Free Affidavit - District Court of Connecticut - Connecticut

Case 3:03-cv-01014-JBA Document 72 Filed 06/18/2004 Page 1 of 4
UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
H. JONATHAN FRANK and FRANK FAMILY 1996 : Civil Action No.
TRUST (on behalf of themselves and REFLEXITE : 3:03-CV- 1014 (JBA)
CORPORATION), :
Plaintiffs,
v.
ARTHUR LOVETERE, CECIL URSPRUNG, LOUIS J.
BACCEI, WORTH LOOMIS, THEODORE 2
PATLOVICH, STEPHEN J. RAFFAY, WILLIAM P. :
ROWLAND, PETER EIO (individually and in their :
capacity as members of the Board of Directors of Reflexite :
Corporation) and REFLEXITE CORPORATION, : MARCH `1 1, 2004
Defendants.
DECLARATION OF DAVID MCDONALD
I, DAVID MCDONALD hereby depose and state as follows:
1. I am reside at _Freelton ON Canada. I am over the age of 18 and I offer this
Declaration based on my personal knowledge.
2. I am presently self-employed. Between 1989 and 1997, however, I worked for
Reflexite Corporation. When I joined the company in 1989, I ran Reflexite’s Canadian
operations. In 1991, I was promoted to President of the entire operating division for Reflexite’s
American and Canadian operations, which was Ref1exite’s largest and only profitable operating
division.
3. I have known of Jon Frank since I joined Reflexite. Jon was an important early
contributor to the company’s success and continued to be an ally to the company throughout my
tenure there.

Case 3:03-cv—01014-JBA Document 72 Filed 06/18/2004 Page 2 of 4
4. After becoming President of Reflexite’s American and Canadian operations, I had
several discussions with Cecil Ursprung, the Chief Executive Officer, about shareholder liquidity
issues. I raised this issue because it appeared that the company was going to face a cash crunch
if the large shareholders sought to sell their shares. I was aware, for example, that William
Rowland (a founder and large shareholder of Reflexite stock) was seeking to sell large amounts
of his shares, and the estate of Hugh Rowland (another founder and large shareholder of
Reflexite) was also seeking liquidity.
5. I asked Cecil Ursprung what Reflexite would do if other large shareholders such
as then-director Gerry Robinson or Jon Frank sought liquidity. Cecil told me, and I remember
the words he used, that "as long as I am CEO of this company, he [Jon Frank] will never get his
equity out of here." When I asked why, Cecil responded that Jon Frank is not a friend of this
company.
6. I then asked what would happen to their shareholdings if Gerry Robinson or Jon
were to pass away. Cecil responded that he would take care of Gerry Robinson’s estate, but that
he would deal very differently with Jon Frank’s estate.
7. It appeared to me then, and at all times thereafter, that Cecil Ursprung had a great
deal of animosity towards Jon Frank. It appeared to me that Cecil viewed Jon Frank, who had
been very successful in helping to grow Reflexite, as a threat to his authority.
8. Cecil, and others working for or with him, subsequently caused Reflexite to take
actions against Jon Frank. For example, in 1996, Cecil caused Reflexite to engage in a share
buyback program, under which Reflexite would buy a specified amount of shares from
shareholders. Cecil set up the formula for the buyback, however, specifically and intentionally
so as to minimize Jon Frank’s ability (and the ability of another large shareholder, Gerry
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Case 3:03-cv—01014-JBA Document 72 Filed 06/18/2004 Page 3 of 4
Robinson) to sell his shares and to discourage him from participating in the program. At a
breakfast meeting where I asked about the rationale for Reflexite’s apportionment formula for its
buyback program, which Reflexite used many years thereafter, Cecil referred to it as the "Jon
Frank" program.
9. Since I left Reflexite, I have learned of several other instances on which Cecil
Ursprung made clear that he would prevent Jon Frank (or the Frank Family Trust) from ever
being able to sell his shares. As recently as four months ago, I was told by a Reflexite employee
that Cecil stated that he would do whatever he could to delay or prevent Jon Frank from getting
any money out of Reflexite.
10. After I left Reflexite, I met with Jon Frank and discussed with him the fact that
William Rowland had sold a large quantity of his shares of Reflexite stock. Jon seemed
surprised, and he indicated that he had an agreement with Bill Rowland that Jon Frank would get
an opportunity to sell his shares if Bill Rowland did. John Sheppard was present at this meeting.
Jon appeared never to have been informed of this significant transaction, which involved a
several million dollar purchase by Reflexite, which represented the balance of Bill Rowland’s
shareholdings.
ll. I understand from Jon Frank that Reflexite has told him that it cannot purchase the
shares of particular shareholders but will only use buyback programs such as the one described
above. Reflexite is not being forthright with Jon Frank in this regard. I am aware of a number of
other people connected with Reflexite being permitted to sell their shares in privately-negotiated
sales that were not available to other shareholders. I sold a quantity of my shares to Reflexite in
1997 in such a sale, and I am aware that others, including Cecil Ursprung (CEO and director),
Gerry Robinson (a former director), John Sheppard (division President) and Keith Phillips
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Case 3:03-cv—01014-JBA Document 72 Filed 06/18/2004 Page 4 of 4
(division President) also sold shares to Reflexite in privately-negotiated sales. Some of these
transactions occurred as recently as last summer.
12. I understand that Jon Frank identified me as a person with knowledge of facts
pertinent to the demand letter Jon sent to the Reflexite Board of Directors in February 2003.
Although I was waiting to be called or written about this issue, no one ever contacted me to
interview me about what I know. Had they called me, I would have related the foregoing facts,
as well as various others pertinent to the practices of RefIexite’s Board of Directors.
Pursuant to 28 U.S.C. § 1746, I declare under penalty of perjury under the laws of the
United States of America that the foregoing is true and earnest. . c ed on April 10th, 2004.
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