Ex-Norwood execs say company cheated them out of millions


Indianapolis-based Norwood Promotional Products is facing legal challenges from a half-dozen former executives who say board
members and investors conspired to fire them, withhold severance pay and cheat them out of as much as $3.6 million in company
stock.

Norwood President Paul Lage declined to comment in detail on the allegations made in two pending lawsuits, but said he didn't
see their outcomes as "something that is going to significantly alter our business at all."

With revenue of $330 million last year, the privately held firm is the second-largest promotional products company in the
country. Its 2,000 employees–including 120 in Indianapolis–manufacture customized items like awards and logo-laden coffee
cups, which are sold through a network of distributors.

Norwood has had its headquarters downtown since then-CEO Thomas Roller moved the firm here from Austin, Texas, in September
2003.

Lage joined the company last June, about six months after Roller was fired, kicking off an extensive management overhaul.
Roller and former General Counsel Kathleen Ravotti have since sued Norwood, and four other ex-executives have petitioned to
join Roller's action.

In the new batch of court filings, the ex-employees repeat allegations that board members and outside investors acted to
undervalue the private firm's stock.

The company, its board members and other defendants deny the allegations.

After growing rapidly through acquisition, Norwood restructured its debt in late 2004, giving creditors such as Arizona-based
ING Investments LLC shares in the privately held company. ING Investments provides portfolio-management services for Dutch
financial services company ING Group.

As a result of the restructuring, Norwood now has 38 shareholders. During the overhaul, 15 percent of shares were allocated
to top managers at the company, court documents state. But even during the restructuring, staff leaders expressed concerns
that the investors, especially ING, were working to "devalue the interests of Norwood's … management," according
to filings.

Stock questions

With the restructuring also came more involvement from the new investors, including five appointments to Norwood's seven-member
board. ING Portfolio Manager Robert Wilson selected two board members, including Joyce Johnson-Miller, who became chairwoman.

In 2005, board members put Norwood up for sale, voting to pay themselves a premium if a deal went through. Some managers–including
Roller and Ravotti–expressed concerns about an apparent conflict of interest, according to the lawsuits, saying those who
were considering a sale would directly profit from it and as such might not objectively weigh what was best for the company.

Offers that came in for the company were kept confidential, but court filings said they would have equaled $200 to $900 a
share. In December 2005, the board took Norwood off the market without explanation. But both Roller and Ravotti already had
become so concerned about the conduct of the Norwood board and Wilson that they independently called an ING hot line established
to field confidential calls about misconduct.

According to the lawsuits, ING broke its confidentiality pledge and informed Wilson about the calls. He then passed the information
along to board leader Johnson-Miller, causing relations to break down further.

In turn, Johnson-Miller had the board hire a consultant to help "sack management for cause so that the company would
not have to pay their severance payments or the substantial amounts for the … stock," Roller's suit alleges.

Roller was fired in December 2005 and most of the remaining management team was let go in early to mid-2006. Ravotti also
was terminated that December, although documents filed with the court indicate she had accepted a job at Klipsch Audio Technologies
the previous month.

The ousted executives were paid pennies for their stock, which totaled at least 3,975 shares. According to their claims,
the stock should have been priced between $795,000 and $3.6 million.

In responses filed with the court, the defendants say the stock was repurchased according to the terms of Norwood's employee
stock plan; they deny any wrongdoing.

Cases pending

Roller filed his lawsuit claiming securities fraud in April 2006. Now, four other ex-executives have petitioned to join in
that suit, a move their attorney said Norwood likely will fight. Roller and at least one other ex-executive also have arbitration
cases pending on their severance packages, according to his attorney, David Cutshaw of locally based Cohen and Malad LLP.

Separately, Ravotti is suing ING Investments, Wilson, Johnson-Miller and others alleging they didn't honor a contract
about her severance package, committed securities fraud to wrongfully devalue her stock, caused her emotional distress, and
defamed her.

Ravotti is representing herself and didn't return a message from IBJ.

But court documents show she battled with Norwood about her severance agreement. During the dispute, Ravotti alleges, Norwood's
attorney sent "personal and confidential information" about the disagreement to her new employer. At one meeting,
Ravotti said, Norwood's attorney offered to "'do something for her' in the 'six figures' if she could
'give him a quiver for his arrow' to use against Roller," according to her lawsuit.

Whether the claims will end up costing Norwood, its board members or ING remains to be seen. The defendants moved to dismiss
Roller's original suit but were denied. They then filed to force arbitration, which the trial court denied. The defendants
appealed that decision, which is now before the Indiana Court of Appeals. Ravotti's case also is still pending.

Calming the waters

Norwood, for its part, is looking–and moving–ahead.

Board members brought Lage in as the company's new president in June 2006. Before coming to Norwood, Lage spent 20 years
in the promotional products industry, leaving a position as global vice president of Bic Graphics USA.

Since assuming control of Norwood, Lage has caught the eye of some industry observers. He was named No. 2 in the Advertising
Specialty Institute's December ranking of top 50 power players.

"Paul Lage came to the company with incredible credentials," said Tim Andrews, president of the Pennsylvania-based
trade group that represents manufacturers and distributors. "[Lage's] considered a true leader in the industry."

Norwood's revenue was flat for 2006 as the company focused on stabilizing its operations, Lage said. He said outside
consultants were brought in to address inefficiencies, plant operations were consolidated, and turnover continued through
voluntary departures. Employment at the company's headquarters sagged from a high of 200 to 120.

"The culture was very unsettled at Norwood," Lage said. "There was a lot of what I'll say was unrest."

Lage said his first role was to "calm the waters."

"We've made all the changes and tough decisions and now it's time to look toward the future and on growing the
business again," he said.

While he said the firm remains committed to Indianapolis, it may re-evaluate whether its headquarters needs to be at 10 W.
Market St., high-end office space in the heart of downtown.

Andrews said Norwood struggled recently in part because the company was built through acquisitions and the former management's
plan to streamline the unified companies "wasn't executed flawlessly."

"It went through difficult times with severe customer-service issues," he said.

This year, Norwood won ASI's distributors' choice honors for a calendar and an award product and has rolled out 350
new promotional products so far in 2007.

Andrews said the award in the calendar category was especially notable because it's an area where Norwood had let down
distributors in the past, including delivering calendars after the new year.

"To go from poor customer service to winning the category–that's a pretty impressive feat," Andrews said.

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