9

Ii _e Case 3:O3—cv-0101¢l—‘J%A Document 138-2 Filed 10l11[2005 _ Page 3 of 4
, - i J · .- .
` GOODWlN|PRO;Â¥&TER ` I II .I
0 I The Board of Directors of I . . a
._ . Reflexite Corporation ` I e
.- February l0, 2003 -
‘ - i _ Page 2 _ p . i — g. I _
_ r _. concerning the Corporatiorfs ESOP plan, records concerning the Strategic Minorityhivestor `
_ I Program and records concerning the Corporation’s repurchase of shares from its large T ·
· _ shareholders, including Board members and insiders. I _ . I
· The Corporation wrongfully refused to provide the Frank Family Trust the infomation it has- I" 0
_ . 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,
- that some of this information was notavailable tothe Corporation. In oral communications with `
the Franks, Chairman Arthur LoVetere confirmed that the Corporation ` would provide no
j - - infomation to the Franksi ._ — _ ` . I Q
i . The Franks’ requests were both reasonable and within their rights as shareholders of Reflexite. I a
We_ reiterate these requests for records, and we request allminutes 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 i ,
p ` F Franks access to the corporate records is detrimental to the rights of the Franks as shareholders,. p
0 . Ias well as a continuing violation of the Connecticut GeneralIStatutes, and by this letter we F I
formally requestthat the Board immediately investigate and remediate this misconduct; . ‘
I Sefbealirzg Transactions and Preferential Treatment of Insiders T p I
‘ 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 I
I - Franks or other non-insider shareholders. On occasion, the Corporation has undertaken debt and F
financial risk in order to permit it to prefer its insiders and purchase their shares] Forlexample, ..
Reflexite’s financial statements state that the Corporation spent more than $3,000,000 of its cash
and borrowed $5,000,000 in October of 1992 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
W ‘ _ believe that similar additional transactions have been conducted _whereby the Corporation
I P ¤ purchased insiders’ equity stakes in the Corporation to the benefit of such insiders. I
While engaging in self-dealing transactions redounding to the economic benefit of Reflexite’s. F
I r directors, executives and other insiders, Reflexite has denied similar opportunities to the Franlts, .
‘ and has wrongfully acted to limit the liquidity and value of the Frar1ks’ investment in Retlexitef ·
_ We are informed that President Cecil Ursprung, when asked about the Franks’Iability to sell
shares, said that the Franks "will never get liquid as long as I— am President of Reflexite." The
a I Corporation has thus consistently acted in a manner to favor the pecuniary self—interest of its
» 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- · `
_ — i_ _ — CL00380 _

" a F `Case 3:03-cv-O1 O1 Document 138-2 Filed 1G[IlIIi*{2OO5 Page 4 of 4 I
‘ i GOODWINIPROCTER I ‘
·. The Board of Directors of l
i I _ ‘ Retiexite Corporation _ I 3 -
p _ r February 10, 2003 — . p
- ‘ Page 3 ‘ I F ` __ .
F . interested directors and officers ofthe Corporation, as well as a violation of the fiduciary duties e Q
_ = of any Board members who endorsed or ratified such misconduct. . .F ·
I _F _ We hope that by bringingthese wrongful acts to the attention of the Board of Directors, the . I I` ,
_ disinterested members ofthe Board, if any, will cause the Corporation to take appropriate actions F ·
‘ . to remedy this misconduct. While it is likely that this demand_is futile in light of the self- .
" interested directors’ control over the matters outlined herein; wenonetheless offer this demand I
Q letter in the hope that the Corporation and the Board can avoid incurring the expense and .
F _ disruption ot`. legal proceedings. Pursuant to' Connecticut General Statutes I§ 33-946,-the r I
`. Corporation must provide access to the requmted documents by February IQ, 2003, tive (5) i _ -
I business days from receipt ofthis letter, and we will plan on being at the Corporation at 10:00 _` p
. . ann. on that day to inspect and copy the documents. _ F _ - ‘
I pI . · I . If yon. require any additional information concerning this matter, pleasecontact us. I I I
‘ I Very ¤· ly yo -· F I _ . ·_ · I
. I ‘ V ,4* F! . . F . ‘ - I . I
_r’_ F ‘ _ F . ‘ -
p F ' chard M. ¤ . sberg ` F . ‘
‘ Iefhey A. S` es, Esq. p p I I _ ·
_ _ ‘ cc: J ack Kennedy (counsel to Reflexite Corporation) I _r .
_ _ . · . Mr. H. Jonathan Frank `I I_ I ‘ I ` .
F · _ Mr. Morgan Frank p - _ ~_ F I · .
3 ‘ I p FrankIFarnily 1996 Trust F . p · F . ‘ ‘
· at i · F w * croc:-181
I r.mnvmzam=.o.¤ . `